The Department of Health and Human Services 

and  

  The Department of Justice 

  Health Care Fraud and Abuse Control Program 

  Annual Report for Fiscal Year 2010 

 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
January 2011 
 TABLE OF CONTENTS 
 
 
 
Page 
 
Executive Summary    1 
  
Introduction  3  

Monetary Result s    5  
  
Program Accomplishments    7 

   
Department of Health and Human Services 
      
Office of Inspector General      37 

Office of the Assistant Secretary for Planning and Evaluation    52 

Centers for Medicare & Medicaid Services  52  

Administration on Aging    64 

Office of the General Counsel    66 

Food and Drug Administration Pharmaceutical Fraud Program    69 

Assistant Secretary for Public Affairs     71 

 
Department of Justice 
    
United States Attorneys     72 

Civil Division    73 

Criminal Division    75 

Civil Rights Division    77 

 
 
Appendix: Federal Bureau of Investigation    81 
  
  Corrections to FY 2009 Report              83 

        Return on Investment Calculation            84 

 
Glossary of Terms   86 
  
 
 
 
 
 
 
    GENER AL NOTE   
   
All years are fiscal years unless 
otherwise noted in the text.    EXECUTIVE SUMMARY  

 
 
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national 
Health Care Fraud and Abuse Control Program (HCFAC or the Program) under the joint 
direction of the Attorney General and the Secretary of the Department of Health and Human 
Services (HHS)1, acting through the Inspector General, designed to coordinate Federal, state and 
local law enforcement activities with respect to health care fraud and abuse.  In its fourteenth 
year of operation, the Program=s continued success again confirms the soundness of a 
collaborative approach to identify and prosecute the most egregious instances of health care 
fraud, to prevent future fraud or abuse, and to protect program beneficiaries. 
 
Monetary Results  
 
During Fiscal Year (FY) 2010, the Federal government won or negotiated approximately  
$2.5 billion in health care fraud judgments and settlements2, and it attained additional 
administrative impositions in health care fraud cases and proceedings.  The Medicare Trust Fund 
received transfers of approximately $2.86 billion during this period as a result of these efforts, as 
well as those of preceding years, including over $683.2 million in Federal Medicaid money 
similarly transferred separately to the Treasury as a result of these efforts.  The HCFAC account 
has returned over $18.0 billion to the Medicare Trust Fund since the inception of the Program in 
1997. 
 
Enforcement Actions  
 
In FY 2010, the Department of Justice (DOJ) opened 1,116 new criminal health care fraud 
investigations involving 2,095 potential defendants.  Federal prosecutors had 1,787 health care 
fraud criminal investigations pending, involving 2,977 potential defendants, and filed criminal 
charges in 488 cases involving 931 defendants. A total of 726 defendants were convicted for 
health care fraud-related crimes during the year.  Also in FY 2010, DOJ opened 942 new civil 
health care fraud investigations and had 1,290 civil health care fraud matters pending at the end 
of the fiscal year. 
 
In FY 2010, HHS Office of Inspector General (HHS/OIG) excluded 3,340 individuals and 
entities. Among these were exclusions based on criminal convictions for crimes related to 
Medicare and Medicaid (894), or to other health care programs (263); for patient abuse or 
neglect (247); or as a result of licensure revocations (1,582).   In addition, HHS/OIG imposed 
civil monetary penalties against, among others, providers and suppliers who knowingly submit 
false claims to the Federal government.  HHS/OIG also issued numerous audits and evaluations 
                                                 
1Hereafter, referred to as the Secretary.  
2The amount reported as won or negotiated only reflects Federal recoveries and therefore does not reflect 
state Medicaid  monies recovered as part of any global, Federal-State settlements.   
 
  1 
 with recommendations that, when implemented, would correct program vulnerabilities and save 
program funds. 
 
 
 
  2 
   INTRODUCTION  

   
 
  ANNUAL REPORT OF 

  THE ATTORNEY GENERAL AND THE SECRETARY 

  DETAILING EXPENDITURES AND REVENUES 

  UNDER THE HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM 

  FOR FISCAL YEAR 2010 

 
  As Required by 

  Section 1817(k)(5) of the Social Security Act
  
 
  STATUTORY BACKGROUND  

 
 
The Social Security Act Section 1128C(a), as established by the Health Insurance Portability and 
Accountability Act of 1996 (P.L. 104-191, HIPAA or the Act), created the Health Care Fraud 
and Abuse Control Program, a far-reaching program  to combat fraud and abuse in health care, 
including both public and private health plans. 
 
As was the case before HIPAA, amounts paid to Medicare in restitution or for compensatory 
damages must be deposited in the Medicare Trust Fund.  The Act requires that an amount 
equaling recoveries from health care investigations  including criminal fines, forfeitures, civil 
settlements and judgments, and administrative penalties  also be deposited in the Trust Fund.3   
All funds deposited in the Trust Fund as a result of the Act are available for the operations of the 
Trust Fund. 
 
The Act appropriates monies from the Medicare Trust Fund to an expenditure account, called the 
Health Care Fraud and Abuse Control Account (the Account), in amounts that the Secretary and 
Attorney General jointly certify as necessary to finance anti-fraud activities.  The maximum  
amounts available for certification are specified in the Act.  Certain of these sums are to be used 
only for activities of the HHS Office of Inspector General (HHS/OIG), with respect to the 
Medicare and Medicaid programs.  In FY 2006, the Tax Relief and Health Care Act (TRHCA) 
(P.L 109-432, 303) amended the Act so that funds allotted from the Account are available until 
expended. TRHCA also allowed for yearly increases to the Account based on the change in the 
consumer price index for all urban consumers (all items; United States city average) (CPI-U) 
over the previous fiscal year for fiscal years for 2007 through 2010.4  In FY 2010, the Patient 
Protection and Affordable Care Act, as amended by the Health Care and Education 
Reconciliation Act, collectively referred to as the Affordable Care Act (P.L. 111-148, ACA) 
                                                 
3Also known  as the Hospital Insurance (HI) Trust Fund.  All further references to the Medicare Trust Fund  
refer to the HI  Trust Fund.   
4 The CPI-U adjustment in TRHCA did not apply to the Medicare Integrity Program (MIP).  
 
3  
 extended permanently the yearly increases to the Account based upon the change in the 
consumer price index for all urban consumers or CPI-U. 
 
In FY 2010, the Secretary and the Attorney General certified $266.4 million in mandatory 
funding for appropriation to the Account.  Additionally, Congress appropriated $311.0 million in 
discretionary funding. A detailed breakdown of the allocation of these funds is set forth later in 
this report.  HCFAC appropriations generally supplement the direct appropriations of HHS and 
DOJ that are devoted to health care fraud enforcement and funded approximately three-fourths of 
HHS/OIG=s appropriated budget in FY 2010.  (Separately, the Federal Bureau of Investigation 
(FBI) received $126.3 million from HIPAA which is discussed in the Appendix.) 
 
Under the joint direction of the Attorney General and the Secretary, the Program=s goals are: 
 
(1) 	 to coordinate Federal, state and local law enforcement efforts relating to health care fraud 
and abuse with respect to health plans; 
 
(2) 	 to conduct investigations, audits, inspections, and evaluations relating to the delivery of 
and payment for health care in the United States; 
 
(3) 	  to facilitate enforcement of all applicable remedies for such fraud; 
 
(4) 	 to provide guidance to the health care industry regarding fraudulent practices; and 
 
(5) 	 to establish a national data bank to receive and report final adverse actions against health 
care providers and suppliers. 
 
The Act requires the Attorney General and the Secretary to submit a joint annual report to the 
Congress which identifies both: 
 
(1) 	 the amounts appropriated to the Trust Fund for the previous fiscal year under various 
categories and the source of such amounts; and 
 
(2) 	 the amounts appropriated from the Trust Fund for such year for use by the Attorney 
General and the Secretary and the justification for the expenditure of such amounts. 
 
Additionally, language in HHS/OIGs FY 2010 appropriation (Public Law 111-117) 
accompanying additional discretionary HCFAC funding requires that this report shall include 
measures of the operational efficiency and impact on fraud, waste, and abuse in the Medicare, 
Medicaid, and CHIP programs for the funds provided by this appropriation.   
 
This annual report fulfills the above statutory requirements.   
 
 
 
4  
   MONETARY RESULTS  

 
As required by the Act, HHS and DOJ must detail in this Annual Report the amounts deposited 
to the Medicare Trust Fund, and the source of such deposits.  In FY 2010, $4.021 billion was 
deposited with the Department of the Treasury and the Centers for Medicare and Medicaid 
Services (CMS), transferred to other Federal agencies administering health care programs, or 
paid to private persons during the fiscal year. The following chart provides a breakdown of the 
transfers/deposits: 
Total Transfers/Deposits by Recipient FY 2010 
Department of the Treasury    
Deposits to the Medicare Trust Fund, as required by HIPAA   
Gifts and Bequests  $49,477 
            Amount Equal to Criminal Fines  $1,205,600,509 
            Civil Monetary Penalties  $21,739,469 
Asset Forfeiture *  0 
            Penalties and Multiple Damages  $611,786,212 
Subtotal   $1,839,175,667 
   
Centers for Medicare and Medicaid Services   
HHS/OIG Audit Disallowances - Recovered  $687,124,220 
  Restitution/Compensatory Damages  $336,253,422 
             Subtotal  $1,023,377,642 
   
Grand Total of Amounts Transferred to the Medicare Trust Fund   $2,862,553,309 
   
Restitution/Compensatory Damages to Federal Agencies    
TRICARE  $57,129,312 
Veteran=s Administration  $33,215,359 
 HHS/OIG Cost of Audits, Investigations and Compliance Monitoring  $11,717,923 
Office of Personnel Management  $46,492,777 
Other Agencies  $19,789,193 
Federal Share of Medicaid  $683,209,512 
Subtotal   $851,554,076 
Relators= Payments**   $307,620,401
 TOTAL ***  $4,021,727,786 
*This includes only forfeitures under 18 U.S.C. '  1347, a Federal health care fraud offense that became effective on 
August 21, 1996.  Not included are forfeitures obtained  in numerous health care fraud cases prosecuted under 
Federal mail and wire fraud and other offenses. 
**These are funds awarded to private persons who file suits on  behalf  of the Federal  government under the qui tam  
provisions of the False Claims Act, 31  U.S.C. ' 3730(b). 
***State funds are also collected on behalf  of state Medicaid programs; only the federal share of Medicaid funds  
transferred to CMS are represented here. 
 
  5 
 The above transfers include certain collections, or amounts equal to certain collections, required 
by HIPAA to be deposited directly into the Medicare Trust Fund.  These amounts include: 
 
(1) 	 Gifts and bequests made unconditionally to the Trust Fund, for the benefit of the Account 
or any activity financed through the Account; 
 
(2) 	  Criminal fines recovered in cases involving a Federal health care offense, including 
collections under section 24(a) of Title 18, United States Code (relating to health care 
fraud); 
 
(3) 	  Civil monetary penalties in cases involving a Federal health care offense; 
 
(4) 	 Amounts resulting from the forfeiture of property by reason of a Federal health care 
offense, including collections under section 982(a)(7) of Title 18, United States Code; and 
 
(5) 	 Penalties and damages obtained and otherwise creditable to miscellaneous receipts of the 
general fund of the Treasury obtained  under sections 3729 through 3733 of Title 31, 
United States Code (known as the False Claims Act, or FCA), in cases involving claims  
related to the provision of health care items and services (other than funds awarded to a 
relator, for restitution or otherwise authorized by law). 
 
  6 
 PROGRAM ACCOMPLISHMENTS 

  
EXPENDITURES 
 
In the fourteenth year of operation, the Secretary and the Attorney General certified $266.4 
million in mandatory funding as necessary for the Program.  Additionally, Congress appropriated 
$311.0 million in discretionary funding.  The following chart gives the allocation by recipient: 
 
FY 2010 ALLOCATION OF HCFAC APPROPRIATION  
  Organization   Mandatory  Discretionary  Total 
Allocation5   Allocation   Allocation 
Department of Health and Human Services        
Office of Inspector General6   $178,704,551   $29,790,000  $208,494,551  
Office of the General Counsel  $8,713,598  $0  $8,713,598 
Administration on Aging  $3,779,000  $0  $3,779,000 
Food and Drug Administration  $1,650,000  $0  $1,650,000 
Assistant Secretary for Planning & Evaluation  $1,050,000  $0  $1,050,000 
Assistant Secretary for Public Affairs  $690,894   $0  $690,894  
Centers for Medicare & Medicaid Services  $16,509,000  $251,420,000  $267,929,000 
 Subtotal  $211,097,043  281,210,000  $492,307,043  
Department of Justice            
United States Attorneys   $31,400,000  $11,510,367  $42,910,367 
Civil Division   $18,972,139  $6,934,219  $25,906,358 
Criminal Division  $1,580,000  $5,334,108  $6,914,108 
Civil Rights Division   $2,376,000  $2,064,352  $4,440,352 
Nursing Home and Elder Justice Initiative  $1,000,000  $0  $1,000,000 
Federal Bureau of Investigation   $0  $3,946,954  $3,946,954 
Subtotal   $55,328,139  $29,790,000  $85,118,139 
TOTAL7  $266,425,182   $311,000,000   $577,425,182  
 
 
                                                 
5 In FY 2007, mandatory funds became available until expended. 
 
6In addition, HHS/OIG obligated $5.9 million in funds received as Areimbursement for the costs of 
conducting investigations  and audits and for monitoring compliance plans@ as authorized by section  1128C(b) of the 
Social Security Act, 42  U.S.C. '  1320a-7c(b).    
7Amounts only represent those that are provided by  statute, and do  not include other mandatory sources or  
discretionary appropriated sources provided through Departments annual appropriations. 
  
 
 
  7 
 ACCOMPLISHMENTS 
 
Overall Recoveries  
 
During this fiscal year, the Federal government won or negotiated approximately $2.5 billion in 
judgments and settlements, and it attained additional administrative impositions in health care 
fraud cases and proceedings.  The Medicare Trust Fund received transfers of approximately  
$2.86 billion during this period as a result of these efforts, as well as those of preceding years; and 
another $683 million in Federal Medicaid money was transferred to the Treasury separately as a 
result of these efforts.8   
 
In addition to these enforcement actions, numerous audits, evaluations and other coordinated 
efforts yielded recoveries of overpaid funds, and prompted changes in Federal health care 
programs that reduce vulnerability to fraud.9    
 
The return-on-investment (ROI) for the HCFAC program, since 1997, is $4.9 returned to every 
$1.0 expended. The 3-year average (2008-2010) ROI is $6.8 to $1.0, which is $1.9 higher than 
the historical average.  Due to the fact that the annual ROI can vary from year to year depending 
on the number of cases that are settled or adjudicated during that year, DOJ and HHS use a three-
year rolling average ROI for results contained in the report.  Additional information on how the 
ROI is calculated can be found in the Appendix. 
 
Departmental Collaboration  
 
Health Care Fraud Prevention & Enforcement Action Team (HEAT)  
 
The Attorney General and the HHS Secretary maintain regular consultation at both senior and 
staff levels to facilitate, coordinate and accomplish the goals of the HCFAC Program.  On May 
20, 2009, Attorney General Holder and Secretary Sebelius announced the Health Care Fraud 
Prevention & Enforcement Action Team  (HEAT), a new effort with increased tools and resources,  
and a sustained focus by senior level leadership  to enhance collaboration  between the Departments  
of  Health  and  Human  Services  and  Justice.   With the creation of the new HEAT effort, DOJ and 
HHS pledged a cabinet-level commitment to prevent and prosecute health care fraud.  HEAT, 
which is jointly led by the Deputy Attorney General and HHS Deputy Secretary, is comprised of 
top level law enforcement agents, prosecutors, attorneys, auditors, evaluators, and other staff from 
DOJ and HHS and their operating divisions, and is dedicated to joint efforts across government to 
both prevent fraud and enforce current anti-fraud laws around the country.  The Medicare Fraud 
Strike Force teams are a key component of HEAT.     
 
                                                 
8 Note that some of the judgments, settlements, and administrative actions that occurred in FY 2010  will 
result in transfers in future years, just as  some of the transfers in FY  2010  are attributable to actions  from prior years.  
9 HHS collected approximately $687 million  in HHS/OIG recommended recoveries which are included in 
the total $4.0 billion transferred to the Trust Fund in  FY 2010.  
 
  8 
 The mission of HEAT is: 
 
o	   To marshal significant resources across government to prevent waste, fraud and 
abuse in the Medicare and Medicaid programs and crack down on the fraud 
perpetrators who are abusing the system  and costing us all billions of dollars. 
 
o 	  To reduce skyrocketing health care costs and improve the quality of care by ridding 
the system of perpetrators who are preying on Medicare and Medicaid beneficiaries. 
 
o 	  To highlight best practices by providers and public sector employees who are 

dedicated to ending waste, fraud and abuse in Medicare. 

 
o 	  To build upon existing partnerships between DOJ and HHS, such as our Medicare 
Fraud Strike Forces to reduce fraud and recover taxpayer dollars. 
 
Since its creation in May 2009, HEAT has focused on key areas for coordination and 
improvement.  HEAT members are working to identify new enforcement initiatives and areas for 
increased oversight and prevention to increase efficiency in pharmaceutical and device 
investigations. DOJ and HHS have expanded data sharing and improved information sharing 
procedures in order to get critical data and information into the hands of law enforcement to track 
patterns of fraud and abuse, and increase efficiency in investigating and prosecuting complex 
health care fraud cases.  The departments established a cross-government health care fraud data 
intelligence sharing workgroup to share fraud trends, new initiatives, ideas and success stories to 
improve awareness across the government of issues relating to health care fraud.  
 
Both departments also have increased training to prevent honest mistakes and help stop potential 
fraud before it happens. This includes CMS compliance training for providers, ongoing meetings 
at U.S. Attorneys Offices with the public and private sector, and increased efforts by HHS to 
educate specific groups  including elderly and immigrant communities  to help protect them.  
DOJ launched a new Medicare Fraud Strike Force training program designed to teach the Strike 
Force concept and case model to prosecutors, law enforcement agents and administrative support 
teams.  CMS and HHS/OIG are providing ongoing training to DOJ and HHS staff on the use of 
new technology to catch and quickly turn off funding to those who are defrauding the system. 
 
To achieve the mission and objectives of HEAT, the Attorney General and HHS Secretary began 
several HEAT initiatives during the fiscal year:   
 
 	  Expanded the Medicare Fraud Strike Force to Brooklyn, New York, Baton Rouge, 
Louisiana and Tampa, Florida bringing the total number of cities with Strike Force teams 
up to seven. 
 	  Sent a letter to all state attorneys general urging them to work with HHS and Federal, state 
and local law enforcement officials to mount a substantial outreach campaign to educate 
seniors and other Medicare beneficiaries about how to prevent scams and fraud. 
 	  Following a successful National Summit on Health Care Fraud (January 2010), initiated a 
series of regional fraud prevention summits around the country, beginning in Miami (July 
2010) and Los Angeles (August 2010) and to include several other cities next fiscal year 
 
  9 
 to improve the exchange of information with partners in the public and private sector and 
educate beneficiaries, providers, and the public to better identify and prevent health care 
fraud. 
   Expanded the use of regional and local health care fraud task force meetings to further 
coordinate anti-fraud efforts. 
   Launched a new educational media campaign to educate Medicare beneficiaries about 
how to protect themselves against fraud. 
 
In addition to the activities of HEAT, CMS and law enforcement agency representatives, such as 
members of the Civil and Criminal Divisions, the USAOs and Executive Office for United States 
Attorneys (EOUSA), the FBI, and HHS/OIG, meet on a periodic basis through numerous local or 
regional health care fraud working groups and task forces.   
 
EOUSA and CMS also sponsor a monthly national conference call during which Assistant United 
States Attorneys (AUSA) from all districts have the opportunity to interact directly with CMS 
representatives, receive timely reports on CMS operations, and obtain answers to questions 
related to specific issues regarding current investigations.  The Departments also convene 
interagency staff-level working groups as needed to develop mutual proposals for improving our 
health care fraud fighting capabilities.  
 
Each Department routinely enlists senior staff from the other agencyf to participate in cross-
training programs. DOJs Criminal Division and HHS/OIG initiated a special program in 2007, 
which provides an opportunity for HHS/OIG counsel to serve six month details to gain experience 
managing criminal health care fraud investigations and trial experience in Federal court with 
Criminal Division colleagues.  That program continues.  In addition, attorneys from  HHS/OIG 
have been detailed to the Fraud Section of the Criminal Division as Special Trial Attorneys and to  
U.S. Attorneys Offices as Special Assistant U.S. Attorneys to provide USAOs with additional 
prosecutorial resources. 
 
During FY 2010, the many significant HCFAC Program accomplishments included the following:  
 
HEAT Medicare Fraud Strike Force  
 
The first Medicare Fraud Strike Force (Strike Force) was launched in March 2007 as part of the 
South Florida Initiative, a joint investigative and prosecutorial effort against Medicare fraud and 
abuse among Durable Medical Equipment (DME) suppliers and Human Immunodeficiency Virus 
(HIV) infusion therapy providers in South Florida.  The Strike Force teams use advanced data 
analysis techniques to identify high-billing levels in health care fraud hot spots so that interagency 
teams can target emerging or migrating schemes along with chronic fraud by criminals 
masquerading as health care providers or suppliers.  Based on the success of these efforts and 
increased appropriated funding for the HCFAC program from Congress and the Administration, 
DOJ and HHS expanded the Strike Force to include teams of investigators and prosecutors in a 
total of seven cities  Miami, Florida; Los Angeles, California; Detroit, Michigan; Houston, 
Texas; Brooklyn, New York; Baton Rouge, Louisiana; and Tampa, Florida.  The Departments 
will continue to expand the Strike Force to cities where Medicare claims data reveal aberrant  
billing patterns and intelligence data analysis suggest that fraud may be occurring.   
 
  10 
  
Each Medicare Strike Force combines data analysis capabilities of CMS and the investigative 
resources of the FBI and HHS/OIG with the prosecutorial resources of the DOJ Criminal 
Division, Fraud Section and the USAOs. Strike Force accomplishments from cases prosecuted in 
all seven cities during FY 2010 include10: 
 
 	  140 indictments involving charges filed against 284 defendants who collectively billed the 
Medicare program more than $590 million;  
 
 	  217 guilty pleas negotiated and 19 jury trials litigated, winning guilty verdicts against 23 
defendants;   
 
 	  Imprisonment for 146 defendants sentenced during the fiscal year, averaging more than 40 
months of incarceration; and 
 
In the three and a half years since its inception, Strike Force prosecutors filed 465 cases charging 
829 defendants who collectively billed the Medicare program more than $1.9 billion; 481 
defendants pleaded guilty and 48 others were convicted in jury trials; and 358 defendants were 
sentenced to imprisonment for an average term of nearly 44 months.11    
 
Examples of successful cases initiated or concluded in districts where Strike Force prosecution 
teams were operational during FY 2010  as well as other successful cases, organized by provider 
or fraud type follow. 
 
Phase 1: Miami (Southern District of Florida)  
 
	   In July 2010, the U.S. district court in Miami sentenced the founder of a fraudulent 
Miami-area HIV/AIDS infusion clinic to 120 months in prison and the clinics owner and 
operator to 70 months in prison on their trial convictions stemming from a $5.8 million 
Medicare fraud scheme.  The defendants defrauded Medicare by submitting claims for 
injection and infusion treatments that were medically unnecessary and, in most instances, 
not provided. They conspired to pay kickbacks to induce Medicare beneficiaries to 
provide their Medicare numbers and their signatures, which the clinic used to submit 
fraudulent claims to Medicare for injection and infusion services.  Two other co
defendants pleaded guilty to the conspiracy charge and were sentenced to prison terms of 
84 months and 33 months, respectively.  The court also ordered the four defendants to 
pay, jointly and severally with each other, $2.7 million in restitution. 
 
                                                 
10 The accomplishments figures presented in the bullets include all reported Strike Force cases handled by  
DOJ Criminal Division attorneys and  Assistant United  States Attorneys in the respective U.S. Attorneys  Offices  
during  FY 2010.  During  previous fiscal years, the U.S. Attorneys Offices in the Southern District of  Florida and  
Central District of California implemented the Strike Force model for criminal health care fraud prosecutions. 
However, Strike Force prosecution statistics from previous  years did not include all Strike Force cases  because more 
complete reporting procedures were  not in  place at that time.   
 
11 These statistics are for the period  of May 7, 2007 through September 30, 2010. 
 
  11 
  	  In May 2010, the court sentenced an operator of two DME supply companies to a 144 
month prison term following his trial conviction on charges of conspiracy to commit 
health care fraud and health care fraud.  The court also ordered him to pay over  
$6.2 million in restitution.  The defendant controlled and operated a DME supply 
company in Miami-Dade County and caused the submission of more than $4.8 million in 
false claims to Medicare over a six-month period by seeking reimbursement for the cost of 
DME items and services that were not prescribed by doctors or provided as claimed.  The 
defendant then took control of and operated a second DME company in Miami-Dade 
County and along with a co-conspirator, caused the submission of more than $14.5 million 
in false and fraudulent claims to Medicare seeking reimbursement for the cost of DME 
items and services that were not prescribed by doctors or provided as claimed.  At 
sentencing, the judge noted the severe harm caused to the taxpayers as a result of 
defendants conduct in stealing more than $6 million of funds dedicated to the care of the 
elderly and disabled, especially in light of the current health care funding issues that exist 
in this country. 
 
 	  In April 2010, the court sentenced a defendant who operated and controlled 13 DME 
companies and three medical clinics located in Miami-Dade and Hillsborough Counties, 
Florida, to a 151 month prison term and ordered him to pay restitution of more than  
$11 million to Medicare.  Using various companies, the defendant and his co-conspirators 
submitted nearly $57 million of false claims to Medicare for medical equipment, 
prescription medications, and outpatient medical services.  The defendant concealed his 
control of these DME companies and medical clinics by recruiting nominee or straw 
owners who were typically paid a percentage of the fraud proceeds to sign the necessary 
corporate records and Medicare applications.  To execute the scheme, the defendant 
purchased the identities of various Medicare beneficiaries in Miami-Dade County, 
including their drivers licenses, Medicare cards, and other identification documents, and 
would then use the patients Medicare numbers to submit fraudulent claims for a wide 
variety of high-priced medical equipment.    
 
 	  In October 2009, the court sentenced a defendant who falsely claimed to be a physicians 
assistant and who worked for two separate Miami-area HIV-infusion clinics to 108 
months of imprisonment following his conviction on charges of health care fraud, 
conspiracy to commit health care fraud, and obstruction of justice.  The defendant 
examined patients, prepared treatment plans, and prepared false medical paperwork for the 
clinics which purportedly provided infusion treatments to HIV-positive Medicare 
beneficiaries.  Over a two-year period, the clinics submitted more than $12 million in false 
claims to Medicare for expensive HIV-infusion therapies when, in fact, they were 
providing the patients with nothing more than injections or infusions of Vitamins B-6 and 
B-12. After one of the HIV-infusion clinics received a grand jury subpoena, the defendant 
also created false medical records and placed phony test results inside patient files which 
were ultimately returned to the grand jury. The court also ordered the defendant to pay 
more than $1.2 million in restitution to Medicare.  
 
 	  In March 2010, the owner of a billing company in Florida that submitted fraudulent claims  
to Medicare on behalf of several DME companies was sentenced to 46 months 
 
  12 
 incarceration and ordered to pay $15.9 million in joint and several restitution after 
pleading guilty to conspiracy to commit health care fraud.  Investigators learned that the 
DME companies provided the owner with a list of physicians and Medicare beneficiaries, 
and the owner randomly paired the physicians and beneficiaries together and billed 
Medicare for medical supplies that were never needed or used.  In return for the billing, 
the DME companies paid the owner a percentage of the amount reimbursed by Medicare.   
 
Phase 2: Los Angeles (Central District of California)  
 
	   In June 2010, the U.S. district court in Los Angeles sentenced a co-owner of a DME 
supply company to a 57 month prison term following her guilty plea to a charge of 
conspiracy to commit health care fraud.  The court also sentenced another co-conspirator 
to 30 months in prison, and sentences remain pending for the other co-owner and three 
other defendants who also pleaded guilty in this case.  According to the indictment, the 
defendants conspired to falsely represent that the DME company had supplied Medicare 
beneficiaries with over $1.8 million in enteral nutrition and feeding supply kits, as well as 
another $500,000 in motorized wheelchairs and hospital beds, knowing that these supplies 
and services were not medically necessary and had not been delivered to Medicare 
beneficiaries. The final defendant in this case is scheduled to go to trial in February of 
2011. 
 
