OIG COMPONENTS Department of Health and Human Services
OIG HOTLINE: 800-HHS-TIPS
With more than 1,500 staff throughout the Nation, OIG plans and carries out audits, evaluations, 
investigations, and legal activities through the following four components:
S Office of Audit Services  The Office of Audit Services (OAS) conducts financial  To report matters involving fraud, waste, abuse, and mismanagement in any departmental program(s)
and performance audits of departmental programs, operations, grantees, and 
A contractors following Government Auditing Standards issued by the Government 
Accountability Office. Financial audits principally provide reasonable assurance 
O about whether financial statements are presented fairly in all material respects;  Phone:  1-800-HHS-TIPS TTY:  1-800-377-4950
performance audits assess the achievement of objectives and identify the presence      1-800-447-8477 Fax:  1-800-223-8164
of systemic weaknesses giving rise to waste, fraud, or abuse. Recommendations 
address problems, such as improper payments and inefficient and ineffective use 
of resources. OAS performs audits or oversees the audit work of others through 
a nationwide network of auditors, information technology experts, and other 
professionals.  
E-Mail:  HHSTips@oig.hhs.gov
I Office of Evaluation and Inspections  The Office of Evaluation and Inspections 
E
(OEI) conducts national evaluations to provide HHS, Congress, and the public 
with timely, useful, and reliable information on significant issues. These evaluations, 
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conducted by a nationwide staff of evaluators and other professionals, focus on 
Mail:  Office of Inspector General
preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness 
          Department of Health and Human Services
of departmental programs. To promote impact, OEI reports also present practical 
          Attn: Hotline
recommendations for improving program operations. 
          PO BOX 23489
I Office of Investigations  The Office of Investigations (OI) conducts and coordinates            Washington, DC 20026           
O
investigations of fraud and misconduct related to the Departments programs, 
operations, and beneficiaries. With investigators working in all 50 States, OI leverages 
its resources by actively coordinating with the Department of Justice and other law 
enforcement authorities. OI identifies systemic weaknesses that leave Department 
programs vulnerable to fraud and recovers damages and penalties through civil and 
administrative proceedings. 
G Office of Counsel to the Inspector General  The Office of Counsel to the 
Inspector General (OCIG) provides legal advice and representation to OIG on 
matters relating to Medicare, Medicaid, and other HHS programs and operations, 
I
C administrative law issues, criminal procedure, and internal OIG management. 
OCIG represents OIG in all civil and administrative fraud and abuse cases involving 
HHS programs, including False Claims Act, program exclusion, and civil monetary 
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penalty cases. In connection with these cases, OCIG also negotiates and monitors 
corporate integrity agreements. Finally, OCIG renders advisory opinions, issues fraud 
alerts, and provides other guidance to the health care industry concerning the Federal 
anti-kickback statute and OIG sanctions. April 1, 2007-September 30, 2007 Message from the Inspector General
 
This report, which is submitted to Congress pursuant to the 
Inspector General Act of 1978, as amended, summarizes the 
activities of the Office of Inspector General (OIG) for the 6-month 
period ending September 30, 2007. 
As detailed in this report, OIGs investigations, audits, and 
evaluations continue to generate record savings and expected 
recoveries and also produce recommendations to ensure efficient 
and effective program operations.  We also highlight in this report significant cases 
leading to Federal health care program exclusions of individuals and entities and criminal 
or civil prosecutions in State and Federal courts across the Nation; such cases play a vital 
role in protecting HHS programs and beneficiaries.         
Our record of achievement in HHS program protection has required the commitment of 
OIGs more than 1,500 dedicated professionals.  Not only have they contributed their 
own talents and energy to our mission, but they have also worked to effect productive 
interdisciplinary partnerships with others who share our objective of ensuring the quality 
and integrity of HHS programs.  For example, we have worked closely with fellow 
Department employees involved in program integrity efforts, Department of Justice 
personnel, State antifraud and audit officials, vigilant beneficiaries, and many others in 
Government and the wider health care community.  
         
As we look to build on the work summarized for this reporting period, we will continue 
to concentrate our resources where the challenges are greatest and the benefits most 
advantageous to taxpayers and beneficiaries.  Such challenges include continued attention 
to Medicare Part D; Medicare, Medicaid, and SCHIP payment integrity; Medicaid 
administration; quality of care; public health emergency preparedness and response; food, 
drug, and medical device safety; grants management; information technology systems 
and infrastructure; and ethics program oversight and enforcement. 
I want to express my sincere appreciation to Congress as well as to the Department for 
their support over the past 6 months.  I would like to thank in particular the many 
executives and officials within the Department, our authorizing and appropriating 
committees in Congress, our examiners within the Office of Management and Budget, 
and our audit and evaluation colleagues at the Government Accountability Office for 
helping to support and advance our important mission. 
 
 
Daniel R. Levinson 
Inspector General    External Activities 
During this reporting period, OIG officials participated in a range of external activities to 
further the organizations mission.  Following are examples of such activities. 
Presidents Council on Integrity and Efficiency  
The Inspector General (IG) participates in the Presidents Council on Integrity and 
Efficiency (PCIE), a forum through which Inspectors General coordinate interagency 
policy issues, set professional standards for OIG work, coordinate studies on topics of 
Governmentwide concern, and provide training for OIG executives and their staff.  In 
addition, the IG serves as Chair of the PCIE Inspection and Evaluation Committee.  The 
IG also sits on the Homeland Security Roundtable, a group comprised of IGs with 
oversight responsibility for agency programs impacting our Nations safety and security. 
Congressional Testimony 
OIG officials provided testimony to Congress on several occasions: 
  On April 18, 2007, Deputy Inspector General for Evaluation and Inspections, 
Stuart Wright, testified before the House Committee on Energy and 
Commerce, Subcommittee on Health, regarding OIGs work related to 
Medicare integrity and efficiency.  The testimony focused on such areas as 
appropriateness of Medicare payments and prices for items and services, 
access and quality-of-care issues for beneficiaries, and fraud and abuse 
vulnerabilities associated with durable medical equipment suppliers. 
  On June 26, 2007, Regional Inspector General for Evaluation and Inspections, 
Robert A. Vito, testified before the House Committee on Ways and Means, 
Subcommittee on Health, regarding OIGs continuing work on the pricing of 
end stage renal disease (ESRD) drugs.  The testimony featured findings from 
a June 2007 report (summarized in the Medicare section of this report), which 
determined that dialysis facilities could acquire the majority of ESRD drugs at 
prices 4 to 32 percent less than the Medicare reimbursement amount during 
the third quarter of 2006. 
 
  On June 27, 2007, Chief Counsel to the Inspector General, Lewis Morris, 
submitted a Statement for the Record to the Senate Special Committee on 
Aging on OIG activities related to pharmaceutical fraud.  The Statement 
addressed OIGs efforts to promote industrys voluntary compliance with 
program requirements, enforcement accomplishments in the area of 
pharmaceutical manufacturer fraud, and future OIG guidance to address the 
interactions between physicians and pharmaceutical and medical device 
manufacturers. 
  On July 18, 2007, Assistant Inspector General for Legal Affairs, Gregory 
Demske, testified before the Senate Special Committee on Aging regarding 
OIGs work related to identifying and preventing the abuse of the elderly.  
The testimony described the spectrum of activities, enforcement actions, and  
HHS OIG Semiannual Report to Congress  iii  External Activities 
Fall 2007      initiatives OIG has undertaken to identify cases of elder abuse, ensure that 
those who would harm the elderly are prosecuted to the fullest extent of the 
law and/or prevented from continuing to participate in Federal health care 
programs, identify where programs and systems involved in the oversight of 
quality of care may be strengthened, and promote practices that will help 
prevent elder abuse.  
 
The full texts of testimony provided at these hearings can be found on the Internet at 
http://oig.hhs.gov/testimony.html#1. 
Speeches 
On April 23, 2007, the IG served as the keynote speaker for the Health Care Compliance 
Associations Annual Compliance Institute.  He discussed the evolution and future of 
OIGs compliance activities and also discussed OIGs recently published Protecting 
Public Health and Human Services Programs:  A 30-Year Retrospective.  Principal 
Deputy Inspector General (PDIG), Larry Goldberg, also spoke at this conference 
focusing on OIGs review of State False Claims Acts and work related to Medicare 
supplier fraud and quality of care. 
Events 
OIG officials participated in the following events: 
 
  On April 23, 2007, the IG spoke to the newly established Chicago Chapter of the 
Association of Health Care Journalists at the Columbia College School of 
Journalism.  The PDIG and OIG senior staff from the Chicago Regional Office 
also participated.  The IG spoke about OIGs relationship with health care media 
and discussed OIGs history and accomplishments related to the recently 
published Protecting Public Health and Human Services Programs:  A 30-Year 
Retrospective.   
  On May 30, 2007, OIG sponsored a Conflict of Interest and Ethics Violations 
Summit that brought together over 200 individuals from the oversight, ethics 
program and policy, and enforcement communities to discuss a variety of issues 
related to operation of Government ethics programs and violations of Federal 
conflict of interest statutes.  U.S. Securities and Exchange Commissioner 
Annette L. Nazareth welcomed all participants to the program.  The IG provided 
the keynote address, and speakers included senior officials from OIG; the 
Securities and Exchange Commission, Office of Government Ethics; U.S. 
Department of Justice; HHS; and the Chief Investigative Counsel, Senate 
Committee on Health, Education, Labor, and Pensions. 
External Organizations 
The IG and PDIG are Invited Ethics Resource Center Fellows from the Government 
sector.  The Ethics Resource Center (ERC) is Americas oldest nonprofit organization 
devoted to the advancement of high ethical standards and practices in public and private 
institutions.  ERC serves as a resource for institutions committed to a strong ethics 
culture.  ERCs expertise also informs the public dialogue on ethics and ethical behavior.
HHS OIG Semiannual Report to Congress  iv  External Activities 
Fall 2007       
Highlights 
Summary of Accomplishments 
For fiscal year (FY) 2007, the Department of Health and Human Services (HHS)  
Office of Inspector General (OIG) reported savings and expected recoveries of over 
$43 billion:  $39 billion in implemented recommendations and other actions to put  
funds to better use, $1.9 billion in audit receivables, and $2.18 billion* in investigative 
receivables. 
 
