Office of 
Inspector 
General 
Semiannual 
Report 
 
Congress
to
 
October 2012  March 2013 
 
 
 
   
 
OIG Organization 
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) 
employs about 1,700 professional staff members who are deployed throughout the Nation 
in regional and field offices and in Washington, DC, headquarters.  We collaborate with HHS 
and its operating and staff divisions, the Department of Justice (DOJ) and other executive 
branch agencies, Congress, and States to bring about systemic changes, successful 
prosecutions, negotiated settlements, and recovery of funds.  Following are descriptions of 
our mission-based components.  The components are supported by the Immediate Office of 
the Inspector GenTeHrEa lO aFnFdIC tEh Oe FO AffUicDeIT o Sf EMRaVnICaEgSe (mOeAnSt) and Policy. 
 
S  provides auditing services for HHS, 
either by conducting audits with its own audit resources or by overseeing 
A
audit work done by others.  Audits examine the performance of HHS 
O programs and/or its grantees and contractors in carrying out their 
respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations.  These assessments help 
reduce waste, abuse, and mismanagement and promote economy and 
eTfHfiEc iOenFFcIyC Eth OrFo EuVgAhLoUuAtT HIOHNS A. ND INSPECTIONS (OEI)
I  
E  conducts national 
evaluations to provide HHS, Congress, and the public with timely, useful, 
O
and reliable information on significant issues.  These evaluations focus 
on preventing fraud, waste, and abuse and promoting economy, efficiency, 
and effectiveness in HHS programs.  OEI reports also present practical 
rTeHcEo mOFmFIeCnEd OaFt iIoNnVsE fSoTrIG imATpIOroNvSi (nOgI p)rogram operations. 
 conducts criminal, civil, and 
I  
administrative investigations of fraud and misconduct related to HHS 
O
programs, operations, and beneficiaries.  With investigators working in 
almost every State and the District of Columbia, OI actively coordinates 
with DOJ and other Federal, State, and local law enforcement authorities.  
The investigative efforts of OI often lead to criminal convictions, 
aTdHmE iOnFisFtIrCaEt OivFe C sOaUnNcStiEoLn TsO, o TrH CEM INPSsP. ECTOR GENERAL (OCIG)
G    provides general 
legal services to OIG, rendering advice and opinions on HHS programs and 
I operations and providing all legal support for OIGs internal operations.  
C OCIG represents OIG in all civil and administrative fraud and abuse cases 
involving HHS programs, including False Claims Act, program exclusion, 
O
and CMP cases.  In connection with these cases, OCIG also negotiates and 
monitors corporate integrity agreements.  OCIG renders advisory opinions, 
issues compliance program guidance, publishes fraud alerts, and provides 
other guidance to the health care industry concerning the antikickback 
statute and other OIG enforcement authorities. 
 
  Page ii  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
 
A Message From 
 
the Inspector General 
This Semiannual Report to Congress, submitted pursuant to the 
Inspector General Act of 1978, as amended, summarizes the activities 
of the Office of Inspector General (OIG), Department of Health and  Daniel R. Levinson 
Inspector General 
Human Services (HHS), for the 6-month period that ended March 31,   
2013.  
uring this reporting period, OIG continued to generate important work that 
significantly contributed toward our core mission of protecting HHS programs and 
beneficiaries.  Much of what we accomplished in the first quarter of 2013 was the result of 
effective partnerships.   OIG continuously looks for ways to enhance the relevance and 
D 
impact of our work by engaging and working with our internal and external stakeholders.   
Many of our cooperative activities have generated successful results.  The Health Care Fraud 
Prevention and Enforcement Action Team (HEAT), the OIG Portfolio, and our series of audits 
examining the Centers for Disease Control and Prevention's (CDC) oversight of the 
Presidents Emergency Plan for AIDS Relief (PEPFAR) grants exemplify our successful 
efforts.  These partnerships have demonstrated, or show great potential to produce, 
significant results and maximum utility of OIG resources.   
Our partnership with other Federal, State, and local law enforcement entities as part of 
HEAT continues to yield impressive results.  HEATs strike force teams use sophisticated 
data analysis, combined with field intelligence and traditional law enforcement techniques, 
to quickly identify fraud schemes and trends.  Strike Force teams mine voluminous amounts 
of data to pinpoint hot spots and target criminal behavior as it occurs.  Since 2007, through 
the end of the semiannual period that ended March 31, 2013, Strike Force efforts have 
resulted in over $887 million in investigative receivables and over 800 criminal actions.  
These significant results would not have been possible without our government partners.  
OIG auditors, evaluators, investigators, and legal professionals joined forces to produce the 
first-ever OIG Portfolio, which synthesizes OIGs work examining vulnerabilities in Medicaid 
personal care services (PCS) and offers recommendations for improvement.  Over the past 
6 years, OIG has issued over 20 reports on the topic of PCS and conducted numerous 
investigations involving PCS fraud.  This new product, which draws on all of OIGs 
professionals and disciplines, offers great potential for affecting positive change in programs 
shown to present serious vulnerabilities to program integrity.  
HHS is the largest Federal grantmaker and the third largest Federal contracting agency.  
During this audit period, OIG produced three reports examining CDCs oversight of PEPFAR 
grants in South Africa, Namibia, and the Republic of Namibia.  In planning for these audits, 
OIG coordinated closely with CDC to understand the program and its operations and to 
identify areas that posed the greatest risk for PEPFAR integrity.  We developed a joint work 
planning process with the U.S. Agency for International Development, coordinated with 
other OIG offices conducting PEPFAR work, and sought input from domestic and 
international organizations to examine grants and controls related to PEPFAR.    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
 
Thus far, OIGs efforts have uncovered several opportunities to strengthen grant compliance 
practices, but showed no widespread problems overseas.  Going forward, OIG will continue 
to benefit from the strong communication and coordination it has cultivated with its 
PEPFAR partners.  
Since its 1976 establishment, OIG has worked diligently with its partners to fight waste, 
fraud, and abuse in Medicare and more than 300 other HHS programs.  I would once again 
like to express my appreciation to Congress and to the Department for their sustained 
commitment toward improving the efficiency and effectiveness of HHS programs.   
 
 
 
Daniel R. Levinson 
Inspector General 
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 Highlights 
 
Semiannual Report to Congress
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) 
 (Semiannual Report) describes significant problems, abuses, 
deficiencies, and investigative outcomes relating to the administration of HHS programs and 
operations that were disclosed during the reporting period.  This edition addresses work 
completed during the first half of fiscal year (FY) 2013 (October - March) and provides 
summary data on key accomplishments during the period and for the year.      
Summary of Accomplishments 
For the first half of FY 2013, we reported expected recoveries of about $3.8 billion 
consisting of over $521 million in audit receivables and about $3.28 billion in investigative 
receivables, which includes $642.3 million in non-HHS investigative receivables resulting 
from our work in areas such as the States shares of Medicaid restitution.   
We reported exclusions of 1,661individuals and entities from participation in Federal health 
care programs; 484 criminal actions against individuals or entities that engaged in crimes 
against HHS programs; and 240 civil actions, which include false claims and unjust-
enrichment lawsuits filed in Federal district court, civil monetary penalties (CMP) 
settlements, and administrative recoveries related to provider self-disclosure matters.   
Following are highlights of some of the significant problems, abuses, deficiencies, activities, 
and investigative outcomes that are included in the Semiannual Report for the first half of 
FY 2013. 
Health Care Fraud Prevention 
and Enforcement Action Team 
The Health Care Fraud Prevention and Enforcement Action Team (HEAT) was started in 
2009 by HHS and the Department of Justice (DOJ) to strengthen programs and invest in new 
resources and technologies to prevent and combat health care fraud, waste, and abuse.  
HEAT has continued with increasing momentum to identify and hold accountable those who 
seek to defraud Medicare and Medicaid. 
Medicare Strike Force Teams  
Medicare Fraud Strike Force teams coordinate law enforcement operations conducted 
jointly by Federal, State, and local law enforcement entities.  The teams, now a key 
component of HEAT, have a record of successfully analyzing data to quickly identify and 
Strike Force Accomplishments
prosecute fraud.  The Strike Force began in March 2007 and is operating in nine major cities.   
During the first half of FY 2013, Strike Force efforts resulted 
in the filing of charges against 148 individuals or entities, 139 criminal actions, and 
$193.7 million in investigative receivables.   
  Page i  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 Nationwide Takedown
 
In October 2012, Medicare Fraud Strike Force operations in 7 cities 
led to charges against 91 individuals, including doctors, nurses, and other licensed medical 
professionals, for their alleged participation in Medicare fraud schemes involving 
approximately $429.2 million in false billing.  HHS also suspended or took other 
administrative action against 30 health care providers based upon credible allegations of 
Strike Force Case
fraud.   
15 defendants were sentenced to a combined 183 Years in Prison for 
their roles in a $205 million Medicare fraud scheme.  According to the indictment, the 
American Therapeutic Corporation (ATC) and the American Sleep Institute (ASI) submitted 
false and fraudulent claims to Medicare for services that were medically unnecessary, were 
not eligible for Medicare reimbursement, or were never provided.  ATC paid up to 
approximately $500,000 monthly in kickbacks in exchange for the recruitment of Medicare 
beneficiaries for purported mental health therapy and sleep study services at ATC and ASI.  
The 15 defendants were also ordered to pay $87 million in restitution, joint and several, as 
well as $37,000 in fines.  
Prescription Drugs 
Medicare and Medicaid are major payers for prescription drugs.  Our investigations 
and reviews find vulnerabilities at many levels, including pharmaceutical manufacturer 
noncompliance, retail pharmacy and prescriber schemes, drug diversion, and flawed 
reimbursement methodologies. 
Chemotherapy-Related Reports 
The following reports describe pricing policy and improper billing associated with three 
types of drugs:  prostate cancer drugs; Herceptin, used in treating breast cancer; and 
Emend, used to help reduce nausea and vomiting in chemotherapy patients.  
Prostate Cancer Drugs
 
OEI-12-12-00210  We found that Medicare spending for certain 
November 2012  prostate cancer drugs is higher in the absence of least costly alternative 
  (LCA) policies for clinically comparable drugs.  If such policies had not 
been rescinded, Medicare expenditures would have been reduced by 
$33.3 million over 1 year.  There was concern that rescinding LCA policies 
may have created an unintentional( Linecaesnt tCivoest floy rA pltheyrnsiactiiavnes P tool iacdiems:i n Iimstpearc t 
ocons Ptlrioesrt datreu gCsa,n ccaeurs Dinrgu gMse Cdoivcearreed t oU npdaeyr m Moerdei cwahree nP alersts B c.)ostly clinically 
comparable drugs were available. 
Herceptin (Trastuzumab)  
A-05-11-00114  Herceptin is a Medicare-covered drug used to 
A-09-12-02069  treat breast cancer that has spread to other parts of the body.  In six 
A-06-12-00001  reviews, we found that 75 to 89 percent of payments for selected line items 
A-04-12-06146  were incorrect, resulting in overpayments by Medicare.  Providers 
A-04-12-03070  incorrectly billed units of service equivalent to the dosage of entire multi-
A-05-12-00017  use vials when only partial vials were administered, billed for unallowable 
Various Dates  services, incorrectly coded claims, and did not provide supporting 
documentation.     
  Page ii  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
Emend (Aprepitant)
 
A-07-11-04181  For the oral form of Emend, one of three drugs in 
December 2012  a regimen of oral anti-emetic drugs that are prescribed to help reduce 
  nausea and vomiting in chemotherapy patients, we found that about 
91 percent (oPfr soevliedcetresd D liidn eN iotte mCosr trhecattl yw Berilel  Mbielldeidca brye  fPivaer ts Bel feocrt etdhe p Ororvaild  ers 
dFourrmin go fc tahleen Ddraurg y Eemare 2n0d1.)0 were incorrect, resulting in overpayments by 
Medicare.  
  
Drug-Related Settlements and Criminal Actions 
Abbott Laboratories Agrees To Pay $1.5 Billion (Virginia)
Abbott Laboratories (Abbott) also 
entered into a 5-year Corporate Integrity Agreement (CIA) in a global criminal, civil, and 
administrative settlement to resolve allegations that it violated the False Claims Act by 
improperly marketing and promoting the drug Depakote for uses not approved by the Food 
and Drug Administration (FDA), including the treatment of aggression and agitation in 
elderly dementia patients and the treatment of schizophrenia.  Abbott allegedly offered and 
paid illegal remuneration to induce health care professionals and long-term care-
Amgen, Inc., Agrees To Pay $762 Million (New York)
pharmacies to prescribe Depakote.   
After pleading guilty to violations of the 
Federal Food, Drug, and Cosmetic Act, pharmaceutical manufacturer Amgen, Inc. (Amgen), 
agreed to pay about $762 million plus interest to resolve its criminal and civil liability 
arising from its sale and promotion of certain drugs, including Aranesp (used in treating 
anemia) and two other drugs that it manufactured.  Amgen promoted uses and/or dosing 
regimens that were not approved by FDA; offered illegal kickbacks to influence health care 
providers to select and use its products, regardless of whether administered, reimbursable, 
or medically necessary; and engaged in false price-reporting practices.  As part of the global 
settlement, Amgen also agreed to pay a criminal fine and forfeiture amount of $150 million.  
Amgen entered into a CIA to increase accountability transparency, and to strengthen 
Clinic President Sentenced for Illegally Distributing Oxycodone and Other Schedule II Narcotics 
compliance. 
(Virginia)
Paul Boccone treated patients and prescribed narcotics by directing medical 
practitioners to endorse prescriptions that he wrote.  According to the indictment, though 
Boccone was the president of a pain management clinic, he lacked any medical education, 
qualifications, or licensing.  He also hired medical professionals with no background or 
specialized training in pain management.  In addition to being sentenced to 15 years 
imprisonment, Boccone was ordered to pay $275,154 in restitution.     
Medicare Part A and Part B 
Medicare Part A and Part B together are generally referred to as traditional Medicare.  
Part A helps cover certain inpatient services such as in hospitals and skilled nursing 
facilities and some home health services.  Part B helps cover designated other medical 
services, equipment, supplies, and drugs that Part A does not cover. 
  Page iii  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 Hospitals 
 
Certain indicators on hospitals claims to Medicare identify conditions as being present on 
admission (POA).  Centers for Medicare & Medicaid Services (CMS) officials have expressed 
continued interest in the accuracy of POA indicators because they provide an opportunity 
Hospital claims-coding staff misreported POA indicators.
for monitoring hospital quality of care.   
OEI-06-09-00310    We found at least 
November 2012  one incorrect indicator on 18 percent of claims we reviewed.  Hospitals do 
  not receive increased Medicare reimbursement for certain conditions 
(referred to (aAss shesossmpeitnatl -oafc Hquosirpeidta cl oRnedpiotriotinnsg )o fw Phreense snutc ohn c Aodnmdiitsisoinons  
Idnedvieclaotpo rdsu ornin Mg etdhiec ahroes pCilataiml sst.a)y and are not present at the time of 
admission.  
 
Skilled Nursing Facilities 
Skilled nursing facilities (SNFs) provide skilled care to Medicare patients, such as nursing 
care, therapy, and other services.  We found that many SNFs were not developing proper 
plans of care; were not providing adequate care; or were doing too much by providing 
unnecessary services that could actually cause harm, e.g., by providing intense therapy to 
terminal patients who did not want it. 
Poor Care and Discharge Planning at SNFs
 
OEI-02-09-00201  Medicare paid approximately 
February 2013  $5.1 billion for stays in which SNFs did not meet planning and discharge 
  requirements.  We also found poor quality care related to wound care, 
medication management, a(nSdk itlhleedr aNpuyr. s Tinhge Fsea cfiilnitdiiensg Osf rteanis Fea ciol nTcoe Mrnese ta Cbaoruet  
 
Pwlhaantn Minegd aincadr De iissc phaayrgineg P floarn. n Tinhge yR aeqlsuoi rdeemmeonntss.t)rate that SNF oversight 
needs to be strengthened.  
SNFs Misreported Information When Billing Medi care
OEI-02-09-00200  We found that SNFs 
November 2012  billed one-quarter of claims in error in 2009, resulting in about $1.5 billion 
  in inappropriate Medicare payments.  For 47 percent of claims, SNFs 
misreported information on the Minimum Data Set, the system used to 
 
classify beneficiaries into resource utilization groups (RUG) for payment.   
(SIonmapep SrNopFrsi iantceo Praryemctelyn rtse ptoo rStkeidll eitde Nmusr ssuincgh  Faasc tihlietireasp Cyo astn Md aedcticivairteie Ms oorf e 
Tdahialyn  l$iv1i nBgil,l itohne rineb 2y0 p09la.)cing beneficiaries into higher paying RUGs.  
 
Ineligible BeneficiariesUnlawfully Present or Incarcerated 
Medicare does not make payments for care rendered to patients unlawfully present in the 
United States and generally does not pay for care rendered to incarcerated patients.  We 
found that when CMS received untimely information indicating that a beneficiarys unlawful 
presence overlapped with the dates of service on previously paid Medicare claims, CMS did 
not notify Medicares contractors of this updated information.  In the absence of such 
notification, the contractors did not detect and recoup improper payments.  Also, when 
CMSs data systems did not indicate until after a claim had been processed that a beneficiary 
  Page iv  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
 
was incarcerated, CMSs controls were not adequate to detect and recoup the improper 
payments.   
Unlawfully Present Beneficiaries
 
(Medicare Improperly Paid Providers Millions of Dollars for 
A-07-12-01116  Unlawfully Present Beneficiaries WWhoe  Rideecneitvifeide dS e$r9v1ic.6e sm Diullrioinng i n20 im09p roper 
January 2013  PTahyromuegnht s2.0  11.)
 
Incarcerated Ben eficiaries
(Medicare Improperly Paid Providers Millions of Dollars for 
A-07-12-01113  Incarcerated Beneficiaries WWheo  iRdeecnetiivfeiedd S $e3rv3i.c6e sm Diluliroinng i n2 0im09p rTohpreoru gh 
January 2013  P20ay1m1.)e n ts.  
 
      
Medicare Contractors Activities To Detect and Deter Fraud 
CMS contracts with several entities, including Program Safeguard Contractors, Medicare 
Drug Integrity Contractors, Recovery Audit Contractors, and Zone Program Integrity 
Contractors (ZPICs), to perform many Medicare integrity functions.   
Home Health Agencies
 
OEI-04-11-00220  The two CMS Medicare Administrative Contractors 
December 2012  we reviewed prevented $275 million in home health agency (HHA) 
  improper payments and referred several instances of potential fraud, but 
the four ZPICs we reviewed, which serv(eOdE fIr-a0u4d-1-1p-r0o0n2e2 g0eogHroapmhei cH aeraeltahs , 
 
Adigde nncoite sidenCtMifSy  aanndy  CHoHnAtr-aspcteocri fOicv veruslingehrta obfi lHitoiemse a Hndea vlathri Aedg esnucbiessta.)ntially in 
their efforts to detect and deter fraud.  
Community Mental Health Centers    
OEI-04-11-00101  Only one of nine payment contractors 
January 2013  we reviewed performed activities to detect and deter community mental 
  health center (CMHC) fraud in 2010, and most were part of a CMS-led 
special project.  Activities to detect and deter CMHC fraud varied 
 
substantially among ZPICs in 2010; one ZPIC performed almost all such 
activities, most of which were part of the same CMS-led special project.  
The other contractors performed only minimal activities to detect and 
deter fraudulent CMHC billing, despite having jurisdiction over fraud-prone 
areas.  (Vulnerabilities in CMSs and Contractors Activities To Detect and 
Deter Fraud in Community Mental Health Centers.) 
Implementation of Surety Bonds for Medical Equipment Suppliers 
Medical Equipment Suppliers
OEI-03-11-00350  Two years after the surety bond requirement 
March 2013  for medical equipment suppliers was implemented, CMS did not have 
  accurate surety bond information for all suppliers.  Information for 
  thousands of bonded suppliers and surety bond amounts were not 
consistently maintained.  Further, CMS can only collect up to $50,000 per 
bonded supplier, so it is unlikel(yS ugoreintyg  Btoo nbdes a Rbelem taoi nr eacno Uncnidlee rsuutrielitzye db oTnodo l 
Tcool Plercottieocnts M weidthic athree  Fternosm o Sf umpipllliioern sO voef rdpoalylamrse nints o.)verpayments owed by 
medical equipment suppliers.  
 
  Page v  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 Fraudulent Billing by Clinic Owner and Optometrist 
 
Clinic Owner Sentenced to 12 Years and 7 Months for Engaging in Elaborate Medicare Fraud 
Scheme (Florida)
Arbilio Yanes was sentenced to 12 years and 7 months of incarceration 
and ordered to pay $11 million in restitution after pleading guilty to charges related to 
health care fraud.  Yanes, the president and one of two owners of the purported medical 
clinic, paid more than $2.3 million to third parties to recruit Medicare beneficiaries as 
purported patients for cash in return.  The clinic then billed Medicare for alleged services, 
Optometrist Sentenced to 3 Years in Prison for Submitting Claims for False Diagnoses (Idaho)
even though they either were not provided or were not medically necessary.     
Christopher Card was ordered to pay $1 million in restitution and a $100,000 fine after 
pleading guilty to charges.  Card was a licensed optometrist who, according to the plea 
agreement, fraudulently billed Medicaid, Medicare, and other health care benefit programs 
for false diagnoses, including glaucoma, acquired color deficiency (color blindness), tension 
headaches, macular degeneration, treatment of eye injuries, and removal of foreign objects 
from the eye.  Card also billed for testing that did not actually occur and for testing results 
that were falsified or altered.   
Medicare Part C and Part D 
Medicare Part C, known as the Medicare Advantage (MA) program, provides covered 
services to qualified Medicare beneficiaries through State-licensed risk-bearing entities 
operating under contract with CMS.  Medicare Part D is an optional outpatient drug benefit 
Ability To Identify and Investigate Fraud
available to Medicare beneficiaries. 
OEI-03-11-00310  Our review of the one Medicare 
January 2013  Drug Integrity Contractor (MEDIC) responsible for detecting and 
  preventing fraud, waste, and abuse in Medicare Parts C and D nationwide 
revealed that its Part C investigations and case referrals represented only a 
small percentage of its benefit integrity activities.  We identified several 
problems hindering the MEDIC's ability to identify and investigate fraud 
and abuse in Part C and Part D.  The two programs involved $190 billion in 
expenditures in 2011 and 33 million beneficiaries in 2012.   (MEDIC Benefit 
PInatretg Dr iPtyh aArcmtiavcityi easn idn T Mheerdaipcaeruet iPcsa rCtos mC manitdte De.s) 
OEI-05-10-00450  Part D sponsors' pharmacy 
March 2013  and therapeutics committees, whose decisions affect beneficiaries' access 
  to specific prescription drugs and the cost of drugs to beneficiaries and the 
Federal Government, have limited definitions of conflicts of interest, which 
 
could hinder them from identifying conflicts.  (Medicare Gaps in Oversight 
of Conflicts of Interest in Medicare Prescription Drug Decisions.) 
Medicaid Program   
States have considerable flexibility in designing and operating their Medicaid programs; 
however, to receive a Federal share of Medicaid costs, applicable State and Federal 
requirements must be met. 
  Page vi  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
 
OIG Portfolio:  Personal Care Services
   
OIG-12-12-01  In the past 6 years, Medicaid costs 
November 2012  for personal care services increased by 35 percent, totaling approximately 
Spotlight  $12.7 billion in 2011.  OIG has issued 23 reports on personal care services 
Article  and conducted numerous investigations involv(iPnegr sroenlaatle Cda frrea Suedr. v Ticheiss:   OIG 
TPorerntfdosl,i oV uslynnetrhaebsiilziteiess o, uarn db oRdeyc oomf wmoernkd aatniodn osf ffeorrs I mnepwro avnemd ceonmt.)prehensive 
recommendations to address vulnerabilities.  
Disproportionate Share Hospital Payments  
A-02-09-01017   New Jersey claimed payments 
November 2012  of about $50 million Federal share for five hospitals that did not meet 
  Federal requirements during our audit period.  States are required to make 
special payments, known as disproportionate share payments, to hospitals 
t(hTahte s Neervwe J ae rdsiesyp Droeppoarrttimonenatte o sf hHaurme aonf  lSoewrv-iincecso mClea iamnedd/ oMre udnicianisdu red 
pDaistpiernotpso. r  tionate Share Hospital Payments to Five Hospitals That Did Not 
Meet Federal Eligibility Requirements.)
Collection of Sustained Overpayments 
A-05-11-00071  As of December 2012, CMS reported 
February 2013  collecting $987.5 million of the $1.2 billion in Medicaid overpayments that 
  it had sustained in the 147 audit reports covered by our review.  However, 
CMS had not collected the remaining $225.6 million.  The uncollected 
amount related to overpayments that OIG had identified in 10 audit reports 
t(hTahte t Cheen Stetartse fso rh aMde ndiocta arge r&e eMde tdoi craeifdu nSder. v Iince asd Cdoiltlieocnt,e CdM thSe c Moualjdor nitoyt  of 
dMoecduicmaeidn tO tvheartp $a7ym.2 emntilsl ibount  tMhailtli iotn rse Rpeomrtaeidn a Usn ccoolllleecctteedd .h)ad been collected.  
Federal Upper Limit for Medicaid Drug Reimbursements 
OEI-03-11-00650  For our review 
October 2012  period, we found that Federal Upper Limit (FUL) amounts based on 
  published prices were more than four times greater than sampled 
pharmacy acquisition costs.  Medicaid FUL amounts based on average 
manufacturer prices (AMP) were 61 percent lower than FUL amounts 
based on published prices at the median, and AMP-based FULs exceeded 
sampled pharmacy acqu(Aisnitailoynz icnogs tCsh bayn g4e3s  ptoe rMceendtic iani dth Fee adgegrarel gUaptpee. r T Lhiem it 
Afimndoiunngtss s.)upport the implementation of the AMP-based FUL amounts for 
drug reimbursements.  
 
Public Health and Other HHS-Related Reviews 
Public health activities and programs represent the countrys primary defense against acute 
and chronic diseases and disabilities and generally promote and enhance health.  Other HHS 
reviews address various human services and administrative issues.   
Global HIV/AIDS Program 
Through its Global HIV/AIDS Program, the Centers for Disease Control and Prevention 
(CDC) implemented the President's Emergency Plan for AIDS Relief (PEPFAR), working with 
  Page vii  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
 
ministries of health and other in-country partners to combat HIV/AIDS by strengthening 
health systems and building sustainable HIV/AIDS programs in more than 75 countries. 
CDC's offices in host countries are responsible for PEPFAR funds awarded to government 
agencies and for-profit and nonprofit organizations (recipients).  Three reports indicate 
better guidance and oversight are needed. 
CDC South Africa
 
(The Centers for Disease 
A-04-12-04022  Control and PrevenWtioen f'os uSnodu tihn sAufrffiiccai eOnfcfiicees  Dinid d Nocout mAlewnataysti Porno apnedrl ye vMidoennitcoer  
February 2013  Rofe cmipoineinttosr' iUnsge a onfd t haes sPurreasnidceenst o'sf  Eumsee rogf efuncnyd Ps.l a n for AIDS Relief Funds.)
 
CDC Namibia  
(The Centers for Disease Control and Prevention's Namibia 
A-04-12-04020  Office Did Not A Wlwea yfos uPnrdo pinersluyf Mficoiennitcoire sR einc idpoiecnutms' eUnstea otifo tnh ea nPdre esvididenent'cs e of 
November 2012  Emmoenritgoernicnyg .P  lan for AIDS Relief Funds.)
 
Republic of Namibia    
A-04-12-04019  We foundUna(lTlohwe aRbelpeu abnlidc  poof tNeanmtiaiblliya ,u Mnianlliostwrya bolfe  
January 2013  eHxepaeltnhd aitnudr eSso,c rieapl oSretrivnigce asc, cDoimd Nploits hAmlweanytss  Mnoatn raeglea ttehde  tPor ethsied econotps erative 
  aEgmreeregmeenncyt,  Palnadn  ofothr eArI DdeS fRiceileienfc Fieusn. d s or Meet Program Goals in Accordance 
With Award Requirements.)
 
Food SafetyDietary Supplements 
Two reports related to dietary supplements addressed the extent to which FDA is able to 
effectively locate manufacturers through its Food Facility Registry and determined whether 
manufacturers structure/function claims made on the labels of dietary supplements are 
truthful and not misleading. 
Locating Dietary Supplement Manufacturers in Emergencies
 
OEI-01-11-00211  Of the dietary 
October 2012  supplement manufacturers we contacted for review, 28 percent failed to 
  register with the FDA Food FacDiliietyta Rreyg Siustprpyl. e Omfe tnhtes coCmopmapnainesie tsh Mata dy iBde  
rDeigffiisctuelrt,  T7o2  Lpoecracteen itn f aainle Edm toe rpgreonvciyde the complete and accurate 
information required by law.  (
Truthfulness of Claims on Dietary Su)p plement Labels
OEI-01-11-00210  For dietary 
October 2012  supplements that were marketed for weight loss or immune system 
  support, we found that manufacturers substantiations for 
structure/function claims (wDeireeta irnyc oSunpsipslteemnte nwtisth FStDrAucst ugureid/Faunncec tfioorn  
Cevlaidimens cFea. i lA Tloso M, meeatn Fuefdaecrtaulr Reresq udiirde nmoetn atlsw.)ays meet related notification and 
disclaimer requirements.  
 
