April 1, 2009  September 30, 2009            
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
OIG  Department of Health and Human Services 
Office of Inspector General 
 
  Message From the Inspector General 
This report, submitted to Congress pursuant to the Inspector General 
Act of 1978, as amended, summarizes the activities of the Office of 
Inspector General (OIG), Department of Health and Human Services 
(HHS), for the 6 month period ending September 30, 2009.   
Our office has witnessed an unprecedented level of activity as we 
have integrated emerging responsibilities linked to governmentwide 
projects, congressional initiatives, and public health emergencies with our ongoing audit, 
investigative, and evaluation activities across a broad spectrum of HHS programs.  By 
capitalizing on collaboration among OIG components, this has been a period of 
considerable achievement.   
We continue our mandated work pursuant to the American Recovery and Reinvestment 
Act of 2009 (Recovery Act).  The leadership demonstrated by our Office of Audit 
Services has assisted the Department in appropriately meeting its spending goals and has 
contributed significantly to the Recovery Act Accountability and Transparency Boards 
governmentwide efforts to help prevent fraud, waste, and abuse and ensure transparency.  
Our health care integrity work is informed by OIGs Five Principles strategy to combat 
fraud, waste, and abuse and covers enrollment, payment, compliance, oversight, and 
response issues.  Led by our Office of Counsel, we have used this strategy to inform 
Congress about our work and recommendations to strengthen program integrity.  Many 
of our recommendations have been incorporated into health care reform initiatives.  
We also continue to work with our law enforcement partners to pursue bad actors who 
bilk scarce resources from Medicare and Medicaid.  Relying upon our Office of 
Investigations, which has spearheaded Medicare Fraud Strike Forces in conjunction with 
the Department of Justice (DOJ) since 2007, we have been able to effectively target 
broad-based fraud schemes.  Strike Force operations in Miami, Los Angeles, Houston, 
and Detroit have resulted in nearly 200 convictions and millions of dollars in restitution.  
Building upon the success of the Strike Force model, we are working closely with the 
Department and DOJ on a new initiative, announced in May, known as the Health Care 
Fraud Prevention and Enforcement Action Team (HEAT).  Integral to fraud prevention 
and enforcement, HEAT will enhance the Governments ability to detect fraud by 
increasing its reliance on data, technology, and analysis.  In addition, OIGs public health 
oversight continues to address the Departments critical challenges in ensuring public 
health and safety.  Our Office of Evaluation and Inspections and Office of Audit Services 
have issued reports on State and local pandemic influenza preparedness and on the Food 
and Drug Administrations responsibility for overseeing food safety.   
As we address an expanding mission to protect HHSs vital health and human services 
programs, I would once again like to express my appreciation to Congress and to the 
Department for their sustained commitment to supporting the important work of our 
Office. 
 
 
Daniel R. Levinson 
Inspector General  Highlights 
Summary of Accomplishments 
For fiscal year (FY) 2009, the Department of Health and Human Services (HHS) Office 
of Inspector General (OIG) reported savings and expected recoveries of $20.97 billion:  
$16.48 billion in implemented recommendations to put funds to better use; $492 million 
in audit receivables; and $4 billion in investigative receivables, which includes $1 billion 
in non-HHS receivables resulting from OIG work (e.g., the States share of Medicaid 
restitution). 
Also for this FY, OIG reported exclusions of 2,556 individuals and entities from 
participation in Federal health care programs; 671 criminal actions against individuals or 
entities that engaged in crimes against departmental programs; and 394 civil actions, 
which included False Claims Act Amendments of 1986 (FCA) and unjust enrichment 
lawsuits filed in Federal district court, Civil Monetary Penalties Law (CMPL) 
settlements, and administrative recoveries related to provider self-disclosure matters. 
The following are highlights of some of OIGs efforts during this semiannual period: 
Medicare Fraud Strike Force Operations Lead to Sentencing of Seven 
Miami-Area Residents in Medicare Infusion Fraud Scheme 
Seven employees of a Miami infusion clinic were ordered to pay $19.8 million in 
restitution and sentenced to prison terms ranging from 37 to 97 months.  In their guilty 
pleas, the individuals admitted to activities including manipulating patients blood 
samples to generate false medical records, ordering and administering medications to 
treat conditions that were falsely documented with fraudulent test results, and billing 
Medicare for services that were medically unnecessary or never provided.   
(Details on p. 45.) 
State and Local Pandemic Influenza Preparedness 
During this semiannual period, we issued two reports related to States and localities 
pandemic influenza preparedness.  Our key findings include the following: 
  In one review, we found that although the majority of selected localities had 
begun planning to distribute and dispense vaccines and antiviral drugs, more 
needs to be done to improve localities ability to respond to an influenza 
pandemic.  Specifically, we found that in their preparedness plans, selected 
localities had not addressed most of the vaccine and antiviral drug distribution and 
dispensing preparedness items identified in HHS guidance.  Further, although all 
of the selected localities conducted exercises related to vaccine and antiviral drug 
distribution and dispensing, most did not create after-action reports and 
improvement plans for these exercises.  (OEI-04-08-00260)  (Details on p. 55.) 
HHS OIG Semiannual Report to Congress  i  Highlights 
Fall 2009    In the other review, we found that although the selected States and localities that 
we reviewed are making progress in preparing for a medical surge, more needs to 
be done to improve States and localities ability to respond to an influenza 
pandemic.  Specifically, we found that fewer than half of the selected localities 
had started to recruit the medical volunteers required to respond to a medical 
surge and that none of the States reviewed had implemented electronic systems to 
manage volunteers.  Moreover, although all of the selected localities had acquired 
limited medical equipment for a pandemic, only three of the five States reviewed 
had electronic systems to track beds and equipment.  We also found that most of 
the selected localities had not identified guidelines for altering triage, admission, 
and patient care during a pandemic.  (OEI-02-08-00210)  (Details on p. 54.) 
Pfizer, Inc., Enters Into Settlement for Marketing and Promotion Practices 
Pfizer, Inc., (Pfizer) entered into a $1 billion civil FCA settlement with the United States 
in connection with Pfizers marketing and promotion practices associated with the anti-
inflammatory drug Bextra and several other drugs.  The settlement agreement is part of a 
global criminal, civil, and administrative settlement with Pfizer and its subsidiary, 
Pharmacia and Upjohn Company, Inc., which also includes a comprehensive 5-year 
corporate integrity agreement between Pfizer and OIG.  (Details on p. 49.) 
Medicaid Personal Care Claims Made by Providers in New York City  
We estimated that New York State improperly claimed $275.3 million in Federal 
Medicaid reimbursement for some personal care claims submitted by providers in 
New York City during calendar years 2004 through 2006.  The improper claims occurred 
because the State did not adequately monitor New York Citys personal care services 
program for compliance with Federal and State requirements.  We recommended that the 
State refund $275.3 million, work with the Centers for Medicare & Medicaid Services 
(CMS) to resolve two Consumer Directed Personal Assistance Program (CDPAP) claims, 
improve its monitoring of New York Citys personal care services program, and 
promulgate specific regulations related to CDPAP claims.  The State disagreed with our 
first recommendation and with several of our findings.  (A-02-07-01054)  (Details on 
p. 27). 
Barriers to the Food and Drug Administrations Response to Food 
Emergencies  
In two reviews, we addressed the Food and Drug Administrations (FDA) responsibilities 
for overseeing the safety of food in both the human and pet food supply.  These reviews 
described difficulties identifying and removing contaminated products from store shelves.  
Both reviews found that additional statutory authority and guidance to the industry would 
strengthen FDAs effectiveness and its ability to respond to a contamination of human 
and pet food.    
  In one review, we found that in the event of a food emergency, FDA would likely 
have difficulty tracing food products through the food supply chain.  We were 
HHS OIG Semiannual Report to Congress  ii  Highlights 
Fall 2009  able to trace only 5 of the 40 products reviewed through each stage of the food 
supply chain.  For 31 of the 40 products, we could identify the facilities that likely 
handled the products, and for the remaining 4 products, we could not identify the 
facilities.  Furthermore, 59 percent of the facilities reviewed did not meet FDAs 
requirements to maintain records about their sources, recipients, and transporters, 
and 25 percent were not aware of these requirements.  We recommended, among 
other things, that FDA consider seeking additional statutory authority to 
strengthen its lot-specific information requirements and to request facilities 
records at any time.  We also recommended that FDA work with the industry to 
develop needed guidance and that FDA address issues related to mixing raw food 
products from a large number of farms.  FDA agreed to consider these 
recommendations.  (OEI-02-06-00210)  (Details on p. 57.) 
  In the second review, which was conducted in response to a request from the 
Senate Committee on Agriculture, Nutrition, and Forestry, we found that FDA 
did not have statutory authority to require pet food manufacturers or importers to 
initiate recalls of contaminated food or to assess penalties for recall violations.  
Furthermore, FDAs existing regulations were issued as nonbinding recall 
guidance for firms.  We found that FDAs lack of authority, coupled with its 
sometimes lax adherence to its recall guidance and internal procedures, limited 
FDAs ability to ensure that contaminated pet food was promptly removed from 
retailers shelves.  Our report contained detailed recommendations for 
strengthening FDAs recall authority and improving its monitoring of recalls.  
FDA agreed or agreed in principle with all of our recommendations.  
(A-01-07-01503)  (Details on p. 58.) 
Nursing Home Executive Agrees to Permanent Exclusion 
The President and Chairman of the Board of Pleasant Care Corporation (Pleasant Care), 
Emmanuel Bernabe, agreed to be permanently excluded from Federal health care 
programs following an investigation of substandard care at nursing homes formerly 
operated by Pleasant Care.  OIG alleged that Bernabe, through his management and 
oversight of Pleasant Care, caused services to be furnished to Pleasant Care residents that 
substantially departed from the professional standard of care.  For example, Pleasant Care 
failed to maintain adequate staffing levels, properly administer medication, provide 
adequate hydration and nutrition, and prevent accidents.  (Details on p. 42). 
Walgreen Enters Into $1 Million Settlement for Employing Excluded 
Pharmacist 
Walgreen Louisiana Co. (Walgreen) agreed to pay $1,053,774 to settle its liability under 
the OIGs CMPL authority for allegedly employing an individual that Walgreen knew or 
should have known was excluded from participation in Federal health care programs.  
Walgreen submitted claims to Medicare, Medicaid, and TRICARE for prescriptions filled 
by the excluded pharmacist, as reported by Walgreen under OIGs Provider 
Self-Disclosure Protocol.  (Details on p. 41). 
HHS OIG Semiannual Report to Congress  iii  Highlights 
Fall 2009  Evaluation and Management Services Included in Eye and Ocular Adnexa 
Global Surgery Fees  
We estimated that Medicare paid $97.6 million for evaluation and management (E&M) 
services that were included in eye global surgery fees but not provided during the global 
surgery periods in calendar year 2005.  Global surgery fees include payment for a 
surgical service and the related preoperative and postoperative E&M services provided 
during the global surgery period, which extends from the day before the surgery to 
90 days after the surgery.  We recommended that CMS consider adjusting the estimated 
number of E&M services to better reflect the number of E&M services actually being 
provided to beneficiaries or using the financial results of the audit, in conjunction with 
other information, during the annual update of the physician fee schedule.  CMS believed 
that it would be prudent to conduct further analysis before proposing any changes in the 
number of E&M services.  (A-05-07-00077)  (Details on p. 7.) 
Medicare Hospice Care for Beneficiaries in Nursing Facilities:  Compliance 
With Medicare Coverage Requirements 
Our medical record review determined the extent to which hospice claims for 
beneficiaries in nursing facilities in 2006 met Medicare coverage requirements.  We 
found that 82 percent of sampled hospice claims for beneficiaries in nursing facilities 
did not meet at least one Medicare coverage requirement.  We found that 33 percent of 
claims did not meet election requirements and that 63 percent of claims did not meet 
plan-of-care requirements.  For 31 percent of claims, hospices provided fewer services 
than outlined in beneficiaries plans of care.  For 4 percent of claims, the certifications 
were missing or did not meet one or more Federal requirements. We recommended that 
CMS educate hospices about the coverage requirements and their importance in ensuring 
quality of care, provide tools and guidance to hospices to help them meet the coverage 
requirements, and strengthen its monitoring practices regarding hospice claims.  
(OEI-02-06-00221) (OEI-02-06-00223)  (Details on p. 6.) 
Power Wheelchairs in the Medicare Program:  Supplier Acquisition Costs 
and Services 
Our review compared Medicare payments for power wheelchairs with suppliers 
acquisition costs and determined the number and type of services that suppliers 
performed in conjunction with providing power wheelchairs to Medicare beneficiaries.  
We found that in the first half of 2007, Medicare allowed an average of $4,018 for 
standard power wheelchairs that cost suppliers an average of $1,048.  During the same 
timeframe, Medicare allowed an average of $11,507 for complex rehabilitation packages 
that cost suppliers an average of $5,880.  Suppliers of standard power wheelchairs 
reported performing an average of five services per chair, while suppliers of complex 
rehabilitation power wheelchair packages reported performing an average of seven 
services, such as assembling and delivering the power wheelchair and educating the 
beneficiary about its use.  We found that suppliers performed most services prior to and 
during, rather than after, the wheelchairs delivery.  We recommended that CMS 
determine whether Medicares fee schedule amounts for standard and complex 
HHS OIG Semiannual Report to Congress  iv  Highlights 
Fall 2009  rehabilitation power wheelchairs should be adjusted by using information from the 
Competitive Bidding Program, seek legislation to ensure that fee schedule amounts are 
reasonable and responsive to market changes, or exercise its authority to set payment 
limits when payments are grossly higher than acquisition costs.  (OEI-04-07-00400)  
(Details on p. 12.) 
Former Major League Baseball Player To Pay Close to $800,000 for Evading 
Child Support Obligations While Residing in the South Pacific 
Troy Lee Neel was ordered to pay $778,917 and sentenced to 5 years probation for 
evading child support obligations.  A former major league baseball player, Neel failed to 
pay $5,000 a month in child support; fled the country; and purchased a small island in the 
South Pacific, where he ran a resort.  The case involved a 6-year multiagency 
international investigation.  (Details on p. 65). 
HHS OIG Semiannual Report to Congress  v  Highlights 
Fall 2009  Background 
At all levels, OIG works in close cooperation with HHS and its operating and staff 
divisions, the Department of Justice, other agencies in the executive branch, Congress, 
and States to bring about successful prosecutions, negotiated settlements, recovery of 
funds, and systemic improvements, which often include greater beneficiary protections, 
improved program oversight, or funds put to better use.  Systemic results are usually 
achieved through modifications to administrative policies, processes, or procedures 
changes to existing regulations and law; or improvements in information technology. 
Office of Inspector General Recommendations 
OIG relies on HHS management and governmentwide policymakers to decide which 
program recommendations are implemented.  Although many OIG recommendations are 
directly implemented by organizations within HHS, some are acted on by States that 
collaborate with HHS to administer, operate, and/or oversee designated programs such as 
Medicaid.  HHS and the States sometimes do not immediately implement OIGs 
recommendations for various reasons, including administrative complexities, the current 
policy environment, or a lack of statutory authority.  In such cases Congress often steps 
in to weave OIGs recommendations into legislative actions, many of which result in 
substantial funds being made available for better use or in program improvements.   
The body of this Semiannual Report describes the results of selected reviews and other 
efforts finalized during the period.  Information about the estimated current or potential 
monetary impact of our recommendations is found in the appendixes.  Some current 
outcomes relate to reports issued and corresponding actions taken in prior periods.  
Specifically, Appendix A in this Semiannual Report lists cost savings estimates that 
apply to the entire fiscal year as a result of administrative, regulatory, and legislative 
actions that were taken based on OIG recommendations made in prior periods.  
Appendix B includes data on management decisions that were made during the period to 
disallow questioned costs, thus creating audit receivables.  Some of the questioned costs 
disallowed were identified as findings in reports that were issued in prior semiannual 
periods. 
In addition to the semiannual reports to Congress, OIG annually publishes the 
Compendium of Unimplemented Recommendations that consolidates significant 
unimplemented monetary and nonmonetary recommendations that have been addressed 
previously to HHS and its pertinent operating and staff divisions.  The Compendium 
provides information about outstanding recommendations that, if implemented, have the 
potential to result in cost savings and improvements to program efficiency and 
effectiveness.  These recommendations, which are selected from audits and evaluations, 
require one or more of three types of actions:  administrative, regulatory, or legislative.  
OIG performs routine followup with the Department to determine the status of actions 
being taken in response to our recommendations.  The Compendium is available on 
OIGs Web site at:  http://www.oig.hhs.gov/publications/compendium.asp.  
HHS OIG Semiannual Report to Congress  vii  Background 
Fall 2009  Table of Contents 
Centers for Medicare & Medicaid Services....................................................................1 
Medicare Part A and Part B Reports........................................................................2 
Hospitals:  Oxaliplatin Claims Billed by Hospitals.....................................................................2 
Hospitals:  Interrupted Stays at Inpatient Rehabilitation Facilities.............................................2 
Hospitals:  A Pennsylvania Hospitals Reported Wage Data.....................................................3 
Hospitals:  High-Dollar Payments for Inpatient Services...........................................................3 
Home Health Services:  Medicare and Medicaid Home Health Payments for Skilled 
Nursing and Home Health Aide Services.............................................................................4 
Hospice Care:  Compliance With Coverage Requirements for Beneficiaries in 
Nursing Facilities...................................................................................................................5 
Hospice Care:  Services Provided to Beneficiaries Residing in Nursing Facilities....................5 
End-Stage Renal Disease:  Separately Billed Laboratory Tests for Medicare 
Beneficiaries..........................................................................................................................6 
High-Dollar Payments:  Medicare Part B Claims.......................................................................6 
Physicians:  Evaluation and Management Services Included in Eye and Ocular 
Adnexa Global Surgery Fees................................................................................................7 
Physicians:  Place-of-Service Coding..........................................................................................8 
Physicians:  Prevalence and Qualifications of Nonphysicians Who Performed 
Medicare Physician Services.................................................................................................8 
Chiropractors:  Inappropriate Medicare Payments for Chiropractic Services............................9 
Imaging Services:  Medicare Part B Billing for Ultrasound.....................................................10 
Laboratories:  Variation in the Clinical Laboratory Fee Schedule............................................10 
Ambulance Services:  Transportation Provided to Beneficiaries in Skilled Nursing 
Stays Covered Under Medicare Part A...............................................................................11 
Durable Medical Equipment:  Independent Contractors Review of Durable Medical 
Equipment Claims From the Fiscal Year 2008 Comprehensive Error Rate 
Testing Program..................................................................................................................12 
Durable Medical Equipment:  Supplier Acquisition Costs and Services for Power 
Wheelchairs.........................................................................................................................12 
Durable Medical Equipment:  Miscoded Claims for Power Wheelchairs................................14 
Durable Medical Equipment:  Part B Services During Non-Part A Nursing Home 
Stays.....................................................................................................................................14 
Durable Medical Equipment:  Comparison of Prices for Negative Pressure Wound 
Therapy Pumps....................................................................................................................15 
Durable Medical Equipment:  Inappropriate Medicare Payments for Pressure 
Reducing Support Surfaces.................................................................................................16 
Prescription Drugs:  Aberrant Claim Patterns for Inhalation Drugs in South Florida..............17 
Prescription Drugs:  Part B Payment and Policy for Chemotherapy Administration..............18 
Prescription Drugs:  Beneficiary Utilization of Albuterol and Levalbuterol Under 
Medicare Part B...................................................................................................................18 
Contractor Operations:  Termination Claims for Postretirement Benefit Costs.......................19 
Contractor Operations:  Medicare Contractor Processes for Reviewing Pennsylvania 
Hospitals Wage Data..........................................................................................................20 
HHS OIG Semiannual Report to Congress  ix  Table of Contents 
Fall 2009  Contractor Operations:  Contractor Pension Costs Claimed for 
Medicare Reimbursement...................................................................................................20 
Contractor Operations:  Contractors Postretirement Benefit Assets.......................................21 
Medicare Part C Reports.........................................................................................21 
Medicare Advantage Organizations Adjusted Community Rate Proposal 
Modifications.......................................................................................................................21 
Duplicate Capitation Payments..................................................................................................22 
Medicare Part D Reports.........................................................................................22 
Dual-Eligible Demonstration Project.........................................................................................22 
Accuracy of Part D Plans Drug Prices on the Medicare Prescription Drug Plan 
Finder...................................................................................................................................23 
Effect of the Part D Coverage Gap on Medicare Beneficiaries Without Financial 
Assistance in 2006...............................................................................................................24 
Reconciliation Payments for 2006 and 2007.............................................................................24 
Payments for Beneficiaries in Part A Skilled Nursing Facility Stays in 2006..........................26 
Medicaid Related Reports........................................................................................26 
Hospitals:  Inpatient Hospital Claims Billed as Family Planning Services in New 
York State............................................................................................................................26 
Hospitals:  Medicaid Participation Eligibility for One Indiana State-Owned 
Psychiatric Hospital.............................................................................................................27 
Home Care:  Medicaid Personal Care Claims Made by Providers in New York City............27 
Medicaid Home, Community, and Nursing Home Care:  Targeted Case Management 
Services in Pennsylvania.....................................................................................................28 
Nursing Homes:  Long-Term Care, Managed Care Program Costs Claimed by Utah............28 
Prescription Drugs:  Accuracy of Drug Categorizations for Medicaid Rebates.......................29 
Prescription Drugs:  Medicaid Outpatient Drug Expenditures.................................................30 
Laboratories:  Potential Improper Medicaid Payments for Outpatient Clinical 
Diagnostic Laboratory Services for Dual-Eligible Beneficiaries.......................................31 
Excluded Services:  Medicaid Services to Incarcerated Juveniles in Georgia.........................31 
Family Planning:  Services Claimed Twice in Michigan..........................................................32 
Medicaid Administration:  Calculations of Additional Medicaid Funds Under the 
American Recovery and Reinvestment Act.......................................................................32 
Medicaid Administration:  Fraud and Abuse Safeguards for State Medicaid 
Nonemergency Medical Transportation Services..............................................................33 
Medicaid Administration:  Managed Care Encounter Data Collection and Use......................33 
Medicaid Administration:  Indirect Costs Submitted by the New York State 
Department of Health on Behalf of the Office of Mental Retardation and 
Developmental Disabilities.................................................................................................34 
Medicaid Administration:  West Virginias Retroactive Claims for Medicaid School-
Based Services.....................................................................................................................35 
Medicaid Administration:  Hurricane Katrina-Related Uncompensated Care Claims............35 
Medicare and Medicaid Information Systems and Data Security Reports.........36 
Information Systems:  Usefulness of Medicaid Statistical Information System Data 
for Detecting Medicaid Fraud, Waste, and Abuse.............................................................36 
HHS OIG Semiannual Report to Congress  x  Table of Contents 
Fall 2009  Inaccurate Data in the Provider Enrollment, Chain, and Ownership System 
Individual Global Extract File.............................................................................................37 
Other CMS Related Reports....................................................................................38 
Nursing Home Corporations Under Quality of Care Corporate Integrity Agreements...........38 
Emergency Health Services Furnished to Undocumented Aliens Covered by Section 
1011 of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003.................................................................................................................................39 
Medicare and Medicaid Related Outreach.............................................................39 
Advisory Opinions.....................................................................................................................39 
Provider Self-Disclosure Protocol.............................................................................................40 
Office of Inspector General Administrative Sanctions..........................................41 
Program Exclusions....................................................................................................................42 
Civil Monetary Penalties Law....................................................................................................43 
Patient Dumping.........................................................................................................................43 
Criminal and Civil Enforcement.............................................................................44 
Special Assistant United States Attorney Program...................................................................45 
Health Care Fraud Prevention and Enforcement Action Team................................................45 
Laboratories................................................................................................................................46 
Hospitals.....................................................................................................................................47 
Clinics.........................................................................................................................................47 
Nursing Homes...........................................................................................................................48 
Durable Medical Equipment Suppliers......................................................................................48 
Prescription Drugs......................................................................................................................48 
Practitioners................................................................................................................................49 
Medicaid Fraud Control Units................................................................................50 
Joint Investigations.....................................................................................................................50 
Public Health and Human Services Programs and Departmentwide Issues............53 
Public Health Related Reports................................................................................54 
Emergency Preparedness:  State and Local Pandemic Influenza Preparedness for 
Medical Surge......................................................................................................................54 
Local Pandemic Influenza Preparedness:  Vaccine and Antiviral Drug Distribution 
and Dispensing....................................................................................................................55 
Vermonts Pandemic Influenza Expenditures...........................................................................56 
Traceability in the Food Supply Chain......................................................................................57 
Food and Drug Administrations Monitoring of Pet Food Recalls...........................................58 
Health Resources and Services Administration Grant Closeout Procedures............................58 
Indian Health Service Contract Health Services Program:  Overpayments and 
Potential Savings.................................................................................................................59 
Indian Health Service Cost Statement for Fiscal Year 2005.....................................................59 
HHS OIG Semiannual Report to Congress  xi  Table of Contents 
Fall 2009  Followup of Procurements Made by the National Institutes of Health for the 
Department of Defense........................................................................................................60 
Superfund Financial Activities at the National Institute of Environmental Health 
Sciences...............................................................................................................................60 
Public Health Related Legal Actions and Investigations......................................61 
Health Education Assistance Loan Defaults..............................................................................61 
Public Health Related Investigations.........................................................................................62 
Human Services Related Reports............................................................................63 
Title IV-E Adoption Assistance Payments in Florida...............................................................63 
Title IV-E Training Costs in Missouri.......................................................................................63 
Office of Community Services Corrective Actions Resulting From a Government 
Accountability Office Review.............................................................................................64 
Child Support Enforcement.......................................................................................................64 
Child Support Task Forces.........................................................................................................64 
Child Support Investigations......................................................................................................64 
Departmentwide Issues.............................................................................................65 
Department of Health and Human Services Employee Travel Cards:  Usage and 
Internal Controls..................................................................................................................65 
Non-Federal Audits....................................................................................................................66 
Resolving Recommendations...................................................................................67 
Legislative and Regulatory Review.........................................................................67 
Employee Fraud and Misconduct............................................................................68 
Appendix A:   Fiscal Year 2009 Savings Achieved Through Implementation of 
Recommendations in Audits and Evaluations........................................................69 
Appendix B:   Resolving Recommendations.................................................................75 
Table 1:  Reports With Questioned Costs..................................................................................75 
Table 2:  Funds Recommended To Be Put to Better Use.........................................................76 
End Notes to Tables 1 and 2......................................................................................................77 
Appendix C:   Reporting Requirements of the Inspector General Act of 1978, as 
Amended....................................................................................................................83 
Appendix D:   Status of Public Proposals for New and Modified Safe Harbors to the  
Anti-Kickback Statute..............................................................................................85 
Appendix E:   Summary of Sanctions Authorities.......................................................87 
Program Exclusions....................................................................................................................87 
Patient Dumping.........................................................................................................................87 
Civil Monetary Penalties Law....................................................................................................88 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities.........................88 
HHS OIG Semiannual Report to Congress  xii  Table of Contents 
Fall 2009  Appendix F:   Acronyms and Abbreviations................................................................91 
 
NOTE:  Summaries of OIG audit and evaluation reports in this publication contain 
rounded figures.  Monetary amounts in case narratives are rounded to the next lower 
dollar, where appropriate.
HHS OIG Semiannual Report to Congress  xiii  Table of Contents 
Fall 2009  Centers for Medicare & Medicaid Services  
The Office of Inspector General (OIG) allocates about 80 percent of its resources to work 
related to the Centers for Medicare & Medicaid Services (CMS), which administers the 
following programs:   
  Medicare, which provides health insurance for people 65 years of age or older, 
people younger than 65 years old with certain disabilities, and people of any 
age with end stage renal disease.  In fiscal year (FY) 2008, Medicare served 
an estimated 45 million enrollees at a cost of more than $460.9 billion.1  
Medicare has four parts:  Part A (Hospital Insurance), which helps cover 
inpatient care in hospitals, including critical access hospitals, skilled nursing 
facilities (SNF), and hospice and certain home health care; Part B 
(Supplementary Medical Insurance), which helps pay for physician services, 
outpatient care, and other medical services that Part A does not cover, such as 
certain services offered by physical and occupational therapists; Part C 
(Medicare Advantage (MA)), which offers a range of prepaid managed health 
care choices; and Part D (the Medicare Prescription Drug Benefit), which 
provides an optional prescription drug benefit to individuals enrolled in 
Medicare, generally through private prescription drug plans (PDP).   
  Medicaid, a joint Federal-State program, supports States coverage of medical 
care and other support services for low-income individuals.  In FY 2008, the 
enrollment for Medicaid was estimated at 48.2 million beneficiaries; total 
Federal and State outlays were approximately $352 billion, of which the 
Federal share was $201.4 billion.   
  The Childrens Health Insurance Program (CHIP), a joint Federal-State 
program established in 1997 under Title XXI of the Social Security Act, 
provides health insurance for children who do not qualify for Medicaid but 
whose families are not able to afford private coverage.  In FY 2008, CHIP 
served 7.4 million beneficiaries at a Federal cost of $6.9 billion.   
OIGs focus on these health care programs reflects the spending of the Department of 
Health and Human Services (HHS):  CMS expenditures account for more than 80 percent 
of the Departments budget.  OIGs focus is also rooted in legislative mandates and 
funding sources, including the following:   
  The Health Insurance Portability and Accountability Act of 1996 (HIPAA), 
which established the Health Care Fraud and Abuse Control program 
(HCFAC) under the direction of the Attorney General and the Secretary of 
                                                 