Also for this FY, OIG reported exclusions of 3,308 individuals and entities for           
fraud or abuse involving Federal health care programs and/or their beneficiaries; 
447 criminal actions against individuals or entities that engaged in crimes  
against departmental programs; and 262 civil actions, which include False Claims 
Act (FCA)  and unjust enrichment suits filed in Federal district court, Civil Monetary 
Penalties Law (CMPL) settlements, and administrative recoveries related to provider  
self-disclosure matters.   
Purdue Companies and Three Executives To Pay Nearly $635 Million for 
Fraudulently Marketing OxyContin  
As part of a global criminal, civil, and administrative settlement agreement, the Purdue 
Frederick Company, Inc., and Purdue Pharma L.P. (collectively, the Purdue Companies), 
and three top executives agreed to pay almost $635 million to resolve a variety of 
Federal, State, and private liabilities.  Specifically, the agreement resolved allegations 
that the Purdue Companies waged a fraudulent and deceptive marketing campaign aimed 
at convincing doctors nationwide that OxyContin, because of its time-release formula, 
was less prone to abuse and that it was less likely to cause addiction or to produce other 
narcotic side effects than competing immediate release opioids.  The Purdue Frederick 
Company, Inc. is subject to a 25-year exclusion; Purdue Pharma L.P. agreed to enter a 
5-year corporate integrity agreement (CIA) with OIG.  (Details on pp. 27-28.) 
South Florida Medicare Fraud  
OIG has employed a multifaceted approach to fight Medicare fraud in South Florida.  
Along with our partners and the U.S. Attorneys Office for the Southern District of 
Florida, we developed innovative methods to identify and prosecute fraud in a timely 
manner, resulting in $54.3 million in investigative receivables and a number of 
indictments.  Additionally, we analyzed the claims patterns of HIV/AIDS infusion 
therapy providers and beneficiaries in three South Florida counties and determined that in 
the last half of 2006, these counties accounted for half of the total amount, and 79 percent 
of the amount for drugs, billed nationally for Medicare beneficiaries with HIV/AIDS.  
We also found that the approaches CMS and its contractors have used to control these 
aberrant billing practices have not proven effective.  We recommended that CMS treat 
South Florida as a high-risk area, mandate site visits for certain providers, adjust 
contractor standards for processing new applications, modify the Statement of Work for 
                                                 
*This amount represents HHS investigative receivables only; receivables of other Federal agencies, States, 
and other entities are not included here.  
HHS OIG Semiannual Report to Congress  v  Highlights 
Fall 2007         
the jurisdiction that includes South Florida, review all reassignments in high-risk areas, 
and strengthen revocations.  (Details on pp. 3 and 28-29.) 
FDAs Oversight of Clinical Trials Through Its Inspection Processes   
We identified data limitations and other factors that affect the Food and Drug 
Administrations (FDA) ability to effectively manage the Bioresearch Monitoring (BiMo) 
program.  For example, FDA is unable to identify all clinical trials and institutional 
review boards (IRB), and it lacks a single database for tracking its own inspections.  
Furthermore, the three FDA centers and the Office of Regulatory Affairs inconsistently 
classify some inspections.  In addition, FDAs guidance and regulations do not reflect 
current clinical trials practices.  Finally, we estimate that FDA inspected about 1 percent 
of clinical trials for the fiscal year 20002005 period.  We recommended that FDA take 
the following steps to improve its information systems and processes:  (1) develop a 
clinical trial database that includes all clinical trials, (2) create an IRB registry, (3) create 
a cross-center database that enables complete tracking of BiMo inspections, (4) establish 
a mechanism to provide feedback to BiMo investigators on their inspection reports and 
findings, and (5) seek legal authority to provide oversight that reflects current clinical 
trial practices.  (Details on pp. 37-38.) 
Eligibility for the State Childrens Health Insurance Program  
We found that California, Florida, and New York made some State Childrens Health 
Insurance Program (SCHIP) payments on behalf of beneficiaries who did not meet 
Federal and State eligibility requirements and did not adequately document all 
determinations of eligibility.  Florida, for example, paid an estimated $19 million to  
$33 million in Federal funds for ineligible beneficiaries.  We recommended that the 
States use our results to help ensure compliance with applicable requirements.  Most 
importantly, beneficiaries should be reminded of the need to provide accurate and timely 
information, and employees should be required to verify and document eligibility 
determinations.  (Details on pp. 21-22.) 
Maximus, Inc., Entered Into a $42.65 Million Settlement 
Maximus, Inc., a revenue maximization consulting business for State and local 
jurisdictions throughout the country, entered into a $42.65 million settlement agreement 
with the Government to resolve its liability under the FCA.  Maximus allegedly filed 
false claims for Medicaid-funded targeted case management services, which assist foster 
children with their medical, social, and educational needs.  As part of the global 
settlement agreement, Maximus entered into a 5-year CIA and into a 24-month deferred 
prosecution agreement.  In a novel provision, the CIA requires that OIGs Office of Audit 
Services perform the claims and contract reviews that are ordinarily performed by an 
Independent Review Organization.  (Details on p. 28.) 
Certification and Oversight of Medicare Hospices   
We found that, as of July 2005, 86 percent of Medicare hospices were certified by State 
agencies within 6 years, as required at that time, and 14 percent averaged 3 years past 
due.  In addition, health deficiencies were cited for 46 percent of the hospices surveyed 
and for 26 percent of hospices investigated for complaints and many deficiencies related 
to patient care.  CMS and State agencies rarely use methods other than certification 
HHS OIG Semiannual Report to Congress  v i Highlights 
Fall 2007       
surveys and complaint investigations to monitor or enforce hospice performance.  We 
recommended that CMS (1) provide guidance to State agencies and CMS regional offices 
regarding analysis of existing data and identification of at-risk hospices; (2) include 
hospices in Federal comparative surveys and annual State performance reviews; (3) seek 
regulatory or statutory changes to establish specific requirements for the frequency of 
hospice certification; and (4) seek legislation to establish enforcement remedies, in 
addition to termination, for poor hospice performance.  (Details on p. 7.) 
Outpatient Outlier Payment Adjustments   
We determined that CMSs practice of not retroactively adjusting erroneous outpatient 
outlier payments creates vulnerabilities in the outpatient outlier program and is 
inconsistent with CMSs general policy on revisiting incorrectly calculated payments, as 
well as CMSs policy of retroactively adjusting inpatient prospective payment system  
outlier payments.  Medicare makes outlier payments to health care providers for 
extremely costly cases.  Prior OIG reviews found that some providers received significant 
outpatient outlier overpayments as a result of fiscal intermediaries and providers errors 
and providers manipulation of charge data.  CMS did not adjust these overpayments, 
resulting in substantial losses to the Medicare trust fund and payment inequities among 
providers.  We recommended that CMS issue regulations to require retroactive 
adjustments of outpatient outlier payments within appropriately established thresholds. 
(Details on p. 7-8.) 
Advanced Neuromodulation Systems, Inc., Entered into a $2.95 Million Settlement 
To resolve its liability under the CMPL, Advanced Neuromodulation Systems, Inc. 
(ANS), a medical device manufacturer, paid $2.95 million and entered into a 3-year CIA 
to settle allegations that it engaged in a marketing program in which physicians were paid 
kickbacks for patient referrals.  Specifically, ANS allegedly paid illegal remunerations 
for the purchase or lease of its medical devices and for patient trials using ANSs spinal 
cord simulator.  (Details on p. 25.) 
Use of Health Information Technology in State Medicaid Programs   
We found that 12 State Medicaid agencies have implemented 16 health information 
technology (HIT) initiatives for Medicaid beneficiaries and participating providers, 
including claims-based electronic health records initiatives, electronic prescribing 
initiatives, remote disease-monitoring initiatives, and personal health records initiatives.  
We also found that 25 State Medicaid agencies are currently involved in planning and 
developing statewide health information exchange (HIE) networks.  Lastly, we found that 
13 State Medicaid agencies are incorporating the Medicaid Information Technology 
Architecture (MITA) into their HIT and HIE planning.  We recommended that CMS 
continue to support the goals of MITA, collaborate with other Federal agencies and 
offices to assist State Medicaid agencies with developing privacy and security policies, 
and continue to work with the Office of the National Coordinator for HIT to ensure that 
State Medicaid initiatives are consistent with national goals.  (Details on p. 15.) 
Unobligated Funds Provided for HIV/AIDS Services   
We found that the Health Resources and Services Administration (HRSA) did not fully 
comply with applicable requirements or use its offset authority in managing unobligated 
HHS OIG Semiannual Report to Congress  vi i Highlights 
Fall 2007       
funds provided to the States for HIV/AIDS services under Title II of the Ryan White 
Comprehensive AIDS Resources Emergency (CARE) Act.  Unobligated funds in  
10 States totaled more than $60 million in grant year 2002.  Had HRSA used its offset 
authority, it could have carried over unobligated balances from the prior year and offset 
the amount of current-year funds needed for grant awards.  This action would have made 
more current-year funds available to address certain States unmet program needs.  We 
recommended that HRSA monitor the States compliance with CARE Act requirements, 
comply with carryover policy, examine the reasons for some States large unobligated 
balances, and analyze each States unobligated balance in light of its offset authority.  
(Details on p. 37.) 
 