Deployment of HHS Resources in Emergencies 
Within HHS, the Assistant Secretary for Preparedness and Response organizes HHS's 
resources and its response as the Coordinator and Primary Agency responsible for 
  Page viii  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
 
Emergency Support Function-8 (ESF-8), Public Health and Medical Services.  HHS also has 
responsibilities as a support agency for nine additional ESFs. 
HHS Emergency Support Function
 
OEI-04-11-00260  We found that HHS deployed 
November 2012  resources in response to 28 emergency incidents in 2010 and 2011.  
  Of the 28 incidents, we reviewed 3, which affected 17 States.  HHS 
demonstrated its ability to effectively fulfill its emergency support function 
(ESF) responsibilities for the three selected incidents.  We found that the 
other ESF coordinators and primary a(HgeHnSc iPeusb dliicd  Hneoat lathlw aanyds  Mreepdoicrat lh aving 
Sae crlveiacre su Enmdeerrsgteanncdyi nSgu popf oHrHt SP'rse spuaprepdonret sasg.)ency role and its available 
resources during incident response.  
 
OIG Participation in Congressional Hearings 
Daniel R. Levinson, Inspector General, testified before 
 
the House Appropriations Committee, Subcommittee on 
3-19-2013  Labor, Health and Human Services, Education, and 
Related Agencies, about HHSs top management 
challenges.    
 
Testimony.  Video. Daniel R. Levinson 
Inspector General 
 
 
   
  Page ix  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Inspector Generals Message and Highlights 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  http://oig.hhs.gov 
 
  Page x  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Table of Contents 
 
 
Contents 
Medicare Program Reviews  1 
Improper Payments and Other Wasteful Spending ------------------------------------------ 1 
Ineligible BeneficiariesUnlawfully Present or Incarcerated ---------------------------- 1 
Long-Term Care HospitalsCo-Location With Other Facilities --------------------------- 3 
Inpatient Rehabilitation FacilitiesDocumentation Requirements --------------------- 3 
Skilled Nursing FacilitiesQuestionable Care and Misreported Data ------------------- 4 
Medical Equipment and SuppliesProsthetics, Custom Fabricated Orthotics, 
and Back Orthoses ------------------------------------------------------------------------------- 5 
Medical Equipment and SuppliesMail Order Diabetes Testing Supplies ------------- 6 
Medical Equipment SuppliersSurety Bond Requirements ------------------------------ 7 
Part B Drugs Price Substitution Option -------------------------------------------------------- 8 
Part B Chemotherapy-Related Drugs ----------------------------------------------------------- 9 
Part B Infusion Drugs ---------------------------------------------------------------------------- 11 
Appeals of Claims-Related Decisions --------------------------------------------------------- 11 
Preventing and Detecting Medicare Fraud -------------------------------------------------- 12 
Home Health AgenciesFraud Detection --------------------------------------------------- 12 
Community Mental Health CentersFraud Detection ------------------------------------ 13 
Medical Equipment and SuppliesSupplier Solicitation of Physicians --------------- 14 
Identity TheftCMS Response to Known Breaches --------------------------------------- 14 
Savings and Return on Investment From Fraud Prevention Technologies ----------- 15 
Other Part A- and Part B-Related Oversight------------------------------------------------- 16 
Electronic Health RecordsIncentive Payment Program ------------------------------- 16 
Information SecurityCompliance With Statutory Requirements -------------------- 16 
Hospital Quality of CareConditions Present on Admission ---------------------------- 17 
Medicare Part C and Part D --------------------------------------------------------------------- 17 
Part C Risk Adjustment Data Validation------------------------------------------------------ 17 
Parts C and Part D Benefit Integrity Activities ---------------------------------------------- 18 
Part D Pharmacy and Therapeutics CommitteesConflicts of Interest --------------- 19 
Medicaid Program Reviews  21 
Improper State Claims  for Federal Reimbursement -------------------------------------- 21 
Disproportionate Share Hospital Payments (New Jersey) ------------------------------- 21 
Inpatient Psychiatric Hospitals (Indiana) --------------------------------------------------- 22 
Personal Care ServicesAn OIG Portfolio --------------------------------------------------- 22 
HCBS-Covered Assisted Living Facilities in Seven States --------------------------------- 23 
Home Health Services (New York) ------------------------------------------------------------ 24 
Family-Based Treatment Rehabilitation Services (New York) -------------------------- 24 
Family Planning (Arkansas and California) ------------------------------------------------- 25 
Medicaid School-Based Transportation Services (New Hampshire) ------------------- 26 
Medicaid School-Based Services Administrative Costs (Arizona) ---------------------- 26 
Administrative Costs Unallowable or Indeterminable (Florida) ------------------------ 27 
Administrative Costs for Housing Program (Pennsylvania) ----------------------------- 27 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Table of Contents 
 
 
Other Sources of Wasteful Medicaid Spending --------------------------------------------- 28 
Federal Upper Limits on Drug Payments ---------------------------------------------------- 28 
Overpayments To Be Collected, Adjusted ---------------------------------------------------- 28 
Federal Share of Collected Overpayments Not Returned (Florida) --------------------- 29 
Third Party Liability------------------------------------------------------------------------------ 29 
Overpayments Associated With Credit Balances (North Carolina) --------------------- 30 
Preventing and Detecting Medicaid Fraud -------------------------------------------------- 31 
OIG Oversight of State Medicaid Fraud Control Units ------------------------------------- 31 
Legal and Investigative Activities Related to Medicare and Medicaid  33 
Advisory Opinions and Other Industry Guidance ------------------------------------------ 34 
HEATHealth Care Fraud Prevention and Enforcement Action Team ---------------- 34 
HEAT Provider Compliance Training --------------------------------------------------------- 35 
Medicare Fraud Strike Force Activities------------------------------------------------------- 35 
Strike Force Takedown Led to Charges Against 91 Individuals ------------------------- 35 
Additional Examples of Strike Force Efforts ------------------------------------------------ 35 
Other Criminal and Civil Enforcement Activities ------------------------------------------- 37 
Special Assistant U.S. Attorney Program ----------------------------------------------------- 37 
Most Wanted Fugitives Listed on OIGs Website ------------------------------------------- 37 
Recently Completed Actions and Settlements ---------------------------------------------- 37 
Home Health Providers -------------------------------------------------------------------------- 38 
Pharmaceutical Companies --------------------------------------------------------------------- 38 
Physicians ------------------------------------------------------------------------------------------ 40 
Kickbacks ------------------------------------------------------------------------------------------- 41 
Durable Medical Equipment -------------------------------------------------------------------- 41 
Clinics ----------------------------------------------------------------------------------------------- 42 
Mental and Social Services ---------------------------------------------------------------------- 43 
Hospitals ------------------------------------------------------------------------------------------- 44 
Medicaid Fraud------------------------------------------------------------------------------------ 44 
Medicaid Fraud Control Units ----------------------------------------------------------------- 45 
Funding and Accomplishments ---------------------------------------------------------------- 45 
Joint Investigations ------------------------------------------------------------------------------- 45 
Sanction Authorities and Related Administrative Actions ------------------------------- 46 
Program Exclusions ------------------------------------------------------------------------------ 46 
Corporate Integrity Agreements --------------------------------------------------------------- 47 
Civil Monetary Penalties Law ------------------------------------------------------------------ 47 
Patient Dumping ---------------------------------------------------------------------------------- 48 
Provider Self-Disclosure Protocol ------------------------------------------------------------- 49 
Public Health Reviews  51 
Centers for Disease Control and Prevention ------------------------------------------------ 51 
Global HIV/AIDS Program ---------------------------------------------------------------------- 51 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Table of Contents 
 
 
Food and Drug Administration ---------------------------------------------------------------- 52 
Food SafetyDietary Supplements ----------------------------------------------------------- 52 
Drug SafetyRisk Evaluation and Mitigation Strategies --------------------------------- 53 
Health Resources and Services Administration -------------------------------------------- 54 
HIV Testing at Health Center Sites ------------------------------------------------------------ 54 
Health Center Program Section 330 Grants ------------------------------------------------- 54 
Public-Health-Related Legal Actions and Investigations --------------------------------- 55 
Health Education Assistance Loan Program ------------------------------------------------ 55 
HEAL Exclusions ---------------------------------------------------------------------------------- 55 
Human Services Reviews  56 
Title IV-E Foster Care and Adoption Assistance Programs ------------------------------- 56 
Child Support Enforcement -------------------------------------------------------------------- 56 
Child Support Investigative Outcomes ------------------------------------------------------- 57 
Engaging the Public in Capturing Deadbeat Parents -------------------------------------- 57 
Other HHS-Related Reviews and Investigations  58 
HHS Preparedness and Support in Emergencies ------------------------------------------- 58 
HHS and CMS Financial Statement Audits --------------------------------------------------- 58 
Improper Payment Reporting ----------------------------------------------------------------- 60 
OIG Reviews of Non-Federal Audits ---------------------------------------------------------- 61 
Grants and Contracts ---------------------------------------------------------------------------- 61 
Misuse of Grant Funds --------------------------------------------------------------------------- 62 
Significant Grant-Related Reviews ------------------------------------------------------------ 62 
Small Business Innovative Research Program ---------------------------------------------- 63 
Contract Audits------------------------------------------------------------------------------------ 63 
Other HHS-Related Matters -------------------------------------------------------------------- 63 
Recovery Act Retaliation Complaints --------------------------------------------------------- 63 
Employee Misconduct --------------------------------------------------------------------------- 63 
Legislative and Regulatory Reviews ---------------------------------------------------------- 64 
Affordable Care ActImplementation  64 
National Background Check Program -------------------------------------------------------- 65 
Eligibility and Enrollment in State Health Subsidy Programs --------------------------- 65 
List of Appendixes  67 
 
   
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Table of Contents 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  http://oig.hhs.gov 
 
 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 Medicare Program Reviews 
 
Medicare Part A and Part B together are generally referred to as traditional Medicare.  
Part A helps cover certain inpatient services such as in hospitals and skilled nursing 
facilities and some home health services.  Part B helps cover designated other medical 
services, equipment, supplies, and drugs that Part A does not cover.   
Medicare Part C, known as the Medicare Advantage (MA) program, provides covered 
services to qualified Medicare beneficiaries through State-licensed risk-bearing entities 
operating under contract with CMS.  Medicare Part D is an optional outpatient drug benefit 
available to Medicare beneficiaries. 
 
 
Improper Payments and Other Wasteful Spending 
Wasteful spending occurs when Medicares laws, policies, and methodologies fail to ensure 
that program costs are reasonable and appropriate or fail to reflect Medicares role as a 
high-volume, prudent insurer/payer in the health care marketplace.  Medicares policies and 
methodologies may also cause waste when unintended loopholes or other inherent 
problems invite exploitation or hinder consistent payment determinations.  Medicares 
supporting systems and practices sometimes cause waste by hindering timely and 
appropriate payment adjustments. 
Improper payments, some of which are fraudulent, are a form of wasteful spending.  For 
Part A and Part B, improper payments generally occur when Medicare does not effectively 
identify and reduce erroneous, inappropriate, and fraudulent billing by providers and 
suppliers. 
Office of Inspector General (OIG) audits and evaluations do not routinely project the annual 
cost savings that could be realized at the program level from implementing the 
recommendations in our reports.  However, the reports are indicative of the extent to which 
policies and methodologies may be less than effective and may be in need of correction.  
Ineligible BeneficiariesUnlawfully Present or Incarcerated 
We audited Medicare payments made for patients who were not lawfully present in the 
United States or were incarcerated.  A lawfully present Medicare patient is an immigrant 
living in the United States legally.  Unlawful presence occurs when a non-U.S. citizen remains 
in the United States longer than the time authorized by U.S immigration agencies.  
Incarcerated patients are people who are under arrest, are imprisoned, reside in a halfway 
house, or are required to live under home detention.  Medicare does not make payments for 
the care of unlawfully present patients and generally does not pay for incarcerated patients.  
The Centers for Medicare and Medicaid Services (CMS) identifies these people in 
collaboration with the Social Security Administration (SSA), which obtains information from 
prison systems and other Federal agencies.  SSA uses data systems to identify unlawfully 
present and incarcerated patients, then transmits the names to CMS via computer link.  CMS 
does not always receive this information promptly.  In such instances, inappropriate claims 
  Page 1  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
are paid.  C MImSp rdoopeesr  noMt ehdaivcaer pe oImlicpireosp earnlyd  Ppariodc Perdouvirdeesr st oM giloli obnasc okf  aDnodlla dres tfeocr tU annladw rfeuclloyv er 
the moneyP. a  y ments1  Present Beneficiaries Who Received Services During 2009 Through 2011 
A-07-12-01116  CMSs controls were not adequate to ensure that all improper payments for 
January 2013 
services to unlawfully present beneficiaries were detected and recouped.  
 
We found that when CMS received untimely information indicating that the 
unlawful presence overlapped with the dates of service on previously paid 
Medicare claims, CMS did not notify Medicares contractors of this updated 
information.  In the absence of such notification, the contractors did not 
detect and recoup improper payments.     
RecommendationsCMS should ensure that Medicare contractors recoup 
the $91.6 million in improper payments we identified, identify improper 
payments made on behalf of unlawfully present beneficiaries after our 
audit period but before implementation of new policies and procedures, 
and ensure that Medicare contractors recoup those payments.  We also 
recommend that CMS implement administrative policies and procedures 
to detect and recoup improper payments made for Medicare services when 
information relating to the unlawful presence is received on previously 
paid Medicare claims. 
 Improper  Medicare Improperly Paid Providers Millions of Dollars for Incarcerated 
  Payments   Beneficiaries Who Received Services During 2009 Through 2011 
A-07-12-01113  CMSs controls were not adequate to ensure that all improper payments 
January 2013 
for services to incarcerated beneficiaries were detected and recouped.  
 
With certain exceptions, prisons (instead of Medicare) pay for the health 
care of incarcerated people who are otherwise eligible for Medicare 
(incarcerated beneficiaries).  CMS does not always receive timely updates 
regarding incarceration information before Medicare contractors pay 
providers on behalf of incarcerated beneficiaries.  We found that when 
CMSs data systems did not indicate until after a claim had been processed 
that a beneficiary was incarcerated, CMSs controls were not adequate to 
detect and recoup the improper payments.        
RecommendationsCMS should ensure that Medicare contractors recoup 
the $33.6 million in improper payments we identified; identify improper 
payments made on behalf of incarcerated beneficiaries after our audit 
period but before implementation of policies and procedures and ensure 
that Medicare contractors recoup those payments; work with other 
entities, including SSA (which is CMS's primary source of information 
about incarcerated beneficiaries), to improve the timeliness of information; 
and work with the Medicare contractors to ensure that all claims with 
exception codes are processed consistently and pursuant to Federal 
requirements.  We also recommend that CMS implement administrative 
policies and procedures to detect and recoup improper payments when 
incarceration information is received on previously paid Medicare claims.    
 1                                                            
 To the left of each report title, we have flagged with a checkmark the management challenge(s) 
associated with the reviews findings and recommendations, e.g.,  Improper Payments,  Wasteful 
Spending,  Quality of Care, etc.  Implementing a reports recommendations would help curb negative 
outcomes associated with the designated management challenges. 
 
  Page 2  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 Long-Term Care HospitalsCo-Location With Other Facilities 
 
Long-term-care hospitals (LTCHs) generally treat patients who have been discharged from 
acute care hospitals but have complex medical conditions that require prolonged hospital-
level care.  An LTCH can be freestanding or co-located with another hospital-level provider 
(e.g., an acute care hospital) or a skilled nursing facility.  A co-located LTCH is in the same 
building or in a separate building on the same campus as another provider.  Co-located 
LTCHs must notify their Medicare claims processing contractors about the providers with 
which they are co-located and indicate whether there are any changes in co-located status.  
Because co-location creates incentives for providers to make decisions about admitting 
and discharging patients on the basis of maximizing Medicare payments, CMS developed 
payment policies that reduce payments to co-located LTCHs when certain thresholds are 
exceeded.  Improper   Co-Located Long-Term Care Hospitals Remain Unidentified, Resulting in 
   Payments  Potential Overpayments 
OEI-04-12-00491  Medicare overpayments can result when LTCHs provide inaccurate data on 
March 2013 
their co-location status and the LTCHs exceed the threshold for Medicares 
 
pertinent payment policies.  Our preliminary data analysis shows that 
67 percent of LTCHs we identified were co-located.  At least 46 percent had 
not notified their claims processing contractors of their co-located status, 
according to contractor responses.  The report does not contain 
recommendations. 
Inpatient Rehabilitation FacilitiesDocumentation Requirements 
Inpatient rehabilitation facilities (IRFs) provide rehabilitation for patients who require 
hospital-level care to improve their ability to function.  Effective for discharges on or after 
January 1, 2010, documentation requirements specified in regulations must be met to 
ensure that the IRF care is reasonable and necessary under the Social Security Act.  If not, 
the claims  aImrep nroopte ar l loNwoarbwlael.k    Hospital Did Not Comply With Medicare Inpatient Rehabilitation 
  Payments  Facility Documentation Requirements 
A-01-11-00531  Because procedures at one selected hospital did not ensure that 
February 2013 
IRF services were documented according to Medicare requirements, 
 
Medicare made improper payments.  The hospital's medical records 
did not sufficiently support that it met requirements that a comprehensive 
preadmission screening occurred within the 48 hours immediately 
preceding the admission; that a rehabilitation physician performed a 
postadmission evaluation within the first 24 hours of the IRF admission; 
that a rehabilitation physician developed and documented an 
individualized overall plan of care within 4 days of the IRF admission; and 
that interdisciplinary team meetings met all Federal requirements. 
RecommendationsThe hospital should refund to the Medicare program 
$2.7 million for claims in our sample that did not comply with 
requirements; work with CMS to resolve the claims that were not included 
in our sample, with potential overpayments estimated at $5.2 million; 
identify IRF claims in subsequent years that did not meet documentation 
requirements and refund any associated overpayments; and develop and 
  Page 3  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
implement procedures to ensure that it bills Medicare only for IRF services 
that comply with documentation requirements. 
Skilled Nursing FacilitiesQuestionable Care and Misreported Data 
Skilled nursing facilities (SNFs) are nursing homes that provide skilled care to Medicare 
patients.  This can be nursing care; therapy; and other services, such as assistance with 
eating or bathing.  Last year, Medicare paid for services for nearly 2 million SNF patients.  
SNFs are required to evaluate each patient's needs and develop a care plan specifically for 
tha t  p aQtuieanlitty.   oCfa Craer pe lanSsk iildleedn Ntiufrys ipnrgo Fbalceimlitsie as nOdft seen tF sapile Tcoif Mice terte Caatmre ePnlat ngnoinagls a. nd Discharge 
  Wasteful Spending  Planning Requirements 
OEI-02-09-00201  Medicare paid approximately $5.1 billion for stays in which SNFs did not 
February 2013 
meet quality-of-care requirements.  Our findings raised concerns about 
Spotlight 
what Medicare is paying for (i.e., possible wasteful spending of Medicare 
Article  
dollars for questionable care) and demonstrated that oversight needs to be 
strengthened to ensure that SNFs perform appropriate care planning and 
discharge planning.  We found that for 37 percent of stays, SNFs did not 
develop care plans that met requirements or did not provide services in 
accordance with care plans.  For 31 percent of stays, SNFs did not meet 
discharge planning requirements.  Additionally, reviewers found examples 
of poor quality care related to wound care, medication management, and 
therapy.  
RecommendationsCMS should strengthen the regulations on care 
planning and discharge planning, provide guidance to SNFs to improve care 
planning and discharge planning, increase surveyor efforts to identify SNFs 
that do not meet care planning and discharge planning requirements and 
to hold these SNFs accountable, link payments to meeting quality-of-care 
requirements, and follow up on the SNFs that failed to meet care planning 
and discharge planning requirements or that provided poor quality care.  
 Wasteful Spending  Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More 
  Than $1 Billion in 2009 
OEI-02-09-00200  SNFs misreported information to Medicare; as a result, inappropriate 
November 2012 
payments were made.  We found that SNFs billed one-quarter of claims in 
Podcast  
error in 2009; the incorrect claims resulted in about $1.5 billion in 
inappropriate Medicare payments.  For 47 percent of claims, SNFs 
misreported information on the Minimum Data Set (MDS), the system used 
to classify beneficiaries into resource utilization groups (RUGs) for 
payment.   Some SNFs incorrectly reported items such as therapy and 
activities of daily living, thereby placing beneficiaries into higher paying 
RUGs.   
RecommendationsCMS should change the current methodology for 
determining how much therapy is needed to ensure appropriate payments.  
We also recommend the following administrative actions:  increase and 
expand reviews of SNF claims, use the Fraud Prevention System to identify 
SNFs that are billing for higher paying RUGs, monitor compliance with new 
therapy assessments, improve the accuracy of MDS items, and follow up on 
  Page 4  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
the SNFs we identified as having billed in error.  
Medical Equipment and SuppliesProsthetics, Custom Fabricated 
Orthotics, and Back Orthoses 
The following reviews examine compliance with practitioner and supplier qualifications 
to bill for prosthetics and custom fabricated orthotics and compare acquisition costs and 
Prosthetics and Custom Fabricated Orthotics
reimbursements for back orthoses.  
The Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA),  427(a), prohibits Medicare payments for 
prosthetics and custom fabricated orthotics unless the items are furnished by a qualified 
practitioner and fabricated by either a qualified practitioner or a qualified supplier.  The 
BIPA required the promulgation of regulations to implement the requirements.  After more 
than a decade, CMS has not done so.  Medicare suppliers are also required to maintain 
documentation supporting that prosthetics and custom fabricated orthotics were delivered 
to  bWeansetfeifcuila Srpieens.d  i ng  CMS Has Not Promulgated Regulations To Establish Payment Requirements 
  for Prosthetics and Custom-Fabricated Orthotics 
OEI-07-10-00410  We found that 12 percent of nearly 1,000 claims allowed in 2010 did not 
October 2012 
meet Federal requirements for delivery documentation.  These claims were 
 
either missing all documentation of delivery or lacked a beneficiary 
signature on the documentation provided. 
RecommendationsCMS should promulgate regulations to implement the 
statutory payment requirements, ensure that suppliers maintain delivery 
documentation that meets Federal requirements, and take appropriate 
action to address the inappropriately allowed claims we identified in our 
Back Orthoses sample. 
The following report provides information on supplier acquisition costs for 
certain back orthoses.  Back orthoses provide back support, reduce back pain, and facilitate 
healing of the spine.  To obtain payment for covered equipment, suppliers submit claims 
using procedure codes.  Suppliers may bill Medicare for a variety of back orthosis products 
using the L0631 code we selected for review, and the suppliers acquisition cost for each 
product may vary according to the manufacturer and model provided.  However, Medicare 
does not collect information on the supplier acquisition costs or the models of back orthoses 
pro Wviadsetedfu tlo S bpeenndeifnigci arMieesd. icare Supplier Acquisition Costs for L0631 Back Orthoses 
 
OEI-03-11-00600  We found that Medicare payment amounts were more than four times 
December 2012 
greater than supplier acquisition costs for back orthoses billed using code 
 
L0631.  Consequently, Medicare and its beneficiaries paid approximately 
$37 million more for L0631 back orthoses than suppliers paid to acquire 
them.  Beneficiary copayments alone would have almost covered suppliers' 
L0631 acquisition costs.  For 93 percent of the claims we reviewed, 
suppliers did not provide any additional services related to L0631 back 
orthoses other than general instructions. 
RecommendationsCMS should lower the fee schedule amount for L0631 
  Page 5  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
back orthoses by including them in the Competitive Bidding Program or by 
using CMS's inherent reasonableness authority.  
Medical Equipment and SuppliesMail Order Diabetes Testing Supplies 
Part B covers diabetic testing supplies, such as blood-testing strips (test strips), lancets, 
glucose control solutions, and spring-powered lancet devices for patients for whom the 
glucose monitor is covered.  We identified inappropriate supplier billing and activities 
related to mail order and non-mail order test strips provided in competitive bidding areas.  
We also determined whether two mail order suppliers' billing of supplies as non-mail order 
Incentives for Improper Billing in Competitive Bidding Areas
was correct.   
At the time of our review, the 
term mail order specified delivery by a common carrier, such as the U.S. Postal Service or 
FedEx.  In competitive bidding areas, non-mail order test strips (e.g., those purchased at 
walk-in stores) are reimbursed at a rate more than double that for mail order test strips.  
The payment difference provides a financial incentive for suppliers to improperly bill 
Medicare items delivered by common carrier to beneficiaries as if they were higher paying 
non-mail order items.  A supplier that knowingly presents to the Federal Government a false 
or fraudulent claim for payment faces liability under the Federal False Claims Act.  The 
report below responds to a request from CMS to determine whether the increase in claims 
for non-mail order diabetes test strips between 2010 and 2011 may be associated with 
improper b Iimllipnrgo paenrd   oStuhpeprl iaebr uBsililvineg p forar cDtiiacbeest. e  s Test Strips and Inappropriate Supplier Activities 
  Payments  in Competitive Bidding Areas 
OEI-04-11-00760  We concluded that improper billing and other abusive practices 
November 2012 
contributed to a 33-percent increase in supplier claims for higher paying 
 
non-mail order test strips in 2011.  For 20 percent of beneficiaries in our 
review, suppliers improperly billed Medicare for higher paying non-mail 
order test strips while beneficiaries reported having instead received them 
through mail order.  Also, supplier claims for lower paying mail order test 
strips decreased by 71 percent in the same period.  Twenty-three percent 
of beneficiaries reported other supplier activities that we determined to be 
inappropriate, i.e., routinely waiving coinsurance and sending unsolicited 
test stips to the beneficiaries.  The report did not contain 
recommendations. 
Deliveries in Supplier-Owned Vehicles Billed as Non-Mail Order
 
Pursuant to Medicare 
requirements in effect until CMS implements its revised definition of "mail order," supplies 
delivered by company-owned vehicles are not considered mail order items and can be billed 
at higher rates that generreaglalyr dalpepssly o tfo t hwea mlke-tihno pdu orfc hdaelsievse.r  yTo curb wasteful spending by 
Medicare, the revised definition of "mail order" includes any item shipped or delivered to 
the beneficiarys home,  .  [Emphasis added.]  The revised 
de fWinaitsitoefnu li sS ptaenrgdeintge d tNoe bigehcboomrheo oedff eDciatibveet eisn,  IJnucl.y,  S2u0b1m3it. t e  d  Claims for Diabetic Testing Supplies 
  Without the KL Modifier in Accordance With Medicare Billing Requirements 
A-09-11-02073  We reviewed selected line items that one mail order supplier submitted to 
January 2013 
  Page 6  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
  non-mail order
  non-mail order
  Medicare as being  .  Of the 100 line items we reviewed, 99 
were properly claimed as   under the then-current definition 
because the supplies were delivered to the beneficiaries in company-
owned vehicles instead of by common carrier.  We limited our review to 
determining the suppliers compliance with use of a certain modifier code 
on the claims that identifies mail order supplies.  The claims were correct 
in not including the mail order modifier code and could be paid at higher 
non-mail order rates.   
The supplier, which serves more than 60,000 customers in the 
northeastern and southeastern United States, mails diabetic testing 
supplies or delivers them to customers homes using company-owned 
vehicles.  The supplier established its home delivery department in 
November 2008 to prepare for home delivery services beginning in January 
2009, when Medicare reduced the reimbursement amount for supplies 
delivered by mail.   The report did not contain recommendations.           
 Wasteful Spending  Advanced Diabetes Supply Submitted Claims for Diabetic Testing Supplies 
  Without the KL Modifier in Accordance With Medicare Billing Requirements 
non-mail order
A-09-12-02035  Similar to the preceding report, a review of a second mail order supplier 
March 2013 
revealed that almost all the supplies it claimed as being   
 
were payable as claimed because the supplier used company-owned 
 
vehicles instead of common carriers to deliver diabetic testing supplies 
to Medicare beneficiaries at their homes or to warehouse stores for 
beneficiaries to pick up.  This supplier, based in Carlsbad, California, uses 
company-owned vehicles to deliver supplies to customers who reside in 
the competitive bidding area or to deliver the supplies to warehouse club 
stores for pickup by customers.  The supplier pays a fixed fee to the 
membership warehouse club for its general and administrative expenses 
related to providing the supplies to customers.  The report did not contain 
recommendations. 
Medical Equipment SuppliersSurety Bond Requirements 
Surety bonds, which can discourage enrollment of fraudulent suppliers and aid the recovery 
of debts owed to Medicare, are issued by entities (sureties) guaranteeing to pay CMS the 
amount of any monetary obligations that are incurred during the term of the bond and for 
which the supplier is responsible, up to the surety's maximum obligation.  We determined 
the extent to which CMS maintains complete and accurate surety bond data and the amount 
of  sWuapsptleifeurl  Sdpeebntd tihnga t cSouurledt yh Baovned bs eReenm raeinc oavne Urendde trhurtoiluizgehd  Tsuoorle Ttyo  bPorontdecst.  Medicare From 
   Preventing Fraud  Supplier Overpayments  
OEI-03-11-00350  Two years after the surety bond requirement for medical equipment 
March 2013 
suppliers was implemented, CMS did not have accurate surety bond 
 
information for all suppliers.  Information for thousands of bonded 
 
suppliers was missing, and surety bond amounts were not consistently 
maintained by supplier location.  CMS can only collect $50,000 per bonded 
supplier, so it is unlikely going to be able to reconcile surety bond 
collections with the tens of millions of dollars in overpayments owed by 
suppliers. 
  Page 7  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
RecommendationsCMS should improve oversight of supplier data to 
ensure accurate and consistent information, immediately begin using the 
surety bond requirement to recover outstanding overpayments from 
suppliers' surety bonds, consider using the legislative authority given by 
the Patient Protection and Affordable Care Act of 2010 to require increased 
surety bond amounts for suppliers that receive high overall Medicare 
payments, and revise collection guidelines to state that collection of debts 
through surety bonds is based on dates of service. 
Part B Drugs Price Substitution Option 
When Congress established average sales prices (ASPs) as the primary basis for Medicare 
Part B drug reimbursement, it also mandated that OIG compare ASPs with average 
manufacturer prices (AMPs).  If the ASP for a particular drug exceeds the drug's AMP by a 
threshold of 5 percent, the Secretary of Health and Human Services may disregard the ASP 
for the drug when setting reimbursement and shall substitute the payment amount with the 
lesser of either the widely available market price or 103 percent of the AMP.  OIG has issued 
about 30 reports comparing ASPs to AMPs since the ASP reimbursement methodology was 
implemented in January 2005. 
As of February 2013 when the report was issued, CMS had yet to make any changes to Part B 
drug reimbursement as a result of OIG's reviews; however, the agency published a final rule 
in November 2012 that specifies the circumstances under which AMP-based price 
substitutions will occur.  Under this rule, price substitutions apply to only certain codes that 
me Weta tshteef u5l- Sppeerncdeinntg  thrCeosmhpoaldri suosni nofg A cvoemrapglee Stea lAesM PPri cdeast aan. d Average Manufacturer Prices:  An 
  Overview of 2011 
OEI-03-12-00670  Medicare failed to optimally exercise a statutory option to reduce payments 
February 2013 
for Part B-covered drugs under specified conditions.  Medicare could have 
 