	   In May 2010, the court sentenced a DME supply company owner and operator to a 55 
month prison term following his guilty plea to submitting $1 million in false claims to 
Medicare. The DME owner admitted that, between January 2006 and September 2009, he 
conspired with the owner of another DME company and others to purchase fraudulent 
prescriptions and medical documents.  He then used those documents to submit false 
claims to Medicare for expensive, high-end, power wheelchairs and other equipment that 
he claimed to have supplied to Medicare beneficiaries who lived hundreds of miles from  
his companys store front location.  He also admitted that he knew the beneficiaries did 
not need power wheelchairs and other DME that he had billed to Medicare.    
 
	   In March 2010, the court sentenced a former DME owner and operator to 108 months in 
prison and ordered him to pay over $526,000 in restitution, the sum of payments received 
from Medicare, and a $25,000 fine on his jury conviction for health care fraud.  He billed 
Medicare approximately $1.1 million for power wheelchairs costing up to $7,000 each, on 
behalf of more than 170 beneficiaries, none of whom actually needed the wheelchairs.  At 
trial, elderly and disabled Medicare beneficiaries testified that individuals known as 
marketers approached them on the street, at home or in church to get the beneficiaries to 
give the marketers their Medicare numbers and other personal information in exchange for 
free power wheelchairs. One beneficiary, who was blind, testified that he could not see to 
operate the wheelchair and never used it. Another beneficiary testified that an individual 
purporting to be from Medicare, but who was actually associated with the DME owner 
and his co-conspirators, threatened to terminate the Medicare benefits of the beneficiary 
and her husband unless they accepted two power wheelchairs that they did not need.  
Several Los Angeles-area physicians also testified at trial that their names on the 
prescriptions were forged, that they had never written prescriptions for power wheelchairs, 
 
  13 
 and that the prescriptions bearing their names were phony.  After his conviction, the 
defendant fled the jurisdiction and is a fugitive. 
 
 Phase 3: Detroit (Eastern District of Michigan)  
 
 	  In August 2010, the U.S. district court in Detroit sentenced a physician, following his 
conviction after a three-week jury trial, to serve 168 months in prison for his role in a five-
year conspiracy to defraud the Medicare program and ordered him to pay restitution of 
$9.5 million.   The physician entered into an agreement with an owner of several 
fraudulent medical companies that purported to provide physical and occupational therapy 
services to Medicare beneficiaries and signed prescriptions and other documents to 
support the owners billing for such services that were never provided.  The owner, who 
was convicted for his role in this scheme and sentenced to 81 months in prison, paid cash 
kickbacks and other inducements to Medicare beneficiaries, including prescriptions signed 
by the physician for controlled substances and other drugs, in exchange for the 
beneficiaries Medicare numbers and signatures on documents falsely indicating that they 
had received therapy services when they actually had not.  In addition to receiving 
kickback payments from the owner, the physician also billed Medicare for fictitious 
home visits that he claimed to have made to beneficiaries whom the owner recruited 
into the scheme.  Eight other co-conspirators, including several physical therapists and an 
office assistant have been convicted and sentenced to prison terms ranging from eight to 
62 months in this case.   
 
	   In August 2010, the court sentenced a Miami resident who was an operator of a Detroit-
area medical clinic to 56 months in prison for his role in a $2.2 million scheme to bill 
Medicare for unnecessary medical and testing services.  The defendant pleaded guilty in 
April and admitted managing a medical clinic in Livonia, Michigan, that paid patient 
recruiters between $100 and $150 per patient referral.  He also instructed the patient 
recruiters to pay the patients $50 from that amount for participating in the scheme.  The 
Medicare beneficiaries who received the kickback payments also agreed to feign certain 
symptoms and subject themselves to medically unnecessary diagnostic tests and 
examinations which led to the patients medical records to contain information about false 
symptoms.  The co-conspirators used the falsified records to deceive Medicare about the 
legitimacy and medical necessity of the tests it performed.  The court sentenced a co
conspirator who was a patient recruiter to a 24 month prison term in this case, and ordered 
the defendants to pay $2 million in restitution to Medicare.  
 
	   In March 2010, the court sentenced an owner/operator of two fraudulent medical clinics to 
96 months in prison for her role in a series of fraud schemes and ordered her, along with 
other co-conspirators, to pay over $10.7 million in restitution to Medicare.  The clinic 
owner, a Miami resident, devised the schemes with another co-conspirator to open and 
operate two clinics in Detroit that purported to specialize in infusion and injection therapy 
services when in fact the clinics sole purpose was to defraud Medicare.  She admitted that 
Medicare beneficiaries were not referred to the clinics by their primary care physicians, or 
for any other legitimate medical purpose, but rather were recruited through the payment of  
kickbacks in the form of cash and prescriptions for narcotic drugs.  In exchange for those 
 
  14 
 kickbacks, the Medicare beneficiaries would visit the clinic and sign documents indicating 
that they had received the services billed to Medicare.  A physician co-conspirator, who 
was convicted in a jury trial and sentenced to a 72 month prison term for his role in the 
scheme, routinely prescribed medications for patients that they did not need or were never 
provided. Five other co-conspirators, including a patient recruiter, have received prison 
sentences ranging from seven to 72 months, and three other defendants were sentenced to 
time served or one-day plus supervised release terms of at least two years, and two co
owners await sentencing in February 2011. 
 
 	  In January and February 2010, two managers at separate infusion therapy clinics were 
sentenced to prison terms and ordered to pay a combined $1.8 million in restitution for 
conspiracy to commit health care fraud.  The manager and part owner of one clinic in 
Michigan was sentenced to 63 months in prison and ordered to pay $1.7 million in 
restitution after pleading guilty to conspiracy to commit health care fraud.  The 
manager/owner, along with other owners of the infusion therapy clinic, recruited and paid 
patients $50 per visit to purport to have received legitimate services.  The clinic then 
billed Medicare for beneficiary medications (primarily Cosyntropin and Interferon) and 
services that were medically unnecessary and/or not provided.  The manager of a second 
clinic was sentenced to 1 year and 1 day of incarceration and ordered to pay $81,762 in 
restitution for health care fraud. This individual obtained a doctors provider enrollment 
information, without the doctors knowledge, to apply for and obtain a Medicare provider 
number.  He then used this information to submit false claims to the Medicare program for 
infusion therapy services that were never provided. 
 
Phase 4: Houston (Southern District of Texas)  
 
 	  In July 2010, the U.S. district court in Houston sentenced a patient recruiter for a 
fraudulent DME company to a 21 month prison term following her April trial conviction 
along with the DME owner. The court also ordered the patient recruiter to pay restitution 
in the amount of $807,781 to Medicare.  The defendant was a patient recruiter and the 
DME owner and other co-conspirators paid her kickbacks in exchange for providing the 
company with beneficiaries in whose names they could submit claims to Medicare for 
medically unnecessary DME, including power wheelchairs, wheelchair accessories and 
motorized scooters. The defendants billed Medicare using a special code that designated 
the equipment as replacements for wheelchairs lost during hurricanes that hit the Houston 
area in 2008. The code allowed the company to submit claims to Medicare without a 
doctors order. Beneficiaries, all of whom could walk, testified at trial that the defendant 
came to their homes and offered them free power wheelchairs in exchange for their 
Medicare information, and that they did not need the wheelchairs which were often billed 
to Medicare at more than $6,000 per chair.  The DME owner is awaiting sentencing and a 
third co-conspirator is a fugitive.  
 
 	  In June 2010, a Federal jury convicted a physician and two DME delivery drivers in a  
$2.2 million dollar Medicare fraud scheme following a two-week trial.  Trial evidence 
established that a Houston-area DME company fraudulently billed Medicare for power 
wheelchairs and orthotic devices from 2003 until late 2009.  Seven other co-conspirators 
 
  15 
 have pleaded guilty for their participation in the scheme, including the companys owner 
and its operator. (All ten defendants are awaiting sentencing, which is scheduled for 
December 3, 2010.)  According to evidence presented at trial, the DME owner worked 
with a Medicare biller (whose case has been transferred to another district) and others to 
submit false claims to Medicare using fraudulent documents which identified the 
convicted doctor as the prescribing physician for the DME.  Upon learning about the 
prescriptions, the doctor asked and the DME owner agreed to pay $10,000 in exchange for 
allowing the fraud scheme to continue.  Trial evidence also showed that both delivery 
drivers were fully aware of the fraudulent business practices of the DME owner.  One 
driver admitted that he hoped to open his own DME business.  The other driver delivered 
DME such as power wheelchairs and orthotics to beneficiaries who testified that they did 
not want or need the equipment.    
 
	   In August 2010, the court sentenced a retired nurse to a 33 month prison term following 
her trial conviction in January of charges of conspiracy to commit health care fraud and 
health care fraud for participating in a kickback arrangement with a DME company owner 
who agreed to pay her 10 percent of what Medicare paid his company for each patient the 
nurse referred to the company.  In October 2010, the court gave a 22 month sentence to 
the DME company owner following his guilty plea and cooperation with the government 
investigation.  The two co-conspirators submitted over $740,000 in phony claims to 
Medicare for enteral nutrition supplies and for bundles of orthotics, referred to as artho 
kits.  Medicare regulations require that a beneficiary have a feeding tube in order to bill 
for enteral nutrition supplies.  The forms the nurse provided indicated that the 
beneficiaries she referred to the DME supplier had a feeding tube when in fact trial 
evidence revealed that none of the patients actually had a feeding tube.  The nurse also 
provided the DME owner with high-dollar Medicare codes for specialized enteral food 
supplements when in fact the co-conspirators gave patients over-the-counter supplements, 
one of which stated on the bottle that it was not for tube feeding.   Similarly, the nurse 
provided the DME owner with a product list of inexpensive over-the-counter products to 
be included in the artho kit and the Medicare codes to be used to instead bill for expensive 
high-end orthotics. 
 
Phase 5: Brooklyn (Eastern District of New York)12  
 
 	  On December 15, 2009, the Departments of Justice and Health and Human Services 
announced the expansion of Strike Force operations to Brooklyn, Baton Rouge and 
Tampa.   
 
 	  On December 15, 2009 the U.S. district court in the Eastern District of New York 
unsealed an indictment charging an owner and operator of a Brooklyn medical provider 
and its director of customer service with conspiring to defraud Medicare for diabetic 
supplies and equipment that was not medically necessary from July 2006 through 
                                                 
12 For new Strike Force locations which have recently  been announced during FY  2010, the report includes 
indictments that have been  filed during the fiscal year.  Due to the timing, plea negotiations, trials and sentencing  
proceedings are currently pending.  Successful cases  will be included in the FY 2011 HCFAC report. 
 
  16 
 November 2009.     
 
 	  On July 16, 2010, Strike Force prosecutors in Brooklyn unsealed charges against 22 
defendants for their alleged participation in schemes to submit fraudulent claims totaling 
approximately $78 million for physical and occupational therapy and DME.  The cases 
included the following: 
 
o 	  A criminal complaint and affidavit filed in support of an application for arrest 
warrants charging eight defendants, including two physicians, in a $72 million 
scheme to defraud the Medicare program by submitting fraudulent claims for 
physical therapy and other medical services that were medically unnecessary or 
were not provided to beneficiaries at all.  The governments investigation 
included the use of a court-ordered camera and microphone hidden in a room at 
the clinic, identified in the complaint as the Kickback Room, in which the 
conspirators allegedly paid cash kickbacks to corrupt Medicare beneficiaries. 
The camera recorded the conspirators payment of approximately one thousand 
bribes totaling more than $500,000 during a period of approximately six weeks 
from April to June 2010. The Kickback Room was marked PRIVATE and 
featured a poster picturing a woman with a finger to her lips and the words 
Dont Gossip in Russian. The purpose of the kickbacks was to induce the 
beneficiaries to receive unnecessary medical services or to stay silent when 
services not provided to the patients were billed to Medicare.  Federal agents 
searched the clinic at the time of the arrests.  
 
o 	  A criminal complaint and affidavit in support of an application for arrest 
warrants charging three defendants for their involvement in a $3.5 million  
scheme to defraud the Medicare and Medicaid programs by submitting 
fraudulent claims for DME involving oxygen equipment and supplies.  
Allegedly, the owner of an oxygen equipment services company and two 
patient recruiters targeted local churches to find Medicare and Medicaid 
beneficiaries whose personal information the defendants could use to facilitate 
their fraudulent billings.  
 
o	   A superseding indictment charging a corporate officer, consultant, patient 
recruiter, and two beneficiaries and a criminal complaint charging six serial 
or over-utilized Medicare beneficiaries for their roles in a $2.8 million 
scheme to defraud the Medicare program by submitting fraudulent claims for 
physical and occupational therapy. Each of the defendant beneficiaries 
attended the medical clinic involved in the scheme for the purpose of receiving 
kickback payments, and either received medically unnecessary services or did 
not receive the medical services that were billed to the Medicare program.  
Each of the beneficiaries was over-utilized or serial in the sense that they 
purported to seek medical treatment from numerous providers who submitted 
multiple claims to Medicare for those  purported treatments. During the period 
of January 2004 through February 2010, each of the defendant beneficiaries 
caused the submission of more than 2,200 claims for medical services under 
 
  17 
 their names, and the most over-utilized beneficiary caused the submission of 
more than 3,744 claims under her name.  
Phase 6: Baton Rouge (Middle District of Louisiana)  
 
 	  On July 16, 2010, 31 defendants were charged in Baton Rouge for various schemes 
allegedly involving fraudulent claims for DME totaling approximately $32 million.  The 
defendants include the owners and operators of nine different purported medical services 
companies and four doctors, 14 patient recruiters and other individuals who allegedly 
worked at the medical services companies.  These cases include the following: 
 
o	   A criminal indictment charging two corporate officers and operators of 
three DME companies, two doctors, and ten patient recruiters for allegedly 
conspiring to submit more than $21 million in false and fraudulent claims  
to Medicare. In addition, one corporate officer also was charged with four 
counts of aggravated identity theft.  As charged, from June 2004 through 
October 2009, the operators of the DME companies allegedly paid 
kickbacks to patient recruiters in exchange for names and billing 
information of Medicare beneficiaries, as well as fraudulent prescriptions, 
for the purpose of billing Medicare for medically unnecessary DME.  The 
indictment also charges that the doctors, one who is licensed in Louisiana, 
and the second who is licensed in Mississippi, provided prescriptions to 
patient recruiters for medically unnecessary DME, which included various 
orthotic devices, power wheelchairs and accessories. 
 
o 	  A criminal indictment charging a DME owner and operator, a doctor, and 
two patient recruiters with conspiring to defraud Medicare of more than 
$4.7 million over the period of December 2003 through March 2009.  The 
DME owner allegedly paid kickbacks to the doctor for writing  
prescriptions for medically unnecessary DME and to the patient recruiters 
in return for referrals of Medicare beneficiaries whose names could be used 
to submit fraudulent claims to Medicare. 
Fraud by Pharmaceutical and Device Manufacturers and Related Individuals  
 
	   In August 2010, Allergan, Inc. (Allergan) agreed to plead guilty to misdemeanor 
misbranding and pay $600 million (including a $375 million criminal fine and forfeiture 
and a $225 million civil settlement) to resolve criminal and civil liability arising from the 
companys promotion of Botox for indications that had not been approved as safe and 
effective by the FDA, including headache, pain, spasticity and juvenile cerebral palsy.  In 
addition to off-label marketing, the civil settlement resolves allegations that Allergan 
misled doctors about the safety and efficacy of Botox for off-label indications, instructed 
doctors to miscode uncovered Botox claims to ensure payment by government 
healthcare programs, and paid kickbacks to doctors.  Allergan also entered into a 5-year 
Corporate Integrity Agreement (CIA) with HHS/OIG. 
 
 
  18 
  	  In September 2010, Novartis Pharmaceuticals Corporation agreed to pay $422.5 million to 
resolve criminal and civil liability arising from the illegal marketing of certain 
pharmaceutical products.  The company agreed to plead guilty to a misdemeanor and pay 
a $185 million combined criminal fine and forfeiture for off-label marketing of the anti-
epileptic drug Trileptal.  In addition the company agreed to pay $237.5 million to resolve 
civil allegations that it unlawfully marketed Trileptal and five other drugs, Diovan, 
Zelnorm, Sandostatin, Exforge, and Tekturna.  Specifically, the civil settlement resolves 
allegations of off-label promotion with regard to Trileptal and provision of kickbacks to 
health care professionals in connection with Trileptal and the five other drugs.  
 
 	  In April 2010, AstraZeneca LP and AstraZeneca Pharmaceuticals LP (AstraZeneca) paid 
$520 million to resolve FCA allegations that they marketed the atypical antipsychotic 
drug, Seroquel, for uses not approved by the Food and Drug Administration (FDA) and 
paid kickbacks to doctors.  Of the $520 million, $301.9 million was the Federal share and 
$218.1 million went to states that decide to participate in the agreement.  In addition, 
AstraZeneca entered into a strict CIA with HHS/OIG. 
 
 	  In March 2010, a subsidiary of KV Pharmaceutical pleaded guilty to felony charges 
pursuant to a plea agreement and paid a combined $27.5 million in criminal penalties and 
restitution. The subsidiary, Ethex Corporation, failed to submit required field alert 
reports after it learned that it had manufactured and distributed oversized pills, including 
pills of a pain-relief drug, anti-arrhythmia drug, and a drug to treat attention deficit 
disorder in children. 
 
 	  In October 2009, Mylan Pharmaceuticals Inc. (MPI), UDL Laboratories, Inc. (UDL), 
AstraZeneca Pharmaceuticals LP, and Ortho McNeil Pharmaceutical Inc. paid a total of 
$124 million to resolve FCA allegations that they underpaid their rebate obligations with 
respect to certain of their drugs. By agreeing to participate in the Medicaid Rebate 
Program and signing these Rebate Agreements, these companies agreed to pay quarterly 
rebates to Medicaid that were based upon the amount of money that Medicaid paid for 
each companys drugs.  The precise amount of a rebate is determined in part by whether a 
drug is considered an innovator drug or a non-innovator drug. The rebate that must be 
paid for innovator drugs is higher than the rebate for non-innovator drugs.  The 
government alleged that these companies misclassified their drugs as non-innovator to 
reduce their rebate obligations to Medicaid. 
 
 	  In September 2010, Forest Laboratories, Inc. and Forest Pharmaceuticals, Inc. agreed to  
pay more than $313 million to resolve allegations of civil and criminal liability relating to  
obstruction of justice, the distribution of an unapproved new drug, Levothroid, and the 
illegal promotion of Celexa for use in treating children and adolescents.  With respect to 
its civil liability, Forest paid $89 million to federal programs and $60 million to state 
Medicaid programs to resolve allegations that it caused the submission of false claims to 
federal  health  insurance  programs  by  (1)  illegally  promoting  the  drugs  Celexa  and 
Lexapro for unapproved pediatric uses in treating depression, (2) paying kickbacks to 
physicians through a variety of programs designed to induce providers to prescribe Celexa 
 
  19 
 and Lexapro in violation of the Anti-Kickback Statute, and (3) distributing Levothroid in 
violation of the Food, Drug, and Cosmetic Act (FDCA).  To resolve its criminal liability, 
Forest agreed to plead guilty to felony and misdemeanor counts and pay a $164 million  
combined criminal fine and forfeiture.  
 
 	  In July 2010, the government prevailed on post-trial motions by a defendant, who was 
convicted by a jury in September 2009 of wire fraud relating to statements made in an 
August 2002 press release announcing the results of a clinical trial of the biologic 
Actimmune.  The defendant was President and CEO of Intermune, Inc., a biotechnology 
firm whose principal product was Actimmune, which was approved by the FDA for two 
rare childhood diseases. Intermune conducted a clinical trial to determine if Actimmune 
could be used as a treatment for idiopathic pulmonary fibrosis (IPF), a fatal lung disease.  
The trial failed, and upon learning of the results, FDA notified Intermune that it would not 
approve Actimmune as a safe and effective treatment for IPF based on that trial.  Despite 
these facts, the defendant manipulated the trial data and published a press release 
announcing that the drug demonstrated a survival benefit in patients with IPF.  After the 
press release was issued, sales of Actimmune increased dramatically, resulting in millions 
of dollars of revenue for the company.  The defendant is scheduled to be sentenced in 
March 2011. 
 
 	  In August 2010, Teva Pharmaceuticals paid $100 million to resolve allegations that Teva 
knowingly reported inflated drug prices and thereby caused the submission of false claims  
to the Medicaid program.  Many of the state Medicaid programs established their 
reimbursement rates for drugs based on the average wholesale prices reported by 
manufacturers such as Teva to three leading pricing compendia.  By inflating the prices 
they reported to the compendia, Teva and other manufacturers could cause the government 
to set reimbursement rates far above the actual prices paid to them by their customers, 
such as retail pharmacies.  The manufacturer would then market the spread between the 
actual prices it charged its customers and the amount the government would later 
reimburse the customer, in order to induce higher sales. 
 
 	  In May 2010, Ortho-McNeil Pharmaceutical LLC and Ortho-McNeil-Janssen 
Pharmaceuticals Inc., both subsidiaries of Johnson & Johnson, paid more than $81 million 
to resolve criminal and civil FCA liability arising from the illegal promotion of the 
epilepsy drug Topamax.  The government alleged that Ortho-McNeil Pharmaceutical 
promoted the sale of Topamax for off-label psychiatric uses through a practice known as 
the Doctor-for-a-Day program.  Using this program, Ortho-McNeil hired outside 
physicians to join sales representatives in their visits to the offices of health care providers 
and to speak at meetings and dinners about prescribing Topamax for unapproved uses and 
doses. As part of the global resolution, Ortho-McNeil Pharmaceutical LLC pled guilty to 
a misdemeanor and paid $6.1 million criminal fine for the misbranding of Topamax in 
violation of the FDCA.  In addition to the criminal fine, Ortho-McNeil-Janssen 
Pharmaceuticals paid $75.4 million to resolve civil allegations under the FCA that they 
illegally promoted Topamax and caused false claims to be submitted to government health 
care programs for a variety of psychiatric uses that were not medically accepted 
indications and therefore not covered by those programs.  Finally, Ortho-McNeil entered 
 
  20 
 into a 5-year CIA with HHS/OIG. 
 
   In May 2010, Novartis Vaccines & Diagnostics, Inc. and Novartis Pharmaceuticals 
Corporation paid $72.5 million to resolve civil FCA allegations arising from off-label  
marketing of the cystic fibrosis drug TOBI for diseases other than cystic fibrosis for 
patients who did not meet the parameters of the FDA-approved indication.  The United 
States alleged that this conduct, carried out by Novartis and a predecessor company 
Chiron Corporation, caused false claims to be submitted to federal health care programs 
for certain off-label uses of the drug between January 1, 2001 and July 31, 2006.  
 
	   In March 2010, American pharmaceutical manufacturer Alpharma Inc. paid $42.5 million 
to resolve FCA allegations in connection with the marketing of the morphine-based drug 
Kadian. The settlement resolves allegations that, between January 1, 2000 and December 
29, 2008, Alpharma paid health care providers to induce them to promote or prescribe 
Kadian, and made misrepresentations about the safety and efficacy of the drug, which is 
used to treat chronic moderate to severe pain. 
 
	   In July 2010, Cardinal Health and Bindley Western Industries, Inc., wholesale 
pharmaceutical distributors and Department of Defense (DOD) Prime Vendors, agreed to 
pay $5.5 million to resolve claims that they overcharged the government.  Cardinal and 
Bindley had agreed to acquire pharmaceutical products from drug manufacturers and to 
distribute the products to DOD medical treatment facilities. Cardinal and Bindley had 
agreed not to charge the government more than the prices negotiated between the DOD 
and drug manufacturers.  However, the United States contended that between June 1997 
and December 31, 2000, Cardinal and Bindley charged the government more than the 
negotiated prices for certain pharmaceutical purchases, which resulted in an overpayment 
by the government. 
 
 	  In December 2009, Boston Scientific Corporation paid $22 million to resolve allegations 
that its subsidiary, Guidant Corporation, used post-market studies as vehicles to pay 
kickbacks to induce physicians to implant Guidant pacemakers and defibrillators.  Post-
market studies are studies that ostensibly assess the clinical performance of a medical 
device or drug after that device or drug has been approved by the FDA.  The government 
alleged that Guidant knowingly and intentionally designed and used four post-market 
studies as a means of increasing device sales.  Through the studies, according to the 
Federal government, Guidant paid physicians to select its devices to implant in their 
patients rather than devices manufactured by Guidants competitors.  Each of the four 
studies required participating physicians to implant multiple Guidant devices.  As part of 
the settlement, Boston Scientific entered into a CIA with HHS/OIG. 
 
 	  In December 2009, Spectranetics Corporation paid the United States $4.9 million in civil 
damages plus a $100,000 forfeiture to resolve FCA allegations that the company illegally 
imported unapproved medical devices and provided them to physicians for use in patients, 
conducted a clinical study in a manner that failed to comply with federal regulations and 
promoted certain products for procedures for which the company had not received FDA 
 
  21 
 approval or clearance.  The company manufactures, distributes and sells certain medical 
lasers and peripheral devices for those lasers, such as lead wires that guide the lasers  
through vascular tissue and catheters that carry and contain the lasers inside the veins, 
including, specifically, the CVX-300 Medical Laser and the CliRpath Turbo Laser 
Catheter, the TURBO Elite Laser Ablation Catheter, and the TURBO-Booster Laser 
Guide Catheter. In addition to paying civil damages, Spectranetics entered a non-
prosecution agreement with the United States and a CIA with HHS-OIG. 
 
 	  In January 2010, Atricure, Inc., a medical device manufacturer, paid the United States  
$3.7 million to resolve FCA claims in connection with the alleged promotion of its 
surgical ablation devices.  Surgical ablation devices use focused energy to create 
controlled lesions or scar tissue on a patients heart or other organs.  The settlement 
resolves allegations that the Atricure marketed its medical devices to treat atrial 
fibrillation (the most common cardiac arrhythmia or abnormal heart rhythm), a use that is 
not approved by the FDA. Atricure also allegedly promoted expensive heart surgery using 
the companys devices when less invasive alternatives were appropriate, advised hospitals 
to up-code surgical procedures using the companys devices to inflate Medicare 
reimbursement, and paid kickbacks to health care providers to use its devices. The United 
States asserted that by engaging in this conduct, Atricure knowingly violated the FDCA 
and caused the submission of false and fraudulent claims in violation of the FCA. 
 
 	  In February 2010, Eon Labs, Inc., a subsidiary of Sandoz, Inc., paid $3.5 million to 
resolve FCA allegations relating to the companys drug Nitroglycerin Sustained Release 
(SR) capsules. In April 1999, the FDA determined that Nitroglycerin SR lacked 
substantial evidence of effectiveness and published a notice proposing to withdraw 
approval of the product. The government contended that, after the FDA notice, 
Nitroglycerin SR no longer was legally eligible for reimbursement by government health 
care programs such as Medicaid.  The government further alleged that from April 1999, 
and continuing through September 2008, Eon submitted false quarterly reports to the 
government that misrepresented Nitroglycerin SRs regulatory status and failed to advise 
that Nitroglycerin SR no longer qualified for Medicaid coverage.  As a result, the 
government contends, Eon knowingly caused false Medicaid claims to be submitted for 
Nitroglycerin SR. 
 
 	  In October 2009, as part of a global criminal, civil, and administrative settlement, Biovail 
Corporation (Biovail) agreed to pay $24.7 million to resolve its liability related to the 
marketing and promotion of the drug Cardizem, L.A., an extended-release version of a 
heart medication to control high blood pressure.  From 2003 to 2004, Biovail 
Pharmaceuticals, Inc. (BPI), a U.S. subsidiary of Canada-based Biovail, allegedly paid  
physicians and other medical prescribers up to $1,000 each to induce them to recommend 
and/or write prescriptions for Cardizem, L.A., thereby causing false and/or fraudulent 
claims for payment to be submitted to Medicaid.  Under the civil resolution, Biovail 
agreed to pay $2.5 million plus interest to settle its potential FCA liability.  Under the 
criminal resolution, BPI pleaded guilty to conspiracy and kickback charges and was 
ordered to pay an assessment of $2,800 and a criminal fine of $22.2 million.  In addition 
to the monetary settlement, Biovail agreed to enter a 5-year CIA with HHS/OIG.   
 