HHS OIG Semiannual Report to Congress  vi ii Highlights 
Fall 2007       
Hurricane-Related Activities 
In response to the Gulf Coast hurricanes of 2005, OIG launched a coordinated oversight 
effort to ensure that the Departments response and recovery funds are spent 
appropriately, that those attempting to defraud the Government are brought to justice, and 
that the individuals responsible for the relief efforts are wise stewards in assisting those 
affected by the hurricanes and their aftermath.   
We continue to work with Federal, State, and local partners in this effort, including 
participating as a member of the Presidents Council on Integrity and Efficiencys (PCIE) 
Homeland Security Roundtable and the Disaster Relief Working Group, which are 
coordinating the oversight activities of the Federal Inspectors General (IG).  We took the 
lead in developing information related to State and local liaisons as part of a 
comprehensive Hurricane Action Plan developed by the Homeland Security Roundtable.  
In addition, along with other members of the IG community, we are a member of the 
Department of Justice Fraud Task Force in Baton Rouge.  That task force is investigating 
allegations of fraud related to Federal outlays in connection with Hurricane Katrina.   
We have initiated extensive audit, evaluation, and investigative activities related to the 
oversight of HHSs hurricane recovery efforts.  A list of recently completed and ongoing 
projects follows: 
Department Accounting for Federal Emergency Management Agency Assignments 
As of September 30, 2007, the remaining spending authority for HHS missions assigned 
by the Federal Emergency Management Agency totaled almost $43.7 million.  This 
spending authority is contained within 23 individual open mission assignments with 
different magnitudes and objectives.  OIGs audits are designed to determine whether 
HHS is appropriately accounting for these costs. 
Auditing Hurricane-Related Procurements 
We are auditing all HHS hurricane-related contractual procurements over $100,000.  
These audits focus specifically on the methods of procurement.  As of August 31, 2007, 
we issued 51 audit reports with an audited value of $79.5 million.  Of the 51 reports,  
48 concluded that the awarding agencies had complied with procurement requirements.  
The remaining three reports had administrative findings. 
We also audited costs billed to the largest contract awarded by HHS to assist hurricane 
victims.  This contract provided $21 million to transport returning evacuees requiring 
en route medical care.   
Emergency Response to Hurricane Katrina:  Use of the Government Purchase Card 
OIG recently issued a final report analyzing purchase card transactions by HHS personnel 
deployed in response to Hurricane Katrina.  The purchase card program was designed to 
save the Government money by avoiding costly paperwork and expediting the process of 
making purchases.  Our review of HHSs Hurricane Katrina purchase card transactions 
found that 15 percent did not meet selected purchasing requirements.  We recommended 
HHS OIG Semiannual Report to Congress  ix  Hurricane-Related Activities 
Fall 2007       
that the Assistant Secretary for Administration and Management (ASAM) provide 
additional written guidance on emergency purchasing procedures, require training on 
such procedures, and develop a tracking system for monitoring Government purchase 
card transactions during emergency situations.  ASAM agreed with the recommendations 
and stated that it had established a course of action to strengthen the purchase card 
program, including additional written guidance for training in emergency purchasing 
procedures and a tracking system for monitoring purchases during emergency situations. 
Medicaid Payments and Services Under Hurricane-Related Demonstration Projects 
OIG recently issued two reports analyzing Medicaid payment and services provided to 
hurricane evacuees under HHS demonstration projects.  Because of Hurricanes Katrina 
and Rita, beneficiaries of HHS programs who resided in the Gulf Coast States were 
evacuated to various places around the United States or otherwise significantly affected.  
In response and in an effort to ensure that victims of Katrina and Rita received needed 
health care, HHS used Section 1115 waiver and expenditure authority to expand 
Medicaid coverage criteria.  We found that for eight selected States, Medicaid paid  
$716 million for medical services and prescription drugs under the hurricane-related 
demonstration projects.  Nearly two-thirds, $448 million, was paid for medical services; 
the remainder, $268 million, was paid for prescription drugs.  In addition, a greater 
percentage of evacuees received medical services and prescription drugs than 
nonevacuees, but average total payment per evacuee was less. 
Investigations of Health Care Fraud, Quality-of-Care Lapses, and Other Issues 
As of the end of this reporting period, OIG had five open investigations involving 
allegations of health care fraud, poor quality of care, and patient abandonment and is 
assisting in investigations of circumstances surrounding the deaths of nursing home 
residents and hospital patients.  OIG is also involved in two other cases that include 
allegations of individuals fraudulently obtaining benefits based on false information.  
 
HHS OIG Semiannual Report to Congress  x  Hurricane-Related Activities 
Fall 2007       
Table of Contents 
External Activities............................................................................................................iii 
Highlights...........................................................................................................................v 
Hurricane-Related Activities..........................................................................................ix 
The Centers for Medicare & Medicaid Services............................................................1 
Reports Related to CMSs Programs....................................................................................3 
Medicare-Related Reports.....................................................................................................3 
Aberrant Billing in South Florida for Beneficiaries With HIV/AIDS........................................3 
Medical Equipment and Supplies for Beneficiaries in Skilled Nursing Facilities.....................3 
Quality Concerns Identified Through Quality Improvement Organization Medical 
Record Reviews.....................................................................................................................4 
Fiscal Integrity of Quality Improvement Organizations.............................................................4 
Consecutive Medicare Stays Involving Inpatient and Skilled Nursing Facilities......................5 
Inpatient Rehabilitation Facility Admissions..............................................................................5 
Transition Stays at Inpatient Psychiatric Facilities......................................................................6 
Certification and Oversight of Medicare Hospices.....................................................................7 
Impact of Not Retroactively Adjusting Outpatient Outlier Payments........................................7 
Intravenous Immune Globulin:  Medicare Payment and Availability........................................8 
Comparison of Third-Quarter 2006 Average Sales Prices to Average Manufacturer 
Prices:  Impact on Medicare Reimbursement for First Quarter 2007..................................8 
Medicare Reimbursement for End Stage Renal Disease Drugs:  Third Quarter 2006...............9 
Costs To Administer and Purchase Cancer Drugs......................................................................9 
Medicare Payments for 2003 Part B Mental Health Services:  Medical Necessity, 
Documentation, and Coding...............................................................................................10 
Medicare Payments for Surgical Debridement Services...........................................................10 
Medicare Payments for Negative Pressure Wound Therapy Pumps........................................11 
Provider Enrollment, Chain and Ownership System:  Early Implementation 
Challenges............................................................................................................................11 
Retail Pharmacy Participation in Medicare Part D Prescription Drug Plans in 2006..............12 
Medicares Program Safeguard Contractors:  Activities To Detect and Deter Fraud 
and Abuse............................................................................................................................12 
Medicaid-Related Reports....................................................................................................13 
States Use of New Drug Pricing Data in the Medicaid Program............................................13 
Examining Fluctuations in Average Manufacturer Prices........................................................13 
Medicaid Outpatient Drug Expenditures in Iowa......................................................................14 
Deficit Reduction Act of 2005:  Impact on the Medicaid Federal Upper Payment 
Limits...................................................................................................................................14 
 
HHS OIG Semiannual Report to Congress    Table of Contents 
Fall 2007  xi     
Use of Health Information Technology in State Medicaid Programs......................................15 
Medicaid Disproportionate Share Hospital Payments..............................................................15 
Medicaid Payments and Services Related to Hurricanes Katrina and Rita..............................16 
Medicaid Community Mental Health Center Provider Services in Indiana.............................17 
Medicaid Reimbursement Rate for School-Based Health Services in Maryland....................17 
Medicaid Reimbursement for Graduate Medical Education in Missouri.................................18 
State Claims for the Costs of Family Planning Services Provided Through Medicaid 
Managed Care Programs.....................................................................................................18 
Medicaid Pharmacy Claims Billed as Family Planning............................................................19 
Abortion-Related Laboratory Claims Billed as Family Planning.............................................19 
Missouris Provider Tax.............................................................................................................20 
State Childrens Health Insurance Program-Related Reports.........................................20 
Fraud and Abuse Safeguards in Separate State Childrens Health Insurance Programs..........20 
State Childrens Health Insurance Program Eligibility.............................................................21 
Outreach................................................................................................................................22 
Advisory Opinions.....................................................................................................................22 
Provider Self-Disclosure Protocol.............................................................................................22 
Federal and State Partnership:  Joint Audits of Medicaid...............................................23 
Office of Inspector General Administrative Sanctions......................................................23 
Program Exclusions....................................................................................................................24 
Civil Monetary Penalties Law....................................................................................................25 
Patient Dumping.........................................................................................................................26 
Criminal and Civil Enforcement.........................................................................................27 
Pharmaceutical Companies........................................................................................................27 
Billing Consultant.......................................................................................................................28 
Durable Medical Equipment Suppliers......................................................................................28 
Hospitals.....................................................................................................................................29 
Home Health...............................................................................................................................29 
Clinics.........................................................................................................................................30 
Practitioners................................................................................................................................30 
Group Homes.............................................................................................................................31 
Medicaid Fraud Control Units............................................................................................31 
Investigations..............................................................................................................................32 
OIG Reviews of MFCUs...........................................................................................................32 
 
 
   
HHS OIG Semiannual Report to Congress  xii  Table of Contents 
Fall 2007    
Public Health and Human Service Programs and Departmentwide Issues..............35 
Reports Related to Public Health Programs......................................................................37 
Unobligated Funds Provided by the Ryan White Comprehensive AIDS Resources 
Emergency Act....................................................................................................................37 
FDAs Oversight of Clinical Trials Through Its Inspection Processes.....................................37 
Unobligated Balances of Funds Awarded Under the Bioterrorism Hospital 
Preparedness Program.........................................................................................................38 
Graduate Student Compensation Costs Charged to National Institutes of Health 
Research Grants...................................................................................................................39 
Safeguards Over Controlled Substances at Indian Health Service Facilities...........................39 
Indian Health Services Resolution of Audit Recommendations.............................................40 
Security of Stockpile Sites.........................................................................................................40 
Actions and Investigations Related to Public Health Programs.......................................40 
Health Education Assistance Loan Defaults..............................................................................40 
Public Health-Related Investigations.........................................................................................41 
Reports Related to Human Service Programs...................................................................42 
Enrollment Levels in Head Start................................................................................................42 
Aid to Families With Dependent Children Overpayment Recoveries......................................43 
Costs Claimed for the Statewide Automated Child Welfare Information System in 
California.............................................................................................................................43 
Undistributable Child Support Collections in Indiana..............................................................44 
Child Support Enforcement.................................................................................................44 
Task Forces.................................................................................................................................44 
Child Support Investigations......................................................................................................45 
Misuse of ACF Grant Funds......................................................................................................46 
Reports Related to Departmentwide Issues........................................................................46 
Departmental Processes for Awarding Hurricane Contracts....................................................46 
Hurricane-Related Costs Billed to a Contract...........................................................................46 
Emergency Response to Hurricane Katrina:  Use of the Government Purchase Card............47 
Non-Federal Audits....................................................................................................................47 
Resolving Recommendations...............................................................................................48 
Table 1:  Reports With Questioned Costs..................................................................................49 
Table 2:  Funds Recommended To Be Put to Better Use.........................................................50 
Legislative and Regulatory Review and Development......................................................51 
Regulatory Review Functions....................................................................................................51 
Regulatory Development...........................................................................................................51 
Employee Fraud and Misconduct........................................................................................51 
   
HHS OIG Semiannual Report to Congress  xiii  Table of Contents 
Fall 2007    
Appendixes............................................................................................................................53 
Appendix A:  Savings Achieved Through Implementation of Recommendations in 
Audits and Evaluations for Fiscal Year 2007...........................................................55 
Appendix B:  Notes to Tables 1 and 2.................................................................................63 
Notes to Table 1..........................................................................................................................63 
Notes to Table 2..........................................................................................................................67 
Appendix C:  Reporting Requirements of the Inspector General Act of 1978, as 
Amended.........................................................................................................................69 
Appendix D:  Status of Public Proposals for New and Modified Safe Harbors to the 
Anti-Kickback Statute...................................................................................................71 
Appendix E:  Summary of Sanction Authorities................................................................75 
Program Exclusions....................................................................................................................75 
Patient Dumping.........................................................................................................................75 
Civil Monetary Penalties Law....................................................................................................76 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities.........................76 
Appendix F:  Acronyms and Abbreviations.......................................................................79 
 
Please note:  Numerical information in this report is rounded. 
   