saved an estimated $14.4 million over 1 year if CMS had lowered 
reimbursement for 58 drug codes that exceeded the threshold on the basis 
of complete AMP data in 2011.  Under CMSs price substitution policy, 
reimbursement amounts for over 40 percent of these drugs would have 
been reduced, saving an estimated $7 million over 1 year. 
RecommendationsCMS should finalize the price substitution policy in 
the proposed rule and lower Medicare reimbursement amounts for drugs 
that exceed the 5-percent threshold, consider expanding the price 
substitution policy to include all drug codes with complete AMP data, 
consider expanding the price substitution policy to include certain drug 
codes with partial AMP data, and consider seeking a legislative change to 
require manufacturers of Part B-covered drugs to submit both ASPs and 
 Wasteful Spending  Comparison of First-Quarter 2012 Average Sales Prices and Average 
AMPs. 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2012 
OEI-03-12-00730  In the first quarter of 2012, ASPs for 28 drug codes exceeded AMPs by at 
December 2012 
least 5 percent.  Of these, 22 had complete AMP data.  If reimbursement 
 
amounts for all 22 codes had been based on 103 percent of the AMPs in the 
third quarter of 2012, Medicare would have saved an estimated $739,000 
  Page 8  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
 Wasteful Spending  Comparison of Second-Quarter 2012 Average Sales Prices and Average 
in that quarter alone.  
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2012 
OEI-03-13-00100  In the second quarter of 2012, ASPs for 29 drug codes exceeded AMPs by at 
December 2012 
least 5 percent.  Of these, 19 had complete AMP data.  If reimbursement for 
 
all 19 drug codes had been based on 103 percent of the drugs AMPs in the 
fourth quarter of 2012, Medicare would have saved an estimated $553,000 
in that quarter alone.   
Part B Chemotherapy-Related Drugs  
This section describes billing and pricing issues for three types of drugs:  prostate cancer 
drugs; Herceptin, used in treating breast cancer; and Emend, used to help reduce nausea 
and vomiting in chemotherapy patients.  Implementing the related recommendations would 
recover the identified overpayments and avoid the wasteful spending associated with 
Prostate Cancer Drugs
improper billing for the drugs. 
Between 1995 and 2010, certain prostate cancer drugs covered 
under Medicare Part B (i.e., luteinizing hormone-releasing hormone (LHRH) agonists) were 
subject to least costly alternative (LCA) policies, which based the payment amount for a 
group of clinically comparable products on that of the least costly one.  However, in April 
2010, LCA policies for Part B drugs were discontinued in response to a court ruling stating 
that the use of an LCA policy was not authorized under Medicare law.  There has been 
concern that the withdrawal of LCA policies for prostate cancer drugs may have created an 
un iWntaesntetfiuoln Saple inndcienng tivLee faosrt  Cpohsytlsyi cAilatenrsn taoti aved mPoilniciisetse: r I mcopsatclite orn d Prruogstsa. te Cancer Drugs Covered 
  Under Medicare Part B 
OEI-12-12-00210  Medicare spending for LHRH agonists is higher in the absence of LCA 
November 2012 
policies for clinically comparable drugs.  If LCA policies for LHRH agonists 
 
had not been rescinded, Medicare expenditures would have been reduced 
by $33.3 million over 1 year, from $264.6 million to $231.3 million.  After 
LCA policies were removed, utilization patterns shifted dramatically in 
favor of certain costlier products.  However, the overall use of LHRH 
agonists to treat prostate cancer has been decreasing, a trend that began at 
least 1 year before elimination of LCA policies and continued for more than 
a year after. 
RecommendationCMS should consider seeking legislative authority to 
Herceptin (Trastuzumaibm)plement LCA policies for Part B drugs under appropriate circumstances.   
Herceptin is a Medicare-covered drug used to treat breast cancer 
that has spread to other parts of the body.  The incorrect line items we found included that 
providers reported incorrect units of service on line items with unit counts that represented 
full multiuse vials, did not provide supporting documentation, billed for unallowable 
services, and reported a combination of incorrect units of service and incorrectly coded 
claims.  The providers attributed the incorrect payments to clerical errors and to billing 
systems that could not prevent or detect the incorrect billing of units of service and other 
types of billing errors.  The Medicare contractors made these incorrect payments because 
  Page 9  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
neither the Fiscal Intermediary Standard System nor the Common Working File had 
sufficient edits in place during our audit period to prevent or detect the overpayments.   
In this semiannual period, we reported the results of six reviews.  We recommend that the 
responsible Medicare contractors recover the identified overpayments, implement or 
update system edits that identify for review multiuse-vial drugs that are billed with units of 
service equivalent to the dosage on an entire vial(s), and use the results of the audits in 
provider ed Iumcpartoipoenr  a cHtievrictieepst.i n  The Medicare Contractor's Payments in 26 States From the WPS 
  Payments  Legacy Workload for Full Vials of Herceptin Were Often Incorrect 
A-05-11-00114  WPS Legacy Workload:  89 percent of payments made to providers from 
February 2013 
the Wisconsin Physician Services Insurance Corporation (WPS) Legacy 
 
Workload for selected line items for full vials of Herceptin were incorrect.  
Before Medicare contracting reform, WPS processed claims for hospitals 
and other institutional providers from all 15 jurisdictions.  This workload, 
referred to as the "WPS Legacy Workload," will eventually transition to the 
appropriate Medicare contractors.  (Recover $3 million in identified 
 Improper   HerceptinMedicare Contractors' Payments in Jurisdiction 1 for Full Vials of 
overpayments.)  
Payments  Herceptin Were Often Incorrect 
A-09-12-02069  Medicare Jurisdiction 1:  75 percent of Medicare payments that Medicare 
February 2013 
contractors made to providers in Jurisdiction 1 of the selected line items 
 
for full vials of Herceptin were incorrect.  (Recover  $1.7 million in 
 Improper   HerceptinMedicare Contractors' Payments Made to Providers Currently 
identified overpayments. 
Payments  Assigned to Jurisdiction 4 for Full Vials of Herceptin Were Often Incorrect 
A-06-12-00001  Medicare Jurisdiction 4:  79 percent of the selected line items for full vials 
December 2012 
of Herceptin were incorrect.  (Recover $1.8 million in identified 
 Improper    HerceptinThe Medicare Contractors Payments to Providers in Jurisdiction 
overpayments.)   
Payments  9 for Full Vials of Herceptin Were Often Incorrect 
A-04-12-06146  Medicare Jurisdiction 9:  78 percent of the selected line items for full vials 
January 2013 
of Herceptin were incorrect.  (Recover $1.3 million in identified 
 Improper    HerceptinThe Medicare Contractors' Payments in Jurisdiction 10 for Full 
overpayments.)  
Payments  Vials of Herceptin Were Often Incorrect 
A-04-12-03070  Medicare Jurisdiction 10:  80 percent of the selected line items for full vials 
January 2013 
of Herceptin were incorrect.  (Recover $1.5 million in identified 
 Improper    HerceptinMedicare Contractors' Payments in Jurisdiction 15 to Providers 
overpayments.)  
Payments  for Full Vials of Herceptin Were Often Incorrect 
A-05-12-00017  Medicare Jurisdiction 15:  85 percent of the selected line items for full vials 
December 2012 
of Herceptin were incorrect.   (Recover $1.2 million in identified 
 
overpayments.)  
 
  Page 10  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 Emend (Aprepitant)
 
Emend is one of three drugs in a regimen of oral anti-emetic drugs that 
are prescribed to help reduce nausea and vomiting in chemotherapy patients.  For the oral 
form of Emend to be payable as an outpatient service under Medicare Part B, providers 
3
must administer or prescribe a three-drug oral regimen (consisting of Emend, a 5-HT  
antagonist, and dexamethasone), along with at least one of nine specified anticancer 
chemother aImpepurotpice ra g ePnrtosv. i dTehrse  Ddirdu Ngost s Choorurelcdt lbye B bilil lMleedd oicna rteh Pea srat mB efo cr ltahiem O froarl mFo. rm of the 
  Payments  Drug Emend 
A-07-11-04181  For the oral form of Emend, we found that about 91 percent of selected line 
December 12 
items that were billed by 5 selected providers during calendar year (CY) 
 
2010 were incorrect.  
RecommendationsCMS should verify that about $531,000 in identified 
overpayments has been refunded to the Federal Government; direct the 
selected providers to review the remaining CY 2010 line items on claims 
for the oral form of Emend that were not reviewed as part of this audit, as 
well as all subsequent claims, and refund any overpayments; develop and 
implement system edits to prevent payments for the oral form of Emend 
when providers do not bill for all of the required drugs in the regimen on 
the same claim; and use the results of this audit to educate providers. 
Part B Infusion Drugs 
Medicare pays 106 percent of the ASP for most drugs covered under Part B.  However, 
payment amounts for infusion drugs administered in conjunction with durable medical 
equipment (DME) are instead set at 95 percent of the drugs' average wholesale prices 
(AWPs) that were in effect on October 1, 2003.  Numerous OIG reports have shown that 
AWPs greatly exceed drug acquisition costs.  Basing payments for DME infusion drugs on 
AWPs set almost a decade ago raises concerns about whether Medicare payment levels are 
ap pWroasptreifautl eS.p ending  Part B Payments for Drugs Infused Through Durable Medical Equipment 
 
OEI-12-12-00310  Overall, Medicare payment amounts for DME infusion drugs exceeded ASPs 
February 2013 
by 54 to 122 percent annually.  Most individual drugs had Medicare 
 
payment amounts that exceeded ASPs, many by more than two times, in 
each year.  However, for as many as one-third of DME infusion drugs in each 
year, the payment amounts were below their ASPs, meaning that Medicare 
may be underpaying providers for these drugs.  Medicare spending on DME 
infusion drugs would have been reduced by 44 percent ($334 million) 
between 2005 and 2011 had payment been based on ASPs. 
RecommendationsCMS should either seek a legislative change requiring 
DME infusion drugs to be paid using the ASP methodology or include DME 
infusion drugs in the next round of the competitive bidding program. 
Appeals of Claims-Related Decisions 
Administrative law judges (ALJs) in the Office of Medicare Hearings and Appeals (OMHA) 
decide appeals at the third level of the Medicare appeals system.  OMHA reports directly to 
  Page 11  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
the Secretary of Health and Human Services.  In 2005, among other changes, ALJs were 
required to follow new regulations addressing how to apply Medicare policy, when to accept 
new evidence, and how CMS participates in appeals.  Medicare providers and beneficiaries 
ma Wy aasptpefeual lS cpeerntdaiinng  deIcmispiroonvse mreelnattse Adr teo N celeadimeds a fto trh eh eAadlmthin cisatrrea tsiveer vLiacwes J uadngde  iLteevmels o. f   Medicare 
  Appeals 
OEI-02-10-00340  Wasteful spending may occur when payment decisions are inappropriately 
November 2012 
reversed on appeal because guidance to ALJs and quality assurance 
 
controls are insufficient or ineffective.  We found that for 56 percent of 
appeals, ALJs reversed the prior-level decisions made by Qualified 
Independent Contractors (QICs) and decided in favor of appellants.  
However, when CMS participated in the appeals, ALJ decisions were less 
likely to be favorable to appellants.  QICs are retained by CMS to make 
second-level decisions on appeals.  We found that the reversal rate varied 
substantially across Medicare program areas; the variations were due to 
different interpretations of Medicare policies and other factors.     
RecommendationsCMS should continue to increase its participation in 
ALJ appeals.  We also recommend that CMS and OMHA seek statutory 
authority to postpone appeals with fraud involvement when necessary; 
revise regulations to provide more guidance to ALJs regarding the 
acceptance of new evidence; and implement administrative actions 
pertaining to training, policy clarifications, and electronic case files.  
We also recommend that OMHA seek statutory authority to establish a 
filing fee, implement administrative actions concerning quality assurance 
reviews of ALJ decisions, assess specialization among ALJs, and develop 
policies to handle suspicions of fraud and train staff accordingly.   
Preventing and Detecting Medicare Fraud 
CMS contracts with several entities, including Program Safeguard Contractors, Medicare 
Drug Integrity Contractors, Recovery Audit Contractors, and Zone Program Integrity 
Contractors (ZPICs), to perform many Medicare integrity functions.  OIG reviews have found 
vulnerabilities in Medicare contractors' efforts to identify and investigate potential fraud 
and abuse, as well as limitations in CMS's oversight of these contractors. 
Home Health AgenciesFraud Detection 
In 2010, Medicare paid $19.5 billion to 11,203 home health agencies (HHAs) for services 
provided to 3.4 million beneficiaries.  HHAs are considered to be particularly vulnerable to 
fraud, waste, and abuse.  CMS designated newly enrolling HHAs as high-risk providers in 
March 2011, citing their record of fraud, waste, and abuse.  A 2012 OIG report also found 
that one in four HHAs had questionable billing, which was concentrated in certain 
geographic areas where Federal investigators and analysts have focused their efforts to 
comb Daett fercatuindg,  Fwraaustde , aHnodm aeb Huesael.t h   AgenciesCMS and Contractor Oversight of Home 
  Health Agencies 
  Page 12  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
OEI-04-11-00220  We found issues with CMSs and its contractors ability to identify and 
December 2012 
respond to potential fraud.  The two CMS Medicare Administrative 
Podcast 
Contractors (MACs) we reviewed prevented $275 million in HHA improper 
payments and referred several instances of potential fraud, but the four 
ZPICs we reviewed did not identify any HHA-specific vulnerabilities and 
varied substantially in their efforts to detect and deter fraud.  Two of the 
four ZPICs recommended administrative actions and referred law 
enforcement cases for approximately eight times the number of HHAs as 
the other two ZPICs.  All four ZPICs served fraud-prone geographic areas.   
We also found that in 2011, Medicare inappropriately paid five HHAs with 
suspended or revoked billing privileges.  Further, because CMS did not 
promptly act on five revocation recommendations it directly received from 
a contractor, potentially inappropriate payments resulted.    
RecommendationsCMS should establish additional contractor 
performance standards for high-risk providers in fraud-prone areas 
(including newly enrolled HHAs).  CMS should also develop a system to 
track revocation recommendations and respond to them in a timely 
manner and follow up on and prevent inappropriate payments to HHAs 
with suspended or revoked billing privileges. 
Community Mental Health CentersFraud Detection 
During 2010, 206 community mental health centers (CMHCs) received an estimated 
$218.6 million for providing partial hospitalization program services to approximately 
25,000 Medicare beneficiaries.  Arrests by Medicare Fraud Strike Forces indicate that some 
parts of the country have a higher prevalence of CMHC fraud, including areas in Florida, 
Louisiana, and Texas.  A recent OIG review found that approximately half of CMHCs 
exhibited questionable billing in 2010.  Most of the centers were in Florida, Louisiana, and 
Texas D. e Otetchteinrg O FIrGa urde vieVwulsn ehraavbeil iftoieusn idn  CpMroSbsl eamnds C wonitthra CctMorSs's A ocvtievritsiiegsh Tto o Df eittesc cto anntdr aDcettoerr s.  
  Fraud in Community Mental Health Centers 
OEI-04-11-00101  One of nine MACs we reviewed performed activities to detect and deter 
January 2013 
CMHC fraud in 2010, and most of the activities were part of a CMS-led 
Podcast  
special project.  Activities to detect and deter CMHC fraud varied 
substantially among ZPICs in 2010; one ZPIC performed almost all such 
activities, most of which were part of the same CMS-led special project.  
Other MACs and ZPICs performed minimal activities to detect and deter 
fraudulent CMHC billing, despite having jurisdiction over fraud-prone 
areas.  Also, Medicare paid CMHCs that did not comply with its 
requirements after their revocations were effective and while their 
revocations were being approved.  Medicare could have prevented 
payments to potentially fraudulent CMHCs by consistently applying an 
autodeny edit across Florida CMHCs. 
RecommendationsCMS should implement additional CMHC fraud 
mitigation activities in all fraud-prone areas, develop a system to track 
revocation recommendations and improve revocation communication with 
contractors (e.g., coordinate activities to deter CMHC fraud in Florida), and 
follow up on payments made to CMHCs after the effective dates of their 
  Page 13  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
billing privilege revocations. 
Medical Equipment and SuppliesSupplier Solicitation of Physicians 
The Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
Competitive Bidding Program is an important new initiative for controlling costs and 
reducing fraud, waste, and abuse in Medicare's medical equipment benefit program.  The 
Round 1 Rebid of the program began in nine competitive bidding areas on January 1, 2011, 
and made significant changes to the amount that Medicare pays for items included in the 
program and to the suppliers that Medicare will pay to furnish these items.  Although a 
prescription change in the product brand or mode of delivery would not typically result in a 
different Medicare payment amount, we examined the extent to which suppliers might 
solicit phys iPcoitaennst itaol  mLaikmei tcehda Snugpepsli einr  Stohleicirit aptrieonsc orfi bPrinesgc.r ibing Physicians Under Medicare 
   for Abuse  DMEPOS Competitive Bidding Program 
OEI-06-11-00081  To curb potential abuses, Congress statutorily required OIG to review 
12/21/2012 
supplier solicitation of physicians in the competitive bidding environment.  
 
We found that most physicians in our sample were not solicited by 
suppliers to change the prescribed brand or mode of delivery for 
competitive-bid items.  Many physicians did not prescribe the brand or 
mode of delivery for any competitive-bid items and, therefore, had no 
reason to be solicited by suppliers.  Further, most physicians who 
prescribed a specific brand or mode of delivery received no solicitation 
from suppliers for changes.  Within our sample, most physicians who 
received requests from suppliers described such requests as rare or 
occasional and typically approved the changes.  Physicians reported that 
supplier reasons for change requests included the supplier's belief that a 
different brand or mode of delivery would better meet patient needs, the 
supplier's not carrying the prescribed brand, and requests from patients.  
Finally, none of the nearly 37,000 hotline calls related to the Medicare 
DMEPOS Competitive Bidding Program involved concerns about supplier 
solicitation of physicians regarding brand or mode of delivery.  The report 
did not contain recommendations. 
Identity TheftCMS Response to Known Breaches 
CMS maintains the protected health information of millions of Medicare beneficiaries.  
If a breach occurs and the security or privacy of this information is compromised, CMS is 
required by the American Recovery and Reinvestment Act of 2009 to notify the affected 
beneficiaries.  Such breaches can lead to medical identity theft, i.e., the appropriation or 
misuse of a patient's or a provider's medical identifying information (such as a Medicare 
identification number) to fraudulently obtain or bill for medical care.  Identity theft can 
create patient safety risks and impose financial burdens on those affected, leading to 
sign Pifriecvaenntt ifning aFnraciuadl  loCsMseSs R foesrp tohnese M toe dBirceaarceh eTsr aunsdt  MFuendidcsa la Indden ttaitxyp Tahyeefrt s. 
 
OEI-02-10-00040  Our review of CMSs response to known breaches of protected health 
October 2012 
information and to medical identity theft involving Medicare identification 
  Page 14  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
  numbers revealed opportunities for improvement.  Although CMS notified 
Medicare beneficiaries affected by known breaches, we found that several 
requirements were not met.  CMS has made progress in responding to 
medical identity theft by developing a compromised number database for 
contractors, but the database's usefulness could be improved.  Further, 
Medicares contractors do not consistently develop edits to stop payments 
on compromised numbers.    
RecommendationsCMS should pursue the following administrative 
actions:  ensure that breach notifications meet statutory requirements, 
improve the compromised number database, provide guidance to 
contractors about using database information and implementing edits, 
develop a method for ensuring that beneficiaries who are victims of 
medical identity theft retain access to needed services, and develop a 
method for reissuing identification numbers to beneficiaries affected by 
medical identity theft. 
Savings and Return on Investment From Fraud Prevention Technologies 
Pursuant to the Small Business Jobs Act of 2010, which requires the Department of Health 
and Human Services (HHS) to implement predictive analytics technologies, CMS developed a 
Fraud Prevention System, which reviews claims processed in all 50 States, the District of 
Columbia, and the territories.  The system detects patterns and aberrancies (referred to as 
leads) that CMS provides to its benefit integrity contractors for investigation.  
Investigations can result in administrative actions, including payment suspensions, provider 
and supplier revocations, and referrals to law enforcement.  Investigations can also result in 
the introduction of payment edits that screen claims automatically for specific problems.   
OIG is required to certify the actual and projected improper payments recovered and 
avoided and the return on investment related to HHSs use of predictive analytics 
technologies in the Medicare fee-for-service program.  OIG must also recommend whether 
the H DHeSte schtionugl Fdr caound tinTuhee,  Dexeppaarntdm,e onrt  omf oHdeiaflyth i tasn uds Heu omf apnr eSdericvitcivese  Haansa Ilmytpiclesm teencthendo Plroegdiiecsti.v  e  
  Analytics Technologies But Can Improve Its Reporting on Related Savings 
and Return on Investment 
A-17-12-53000  We found that in the first year of implementation, HHS did not fully meet 
December 2012 
the requirements for reporting actual and projected improper payments 
 
recovered and avoided in the Medicare fee-for-service program and 
reporting HHSs return on investment related to its use of such 
technologies.  HHS did not report some of the amounts required and had 
inconsistencies in its data; in addition, its methodology for calculating 
other reported amounts included some invalid assumptions that may have 
affected the accuracy of those amounts.    
RecommendationsHHS should require contractors to track recoveries 
that result from Fraud Prevention System leads; coordinate with law 
enforcement to enhance reporting of investigative and prosecutorial 
outcomes in cases predicated on referrals from the system; revise the 
methodology used to calculate projected savings with respect to improper 
payments avoided; revise the methodology used to calculate costs avoided 
from edits and payment suspensions, including verifying that the 
information in the Departments records is consistent with that maintained 
  Page 15  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
by the benefit integrity contractors; and include all costs associated with 
the system, including reporting costs, indirect costs, and projected costs, in 
its return on investment calculation.  
Other Part A- and Part B-Related Oversight 
Electronic Health RecordsIncentive Payment Program 
The following review is an early assessment of CMS's oversight of the Medicare electronic 
health record (EHR) incentive program, for which CMS estimates it will pay $6.6 billion in 
incentive payments between 2011 and 2016.  To qualify for Medicare EHR incentive 
payments, professionals and hospitals must possess certified EHR technology and 
meaningfully use that certified EHR technology in accordance with requirements defined by 
CMS.  Professionals and hospitals self-report data to demonstrate that they meet program 
requirements.     
 Other Oversight  Early Assessment Finds That CMS Faces Obstacles in Overseeing the Medicare 
  Electronic Health Record Incentive Program 
OEI-05-11-00250  CMS does not verify the accuracy of professionals and hospitals self-
November 2012 
reported information prior to payment because data necessary for 
 
verifications are not readily available.  CMS also does not direct high-risk 
professionals and hospitals to submit supporting documentation for 
prepayment review.  CMSs ability to safeguard incentive payments after 
they have been made is also limited.  CMSs planned postpayment audits 
may not conclusively verify the accuracy of professionals and hospitals 
self-reported information because supporting documentation may not be 
available. 
RecommendationsCMS should obtain and review supporting 
documentation from selected professionals and hospitals before payment 
to verify the accuracy of their self-reported information and issue guidance 
with specific examples of documentation that professionals and hospitals 
should maintain to support their compliance.  The report also includes 
recommendations for the Office of the National Coordinator for Health 
Information Technology that define EHR technology certification 
requirements in Federal regulations. 
Information SecurityCompliance With Statutory Requirements 
Federal law requires that each Medicare contractor have its information security program 
evaluated annually by an independent entity.  These evaluations must address the eight 
major requirements enumerated in the Federal Information Security Management Act of 
2002 (FISMA).  The FISMA also requires evaluations of the information security controls for 
a subset of systems.  OIG must submit to Congress annual reports on the results of these 
evaluations, including assessments of their scope and sufficiency.  This report fulfills that 
responsibility for fiscal year (FY) 2010. 
   
  Page 16  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
   Other Oversight  Review of Medicare Contractor Information Security Program Evaluations 
  for Fiscal Year 2010 
A-18-12-30100  We found that evaluations of the contractor information security programs 
January 2013 
were adequate in scope and were sufficient.  Assessments for one of the 
 
two enterprise data centers tested were adequate in scope and were 
sufficient.  However, at the other enterprise data center, we could not 
determine whether the scope and sufficiency of the review were adequate 
because of issues with the working papers, such as lack of evidence that all 
testing procedures had been completed and that all identified weaknesses 
were adequately supported.  
RecommendationCMS should ensure that its enterprise data center 
technical assessments are adequately supported.  
Hospital Quality of CareConditions Present on Admission 
The report below provides national estimates for the extent to which hospital coding staff 
misreported indicators that identified conditions as present on admission (POA).  Hospitals 
do not receive increased Medicare reimbursement for certain conditions (referred to as 
hospital-acquired conditions) when they develop during the hospital stay and are not 
present at the time of admission.  CMS officials have expressed continued interest in the 
accuracy of POA indicators because they provide an opportunity for monitoring hospital 
quality of care and are critical to CMS's efforts to link payment to quality; the coding must be 
accurate to serve these purposes. 
 Other Oversight  Assessment of Hospital Reporting of Present on Admission Indicators on 
  Medicare Claims 
OEI-06-09-00310  We found that hospital coders incorrectly reported 3 percent of the 5,491 
November 2012 
POA indicators reviewed, resulting in the presence of at least one incorrect 
 
indicator on 18 percent of claims.   
We did not make formal recommendations; however, encouraging hospitals 
to assess POA reporting practices related to developing conditions and 
exemption codes and to retrain staff as needed could improve accuracy.   
 
Medicare Part C and Part D 
Part C Risk Adjustment Data Validation  
CMS categorizes patient diagnoses, which are submitted by Medicare Advantage (MA) 
organizations, into groups of clinically related diseases called Hierarchical Condition 
Categories and uses the categories and demographic characteristics to calculate a risk score 
for each beneficiary.  CMS then uses the risk scores to adjust the monthly capitated 
payments to MA organizations for the next payment period.  The two examples below 
demonstrate the impact of unsupported diagnosis data on risk ratings and adjustments to 
capitated payments.   
  Page 17  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
RecommendationsWe recommend that the two MA organizations refund to the Federal 
Government the overpayments identified for the sampled beneficiaries; work with CMS to 
determine the correct contract-level adjustment for the estimated overpayments; 
implement written policies and procedures for obtaining, processing, and submitting valid 
risk adjustment data; and improve current practices to ensure compliance with Federal 
requ iIrmempreopnetsr .P art C  Risk Adjustment Data Validation of Payments Made to PacifiCare of 
  Payments  California for Calendar Year 2007 (Contract Number H0543) 
A-09-09-00045  On the basis of our sample results, we estimated that PacifiCare was 
November 2012 
overpaid approximately $423.7 million in calendar year (CY) 2007.  The 
 
risk scores for 45 of 100 selected beneficiaries were invalid because the 
diagnoses PacifiCare provided were not supported.  (Refund to the Federal 
Government $224,388 in overpayments identified for the sampled 
 Improper Part C  Risk Adjustment Data Validation of Payments Made to Excellus Health Plan, 
beneficiaries.)   
Payments  Inc., for Calendar Year 2007 (Contract Number H3351) 
A-02-09-01014  On the basis of our sample results, we estimated that Excellus was overpaid 
October 2012 
approximately $41.6 million in CY 2007.  The risk scores of 45 of 
 
98 selected beneficiaries were invalid because the diagnoses Excellus 
  
submitted were not supported.  (Refund to the Federal Government 
$157,777 in overpayments identified for the sampled beneficiaries.)  
Parts C and Part D Benefit Integrity Activities  
This report focuses on the one Medicare Drug Integrity Contractor (MEDIC) responsible for 
detecting and preventing fraud, waste, and abuse in Medicare Parts C and D nationwide.  
The report provides an update on MEDIC identification of potential Part D fraud and abuse 
and  iFsr athued  fainrsdt A rbeuvsiee w Boefn MefEitD InICte garnittyif rCaoundtr a(bcteonrsefitM inEtDeIgCr Biteyn)e faict tIinvtietgierist yf oArc tPivairttie Cs .i n Medicare 
  Parts C and D 
OEI-03-11-00310  Our review of the MEDIC that has responsibility for both Medicare Part C 
January 2013 
and Part D revealed that its Part C investigations and case referrals 
 
represented only a small percentage of its benefit integrity activities.  We 
identified several problems hindering the MEDIC's ability to identify and 
investigate fraud and abuse in Part C and Part D.  The two programs 
involved $190 billion in expenditures in 2011 and 33 million beneficiaries 
in 2012.   
RecommendationsCMS should amend its regulations to require Part C 
and Part D plan sponsors to refer potential fraud and abuse incidents to the 
MEDIC and authorize the MEDIC to directly obtain information from 
entities such as pharmacies, physicians, and pharmacy benefit managers.  
We also recommend the following administrative improvements:  provide 
the MEDIC with centralized Part C data, clarify policy and instruct the 
MEDIC about the circumstances under which the MEDIC may share specific 
information with other entities, explore methods to develop and 
implement a mechanism to recover payments from Part C and Part D plan 
sponsors when law enforcement agencies do not accept for further action 
  Page 18  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
cases involving inappropriate services, and enhance the MEDIC's monthly 
workload reporting requirements. 
Part D Pharmacy and Therapeutics CommitteesConflicts of Interest 
Part D Sponsors Pharmacy and Therapeutics (P&T) committees make prescription drug 
coverage decisions on the basis of scientific evidence and standards of practice.  Such 
decisions affect beneficiaries' access to specific prescription drugs and the cost of drugs to 
beneficiaries and the Federal Government.  To comply with the law, sponsors' P&T 
committees must prevent conflicts of interest from influencing members to give preference 
to certain drugs.  In addition, sponsors' P&T committees must comply with Federal law and 
regulations requiring that at least one physician and at least one pharmacist on each 
committee be independent and free of conflict relative to the sponsor and pharmaceutical 
manufacturer sE. thics    Medicare Gaps in Oversight of Conflicts of Interest in Medicare Prescription 
  Drug Decisions 
OEI-05-10-00450  Sponsors' P&T committees have limited oversight of their members' 
March 2013 
conflicts of interest, thereby compromising sponsors' ability to prevent 
Podcast 
financial interests from influencing decisions about drug coverage.  The 
majority of sponsors' P&T committees have limited definitions of conflicts 
of interest, which could hinder them from identifying conflicts.  Also, many 
sponsors' P&T committees allow their members to determine and manage 
their own conflicts.  Additionally, CMS does not adequately oversee 
sponsors' compliance with the requirement that at least two members on 
each P&T committee be independent and free of conflict relative to the 
sponsor and pharmaceutical manufacturers. 
RecommendationsCMS should define pharmacy benefit managers as 
entities that could benefit from drug coverage decisions, direct sponsors to 
ensure that safeguards exist to mitigate improprieties related to 
employment by the entity managing the P&T committee, and ensure that 
an objective process is used to determine and manage conflicts.  CMS 
should also oversee sponsors' compliance with the requirement that at 
least two committee members be independent and free of conflicts. 
 