  22 
 Hospital Fraud  
 
 	  In December 2009, Our Lady of Lourdes Health Care Services Inc., the parent company of 
two New Jersey hospitals, paid $7.9 million to resolve FCA allegations that the hospitals 
defrauded Medicare.  The settlement resolves allegations that the hospital wrongfully 
obtained  excessive  outlier  payments.    In  addition  to  its  standard  payment  system, 
Medicare provides supplemental reimbursement, called outlier payments, to hospitals and 
other health care providers in cases where the cost of care is unusually high.  Congress 
enacted the supplemental outlier payments system to give hospitals the incentive to treat 
inpatients whose care requires unusually high costs.   
 
 	  In July 2010, Mercy Health System of Southeastern Pennsylvania; Mercy Catholic 
Medical Center, Mercy Fitzgerald Hospital Division; Mercy Catholic Medical Center,  
Mercy Philadelphia Hospital Division; and Mercy Suburban Hospital paid the United 
States $7.9 million to resolve FCA claims that the hospitals improperly billed Medicare 
for one day inpatient hospital admissions between October 1, 2001 and September 30, 
2007 that should have been coded as observations or outpatient visits.  Because inpatient 
admissions are compensated at a higher rate than observations or outpatient visits, 
admitting patients who did not meet Medicare/Medicaid criteria for admission resulted in 
a higher reimbursement for the hospitals. 
 
	   In December 2009, Kaiser Foundation Hospitals, Kaiser Foundation Health Plan, Inc., the 
Permanente Medical Group and Southern California Permanente Medical Group 
(collectively, Kaiser) paid a total of $3.7 million to resolve allegations arising from  
voluntary disclosures that, during the period January 1, 1996, through October 1, 2002, 
Kaiser did not comply with Medicare guidance concerning billing by teaching physicians 
who supervise medical residents.  Specifically, Kaiser disclosed that it billed Medicare for 
outpatient services performed by residents even though the teaching physicians were not 
physically present during the key and critical portions of the services rendered.  The 
voluntary disclosures were made by Kaiser in 2005 to HHS/OIG pursuant to the HHS
OIG self-disclosure protocol.  Of the total settlement amount, $3.3 million represents the 
Federal share (Medicare and the Federal portion of Medi-Cal) and $352,460 represents the 
state share of Medi-Cal.  
 
	   In February 2010, Brookhaven Memorial Hospital Medical Center of Patchogue, New 
York, paid $2.92 million, plus interest, to resolve allegations that it misled the Medicare 
program about its costs of care and thereby obtained excessive Medicare outlier payments.  
Similarly, in November 2009, Lourdes Medical Center of Burlington County paid  
$1.2 million and Helene Fuld Medical Center paid $750,062 to resolve FCA allegations in 
connection with a scheme to seize excessive  Medicare outlier payments.  Outlier payments 
are supplemental funds that are intended to compensate hospitals for treating patients who 
are extraordinarily costly to treat relative to other patients with similar illnesses or injuries.   
 
 	  In January 2010, Wheaton Community Hospital of Wheaton, Minnesota, a critical access 
hospital, settled allegations of admitting patients unnecessarily, resulting in fraudulent 
overpayments totaling more than $1 million over a six-year period.  A review of 170 
 
  23 
 admissions determined that about 30% of the admissions were unnecessary.  Settlement 
was reached in the amount of $1.31 million against the hospital and $102,500 against an 
individual physician.  
 
 	  In April 2010, the former chief financial officer of Tustin Hospital and Medical Center of  
Tustin, California, pleaded guilty to paying illegal kickbacks for patients who were 
recruited from the Skid Row area of Los Angeles.  The defendant admitted operating a 
scheme to pay illegal kickbacks to marketers who recruited homeless persons from Los 
Angeles Skid Row and had them transported to Tustin Hospital.  In this scheme, the 
defendant paid the operator of a center on Skid Row, which recruited homeless people to 
receive unnecessary health services, and others to refer homeless Medicare and Medi-Cal 
beneficiaries to Tustin Hospital for in-patient hospital stays.  As part of the scheme, Tustin 
Hospital entered into sham consulting contracts intended to  conceal the illegal 
kickbacks. Tustin billed Medicare and Medi-Cal for in-patient services provided to the 
recruited homeless beneficiaries, including those for whom in-patient hospitalization was 
not medically necessary.  The defendant is the fifth person to be convicted in relation to an 
ongoing investigation into health care fraud related to Skid Row residents.  
 
 	  In October 2009, SCCI Hospitals of America, Inc., which operates a chain of long-term 
acute-care hospitals (LTACH), agreed to pay $830,166 to resolve its liability under the 
FCA. Between October 1, 2004, and September 2, 2005, SCCI allegedly (1) improperly 
admitted patients to its Michigan facility who did not meet LTACH criteria, (2) held and 
treated patients who no longer needed hospitalization in order to increase Medicare 
reimbursement, (3) requested referring physicians to modify original orders to circumvent 
medical-necessity requirements, (4) inappropriately discharged patients who were not well 
enough for discharge, and (5) upcoded diagnosis-related group (DRG) classifications. 
Fraud by Physicians  
 
	   In March 2010, the United States executed a $12 million dollar settlement of allegations 
that a physician and Melbourne Internal Medicine Associates (MIMA) violated the FCA 
by submitting false claims to Medicare and TRICARE.  In the complaint filed by the 
United States on October 16, 2009, the government alleged that from the time of its 
inception through 2008, the MIMA Cancer Center, led by the physician, defrauded the 
federal health care programs by improperly inflating claims through various schemes 
specifically designed to cloak MIMA Cancer Centers fraudulent practices.  In particular, 
the MIMA Cancer Center allegedly billed for services not supervised, duplicative and 
unnecessary services, services not rendered, and upcoded services.  
 
	   In February 2010, a physician and his wife were sentenced in relation to a health care 
fraud scheme to defraud Medicare, Medicaid, and other health care benefit programs 
through his pain management business located in Ohio.  The scheme involved millions of 
dollars of fraudulent claims for payment for medical services that were either not 
performed or that were not medically necessary.  The medical doctor, who is an Egyptian 
national here on a work visa, was sentenced to 42 months imprisonment with 36 months 
of supervised release, and ordered to forfeit and pay $6.9 million in restitution to his 
 
  24 
 victims.  The defendant physician agreed to surrender his license to practice medicine in 
the state of Ohio. Upon recommendation of both the United States and the defense, the 
physicians wife was sentenced to 24 months of probation, which includes 12 months of 
home detention with electronic monitoring. The defendants will be deported to Egypt after 
completion of their respective sentences. 
 
 	  In August 2010, a Louisiana psychiatrist pleaded guilty to fifteen counts of failing to 
prepare and maintain records, with intent to defraud and mislead, in connection with 
clinical trials to evaluate the efficacy and safety of Paxil in children and adolescents with 
Obsessive-Compulsive Disorder (OCD).  Defendant, a clinical investigator for SmithKline 
Beecham d/b/a GlaxoSmithKline, included psychiatric diagnoses inconsistent with 
patients psychiatric histories; prepared multiple psychiatric evaluations on study patients 
which contained different diagnoses and treatment plans; reported symptoms of OCD 
when she knew that the study subject did not demonstrate such symptoms; and reported 
that she had examined study subjects when she had not.  The defendant was sentenced to 
13 months in prison and ordered to pay restitution to GlaxoSmithKline in the amount of 
$91,824 and $1,500 in special assessments.  
 
 	  In December 2009, the owner and managing pharmacist of The Rx Shop was sentenced to 
18 months incarceration and ordered to pay $738,000 in restitution after pleading guilty 
to submitting false claims to Medicare and Medicaid.  From 2005 through 2007, this 
individual submitted false claims for prescription medications that were never dispensed.  
The investigation was conducted jointly with the Florida Department of Law Enforcement 
and the Florida Medicaid Fraud Control Unit (MFCU). 
 
	   In March 2010, a Virginia hematologist and oncologist was convicted following a jury 
trial, sentenced to 63 months incarceration, and ordered to pay $790,641 in restitution for 
health care fraud, false statements relating to health care matters, and alteration of records 
to obstruct an investigation.  This individual defrauded Medicare and TRICARE by billing 
for more chemotherapy drugs than patients received and for submitting claims for office 
visits at a higher reimbursement level than what was rendered.  He also directed his staff 
to alter and falsify patient record entries to support the false claims. 
 
	   In May 2010, a Pennsylvania physician was sentenced to 12 months and 1 day in prison 
for health care fraud. Previously, the physician agreed to pay $3.3 million to resolve his 
liability under the FCA. The civil settlement resolved allegations that from January 2003 
to August 2008, he submitted claims to Medicare, TRICARE, and the Federal Employees 
Health Benefits Program for services not rendered to his patients either because the 
physician was not in the office or the patients were in hospitals under the care of other 
physicians on the dates claimed.  He also regularly billed for treatments that his patients 
never received 
 
 	  In June 2010, a Pennsylvania pediatrician was sentenced to 96 months incarceration and 
ordered to pay $7.1 million in restitution after pleading guilty to charges of health care 
fraud, mail fraud, and forfeiture.  From 2003 through 2009, the pediatrician submitted 
 
  25 
 fraudulent claims to Medicaid, TRICARE, and private insurance companies for services 
not rendered. The investigation involved the South Carolina Attorney Generals MFCU 
and Insurance Fraud Division, and the Cumberland County, Pennsylvania District 
Attorneys Office. 
 
Fraud by Other Practitioners  
 
 	  In January 2010, FORBA Holdings LLC, a dental management company that provides 
business management and administrative services to 69 clinics nationwide known as 
"Small Smiles Centers, agreed to pay the United States and participating states $24 
million, plus interest, to resolve FCA allegations that it caused bills to be submitted to 
state Medicaid programs for medically unnecessary dental services performed on children 
insured by Medicaid. In particular, the United States alleged that FORBA was liable for 
causing the submission of claims for reimbursement for a wide range of dental services 
that were either medically unnecessary or performed in a manner that failed to meet 
professionally-recognized standards of care. These services included performing 
pulpotomies (baby root canals), placing crowns, administering anesthesia (including 
nitrous oxide), performing extractions, and providing fillings and/or sealants.  As part of 
the resolution, FORBA entered into a 5-year CIA with HHS/OIG.  
 
 	  In January 2010, in Arkansas, a former Licensed Practical Nurse was sentenced to 78 
months imprisonment and ordered to pay restitution of $611,800 to the hospital, $131,000 
to the hospitals insurer for a dishonest employee loss claim, and approximately $300,000 
to federal health care programs for the false claims paid  The defendant was convicted of 
paying cash kickbacks to a hospital employee to order large amounts of the orthopedic 
products for which defendants wife received commissions.   
 
	   In January 2010, a doctor of podiatric medicine was sentenced to a term of 18 months in 
prison on health care fraud charges. The defendant joins seven other doctors of podiatry 
who have been sentenced for their participation in a large-scale Medicare and health care 
fraud scheme at podiatry clinics located throughout New York City.  At various times 
during the course of the scheme, the defendant employed other podiatrists at a number of 
affiliated foot-care clinics located in Manhattan, the Bronx, Queens, and Brooklyn (the 
Citywide Clinics).  Through the Citywide Clinics, the defendant participated in 
orchestrating a scheme to cheat Medicare and private insurance companies by several 
means, including soliciting patients off the street with flyers offering free treatment, 
when in fact the treatment was free only because Medicare's requirement that patients be 
responsible for the 20 percent co-payment was ignored.  The scheme also involved  
falsifying the nature of their patients' medical conditions in order to obtain reimbursement 
from Medicare and private health care insurance companies for routine foot care services 
which otherwise would have been non-reimbursable; and directing the podiatrists at the 
Citywide Clinics to perform unnecessary medical procedures on their elderly patients. 
 
	   In December 2009, a Virginia man was sentenced in the District of Columbia to 13 
months in prison followed by three years of supervised release for impersonating a doctor.  
 
  26 
 In addition, the defendant was ordered to pay $16,800 in restitution. The defendant 
pretended that he was a doctor and prescribed medicine by using the identities of four 
different victim doctors.  In truth, the defendant was never a licensed medical doctor and 
was not authorized to practice medicine.  He also lacked the authority to prescribe 
controlled substances, as he did not hold the necessary Drug Enforcement Administration 
(DEA) registration number or state and local licenses.  Over the course of the scheme, 
more than 200 patients saw the defendant and believed him to be a licensed medical 
doctor capable and authorized to treat mental health illnesses.  During the time, the 
defendant wrote approximately 226 prescriptions for controlled substances for patients 
and forged the signature of a doctor for each of these prescriptions. 
 
 	  In July 2010, two defendants were sentenced in Texas to 61 months and 30 months in 
prison respectively, for their roles in a $400,000 healthcare fraud scheme and ordered to 
pay restitution in the amount of $366,000.  The defendants, doing business as Narvaez 
Family Provider Services, conspired to defraud the Texas Medicaid and Title XX Block 
Grants to States for Social Services programs administered by the Texas Department of 
Aging and Disability Services (DADS).  The defendants admitted that after fraudulently 
obtaining a DADS provider license and a contract to provide services to program  
recipients, they engaged in a corrupt and systematic practice of falsifying client records, 
forging physician certifications and billing DADS for unauthorized services and services 
not rendered. 
 
 	  In November 2009, a podiatrist was sentenced to 36 months incarceration and ordered to 
pay $5.4 million in restitution for health care fraud and making false statements.  The 
podiatrist systematically billed Medicare for routine foot care not covered by Medicare 
and billed for services not rendered, such as costly nerve conduction tests and abscess 
drainages. In addition to his sentencing, this individual surrendered his license to practice 
podiatry in the state of New York. 
 
Fraud by Pharmacies  
 
 	  In December 2009, Meijer, Inc., a retail grocery and merchandise store with locations in 
four states, paid nearly $2 million to the United States to resolve FCA allegations 
involving the Medicare, Medicaid, and TRICARE programs.  Additional amounts were 
disbursed to states. Over at least a 6-year period, Meijer employed four pharmacists on 
the HHS/OIG exclusion list, and Meijer billed the government for prescription drugs 
dispensed by the pharmacists.  The pharmacists had been initially placed on the exclusion 
list following convictions for illegal drug possession and related charges.  After learning 
of the problem, Meijer submitted a self-disclosure to HHS/OIG in 2007.  The settlement 
resulted from that disclosure. 
 
 	  In March 2010, in Connecticut, a pharmacist and the former owner of RG Pharmacy, Inc. 
paid $1.1 million to resolve allegations that he submitted claims to Medicare and 
Medicaid from 1999 to 2007 for false dispensing fees that pharmacies are allowed to 
charge for filling prescriptions. Through a fraudulent billing scheme, the pharmacist and 
 
  27 
 RG Pharmacy were able to receive multiple dispensing fees for each filled prescription 
instead of the one fee to which the pharmacy was entitled to. In addition to settling their 
civil liability, the pharmacist and RG Pharmacy also agreed to be excluded from  
participation in all federal health care programs for seven years. 
 
	   In October 2010, a New Jersey pharmacy, PBR Drugs, Inc., doing business as Towne 
Pharmacy, pleaded guilty to one count of health care fraud, and was sentenced to one year 
of probation and ordered to pay $730,258 in restitution.  PBR Drugs managing 
pharmacist, also pled guilty to one count of conspiracy to commit health care fraud, and 
was sentenced to three years probation and to the payment of restitution (as noted 
above). At the time of his plea, defendant admitted that he conspired to submit claims for 
reimbursement to various health insurers for medications that the pharmacy never 
dispensed. 
 
 	  In April 2010, a Pennsylvania pharmacist was sentenced to 18 months in prison and 
ordered to pay $576,000 in restitution after pleading guilty to charges of drug adulteration 
and misbranding, health care fraud, mail fraud, and aiding and abetting.  The pharmacist, 
who owned and operated Bergman Pharmacy as a compounding pharmacy, replaced 
proprietary drugs with compounded versions without physician direction.  He then billed 
Medicare and private insurers as if the proprietary drugs were dispensed.  The 
investigation also revealed that the pharmacists compounded drugs were contaminated 
with bacteria, and that he manufactured the compounded drugs without using medicinal 
quality water, wearing gloves, or wearing a mask.  Additionally, in making a budesonide
based drug intended for asthma patients, he used chemicals such as ethyl alcohol and 
Everclear (a pure grain alcohol), which are severe irritants to the respiratory system.   
 
 	  In August 2009, two individuals were found guilty in an unlawful prescription drug 
operation whereby they distributed powerful, addictive painkillers and anti-anxiety 
medications to thousands of customers nationwide.  In May 2010, the first conspirator was 
sentenced to 75 months in prison and the second was sentenced to 60  months in prison for 
conspiracy to distribute schedule III and schedule IV controlled substances, distribution of 
a schedule III controlled substance, and aiding and abetting the unlawful distribution of 
controlled substances. According to evidence presented at trial, the two conspired with 
others to distribute prescription painkillers and anti-anxiety medications based on 
illegitimate prescriptions from one of the conspirators online pharmacy.  Individuals with 
no training or authority to write prescriptions conducted telephone interviews with 
customers, and then created drug orders bearing a doctors photocopied signature.  The 
defendants faxed the drug orders to Woody Pharmacy.  The court found that this unlawful 
operation contributed to the deaths of three former customers.  Previously, the owner of 
Woody Pharmacy was sentenced to 40 months in prison for charges related to this scheme.   
 
 
  28 
 Fraud by Clinics  
 
 	  In October 2009, an employee of an infusion clinic was sentenced to 78 months 
incarceration and ordered to pay $14.0 million in restitution for her participation in a 
health care fraud conspiracy.  The employee recruited and paid cash kickbacks to 
Medicare beneficiaries in exchange for allowing their Medicare numbers to be billed at 
numerous Miami-based infusion therapy clinics for medically unnecessary and 
nonrendered infusion therapy medication.  
 
 	  In November 2009, the operator of three health care clinics was sentenced to 78 months 
incarceration and ordered to pay restitution of $1.5 million for health care fraud.  This 
individual submitted claims to Medicare for office visits, physical therapy, and/or other 
procedures and diagnostic tests that were not needed and/or not rendered.  The operator 
and others entered into illegal relationships with physicians and laboratories to establish 
medical practices using the providers names and operated the practices as if they were run 
by the providers when, in fact, they were not.  Once established, the operator controlled 
the practices and often paid physicians a relatively small flat fee to bill Medicare under 
their provider numbers.  Kickbacks were given to cappers who recruited patients to 
come to the clinics in return for freebies, such as DME and cash payments.   
 
Fraud by Medical Equipment Suppliers  
 
 	  In November 2009, Positive Home Oxygen, LLC (Positive), its owner, and the companys 
medical director were sentenced related to a DME fraud scheme.  Positive was ordered to 
pay $809,169 in restitution and was permanently excluded from the Medicare program.  
The owner was sentenced to 18 months incarceration and ordered to pay $200,000 in 
restitution, and the medical director was sentenced to 3 months home detention and 
ordered to pay $200,000 in restitution. Investigators determined that the owner and his 
company fraudulently billed Medicare for providing motorized wheelchairs to 
beneficiaries who did not qualify for the chairs.  The medical director signed certificates 
of medical necessity for the chairs in exchange for referrals to  his practice and cash.   
 
 	  In March 2010, the owner of Enuda Healthsource, a DME company, was sentenced to  
90 months incarceration and ordered to pay $4.6 million in joint and several restitution  
after pleading guilty to charges related to a scheme to defraud the Medicare program.  
From about December 2004 through July 2008, the owner, along with the owner of 
another DME company, submitted claims for more expensive DME than was delivered to 
beneficiaries and for DME that was medically unnecessary or not delivered at all.  
Employees from both DME companies falsely represented during presentations at 
Medicare beneficiaries homes and churches that they could receive free medical 
equipment from the government.  After the employees obtained beneficiaries Medicare 
numbers, physicians names, and their medical conditions, they completed fraudulent 
prescription forms for submission to Medicare.  The owner of the second DME company 
was previously sentenced to 26 months incarceration and ordered to pay $575,430 in 
restitution for health care fraud. 
 
  29 
 Quality of Care  
 
 	  In FY 2010, nine employees at MultiEthnic Behavioral Health Services, Inc. (MEBH) 
were sentenced for charges related to health care fraud and the death of an at-risk child 
who was under MEBHs care.  MEBHs co-founders, supervisor, and an employee were 
convicted of health care fraud, wire fraud, and conspiracy to obstruct a matter within the 
jurisdiction of a federal agency.  One of the co-owners was also convicted of making false 
statements.  Five other MEBH employees previously pleaded guilty to charges in 
connection with the fraud scheme.  The nine defendants were sentenced to prison terms 
ranging from 15 months to 17 years and 6 months and were ordered to pay restitution 
ranging from $316,000 to $1.2 million. MEBH, a contractor for the Philadelphia 
Department of Health Services, came under Federal and local investigation in 2006 after 
the death of a 14-year-old special-needs child with cerebral palsy who was supposed to be 
receiving services from MEBH.  Instead, the child was severely neglected to the point that 
she suffered severe bed sores and slowly starved, until she weighed only 42 pounds and 
died. After her death, one of the co-founders orchestrated a cover-up, including the 
destruction of old records and the fabrication of new false records.   
 
Fraud by Nursing Homes  
 
	   In January 2010, five nursing homes operated by Cathedral Rock, a Texas corporation, 
pled guilty to felony health care fraud related to the failure to provide adequate care to the 
Medicare and Medicaid residents living in those homes.  The majority owner of Cathedral 
Rock also entered into a criminal deferred prosecution agreement for a period of two 
years. Under the plea and deferred prosecution agreement, the five nursing homes and the 
owner jointly paid $1 million in criminal fines and penalties. In addition, Cathedral Rock 
entities and the owner paid $628,000 to resolve civil FCA allegations that they submitted 
false and fraudulent claims to Medicare and Missouri Medicaid.  As part of the plea deal, 
the nursing homes admitted that, at times, their staffing was insufficient to provide 
adequate nursing care or to provide wound care;  that residents often did not receive their 
medication as prescribed; that medical records were falsified and a charting party 
occurred to fill in medical records so that it appeared that all medication had been properly 
given, regardless of whether the medication was actually given or not; and that the nursing 
homes submitted fraudulent claims to Medicare and Missouri Medicaid for services that 
were not provided or were worthless. 
 
	   In May 2010, in South Dakota, Good Samaritan, a corporation which operates 230 nursing 
home facilities in virtually every state, agreed to pay $480,137 to resolve allegations that 
the corporation employed a registered nurse who had been excluded by HHS. As part of 
the settlement, Good Samaritan was required to do a compliance review and certification 
during which the corporation uncovered six additional excluded employees working in 
facilities outside of South Dakota. Good Samaritan terminated those employees and 
voluntarily repaid an additional $200,000.  This case is particularly noteworthy, because 
what started as a relatively isolated, yet important deficiency, resulted in Good Samaritan 
improving its compliance program for all 230 facilities. 
 
  30 
 Kickbacks and Self-Referrals  
 
 	  In December 2009, St. John Health System, paid $13 million to resolve FCA allegations 
that it submitted claims to Medicare and Medicaid that were tainted by the hospitals 
financial relationships with referring physicians.  Specifically, the United States 
determined that St. John made payments to 23 individual physicians or physician groups 
to induce referrals for medical services.  The Stark law prohibits healthcare providers like 
St. John from billing a federal health care program for referrals from doctors with whom  
the providers have a financial relationship, unless that relationship falls within certain 
exceptions. Additionally, the Anti-Kickback Statute prohibits the payment of kickbacks 
for the referral of services that are paid for under a federal health care program.  This 
settlement resulted from the companys self-disclosure to the HHS/OIG in April 2008.   
 
	   In May 2010, the Health Alliance of Greater Cincinnati and one of its former member 
hospitals, The Christ Hospital, located in Cincinnati, Ohio, paid $108 million to settle  
claims that they violated the FCA by billing the Medicare and Medicaid programs for  
cardiac  services  that  were  referred  to  The  Christ  Hospital  in  exchange  for  improper 
financial incentives in violation of the Anti-Kickback Statute, 42 U.S.C.  1320a-7b(b).  
Specifically, cardiologists were allocated time at The Christ Hospitals Heart Station, an 
outpatient cardiology unit where patients received non-invasive heart procedures such as 
electrocardiograms,  echocardiograms  and  stress  tests,  based  solely  on  the  amount  of 
coronary arterial bypass graph procedures and catheter laboratory revenues generated by 
each cardiologist, or cardiology group, for The Christ Hospital during the previous year.  
Cardiologists who were rewarded with time at the Heart Station had the opportunity to 
generate additional income by billing for the patients they treated at the Heart Station and 
for any follow-up procedures that these patients required.  
 
	   In November 2009, Omnicare, Inc., the nations largest nursing home pharmacy, agreed to 
pay $98 million, plus interest, to resolve FCA allegations that Omnicare submitted false 
claims to federal health care programs as a result of:  providing consultant pharmacist 
services to nursing homes at below-cost and below-fair-market-value prices as a kickback 
to induce the nursing homes to use Omnicares dispensing pharmacist services and 
purchase drugs from Omnicare; soliciting and receiving $8 million in kickbacks from  
defendant IVAX Pharmaceuticals, Inc. (IVAX), in exchange for Omnicares agreement to 
purchase $50 million in drugs from IVAX; paying a multi-million dollar kickback, 
disguised as the purchase amount for a business, to defendants Mariner Health Care, Inc. 
(Mariner), and SavaSeniorCare Administrative Services, LLC (Sava), in exchange for 
agreements by Mariner and Sava to continue using Omnicares pharmacy services for 15 
years; and soliciting and receiving millions of dollars in kickbacks from defendant 
Johnson & Johnson in exchange for purchasing and recommending the drug Risperdal for 
use by patients in facilities served by Omnicare.  In addition, IVAX agreed to pay 
$14 million to resolve liability for its role in this scheme.  
 
	   In May 2010, Universal Health Services paid $27.5 million to settle claims that it violated 
the FCA, the Anti-Kickback Statute and the Stark Law between 1999 and 2006, by paying 
 
  31 
 illegal compensation to doctors in McAllen, Texas, in order to induce them to refer 
patients to the companys hospitals.  The settlement involved allegations that the 
defendants had entered into financial relationships with several doctors in McAllen in 
order to induce them to refer patients to the defendants hospitals.  The government 
alleged that these payments were disguised through a series of sham contracts, including 
medical directorships and lease agreements.  Under the Stark Law, Medicare providers are 
prohibited from billing Medicare for referrals from doctors with whom the providers have 
a financial relationship, unless that relationship falls within certain exceptions.  As part of 
the resolution, Universal Health Services also entered a five-year CIA with HHS/OIG.  
 
 	  In May 2010, the Health Alliance of Greater Cincinnati, two of its member hospitals (The 
Fort Hamilton Hospital and The University Hospital), and University Internal Medicine 
Associates Inc. paid $2.6 million to settle claims that they violated the Anti-Kickback  
Statute and the False Claims Act by engaging in a kickback-for-referral scheme.  In 
particular, the government asserted that University Internal Medicine Associates, a 
physician group based at The University Hospital in Cincinnati, offered to provide the 
interventional cardiology coverage that The Fort Hamilton Hospital needed for the clinical 
trial, but only if the hospital agreed to refer cardiology patients and procedures to the 
physician group on a preferential basis. The government contended that the preferential 
referral arrangements sometimes resulted in patients being transferred to The University 
Hospital, or being seen by cardiologists with University Internal Medicine Associates, 
rather than the hospital or cardiologist of their choosing. 
   
 	  In May 2010, Intercare Health Systems, Inc. (formerly doing business as City of Angels 
Medical Center), paid $10 million to resolve FCA allegations that it paid recruiters to  
deliver homeless Medicare or Medi-Cal beneficiaries by ambulance from the Skid Row 
area in Los Angeles to the hospital for medically unnecessary treatment.  The hospital 
billed Medicare and Medi-Cal for the services, whether necessary or not, provided to the 
homeless beneficiaries.  The United States contended that these services were induced by 
illegal remuneration in violation of the Anti-Kickback statute.  In addition to the civil fine 
the former co-owner of the hospital was sentenced to 37 months and ordered to pay  
$4.1 million in restitution for his role in the kickback scheme.  Two other individuals  
involved with the scheme also pled guilty for their involvement in the kickback scheme  
and are scheduled to be sentenced. 
 