HHS OIG Semiannual Report to Congress  xiv  Table of Contents 
Fall 2007    
The Centers for Medicare & Medicaid 
Services  
The Office of Inspector General (OIG) allocates about 80 percent of its resources to work 
related to the Centers for Medicare & Medicaid Services (CMS), which administers the 
following programs:   
  Medicare provides health insurance for people 65 years old or older, people 
younger than 65 years old with certain disabilities, and people of any age with 
end stage renal disease (ESRD).  In fiscal year (FY) 2006, Medicare served 
43 million beneficiaries at a cost of $337 billion.  Medicare has four parts:  
Hospital Insurance (Part A), which helps cover inpatient care in hospitals, 
including critical access hospitals, skilled nursing facilities (SNF), and 
hospice and certain home health care; Supplementary Medical Insurance   
(Part B), which helps pay for physician services and outpatient care; Medicare 
Advantage (MA), which offers a range of prepaid managed health care 
choices; and the Medicare Prescription Drug Benefit (Part D), which provides 
an optional prescription drug benefit to individuals enrolled in Medicare, 
generally through private prescription drug plans.   
  Medicaid, a joint Federal-State program, supports States coverage of medical 
care and other support services for low-income individuals.  In FY 2006, the 
enrollment for Medicaid was estimated at 47 million people; total Federal and 
State outlays were $317 billion, of which the Federal share was $180 billion.   
  The State Childrens Health Insurance Program (SCHIP), a joint Federal-State 
program established in 1997 under Title XXI of the Social Security Act, 
provides health insurance for children who do not qualify for Medicaid but 
whose families are not able to afford private coverage.  In FY 2006, SCHIP 
served 6.9 million beneficiaries at a Federal cost of $5.5 billion.   
OIGs focus on these health care programs reflects the spending of the Department of 
Health and Human Services (HHS):  CMS expenditures have accounted for about          
80 percent of the Departments budget over the last several years.  This focus is also 
rooted in legislative mandates and funding sources, including the following:   
  The Health Insurance Portability and Accountability Act of 1996 (HIPAA, 
Pub. L. No. 104-191) established the Health Care Fraud and Abuse Control 
program (HCFAC) under the direction of the Attorney General and the 
Secretary of HHS to combat waste, fraud, and abuse in the Medicare and 
Medicaid programs.  HCFAC funding constitutes a major portion of OIGs 
annual operating budget and must be used for work related to Medicare and 
Medicaid. 
 
 
HHS OIG Semiannual Report to Congress  1  The Centers for Medicare & Medicaid Services 
Fall 2007    
  The Deficit Reduction Act of 2005 (DRA, Pub. L. No. 109-171) provides OIG 
annual funding of $25 million from FY 2006 through FY 2010 to undertake 
fraud and abuse control activities related to the Medicaid program. 
This chapter on CMS-related work summarizes OIGs findings and recommendations 
related to the Medicare, Medicaid, and SCHIP programs and provides examples of our 
outreach efforts, partnerships with States on Medicaid reviews, administrative sanctions, 
and criminal and civil enforcement activities.   
 
HHS OIG Semiannual Report to Congress  2  The Centers for Medicare & Medicaid Services 
Fall 2007    
Reports Related to CMSs Programs  
Medicare-Related Reports 
Aberrant Billing in South Florida for Beneficiaries With HIV/AIDS 
We found that CMS has had limited success controlling the aberrant billing practices of 
infusion therapy providers in South Florida.  Our analysis focused on the claims patterns 
of HIV/AIDS infusion therapy providers and beneficiaries in three South Florida 
counties.  In the last half of 2006, these three counties accounted for half of the total 
amountand 79 percent of the amount for drugsbilled nationally for Medicare 
beneficiaries with HIV/AIDS.  Examples of improper billing by these providers in these 
counties in recent years included billing for allowable diagnosis codes rather than the 
diagnosis found in the medical records and billing for services that were never provided.  
CMS and its contractors tried to control inappropriate payments to these providers in 
these three South Florida counties using various tools, including payment suspensions, 
prepayment reviews, provider number revocations, claims processing edits, and onsite 
investigations of existing providers.  We determined that these efforts have not been 
effective because aberrant HIV infusion providers have adjusted their billing patterns and 
circumvented controls.     
 
We recommended that CMS treat South Florida as a high-risk area; mandate announced 
and unannounced site visits for certain infusion therapy providers; give contractors more 
time to review new provider applications; modify the statement of work for the 
jurisdiction that includes South Florida to require enhanced efforts to fight fraud and 
abuse (such as claims-editing activities); require extensive review of all reassignments in 
high-risk areas to confirm they are legitimate; and strengthen revocations to prevent 
further fraud and abuse (such as shortening the notice given to providers before 
revocations are enforced).  CMS generally concurred with our recommendations.  In its 
comments on our draft report, CMS noted that it had incorporated our recommendations 
regarding provider enrollment into a demonstration project, announced on August 20, 
2007, that targets South Florida infusion fraud.  CMS is in the process of investigating 
additional enrollment safeguards to help reduce the fraudulent activity within Medicare.  
(OEI-09-07-00030)                                                                
Medical Equipment and Supplies for Beneficiaries in Skilled Nursing Facilities  
Our review found that Medicare Part B overpaid suppliers of durable medical equipment, 
prosthetics, orthotics, and supplies (DMEPOS) on behalf of beneficiaries in skilled 
nursing facilities (SNF) stays.  Because the cost of furnishing DMEPOS during SNF 
stays is generally included in the SNFs Medicare Part A payments, Part B payments to 
suppliers for such items are overpayments.   
 
Medicare Part Bs durable medical equipment regional carriers (DMERC) made  
$100.8 million in potential overpayments to DMEPOS suppliers in calendar years 
(CY) 19992002 on behalf of beneficiaries in Part A-covered SNF stays.  These  
 
HHS OIG Semiannual Report to Congress  3  The Centers for Medicare & Medicaid Services 
Fall 2007   
overpayments occurred because CMS did not have Common Working File edits in place 
to prevent such overpayments; as a result, DMERCs were unable to initiate recovery 
actions.  For CY 2003, after edits were in place in the Common Working File, our 
computer match identified potential DMEPOS overpayments valued at $15.4 million.  
Our statistical sample showed that DMERCs had not recovered approximately 69 percent 
of these overpayments.  Two of the four DMERCs had not implemented procedures to 
process and recover the backlog of overpayments created by the new Common Working 
File edits; we projected that, as a result, the DMERCs did not recover $11.2 million of 
the $15.4 million in potential CY 2003 overpayments. 
We recommended that CMS direct the DMERCs to review the $100.8 million in potential 
overpayments for CYs 19992002 and make appropriate recoveries and to initiate 
recovery of the estimated $11.2 million in CY 2003 overpayments and ensure that all 
DMERCs have established proper controls to recover overpayments that the Common 
Working File edits identify.  CMS agreed with our recommendations.  (A-01-05-00511) 
Quality Concerns Identified Through Quality Improvement Organization Medical 
Record Reviews 
Our review of Quality Improvement Organizations (QIO), which are under contract with 
CMS to oversee and enhance the quality of care provided to Medicare beneficiaries, 
raised questions about the effectiveness of medical records reviews.  QIOs have a 
statutory and contractual obligation to conduct such reviews to ensure that the care 
provided to Medicare beneficiaries meets professional standards.  We found that, of the 
318,018 cases QIOs selected for review between February 2003 and January 2006, QIOs 
completed full quality-of-care reviews on 34,768 of these cases and confirmed one or 
more quality concerns in 6,439 (19 percent) of those with full quality-of-care reviews.  
QIOs assigned the two lowest classifications to more than 80 percent of the cases with 
confirmed quality concerns.  QIOs imposed no corrective actions in 1,794 cases  
(28 percent) with confirmed quality concerns and, in 70 percent of the cases with 
corrective actions, recommended the least severe corrective action available. 
These findings raise questions for CMS to consider in its administration of the QIO 
program, including whether CMS should revisit its guidance regarding classifications of 
confirmed quality concerns and corrective actions.  CMS indicated that it was reviewing 
the QIO case review process for reviewing and classifying quality-of-care concerns and 
had implemented a revised array of quality improvement activities for QIOs to 
recommend to providers.  (OEI-01-06-00170) 
Fiscal Integrity of Quality Improvement Organizations  
At the request of the Senate Finance Committee, we assessed the fiscal integrity of QIOs 
in nine States with respect to the following specified areas:  board member and executive 
staff compensation and travel, legal fees, administrative and equipment charges, business 
relationships and conflicts of interest, and contract modifications.  During the reporting 
period, we issued the first two reports of this series.   
 Missouri  The QIO in Missouri provided adequate documentation to support costs 
claimed in the specified fiscal integrity areas.  Between February 2003 and January 2006, 
 
HHS OIG Semiannual Report to Congress  4  The Centers for Medicare & Medicaid Services 
Fall 2007    
the QIO received $18.2 million in Federal reimbursement and incurred total costs of 
approximately $23 million to support all lines of business, including the QIO contract.  
We reviewed a sample of approximately $4.5 million of the $23 million of costs incurred 
in the areas of interest to the Committee.  We did not make any recommendations.       
(A-07-06-01036) 
 