1 The $460.9 billion figure represents total outlays for Medicare health care and program administrative 
overhead (the latter being in the $6 billion range for FY 2008).  Lower Medicare outlay estimates found in 
budget documents typically subtract particular income items classified as offsetting receipts in the Federal 
budget, mainly from Part B premiums.  Medicare premiums (Parts A, B, and D) go directly into one of two 
pertinent trust funds. 
HHS OIG Semiannual Report to Congress  1  Centers for Medicare & Medicaid Services 
Fall 2009  HHS to combat waste, fraud, and abuse in the Medicare and Medicaid 
programs.  HCFAC funding constitutes a major portion of OIGs annual 
operating budget and must be used for work related to Medicare and 
Medicaid. 
  The Deficit Reduction Act of 2005 (DRA), which provides OIG annual 
funding of $25 million in FYs 2006  2010 to undertake fraud and abuse 
control activities related to the Medicaid program. 
  The American Recovery and Reinvestment Act of 2009 (Recovery Act), 
which provides OIG $31.25 million in FY 2009, to remain available through 
FY 2011, for activities that ensure the proper expenditure of Medicaid funds. 
This chapter on CMS-related work summarizes OIGs findings and recommendations 
related to the Medicare, Medicaid, and CHIP programs and provides examples of our 
outreach efforts, administrative sanctions, and criminal and civil enforcement activities.   
Medicare Part A and Part B Reports 
Hospitals:  Oxaliplatin Claims Billed by Hospitals  
For the 88 payments that we reviewed, 10 hospitals billed a Medicare contractor for the 
incorrect number of service units of oxaliplatin, a chemotherapy drug used to treat 
colorectal cancer.  As a result, the hospitals received overpayments totaling $2.2 million 
during calendar years (CY) 2004 and 2005.  These overpayments occurred primarily 
because the hospitals did not update their systems following a change in Medicare billing 
guidance.   
We recommended that the contractor recover the $2.2 million in overpayments to 
hospitals.  The contractor agreed with our finding and recommendation and said that it 
had recouped all of the outstanding provider overpayments.  (A-05-09-00010) 
Hospitals:  Interrupted Stays at Inpatient Rehabilitation Facilities  
Inpatient rehabilitation facilities (IRF) did not always bill correctly for interrupted stays 
with discharge dates during CYs 2004 and 2005.  Our nationwide computer match 
showed that 448 IRFs billed incorrectly for 986 interrupted stays during that period.  
If a Medicare inpatient is discharged from an IRF and returns to the same IRF within 
3 consecutive calendar days, the IRF should combine the interrupted stay into a single 
claim and receive a single discharge payment. 
We determined that the correct value of the stays was $17.5 million, rather than the 
$21.7 million that the IRFs billed.  As a result, Medicare made net overpayments of 
$4.2 million to the IRFs.  The payment errors occurred because the IRFs did not have the 
necessary controls to identify or correctly bill interrupted stays.  Additionally, until 
April 2005, CMSs Common Working File did not have an edit designed to identify all 
interrupted stays billed as two or more claims.  After its adoption, the new Common 
HHS OIG Semiannual Report to Congress  2  Centers for Medicare & Medicaid Services 
Fall 2009  Working File edit effectively detected incorrectly billed interrupted stays and prevented 
overpayments to IRFs. 
We recommended that CMS direct its fiscal intermediaries to recover the $4.2 million in 
net overpayments that our review identified.  CMS concurred with our recommendation.  
(A-01-08-00502) 
Hospitals:  A Pennsylvania Hospitals Reported Wage Data  
We found that a Pennsylvania hospital did not fully comply with Medicare requirements 
for reporting wage data in its FY 2006 Medicare cost report.  Under the acute-care 
hospital inpatient prospective payment system, CMS adjusts the Medicare base rate paid 
to participating hospitals by the wage index applicable to the area in which each hospital 
is located.  CMS updates the wage indexes annually based on hospitals wage data 
reported 4 years earlier. 
We found that the hospital overstated its wage data by $1.1 million and 1,977 hours.  
Our correction of the hospitals errors decreased the average hourly wage rate 
approximately 0.83 percent.  Because the hospital did not revise the wage data in its cost 
report before CMS computed the FY 2009 wage indexes, the FY 2009 wage index for the 
hospitals statistical area was overstated, resulting in overpayments of the hospitals that 
use this wage index. 
We recommended that the hospital implement review and reconciliation procedures to 
ensure that the wage data reported in future Medicare cost reports are accurate, 
supportable, and in compliance with Medicare requirements.  The hospital stated that it 
would do so.  (A-03-08-00019)   
Hospitals:  High-Dollar Payments for Inpatient Services  
During the semiannual period, we issued two reports on high-dollar payments that fiscal 
intermediaries (intermediaries) made to hospitals for inpatient services claimed under 
Medicare Part A.  We defined high-dollar payments as those that were $200,000 or more 
each.  CMS contracts with intermediaries to, among other functions, process and pay 
Medicare Part A (inpatient) claims submitted by providers. 
The results of our audits follow. 
 Intermediary for Illinois, Indiana, Kentucky, and Ohio  Of the 303 high-dollar 
payments that the intermediary made to hospitals for inpatient services for CYs 2004 
through 2006, 264 payments included net overpayments totaling $7.4 million.  At the 
start of our audit, hospitals had refunded overpayments totaling $2.8 million for 4 claims 
but had not refunded net overpayments totaling $4.7 million for 260 claims.  Contrary to 
Federal guidance, hospitals had reported an inaccurate number of billing units for 
blood-clotting factor, incorrect diagnosis and procedure codes, and excessive charges that 
resulted in inappropriate payments. 
HHS OIG Semiannual Report to Congress  3  Centers for Medicare & Medicaid Services 
Fall 2009  We recommended that the intermediary (1) recover the $4.7 million in identified net 
overpayments, (2) use the results of this audit in its provider education activities related 
to data entry procedures and proper documentation, and (3) consider implementing 
controls to identify and review all high-dollar payments for inpatient services.  The 
intermediary agreed with our recommendations.  (A-05-08-00028) 
 Intermediary for All States Except New York  Of the 249 high-dollar payments 
that another intermediary made to hospitals for inpatient services for CYs 2004 through 
2006, 221 payments included net overpayments totaling $3.9 million.  The hospitals, 
which had not refunded this amount as of the start of our audit, received the 
overpayments by reporting the same types of incorrect information as noted above. 
We recommended that the intermediary (1) recover the $3.9 million in identified net 
overpayments, (2) use the results of this audit in its provider education activities related 
to data entry procedures and proper documentation, and (3) consider implementing 
controls to identify and review all high-dollar payments for inpatient services.  In 
comments on our draft report, the contractor described corrective actions that it had taken 
or planned to take to implement our recommendations.  (A-05-08-00061)  
Home Health Services:  Medicare and Medicaid Home Health Payments for 
Skilled Nursing and Home Health Aide Services 
Payment policies for home health services create vulnerabilities that may lead to both 
Medicare and Medicaid paying for the same skilled nursing and home health aide 
services.  The claims information available to Medicaid payers does not enable them to 
ensure the appropriateness of payments.   
Medicare pays home health providers through the prospective payment system (PPS) for 
services provided during episodes of care.  For Medicaid services, we limited our review 
to fee-for-service claims.  Medicaid is the payer of last resort; therefore, Medicaid should 
pay for home health services only if Medicare or another payer does not pay for them.  
During the period reviewed, we identified Medicaid payments amounting to $3.3 million 
for 68,765 skilled nursing and home health aide claims potentially coverable by 
Medicare.  We reviewed a sample of beneficiaries case records to determine whether the 
Medicaid payments were appropriate based on Medicaid and Medicare policies.  A 
companion report entitled Duplicate Medicaid and Medicare Home Health Payments:  
Medical Supplies and Therapeutic Services (OEI-07-06-00640) describes the extent to 
which both Medicare and Medicaid paid home health providers for the same medical 
supplies and therapeutic services.   
We found that  Medicaid paid nearly $2 million for skilled nursing and home health aide 
services that were also vulnerable to being paid by Medicare in four of five States.  
Problems with coordination of care between providers and a lack of clarity in the 
Medicare coverage policy regarding billing for unskilled and skilled nursing services 
contributed to vulnerabilities.  Claims data do not contain sufficient information to 
determine the appropriateness of Medicare coverage, limiting States abilities to prevent 
Medicaid payments for services covered by Medicare.   
HHS OIG Semiannual Report to Congress  4  Centers for Medicare & Medicaid Services 
Fall 2009  From our findings, we concluded that CMS could consider methods to better integrate 
Medicare and Medicaid claims processing to prevent duplicate payments without relying 
on medical review and provide greater clarity in the CMS Medicare Benefit Policy 
Manual to explain that unskilled services provided during a skilled nursing visit paid 
under the PPS are included in the PPS payment.  (OEI-07-06-00641) 
Hospice Care:  Compliance With Coverage Requirements for Beneficiaries in 
Nursing Facilities  
We found that 82 percent of hospice claims for beneficiaries in nursing facilities (NF) did 
not meet at least one Medicare coverage requirement.  Medicare paid approximately 
$1.8 billion for these claims.  More specifically, 33 percent of claims did not meet 
election requirements, and 63 percent did not meet plan of care requirements.  For 
31 percent of claims, hospices provided fewer services than outlined in beneficiaries 
plans of care.  For 4 percent of claims, the certifications were missing or did not meet one 
or more Federal requirements.  
The Medicare hospice benefit allows a beneficiary with a terminal illness to forego 
curative treatment for the illness and instead receive palliative care, which is the relief 
of pain and other uncomfortable symptoms.  Based on the findings in this report, we 
recommended that CMS educate hospices about the coverage requirements and their 
importance in ensuring quality of care.  We also recommended that CMS provide tools 
and guidance to help hospices meet the coverage requirements and that it strengthen its 
monitoring practices regarding hospice claims.  CMS concurred with our 
recommendations and stated that it has educated providers about the requirements of the 
new Conditions of Participation (CoP), issued June 5, 2008, and has issued new Hospice 
Program Interpretive Guidance; a tool used by providers and State Survey agencies to 
determine compliance with the CoPs.  We continue to recommend that CMS strengthen 
its monitoring practices regarding hospice claims. 
This report is one in a series of four reports conducted by OIG that examine the hospice 
benefit for NF residents.  It is based on data from a medical record review of a stratified 
random sample of hospice claims for beneficiaries in NFs in 2006.   
(OEI-02-06-00221)   
Hospice Care:  Services Provided to Beneficiaries Residing in Nursing 
Facilities 
In 2006, 31 percent of Medicare hospice beneficiaries resided in NFs.  Medicare paid 
$2.59 billion for their hospice care, at an average of $960 per week for each beneficiary.  
Hospices most commonly provided nursing, home health aide, and medical social 
services.  They furnished an average of 4.2 visits per week per beneficiary for these three 
services combined.  They also commonly provided drugs.   
Medicare spending on hospice care and the number of beneficiaries receiving it have 
increased significantly in recent years.  Previous OIG work has raised questions about the 
hospice benefit for NF residents.  However, little subsequent research has been done to 
HHS OIG Semiannual Report to Congress  5  Centers for Medicare & Medicaid Services 
Fall 2009  examine hospice care for these beneficiaries and almost no beneficiary-specific data 
exist.   
This memorandum report found that hospices provided nursing services to beneficiaries 
for 96 percent of claims, home health aide services for 73 percent of claims, and medical 
social services for 68 percent of claims.  Drugs were provided to beneficiaries for 
96 percent of claims.  In addition, nursing services were provided at an average of 
1.7 times per week, home health aide services at an average of 2.2 times per week, and 
medical social services at an average of 1.7 times per month. 
This memorandum report is one in a series of four reports prepared by OIG that examine 
the hospice benefit for NF residents.  It is based on data from a medical record review of 
a stratified random sample of hospice claims for beneficiaries in NFs in 2006.  The report 
also uses claims data for all Medicare beneficiaries who received hospice care in 2006.  
This report contained no recommendations.  (OEI-02-06-00223) 
End Stage Renal Disease:  Separately Billed Laboratory Tests for Medicare 
Beneficiaries  
Medicare claims paid by an intermediary for laboratory tests that dialysis facilities 
provided to end stage renal disease (ESRD) beneficiaries did not always comply with 
Medicare ESRD payment requirements.  Under the composite rate method of paying for 
dialysis services provided to ESRD beneficiaries, CMS specifies the laboratory tests that 
are included in the composite rate and the frequencies at which the tests are reimbursable 
as part of that rate.  For 270 of the 360 beneficiary quarters that we sampled, dialysis 
facilities incorrectly billed and were reimbursed $11,000 for ESRD-related laboratory 
tests.  Based on our sample results, we estimated that the intermediary overpaid dialysis 
facilities $3.9 million for laboratory tests provided to ESRD beneficiaries during 
CYs 20042006. 
We recommended that the intermediary coordinate with CMS and other involved 
Medicare contractors to (1) conduct postpayment medical record reviews of claims 
submitted by dialysis facilities that separately billed ESRD laboratory tests to identify 
and recover overpayments estimated at $3.9 million and (2) educate dialysis facilities 
about Medicare ESRD billing requirements related to the types of errors identified in our 
review.  The intermediary agreed with our recommendations but noted that it no longer 
has jurisdiction over 2 of the 12 contracts covered by our review.  We modified our 
recommendations accordingly and provided a copy of our report to the other contractor.   
(A-01-07-00522) 
High-Dollar Payments:  Medicare Part B Claims  
In our review of high-dollar payments that a carrier made for services claimed under 
Medicare Part B, we defined high-dollar payments as those that were $10,000 or more 
each.  CMS contracts with carriers to, among other things, process and pay Medicare Part 
B claims submitted by physicians and medical suppliers. 
HHS OIG Semiannual Report to Congress  6  Centers for Medicare & Medicaid Services 
Fall 2009  Of the 100 sampled high-dollar Part B payments that a carrier made for services supplied 
during CYs 2004 through 2006, 23 payments included net overpayments totaling 
$118,000.  At of the start of our audit, $96,000 for 20 payments had not been refunded.  
Based on the sample results for our 3-year audit period, we estimated that the contractor 
made 402 overpayments totaling $2.06 million to physicians and suppliers in Illinois, 
Michigan, Minnesota, and Wisconsin for Part B services. 
We recommended that the carrier (1) recover the $96,000 in identified overpayments, 
(2) review the 1,647 remaining high-dollar payments with potential overpayments 
estimated at $1.9 million ($2.06 million less $118,000 overpaid) and work with the 
suppliers that claimed these services to recover any overpayments, (3) consider reviewing 
high-dollar payments made for services supplied after CY 2006 and recover any 
additional overpayments, and (4) improve internal controls related to manual claim 
processing.  The carrier described corrective actions that it had taken or planned to take to 
implement our recommendations.  (A-05-08-00022) 
Physicians:  Evaluation and Management Services Included in Eye and 
Ocular Adnexa Global Surgery Fees  
In this CMS-requested review, we found that eye global surgery fees often did not reflect 
the number of evaluation and management (E&M) services that physicians provided to 
Medicare beneficiaries during global surgery periods.  Global surgery fees include 
payment for a surgical service and the related preoperative and postoperative E&M 
services provided during the global surgery period.  The period for major surgeries 
includes the day before the surgery, the day of the surgery, and the 90 days immediately 
following the day of the surgery.  In determining a global surgery fee, CMS estimates the 
number of E&M services that a physician provides to a typical beneficiary during the 
global surgery period. 
Of the 300 global surgeries that we sampled, 240 did not reflect the number of E&M 
services actually provided.  Based on our sample results, we estimated that Medicare paid 
$97.6 million for E&M services that were included in eye global surgery fees but not 
provided during the global surgery periods in CY 2005.  The global surgery fees did not 
reflect the number of E&M services provided to beneficiaries because CMS had not 
adjusted or recently adjusted the relative value units for most of the sampled surgeries. 
We recommended that CMS consider (1) adjusting the estimated number of E&M 
services within eye global surgery fees to reflect the number of E&M services actually 
being provided to beneficiaries, which may reduce payments by an estimated 
$97.6 million, or (2) using the financial results of this audit, in conjunction with other 
information, during the annual update of the physician fee schedule.  CMS acknowledged 
the merit of our findings but believed that it would be prudent to conduct further analysis 
before proposing any changes in the number of E&M services assigned to eye surgeries.  
(A-05-07-00077) 
HHS OIG Semiannual Report to Congress  7  Centers for Medicare & Medicaid Services 
Fall 2009  Physicians:  Place-of-Service Coding 
Based on our sample results, we estimated that carriers nationwide overpaid physicians 
$20.2 million for incorrectly coded services provided during the 2-year period that ended 
December 31, 2006.  The overpayments occurred because physicians did not always 
correctly code the office place of service on Medicare claims submitted to and paid by 
Part B carriers.  The correct place-of-service code ensures that Medicare does not 
incorrectly reimburse the physician for the overhead portion of the payment if the service 
was performed outside the physicians office.  For 129 of the 150 services that we 
sampled, physicians incorrectly coded the claims by using the office place-of-service 
code for services that were actually performed in outpatient hospitals or ambulatory 
surgical centers, resulting in approximately $7,000 in overpayments.   
We recommended that CMS instruct its Part B carriers to (1) recover the $7,000 in 
overpayments for the sampled services, (2) review our information on the 857,761 
nonsampled services to identify services estimated at $20.2 million that were potentially 
billed with incorrect place-of-service codes and work with the physicians who provided 
the services to recover any overpayments, (3) strengthen their education process and 
reemphasize to physicians and their billing agents the importance of correctly coding the 
place of service and the need for internal controls to prevent Medicare billings with 
incorrect place-of-service codes, and (4) work with fiscal intermediaries and program 
safeguard contractors to develop a data match that will identify physician services at high 
risk for place-of-service miscoding and recover any identified overpayments.  CMS 
concurred with our recommendations and described the actions that it planned to take to 
implement them.  (A-01-08-00528)   
Physicians:  Prevalence and Qualifications of Nonphysicians Who 
Performed Medicare Physician Services  
In the first 3 months of 2007, when Medicare allowed physicians more than 24 hours of 
services in a day, nonphysicians performed half of the services and 21 percent of these 
services were performed by unqualified nonphysicians.  Medicare Part B pays for 
services that are billed by physicians but are performed by nonphysicians under the 
incident to rule.  Little is known about Medicare services performed incident to the 
professional services of a physician because physicians are not required to identify them 
on their Medicare claims.   
To identify the services not personally performed by physicians, we sampled claims from 
physicians for whom Medicare allowed more than 24 hours of services in a single day in 
the first 3 months of 2007.  Some of the services that were performed by unqualified 
nonphysicians were invasive services, involving entry into the body by incision or 
insertion of an instrument.  Our primary criteria for determining whether nonphysicians 
were qualified to perform the services were State laws and regulations.   
We recommended that CMS revise the incident to rule.  The rule should require that 
physicians who do not personally perform the services they bill to Medicare ensure that 
no persons except (1) licensed physicians personally perform the services or 
HHS OIG Semiannual Report to Congress  8  Centers for Medicare & Medicaid Services 
Fall 2009  (2) nonphysicians who have the necessary training, certification, and/or licensure, 
pursuant to State laws, State regulations, and Medicare regulations, personally perform 
the services under the direct supervision of licensed physicians.  Further, CMS should 
require physicians who bill services to Medicare that they do not personally perform to 
identify the services on their Medicare claims by using a service code modifier.  The 
modifier would enable CMS to monitor claims to ensure that physicians are billing for 
services performed by nonphysicians with appropriate qualifications.  Finally, CMS 
should take appropriate action to address the claims for services that we detected that 
(1) were billed by physicians and performed by nonphysicians that were, by definition, 
not incident to services and (2) were for rehabilitation therapy services performed by 
nonphysicians who did not have the training of a therapist.   
CMS concurred with two of our three recommendations.  CMS did not concur with our 
recommendation to create a service code modifier to identify physicians claims for 
services that physicians do not personally perform.  We continue to recommend that 
CMS have the ability to identify and monitor these claims.  CMS stated it would study 
the operational issues involved in implementing the recommendation.  
(OEI-09-06-00430)   
Chiropractors:  Inappropriate Medicare Payments for Chiropractic Services  
In 2006, Medicare inappropriately paid a total net $178 million (out of $466 million) for 
chiropractic claims for services that medical reviewers determined to be maintenance 
therapy, miscoded, or undocumented.  These claims represent 47 percent of chiropractic 
claims associated with beneficiaries receiving more than 12 chiropractic services within 
a year from the same chiropractor.  OIG studies published in 1986, 1998, and 1999 found 
that significant vulnerabilities existed in connection with chiropractic claims, particularly 
concerning Medicare payments for maintenance therapy.  Each of these studies 
recommended frequency edits or caps on the number of chiropractic claims allowed.  In 
2005, OIG conducted an additional study that found that 40 percent of allowed 
chiropractic claims in 2001 were for maintenance therapy and that when chiropractors 
provide more than 12 services per year to a beneficiary, the likelihood that some of those 
services were maintenance therapy increased greatly.   
This study found that efforts to stop payments for maintenance therapy have been largely 
ineffective.  Efforts to require a new modifier, educate chiropractors, and implement 
frequency-based controls or medical reviews have not been successful as carriers 
continue to report high error rates.  To appropriately identify active/corrective treatment 
and thereby distinguish it from maintenance therapy, it is useful to identify the start of a 
new treatment episode.  Because claims data do not indicate when a treatment episode 
began, the expectation of functional improvement can be determined only from a 
complete medical review of the treatment episode.  We noted that the Comprehensive 
Error Rate Testing (CERT) paid claims error rate used by CMS is based on a review of a 
single claim, which limits its ability to detect maintenance therapy and may 
underestimate errors in claims made for chiropractic services.  Finally, we found that 
chiropractors often do not comply with the Medicare Benefit Policy Manual 
documentation requirements. 
HHS OIG Semiannual Report to Congress  9  Centers for Medicare & Medicaid Services 
Fall 2009  Based on these findings, we recommended that CMS (1) implement and enforce policies 
to prevent future payments for maintenance therapy by implementing a new modifier for 
chiropractic claims to indicate the start of a new episode and/or a cap on allowed 
chiropractic claims; (2) review treatment episodes that include all claims from the initial 
visit to the sampled claim to strengthen the ability of the CERT to detect errors in 
chiropractic claims; (3) ensure that chiropractic claims are not paid unless documentation 
requirements are met; and (4) take appropriate action regarding the undocumented, 
medically unnecessary, and miscoded claims identified in our sample. 
CMS agreed with the second recommendation and described actions it would take to 
address the fourth recommendation.  CMS did not indicate agreement or disagreement 
with the first and third recommendations, but did describe its medical review process as it 
relates to documentation requirements and indicated no change in future practice to 
prevent claims without required documentation from being paid in error.   
(OEI-07-07-00390) 
Imaging Services:  Medicare Part B Billing for Ultrasound  
We found that in 2007, 20 high-use counties accounted for 16 percent of Part B spending 
on ultrasound services despite having only 6 percent of Medicare beneficiaries.  We also 
found that 3.2 million claims, or nearly one in five nationwide, had characteristics that 
raise concern about whether the claims were appropriate.  These claims represent 
$403 million in Part B charges.   
Medicare Part B covers ultrasound services provided in ambulatory settings, such as 
doctors offices and testing centers.  In 2007, Part B covered about 17 million ultrasound 
services at a cost of over $2 billion.  Previous OIG work has raised concern about the 
growth in other types of imaging covered under Part B and found that high geographic 
concentrations of suppliers or services may indicate weaknesses in Medicares program 
safeguards.  In this review, we found that average per-beneficiary spending on ultrasound 
in high-use counties was over three times that for beneficiaries in the rest of the country.  
We also found that certain suppliers billed for a large number of ultrasound claims with 
questionable characteristics. 
We recommended that CMS monitor ultrasound claims data to detect questionable claims 
and review them prior to payment.  We also recommended that CMS take action when 
suppliers bill for high numbers of questionable claims, including reviewing their claims 
to ensure that they are legitimate prior to payment and taking steps to revoke the 
Medicare billing numbers of suppliers that submit fraudulent claims.  CMS concurred 
with both of our recommendations and described actions it would take to address them.  
(OEI-01-08-00100) 
Laboratories:  Variation in the Clinical Laboratory Fee Schedule  
In 2007, 97 percent of lab tests had at least one carrier rate that varied from the national 
limit amount (NLA).  However, 83 percent of all carrier rates were at the NLA and 
89 percent of laboratory test claims were paid at the NLA.  
HHS OIG Semiannual Report to Congress  10  Centers for Medicare & Medicaid Services 
Fall 2009  Medicare Part B payments for laboratory tests are determined by fee schedules originally 
established by carriers in 1985.  These carrier fee schedules are collectively known as the 
Clinical Laboratory Fee Schedule.  Each laboratory test has a congressionally mandated 
NLA that caps payments at a percentage of the median carrier rate.  Currently, the NLA 
for laboratory tests is 74 percent of the median carrier rate for each laboratory test.   
In establishing the Clinical Laboratory Fee Schedule in 1985, carriers used laboratory 
charge data that may not have reflected laboratory tests costs.  Since then, methods used 
to update carrier rates have incrementally added to the variation in carrier rates.  As a 
result, carrier rates in 2007 were inconsistent both across carriers and within each carrier.  
The variation did not appear to reflect geographic differences in cost. 
Carriers pay different rates for the same laboratory test, so Medicare payments also vary.  
Medicare paid over $3.4 billion for laboratory tests in 2007.  Medicare payments would 
have been $3.5 billion if all tests had been paid at the NLA or $2.4 billion if the NLA had 
been reduced to 50 percent of the median carrier rate.  Setting all carrier rates at 
73 percent of the median carrier rate would have eliminated variation without a change in 
overall Medicare payments. 
Based on these findings, we recommended that CMS seek legislative authority to 
establish a new process for setting accurate and reasonable payment rates for laboratory 
tests.   
In its comments to our report, CMS stated that it did not concur with our recommendation 
to seek legislation that would allow it to set accurate and reasonable payment rates for lab 
tests.  However, CMS stated that it would consider the recommendation and that it was 
committed to improving payment policies for lab tests and to refining methodologies for 
establishing new payment rates.  CMS explained that the Presidents budget for fiscal 
year 2010 does not include any proposals to amend the payment methodology for clinical 
laboratory tests.  We encourage CMS to pursue legislation that would allow it to set 
accurate and reasonable payment rates for lab tests.  (OEI-05-08-00400) 
Ambulance Services:  Transportation Provided to Beneficiaries in Skilled 
Nursing Stays Covered Under Medicare Part A  
Based on our sample results, we estimated that Medicare Part B carriers made a total of 
$12.7 million in potential overpayments to ambulance suppliers for transportation 
provided to beneficiaries in Part A SNF stays in CY 2006.  Medicare Part A pays SNFs 
through prospective, per diem, case-mix adjusted rates that cover virtually all of their 
costs for furnishing services.  Under this prospective payment system, some ambulance 
transportation provided by outside suppliers to SNF residents is included in the SNFs 
Part A payments and is subject to consolidated billing.  Therefore, Medicare Part B 
payments that suppliers receive for such transportation are overpayments.   
Of the 114 claims that we reviewed, 61 claims totaling $27,000 were incorrectly billed to 
Medicare Part B.  As a result, Medicare paid twice for the ambulance transportation:  
HHS OIG Semiannual Report to Congress  11  Centers for Medicare & Medicaid Services 
Fall 2009  once to the SNF under the Part A prospective payment system and again to the 
ambulance supplier under Part B. 
We recommended that CMS instruct its carriers to recover the $27,000 in overpayments 
for the 61 incorrectly billed claims that we identified and review the claims that we did 
not review, which represent $12.7 million in potential overpayments; provide additional 
guidance for suppliers and SNFs on its Web site and instruct its carriers and fiscal 
intermediaries to provide guidance to suppliers and SNFs to ensure compliance with 
consolidated billing requirements; and either establish additional edits in its Common 
Working File to prevent and detect Part B overpayments for ambulance transportation or 
instruct its carriers to develop a postpayment data match and recover any identified 
overpayments.  CMS concurred with our recommendations.  (A-01-08-00505)   
Durable Medical Equipment:  Independent Contractors Review of Durable 
Medical Equipment Claims From the Fiscal Year 2008 Comprehensive Error 
Rate Testing Program   
This audit, conducted at the request of the Senate Committee on Finance, found that an 
independent medical review contractor complied with its CMS contract in performing 
medical reviews of a subsample of claims from the FY 2008 durable medical equipment 
(DME) sample.  However, the contractors results did not provide assurance that the 
FY 2008 DME error rate was accurate.  The CERT program was established to produce a 
Medicare fee-for-service error rate, which CMS must submit to Congress annually.  To 
determine the error rate for FY 2008, CMSs CERT contractor conducted medical record 
reviews of a random sample of paid claims.  The medical review contractor reviewed the 
CERT contractors payment determinations.   
The medical review contractor found that 175 of the 250 sampled claims were in error, 
significantly exceeding the 23 errors found by the CERT contractor.  After further 
review, the CERT contractor agreed with 17 of the medical review contractors additional 
error determinations (for a total of 40 error determinations) but disagreed with the 
remaining 135 error determinations.  Most of the medical review contractors error 
determinations were based on insufficient documentation to establish medical necessity.   
We recommended that CMS require the CERT contractor to (1) develop a corrective 
action plan to reduce its number of incorrect determinations and (2) perform a complex 
medical review by obtaining and reviewing all medical records from all relevant suppliers 
to support the medical necessity of DME items.  CMS concurred with our findings and 
recommendations and outlined the steps that it had taken to begin implementing our 
recommendations.  (A-01-09-00500) 
Durable Medical Equipment:  Supplier Acquisition Costs and Services for 
Power Wheelchairs   
Medicare and its beneficiaries paid almost four times the average amount paid by 
suppliers to acquire standard power wheelchairs during the first half of 2007.  Suppliers 
purchased standard power wheelchairs for an average of $1,048 and reported performing 
HHS OIG Semiannual Report to Congress  12  Centers for Medicare & Medicaid Services 
Fall 2009  an average of five services in conjunction with supplying them.  Because Medicare 
allowed an average of $4,018 for standard power wheelchairs, Medicare and its 
beneficiaries paid suppliers an average of $2,970 beyond the suppliers acquisition cost to 
perform an average of five services and cover supplier business costs.  The beneficiaries 
average copayments covered 77 percent of the suppliers average acquisition cost for 
standard power wheelchairs.  Medicare and its beneficiaries paid almost two times the 
average amount paid by suppliers to acquire complex rehabilitation power wheelchair 
packages during the first half of 2007.  Suppliers purchased complex rehabilitation power 
wheelchair packages for an average of $5,880 and reported performing an average of 
seven services in conjunction with supplying them.  Because Medicare allowed an 
average of $11,507 for complex rehabilitation power wheelchair packages, Medicare and 
its beneficiaries paid suppliers an average of $5,627 beyond the suppliers acquisition 
cost to perform an average of seven services and cover supplier business costs.   
We collected documentation of the prices suppliers paid to purchase a sample of standard 
and complex rehabilitation power wheelchairs that Medicare beneficiaries received in the 
first half of 2007.  We also collected documentation of the services performed prior to, 
during, and over an average of 9 months after the delivery of the power wheelchairs. 
Medicares average allowed amount for standard power wheelchairs in the first half of 
2007 ($4,018) was 383 percent of suppliers average acquisition cost.  In comparison, 
Medicares payment under the Competitive Bidding Acquisition Program ($3,073) would 
have been 293 percent of suppliers average acquisition cost.  Although Medicares fee 
schedule amount was reduced to $3,641 to offset the Competitive Bidding Acquisition 
Programs delay, the 2009 fee schedule amount exceeds the average competitively bid 
price by $568.   
Medicares fee schedule amounts include reimbursement for the acquisition cost of the 
power wheelchair and also for supplier services, such as assembling and delivering the 
power wheelchair and educating the beneficiary about its use.  We found that suppliers 
performed most services prior to and during, rather than after, the wheelchairs delivery.  
Suppliers of complex rehabilitation power wheelchair packages reported performing 
twice as many services as suppliers of standard power wheelchairs at times other than the 
day of delivery.  Suppliers reported performing required services most of the time, as 
well as other services as needed.   
We recommended that CMS determine whether Medicares standard and complex 
rehabilitation power wheelchair fee schedule amounts should be adjusted by using 
information from the Competitive Bidding Program, seeking legislation to ensure that fee 
schedule amounts are reasonable and responsive to market changes, or using its inherent 
reasonableness authority.  CMS concurred with our recommendation and noted that the 
report provided valuable insight on suppliers average acquisition costs for standard and 
complex rehabilitation power wheelchairs. (OEI-04-07-00400)   
HHS OIG Semiannual Report to Congress  13  Centers for Medicare & Medicaid Services 
Fall 2009  Durable Medical Equipment:  Miscoded Claims for Power Wheelchairs  
Eight percent of Medicare standard and complex rehabilitation power wheelchair claims 
from the first half of 2007 were miscoded.  The suppliers billed Medicare for these claims 
using procedure codes that did not match the power wheelchairs model information.   
We discovered the coding errors identified in this report while reviewing power 
wheelchair model information on manufacturer invoices as part of a separate evaluation 
to determine suppliers costs to purchase these chairs.  Power wheelchairs are assigned to 
procedure codes based on the manufacturers model information.  However, the supplier 
is not required to include the model information on the claim when requesting Medicare 
reimbursement.   
Three percent of standard and complex rehabilitation power wheelchair claims were 
upcoded and 4 percent were downcoded.  One percent of claims were miscoded but had 
insufficient model information to categorize as either upcoded or downcoded.  Complex 
rehabilitation power wheelchair claims were miscoded more often than standard power 
wheelchair claims (23 percent and 7 percent, respectively).  Complex rehabilitation 
power wheelchair claims were also upcoded more often than standard power wheelchair 
claims (12 percent and 3 percent, respectively).  In the first half of 2007, suppliers 
submitted over 13 times more standard than complex rehabilitation power wheelchair 
claims.  Therefore, the greater number of standard power wheelchair claims strongly 
influenced the combined error rates.   
Our analysis indicates that suppliers may need further education to determine the correct 
power wheelchair procedure codes to bill Medicare, and that opportunities exist to 
improve CMSs review of power wheelchair claims.  This report contained no 
recommendations.  (OEI-04-07-00403) 
Durable Medical Equipment:  Part B Services During Non-Part A Nursing 
Home Stays 
This report presents findings based on our review of Part B DME payments during 
non-Part A nursing home stays in 2006.  This report stems from the Medicare, Medicaid, 
and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), which mandates 
OIG to monitor Medicare Part B payments during non-Part A nursing home stays.   
We found that $30 million was inappropriately allowed for DME during non-Part A SNF 
stays, most of which were also certified by Medicaid.  Also, we found that nearly 
$11.9 million more was inappropriately allowed by Part B during Medicaid NF stays and 
distinct part nursing home stays providing primarily skilled care.  Further, CMS and 
States reported that they do not maintain a primary level of care designation for nursing 
homes that could facilitate accurate claim submission by suppliers and proper claim 
adjudication by payment contractors.   
Medicare Part A covers nursing home care for up to 100 days in a SNF.  If nursing home 
care is still needed after the 100 days or the beneficiary did not qualify for a Part A 
HHS OIG Semiannual Report to Congress  14  Centers for Medicare & Medicaid Services 
Fall 2009  SNF stay, Medicare Part B may provide coverage for certain medical and other health 
services.  In these situations, the stays are termed non-Part A nursing home stays.  
However, Part B does not pay for DME unless the nursing home qualifies as a 
beneficiarys home.  Because most nursing homes provide primarily skilled care or 
rehabilitation, they are excluded from qualifying as a beneficiarys home.  Only a small 
number of nursing homes certified only for Medicaid, called NFs, or distinct parts of 
nursing homes may qualify as a beneficiarys home.  In contrast, the large number of 
SNFs and dually certified nursing homesthose certified for both Medicare and 
Medicaiddo not qualify as a beneficiarys home.   
To identify inappropriate payments for DME, we used resident assessment data to 
determine all nursing home stays nationwide during 2006.  We then analyzed related 
Medicare claims data for any DME payments during these stays.   
To address these overpayments, we recommended that CMS routinely identify 
non-Part A beneficiary nursing home stays; recoup inappropriate payments identified in 
this report; identify patients entering nursing homes with rented DME; and implement a 
process to identify nursing homes that provide primarily skilled care and make this 
information available to claims processors, nursing homes, and suppliers.  CMS 
concurred with the first two recommendations and agreed with the underlying objectives 
of the other recommendations but suggested alternative approaches using claims 
processing edits to address them.  (OEI-06-07-00100)  
Durable Medical Equipment:  Comparison of Prices for Negative Pressure 
Wound Therapy Pumps 
Suppliers paid an average of $3,604 for new negative pressure wound therapy pump 
models, compared to Medicares purchase price of $17,165.  Medicare reimbursed 
suppliers for these pumps based on this purchase price, which is more than four times the 
average price paid by suppliers.  Medicare reimbursed suppliers $1,716 for these pumps 
each month for the first 3 months.  At this rate, suppliers recouped the average cost of a 
new pump in about 2 months.  Moreover, if a beneficiary were to rent the pump for all of 
the 13 months allowed by Medicare, the beneficiarys coinsurance alone ($3,599) would 
cover almost the entire average cost of a new pump.  These pumps are portable or 
stationary devices used for the treatment of ulcers or wounds that have not responded to 
traditional wound treatment methods. 
When Medicare first started covering pumps in 2001, it covered only one pump model, 
which was both manufactured and supplied by a single manufacturer.  Since then, a 
number of manufacturers have introduced new pump models in the market and are 
charging substantially less for them. 
Our review also found that suppliers purchased three-quarters of the pumps that they 
provided to beneficiaries, while the remaining one-quarter were leased, rented, or 
exchanged.  Finally, we found that suppliers reported not communicating as required with 
almost one-quarter of beneficiaries clinicians.  In the absence of clinician input, 
suppliers cannot determine whether there is a continued medical need for a pump.  
HHS OIG Semiannual Report to Congress  15  Centers for Medicare & Medicaid Services 
Fall 2009  Suppliers generally reported meeting other requirements, such as providing delivery, 
education, as well as maintenance and repairs when needed.   
Based on the findings of this report, we recommended that CMS reduce Medicares 
reimbursement amount for pumps.  CMS should consider the following methods to 
reduce the reimbursement amount:  use its inherent reasonableness authority to reduce the 
reimbursement amount for pumps and include pumps in the second round of the 
Competitive Bidding Acquisition Program.  In addition, CMS should continue to monitor 
the growth of the new pump market.  Lastly, CMS should educate suppliers of new pump 
models on the importance of communication with beneficiaries treating clinicians and 
follow up on the claims that we identified that may be inappropriate.  CMS concurred 
with four of our recommendations and will consider the remaining recommendation 
about including pumps when designing the second round of the Competitive Bidding 
Acquisition Program.  (OEI-02-07-00660) 
Durable Medical Equipment:  Inappropriate Medicare Payments for Pressure 
Reducing Support Surfaces  
Based on a review of medical record documentation and supplier documentation,  
86 percent of group 2 support surface claims for the first half of 2007 did not meet 
Medicare coverage criteria.  This amounted to an estimated $33 million in inappropriate 
payments during that time.  We considered a claim as not meeting Medicare coverage 
criteria if it either (1) did not meet Medicares clinical coverage requirements or (2) did 
not meet Medicares supplier documentation requirements.  
Pressure reducing support surfaces are used for the care or prevention of pressure ulcers.  
Pressure ulcers, also known as bed sores or decubitus ulcers, commonly occur among the 
elderly and among individuals with spinal cord injuries.  Support surfaces are covered 
under Medicare Part B as DME.  CMS categorizes support surfaces into three groups 
based on the complexity of their features.  Group 2 support surfaces is the largest group. 
Based on an independent medical review, we found that 80 percent of group 2 support 
surface claims did not meet Medicares clinical coverage requirements.  In addition, we 
found that 33 percent of claims did not meet supplier documentation requirements.  Over 
three-quarters of the claims that did not meet supplier documentation requirements also 
did not meet Medicares clinical coverage requirements.   
More specifically, 38 percent of the claims were undocumented, 22 percent were 
medically unnecessary, 17 percent had insufficient documentation, and 3 percent had 
other billing errors.  For the claims that did not meet supplier documentation 
requirements, the supplier delivered the support surface before obtaining the physician 
order, the supplier did not have a physician order, the supplier was missing the proof of 
delivery, or the physician order was not dated.   
Last, we found that CMS contractors had limited safeguards in place to prevent improper 
payments for group 2 support surfaces.  In particular, contractors use of the KX 
modifier, which a supplier uses to indicate that a claim meets Medicare coverage criteria 
HHS OIG Semiannual Report to Congress  16  Centers for Medicare & Medicaid Services 
Fall 2009  and that adequate documentation exists, was not successful in flagging inappropriate 
claims.  In addition, none of the CMS contractors conducted any widespread medical 
reviews of support surface claims.  Moreover, only half of the CMS contractors 
responsible for supplier education conducted any educational activities in recent years 
that focused on group 2 support surfaces.   
Based on the findings of this report, we recommended that CMS ensure that claims for 
group 2 support surfaces meet Medicare coverage criteria and are paid appropriately.  
Accordingly, CMS should (1) conduct prepayment and postpayment medical reviews of 
group 2 support surface claims;(2) educate suppliers and health care providers, such as 
home health agencies, about Medicare coverage criteria for support surfaces; (3) review 
the use of the KX modifier as a program safeguard; and (4) conduct additional statistical 
analyses to monitor payments for group 2 support surfaces.  In addition, CMS should take 
appropriate action regarding the claims in our sample that were inappropriate.  CMS 
concurred with our recommendations and stated that it will share our findings on 
inappropriate claims with its contractors for potential additional prepayment edits and 
prepayment medical review.  (OEI-02-07-00420)   
Prescription Drugs:  Aberrant Claim Patterns for Inhalation Drugs in South 
Florida   
Even though just 2 percent of Medicare beneficiaries live in South Florida, this area 
accounted for 17 percent of Medicares total spending for inhalation drugs in 2007.  In 
addition, the beneficiaries listed on 62 percent of South Florida inhalation drug claims did 
not have Medicare-billed office visits or other services in the past 3 years with the 
physicians who reportedly prescribed the drugs.  Medicare Part B covers inhalation drugs 
when they are used in conjunction with DME.  Beneficiaries typically obtain DME items, 
including inhalation drugs, through suppliers, which then submit claims to Medicare.  
CMS contractors established a local coverage determination (LCD) for inhalation drugs 
that set coverage limitations, such as the maximum milligrams per month that may be 
billed for certain inhalation drugs. 
In our review, we found that Medicare spent an average of five times more per 
beneficiary on inhalation drugs in South Florida compared to the rest of the country, with 
the greatest spending differences attributable to the more expensive brand-name drugs 
levalbuterol and budesonide.  In addition, three-fourths of South Florida beneficiaries 
receiving budesonide frequently exceeded coverage guidelines set in the LCD (for a 
90-day period).   
To address these issues, we recommended that CMS ensure that its contractors are 
enforcing the coverage guidelines for inhalation drugs, eliminate Medicares vulnerability 
to potentially fraudulent or excessive inhalation drug claims in South Florida, and review 
cases where the DME supplier appears to be fraudulently billing Medicare for inhalation 
drugs and take appropriate action based on the reviews results.  CMS concurred with our 
three recommendations and stated that a medically unlikely edit for budesonide was 
implemented in September 2008.  (OEI-03-08-00290) 
HHS OIG Semiannual Report to Congress  17  Centers for Medicare & Medicaid Services 
Fall 2009  Prescription Drugs:  Part B Payment and Policy for Chemotherapy 
Administration    
Although questionable claims for chemotherapy administration exceeded $60 million 
from 2005 to 2007, Medicare data are insufficient to determine consistently whether such 
payments are appropriate.  Medicare pays for certain drugs, including chemotherapy 
agents, under Part B and pays separately for the administration of covered drugs.  
Payment rates for the administration of chemotherapy agents are nearly twice those for 
administering other drugs.  CMS does not specify which particular drugs qualify for the 
chemotherapy administration rate, leaving that decision to the carriers that it contracts 
with to process Part B claims. 
Physicians sometimes legitimately bill Medicare for a drug administration service, but do 
not bill for the drug itself.  Therefore, we cannot determine with certainty what portion 
was inappropriate of the $16.9 million that Medicare paid for chemotherapy 
administration on days when no drug was billed or of the $43.8 million paid on days 
when only nonqualifying drugs were billed.  Furthermore, carriers have implemented 
inconsistent chemotherapy administration coding policies and review procedures, 
sometimes disagreeing on whether certain drugs qualify for billing with chemotherapy 
administration codes, which are reimbursed at a higher rate than the equivalent 
nonchemotherapy administration codes. 
OIG recommended that CMS (1) establish a process to determine which specific drugs 
qualify for the chemotherapy administration payment rate, (2) instruct carriers that have 
not done so to consider a probe review of unmatched chemotherapy administration 
claims, and (3) ensure that drug administration claims are coded correctly and paid 
appropriately. 
CMS concurred with our recommendation to instruct carriers that have not done so to 
consider a probe review of unmatched chemotherapy administration claims.  CMS did 
not concur with our other two recommendations.  Based on CMSs response to our 
recommendation to clearly define the criteria for qualifying drugs, we modified the 
language in a way that addressed practice variations. The remaining two 
recommendations, which suggested specific actions to help ensure that drug 
administration claims are coded correctly, were replaced with a broader recommendation 
that defers to CMSs judgment of actions.  (OEI-09-08-00190) 
Prescription Drugs:  Beneficiary Utilization of Albuterol and Levalbuterol 
Under Medicare Part B 
We found that utilization patterns among beneficiaries who were prescribed albuterol and 
levalbuterol fluctuated noticeably between 2003 and 2007almost always shifting 
toward the drug that was most favorable for the supplier from a reimbursement 
perspective.   
In 2003 and 2004, albuterol and levalbuterol were included in the same payment code 
and had the same Medicare payment amount, which was based on the median average 
HHS OIG Semiannual Report to Congress  18  Centers for Medicare & Medicaid Services 
Fall 2009  wholesale price of all versions of both drugs.  Effective January 1, 2005, CMS 
established separate payment codes and payment amounts for these drugs.  At the same 
time, under the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA), Medicare reimbursement for an inhalation drug was set at 106 percent of 
the drugs average sales price (ASP).  These changes increased the payment amount for 
levalbuterol but decreased the payment amount for albuterol.  Effective July 1, 2007, 
CMS recombined albuterol and levalbuterol into a single code and began to base payment 
on the volume-weighted ASP for both drugs.  However, as of April 1, 2008, CMS again 
reestablished separate payment codes and payment amounts for these two drugs. 
Medicare reimbursement favored albuterol in 2003 and 2004 (from a suppliers 
reimbursement perspective), and nearly all beneficiaries (97 percent) received that drug.  
However, as a result of payment and coding changes that took effect on January 1, 2005, 
reimbursement became much more favorable for levalbuterol.  Twenty-five percent of 
beneficiaries who were on albuterol in 2004 were changed to levalbuterol between 
January 1, 2005, and June 30, 2007.  Physicians in our sample typically cited clinical 
reasons for changing beneficiaries from albuterol to levalbuterol during this time.  
Despite the move to ASP, average per-beneficiary spending on albuterol and levalbuterol 
actually increased above pre-MMA levels.  Between January 1 and June 30, 2007, 
Medicare paid an average of $600 per beneficiary for both albuterol and levalbuterol, or 
$94 more per beneficiary than in the first half of 2003. 
However, a July 1, 2007, payment and coding change made albuterol more favorable 
from a suppliers perspective; two-thirds of beneficiaries in our sample were changed 
from levalbuterol to albuterol between July 1 and December 31, 2007.  Physicians in our 
sample typically cited financial reasons for changing beneficiaries from levalbuterol to 
albuterol in the second half of 2007.   
When Congress and CMS make reimbursement and coding decisions, it is important that 
they take into consideration that new policies may affect what drug a beneficiary is 
prescribed and, in some cases, limit access to a potentially more effective product or 
drive utilization to a more expensive product that offers no clinical advantage.  
(OEI-03-07-00440)   
Contractor Operations:  Termination Claims for Postretirement Benefit Costs  
Our reviews of three terminated contractors found that they did not always claim 
allowable postretirement benefit (PRB) costs for Medicare reimbursement.  Medicare 
pays a portion of contractors PRB costs.  In claiming these costs, contractors must 
follow cost reimbursement principles and the provisions of their Medicare contracts.  
Our findings follow. 
 Kansas contractor  The contractors entire termination claim of $11.2 million for 
PRB costs was unallowable for Medicare reimbursement.  The contractor based its claim 
on a retroactive change in accounting practice without CMS approval.  Therefore, and 
pursuant to the Medicare contracts, none of the costs claimed were allowable for 
Medicare reimbursement.  We recommended that the contractor withdraw its 
HHS OIG Semiannual Report to Congress  19  Centers for Medicare & Medicaid Services 
Fall 2009  $11.2 million termination claim.  The contractor disagreed with our finding and 
recommendation.  After reviewing the contractors comments, we maintain that the 
contractor should withdraw the full claim amount.  (A-07-09-00310)   
 Maryland contractor  The contractors entire termination claim of $1.5 million for 
PRB costs was unallowable for Medicare reimbursement.  The contractor based its claim 
on a retroactive change in accounting practice without CMS approval.  Therefore, and 
pursuant to the Medicare contracts, none of the costs claimed were allowable for 
Medicare reimbursement.  We recommended that the contractor withdraw its $1.5 million 
termination claim.  The contractor disagreed with our recommendation.  After reviewing 
the contractors comments, we maintain that the contractor should withdraw the full 
claim amount.  (A-07-09-00299) 
 Utah contractor  The contractors entire termination claim of $1.4 million in PRB 
costs for Part A and Part B contracts was unallowable for Medicare reimbursement.  The 
claim was calculated based on a retroactive change in accounting practice without CMS 
approval.  Therefore, and pursuant to the Medicare contracts, none of the costs claimed 
were allowable.  We recommended that the contractor withdraw its $1.4 million 
termination claim.  The contractor did not concur with our recommendation.  The 
contractor also stated that its recalculated termination claim was approximately $83,000 
less than we reported in our draft report.  After reviewing the contractors comments and 
additional documentation, we revised our finding and recommendation to reflect the 
recalculated termination claim amount.  We maintain that the contractor should withdraw 
the full claim amount.  (A-07-08-00278) 
Contractor Operations:  Medicare Contractor Processes for Reviewing 
Pennsylvania Hospitals Wage Data 
As a result of a congressional request, we reviewed two Medicare contractors and found 
that the first contractor followed CMS requirements when reviewing a Pennsylvania 
hospitals wage data that CMS used to calculate the FYs 2004 through 2009 wage 
indexes.  Both contractors followed CMS requirements when reviewing 20 other 
Pennsylvania hospitals wage data that CMS used to calculate the FY 2009 wage indexes. 
Both contractors completed their reviews within established timeframes and provided 
documentation to support their adjustments to the hospitals wage data.   
Because we found no evidence of disparate treatment based on the Medicare contractor 
that reviewed the wage data or a hospitals geographic location, we made no 
recommendations.  (A-03-08-00020)   
Contractor Operations:  Contractor Pension Costs Claimed for 
Medicare Reimbursement  
A Medicare contractor in Puerto Rico claimed $2.9 million of unallowable Medicare 
pension costs for FYs 1988 through 2006, primarily because the contractor calculated 
pension expense using a standard intended for financial reporting.  Medicare reimburses 
a portion of the annual contributions that contractors make to their pension plans.  In 
HHS OIG Semiannual Report to Congress  20  Centers for Medicare & Medicaid Services 
Fall 2009  claiming costs, contractors must follow cost reimbursement principles contained in the 
Federal Acquisition Regulation, Cost Accounting Standards, and Medicare contracts.  
The contractor claimed $7 million in pension costs, but we calculated the allowable 
pension costs to be $4.1 million. 
We recommended that the contractor reduce its Final Administrative Cost Proposal 
pension costs by $2.9 million or refund this amount to CMS and ensure that future 
pension cost claims are in accordance with the Medicare contracts.  The contractor stated 
that it was not in a position to concur with our recommendations because its Medicare 
contract had been terminated.  We maintain that our finding and recommendations are 
valid.  (A-07-08-00268)  
Contractor Operations:  Contractors Postretirement Benefit Assets  
We found that a Medicare contractor understated its Medicare segment PRB assets as of 
January 1, 2006, by $2.4 million.  In claiming costs for PRB plans, contractors must 
follow cost reimbursement principles contained in the Federal Acquisition Regulation 
and applicable Cost Accounting Standards, as required by the Medicare contracts.  As 
part of a change in its accounting practice, the contractor was required to identify and 
update the Medicare segments PRB assets.  However, the contractor made errors in its 
update computations.  In addition, the contractor did not make adjustments for 
participants who transferred into and out of the Medicare segment.  
We recommended that the contractor increase the Medicare segment PRB assets by 
$2.4 million as of January 1, 2006, and make adjustments for participant transfers in 
future updates.  The contractor disagreed with the amount of our recommended increase 
but agreed to make adjustments for participant transfers in future updates.  After 
reviewing the contractors comments and additional information, we revised our 
recommended asset increase to $2.4 million, not the higher amount reflected in our draft 
report.  (A-07-08-00280)  
Medicare Part C Reports 
Medicare Advantage Organizations Adjusted Community Rate Proposal 
Modifications  
An MA organizations proposed uses of a $41 million estimated MMA payment increase 
in contract year 2004 for three plans were not always supported and allowable under the 
MMA.  MA organizations assume responsibility for providing all Medicare-covered 
services, except hospice care, in return for a predetermined capitated payment.  The 
organizations proposed uses of $4.7 million for one of its three plans were not allowable 
because, contrary to CMS instructions, these funds related to mandatory supplemental 
benefits.  In addition, because of a clerical error, the organization overstated by an 
estimated $95,000 its proposed use of the payment increase to enhance benefits for 
another plan.  The organizations proposed uses of approximately $36 million were 
allowable.   
HHS OIG Semiannual Report to Congress  21  Centers for Medicare & Medicaid Services 
Fall 2009  We recommended that the organization follow CMS instructions and guidance when 
preparing future proposals (now referred to as bids) and ensure that amounts included 
in the proposals are allowable.  The organization did not agree with our recommendation.  
The organization did not provide any additional information that would cause us to 
change our finding or recommendation.  (A-06-06-00093) 
Duplicate Capitation Payments 
We found that of the 218 million capitation payments totaling approximately $158 billion 
that CMS made for Medicare Part C enrollees from January 2006 through March 2008, 
only 373 payments totaling $301,000 were duplicate payments for 1 month of health care 
coverage.  CMS may make only one capitation payment per month for each individual 
enrolled in an MA plan or a Programs of All-Inclusive Care for the Elderly plan.  
Although CMS had correctly paid organizations for the vast majority of plan enrollees, 
the validation process that CMS used to ensure the accuracy of payments did not identify 
and prevent all improper payments.  
We recommended that CMS (1) recoup the $301,000 in improper payments; 
(2) determine whether enhancements to its validation process would be cost effective 
and, if so, implement the enhancements; and (3) periodically review, on a postpayment 
basis, payments made to organizations to detect and recover any duplicate payments.  
CMS concurred with our recommendations and described the corrective actions that it 
was taking or planned to take.  (A-07-08-01052)  
Medicare Part D Reports 
Dual-Eligible Demonstration Project 
New Jersey complied with certain provisions of the Medicare demonstration application 
when claiming drug costs for full-benefit dually eligible beneficiaries (fully eligible for 
both Medicare and Medicaid).  The demonstration project permitted Medicare to fully 
reimburse States for full-benefit dually eligible beneficiaries Part D drugs to the extent 
that the costs were not recoverable from a Medicare Part D plan.  However, New Jersey 
claimed some drug and administrative costs to both the Medicaid program and the 
Medicare demonstration project.  For the $79 million that the State was reimbursed 
through the Medicare demonstration project and that it included on its Medicaid Forms 
CMS-64, the State did not adjust its Forms CMS-64 to reflect $11.3 million ($5.8 million 
Federal share) for some demonstration project costs.  According to State officials, New 
Jersey did not adjust its Forms CMS-64 to account for some of its drug costs and most of 
its administrative costs paid through the Medicare demonstration project because of a 
clerical oversight. 
We recommended that the State refund $5.8 million to the Federal Government for 
improper Medicaid drug claim payments ($5.2 million) and administrative cost payments 
($600,000).  We did not make any procedural recommendations because the 
demonstration project has ended.  The State said that it would adjust its expenditure 
reports in accordance with our recommendation.  (A-02-08-01007) 
HHS OIG Semiannual Report to Congress  22  Centers for Medicare & Medicaid Services 
Fall 2009  Accuracy of Part D Plans Drug Prices on the Medicare Prescription Drug 
Plan Finder 
A comparison of selected Part D plans retail prices posted on the Medicare Prescription 
Drug Plan Finder (Plan Finder) for 10 drugs commonly used by seniors to actual drug 
costs on corresponding prescription drug event claims revealed that Plan Finder prices 
generally exceeded actual drug costs, frequently by large amounts.  Overall, we found 
that drug price data in Plan Finder did not accurately reflect actual drug costs on Part D 
claims because the prices frequently overestimated the drug costs charged when 
beneficiaries had their prescriptions filled at the pharmacy. 
CMS created Plan Finder, located on the Medicare.gov Web site, as a tool to help 
beneficiaries compare and select Part D plans.  Plans drug prices are a significant factor 
to beneficiaries selecting a plan.  Plan Finder indicates in its plan drug details section that 
drug costs displayed are only estimates and that actual costs at the pharmacy may vary 
slightly.  However, our review revealed that Plan Finder drug prices were a median of 
28 percent (or $18) higher than actual drug costs for the 10 drugs included in our review.  
Drug prices posted on Plan Finder exceeded actual drug costs for 92 percent of the claims 
in our review and were less than actual drug costs for 7 percent of claims.  Plan Finder 
prices equaled actual drug costs for 1 percent of the claims reviewed.  Percentage 
differences between Plan Finder prices and actual costs were generally greater for the 
generic drugs in our review, while dollar differences were greater for the brand-name 
drugs reviewed. 
OIG recommended that CMS ensure that plans drug prices displayed on Plan Finder 
accurately reflect actual drug costs on Part D claims.  As an immediate measure, OIG 
also recommended that CMS add a disclaimer to the Plan Finder plan search results 
screen indicating that drug cost estimates may differ more than slightly from actual 
drug costs.  CMS concurred with our first recommendation but did not concur with our 
second recommendation.  However, CMS indicated that it will revise language on the 
Plan Finder Web site to advise beneficiaries that if they do not select a specific pharmacy 
when conducting a Plan Finder search, the drug prices displayed may be different from 
point-of-sale drug costs at their pharmacies. 
In addition, CMS stated that OIGs methodology is flawed and OIGs findings are false 
and misleading because we conducted a general search rather than a pharmacy-specific 
search in Plan Finder.  OIG does not agree.  By choosing to conduct a general search, we 
employed the same method that beneficiaries using Plan Finder were advised to employ 
to find the least expensive plan for their needs.  Both CMS and AARP (formerly the 
American Association of Retired Persons) recommended conducting a general search 
rather than a pharmacy-specific search to improve a beneficiarys ability to find the least 
expensive plan.  Our findings generate concerns about the accuracy of the plan and drug 
cost information provided to beneficiaries who choose to conduct a general search rather 
than a pharmacy-specific search in Plan Finder.  (OEI-03-07-00600) 
HHS OIG Semiannual Report to Congress  23  Centers for Medicare & Medicaid Services 
Fall 2009  Effect of the Part D Coverage Gap on Medicare Beneficiaries Without 
Financial Assistance in 2006   
Seven percent of Part D beneficiaries entered the coverage gap and did not receive 
financial assistance with prescription drug costs in 2006.  During the coverage gap, 
drug-purchasing behavior changed for almost all these beneficiaries.  Medicare Part D 
provides an optional drug benefit to Medicare beneficiaries.  During the coverage year, 
the financial responsibilities of beneficiaries, plan sponsors, and CMS vary during four 
distinct coverage phases:  annual deductible, initial coverage, coverage gap, and 
catastrophic coverage.  Some research suggests that beneficiaries who entered the 
Medicare Part D coverage gap may have changed their prescription drug use behaviors 
because they were responsible for 100 percent of their drug costs during the coverage 
gap. 
Sixty-nine percent of beneficiaries decreased the average number of drugs they purchased 
during the coverage gap.  This decrease could have represented a strategy that 
beneficiaries used to reduce their financial burden during the coverage gap, or it could 
have represented appropriate reductions due to changes in beneficiaries health status.  
In addition, the greater the average number of drugs per month that beneficiaries 
purchased before entering the coverage gap, the more they reduced the average number 
of drugs per month that they purchased during the coverage gap.  Beneficiaries who 
purchased an average of at least nine drugs per month had the largest decrease at 
18 percent.   
Based on these findings, we recommended that CMS support outreach and education 
activities targeted at beneficiaries who make more prescription drug purchases before 
entering the coverage gap.  To do this, CMS could encourage plan sponsors to augment 
current outreach and beneficiary education efforts and supplement plans outreach and 
education efforts by working directly with beneficiaries to explore cost-saving strategies.  
In addition, CMS should target low income subsidy outreach to beneficiaries who entered 
the coverage gap in previous years without financial assistance.  CMS concurred with one 
of our two recommendations.  CMS did not agree with our first recommendation.  We 
continue to believe that targeting beneficiaries with more prescription drug purchases 
before the coverage gap for outreach and education will assist these beneficiaries in 
identifying cost-saving strategies.  CMS concurred with our second recommendation.  
However, the actions CMS stated it would take may not fully address our 
recommendation to use drug utilization data to identify potential beneficiaries for the 
subsidy.  (OEI-05-07-00610) 
Reconciliation Payments for 2006 and 2007  
Part D sponsors owe a net total of $18 million to Medicare for the 2007 Part D payment 
reconciliation, which is significantly less than the net total of $4.4 billion that sponsors 
owed for 2006.  Despite this improvement, sponsors continue to submit inaccurate bids 
and make large unexpected profits.  
HHS OIG Semiannual Report to Congress  24  Centers for Medicare & Medicaid Services 
Fall 2009  CMS makes monthly prospective payments to sponsors for providing prescription drug 
coverage to Medicare beneficiaries.  These payments are based on estimates that sponsors 
provide in their bids prior to the beginning of the plan year.  After the close of the plan 
year, CMS reconciles these payments with the sponsors actual costs to determine 
whether sponsors owe money to Medicare or Medicare owes money to sponsors.   
More specifically, sponsors owe Medicare a net total of $600 million because of 
unexpected profits or losses that triggered risk sharing for 2007.  Many of these sponsors 
overestimated the costs of providing the benefit in their bids.  As a result, Medicare 
payments to sponsors and beneficiary premiums were higher than necessary.  Medicare 
recoups a portion of these higher payments.  However, beneficiaries do not directly 
recoup any of the money that they paid in higher premiums.  At the same time, sponsors 
will receive a net total of $406 million from Medicare for the low-income cost-sharing 
subsidy and a net total of $186 million for the reinsurance subsidy because they 
underestimated these costs in their bids.   
Further, sponsors continue to make large unexpected profits.  Based on our calculations, 
the 179 sponsors that had profits large enough to trigger risk sharing made at least 
$1.02 billion in unexpected profits in 2007.  These sponsors owe a portion of these 
unexpected profits to Medicare based on the risk-sharing requirements.  In addition, 
sponsors included an estimated $1.07 billion of expected profits in their bids.  
Finally, for 2006, CMS collected almost all of the funds that sponsors owed to Medicare 
in November and December 2007.  However, we reported that CMS has not collected a 
total of $14 million from five sponsors for 2006.  
Based on these findings, we recommended that CMS (1) ensure that sponsors bids more 
accurately reflect their costs of providing the benefit to Medicare beneficiaries, (2) hold 
sponsors more accountable for inaccuracies in the bids, (3) determine whether changes to 
the risk corridors are appropriate, (4) determine whether alternative methodologies would 
better align payments with sponsors costs for the low-income cost-sharing and 
reinsurance subsidies, and (5) follow up with the sponsors that owe funds for 2006.  CMS 
concurred with three of our recommendations and did not state whether it concurred with 
the other two recommendations.  CMS noted in its July 17, 2009, letter to OIG that there 
was no longer $14 million outstanding.  It indicated that immediately following 
reconciliation, plan sponsors owed approximately $4.4 billion for 2006 and collected 
virtually all of this money soon after reconciling the plan year; leaving as outstanding 
approximately $14 million or .03 percent of the original amount owed,. CMS reported 
that it has since collected amounts owed due to the 2006 reconciliation from all sponsors 
that are solvent.  With respect to a plan sponsor that owed $7.9 million, CMS noted that it 
performed a reopening after the plans submission of added data, and it was determined 
that the sponsor only owed $7.6 million.  CMS stated that it had collected $7.6 million on 
April 30, 2009, and $252,000 from another of the applicable sponsors, which represented 
the total amounts owed by those sponsors for 2006.  The remaining sponsors are 
insolvent and owe minimal amounts.  CMS noted that it has filed the appropriate 
documents with the applicable bankruptcy courts.   
(OEI-02-08-00460)   
HHS OIG Semiannual Report to Congress  25  Centers for Medicare & Medicaid Services 
Fall 2009  Payments for Beneficiaries in Part A Skilled Nursing Facility Stays in 2006   
Medicare Part D paid for 1.2 million prescription drugs events, amounting to $75 million, 
for beneficiaries in Part A SNF stays in 2006.  The majority of these payments were most 
likely inappropriate. 
Medicare Part D covers most prescription drugs; however, it excludes drugs that are 
covered under Medicare Parts A or B.  Specifically, Part D excludes drugs for 
beneficiaries in Part A SNF stays if the drugs were for use in the facility or to facilitate 
the beneficiaries discharge.  These drugs are covered under Part A, except for a few 
drugs that are covered under Part B.  CMS has identified duplicate payments by Medicare 
Parts A and D as a potential vulnerability. 
Sixty percent of the drugs Part D paid for while beneficiaries were in Part A SNF stays in 
2006 were dispensed by long-term care pharmacies.  These pharmacies dispense drugs 
for use in long-term care settings, including SNFs.  Because these drugs were most likely 
dispensed for use in the facility during a Part A SNF stay, Part D payments for them, 
which amounted to $41.3 million, were most likely inappropriate.  The remaining 
40 percent of drugs paid for by Part D for beneficiaries in Part A SNF stays were 
dispensed by retail and other types of pharmacies.  If these drugs were for use in the 
facility or were to facilitate the beneficiaries discharge, then Part D payments were also 
inappropriate.  Nearly every SNF and half of all pharmacies had beneficiaries who had a 
drug paid for by Part D during their Part A SNF stay.  At the same time, a small number 
of SNFs and pharmacies were responsible for a large percentage of these Part D 
payments. 
Based on these findings, we recommended that CMS ensure that Part D payments for 
drugs for beneficiaries in Part A SNF stays are appropriate.  More specifically, CMS 
should provide additional guidance about when Parts A and D may pay for drugs for 
beneficiaries preparing for discharge; educate SNFs, pharmacies, and Part D sponsors 
that drugs covered under Parts A or B for beneficiaries in SNF stays are not eligible for 
coverage under Part D; implement retrospective reviews to prevent inappropriate Part D 
payments for drugs for this population; and follow up with the SNFs and pharmacies that 
were responsible for a large percentage of Part D payments for beneficiaries in Part A 
SNF stays.  CMS concurred with the three recommendations in our draft report.  
However, it raised several concerns, and in response, we clarified the language in the 
report and added a recommendation that CMS provide additional guidance that clarifies 
the circumstances under which Parts A and D may pay for drugs for beneficiaries 
preparing for discharge.  (OEI-02-07-00230) 
Medicaid Related Reports 
Hospitals:  Inpatient Hospital Claims Billed as Family Planning Services in 
New York State   
New York State improperly claimed enhanced 90-percent Federal reimbursement for 
inpatient family planning claims submitted by hospitals.  Of the 173 claims in our 
HHS OIG Semiannual Report to Congress  26  Centers for Medicare & Medicaid Services 
Fall 2009  sample, 3 qualified as family planning services and could be claimed at the enhanced 