	   In March 2010, Rush University Medical Center in Chicago, Illinois, paid $1.5 million to 
resolve allegations that it submitted false claims to Medicare and Medicaid during the 
period 2000 through 2007 by entering into certain leasing arrangements for office space 
with two individual physicians and three physician practice groups that violated the Stark 
Law, which prohibits a hospital from profiting from patient referrals made by a physician 
with whom the hospital has an improper financial arrangement.   
 
	   In December 2009, Kerlan Jobe Orthopaedic Clinic (KJOC), a sports medicine clinic in 
Los Angeles, agreed to pay the United States $3 million to resolve allegations that KJOC 
had financial relationships with HealthSouth Corporation (HealthSouth) that violated the 
Anti-Kickback Statute and/or Stark Law, and that these illegal relationships caused the 
 
  32 
 submission of false claims to Medicare.  The alleged illegal financial relationships 
included stock options granted by HealthSouth to KJOC; donations by HealthSouth to the 
Kerlan Jobe Foundation; and a disproportionately high ownership interest awarded to 
KJOC by HealthSouth in a jointly owned ambulatory surgery center.   
 
 	  In May 2010, Parma Community Hospital (Parma), Norton Healthcare (Norton), and St. 
Jude Medical, Inc. (St. Jude), agreed to pay the government $40,000, $133,300, and  
$3.7 million, respectively, to resolve allegations of illegal kickbacks resulting in false 
claims submitted to Medicare.  St. Jude, a heart device manufacturer, was alleged to have 
offered and paid kickbacks to Norton and Parma, which agreed to buy certain percentages 
of St. Jude manufactured implantable cardioverter-defibrillators and pacemakers.  The 
kickbacks took the form of account credits towards the hospitals future purchases of other 
St. Jude devices. 
 
 	  In October 2009, South Texas Health System (STHS) agreed to pay $27.5 million and 
enter into a 5-year CIA to resolve its liability for violations of the Stark Law, Anti-
Kickback Statute, and the FCA.  STHS allegedly engaged in improper financial 
relationships, including medical directorships and leases, with seven doctors during 
various periods from January 1, 1999, to December 31, 2006.  STHS submitted claims to 
Medicare and Medicaid for services rendered to patients referred by these doctors to its 
hospitals. 
 
Home Health Fraud  
 
 	  In December 2009, Nursing Personnel Home Care (Nursing Personnel), Extended Home  
Care (Extended) and Excellent Home Care (Excellent) paid the United States and the state 
of New York a total of $24 million to resolve FCA allegations that they submitted false 
claims to the New York Medicaid and Medicare programs.  The New York Medicaid 
program provides coverage for home health aides only if those aides have valid 
certificates showing that they received proper training. The government contended that 
Nursing Personnel knowingly supplied aides with phony training certificates to Extended 
and Excellent, which then billed New York Medicaid for the aides services; that 
Extended and Excellent knowingly billed for aides with phony certificates who were 
untrained; and that Extended and Excellent knowingly submitted claims to the Medicare 
program for home health aide services purportedly rendered by aides supplied by Nursing 
Personnel that were not actually provided. The United States is receiving approximately 
$9.7 million out of the total settlement amount. 
 
 	  In December 2009, Visiting Physicians Association paid the United States and the state of 
Michigan $9.5 million to settle FCA allegations that the association submitted false claims  
for home health services to Medicare, TRICARE and the Michigan Medicaid program.  In 
particular, the government alleged that Visiting Physicians Association submitted claims  
for unnecessary home visits and care plan oversight services, for unnecessary tests and 
procedures, and for more complex evaluation and management services than the services 
that Visiting Physicians Association actually provided. 
 
 
  33 
  	  In October 2009, Omni paid the United States $1.97 million to resolve FCA allegations  
that it billed Medicare for home health services without obtaining certain required 
physician signatures. Under the Medicare program, a physician must sign plan of care 
forms for the initial home care, and must re-certify the plan at least every 60 days.  In 
August 2008, Omni submitted a disclosure to HHS/OIG, in which Omni stated that the 
required physician signatures were not timely obtained for certain services provided at its 
Evansville, Indiana facility. The settlement resulted from the companys disclosure.   
 
Other Medicare/Medicaid Fraud  
 
 	  In April 2010, a defendant in Maine was sentenced to 60 months imprisonment after 
pleading guilty to health care fraud and distribution of methadone and other controlled 
substances. The defendant was a methadone clinic patient who made false statements in 
order to receive take-home methadone from  her clinic and prescription drugs from her 
physician, all paid for with Medicaid funds. She then sold, gave away, traded or otherwise 
distributed some of the methadone and prescription drugs.  In April 2005, the defendants 
brother died within hours after ingesting methadone and benzodiazepines that she gave to 
him.    
 
	   In November 2009, Ambulance Service, Inc. (ASI), and Northern Maine Medical Center 
(NMMC) agreed to pay a total settlement amount of $1.0 million to resolve their liability 
under the FCA.  ASI also entered into a 5-year CIA with OIG. The settlement resolves 
ASIs and NMMCs liability for allegedly submitting improper advanced life support 
transport claims to Medicare and Medicaid between January 1, 2003, and December 31, 
2005. Investigators found that an ASI employee was improperly billing and coding for 
ASIs services in 2003 and 2004.  In 2005, NMMC took over the billing and coding 
functions for ASI, and in doing so, hired the same ASI biller who had been improperly 
billing and coding. The government concluded that ASI and NMMC failed to adequately 
supervise the employee or ensure that she was properly trained.  As a result of the 
investigation, NMMC terminated the employee. 
 
	   In June 2010, Metropolitan Ambulance & First Aid Corp. (now known as SEZ Metro 
Corp.), Metro North Ambulance Corp. (now known as SEZ North Corp.) and Big Apple 
Ambulance Service, Inc. (formerly known as United Ambulance) paid the United States 
$2.8 million to resolve FCA allegations that the companies used, or caused the use of, 
falsified records to appeal a Medicare program refund demand.  In particular, the 
government contended that the companies used hundreds of forged letters to support the 
medical necessity of the ambulance services.   
 
	   In October 2009, Surgical Concepts LLC (Surgical Concepts) agreed to pay $242,528 to 
settle its liabilities under the FCA.  From January 1, 2006, through December 31, 2007, 
Surgical Concepts submitted claims to Medicare, TRICARE, and the Federal Employees 
Health Benefits Program for physician time and effort reviewing neurological test data 
before surgery and providing real-time intraoperative neuromonitoring services.  
However, the test results were not reviewed by a physician before surgery, and no 
 
  34 
 physician provided real-time monitoring services during surgery.  Instead, a physician 
conducted a post hoc review of the data in the days or weeks after the surgeries. 
 
	   In June 2010, the owner of a sham medical transportation company, Lane Medical 
Transportation (Lane Medical), was sentenced to 24 months incarceration and ordered to 
pay $1.2 million in restitution after pleading guilty to conspiracy to commit health care 
fraud. Lane Medical did not own or use any ambulances, but submitted false claims for  
non-existent ambulance trips and basic life support.  Investigators interviewed 
beneficiaries who Lane Medical claimed to have transported, but the beneficiaries had 
never heard of the company. 
 
Identity Theft  
 
	   In October 2009, an Iowa physician was sentenced to 85 months incarceration and 
ordered to pay $71,375 in restitution for mail fraud, aggravated identity theft, and money 
laundering. The physician obtained names and dates of birth of Medicaid beneficiaries 
(primarily children) through family members and friends and used this information to bill 
the maximum number of chiropractic manipulation services allowed by Medicaid for each 
beneficiary per year. In one example in 2006, the defendant billed the annual maximum 
chiropractic services (24) on nearly consecutive days for premature twin newborns who 
were patients in a neonatal intensive care unit at the time of the purported services. 
 
Other Fraud  
 
	   In May 2010, a former account manager for Medical Provider Services (MPS) in Louisiana, 
a company that provides billing services for physicians and other medical providers, pleaded 
guilty to three counts of health care fraud and was sentenced to 37 months in prison for 
embezzling hundreds of thousands of dollars from medical providers accounts and ordered 
to pay $621,737 in restitution. The defendant altered MPS records to reflect that certain 
treatments and medications were ordered by the physicians when in fact such treatments and 
medications were neither ordered nor performed.  After altering the records, the defendant 
then fraudulently billed the patients insurance companies to obtain payments, which 
defendant then deposited into her personal checking account after forging their 
endorsements.  The government is seeking to forfeit certain assets belonging to defendant 
which were purchased with proceeds of the fraud, including two jet skis, a motorboat, and 
31 foot travel trailer, as well as cash. 
 
 	  In December 2009, a participant in a prescription drug scam was sentenced to 60 months 
in prison and ordered to pay $250,828 in restitution for conspiracy to commit mail, wire, 
and health care fraud. This individual was responsible for financial arrangements in a 
conspiracy in which he and numerous individuals based in Canada solicited and received 
money from thousands of elderly American victims on the false promise of receiving free 
government grants or discount prescription drug coverage through an insurance plan 
purportedly affiliated with Medicare.  The investigation revealed that telemarketers 
contacted Medicare beneficiaries to get them to enroll in a bogus discount drug benefit 
program.  Some beneficiaries were told that they would lose their Medicare benefit if they 
 
  35 
 did not enroll. The telemarketers were able to persuade some Medicare beneficiaries to 
provide their bank account information, after which the individual and his co-conspirators 
withdrew money from the victims bank accounts. 
 
 
 
 
  36 
 DEPARTMENT OF HEALTH AND HUMAN SERVICES
 
 
 
Office of Inspector General  
 
A certain portion of the funds appropriated under HIPAA are, by law, set aside for Medicare and 
Medicaid activities of HHS/OIG13.   In FY 2010, the Secretary and the Attorney General jointly 
allotted $177.2 million to the HHS/OIG, plus HHS allotted $1.5 million to OIG to fund additional 
compliance trainings and a data analysis and mining project.  Additionally, Congress appropriated 
$29.8 million in discretionary funding for HHS/OIG HCFAC activities.  
 
HHS/OIG participated in investigations or other inquiries that resulted in 1,025 prosecutions or 
settlements in FY 2010, of which 923, or 90 percent, were health care cases.  A number of these 
are highlighted in the Accomplishments section.  In addition, during FY 2010, HHS/OIG 
excluded a total of 3,340 individuals and entities.  Details are below. 
 
Program Savings 
 
Frequently, investigations, audits and evaluations reveal vulnerabilities or incentives for 
questionable or fraudulent financial practices in agency programs or administrative processes.  As 
required by the Inspector General Act, HHS/OIG makes recommendations to agency managers to 
address these vulnerabilities. In turn, agency managers recommend legislative proposals or other 
corrective actions that, when enacted or implemented, close loopholes and reduce improper 
payments or conduct.  The savings from these joint efforts toward program improvements can be 
substantial. During FY 2010, HHS/OIG reported that legislative and administrative actions to 
make funds available for better use resulted in an estimated $21 billion in health care savings 
attributable to FY 2010  $9.4 billion in Medicare savings and $11.6 billion in savings to the 
Federal share of Medicaid.    
 
Additional information about savings achieved through such policy and procedural changes may 
be found in the HHS/OIG Semiannual Report, on-line at http://oig.hhs.gov. 
 
                                                 
13 In addition to the funds made available to OIG from the HCFAC account under HIPAA, Congress also 
provided funds to  OIG on a temporary basis specifically for oversight  of the Medicaid program.  The Deficit  
Reduction Act  of 2005 (DRA, P.L.  109-171)  appropriated $25 million to the OIG for Medicaid fraud and abuse  
control activities for each of fiscal years 2006 through 2010.  Also, the Supplemental Appropriations Act of 2008 
(Pub. L. 110-252) at   7001(b) appropriated $25 million to  HHS/OIG for purposes of reducing fraud and abuse in  
the Medicaid program.   Finally, the American Recovery and Reinvestment Act of  2009  (Pub. L. 111-5) at   
5007(b) appropriated $31.25 million to the HHS/OIG for purposes of ensuring the proper expenditure  of Federal 
funds under [Medicaid], available for FYs 2009-2011.  Therefore, OIGs FY 2010 Medicaid-related activities cited  
throughout this report, including the activities discussed  below, may draw on funding from HCFAC as well as other 
sources.  
 
  37 
 Exclusions 
 
One important mechanism for safeguarding the care provided to program beneficiaries is through 
exclusion of providers and suppliers who have engaged in the abuse or neglect of patients or fraud 
from participation in Medicare, Medicaid, and other Federal health care programs.  During 
FY 2010, HHS/OIG excluded a total of 3,340 individuals and entities.  Among these were 
exclusions based on criminal convictions for crimes related to Medicare and Medicaid (894), or to 
other health care programs (263); for patient abuse or neglect (247); or as a result of licensure 
revocations (1,582). This list of conduct is not meant to be exhaustive, but identifies the most 
prevalent causes underlying HHS/OIGs exclusions of individuals or entities in FY 2010.  
Exclusion actions by HHS/OIG included: 
 
 	  An Ohio chiropractor was excluded for a minimum of 60 years based on his conviction for 
rape, corruption of a minor, and gross sexual imposition.   The Ohio State Chiropractic Board 
permanently revoked his license, and the State Medical Board of Ohio permanently revoked 
his license to practice as a physician assistant.  In addition, the Ohio Department of Job and 
Family Services terminated his Medicaid Provider  Agreement.  He was sentenced to 43 years 
incarceration.   
 
 	  The owner of an independent diagnostic testing facility in California was excluded for a 
minimum of 45 years based on his health-care-related conviction.  Over a 4-year period, the 
owner was involved in a fraud scheme that caused Medicare to pay for tests that were 
unnecessary or were never performed.  As part of the scheme, individuals known as cappers 
were paid cash to recruit Medicare patients to receive services at medical clinics and 
diagnostic testing facilities owned and operated by the owner and his co-conspirators.  He was 
sentenced to 24 months incarceration and ordered to pay $11.0 million in joint and several 
restitution. 
 
	   A  Virginia midwife was excluded for an indefinite period based on the suspension of her 
license to practice midwifery by the Virginia Board of Medicine.  The Board found that she 
provided negligent care to two patients during the course of their home births.  She allegedly 
made numerous clinical and professional misjudgments, which resulted in the infants being 
stillborn. 
 
 	  A certified alcohol and drug abuse counselor and owner/operator of a counseling center in 
Kansas was excluded for a minimum of 30 years based on her health care fraud conviction.  
Between June 2001 and February 2006, the individual, doing business as A New Beginning, 
submitted materially false and fraudulent claims and caused others to submit materially false 
and fraudulent claims to Medicaid for community-based drug and alcohol abuse services for 
81 children.  She was sentenced to 24 months incarceration and ordered to pay $3.8 million in 
restitution. 
 
 
  38 
  	  An owner/operator of a DME company in Florida, K.M. Medical Services, Inc., was excluded 
for a minimum of 50 years based on his conviction for health care fraud.  Between June 2005 
and December 2005, he billed Medicare for various health care benefits, items, and services 
that were not medically necessary or were not provided to beneficiaries.  The owner was 
sentenced to 46 months incarceration and ordered to pay $668,079 in restitution.   
 
	   A previous owner of a Texas DME company was excluded for a minimum of 25 years based 
on his conviction for aiding and abetting the unlawful obtaining of individually identifiable 
health information of an individual with the intent to sell, transfer, or use that health 
information for commercial advantage or personal gain.  Over a 2-year period, the owner 
purchased over 1,000 files from various DME companies that contained Medicare beneficiary 
information.  He sold these beneficiaries medical information to another owner of several 
DME companies, who used it to bill Medicare for DME that was not purchased by or 
delivered to beneficiaries. He was sentenced to 60 months incarceration and ordered to pay 
$1.7 million in restitution.   
 
Other Administrative Enforcement Actions  Civil Monetary Penalties 
 
The Office of Inspector General has authority to impose civil monetary penalties (CMPs) against 
providers and suppliers who knowingly submit false claims to the Federal government, who 
participate in unlawful patient referral or kickback schemes, who fail to appropriately treat or 
refer patients who present at hospital emergency rooms, or who engage in other activities 
prescribed in statute.  HHS/OIG has continued to pursue its affirmative enforcement actions under 
these authorities.  Examples include:   
 
	   In California, Tenet Healthcare Corporation and Tenet HealthSystem KNC, Inc. (d/b/a USC 
Norris Cancer Hospital) (collectively, Tenet), who are currently subject to a 5-year CIA with 
HHS/OIG, agreed to pay $1.9 million to resolve their liability under the CMPL.  Tenet, 
pursuant to the CIAs Reportable Event disclosure requirements, revealed to HHS/OIG that 
between December 2003 and October 2007, it submitted claims not entitled to federal health 
care program reimbursement for clinical research-related items or services rendered at USC 
Norris Cancer Hospital. Specifically, Tenet improperly received government reimbursement 
for: (1) items or services that were paid for by clinical research sponsors or grants under 
which the clinical research was conducted; (2) items or services intended to be free of charge 
in the research informed consent; (3) items or services that were for research purposes only 
and not for the clinical management of the patient; and/or (4) items or services that were 
otherwise not covered under the CMS Clinical Trial Policy.   
 
	   In Illinois, United Shockwave Services, Ltd; United Urology Centers LLC; and United 
Prostate Centers, LLC (collectively, United) agreed to pay $7.3 million, along with United 
Therapies, LLC, enter into a 5-year CIA to resolve their CMP liability. United is a physician-
owned enterprise that leases medical equipment and services for the treatment of kidney 
stones and enlarged prostate glands.  The settlement resolves a number of allegations, 
including that United and certain physician-investors used their ability to control patient 
 
  39 
 referrals to obtain contract business from hospitals in Illinois, Iowa, and Indiana.  Specifically, 
OIG alleged that United threatened hospitals that it would refer patients to competing 
hospitals if they did not agree to a contract  with United, or promised additional referrals to 
hospitals that did contract with United. Consequently, if hospitals chose to contract with 
United over competitors to get more referrals, all claims resulting from that relationship were 
prohibited by the Anti-Kickback Statute.  Furthermore, OIG alleged that certain physician-
investor referrals to hospitals that had contracts with United also violated the Stark Law.  
 
	   In Missouri, St. Johns Regional Medical Center (St. Johns) agreed to pay $274,815 to 
HHS/OIG to resolve its CMP liability in a self-disclosed improper financial relationship 
between a wholly owned subsidiary of St. Johns and a physician.  HHS/OIG contended that 
the subsidiary allowed the physician, a referral source for St. Johns, to be regularly 
delinquent in rent under a written lease agreement in violation of the Stark Law and Anti-
Kickback Statute.  St. Johns also paid the physician for services without a written contract in 
place. 
 
	   A Florida doctor agreed to pay $65,000 and enter into a 3-year period of exclusion to resolve 
his CMP liability for receiving kickbacks from  medical device manufacturers.  The doctors  
potential liability arises from his solicitation and receipt of remuneration in the form of 
consulting payments from Biomet Orthopedics, Inc. (Biomet), and Zimmer, Inc. (Zimmer), in 
exchange for using their orthopedic hip and knee products.  HHS/OIG alleged that the 
compensation paid under consulting agreements with Biomet and Zimmer were received, in 
part, in return for his ordering, or causing to order, Biomet and Zimmer orthopedic products, 
respectively, to be paid for, in whole or in part, by federal health care programs. 
 
	   In California, the former Executive Director of Community Memorial Hospital (CMH), 
agreed to pay $64,000 to resolve his liability under provisions of the Stark Law.  From May 
29, 2002, through September 23, 2003, the individual allegedly orchestrated a scheme  
involving CMH remunerating doctors and cardiac surgeons for referrals to CMH.  In 
December 2007, CMH agreed to pay the United States over $1.5 million to resolve CMHs 
liability for more than 17 different arrangements with physicians and physician family  
members that allegedly violated the Stark Law and the FCA.  
 
Audits and Evaluations 
 
HHS/OIG conducts numerous audits and evaluations that disclose questionable or improper 
conduct in Medicare and Medicaid, and recommends corrective actions that, when implemented, 
correct program vulnerabilities and save program funds.  Among these were:  
 
Medicaid Administrative Claims  
 
	   Of the $15.3 million (Federal share) that Missouri claimed in Medicaid administrative costs 
for the St. Louis Public and Springfield school districts for FYs 2004 through 2006, HHS/OIG 
found that $4.2 million was unallowable for Federal reimbursement because the state did not 
 
  40 
 correctly calculate and claim  administrative costs for the School District Administrative 
Claiming (SDAC) program.  In addition, because of errors identified during our review of the 
St. Louis and Springfield school districts, the other Missouri school districts received  
$16.3 million in unallowable Medicaid payments for FYs 2004 through 2006.  We set aside 
for CMS adjudication $1.5 million for administrative costs claimed for the St. Louis Public 
and Springfield school districts and $3.9 million for administrative costs claimed for all other 
Missouri school districts. The SDAC program permits children to receive health-related 
services, generally without having to leave school.  States may be reimbursed for the 
administrative activities that directly support identifying and enrolling potentially eligible 
children in Medicaid. HHS/OIG recommended, among other things, that Missouri refund 
$20.5 million to the Federal government for unallowable SDAC expenditures. 
 
Medicaid School-Based Health Services  
 
 	  HHS/OIG found that Arizona did not always claim Federal reimbursement for Medicaid 
school-based health services in accordance with Federal and state requirements.  Of the 100 
sampled student-months from the period January 1, 2004, to June 30, 2006, 46 had 1 or more 
school-based health services that were not allowable.  Based on sample results, HHS/OIG 
estimated that the state was improperly reimbursed at least $21.3 million in Federal Medicaid 
funds. Medicaid pays for medical services provided to children under Part B of the 
Individuals with Disabilities Education Act of 2004 through a childs individualized education 
plan. HHS/OIG recommended, among other things, that Arizona refund to the Federal 
government $21.3 million for unallowable school-based health services. 
 
 	  In two reviews, HHS/OIG found that New Jerseys claims for reimbursement of Medicaid 
school-based health services submitted by its billing agents did not fully comply with Federal 
and state requirements.  During our audit periods, New Jersey contracted with separate billing 
agents to help administer its Medicaid school-based health services program under 
contingency-fee-based agreements.   
 
Based on our sample results for claims submitted by the first billing agent for the period July 
27, 2003, through October 4, 2006, HHS/OIG estimated that New Jersey was improperly 
reimbursed $8 million in Federal Medicaid funds.  Of the 100 school-based health claims in 
our sample, 51 did not comply with Federal and state requirements.  Based on our sample 
results for claims submitted by the second billing agent for the period April 6, 2005, through 
June 27, 2007, HHS/OIG estimated that New Jersey was improperly reimbursed $5.6 million 
in Federal Medicaid funds. For the both billing agents, the claims submitted in error were not 
(1) provided or supported, (2) in compliance with referral or prescription requirements, (3) in 
compliance with Federal provider qualification requirements, or (4) documented in the childs 
plan. HHS/OIG recommended, among other things, that New Jersey refund the overpayments 
to the Federal government. 
 
Enrollment of Excluded Medicaid Providers  
 
 
  41 
  	  HHS/OIG examined enrollment information of providers who were excluded by OIG 
subsequent to their enrollment as Medicaid providers to gather information related to potential 
weaknesses in states provider enrollment procedures.  Of 188 Medicaid providers from 26 
states who had been excluded by OIG subsequent to their enrollment, 8 had disclosed false 
ownership information at the time of enrollment.  Another 8 of the 188 had criminal 
convictions before they enrolled and committed health care-related crimes after they enrolled.  
Of the 188 excluded providers, 88 had Federal or state tax liens before or after they enrolled 
in Medicaid and 24 had a history of tax debt, criminal convictions, or false disclosures before 
they enrolled. HHS/OIG also found that states impose few enrollment requirements beyond 
those mandated by Federal regulations.   
 
Medicaid Supplemental Payments  
 
 	  In a review of Medicaid supplemental rate payments made to a hospital company in 
Massachusetts, HHS/OIG found that of the $337 million that Massachusetts claimed during 
FYs 2004 and 2005, $11.5 million ($5.75 million Federal share) was not claimed in 
accordance with Federal and state plan requirements.  HHS/OIG identified an additional 
$5.6 million ($2.8 million Federal share) in supplemental payments to a medical school 
affiliated with the company on which we were unable to express an opinion.  HHS/OIG  
recommended, among other things, that the state make a financial adjustment of $11.5 million 
($5.75 million Federal share). 
 
Medicaid Drug Rebates  
 
 	  HHS/OIGs review of the top 150 brand-name drugs for CY 2007 ranked by Medicaid 
reimbursement found that 114 had more than 1 version.  For 65 of the 114, the prices of the 
earliest versions of the drugs exceeded their inflation-adjusted prices when the new versions 
entered the market.  HHS/OIG calculated that for CYs 19932007, states could have collected 
about $2.5 billion in additional rebates for the 65 brand-name drugs if the baseline average 
manufacturer prices of the new versions had been adjusted (i.e., reduced) to reflect price 
increases in excess of inflation for the earliest versions.  For a manufacturers covered 
outpatient drug to be eligible for Federal Medicaid funding, the manufacturer must enter into a 
rebate agreement that is administered by CMS and pay quarterly rebates to the states.   
 
HHS/OIG did not evaluate the drug manufacturers bases for developing the new versions of 
existing drugs identified in this review.  Because the Medicaid drug rebate program calculates 
rebates separately for each version of a drug, manufacturers could develop new versions of 
existing brand-name drugs solely to avoid paying additional rebates when they substantially 
increase prices. Without some modification to the rebate law, the risk that manufacturers will 
take advantage of this potential loophole may increase over time.  HHS/OIG recommended 
that CMS continue to seek legislative authority to modify the present rebate formula 
calculation to ensure that manufacturers cannot circumvent paying additional rebates by 
bringing new versions of existing brand-name drugs to market.   
 
 
 
  42 
  
 
Medicaid and CHIP Concurrent Enrollees  
 
	   Based on our sample results, HHS/OIG estimated that from April 1, 2007, through March 31, 
2008, Florida claimed $5.3 million in Federal financial participation (FFP) for State 
Childrens Health Insurance Plan (SCHIP) (now known as CHIP) enrollees who were 
concurrently enrolled in the SCHIP and Medicaid for a total 65,121 enrollment-months.  If an 
individual is eligible for Medicaid, he or she is ineligible for SCHIP.  The concurrent 
enrollments occurred primarily because (1) Medicaid enrollment can be retroactive for up to 3 
months, during which time the individual may also have been enrolled in SCHIP, and (2) the 
State agencys partners did not have adequate internal controls to prevent or correct 
concurrent enrollments promptly.  HHS/OIG recommended, among other things, that the State 
(1) make a financial adjustment of $5.3 million for FFP claimed on behalf of concurrent 
enrollees, (2) make regular financial adjustments in the future to correct FFP claimed on 
behalf of concurrent enrollees. 
 
Hurricane-Related Uncompensated Care  
 
 	  HHS/OIG found that Louisiana did not always claim reimbursement for services provided by 
one hospital in accordance with Federal and state laws and regulations or with the approved 
provisions of the uncompensated care pool (UCCP) plan.  In response to Hurricane Katrina, 
the Deficit Reduction Act of 2005 (DRA) authorized Federal funding for the total costs of 
medically necessary uncompensated care furnished to evacuees and affected individuals 
without other coverage in eligible states.  Of the $3.7 million in costs claimed for services 
provided to 86 patients, $3.4 million was unallowable, in part because the state did not have 
procedures to ensure that it claimed uncompensated care costs only for services covered under 
the Medicaid plan.  HHS/OIG recommended that Louisiana refund to CMS the $3.4 million in 
unallowable costs claimed.   
 
Medicare Payment Error Rates  
 
 	  HHS/OIG conducted a review of a medical review contractors compliance with the terms of 
its contract with CMS to perform medical reviews of a subsample of claims from FY 2008 
Comprehensive Error Testing (CERT) samples.  To help determine the annual Medicare error 
rate, CMSs CERT contractor conducts medical reviews of a sample of paid claims and in 
accordance with CMSs written policies.  HHS/OIG found that the medical review contractor 
complied with its CMS contract, but it also found that the medical review contractors results 
may not have provided CMS with assurance that the CERT contractors FY 2008 fiscal 
intermediaries (FI) and carrier error rates were accurate.  The medical review contractor 
identified enough incorrect determinations by the CERT contractor to warrant further CMS 
corrective action to improve the Medicare error rate process.  HHS/OIG recommended, 
among other things, that CMS require the CERT contractor to develop a corrective action plan 
to reduce the number of incorrect determinations.  
 