 Rhode Island  The QIO in Rhode Island provided adequate documentation to support 
costs claimed in the fiscal integrity areas.  Between November 2002 and October 2005, 
the QIO received $11.2 million in Federal reimbursement and incurred total costs of 
approximately $14.6 million to support all lines of business, including the QIO contract.  
We reviewed a sample of approximately $3.7 million of the $14.6 million of costs 
incurred in the areas of interest to the Committee.  We did not make any 
recommendations.  (A-01-06-00507)   
Consecutive Medicare Stays Involving Inpatient and Skilled Nursing Facilities 
Our review of consecutive Medicare stays involving inpatient facilities and SNFs in  
CY 2004 found that 35 percent of consecutive stay sequences, for which Medicare paid 
an estimated $4.5 billion, were associated with quality-of-care problems (that is, medical 
errors and accidents) and/or fragmentation of services.  For the purposes of this review, 
we defined consecutive stay sequence as a sequence of three or more individual 
inpatient and SNF stays for the same Medicare beneficiary for whom the admission date 
for each successive stay occurred within 1 day of the discharge date for the preceeding 
stay.  In addition, we found that 11 percent of individual stays within these sequences, for 
which Medicare paid an estimated $1.4 billion, were associated with problems involving 
quality of care, admissions, treatments, or discharges that contributed to the need for 
multiple stays and that 20 percent of individual stays, for which Medicare paid an 
estimated $3.1 billion, lacked documentation sufficient for reviewers to determine 
whether appropriate care was rendered.  
We recommended that CMS take the following actions:  (1) direct QIOs to monitor for 
fragmentation and quality of care across consecutive stay sequences and the quality of 
care provided during the individual stays within those sequences; (2) encourage both 
QIOs and fiscal intermediaries to monitor the medical necessity and appropriateness of 
services provided within these consecutive stay sequences; (3) collaborate with providers 
to improve systems of care based on review results; and (4) reinforce efforts to educate 
medical providers on their responsibility for ensuring that medical records provide such 
information as may be necessary to determine the quality, medical necessity, and medical 
appropriateness of care.  CMS concurred with our recommendations.  (OEI-07-05-00340) 
Inpatient Rehabilitation Facility Admissions  
We found that two hospitals submitted numerous inpatient rehabilitation facility (IRF) 
claims in CY 2003 that did not meet Medicare requirements.  An IRF provides 
specialized care for patients recovering from conditions requiring intensive inpatient 
rehabilitation therapy.   
  Of 100 claims sampled at a hospital in Massachusetts, 47 were determined by 
medical reviewers to be unallowable.  The unallowable claims involved 
 
HHS OIG Semiannual Report to Congress  5  The Centers for Medicare & Medicaid Services 
Fall 2007    
beneficiaries who were capable of significant practical improvement but could 
have received rehabilitation services in a less intensive setting, such as an 
SNF or an outpatient facility, and beneficiaries who were not capable of 
significant practical improvement as a result of therapy or were medically 
unable to participate in intensive treatment.  As a result, we projected a total 
overpayment by Medicare to the hospital of approximately $4.8 million.  
  Of 100 claims sampled at a hospital in New Hampshire, 44 were determined 
by medical reviewers to be unallowable.  The unallowable claims involved 
beneficiaries with conditions similar to those found in the Massachusetts 
hospital.  As a result, we projected a total overpayment to the hospital of 
approximately $1.7 million.   
We recommended that both hospitals refund to the Medicare program the estimated 
overpayments; identify and refund any overpayments for subsequent years IRF claims 
that did not meet Medicare requirements; and strengthen their preadmission screening 
procedures to provide reasonable assurance that beneficiaries admitted for IRF services 
require treatment at the IRF level of care, are capable of significant practical 
improvement, and are able to participate in intensive rehabilitation.  The hospitals 
disagreed with our findings and recommendations.  (A-01-04-00531, A-01-04-00530) 
Transition Stays at Inpatient Psychiatric Facilities 
We found that inpatient psychiatric facilities did not always properly submit claims for 
transition stays paid in CY 2005 by a Medicare fiscal intermediary.  Under Medicares 
inpatient psychiatric facilities prospective payment system (IPF PPS), these facilities 
must submit a single discharge bill for an entire inpatient stay.  Under CMS instructions, 
if a beneficiarys stay begins before and ends on or after the date on which the facility 
becomes subject to the PPS (herein called a transition stay), the fiscal intermediary 
should base its payments to the facility on prospective payment rates and rules.   
For 76 of the 100 claims sampled, inpatient psychiatric facilities incorrectly split the 
beneficiarys stay by submitting claims under two separate payment periods, rather than 
submitting 1 claim for the entire inpatient stay.  These claims occurred because the 
facilities did not have adequate controls to ensure that claims submitted during their 
transition to the IPF PPS complied with Medicare requirements.  Based on our sample 
results, we estimated that Medicare overpaid the facilities $2.17 million for incorrectly 
billed claims for transition stays in 2005.   
We recommended that the intermediary make the appropriate adjustments to the sampled 
claims that resulted in overpayments of $341,000, review our information on the 
additional claims with potential overpayments estimated at $1.83 million and recover any 
overpayments, and analyze postpayment data from claims submitted after our review to 
ensure that they were billed properly and paid correctly.  The intermediary agreed with 
our recommendations.  (A-01-07-00500) 
 
HHS OIG Semiannual Report to Congress  6  The Centers for Medicare & Medicaid Services 
Fall 2007    
Certification and Oversight of Medicare Hospices   
We found that, as of July 2005, 86 percent of Medicare hospices were certified by State 
agencies within 6 years, as required at that time, and 14 percent averaged 3 years past 
due.  In addition, we found that 46 percent of the hospices surveyed were cited for at least 
one health deficiency, such as care planning for patients, and 15 percent received repeat 
citations for the same deficiency during previous surveys.  CMS and State agencies rarely 
used methods other than certification surveys and complaint investigations to monitor 
and enforce hospice performance.  Other available methods include Federal comparative 
surveys, annual State performance reviews, and analysis of hospice performance data.  
We also found that CMS rarely used its only enforcement remedy for noncompliant 
hospices, which is termination from the Medicare program; only one hospice was 
terminated as a result of severe problems during an initial survey. 
To strengthen oversight of the Medicare hospice program to better protect both the 
program and its beneficiaries, we recommended that CMS provide guidance to State 
agencies and CMS regional offices regarding analysis of existing data and identification 
of at-risk hospices; include hospices in Federal comparative surveys and annual State 
performance reviews; seek regulatory or statutory changes to establish specific 
requirements for the frequency of hospice certification; and seek legislation to establish 
additional enforcement remedies, apart from termination, for poor hospice performance.   
CMS agreed to provide increased guidance and include hospices in State performance 
reviews.  However, because of resource constraints, it did not agree with greater inclusion 
of hospices in Federal comparative surveys and establishing frequency requirements for 
hospice certification.  CMS indicated it will continue to consider the recommendation to 
seek legislation to establish additional enforcement remedies for poor hospice 
performance.  (OEI-06-05-00260) 
Impact of Not Retroactively Adjusting Outpatient Outlier Payments 
We determined that CMSs practice of not retroactively adjusting erroneous outpatient 
outlier payments creates vulnerabilities in the outpatient outlier program and is 
inconsistent with CMSs general policy on revisiting incorrectly calculated payments, as 
well as CMSs policy of retroactively adjusting inpatient PPS outlier payments.  Under 
the outpatient PPS, CMS reimburses outpatient providers, including hospital outpatient 
departments and community mental health centers (CMHC), based on predetermined 
fixed payment amounts.  CMS may make additional payments, called outlier payments, if 
the cost of care is extraordinarily high in relation to the average cost of treating 
comparable conditions or illnesses.  CMSs fiscal intermediaries determine whether 
claims qualify for outlier payments after reviewing the cost and charge data in providers 
annual cost reports.  Although inpatient outlier claims are subject to retroactive 
adjustments, CMS considers outpatient outlier payments, estimated at $2.73 billion for 
CYs 2001 through 2007, as final payments not subject to such adjustments.   
Using the results of four earlier reviews of outpatient outlier payments to CMHCs, we 
calculated that the CMHCs received net overpayments totaling $24.4 million.  In 
response to our earlier recommendations to collect the overpayments, the fiscal  
 
HHS OIG Semiannual Report to Congress  7  The Centers for Medicare & Medicaid Services 
Fall 2007    
intermediaries stated that they were not authorized to do so.  CMSs practice of not 
adjusting erroneous outpatient outlier payments contributes to substantial net losses to the 
Medicare trust fund and payment inequities among CMHCs.  Although our work was 
specific to CMHCs, similar vulnerabilities may exist in the overall outpatient outlier 
program.   
We recommended that CMS issue regulations to require adjustments of outpatient outlier 
payments at final cost report settlement, retroactive to the beginning of the cost report 
period, and retroactive adjustments of outpatient outlier payments when an error caused 
by the fiscal intermediary or provider is identified after the cost report is settled.  CMS 
stated that it would explore the feasibility and cost effectiveness of implementing our 
recommendations.  (A-07-06-04059) 
Intravenous Immune Globulin:  Medicare Payment and Availability 
For the third quarter of 2006, we found that there were improvements relative to previous 
quarters in the ability of hospitals and physicians to purchase intravenous immune 
globulin (IVIG) at prices below the Medicare payment amounts but that there were 
problems with the availability of IVIG.  IVIG is a plasma-derived product administered 
to patients with poorly functioning immune systems.  In terms of payments, OIG found 
that, during the third quarter of 2006, 56 percent of IVIG sales to hospitals and 59 percent 
to physicians by the three largest distributors occurred at prices below the Medicare 
payment amounts.  This represented a dramatic shift from the previous quarters, when the 
percentage of sales at prices below Medicare payment rates for IVIG was as low as  
23 percent for hospitals and 4 percent for physicians.  In terms of availability, OIG found 
that most physicians and distributors reported problems with IVIG availability in 2005 
and 2006 and that these availability problems were related to Medicare payment.   
CMS stated that the report, which had no recommendations, provided initial information 
on the availability and pricing of IVIG and set the stage for further review of certain 
issues, such as off-label use, payment lags, and distributor markups.  (OEI-03-05-00404) 
Comparison of Third-Quarter 2006 Average Sales Prices to Average Manufacturer 
Prices:  Impact on Medicare Reimbursement for First Quarter 2007 
In our third review comparing ASPs to AMPs, we identified 39 of 326 Healthcare 
Common Procedure Coding System (HCPCS) codes with ASPs that exceeded AMPs by 
at least 5 percent in the third quarter of 2006.  Pursuant to section 1847A(d)(3) of the 
Social Security Act (the Act), OIG must notify the Secretary of HHS if the ASP for a 
particular drug exceeds the drugs AMP by a threshold of 5 percent.  If that threshold is 
met, the Act grants the Secretary authority to disregard the ASP pricing methodology for 
that drug and substitute the payment amount for the drug code with the lesser of the 
widely available market price for the drug (if any) or 103 percent of the AMP.   
 