   
  Page 19  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013  Medicare Program Reviews 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  http://oig.hhs.gov 
 
 
  Page 20  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 Medicaid Program Reviews 
 
States have considerable flexibility in designing and operating their Medicaid programs; 
however, to receive a Federal share of Medicaid costs, applicable State and Federal 
requirements must be met.  The Federal Government pays its share of a States medical 
assistance expenditures under Medicaid based on the Federal medical assistance 
percentage, which varies depending on a States relative per capita income. 
 
 
Improper State Claims  
for Federal Reimbursement 
Improper payments are those that should not have been made or that were made in 
incorrect amounts, i.e., overpayments or underpayments.  This section focuses on Federal 
overpayments (a form of wasteful spending) that resulted from improper State claims for 
Federal reimbursement.  For example, States do not always effectively identify and reduce 
their erroneous and inappropriate payments for provider and supplier billings before 
submitting the amounts for reimbursement of the Federal share.  Provider billings may be 
inappropriate for several reasons:  the items or services billed are not supported by the 
documentation in the providers medical files or are not medically necessary for the 
patients condition, the billings have administrative or policy errors, or other Federal and 
State requirements are not met.   
States own administrative errors or misinterpretations may also result in unallowable 
claims for the Federal share of Medicaid. 
Disproportionate Share Hospital Payments (New Jersey) 
Under the Medicaid disproportionate share hospital (DSH) program, a State is required to 
make special payments, known as DSH payments, to hospitals that serve a disproportionate 
share of low-income and/or uninsured patients.  For a hospital to receive DSH payments, the 
State must classify the hospital as a DSH.  A State may not define or deem a hospital as a 
DSH unless the hospital has a Medicaid inpatient utilization rate (MIUR) of not less than 
1 percent.  A hospital's MIUR, expressed as a percentage, is the number of inpatient days 
attributable to patients who were Medicaid eligible, divided by the total of the hospital's 
inpa tIimepnrto dpaeyr sC liani ma sp arTthiceu Nlaerw y Jeerasre. y Department of Human Services Claimed Medicaid 
  for Federal Share 2   Disproportionate Share Hospital Payments to Five Hospitals That Did Not 
Meet Federal Eligibility Requirements 
 2                                                            
 To the left of each report title, we have flagged with a checkmark the management challenge(s) 
associated with the reviews findings and recommendations, e.g.,  Improper Claims for the Federal 
Share,  Other Wasteful Medicaid Spending,  Quality of Care, etc.  Implementing a reports 
recommendations would help curb negative outcomes associated with the designated management 
challenges. 
  Page 21  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
   
 
A-02-09-01017   New Jersey claimed DSH payments of about $100 million ($50 million 
November 2012  Federal share) for five hospitals that did not meet Federal requirements for 
  DSH payments during our audit period.  Specifically, for the five hospitals, 
New Jersey calculated a MIUR of less than 1 percent during one or more 
State fiscal years but claimed DSH payments for the hospitals because it 
misinterpreted Federal regulations on DSH eligibility. 
RecommendationsNew Jersey should refund $50 million to the Federal 
Government and ensure that all hospitals designated as DSHs meet Federal 
eligibility requirements for DSH payments. 
Inpatient Psychiatric Hospitals (Indiana) 
For States to claim Federal reimbursement for their Medicaid inpatient psychiatric service 
payments to a psychiatric hospital, the hospital's inpatient services must meet the Federal 
definitions of such services.  The definitions require the provider to demonstrate 
compliance with the basic Medicare Conditions of Participation (CoPs) generally applicable 
to al lI mhopsroppitearl Cs laanimds t wIon dsipaencai aIml Mpreodpiecralyr eC lCaoimPesd a Fpepdleicraalb Rlee itmob pusrysecmhieanttr fiocr h Aolsl pRietvaielsw. ed 
  for Federal Share,  Medicaid Inpatient Psychiatric Hospital Service Payments to Logansport 
Quality of Care  State Hospital 
A-05-12-00042  Indiana claimed Federal reimbursement for Medicaid inpatient psychiatric 
February 2013  service payments made to Logansport State Hospital (Logansport) that 
  were not in accordance with Federal requirements for inpatient psychiatric 
hospital services.  Logansport did not demonstrate compliance with the 
special Medicare CoP at any time during the audit period.  Therefore, none 
of the Federal reimbursement for Medicaid inpatient psychiatric service 
payments made to Logansport for claims with dates of service during the 
audit period was allowable. 
RecommendationsIndiana should refund $5.8 million to the Federal 
Government, identify and refund the Federal share of any additional 
payments made to Logansport for claims with dates of service after the 
audit period if neither the State agency nor Logansport can demonstrate 
Logansport's compliance with Federal requirements for inpatient 
psychiatric hospital services, and ensure that Federal reimbursement for 
Medicaid inpatient psychiatric service payments to psychiatric hospitals is 
claimed only if those hospitals can demonstrate compliance with the 
special Medicare CoP. 
Personal Care ServicesAn OIG Portfolio 
Eligible beneficiaries can receive personal care services (PCS) under Medicaid State plan 
options or waivers.  States providing PCS through demonstration or waiver authorities must 
adhere to the terms approved by CMS.  PCS must be provided at home or another approved 
location and follow a specific plan of care and are typically performed by care attendants
a career field that is expected to grow substantially over the next few years, along with the 
costs to Medicaid for personal care services.  In the past 6 years, Medicaid costs for such 
services increased by 35 percent, totaling approximately $12.7 billion in 2011.  In the same 
  Page 22  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
period, the Office of Inspector General (OIG) issued 23 reports on personal care services and 
conducted numerous investigations involving related fraud.  Our latest product, the OIG 
Portfolio below, synthesizes this body of work and offers new and comprehensive 
recomme nPdoatetniotinasll yt o aPdedrsroensasl  vCualrnee Srearbviiclietsi:e  sT.r  e nds, Vulnerabilities, and Recommendations for 
  Improper Claims,  Improvement 
Quality of Care 
 Fraud and Abuse  
OIG-12-12-01  Our audit and evaluation work has revealed a pattern of improper PCS 
November 2012  payments linked to lack of compliance with State policies and requirements 
Spotlight  and found that existing controls designed to prevent improper payments 
Article  are ineffective.  PCS fraud (including many cases in which the care 
attendants and the beneficiaries act as conspirators to scam the Medicaid 
system) is on the rise, representing more cases investigated by State 
Medicaid Fraud Control Units than any other type of Medicaid fraud. 
RecommendationsCMS should take action to address the concerns in 
our prior reports.  We further recommend that CMS make qualification 
standards for care attendants more consistent; require care attendants 
to be enrolled or registered with the State; require dates, times, and 
attendants' identities to be listed on claims submitted to Medicaid; and 
expand Federal requirements and guidance to reduce variation in  
requirements for claims documentation, beneficiary assessments, plans of 
care, and supervision of attendants across States.  OIG also recommends 
that CMS issue guidance to States regarding adequate prepayment controls 
and provide States with the data they need to identify overpayments 
occurring when beneficiaries are receiving institutionalized care.  Finally, 
CMS should consider whether additional program controls are needed. 
HCBS-Covered Assisted Living Facilities in Seven States 
CMS may waive certain requirements to allow State Medicaid programs to cover home and 
community-based services (HCBS) for beneficiaries.  However, States must implement their 
waivers as specified in their CMS-approved applications, including any additional 
requirements related to plans of care.  Little information exists about the HCBS furnished to 
beneficiaries in assisted living facilities (ALFs), the costs of those HCBS, or the extent to 
which those HCBS are furnished in compliance with Federal and State requirements.  The 
review cited below revealed that in 2009, 35 Medicaid programs reported that they covered 
various HCBS for beneficiaries in ALFs under waivers at an annual cost of $1.7 billion.  Each 
State had federally mandated provider standards; however, ALFs in seven States we selected 
for further review did not always comply with them, and required plans of care did not 
always mePeott eFnetdiaelrlya l rHeqoumier eamnde Cnotsm. m  unity-Based Services in Assisted Living Facilities 
  Improper Claims, 
Quality of Care 
 
OEI-09-08-00360  In seven selected States, we found that 77 percent of beneficiaries received 
December 2012  HCBS in ALFs that were cited for a deficiency with regard to at least one 
State licensure or certification requirement.  Nine percent of beneficiaries' 
  Page 23  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
  records did not include plans of care required by the States.  Forty-two 
percent of the federally required plans of care did not include the 
frequency of HCBS furnished, as required.  Five of the seven States required 
that plans of care specify the beneficiaries' goals and the interventions to 
meet them, but 69 of 105 plans of care for selected beneficiaries did not 
meet that requirement.  Two of the seven States also required that plans of 
care be signed by beneficiaries or their representatives.  In the 2 States, 12 
of 25 plans of care for beneficiaries receiving HCBS in ALFs did not meet 
that requirement. 
RecommendationCMS should issue guidance to State Medicaid programs 
emphasizing the need to comply with Federal requirements for covering 
HCBS under the 1915(c) waiver. 
Home Health Services (New York) 
Certified Home Health Agencies (CHHAs) in New York City provide preventive, therapeutic, 
and/or rehabilitative services to Medicaid beneficiaries.  `Pursuant to Federal regulations, 
home health services are provided to a beneficiary at the beneficiary's place of residence 
and on his or her physician's orders as part of a written plan of care that the physician 
revie Iwmsp reovpeerry C 6la0im dsa ysN.  ew York Improperly Claimed Medicaid Reimbursement for Some Home 
  for Federal Share,  Health Services Claims Submitted by Certified Home Health Agencies in New 
Quality of Care  York City 
A-02-10-01022  New York claimed Federal Medicaid reimbursement for some home health 
November 2012  services claims submitted by CHHAs in New York City that were not in 
  accordance with Federal and State requirements.  Specifically, for 17 claims, 
the plan of care was not reviewed every 60 days, and for 1 claim, the 
provider was unable to document that the service was provided.  On the 
basis of our sample results, we estimated that the State improperly claimed 
$69.1 million in Federal Medicaid reimbursement during our January 1, 
2007, through December 31, 2009, audit period. 
RecommendationsNew York should refund $69.1 million to the Federal 
Government and issue guidance to CHHAs in New York City on Federal and 
State requirements for physicians' orders and plans of care. 
Family-Based Treatment Rehabilitation Services (New York)  
Family-based treatment (FBT) rehabilitation services include training and assistance with 
daily living skills, medication management, socialization, counseling, family support, and 
heal tIhm sperrovpiecre Csl.a ims  New York Improperly Claimed Medicaid Reimbursement for Family-Based 
  for Federal Share  Treatment Rehabilitation Services 
A-02-10-01024  New York improperly claimed a Federal share of FBT rehabilitation 
March 2013  services that did not meet Federal and State requirements.  Of the 100 
  claims in our random sample, 84 did not comply and 58 contained more 
than 1 deficiency.  These deficiencies occurred because providers did not 
fully comply with State regulations, authorizing physicians were not 
  Page 24  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
familiar with applicable State regulations and program requirements, 
and the State did not adequately monitor the program.  
RecommendationsNew York should refund $27.5 million to the Federal 
Government.  If the State does not close the FBT program by a date it has 
set as a deadline, we further recommend that it provide guidance to the 
provider community on State regulations, provide guidance to physicians 
on State regulations and program requirements, and improve its 
monitoring and oversight to ensure compliance. 
Family Planning (Arkansas and California) 
The Federal Government pays its share of a State's medical assistance expenditures under 
Medicaid on the basis of the Federal medical assistance percentage, which varies depending 
on the State's relative per capita income.  Family planning services are reimbursed at an 
enhanced 90-percent rate.  Family planning services are those that prevent or delay 
pregnancy or otherwise control family size.  Following are the results of family planning 
serv iIcmepsr roepveire Cwlasi mins  ArAkraknasnassa sa Innda pCparloifporriantieal.y  Received Medicaid Family Planning Funding for 
  for Federal Share  Federal Fiscal Years 2006 Through 2010 
A-06-11-00022  Arkansas improperly claimed expenditures that did not qualify for the 
January 2013  90-percent rate for family planning.  The expenditures exceeded limits 
  specified in the State's infant delivery allocation methodology and resulted 
from errors in compiling the family planning expenditures and from errors 
in the computer programming used to identify infant delivery costs.  Other 
questionable expenditures were set aside for further analysis.  
RecommendationsArkansas should refund to the Federal Government 
$1.9 million in family planning Federal share, work with CMS to determine 
the allowable portion of $929,000 in family planning Federal share that it 
received for allocated sterilization costs, review the claim-level data of 
quarters that we did not analyze, identify infant delivery costs incorrectly 
classified, and refund overpayments to the Federal Government.  We also 
recommend that the State review its pertinent computer programming; 
submit documentation to CMS supporting the reasonableness of the 
percentages used in allocations; and establish review procedures to ensure 
that expenditures are correctly compiled, assigned, and claimed. 
 Improper Claims  California Improperly Claimed Enhanced Federal Reimbursement for 
  for Federal Share  Medicaid Family Planning Services Provided in San Diego County 
A-09-11-02040  California did not always comply with certain Federal and State 
December 2012  requirements when claiming Federal reimbursement at the 90-percent rate 
  for family planning services.  The rate was unallowable because the 
primary purpose of the visits was not family planning, the visits were for 
followup properly reimbursed at the regular rate, or the supporting 
documentation was insufficient.  We also found claims that contained 
either no procedure code or a procedure code that was not approved by 
CMS for reimbursement at the 90-percent rate. 
RecommendationsCalifornia should refund $5.7 million to the Federal 
Government, establish billing procedures to ensure that only services 
  Page 25  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
whose primary purpose is family planning are claimed for reimbursement 
at the 90-percent enhanced rate, and establish Medicaid Management 
Information System edits to ensure that family planning claims meet 
Federal and State requirements for reimbursement at the 90-percent 
enhanced rate and at the regular rate for followup visits. 
Medicaid School-Based Transportation Services (New Hampshire) 
Medicaid payments are allowed for medical services provided to children under the 
Individuals with Disabilities Education Act through a childs individualized education plan. 
Covered services may include, but are not limited to, physical therapy, occupational therapy, 
speech pathology/therapy services, psychological counseling, nursing, and transportation 
serv iIcmepsr. oper Claims  Transportation ServicesNew Hampshire Did Not Always Correctly Claim 
  for Federal Share  Medicaid Payments for School-Based Transportation Services 
A-01-11-00008  New Hampshire did not always claim Federal Medicaid reimbursement for 
October 2012  school-based transportation services submitted by schools in accordance 
  with Federal and State requirements during calendar years (CYs) 2006 
   through 2009.  Of the 115 items in a random sample, 78 items had 1 or 
more transportation services that were not reimbursable.  The deficiencies 
occurred because New Hampshire issued incorrect guidance to the school 
administrative units (SAUs) on the basis of its misunderstanding of Federal 
requirements.  In addition, the State did not adequately monitor the claims 
for Medicaid school-based transportation services submitted by SAUs.  
RecommendationsNew Hampshire should refund an estimated 
$2.7 million to the Federal Government, work with CMS to review Medicaid 
payments made to SAUs after our audit period and refund any 
overpayments, strengthen its oversight of the New Hampshire Medicaid to 
Schools program to ensure that claims for school-based transportation 
services comply with Federal and State requirements, and issue new 
guidance on school-based transportation that is consistent with Federal 
requirements. 
Medicaid School-Based Services Administrative Costs (Arizona)  
Federal law provides for States to be reimbursed for administrative activities that directly 
support identifying and enrolling potentially eligible children in Medicaid.  The Federal 
reimbursement is 50 percent of allowable administrative expenses.  According to Federal 
regulations, random moment sampling (RMS), which uses random moment timestudies 
(RMTS), is one of the federally acceptable methods for allocating costs to Federal awards 
when employees work on multiple activities not allocable to a single Federal award.  CMS 
guidance clarifies the regulations by providing information on the sample universe, 
sampling plan methodology, treatment of the summer period, RMTS documentation, 
train Iimngp rfoopre Rr MClaTiSm ps arAtidcmipiannisttsr,a atinvde  Cthoset smoAnriitzoornian gIm pprroocpeesrsly.   C  l a imed Federal Reimbursement 
  for Federal Share  for Medicaid School-Based Administrative Costs 
A-09-11-02020  Arizona did not always maintain required documentation to support the 
  Page 26  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
January 2013  RMTS methodology used to allocate school-based administrative costs to 
  Medicaid, and the RMTS methodology was not fully consistent with Federal 
requirements.  Also, the 2004 State guide included incorrect guidance that 
allowed its contractor to discard sample items. 
RecommendationsArizona should refund to the Federal Government 
$11.7 million for unallowable school-based administrative costs, work with 
CMS to determine the allowability of $18.8 million that we set aside for 
further analysis, and refund to the Federal Government any amount 
determined to be unallowable.  We also recommend that Arizona 
strengthen controls to ensure that all required documentation to support 
the RMTS methodology is maintained and the RMTS methodology is 
consistent with Federal requirements.  Arizona should also review periods 
after our audit period and make appropriate financial adjustments for any 
unallowable school-based administrative costs claimed. 
Administrative Costs Unallowable or Indeterminable (Florida)  
Floridas Agency for Persons With Disabilities (APD) serves individuals with developmental 
disabilities and their families.  Because APD performed certain services required under the 
State plan on behalf of individuals with developmental disabilities, the allowable portion of 
its administrative costs allocable to Medicaid was eligible for Federal reimbursement.  On 
the quarterly Form CMS-64, Florida claimed a 50-percent Federal share for APDs Medicaid 
adm iInmisptrroapteirv eC lcaoimstss , iFnlcolruiddain Cgla ciomsetds  Saollmoec aMteeddi coanid t hAed mbiansiisstr oaft iAveP CDosst qs uTahartte Drildy  NRoMt SC.o..m  ply 
  for Federal Share  With Program Requirements 
A-04-10-00076  A portion of the administrative costs Floridas APD allocated to Medicaid 
March 2013  during our review period did not comply with Federal requirements and 
  therefore was unallowable for Federal financial participation.  Also, we 
  could not determine whether the remaining amount we reviewed was 
allowable because we could not quantify the effect of vulnerabilities 
identified in the statistical sampling methods used. 
RecommendationsFlorida should refund $2.2 million to the Federal 
Government; ensure that APD follows pertinent procedures defined in its 
cost allocation plan; work with CMS to determine what portion of the 
remaining $40 million ($20 million Federal share) in costs allocated to 
Medicaid on the basis of RMS was allowable under Federal requirements; 
and require APD to amend its cost allocation plan to ensure that APD's RMS 
gives appropriate consideration to all hours worked by employees, 
properly accounts for invalid responses and nonresponses, and requires 
observation forms to include the sampled position numbers. 
Administrative Costs for Housing Program (Pennsylvania) 
The Social Security Act permits States to claim Federal reimbursement for Medicaid 
administrative costs.  Such costs must be for the proper and efficient administration of the 
State plan.  CMS guidance clarifies that allowable claims must be directly related to the 
administration of the Medicaid program.  The Federal share of most Medicaid 
administrative costs is reimbursed at the 50-percent rate.   
  Page 27  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
 Improper Claims  Pennsylvania Claimed Unallowable Medicaid Administrative Costs for the 
  for Federal Share  Regional Housing Coordinator Initiative 
A-03-11-00210  Pennsylvania did not comply with Federal requirements when it claimed a 
December 2012  Federal share of Medicaid administrative costs for the Pennsylvania 
  Regional Housing Coordinator Initiative (Initiative) costs.  The claimed 
costs represented indirect services, such as information, referrals, training, 
and technical assistance, to support Pennsylvania's housing programs, 
including programs that provided housing services to Medicaid 
beneficiaries transitioning to waiver programs.  These indirect services 
were not directly related to the administration of the Medicaid program.  
Accordingly, Pennsylvania's claims for the Initiative's costs from July 2008 
through December 2011 were unallowable. 
RecommendationsPennsylvania should refund $2 million in Federal 
funds for unallowable Initiative costs, refund the Federal share of 
unallowable Initiative costs claimed after our audit period, and discontinue 
all future claims for Initiative costs. 
Other Sources of Wasteful Medicaid Spending 
Federal Upper Limits on Drug Payments 
The Medicaid Federal upper limit (FUL) program limits Medicaid reimbursement for certain 
multiple-source drugs and seeks to ensure that the Federal Government acts as a prudent 
buyer by taking advantage of market prices for these drugs.  Prior OIG work consistently 
found that the published prices used to set Medicaid's FUL amounts often greatly exceeded 
prices available in the marketplace.  CMS has taken steps to implement FUL amounts based 
on average manufacturer prices (AMPs), but wasteful spending has occurred because FULs 
contin Outeh etor  Wbea sbtaefsueld   oDnr upgu Pbrliicsihnegd pArniacelysz.i ng Changes to Medicaid Federal Upper Limit Amounts 
   Medicaid Spending  
OEI-03-11-00650  For our review period, we found that Medicaid FUL amounts based on 
October 2012  AMPs were 61 percent lower than FUL amounts based on published prices 
  at the median and AMP-based FULs exceeded sampled pharmacy 
acquisition costs by 43 percent in the aggregate.  FUL amounts based on 
published prices were more than four times greater than sampled 
pharmacy acquisition costs.    
RecommendationCMS should complete the implementation of the 
AMP-based FUL amounts for drug reimbursements. 
Overpayments To Be Collected, Adjusted 
Failure to recoup overpayments perpetuates waste.  Our objective was to determine the 
extent to which CMS had collected sustained overpayments identified in selected OIG 
Medicaid audit reports.  When CMS concurs with a recommendation to collect 
overpayments, it may sustain either the entire amount or a different amount.  If the State 
  Page 28  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
agrees in writing with OIG or CMS to refund the overpayment, the State should refund it to 
the Federal Government.  If the State does not agree, CMS follows different procedures to 
resolve the OIG recommendations.  In 147 OIG audit reports issued between fiscal years 
(FYs) 2000 and 2009, OIG recommended that States refund Medicaid overpayments, and 
CMS agreed to sustain $1.2 billion. 
 Other Wasteful  Uncollected OverpaymentsThe Centers for Medicare & Medicaid Services 
   Medicaid Spending  Collected the Majority of Medicaid Overpayments but Millions Remain 
Uncollected 
A-05-11-00071  As of December 2012, CMS reported collecting $987.5 million of the 
February 2013  $1.2 billion in Medicaid overpayments that it had sustained in the 
  147 audit reports covered by our review.  However, CMS had not collected 
the remaining $225.6 million.  The uncollected amount related to 
overpayments that OIG had identified in 10 audit reports that the States 
had not agreed to refund.  In addition, CMS could not document that 
$7.2 million that it reported as collected had been collected. 
RecommendationsCMS should collect the remaining $225.6 million that 
is due the Federal Government, review and address delays in resolving OIG 
audit recommendations and promptly pursue corrective actions, maintain 
adequate documentation to support the collection of overpayments in 
accordance with requirements, and educate the States about their 
responsibility to report overpayments on the correct line of the Form 
CMS-64 and to improve oversight of the reporting process. 
Federal Share of Collected Overpayments Not Returned (Florida) 
 Other Wasteful  Florida Medicaid:  Millions in Overpayments Not Refunded 
   Medicaid Spending 
A-04-11-08007  Florida did not return to CMS the Federal share of Medicaid overpayments 
3-27-2013  the State identified or collected in our audit period (July 1, 2007, through 
  June 30, 2010).  The State also collected overpayments during the 2 years 
that followed our audit period and did not return the Federal share.    
RecommendationsFlorida should repay $1.4 million (Federal share) of 
overpayments collected during our audit period, repay $852,000 (Federal 
share) of overpayment collections during the 2 State fiscal years after our 
audit period, improve internal coordination to report State-identified 
Medicaid overpayments and collections, and work with CMS to determine 
whether the State must repay $10.8 million (Federal share) of recipient 
overpayments identified but not collected.    
Third Party Liability 
Medicaid is intended to be the payer of last resort.  Millions of Medicaid beneficiaries have 
additional health insurance through third-party sources, such as Medicare, TRICARE, or 
other payers.  If beneficiaries have another source of payment, that source should pay 
before Medicaid does, up to the extent of its liability.  Medicaid has provisions designed to 
enhance States' ability to identify and recover payments from liable third parties.  Cost 
avoidance is the method that States use to avoid payment when other insurance resources 
  Page 29  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
are available to the beneficiary.  In contrast, the pay-and-chase method occurs when States 
pay providers for submitted claims and then attempt to recover payments from liable third 
partie sO.t  h er Wasteful  Third Party LiabilityMedicaid Third-Party Liability Savings Increased, But 
   Medicaid Spending  Challenges Remain 
OEI-05-11-00130  States reported increased Medicaid savings from third-party liability cost 
January 2013  avoidance and recoveries.  States reported that improvements to their 
  processes facilitated savings.  Despite these improvements, States reported 
longstanding challenges with third parties when trying to identify 
insurance coverage and recover payments.  In addition, States reported 
challengescaused, they say, by laws and regulationsthat hinder the 
recovery of payments.  We found $4 billion in third-party liability 
overpayments that remain at risk of not being recovered. 
RecommendationsCMS should work with States to address longstanding 
challenges related to identification of insurance coverage and recovery of 
payments, address States' challenges with 1-year timely filing limits for 
Medicare and TRICARE, and work to strengthen enforcement mechanisms 
designed to deal with uncooperative third parties. 
Overpayments Associated With Credit Balances (North Carolina) 
North Carolinas Billing Guide requires providers to submit a quarterly report showing all 
identified Medicaid overpayments recorded as credit balances in the providers accounting 
systems as of the last day of each calendar quarter.  Credit balances may occur when a 
providers reimbursement for services it provides exceeds the allowable amount or when 
the reimbursement is for unallowable costs, resulting in an overpayment.  Credit balances 
also may occur when a provider receives payments from Medicaid and a third-party payer 
for the same services.  The audit objectives were to determine whether the providers 
reconciled invoice records with credit balances and reported the associated Medicaid 
overp aOytmheer nWtsa sttoe ftuhle   SUtantreep aogretendc yO,v aesr praeyqmueirnetsd. Noninstitutional Providers in North Carolina 
   Medicaid Spending  Did Not Reconcile Invoice Records With Credit Balances and Report the 
Associated Medicaid Overpayments to the State Agency 
A-04-11-04016  The noninstitutional providers we reviewed did not identify and report 
November 2012  Medicaid overpayments because North Carolina did not require them to 
  exercise reasonable diligence in reconciling invoice records with credit 
balances to determine whether overpayments existed.  Of the 185 invoice 
records with both Medicaid payments and credit balances in our sample, 
112 contained Medicaid overpayments, but 73 did not.   
RecommendationsNorth Carolina should refund $7,000 (Federal share) 
to the Federal Government for overpayments paid to the selected 
providers.  The State should also enhance its efforts to recover additional 
overpayments estimated at $1.26 million ($902,000 Federal share) from 
our audit period and realize future savings by requiring providers to 
exercise reasonable diligence in reconciling invoice records with credit 
balances and reporting the associated Medicaid overpayments. 
  Page 30  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 Preventing and Detecting Medicaid Fraud 
 
OIG Oversight of State Medicaid Fraud Control Units 
Medicaid Fraud Control Units (MFCU) are key partners in the fight against fraud, waste, and 
abuse in State Medicaid programs.  OIG is responsible for overseeing MFCUs activities.   As 
part of this oversight, OIG conducts periodic reviews of all Units and prepares public reports 
based on these reviews.  The reviews describe the Units' caseloads; assess performance in 
accordance with the 12 MFCU performance standards; identify any opportunities for 
improvement; and identify any instances of noncompliance with laws, regulations, or policy 
tran sFmraiuttda alsn.d  Abuse  New Hampshire State Medicaid Fraud Control Unit:  2012 Onsite Review 
 
OEI-02-12-00180  From FYs 2009 to 2011, the New Hampshire Unit reported recoveries of 
October 2012  $14 million, filed criminal charges against 25 defendants, and obtained 
  15 convictions.  The overall number of cases opened and closed by the Unit 
decreased.  This was due to a decrease in patient abuse and neglect cases.  
The Unit attributed the overall decrease primarily to staffing limitations; 
for all 3 years, the Unit's staffing levels were below the number of staff that 
the Unit requested and OIG approved.  Additionally, although the Unit 
reported that its best source of fraud referrals was the State's Surveillance 
and Utilization Review Subsystem (SURS), the Unit noted that the number 
of referrals from SURS was low. 
RecommendationsThe New Hampshire Unit should seek to expand staff 
sizes to reflect the number of staff approved in the Unit's budget, ensure 
that it maintains an adequate workload through referrals from SURS, 
ensure that case files contain documented supervisory reviews, and 
 Fraud and Abuse  Louisiana State Medicaid Fraud Control Unit:  2012 Onsite Review 
establish annual training plans for each professional discipline.  
OEI-09-12-00010  From FYs 2009 through 2011 (our period of review), the Unit reported 
December 2012  recoveries of $95 million, obtained 192 convictions and 86 civil judgments 
  or settlements, and received 1,043 referrals.  Provider fraud referrals to the 
Unit increased, and the Unit received patient abuse and neglect referrals 
from a variety of sources.  Findings, which are addressed below, included 
that the Unit had not updated its memorandum of understanding (MOU) 
with the Louisiana Department of Health and Hospitals (DHH) to reflect 
current law and practice.  Except for not reporting all of its program 
income, we found no evidence of Unit noncompliance with applicable laws, 
regulations, and policy transmittals. 
RecommendationsThe Louisiana Unit should revise its policies and 
procedures to ensure that periodic supervisory reviews are documented in 
Unit case files, ensure that letters referring providers for exclusion from 
Federal health care programs are submitted to OIG within the appropriate 
timeframe, revise its MOU with DHH to reflect current law and practice, 
and ensure that all program income is reported properly on its Federal 
 Fraud and Abuse  South Carolina State Medicaid Fraud Control Unit:  2012 Onsite Review 
Financial Status Reports. 
OEI-09-11-00610  Our analysis of collected data from FYs 2008 through 2010 shows that the 
  Page 31  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2013    Medicaid Program Reviews 
 
 
October 2012  Unit's caseload increased by 65 percent and that the amount of funds the 
  Unit recovered nearly doubled, from $15.3 million in FY 2008 to 
$30.3 million in FY 2010.  Our findings, which are addressed by the 
recommendations below, included that although the Unit maintained 
proper fiscal control of its resources, it did not report program income 
properly in FY 2010. 
RecommendationsThe South Carolina Unit should ensure that periodic 
supervisory reviews are documented in Unit case files, complete revisions 
to its policies and procedures manual to reflect Unit operations and revise 
its MOU with South Carolina's State Medicaid agency to reflect current law 
and practice, and ensure that program income is reported properly. 
 