 
  43 
  	  Based on a review of the erroneous claims  identified by CMSs Medicare CERT contractor 
for FY 2009, HHS/OIG found that 6 types of health care providers accounted for $4.4 million, 
or 94 percent, of the $4.7 million in improper payments.  The provider types were inpatient  
hospitals, DME suppliers, hospital outpatient departments, physicians, and home health 
agencies (HHA).  Analysis of the erroneous claims also found that 3 types of errors accounted 
for about 98 percent of the $4.4 million in improper payments:  insufficient documentation, 
miscoded claims, and medically unnecessary services and supplies.  HHS/OIG recommended 
that, as part of its analysis of the FY 2009 CERT improper payments, CMS use the results of 
this analysis in identifying (1) the types of payment errors indicative of programmatic 
weaknesses and (2) any additional corrective actions needed to strengthen the CERT program.   
 
High-Dollar Inpatient and Outpatient Medicare Services  
 
	   HHS/OIG issued three reports on high-dollar payments that Medicare FIs made to hospitals 
for inpatient services claimed under Medicare Part A.  High-dollar payments were defined as 
those that were $200,000 or more each.  CMS contracts with FIs to, among other functions, 
process and pay Medicare Part A (inpatient) claims submitted by providers.   
 
HHS/OIG found that an FI overpaid Alabama hospitals $1.5 million for inpatient services 
during calendar years (CY) 2004 through 2006.  Contrary to Federal guidance, hospitals 
reported excessive units of service and charges that resulted in inappropriate outlier or add-on 
payments and failed to maintain documentation of all charges filed.  In a review of another FI 
that operates in all states, except New York, HHS/OIG found that of the 520 high-dollar 
Medicare payments made to hospitals for inpatient services for CYs 2004 through 2006, 42 
were appropriate. The 478 remaining payments included net overpayments totaling $4.7 
million, which the hospitals had not refunded before the start of our audit. Contrary to  
Federal guidance, hospitals inaccurately reported the number of billing units for blood clotting 
factor, reported incorrect diagnosis and procedure codes, and reported excessive charges that 
resulted in inappropriate outlier payments.  Finally, in a third review, HHS/OIG found that of 
the 415 high-dollar Medicare Part A payments made to hospitals for inpatient services for CY 
2003 through 2005, 306 were appropriate. The remaining payments included net 
overpayments totaling $3 million.  At the start of our audit, hospitals had not refunded $1.9 
million of these net overpayments.  Contrary to Federal guidance, hospitals inaccurately 
reported the number of billing units of service, reported incorrect procedure codes, and 
reported excessive charges that resulted in inappropriate outlier payments.  In all three reports, 
HHS/OIG recommended, among other things, that the FIs recover the net overpayments. 
 
 	  HHS/OIG issued two reports on high-dollar payments made for outpatient services claimed 
under Medicare Part B. High-dollar payments were defined as payments as those that were 
$50,000 or more each. In the first review, HHS/OIG found that that all 46 sampled high-
dollar payments ($50,000 or more) that an FI made to the outpatient departments of hospitals 
in Virginia and West Virginia during CYs 2003 through 2005 were inappropriate.  The 46 
payments included overpayments totaling $3.5 million.  Providers received these 
overpayments by billing for excessive units of service or by billing for the wrong service or 
procedure. In the second review, HHS/OIG found that of the 104 high-dollar payments made 
 
  44 
 to hospitals for outpatient services for CYs 2003 through 2005, 27 were appropriate.  The 77 
remaining payments included overpayments totaling $6.1 million.  HHS/OIG recommended 
in both reports that the FIs, among other things, recover the net overpayments. 
 
Medicare Payments to Inpatient Rehabilitation Facilities  
 
 	  In a review of claims submitted by Inpatient Rehabilitation Facilities (IRFs) with dates of  
service in calendar years 2006 and 2007, HHS/OIG  found that IRFs did not receive reduced 
case-mix-group payments for 113 of 200 sampled claims with patient assessment instruments 
that were transmitted to CMSs National Assessment Collection Database (the Database) 
more than 27 days after the beneficiaries discharges.  To administer the prospective payment 
system, CMS requires IRFs to electronically transmit a patient assessment instrument for 
each IRF stay to the Database, which the Iowa Foundation for Medical Care (the Foundation)  
maintains.  If an IRF transmits the instrument more than 27 calendar days from (and 
including) the beneficiary's discharge date, the IRF's payment rate for the applicable case-mix 
group should be reduced by 25 percent. Based on these sample results, HHS/OIG estimated 
that FIs made $20.2 million in overpayments to IRFs during the audit period.  The reports 
recommendations included the following:  (1) adjust the 113 sampled claims for 
overpayments of $424,000; (2) determine whether any of the $323,000 potential payment 
penalty should apply to the 79 sampled claims  with modified patient assessment instruments 
that were transmitted after the 27-day deadline; and (3) immediately reopen the nonsampled 
claims, review our information on these claims (which have overpayments estimated at  
$19.8 million and set-aside payments estimated at $18.7 million), and recover any 
overpayments. 
 
Medicare Payments for Interrupted Stays at Inpatient Psychiatric Facilities  
 
	   Based on a sample of 100 claims, HHS/OIG estimated that Medicare FIs made $3.9 million in 
improper payments to Inpatient Psychiatric Facilities (IPFs) nationwide in CYs 2006 and 
2007 for claims on behalf of beneficiaries who had been discharged from another IPF within 
the prior 3 days. An interrupted stay occurs when a beneficiary is discharged from an IPF and 
admitted to the same or a different IPF within 3 consecutive days.  In such a case, the 
readmission is considered a continuation of the initial stay.  CMS provides an exception to 
the 3-day policy when the beneficiary is admitted to a different IPF within 3 days and the 
second IPF is unaware of the beneficiarys immediately preceding stay in the first IPF.  
HHS/OIG recommended, among other things, that CMS instruct its FIs to recover $19,000 for 
the 75 sampled claims with payment errors; and that it review our information on the 
unsampled claims for IPF interrupted stays, which had potential overpayments estimated at 
$3.8 million, and work with its FIs to recover any overpayments. 
 
Medicare Outlier Payments to Home Health Agencies  
 
 	  In this review, HHS/OIG found that Miami-Dade County accounted for more home health 
outlier payments in 2008 than the rest of the Nation combined.  Twenty-three other counties 
nationwide also exhibited aberrant home health payment patterns similar to that of Miami
 
  45 
 Dade County, but to a lesser extent.  HHS/OIG also found that more than 85 percent of home  
health providers that received outlier payments over $100,000 per beneficiary were in Miami-
Dade County. In addition, 67 percent of home  health providers that received total outlier 
payments over $1 million were in Miami-Dade County.  HHS/OIG recommended that CMS 
(1) continue efforts to institute a cap on the total outlier payments an individual home health 
provider may receive annually, (2) review home health providers that show aberrant outlier 
payment patterns and respond appropriately based on the findings, and (3) continue efforts to 
strengthen enrollment standards for home health  providers to prevent illegitimate home health 
agencies from obtaining billing privileges. 
 
Inadequately Documented Claims for Power Wheelchairs  
 
	   In its review of Medicare claims for power wheelchairs, HHS/OIG found that two out of five 
claims for standard and complex rehabilitation power wheelchairs did not meet Medicare 
documentation requirements during the first half of 2007.  Power wheelchair claims that did 
not meet all documentation requirements accounted for $112 million in improper Medicare 
payments, out of $189 million total allowed by Medicare during the 6-month period.  
Beneficiaries were responsible for paying $22 million of this amount.  Based on the results of 
the review, HHS/OIG recommended that CMS improve compliance with Medicares power 
wheelchair documentation requirements and suggested several methods for improving 
compliance. 
 
Capped Rental Durable Medical Equipment  
 
	   In a study of claims for maintenance and repair costs for capped rental DME, HHS/OIG found 
that from 2006 to 2008 Medicare erroneously allowed $2.2 million for unallowable routine 
maintenance and servicing and nearly $4.4 million for unallowable repairs.  HHS/OIG also 
found that in 2007, Medicare allowed nearly $27 million for repair claims for beneficiary-
owned capped rental DME that failed to meet payment requirements.  Medicare allowed an 
additional $29 million (49 percent of all allowed claims) for questionable repair claims for 
beneficiary-owned capped rental DME in 2007.  Additionally, supplier practices adversely 
affected some beneficiaries with repairs exceeding $5,000.  HHS/OIG recommended that, 
among other things, CMS implement an edit to deny unallowable claims for routine 
maintenance and servicing of capped rental and implement an edit to deny claims for repair of 
beneficiary-rented capped rental DME. 
 
Medicare Payments for Pressure Reducing Support Services  
 
	   In a review of suppliers use of two billing modifiers, HHS/OIG found that in 2007, Medicare 
Part B paid for 72 percent of all pressure reducing support surface claims containing these 
modifiers. DME suppliers use these two specific billing modifiers (the GA and GZ modifiers) 
when they expect that Medicare will deny the claim as not reasonable and necessary.  
Medicare potentially inappropriately paid $4.4 million for such claims.  These findings, and 
the additional findings in the report, indicate that Medicare contractors may not have 
appropriate safeguards in place to pay for Part B claims with these two specific billing  
 
  46 
 modifiers. The results also demonstrate that suppliers may need further instructions on the 
appropriate use of these modifiers when they provide upgraded items to beneficiaries.   
Medicare Payments for Transforaminal Epidural Injection Services  
 
 	  Based on a medical review of 433 transforaminal epidural injection services allowed by 
Medicare in 2007, HHS/OIG found that 34 percent did not meet Medicare requirements, 
resulting in approximately $45 million in improper payments.  Transforaminal epidural 
injections are a type of interventional pain management technique used to diagnose or treat 
pain. Medicare allowed an additional $23 million in associated facility claims for 
transforaminal epidural injections performed in error.  In addition, services provided in offices 
were more likely to have a documentation error than those provided in ambulatory surgical 
centers or hospital outpatient departments.  Also, HHS/OIG found that in 2007, 9 of 14 
Medicare Part B contractors had a local coverage determination for transforaminal epidural 
injection services, but reported limited use of other safeguards.  Only one contractor enforced 
all of its local coverage determination requirements with edits.  HHS/OIG recommended that, 
among other things, CMS conduct provider education, directly and through contractors, about 
proper documentation and strengthen program  safeguards to prevent improper payment for 
transforaminal epidural injection services.   
 
Less-Than-Effective Medicare Part D Drugs  
 
 	  Of approximately $115 billion in gross drug costs included in Medicare Part D sponsors 
prescription drug event (PDE) data for CYs 2006 and 2007, HHS/OIG found that CMS 
accepted PDE data totaling $43.3 million associated with less-than-effective drugs.  Pursuant 
to Federal requirements, Medicare Part D should not have covered these drugs.  Less-than
effective drugs are drugs that the FDA approved before 1962 and that FDA subsequently 
found to be less than effective. CMSs Drug Data Processing System subjects sponsors PDE 
data to an edit designed to reject less-than-effective drugs.  However, the edit did not identify 
and reject PDE data for some less-than-effective drugs because the Part D program used an 
incomplete list of less-than-effective drugs as the basis for the edit.  HHS/OIG recommended 
that CMS determine whether it can impose financial adjustments on sponsors that were paid 
for furnishing less-than-effective drugs; and help ensure that drugs covered by Medicare Part 
D comply with Federal requirements by collaborating with FDA to create and maintain a 
comprehensive list of less-than-effective drugs, regularly disseminating this list to all 
sponsors, and using this list to reject PDE data for less-than-effective drugs.   
 
Medicare Adverse Events  
 
 	  HHS/OIG conducted two evaluations examining adverse events at selected hospitals.  The 
term adverse event refers to an undesirable event that may cause harm to a patient during 
the delivery of health care. Studies indicate that adverse events lead to thousands of patient 
deaths annually and billions of dollars in increased health care costs and lost productivity.   
HHS/OIG provided CMS with informational copies of our reports, which are considered 
sensitive and thus are not publicly available. 
 
 
  47 
 In the first evaluation, HHS/OIG found only limited public disclosure of information about 
adverse events among entities reviewed, including state adverse event reporting systems, 
Patient Safety Organizations (PSO), and CMS.  Publicly disclosing adverse event information 
can educate health care providers about causes of events, compel providers to correct 
vulnerabilities that lead to adverse events, and assist patients in making decisions about their 
care. All of the reviewed entities maintain policies, practices, and legal provisions to protect 
patient privacy. This report examined 17 state adverse event reporting systems, 8 PSOs 
overseen by the Agency for Healthcare Research and Quality (AHRQ), and CMS regarding its 
Medicare claims data to analyze policies, practices, and plans for publicly disclosing 
information about adverse events and protecting patient privacy.  Among other things, 
HHS/OIG found that the more extensive disclosure practices of seven state systems identified 
in the report can serve as models for other entities.  
 
In the second evaluation, HHS/OIG examined 5 methods used in a two-county case study for 
identifying possible adverse events experienced by Medicare beneficiaries and found that 
overall, the methods that were reviewed were found to be useful for identifying events that 
harmed Medicare beneficiaries in hospitals.  These methods include:  nurse reviews of 
medical records, interviews of Medicare beneficiaries, two types of analysis of hospital billing 
data, and reviews of internal hospital incident reports.  For hospitalizations with possible 
events identified by the five screening methods, physicians reviewed medical records to 
determine whether actual events occurred.  However, physician reviewers determined that 62 
percent of the possible events identified by the five screening methods were not associated 
with actual events. HHS/OIG also found that shortcomings in two of the methods have 
implications for Medicare payments and federal initiatives to identify, track, and monitor 
events. First, patient diagnosis codes were inaccurate or absent for 7 of the 11 Medicare 
hospital-acquired conditions (HAC) identified by physician reviewers.  Second, reviewed 
hospitals did not generate incident reports for 93 percent of the events, including some of the 
most serious events involving death or permanent disability to the patient.  Recommendations 
in the report included that CMS and AHRQ explore opportunities to identify adverse events 
when conducting medical record reviews for other purposes. 
 
Healthcare Integrity and Protection Data Bank  
 
 	  In a review of CMSs compliance with Healthcare Integrity and Protection Data Bank 
(HIPDB) reporting requirements, HHS/OIG found that although CMS took adverse actions, it 
did not report all of the actions to the HIPDB as required.  Federal and state government 
agencies and health plans are required to report certain adverse actions to the HIPDB.  CMS 
takes several types of adverse actions that are required to be reported to the HIPDB, including 
revocations and suspensions of laboratory certifications; terminations of providers from  
participation in Medicare; and imposition of CMPs against all types of providers, managed 
care plans, and prescription drug plans. CMS failed to report 148 adverse actions imposed 
against laboratories in 2007 and 30 adverse actions imposed against managed care and 
prescription drug plans between January 1, 2006, and July 31, 2009.  None of the adverse 
actions against DME suppliers taken after 2008 had been reported to HIPDB at the time of our 
review; however, as of April 30, 2009, the HIPDB contained 5,125 adverse actions against 
DME suppliers imposed from 19982008.  None of the 45 nursing homes terminated from  
 
  48 
 participating in Medicare from 2004 through 2008 were reported to the HIPDB until 2009, 
well after the required reporting timeframe.  HHS/OIG recommended that CMS report all 
adverse actions to the HIPDB as required. 
 
Medicare Part D Drug Claims  
 
 	  HHS/OIG found that Medicare drug plans and enrollees paid pharmacies $1.2 billion in 2007 
for more than 18 million prescription drug claims that contained 527,749 different invalid 
prescriber identifiers.  These invalid identifiers either (1) were not listed as valid identifiers in 
the National Provider Identifier, DEA number, or Unique Physician Identification Number 
registries or (2) had been deactivated or retired before January 1, 2006.  Our review also 
revealed that only 10 identifiers accounted for 17 percent of all drug claims with invalid 
prescriber identifiers in 2007.  These drug claims represented $237 million in payments by 
Medicare drug plans and enrollees. One of the top ten invalid prescriber identifiers was 
recorded on almost 1.8 million PDE records for more than 150,000 beneficiaries enrolled with 
248 different Medicare drug plan sponsors. Plan sponsors and enrollees paid pharmacies 
almost $105 million for drug claims with this single invalid identifier.  In addition, 5 of the 
top 10 invalid prescriber identifiers appeared on individual claims for very expensive drugs, 
with payment amounts totaling more than $10,000 per claim.    
 
Medicare Drug Integrity Contractors  
 
 	  In its review of potential Medicare Part D fraud and abuse incidents identified by Medicare 
Drug Integrity Contractors (MEDIC) in FY 2008, HHS/OIG found that 87 percent were 
identified through external sources, such as complaints.  The remaining 13 percent of potential 
fraud and abuse incidents were identified through proactive methods, such as data analysis.  
Additionally, 96 percent of investigations conducted by MEDICs in FY 2008 involved 
incidents identified through external sources.  Problems with accessing and using data 
hindered MEDICs ability to identify and investigate potential fraud and abuse incidents.  
MEDICs lacked the authority to directly obtain information, such as prescriptions and medical 
records from pharmacies, pharmacy benefit managers, and physicians.  Also, MEDICs may 
not have been aware of some potential fraud and abuse incidents because plan sponsors are 
not required to refer them. MEDICs did not have CMS approval to conduct audits of plan 
sponsors compliance plans in FY 2008. 
 
Medicare Program Safeguard Contractors  
 
 	  In its review of Medicare Program Safeguard Contractors (PSCs), HHS/OIG found that of 18 
PSCs only 2 were responsible for 62 percent of the $835 million referred in overpayments to 
claims processors for collection in 2007.  Moreover, the amount of overpayment dollars that 
PSCs referred for collection was not always related to the size of PSCs oversight 
responsibility. PSCs are engaged by CMS to conduct a variety of activities to ensure the 
integrity of Medicare payments.  In addition, while Part B payments represented 29 percent of 
PSCs oversight responsibility ($87 billion of $296 billion), Part B overpayments accounted 
for 89 percent of PSCs overpayment dollars referred for collection ($747 million of $835 
million).  Part A payments represented 71 percent of PSCs' oversight responsibility ($209 
 
  49 
 billion of $296 billion), and Part A overpayments accounted for 11 percent of PSCs'  
overpayment dollars referred for collection ($88 million of $835 million).  HHS/OIG 
recommended that CMS determine why certain PSCs have low levels of overpayment dollars 
referred for collection and why certain PSCs have low Part A overpayment dollars referred for 
collection compared with their Part B overpayment dollars referred for collection. 
 
 	  In a second review of the activities of PSCs, HHS/OIG found that overpayments referred for 
collection by PSCs in 2007 did not result in significant recoveries to the Medicare program.  
Only 7 percent ($55 million) of the $835 million referred to claims processors had been 
collected by claims processors as of June 2008.  Of the $55 million collected, 27 percent was 
for Part A claims; 56 percent was for Part B claims excluding DMEPOS; and 17 percent was 
for Part B DMEPOS claims.  CMS is transitioning PSCs to seven Zone Program Integrity 
Contractors (ZPIC) and is providing ZPICs an incentive to keep track of the amount claims  
processors collect on ZPIC overpayment referrals.  HHS/OIG recommended, among other 
things, that CMS regularly collect all necessary information to determine the overpayments 
PSCs refer to claims processors for collection, the collection status of these overpayments, 
and the percentage of overpayments in each category of collection status.   
 
Fraud Referrals by Recovery Audit Contractors  
 
 	  In its review of Medicare Recovery Audit Contractors (RACs), HHS/OIG found that between 
March 2005 and March 2008, RACs referred two cases of potential fraud to CMS.  However, 
CMS reported that it received no potential fraud referrals from RACs during this period.  A 3
year RAC demonstration project conducted from March 2005 through March 2008 was 
designed to detect and correct past improper payments in the Medicare fee-for-service  
program and provide information to CMS and to the Medicare claims-processing contractors 
that could help protect the Medicare trust funds by preventing future improper payments.  
HHS/OIG recommended the following to CMS: (1) conduct follow-up to determine the 
outcomes of the two referrals made during the demonstration project, (2) implement a system  
to track fraud referrals, and (3) require RACs to receive mandatory training on the 
identification and referral of fraud. 
 
Medicare Part C Marketing  
 
 	  In its review of the marketing practices of six Medicare Advantage (MA) plan sponsors, 
HHS/OIG found that each sponsor did not follow at least one of the marketing regulations 
related to sales agent compensation and qualifications.  Five of the selected plan sponsors in 
our review that employ independent sales agents had compensation practices that resulted in 
inappropriate financial incentives for sales agents and field marketing organizations (FMO).  
FMOs typically provide sales agents with enrollment leads and marketing assistance.  Five of 
the six selected plan sponsors also did not ensure that all of their sales agents were qualified 
under CMSs regulations. We also found that the number and types of beneficiaries 
complaints remained unchanged after implementation of sales agent marketing regulations.  
HHS/OIG recommended that CMS take appropriate action regarding specific instances of 
misconduct documented in the report, audit plan sponsors, and issue additional guidance and 
regulations. 
 
  50 
  
Other Fraud and Abuse Prevention Activities  
 
In addition to amounts specifically designated by statute for HHS/OIG activities, OIG was 
allocated $1.5 million for Compliance Training and Data Mining Activities. 
 
HHS/OIG is planning a series of compliance training programs that will provide free or low cost, 
high quality compliance training for providers, compliance professionals, and attorneys in Strike 
Force cities and elsewhere.  These compliance training programs will bring together  
representatives from OIG and other HHS agencies, DOJ, and MFCUs to address the local 
provider, legal, and compliance community.  The training will focus on methods to identify fraud 
risk areas and compliance best practices so that providers can strengthen their own compliance 
efforts and more effectively identify and avoid illegal schemes that may be targeting their 
communities. $250,000 has been allocated for Compliance Training activities. 
 
$1.25 million will support HHS/OIGs enhancement of data analysis and mining capabilities for 
detecting health care fraud. These expanded capabilities will allow law enforcement officials to 
use software with predictive and link analysis features to analyze near-time data, allowing them to 
identify providers that appear to have submitted improper claims, groups that have assumed 
multiple identities to circumvent fraud detection, and other systemic vulnerabilities. This initiative 
will assist OIG and its partners in identifying potential fraud with unprecedented speed and 
efficiency and will result in provider investigations and program improvements at the Federal and 
state levels. This project supports OIGs core mission of protecting the integrity of HHS 
programs, and will directly support the HEAT initiative, which relies on near-time data to identify 
and aggressively prosecute fraud. 
 
Each of these projects will continue into FY 2011 and additional information will be provided in 
the FY 2011 report. 
 
Industry Outreach and Guidance 
 
	   Advisory Opinions. Central to the HIPAA guidance initiatives is an advisory opinion process 
through which parties may obtain binding legal guidance as to whether their existing or 
proposed health care business transactions run afoul of the Federal Anti-Kickback Statute, the 
CMP laws, or the exclusion provisions. During FY 2010, the HHS/OIG, in consultation with 
DOJ, issued 14 advisory opinions. A total of 233 advisory opinions have been issued during 
the 14 years of the HCFAC program. 
 
	   Corporate and Other Integrity Agreements. Many health care providers that enter agreements 
with the government to settle potential liabilities for violations of the FCA also agree to 
adhere to a separate CIA, Integrity Agreement or other similar agreement.  Under these 
agreements, the provider commits to establishing a program or taking other specified steps to 
ensure its future compliance with Medicare and Medicaid rules.  At the close of FY 2010, 
HHS/OIG was monitoring compliance with 285 such agreements. 
 
 
  51 
  
Office of the Assistant Secretary for Planning and Evaluation 
 
The  Office  of  the  Assistant  Secretary  for  Planning  and  Evaluation  (ASPE)  was  allocated 
approximately $1.1 million by HHS during FY 2010.  This funding is being used to develop 
approaches for improving the Departments ability to measure and detect improper payments and 
fraud. 
 
ASPE is pursuing two areas of research. The purpose of the first research project is to begin the 
implementation of the determination of a baseline estimate of Medicare fraud.  This involves 
developing and prototyping a methodology to estimate the total amount of fraudulent payments, 
which consists of the types of fraudulent payments that can be detected within a Comprehensive 
Error Rate Testing (CERT) framework and other fraudulent payments that can only be estimated 
via additional information gathering.  ASPE currently has a contractor developing the sampling 
design specifications. This contractor has developed six initial designs and is currently 
completing detailed sampling specifications.  Depending upon the final design, implementation 
could require examining existing Medicare claims, conducting medical record reviews of these 
claims, surveying beneficiaries (either in person or via telephone), and conducting on-site 
provider audits.  This project began in FY 2010 and will continue in FY 2011. 
 
The second area of research is undertaking an assessment of the application of pre-payment fraud 
detection methods to the Medicare program.  Current efforts to detect fraud in the Medicare 
program rely extensively on post-payment claims review, where claims are examined for 
anomalies and possible fraud after Medicare has paid the provider for the billed service(s).  This 
study will look at pre-payment methods that incorporate sophisticated predictive models to 
identify claims and providers for further investigation, such as the alternative methods of fraud 
detection that are currently being employed by commercial insurance carriers.  The project will 
focus on an available pre-payment approach that draws from similar approaches used in the 
financial services sector to indentify potentially fraudulent transactions. This non-parametric 
predictive modeling approach will combine upwards of 30 separate risk indicators into a single 
risk score. The resulting scores will then be independently validated by examining beneficiaries 
medical claims histories The objective of this project is to ascertain how well this and other 
predictive modeling approaches perform in detecting fraud compared to current Medicare control 
approaches (both pre-payment and post-payment), and what, if any, savings would be realized by 
implementing a pre-payment approach.  This project began in FY 2010 and will continue into FY 
2011. 
 
 
  Centers for Medicare & Medicaid Services 
 
In FY 2010, CMS was allocated approximately $16.5 million by HHS, and appropriated $251.4 
million in discretionary funds by Congress to support a variety of projects related to fraud, waste, 
and abuse in the Medicare and Medicaid programs.  With these funds, CMS has continued to 
build on existing fraud prevention activities and has increased its efforts to use advanced 
technology to ensure that accurate payments are made to legitimate providers for appropriate and 
reasonable services for eligible beneficiaries of the Medicare, Medicaid, and CHIP programs and 
 
  52 
 to prevent improper payments related to errors, fraud, waste, and abuse.  CMS is engaged in many 
program integrity activities that are beyond the scope of this report because they are not funded 
directly by the HCFAC Account or discretionary HCFAC funding.  For example, Medicare 
Integrity Program (MIP) activities, such as audit and medical review functions, and Medicaid 
Integrity program activities are discussed in separate reports. 
 
Affordable Care Act  
 
HCFAC has been a critical component of fraud fighting since its creation in HIPAA.  The new 
authorities granted to HHS and DOJ under the Patient Protection and Affordable Care Act of 
2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively 
known as the Affordable Care Act (ACA), will be instrumental in further clamping down on 
fraudulent activity in the health care sector.  For example, the ACA provides CMS with new and 
enhanced authorities to keep fraudsters out, before they can begin to bill Medicare and Medicaid. 
The ACA also provides expanded resources and authorities for sharing data across anti-fraud 
agencies to heighten monitoring and oversight capability, leading to faster identification and 
eradication of fraudulent activity. In addition, new HCFAC funding provided by the ACA will 
assist CMS, OIG and DOJ in further developing predictive modeling capacity and enhancing 
information systems that can improve anti-fraud tracking as well as add to the number of 
individuals who can perform site visits to ensure legitimacy of providers who seek the privilege of 
serving Medicare and Medicaid beneficiaries.  CMS began implementing new and enhanced 
authorities provided by the ACA in FY 2010. 
 
Strengthened Program Integrity Activities in Medicare Advantage and Medicare Part D  
 
CMS invested $158 million in HCFAC discretionary funds to strengthen Medicare Parts C and D  
oversight. Activities included expanding the scope of MEDICs by adding Part C to their 
jurisdiction and conducting a comprehensive program assessment to reevaluate its contracting 
strategy, the structure of the MEDICs, and the manner in which it oversees fraud, waste, and 
abuse activities. As a result, CMS changed the focus of the MEDIC work from two regional 
contractors that performed similar duties to a functional contracting approach.  One MEDIC 
focused on contract compliance oversight activities for the entire nation, while the other MEDIC 
has a national emphasis on fraud, waste, and abuse oversight activities. More specifically, the 
compliance and enforcement MEDIC was responsible for the following: 
 
   Conducting compliance plan audits; 
   Monitoring inappropriate agent/broker activities;  
   Interfacing with the State Departments of Insurance; 
   Investigating marketing violations;  
   Data trending and analysis of compliance issues; and  
   Other compliance/enforcement assistance as necessary. 
 