Of the 39 codes, 4 have met the threshold for price adjustments in all three of OIGs 
studies comparing ASPs and AMPs.  An additional eight HCPCS codes were also 
previously eligible for price adjustments as a result of OIGs second report, which used 
data from the fourth quarter of 2005.  If reimbursement amounts for all 39 codes had 
 
HHS OIG Semiannual Report to Congress  8  The Centers for Medicare & Medicaid Services 
Fall 2007    
been based on 103 percent of the AMP during the first quarter of 2007, we estimate that 
Medicare expenditures would have been reduced by $13 million.   
We recommended that CMS adjust Medicare reimbursement amounts for drugs that meet 
the 5-percent threshold specified in section 1847A(d)(3) of the Act.  CMS may want to 
focus on those drugs that, according to the three OIG reports, have ASPs that consistently 
meet this threshold.  In response, CMS expressed a desire to better understand fluctuating 
differences between ASPs and AMPs, with the intent to develop a process to adjust 
payment amounts based on the results of OIGs pricing comparisons.  (OEI-03-07-00140) 
Medicare Reimbursement for End Stage Renal Disease Drugs:  Third Quarter 2006 
We found that, on average, independent and hospital-based dialysis facilities responding 
to this OIG study could acquire the majority of selected separately billable ESRD drugs 
for less than the Medicare reimbursement amounts in the third quarter of 2006.  This 
review is the third in a series of OIG reviews examining separately billable ESRD drugs 
and Medicare reimbursement in dialysis facilities.   
Effective January 1, 2006, CMS promulgated several significant changes to the drug 
reimbursement methods used for dialysis facilities, including paying all dialysis facilities 
106 percent of the ASP for all separately billable ESRD drugs and biologicals (with the 
exception of vaccines, blood, and blood products).  
We found that, among responding independent dialysis facilities, the average acquisition 
cost for 9 of the 11 drugs under review was between 7 and 32 percent less than the 
Medicare reimbursement amounts; for the remaining 2 drugs, average acquisition costs 
ranged from 3 to 9 percent above the Medicare reimbursement amount.  We also found 
that overall drug acquisition costs among independent chain facilities were somewhat less 
than those of independent nonchain facilities.  And, among responding hospital-based 
dialysis facilities, the average acquisition cost for 6 of the 11 drugs under review was 
between 4 and 29 percent less than the Medicare reimbursement amount; for the 
remaining 5 drugs, average acquisition costs ranged from 1 to 8 percent above the 
Medicare reimbursement amount. 
We concluded that acquisition costs for the same drug may vary based on the type and 
chain affiliation of the facility, causing some dialysis facilities (especially hospital-based 
facilities) to potentially experience greater gaps in reimbursement than others.  We 
suggested that CMS continue to monitor the situation closely to ensure that all facilities 
are reimbursed appropriately.  CMS stated that our findings in this report, which did not 
have recommendations, provided useful information that will be helpful in the agencys 
monitoring efforts.  (OEI-03-06-00590) 
Costs To Administer and Purchase Cancer Drugs 
Nine of the twelve practices that we reviewed could generally purchase drugs related 
to 15 selected payment codes for the treatment of cancer patients at or below the  
MMA-established reimbursement rates from April through June 2005.  Only 
three practices paid prices above the reimbursement rates for at least half of the  
 
HHS OIG Semiannual Report to Congress  9  The Centers for Medicare & Medicaid Services 
Fall 2007    
payment codes related to the drugs purchased.  Also, 11 of the 12 physician practices that 
we reviewed did not have (nor were they required to have) procedures to track, by 
procedure code, the costs associated with administering drugs to cancer patients.  Without 
such procedures, the practices could not determine whether Medicare reimbursement for 
each code was sufficient to cover the costs of providing drug administration services.    
We recommended that CMS consider the results of our review in any future evaluations 
of Medicare Part B reimbursement of costs associated with the administration and 
purchase of drugs for the treatment of cancer patients.  CMS agreed.  (A-09-05-00066)   
Medicare Payments for 2003 Part B Mental Health Services:  Medical Necessity, 
Documentation, and Coding 
We determined that 47 percent of the Part B mental health services allowed by Medicare 
in 2003 did not meet program requirements, resulting in a projected $718 million in 
improper payments.  Miscoded and undocumented services accounted for 26 and  
19 percent of all mental health services in 2003, respectively.  Medically unnecessary 
services and services that violated the incident to rule each accounted for 4 percent of 
all mental health services.  Some services had more than one error.   
We recommended that CMS revise, expand, and reissue its 2003 Program Memorandum 
on Part B mental health services with an increased emphasis on proper documentation 
coding and the requirements for services billed incident to.  CMS agreed with the 
recommendation and stated it would consolidate existing guidance for providers of 
mental health services.  (OEI-09-04-00220) 
Medicare Payments for Surgical Debridement Services  
In our review of Medicare Part B payments for surgical debridement services in 2004, we 
found that 64 percent of these services did not meet Medicare requirements, resulting in 
improper payments of approximately $64 million.  Surgical debridement is the removal 
of dead or unhealthy tissue from a wound with the use of a sharp instrument.  Medicare 
paid for 3 million surgical debridement services claims totaling $188 million in 2004.  
We found that 39 percent of these surgical debridement services were billed with codes 
that did not accurately reflect the services provided, 29 percent had no or insufficient 
documentation to determine whether the services were medically necessary or were 
coded accurately, and 1 percent was not medically necessary.  We also found that most 
carriers had local coverage determinations and edits in place but conducted limited 
medical review of the procedures.   
 
We recommended that CMS strengthen program safeguards to prevent improper 
payments for surgical debridement services by developing more uniform policy guidance, 
instructing carriers to conduct additional medical reviews and education, and working 
with one particular carrier to ensure that its policy is consistent with current Medicare 
coding guidelines.  CMS generally agreed with the recommendations.   
(OEI-02-05-00390) 
 
HHS OIG Semiannual Report to Congress  10  The Centers for Medicare & Medicaid Services 
Fall 2007    
Medicare Payments for Negative Pressure Wound Therapy Pumps 
Of the $90 million that Medicare paid for negative pressure wound therapy pumps 
(pump) in 2004, we found that 24 percent of the claims for these pumps did not meet 
Medicare coverage criteria.  This resulted in approximately $21 million in improper 
payments and an additional $6 million in improper payments for supplies associated with 
these claims.  The pump, which Medicare covers under Part B as DME, is a portable or 
stationary device used for the treatment of ulcers or wounds that have not responded to 
traditional wound treatment methods.  Specifically, our review found that 15 percent of 
all pump claims in 2004 did not have sufficient documentation to determine whether the 
claims met Medicare coverage criteria, 6 percent of the claims were undocumented, and  
3 percent were not medically necessary.  
 
We recommended that CMS ensure that claims for the pump meet Medicare coverage 
criteria and are paid appropriately.  We provided specific options to consider, such as 
conducting additional medical reviews, educating suppliers and wound care providers 
about the appropriate use of the pump, and establishing advance coverage determinations 
of pump claims from suppliers that have a high number of claims that have been denied 
or have a pattern of overutilization.  CMS concurred with our recommendations for 
medical review and education activities but did not concur with the five additional 
options that we presented.  (OEI-02-05-00370) 
Provider Enrollment, Chain and Ownership System:  Early Implementation 
Challenges 
We assessed the early implementation of CMSs Provider Enrollment, Chain and 
Ownership System (PECOS), which serves as the repository of enrollment records for 
Medicare providers, and found the following regarding delayed application processing:   
  For Medicare Part A, 66 percent of the provider applications to the PECOS 
enrollment process that had been identified as late as of July 31, 2005, had not 
actually exceeded timeframes for enrollment processing established by CMS.  
This misclassification occurred because of contractors, which verify and enter 
the provider information into the PECOS, improperly retaining certain 
applications in a pending inventory or failing to correctly update the status in 
the PECOS.   
  For Medicare Part B, the provider applications that were reported as 
exceeding timeframes as of July 31, 2005, were the result primarily of one 
contractors backlog and providers failure to respond to requests for 
information.   
  More than half (25 of 41) of all contractors reported difficulty in accessing the 
PECOS and obtaining and recertifying user identification (ID) numbers. 
We provided several suggestions to CMS to improve the provider application process.  
These included conducting updated training for Part A contractor staff to ensure 
consistent understanding of application-processing policy, addressing issues with system  
 
HHS OIG Semiannual Report to Congress  11  The Centers for Medicare & Medicaid Services 
Fall 2007    
access and user IDs that could lead to future delays in application processing, and 
determining the need for increased system capacity to ensure that periods of limited 
access to the PECOS will not reoccur as other planned initiatives are implemented.  CMS 
indicated in its comments that the information in the report will assist in its ongoing 
management of the PECOS but CMS believed that the startup issues noted in our report 
have been resolved.  (OEI-07-05-00100) 
Retail Pharmacy Participation in Medicare Part D Prescription Drug Plans in 2006 
We found that, as of October 2006, 97 percent of the 58,768 retail pharmacies throughout 
the country participated in at least one Medicare prescription drug plan (PDP).  We also 
found that retail pharmacies in metropolitan and nonmetropolitan counties participate at 
similarly high rates and that 70 percent of participating retail pharmacies offer 
beneficiaries the choice of all available PDPs in their region.  The Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA, Pub. L. No. 108-173) 
requires at least two plans offered by different sponsors to be available in every region.  
PDP sponsors contract with pharmacies to create pharmacy networks that provide Part D 
coverage to beneficiaries in their plans.   
The high percentage of retail pharmacy participation suggests that beneficiaries access to 
retail pharmacies that dispense Part D-covered drugs does not appear to be limited by any 
lack of willingness on the part of retail pharmacies to participate in PDPs.  In response to 
the report, which had no recommendations, CMS stated that it was pleased with OIGs 
findings.  (OEI-05-06-00320) 
Medicares Program Safeguard Contractors:  Activities To Detect and Deter Fraud 
and Abuse  
We found that Program Safeguard Contractors (PSC) differed substantially in the number 
of new investigations and case referrals to law enforcement; some had minimal activity in 
these primary workload categories.  Neither the size of a PSCs budget nor its oversight 
responsibility (dollar amount of Medicare paid claims) was strongly correlated with the 
number of new investigations or the number of new case referrals produced in 2005.  We 
also found that most PSCs had minimal results from proactive data analysis.  In addition, 
we found no consistency across PSCs regarding the level of detail about proactive data 
analysis included in the monthly status reports.  We recommended that CMS review 
PSCs with especially low volumes of activity in investigations and case referrals for 
Medicare Parts A and B.  In addition, we recommended that CMS should require PSCs to 
provide more detailed explanations of their investigations, case referrals to law 
enforcement, and proactive data analysis activities in their monthly reports.  
CMS concurred in part with our first recommendation, stating that direct comparisons 
between PSC task orders are difficult to make.  CMS concurred with our second 
recommendation and stated that it has revised the monthly reporting system to collect 
more information and to improve reporting consistency across PSCs.  (OEI-03-06-00010) 
 