90-percent Federal reimbursement rate.  However, the remaining 170 claims could not be 
claimed as family planning services or could be claimed only in part as family planning 
services.  Based on our sample results, we estimated that the State received $2.6 million 
in unallowable Federal Medicaid reimbursement.  
This overpayment occurred because (1) providers incorrectly claimed services as family 
planning, (2) the States Medicaid Management Information System (MMIS) edit 
routines did not adequately identify claims unrelated to family planning, (3) the State did 
not have procedures to allocate the costs of inpatient hospital claims partially related to 
family planning, and (4) providers did not properly complete sterilization consent forms. 
We recommended that the State (1) refund $2.6 million to the Federal Government, 
(2) reemphasize to providers that only services directly related to family planning should 
be billed as family planning, (3) ensure that MMIS edit routines properly identify claims 
that are ineligible for enhanced 90-percent Federal reimbursement, (4) develop 
procedures to properly allocate the cost of inpatient hospital stays partially related to 
family planning, (5) reinforce guidance to hospitals regarding Medicaid sterilizations, and 
(6) determine the amount of Federal Medicaid funds improperly reimbursed for claims 
unrelated to family planning subsequent to our audit period and refund that amount to the 
Federal Government.  The State generally agreed with our recommendations and 
described actions that it will take in response. (A-02-06-01007) 
Hospitals:  Medicaid Participation Eligibility for One Indiana State-Owned 
Psychiatric Hospital  
During the period July 1, 1996, through June 30, 2007, Indiana paid $26.2 million 
($16.3 million Federal share) to a hospital that was not eligible to receive Medicaid 
payments for inpatient psychiatric services.  The hospital did not meet Federal Medicaid 
eligibility requirements because it did not demonstrate compliance with two special 
Medicare Conditions of Participation requirements. 
We recommended that the State (1) refund $16.3 million to the Federal Government for 
Medicaid inpatient psychiatric service payments made to the hospital from July 1, 1996, 
through June 30, 2007; (2) identify and refund the Federal share of additional 
unallowable Medicaid payments to the hospital for inpatient psychiatric services provided 
after June 30, 2007; and (3) ensure that Medicaid payments for inpatient psychiatric 
services are made only to eligible hospitals.  The State disagreed with the finding and 
first recommendation and did not address the other recommendations.  After reviewing 
the States comments, we maintain that our finding and recommendations are valid.   
(A-05-07-00076) 
Home Care:  Medicaid Personal Care Claims Made by Providers in New York 
City  
New York State improperly claimed Federal Medicaid reimbursement for some personal 
care claims submitted by providers in New York City during CYs 2004 through 2006.  
HHS OIG Semiannual Report to Congress  27  Centers for Medicare & Medicaid Services 
Fall 2009  Of the 100 claims in our random sample, 80 claims complied with Federal and State 
requirements, but 18 claims did not.  We could not determine whether the two remaining 
claims, which involved services under the States Consumer Directed Personal 
Assistance Program (CDPAP), complied with Federal and State requirements.  Based on 
our sample results, we estimated that the State improperly claimed $275.3 million in 
Federal Medicaid reimbursement during the audit period. 
We recommended that the State (1) refund $275.3 million to the Federal Government, 
(2) work with CMS to resolve the two CDPAP claims, (3) improve its monitoring of New 
York Citys personal care services program to ensure compliance with Federal and State 
requirements, and (4) promulgate specific regulations related to claims submitted under 
the CDPAP.  The State disagreed with our first recommendation and agreed with our 
remaining recommendations.  The State also disagreed with many elements of our 
findings.  After reviewing the States comments and additional documentation, we 
revised our findings and statistical estimates to reflect the $275.3 million improper claim, 
not the higher amount reflected in our draft report.  (A-02-07-01054) 
Medicaid Home, Community, and Nursing Home Care:  Targeted Case 
Management Services in Pennsylvania 
Pennsylvanias claims for targeted case management (TCM) services did not always 
comply with Federal and State requirements.  Federal law authorizes State Medicaid 
agencies to provide case management services to Medicaid beneficiaries.  These services 
are referred to as TCM when they are furnished to specific populations in a State.  Based 
on our review of 375 claims in 100 sampled beneficiary-months, 36 claims included in 
15 beneficiary-months were unallowable because the services were unsupported by case 
records or insufficiently documented.  As a result, we estimated that during CYs 2003 
through 2005, the State claimed $11.9 million ($6.5 million Federal share) in unallowable 
TCM costs. 
We recommended that the State (1) refund to the Federal Government the $6.5 million 
for unallowable TCM services, (2) review TCM claims submitted subsequent to our audit 
period and report any necessary adjustments, and (3) ensure that future TCM services 
claimed under the Medicaid program are properly documented in accordance with 
Federal and State requirements.  The State partly agreed and partly disagreed with our 
findings.  Based on additional documentation provided by the State, we revised our report 
and recommendations to reflect that we are questioning 15 sampled beneficiary-months 
with 36 errors.  (A-03-06-00202)   
Nursing Homes:  Long-Term Care, Managed Care Program Costs 
Claimed by Utah  
Utah did not ensure that payments made under nonrisk contracts for long-term care 
services were equal to or less than the upper payment limits.  Under a nonrisk contract, 
the contractor (1) is not at financial risk for changes in utilization or for service costs 
incurred that are equal to or less than the upper payment limits specified in Federal 
regulations and (2) may be reimbursed by the State for the incurred costs, subject to 
HHS OIG Semiannual Report to Congress  28  Centers for Medicare & Medicaid Services 
Fall 2009  specified limits.  Because the State could not ensure that the costs claimed for long-term 
care services were equal to or less than the upper payment limits, we were unable to 
express an opinion on the $27.4 million of Federal reimbursement that the State received 
for the costs of long-term care services for the period July 1, 2000, through December 31, 
2005.  Therefore, we set aside these costs for adjudication by CMS.  
We recommended that the State work with CMS to (1) resolve the allowability of 
$27.4 million in Federal reimbursement for long-term care services and (2) review claims 
subsequent to our audit period through the end of the program in 2007 and return to CMS 
any overpayments identified subject to the upper payment limits.  The State did not 
concur with our findings or recommendations.  After reviewing the States comments, we 
slightly modified our second recommendation.  However, the State did not provide 
information that caused us to change our findings or remaining recommendation.   
(A-07-08-02719) 
Prescription Drugs:  Accuracy of Drug Categorizations for Medicaid Rebates 
We found that manufacturers typically categorize their drugs in the average manufacturer 
price (AMP) file in the same manner as national compendia.  However, our manual 
review of drug categorizations identified (1) a potential problem with Medicaid payment 
for drugs that do not have Food and Drug Administration (FDA) approval and 
(2) instances in which certain drugs appear to have been categorized incorrectly in the 
AMP file, thus resulting in a loss of rebates for States.   
For Federal payments to be available for covered outpatient drugs provided under 
Medicaid, drug manufacturers must pay quarterly rebates to State Medicaid agencies and 
provide CMS with the AMP for each national drug code (NDC) they market.  In addition, 
for Medicaid Federal payment to be available, most covered outpatient drugs must be 
approved by FDA for safety and effectiveness, with certain exceptions.   
Drugs with matching drug categorizations accounted for 90 percent of NDCs and 
97 percent of Medicaid expenditures under review.  However, a manual review of 
75 high-expenditure nonmatching NDCs revealed that over 40 percent of the NDCs that 
underwent manual review were associated with unapproved drugs.   
Based on the findings of this report, we recommended that CMS (1) work closely with 
FDA to identify drugs not approved for safety and effectiveness by FDA and therefore 
potentially ineligible for Medicaid Federal financial participation; (2) work with 
manufacturers to determine the correct categorizations of the drugs identified in this 
report as potentially miscategorized in the AMP file; and (3) continue to explore and 
undertake a range of efforts to ensure that drug manufacturers are submitting the required 
AMP data in a timely manner, including collaborating with OIG on administrative 
remedies for noncompliance. 
In its response to our final report, CMS concurred with our three recommendations.  
Further, CMS did note that it reaffirms its intention to continue working to improve each 
of the three areas identified by OIG.  (OEI-03-08-00300) 
HHS OIG Semiannual Report to Congress  29  Centers for Medicare & Medicaid Services 
Fall 2009  Prescription Drugs:  Medicaid Outpatient Drug Expenditures  
In separate reviews of Medicaid outpatient prescription drug expenditures, we found that 
three States had claimed Federal reimbursement for expenditures that did not fully 
comply with Federal requirements.  Medicaid generally covers outpatient drugs if the 
drug manufacturers have rebate agreements with CMS and pay rebates to the States.  
Under the Medicaid drug rebate program, CMS provides the States with a quarterly 
Medicaid drug tape, which lists all covered outpatient drugs, indicates each drugs 
termination date if applicable, and specifies whether FDA has determined the drug to be 
less than effective.  CMS guidance instructs the States to use the tape to verify coverage 
of the drugs for which they claim reimbursement. 
Our specific findings were as follows: 
 California  For FYs 2004 and 2005, California claimed $24 million (Federal share) 
for unallowable Medicaid expenditures, which included $21 million in unsupported drug 
expenditures and $3 million in drug expenditures that were not eligible for Medicaid 
coverage because the drugs were dispensed after their termination dates.  In addition, the 
State claimed $10.9 million (Federal share) for drug products not listed on the quarterly 
drug tapes for which the State did not provide conclusive evidence that the drugs were 
eligible for Medicaid coverage.   
We recommended that the State (1) refund $24 million (Federal share) to the Federal 
Government for unallowable drug expenditures, (2) work with CMS to resolve 
$10.9 million (Federal share) in expenditures for drug products that were not listed on the 
quarterly tapes and that may not have been eligible for Medicaid coverage, and 
(3) strengthen and establish internal controls to ensure that claimed Medicaid drug 
expenditures comply with Federal requirements.  The State agreed to work with CMS to 
resolve the issues regarding drugs not listed on the quarterly drug tapes and disagreed 
with our internal control recommendations related to maintaining documentation and 
retaining funding codes.  The State did not provide any new information to cause us to 
modify our recommendations.  (A-09-07-00039) 
 Michigan  Michigan claimed Medicaid reimbursement for $106,000 (Federal share) 
in FY 2005 for outpatient expenditures for drug products that were not eligible for 
Medicaid coverage because they were dispensed after their termination dates or less than 
effective.  In addition, the State claimed $2.9 million (Federal share) for drug products 
that were not listed on the CMS quarterly drug tapes.  Because the State did not verify 
whether the drugs missing from the tapes were eligible for Medicaid coverage, these drug 
expenditures may not be allowable for Medicaid reimbursement.   
We recommended that the State (1) refund $106,000 to the Federal Government for drug 
expenditures that were not eligible for Medicaid coverage, (2) work with CMS to resolve 
$2.9 million in payments for drugs that were not listed on the quarterly drug tapes and 
that may not have been eligible for Medicaid reimbursement, and (3) strengthen internal 
controls to ensure that claimed Medicaid drug expenditures comply with Federal 
requirements.  The State concurred with our first and second recommendations and 
HHS OIG Semiannual Report to Congress  30  Centers for Medicare & Medicaid Services 
Fall 2009  described corrective actions that it had taken to strengthen its internal controls.   
(A-05-08-00048) 
 New York  New York State claimed Medicaid reimbursement for $1.2 million 
(Federal share) in FYs 2004 and 2005 for outpatient expenditures for drug products that 
were not eligible for Medicaid coverage because they were dispensed after their 
termination dates, less than effective, or inadequately documented.  In addition, the State 
claimed $16.2 million (Federal share) for drug products that were not listed on the CMS 
quarterly drug tapes.  Because the State did not verify whether the drugs missing from the 
tapes were eligible for Medicaid coverage, these drug expenditures may not be allowable 
for Medicaid reimbursement.   
We recommended that the State (1) refund $1.2 million to the Federal Government for 
drug expenditures that were not eligible for Medicaid coverage, (2) work with CMS to 
resolve $16.2 million in payments for drugs that were not listed on the quarterly drug 
tapes and that may not have been eligible for Medicaid reimbursement, and (3) strengthen 
internal controls to ensure that claimed Medicaid drug expenditures comply with Federal 
requirements.  The State generally agreed with our recommendations.  (A-02-07-01028) 
Laboratories:  Potential Improper Medicaid Payments for Outpatient Clinical 
Diagnostic Laboratory Services for Dual-Eligible Beneficiaries   
We determined that Medicaid programs in 8 of 11 selected States spent a total of 
$1.3 million in potential improper payments for clinical diagnostic laboratory services 
that were provided on an assignment-related basis to dual eligibles in FY 2005 and 2006.  
Dual eligibles are beneficiaries who are enrolled in Medicare Part A and/or Part B and 
also entitled to some Medicaid benefits.  Over half of the potential improper payments we 
identified corresponded to five Current Procedural Terminology codes.  One of these 
codes accounted for almost 30 percent of the potential improper payments we 
identified.  State Medicaid programs should not pay for any portion of outpatient clinical 
diagnostic laboratory services that were provided on an assignment-related basis to dual 
eligibles who are enrolled in Medicare Part B. 
This memorandum report had no recommendations.  Our results demonstrated that 
opportunities exist to educate State Medicaid programs that they should not pay for any 
portion of outpatient clinical diagnostic laboratory services provided to dual-eligible 
beneficiaries.  CMS did not have any comments on this memorandum report.  
(OEI-04-07-00340) 
Excluded Services:  Medicaid Services to Incarcerated Juveniles in Georgia  
For Federal FYs 2003 and 2004, the Georgia Medicaid agency inappropriately claimed 
$3.8 million ($2.3 million Federal share) in costs relating to non-inpatient medical 
services provided to juvenile inmates of public institutions because neither the Georgia 
Department of Juvenile Justice (DJJ) nor the Medicaid agency had adequate controls to 
ensure that those services were excluded from Federal financial participation.   
HHS OIG Semiannual Report to Congress  31  Centers for Medicare & Medicaid Services 
Fall 2009  We recommended that the Medicaid agency refund the $2.3 million overpayment, 
identify and refund overpayments made subsequent to our audit, and establish monitoring 
procedures to ensure the accuracy of Medicaid eligibility status codes. The Medicaid 
agency requested that we delay the release of our report until April 2009 to give it the 
opportunity to review each claim considered erroneously reimbursed.  We delayed 
issuance of our report; however, neither DJJ nor the Medicaid agency provided additional 
support for their assertion that juveniles voluntarily residing at the institutions were 
included in our overpayment calculation.  (A-04-06-00026) 
Family Planning:  Services Claimed Twice in Michigan  
For FYs 2006 and 2007, Michigan claimed and received $1.1 million ($1 million Federal 
share) in unallowable reimbursement for family planning services that it claimed more 
than once.  Our review showed that some services were claimed twice on behalf of the 
same beneficiaries on the same dates of service.  The State reported the claims twice 
because the computer system that it used to report family planning services 
inappropriately compiled the same claim data from a report that identified family 
planning services for all places of service and another report that identified services only 
at family planning clinics.  
We recommended that the State refund $1 million to the Federal Government for the 
unallowable duplicate Medicaid costs claimed from October 2005 through September 
2007 and review family planning services claimed during the period January 2001 
through September 2005 and for the period after September 2007 and refund to the 
Federal Government any Federal reimbursement for additional costs claimed more than 
once.  The State concurred with our recommendations.  (A-05-08-00064) 
Medicaid Administration:  Calculations of Additional Medicaid Funds Under 
the American Recovery and Reinvestment Act  
In two reviews during this semiannual period, we evaluated HHSs compliance with 
certain provisions of the Recovery Act, which provides fiscal relief to States to protect 
and maintain State Medicaid programs in a period of economic downturn.  For the 
recession adjustment period (October 1, 2008, through December 31, 2010), the 
Recovery Act provides $87 billion in additional Medicaid funding based on temporary 
increases in States Federal medical assistance percentages (FMAP).  The Federal 
Government pays its share of States medical assistance expenditures based on the 
FMAP, which varies depending on each States relative per capita income.   
 The first report found that the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) calculated the temporary FMAP increases for the first two quarters of 
FY 2009 for the 50 States and the District of Columbia in accordance with the Recovery 
Act.  ASPE provided these FMAP increases to CMS for use in determining the amount of 
Federal funds to award to States through the Medicaid grant process.  This report 
contained no recommendations.  (A-09-09-00075) 
HHS OIG Semiannual Report to Congress  32  Centers for Medicare & Medicaid Services 
Fall 2009   The second report found that for the first two quarters of FY 2009, CMS calculated the 
additional Medicaid funding awarded under the Recovery Act in accordance with the 
Social Security Act and the Recovery Act.  To calculate the additional funding for each 
State and the District of Columbia, CMS used the State-reported actual or estimated 
expenditures, deducted the expenditures identified in section 5001(e) of the Recovery Act 
(to which the increased FMAPs do not apply) if the State reported the expenditures, and 
multiplied the remaining expenditures by the correct percentage-point increase in the 
FMAP provided by ASPE.  Based on its calculations, CMS made available to States 
approximately $15.2 billion in additional funding for the first two quarters of FY 2009.  
This report contained no recommendations.  (A-09-09-00080)   
Medicaid Administration:  Fraud and Abuse Safeguards for State Medicaid 
Nonemergency Medical Transportation Services   
OIG found that States concentrate their Medicaid nonemergency medical transportation 
(NEMT) safeguard activities on screening providers, requiring prior approval for 
services, and implementing methods to prevent and detect improper payments.  
Depending upon the State, responsibility for conducting these activities lies with the State 
Medicaid agency itself, other State agencies, contracted transportation brokers, or some 
combination of these entities.  The 29 States that use brokers to administer their NEMT 
benefit reported using multiple techniques to monitor their brokers, including complaint 
investigation, periodic contract renewal, and broker reporting requirements.   
Federal regulations require each State to ensure that Medicaid beneficiaries have 
necessary transportation to and from medical providers and to describe, in their State 
plans, the methods that the State will use to meet this requirement.  Federal regulations 
also require that each State Medicaid agency establish an integrity program for 
identifying and investigating suspected fraud and abuse cases and referring them to law 
enforcement.  If a State detects evidence of potential fraud and abuse, it must refer those 
cases to the State Medicaid Fraud Control Unit (MFCU) or other appropriate law 
enforcement agency, such as a local district attorney, for investigation. 
OIG also found that State MFCUs investigated a combined total of 509 NEMT fraud and 
abuse cases from 2004 to 2006, with the most common types involving billing for 
services not rendered, unspecified overbilling, and upcoding.  Of the 509 cases reported 
by State MFCUs, 73 percent were closed and the remaining 27 percent were open at the 
time the State MFCUs submitted data to OIG during the second half of 2007.  Among the 
closed cases, 40 percent were dismissed because the allegations were unsubstantiated 
after investigation and another 18 percent were investigated and closed without 
prosecution.  Twelve percent of closed cases resulted in criminal convictions, and parties 
agreed to settlements in another 10 percent of closed cases.  This memorandum report 
contained no recommendations.  (OEI-06-07-00320) 
Medicaid Administration:  Managed Care Encounter Data Collection and Use  
We found that all 40 States with capitated Medicaid managed care collect encounter data 
from managed care organizations (MCO); however, the usefulness of the Medicaid 
HHS OIG Semiannual Report to Congress  33  Centers for Medicare & Medicaid Services 
Fall 2009  Statistical Information System (MSIS) is limited because CMS does not enforce 
encounter data requirements.  The Balanced Budget Act of 1997 (BBA) requires that 
Medicaid claims submitted to CMS on or after January 1, 1999, provide for electronic 
transmission of claims data in the format specified by the Secretary [of Health and 
Human Services] and consistent with the MSIS (including detailed individual enrollee 
encounter data and other information that the Secretary may find necessary).   
As the only national database of Medicaid claims and beneficiary eligibility information, 
the MSIS is used by CMS to manage, analyze, and disseminate information on Medicaid 
beneficiaries, services, and payments.  The MSIS is also widely used for research and 
policy analysis by both public and private organizations, and may also be used for 
detecting fraud, waste, and abuse.  The MSIS must include encounter data to be 
representative of Medicaid beneficiaries because over 65 percent of Medicaid 
beneficiaries receive all or part of their health care services through Medicaid managed 
care.   
State Medicaid agency staff in 39 of the 40 States with capitated Medicaid managed care 
reported using the encounter data that they collect to manage their Medicaid managed 
care programs.  To ensure the successful collection of encounter data from MCOs, most 
States have established reporting requirements that dictate the format, frequency, and/or 
validation expectations of the data.  States have also established incentives and/or 
sanctions related to encounter data reporting.   
State Medicaid agency staff indicated that they would welcome information about how 
other States are using the data and additional guidance from CMS regarding encounter 
data.  However, although all States with Medicaid managed care are collecting encounter 
data from MCOs, CMS accepted MSIS submissions without encounter data from  
15 States.  The usefulness of the MSIS is limited by the absence of encounter data and 
CMS staff indicated that encounter data are needed to measure what Medicaid is paying 
for.   
We recommended that CMS clarify and enforce existing Federal requirements that States 
include encounter data in their MSIS submissions.  CMS concurred with these two 
recommendations.  We also recommended that CMS seek legislative authority to impose 
sanctions against States that fail to meet the MSIS reporting requirements for encounter 
data, to which CMS responded that it did not concur at that time.  CMS stated that it 
wants to pursue efforts that address our first two recommendations before considering 
seeking sanction authority.  (OEI-07-06-00540) 
Medicaid Administration:  Indirect Costs Submitted by the New York State 
Department of Health on Behalf of the Office of Mental Retardation and 
Developmental Disabilities  
The New York Office of Mental Retardation and Developmental Disabilities (OMRDD) 
did not maintain documentation to support its indirect administrative cost rate 
calculations.  In addition, the New York State Department of Health (DOH) did not 
review OMRDDs administrative costs before claiming them on the Form CMS-64.  
HHS OIG Semiannual Report to Congress  34  Centers for Medicare & Medicaid Services 
Fall 2009  As a result, $8.1 million ($4 million Federal share) of the $9.7 million ($4.8 million 
Federal share) in indirect administrative costs that DOH claimed from January 1, 2003, 
through June 30, 2006, was unallowable.  OMRDD provides services to individuals, both 
Medicaid and non-Medicaid beneficiaries, with mental retardation and developmental 
disabilities under a cooperative agreement with DOH, which administers the States 
Medicaid program.  DOH reports the total of OMRDDs direct and indirect Medicaid 
administration costs for Federal Medicaid reimbursement.   
We recommended that DOH refund $4 million to the Federal Government and verify that 
Medicaid indirect costs billed by OMRDD are adequately supported.  DOH concurred 
with our finding and recommendations.  (A-02-06-01028) 
Medicaid Administration:  West Virginias Retroactive Claims for Medicaid 
School-Based Services  
The State did not fully comply with Federal requirements for an exemption to the 2-year 
limit for filing retroactive claims for Medicaid school-based services.  A portion of the 
States retroactive claim, $4.1 million (Federal share), fell outside the required 2-year 
filing period because it related to expenditures made by the State in the quarters ending 
December 31, 2000, through June 30, 2001.  Of this amount, $2.3 million (Federal share) 
related to new cost components that were not in the original rates used to calculate the 
claims for school-based services and did not reflect the settlement of previously identified 
costs.  As a result, the $2.3 million (Federal share) was not exempt from the 2-year time 
limit and was therefore unallowable.  The remaining $1.8 million (Federal share) met the 
requirements for an exemption because it reflected the settlement of previously identified 
salary and fringe benefit costs. 
We recommended that the State refund $2.3 million (Federal share) for costs claimed 
after the 2-year filing limit that were not exempt and ensure that future claims comply 
with the limit.  The State did not concur with our finding or recommendation.  However, 
nothing in the States comments gave us cause to modify our recommendation.   
(A-03-06-00201) 
Medicaid Administration:  Hurricane Katrina Related Uncompensated Care 
Claims  
Under the Social Security Act,  1115, CMS authorized certain States to operate an 
uncompensated care pool (UCCP) to reimburse providers for medically necessary 
services provided to Hurricane Katrina evacuees and affected individuals and to 
Hurricane Rita evacuees without other coverage.  We evaluated UCCP reimbursement in 
two States. 
 Alabama  For services supplied through January 31, 2006, by five providers that 
received high UCCP reimbursement, the State generally claimed reimbursement in 
accordance with the approved section 1115 demonstration and UCCP plan.  However, 
we found that nine claims totaling $27,000 were unallowable because the individuals 
who received the services were not from an area affected by Hurricane Katrina or Rita, 
HHS OIG Semiannual Report to Congress  35  Centers for Medicare & Medicaid Services 
Fall 2009  had health care coverage under other programs, or did not provide addresses that could be 
used to establish eligibility.  One other claim totaling $16,000 was allowable as a UCCP 
claim, but the State inappropriately used this claim in its Medicaid disproportionate share 
hospital (DSH) calculation. 
We recommended that the State (1) refund $27,000; (2) consider reviewing the claims 
that were not included in our sample and, if appropriate, make a refund to CMS; and 
(3) determine the effect of incorrectly including a claim reimbursed under the UCCP in 
the hospital-specific DSH calculation and make an appropriate adjustment on its 
quarterly claim.  The State concurred with our first recommendation and did not address 
our second recommendation.  With respect to our third recommendation, the State said 
that the hospital would have received only a small payment from the inclusion of the 
UCCP claim in the DSH calculation.  We revised our third recommendation in response 
to the States comments.  (A-04-08-03040)  
 Louisiana  Louisiana did not always claim reimbursement for services provided by 
a hospital in accordance with Federal and State laws and regulations or with the approved 
provisions of the UCCP plan.  Of the $8.3 million in costs claimed as of December 31, 
2006, for services provided by the hospital, $7.7 million was unallowable.  The State 
claimed the unallowable costs because it (1) did not have procedures to ensure that it 
claimed uncompensated care costs only for services covered under the Medicaid plan,  
(2) did not instruct the hospital to analyze its uncompensated care claims to determine 
whether payments had been received from other sources, (3) relied on the hospital to 
verify that the costs claimed were based on actual inpatient days, and (4) did not have 
procedures to ensure that it identified all duplicate claims. 
We recommended that the State refund to CMS the $7.7 million in unallowable costs 
claimed.  Because the States authorization to obtain Federal reimbursement for 
hurricane-related uncompensated care has ended, we made no procedural 
recommendations.  The State disagreed with our findings and recommendation.  Nothing 
in the States comments caused us to revise our report.  (A-06-08-00023) 
Medicare and Medicaid Information Systems and Data 
Security Reports 
Information Systems:  Usefulness of Medicaid Statistical Information System 
Data for Detecting Medicaid Fraud, Waste, and Abuse 
We determined that Medicaid Statistical Information System (MSIS) data were not 
timely, accurate, or comprehensive for detection of fraud, waste, and abuse.  The MSIS is 
the only source of nationwide Medicaid claims and beneficiary eligibility information.  
CMS collects MSIS data directly from States to, among other things, assist in detecting 
fraud, waste, and abuse in the Medicaid program.  Timely, accurate, and comprehensive 
MSIS data can assist HHS in meeting Health Care Fraud Prevention and Enforcement 
Action Team (HEAT) objectives to combat health care fraud.   
HHS OIG Semiannual Report to Congress  36  Centers for Medicare & Medicaid Services 
Fall 2009  We analyzed State submission and CMS release of FYs 2004 through 2006 quarterly 
MSIS files; CMSs disclosure and documentation of MSIS error tolerance adjustments; 
and the data elements captured by MSIS to determine its usefulness for detecting fraud, 
waste, and abuse.  We determined that during FYs 2004 through 2006, MSIS data were 
an average of 112 years old when they were released to all users.  In addition, CMS did 
not fully disclose or document information about the accuracy of MSIS data.  
Furthermore, as of June 2009, the MSIS had not captured many of the data elements that 
can assist in fraud, waste, and abuse detection.  
Our results indicate opportunities for States and CMS to reduce the timeframes for file 
submission and validation, respectively.  Further, there are opportunities for CMS to 
improve the documentation and disclosure of error tolerance adjustments and expand 
current State Medicaid data collection and reporting to further assist in fraud, waste, and 
abuse detection and meet HEAT objectives.  This report was issued directly in final form 
because it contained no recommendations.  (OEI-04-07-00240)  
Inaccurate Data in the Provider Enrollment, Chain, and Ownership System 
Individual Global Extract File  
During data collection for an upcoming study entitled Reassignment of Medicare 
Benefits (OEI-07-08-00180), we identified inaccurate data in the Provider Enrollment, 
Chain, and Ownership System (PECOS) Individual Global Extract File (the Extract).  
The Extract is designed to provide a point-in-time snapshot of all PECOS data on active 
providers and their active reassignments of benefits (reassignments).  The inaccurate data 
we identified limited the usefulness of the Extract, requiring us to search the PECOS 
database for the individual records of 497 Medicare providers in our study sample to 
verify the accuracy of the Extract data.  CMS staff investigated and confirmed the errors 
that we identified and indicated that they would conduct further research to determine the 
exact cause of errors in the Extract.  CMS staff also indicated that they would add 
information regarding the inaccurate data to their tracking log for PECOS and prioritize 
identifying solutions in a future release of PECOS, although they did not indicate when 
the solutions would be implemented.  
We found two types of errors.  One type of error resulted in records of terminated 
reassignments being retained in the Extract, which should have contained only records of 
reassignments that were active on the date the Extract was created.  We found that 
3.2 percent of the records present in the Extract were affected by this type of error.  The 
second type of error we identified occurred when the date that the reassignment record 
was created in PECOS populated the effective date field in the Extract, rather than the 
date the reassignment took effect. 
To limit the impact of the inaccurate data, CMS may want to alert all users of the Extract 
of the extent and nature of data inaccuracies in the Extract until a corrected version of 
PECOS is released.  When correcting the processing errors, CMS may also want to 
explore whether other inaccuracies exist in the Extract, such as the Organizational Global 
Extract file containing similar inaccuracies, other date fields populating incorrectly, and 
records of disenrolled providers remaining in the Extract.  (OEI-07-08-00181) 
HHS OIG Semiannual Report to Congress  37  Centers for Medicare & Medicaid Services 
Fall 2009  Other CMS Related Reports 
Nursing Home Corporations Under Quality of Care Corporate Integrity 
Agreements   
OIG found that all 15 corporations included in this review enhanced quality of care 
structures and processes while under their corporate integrity agreements (CIA) and cited 
positive effects of the CIAs.  All 15 corporations had written policies and procedures 
regarding quality of care, codes of conduct, and training required by their CIAs; 
monitored their quality of care using standardized data and internal self-assessment tools 
and by tracking complaints; and created or expanded their compliance infrastructures to 
integrate quality of care.  This review included all nursing homes that were placed under 
CIAs between June 2000 and December 2005. 
Under quality of care CIAs, nursing home corporations with identified quality of care 
problems consent to certain requirements in exchange for an agreement by OIG not to 
exclude them from participation in Federal health care programs.  A nursing home quality 
of care CIA is a contract that is typically entered into for 3 to 5 years and requires 
implementation of quality of care structures and processes and monitoring by an 
independent quality monitor. 
Despite some initial resistance from 3 corporations, OIG found that all 15 corporations 
were ultimately responsive to quality monitors guidance and corporate representatives 
reported that they valued the input.  OIGs review of quality monitoring reports and 
corporate annual reports confirmed the monitors opinions that the 15 corporations were 
largely responsive to their guidance.  Corporate representatives cited several benefits of 
quality monitoring; for example, monitors offered new ideas and fresh ways of thinking 
about quality of care structures and processes. 
Representatives of all 15 corporations described challenges they encountered when 
implementing the CIA requirements.  Corporations with multiple nursing homes 
encountered challenges in ensuring consistency in quality of care systems across all 
layers of their organizations and across geographic regions.  For example, an analysis 
of Quality Assessment and Assurance (QAA) committee minutes indicated that nursing 
homes implementation of quality of care systems was inconsistent.  Other challenges 
involved organizational disruptions, such as sales and purchases of nursing homes or 
corporate level reorganizations, staff resistance to implementation, use of staff time to 
implement the CIA requirements, and costs associated with CIAs. 
Based on these findings, areas that OIG will explore for its oversight of future CIAs 
include:  responding swiftly to noncompliant corporations and those that fail to address 
quality problems, including in the CIAs specific requirements for documentation of 
nursing home QAA activities, and sharing lessons learned by corporations and quality 
monitors with other corporations placed under subsequent CIAs.  (OEI-06-06-00570) 
HHS OIG Semiannual Report to Congress  38  Centers for Medicare & Medicaid Services 
Fall 2009  Emergency Health Services Furnished to Undocumented Aliens Covered by 
Section 1011 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003  
Of the 31 sampled claims submitted by a Florida hospital for services provided under 
section 1011 of the MMA for the period May 10 through September 30, 2005, 24 claims 
totaling $93,000 were either partially or completely unallowable for section 1011 
program reimbursement.  As a result, the hospital received $67,000 in unallowable 
payments.  Section 1011 of the MMA provided $250 million per year for FYs 2005 
through 2008 for payments to eligible providers for emergency health services provided 
to undocumented aliens and other specified aliens pursuant to Emergency Medical 
Treatment and Labor Act of 1986 (EMTALA) requirements.   
We recommended that the hospital (1) refund to its program contractor $67,000 for 
services that did not meet section 1011 reimbursement requirements; (2) review the 
remaining claims for our audit period totaling $82,000 and claims for subsequent periods 
and submit adjustments for any claims that did not meet section 1011 reimbursement 
requirements; (3) follow its existing policies and procedures to ensure that future section 
1011 program claims meet section 1011 reimbursement requirements; and (4) develop 
and implement procedures to ensure that section 1011 program claims are for covered 
services up to the point of stabilization rather than through the patients entire hospital 
stays. 
The hospital did not directly address our first three recommendations.  Regarding the 
fourth recommendation, the hospital said that it had modified its internal processes and 
would ensure that all future claims are not billed past the point of stabilization.  Nothing 
in the hospitals comments caused us to revise our findings or recommendations.   
(A-04-06-07007) 
Medicare and Medicaid Related Outreach 
As part of OIGs ongoing efforts to promote the highest level of ethical and lawful 
conduct by the health care industry, we have continued to issue advisory opinions and 
other guidance to educate industry and other stakeholders on how to avoid fraud, waste, 
and abuse. 
Advisory Opinions 
In accordance with section 205 of HIPAA, OIG, in consultation with the Department of 
Justice (DOJ), issues advisory opinions to outside parties regarding the interpretation and 
applicability of certain statutes relating to Federal health care programs.  This authority 
allows OIG to provide 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 April 1 through September 30, 2009, OIG received 
22 advisory opinion requests and issued 15 advisory opinions.  OIG advisory opinions 
are available at http://oig.hhs.gov/fraud/advisoryopinions.asp. 
HHS OIG Semiannual Report to Congress  39  Centers for Medicare & Medicaid Services 
Fall 2009  Provider Self-Disclosure Protocol 
OIG is committed to assisting health care providers and suppliers in detecting and 
preventing fraudulent and abusive practices.  Since 1998, we have made available 
comprehensive guidelines describing the process for providers to voluntarily submit to 
OIG self-disclosures of fraud, waste, or abuse.  The guidelines, entitled Provider 
Self-Disclosure Protocol, give providers an opportunity to minimize the potential costs 
and disruption that a full-scale OIG audit or investigation may entail if fraud is 
uncovered.  In doing so, the self-disclosure also enables the provider to negotiate a fair 
monetary settlement and potentially avoid being excluded from participation in Federal 
health care programs.  The protocol guides providers and suppliers through the process of 
structuring a disclosure to OIG about matters that constitute potential violations of 
Federal laws (as opposed to honest mistakes that may have resulted in overpayments).  
After making an initial disclosure, the provider or supplier is expected to thoroughly 
investigate the nature and cause of the matters uncovered and make a reliable assessment 
of their economic impact (e.g., an estimate of the losses to Federal health care programs).  
OIG evaluates the reported results of each internal investigation to determine the 
appropriate course of action.   
In addition, OIG issued an Open Letter to Health Care Providers in 2006 to promote the 
use of the self-disclosure protocol to resolve civil monetary penalty (CMP) liability under 
the physician self-referral and anti-kickback statutes for financial arrangements between 
hospitals and physicians. 
On April 15, 2008, OIG published another Open Letter to Health Care Providers.  The 
letter sets forth certain refinements to the October 1998 Self-Disclosure Protocol.  To 
improve the self-disclosure process, OIG, among other steps, streamlined its internal 
self-disclosure procedures.  In addition, OIG explained that it will generally not require 
a self-disclosing entity to enter into a corporate integrity agreement (CIA) or certification 
of compliance agreement (CCA) when a resolution has been negotiated pursuant to the 
protocol.  A CIA is an agreement between the provider and OIG that is entered into in 
exchange for OIGs agreement not to seek an exclusion of that provider from 
participation in Medicare, Medicaid, and other Federal health care programs.  CIAs are 
monitored by OIG and require providers to enhance existing compliance programs or 
establish new ones.  The compliance programs are designed, in part, to prevent a 
recurrence of the underlying fraudulent conduct.  OIG may also negotiate a CCA in lieu 
of a comprehensive CIA, under appropriate circumstances.  The CCA requires that the 
provider maintain its existing compliance program and agree to certain compliance 
obligations that mirror those found in a comprehensive CIA. 
OIG published another Open Letter to Health Care Providers on March 24, 2009, that 
narrowed the scope of the self-disclosure protocol regarding violations of the physician 
self-referral (Stark) law and explained that OIG will no longer accept disclosure of a 
matter that involves only liability under the physician self-referral law in the absence of a 
colorable anti-kickback statute violation.  The Open Letter also established a minimum 
settlement amount for anti-kickback disclosures of $50,000. 
HHS OIG Semiannual Report to Congress  40  Centers for Medicare & Medicaid Services 
Fall 2009  The self-disclosure guidelines are available on the OIG Web site at 
http://www.oig.hhs.gov/fraud/selfdisclosure.asp.   
During this reporting period, self-disclosure cases resulted in $12.7 million in HHS 
receivables.  The following are examples:  
 Louisiana  Walgreen Louisiana Co. (Walgreen) agreed to pay $1,053,774 to settle its 
liability under OIGs Civil Monetary Penalties Law (CMPL) authority for allegedly 
employing an individual who Walgreen knew or should have known was excluded from 
participation in Federal health care programs.  As reported under OIGs Provider Self-
Disclosure Protocol, Walgreen submitted to Medicare, Medicaid, and TRICARE claims 
for prescriptions filled by an excluded pharmacist who had applied for his job using his 
middle name, thereby allegedly obscuring his excluded status.  However, if Walgreen had 
checked his pharmacy license, as it is required to do, it would have uncovered his first 
name, under which he was excluded.  The State of Louisiana was a party to the settlement 
agreement and released its administrative claims.  
 New Mexico  The University of New Mexico Health Sciences Center and UNM 
Medical Group, Inc., the billing agent for professional services rendered by physicians 
and other medical providers associated with the University of New Mexico Health 
Sciences Center (collectively, UNMHSC), agreed to pay $200,000 to settle its potential 
FCA liability for employing two excluded individuals.  Specifically, as disclosed under 
OIGs Provider Self-Disclosure Protocol, UNMHSC employed an excluded individual 
in an administrative position between March 2001 and February 2004 and employed an 
excluded physician between August 2004 and August 2005.  As part of the settlement 
agreement, UNMHSC signed a certification relating to its practices designed to prevent 
hiring, contracting, or employing any excluded individuals. 
 Pennsylvania  St. Mary Medical Center (SMMC) agreed to pay $172,617 to resolve 
its CMPL liability for billing for items and services provided by an excluded emergency 
department nurse employee.  SMMC self-disclosed that it had employed an excluded 
individual as an emergency department nurse from June 20, 2005, until December 17, 
2007.  Prior to hiring this individual in 2004, SMMC completed a preemployment 
screening that accurately reflected that the individual was not excluded at that time.  The 
individual subsequently was excluded on June 20, 2005.  SMMC disclosed that its CMPL 
liability began on October 22, 2005, the date that it should have known that the individual 
was excluded, based upon an annual screening completed by a third-party contractor.  
SMMC terminated the individuals employment on December 17, 2007. 
Office of Inspector General Administrative Sanctions 
OIG has the authority to impose administrative sanctions for fraud or abuse or other 
activities that pose a risk to Federal health care programs and their beneficiaries (see 
Appendix E for an explanation of OIGs sanction authorities).  These sanctions include 
the exclusion of individuals and entities from Federal health care programs and the 
imposition of CMPs for submitting false or fraudulent claims to a Federal health care 
HHS OIG Semiannual Report to Congress  41  Centers for Medicare & Medicaid Services 
Fall 2009  program or for violating the anti-kickback statute, the physician self-referral statute, or 
the patient dumping provision of the Social Security Act.  
During this reporting period, OIG administered 1,166 sanctions in the form of program 
exclusions or administrative actions for alleged fraud or abuse or other activities that 
posed a risk to Federal health care programs and their beneficiaries.  Details and 
examples follow.  
Program Exclusions 
During this reporting period, OIG excluded 1,141 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 follow: 
 California  The president and chairman of the board of Pleasant Care Corporation 
(Pleasant Care), Emmanuel Bernabe, agreed to be permanently excluded from Federal 
health care programs following an investigation of substandard care at nursing homes 
formerly operated by Pleasant Care.  Until March 2007, Pleasant Care was the second 
largest nursing home chain in California, operating more than 29 facilities in 14 counties.  
The exclusion of Bernabe is the result of an OIG investigation of allegations of 
substandard care provided at Pleasant Care-operated nursing facilities between 2003 and 
2007.  OIG alleged that Bernabe, through his management and oversight of Pleasant 
Care, caused services to be furnished to Pleasant Care residents that substantially 
departed from the professional standard of care.  The alleged failures put residents at risk 
for harm and included the failure to maintain adequate staffing levels, properly 
administer medication, provide adequate hydration and nutrition, and prevent accidents. 
 Alabama  Pediatrician Michael Sharpe was excluded indefinitely based on his 
voluntary surrender of his license to practice medicine while under investigation for 
allegations of sexual misconduct involving a minor.  
 Multi-State  Eleven individuals were excluded for various periods, ranging from 
5 to 40 years, based on their convictions in a conspiracy scheme that involved the 
purchase and sale of counterfeit, misbranded, or illegally imported drugs not intended or 
approved for distribution in the United States.  In addition, OIG continues to review other 
potential exclusion cases associated with this fraud scheme.  The names and periods of 
exclusion of those already excluded as part of this investigation include Michael Carlow 
and Julio Cruz, 40 years; Noah Salcedo-Smith and Christopher Lamoreaux, 35 years; 
Alexander Nassar, 30 years; Paul Kriger, 25 years; Salvatore Esposito, 20 years; Frank 
Ianneillo, 15 years; and Douglas Albers, Richard Rounsborg, and Robert Spence, 5 years.  
Defendants convicted in this fraud scheme have been sentenced to various periods of 
incarceration and/or home detention and ordered to pay restitution amounts ranging from 
approximately $680,000 to over $4 million. 
 California  Kyon Maung Teo, a dentist and owner of a dental practice, and his wife 
and office manager, Kin Thor Pang, were excluded for a minimum of 30 years based on 
HHS OIG Semiannual Report to Congress  42  Centers for Medicare & Medicaid Services 
Fall 2009  their health-care-related convictions in a $4.5 million Medi-Cal fraud scheme.  From 
November 1999 to December 2003, Teo and Pang submitted false claims to Medi-Cal for 
dental procedures that were medically unnecessary or were not performed.  In State court, 
Teo and Pang pleaded no contest and agreed to pay $3 million, half of which will cover 
the cost of the investigation and the costs of the victims corrective dental treatment.  
Teo and Pang were also sentenced to 1 year and 360 days of incarceration, respectively. 
 California  Alberto Miguel Otiniano, a certified nursing assistant, was excluded for 
a minimum of 15 years based on his conviction related to patient abuse.  Otiniano 
sexually assaulted three patients, one of whom was on pain medication and in and out of 
consciousness at the time of the assault.  Otiniano was sentenced to 6 years of 
incarceration and his license to practice as a certified nursing assistant was revoked by 
the California Department of Public Health. 
 New York  Patricia Villegas, an unlicensed esthetician, was excluded for a minimum 
of 15 years based on her health-care-related conviction.  A New York State jury trial 
showed that Villegas caused serious injury to two of her clients when she injected a 
silicone-type substance into their faces.  Villegass actions caused deformities, 
impairment, and permanent scarring to her clients faces, requiring them to undergo 
multiple reconstructive surgeries.  Villegas was sentenced to 5 years of incarceration. 
Civil Monetary Penalties Law 
The CMPL authorizes OIG to impose administrative penalties and assessments against a 
person who, among other things, submits or causes to be submitted claims to a Federal 
health care program that the person knows or should know are false or fraudulent.  
During this reporting period, OIG concluded cases involving more than $5.2 million in 
CMPs and assessments.  The following are among the CMP actions resolved during this 
reporting period: 
 Nevada  West Valley Imaging Limited Partnership; William L. Boren, M.D.; 
Luke S. Cesaretti, M.D.; and Sundant Limited Partnership (collectively, West Valley) 
agreed to pay $2 million plus interest and to enter into a 5-year integrity agreement for 
allegedly violating the CMPL.  West Valley allegedly performed radiology tests and 
exams that were not ordered by Medicare beneficiaries treating physicians.  The 
integrity agreement requires an annual independent review organization (IRO) claims 
review and a quarterly IRO review of paid claims submitted by West Valley to determine 
whether West Valley complied with applicable rules and procedures relating to obtaining 
and maintaining treating physician orders for all diagnostic services provided to Medicare 
beneficiaries. 
Patient Dumping 
Some of the CMP cases that OIG resolved between April 1 and September 30, 2009, 
were pursued under EMTALA, a statute designed to ensure patient access to appropriate 
emergency medical services.  The following are examples of settlements under this 
statute: 
HHS OIG Semiannual Report to Congress  43  Centers for Medicare & Medicaid Services 
Fall 2009   Florida  Palms West Hospital paid $50,000 to resolve allegations that it refused to 
accept requests to transfer two individuals at emergency departments at nearby hospitals.  
In both instances, the individuals had unstable emergency medical conditions that the 
transferring hospital could not stabilize.  The first instance involved a 38-year-old woman 
with a suspected ectopic pregnancy.  The obstetrician/gynecologist refused to accept the 
transfer of this patient because he felt that the patient should be taken to a hospital closer 
to the transferring hospital.  The second instance involved a 60-year-old man with a 
fracture/dislocation of his shoulder.  The on-call physician at Palms West Hospital 
refused to accept the transfer. 
 Florida  Plantation General Hospital paid $40,000 to resolve allegations that it failed 
to provide an appropriate medical screening examination, stabilizing treatment, and/or an 
appropriate transfer to a 22-year-old pregnant woman who presented to its ED.  The 
woman told the ED staff that her doctor said she could deliver any time and that she was 
leaking fluid and having contractions.  A nurse called the womans doctor and told him 
that the patient appeared stable (without having examined the patient).  The nurse then 
reported to the woman that she had to go to another hospital, about a half hour away, to 
deliver her child.  When the woman expressed worry about whether she could get to the 
other hospital in time and requested ambulance transport, the nurse told her that she could 
not help her and that she must go to the other hospital.  A friend drove the woman at very 
high speeds to the other hospital where she delivered shortly after arrival. 
Criminal and Civil Enforcement 
One of the most common types of fraud perpetrated against Medicare, Medicaid, and 
other Federal health care programs involves filing false claims for reimbursement.  False 
claims may be pursued under Federal and State criminal statutes and, in appropriate 
cases, under the civil FCA.  A description of these enforcement authorities can be found 
in Appendix E.   
The successful resolution of false claims often involves the combined investigative 
efforts and resources of OIG, the Federal Bureau of Investigation (FBI), Medicaid Fraud 
Control Units (MFCU), and other law enforcement agencies.  OIG is responsible for 
assisting DOJ in bringing and settling cases under the FCA.  Many providers elect to 
settle their cases prior to litigation.  As part of their settlements, providers often agree to 
enter into integrity agreements with OIG to avoid exclusions from Medicare, Medicaid, 
and other Federal health care programs.  Such agreements are monitored by OIG and 
require the providers to enhance existing compliance programs or establish new ones.  
The compliance programs are designed, in part, to prevent a recurrence of the underlying 
fraudulent conduct. 
During FY 2009, the Governments enforcement efforts resulted in 515 criminal actions 
and 387 civil actions against individuals or entities that engaged in health-care-related 
offenses.  These efforts resulted in $3 billion in HHS and $985.7 million in non-HHS 
investigative receivables, including civil and administrative settlements or civil 
judgments related to Medicare; Medicaid; and other Federal, State, and private health 
care programs.  Some of the notable enforcement actions are described below.  
HHS OIG Semiannual Report to Congress  44  Centers for Medicare & Medicaid Services 
Fall 2009  Summaries are organized by the sector of the health care industry involved or by the 
nature of the offense. 
Special Assistant United States Attorney Program 
DOJ and OIG launched a program in which OIG attorneys serve as Special Assistant 
United States Attorneys.  OIG attorneys are detailed full-time to DOJs Criminal 
Division, Fraud Section, for 6-month assignments, such as with the Medicare Fraud 
Strike Force described below; others prosecute matters on a case-by-case basis.  Both 
arrangements offer excellent litigation training for OIG attorneys and enhance 
collaboration between the departments in fighting fraud.   
Under this program, OIG attorneys have successfully litigated important criminal cases 
relating to DME, infusion therapy, physical therapy, and other types of Medicare and 
Medicaid fraud.   
Health Care Fraud Prevention and Enforcement Action Team 
On May 20, 2009, Secretary of Health and Human Services Kathleen Sebelius and 
Attorney General Eric Holder announced the creation of the Health Care Fraud 
Prevention and Enforcement Action Team (HEAT), an interagency effort focused 
specifically on combating health care fraud.  HEAT includes senior officials from DOJ 
and HHS who are strengthening existing programs, as well as investing in new resources 
and technologies, to prevent and combat fraud, waste, and abuse.  As a key component of 
its efforts, the HEAT taskforce utilizes and supports the joint HHS-DOJ Medicare Fraud 
Strike Force teams in South Florida and Los Angeles, operating since 2007 and 2008, 
respectively, and Detroit and Houston, created in 2009.  These teams have a proven 
record of success analyzing real-time data to quickly identify and prosecute fraud almost 
as it occurs.  The Strike Force teams coordinate law enforcement operations with other 
Federal, State, and local law enforcement entities.  
During this reporting period, Strike Force efforts have resulted in the filing of charges 
against 138 individuals or entities, 44 convictions, and $40.7 million in investigative 
receivables.  Examples of Strike Force efforts during this reporting period follow: 
 Florida  Seven Miami-area residents were sentenced to prison terms ranging from 
37 to 97 months and ordered to pay restitution amounts ranging from $747,433 to 
$12,464,499, for a total of $19,816,398, in connection with a Medicare fraud scheme 
involving human immunodeficiency virus (HIV) infusion services.  The seven defendants 
pleaded guilty to conspiracy to commit health care fraud.  All seven co-conspirators 
worked at Midway Medical Center, Inc. (Midway), a Miami clinic that purportedly 
provided injection and infusion treatments to patients with HIV.  Most of the services 
allegedly provided to patients at Midway were billed to the Medicare program as 
treatments for a diagnosis of thrombocytopenia, a disorder involving a low count of 
platelets in the blood.  None of the patients at Midway actually had low blood platelet 
counts.  Midway laboratory technician Alexis Dagnesses admitted to manipulating 
patients blood samples to make it appear that the patients had low blood platelet counts 
HHS OIG Semiannual Report to Congress  45  Centers for Medicare & Medicaid Services 
Fall 2009  before the blood was sent to a laboratory for analysis.  Roberto Rodriguez and Carmen 
Del Cueto, part-owners and practicing physicians at Midway, admitted to prescribing 
medications designed to treat thrombocytopenia despite knowing that the laboratory 
results had been falsified and that the patients did not actually have that condition.  
Rodriguez, Del Cueto, and Carlos Garrido, also a part-owner and practicing physician at 
Midway, admitted to routinely billing Medicare for services that were medically 
unnecessary and, in many instances, never provided.  Midway part-owner and operator 
Marcia Garcia admitted to conspiring with physicians in these fraudulent activities.  
Midway medical assistants Gonzalo Nodarse and Alexis Carrazana admitted to making 
false entries in medical records indicating that they had provided medications on 
particular dates and in particular dosages to patients when, in fact, they had not provided 
medications. 
 California  Melkon Gabriyelyan was sentenced to 54 months incarceration and 
ordered to pay $807,000 in restitution pursuant to his guilty plea to health care fraud and 
aggravated identity theft.  As the owner and operator of durable medical equipment 
company, TA Medical Supply, Gabriyelyan admitted that beginning in January 2004, 
he fraudulently billed Medicare for durable medical equipment purportedly supplied to 
beneficiaries.  Gabriyelyan submitted claims to Medicare for items such as orthotic 
braces and power wheelchairs that were not delivered, were not prescribed by the 
physicians listed on the claims, or were not medically necessary.  In addition, 
Gabriyelyan acknowledged that he knowingly and willfully stole the identity of a 
Medicare beneficiary for the purpose of submitting false claims. 
 Florida  Pedro Gonzalez and William Sosa were each sentenced to 33 months of 
imprisonment and ordered to pay joint and several restitution of $714,208 after pleading 
guilty to health care fraud and conspiracy to commit health care fraud.  Gonzalez and 
Sosa controlled and operated P & W Medical Equipments, Inc. (P & W Medical), a DME 
provider, from June 2002 through October 2004.  During that time, P & W Medical billed 
Medicare for orthotic devices that were neither prescribed by physicians nor received by 
beneficiaries. 
Laboratories 
 New York  Quest Diagnostics Incorporated (Quest) and its wholly owned subsidiary, 
Nichols Institute Diagnostics (NID), entered a $302 million global criminal and civil 
settlement to resolve allegations raised in a qui tam complaint concerning various types 
of diagnostic test kits that NID manufactured, marketed, and sold to laboratories 
throughout the country between May 1, 2000, and April 30, 2006.  As part of the criminal 
resolution, NID pleaded guilty to a felony misbranding violation of the Federal Food, 
Drug, and Cosmetic Act of 1938 (FDCA) relating to NIDs Nichols Advantage Intact 
Parathyroid Hormone Immunoassay, a test used by laboratories throughout the country to 
measure parathyroid hormone (PTH) levels in patients.  As part of the plea, NID agreed 
pay a criminal fine of $40 million.  Quest also entered into a nonprosecution agreement 
with the United States.  As part of the civil settlement, Quest, as the parent company of 
NID, agreed to pay $262 million plus interest to resolve FCA allegations relating to the 
Advantage Intact PTH assay and four other assays manufactured by NID that allegedly 
HHS OIG Semiannual Report to Congress  46  Centers for Medicare & Medicaid Services 
Fall 2009  provided inaccurate and unreliable results.  Quest has also agreed to pay various State 
Medicaid programs approximately $6.2 million to resolve similar civil claims. Quest 
entered a 5-year CIA that requires it to hire two independent review entities.  Quests 
board of directors (board) is required to hire a compliance expert to determine how 
compliance concerns are communicated to senior management and the board.  The 
company is required to retain an independent review organization to review Quests 
compliance with FDA Quality System Regulation and labeling requirements. 
Hospitals 
 Texas  The Methodist Hospital (Methodist) agreed to pay the Government 
$9,990,000 plus interest to resolve its liability under the FCA and other statutes for the 
submission of false claims to Medicare and TRICARE.  The Government alleged that 
from January 1, 2001, through August 7, 2003, Methodist artificially inflated its cost-to-
charge ratio through its cost reports, triggering payments exceeding those to which it was 
entitled. 
 Ohio  Regency Hospital Company, LLC; Regency Hospital of North Central Ohio, 
LLC; Regency Hospital of Odessa, LLLP; and Regency Hospital of Northwest Arkansas, 
LLC (collectively, Regency), agreed to pay $9.8 million plus interest to resolve their 
potential FCA liability.  Regency Hospital Company, LLC, owns and operates 23 
long-term acute care hospitals (LTACH) in 10 States, including Regency Hospital of 
North Central Ohio, LLC (doing business as Regency Hospital of Akron and Regency 
Hospital of Ravenna); Regency Hospital of Odessa, LLP; and Regency Hospital of 
Northwest Arkansas, LLC (doing business as Regency Hospital of Springdale).  The 
United States contended that Regency violated the FCA by falsely certifying that the 
average length of stay was greater than 25 days and, as a result, the LTACHs were 
reimbursed at the higher LTACH diagnosis-related group (DRG) rate when they were 
only entitled to be reimbursed at the acute care hospital DRG rate.  Regency Hospital 
Company, LLC, also agreed to enter into a 5-year CIA. 
Clinics 
 Florida  Jorge Ramirez was sentenced to 70 months of incarceration and ordered to 
pay $4,028,994 in restitution following his guilty plea to health care fraud.  Ramirez was 
the owner of the Rehabilitation Institute & Science Clinic (RISC), a clinic that 
purportedly provided Medicare beneficiaries with Imiglucerase, Rituximab, Octreotide, 
and other infusion medications used to treat HIV/AIDS, non-Hodgkins lymphoma, and 
Gauchers disease.  From March 31 through November 7, 2005, Ramirez, on behalf of 
RISC, caused the submission of false and fraudulent claims for these drugs to Medicare. 
 Georgia  Alain Amador was sentenced to 52 months of incarceration and ordered to 
pay $3,928,552 in restitution following his guilty plea to conspiracy to commit health 
care fraud.  Amador and his co-conspirators set up a series of medical clinics that existed 
in name only.  Amador, who has a nursing degree, was instrumental in leasing space in 
the names of the companies, opening bank accounts, incorporating the companies, and 
obtaining Medicare billing numbers for them.  The co-conspirators also improperly 
HHS OIG Semiannual Report to Congress  47  Centers for Medicare & Medicaid Services 
Fall 2009  obtained identity information of actual doctors and Medicare patients.  The fraudulent 
information was used to bill Medicare for infusion therapy services that were not 
rendered. 
Nursing Homes 
 Texas  Regency Nursing and Rehabilitation Centers, Inc. (Regency), agreed to pay 
$4 million plus interest to resolve its potential FCA liability for violations allegedly 
committed at 10 of its nursing facilities located in south, central, and east Texas. The 
allegations included submitting claims to Medicare and Medicaid for skilled services that 
were not medically necessary and/or were for patients that did not qualify for the claimed 
services.  In addition, the Government alleged that Regency falsely certified on its cost 
reports that all services had been provided in accordance with all applicable laws and 
regulations. 
Durable Medical Equipment Suppliers 
 Florida  A durable medical equipment company, Nationwide Medical, Inc. 
(Nationwide), and Howard Siegel agreed to pay the Government $2 million for allegedly 
violating the anti-kickback statute.  Between September 30, 2004, and June 25, 2007, 
Nationwide and Howard Siegel, President and Chief Executive Officer of Nationwide, 
allegedly entered into professional services agreements (PSA) with sleep labs and other 
health care providers (collectively, sleep labs) in multiple States.  Under the PSAs, 
Nationwide provided continuous positive airway pressure (CPAP) devices and associated 
equipment to the sleep labs and paid the sleep labs a set-up fee each time a sleep lab 
provided Nationwides device and equipment to a patient.  Nationwide submitted claims 
for reimbursement to Medicare for the delivery of the CPAP device and associated 
equipment, as well as for the monthly rental of the CPAP device and replacement 
supplies.  Nationwide also entered into a 5-year CIA. 
 Texas  Aniekan Jonathan Ekwere, owner of Coastal Medical Supply, was sentenced 
to 18 months of incarceration and ordered to pay $702,963 in restitution for health care 
fraud and conspiracy to commit health care fraud.  Through his durable medical 
equipment company, Ekwere submitted claims to Medicare and Medicaid for 
reimbursement of motorized wheelchairs.  In most cases, Ekwere provided Medicare and 
Medicaid recipients in both Texas and Louisiana either with less expensive scooters or 
nothing at all.  As part of his scheme, Ekwere paid Jude Akpan, an employee of one of 
Texass largest not-for-profit hospital systems, for fraudulent prescriptions, certificates of 
medical necessity, and Medicare patient information. Akpan was sentenced to 5 years 
probation and ordered to pay restitution of $19,221, joint and several with Ekwere, for 
receiving illegal kickbacks. 
Prescription Drugs 
 Kentucky  Verlon Lane Pierce, a pharmacist, was sentenced to 6 months of home 
incarceration on charges of health care fraud and the sale of prescription drug samples.  
In addition, Pierce paid the United States $850,000 as a criminal forfeiture of proceeds 
HHS OIG Semiannual Report to Congress  48  Centers for Medicare & Medicaid Services 
Fall 2009  from the criminal activity.  He also paid the United States $495,606 in an FCA 
settlement, making the combined criminal and civil recovery $1,345,606.  During his 
guilty plea, Pierce admitted that from January 1, 2001, through December 1, 2004, he 
defrauded health care benefit programs, including Medicaid, by unlawfully billing those 
programs for pharmaceutical drug samples provided to patients.  Pierce also admitted he 
unlawfully purchased, sold, and traded prescription drug samples.  Pierces activities 
occurred in connection with his business, Medicine Arts Pharmacy. 
 South Carolina  The Medicine Dropper, Inc., and its pharmacist owners, John Frank 
Weeks and Derrelyn B. Weeks (collectively, Medicine Dropper), agreed to pay the 
United States $500,000 plus interest to resolve allegations of violating the Controlled 
Substances Act (CSA), which was enacted as Title II of the Comprehensive Drug Abuse 
Prevention and Control Act of 1970, and applicable regulations and to settle allegations 
of violating the FCA for submitting false claims to Medicaid for prescriptions for three 
Medicaid recipients.  The Government alleged that Medicine Dropper filled invalid 
Ketamine prescriptions and filled prescriptions that were not for a legitimate medical 
purpose.  As part of the resolution of this matter, Medicine Dropper agreed to adopt 
reasonable and customary policies to prevent the use of its pharmacy for doctor 
shopping, fill prescriptions using the correct Drug Enforcement Administration number 
for the physician, ensure that all required elements of the prescription are present prior to 
dispensing, and no longer dispense Ketamine products. 
  Massachusetts  Pfizer, Inc. (Pfizer), entered into a $1 billion civil FCA settlement 
with the United States in connection with Pfizer's marketing and promotion practices 
associated with the anti-inflammatory drug Bextra and several other drugs.  The 
settlement agreement is part of a global criminal, civil, and administrative settlement with 
Pfizer and its subsidiary, Pharmacia and Upjohn Company, Inc., which also includes a 
comprehensive 5-year corporate integrity agreement between Pfizer and OIG.   
The civil settlement agreement resolved allegations against Pfizer brought by relators in 
nine separate FCA qui tam cases.  The relators generally alleged that Pfizer promoted 
Bextra and other drugs for uses that were not approved by FDA and that Pfizer provided 
illegal remuneration to health care professionals in connection with the promotion of the 
drugs.  The civil settlement resolved allegations that Pfizer engaged in the improper 
marketing and promotion practices for the drugs at issue at various times between 2001 
and 2008.  
The CIA entered into between the OIG and Pfizer contains several provisions designed to 
promote corporate and individual accountability, increased transparency, and extensive 
monitoring of field and headquarters activities of Pfizer.  The CIA also requires that 
Pfizer proactively identify potential risks associated with promoting individual products 
and that it implement a plan to mitigate the identified risks. 
Practitioners 
 Missouri  Dr. Bic Stafford and Family Foot & Ankle Care, Ltd. (FFA), agreed to pay 
$425,000 to resolve their liability under the FCA.  From January 2003 to October 2008, 
HHS OIG Semiannual Report to Congress  49  Centers for Medicare & Medicaid Services 
Fall 2009  Stafford and FFA allegedly submitted claims to Medicare for complex podiatric surgical 
procedures when, in fact, only routine foot care was provided.  As part of the settlement, 
Dr. Stafford agreed to be excluded from Federal health care programs for 5 years and 
FFA agreed to be permanently excluded.   
Medicaid Fraud Control Units 
MFCUs are key partners in the fight against fraud, waste, and abuse in State Medicaid 
programs.  State MFCUs operate in 49 States and the District of Columbia pursuant to the 
Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977 with the objective of 
strengthening the Governments capability to detect, prosecute, and punish Medicaid 
fraud.  MFCUs investigate and prosecute, or refer for prosecution, providers charged with 
defrauding the Medicaid program or abusing, neglecting, or financially exploiting 
beneficiaries in Medicaid-sponsored facilities.   
Since 1979, OIG has been responsible for administering the Medicaid fraud control grant 
program and providing oversight and guidance to State MFCUs.  This involves 
administering Federal financial grants to MFCUs, assessing the performance of MFCUs, 
and partnering with MFCUs in conducting joint investigations and performing other 
outreach work.  During FY 2008, OIG provided oversight for and administration of 
approximately $184 million in Federal grants distributed to the 50 MFCUs.   
Joint Investigations 
 Indiana  Dennis Lennartz was sentenced to 43 months of incarceration and ordered 
to pay $964,852 in restitution for his guilty plea to health care fraud.  The investigation 
revealed that Lennartz received payments from Medicaid by having his business partner 
bill for transportation services purportedly provided to Medicaid beneficiaries from 
August 2006 through December 2008.  Lennartz had obtained approximately 
160 Medicaid numbers of nursing home patients with developmental disabilities and used 
these numbers to submit the false claims to Medicaid.  Lennartz, who was previously 
convicted of health care fraud, hid his involvement in the scheme by having the Medicaid 
provider number registered to one of his former employees.  The investigation involved 
OIG, the FBI, and the Indiana MFCU. 
 Texas  Brothers Mazen and Wesam Abdallah were each sentenced to 30 months 
imprisonment and were ordered to pay $637,425 in joint and several restitution for their 
involvement in a scheme to defraud Medicare and Medicaid.  After a 5-week trial in 
which more than 50 witnesses testified, a jury convicted both brothers of conspiracy to 
commit health care fraud and convicted Wesam Abdallah of additional charges of health 
care fraud and an anti-kickback violation.  The Abdallahs owned and operated Americare 
Medical Service (Americare), an ambulance company that specialized in transporting 
dialysis patients to and from their treatments.  Many of their patients did not qualify for 
transportation and either had no prescriptions or used prescriptions on which the doctors 
signatures were either photocopied or procured by tricking doctors into signing the 
prescriptions.  In addition, the Abdallahs recruited patients using public transportation 
manifests that they had purchased and by paying kickbacks to patients.  Defendants Ayad 
HHS OIG Semiannual Report to Congress  50  Centers for Medicare & Medicaid Services 
Fall 2009  Fallah and Murad Almasri, who owned and operated Americare before selling it to 
Mazen Abdallah, were previously sentenced pursuant to their guilty pleas to conspiracy.  
Fallah and Almasri were each sentenced to time served and ordered to pay $1,660,113 in 
joint and several restitution.  A third previous owner of Americare was also charged but 
remains a fugitive.  The investigation involved OIG, the FBI, the Internal Revenue 
Service (IRS), and the Texas MFCU. 
 Rhode Island  Carmine DeTomasis, a pharmacist and co-owner of Prime Drug, Inc. 
(Prime Drug), was sentenced to 1 year and 1 day of incarceration and ordered to pay 
$404,125 in joint and several restitution for illegally buying and selling pharmaceuticals 
and defrauding health care insurers.  DeTomasiss codefendant, Louis Romanelli, was 
sentenced to 30 months of imprisonment for his role in the scheme.  DeTomasis supplied 
Romanelli with the drug Vicodin, which Romanelli then sold on the street.  Prime Drug 
also purchased HIV/AIDS drugs and controlled prescription drugs from beneficiaries 
through Romanelli at one-third the cost of the purchase price from a legitimate drug 
wholesaler.  Upon receiving the prescription drugs from Romanelli, Prime Drug 
repackaged them for redistribution to Medicare Part D and Medicaid beneficiaries at the 
full reimbursement rate.  Additionally, DeTomasis also submitted false reimbursement 
claims to health insurance carriers for prescription drugs that the store had not dispensed.  
Further implicated in connection with the scheme was former North Providence Police 
officer Paul Vittorio, who had warned Romanelli that he might be under investigation and 
suggested that Romanelli move his operation.  Vittorio also admitted trying to influence 
the testimony of a grand jury witness.  Vittorio was sentenced to 5 months of 
imprisonment and ordered to pay a fine of $17,627 for misprision of a felony, tampering 
with a witness, and making false statements.  This investigation involved OIG, FDA, the 
Rhode Island MFCU, the U.S. Postal Inspection Service, the IRS, and the Drug 
Enforcement Administration. 
 Maryland  Chesapeake Youth Center (CYC), a former residential treatment center 
for adolescents, agreed to pay $259,120 to resolve its potential FCA liability.  The United 
States alleged that from January through July 2005, CYC submitted or caused to be 
submitted claims to Medicaid for inpatient adolescent psychiatric services that were not 
provided or were substandard or worthless.  The investigation involved OIG, the 
Maryland MFCU, and the Civil Division of DOJ. 
 