 
  Page 32  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 Legal and Investigative Activities 
 
Related to Medicare and Medicaid 
 
For this semiannual period, we reported 436 criminal and 232 civil actions against 
individuals or entities that engaged in health-care-related offenses.  We also reported 
$2.64 billion in investigative receivables due the U.S. Department of Health and Human 
Services (HHS) and $640 million in non-HHS investigative receivables, including civil and 
administrative settlements or civil judgments related to Medicare; Medicaid; and other 
Federal, State, and private health care programs. 
The Office of Inspector Generals (OIG) investigations often involve the combined efforts and 
resources of our office and other Federal and State law enforcement agencies.  One of the 
most common types of fraud perpetrated against Medicare, Medicaid, and other Federal 
health care programs involves filing false claims for reimbursement.  False claims may be 
pursued under Federal and State criminal statutes and, in appropriate cases, under the False 
Claims Act Amendments of 1986 (FCA), as further amended in 2009.   
Depending on the types of fraud or other violations involved, OIG investigations may 
culminate in criminal or civil court judgments and decisions, administrative sanctions and 
decisions, and/or negotiated settlement agreements.  Investigative outcomes take many 
forms, including incarceration, restitution, fines, penalties, forfeitures, assessments, and 
excluSseimonia onfn iunadli vRiedpuoarlts t oor C eonntgitrieesss from participation in all Federal health care programs.  
Frequently used exclusion and penalty authorities are described in Appendix D of 
this   (Semiannual Report) and on our Web site 
at:  http://www.oig.hhs.gov/fraud/enforcement/cmp/index.asp. 
Chart 1- Actions: All HHS Programs 
 
 
 
   
  Page 33  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
  Chart 2  Receivables:  All HHS Programs 
 
 
(Includes non-HHS receivables, e.g., States share of Medicaid restitution.) 
 
Advisory Opinions and Other Industry Guidance 
As part of OIGs continuing efforts to promote the highest level of ethical and lawful conduct 
by the health care industry, we issue advisory opinions and other guidance to educate 
industry and other stakeholders on how to avoid fraud, waste, and abuse.  Advisory 
opinions, which are developed in consultation with the Department of Justice (DOJ), are 
issued to requesting parties regarding the interpretation and applicability of certain statutes 
relating to Federal health care programs.  The Health Insurance Portability and 
Accountability Act of 1996,  205, allows OIG to provide case-specific formal guidance on 
the application of the anti-kickback statute and safe harbor provisions and other OIG health 
care fraud and abuse sanctions.  From October 1 through March 31, 2013, OIG received 31 
requests for advisory opinions and issued 10 opinions.  OIG also issued one modification of 
an earlier opinion.   
HEATHealth Care Fraud Prevention and Enforcement 
Action Team 
On May 20, 2009, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder 
announced the creation of the Health Care Fraud Prevention and Enforcement Action Team 
(HEAT), an interagency effort focused specifically on combating health care fraud.  HEAT 
includes senior officials from DOJ and HHS who are strengthening programs, as well as 
investing in new resources and technologies, to prevent and combat fraud, waste, and abuse.  
  Page 34  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 HEAT Provider Compliance Training  
 
OIG provides free training on our Web site for health care providers, compliance 
professionals, and attorneys.  OIGs Provider Compliance Training was an initiative 
developed as part of HEAT in 2011 that continues to reach the health care community with 
OIGs message of compliance and prevention via free, downloadable comprehensive training 
materials and podcasts.  Following are links to OIGs provider compliance training 
resources:  
http://oig.hhs.gov/newsroom/video/2011/heat_modules.asp 
http://oig.hhs.gov/newsroom/video/2011/heat_modules.asp#modules 
http://oig.hhs.gov/compliance/provider-compliance-training/index.asp#materials 
Medicare Fraud Strike Force Activities  
The Medicare Fraud Strike Force (Strike Force) is a key component of HEAT.  The Strike 
Force was established in March 2007 and is operating in nine citiesMiami, Florida; Los 
Angeles, California; Detroit, Michigan; Houston, Texas; Brooklyn, New York; Baton Rouge, 
Louisiana; Tampa, Florida; Chicago, Illinois; and Dallas, Texas.  Strike Force teams coordinate 
joint law enforcement operations conducted by Federal, State, and local law enforcement 
entities.  These teams have a proven record of success in analyzing data to quickly identify 
fraud and bring prosecutions.  During this reporting period, Strike Force efforts resulted in 
the filing of charges against 148 individuals or entities, 139 criminal actions, and $193.7 
million in investigative receivables. 
Strike Force Takedown Led to Charges Against 91 Individuals  
In October 2012, Medicare Fraud Strike Force operations in 7 cities led to charges against 
91 individuals, including doctors, nurses, and other licensed medical professionals, for their 
alleged participation in Medicare fraud schemes involving approximately $429.2 million in 
false billing.  The coordinated nationwide takedown encompassed indictments charging 
more than $230 million in home health care fraud, more than $100 million in mental health 
care fraud,more than $49 million in ambulance transportation fraud, and millions more in 
other types of fraud.  HHS also suspended or took other administrative actions against 30 
health care providers following credible allegations of fraud.   
Additional Examples of Strike Force Efforts 
Florida
Twenty-four defendants have been charged and 15 sentenced in a $205 million 
Medicare fraud scheme perpetrated by Lawrence Duran and his co-conspirators.  Duran 
owned and operated American Therapeutic Corporation (ATC), an umbrella organization 
that managed seven community mental health centers.  According to the indictment, ATC 
and the American Sleep Institute (ASI), another company owned by Duran, submitted more 
than $205 million in false and fraudulent claims for services that were medically 
unnecessary, were not eligible for Medicare reimbursement, or were never provided.   
Duran and his co-conspirators created a massive criminal operation, in which ATC 
paid up to approximately $500,000 in cash each month in kickbacks to a network of 
patient recruiters, assisted living facilities, and halfway houses in exchange for Medicare 
  Page 35  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
beneficiaries who received purported mental health therapy and sleep study services at ATC 
and ASI.  The defendants created fictitious identities, set up various corporations, and used 
multiple individuals to launder money.  The corporate officers of the companies, and other 
individuals who received personal checks, deposited the checks, withdrew cash, 
and returned it to Duran to pay the kickbacks.  Evidence at trial revealed that ATC medical 
directors signed patient files without reading them; did not see patients; and changed, 
removed, or placed patients on psychotropic medications without medical evaluation, all 
in an effort to conceal from Medicare the fact that many ATC patients did not qualify for 
reimbursement.   
Duran was sentenced to 50 years in prison and ordered to pay $87 million in restitution, 
joint and several.  To date, 14 other defendants have been sentenced to a combined 
133 years in prison and ordered to pay $87 million in restitution, joint and several, as well 
New York
as more than $30,000 in fines.  
Boris Sachakov was sentenced to 2 years and 6 months in prison and ordered to 
pay $1.1 million in restitution and forfeit $1.1 million after being convicted on health care 
fraud charges.  Evidence at trial showed that from January 2008 to January 2010, Sachakov 
defrauded Medicare and private insurers by billing for surgeries and services that he never 
provided.  Sachakov owned and operated Colon and Rectal Care of New York, P.C., a clinic 
that purportedly provided proctological services, including examinations and 
hemorrhoidectomies.  According to the indictment, Sachakov submitted and caused the 
submission of more than $22 million in false and fraudulent claims to Medicare and private 
insurers for services that were not performed.  Sachakov also billed for multiple office visits, 
examinations, and hemorrhoidectomies as if he were treating distinct, unrelated conditions.  
However, to the extent any of these services were performed, Sachakov merely provided 
Florida
followup services related to the initial procedure.   
Eulises Escalona was sentenced to 10 years in prison and ordered to pay 
$26 million in restitution, joint and several, after pleading guilty to charges of conspiracy 
to commit health care fraud.  Escalona was owner and operator of Willsand Home Health 
Services, Inc. (Willsand), which purportedly provided home health care and physical 
therapy services to Medicare beneficiaries.  According to court documents, Escalona paid 
kickbacks to patient recruiters for enrolling Medicare beneficiaries to be placed at Willsand 
and signed false documents stating that they received home health care services.  Escalona 
also paid kickbacks to physicians in return for signing false prescriptions for these patients.  
From about January 2006 through November 2009, Willsand submitted more than 
$40 million in claims to Medicare for home health services it purportedly provided to 
beneficiaries when, in fact, the patients were not homebound and/or had no medical need 
Texas
for the services. 
Michelle Turner was sentenced to 2 years in prison and ordered to pay $295,000 in 
restitution, joint and several, after being found guilty on charges of conspiracy to commit 
health care fraud and conspiracy to defraud the United States and to receive health care 
kickbacks.  The investigation revealed that Turner ran a "boiler room" operation in which 
she employed teenagers to call Medicare beneficiaries and try to persuade them to accept 
"arthritis kits," which consisted of a box of neoprene braces for various body parts.  Family 
DME, the Houston company with which she contracted, billed Medicare for several high-
quality rigid braces.  Turner's company would often find physicians who would sign off on 
the bogus orders when the patients' primary care physicians refused.  Turner is the fifth and 
final defendant to be sentenced in this case.   
  Page 36  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 Other Criminal and Civil Enforcement Activities 
 
Special Assistant U.S. Attorney Program  
During this reporting period, DOJ and OIG continued their participation in a program in 
which OIG attorneys, some of whom are Special Agents, serve as Special Assistant U.S. 
Attorneys.  OIG attorneys are detailed full time to DOJs Criminal Division, Fraud Section, 
for temporary assignments, including assignments to the Medicare Fraud Strike Force.  
Other attorneys prosecute matters on a case-by-case basis.  Both arrangements offer 
excellent litigation training for OIG attorneys and enhance collaboration between the 
Departments in their efforts to fight fraud.  Under this program, OIG attorneys have 
successfully litigated important criminal cases relating to fraud pertaining to medical 
equipment and supplies, infusion therapy, and physical therapy and other types of Medicare 
and Medicaid fraud. 
Most Wanted Fugitives Listed on OIGs Website 
The OIG Most Wanted Fugitives Web site continues to garner national and international 
attention and greatly assists in helping to capture fugitives charged with defrauding Federal 
health care programs and stealing millions of taxpayer dollars.  The Most Wanted Fugitives 
Web site is periodically updated and features a profile and statistics for each fugitive, as well 
as an online tip form and a hotline number for individuals to report fugitive-related 
information to OIG, in English or Spanish, 24 hours a day, 365 days a year.  The Most Wanted 
Fugitives list can be accessed at https://oig.hhs.gov/fraud/fugitives.   
The Web site features recently captured fugitives, including Elisabet Martinez, who was 
arrested in December 2012 after she arrived at Miami International Airport.  In 2012, 
Martinez was indicted on charges of health care fraud and conspiracy to commit health care 
fraud.  Investigators believe that, through her company, Your Neighbor Pharmacy, LLC, 
Martinez submitted false and fraudulent claims to Medicare for prescription drugs that were 
medically unnecessary, were not prescribed by a doctor, or were not provided to Medicare 
beneficiaries.   
Because of the success of OIGs Most Wanted Fugitives Web site, OIG also launched its Most 
Wanted Deadbeat Parents Web site at: https://oig.hhs.gov/fraud/child-support-
enforcement/index.asp.  The site highlights parents who fail to pay court-ordered child 
support for their children and put an unnecessary strain on the custodial parents and the 
children, as well as on agencies that enforce these matters.  Examples are provided in the 
"Human Services Reviews" section of this Semiannual Report. 
Recently Completed Actions and Settlements 
Following are summaries of various civil and criminal actions from this semiannual period.  
The summaries are organized by the sector of the health care industry involved or by the 
nature of the offense. 
  Page 37  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 Home Health Providers 
 
Florida
Seventeen defendants have been sentenced in a home health care fraud scheme.  
According to the indictment, employees at Superstar Home Health Care, Inc., a provider in 
Miami, Florida, allegedly offered and paid thousands of dollars in kickbacks and bribes to 
patient recruiters and Medicare beneficiaries.  In exchange, the beneficiaries acted as 
patients for the health agency.  Beneficiaries involved in the scheme received prescriptions 
and health-related services from Superstar, even though there was no medical need.  
Superstar used beneficiary information to submit $1.5 million in claims to Medicare for 
home health services that either were medically unnecessary or were not provided.  During 
this reporting period, Jesus Cabanes-Hernandez, Vivian Augustine, Yuria Perez-Rivero, Olga 
Martinez, Joel Loyola, Marianela Terrero, Daymi Fuentes-Gil, Victor Escalante, Marisela 
Sherwood, Pablo Orama, Nancy Diaz, Jose Abreu, Carlos Herrera, Marlene Garcia, Jose 
Orelvis-Ortega, Ivon Perez, and Elba Caicedo were sentenced to a combined 17 years of 
Florida
incarceration and ordered to pay $742,742 in restitution, joint and several. 
Kelvin Soto and Odalys Fernandez were sentenced after being found guilty on 
charges of conspiracy to commit health care fraud and health care fraud.  According to 
evidence at trial, Soto and Fernandez were registered nurses employed by Ideal Home 
Health, Inc., a company that allegedly submitted approximately $40 million in false claims to 
Medicare.  Soto and Fernandez falsified and caused Medicare beneficiaries to falsify Weekly 
Visits and/or Time Records sheets, which indicated that they provided skilled nursing 
services to Medicare beneficiaries.  From about August 2007 through March 2009, Soto and 
Fernandez caused Medicare to make approximately $1.3 million in payments to Ideal Home 
Health.  Soto was sentenced to 6 years of imprisonment and ordered to pay $727,418 in 
restitution.  Fernandez was sentenced to 3 years and 5 months of imprisonment and 
Texas
ordered to pay $240,369 in restitution. 
Home health agency Kai Heart, Inc., also known as Kai Heart Home Health Care (Kai 
Heart), agreed to pay $778,093 to resolve FCA allegations.  The Government alleged that 
from July 2006 through June 2007, Kai Heart falsified Outcome and Assessment Information 
Set (OASIS) certifications in support of improper claims submitted to Medicare for home 
health services.  Specifically, the Government alleged that Kai Heart knowingly altered the 
OASIS forms by upcoding the severity of patients conditions in order to receive additional 
Medicare reimbursement.  Kai Heart also agreed to enter into a 5-year corporate integrity 
agreement (CIA) with OIG. 
Pharmaceutical Companies  
Virginia
Abbott Laboratories (Abbott) agreed to pay $1.5 billion and enter into a 5 year CIA 
in a global criminal, civil, and administrative settlement to resolve allegations that it violated 
the FCA by improperly marketing and promoting the drug Depakote.  As part of the 
settlement, Abbott agreed to pay $800 million in a civil settlement; plead guilty to a 
misdemeanor violation of the Federal Food, Drug, and Cosmetic Act; and pay a criminal fine 
and forfeiture of $700 million.  Between 1998 and 2008, Abbott promoted Depakote for uses 
not approved by the Food and Drug Administration (FDA), including the treatment of 
aggression and agitation in elderly dementia patients and the treatment of schizophrenia.  
Abbott also allegedly offered and paid illegal remuneration to induce health care 
professionals and long-term care pharmacies to prescribe Depakote.  The CIA requires 
  Page 38  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
Abbott to maintain a centralized system to identify and mitigate risks associated with the 
New York
sale, marketing, and promotion of drugs.    
Pharmaceutical manufacturer Amgen, Inc. (Amgen), agreed to pay approximately 
$762 million plus interest to resolve its criminal and civil liability arising from its sale and 
promotion of certain drugs, including Aranesp, an erythropoiesis-stimulating agent 
approved by FDA at specific doses for particular patient populations suffering from 
anemia.  The Federal civil settlement agreement resolved allegations that Amgen promoted 
Aranesp and two other drugs that it manufactured, Enbrel and Neulasta, for off-label uses 
and/or dosing regimens that were not approved by FDA; offered illegal kickbacks to a wide 
range of entities in an effort to influence health care providers to select and use several of its 
products, regardless of whether they were administered, reimbursable by Federal health 
care programs, or medically necessary; and engaged in false price-reporting practices 
involving several of its drugs.  As part of the global settlement, Amgen agreed to plead guilty 
to a misdemeanor violation of the Federal Food, Drug, and Cosmetic Act and pay a criminal 
fine and forfeiture of $150 million.  Amgen also agreed to enter into a CIA that includes 
provisions designed to increase accountability of individuals and board members, to 
increase transparency, and to strengthen Amgens compliance program. 
In a separate New York civil settlement, International Nephrology Network (INN), renamed 
Integrated Nephrology Network, an AmerisourceBergen Corporation subsidiary, agreed to 
pay $15 million plus interest to resolve its civil liability arising from its role in the marketing 
of Aranesp.  INN allegedly offered illegal kickbacks to physicians, pharmacists, and physician 
organizations to influence their selection of Aranesp for treating kidney disease and chronic 
renal failure.  These kickbacks came in the form of, among other things, meals, travel, hotels, 
Massachusetts
consulting fees, education and research grants, and improper discounts.   
Sanofi-Aventis U.S., Inc., and Sanofi-Aventis U.S. LLC, subsidiaries of 
international drug manufacturer Sanofi (collectively, Sanofi), agreed to pay $109 million to 
resolve allegations that it violated the FCA.  Sanofi allegedly provided physicians with free 
units of Hyalgan, a knee injection, in violation of the anti-kickback statute, to induce them to 
purchase and prescribe the product.  The settlement also resolved allegations that Sanofi 
submitted false average sales price (ASP) reports for Hyalgan that failed to account for the 
free units distributed contingent on Hyalgan purchases.  The Government alleged that the 
false ASP reports, which were used to set reimbursement rates, caused Government 
Maryland
programs to pay more than they should have for Hyalgan. 
Boehringer Ingelheim Pharmaceutical, Inc. (BIPI), agreed to pay $95 million to 
resolve FCA allegations involving the promotion of its stroke-prevention drug Aggrenox, 
chronic obstructive pulmonary disease (COPD) drugs Atrovent and Combivent, and 
hypertension drug Micardis.  The Government alleged that between 2001 and 2008, BIPI 
promoted the four drugs for uses that were not approved by FDA.  Specifically, BIPI 
promoted Aggrenox for certain cardiovascular events, such as myocardial infarction and 
peripheral vascular disease; marketed Combivent for use prior to another bronchodilator in 
treating COPD; and marketed Micardis for treating early diabetic kidney disease.  In 
addition, BIPI allegedly promoted the sale and use of Combivent and Atrovent at doses that 
exceeded those covered by Federal health care programs, made unsubstantiated claims 
about the efficacy of Aggrenox, and paid kickbacks to health care professionals to induce 
them to prescribe all four drugs.  In addition to agreeing to the monetary settlement, BIPI 
agreed to enter into a comprehensive 5-year CIA with OIG.  
  Page 39  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 Massachusetts
 
Pfizer, Inc., agreed to pay $55 million plus interest to resolve allegations 
that one of its subsidiaries, Wyeth LLC, illegally misbranded and promoted its drug Protonix, 
a proton pump inhibitor (PPI) used to treat various forms of gastro-esophageal reflux 
disease (GERD).  Protonix was approved by FDA for short-term treatment of erosive 
esophagitis, a condition associated with GERD that can be diagnosed only with invasive 
endoscopy.  According to published reports, Wyeth allegedly promoted Protonix for all 
forms of GERD, including symptomatic GERD, which was far more common and could be 
diagnosed without endoscopy.  Wyeth allegedly trained its sales force to promote Protonix 
for all forms of GERD, beyond its limited erosive esophagitis indication, and its sales 
representatives frequently promoted Protonix to physicians for unapproved uses, such as 
treatment of symptomatic GERD.  In addition, Wyeth allegedly promoted Protonix as the 
best PPI for nighttime heartburn, even though there was never any clinical evidence that 
Protonix was more effective than any other PPI for that condition.  Finally, Wyeth allegedly 
New York
used continuing medical education programs to promote Protonix for unapproved uses.  
RxAmerica, LLC, agreed to a $5.25 million settlement to resolve FCA 
allegations.  From January 2007 to December 2008, RxAmerica allegedly submitted false 
drug prices for certain generic prescription drugs to CMS in order to induce Medicare Part D 
beneficiaries to enroll in RxAmericas Advantage Freedom Plan.  As a result, RxAmerica 
allegedly received Medicare Part D payments for these drugs at prices that, in some cases, 
were significantly higher than the prices that RxAmerica submitted to CMS.  As a result, 
some Medicare Part D beneficiaries who were enrolled with RxAmerica entered the 
Medicare Part D coverage gap or donut hole earlier than they otherwise would have.  This 
is the first FCA settlement with a Medicare Part D plan. 
Physicians 
Illinois
Bahir Khalil was sentenced to 10 years in prison and ordered to pay $2.9 million in 
restitution after being convicted on charges of health care fraud and fraud regarding visas, 
permits, or other documents.  Khalil was manager and co-owner of House Call Physicians, 
LLC, a home health care provider.  According to court documents, through Khalils direction, 
House Call Physicians billed Medicare for services that were not medically necessary, 
including uncomfortable nerve conduction tests; services purportedly provided by 
physicians when, in fact, they were performed by physician assistants; and services 
purportedly performed by a licensed podiatrist when, in fact, they were performed by a 
podiatrist whose license had been suspended.  Khalil also directed the false certification of 
patients as eligible for home health services when they were not homebound, as required by 
Medicare.  Two other defendants, including Khalils business partner, Mohammed Rashed, 
and the suspended podiatrist, Paschal Oparah, were also sentenced to 6 months and 1 year 
and 6 months of incarceration, respectively.  Rashed was also fined $20,000, while Oparah 
was ordered to pay $791,095 in restitution.  After completing his sentence, Khalil, a 
Canadian citizen who was not authorized to work in the United States, faces possible 
Michigan
deportation. 
Jonathan Agbebiyi was sentenced to 5 years of incarceration and ordered to pay 
$2.9 million in restitution, joint and several, after being convicted on charges of conspiracy 
to commit health care fraud and health care fraud.  An obstetrician/gynecologist, Agbebiyi 
served as a general practitioner for three clinics:  Blessed Medical Clinic, Alpha and Omega 
Medical Clinic, and Manuel Medical Clinic.  According to evidence presented at trial, 
Agbebiyi joined a conspiracy to bill Medicare for medically unnecessary neurological tests, 
  Page 40  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
some of which involved sending electrical current through the arms and legs of patients.  
Clinic employees, who lacked any meaningful training, administered the diagnostic tests.  
The patients never received any followup treatment by neurologists.  Evidence at trial also 
showed that the patients were neither referred to the clinics by their primary care 
physicians nor referred for any legitimate purpose.  Rather, they were recruited with 
prescriptions for controlled substances, cash payments, and fast food.  The three clinics then 
billed Medicare for diagnostic tests that were medically unnecessary.   
Kickbacks 
Florida
Hassan Collins was sentenced to 4 years and 3 months of imprisonment and 
ordered to pay $2.4 million in restitution, joint and several, after pleading guilty to charges 
of conspiracy to receive and pay health care kickbacks.  Collins was owner and operator of a 
halfway house, New Way Recovery, Inc.  According to court documents, Collins, in exchange 
for kickbacks, sent Medicare beneficiaries who resided at New Way to American 
Therapeutic Corporation (ATC) for partial hospitalization services.  Investigators believe 
that the services were not medically necessary and were not provided at ATC.  ATC billed 
California
Medicare for the services.   
Drug manufacturer Victory Pharma, Inc. (Victory), agreed to pay $12.2 million to 
resolve allegations under the FCA.  The Government contended that Victory engaged in a 
kickback scheme to induce prescriptions for its pain medication Naprelan and three other 
drugs.  The alleged kickbacks primarily took the form of meals, gifts; entertainment; event 
tickets; recreational activities; speaker fees; and preceptorships, under which Victory sales 
representatives shadowed doctors while they saw their patients and paid the doctors a 
stipend in return.  Preceptorships are typically not in violation of Federal regulations if the 
purpose is to educate sales representative about the doctor and/or the medical practice.  
However, investigators believe that Victory used preceptorships to pay doctors to influence 
them to prescribe its drugs.   
Durable Medical Equipment 
Florida
Ramon Miguel Llanes was sentenced to 11 years and 3 months of incarceration and 
ordered to pay $1.7 million in restitution, joint and several, after pleading guilty to charges 
of conspiracy to commit health care fraud.  Llanes co-owned MA Medical Supply, Inc., which 
purportedly provided durable medical equipment (DME) to Medicare beneficiaries.  
Investigators believe that Llanes and employees at MA Medical Supply paid beneficiaries for 
allowing them to use their information to create false and fraudulent prescriptions for DME 
and medical services that either were not rendered or were unnecessary.  From January 
2006 through July 2011, MA Medical Supply submitted $4 million in false and fraudulent 
claims to Medicare.  In addition, Ramon and his co-conspirators caused the submission of 
false and fraudulent claims and prescriptions to Medicare through several pharmacies.  
From approximately April 2009 through January 2012, Medicare paid more than $16 million 
to these pharmacies on the basis of claims for medical benefits, primarily prescription 
Massachusetts
drugs, which, in turn, were never actually received by the beneficiaries.   
Orthofix International NV agreed to pay $30 million to resolve allegations 
that its subsidiary, Blackstone Medical, Inc., paid illegal kickbacks to physicians to induce the 
use of its products.  Orthofix is an orthopedic products company that offers a line of surgical 
and nonsurgical products.  In 2006, Orthofix acquired Blackstone Medical, which 
  Page 41  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
manufactures, markets, and sells spinal implants and spinal surgery products.  The 
Government contended that from October 2000 through September 2007, Blackstone 
offered and paid physicians through fraudulent Medical Advisory Board memberships and 
agreements in a manner intended to induce the promotion, use, and/or purchase of its 
products.  The kickbacks allegedly came in the form of company stock options, royalty fees 
for Blackstone products, expensive meals, gifts, entertainment and sporting event tickets, 
travel, unrestricted grants, and charitable donations, all in violation of the Federal anti-
New York
kickback statute.  Orthofix also entered into a 5-year CIA with OIG. 
Husband and wife Armando and Maria Montiel were sentenced for their roles to 
defraud Medicare.  Armando and Maria, who resided in Florida, owned Care Plus Medical 
Equipment, a medical equipment company based in Puerto Rico.  Care Plus allegedly 
submitted $1.5 million in false claims to Medicare for wound care, prosthetics, orthotics, and 
power wheelchairs that were not medically necessary and/or were never provided.  
Investigators found that a high percentage of beneficiaries for whom Care Plus billed lived in 
the Miami area while the referring physicians all practiced in Puerto Rico.  Interviews with 
these referring physicians revealed that they never treated the beneficiaries and never 
ordered any DME for them.  Armando was sentenced to 3 years and 6 months of 
imprisonment, while Maria was sentenced to 3 years of probation.  Both were ordered to 
pay $262,687 in restitution, joint and several.    
Clinics 
Florida
Arbilio Yanes was sentenced to 12 years and 7 months of incarceration and ordered 
to pay $11 million in restitution after pleading guilty to charges of conspiracy to commit 
health care fraud and to pay health care kickbacks, health care fraud, payment of health care 
kickbacks, and money laundering.  Yanes was the president and one of two owners of 
Research Center of Florida, Inc., a purported medical clinic.  According to court documents, 
Yanes paid more than $2.3 million to fraudulent companies controlled by outside patient 
recruiters to recruit Medicare beneficiaries who were willing to attend Research Center as 
purported patients for cash.  Between October 2003 and November 2004, Research Center 
submitted claims to Medicare for nearly $21 million, almost exclusively for the purported 
treatment of HIV-positive Medicare beneficiaries and for the administration of prescription 
drugs.  On the basis of these claims, Medicare paid Research Center more than $11 million 
Virginia
for medications that either were not provided or were not medically necessary.   
Paul Boccone was sentenced to 15 years of incarceration and ordered to pay 
$275,154 in restitution after being convicted on charges related to illegally distributing 
oxycodone and other Schedule II narcotics.  Boccone was president of Chantilly Specialists, a 
pain management clinic in Chantilly, Virginia.  According to the indictment, Boccone lacked 
any medical education, qualifications, or licensing and he hired medical professionals with 
no background or specialized training in pain management.  However, he treated patients 
and prescribed narcotics by directing medical practitioners to endorse prescriptions that he 
wrote.  According to court records, Boccone charged customers approximately $200 in cash 
per routine visit and he misinformed customers that Federal and State law required that 
they return to the clinic every 28 days to receive prescriptions.  Customers would then 
receive only cursory examinations before being prescribed Schedule II narcotic pain 
medications. 
Court records showed that Charles Brown, Jr., the lead nurse practitioner at Chantilly 
Specialists, provided 600 customers, including known drug addicts, with more than 800,000 
  Page 42  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
oxycodone-based pills over 1year.  One addict received more than 14,000 oxycodone-based 
pills.  Brown, who at Buccones direction altered one of the patients files after Chantilly 
Specialists learned of the patients death, was sentenced to 5 years of incarceration after 
California
being convicted at trial.   
Ramanathan Prakash was sentenced to 10 years of incarceration and ordered to 
pay $607,456 in restitution, joint and several, and a $75,000 fine after being convicted on 
charges of conspiracy to commit health care fraud and health care fraud.  Prakash served as 
a physician for the Sacramento Clinic.  Evidence at trial showed that the clinic and two 
associated clinics recruited Medicare patients, almost all of whom were elderly and did not 
speak English, who were transported to the clinics by individuals who were paid according 
to the number of patients they brought to the facilities.  Rather than being charged a co-
payment, the patients were paid for their time and the use of their Medicare eligibility, 
generally $100 per visit.  According to court records, patient charts were created that falsely 
stated each patient received comprehensive exams and/or diagnostic tests.  However, only a 
few of the tests were performed, none were based on any medical need, and clinic 
employees filled out other portions of the charts using preprinted templates.  The patient 
files were used to bill Medicare for treatments and services that were unnecessary and/or 
were never performed.  Several other defendants associated with the scheme were also 
convicted and sentenced or are awaiting sentencing.   
Mental and Social Services 
Indiana
Carol Woodard was sentenced to 6 years and 8 months of incarceration and 
ordered to pay more than $1.9 million in restitution after pleading guilty to health care 
fraud.  Woodard owned Gideons Gate, which purportedly provided tutoring and day care 
services to indigent and school-age children.  Woodard admitted that she executed a scheme 
to defraud Indiana Medicaid by filing more than 2,400 illegitimate reimbursement claims for 
psychological services that she never performed.  Woodard conspired with a previously 
convicted defendant, who provided Medicaid recipients' personal identifiers to Woodward, 
New York
which she then used in false billings. 
Westchester County Health Care Corporation (WCHCC) agreed to pay $7 million 
to resolve allegations that it violated the FCA.  WCHCC operates the freestanding mental 
health facility Westchester Behavioral Health Center (BHC).  From August 2001 through 
June 2010, WCHCC allegedly submitted false certifications to Medicaid stating that claims 
for services at BHC complied with applicable regulations.  However, WCHCC allegedly knew 
or should have known that many of the claims lacked the required supporting 
documentation and that many of the services either did not meet the minimum duration 
requirements and/or were provided by staff who lacked proper certification.  Specifically, 
WCHCC allegedly billed for professional services by uncredentialed nurse practitioners; 
billed for services rendered without required progress notes, physician signatures, or other 
supporting records; billed for hospital stays without the required certification or 
recertification of medical necessity; routinely failed to collect copayments from psychiatric 
inpatients to induce use of services; and offered potential kickbacks to private-practice 
physicians in return for patient referrals.  The investigation also revealed that BHC allegedly 
billed Medicaid for psychiatric services without creating or maintaining treatment plans and 
progress notes.   
  Page 43  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 Hospitals 
 