HHS OIG Semiannual Report to Congress  12  The Centers for Medicare & Medicaid Services 
Fall 2007    
Medicaid-Related Reports 
States Use of New Drug Pricing Data in the Medicaid Program  
We found that as of September 2006, many States had not yet decided whether to use 
AMP data and/or retail sales price (RSP) data to calculate the amount their State 
Medicaid programs reimburse for prescription drugs.  States use of this data has the 
potential to reduce Medicaid prescription drug expenditures, which reached $41 billion in 
2005.  Although the DRA requires CMS to provide AMP and RSP data to the States, the 
States are not required to use the data.  In our early assessment, we found that States are 
anticipating CMSs final regulations to clearly explain how the AMP will be defined and 
calculated.  States raised concerns about the AMP data files that they had received from 
CMS, indicating that the AMP units appeared to be inconsistent with typical unit 
definitions of drug products and requesting that the drug unit definitions be included in 
the data files.  They also questioned whether the vendors that already provide  
drug-pricing information for claims processing could have access to AMP data.   
To ensure that AMP and RSP data are accurate, reliable, and accessible, we 
recommended that CMS explicitly detail AMPs definition and calculation, including the 
definition of retail pharmacy class of trade when promulgating new AMP regulations; 
furnish States with interim guidance and/or information regarding AMP data; and 
explicitly detail the RSPs definition, calculation, and method of collection when 
distributing RSP data to States.  CMS generally agreed with the recommendations and 
stated that it had taken several steps toward addressing them.  (OEI-03-06-00490) 
Examining Fluctuations in Average Manufacturer Prices 
In a review of fluctuations in the AMPs of pharmaceuticals, we found that AMPs did not 
fluctuate substantially from the second quarter of 2005 to the second quarter of 2006 and 
that roughly equal numbers of AMPs decreased as increased.  Overall, 39 percent of the 
AMPs stayed the same between the quarters, and an additional 16 percent changed by 
less than 2 percent.  However, AMPs for single-source drugs (that is, brand name 
products for which there are no generics) were more prone to increases between quarters.   
The DRA requires CMS to make AMP data available to States as of July 1, 2006, for 
optional use in setting the reimbursement amounts paid to pharmacies that dispense 
prescription drugs to Medicaid beneficiaries.  States use of AMPs is expected to help 
reduce Medicaid prescription drug expenditures; prior to 2006, States lacked access to 
AMP data and have used reimbursement rates that have little relationship to market 
prices.   
 
Industry representatives raised concerns that the AMP was too volatile to serve as a 
payment basis and may result in pharmacies having to absorb price increases in the 
period between AMP reporting and the establishment of reimbursement amounts.  
Although the increases tended to be relatively small, we would advise States to take into 
account the potential effects of AMP increases during the lag period when developing 
any AMP-based formulas.  
 
HHS OIG Semiannual Report to Congress  13  The Centers for Medicare & Medicaid Services 
Fall 2007    
CMS stated that the report, which had no recommendations, shows that AMPs can be 
used appropriately to set Medicaid payment to pharmacies.  It noted, however, that our 
findings may not be comparable to actual experience once a new definition of the AMP is 
implemented.  (OEI-03-06-00350) 
Medicaid Outpatient Drug Expenditures in Iowa 
Of the $466 million in Federal Medicaid funds that Iowa claimed for outpatient drug 
expenditures for FYs 2003 and 2004, $154,000 represented expenditures for drugs that 
were not eligible for Medicaid coverage because the coverage terminated before the 
drugs were dispensed.  An additional $1 million represented expenditures for drugs that 
were not listed as covered.  Contrary to CMS guidance, the State did not verify whether 
those drugs were eligible for Medicaid coverage; therefore, the expenditures may not be 
allowable for Medicaid reimbursement. 
We recommended that Iowa (1) refund $154,000 to the Federal Government, (2) work 
with CMS to resolve $1 million in payments for drugs that were not listed as covered and 
that may not have been eligible for Medicaid coverage, and (3) strengthen internal 
controls to ensure that claimed Medicaid drug expenditures comply with Federal 
requirements.  Iowa partly agreed with the recommendations.  (A-07-06-04062) 
Deficit Reduction Act of 2005:  Impact on the Medicaid Federal Upper Payment 
Limits  
In our preliminary assessment of the expected impact of certain provisions of the DRA on 
Medicaid upper payment limits, we found that Federal upper limit amounts are likely to 
decrease substantially as a result of the DRA.  The Federal upper payment limits help 
ensure that the Federal Government acts as a prudent buyer by taking advantage of 
current market prices for multiple-source drugs.  Beginning January 1, 2007, pursuant to 
the DRA, Medicaid Federal upper limits are to be based on 250 percent of the lowest 
AMP rather than 150 percent of the lowest price published in the national compendia.   
This preliminary assessment, which focused on the 521 drugs on the Federal upper limit 
list in the second quarter of 2006 and 25 selected drugs with the highest total Medicaid 
expenditures in 2005, found the following: 
  For 23 of the 25 high-expenditure drugs reviewed, Federal upper limit 
amounts set under the previous calculation method were more than double the 
average pharmacy costs in the second quarter of 2006. 
  Federal upper limit amounts would decrease for 492 of the 521 drugs under 
the new calculation set forth in the DRA. 
  Of the 25 high-expenditure drugs reviewed, only 6 had estimated average 
pharmacy acquisition costs that would be below the new Federal upper limit 
amount. 
  The AMP used to set a new Federal upper limit amount may be substantially 
lower than other AMPs associated with a drug. 
 
HHS OIG Semiannual Report to Congress  14  The Centers for Medicare & Medicaid Services 
Fall 2007    
  Among the 25 high-expenditure drugs reviewed, examining the volume-
weighted AMPs helped identify instances in which pharmacy acquisition costs 
may exceed the new Federal upper limit amount. 
We recommended that CMS take steps to identify when a new Federal upper limit 
amount may not be representative of a drugs acquisition cost to pharmacies and, in those 
situations, determine the proper course of action (working with Congress, if necessary).  
CMS disagreed with the findings concerning the effect of the DRA-related changes to the 
Federal upper limit calculation.  (OEI-03-06-00400) 
Use of Health Information Technology in State Medicaid Programs   
We found that 12 State Medicaid agencies have implemented a total of 16 health 
information technology (HIT) initiatives for Medicaid beneficiaries and participating 
providers, including claims-based electronic health records initiatives, electronic 
prescribing initiatives, remote disease-monitoring initiatives, and personal health records 
initiatives.  We also found that 25 State Medicaid agencies are currently involved in 
planning and developing statewide health information exchange (HIE) networks.  Lastly, 
we found that 13 State Medicaid agencies are incorporating the Medicaid Information 
Technology Architecture (MITA) into their HIT and HIE planning.  MITA is a 
framework developed by CMS to help States modernize their Medicaid information 
systems.   
In recent years, both the President and the Secretary of the Department of HHS have 
promoted the goal of developing interoperable HIT and HIE initiatives.  We 
recommended that CMS continue to support the goals of MITA to help facilitate future 
State Medicaid HIT and HIE initiatives, assist State Medicaid agencies with developing 
privacy and security policies regarding the use of Medicaid health care information in 
HIT and HIE initiatives, and continue to work with the Office of the National 
Coordinator for HIT to ensure that State Medicaid initiatives are consistent with national 
goals.  (OEI-02-06-00270) 
Medicaid Disproportionate Share Hospital Payments  
In our review of disproportionate share hospital (DSH) payments to hospitals, we found 
that two States claimed a total of $45.3 million in unallowable Federal payments.  The 
Social Security Act requires that States make Medicaid DSH payments to hospitals that 
serve disproportionately large numbers of low-income patients.  The Omnibus Budget 
Reconciliation Act of 1993 limits these payments to a hospitals uncompensated care 
costs, which are the annual costs incurred to provide services to Medicaid and uninsured 
patients less payments received for those patients.  This limit is known as the  
hospital-specific DSH limit.   
 New Hampshire  Of the $194.1 million that New Hampshire claimed in DSH 
payments for FY 2004, $70.6 million ($35.3 million Federal share) was unallowable.  
The State did not comply with the hospital-specific DSH limits for 24 of the 28 DSH 
hospitals because it did not properly determine the hospitals allowable costs in 
accordance with the Medicare principles of cost reimbursement, as CMS guidance  
 
HHS OIG Semiannual Report to Congress  15  The Centers for Medicare & Medicaid Services 
Fall 2007    
requires.  Specifically, the cost-to-charge ratios that the State used in determining 
allowable costs were inflated because they overstated costs by including unallowable 
costs and understated charges by using net, rather than gross, patient services revenue.   
We recommended that the State (1) refund $35.3 million to the Federal Government, 
(2) work with CMS to review DSH payments claimed after our audit period and refund 
any overpayments, and (3) establish policies and procedures to ensure that it complies 
with Federal requirements and the State plan in calculating future hospital-specific DSH 
limits.  The State disagreed with our finding and recommendations.  (A-01-05-00001) 
 
 New Jersey  Our review of DSH payments to two New Jersey hospitals identified 
unallowable payments.  As a result of a State consultants erroneous calculation of the 
hospital-specific DSH limits, these hospitals received millions of dollars in additional 
DSH payments. 
DSH payments to one hospital from July 1995 through June 2001 exceeded the    
hospital-specific limits by $20 million ($10 million Federal share).  The consultant 
erroneously included nonreimbursable costs that were not DSH eligible in its 
calculations, and the State claimed some duplicate DSH expenditures.  We were unable 
to determine the reasonableness of another $9.9 million ($4.9 million Federal share) 
because the consultant included in the hospital-specific DSH limits an undetermined 
amount of costs for patients with private insurance coverage.  We recommended that the 
State (1) refund $10 million to the Federal Government, (2) work with CMS to resolve 
$4.9 million in set-aside costs, (3) adhere to Federal law and State plan requirements 
when submitting DSH claims subsequent to June 2001 for Federal reimbursement, and 
(4) review all work performed by consultants to ensure the veracity of future Medicaid 
claims to the Federal Government.  The State partially agreed with the recommendations.  
(A-02-04-01024) 
DSH payments to the other hospital exceeded the hospital-specific limits by $2.2 million 
($1.1 million Federal share) from November 1996 through June 2001.  In its calculations 
of the limits, the consultant improperly included $2.2 million of costs applicable to 
patients with private insurance coverage.  We recommended that the State (1) refund 
$1.1 million to the Federal Government, (2) adhere to Federal law and State plan 
requirements when submitting DSH claims subsequent to June 2001 for Federal 
reimbursement, and (3) review all work performed by consultants to ensure the veracity 
of future Medicaid claims to the Federal Government.  Again, the State partially agreed.  
(A-02-05-01007)  
Medicaid Payments and Services Related to Hurricanes Katrina and Rita 
We found that for eight selected States, Medicaid paid $716 million for medical services 
and prescription drugs under the hurricane-related demonstration projects initiated in 
response to Hurricanes Katrina and Rita.  Nearly two-thirds$448 millionwas paid for 
medical services; the remainder, $268 million, was paid for prescription drugs.  In 
addition, a greater percentage of evacuees received medical services and prescription 
drugs than nonevacuees.  Overall and in each State, the average total payment per  
 