HHS OIG Semiannual Report to Congress  51  Centers for Medicare & Medicaid Services 
Fall 2009  Public Health and Human Services Programs 
and Departmentwide Issues 
Based on our available resources each fiscal year (FY), we allocate about 20 percent of 
our appropriations to reviews of the Department of Health and Human Services (HHS) 
approximately 300 public health and human services programs and to departmentwide 
issues that affect more than one program.  However, a portion of these resources is used 
for mandatory reviews, including financial statement audits conducted pursuant to section 
405(b) of the Government Management Reform Act of 1994 (GMRA), the Chief 
Financial Officers Act of 1990 (CFO Act), and information systems reviews required by 
the Federal Information Security Management Act of 2002 (FISMA). 
This chapter summarizes the Office of Inspector Generals (OIG) reports related to public 
health and human services programs and departmentwide issues.  It also provides 
statistics related to and examples of OIG actions and investigations related to public 
health and human services programs, describes actions taken on OIGs recommendations, 
and offers examples of OIGs review and clearance of regulations and guidance related to 
the Departments programs.   
This chapter describes OIGs work related to the following areas:   
Public health programs.  Several HHS agencies perform a wide spectrum of public 
health activities.  Public health activities and programs represent this countrys primary 
defense against acute and chronic diseases and disabilities and provide the foundation for 
the Nations efforts to promote and enhance the health of the American people.  Public 
health agencies within HHS include the following:  
  The Centers for Disease Control and Prevention (CDC) operates a system of 
health surveillance to monitor and prevent disease outbreaks, including those 
that would result from acts of bioterrorism; implements disease-prevention 
strategies; and maintains national health statistics.  
  The Food and Drug Administration (FDA) is responsible for ensuring the 
safety of the Nations food, drugs, medical devices, biologics, cosmetics, and 
animal food and drugs; and for ensuring the efficacy of the Nations drugs, 
medical devices, biologics, and animal drugs. 
  The Health Resources and Services Administration (HRSA) maintains a 
safety net of health services for people who have low incomes, are uninsured, 
or live in rural areas or urban neighborhoods where health care is scarce. 
  The Indian Health Service (IHS) provides or funds health care services for 
1.9 million American Indians and Alaska Natives. 
HHS OIG Semiannual Report to Congress  53  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues    The National Institutes of Health (NIH) supports medical and scientific 
research examining the causes of and treatments for diseases such as cancer 
and HIV/AIDS. 
  The Substance Abuse and Mental Health Services Administration (SAMHSA) 
funds services to assist people with or at risk for mental and substance abuse 
disorders.  
Human services programs.  Several HHS agencies support human services to assist 
vulnerable individuals of all ages, including the following:  
  The Administration for Children and Families (ACF) operates more than 
60 programs that promote the economic and social well-being of children, 
families, and communities, including Temporary Assistance for Needy 
Families (TANF), the national child support enforcement system, the Head 
Start program for preschool children, and programs relating to foster care and 
adoption services.  
  The Administration on Aging (AoA) supports programs that provide services 
such as meals, transportation, and caregiver support to older Americans at 
home and in the community through a nationwide network of services for the 
aging. 
Departmentwide issues.  Certain OIG work cuts across HHS programs, including 
financial accounting, information systems management, and oversight of grants and 
contracts.  Such work may relate to functions carried out by HHSs Program Support 
Center (PSC), which provides a wide range of administrative support to operating and 
staff divisions within the Department.  
Public Health Related Reports  
Emergency Preparedness:  State and Local Pandemic Influenza 
Preparedness for Medical Surge   
We found that although the selected States and localities that we reviewed are making 
progress in preparing for a medical surge, more needs to be done to improve States and 
localities ability to respond to an influenza pandemic.   
A pandemic will affect much of the country at the same time, so medical resources such 
as hospital beds, medical equipment, and personnel will likely be scarce.  The ability to 
rapidly respond to an increased demand for medical resources is often referred to as a 
medical surge.  The recent public health emergency caused by an outbreak of human 
cases of H1N1 influenza has highlighted the need for States and localities to be prepared 
for a medical surge.   
We found that all of the 10 selected localities that we reviewed had established 
partnerships to prepare for a medical surge; however, there was variation in the degree to 
HHS OIG Semiannual Report to Congress  54  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  which coordination between partners occurred.  We also found that fewer than half of the 
selected localities had started to recruit medical volunteers, and none of the five States 
that we reviewed had implemented an electronic system to manage these volunteers.  
Similarly, all 10 localities had acquired limited medical equipment for a pandemic, but 
only three of the five States had electronic systems to track available beds and equipment.  
In addition, most of the selected localities were in the early stages of planning for 
alternate care sites, and most had not identified guidelines for altering triage, admission, 
and patient care during a pandemic.  Finally, although all of the selected localities 
conducted medical surge exercises, none consistently documented the lessons learned 
from these exercises.    
Based on the findings of this report, we recommend that the Assistant Secretary for 
Preparedness and Response (ASPR), in collaboration with CDC (1) work with States and 
localities to improve their efforts within each of the five components of medical surge 
that we reviewed, (2) ensure that States and localities document the lessons learned from 
preparedness exercises that address medical surge, (3) address the issue of legal 
protections for medical professionals and volunteers who respond to public health 
emergencies, (4) facilitate the sharing of information and emerging practices among 
States and localities, and (5) provide training and technical assistance to States and 
localities on key issues. ASPR concurred with all five of our recommendations. CDC did 
not formally comment, but did provide technical comments.  (OEI-02-08-00210)   
Local Pandemic Influenza Preparedness:  Vaccine and Antiviral Drug 
Distribution and Dispensing   
We found that although the majority of selected localities had begun planning to 
distribute and dispense vaccines and antiviral drugs, more needs to be done to improve 
localities ability to respond to an influenza pandemic.  
In June 2009, the World Health Organization raised the pandemic influenza alert level to 
Phase 6 and declared the start of the 2009 H1N1 influenza pandemic.  To assist States 
and localities in planning for an influenza pandemic, HHS provides guidance regarding 
vaccine and antiviral drug distribution and dispensing.  HHS also recommends that States 
and localities exercise their pandemic influenza vaccine and antiviral drug distribution 
and dispensing plans and collaborate with community partners to develop and exercise 
these plans.  Although the Office of the Assistant Secretary for Preparedness and 
Response (ASPR) annually reviews State-level pandemic influenza (pan flu) planning, it 
does not directly assess local pan flu planning.  Therefore, based on HHS guidance 
documents and input from CDC and ASPR, we reviewed 89 preparedness items within 
eight planning areas (components) to determine the extent to which 10 selected localities 
had prepared to distribute and dispense pan flu vaccines and antiviral drugs.     
We found that selected localities had not addressed in their planning documents most of 
the distribution and dispensing components and preparedness items identified in HHS 
pan flu guidance that we reviewed.  Across the eight components, localities planning 
documents generally were not actionable.  That is, plans did not generally identify the 
organization or individuals responsible for carrying out specific actions; identify the 
HHS OIG Semiannual Report to Congress  55  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  sources of personnel that would be necessary to staff distribution and dispensing 
positions; and/or include valid, detailed formal agreements with partnering agencies.  
In addition, although all selected localities conducted at least one exercise related to 
vaccine and antiviral drug distribution and dispensing, most did not consistently create 
After Action Reports and Improvement Plans for these exercises.  Finally, all selected 
localities collaborated with different types of community partners to develop and exercise 
their plans to distribute and dispense vaccines and antiviral drugs during an influenza 
pandemic.   
We recommended that CDC work with States to improve local pan flu vaccine and 
antiviral drug distribution and dispensing preparedness by (1) determining why localities 
appear to be in the early stages of planning, (2) prioritizing the planning areas where 
States should focus any carryover or future funding, and (3) placing special emphasis on 
ensuring that localities develop actionable plans.  Further, CDC should coordinate with 
States to ensure that localities consistently document exercises with After Action Reports 
and Improvement Plans to enhance their pan flu vaccine and antiviral drug distribution 
and dispensing preparedness.  Finally, CDC should facilitate the sharing of pan flu 
planning and response information and emerging promising practices.  CDC agreed with 
two of the three recommendations.  Specifically, CDC agreed to work with States to 
encourage localities to develop After Action Reports and Improvement Plans for their 
preparedness exercises.  Additionally, CDC agreed that States and localities should use 
the Lessons Learned Information Sharing Web site to share planning resources.  CDC 
did not indicate whether it agreed with the first recommendation, but noted that it plans to 
use some of OIGs suggested actions to address this recommendation.  
(OEI-04-08-00260)   
Vermonts Pandemic Influenza Expenditures  
As of June 30, 2008, Vermont had not spent $1 million, or 44 percent, of the 
$2.36 million in pan flu funding that it received from CDC for award phases I through III.  
CDC provides funding to States, territories, and certain large cities through cooperative 
agreements to improve preparedness and response capabilities for bioterrorism and other 
public health emergencies.  Beginning in 2005, Congress appropriated funds in three 
phases specifically to upgrade capabilities to prepare for and respond to pan flu.   
The State attributed its unspent funds to delays in receiving supplemental guidance and 
funding from CDC for award phases I and II and to Vermonts legislative and 
administrative procedures, which caused delays in bringing new positions online.  Of the 
$1.32 million that the State charged to the award, more than $5,000 was not allowable.  
Specifically, $4,753 should have been charged to another CDC award, and $686 was not 
supported by the required documentation. 
We recommended that the State amend the final pan flu financial status reports to reverse 
the $4,753 incorrectly charged to the pan flu award and to refund the $686 that lacked 
required documentation.  The State agreed with our findings and recommendation.  
(A-01-08-01500) 
HHS OIG Semiannual Report to Congress  56  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  Traceability in the Food Supply Chain   
We were able to trace 5 of 40 products in our review through each stage of the food 
supply chain.  The facilities that handled these products in our review were able to 
provide information about the specific product that we purchased or were able to link that 
product to lot-specific information in their records.  For 31 of the 40 products, we could 
identify the facilities that likely handled the products.  For the remaining four products, 
we could not identify the facilities that likely handled the products. 
Beginning in 2005, FDA required certain food facilities to maintain records identifying 
the sources, recipients, and transporters of food products.  The purpose of these records is 
to enable FDA to trace an article of food through each stage of the food supply chain 
(from a retail shelf back to a farm) if FDA has a reasonable belief that a food product is 
adulterated and presents a serious health threat.  Traceability is the ability to follow the 
movement of a food product through the stages of production, processing, and 
distribution.  Traceability is often used to identify the sources of food contamination and 
the recipients of contaminated food in product recalls and seizures.  
Several factors limited our ability to trace the specific food products through each stage 
of the food supply chain:  (1) processors, packers, and manufacturers did not always 
maintain lot-specific information, as required; (2) other types of facilities commonly did 
not maintain lot-specific information because it is not required; (3) retailers received 
products not labeled with lot-specific information; and (4) products from a large number 
of farms were mixed.  Additionally, 59 percent of the food facilities did not meet FDAs 
requirements to maintain records about their sources, recipients, and transporters.  
Finally, 25 percent of the food facilities were not aware of FDAs records requirements. 
Based on these findings, we recommended that FDA improve the traceability of food 
products by seeking statutory authority, if necessary, to strengthen its existing records 
requirements regarding lot-specific information.  We also recommended that FDA 
consider seeking additional statutory authority, such as the ability to require each facility 
that handles a food product to maintain records about every facility or farm that 
previously handled the product.  We also recommended that FDA work with the food 
industry to develop guidance on traceability and that FDA address issues related to 
mixing raw food products from a large number of farms.  To increase compliance with 
the records requirements, we recommended that FDA seek statutory authority to request 
facilities records at any time, as opposed to its current authority to request records only 
when FDA has a reasonable belief that an article of food presents a serious health threat.  
We also recommended that FDA should include a component in its food facility 
inspections that verifies whether facilities are complying with its records requirements.  
Finally, we recommended that FDA conduct education and outreach activities to inform 
the food industry about its records requirements.  FDA stated that it will consider our 
recommendations on seeking statutory authority and mixing food from a large number of 
farms, and described its efforts in response to our recommendations to work with the 
food industry and to conduct education and outreach activities.  (OEI-02-06-00210) 
HHS OIG Semiannual Report to Congress  57  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  Food and Drug Administrations Monitoring of Pet Food Recalls 
In this review, conducted at the request of the Senate Committee on Agriculture, 
Nutrition, and Forestry, we evaluated FDAs authority and procedures with respect to 
pet food recalls.  From March 16 to April 26, 2007, firms initiated and FDA oversaw 
16 Class I (highly hazardous) recalls of pet food contaminated with melamine.  Three 
recalls by one manufacturer accounted for approximately 89 percent of the products in 
the 16 recalls.  Our review focused on three recalls by that manufacturer and one small 
recall each by an import firm and an import broker.   
We found that FDA did not have statutory authority to require manufacturers or 
importers to initiate pet food recalls or to assess penalties for recall violations.  
Furthermore, FDA issued its regulations as nonbinding recall guidance for firms.  Several 
bills proposed in the 110th session of Congress would have provided FDA with authority 
to mandate recalls and to dictate and enforce the terms of a recall.   
FDA had developed procedures for monitoring recalls and assessing a firms recall 
effectiveness.  However, FDA did not always follow its procedures in overseeing three 
of the five recalls that we reviewed.  Furthermore, FDAs procedures were not always 
adequate for monitoring large recalls.  FDAs lack of authority, coupled with its 
sometimes lax adherence to its recall guidance and internal procedures and the 
inadequacy of some of those procedures, limited FDAs ability to ensure that 
contaminated pet food was promptly removed from retailers shelves. 
Our report contained detailed recommendations for strengthening FDAs recall authority 
and improving its effectiveness in monitoring food recalls.  FDA agreed or agreed in 
principle with all of our recommendations.  (A-01-07-01503)   
Health Resources and Services Administration Grant Closeout Procedures  
We found that the 3,184 HRSA grants identified by the HHS Division of Payment 
Management (DPM) as eligible for closeout as of December 31, 2006, which had 
unexpended balances totaling more than $173 million, remained open in the payment 
system for several reasons.  DPM is responsible for closing grants after receiving 
instructions from the Administration for Children and Families or the HHS Division of 
Financial Operations.  HRSA is responsible for initiating closeout of grants.   
As a general rule, grants must be closed within 180 days after the end of the grant period 
(the cutoff date).  However, the grants remained open after the cutoff dates because of 
staffing shortages; differences among the grant award, expenditure, and drawdown 
amounts in the payment system; or a lack of grant closeout procedures.  Also, HRSA and 
the Division of Financial Operations did not adhere to or lacked follow-up procedures to 
determine whether DPM had actually closed grants for which closeout was initiated. 
We recommended that HRSA use the information in this report to ensure that grants are 
closed in a timely manner and to eliminate the backlog of grants eligible for closeout.  In 
HHS OIG Semiannual Report to Congress  58  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  response, HRSA described actions that it had taken or planned to take to implement our 
recommendation.  (A-02-07-02008) 
Indian Health Service Contract Health Services Program:  Overpayments and 
Potential Savings  
IHS and tribes paid above the Medicare rate for 22 percent of hospital claims.  As a 
result, IHS and tribes overpaid $1 million for hospital claims between January and March 
2008.   
Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA) and its implementing regulations, all Medicare-participating hospitals must 
accept reimbursement no greater than the Medicare rate as payment in full for patients 
eligible for Contract Health Services (CHS).  Nonhospital providers, including 
physicians, are not covered by the MMA provision. 
If IHS and tribal payments for nonhospital claims had been capped at the Medicare rate, 
they could have saved as much as $13 million between January and March 2008.  
Savings from claims over the Medicare rate could have paid for approximately 41,000 
additional nonhospital claims between January and March 2008 that might otherwise 
have been deferred or denied.  IHS and tribes paid above Medicare rates for 71 percent of 
nonhospital claims, most of which were for physician services.     
We recommended that IHS and tribes take appropriate action regarding overpaid CHS 
hospital claims.  IHS should also direct its fiscal intermediary to ensure that all future 
CHS claims are paid at or below the Medicare rate.  IHS should provide technical 
assistance to tribes to ensure proper payments of hospital claims.  Lastly, IHS should seek 
legislative authority to cap payments for CHS nonhospital services.  (OEI-05-08-00410) 
Indian Health Service Cost Statement for Fiscal Year 2005 
We found that the $173.9 million of obligations reported in the IHS Headquarters 
FY 2005 Medicare cost statement included $3.4 million of unallowable obligations for 
the section 103 scholarship program, $10 million of obligations for the sections 104 and 
112 scholarship programs on which we could not express an opinion, and $350,000 of 
unallowable obligations related to construction.  Federal regulations and CMS guidance 
establish standards for the allowability and allocability of costs included in Medicare cost 
statements. 
We recommended that IHS (1) adjust a future Headquarters cost statement for 
$3.4 million of unallowable section 103 scholarship obligations, (2) review the 
Headquarters cost statements before and after FY 2005 and adjust a future cost statement 
for section 103 scholarship obligations, (3) discontinue reporting section 103 scholarship 
obligations in its Headquarters cost statements, (4) work with CMS to determine the 
appropriate credits to offset $10 million of sections 104 and 112 scholarship obligations 
and adjust a future cost statement for these credits, (5) ensure that it identifies and reports 
appropriate credits in its cost statements for sections 104 and 112 scholarships for which 
HHS OIG Semiannual Report to Congress  59  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  the recipients had not fulfilled their service obligations, (6) adjust a future Headquarters 
cost statement for $350,000 of unallowable obligations related to construction, and 
(7) ensure that it does not include obligations reimbursed by other governmental entities 
in Headquarters cost statements.   
IHS disagreed that the section 103 scholarship obligations were unallowable under 
Medicare and did not explicitly address our recommendation to adjust a future 
Headquarters cost statement for $3.4 million.  IHS disagreed with our second and third 
recommendations, did not explicitly address our fourth and fifth recommendations, and 
agreed with our sixth and seventh recommendations.  Nothing in IHSs comments caused 
us to revise our findings or recommendations.  (A-09-07-00054)   
Followup of Procurements Made by the National Institutes of Health for the 
Department of Defense  
As required by the John Warner National Defense Authorization Act for Fiscal Year 
2007,  817, as amended, we conducted a follow-up review of procurements made by the 
NIH Information Technology Acquisition and Assessment Center (the Center) on behalf 
of the Department of Defense (DoD).   
We found that the Centers compliance with acquisition requirements had significantly 
improved.  However, the Center did not fully implement our prior recommendations 
related to the use of operations and maintenance (O&M) funds instead of research, 
development, test, and evaluation (RDT&E) funds and the use of funds for equipment 
and services that were provided after the period of performance for which the funds were 
obligated.  We also found that between FYs 2002 and 2007, the Center paid for some 
equipment and services that were provided after the period of performance and that the 
Center did not always maintain adequate documentation on competition, award decisions, 
and contractor monitoring.  In addition, the Center exercised a task order option that may 
not have filled an existing need of the Government. 
We recommended, among other things, that the Center (1) request that DoD provide a 
final decision on the use of $1.2 million of O&M funds instead of RDT&E funds for 
three task orders identified in our previous review that remain unresolved, (2) work with 
DoD to resolve funds ($1.4 million identified in our previous review and $3.7 million 
identified in our current review) that were used for equipment and services provided after 
the period of performance for which the funds were obligated, and (3) determine whether 
options to task orders fill an existing need of the Government before awarding the 
options.  NIH concurred with our recommendations and stated that for those areas under 
its control, it had taken action or was planning corrective measures in conjunction with 
DoD.  (A-03-08-03000) 
Superfund Financial Activities at the National Institute of Environmental 
Health Sciences 
In our review of Superfund financial transactions at the National Institute of 
Environmental Health Sciences (NIEHS) for FY 2008, we found that the transactions 
HHS OIG Semiannual Report to Congress  60  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  were allowable, allocable, and reasonable in accordance with applicable laws and 
regulations.  NIEHS receives Superfund funding to train people who handle hazardous 
waste and manage hazardous waste facilities and to conduct research on the effects of 
hazardous substances on human health.  We conducted this audit pursuant to the 
Comprehensive Environmental Response, Compensation, and Liability Act of 1980 
(CERCLA), which requires the inspector general of a Federal organization with 
Superfund responsibilities to audit all uses of the Superfund.  Our report contained no 
recommendations.  (A-04-09-01062)   
Public Health Related Legal Actions and Investigations  
OIG excludes from participation in Federal health care programs individuals who fail to 
repay HHS-secured educational loans and investigates specific allegations of fraud, 
waste, and abuse affecting public health and human services programs.  These 
investigations are often complex and can include allegations of misuse or theft of grant 
funds, conflict of interest, and kickbacks. 
The following paragraphs provide descriptions and statistics related to these efforts. 
Health Education Assistance Loan Defaults   
OIG excludes from participation in Federal health care programs individuals who have 
defaulted on loans obtained through the Health Education Assistance Loan (HEAL) 
program.  Through the 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 begun to earn income.  
Although the Departments PSC takes steps to ensure repayment, some loan recipients do 
not resolve their indebtedness. 
After the PSC has exhausted efforts to secure repayment of a debt, it declares an 
individual in default.  Thereafter, the Social Security Act permits, and in some instances 
mandates, exclusion from Medicare, Medicaid, and all other Federal health care programs 
for nonpayment of these loans.  Exclusion means that the individual may not receive 
reimbursement under these programs for professional services rendered nor can any other 
provider receive reimbursement for services ordered or prescribed by the individual.  
During the period covered by this report, 13 individuals and related entities were 
excluded as a result of PSC referral of their cases to OIG. 
Individuals who have been excluded as a result of default may enter into settlement 
agreements whereby the exclusions are stayed while they pay specified amounts each 
month to satisfy their debts.  If they default on these settlement agreements, they may be 
excluded until the entire debts are repaid and they may not appeal the exclusions.  Some 
health professionals, upon being notified of their exclusion, immediately repay their 
HEAL debts. 
After being excluded for nonpayment of their HEAL debts, 2,239 individuals have 
chosen to enter into settlement agreements or completely repay their debts.  That figure 
HHS OIG Semiannual Report to Congress  61  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  includes the 51 individuals who have entered into such settlement agreements or 
completely repaid their debts during this reporting period.  The amount of money being 
repaid through settlement agreements or through complete repayment is $164.8 million.  
Of that amount, $4.9 million is attributable to this reporting period. 
Each of the following individuals entered into a settlement agreement to repay the 
amount indicated: 
 Georgia  Chiropractor Ronald G. Knight - $277,707 
 California  Podiatrist Susan Kirkpatrick - $190,066 
 Georgia  Dentist Cheryl Coggins - $178,040 
 U.S. Virgin Islands  Podiatrist Ian Cook - $169,754 
 Indiana  Dentist David Price - $141,733 
 Washington  Osteopath Ralph A. Mitchell - $120,804 
Public Health Related Investigations   
OIG investigates cases involving the misuse of public health agency funds as well as the 
improper possession, use, and transfer of biological agents and toxins, called select 
agents, that the Department has determined to pose a severe threat to public health.  
The following are examples of cases involving improper use of grant funds resolved 
during this reporting period: 
 Maine  Robert L. Newell, the former Governor of the Passamaquoddy Tribe, Indian 
Township, was sentenced to 60 months in prison and ordered to pay $1,741,876 in joint 
and several restitution for conspiring to defraud the United States and other offenses he 
committed while serving as tribal governor from 2002 to 2006.  Newells co-conspirator, 
James J. Parisi, Jr., was sentenced to 12 months and 1 day in prison and held responsible 
for $1,602,516, a portion of the joint restitution figure, for crimes he committed while 
serving as the Director of Finance at the Passamaquoddy Tribe, Indian Township 
Reservation, from 2003 to 2006.  Newell and Parisi misapplied approximately 
$1.74 million in restricted Federal funds awarded to Indian Township for its tribal 
programs, including funds awarded to the tribes Indian Health Center for a substance 
abuse and HIV prevention program. 
 Puerto Rico  The Inter-American University of Puerto Rico (IAUPR) agreed to pay 
$611,117 plus interest to resolve its civil and administrative liability in connection with 
its misappropriation and improper use of HRSA grant funds for grant years 2000 through 
2004.  A non-profit private educational institution, IAUPR received grant funds from 
HRSA for a Health Careers Opportunity Program (HCOP).  The HCOP grant funds were 
intended to be used by IAUPR to increase the participation of disadvantaged students in 
the health care field.  Instead, as reported under OIGs Provider Self-Disclosure Protocol, 
the Director of IAUPRs HCOP program allegedly diverted a portion of the HCOP funds 
HHS OIG Semiannual Report to Congress  62  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  from the grants for her own personal use.  In addition, the Director allegedly made other 
improper grant disbursements as a result of her failure to document the eligibility of a 
handful of students participating in the HCOP program.  In conjunction with the 
settlement agreement, the HHS Office of Grants agreed to provide IAUPR with a 
suspension and debarment release as part of a separate administrative agreement. 
Human Services Related Reports 
Title IV-E Adoption Assistance Payments in Florida  
Based on our sample results, we estimated that Florida claimed unallowable adoption 
assistance payments totaling $4.4 million (Federal share) for the period October 2004 
through September 2007.  Of the 200 payments in our sample, 18 were unallowable 
because State records did not demonstrate that the payments met Federal reimbursement 
requirements.  Although the State had internal controls that prevented most unallowable 
payments, controls over eligibility documentation were not sufficient to detect 
documentation errors in all cases.  The State recently took steps to improve these 
controls. 
We recommended that the State refund $4.4 million to the Federal Government, review 
payments claimed after the audit period on behalf of the 18 children identified in our 
review to ensure compliance with Federal requirements and repay any unallowable 
amounts, and use the results of this audit in staff education and quality assurance reviews.  
The State did not specifically address our first recommendation; however, it provided 
information on steps that it planned to take to implement our second and third 
recommendations.  (A-04-08-03523) 
Title IV-E Training Costs in Missouri 
We found that none of the $10.2 million ($7.7 million Federal share) in Title IV-E 
(foster care and adoption assistance) training costs that Missouri allocated from its social 
services cost pool from July 2002 through June 2006 were allowable for Federal 
reimbursement at the enhanced 75-percent Federal financial participation rate.  Of the 
$7.7 million Federal share, $2.6 million was unallowable because the cost pool did not 
consist entirely of allowable training costs reimbursable at the enhanced rate.  In addition, 
contrary to Federal regulations, none of the costs included in the cost pool were included 
in the States approved training plan.  We set aside an additional $3.3 million for 
adjudication by ACF and accepted the remaining $1.8 million. 
We recommended that Missouri (1) adjust its next Title IV-E Foster Care and Adoption 
Assistance Financial Report to reduce Federal reimbursement claimed for Title IV-E 
training by $2.6 million and (2) work with ACF to determine what portion of the 
$3.3 million Federal share was not allocable to Title IV-E and make financial adjustments 
as necessary.  Missouri did not agree with our findings or recommendations.  Nothing in 
the States comments caused us to revise our report.  (A-07-08-03114)   
HHS OIG Semiannual Report to Congress  63  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  Office of Community Services Corrective Actions Resulting From a 
Government Accountability Office Review  
We initiated a review at ACFs Office of Community Services (OCS) in response to the 
$1 billion that the American Recovery and Reinvestment Act of 2009 (Recovery Act) 
appropriated for the Community Services Block Grant (CSBG) program.  CSBG program 
funds are intended to reduce poverty, revitalize low-income communities, and help 
low-income families become self-sufficient.  In a June 2006 report, the Government 
Accountability Office (GAO) identified deficiencies in OCSs management of and 
internal controls over the CSBG program.  To correct these deficiencies, GAO made nine 
recommendations.  
During our follow-up audit, we found that OCS had implemented the six GAO 
recommendations that we reviewed.  Specifically, OCS conducted a risk-based 
assessment of State CSBG programs and established policies and procedures to help 
ensure that OCSs onsite monitoring was focused on the States with the highest risk.  
In addition, OCS developed written policies and procedures in the areas that GAO 
identified.  Because OCS had implemented GAOs recommendations, we made no 
recommendations.  (A-01-09-02502)  
Child Support Enforcement  
Congress annually appropriates funds to OIG for the purpose of detecting, investigating, 
and prosecuting noncustodial parents who fail to pay court-ordered child support.  These 
activities are priorities for OIG.  OIG works closely with the Office of Child Support 
Enforcement (OCSE); DOJ; U.S. Attorneys Offices; the U.S. Marshals Service; and 
other Federal, State, and local partners to expedite the collection of child support.   
Child Support Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a child support initiative 
that united the efforts of multiagency, multijurisdictional investigative task forces for 
child support enforcement.  The task forces are designed to identify, investigate, and 
prosecute egregious criminal nonsupport cases on 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, where 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. 
Child Support Investigations 
OIG investigations of child support cases, nationwide, resulted in 48 convictions and 
court-ordered restitution and settlements of $3.4 million during this semiannual period.  
Examples of OIGs enforcement results for failure to pay child support include the 
following: 
HHS OIG Semiannual Report to Congress  64  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues   Texas  Troy Lee Neel, the most egregious child support evader in the States history, 
was sentenced to 5 years probation and ordered to pay $778,916 in restitution for foreign 
travel to evade legal child support obligations.  As part of a 1998 divorce decree, Neel 
was ordered to pay $5,000 per month for his two children, both of whom have serious 
medical conditions.  Neel was a former professional major league baseball player whose 
annual salary was over $2 million.  After leaving the baseball profession, Neel lived on a 
resort island in the Republic of Vanuatu in the South Pacific that he had purchased for 
$1.5 million.  The U.S. State Department refused to issue Neel a new passport once his 
old one expired, and, in December 2008, Neel was arrested in a California airport after 
arriving on a flight from Australia.  Neels guilty plea and sentencing were the 
culmination of a 6-year, multi-agency international investigation. 
 Iowa  Robert Ray Davis was sentenced to 21 months of incarceration and 1 year of 
supervised release, and was ordered to pay restitution of $117,655, for failure to pay child 
support for two of his three children.  In a May 2000 divorce decree, Davis was ordered 
to pay $1,379 per month for the support of his two minor children; the third child was 
emancipated at the time of the decree.   
 Ohio  David Pandorf was sentenced to 5 years probation and ordered to pay $45,987 
in restitution for failure to pay child support.  Pandorfs guilty plea had been entered into 
the Southern District of Florida after the case was transferred from the Southern District 
of Ohio.  Pandorf had been licensed and registered in the State of Florida as a yacht 
broker and had approximately $126,000 credited into his bank account from January 
2007 through May 2008, while making only one $400 child support payment.  Pandorf is 
also a convicted felon who had previously served time in Federal prison on State and 
Federal drug-related charges.  
Departmentwide Issues 
Department of Health and Human Services Employee Travel Cards:  Usage 
and Internal Controls   
Based on a review of 2007 HHS travel card transactions, 6 percent constituted misuse.  
Of the 6 percent, 4 percent were for personal purchases while the cardholder was not on 
official travel, including airfare to attend a relatives funeral and lodging for a personal 
trip following official travel.  One percent of the transactions were for personal purchases 
while the cardholder was on official travel.  Lastly, 1 percent of the transactions were for 
local travel expenses.  The travel card may not be used for expenses within the local 
travel area, with the exception of expenses for authorized rental cars.   
Federal regulations require an employee who travels more than five times per year to 
obtain a travel card.  Travel cardholders are personally liable for transactions made with 
their travel cards.  Pursuant to the Federal Travel Regulation and the HHS Travel 
Manual, official travel expenses include transportation, lodging, meals, and incidentals 
associated with official temporary duty travel.  Misuse is defined in part as the use of a 
Federal charge card for other than the official Government purpose for which it is 
HHS OIG Semiannual Report to Congress  65  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  intended.  Travel card program administrators are responsible for reviewing and 
monitoring cardholder activities, including occurrences of misuse. 
We also found that of the transactions that did not match electronic voucher data, 
27 percent constituted misuse, projecting to $1.4 million.  Travel card program guidance 
is lacking in some areas, and training does not meet Office of Management and Budget 
(OMB) requirements.  Furthermore, program administrators may not identify all misuse.  
Finally, less than one-third of sampled transactions that constituted misuse were 
associated with follow-up actions. 
Based on these findings, we recommended that the Assistant Secretary for Administration 
and Management (ASAM) improve travel card program guidance, travel card program 
training, and methods used to identify misuse.  In its comments to the draft report, 
ASAM accepted the report recommendations and described actions it has taken or will 
take to address them.  (OEI-07-07-00480)  
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 single audits of all 
Federal money they receive.  These audits are conducted by non-Federal auditors, such as 
public accounting firms and State auditors.  OIG reviews the quality of these audits and 
assesses the adequacy of the entities management of Federal funds.  In this semiannual 
period, OIGs National External Audit Review Center reviewed 1,339 reports that 
covered $1.5 trillion in audited costs.  Federal dollars covered by these audits totaled 
$463 billion, about $199 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.  We identify entities for high-risk monitoring, alert 
program officials to any trends that could indicate problems in HHS programs, and 
profile non-Federal audit findings of a particular program or activity over time to identify 
systemic problems.  We also provide training and technical assistance to grantees and 
members of the auditing profession. 
OIG maintains a process to assess the quality of the non-Federal reports received and the 
audit work that supports selected reports.  The non-Federal audit reports reviewed and 
issued during this reporting period are categorized in the following table. 
 