Tennessee
Hospital Corporation of America (HCA) agreed to pay $16.5 million plus interest 
to resolve allegations under the Federal Stark Law and anti-kickback statute.  HCA, through 
subsidiaries Parkridge Medical Center, Inc., and HCA Physician Services, allegedly paid 
remuneration to Diagnostic Associates of Chattanooga (DAC) and provided other financial 
benefits intended to induce physician members to refer patients to HCA facilities.  HCA 
Physician Services also purchased DAC, hired many of its physicians, and leased office space 
from DAC at a rental rate much higher than fair market value to meet the mortgage 
obligations of the DAC members.  These financial arrangements were in violation of the 
Kentucky
Stark Law and anti-kickback statute.   
American Sleep Medicine, LLC (ASM), agreed to pay $15 million to resolve 
allegations that it violated the FCA.  ASM is headquartered in Jacksonville, Florida, and 
operates 19 sleep diagnostic centers throughout the United States.  ASM allegedly submitted 
claims to Medicare and other Federal health care programs for sleep diagnostic services that 
were not eligible for payment because the diagnostic tests were performed by individuals 
who lacked the required license, certification, or credentials.  Between January 2004 and 
December 2011, ASM submitted nearly 20,000 claims for reimbursement.  In addition to 
Missouri
entering into the monetary agreement, ASM entered into a CIA with OIG.   
Freeman Health System (Freeman) agreed to pay $9.3 million to resolve 
allegations under the FCA.  Freeman provides comprehensive health care and behavioral 
health services at multiple hospitals and other provider facilities.  Freeman self-disclosed 
through the U.S. Attorneys Office that between January 1999 and December 2009, it 
compensated certain employed physicians on the basis of a formula that improperly took 
into account the volume and value of revenue generated by the physicians referrals for 
certain diagnostic tests and other procedures that constituted designated health services 
under the Physician Self-Referral Law, also known as the Stark Law.   
Medicaid Fraud 
Texas
Juanita Leyva, Arlene Rodriguez, Edward Devally, Leticia Orosco, Michelle Aguilar, 
Patricia Cortez, and Loretta Cortez all were sentenced during this semiannual period on 
charges related to a scheme to defraud Texas Medicaid's Medical Transportation Program 
(MTP) of more than $200,000.  The investigation revealed that MTP employees obtained the 
Medicaid numbers and personally identifiable information of Medicaid recipients, including 
friends and family members, to submit false MTP claims for transportation services that 
were never provided or were unnecessary.  According to the indictment, the defendants 
fraudulently obtained reimbursement checks, cashed the checks, and either kept the money 
or divided it among the co-conspirators.  Several other defendants were previously 
sentenced in this case.  In total, 19 defendants were sentenced to a combined 6 years of 
incarceration and ordered to pay more than $247,542 in restitution and fines.  As a result of 
the investigation, a new MTP director was appointed, the program was restructured, and 
District of Columbia
new policies were put in place.   
Jacqueline Wheeler was sentenced to 6 years and 3 months of 
incarceration and ordered to pay $3.1 million in restitution after being convicted of charges 
related to health care fraud.  According to the indictment, Wheeler was part-owner and chief 
executive officer of the Health Advocacy Center, Inc. (HAC), in Washington, DC, which 
purportedly was an advocate for improving health care delivery to the community.  About 
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Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
October 2002, HAC entered into an agreement with D.C. Medicaid to provide health care 
services to DC Medicaid beneficiaries.   
Wheeler owned two apartments that were rented by HAC patients who had alcohol and/or 
drug addictions.  Wheelers employees transported many of the patients to HAC, where they 
often slept, watched television, and occasionally received drug and alcohol counseling.  
From these visits, Wheeler submitted more than $6 million in claims to D.C. Medicaid for 
manual therapy services. Wheeler did not maintain required progress notes and related 
documentation for the purported manual therapy and other services, she frequently billed 
for services for which HAC lacked medical equipment, and she frequently billed for more 
than 24hours of services for a single patient in a given day. 
Medicaid Fraud Control Units 
Funding and Accomplishments 
Medicaid Fraud Control Units (MFCU) are key partners in the fight against fraud, waste, and 
abuse in State Medicaid programs.  In fiscal year (FY) 2012, HHS awarded $162.9 million in 
Federal grant funds to 50 MFCUs (including 1 in Washington, DC), which employed 1,901 
individuals.  Collectively, in FY 2012, MFCUs reported 15,531 investigations, of which 11,660 
were related to Medicaid fraud and 3,871 were related to patient abuse and neglect, 
including misappropriation of patients private funds.  The cases resulted in criminal 
charges against or indictments of 1,359 individuals, including 995 for fraud and 364 for 
patient abuse and neglect, including patient funds cases.  In total, 1,337 criminal actions 
were reported in FY 2012, of which 982 were related to Medicaid fraud and 355 were 
related to patient abuse and neglect, including patient funds cases.  Civil judgments and 
settlements for FY 2012 totaled 823.  
Joint Investigations 
Idaho
The following are examples of joint investigations with MFCUs. 
Christopher Card was sentenced to 3 years in prison and ordered to pay $1 million 
in restitution and a $100,000 fine after pleading guilty to charges of executing a scheme to 
defraud health care benefit programs.  Card was a licensed optometrist who owned, 
managed, and provided care at Total Vision, P.A.  According to the plea agreement, Card 
fraudulently billed Medicaid, Medicare, and other health care benefit programs for false 
diagnoses, including glaucoma, acquired color deficiency (color blindness), tension 
headaches, macular degeneration, treatment of eye injuries, and removal of foreign objects 
from the eye.  Card also billed for testing that did not occur and for testing results that were 
falsified or altered.  According to the plea agreement, 18 patients identified in the original 
indictment were diagnosed by Card as having glaucoma or glaucoma-related conditions.  All 
were subsequently examined by other doctors, and only one patient was found to have 
glaucoma or glaucoma-related diseases.  The patients named in the original indictment 
represented only a fraction of those for whom Card falsely billed health insurance 
companies.  This was a joint investigation with the Federal Bureau of Investigation (FBI), the 
Idaho Medicaid Fraud and Program Integrity Unit, and the Railroad Retirement Board OIG. 
  Page 45  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 California
 
Dr. Kenneth Thaler was sentenced to 1 year and 1 day in prison and ordered to 
pay $11 million in restitution after pleading guilty to conspiracy to receive kickbacks.  
According to court documents, Tustin Hospital paid marketers to recruit "skid row" patients 
and transport them to the facility.  Thaler admitted the patients; then he and the hospital 
billed Medicare for inpatient services, even if the services were not medically necessary.  
Thaler admitted that many of the recruited patients had been coached to recite false 
symptoms and that he falsified medical records to justify the admissions of some patients.  
On average, Thaler admitted approximately 60 patients per month to the hospital.  This was 
a joint investigation with the Internal Revenue Service, the FBI, and the Bureau of Medi-Cal 
Fraud and Elder Abuse.  
Sanction Authorities and Related Administrative Actions 
Various Federal laws provide authorities to impose administrative sanctions for fraud and 
abuse, as well as other activities that pose a risk to Federal health care programs and their 
beneficiaries.  (See Appendix D for a summary of frequently used sanction authorities.)   
Sanctions include the exclusion of individuals and entities from Federal health care 
programs and the imposition of civil monetary penalties (CMPs) for submitting false and 
fraudulent claims to a Federal health care program or for violating the anti-kickback statute; 
the Stark Law; or the Emergency Medical Treatment and Labor Act of 1986 (EMTALA), also 
known as the anti-patient-dumping law.  
During this semiannual reporting period, OIG imposed 1,712 administrative sanctions in the 
form of program exclusions or administrative actions for alleged fraud or abuse or other 
activities that posed a risk to Federal health care programs and their beneficiaries.  
Exclusion and penalty authorities are described in Appendix D and on our Web site 
at: http://www.oig.hhs.gov/fraud/enforcement/cmp/index.asp. 
Program Exclusions  
During this semiannual reporting period, OIG excluded 1,661 individuals and entities from 
Medicare, Medicaid, and other Federal health care programs.  Most of the exclusions 
resulted from convictions for crimes relating to Medicare or Medicaid, for patient abuse or 
neglect, or as a result of license revocation.  OIG is also responsible for reinstating providers 
who apply and have met the requirements of their exclusions.  For a list of excluded 
individuals and entities, see https://exclusions.oig.hhs.gov/. 
Florida
Examples are as follows: 
Juan De Dios Gomez, owner and operator of a pain clinic, was excluded for a 
minimum of 50 years on the basis of his convictions for conspiracy to possess with intent to 
distribute oxycodone and oxymorphone, attempt to possess with intent to distribute 
oxycodone, and conspiracy to commit health care fraud.  From November 2007 to about 
September 2011, Gomez owned and operated the pain clinic for the purpose of obtaining 
false prescriptions for oxycodone and oxymorphone for beneficiaries of the Medicare, 
Medicaid, and private health care prescription drug insurance plans.  These drugs were 
medically unnecessary.  Gomez would also offer kickbacks, bribes, and inducements to 
beneficiary recruiters so they would bring beneficiaries to his pain clinic.  The court 
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Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
sentenced Gomez to more than 16 years of incarceration and ordered him to pay $15 million 
Massachusetts
in restitution.   
Leo Lawless, a pharmacist, was excluded for an indefinite period.  The 
Massachusetts Board of Pharmacy found that Lawless was involved in multiple patient 
safety adverse events, including verifying the wrong quantity of a drug that was prescribed 
for a patient, verifying a prescription for insulin NPH (neutral protamine Hagedorn) that 
was filled partially with another pharmaceutical, and verifying and dispensing a drug that 
was intended for another patient.  On the basis of these charges, the Board revoked the 
Pennsylvania
license of Lawless to practice as a pharmacist. 
Christopher Vassalluzzo, an osteopath, was excluded for a minimum of 
20 years on the basis of his drug trafficking conviction.  Between September 2000 and 
March 2010, Vassalluzzo and others distributed controlled substance prescription diet 
drugs outside professional practice.  This included more than 1.5 million doses of a 
substance that contained phendimetrazine and more than 2.5 million doses of a substance 
that contained phentermine.  Vassalluzzo made it appear as though he maintained a 
professional medical practice when, in fact, he was running the practice as a pill mill for 
the prescribing of diet drugs.  The court sentenced Vassalluzzo to 2 years and 10 months of 
incarceration.  The Pennsylvania State Board of Osteopathic Medicine revoked his license to 
Kansas
practice as an osteopath. 
Wendy Parmenter, a licensed practical nurse, was excluded for a minimum of 
10 years on the basis of her conviction on charges of consumer product tampering and 
adulteration of a drug.  Parmenter would steal morphine from a particular patient at the 
facility where she worked.  To conceal her behavior, she added tap water to the patients 
medication bottle and then placed the bottle back on the medication cart to dispense to the 
patient.  The court sentenced Parmenter to 3 years of incarceration.  The Kansas State Board 
of Nursing permanently revoked her license to practice nursing. 
Corporate Integrity Agreements 
Many health care providers elect to settle their cases before litigation.  As part of the 
settlements, providers often agree to enter into CIAs with OIG to avoid exclusions from 
Medicare, Medicaid, and other Federal health care programs.  Under a CIA, a provider 
commits to establishing a program and taking other specified steps to ensure future 
compliance with Medicare and Medicaid rules.  The compliance programs are designed, in 
part, to prevent future fraud.  OIG monitors providers compliance with these 
agreements.  OIG may impose penalties on entities that fail to comply with the requirements 
of their CIAs.  More information on CIAs is available on our Web site.  
Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose administrative penalties 
on and assessments against a person who, among other things, submits, or causes to be 
submitted, claims to a Federal health care program that the person knows or should know 
are false or fraudulent.  During this semiannual reporting period, OIG concluded cases 
involving more than $10.8 million in CMPs and assessments.  Following are examples of 
CMP actions resolved during this reporting period: 
  Page 47  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 South Carolina
 
Heritage Medical Partners agreed to pay $170,260 to resolve allegations 
that from April 2008 through December 2008, Heritage violated the CMPL by requesting 
that its 5,474 patients who were Medicare beneficiaries pay a $50 administrative 
fee.  Heritage told these Medicare beneficiaries that the Federal Government (Medicare) 
continue[s] to increase the amount of paperwork were required to fill out to assure you 
receive the benefits to which youre entitled and that Heritage instituted the fee as partial 
compensation for the time the physician and staff spend assuring [patients] receive 
prescription renewals quickly [and] maximum benefits from Medicare.  OIG alleged that a 
portion of the $50 constituted payment for Medicare services that are covered and 
reimbursed by Medicare and constituted a request for payment other than copayments or 
coinsurance, which violated Medicare assignment regulations.  Heritage agreed to return the 
Illinois
money it collected to patients and pay a penalty to OIG.   
ForTec Medical, Inc.; ForTec Litho, LLC; ForTec Litho Florida, LLC; ForTec Litho 
Central, LLC; and ForTec Litho NY, LLC (collectively, ForTec), agreed to pay $126,249 to 
resolve their liability under the CMPL for offering remuneration in exchange for 
referrals.  From 2006 through 2011, ForTec allegedly provided customers, including 
physicians, with all-expense paid trips to the Masters Golf Tournament in Augusta, 
Georgia.  Invitations to these trips were extended to physicians on the basis of their use of 
ForTecs products and services and the potential for additional business from those 
physicians.  
 Patient Dumping  
Some of the CMPL cases that OIG resolved between October 1, 2012, and March 31, 2013, 
were pursued under EMTALA, a statute designed to prevent hospitals from denying 
emergency care to patients and to ensure patient access to appropriate emergency medical 
New Mexico
services.  Following are examples of settlements under this statute: 
University of New Mexico Hospital (UNMH) agreed to pay $30,000 to resolve 
its liability under the anti-patient-dumping statute.  UNMH allegedly failed to provide an 
adequate medical screening examination and failed to stabilize a suicidal patient when it did 
not prevent the patient from hanging himself in the hospital.  The patient came to the 
emergency room experiencing suicidal thoughts and was placed in an observation room, but 
he was not medically screened for 7 hours.  During that time, he used his shoelaces to hang 
himself from an air vent.  After the patient was found still alive by a security employee, the 
Michigan
hospital treated and admitted him.  UNMH self-reported the incident to the State.  
Hackley Hospital agreed to pay $90,000 to resolve its liability for CMPs under the 
patient-dumping statute.  Hackley allegedly failed to provide stabilizing treatment within its 
capabilities to a woman in labor and her unborn child before transferring her to another 
Illinois
hospital for treatment.  
University of Chicago Medical Center (UCMC) agreed to pay $50,000 to resolve its 
liability under the anti-patient-dumping statute.  UCMC allegedly failed to provide 
appropriate medical screening and stabilizing treatment within its capabilities to a patient 
who arrived at its emergency department complaining of severe jaw pain after an assault.  
The results of a CT scan taken by UCMC revealed injuries that needed corrective surgery.  
However, UCMC did not provide further treatment and discharged the patient with 
instructions to go to another hospital for further care.  
  Page 48  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 Provider Self-Disclosure Protocol  
 
OIG is committed to assisting health care providers and suppliers in detecting and 
preventing fraud and abuse.  Since 1998, we have made available comprehensive guidelines 
describing the process for providers to voluntarily submit to OIG self-disclosures of fraud, 
waste, or abuse.  The provider self-disclosure protocol gives providers an opportunity to 
minimize the potential costs and disruption that a full-scale OIG audit or investigation might 
entail if fraud is uncovered.  The self-disclosure also allows the provider to negotiate a fair 
monetary settlement and potentially avoid being excluded from participation in Federal 
health care programs.  
The protocol guides providers and suppliers through the process of structuring a disclosure 
to OIG about matters that constitute potential violations of Federal laws.  After making an 
initial disclosure, the provider or supplier is expected to thoroughly investigate the nature 
and cause of the matters uncovered and make a reliable assessment of their economic 
impact.  OIG evaluates the reported results of each internal investigation to determine the 
appropriate course of action.  The self-disclosure guidelines are available on the OIG Web 
site at http://www.oig.hhs.gov/fraud/selfdisclosure.asp. 
During this reporting period, self-disclosure cases resulted in $20.5 million in HHS 
Alaska
receivables.  Following are examples: 
Bartlett Regional Hospital agreed to pay more than $1.4 million to resolve its 
liability under the CMPL.  Bartlett self-disclosed that from May 2006 to April 2012, when a 
patient was seen by a physician who was not enrolled with Medicare B or who had not 
completed an assignment of revenue to the hospital, Bartlett instructed billing staff to 
submit claims under the name of a physician who was enrolled with Medicare Part B and 
Arizona
had completed the assignment, even if that physician did not perform the service.     
Maryvale Hospital agreed to pay $361,041 to resolve its liability under the CMPL.  
Maryvale self-disclosed that from December 2002 through July 2009, it employed a 
cardiovascular pulmonary technician who was excluded from participation in the Federal 
New York
health care programs. 
Woodmark Services, Inc., agreed to pay $311,193 to resolve its liability under the 
CMPL.  Woodmark self-disclosed that from September 2002 through October 2010, KABA 
Health, a medical equipment company and a subsidiary of Woodmark, submitted claims for 
Medicare patients who were not properly qualified by an independent testing facility to 
receive those services, as required by Medicare.  
   
   
  Page 49  HS Office of Inspector General  Legal and Investigative Activities 
Semiannual Report to Congress | Spring 2013  Related to Medicare and Medicaid 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  http://oig.hhs.gov 
 
 
 
  Page 50  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
P  ublic Health Reviews 
 
 
Centers for Disease Control and Prevention 
Global HIV/AIDS Program 
The Centers for Disease Control and Prevention (CDC) implemented the President's 
Emergency Plan for AIDS Relief (PEPFAR) through the Global HIV/AIDS Program, working 
with ministries of health and other in-country partners to combat HIV/AIDS by 
strengthening health systems and building sustainable HIV/AIDS programs in more than 75 
countries.  CDC's offices in host countries are responsible for PEPFAR funds awarded to 
government agencies and for-profit and nonprofit organizations (recipients).  (See also the 
Office of Insp eGcrtaonrt sG enCeDrCa Sl'osu (tOh IAGf)r iScapotTlihgeh Ct eanrtteircsl efo orn D gisreaansets C monatnroalg aenmd ePnretv aenndti oonv'se rSsoiugthht .) 
  Management 3   Africa Office Did Not Always Properly Monitor Recipients' Use of the 
President's Emergency Plan for AIDS Relief Funds  
A-04-12-04022  CDC South Africa did not always monitor recipients' use of PEPFAR funds in 
February 2013  accordance with Department of Health and Human Services (HHS) and 
  other Federal requirements.  Most of the recipient cooperative agreement 
files did not include required documentation or evidence of required 
monitoring.  CDC South Africa did not have written policies and procedures 
for monitoring and did not have assurance that PEPFAR funds were used as 
intended by law.  RecommendationCDC South Africa should implement 
standard operating procedures for monitoring recipients' use of PEPFAR 
funds.  
 Grants  CDC NamibiaThe Centers for Disease Control and Prevention's Namibia 
  Management  Office Did Not Always Properly Monitor Recipients' Use of the President's 
Emergency Plan for AIDS Relief Funds 
A-04-12-04020  Most of CDC Namibias recipient cooperative agreement files did not 
November 2012  include required documents or evidence that CDC Namibia had monitored 
  all cooperative agreements, as required.  RecommendationCDC Namibia 
should implement standard operating procedures for monitoring 
recipients' use of PEPFAR funds.   
 Grants  The Republic of Namibia, Ministry of Health and Social Services, Did Not 
  Management  Always Manage the Presidents Emergency Plan for AIDS Relief Funds or 
Meet Program Goals in Accordance With Award Requirements 
 3                                                            
 To the left of each report title, we have flagged with a checkmark the management challenge(s) 
associated with the reviews findings and recommendations, e.g.,  Grants Management,  Food 
Safety,  Financial Statements, or the name of a specific program.  Implementing a reports 
recommendations would help curb negative outcomes associated with the designated management 
challenges. 
  Page 51  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
A-04-12-04019  Our review of the Republic of Namibia, Ministry of Health and Social 
January 2013  Services (Ministry), revealed unallowable and potentially unallowable 
  expenditures, the reporting of accomplishments that were not related to 
the cooperative agreement, and deficiencies in meeting various other 
requirements.  RecommendationThe Ministry should refund to CDC 
$243,000 of unallowable expenditures, work with CDC to resolve whether 
the $565,000 of potentially unallowable value-added taxes was an 
allowable expenditure, file an amended financial report for the budget 
period we reviewed, develop and implement reconciliation and supporting 
documentation before submission, use correct exchange rates, develop 
policies and procedures for reporting goals and objectives related to the 
cooperative agreement, have an annual audit performed, and submit all 
required reports in a timely manner. 
Food and Drug Administration 
Food SafetyDietary Supplements 
Our final reports related to dietary supplements addressed the extent to which the Food and 
Drug Administration (FDA) is able to effectively locate manufacturers through its Food 
Facility Registry and determined whether manufacturers structure/function claims made 
Locating Dietary Supplement Manufacturers in Emergencies.
on the labels of dietary supplements are truthful and not misleading.     
  The Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002 requires certain dietary supplement 
companies to register with FDA.  Registration in the Food Facility Registry (the registry) is 
intended to provide FDA with sufficient information to contact companies in an emergency. 
Previous OIG work identified problems with FDA's registry.  Recent recalls of dietary 
supplements tainted with prescription drugs, synthetic steroids, and other potentially 
dangerous ingredients highlight the importance of registration and adverse event contact 
information so that FDA can trace the source of the product.  These problems raised 
questions about FDA's ability to identify and contact manufacturers in a food emergency to 
pro FteDcAt puFobolidc  Shaefeatlyt h. Companies May Be Difficult To Locate in an Emergency 
 
OEI-01-11-00211  Of the dietary supplement manufacturers we contacted for review, 28 
October 2012  percent failed to register with the registry.  Of the companies that did 
  register, 72 percent failed to provide the complete and accurate 
information required by law.  Twenty percent of dietary supplement labels 
we sampled did not provide the required telephone numbers or addresses.   
RecommendationsFDA should seek statutory authority to impose civil 
monetary penalties on companies that do not comply with registration 
requirements, take administrative action to educate the dietary 
supplement industry about registration and labeling requirements, and 
Truthfulness of Claims iomnp Droieveta trhye  Saucpcuprlaecmy eonf tin Lfaobrmelast.ion in the registry.  
  Manufacturers use structure/function 
claims to promote the health benefits of their products.  Stakeholders have urged FDA to 
  Page 52  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
strengthen oversight of these claims because they are potentially misleading and may lack 
scientific support.  FDA lacks authority to review or approve such claims before products 
enter the market.  Manufacturers are supposed to have evidence of their claims but do not 
have to submit it to FDA, and FDA has only voluntary standards for it.  Manufacturers must 
notify FDA when they use structure/function claims, and product labels must include 
disclaimers stating that FDA has not reviewed the claims and that the products are not 
inte FnDdAed Ftooo ddi aSagfneotys e, Strtreuactt,u cruer/eF,u onrc tpiorne vCelanitm asn Fya idl iTsoe aMseee.t  Federal Requirements 
 
OEI-01-11-00210  Our findings raised questions about whether some structure/function 
October 2012  claims made on the labels of dietary supplements are truthful and not 
  misleading.  We selected for our review dietary supplements that were 
marketed for weight loss or immune system support.  Overall, we found 
that manufacturers substantiation for structure/function claims was 
inconsistent with FDAs guidance.  Also, manufacturers did not always meet 
related notification and disclaimer requirements. 
RecommendationsFDA should seek statutory authority to review 
manufacturers evidence for structure/function claims and determine 
whether the claims are truthful and not misleading.  We also recommend 
that FDA take administrative actions to improve the notification system for 
such claims to make it more organized, complete, and accurate and expand 
market surveillance to enforce manufacturers use of required disclaimers.  
Drug SafetyRisk Evaluation and Mitigation Strategies 
FDA requires drug manufacturers to submit structured plans, known as Risk Evaluation and 
Mitigation Strategies (REMS), for drugs associated with known or potential risks that may 
outweigh the drugs' benefits.  If FDA does not properly monitor REMS' performance, it 
cannot ensure that the public is provided maximum protection from a drug's known or 
potential risks.  However, FDA does not have the authority to require, but may request, drug 
ma nFDuAfactDurruegr sS a(fie.et.y,  spFoDnAs oLrasc)k st oC osmubpmrehite snpsievcei Dfiact ian Tfoor Dmeatetriomnin ree Wgahredtihnegr  RRiEskM ESv'a eluffaetciotinv aennde ss. 
  Mitigation Strategies Improve Drug Safety 
OEI-04-11-00510  Nearly half of sponsor assessments for the 49 REMS we reviewed did not 
February 2013  include all information requested in FDA assessment plans, and 10 were 
Podcast   not submitted to FDA within required timeframes.  FDA determined that 7 
of the 49 REMS we reviewed met all of their goals.  However, FDA has not 
identified reliable methods to assess the effectiveness of REMS.  Finally, 
FDA's assessment review times exceeded its goal of 60 days for all but one  
sponsor assessment, which reduces sponsors' time to make suggested 
changes before submitting subsequent assessments. 
RecommendationsFDA should seek legislative authority to make 
assessment plans enforceable.  We also made seven administrative 
recommendations regarding FDA's evaluation and assessment of REMS and 
its review of sponsors' REMS assessments.   
  Page 53  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
H  ealth Resources and Services Administration 
 