The benefit integrity MEDIC is responsible for:  
 
 
  53 
    Managing all incoming complaints about Part C and Part D Fraud, Waste, and Abuse 
(FWA);  
   Utilizing new and innovative techniques to monitor and analyze information to help 
identify potential fraud;  
   Working with law enforcement, Medicare Advantage and prescription drug plans, 
consumer groups and other key partners to protect consumers and enforce Medicares 
rules;  
   Providing basic tips for consumers so that they can protect themselves from potential 
scams; and  
   Performing proactive research utilizing all available data to find trends in order to ferret 
out FWA activities.  
 
In addition to the HCFAC resources CMS devoted to the MEDICs to address new complexities 
facing law enforcement; funding was added to other Part C and Part D oversight functions 
including contract and plan oversight ; monitoring, plan performance assessment, and 
surveillance/secret shopper activities; audits of programs; and routine compliance and 
enforcement tracking.   In FY 2010, $16 million in discretionary funding supported the work 
being done by the MEDICs. This funding supported the Part C and D anti-fraud efforts conducted 
by the benefit integrity MEDIC and the data analysis work conducted by Safeguard Services.  
Approximately $5 million was allocated to the Program Integrity Technical Assistance contractor.   
Work performed by this contractor included performance measure development for the MEDIC 
program, vulnerability analysis of policy and operational processes, and assistance with 
implementation planning for the Affordable Care Act. 
 
Since their inception, the work of the MEDICs has resulted in thousands of complaints being 
investigated and over 300 cases being referred to law enforcement for further actions.  In 2010 
alone, the MEDICs referred 135 cases to Federal law enforcement and 58 Immediate 
Advisements (inquiries or allegations by beneficiaries or providers concerning potential health 
care fraud, kickbacks or, brides, a crime by a Federal employee, indications of contractor 
employee fraud such as altering claims data or manipulating it to create preferential treatment to 
certain providers, improper preferential treatment in collection of overpayments or 
embezzlement.)  
 
More specifically, investigators with the benefit integrity MEDIC provided significant assistance 
that resulted in the indictment of four individuals who had established phantom infusion therapy 
clinics in Harris County, Texas. On July 2, 2010, an 11 count Federal indictment was unsealed in 
the Southern District of Texas charging the four individuals with one count of conspiracy to 
commit health care fraud, five counts of health care fraud and three counts of aggravated identity 
theft. The phantom clinics submitted claims to Part C plans for  $3.3 million in Medicare 
treatments, diagnoses, and prescription services that were not rendered.  In 2010, the benefit 
integrity MEDIC referred 10 Immediate Advisements and 4 Referrals to HHS/OIG regarding the 
infusion therapy fraud scheme. 
 
Established Additional Regional Call Centers and Focused Beneficiary Outreach  
 
 
  54 
 South Florida Fraud Hot Line  
 
As part of a two-year infusion therapy demonstration project, CMS established a special fraud 
hotline in 2007 to protect Medicare beneficiaries in South Florida from fraudulent providers of 
infusion therapy. As a result of the hotlines success, in FY 2009 CMS expanded the scope of 
this infusion therapy fraud hotline to handle all Medicare fraud-related calls in South Florida.   
The fraud hotline number is included on monthly Medicare Summary Notices (MSNs) sent to 
beneficiaries in Miami-Dade, Broward and Palm  Beach counties.  This work continued in FY 
2010. 
 
Trained, bilingual or trilingual staff fielded and routed calls, as well as acknowledged receipt of 
complaints in writing.  A rapid response team at the ZPIC investigated the highest priority leads 
received from the fraud hotline within 48 hours of  receipt of the call and then collaborated with 
CMS and/or law enforcement to pursue appropriate follow up action(s).  CMS worked with its 
partners to conduct beneficiary outreach and education to ensure beneficiaries understood the 
types of fraud that may occur and how to read their MSNs to better detect potential fraudulent 
billings. 
 
To date the hotline has received more than 29,938 calls leading to 664 new fraud investigations.  
In addition, the ZPIC has placed 71 providers on prepayment review saving $3.8 million, 
revoked/deactivated 59 provider numbers, requested $15.6 million overpayments, referred 14 
cases to law enforcement, and sent 55 Immediate Advisements to the OIG.  Law enforcement has 
seized $2.8 million in provider bank accounts. 
 
Increased Funding for Program Integrity Demonstrations/Special Initiatives  
 
Durable Medical Equipment Stop Gap Plan  
 
The DME Stop Gap Plan was developed in response to the continued escalation in DME 
payments, the growth in the number of DMEPOS suppliers, and Congress postponement of 
DMEPOS competitive bidding.   This two-year project was initiated in FY 2009 to enhance DME 
fraud, waste and abuse detection and prevention activities in seven high risk states (California, 
Florida, Illinois, Michigan, North Carolina, New York and Texas), as well as high risk suppliers, 
ordering physicians, DMEPOS items, and beneficiaries in each area.   
 
Under this project, CMS and its contractors (1) identify and interview or conduct site visits to the: 
(a) highest paid/highest risk DMEPOS suppliers; (b) highest ordering physicians; and (c) highest 
utilizing beneficiaries; and (2) identify and scrutinize the highest billed/highest risk DMEPOS 
equipment and supplies.  Based on the findings, autodenial edits and other administrative actions, 
as appropriate, are initiated. 
 
The first year of the project concluded on September 30, 2010 and the results to date include 
onsite interviews/reviews of 2,689 high risk providers, suppliers, and beneficiaries; 
implementation of 9,227 claims processing edits to prevent improper payment (with associated 
$17.7 million in denied claims); $16.4 million in requested overpayments; 759 new investigations  
opened; and 367 suppliers revoked or deactivated.    
 
  55 
  
 
 
Enrollment Special Study  
 
Experts agree that the most effective way to stop fraud is to prevent it before it starts.  The 
traditional manner in which provider enrollment applications are processed does not focus on the 
potential for fraudulent conduct by those submitting the applications.  In high vulnerability areas 
such as South Florida, where the potential for fraud is the greatest, a more thorough scrutiny of 
providers/suppliers is necessary before issuing Medicare numbers that enable them to bill 
Medicare. Focusing resources on the front end of the process helps to significantly reduce or 
eliminate many of the most common schemes involving sham providers by ensuring providers 
have been thoroughly evaluated before allowing them to enroll in the Medicare program.  
 
The purpose of this special study is to perform additional fraud, waste and abuse detection, 
deterrence and prevention activities.  Currently in the option year, this one year project began in 
July 2009 and is based on collaboration between the Medicare Administrative Contractor (First 
Coast Services, or FSCO) and the Zone Program Integrity Contractor (Safeguard Services, 
orSGS) for currently enrolled and new Medicare providers in South Florida (Dade/Broward/Palm  
Beach Counties).  
 
SGS and FCSO worked together to create a Fraud Level Indicator (FLI), which provides a 
ranking for each provider type that submitted a Medicare enrollment (CMS-855) Form.  FCSO 
scores each provider and those that exceed the threshold for the relevant provider type are referred 
to SGS to conduct an onsite inspection. 
 
SGS sends a team of investigators and nurses to the providers location to ensure that the provider 
is in compliance with Medicare rules and regulations as well as verify that the information 
provided to CMS/FCSO in the application form is accurate. 
 
The goal of this project is to stop the fraudulent providers from obtaining new Medicare provider 
numbers, reduce the number of the habitual bad providers from re-entering the Medicare system 
after they have been kicked out in the past, and to stop the pay and chase mentality that has 
existed in the PSC/ZPIC world in years past. 
 
Through its participation in the project, FCSO has conducted over 4,586 activity checks to verify 
providers/suppliers operational status, deactivated 260 providers, and revoked 211 providers.  
Since inception, FCSO saved $14.9 million from prepayment claim edits and requested over 
$140,000 in overpayments.  In addition, SGS conducted over 520 on-site investigations resulting 
in 124 providers being revoked or deactivated.   SGS placed 327 providers on prepayment review 
saving $7 million and requested $23 million in overpayments. 
 
Miami Field Office / ZPIC Home Health Project    
 
FY 2010 was the second year of the Home Health project.   Results through September 30, 2010, 
included adding a Fraud Prevention & Early Abatement approach and resulted in 753 
 
  56 
 beneficiaries being placed on Not Homebound edits, 39 beneficiaries being placed on No 
Skilled Nursing edits; and 10 beneficiaries being placed on No Aide edits.  These edits auto- 
deny claims for these beneficiaries who were not homebound but for whom claims were 
submitted as though they were home bound, receiving skilled nursing or receiving other aide.  
The task order also added a Diabetic Edit approach resulting in 516 diabetic edits as of September 
30, 2010.  Three additional HHAs were placed on payment suspension in year two bringing the 
total number of HHs on payment suspicion to 32 for the project.  Two additional payment 
suspension requests were pending as of September 30, 2010.  Overpayments calculated to date 
amount to $76 million.  Edit savings are $3.7 million year to date and $9.6 million total to date.  
Finally, this project resulted in $2 million in cost avoidance from edits; and $5.5 million in cost 
avoidance from monies in payment suspension.       
 
Los Angeles Field Office (FO)/Texas HHA Special Project    
 
There are approximately 2,000 HHAs in the state of Texas.  Many of these HHAs have come to 
rely upon outlier payments, specifically for diabetic beneficiaries, as a predominant part of their 
overall reimbursement.  In an effort to combat home health fraud, waste, and abuse in Texas, the 
Los Angeles FOs engaged the Zone 4 ZPIC, to address aberrant home health billing.  Since 
September 2009, the Zone 4 ZPIC, in conjunction with the Medicare Administrative Contractor 
(MAC), has implemented 337 autodenial edits.  In addition, the Zone 4 ZPIC added an additional 
192 autodenial edits before September 30, 2010.  The Zone 4 ZPIC has already imposed 11 
payment suspensions, which resulted in a $1.2 million dollar savings to the Medicare Trust Fund.  
Overpayments based on post payment review were $6 million.  
 
Increased Capacity to Identify and Prevent Excessive Payments  
 
Automated Fraud Edits  
 
CMS used automated fraud edits to help prevent payment for improper or fraudulent claims.  For 
example, after uncovering a Medicare infusion scam that involved for-profit clinics and 
physicians who recruited HIV/AIDS patients for infusion services, paid them kickbacks to come  
to their clinics, and billed for those services at medically unnecessary frequencies and at lethal 
dosages, CMS and the Florida PSC (now Zone 7 ZPIC) and Medicare carrier developed and 
implemented Clinically Unlikely Dosage Edits. These edits auto-deny claims from providers who 
bill units of medication at lethal dosage amounts.  During the time period of June 1, 2005, through  
June 30, 2010, these edits resulted in denials totaling approximately $287.6 million.  CMSs 
Miami FO and the Florida PSC also implemented Beneficiary Auto-denial edits for the top 
Medicare high volume infusion beneficiaries, which have resulted in denials totaling 
approximately $452.4 million in the same time period.  
 
CMS has also implemented Medically Unbelievable Dosage Edits. With these edits, claims from  
providers who bill units of medication at lethal dosage amounts are automatically denied. CMS 
has also implemented Beneficiary Autodenial Edits which deny claims for the top 200 Medicare 
high volume infusion beneficiaries.   
 
Compromised Numbers  
 
  57 
  
CMS contracted with an 8(a) firm in September 2009 to create a national repository of 
compromised numbers for use by the PSCs, ZPICs and MEDICs.  This Compromised Number 
Contractor (CNC) was also tasked with assisting CMS in developing a national automated 
database for the compromised numbers that will interface with claims processing so that national 
edits can be implemented. 
   
To date, the CNC has identified 4,999 compromised providers/suppliers and approximately 
266,848 compromised beneficiaries.  The CNC provided the updated repository each month to the 
PSCs/ZPICs/MEDIC and the DMEPOS Pricing, Data Analysis and Coding Contractor, along 
with associated geomapping analyses to identify clustering of compromised numbers.  This 
information was used by the contractors to open investigations and implement claims processing 
edits. The compromised numbers were also used in national predictive modeling to identify 
providers/suppliers for investigation. As CMS implements real time analytic tools (see below), 
the compromised numbers will be one source of valuable data used in the predictive analytics. 
 
Labs & PINs Workgroup   
 
CMS continued to host monthly conference calls for a workgroup comprised of CMS staff 
nationwide, PSCs and ZPICs, the CNC, and law enforcement, including Assistant United States 
Attorneys, the Federal Bureau of Investigation and HHS/OIG, to share information on false 
front (sham) providers and current fraudulent schemes.  Monthly meetings provide invaluable 
intelligence on geographic shifts and cross-regional schemes.  
 
Workgroup activities resulted in $133 million in Part B savings through overpayments, 
administrative actions, and seizures by law enforcement and CMS tasked one PSC to run national 
claims history for Labs and PINs leads for early identification of potential false provider numbers. 
For example, in the past 20 months, the workgroup identified 439 false front providers or 
providers whose identities had been compromised, and approximately 214 were identified prior to 
any loss of Medicare funds and additional actions were taken against the remaining 225 providers.   
 
Targeted Focus  
 
CMS addressed Medicare hot fraud areas with ZPICs and CMS Program Integrity Field 
Offices. The ZPIC contracting strategy allowed CMS the opportunity to allocate and adjust 
resources to focus on the highest risk fraudulent activities and geographic areas, particularly 
fraud, waste, and abuse hot zones.  Examples include targeted data analysis, site visits to 
provider locations, beneficiary interviews, and innovative support to law enforcement.  The 
designated Program Integrity FOs in Los Angeles, Miami and New York provided an on the 
ground presence focused on high risk fraud areas of the country.  Together, the Field Offices and 
ZPICs conducted data analysis to proactively identify targets and to coordinate efforts among 
various contractors and agencies to identify local, field level issues and vulnerabilities with 
national or regional impact.  All three FOs, which are located in or near the HEAT cites of Miami, 
Los Angeles and Brooklyn, have staff who are designated CMS Strike Force Liaisons, who then 
coordinate with law enforcement, facilitate data analysis and expedition suspension requests. 
 
 
  58 
 The Miami FO has implemented a comprehensive, multipronged approach to address the varied 
aspects of health care fraud in South Florida and has provided a testing ground for the efficacy of 
these efforts on a national level.  This initiative focused on intensive provider enrollment 
screening. CMS also implemented a fraud hotline, follow-up site visits, and prepay review for 
watch lists providers and suppliers under the South Florida strategy.  In addition, CMS instituted a 
number of targeted efforts in high vulnerability areas such as Miami, Houston, and Los Angeles 
where there are a large number of beneficiaries and providers/suppliers.  CMS and its contractors 
conducted special projects focused on both high fraud provider/supplier types and high fraud 
areas of the country. For example, the New York FO led the Medicare 7-State DME Stop Gap 
Project and the CNC project and participated in the National HEAT Strike Force Data Workgroup 
to develop data analysis reporting templates 
 
Medicare Secondary Payer Recovery Contractors  
 
The Medicare Secondary Payer (MSP) Recovery Contractor was also partially funded through the 
use of discretionary HCFAC dollars. This contractor ensures recovery actions are undertaken 
when Medicare pays for claims where it did not have the primary responsibility to do so.  In FY 
2010, collections by the MSP Recovery Contractor totaled $412M. 
 
Enhanced Provider Oversight Efforts  
 
In 2010, CMS invested $12 million of the HCFAC discretionary funding to enhanced provider 
oversight activities. CMS has undertaken numerous aggressive actions to tighten the provider 
enrollment process through a systematic and risk-based application review before enrollment 
occurs by conducting onsite verifications and by requiring surety bonds. 
 
For example, in some of our special oversight activities and projects, enrollment applications for 
specific supplier types were evaluated and assigned a Fraud and Abuse Indicator of Risk (FAIR) 
of high, medium, or low based on potential fraud risk to the program.  In assessing the FAIR, 
factors such as experience as a DMEPOS supplier, experience with other payers, prior Medicare 
experience, and geographic area were considered.  The level of screening used for an applicant 
depended on the fraud score. Those applicants with a high or medium FAIR received at least one 
unannounced site visit to verify compliance with the supplier standards.  DMEPOS suppliers that 
were not in compliance with one or more of the supplier standards had their billing number 
revoked. The enhanced review of applications for new DMEPOS supplier billing numbers helps 
to prevent non-compliant providers from ever entering the program.    
 
CMS also continued to implement DMEPOS Accreditation Standards which ensure DMEPOS 
suppliers meet CMSs supplier quality standards. All DMEPOS suppliers were required to 
comply with the CMS quality standards in order to receive Medicare Part B payments and to 
retain a supplier billing number starting on October 1, 2009.  A supplier billing number is not 
issued to any non-accredited supplier, thus any non-accredited supplier cannot receive nor 
maintain any Medicare billing privileges.  CMS also implemented additional supplier standards 
for all DMEPOS suppliers, including hours of operation, physical space and access, obtaining 
oxygen from state licensed suppliers in states that license, and requiring documentation on 
ordering and referring of DMEPOS supplies. 
 
  59 
  
CMS has established a surety bond requirement for all DMEPOS suppliers that went into effect 
on October 2, 2009. Provider numbers cannot be issued or renewed unless the supplier obtains 
and maintains a surety bond on a continuous basis.  The surety bond requirement for DMEPOS 
suppliers is expected to: 
 
   Limit the Medicare program risk to fraudulent DMEPOS suppliers; 
   Ensure that only legitimate DMEPOS suppliers are enrolled or are allowed to remain 
enrolled in the Medicare program; 
   Provide Medicare with the time necessary to determine if a DMEPOS supplier is acting in 
good faith; 
 	  Ensure that the Medicare program recoups erroneous payments from fraudulent or abusive 
billing practices by allowing CMS or its designated contractor to seek payments from a 
surety up to the penal sum; and 
 	  Ensure that Medicare beneficiaries receive products and services that are considered  
reasonable and necessary from legitimate DMEPOS suppliers. 
 
The combined impact of the surety bond and accreditation efforts in 2009 was substantial.  
During the first quarter of FY 2010,  CMS revoked over 10,000 suppliers as a result of failure to 
meet the more stringent enrollment criteria and another 6,000 suppliers have voluntarily 
withdrawn from the program rather than be held accountable to the new standards. 
 
All of these program integrity efforts will work in tandem with CMS DMEPOS Competitive 
Bidding Program that has now been implemented and which strengthens Medicare by taking an 
important step towards paying appropriately for medical equipment and supplies.  Competitive 
bidding reduces out-of-pocket costs for consumers and is estimated to save the Medicare program  
billions over 10 years. Importantly, DME competitive bidding helps to prevent Medicare fraud.  
All suppliers in the program must be licensed, meet strict quality and financial standards, and be 
accredited by a national accreditation organization.  A reduction in excessive payment amounts 
makes competitively bid items less attractive targets for fraud and abuse.  
 
Measured Error Rate  
 
Payment Error Rate Measurement (PERM)  
 
The PERM program was developed to comply with the requirements of the Improper Payments 
Information Act of 2002 (IPIA), which requires HHS to annually produce national level error 
rates for Medicaid and CHIP. The IPIA was later amended by the Improper Payments 
Elimination and Recovery Act of 2010 (IPERA) in order to strengthen improper payment 
programs and reduce improper payment amounts by $50 million by 2012.  CMS uses Federal 
contractors to measure Medicaid and CHIP error rates in a subset of States every year. In  
2006, CMS measured the fee-for-service component of Medicaid. Starting in2007, PERM was 
expanded to measure error rates for fee-for-service, managed care, and eligibility in both the 
Medicaid and CHIP programs.   
 
 
  60 
 HHS calculated and is reporting the three-year weighted average national error rate that includes 
data from FYs 2008, 2009, and 2010.  This three-year rolling error rate is 9.4 percent or  
$22.5 billion. The weighted national error components rates are as follows:  Medicaid FFS: 4.4 
percent; Medicaid managed care: 1.0 percent; and Medicaid eligibility: 5.9 percent.  Further 
evaluation of the error rates shows that the vast majority of Medicaid errors were due to cases 
reviewed for eligibility that were either not eligible or undetermined, followed by diagnosis 
coding errors and insufficient documentation errors in the fee-for-service medical review.   
 
HHS reported in the FY 2009 Agency Financial Report a two-year weighted average national 
error rate for Medicaid that included data from 2008 and 2009.  The two-year average national 
Medicaid error rate was 9.6 percent.  The weighted national error component rates were:  
Medicaid fee-for-service: 5.7 percent; Medicaid managed care: 1.5 percent; and Medicaid 
eligibility: 4.9 percent.    
Importantly, CMS noted instances where some States policies were in conflict with the resulting  
measurements. One of these instances was in the review of eligibility cases.  In some cases, policy 
and operational differences among states may affect the degree to which states and providers can 
obtain documentation to validate payments and eligibility decisions. States that have simplified 
eligibility documentation rules through use of self-declaration and passive renewal often found it 
harder to obtain necessary documentation for PERM reviews, which led to more undetermined 
cases that were treated as errors for PERM. To address this issue, one of the requirements 
Congress included in the Childrens Health Insurance Program Reauthorization Act of 2009 
(CHIPRA) is that the payment error rate determined for a State should not take into account 
payment errors resulting from the states verification of an applicants self-declaration or self-
certification of eligibility if the State process for verifying an applicants self-declaration or self-
certification was approved by CMS. CMS anticipates errors will decrease in the future due to this 
important policy change.  
CMS is currently measuring cycles that will be reported in 2011 and 2012. CMS expects the error 
rates for Medicaid will decline in future years through program maturation and corrective action 
initiatives implemented at the State and Federal levels. 
 
As a result of the Presidents Executive Order on Reducing Improper Payments, the PERM 
program has added several new requirements including reporting on the Treasury payment 
accuracy website and reporting comprehensive improper payment measurement and reduction 
activities to HHS/OIG.  
 
The PERM final rule (75 FR 48816) was published on August 11, 2010 and was effective 
September 10, 2010.  This final rule implements provisions from the Childrens Health Insurance 
Program Reauthorization Act (CHIPRA) of 2009 with regard to the PERM program.  Section 601 
of CHIPRA prohibits HHS from calculating or publishing any national or State-specific error 
rates for CHIP until six months after the new PERM final rule is effective. HHS will begin CHIP 
error rate measurement in 2010 with the results being published in November 2012.  There was 
no CHIP error rate calculated or published in 2010, and HHS will not calculate or publish a CHIP 
error rate in 2011. 
 
 
  61 
 Further Development of Near-Real Time Data Analysis Tool  
 
The One Program Integrity (One PI) data project was developed to provide a fully integrated 
searchable database of all Medicare paid claims.  One PI is comprised of analytic tools that will 
be used to perform data analysis across a centralized Integrated Data Repository (IDR), which 
does include data from Medicare Parts A, B, and D.  The IDR currently houses Part A and B 
claims data dating back to January 1, 2006 and prescription drug event records dating back to 
January 1, 2006.  CMS will continue to add additional data streams and reference data to the IDR.  
The availability of a centralized source for accessing the tremendous volume of data on claims, 
providers, and beneficiaries will enable consistent, reliable, and timely analyses. This will in turn  
improve the ability to detect fraud, waste, and abuse in the Medicare and Medicaid programs.  
CMS will continue to add additional data streams, such as standardized Medicaid data across 
multiple states,  and reference data to the IDR.   
 
The Center for Program Integrity (CPI) was created by Secretary Sebelius in April, 2010, to give 
new focus to antifraud activities in CMS.  CPI brings together the Medicaid and Medicare 
Program Integrity Groups for the first time.  Working with the related components of CMS, CPI 
is coordinating and consolidating program integrity policies and activities.  A major initiative of  
CPI is leveraging innovative technology and techniques to better identify excessive payments 
early. In FY 2010, CPI initiated several pilot projects to demonstrate the capabilities and gather 
knowledge for potential broader implementation.  
 
Predictive Modeling  
 
To prevent excessive payments before they are made, CPI began moving toward using predictive 
modeling techniques (similar to those currently used in the financial sector) to identify high-risk 
claims for further review prior to payment.  CPI has implemented several pilot projects to develop 
and test predictive models to determine their efficiency (e.g., probability of false positives).  
Many of these models will be tested with near real-time data in order to ensure that they are 
effective at identifying high-risk claims.  Analyses are specifically underway in the areas of home 
health, durable medical equipment, and compromised beneficiary and provider numbers.  Results 
from such analyses will be evaluated internally or referred to appropriate contractors for 
investigation; when confirmed, the results from predictive analytics will provide the basis for 
administrative actions by CMS and, when appropriate, referral to OIG and DOJ.  The long-term  
plan is to use these models for prepayment risk scoring to identify claims for further review.  The 
sophisticated analytics will move CMS toward its goal of preventing inappropriate payments 
before they are made. 
 
Advanced Investigative Tool  
 
CPI worked with the Recovery Accountability and Transparency Board to pilot the use of a fraud 
detection tool that links publicly available data sources in order to conduct network analysis for 
specific Medicare providers. The pilot involved identifying and analyzing a group of providers 
that are considered high-risk for potential fraud. The providers were those: 1) most frequently 
reported by beneficiaries as potentially fraudulent through 1-800-MEDICARE; or 2) screened as 
high risk in the high fraud area of South Florida.  This type of tool may be useful in reviewing 
 
  62 
 high-risk providers prior to Medicare enrollment.  Preliminary results of the pilot were positive 
and the more extensive use of such tools in enrollment screening is being considered.  
 
 
 
Funded Medicaid/CHIP Financial Management Project  
 
Under this project, funding specialists, including accountants and financial analysts, worked to 
improve CMSs financial oversight of the Medicaid and CHIP programs.  Through the continued 
efforts of these specialists, CMS identified and resolved $1.7 billion of approximately $5.8 billion 
in cumulative questionable costs in FY 2010.   
 
Furthermore, an estimated $204 million in questionable reimbursement was actually averted due 
to the funding specialists preventive work with states to promote proper state Medicaid 
financing. The funding specialists activities included reviews of proposed Medicaid state plan 
amendments that related to reimbursement; development of financial management reviews; 
research regarding state Medicaid financing policy and practices; collaboration with states to 
resolve the Medicaid and CHIP portions of the A-133 Single State audits; and identification of 
sources of the non-Federal share of Medicaid program payments to ensure proper financing of 
Medicaid program costs.  
 
National and Regional Fraud Summits  
On January 28, 2010 HHS and DOJ leadership joined private sector leaders, law enforcement 
personnel, and health care experts for a landmark National Summit on Health Care Fraud. The 
summit was the first national gathering on health care fraud between law enforcement and the 
private and public sectors. The National Fraud Summit featured discussions of innovative ways 
to eliminate fraud and abuse in the U.S. health care system.  It laid the groundwork for an open 
dialogue among stakeholders in the private and public sectors to discuss innovative ways to 
eliminate fraud within the U.S. health care system.  On June 8, 2010 a nationwide series of 
regional fraud prevention summits as part of a multi-faceted effort to crack down on health care 
fraud summits was initiated.  Summits were held on July 16, 2010, in Miami; on August 26, 2010, 
in Los Angeles; on November 5, 2010, in New York, and on December 16, 2010 in Boston.  $2 
million in HCFAC funds were used to fund these regional fraud summits and also to underwrite 
the Fraud Prevention Campaign described below. DHHS has a strong commitment to partnering 
with the private sector so we can mutually learn from best practices. We intend to move forward 
from the Fraud Prevention Summits to further collaboration and learning and increase focus on 
anti-fraud activities across the nation.  
Fraud Prevention Campaign  
 
A Fraud Prevention Campaign was launched in January 2010 to increase public awareness about 
Medicares fight against fraud. The main goal of the campaign is to inform beneficiaries about 
how to prevent, identify, and report Medicare fraud and raise awareness of the governments 
robust crackdown resulting from the passage of the Affordable Care Act. Federal, state and local 
partners, beneficiaries, providers, and other interested parties are joining forces for the Fraud 
 
  63 
 Prevention Campaign initiative to discuss innovative ways to eliminate fraud within the U.S. 
health care system, as well as develop strategies aimed at changing the behaviors. 
  