Reports issued:   
Without changes or with minor changes 1,235 
With major changes  84 
With significant inadequacies  20 
  Total 1,339 
HHS OIG Semiannual Report to Congress  66  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  The 1,339 reports included 5,265 recommendations for improving management 
operations.  In addition, these audit reports provided information for 101 special 
memoranda that identified concerns for increased monitoring by management. 
Resolving Recommendations 
In accordance with the Inspector General Act of 1978 (IG Act),  5, 5 U.S.C. App., tables 
indicating the dollar value of actions taken on OIGs recommendations in this semiannual 
period have been developed and are provided in Appendix B. 
Legislative and Regulatory Review 
Pursuant to the IG Act,  4(a)(2), OIG reviews existing and proposed legislation and 
regulations relating to HHSs programs and operations and makes recommendations 
concerning their impact on economy and efficiency or the prevention and detection of 
fraud and abuse.  Most audits and other reviews that OIG conducts are designed to test 
compliance with and/or assess the administration and oversight of existing laws and 
regulations.  OIGs reports of such reviews describe our findings, which include 
questioned costs, inefficiencies, vulnerabilities to fraud, inconsistencies, errors in 
application, or weaknesses in oversight or supporting systems.  OIGs corresponding 
recommendations advise HHS and the pertinent operating or staff divisions of the type of 
actions we believe are needed to effectively respond to the findings.  Recommendations 
may be administrative, regulatory, legislative, or a combination.   
The narratives in this Semiannual Report to Congress describe findings and 
recommendations from recently completed OIG reviews, many of which focus on 
existing laws and regulations.  In our Compendium of Unimplemented Office of 
Inspector General Recommendations, which is published annually, we describe priority 
findings and recommendations from past periods that remain to be implemented, along 
with pertinent citations of existing laws and regulations.  In our annual Work Plan, 
which is published at the start of each fiscal year, we provide citations that pertain to 
ongoing or future reviews  All three publications are available on our Web site at 
http://www.oig.hhs.gov/publications.asp. 
OIG also reviews proposed legislation and regulations related to HHS programs and 
operations.  HHS routinely involves its operating and staff divisions, including the Office 
of Inspector General, in the review and development of HHS regulations through a 
well-established HHS process.  Moreover, OIGs audits, evaluations, and investigations 
are sometimes cited in regulatory preambles as influencing HHS regulations.  OIG also 
participates in a longstanding HHS process for developing and reviewing HHSs 
legislative proposals.  In addition, OIG provides independent, objective technical 
assistance on a bipartisan, bicameral basis to congressional committees and members 
who request it. 
HHS OIG Semiannual Report to Congress  67  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  Employee Fraud and Misconduct 
Most people employed by HHS are dedicated, honest civil servants.  Occasionally, 
however, employees violate their ethical and fiduciary responsibilities.  OIG conducts or 
oversees investigations of serious allegations of wrongdoing by Department employees, 
as in the following example: 
 Maryland  Former NIH employee Delores Stroud was sentenced to 6 months of 
home detention and ordered to pay $43,065 in restitution for theft of Government 
property.  Stroud used her Government-issued Visa card to make unauthorized personal 
purchases for various items, including a Nintendo Wii console, Wii video games and 
accessories, a University of Phoenix class ring, televisions, and cameras. 
HHS OIG Semiannual Report to Congress  68  Public Health and Human Services Programs 
Fall 2009    and Departmentwide Issues  Appendix A:   
Fiscal Year 2009 Savings Achieved Through 
Implementation of Recommendations in 
Audits and Evaluations 
After laws involving the Department of Health and Human Services (HHS) programs 
have been enacted, the Office of Inspector General (OIG) analyzes them to identify 
provisions that were supported by recommendations arising from OIG work.  A similar 
process occurs with respect to administrative changes recommended by OIG and 
implemented by HHS management through regulations or other directives.  For 
administrative changes, the savings estimates are developed by the relevant HHS 
operating or staff division or by OIG.  For legislative savings, we use estimates prepared 
by the Congressional Budget Office (CBO).  As part of the process of informing 
Congress of the potential impact of legislation under consideration, CBO projects the 
annual Federal costs and savings that are expected to result from enacting the legislation.   
The savings estimates described annually in this appendix represent funds that will be 
available for better use as a result of actions taken, such as reductions in budget outlays; 
deobligations of funds, reductions in costs incurred; preaward grant reductions; and 
reductions and/or withdrawal of the Federal portion of interest subsidy costs of loans or 
loan guarantees, insurance, or bonds.  Savings of this kind often reflect not only OIGs 
recommendations, but also the contributions of others, such as HHS operating divisions 
and the Department of Justice. 
Total savings attributed to fiscal year (FY) 2009 as a result of legislative and 
administrative actions related to OIG recommendations totaled $16,484.7 million 
($16.48 billion). 
 