HIV Testing at Health Center Sites 
Health center sites funded by the Health Resources and Services Administration (HRSA) 
provide primary health care to millions of patients each year and are critical to efforts to 
test patients for HIV and reduce its spread.  Since 2006, CDC has recommended routine HIV 
testingi.e., that patients be tested as a routine part of care and be told they will be tested 
unless they decline.  This approach aims to expand testing to a wider patient population and 
increase testing rates.  The review summarized below determines the extent to which HRSA-
funded s HitReSsA a Gdroapnttes d pHrIaVc Ttiecsetisn tgh iant H CRDSCA -rFeucnodmedm Heenadltehd C.e nter Sites 
  Management 
OEI-06-10-00290  Health center sites had not fully adopted certain practices recommended 
January 2013  by CDC for routine HIV testing.  Regarding whom to test, for which CDC's 
  recommendation varies according to the circumstances of individual health 
care providers, 20 percent of sites reported testing all patients 13-64 years 
of age; 1 percent tested all adults, but not teens; and 55 percent targeted 
testing to high-risk patients.  Regarding the other practices, 29 percent 
adopted the practice regarding prevention counseling; 27 percent adopted 
the practice regarding gaining patient consent for the HIV test; and 15 
percent adopted the practice regarding providing HIV tests as standard, 
opt-out tests.  Most sites had written HIV testing policies that were 
influenced by CDCs recommendations.  
RecommendationsHRSA should require grantees to establish and report 
the prevalence of undiagnosed HIV among their patient populations and 
report HIV positivity (the proportion of patients who test positive among 
all those tested).  We also recommend that HRSA continue to provide 
guidance and education to grantees and sites regarding the CDC-
recommended practices and HIV testing. 
Health Center Program Section 330 Grants   
The Health Center Program, administered by HRSA, provides grants to nonprofit private or 
public entities that serve designated medically underserved populations and areas, as well 
as vulnerable populations of migrant and seasonal farmworkers, the homeless, and 
residents of public housing.  These grants are commonly referred to as "section 330 grants."   
Below  HisR oSAne eGxraamntps le Coofm omuru nreitcye Mnet dwicoarl ka nind  tDheinst aalr eCaa.r e, Inc., Did Not Meet Select Financial 
  Management  Performance Measures and Claimed Unallowable Federal Grant Expenditures 
A-02-11-02001  We found that one grantee we reviewed did not meet select HRSA financial 
November 2012  performance measures.  In addition, the grantee claimed Federal grant 
Spotlight  expenditures totaling $3 million that were not separately accounted for.  
Article  Specifically, the grantee commingled expenditures in its accounting system 
on Grants  with other operational payments and did not maintain personnel activity 
reports for employees who worked on HRSA grants.  Therefore, we could 
  Page 54  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
not determine whether these costs were allowable. 
RecommendationHRSA should either require the grantee to refund 
$3 million to the Federal Government or work with the grantee to 
determine whether any of the costs that it claimed against these grants 
were allowable.   
Public-Health-Related 
Legal Actions and Investigations 
Health Education Assistance Loan Program 
Under the Health Education Assistance Loan (HEAL) program, HRSA guarantees commercial 
loans to students seeking education in health-related fields.  The students are allowed to 
defer repayment of the loans until after they graduate and begin to earn income.  Although 
HHSs Program Support Center (PSC) takes steps to ensure repayment, some loan recipients 
do not resolve their indebtedness.  After PSC has exhausted efforts to secure repayment of a 
debt, it declares an individual in default.  Thereafter, the Social Security Act permits 
exclusion from Medicare, Medicaid, and all other Federal health care programs for 
nonpayment of these loans.  
Exclusion means that the individual may not receive reimbursement under these programs 
for professional services rendered, nor can any other provider receive reimbursement for 
services ordered or prescribed by the individual.  OIG is responsible for excluding 
individuals who have defaulted on HEAL loans from participation in Federal health care 
programs. 
HEAL Exclusions 
During this semiannual reporting period, 21 individuals and related entities were excluded 
as a result of PSC referral of their cases to OIG.  Individuals who have been excluded as a 
result of default may enter into settlement agreements, whereby the exclusions are stayed 
while they pay specified amounts each month to satisfy their debts.  If they default on these 
settlement agreements, they may be excluded until the entire debts are repaid and they may 
not appeal the exclusions. 
After being excluded for nonpayment of their HEAL debts, a cumulative 2,480 individuals 
chose to enter into settlement agreements or completely repay their debts.  That figure 
includes 31 individuals who entered into such settlement agreements or completely repaid 
their debts during this semiannual reporting period.  The amount of money being repaid 
through settlement agreements or through complete repayment is $190,889,720.  Of that 
amount, $3,219,958 is attributable to this semiannual reporting period. 
Practitioners in five States entered into settlement agreements to repay the amounts 
 
indicated: 
 
Virgin Islands podiatrist ($295,297) 
Florida pharmacist ($203,685) 
  Page 55  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
   
 
 
Washington medical doctor ($147,349) 
 
Colorado chiropractor  ($98,912) 
Georgia pharmacist ($86,128) 
 
Human Services Reviews 
 
 
Title IV-E Foster Care and 
Adoption Assistance Programs 
Federal financial participation for the Administration for Children and Families (ACF) 
Title IV-E foster care and adoption assistance programs allows intensive agency training 
sessions at an enhanced rate (75 percent) for salaries, fringe benefits, travel, and per diem 
for employees in initial inservice training of at least 1 week.  An employee who accepts a 
new position at a Title IV-E agency may be considered a new employee for the purpose of 
training cost reimbursement.  However, training cannot be considered intensive when an 
employe AeC hFasG ar afunltls  caCseolnonaedct. icut Title IV-E Training Costs Did Not Always Comply With Federal 
  Management  Requirements 
A-01-12-02500  Connecticut improperly claimed Title IV-E foster care and adoption 
December 2012  assistance programs training costs at the enhanced rate (75 percent) that it 
  should have claimed at the administrative rate (50 percent); thus a net 
overpayment resulted.  This occurred because Connecticut did not have 
procedures in place to ensure that it claimed the enhanced rate only when 
training occurred during an employee's initial inservice period and was 
intensive.      
RecommendationConnecticut should refund the Federal share of 
$1.3 million to the Federal Government and implement procedures to 
correlate training, human resources, and caseload data to help ensure that 
it claims training costs in accordance with Federal requirements. 
Child Support Enforcement 
OIG investigates noncustodial parents who fail to pay court-ordered child support.  OIG 
works with the Office of Child Support Enforcement (OCSE); the Department of Justice; U.S. 
Attorneys Offices; the U.S. Marshals Service; and other Federal, State, and local partners to 
expedite the collection of child support in cases that meet prosecutorial guidelines.   
  Page 56  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
C  hild Support Investigative Outcomes 
 
OIG investigations of child support cases nationwide resulted in 29 criminal actions and 
court-ordered restitution and settlements of $1.49 million during this semiannual period.  
Examples of OIGs enforcement results for failure to pay child support included the 
Kansas
following. 
David Fuller was sentenced to 5 years of probation and ordered to pay $53,778 in 
restitution after being found guilty on charges of willful failure to pay child support.  Fuller 
was ordered by the court in February 1994 to pay child support for his three children.  
However, court records showed that he did not make any payments toward his child support 
obligations.  Fuller, who works as a musician in the Kansas City area using the stage name 
"Doc" Fuller, was indicted in July 2012, owing at the time more than $54,000 in child 
South Dakota
support obligations.   
Alton McEachern was sentenced to 5 years of probation and ordered to pay 
$98,991 in restitution after pleading guilty to charges of failure to pay legal child support.  
McEachern was indicted in March 2011 on charges that, dating back to April 2009, he 
willfully and unlawfully failed to pay past due child support obligations for his two children, 
who are twins.  McEachern moved out of State from his children and had been living in 
North Carolina. 
Engaging the Public in Capturing Deadbeat Parents 
OIGs Most Wanted Deadbeat Parents Web site at:  
https://oig.hhs.gov/fraud/child-support-enforcement/index.asp.   
The site highlights parents who fail to pay court-ordered child support for their children and 
put an unnecessary strain on the custodial parents and the children as well as on agencies 
that enforce these matters.  The site is updated frequently and includes information on OIGs 
role in pursuing parents who fail to pay court-ordered child support.  It has a link to report 
deadbeat parents. 
One of OIGs most wanted deadbeat parents, Robert Sand, was arrested during this 
semiannual reporting period.  Sand had a total delinquent support payment of more than 
$1.2 million for his three children from two marriages.  Sand had been ordered to pay child 
support since 1996, and arrest warrants were issued in 2000, 2002, and 2010 on charges of 
failure to comply with a court order and failure to pay child support.  The investigation 
revealed that Sand made several attempts to elude his child support obligations, including 
underreporting his income and moving from New York to Florida and then to 
Thailand.  Sand was arrested on December 17, 2012, at Los Angeles International Airport 
after being deported from the Philippines. 
 
 
 
 
  Page 57  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
O  ther HHS-Related 
 
Reviews and Investigations 
 
HHS Preparedness and Support in Emergencies 
An IG's 
Guide for Assessing Federal Response Capabilities
In 2010, the Council of the Inspectors General on Integrity and Efficiency published 
, which recommended that Federal agencies 
assess their emergency preparedness.  Within HHS, the Assistant Secretary for 
Preparedness and Response (ASPR) organizes HHS's resources and its response as the 
coordinator and primary agency responsible for Emergency Support Function-8 (ESF-8), 
Public Health and Medical Services.   
HH ASS aPlRso hEmase rrgeesnpcoyn siHbHiliSt iPeusb alisc  aH esaulpthp aonrdt  aMgeedniccayl  fSoerr vnicinese E amdedrigtieonncya lS EupSpFosr. t Preparedness 
  Support Function 
OEI-04-11-00260  We found that HHS deployed resources to 28 emergency incidents in 2010 
November 2012  and 2011.  Of the 28 incidents, we reviewed 3 that affected 17 States.  HHS 
  demonstrated its ability to effectively fulfill its emergency support function 
(ESF) responsibilities for the three  selected incidents.  We found that the 
other ESF coordinators and primary agencies did not always report having 
a clear understanding of HHS's support agency role and its available 
resources during incident response.  States reported receiving multiple 
requests from HHS for the same information, which was burdensome 
during incident response. 
RecommendationASPR should continue to increase communication with 
the ESF coordinators and primary agencies for which HHS serves as a 
support agency and coordinate requests from HHS staff divisions and 
operating divisions to reduce the burden on States during incident 
response. 
HHS and CMS Financial Statement Audits 
Chief Financial Officers Act of 1990, as amended
OIG (or an independent external auditor, as 
determined by OIG) is required to audit the HHS financial statements in accordance with 
applicable standards.  To support this audit, OIG must also audit the Centers for Medicare & 
Medicaid S eFrinvaicnecsia (lC  MRSe)p ofirnt aonnc tihael  Fstinaatenmciaeln Sttsa. tement Audit of the Department of Health and 
  Statement Audits,  Human Services for Fiscal Year 2012 
(HHS) 
A-17-12-00001  Independent external auditors provided an unqualified opinion on the 
November 2012  FY 2012 HHS financial statements, except for the Statement of Social 
  Page 58  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
  Insurance and the related Statement of Changes in Social Insurance 
Amounts, which are described below.  This means that for the 14th 
consecutive year, the statements were reliable and were fairly 
presented.  However, the report on internal controls noted one significant 
deficiency related to financial reporting systems, analyses, and oversight 
and one material weakness related to financial management information 
systems.  In addition, the report on compliance with laws and other 
matters noted areas of noncompliance.  HHS declared a violation to certain 
provisions of the Anti-Deficiency Act and OMB Circular A-11 and is not in 
full compliance with the Improper Payments Information Act of 2002 as 
amended by the Improper Payments Elimination and Recovery Act of 2010.  
HHS did not comply with the Federal Financial Management Improvement 
Act of 1996, which requires Federal agencies to have integrated financial 
management systems that provide effective and efficient interrelationships 
involving software, hardware, personnel, procedures, controls, and data in 
the systems and that are in compliance with the United States Standard 
General Ledger at the transaction level and applicable Federal accounting 
standards.  HHS does not expect to be compliant with the Federal Financial 
Improvement Act of 1996 until FY 2015.  Finally, noncompliance with other 
Financial Reporting Systems, Analyses, and Oversight
legislative provisions was noted. 
In FY 2012, HHS 
made continued progress in its ability to report accurate and timely 
financial information.  However, HHS does not have integrated financial 
management systems, which continues to impair its ability to support and 
analyze account balances reported.  In addition, HHS did not perform 
sufficient analysis of certain accounts; as a result, HHS's ability to report 
Financial Management Information Systems
timely financial information was impaired. 
In FY 2012, HHS made 
continued improvement in the controls that support information 
technology and the financial application systems.  HHS and its Operating 
Divisions have made efforts to address the existing needs for processes and 
practices that protect the integrity of information systems that support 
financial reporting.  However, despite improvements, longstanding 
deficiencies were not remediated to a level that supports reliance on 
controls that exist within these systems.   
 Financial  Report on the Financial Statement Audit of the Centers for Medicare & 
  Statement Audits,  Medicaid Services for Fiscal Year 2012 
(CMS) 
 
A-17-12-02012  Independent external auditors provided an unqualified opinion on the 
November 2012  fiscal year (FY) 2012 CMS consolidated balance sheets, the related 
  consolidated statements of net costs, changes in net position, and the 
combined statement of budgetary resources.  CMS management noted that 
the actual future costs for Medicare are likely to exceed those projections 
estimated under the Patient Protection and Affordable Care Act and other 
current law.  As a result, the auditors were unable to express an opinion on 
the Statements of Social Insurance as of January 1, 2012, 2011, and 2010 
and the Statements of Changes in Social Insurance Amounts for the periods 
ending January 1, 2012, 2011, and 2010.   
In addition, the report on internal controls noted two significant 
deficienciesin the financial reporting process and in information systems 
controls related to CMSs Medicare fee-for-service claims processing 
  Page 59  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
Financial Reporting Process
systems. 
In FY 2012, CMS took steps to improve its 
financial reporting process, but it can still be improved.  CMSs 
management and review control was not functioning as designed or 
intended and did not detect errors.  Also, weaknesses in financial reporting 
Information Systems Controls
oversight were identified.   
In continuing to provide affordable health 
care, monitoring, and validation activities, CMS has not kept pace with the 
increased volume of activity at the Medicare fee-for-service contractors and 
new Government mandates for enhanced information security processes.  
When combined with inadequately designed controls over monitoring and 
oversight, the factors may result in unauthorized system access; 
inconsistencies in access rights, which allow a potential lack of segregation 
of duties; and a lack of compliance with established policies.  Additional 
focus is required to minimize the risk of current and unresolved prior-year 
deficiencies. 
Improper Payment Reporting 
Improper Payments Elimination and Recovery Act of 2010 (IPERA)
OIG is required to 
determine whether HHS has reported required improper payment information in its annual 
Agency Financial Report (AFR) of the most recent FY.  Specifically, OIG must determine 
whether HHS conducted program-specific risk assessments to identify programs or 
activities that are susceptible to significant improper payments and whether it reported 
specific information on those programs in its AFR, including whether the rate of improper 
payments was less than 10 percent.  OIG must also evaluate the accuracy and completeness 
of agency reporting and evaluate agency performance in reducing and recapturing improper 
pa yImmpernotpse.r  Payment  U.S. Department of Health and Human Services Met Many Requirements of 
  Reporting  the Improper Payments Information Act of 2002 but Was Not Fully 
Compliant 
A-17-13-52000  Although HHS met many of the statutory requirements applicable to 
March 2013  reporting on improper payments in its AFR, it did not fully comply with all 
  criteria.  Our report describes a number of findings that are addressed by 
the following recommendations. 
RecommendationsHHS should improve its compliance with 
requirements by assessing the need for additional actions to meet 
improper payment rate reduction targets, developing and reporting 
improper payment rate reduction targets and corrective action plans for 
the Childrens Health Insurance Program, ensuring that amounts used in 
the computations for reporting overpayments recaptured are accurate and 
complete, and ensuring that data are retained in accordance with program 
requirements. 
  Page 60  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
O  IG Reviews of Non-Federal Audits 
 
In this semiannual period, OIGs National External Audit Review Center reviewed 1,764 
reports covering $651 billion in audited costs.  Federal dollars covered by these audits 
totaled $160.5 billion, about $62 billion of which was HHS money. 
Office of Management and Budget (OMB) Circular A-133 establishes audit requirements for 
State and local governments, colleges and universities, and nonprofit organizations 
receiving Federal awards.  Under this circular, covered entities must conduct annual 
organizationwide single audits of all Federal money they receive.  These audits are 
conducted by non-Federal auditors, such as public accounting firms and State auditors.  OIG 
reviews the quality of these audits and assesses the adequacy of the entities management of 
Federal funds.  OIGs oversight of non-Federal audit activity informs Federal managers about 
the soundness of management of Federal programs and identifies any significant areas of 
internal control weakness, noncompliance, and questioned costs for resolution or followup.   
We identify entities for high-risk monitoring, alert program officials to any trends that could 
indicate problems in HHS programs, and profile non-Federal audit findings of a particular 
program or activity over time to identify systemic problems.  We also provide training and 
technical assistance to grantees and members of the auditing profession.  OIG maintains a 
process to assess the quality of the non-Federal reports received and the audit work that 
supports the selected reports.  OIGs reports on non-Federal audits reviewed during this 
reporting period are categorized in the following table. 
Non-Federal Audits, October 1, 2012, Through March 31, 2013 
 
Number of Non-Federal Audits: 
 
   
  Not requiring changes or having minor changes  1,679 
  Requiring major changes  83 
Having significant technical inadequacies Total  2 
1,764 
The 1,764 reports included 3,242 recommendations for improving management operations.  
In addition, these audit reports provided information for 37 OIG special memorandums that 
identified concerns for increased monitoring by management. 
Grants and Contracts 
HHS is the largest grantmaking organization in the Federal Government.  Its funding of 
health and human services programs touches the lives of almost all Americans.  Increased 
concerns by Congress and the Administration regarding transparency of and accountability 
for agency expenditures is creating heightened scrutiny over the administration of grant and 
contract dollars.  (See also OIGs Spotlight article on grants management and oversight.) 
  Page 61  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
M  isuse of Grant Funds 
 
South Dakota
Following are examples of grant-related investigative outcomes in this semiannual period. 
Nathan Janis, Tanya Walking Eagle, and Barbara Duysak (aka Barbara 
McCloskey) were all sentenced after pleading guilty to charges that included theft from an 
Indian tribal organization.  Duysak was the former assistant director of the Rosebud Sioux 
Tribe's Child Care Services Program (CCSP).  Janis was a childcare provider/vendor for CCSP, 
while Walking Eagle was receiving benefits from CCSP for the care of her children.  
According to court documents, between October 2009 and December 2010, the three 
defendants submitted false payment request forms to CCSP for falsified childcare hours.  
They then embezzled money meant for the program that they were not entitled to receive.  
Janis was sentenced to 6 months of incarceration and ordered to pay $33,816 in restitution, 
joint and several; Walking Eagle was sentenced to 1 month of incarceration and ordered to 
pay $30,304 in restitution, joint and several; and Duysak was sentenced to 2 months of 
incarceration and ordered to pay $42,433 in restitution, a portion of which was joint and 
Pennsylvania
several. 
Craig Grimes was sentenced to 3 years and 5 months of incarceration and 
ordered to pay $640,660 in restitution after pleading guilty to charges of wire fraud, false 
statements, and money laundering.  According to published reports, Grimes was a Penn 
State professor who owned the research company SentechBiomed.  The company requested 
a nearly $1.2 million grant from the National Institutes of Health (NIH) to perform research 
related to the measurement of gases in a patients blood.  Grimes was supposed to direct 
nearly half of the grant to the Hershey Medical Center to conduct clinical research on adult 
and infant subjects.  However, he never paid the center to conduct the studies and trials.  
Instead, Grimes misspent the money for his own use. 
Significant Grant-Related Reviews 
Brief descriptions of the following significant grant-related reports issued in this period are 
desc rCiDbCe d  iGnlo tbhael  "PCuDbCli Sco Huteha Altfhr"ic aandT "hHe uCmenatenr Ss eforrv Diciesesa"s see Ccotniotrnosl  oanf dth Pirse dveonctuiomne'sn Sto: uth Africa 
  HIV/AIDS  Office Did Not Always Properly Monitor Recipients' Use of the President's 
Program  Emergency Plan for AIDS Relief Funds.    
 
  CDC NamibiaThe Centers for Disease ACo-0n4tr-1ol2 a-0n4d0 P2r2e.vention's Namibia Office 
Did Not Always Properly Monitor Recipients' Use of the President's Emergency Plan 
for AIDS Relief Funds.    
 
  The Republic of NamibAia-,0 M4i-n1i2st-0ry4 o0f2 H0.ealth and Social Services, Did Not Always 
Manage the Presidents Emergency Plan for AIDS Relief Funds or Meet Program 
Goals in Accordance With Award Requirements.    
 
 HRSA  Health  Community Medical and Dental Care, Inc., Did NoAt -M04ee-1t 2Se-0le4c0t 1F9in.ancial 
Center Program   Performance Measures and Claimed Unallowable Federal Grant Expenditures.   
 
 
 ACF Foster  CAo-0n2n-e1c1ti-c0u2t 0T0it1le. IV-E Training Costs Did Not Always Comply With Federal 
Care and  Requirements.    
Adoption  
A-01-12-02500.
  Page 62  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
S  mall Business Innovative Research Program 
 
National Defense Authorization Act for Fiscal Year 2012, 5143
Certain inspectors general 
are required to annually report on the number of cases referred to them related to fraud 
waste, or abuse related to Small Business Innovative Research (SBIR) program; the actions 
taken in each case; justification for not taking action on a case; and an accounting of funds 
used to address waste, fraud, and abuse in this program.  Since its enactment in 1982, as 
part of the Small Business Innovation Development Act, SBIR has helped small businesses to 
compete for Federal research and development awards.  In a November 2, 2012, report 
delivered to the three Congressional oversight committees, HHS OIG reported that it spent 
approximately $133,595 in salaries on self-initiated oversight activities related to the SBIR 
program.  HHS did not refer any SBIR cases to OIG in FY 2012. 
Contract Audits 
National Defense Authorization Act for FY 2008,  845
SemiannualReports to Congress Inspectors General appointed under 
the Inspector General Act of 1978 are required to submit, as part of 
their     pursuant to section 5 of such Act, information on final, 
completed contract audit reports issued during the period to the contracting activity 
containing significant audit findings.  OIG did not issue final reports meeting  845 criteria 
during this semiannual period. 
Other HHS-Related Matters 
Recovery Act Retaliation Complaints 
The American Recovery and Reinvestment Act of 2009 (Recovery Act),  1553
The Recovery 
Act prohibits non-Federal employers that have received Recovery Act funding from 
retaliaSteimngia angnauinasl tR eempoprltosy teoe Cso wnhgore dssisclose evidence of mismanagement of Recove ry Act 
funds or any violation of law related to Recovery Act funds.  OIG s  are required to include in 
their   the retaliation complaint investigations thatthey 
decided not to conduct or continue during the reporting period. OIG did not discontinue or 
decline to conduct any investigations of Recovery Act whistleblower retaliation complaints 
during this reporting period. 
Employee Misconduct 
North Carolina
Jihan Cover was sentenced to 6 months of imprisonment and ordered to 
pay $114,494 in restitution after pleading guilty to embezzlement charges.  Cover worked as 
a purchasing agent for NIHs National Cancer Institute (NIH/NCI).  From approximately June 
2009 to December 2010, Cover used and caused to be used NIH/NCI purchase cards 
assigned to her to complete more than 250 unauthorized personal transactions, totaling 
$114,494.  These purchases included buying personal items at Amazon.com; using the cards 
to pay off balances she accrued from various cash advances and loan vendors; and making 
self-payments to her personal accounts, which were designed to appear as a legitimate 
vendor.  When Cover was confronted by her supervisor regarding suspicious transactions, 
  Page 63  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
she falsely claimed that she was the victim of identity theft and filed false dispute forms with 
the credit-card-issuing bank. 
Legislative and Regulatory Reviews 
Inspector General Act, 4(a)(2)
OIG is required to review existing and proposed 
legislation and regulations relating to HHSs programs and operations and make 
recommendations concerning their impact on economy and efficiency or the prevention and 
detection of fraud and abuse.  Most audits and other reviews that we conduct are designed 
to test compliance with and/or assess the administration and oversight of existing laws and 
regulations.  Our reports of such reviews describe findings, which include questioned costs, 
inefficiencies, vulnerabilities to fraud, inconsistencies, errors in application, or weaknesses 
in oversight or supporting systems.  Our corresponding recommendations tell HHS and its 
operating or staff divisions what administrative, regulatory, or legislative actions we believe 
are needed to effectively respond to the findings.  Our regularly published core publications 
  Semiannual Report to Congress
reflect the relationship between our work and laws and regulations.    
Our   describes findings and recommendations from 
  Compendium of Unimplemented Recommendations
recently completed reviews, many of which focus on existing laws and regulations.   
Our  , which is published annually, 
describes priority findings and recommendations from past periods that remain to be 
  Work Plan
implemented, along with pertinent citations of existing laws and regulations.   
Our annual  , which is published at the start of each fiscal year, provides 
citations to laws and regulations that are the subject of ongoing or future reviews.   
We also review proposed legislation and regulations related to HHS programs and 
operations.  HHS routinely involves us and its operating and other staff divisions in the 
review and development of HHS regulations through a well-established HHS process.  Our 
audits, evaluations, and investigations are sometimes cited in regulatory preambles as 
influencing HHS regulations.  In addition, we provide independent, objective technical 
assistance on a bipartisan, bicameral basis to congressional committees and members who 
request it. 
 
 
Affordable Care ActImplementation 
The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and 
Education Reconciliation Act of 2010 (Affordable Care Act), created new programs and 
initiatives and expanded and modified a number of existing HHS programs.  OIG has begun 
to issue reports of its reviews related to the implementation of the new programs.  Two such 
reports issued during this semiannual period relate to the National Background Check 
program and the affordable insurance exchanges. 
 
   
  Page 64  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
 
National Background Check Program 
The Affordable Care Act mandates that OIG submit a report to Congress evaluating the 
Nationwide Program for National and State Background Checks on Direct Patient Access 
Employees of Long Term-Care Facilities and Providers.  This report provides baseline 
information for the mandated report on the extent to which nurse aides with substantiated 
findings of abuse, neglect, and/or misappropriation of resident property had previous 
criminal convictions that could have been detected through background checks and the 
na Atuffroerd oafb tlhe oCsaere c Aocntv icBtiaocnksg.r ound ChecksCriminal Convictions for Nurse Aides With 
  Implementation  Substantiated Findings of Abuse, Neglect, and Misappropriation 
OEI-07-10-00422  Our review of nurse aides provided baseline information for a mandatory 
October 2012  evaluation of the background check program.  Our analysis of - criminal 
  history records maintained by the Federal Bureau of Investigation revealed 
that 19 percent (300 of 1,611) of nurse aides who received substantiated 
findings of abuse, neglect, or misappropriation in 2010 had at least 1 
conviction prior to their substantiated findings.  This information will be 
used in an evaluation report mandated by the Affordable Care Act,  6201.  
The report does not contain recommendations.   
Eligibility and Enrollment in 
State Health Subsidy Programs 
The Affordable Care Act,  1413, requires HHS and States to streamline eligibility and 
enrollment systems in State health subsidy programs, i.e., Medicaid, the Children's Health 
Insurance Program, and State exchanges.  Implementation of affordable insurance 
ex Achffaonrdgaebsl ea Cffaercet sA cint forHmeaalttiho Snu sbysisdtye mPrso,g arpamplsicaMtioosnt  fSotarmtess ,A anntidci pealitgei bImilpitlye mdeantati nsgh aErliignigb.i l ity 
   Implementation  and Enrollment Requirements by 2014 
OEI-07-10-00530  We found that streamlining of eligibility and enrollment systems was on 
February 2013  track, but States reported challenges.  In response to a national survey, 35 
  of the 45 States that responded to our survey said they generally anticipate 
streamlining the systems by the January 1, 2014, target date.  However, 
States reported challenges in upgrading outdated systems and resolving 
implementation-related funding issues.  They reported needing more 
information and guidance from HHS on a number of topics.  We concluded 
that  CMS should continue to provide guidance to States as they implement 
the streamlined eligibility and enrollment systems.  The report does not 
contain recommendations.   
 
   
  Page 65  HHS Office of Inspector General  Public Health, Human Services 
Semiannual Report to Congress | Spring 2013  and Other HHS-Related Reviews 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  http://oig.hhs.gov 
 
 
  Page 66  HHS Office of Inspector General   
Semiannual Report to Congress  Spring 2013  List of Appendixes 
 List of 
 
Appendixes 
 
 
 
Appendix A  Reporting Requirements 
Appendix B  Questioned Costs and Funds To Be 
Put to Better Use 
Appendix C  Peer Review Results 
Appendix D  Summary of Sanction Authorities 
   
 
   
  Page 67  HHS Office of Inspector General   
Semiannual Report to Congress  Spring 2013  List of Appendixes 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  http://oig.hhs.gov 
 
 
 
 
  Page 68  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress | Spring 2013  Reporting Requirements 
 
 
Appendix A 
Reporting Requirements 
 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed in 
the following table along with the location of the required information.     
Section  Requirement  Location 
   
Section 4     
Se(cat)i(o2n)  5  Review of legislation and regulations  Other HHS-Related Issues.   
 