The national paid advertising buy was targeted to Medicare beneficiaries and was designed to 
educate Medicare beneficiaries about the importance of keeping Medicare information private and 
where to go for help if fraud is suspected. The paid advertising referred beneficiaries to 1-800
MEDICARE or www.stopmedicarefraud.gov for help. The paid advertising plan ran nationally 
on network news, national cable, and national print.  An estimated 95 percent of Adults over age 
55 were exposed to the fraud message an average of 8.35 times.    
 
Administration on Aging 
 
In FY 2010, the Administration on Aging (AoA) was allocated $3.8 million in HCFAC funding 
by HHS to support infrastructure, technical assistance and the other Senior Medicare Patrol 
(SMP) program support and capacity-building activities designed to enhance the effectiveness of 
state-wide SMP programs.  SMP is funded from  a separate Congressional appropriation.  These 
dollars support SMP programs that recruit retired professionals to educate and assist Medicare 
beneficiaries to detect and report health care fraud, error, and abuse in the Medicare and Medicaid 
programs.  According to the most recent annual performance report from HHS/OIGs Deputy 
Inspector General for Evaluation and Inspections, dated May 19, 2010, 4,444 active volunteers 
served the 55 SMP projects during 2009. These volunteers performed an essential function of this 
program, contributing close to 122,410 hours in efforts to share the SMP message of fraud 
awareness and prevention within the senior community.  
 
Of the $3.8 million in HCFAC dollars given to AoA, $500,000 was used specifically to develop  
and disseminate consumer education information targeted to older Americans, with a particular 
focus on persons with low health literacy, individuals from culturally diverse backgrounds, 
persons living in rural areas, and other vulnerable populations.  AoA and its nationwide network 
of agencies support community education activities designed to assist older Americans and their 
families to recognize and report potential errors or fraudulent situations in the Medicare and 
Medicaid programs. 
 
Of this $500,000, AoA used $165,000 to develop SMP Fraud Prevention Public Service 
Announcements (PSAs), and to provide media toolkits, training and support for SMPs to ensure 
effective use, placement and response to the PSA.   Public awareness campaign fact sheets and 
supporting materials have been developed and training webinars for SMPs have been planned.   
 
Additionally, AoA plans to use $335,000 received in FY 2010 to provide additional Hispanic 
Outreach by working with The National Hispanic SMP (NHSMP) in FY 2011.  The NHSMP will 
work with AoA to develop a SMP Training Manual for Hispanic Volunteers across the country 
and to conduct a targeted Volunteer Outreach Program and Outreach and Communications  
Campaign in South Florida.  
 
The key to the campaign will be linguistic, cultural and age-appropriate strategies for reaching 
this population. The educational campaign will be carried out with media that are shown to reach 
 
  64 
 Hispanic adults, and educational efforts carried out by people that the Hispanic older adults trust, 
including Hispanic community-based organizations and members of the local community who are 
their neighbors and friends. This project is founded on the idea that fighting Medicare fraud in 
the Hispanic community requires as high a level of cultural competency as that employed by the 
criminals - the winner will be determined by who is able to gain the trust and confidence of the 
community. AoA will use this program targeted to South Florida to learn more about National 
SMP strategies that may be effective nationally in the Hispanic community. 
 
Outreach to senior consumers is a key element of the SMP program.  During 2009, SMP projects 
held 5,684 community education events reaching close to an estimated 1.5 million people, and 
conducted over 311,000 media outreach activities to increase beneficiary awareness about issues 
related to Medicare and Medicaid integrity.  During this period, 33,855 one-on-one counseling 
sessions were held with or on behalf of a beneficiary on a variety of issues related to potential 
Medicare or Medicaid fraud, error or abuse.  In addition, over 217,000 beneficiaries were 
educated through close to 7,200 group educational sessions conducted by SMP programs in local 
communities.   
 
As a result of educating beneficiaries, the projects received over 60,000 inquiries in 2009 from or 
on behalf of beneficiaries and resolved over 99 percent of the inquiries during this period.  In 
addition, as a result of educational efforts, SMP projects received 3,052 complex issuesi.e., 
beneficiary complaints requiring further research, assistance, case development and/or referral.   
While the SMP program staff was able to resolve 2,588 complex issues for beneficiaries during 
2009, an additional 966 of these issues, with an estimated dollar value of $3.8 million, were 
referred to law enforcement, CMS integrity contractors, state Medicaid  Fraud Control Units, or 
other entities for further action.  During this period, HHS/OIG documented that almost $565,000 
in healthcare expenditures were avoided and over $214,000 in Medicare, Medicaid and other 
savings resulted from actions taken by the SMP program. 
 
Since the programs inception, the program has educated over 3.84 million beneficiaries in group  
or one-on-one counseling sessions and has reached almost 24 million people through community 
education outreach events. While SMPs make numerous referrals of potential fraud to CMS 
program integrity contractors, there is no mechanism for tracking the actions (investigation, 
prosecution, collection) required to realize actual savings to the government as a result of these 
referrals. Therefore, it is not possible to directly track the outcome of most of the cases reported 
and dollars recovered as a result of SMP program activities.   Moreover, the impact of the SMP 
programs primary activities - education of beneficiaries to prevent health care fraudis difficult 
to measure and impossible to quantify in dollars and cents.  As HHS/OIG indicated in the May 
2010 report: 
 
 We continue to emphasize that the number of beneficiaries who have learned from the 
Senior Medicare Patrol Projects to detect fraud, waste, and abuse and who subsequently 
call the OIG fraud hotline or other contacts cannot be tracked.  Therefore, the projects may 
not be receiving full credit for savings attributable to their work.  In addition, the projects 
are unable to track substantial savings derived from a sentinel effect, whereby fraud and 
errors are reduced in light of Medicare beneficiaries scrutiny of their bills.   
 
 
  65 
 AoA recognizes the importance of measuring the value of the SMP program impact to the fullest 
degree possible. Toward that end, AoA has recently initiated a first-ever SMP program 
evaluation that will assess the adequacy of current SMP performance measures, and seek to 
determine the most appropriate measures of SMP program value (benefits, results and impact), 
including return on investment.  
 
Despite the factors that have limited AoAs ability to quantify the value of the SMP program in 
preventing, identifying and reporting health care fraud, it must be noted that the OIG has 
documented over $105.9 million in savings attributable to the program as a result of beneficiary 
complaints since its inception in 1997.   
 
Office of the General Counsel   
 
In FY 2010, the Office of the General Counsel (OGC) was allocated approximately $8.7 million 
in HCFAC funding by HHS to supplement OGCs efforts to support program integrity activities.  
OGCs efforts in FY 2010 focused heavily on program integrity review, in which OGC reviews 
CMS programs and activities in order to strengthen them against potential fraud, waste, and 
abuse. OGC also continued to expand its litigation role in order to assist in the recovery of 
program funds.  During FY 2010, OGC was involved in a wide range of HCFAC efforts that 
resulted in Government recoveries of over $1.2 billion in judgments, settlements, or other types of 
recoveries, savings, or receivables described elsewhere in this report.     
 
The Affordable Care Act:  The ACA significantly amends existing anti-fraud statutes. These 
provisions establish fundamental expectations for compliance, disclosure, transparency, and 
quality of care, and are matched by corresponding enforcement provisions. Some specific 
provisions of the ACA that particularly support HCFAC priorities and goals amend the Anti-
Kickback Act provider/supplier Medicare and Medicaid enrollment requirements, overpayment 
provisions to specifically invoke the FCA, and create a statutory disclosure protocol for violations 
of the physician self-referral prohibitions known as the Stark Law.  During FY 2010, OGC 
spent significant time and resources working with CMS and Congress to review and implement 
the program integrity provisions of the ACA.    As new programs from the ACA were  
implemented, OGC was involved in working with the relevant agencies to ensure that program  
integrity issues were reviewed and resolved and assisted the agencies in addressing program  
integrity and compliance problems as they occur.   
 
HEAT: During FY 2010, OGC was involved in HEAT initiatives and worked closely with other 
HEAT members to combat fraud, waste and abuse in the Medicare and Medicaid programs by 
providing advice on the myriad legal issues presented as the Government works to initiate 
innovative anti-fraud programs in various hotspots throughout the country.  OGCs involvement 
in HEAT included advising CMS on provider and supplier revocations, payment suspensions and 
recoupments that arise from the initiative (as they arose, in addition to criminal and civil fraud 
prosecutions) and defending the administrative appeals that resulted.  OGC continued to assist 
DOJ in prosecuting those seeking to defraud Medicare and Medicaid and defend any Federal 
court challenges that are brought as a result of this initiative.  
 
FCA and Qui Tam Actions: OGC assisted DOJ in assessing qui tam actions filed under the FCA 
 
  66 
 by interpreting complex Medicare and Medicaid rules and policies in order to help DOJ focus on 
those matters which were most likely to result in  a recovery of money for the Government.  When 
DOJ filed or intervened in a FCA matter, OGC provided litigation support, including interviewing 
and preparing witnesses and responding to requests for documents and information.  In FY 2010, 
OGC participated in FCA and related matters that recovered over $1.07 billion for the 
Government.  The types of FCA cases in which OGC participated included: drug pricing 
manipulation; illegal marketing activity by pharmaceutical manufacturers that resulted in 
Medicare and Medicaid paying for drugs for indications that were not covered; underpayment of 
rebates to state Medicaid programs; physician self-referral and Anti-Kickback Statute violations; 
and provider upcoding and outlier cases. OGC also assisted DOJ in an emerging workload of 
cases involving alleged fraud in Medicare Part D, the Medicare prescription drug program.   
     
Provider/Supplier Suspensions and Enrollment Revocations or Denials: Suspensions play a 
critical role in protecting against the abuse of program funds because they provide a source from  
which CMS can obtain recoupment after a final overpayment has been determined.  Suspensions 
can also prevent improper payment from being made, thus avoiding the need to chase down 
these funds later. OGC advised CMS on whether to suspend payments to Medicare providers and 
suppliers and defended the suspensions when challenged. During FY 2010, OGC attorneys were 
involved in a myriad of suspension and recoupment actions, totaling over $43 million, many of 
which involved fraudulent billings and different segments of the health care industry, including 
DME suppliers, ambulance companies, physicians, infusion clinics, therapists, home health 
agencies, and diagnostic testing facilities. OGC also represented CMS when a provider or 
supplier appealed CMS denial of enrollment or revocation.  During FY 2010, OGC represented 
CMS in numerous appeals before the Departmental Appeals Board (DAB) and typically resolved 
these cases without formal hearings.  OGC also continued to advise CMS on the interpretation of 
enrollment regulations and reviewed proposed enrollment rules and manual changes.   
 
Medicare Prescription Drug Program (Part D) & Medicare Advantage Program (Part C) 
Compliance: OGC continued to provide extensive advice to CMS on a variety of Part D and 
Medicare Advantage-related contract compliance issues, including identifying enforcement 
options against sponsors that are noncompliant or violate program rules, such as Marketing 
Guidelines. OGC reviewed compliance-related correspondence that CMS issued to Part D 
sponsors and MA plans in the form of warning letters, corrective action plan letters, intermediate 
sanction and CMP notices and non-renewal or termination notices.  One example of OGCs work 
in this area in FY 2010 involved the termination of a Part D plan sponsor.  OGC advised CMS on 
the possible termination action, as well as other potential penalties that could apply to this 
sponsors misconduct.  OGC is defending the termination in the administrative appeal process and 
OGC worked closely with DOJ to defend against the sponsors federal lawsuit and subsequent 
federal appeal. 
 
Civil Monetary Penalties:  CMS has the responsibility for administering numerous CMP 
provisions enacted by Congress to combat fraud, waste, and abuse by enforcing program  
compliance and payment integrity.  During FY 2010, OGC provided legal advice to CMS 
regarding the development and imposition of CMPs and defended CMS in numerous 
administrative appeals and judicial litigation resulting from these cases, recovering or establishing 
the right to recover over $13 million in CMPs. 
 
  67 
  
Petitions for Remission: OGC collaborated with Federal law enforcement, including the FBI, the 
USAOs, the Secret Service, U.S. Postal Service, and the U.S. Marshals Service in filing petitions 
for remission directed to recover assets subject either to administrative forfeiture by Federal law 
enforcement or civil judicial forfeiture by DOJ.  Each petition set forth the background of the 
fraudulent scheme, the history of Medicares payments, and how the fraudulently induced 
payments could be traced to the seized assets.  During FY 2010, OGC petitioned these agencies to 
recover funds in both criminal and civil litigation matters in which Medicare was a victim of 
fraud involving about $1 million seized by law enforcement agencies. 
     
Regulatory Review and Programmatic Advice: During FY 2010, OGC advised CMS in 
developing draft regulations related to compliance and appeals in a proposed rule for the 
Medicare Parts C and D programs.  OGG also advised CMS regarding a variety of contract 
compliance, immediate sanction and civil money penalty issues, and assisted CMS with a variety 
of law enforcement inquiries related to Parts C and D.  Further, OGC advised CMS regarding the 
development and finalization of the appeals process for Part C routine audit data validation 
initiative and reviewed Part D licensure waiver issues. 
 
Medicaid Integrity: OGC saw increased involvement in FY 2010 in Medicaid integrity issues as 
CMS devoted more resources to financial reviews and oversight and as States continued to 
present innovative proposals to reconfigure their programs and to draw down federal financial 
participation at or beyond the margins of the regular Medicaid program.  OGC also saw a 
significant increase in the provision of legal advice to CMS regarding proposed disallowances, 
many resulting from increased audit scrutiny of state Medicaid expenditures and the filing of 
Medicaid disallowance appeals before HHS DAB.  In FY 2010, OGC continued to see an 
increase in disallowances taken in instances where a State received a settlement, often from a 
pharmaceutical manufacturer, under its State false claims act law or a State consumer protection 
or fraud law and did not properly pay the Federal government its fair share of the recovery.  
During FY 2010, OGC was successful in securing over $150 million in Medicaid program  
savings. 
 
Physician Self-Referral: OGC provided valuable assistance to CMS in navigating the 
complexities of the Stark physician self-referral law.  In FY 2010, OGC reviewed and offered 
extensive comments on recent Stark regulations and their implementation, successfully defended 
regulatory challenges to controversial new provisions in the Stark Law and anti-markup rules, and 
reviewed several draft Stark advisory opinions.  In addition, OGC has reviewed various payment 
or coverage rules and suggested modifications necessary to avoid implicating, or to conform the 
regulation to, the Stark law.   
     
Medicare Secondary Payer (MSP) Workload: OGCs efforts to recover conditional payments by 
Medicare that are the primary responsibility of other payers directly supports the HCFAC 
statutory goal of facilitating the enforcement of all applicable legal remedies for program fraud 
and abuse. During FY 2010, OGC has been successful in establishing the right to recover over 
$15 million for Medicare under the MSP program.  Recent statutory changes to the MSP law have 
strengthened and expanded OGCs efforts in this area  to the benefit of the Medicare Trust Fund 
 including substantial CMPs for failure to report.   
 
  68 
  
Bankruptcy Litigation:   OGC protected Medicare funds when providers sought bankruptcy 
protections by asserting CMS recoupment rights to collect overpayments, arguing to continue 
suspension or termination actions against debtors, seeking adequate assurances from the 
bankruptcy court that CMS interests in the debtor's estate will be protected, arguing for the 
assumption of the Medicare provider agreement as an executory contract, and petitioning for 
administrative costs where appropriate.  In FY 2010, OGC vigorously asserted CMS interests in 
numerous bankruptcy and receivership actions involving hospitals, nursing homes and nursing 
home chains, negotiated agreements to recover overpayments, and aggressively advanced the use 
of Medicares recoupment authority, collecting or establishing the right to collect over $12.8 
million in overpayments involving bankrupt providers. 
 
Denial of Claims and Payments: CMS and its contractors engaged in various activities and 
initiatives to detect and prevent abusive and fraudulent billing practices.  These measures 
included provider and beneficiary education, use of claim sampling techniques and a more 
rigorous scrutiny of claims with increased medical review.  In FY 2010, OGC played a major role 
in advising CMS regarding the development and implementation of these types of program  
integrity measures and defended CMS in litigation brought by providers and suppliers who 
challenged these efforts. OGC continued to aggressively defend CMS and its contractors in cases  
seeking damages for the alleged wrongful denial of claims, for being placed on payment 
suspension and for not being granted extended repayment plans.   
 
Food and Drug Administration Pharmaceutical Fraud Program 
 
In FY 2010, the Food and Drug Administration (FDA) was allocated $1.7 million in HCFAC 
funding by HHS for the FDA Pharmaceutical Fraud Pilot Program (PFPP).  The PFPP has 
enhanced the health care fraud-related activities of FDA's Office of Criminal Investigations (OCI) 
and the Office of the General Counsel, Food and Drug Division (OGC).  OCI, with the support of 
OGC, investigates criminal violations of the FDCA, the Prescription Drug Marketing Act, the 
Federal Anti-Tampering Act, and related Federal statutes.   
 
The PFPP is designed to detect, prosecute, and prevent pharmaceutical, biologic, and medical 
device fraud.  The PFPP focuses on fraudulent marketing schemes, application fraud, clinical trial 
fraud, and flagrant manufacturing-related violations for biologics, drugs, and medical devices.  
The early detection and prosecution of fraudulent conduct  furthers FDAs public health mission 
and helps reduce health care costs and deter future violators.  As described below, the PFPP has 
identified, in a relatively short time, several alleged pharmaceutical fraud schemes through 
various avenues including enhanced intra-agency coordination.  PFPP is pursuing all available 
criminal and civil remedies to punish and deter such conduct.  
 
The PFPP gathers information from sources inside and outside FDA to detect and prosecute 
pharmaceutical fraud cases by focusing on marketing, clinical trial, and application fraud. The 
PFPP anticipates that some of these schemes will involve the promotion of drugs and medical 
devices for uses not approved or cleared by FDA, also known as off-label promotion. Other 
cases involve marketing schemes that knowingly overstate the effectiveness or minimize the risk 
of a medical product.  FDA also hopes to detect schemes involving clinical trials and the 
 
  69 
 submission of false or fraudulent FDA approval applications to prevent the distribution of drugs, 
biologics, and medical devices that do not meet FDA standards. 
 
 
Status of FY 2010 HCFAC Program  
 
FDA received approval for the PFPP in FY 2010 and has hired or is in the process of hiring the 
approved complement of personnel.  
 
The FDA PFPP has developed investigative leads from within FDA's Center for Drug Evaluation 
and Research.   Developing additional investigative leads relating to biologics and medical 
devices is expected through future increased coordination with FDA's Center for Biologics 
Evaluation and Research and FDA's Center for Devices and Radiological Health.  In 
addition, FDA has identified and is monitoring various other available sources of information for 
indications of fraudulent medical product schemes, such as government and public internet sites.  
 
FDA has established the ground-work for coordination and communication between criminal 
investigators, regulatory components of FDA and the United States Attorneys Offices 
investigating PFPP-identified health care fraud investigations.  FDA has developed procedures to 
investigate suspected fraudulent schemes that risk the public's health, schemes involving 
regulated products that thus defraud health benefit programs.  
 
FDA Criminal Investigators are providing support for fraud investigations initiated as a result of 
the PFPP research and case development.  FDA Criminal Investigators are working with the 
United States Attorneys Offices to investigate these cases and pursue criminal and civil remedies 
and monetary recoveries.  OGC is providing direct legal support for both criminal and civil cases 
initiated as a result of the PFPP program.  
 
FDA also has established a training plan to further implement the PFPP.  This includes instruction 
of OCIs field office supervisors, who manage the criminal investigators assigned to PFPP 
investigations, on the internal and external protocols of the program.   
 
Through its PFPP, as a result of HCFAC funding, FDA has opened, within a relatively short time, 
criminal investigations that FDA continues to investigate, including:   
 
   two off-label promotion matters involving different manufacturers of brand name  
prescription drugs;  
   a third pharmaceutical manufacturer for various violative promotional issues including but 
not limited to overstatement of efficacy claims, omission of material facts, and promotion 
of unapproved uses;  
   two matters involving manufacturing fraud associated with current Good Manufacturing 
Practice issues, one which also involves potential application and promotional fraud;  
   a clinical trial fraud matter where study documents are alleged to have been falsified by a 
study coordinator;  
   a Contract Research Organization company that reportedly falsified study documents 
related to research studies conducted for pharmaceutical manufacturers; and  
 
  70 
  	  a Contract Testing Laboratory company that allegedly falsified data used to support 
multiple drug applications  
 
Assistant Secretary for Public Affairs  
 
In FY 2010, the Assistant Secretary for Public Affairs (ASPA) was allocated $690,894 in HCFAC 
funding by HHS to produce a series of live, remote events to promote the awareness of healthcare 
fraud issues before national and regional public and law enforcement audiences.  Local and 
regional audiences, as well as the national press, are key targets for the messages to be presented.  
Funding for this project is a direct result of feedback given at the National Fraud Summit; it 
addresses multiple workgroup recommendations that more be done to raise the public awareness 
of how health care fraud can be prevented. While funding was allocated to ASPA in FY 2010, 
these events will occur, and the funds will be obligated, in FY 2011. 
 
In FY 2011, ASPA will produce six to eight events spanning approximately six months.  These 
events will include presentations with distinguished speakers and panel discussions.  Additionally, 
the events will be webcast live and involve a press conference for press to ask questions of 
administration officials. 
 
ASPA will seek to maximize health care fraud awareness through the internet, including blogs; 
multi-media viewership, including downloads of any webcasts; podcasts; and other outreach 
mediums.  Additionally, in order to measure the results of this project, a base metric will be  
gathered, tracked, and analyzed through the use of focus groups, surveys and other awareness 
measures, and the volume of calls to the fraud phone line.  ASPA expects this campaign to create 
an improved awareness of fraudulent practices and to decrease incidents of fraud. 
 
  71 
 THE DEPARTMENT OF JUSTICE 

 
United States Attorneys 
 
In FY 2010, the USAOs were allocated approximately $42.9 million in HCFAC funding to 
support civil and criminal health care fraud and abuse litigation as exemplified in the Program  
Accomplishments section.  The USAOs dedicated substantial district resources to combating 
health care fraud and abuse in 2010, and HCFAC allocations have supplemented those resources 
by providing funding for attorneys, paralegals, auditors and investigators, as well as funds for 
litigation of resource-intensive health care fraud cases. 
 
The 93 United States Attorneys and their assistants, or AUSAs, are the nation=s principal 
prosecutors of federal crimes, including health care fraud.  Each district has a designated Criminal 
Health Care Fraud Coordinator and a Civil Health Care Fraud Coordinator.  Civil and criminal 
health care fraud referrals are often made to USAOs through the law enforcement network 
described herein, and these cases are usually handled primarily by the USAOs, although civil 
cases are sometimes handled jointly with the Civil Division.  The other principal source of 
referrals of civil cases for USAOs is through the filing of qui tam (or whistleblower) complaints.  
These cases are often handled jointly with trial attorneys within the Civil Division, but may be 
handled solely by the USAO. USAOs also handle most criminal and civil appeals at the federal 
appellate level. 
 
USAOs play a major role in health care fraud enforcement by bringing criminal and affirmative 
civil cases to recover funds wrongfully taken from the Medicare Trust Fund and other taxpayer-
funded health care systems as a result of fraud, waste, and abuse.  Civil and criminal AUSAs 
litigate a wide variety of health care fraud matters, including false billings by doctors and other 
providers of medical services, overcharges by hospitals, Medicaid fraud, and kickbacks to induce 
referrals of Medicare or Medicaid patients, fraud by pharmaceutical and medical device 
companies, and failure of care allegations against nursing home owners.  The Medicare Fraud 
Strike Forces are currently operating in seven districts.  Each district has dedicated several 
AUSAs and support personnel to this important initiative, along with Criminal Division attorneys 
who support these cases.  New Special Focus Teams, consisting of additional AUSAs, paralegals, 
and auditors, have been established in three districts and are focusing on pharmaceutical and 
device fraud. The teams have created a training and mentoring program to increase the capacity 
of other districts to successfully litigate these complex health care fraud cases.  Finally, several of 
the USAOs partner with the Civil Division in the Elder Justice and Nursing Home Initiative to 
address elder abuse and neglect. 
 
In addition to the positions funded by HCFAC, the Executive Office for United States Attorneys=  
Office of Legal Education (OLE) uses HCFAC funds to train AUSAs and other DOJ attorneys, as 
well as paralegals, investigators, and auditors in the investigation and prosecution of health care 
fraud. In 2010, OLE offered an Affirmative Civil Enforcement (ACE) Seminar, which included 
training on health care fraud, and was attended by over 100 AUSAs and DOJ trial attorneys.  In 
addition, an ACE Conference, with a heavy concentration on health care fraud issues, was offered 
for paralegals, auditors and investigators. Many of our attorneys, investigators, auditors and 
 
  72 
 paralegals serve as faculty at these OLE trainings, and also participate in other federal, state and 
private healthcare fraud seminars.       
 
Criminal Prosecutions 
 
In FY 2010, the USAOs received 1,116 new criminal matters involving 2,095 defendants, and had 
1,787 health care fraud criminal matters pending14, involving 2,977 defendants. The USAOs filed 
criminal charges in 488 cases involving 931 defendants, and obtained 726 federal health care 
fraud related convictions. 
 
Civil Matters and Cases  
 
In FY 2010, the USAOs had opened 942 new civil health care fraud investigations.  At the end of 
FY 2010, the USAOs had 1,130 civil health care fraud investigations pending.  
 
Civil Division  
 
In FY 2010, the Civil Division was allocated approximately $26.9 million in HCFAC funding to 
support civil health care fraud litigation (this amount includes $1 million allotted for the  Elder 
Justice and Nursing Home Initiative).   
 
The Civil Division recovers money on behalf of defrauded federal health care programs including 
Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program.  The Civil 
Division, working closely with USAOs, HHS/OIG and other law enforcement agencies, has 
recovered over $1 billion almost every year since 2000 and $2.5 billion in FY10 alone. 
 
In recent years, pharmaceutical fraud cases have constituted a significant part of the Civil 
Divisions efforts, together with United States Attorneys throughout the country, to combat health 
care fraud. These cases are commonly nationwide in scope, both legally and factually complex, 
and routinely require the dedication of significant resources.  Moreover, these cases are important 
as they involve schemes that cost federal payers billions of dollars and affect public health.  For 
example, the Allergan, Novartis, and AstraZeneca cases cited earlier in this report all arose from  
allegations that those pharmaceutical manufacturers marketed their drugs for uses that the FDA 
had not found to be safe or effective and thereby caused federal payers to pay for those 
unapproved uses. Those cases resulted in civil recoveries of $225 million, $237 million, and 
$520 million, respectively.  Moreover, in addition to the pharmaceutical fraud cases, the Civil 
Division pursues a wide array of cases that protect both the public fiscal and public health.  For 
example, Omnicare (the nations largest supplier of pharmaceutical products to long term care 
facilities) paid $98 million to resolve allegations pursued by the Civil Division and the United 
States Attorney in Massachusetts that it solicited and received kickbacks from certain 
pharmaceutical manufacturers in order to market their drugs to elderly nursing home patients.  
                                                 
14  When a USAO accepts a criminal referral for consideration, the office opens it as a matter pending in the 
district.  A referral remains a pending matter until an indictment or information is filed  or it is declined  for 
prosecution.  
 
  73 
 Likewise, FORBA, a dental management company that managed the Small Smiles chain of dental 
clinics, paid $24 million to resolve allegations pursued by the Civil Division and several United 
States Attorneys that it caused bills to be submitted to Medicaid for medically unnecessary dental 
services provided to children. 
 
In addition to the matters highlighted above, Civil Division personnel investigate and litigate 
against the full spectrum of Medicare and Medicaid providers and suppliers, such as hospitals, 
physicians, skilled nursing facilities, and pharmaceutical and device manufacturers for 
overcharging the government for health care services or goods, or, for billing for goods and 
services that were either not provided or not medically necessary.  Oftentimes, these allegations 
are linked to allegations that the doctors and others were paid kickbacks or other remuneration to 
induce referrals of Medicare or  Medicaid patients in violation of the Anti-Kickback Statute and 
Physician Self-Referral laws.  Through its Office of Consumer Litigation, the Civil Division 
investigates both criminal and civil violations of the Food, Drug, and Cosmetic Act.   The Civil 
Division also investigates allegations of drug price manipulation and illegal marketing activity 
that cause the Medicare and Medicaid programs to pay for drug uses that were neither approved 
by the FDA nor supported by medical literature.   
 