Savings 
OIG Recommendation  Implementing Action  (millions) 
 
CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS) 
State-Enhanced Payments Under Medicaid  On January 12, 2001, CMS issued revisions  $7,600 
Upper Payment Limit Requirements.  to the UPL regulations that, among other 
The Centers for Medicare & Medicaid  things, created new payment limits for 
Services (CMS) should move as quickly as  local-government-owned providers.  This 
possible to issue regulatory changes to the  final rule significantly affects a States 
upper payment limit (UPL) rules governing  ability to reap windfall revenues by 
enhanced payments to local government  reducing the available funding pool from 
providers.  The recommendation related to  which to make enhanced payments to local-
findings in OIG report number A-03-00- government-owned providers. 
00216.   
HHS OIG Semiannual Report to Congress  69  Appendix A 
Fall 2009    Savings 
OIG Recommendation  Implementing Action  (millions) 
Medicaid Enhanced Payments to Local  CMS issued a final rule that modified the  $3,100 
Providers.  Medicaid UPL provisions to remove the 
Reconsider capping the aggregate UPL at  150-percent UPL for services furnished by 
100 percent for all facilities, rather than the  non-State-owned or -operated hospitals.  
150-percent allowance for non-State-owned  The rule became effective in the spring of 
Government hospitals.  The recommendation  2002. 
related to findings in OIG report number  
A-03-00-00216. 
 