   
(a)(1)  Significant problems, abuses, and  Throughout this report 
deficiencies 
 
(a)(2)  Recommendations with respect to  Throughout this report 
significant problems, abuses, and 
deficiencies  Compendium of Unimplemented 
  Recommendations 
(a)(3)  Prior significant recommendations on 
which corrective action has not been 
completed 
 
(a)(4)  Matters referred to prosecutive authorities  Legal and Investigative Activities 
 
(a)(5)  Summary of instances in which information  None 
requested by OIG was refused 
 
(a)(6)  List of audit reports  Submitted to the Secretary under 
separate cover 
 
(a)(7)  Summary of significant reports  Throughout this report 
 
(a)(8)  Statistical Table 1  Reports With  Appendix B 
Questioned Costs 
 
(a)(9)  Statistical Table 2  Funds Recommended  Appendix B 
To Be Put to Better Use 
 
(a)(10)  Summary of previous audit reports without  Appendix B 
management decisions 
 
(a)(11)  Description and explanation of revised  Appendix B 
management decisions 
 
(a)(12)  Management decisions with which the  None 
Inspector General disagrees 
 
  Page 69  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress | Spring 2013  Reporting Requirements 
  Section  Requirement  Location 
 
 
Semiannual Report to Congress
(a)(13)  Information required by the Federal  Reported annually in the spring 
Financial Management Improvement Act of  , 
1996  Other HHS-Related Issues.   
   
(a)(14)-(16)  Results of peer reviews of HHS-OIG  Appendix C 
conducted by other OIGs or the date of the 
last peer review, outstanding 
recommendations from peer reviews, and 
peer reviews conducted by HHS OIG of 
  other OIGs. 
 
Other Reporting Requirements 
Requirement  Location 
 
Contract Audits
Report to Congress on significant contract  Other HHS-Related Reviews 
audits pursuant to criteria in the National Defense 
ASaufteh oHraizrabtoiorns Act for Fiscal Year 2008,  845.  Federal 
 Register Semiannual Report
Solicit proposals annually via a  Reported annually in the fall 
 notice for developing new and modifying existing  , Other HHS-
safe harbors to the anti-kickback statute of the Social  Related Reviews  
Security Act,  1128(b), and for developing special fraud   
alerts.  Report annually to Congress on the status of the   
proposals received related to new or modified safe harbors.  
Health Insurance Portability and Accountability Act of 1996 
(RHeIcPoAvAe)r.y  Act
 
Report to Congress the retaliation complaint  Other HHS-Related Reviews 
investigations OIG decided not to conduct or continue during 
the period.  American Reinvestment and Recovery Act of 
2Sm01a0l l( BRuecsoinveesrys  IAncnt)o, va 1ti5v5e3 R.  esearch (SBIR)
 
Report on  Other HHS-Related Reviews 
cases referred to OIG related to fraud waste, or abuse related 
to SBIR.  National Defense Authorization Act for Fiscal Year 
2012, 5143.  
 
   
 
  Page 70  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress | Spring 2013  Questioned Costs, Funds To Be Put to Better Use 
 
 
Appendix B 
Questioned Costs and  
 
Funds Recommended To Be Put to Better Use 
The following tables summarize the Office of Inspector Generals (OIG) monetary 
recommendations and the Department of Health and Human Services (HHS) responses to 
them.  This information is provided in accordance with the Inspector General Act,  5(a)(8) 
and (a)(9), (5 U.S.C. App.  5(a)(8) and (a)(9)), and the Supplemental Appropriations and 
Rescissions Act of 1980.   
 
Audit Reports With Questioned Costs 
Questioned costs are those questioned by OIG audits because of an alleged violation of a 
provision of a law, regulation, contract, grant, or other agreement governing the expenditure 
of funds.  Costs are questioned because the expenditure was not supported by adequate 
documentation or because the expenditure was unnecessary or unreasonable.  OIG includes 
those questioned costs that HHS program officials, in a management decisions, have agreed 
shouSledm niaont nbuea clh Raerpgoerdt to the Federal Government, commonly referred to as disallowed 
costs, as part of the expected recoveries in the Accomplishment section at the beginning of 
the  .  Superscripts indicate end notes. 
Table 1  Audit Reports With Questioned Costs 
Reports  Dollar Value  Dollar Value 
Questioned  Unsupported 
Section 1         
Reports for which no management decisions had  228  $757,571,000  $41,257,000 
been made by the beginning of the reporting 
1
period   Total Section 1 
Reports issued during the reporting period  97  $593,866,000  $3,238,000 
Section 2    325  $1,351,437,000  $44,495,000 
 
     
Reports for which management decisions were       
2, 3 
made during the reporting period  
  Disallowed costs  Total Section 2  203  $521,231,000*  $12,683,000 
   Costs not disallowed  11  $52,218,000   $4,813,000 
  214  $573,449,000  $17,496,000 
       
* Audit receivables (expected recoveries).       
       
  Page 71  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress | Spring 2013  Questioned Costs, Funds To Be Put to Better Use 
  Reports  Dollar Value  Dollar Value 
  Questioned  Unsupported 
   
Section 3 
Reports for which no management decisions had  111  $777,988,000  $26,999,000 
been made by the end of the reporting period (Sec. 
1Se mctiinouns 4 S  ec. 2) 
 
     
Reports for which no management decisions were  46  $198,822,000  $23,762,000 
4 
made within 6 months of issuance
 
 
Audit Reports With Funds  
Recommended To Be Put to Better Use  
The phrase recommendations that funds be put to better use means that funds could be 
used more efficiently if management took action to implement an OIG recommendation 
through reductions in outlays, deobligation of funds, and/or avoidance of unnecessary 
expenditures.  Table 2 reports HHS program officials decisions to take action on these audit 
recommendations.   
Table 2  Audit Reports With Funds To Be Put to Better Use 
Reports  Dollar Value 
Section 1 
 
   
Reports for which no management decisions had been made by the  17  $1,480,248,000 
1
beginning of the reporting period   Total Section 1 
Reports issued during the reporting period  15  $14,298,000 
Section 2    32  $1,494,546,000 
     
   
Reports for which management decisions were made during the     
reporting period 
Value of recommendations agreed to      
by management 
  Based on proposed management action  7  $801,744,000 
  Based on proposed legislative action  0  0 
  Total Section 2     
Value of recommendations not agreed to by management  4  $213,612,000 
Section 3    11  $1,015,356,000 
     
   
Reports for which no management decisions had been made by the  21  $479,190,000 
2 
end of the reporting period (Sec. 1 minus Sec. 2) 
 
  Page 72  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress | Spring 2013  Questioned Costs, Funds To Be Put to Better Use 
 End Notes 
 
Table 1 End Notes 
1
 The opening balance was adjusted upward by $107.6 million because of a reevaluation of 
previously issued recommendations.  
2
  Revisions to previously reported management decisions: 
 
CMS determined that it could not recoup disallowances totaling $517,355,025 
associated with 21 audits because Federal regulations at 42 CFR 405.980(b) prevented 
  it from reopeningR ecvlaieimw so bf eInydoinadn a4  Myeeadrisc aaifdte Hr oitssp iitnailt iDails dpertoepromrtiinoantaioten .S  h are Eligibility  
State FYs 2001-2003.
A-05-06-00045, 
  On the basis of additional information provided by the State, CMS 
determined that one of three psychiatric hospitals reviewed by OIG met specific 
conditions of participation and reduced its original disallowance of $88,236,417 by 
  $34,008,371.  State of California.
A-09-07-88410, A-09-09-92146, and A-09-09-94256,    CMS revised a 
finding involving duplicate Medicaid payments made to long-term care facilities and 
providers that was initially reported in the FY 2006 single audit and subsequently 
included in the FY 2007 and 2008 single audits.  On the basis of information provided by 
the State auditor, CMS determined that the Federal share of duplicate payments was 
  $3,311,446 and rSetdautec eodf  Iintsd ioarnigainal disallowances by $14,524,773.   
A-05-10-95134,  .  CMS determined that prior to FY 2010, the State could 
charge allowable administrative expenses against the subsequent years grant award 
  and reversed its Sdtiasatell oowf Ianndciaen oaf $14,017,440. 
A-05-07-88075,  .  On the basis of a review of an amended cost report for 
a State-owned facility that had the effect of reducing the amount of overpayment 
identified in the non-Federal audit of the State, CMS reduced its original disallowance of 
  $16,376,503 by $R9e,v1i0e3w,8 o8f 1M. edicaid Outpatient Drug Expenditures in California for FYs 
2004 and 2005
A-09-07-00039, 
.  CMS reduced its original disallowance of $24,082,193 by $6,553,600 on 
  the basis of OIG, sR reevvieiswe do fe Isnttimerarutep toefd u Sntaalylos wata bInlep adtriueng te Rxepheanbdiiltiutarteiso.n    Facilities
A-01-04-00525 .  CMS 
contractors completed their review of claims and recovered $3,994,014 in additional 
  overpayments. 
A-05-01-65324, State of Indiana.  On the basis of additional information from the State 
Board of Accounts regarding the reimbursement of medical supplies to Medicaid 
providers, CMS reduced its original disallowance of $5,396,116 by $2,557,019. 
  Page 73  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress | Spring 2013  Questioned Costs, Funds To Be Put to Better Use 
 
 
3 
Included are management decisions to disallow $25.7 million in questioned costs that 
were identified by non-Federal auditors in audits of State and local governments, colleges 
and universities, and nonprofit organizations receiving Federal awards conducted in 
accordance with Office of Management and Budget Circular A-133.  By law, OIG is 
responsible for ensuring that work performed by these non-Federal auditors complies with 
Federal audit standards; accordingly, OIG tracks, resolves, and reports on recommendations 
in these audits. 
4 
Because of administrative delays, some of which were beyond management control, 
resolution of the following 46 audits was not completed within 6 months of issuance of the 
reports; however, agency management has informed us that the agency is working to 
resolve the outstanding recommendations before the end of the next semiannual reporting 
period:  
 
A-09-06-00023   REVIEW OF LOS ANGELES COUNTY APPROVAL PROCESS OF RELATIVE FOSTER 
FAMILY HOMES, OCT 2009, $45,520,603 
A-05-08-00098   REVIEW OF OHIO DEPARTMENT OF JOB AND FAMILY SERVICES CLAIMS FOR 
COSTS REPORTED BY THE HAMILTON COUNTY DEPARTMENT OF JOB AND FAMILY 
SERVICES, JAN 2011, $34,056,598 
A-01-02-00006   REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID SCHOOL-BASED 
HEALTH SERVICES ,  CT, MAY 2003, $32,780,146 
A-01-10-00513   NATIONWIDE REVIEW OF PLACE OF SERVICE CODING FOR PHYSICIAN SERVICES 
PROCESSED BY PART B CONTRACTORS FOR CY 2008, SEP 2011, $19,266,050 
A-07-10-06004   REVIEW OF PART D DRUGS PRESCRIBED BY EXCLUDED PROVIDERS, DEC 2011, 
$15,079,608 
A-03-09-00019   REVIEW OF MEMBERHEALTH'S 2006 AND 2007 DIRECT AND INDIRECT 
REMUNERATION REPORTS, OCT 2010, $9,339,013 
A-01-11-00534   NATIONWIDE REVIEW OF INPATIENT REHABILITATION FACILITIES PATIENT 
ASSESSMENT INSTRUMENTS FOR CALENDAR YEARS 2009 AND 2010, SEP 2012, 
$8,397,071 
A-01-10-00508   REVIEW OF PAYMENTS TO HOSPITALS FOR NONPHYSICIAN OUTPATIENT 
SERVICES UNDER THE I/P PROSPECTIVE PAYMENT SYSTEM, JUN 2012, $6,100,000 
A-04-08-03521   AUDIT OF UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS IN TN FOR THE 
PERIOD OCTOBER 1, 1998  DECEMBER 31, 2007, FEB 2009, $5,768,243 
A-01-11-02500   REVIEW OF MASSACHUSETTS' TITLE IV-E ADOPTION ASSISTANCE COSTS FOR 
FEDERAL FISCAL YEARS 2006  2008, AUG 2011, $4,242,540 
A-04-11-01095   ADMINISTRATIVE AND CLERICAL COSTS CHARGED TO FEDERAL GRANTS AND 
CONTRACTS, JUL 2012, $2,977,548 
A-03-11-00002   REVIEW OF NEW ENGLAND JOINT ENTERPRISE 2009 DIR REPORTS, APR 2012, 
$2,710,732 
A-07-11-03163   REVIEW OF CCDF TARGETED FUNDS IN IOWA, MAR 2012, $2,654,238 
A-04-11-08008   REVIEW OF CONCURRENTLY ENROLLED CHIP AND MEDICAID BENEFICIARIES IN 
AL, SEP 2012, $1,699,959 
A-02-11-02007   LONG ISLAND CHILD AND FAMILY DEVELOPMENT SERVICES, INC.S FINANCIAL 
MANAGEMENT SYSTEM DID NOT ACCURATELY DISCLOSE HEAD START PROGRAM 
RESULTS, MAY 2012, $1,489,093 
A-06-11-00031   RCA OF THE CHILD DEVELOPMENT COUNCIL OF ACADIANA, INC., SEP 2012, 
$1,173,276 
  Page 74  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress | Spring 2013  Questioned Costs, Funds To Be Put to Better Use 
 
 
A-02-10-01001   NEW JERSEY DID NOT ALWAYS CLAIM FEDERAL MEDICAID REIMBURSEMENT FOR 
PERSONAL CARE SERVICES MADE BY BAYADA NURSES, INC., IN ACCORDANCE 
WITH FEDERAL AND STATE REQUIREMENTS, SEP 2012, $774,274 
A-02-11-02005   LIMITED HEAD START REVIEW OF INCLUDED EDUCATIONAL SERVICES, JUL 2012, 
$588,830 
A-01-11-02506   CHILDCARE LEARNING CENTERS, HEAD START LIMITED SCOPE REVIEW,  
ALLOCATING OF COSTS  ARRA, MAY 2012, $563,059 
A-01-11-02505   NEON - HEAD START LIMITED SCOPE REVIEW  ALLOCATING OF COSTS  ARRA, 
JAN 2012, $406,434 
A-02-11-01004   REVIEW OF THE QUARTERLY MEDICAID STATEMENT OF EXPENDITURES FOR THE 
MEDICAL ASSISTANCE PROGRAM IN THE U.S. VIRGIN ISLANDS FOR THE QUARTER 
ENDED SEPTEMBER 30, 2009, APR 2012, $393,316 
A-06-11-00034   RCA OF THE ECONOMIC OPP. DEV. CORP. OF ATASCOSA, KARNES, WILSON 
COUNTIES, SEP 2012, $372,081 
A-01-10-02505   RESULTS OF LIMITED SCOPE REVIEW OF CTE, INC., MAY 2011, $293,870 
A-05-05-00033   UNDISTRIBUTED CHILD SUPPORT COLLECTIONS  MI, AUG 2006, $257,859 
A-01-11-02508   REVIEW OF VERMONT'S TITLE IV-E ADMINISTRATIVE AND TRAINING COSTS, FEB 
2012, $242,233 
A-07-06-01035   AUDIT OF QUALITY IMPROVEMENT ORGANIZATION  IOWA, OCT 2007, $208,974 
A-05-09-00044   RISK ADJUSTMENT DATA VALIDATION OF PAYMENTS MADE TO PARAMOUNT 
CARE, INC., FOR CALENDAR YEAR 2007 (CONTRACT NUMBER H3653), SEP 2012, 
$205,534 
A-06-09-00012  RISK ADJUSTMENT DATA VALIDATION  PACIFICARE H4590, MAY 2012, $183,247 
A-04-11-01004   NORTHEAST FLORIDA COMMUNITY ACTION AGENCY, INC.S CSBG FUNDS 
AWARDED UNDER THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009, 
SEP 2012, $165,795 
A-04-11-03538   HEAD START HIGH RISK GRANTEE - MOBILE COMMUNITY ACTION AGENCY, INC., 
DEC 2011, $147,587 
A-09-09-01007   REVIEW OF IDAHO'S TITLE IV-E ADOPTION ASSISTANCE COSTS FOR FEDERAL 
FISCAL YEARS 2006  2008, JUL 2009, $124,046 
A-04-07-01045   COSTS CLAIMED FOR ESRD NETWORK 6 OPERATIONS, AUG 2009, $116,728 
A-06-11-00058   REVIEW OF CSBG ARRA COSTS CLAIMED BY CROWLEY'S RIDGE DEVELOPMENT 
COUNCIL, AUG 2012, $115,420 
A-09-11-02044   SOUTHERN CALIFORNIA RENAL DISEASE COUNCIL, INC.,  CONTRACT 500-2006-
NW018C, YRS 07/2006  09/2010, MAY 2012, $112,670 
A-02-11-02000     REVIEW OF SELECT EXPENDITURES, SUNY AT ALBANY, OCT 2011, $62,560 
 
A-09-12-01000   REVIEW OF CSBG RECOVERY ACT ADMINISTRATIVE COSTS CLAIMED BY HI OFFICE 
OF COMMUNITY SERVICES, JUN 2012, $34,861 
A-04-06-00023   REVIEW OF QUALITY IMPROVEMENT ORGANIZATIONS - TENNESSEE, JUL 2008, 
$30,654 
A-09-11-02005   REVIEW OF INCURRED COSTS OF NETWORK COORDINATING CENTER CONTRACT, 
APR 2012, $29,192 
A-03-10-03110   TIGER TEAM  CONTRACT HHSN267-2007-00014C, OCT 2011, $27,707 
A-09-11-01014   REVIEW OF CSBG RECOVERY ACT COSTS CLAIMED BY HI FOR THE HAWAII 
COUNTY ECONOMIC OPPORTUNITY COUNCIL, JUL 2012, $22,602 
  Page 75  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress | Spring 2013  Questioned Costs, Funds To Be Put to Better Use 
 
 
A-09-10-02045   REVIEW OF INCURRED COSTS OF ESRD NETWORK 18 CONTRACT, MAR 2012, 
$19,996 
A-02-11-02008   REVIEW OF SELECT EXPENDITURES, SUNY AT STONY BROOK, AUG 2012, $18,254 
A-05-11-00042   MEDICARE PART D MADE SOME INCORRECT PAYMENTS TO COMMUNITY 
INSURANCE INC FOR INSTITUTIONAL BENEFICIARIES IN 2008, AUG 2012, $13,346 
A-05-11-00053   THE COLUMBUS URBAN LEAGUE CLAIMED SOME UNALLOWABLE COSTS TO HEAD 
START, SEP 2012, $13,102 
A-05-06-00043     REVIEW OF OHIO KEPRO, INC., FEB 2008, $11,874 
 
A-01-12-02501   REVIEW OF CSBG RECOVERY ACT COSTS CLAIMED - CFC, FALL RIVER, MA, AUG 
2012, $10,769 
 
TOTAL NUMBER OF REPORTS:  46 
TOTAL AMOUNT:  $198,821,592 
 
Table 2 End Notes 
1
The opening balance was adjusted downward by $31.3 million because of reevaluation of 
previously issued recommendations.  
2 
Because of administrative delays, some of which were beyond management control, 
resolution of the following five audits was not completed within 6 months of issuance of the 
report.  OIG is working with management to reach resolution on these recommendations 
before the end of the next semiannual reporting period: 
 
A-04-10-03059   REVIEW OF CMS MONETARY RECOVERIES MADE AS A RESULT OF OAS AUDIT 
REPORTS, MAY 2012, $416,287,546 
A-06-10-00059   REVIEW OF HOSPICE COVERED DRUGS NATIONWIDE, JUN 2012, $33,638,137 
A-05-05-00033   UNDISTRIBUTED CHILD SUPPORT COLLECTIONS - MI, AUG 2006, $4,397,133 
A-05-06-00023   UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS - MN, SEP 2006, $28,240 
A-09-09-01007   REVIEW OF IDAHO'S TITLE IV-E ADOPTION ASSISTANCE COSTS FOR FEDERAL 
FISCAL YEARS 2006  2008, JUL 2009, $17,764 
 
TOTAL NUMBER OF REPORTS: 5 
TOTAL AMOUNT:   $454,368,820 
 
  Page 76  HHS Office of Inspector General  Appendix C   
Semiannual Report to Congress | Spring 2013  Peer Review Results 
 
 
Appendix C 
Peer Review Results 
 
The Inspector General Act of 1978, as amended, requires Offices of Inspector General (OIGs) 
to report the results of peer reviews of their operations conducted by other OIGs, the date of 
the last peer review, and outstanding recommendations from peer reviews.  OIGs also report 
peer reviews they conducted of other OIGs in the semiannual period.  Peer reviews are 
conducted by member organizations of the Council of the Inspectors General on Integrity 
and Efficiency (CIGIE).  The required information follows. 
 
Office of Audit Services Peer Review Results 
During this semiannual reporting period, OAS did not participate in any peer review 
process.  Listed below is information concerning OASs peer review activities during prior 
reportinOgA pS eriods.  Date  Reviewing Office  Office Reviewed 
 
June 2012  Department of  HHS OIG, OAS 
Homeland Security 
The system of quality control for the audit organization of HHS OIG in effect for the year 
ending September 30, 2011, has been suitably designed and complied with to provide 
HHS OIG with reasonable assurance of performing and reporting in conformity with 
applicable professional standards in all material respects.  Federal audit organizations can 
receive a rating of pass, pass with deficiencies, or fail.  HHS OIG received a peer review 
rating of pass. 
  OAS  Date  Reviewing Office  Office Reviewed 
 
`  HHS OIG, OAS  U. S. Environmental 
Protection Agency (EPA) 
The system of quality control for the audit organization of EPA OIG in effect for the year 
ending  September 30, 2011, has been suitably designed and complied with to provide 
EPA OIG with reasonable assurance of performing and reporting in conformity with 
applicable professional standards in all material respects.  Federal audit organizations can 
receive a rating of pass, pass with deficiencies, or fail.  EPA OIG received a peer review 
rating of pass. 
 
 
   
  Page 77  HHS Office of Inspector General  Appendix C   
Semiannual Report to Congress | Spring 2013  Peer Review Results 
 Office of Investigations Peer Review Results  
 
During this semiannual reporting period, OI did not participate in any peer review process.  
Listed below is information concerning OIs peer review activities during prior reporting 
periods.  
OI  Date  Reviewing Office  Office Reviewed 
   
August 2012  USPS-OIG  HHS-OIG, OI 
 
The system of internal safeguards and management procedures for the investigative 
function of HHS-OIG in effect for the year ending September 30, 2012, were in full 
compliance with the quality standards established by CIGIE and the Attorney General's 
guidelines. 
  OI  Date  Reviewing Office  Office Reviewed 
   
July 2011  HHS-OIG, OI  Department of Defense 
  (DoD)-OIG 
The system of internal safeguards and management procedures for the investigative 
function of DoD-OIG in effect through July 2011 were in full compliance with the quality 
standards established by CIGIE and the Attorney General's guidelines. 
  OI  Date  Reviewing Office  Office Reviewed 
 
January 2011  HHS-OIG, OI  Department of Housing 
and Urban Development 
 
(HUD) OIG 
 
The system of internal safeguards and management procedures for the investigative 
function of HUD-OIG in effect through February 2011 was in full compliance with the 
quality standards established by CIGIE and the Attorney Generals guidelines. 
 
 
 
  Page 78  HHS Office of Inspector General  Appendix D 
Semiannual Report to Congress | Spring 2013  Sanction Authorities 
 
 
Appendix D 
Summary of Sanction Authorities 
 
The Inspector General Act of 1978, as amended, specifies requirements for semiannual 
reports to be made to the Secretary for transmittal to Congress.  A selection of other 
authorities appears below. 
 
Program Exclusions 
The Social Security Act,  1128 (42 U.S.C.  1320a-7), provides several grounds for excluding 
individuals and entities from participation in Medicare, Medicaid, and other Federal health 
care programs.  Exclusions are required for individuals and entities convicted of the 
following types of criminal offenses:  Medicare or Medicaid fraud; patient abuse or neglect; 
felonies for other health care fraud; and felonies for illegal manufacture, distribution, 
prescription, or dispensing of controlled substances.   
The Office of Inspector General (OIG) is authorized to exclude individuals and entities on 
several other grounds, including misdemeanors for other health care fraud (other than 
Medicare or Medicaid) or for illegal manufacture, distribution, prescription, or dispensing of 
controlled substances; suspension or revocation of a license to provide health care for 
reasons bearing on professional competence, professional performance, or financial 
integrity; provision of unnecessary or substandard services; submission of false or 
fraudulent claims to a Federal health care program; or engaging in unlawful kickback 
arrangements. 
The Patient Protection and Affordable Care Act of 2010 (Affordable Care Act) added another 
basis for imposing a permissive exclusion, that is, knowingly making, or causing to be made, 
any false statements or omissions in any application, bid, or contract to participate as a 
provider in a Federal health care program, including managed care programs under 
Medicare and Medicaid, as well as Medicares prescription drug program. 
Providers subject to exclusion are granted due process rights.  These include a hearing 
before an administrative law judge and appeals to the Department of Health and Human 
Services Departmental Appeals Board and Federal district and appellate courts regarding 
the basis for and the length of the exclusion. 
Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) of the Social Security Act, 1128A (42 U.S.C. 
 1320a-7a), imposes penalties, assessments, and exclusion from participation in Federal 
health care programs for engaging in certain activities.  For example, a person who submits, 
or causes to be submitted, to a Federal health care program a claim for items and services 
  Page 79  HHS Office of Inspector General  Appendix D 
Semiannual Report to Congress | Spring 2013  Sanction Authorities 
 
 
that the person knows or should know is false or fraudulent is subject to a penalty of up to 
$10,000 for each item or service falsely or fraudulently claimed, an assessment of up to 
three times the amount falsely or fraudulently claimed, and exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The law and 
its implementing regulations also authorize actions for a variety of other violations, 
including submission of claims for items or services furnished by an excluded person; 
requests for payment in violation of an assignment agreement; violations of rules regarding 
the possession, use, and transfer of biological agents and toxins; and payment or receipt of 
remuneration in violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)). 
The Affordable Care Act added more grounds for imposing civil monetary penalties (CMPs).  
These include, among other conduct, knowingly making, or causing to be made, any false 
statements or omissions in any application, bid, or contract to participate as a provider in 
a Federal health care program (including Medicare and Medicaid managed care programs 
and Medicare Part D) for which the Affordable Care Act authorizes a penalty of up to 
$50,000 for each false statement, as well as activities relating to fraudulent marketing by 
managed care organizations, their employees, or their agents.  
Patient Dumping 
The Social Security Act,  1867 (42 U.S.C.  1395dd), provides that when an individual goes 
to the emergency room of a Medicare-participating hospital, the hospital must provide an 
appropriate medical screening examination to determine whether that individual has an 
emergency medical condition.  If an individual has such a condition, the hospital must 
provide either treatment to stabilize the condition or an appropriate transfer to another 
medical facility. 
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to 
minimize the risks of transfer and must ensure that the receiving hospital agrees to the 
transfer and has available space and qualified personnel to treat the individual.  In addition, 
the transferring hospital must effect the transfer through qualified personnel and 
transportation equipment.  Further, a participating hospital with specialized capabilities or 
facilities may not refuse to accept an appropriate transfer of an individual who needs 
services if the hospital has the capacity to treat the individual. 
OIG is authorized to collect CMPs of up to $25,000 against small hospitals (fewer than 100 
beds) and up to $50,000 against larger hospitals (100 beds or more) for each instance in 
which the hospital negligently violated any of the section 1867 requirements.  In addition, 
OIG may collect a penalty of up to $50,000 from a responsible physician for each negligent 
violation of any of the section 1867 requirements and, in some circumstances, may exclude 
a responsible physician. 
  Page 80  HHS Office of Inspector General  Appendix D 
Semiannual Report to Congress | Spring 2013  Sanction Authorities 
 Anti-Kickback Statute and Civil False Claims Act 
 
Enforcement Authorities 
The Anti-Kickback Statute
The anti-kickback statute authorizes penalties against anyone 
who knowingly and willfully solicits, receives, offers, or pays remuneration, in cash or in 
kind, to induce or in return for referring an individual to a person or an entity for the 
furnishing, or arranging for the furnishing, of any item or service payable under the Federal 
health care programs or purchasing, leasing, ordering, or arranging for or recommending 
the purchasing, leasing, or ordering, of any good, facility, service, or item payable under the 
Federal health care programs of the Social Security Act,  1128B(b) (42 U.S.C.  1320a-
7b(b)). 
Individuals and entities that engage in unlawful referral or kickback schemes may be subject 
to criminal penalties under the general criminal anti-kickback statute; a CMP under OIGs 
authority pursuant to the Social Security Act,  1127(a)(7) (42 U.S.C.  1320a-7a); and/or 
program exclusion under OIGs permissive exclusion authority under the Social Security Act, 
False Claims Amendments Act of 1986
 1128(b)(7) (42 U.S.C.  1320a-7(b)(7)). 
Under the Federal False Claims Amendments Act of 
1986 (FCA) (31 U.S.C.  37293733), a person or an entity is liable for up to treble damages 
and a penalty between $5,500 and $11,000 for each false claim it knowingly submits, or 
causes to be submitted, to a Federal program.  Similarly, a person or an entity is liable under 
the FCA if it knowingly makes or uses, or causes to be made or used, a false record or 
statement to have a false claim paid. 
The FCA defines knowing to include not only the traditional definition but also instances 
in which the person acted in deliberate ignorance or reckless disregard of the truth or falsity 
of the information.  Under the FCA, no specific intent to defraud is required.  Further, the 
FCA contains a qui tam, or whistleblower, provision that allows a private individual to file a 
lawsuit on behalf of the United States and entitles that whistleblower to a percentage of any 
fraud recoveries.  The FCA was again amended in 2009 in response to recent Federal court 
decisions that narrowed the laws applicability.  Among other things, these amendments 
clarify the reach of the FCA as extending to false claims submitted to contractors or grantees 
of the Federal Government. 
 
 
 
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