In addition to its recovery efforts, the Civil Division actively provides training and guidance on 
health care fraud matters generally and pharmaceutical and device fraud specifically.  Likewise, 
the Civil Division regularly provides speakers and trainers to health care fraud conferences 
organized by other law enforcement organizations such as the National Association of Medicaid 
Fraud Control Units, National Health Care Anti-Fraud Association, and assorted Medicare 
contractor entities. 
 
The Elder Justice and Nursing Home Initiative, which is housed in the Civil Division, continues 
to coordinate and support law enforcement efforts to combat elder abuse, neglect, and financial 
exploitation. The Initiative supports law enforcement efforts by maintaining an information bank 
of Elder Justice related materials (including briefs, opinions, indictments, plea agreements, 
subpoenas templates); funding medical reviewers, auditors, and other consultants to assist DOJ 
attorneys and AUSAs in their nursing home and/or long term care facility cases; hosting quarterly 
teleconferences with DOJ attorneys and AUSAs across the country to discuss issues or 
developments in connection with our nursing home and failure of care cases; and coordinating 
nationwide investigations of skilled nursing facilities.  Moreover, starting this fiscal year, the 
Initiative began assembling an elder justice team to be comprised of a lead attorney and an 
investigative staff.  This team will help AUSAs to triage and investigate failure of care 
allegations, to develop new investigative leads, and to litigate, if necessary.  In addition to 
supporting law enforcement efforts, the Initiative continues to fund research projects awarded by 
the Office of Justice Programs, National Institute of Justice, to study the abuse, neglect and 
exploitation of elderly individuals and residents of residential care facilities. 
 
Lastly, the Civil Division works closely with the Office of Inspector General, Office of Counsel, 
in all settlements of health care fraud allegations in order to ensure that the administrative 
remedies possessed by HHS are appropriately considered and to enable the negotiation of 
compliance terms that diminish the risk that the offending conduct will be repeated. 
 
  74 
 Criminal Division 
 
In FY 2010, the Criminal Division was allocated $6.9 million in HCFAC funding to support 
criminal health care fraud litigation and interagency coordination, which is carried out primarily 
by two sections with the Criminal Division: the Fraud Section and the Organized Crime and 
Racketeering Section (OCRS).   
 
The Fraud Section 
 
The Fraud Section initiates and coordinates complex health care fraud prosecutions and supports 
the USAOs with legal and investigative guidance  and training, and trial attorneys to prosecute 
health care fraud cases.   Beginning in March 2007, the Criminal Divisions Fraud Section 
working with the local USAOs, the FBI and law enforcement partners in HHS/OIG, and state and 
local law enforcement agencies launched the Medicare Fraud Strike Force in Miami-Dade 
County, Florida, to prosecute individuals and entities that do not provide legitimate health care 
services, but exist solely for the purpose of defrauding Medicare and other Government health 
care programs.  Since 2007, DOJ and HHS have expanded the Strike Force to seven cities.  In FY  
2010, the Fraud Section continued to provide attorney staffing, litigation support, as well as 
leadership and management oversight for numerous Strike Force prosecutions in each of the 
seven cities.  A summary of the Fraud Sections key litigation accomplishments in FY 2010 
follows:   
o	   Opened or filed 27 new health care fraud cases involving charges against 131 defendants 
who collectively billed the Medicare and Medicaid programs more than $208 million;  
o	   Obtained 95 guilty pleas and litigated 12 jury trials, winning guilty verdicts against 18  
defendants.15    
o	   Prison sentences imposed in the Section=s health care fraud cases during the year averaged 
more than 43 months; and 
o	   Court-ordered restitution, forfeiture and fines exceeded $78 million.   
 
Fraud Section attorneys staffed and coordinated most of the Division=s health care fraud litigation 
through the existing Medicare Fraud Strike Force teams in Miami, Los Angeles, Detroit, and 
Houston, and by implementing the new Strike Force phases in Brooklyn, Baton Rouge, and 
Tampa during FY 2010.  Section attorneys coordinated two major multi-district Strike Force 
arrest takedowns carried out during the fiscal year and handled several of the investigations and 
indictments that were filed in these operations. 
 
On December 15, 2009, Fraud Section and federal prosecutors from three USAOs charged 30 
people in Brooklyn, Detroit, and Miami for their alleged roles in schemes to submit more than 
$61 million in false Medicare claims.  On July 16, 2010, Fraud Section attorneys and federal 
prosecutors from five USAOs charged 94 people for their alleged participation in schemes to 
collectively submit more than $251 million in false claims to the Medicare program in the largest 
federal health care fraud takedown in U.S. history.  More than 360 law enforcement agents from  
                                                 
15 Fraud Section attorneys litigated twelve of the eighteen Medicare Fraud  Strike Force trials during FY 
2010. Several of these trials were  summarized previously in the Medicare Fraud Strike Force section of this report.  
 
  75 
 the FBI, HHS/OIG, multiple Medicaid Fraud Control Units, and other state and local law 
enforcement agencies participated in the arrests and searches in Miami, New York, Baton Rouge 
and Detroit. Four defendants were also charged in Houston for their alleged roles in a fraudulent 
DME scheme. 
 
In addition to health care fraud litigation, the Fraud Section also provided legal guidance to FBI 
and HHS/OIG agents, health program agency staff, AUSAs and other Criminal Division attorneys 
on criminal, civil and administrative tools to combat health care fraud; provided advice and 
written materials on patient medical record confidentiality and disclosure issues, and coordinated 
referrals of possible criminal HIPAA privacy violations from the HHS Office for Civil Rights; 
monitored and coordinated DOJ responses to legislative proposals, major regulatory initiatives, 
and enforcement policy matters; reviewed and commented on health care provider requests to the 
HHS/OIG for advisory opinions, and consulted with the HHS/OIG on draft advisory opinions; 
worked with CMS to improve Medicare contractors= fraud detection, referrals to law enforcement 
for investigation, and case development work; and prepared and distributed to all USAOs and FBI 
field offices periodic summaries of recent and significant health care fraud cases. 
 
The Organized Crime and Racketeering Section (OCRS)  
 
The Criminal Divisions Organized Crime and Racketeering Section (OCRS) supports 
investigations and prosecutions of fraud and abuse targeting the 2.8 million private sector health 
plans sponsored by employers and/or unions, including schemes by corrupt entities that sell 
insurance products. Such private sector group health plans are the leading source of health care 
coverage for individuals not covered by Medicare or Medicaid. OCRS also provides strategic 
coordination in the identification and prosecution of domestic and international organized crime 
groups engaged in sophisticated frauds posing a threat to the health care industry. 
 
OCRS provides litigation support and guidance to AUSAs and criminal investigative agencies to 
combat corruption and abuse of employment based group health plans covered by the Employee 
Retirement Income Security Act. For example, one OCRS attorney provided substantial litigation 
support in the prosecution of a scheme to deprive private sector workers on Federal and state 
construction projects in New York of their health and other employment benefits guaranteed 
under prevailing wage laws. 
 
OCRS attorneys also provide health care fraud and abuse training and legal guidance to AUSAs 
and to criminal investigators and agents of the Department of Labors Employee Benefits Security 
Administration and Office of Inspector General.  The Section drafts and coordinates criminal 
legislative initiatives affecting employee health benefit plans and reviews and comments on 
legislative proposals affecting employment based health benefit plans.  
 
OCRS attorneys provide litigation support and advice in the investigation and prosecution of 
health care fraud perpetrated by domestic and international organized crime groups through the 
long-standing Organized Crime Strike Force Units located within various United States 
Attorneys Offices. In February 2010, the lead defendant in a racketeering prosecution of La Cosa 
Nostra associates of the Bonanno crime family was sentenced to 151 months in prison and 
 
  76 
 $140,000 in restitution for a scheme to defraud Medicare.  That case was prosecuted by the 
Organized Crime Unit in Fort Lauderdale, Florida.  
 
Under the International Organized Crime Initiative commenced in 2009, OCRS monitors trends in 
the targeting of health care by international organized criminal groups and assists in the 
coordination of multi-district health care fraud investigations.  Through the International 
Organized Crime Intelligence and Operations Center (IOC-2), OCRS provides training and 
organizes case coordination meetings for multi-district organized crime investigations of health 
care fraud. The threat posed by international organized crime groups targeting Medicare and 
Medicaid was emphasized by the racketeering indictment in September 2010 of members of an 
international organized crime enterprise allegedly involved in sophisticated and wide-ranging 
money making criminal schemes which defrauded the health care system.  The leadership of the 
organization was based in Los Angeles and New York with members and associates located 
throughout the United States and in Armenia.  They are alleged to have perpetrated a large-scale, 
nationwide scam that fraudulently billed Medicare for more than $100 million of medical 
treatments that were unnecessary or never performed using a series of phantom clinics. One of the 
defendants charged with racketeering is alleged to be a Vor, a term translated as Thief-in-
Law and refers to a member of a select group of high-level criminals from Russia and the 
countries that have been part of the former Soviet Union, including Armenia.  This case is being 
prosecuted by the Organized Crime Unit of the United States Attorneys Office in the Southern 
District of New York. 
 
Civil Rights Division  
 
In FY 2010, the Civil Rights Division was allocated approximately $4.4 million in HCFAC 
funding to support Civil Rights Division litigation activities related to health care fraud and abuse.  
The Civil Rights Division pursues relief affecting public, residential health care facilities.  The 
Division has also established an initiative to eliminate abuse and grossly substandard care in 
public, Medicare and Medicaid funded nursing homes and other long-term care facilities.  
 
The Division plays a critical role in the HCFAC Program.  The Special Litigation Section of the 
Civil Rights Division is the sole DOJ component responsible for the Civil Rights of 
Institutionalized Persons Act, 42 U.S.C. ' 1997 (CRIPA). CRIPA authorizes the investigation of 
conditions of confinement at state and local residential institutions (including facilities for persons 
with developmental disabilities or mental illness, and nursing homes) and initiation of civil action 
for injunctive relief to remedy a pattern or practice of violations of the Constitution or Federal 
statutory rights.  The review of conditions in facilities for persons who have mental illness, 
facilities for persons with developmental disabilities, and nursing homes comprises a significant  
portion of the program.  The Special Litigation Section works collaboratively with the USAOs 
and HHS. 
Fiscal Year 2010 Accomplishments  
As part of DOJs Institutional Health Care Abuse and Neglect Initiative, and as an enhancement 
to ongoing CRIPA enforcement efforts, the Special Litigation Section staff conducted preliminary 
 
  77 
 reviews of conditions and services at six health care facilities in five states during FY 2010.  The 
task in preliminary inquiries is to determine whether there is sufficient information supporting 
allegations of unlawful conditions to warrant formal investigation under CRIPA.  The Section 
reviews information pertaining to areas such as abuse and neglect, medical and mental health 
care, use of restraints, fire and environmental safety, and placement in the most integrated setting 
appropriate to individual needs.  Separately, in FY 2010, the Section opened or continued formal 
investigations, entered remedial agreements, or monitored existing remedial agreements regarding 
71 health care facilities in 25 states, the District of Columbia, the Territory of Guam, and the 
Commonwealth of Puerto Rico.   
 
The Section found that conditions and practices at five state facilities for persons with mental 
illness, and three state facilities for persons with intellectual and developmental disabilities violate 
the residents' Federal constitutional and statutory rights.  Those facilities are:  Rosewood Center 
in Owings Mills, Maryland; W.A. Howe Developmental Center in Tinley Park, Illinois; Clyde L. 
Choate Developmental Center in Anna, Illinois; and five Georgia facilities for persons with 
mental illness, including Georgia Regional Hospital in Savannah; East Central Regional Hospital 
in Augusta; Central State Hospital in Milledgeville; Southwestern State Hospital in Thomasville; 
and, West Central Georgia Regional Hospital in Columbus.   
 
In Fiscal Year 2010, the Section commenced investigations of five facilities for person with 
intellectual and developmental disabilities in Arkansas, including Alexander Human 
Development Center; Arkadelphia Human Development Center; Booneville Human Development 
Center; Jonesboro Human Development Center; and, Southeast Arkansas Human Development 
Center, and two publicly operated nursing facilities, LaSalle Nursing Home in Ottowa, Illinois 
and Casa del Veterano in Juana Diaz, Puerto Rico.  
 
The Section entered settlement agreements to resolve its investigation of one state operated 
facility for persons with mental illness.  That facility is: Kings County Hospital Center in 
Brooklyn, New York. 
 
In addition, the Section filed an amended complaint in  United States v. Georgia (N.D. Ga.) 
regarding conditions at Georgia Regional Hospital in Atlanta; Georgia Regional Hospital in 
Savannah; Northwest Georgia Regional Hospital in Rome; East Central Regional Hospital in 
Augusta; Central State Hospital in Milledgeville; Southwestern State Hospital in Thomasville; 
and, West Central Georgia Regional Hospital in Columbus.   
 
The Section continued its investigations of ten residential facilities for persons with intellectual 
and developmental disabilities:  Sonoma Developmental Center, in Eldridge, California; 
Lanterman Developmental Center, in Pomona, California; Rainier Residential Rehabilitation 
Center, in Buckley, Washington; Frances Haddon Morgan Center, in Bremerton, Washington; 
Bellefontaine Developmental Center, in St. Louis, Missouri; Northwest Habilitation Center, in St. 
Louis, Missouri; Rosewood Center in Owings Mills, Maryland; Clyde L. Choate Developmental 
Center, in Anna, Illinois;  Howe Developmental Center, in Tinley Park, Illinois; and, Central 
Virginia Training Center in Lynchburg, Virginia.  The Division also continued its investigations 
of seven facilities for persons with mental illness, including Oregon State Hospital, in Salem,  
 
  78 
 Oregon; Delaware State Psychiatric Center in New Castle, Delaware; Ancora Psychiatric Hospital 
in Winslow, New Jersey; and, four facilities in North Carolina, including John Umstead Hospital 
in Butner; Dorothea Dix Hospital in Raleigh; Cherry Hospital in Goldsboro; and Broughton 
Hospital in Morgantown.  The Section also continued its investigations of William F. Green State 
Veterans Nursing Home in Bay Minette, Alabama and Maple Lawn Nursing Home in Palmyra, 
Missouri. In some of these matters, the Section is reviewing voluntary compliance to improve 
conditions. 
 
The Section monitored the implementation of remedial agreements for 23 facilities for persons 
with intellectual and developmental disabilities:  Clover Bottom Developmental Center, in 
Nashville, Tennessee; Greene Valley Developmental Center, in Greeneville, Tennessee; Harold 
Jordan Center, in Nashville, Tennessee; Arlington Developmental Center, in Arlington, 
Tennessee; Southbury Training School, in Southbury, Connecticut; Woodward Resource Center, 
in Woodward, Iowa; Glenwood Resource Center, in Glenwood, Iowa; Woodbridge 
Developmental Center in Woodbridge, New Jersey; Oakwood Community Center in Somerset, 
Kentucky; Beatrice State Developmental Center, in Beatrice, Nebraska; Lubbock State Supported 
Living Center, in Lubbock, Texas; Denton State Supported Living Center, in Denton, Texas; 
Abilene State Supported Living Center, in Abilene, Texas; Austin State Supported Living Center 
in Austin, Texas; Brenham State Supported Living Center, in Brenham, Texas; Corpus Christi 
State Supported Living Center, in Corpus Christi, Texas; El Paso State Supported Living Center, 
in El Paso, Texas; Lufkin State Supported Living Center, in Lufkin, Texas; Mexia State 
Supported Living Center, in Mexia, Texas; Richmond State Supported Living Center, in 
Richmond, Texas; Rio Grande State Supported Living Center, in Harlingen, Texas; San Angelo 
State Supported Living Center, in Carlsbad, Texas; San Antonio State Supported Living Center, 
in San Antonio, Texas. It also monitored the implementation of remedial agreements regarding 
community placements from facilities for persons with intellectual and developmental disabilities 
in Indiana, Puerto Rico, and Washington, D.C. 
 
The Section also monitored the implementation of remedial agreements regarding 15 state-
operated residential facilities for persons with mental illness:  Guam Mental Health Unit in the 
Territory of Guam; Vermont State Hospital, in Waterbury, Vermont; Metropolitan State Hospital, 
in Norwalk, California; Napa State Hospital in Napa, California; Atascadero State Hospital, in 
Atascadero, California; Patton State Hospital, in Patton, California;  St. Elizabeths Hospital, 
Washington, D.C.; Georgia Regional Hospital, in Atlanta, Georgia; Georgia Regional Hospital, in 
Savannah, Georgia; Northwest Georgia Regional Hospital, in Rome, Georgia; Central State 
Hospital, in Milledgeville, Georgia; Southwest State Hospital, in Thomasville, Georgia; West 
Central Georgia Hospital, in Columbus, Georgia; East Central Georgia Regional Hospital, in 
Augusta, Georgia; and Connecticut Valley Hospital, in Middletown, Connecticut. 
 
In addition, the Section continued its monitoring of seven nursing facilities, including Reginald P. 
White Skilled Nursing Facility, in Meridian, Mississippi; Mercer Geriatric Center, in Trenton, 
New Jersey; C.M. Tucker Nursing Care Center, in Columbia, South Carolina; Tennessee State 
Veterans Homes, in Murfreesboro and Humboldt, Tennessee; Ft. Bayard Medical Center, in Ft. 
Bayard, New Mexico; and, Laguna Honda Hospital and Rehabilitation Center, in San Francisco, 
California. 
 
  79 
  
  80 
 Federal Bureau of Investigation 

Mandatory Funding & Discretionary Funding 

 
There are hereby appropriated from the general fund of the United States Treasury and hereby 
appropriated to the Account for transfer to the Federal Bureau of Investigation to carry out the 
purpose described in subparagraph (c), to be available without further appropriation - (I) for fiscal  
year 2010, $126,258,242.@  
In FY 2010, the FBI was allocated $130.2 million in funding, including $126.3 million from  
HIPAA and $3.9 million from discretionary HCFAC, for health care fraud enforcement.  This 
yearly appropriation is used to support 769 positions (460 Agent, 309 Support).  The number of 
pending investigations has shown steady increase from 591 pending cases in 1992 to 2,584 cases 
through the 3rd quarter of FY 2010.  FBI-led investigations resulted in 648 criminal health care 
fraud convictions and 889 indictments and informations being filed through the 3rd quarter of FY 
2010.  Through July of FY 2010, FBI HCF fraud investigations resulted in the operational 
disruption of 163 criminal fraud organizations, and the dismantlement of the criminal hierarchy of 
more than 60 HCF criminal enterprises.      
The FBI is the primary investigative agency involved in the fight against health care fraud that 
has jurisdiction over both the federal and private insurance programs.  With health care 
expenditures rising at three times the rate of inflation, it is especially important to coordinate all 
investigative efforts to combat fraud within the health care system.  More than $1 trillion is spent 
in the private sector on health care and its related services and the FBIs efforts are crucial to the 
overall success of the program.  The FBI leverages its resources in both the private and public 
arenas through investigative partnerships with agencies such as HHS/OIG, the FDA, the DEA, the 
Defense Criminal Investigative Service, the Office of Personnel Management, the Internal 
Revenue Service and various state and local agencies.  On the private side, the FBI is actively 
involved with national groups, such as the National Health Care Anti-Fraud Association, the Blue 
Cross and Blue Shield Association and the National Insurance Crime Bureau, as well as many 
other professional and fundamental efforts to expose and investigate fraud within the system.   
 
Health care fraud investigations are considered a high priority within the FBI White Collar Crime 
Program Plan.  In addition to being a partner in the majority of investigations listed in the body of 
this report, FBI field offices throughout the U.S. have pro-actively addressed significant health 
care fraud through coordinated initiatives, task forces, and undercover operations to identify and 
pursue investigations against the most egregious offenders, which may include organized criminal 
activity and criminal enterprises.  Organized criminal activity has been identified in the operation  
of medical clinics, independent diagnostic testing facilities, durable medical equipment 
companies and other health care facilities.  The FBI is committed to addressing this criminal 
activity through disruption, dismantlement and prosecution of criminal organizations.  
 
During FY 2010, the FBI initiated the Home Health Agency Fraud Initiative.  The overall goal of 
this program is to develop intelligence, identify fraudulent providers, and target physicians who 
 
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 exploit this care system for financial gain.  The initiative utilizes data analysis, sophisticated and 
advanced investigative techniques, and traditional investigative strategies to identify and target  
perpetrators of home health care fraud.  The FBI maintained a national initiative addressing DME  
fraud, one of the most pervasive targets of health care fraudsters.  In addition, during FY 2010, 
the FBI realigned existing initiatives into National Focus Threats, to provide a mechanism to 
allocate investigative and analytical/intelligence  resources against significant health care fraud 
schemes involving Infusion Therapy, Staged Accident, and Internet Pharmacy.  
 
In FY 2010 the FBI continued to staff and support DOJ Medicare Strike Force operations in 
Miami, New York City, Houston, Tampa, Detroit, Los Angeles, and Baton Rouge.  These task 
force operations are comprised of agencies that include the United States Attorney=s office, state 
prosecutor/Attorney General offices, the Internal Revenue Service B Criminal Investigative, 
HHS/OIG, state health care fraud investigative agencies, and local law enforcement personnel.  
Entering the final quarter of FY 2010, the FBI has finalized plans to deploy additional resources 
to Strike Force locations, as well as increase investigative personnel in future Strike Force 
locations. 
 
In FY 2010, the FBI aggressively expanded its involvement in qui tam investigations involving 
major pharmaceutical manufacturers.  High-profile qui tam investigations, such as the $2.3 billion 
Pfizer criminal/civil settlement, the $126 million Omnicare civil settlement, and the recently 
announced $600 million Allergan criminal/civil settlement required a significant dedication of 
FBI investigative resources. These investigations involve violations of the FCA, and include 
kickbacks, off-label marketing, misbranding, and the submission of fraudulent/false claims to 
Medicare and Medicaid. 
 
The FBI has teamed with DOJ, the United States Attorneys, and HHS/OIG to expand training in 
the priority threat areas of health care fraud.  Training was expanded to include the involvement 
of traditional organized crime and extraterritorial groups in health care fraud schemes, with joint 
training sessions addressing common health care fraud activity, identity theft, money laundering, 
and criminal enterprise targeting.  The FBI training program in health care fraud focuses on the 
development of human capital capable of adapting to emerging threats and fraud schemes.  
Training also included innovative methods of employing sophisticated and advanced investigative 
techniques against organized criminal enterprises engaged in defrauding United States 
government sponsored health care programs.  In FY 2010, more than 400 FBI health care fraud 
investigators and analysts received training, and the FBI conducted a wide range of training for 
external audiences involved in the investigation of health care fraud matters.   
 
Funding received by the FBI is used to pay direct and indirect personnel-related costs associated 
with the 769 funded positions.  Funds not used directly for personnel matters are used to provide  
operational support for major health care fraud investigations, national initiatives, training, 
specialized equipment, expert witness testimony, and Strike Force operations.  
 
 
 
 
 
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 Corrections to the FY 2009 HCFAC Report 
 
 
1. 	  On page 5 of the FY 2009 HCFAC report, the line Restitution/Compensatory Damages 
was overstated by $30,442,595. In addition, the Federal Share of Medicaid amount of  
$440,955,428 was included in the line Restitution/Compensatory Damages, and should 
have been included in the section titled Restitution/Compensatory Damages to Federal 
Agencies. 
 
2.	   On page 27 of the FY 2009 HCFAC report, it was stated that the Condell Health Network 
admitted in the settlement agreement to leasing medical office space at rates below fair 
market value; giving improper loans to physicians; and providing hospital reimbursement 
to doctors who performed patient services without required agreements.  While this 
sentence accurately describes the covered conduct, the Condell Health Network did not 
admit to the allegations. 
 
 
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 Return-on-Investment Calculation 
 
 	  The Return-on-Investment (ROI) for the HCFAC program is calculated by dividing the total 
monetary results to the Federal government (not including relator payments) by the annual 
appropriation for the HCFAC Account in a given year. 
 
 	  The monetary results include deposits and transfers to the Medicare Part A Trust Fund and the 
Treasury, as well as restitution and compensatory damages to Federal agencies. 
 
 	  The HCFAC Account is made up of three funding sources: mandatory funding for HHS and 
DOJ, including HHS/OIG, appropriated through Section 1817(k) (3) (A) of the Social 
Security Act; mandatory funding for FBI activities appropriated through Section 1817(k) (3) 
(B) of the Social Security Act; and discretionary funding for the HCFAC Account 
appropriated through the annual Labor-HHS-Education appropriation.  FBI mandatory 
HIPAA funding is included in ROI calculations given the important role the FBI plays in 
achieving the monetary results reflected in the HCFAC annual report and because that statute 
states that the funds are for the same purposes as the funds provided for HHS and DOJ under 
the Social Security Act, even though FBI spending and monetary results are not required to be 
reported, per the statute.  
 
	   While all mandatory HCFAC Account funding is included in the ROI calculation of this 
report, only certain portions of discretionary HCFAC funding is included.  All discretionary 
HCFAC funding for HHS/OIG and DOJ are included in the HCFAC report ROI since they 
spend their discretionary funding on the same  types of activities that they support with 
mandatory funding.  Only the portion of CMS Medicare discretionary HCFAC funding that 
supports law enforcement is included in the HCFAC report ROI.  The remainder of CMSs 
HCFAC Medicare discretionary funding supports activities in the Medicare Integrity Program  
(MIP) that are included in the MIP ROI, which is calculated separately and outside of the 
HCFAC report. All discretionary Medicaid Integrity program funding is included in a 
separate Medicaid Integrity Program  ROI published in a separate report.  
 
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  85 
 Glossary of Terms  
 
 
The Account - The Health Care Fraud and Abuse Control Account 
 
ACA  Affordable Care Act 
 
AoA - Department of Health and Human Services, Administration on Aging 
 
ASPA  Assistant Secretary for Public Affairs (HHS) 
 
AUSA - Assistant United States Attorney 
 
CERT - Comprehensive Error Rate Testing 
 
CHIP - State Children=s Health Insurance Plan 
 
CIA - Corporate Integrity Agreement 
 
CMP - Civil Monetary Penalty 
 
CMS - Department of Health and Human Services, Centers for Medicare & Medicaid 
Services 
 
CNC  Compromised Number Contractors 
 
CPI  Center Program Integrity 
 
CPI-U  Consumer Price Index  Urban Consumers 
 
CRIPA - Civil Rights of Institutionalized Persons Act 
 
CY  Calendar Year 
 
DAB-Department of Health and Human Services, Departmental Appeals Board  
 
DEA - Drug Enforcement Administration 
 
DME - Durable Medical Equipment 
 
DMEPOS  Durable Medical Equipment Prosthetics, Orthotics, and Supplies 
 
DOJ - The Department of Justice 
 
DRA - Deficit Reduction Act of 2005 
 
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 EOUSA - Executive Office for the United States Attorneys 
 
FBI - Federal Bureau of Investigation 
 
FCA - False Claims Act 
 
FDA - Food and Drug Administration 
 
FDCA  Food, Drug, and Cosmetic Act 
 
FI  Fiscal Intermediaries 
 
FLI  Fraud Level Indicator 
 
FY  Fiscal Year 
 
HCFAC - -Health Care Fraud and Abuse Control Program or the Program 
 
HEAT - Health Care Fraud Prevention & Enforcement Action Team  
 
HHA  Home Health Agency 
 
HHS - The Department of Health and Human Services 
 
HHS/OIG - The Department of Health and Human Services - Office of the Inspector 
General 
 
HI - Hospital Insurance Trust Fund 
 
HIPAA, or the Act - The Health Insurance Portability and Accountability Act of 1996, 
P.L. 104-191 
 
HIV - Human Immunodeficiency Virus 
 
IPIA - Improper Payments Information Act of 2002, P.L. 107-300 
 
MEDIC - Medicare Drug Integrity Contractors 
 
MFCU  Medicaid Fraud Control Unit 
 
OCRS - Organized Crime and Racketeering Section 
 
OGC - Office of the General Counsel, Department of Health and Human Services  
 
PERM - Program Error Rate Measurement 
 
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 PFPP  Pharmaceutical Fraud Pilot Program  
 
The Program - The Health Care Fraud and Abuse Control Program  
 
Secretary - The Secretary of the Department of Health and Human Services 
 
SMP - Senior Medicare Patrol 
 
TRHCA - Tax Relief and Health Care Act 
 
USAO - United States Attorney=s Office 
 
ZPIC - Zone Program Integrity Contractor 
 
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