Payment Reform for Part B Drugs and  Sections 303 through 305 of the Medicare  $1,500 
Biologicals.  Prescription Drug, Improvement, and 
Reexamine drug reimbursement  Modernization Act of 2003 (MMA) revised 
methodologies based on average wholesale  the current payment methodology for Part 
price (AWP) with the goal of reducing  B-covered drugs and biologicals that were 
payments in both Medicare and Medicaid.   not paid on a cost or prospective payment 
The recommendation related to findings in the  basis.  Under the MMA, most drugs were to 
following OIG reports.  be paid at 85 percent of the April 1, 2003, 
OEI-03-96-00420   AWP effective January 1, 2004, through 
OEI-03-97-00290   December 31, 2004, unless they met certain 
OEI-03-00-00310   exceptions.  Since January 1, 2005, most 
OEI-03-97-00293   drug prices have been based on the average 
A-06-00-00023   sales price or competitive acquisition 
A-06-01-00053   instead of AWP. 
A-06-02-00041   
Medicare Secondary Payer.  Section 301 of the MMA clarifies the  $900 
Ensure sufficient resources and contractor  Secretarys authority to make certain 
training for retroactively examining paid  reimbursable conditional payments and to 
claims to identify other payer sources and  take recovery actions against all responsible 
initiating recovery action on all related  entities, including collection of damages, 
overpayments.  The recommendation related  under Medicare Secondary Payer 
to findings in the following OIG reports.  provisions.  This section builds on other 
A-02-98-01036   program improvements related to OIGs 
A-04-92-02057   work that were implemented by the 
A-09-89-00162   Balanced Budget Act (BBA), Omnibus 
A-10-86-62005  Budget Reconciliation Act (OBRA) 1993, 
OBRA 1990, and OBRA 1989.  
  
Clinical Diagnostic Laboratory Tests.  Section 628 of the MMA froze annual  $900 
Seek legislation to allow across-the-board  updates for FY 2004 through FY 2008.  
adjustments in Medicare laboratory fee  This action builds on prior legislative 
schedules, bringing them in line with the  actions in the BBA, OBRA 1993, OBRA 
prices that laboratories charge physicians in a  1990, and legislation in 1984 that were also 
competitive marketplace, and periodically  responsive to OIGs recommendations to 
evaluate the national fee schedule levels.  The  curb excessive clinical laboratory test 
recommendation related to findings in the  reimbursements by Medicare. 
following OIG reports. 
A-09-89-00031  
A-09-93-00056 
 
HHS OIG Semiannual Report to Congress  70  Appendix A 
Fall 2009    Savings 
OIG Recommendation  Implementing Action  (millions) 
Payments for Durable Medical Equipment.  Section 302 of the MMA froze payments  $700 
Take steps to reduce payments for a variety of  for certain DME items, including 
durable medical equipment (DME) and  prosthetics and orthotics, effective  
related supplies.  The recommendation related  January 1, 2004.   
to findings in the following OIG reports: 
OEI-03-01-00680  
OEI-03-02-00700  
OEI-07-96-00221  
OEI-03-96-00230  
OEI-03-94-0021  
OEI-06-92-00861  
OEI-06-92-00866 
 
Medicare Home Health Payments.  Section 701 of the MMA changed the  $700 
Reduce the Home Health Agency (HHA)  updates of home health rates from fiscal 
update factor to account for the high error rate  year to calendar year beginning in 2004, 
found in OIGs review.  The annual update  with the update for the last three quarters of 
was defined as the home health market basket  2004 equal to the market basket increase 
percentage increase.  The recommendation  minus 0.8 percent.   
related to findings in report number  
A-04-99-01194. 
 
Payment for Services Furnished in  Section 626 of the MMA limited the ASC  $400 
Ambulatory Surgical Centers.  update starting April 1, 2004, then froze 
Set rates that are consistent across sites and  updates for a period beginning the last 
reflect only the costs necessary for the  quarter of FY 2005, effectively reducing the 
efficient delivery of health services and  payment advantage to ASCs for those 
establish parity among ambulatory surgical  procedure codes that are more highly paid 
centers (ASC) and outpatient departments.   in the surgical center compared to 
The recommendation related to findings in the  outpatient departments.  Section 626 also 
following OIG reports.   mandated that CMS implement a new 
OEI-05-00-00340   payment system that takes into account 
OEI-09-88-01003   disparities in the costs of procedures 
A-14-98-00400   performed in ASCs and the costs of 
A-14-89-00221  procedures performed in hospital outpatient 
departments, which CMS implemented by 
regulation effective January 1, 2008.  
  
Capped Rental Durable Medical  Section 5101 of the Deficit Reduction Act  $200 
Equipment.  of 2005 (DRA) revised the payment rules 
Eliminate the semiannual maintenance  for capped rental DME to require that 
payment allowed for capped rental DME, pay  ownership of the item transfer to the 
only for repairs when needed, eliminate the  beneficiary after the 13th month and that 
15-month rental option, and convert rentals to  Medicare pay for maintenance services on a 
purchases after the 13th month.  The  cost-reimbursement basis. 
recommendation related to findings in report 
number OEI-03-00-00410. 
 
HHS OIG Semiannual Report to Congress  71  Appendix A 
Fall 2009    Savings 
OIG Recommendation  Implementing Action  (millions) 
Part B Drugs Average Sales Price.  Section 112 of the Medicare, Medicaid, and  $200 
Adopt an alternate calculation of volume- State Childrens Health Insurance Program 
weighted average sales price that is consistent  (SCHIP) Extension Act of 2007 establishes 
with the results set forth in section  a revised calculation method for calculating 
1847A(b)(3) of the Social Security Act.  The  volume weighted average sales prices for 
recommendation related to findings in report  Medicare Part B drugs that comports with 
number OEI-03-05-00310.  OIGs recommendation. 
 
Medicaid Third Party Liability.  Section 6035 of the DRA made several  $170 
Determine whether legislation is needed to  changes to strengthen Medicaids third-
explicitly include pharmacy benefit  party liability provisions, including 
management companies in the Medicaid  clarification regarding pharmacy benefit 
definition of a third party, require third parties  managers.  The section also includes 
to match their eligibility files with Medicaids  requiring States to ensure that health 
eligibility files, and allow Medicaid up to 3  insurers, as a condition of doing business in 
years to recover payments from liable third  the State, provide requested coverage data; 
parties.  The recommendation related to  accept the States right of recovery; and 
findings in report number OEI-03-00-00030.  agree, conditionally, not to deny a claim 
solely on the basis of date of submission of 
the claim when the claim is submitted by 
the State within a 3-year period beginning 
on the date on which the item or service 
was furnished.   
 
Medicaid Drug RebatesSales to  CMS issued Medicaid Drug Rebate  $81 
Repackagers Excluded From Best Price  Program Release #47 in July 2000, 
Determinations.  reiterating that section 1927(c) of the Social 
Require drug manufacturers that excluded  Security Act requires that manufacturers 
sales to health maintenance organizations  include in the best price the lowest price 
(HMO) from their best price calculations to  available to, among other entities, any 
repay the rebates and evaluate the policy  wholesaler, retailer, provider, and HMO.  
guidance relating to exclusion of sales to other  The release specifically stated that this 
(non-HMO) repackagers from best price  includes sales to organized health care 
determinations.  Medicaid rebates were lost  settings, such as HMOs. 
because sales to HMOs were improperly 
excluded from drug manufacturers best price 
determinations in FYs 1998 and 1999.  The 
recommendation related to findings in report 
number A-06-00-00056. 
 
Rebates for Physician-Administered Drugs.  Section 6002 of the DRA requires States to  $20 
Encourage States to take actions to collect  provide for the collection and submission of 
rebates on physician-administered drugs,  utilization data needed to secure rebates for 
especially single-source drugs.  States should  physician-administered drugs and provide 
either use National Drug Codes (NDC)  that the utilization data for single source 
instead of procedure codes or link procedure  and specified multiple-source physician- 
codes to NDCs for single source drugs.  The  administered drugs be submitted using 
recommendation related to findings in report  NDC numbers (unless the Secretary 
number OEI-03-02-00660.  specifies an alternative coding system). 
 
HHS OIG Semiannual Report to Congress  72  Appendix A 
Fall 2009     
ADMINISTRATION FOR CHILDREN AND FAMILIES 
Savings 
OIG Recommendation  Implementing Action  (millions) 
Availability of Health Insurance for Title  The Balanced Budget Act of 2006  $5.7 
IV-D Children.    established the Childrens Health Insurance 
Connecticut should either implement policies  program to enhance Medicaid coverage 
and procedures to require noncustodial parents  provided to children and to allow States to 
to pay all or part of the Medicaid costs for  create insurance options for families that 
their dependent children or establish a  exceed Medicaid resource and income 
Statewide health insurance plan that provides  limits.  Under Connecticut law, applicants 
reasonably priced, comprehensive coverage  include noncustodial parents ordered to 
for children, with costs paid by noncustodial  provide health insurance. 
parents.  The recommendation related to 
findings in report number A-01-97-02506. 
 
Triennial Reviews of Child Support Orders  Section 7302 of the DRA implemented our  $8 
and Medical Support by Parents.  recommendation to increase periodic 
Ensure that more periodic reviews are initiated  reviews by requiring States to adjust child 
and take action to increase medical support by  support orders of families on the 
parents.  OIG reviewed the effects of 1996  Temporary Assistance for Needy Families 
legislation that no longer required States to  program every 3 years.  CBO estimated net 
conduct periodic reviews and adjustments of  savings resulting from section 7302 
child support orders (unless requested by a  beginning with $7 million in FY 2009.  
State agency or parent) and found that many  Section 7307 of the DRA requires, for court 
States had, in effect, discontinued the reviews.   orders that are issued or amended after 
The recommendations related to findings in  enactment, that all States assess the ability 
report number OEI-05-98-00100.  of either or both parents to provide medical 
  support for their children.  CBO estimated 
savings from section 7307 would accrue 
beginning in FY 2007 and scored the 
FY 2009 savings as $1 million.    
   
HHS OIG Semiannual Report to Congress  73  Appendix A 
Fall 2009    Appendix B:   
Resolving Recommendations 
The following statistical Tables summarize OIG monetary recommendations and the 
Departments responses to those recommendations.  This information is provided in 
accordance with sections 5(a)(8) and (a)(9) of the Inspector General Act (5 U.S.C. 
App.  5(a)(8), (a)(9)) and the Supplemental Appropriations and Rescissions Act of 
1980.   
Table 1:  Reports With Questioned Costs 
Questioned costs are those costs that are questioned by the OIG because of an alleged 
violation of a provision of a law, regulation, contract, grant, or other agreement 
governing the expenditure of funds. Costs are questioned because the expenditure was 
not supported by adequate documentation or because the expenditure was unnecessary or 
unreasonable. 
The OIG includes those questioned costs that HHS program officials, in a management 
decision, have agreed should not be charged to the Federal Government, commonly 
referred to as disallowed costs, as part of the expected recoveries in the Accomplishment 
Section of its Semiannual Report.  Superscripts indicate end notes.  
 
Number of  Dollar Value  Dollar Value 
Reports 
Reports  Questioned  Unsupported 
Section 1       
For which no management decision had 
been made by the beginning of the 
reporting period1  163  $1,283,456,000  $75,198,000
Issued during the reporting period  109 $479,991,000  $52,443,000
  Total Section 1  272 $1,763,447,000  $127,641,000
Section 2    
For which a management decision was 
made during the reporting period2, 3    
  Disallowed costs  129 $217,583,000  $59,645,000
  Costs not disallowed  11 $137,129,000  $9,229,000
  Total Section 2  140 $354,712,000  $68,874,000
Section 3    
For which no management decision had 
been made by the end of the reporting 
period     
  Total Section 1 
  minus Total Section 2  132 $1,408,735,000  $58,767,000
Section 4   
HHS OIG Semiannual Report to Congress  75  Appendix B 
Fall 2009   For which no management decision was 
made within 6 months of issuance4  64 $966,393,000  $96,639,000
Table 2:  Funds Recommended To Be Put to Better Use 
Recommendations that funds be put to better use are recommendations that funds could 
be used more efficiently if management took action to implement an OIG 
recommendation through reductions in outlays, deobligation of funds, and/or avoidance 
of unnecessary expenditures.  Table 2 reports HHS program officials decisions to take 
action on these recommendations.  Implemented recommendations are reported in 
Appendix A.   
 
Number of 
Reports  Dollar Value 
Reports 
Section 1     
For which no management decision had been made by the 
beginning of the reporting period1  11  $1,920,259,000
Issued during the reporting period  3  $97,618,000
  Total Section 1  14  $2,017,877,000
  
Section 2   
For which a management decision was made during the 
reporting period2   
  Value of recommendations agreed to by management   
  Based on proposed management action  1  $173,966,000
  Based on proposed legislative action   
  Value of recommendations not agreed to by management  1  $45,763,000
  Total Section 2  2  $219,729,000
  
Section 3   
For which no management decision had been made by the 
end of the reporting period3   
  Total Section 1  
  minus Total Section 2  12  $1,798,148,000
HHS OIG Semiannual Report to Congress  76  Appendix B 
Fall 2009   End Notes to Tables 1 and 2  
Table 1 End Notes 
1 The opening balance was adjusted upward by $36.4 million due to a reevaluation of 
previously issued recommendations. 
2 During the reporting period, revisions to previously reported management decisions 
included: 
CIN: A-04-00-02171, REVIEW OF ALABAMA STATE MEDICAID AGENCY 
ENHANCED PAYMENTS TO PUBLIC HOSPITALS FOR FYS 1997 TO 2000.  
CMS subsequently determined that the States upper payment limit calculation 
was consistent with its Medicaid State plan and reversed its original management 
decision to disallow $236,983,528. 
CIN:  A-06-03-75545, STATE OF LOUISIANA.  CMS subsequently increased its 
original disallowance for unallowable disproportionate share hospital payments 
by $49,710,047. 
CIN:  A-02-04-01004, REVIEW OF MEDICAID DISPROPORTIONATE SHARE 
HOSPITAL PAYMENTS TO UNIVERSITY HOSPITAL, UNIVERSITY OF 
MEDICINE AND DENTISTRY OF NEW JERSEY:  JULY 1, 1995, THROUGH 
JUNE 30, 2001.  CMS reduced its original disallowance of $85,697,689 by 
$3,018,366 to reflect the actual amount of unallowable costs that had been paid to 
the State.   
CIN:  A-09-02-00085, REVIEW OF MEDICAL CLAIMS FOR OXYGEN 
EQUIPMENT AND SUPPLIES.  CMS determined that it could not recoup its 
2006 disallowance for CY 2000 and 2001 claims because 42 CFR 405.841 
restricted its ability to reopen its initial determination on claims totaling 
$1,745,219. 
CIN:  A-04-07-88264, STATE OF GEORGIA.  CMS originally disallowed estimated 
questioned costs of $2,186,893 in this nonfederal audit report.  Subsequently 
CMS determined that actual unallowable costs totaled $597,029 and reduced its 
original disallowance by $1,589,864. 
Not detailed are net reductions to previously issued management decisions totaling 
$1.1 million. 
3 Included are management decisions to disallow $50.8 million in questioned costs that 
were identified by non-Federal auditors in audits of State and local governments, colleges 
and universities, and nonprofit organizations receiving Federal awards conducted in 
accordance with OMB Circular A-133.  By law, the OIG is responsible for ensuring that 
work performed by these non-Federal auditors complies with Federal audit standards; 
accordingly, the OIG tracks, resolves, and reports on recommendations in these audits.   
HHS OIG Semiannual Report to Congress  77  Appendix B 
Fall 2009   4 Due to administrative delays, many of which are beyond management control, 
resolution of the following 64 audits was not completed within 6 months of issuance; 
however, based upon discussions with management, resolution is expected before the end 
of the next semiannual reporting period: 
 
CIN: A-06-07-00041  REVIEW OF AMP CALCULATION - MANUFACTURER A, MAR 2008, 
$268,000,000 
CIN: A-02-03-01029  REVIEW OF RETROACTIVE SCHOOL HEALTH CLAIMS - NEW YORK 
CITY DEPT. OF EDUCATION, OCT 2006, $259,433,325 
CIN: A-06-07-00039  REVIEW OF AMP CALCULATION - MANUFACTURER C, MAR 2008, 
$101,000,000 
CIN: A-02-04-01021  REVIEW OF RETROACTIVE SCHOOL HEALTH CLAIMS - REST OF 
NEW YORK STATE, OCT 2006, $60,188,395 
CIN: A-03-07-00560  PENNSYLVANIA FOSTER CARE MAINTENANCE PAYMENTS 
PHILADELPHIA UNDER $300, MAY 2008, $56,513,439 
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DISPROPORTIONATE SHARE 
HOSPITAL PROGRAM FOR FY 1998, MAY 2003, $33,318,976 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID 
SCHOOL BASED HEALTH SERVICES - CONNECTICUT, MAY 2003, 
$32,780,146 
CIN: A-06-07-00040  REVIEW OF AMP CALCULATION - MANUFACTURER B, MAR 2008, 
$27,700,000 
CIN: A-02-06-02000  RYAN WHITE - PAYER OF LAST RESORT, SEP 2008, $24,340,789 
CIN: A-05-07-00076  REVIEW OF INDIANA MEDICAID PAYMENTS TO INELIGIBLE 
PSYCHIATRIC HOSPITALS, MAR 2009, $16,298,423 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE 
HOSPITAL PAYMENTS FOR FY 1998, SEP 2002, $14,165,950 
CIN: A-03-06-00564  PENNSYLVANIA FOSTER CARE MAINTENANCE PAYMENT 
PHILADELPHIA OVER $300/DAY, DEC 2007, $11,693,989 
CIN: A-03-05-00550  AUDIT OF PENNSYLVANIA FOSTER CARE MAINTENANCE 
PAYMENTS - CASTILLE SAMPLE, SEP 2007, $11,611,822 
CIN: A-06-02-00034  COST REPORTS AND MEDICARE FEE-FOR-SERVICE PAYMENTS - 
SCOTT & WHITE, MAY 2003, $8,229,574 
CIN: A-04-08-03521  AUDIT OF UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS IN 
TENNESEE FOR THE PERIOD OCTOBER 1, 1998 TO DECEMBER 31, 
2007, FEB 2009, $5,768,243 
CIN: A-01-06-00007  REVIEW OF RHODE ISLANDS MEDICAID ADMINISTRATIVE COST 
CLAIMS - FY 2004  FY 2005, MAR 2008, $5,092,735 
CIN: A-04-04-02003  MEDICARE OUTLIER PAYMENTS TO COMMUNITY MENTAL HEALTH 
CENTERS, APR 2006, $4,762,036 
CIN: A-07-07-01046  REVIEW OF PAYMENTS FOR DECEASED MEDICARE BENEFICIARIES 
ENROLLED IN MEDICARE ADVANTAGE ORGANIZATIONS AND 
MEDICARE ADVANTAGE PRESCRIPTION DRUG PLANS, MAR 2009, 
$4,414,643 
CIN: A-09-01-00085  AUDIT OF UCSD MEDICAL CENTER DISPROPORTIONATE SHARE 
HOSPITAL PAYMENTS FOR SFY 1998, SEP 2002, $3,776,054 
CIN: A-04-07-01046  FLORIDA/CDC - ALLOWABILITY OF COSTS CLAIMED FOR 
REIMBURSEMENT UNDER BIOTERRORISM AND EMERGENCY 
PREPAREDNESS PROGRAM GRANTS, SEP 2008, $3,633,671 
CIN: A-06-04-00076  MEDICAL REVIEW OF SYNERGYS PARTIAL HOSPITALIZATION 
SERVICES CLAIMS, MAR 2006, $3,098,296 
CIN: A-10-96-00001  REVIEW OF GROUP HEALTHS GHCPS REPORTING OF ESRD, APR 
1997, $2,763,498 
CIN: A-06-06-00105  AUDIT OF NEW MEXICOS TITLE IV-E ADMINISTRATIVE AND 
TRAINING COSTS (STATE ISSUES), DEC 2008, $1,138,499 
HHS OIG Semiannual Report to Congress  78  Appendix B 
Fall 2009   CIN: A-05-07-00062  OHIO - TITLE IV-E FOSTER CARE PAYMENTS FOR DELINQUENT 
YOUTH, AUG 2008, $689,720 
CIN: A-04-07-03515  UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS - MISSISSIPPI, 
AUG 2008, $674,578 
CIN: A-04-07-01047  ALABAMA/CDC - ALLOWABILITY OF COSTS CLAIMED FOR 
REIMBURSEMENT UNDER BIOTERRORISM AND EMERGENCY 
PREPAREDNESS GRANT PROGRAMS, SEP 2008, $570,400 
CIN: A-05-06-00038  IN-UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, MAR 2007, 
$461,430 
CIN: A-04-04-02010  REVIEW OF COMPREHENSIVE OUTPATIENT REHABILITATION 
THERAPY SERVICES PROVIDED BY ABSOLUTE THERAPY INC., NOV 
2006, $414,712 
CIN: A-06-06-00072  REVIEW OF COST FOR TEXAS MEDICAL FOUNDATION AUDITEE, 
MAY 2008, $403,581 
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES, 
MAY 2002, $319,355 
CIN: A-07-05-01013  PAYMENTS FOR MEDICARE PLUS CHOICE ORGANIZATION FOR 
INSTITUTIONAL BENEFICIARIES, OCT 2005, $293,885 
CIN: A-05-05-00033  MICHIGAN - UNDISTRIBUTED CHILD SUPPORT COLLECTIONS, AUG 
2006, $257,859 
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL 
BENEFICIARIES, OCT 2002, $229,656 
CIN: A-07-06-01035  AUDIT OF QUALITY IMPROVEMENT ORGANIZATION - IOWA, OCT 
2007, $208,974 
CIN: A-02-06-02005  UNDISTRIBUTABLE CHILD SUPPORT PAYMENTS - NEW JERSEY, FEB 
2008, $186,113 
CIN: A-09-05-00077  REVIEW OF PACIFICARES USE OF ADDITIONAL CAPITATION 
UNDER THE MMA OF 2003, MAR 2006, $135,000 
CIN: A-02-06-02006  TITLE IV-E ADMINIISTRATIVE AND TRAINING COSTS, NOV 2008, 
$132,591 
CIN: A-05-06-00029  AUDIT OF COST-BASED HMOS FOR OVERPAYMENTS MADE TO 
CAPITATED PROVIDERS, SEP 2006, $132,075 
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 FLA FOR INSTITUTIONAL 
BENEFICIARIES, SEP 2002, $121,023 
CIN: A-05-05-00044  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN- ARNETT HEALTH PLANS, 
INC. FOR FISCAL YEARS 2000, THROUGH 2003, SEP 2005, $111,862 
CIN: A-05-97-00017  FHP, INC. - HMO INSTITUTIONAL STATUS PROJECT, JUN 1998, 
$109,114 
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2002, $100,692 
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS AND COST 
REPORTS - 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 FYS 2000-2003, AUG 2005, $91,710 
CIN: A-05-01-00090  PAYMENTS TO AETNA U.S. HEALTHCARE PA FOR INSTITUTIONAL 
BENEFICIARIES, JUL 2002, $87,516 
CIN: A-05-05-00043  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN - JOHN DEERE HEALTH 
PLANS, INC.FOR FYS 2000-2003, SEP 2005, $78,799 
CIN: A-02-06-01023  AUDIT OF QUALITY IMPROVEMENT ORGANIZATION - NEW YORK, 
MAR 2008, $77,358 
HHS OIG Semiannual Report to Congress  79  Appendix B 
Fall 2009   CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW ON MANAGED CARE 
ORGANIZATION, OCT 2002, $77,000 
CIN: A-09-06-00039  MEDICARE INTEGRITY - AUDIT OF QUALITY IMPROVEMENT 
ORGANIZATION - WASHINGTON STATE, FEB 2008, $73,636 
CIN: A-06-07-00009  REVIEW OF CAREFLITE CONTRACT, JUN 2007, $68,841 
CIN: A-04-05-02000  AUDIT OF HHA THERAPY BILLINGS, SEP 2005, $63,425 
CIN: A-05-01-00086  PAYMENTS TO HMO OF NORTHEAST PENNSYLVANIA FOR 
INSTITUTIONAL BENEFICIARIES, MAY 2002, $62,432 
CIN: A-04-06-00023  REVIEW OF QUALITY IMPROVEMENT ORGANIZATIONS - 
TENNESSEE, JUL 2008, $30,654 
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JAN 2003, 
$28,573 
CIN: A-07-02-00150  PAYMENTS TO COVENTRY--PITTSBURG FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2003, $26,000 
CIN: A-05-01-00078  PAYMENTS TO HEALTH NET-TUCSON, ARIZONA FOR 
INSTITUTIONAL BENEFICIARIES, APR 2002, $21,233 
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-07-04-01011  PAYMENTS FOR UNITED HEALTHCARE FOR INSTITUTIONAL 
BENEFICIARIES, MAR 2005, $13,128 
CIN: A-05-06-00043  REVIEW OF OHIO KEPRO, FEB 2008, $11,874 
CIN: A-05-01-00070  PAYMENTS FOR BENEFICIARIES WITH INSTITUTIONAL STATUS - 
MISSOURI GROUP HEALTH PLAN, JAN 2002, $11,089 
TOTAL CINS :   64 
TOTAL AMOUNT :   $966,392,956  
 
Table 2 End Notes 
1 The opening balance was adjusted downward by $ 38.4 million. 
2 During the reporting period revisions to previously reported management decisions 
totaled $18.8 million.   
3 Due to administrative delays, many of which are beyond management control, 
resolution of the following 9 audits was not completed within 6 months of issuance; 
however, based upon discussions with management, resolution is expected before the end 
of the next semiannual reporting period: 
 
CIN: A-06-07-00042  INDEXING THE REBATE FOR GENERIC DRUGS, OCT 2007, $966,000,000 
CIN: A-02-07-02000  OPEN AND INACTIVE GRANTS ON THE PAYMENT MANAGEMENT 
SYSTEM - ACF, FEB 2009, $472,155,156 
CIN: A-02-07-02014  OPEN AND INACTIVE GRANTS ON THE PAYMENT MANAGEMENT 
SYSTEM - CDC, FEB 2009, $245,097,758 
CIN: A-04-06-03508  UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS - FLORIDA, JAN 
2008, $7,881,447 
CIN: A-05-05-00033  MICHIGAN-UNDISTRIBUTED CHILD SUPPORT COLLECTIONS, AUG 
2006, $4,397,133 
HHS OIG Semiannual Report to Congress  80  Appendix B 
Fall 2009   CIN: A-06-00-00073  MANAGED CARE ADDTL BENEFITS -- NYLCARE HEALTH PLANS OF 
THE SOUTHWEST -- CY 2000, MAR 2002, $4,000,000 
CIN: A-05-06-00038  INDIANA-UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, MAR 
2007, $871,677 
CIN: A-05-01-00070  PAYMENTS FOR BENEFICIARIES WITH INSTITUTIONAL STATUS - 
MISSOURI GROUP HEALTH PLAN, JAN 2002, $98,689 
CIN: A-05-06-00023  MINNESOTA - UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, 
SEP 2006, $28,240 
 
TOTAL CINS : 9 
TOTAL AMOUNT : $1,700,530,100  
HHS OIG Semiannual Report to Congress  81  Appendix B 
Fall 2009   Appendix C:   
Reporting Requirements of the Inspector 
General Act of 1978, as Amended 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed 
in the following table along with the location of the required information.  Page numbers 
in the table indicate pages in this report.  The word None appears where there are no 
data to report under a particular requirement.   
 
Section of 
the Act  Requirement  Location 
Section 4  (a)(2)  Review of legislation and regulations  p. 67 
Section 5     
   (a)(1)  Significant problems, abuses, and  Throughout this report 
deficiencies 
   (a)(2)  Recommendations with respect to  Throughout this report 
significant problems, abuses, and 
deficiencies 
   (a)(3)  Prior significant recommendations on  See the Compendium of Unimplemented 
which corrective action has not been  Office of Inspector General 
completed  Recommendations at 
http://www.oig.hhs.gov/publications.html. 
   (a)(4)  Matters referred to prosecutive  p. 44 
authorities 
   (a)(5)  Summary of instances in which  None 
information was refused 
   (a)(6)  List of audit reports  Submitted to Secretary under separate cover 
   (a)(7)  Summary of significant reports  Throughout this report 
   (a)(8)  Statistical Table 1  Reports With  Appendix B 
Questioned Costs 
   (a)(9)  Statistical Table 2  Funds  Appendix B 
Recommended To Be Put To Better Use 
   (a)(10)  Summary of previous audit reports  Appendix B 
without management decisions 
   (a)(11)  Description and explanation of revised  Appendix B 
management decisions 
   (a)(12)  Management decisions with which the  None 
Inspector General is in disagreement 
HHS OIG Semiannual Report to Congress  83  Appendix C 
Fall 2009   Appendix D:   
Status of Public Proposals for New and 
Modified Safe Harbors to the  
Anti-Kickback Statute 
Pursuant to the Health Insurance Portability and Accountability Act,  205, the Inspector 
General is required to solicit proposals annually via a Federal Register notice for 
developing new and modifying existing safe harbors to the anti-kickback statute of the 
Social Security Act,  1128(b), and for developing special fraud alerts.  The Inspector 
General is also required to report annually to Congress on the status of the proposals 
received related to new or modified safe harbors. 
In crafting safe harbors for a criminal statute, it is incumbent upon the Office of Inspector 
General (OIG) to engage in a complete and careful review of the range of factual 
circumstances that may fall within the proposed safe harbor subject area to uncover all 
potential opportunities for fraud and abuse by unscrupulous providers.  Having done so, 
OIG must then determine, in consultation with the Department of Justice, whether it can 
develop effective regulatory limitations and controls not only to foster beneficial or 
innocuous arrangements but also to protect the Federal health care programs and their 
beneficiaries from abusive practices. 
In response to the 2008 annual solicitation, OIG received the following proposals related 
to safe harbors: 
 
Proposal  OIG Response 
Create a new safe harbor protecting the  OIG is not adopting this suggestion with 
provision of free, subsidized, or reduced price  respect to application of the anti-kickback 
language services (including oral interpretation  statute.  These arrangements vary greatly and 
and written translation) by hospitals and health  should be addressed on a case-by-case basis, 
systems to physicians and other health care  such as under the advisory opinion 
providers and clinicians, and a corresponding  procedures.  Development of a physician self-
regulatory exception to the physician self- referral law regulatory exception is beyond 
referral law.  OIGs scope of authority.  
 
Create a new safe harbor for incentive  OIG is not adopting these suggestions at this 
payments and shared-savings programs  time.  OIG may develop an anti-kickback 
(gainsharing) coordinated with, or similar to,  statute safe harbor for similar arrangements in 
the Centers for Medicare & Medicaid Services  the future.  OIG has no authority to 
(CMS) proposal under the physician self- promulgate a safe harbor related to the civil 
referral law.  One proposal was to coordinate  monetary penalty for hospital payments to 
with CMS to develop a consistent,  physicians to reduce or limit services to 
comprehensive safe harbor for such  Medicare or Medicaid beneficiaries.  OIG will 
arrangements that would protect participants  continue to issue advisory opinions on these 
from sanctions under the physician self- types of arrangements in response to requests. 
HHS OIG Semiannual Report to Congress  85  Appendix D 
Fall 2009   Proposal  OIG Response 
referral, civil monetary penalty, and anti-  
kickback laws. 
Create a new safe harbor to protect payments  OIG is not adopting these suggestions at this 
consisting of a portion of savings realized  time.  These suggestions require further study 
through participation in the 340B program2 by  and some of them may be impractical given 
340B-covered entities to State Medicaid plans  the statutory language of the shared risk safe 
to encourage patient referrals to the 340B- harbors.   
covered entities, or, alternatively, to modify the 
shared risk safe harbor to protect such 
arrangements. 
 
Revoke the Government Purchasing  OIG is not adopting the suggestion to revoke 
Organization (GPO) safe harbor, or,  the safe harbor.  The GPO safe harbor is 
alternatively, modify the safe harbor to cap  statutory.  OIG is also not adopting the 
payments at 1 percent and include clarifying  suggestions to modify the safe harbor at this 
language that expressly prohibits any  time.  The suggested modifications require 
remuneration that is not directly related to the  further study and may be impractical given 
costs of negotiating a supply contract.  the statutory language of the GPO safe harbor. 
 
Modify the safe harbor for electronic health  OIG is not adopting these suggestions at this 
records (EHR) arrangements to exclude  time because they require further study and 
laboratories from the category of protected  experience with EHR arrangements.  With 
EHR software donors and provide that donors  respect to the first suggestion, in the preamble 
cannot tie the donation of qualifying software  to the final rule, OIG expressed concern about 
to the acceptance and use of donor-specific  potential abuses by laboratories and indicated 
interfaces, upgrades, or modifications.  that OIG would revisit protection for 
laboratory donors if abuses occurred.  With 
respect to the second suggestion, OIG notes 
that the regulations already require 
interoperability and restrict donors from 
inhibiting the use, compatibility, or 
interoperability of donated items and services 
with other EHR systems. 
 
                                                 
2 Public Health Service Act,  340B. 
HHS OIG Semiannual Report to Congress  86  Appendix D 
Fall 2009   Appendix E:   
Summary of Sanctions Authorities 
The Inspector General Act of 1978, as amended, sets forth specific requirements for 
semiannual reports to be made to the Secretary for transmittal to Congress.  A selection 
of authorities appears below. 
Program Exclusions 
The Social Security Act,  1128 (42 U.S.C.  1320a7), provides several grounds for 
excluding individuals and entities from participation in Medicare, Medicaid, and other 
Federal health care programs.  Exclusions are required for individuals and entities 
convicted of the following types of criminal offenses:  (1) Medicare or Medicaid fraud; 
(2) patient abuse or neglect; (3) felonies for other health care fraud; and (4) felonies for 
illegal manufacture, distribution, prescription, or dispensing of controlled substances.  
The Office of Inspector General (OIG) has the authority to exclude individuals and 
entities on several other grounds, including misdemeanors for other health care fraud 
(other than Medicare or Medicaid) or for illegal manufacture, distribution, prescription, 
or dispensing of controlled substances; suspension or revocation of a license to provide 
health care for reasons bearing on professional competence, professional performance, or 
financial integrity; provision of unnecessary or substandard services; submission of false 
or fraudulent claims to a Federal health care program; or engaging in unlawful kickback 
arrangements. 
Providers subject to exclusion are granted due process rights.  These include a hearing 
before an administrative law judge and appeals to the Department of Health and Human 
Services Departmental Appeals Board and Federal district and appellate courts regarding 
the basis for the exclusion and the length of the exclusion. 
Patient Dumping 
The Social Security Act,  1867 (42 U.S.C.  1395dd), provides that when an individual 
presents to the emergency room of a 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. 
HHS OIG Semiannual Report to Congress  87  Appendix E 
Fall 2009    OIG is authorized to collect civil monetary penalties (CMP) of up to $25,000 against 
small hospitals (fewer than 100 beds) and up to $50,000 against larger hospitals 
(100 beds or more) for each instance in which the hospital negligently violated any of the 
section 1867 requirements.  In addition, OIG may collect a penalty of up to $50,000 from 
a responsible physician for each negligent violation of any of the section 1867 
requirements and, in some circumstances, may exclude a responsible physician. 
Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) of the Social Security Act, 1128A (42 U.S.C. 
 1320a7a), provides penalties, assessments, and exclusion from participation in Federal 
health care programs for engaging in certain activities.  For example, a person who 
submits or causes to be submitted to a Federal health care program a claim for items and 
services that the person knows or should know is false or fraudulent is subject to a 
penalty of up to $10,000 for each item or service falsely or fraudulently claimed, an 
assessment of up to three times the amount falsely or fraudulently claimed, and 
exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The CMPL 
and its implementing regulations also authorize actions for a variety of other violations, 
including submission of claims for items or services furnished by an excluded person; 
requests for payment in violation of an assignment agreement; violations of rules 
regarding the possession, use, and transfer of biological agents and toxins; and payment 
or receipt of remuneration in violation of the anti-kickback statute (42 U.S.C. 
 320a-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 an 
entity for the furnishing, or arranging for the furnishing, of any item or service payable 
under the Federal health care programs or (2) purchasing; leasing; ordering; or arranging 
for or recommending the purchasing, leasing, or ordering, of any good, facility, service, 
or item payable under the Federal health care programs of the Social Security Act, 
 1128B(b), (42 U.S.C.  1320a7b(b)). 
Individuals and entities that engage in unlawful referral or kickback schemes may be 
subject to criminal penalties under the general criminal anti-kickback statute; a CMP 
under OIGs CMPL authority pursuant to the Social Security Act,  1127(a)(7), 
(42 U.S.C.  1320a7a); and/or program exclusion under OIGs permissive exclusion 
authority under the Social Security Act,  1128(b)(7), (42 U.S.C.  1320a7(b)(7)). 
 False Claims Amendments Act of 1986  Under the Federal civil False Claims 
Amendments Act of 1986 (FCA) (31 U.S.C.  37293733), a person or an entity is 
liable for up to treble damages and a penalty between $5,500 and $11,000 for each false 
HHS OIG Semiannual Report to Congress  88  Appendix E 
Fall 2009    claim it knowingly submits or causes to be submitted to a Federal program.  Similarly, a 
person or an entity is liable under the FCA if it knowingly makes or uses, or causes to be 
made or used, a false record or statement to have a false claim paid. 
The FCA defines knowing to include not only the traditional definition but also 
instances in which the person acted in deliberate ignorance or reckless disregard of the 
truth or falsity of the information.  Under the FCA, no specific intent to defraud is 
required.  Further, the FCA contains a qui tam, or whistleblower, provision that allows a 
private individual to file a lawsuit on behalf of the United States and entitles that 
whistleblower to a percentage of any fraud recoveries.  The FCA was again amended in 
2009 in response to recent Federal court decisions that narrowed the laws applicability.  
Among other things, these amendments clarify the reach of the FCA to false claims 
submitted to contractors or grantees of the Federal Government. 
HHS OIG Semiannual Report to Congress  89  Appendix E 
Fall 2009    Appendix F:   
Acronyms and Abbreviations  
Following are lists of acronyms and abbreviations used in this publication. 
Terms, Titles, and Organizations  
 
ACF     Administration for Children and Families  
AMP     average manufacturer price  
ARRA    American Recovery and Reinvestment Act 
ASAM   Office of the Assistant Secretary for Administration and Management  
ASP   average sales price  
ASPE   Office of the Assistant Secretary for Planning and Evaluation  
ASPR   Office of the Assistant Secretary for Preparedness and Response  
CCA   certification of compliance agreement  
CDC   Centers for Disease Control and Prevention  
CDPAP   Consumer Directed Personal Assistance Program  
CERT   Comprehensive Error Rate Testing (program)  
CHIP   Childrens Health Insurance Program  
CHS  contract health services  
CIA   corporate integrity agreement  
CMP   civil monetary penalty  
CMPL   Civil Monetary Penalties Law  
CMS   Centers for Medicare & Medicaid Services  
CoPs   Conditions of Participation  
CPAP   continuous positive airway pressure  
CSBG   Community Services Block Grant  
CY   calendar year  
DME   durable medical equipment  
DoD   Department of Defense  
DOH   Department of Health  
DOJ   Department of Justice  
DPM   Division of Payment Management  
DRG   diagnosis-related group  
DSH   disproportionate share hospital  
E&M   evaluation and management (services)  
ED   emergency department  
ESRD   end-stage renal disease  
FBI   Federal Bureau of Investigation  
FDA   Food and Drug Administration  
FMAP   Federal medical assistance percentage  
FY   fiscal year 
GAO   Government Accountability Office  
HCFAC   Health Care Fraud and Abuse Control (program) 
HCOP   Health Careers Opportunity Program  
HHS OIG Semiannual Report to Congress  91  Appendix F 
Fall 2009    HEAL   Health Education Assistance Loan  
HEAT   Health Care Fraud Prevention and Enforcement Action Team  
HHS   Department of Health and Human Services  
HIV   human immunodeficiency virus  
HRSA   Health Resources and Services Administration  
IHS   Indian Health Service  
IRF   inpatient rehabilitation facility 
IRO   independent review organization  
IRS   Internal Revenue Service  
LCD   local coverage determination  
LTC   long-term care  
LTACH   long-term acute care hospital  
MA   Medicare Advantage  
MCO   managed care organization  
MFCU   Medicaid Fraud Control Unit  
MMIS   Medicaid Management Information System  
NDC   national drug code  
NEMT   nonemergency medical transportation  
NF   nursing facilities  
NIEHS   National Institute of Environmental Health Sciences  
NIH   National Institutes of Health  
NLA   national limit amount  
O&M   operations and maintenance  
OCSE   Office of Child Support Enforcement  
OIG   Office of Inspector General  
OCS   Office of Community Services  
PDP   private prescription drug plan 
PECOS   Provider Enrollment, Chain, and Ownership System  
P.L.   Public Law  
PPS   prospective payment system  
PRB   postretirement benefit  
PSA   professional services agreement  
PSC   Program Support Center  
PTH   parathyroid hormone  
QAA   Quality Assessment and Assurance  
RDT&E   research, development, test, and evaluation  
SNF   skilled nursing facility 
TCM   targeted case management  
UCCP   uncompensated care pool  
U.S.C.  United States Code 
Public Laws 
 
BBA  Balanced Budget Act of 1997, P.L. No. 105-33 
BIPA  Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act of 2000, P.L. No. 106-554 
HHS OIG Semiannual Report to Congress  92  Appendix F 
Fall 2009    CERCLA  Comprehensive Environmental Response, Compensation, and Liability 
Act of 1980, P.L. No. 96-510 
CFO Act  Chief Financial Officers Act of 1990, P.L. No. 101-576 
CSA  Controlled Substances Act, Title II of the Comprehensive Drug Abuse 
Prevention and Control Act of 1970, P.L. No. 91-513 
DRA   Deficit Reduction Act of 2005, P.L. No. 109171,   
EMTALA  Emergency Medical Treatment and Labor Act of 1986, P.L. No. 99-272 
FCA  False Claims Act Amendments of 1986, P.L. No. 99-562 
FDCA  Federal Food, Drug, and Cosmetic Act of 1938, P.L. No. 75-717  
FISMA  Federal Information Security Management Act of 2002, P.L. No. 107-347 
GMRA  Government Management Reform Act of 1994,  P.L. No. 103-356 
HIPAA   Health Insurance Portability and Accountability Act of 1996, P.L. No. 
104-191  
IG Act  Inspector General Act of 1978 (IG Act), as amended by P.L. No. 111-25, 
5 U.S.C. App. 
MMA   Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, P.L. No. 108-173 
Recovery  American Recovery and Reinvestment Act of 2009, P.L. No. 111-5 
Act 
 
Not  John Warner National Defense Authorization Act for Fiscal Year 2007, 
Abbreviated  P.L. No. 109-364 
 
Not    Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977, P.L. No. 
Abbreviated  95142 
 
Not  Supplemental Appropriations and Rescissions Act of 1980 (P.L. 96-304) 
Abbreviated 
 
HHS OIG Semiannual Report to Congress  93  Appendix F 
Fall 2009