HHS OIG Semiannual Report to Congress  16  The Centers for Medicare & Medicaid Services 
Fall 2007    
evacuee was less than that per nonevacuee for medical services and prescription drugs.  
However, in a few specific categories, the average payment per evacuee exceeded that 
per nonevacuee by 50 percent or more.  All States except Louisiana provided services to 
both evacuees and affected individuals; Louisiana did not enroll anyone into its Medicaid 
programs as evacuees. 
We made no specific agency recommendations; however, we concluded that further 
investigation may be warranted for categories in which the average payment per evacuee 
exceeded that per nonevacuee by 50 percent or more.  (OEI-05-07-00300, primary report, 
and OEI-05-06-00140, data compendium) 
Medicaid Community Mental Health Center Provider Services in Indiana  
We estimated that Indiana overpaid CMHC providers at least $33.4 million 
($21.3 million Federal share) in reimbursement for Medicaid Rehabilitation Option 
(MRO) services provided during FY 2003.  Under the MRO services program, clinical 
mental health services are provided to individuals, families, or groups living in the 
community who need aid intermittently for emotional disturbances or mental illness.  Of 
200 randomly selected MRO services provided by CMHCs, 64 did not meet Federal and 
State reimbursement requirements.   
We recommended that Indiana refund the Federal share of the overpayment and 
strengthen its internal controls over the monitoring of MRO services by furnishing 
written notification to CMHC providers that reminds them to prepare and retain complete 
documentation to fully support Federal and State claiming provisions.  Indiana agreed 
with our second recommendation and partly agreed with our first recommendation.      
(A-05-05-00057) 
Medicaid Reimbursement Rate for School-Based Health Services in Maryland 
We found that Maryland had not complied with reimbursement provisions specified in its 
CMS-approved State Medicaid plan for school-based health services; as a result, it 
received substantial overpayments between State FYs 2002 and 2004.  Medicaid covers 
the costs of school-based health services, such as physical therapy, speech 
pathology/therapy services, and psychological counseling that are provided to children 
under the Individuals with Disabilities Education Act.  Although the States Medicaid 
plan required claims to be based on cost, the State instead used an unsupported 
reimbursement rate of $82 per service.  We determined that Marylands use of the 
$82 rate resulted in overpayments totaling $65.5 million ($32.8 million Federal share). 
Because the State could not provide documentation to show that the $82 rate was based 
on the cost of services, we used special education cost data for State FYs 2002 through 
2004 and calculated the difference between the reimbursement claimed and the amount of 
allowable claims.  Our newly calculated rates were significantly lower than the $82 rate 
used by the State:  $42.40 in FY 2002 up to $48.64 in FY 2004.  
We recommended that the State refund $32.8 million to the Federal Government for 
unallowable costs in FYs 2002 through 2004, determine the unallowable costs for          
 
HHS OIG Semiannual Report to Congress  17  The Centers for Medicare & Medicaid Services 
Fall 2007    
FY 2005 and make the appropriate refund, and continue to work with CMS to develop 
more accurate school-based health service rates and make revisions to the State plan.  
The State agreed with our finding that the $82 rate was too high but did not agree on a 
refund amount.  (A-03-05-00206) 
Medicaid Reimbursement for Graduate Medical Education in Missouri 
We found that Missouris claims for Medicaid reimbursement of graduate medical 
education (GME) payments to one private teaching hospital did not fully comply with 
Federal law or the approved State plan.  According to the State, its share of these 
payments consisted of certified public expenditures.  These expenditures represented city 
funds provided to the hospital for the care of indigent children. 
Of the $5.7 million ($3.4 million Federal share) claimed for Medicaid reimbursement, 
$2.2 million ($1.4 million Federal share) was not allowable.  Specifically, the State was 
not entitled to claim certified public expenditures because the city did not certify the 
funds before the State agency claimed Federal reimbursement and because the hospital 
did not certify the funds for all years audited.  In addition, we were unable to determine 
what portion of the certified public expenditures related to the provision of GME. 
 
We recommended that the State (1) refund to the Federal Government the $1.4 million in 
GME overpayments to the hospital during State FYs 19992001, (2) follow Federal 
requirements and the State plan when claiming GME costs in the future, and (3) review 
claims for GME subsequent to our audit period and refund any portion that did not 
comply with Federal requirements and the State plan.  The State partly agreed with the 
recommendations.  (A-07-04-03058)   
State Claims for the Costs of Family Planning Services Provided Through Medicaid 
Managed Care Programs 
In a review of seven States claims for the cost of family planning services provided 
through Medicaid managed care programs, we found that six States had inflated the 
factors or rates used to claim reimbursement at the enhanced 90-percent rate or did not 
provide documentation to support their calculation as required.  CMS defines family 
planning services as those services that prevent or delay pregnancy or otherwise control 
family size.  States may claim enhanced 90-percent Federal funding for the cost of these 
services. 
For the $302.9 million in claims reviewed (Federal share), six of the seven States claimed 
unallowable costs totaling $21.7 million.  We attributed the unallowable claims to CMSs 
lack of specific guidance and controls to ensure that data used by the States conformed to 
their proposed methodologies. 
We recommended that CMS issue specific guidance to States, consistent with current 
Medicaid regulations, to quantify a reasonable portion of the capitation payments 
attributable to family planning services, establish controls in its review process to ensure 
that the data States use to quantify family planning costs conform to the proposed 
methodologies for claiming the enhanced family planning rate, and specify retention 
requirements for base-year data.  CMS supported the collection of funds improperly 
 
HHS OIG Semiannual Report to Congress  18  The Centers for Medicare & Medicaid Services 
Fall 2007    
claimed by four States in the review and agreed to issue guidance as specified in the first 
recommendation.  CMS also confirmed that States should be required to maintain     
base-year data as long as they are using these data to support their claims.          
(A-03-06-00200) 
Medicaid Pharmacy Claims Billed as Family Planning 
We found that two States improperly received enhanced Federal Medicaid funds for 
prescription drug claims billed as family planning services.   
 
 New Jersey  New Jersey improperly received $2.2 million in Federal Medicaid funds 
for prescription drug claims that did not qualify as family planning services.  The 
overpayment occurred because the State had incorrectly designated 227 National Drug 
Codes (NDC) as related to family planning in its Medicaid Management Information 
System (MMIS).  We recommended that the State (1) refund $2.2 million to the Federal 
Government; (2) review all NDCs presently coded as family planning in the MMIS to 
verify that they are related to family planning; (3) periodically review all NDCs to ensure 
that they are appropriately coded in the MMIS; and (4) determine the amount of Federal 
Medicaid funds improperly reimbursed at the enhanced rate for non-family-planning 
NDCs, both prior and subsequent to our audit period, and refund that amount to the 
Federal Government.  New Jersey concurred with our recommendations.   
(A-02-05-01019)   
 
 New York  New York State improperly received $6.1 million in Federal Medicaid 
funds for prescription drug claims that did not qualify as family planning services 
because the State had incorrectly designated 246 NDCs as related to family planning in 
its MMIS.  We recommended that the State (1) refund $6.1 million to the Federal 
Government; (2) review all NDCs presently coded as family planning in the MMIS to 
verify that they are related to family planning; (3) periodically review all NDCs to ensure 
that they are appropriately coded in the MMIS; and (4) determine the amount of Federal 
Medicaid funds improperly reimbursed at the enhanced rate for non-family-planning 
NDCs, both prior and subsequent to our audit period, and refund that amount to the 
Federal Government.  The State generally concurred with our recommendations.   
(A-02-05-01018)   
Abortion-Related Laboratory Claims Billed as Family Planning 
We found that New York State improperly received Federal reimbursement for 
unallowable abortion-related services and was improperly reimbursed at the enhanced  
90-percent rate for allowable abortion-related laboratory services that did not qualify as 
family planning services.  Medicaid funds are available for abortion-related services only 
when the life of the mother would be endangered if the fetus were carried to term.   
 
Of the 100 claims in our sample, 98 either did not qualify as family planning services and 
were not reimbursable at the enhanced 90-percent Federal matching rate or were 
abortion-related laboratory services that were not eligible for Medicaid reimbursement at 
all.  As a result, we estimate that the State improperly received $3.2 million in Federal 
Medicaid funds for CYs 2000 through 2003.  However, we have set aside this amount for 
 
HHS OIG Semiannual Report to Congress  19  The Centers for Medicare & Medicaid Services 
Fall 2007    
consideration by CMS and the State because no medical review was performed on the 
100 sampled claims. 
We recommended that the State (1) work with CMS to resolve $3.2 million in set-aside 
claims; (2) reemphasize that abortion-related services are not considered family planning 
and that Medicaid claims must be properly coded when an abortion-related service is 
provided; (3) strengthen system edits to identify abortion-related laboratory claims that 
are ineligible for Federal funding; and (4) determine the amount of Federal Medicaid 
funds improperly reimbursed at the 90-percent rate for ineligible abortion-related 
laboratory services, both prior and subsequent to our audit period, and work with CMS to 
determine the amount to be refunded to the Federal Government.  The State concurred 
with our recommendations.  (A-02-05-01009) 
Missouris Provider Tax 
We found that Missouris provider tax for State FY 2004 did not comply with the 
requirements for a permissible provider tax outlined in Federal laws and regulations and 
the Medicaid Partnership Plan, which was negotiated between the State and CMS in 2002 
to provide a stable funding mechanism for the States Medicaid program.  We found that 
the State received $23 million in Federal matching funds as a result of using $13 million 
in provider taxes not permitted under Federal regulations and the Medicaid Partnership 
Plan.  However, because of certain limitations imposed by Federal regulations, we 
questioned only an estimated $8 million.  We also found that Missouri lacked policies 
and procedures to ensure that its provider tax program complied with Federal laws and 
regulations and the partnership plan; as a result, the States provider tax may have been 
impermissible. 
We recommended that (1) Missouri submit to CMS a separate waiver test for each class 
of service that would permit waiver of the uniform tax requirement for FY 2004,           
(2) refund more than $8 million to the Federal Government, (3) submit to CMS a separate 
waiver test for each class of service for State FYs 2005 and 2006, (4) refund Federal 
reimbursement for the unallowable tax amounts paid by the hospitals not included in the 
audit and for unallowable Federal reimbursement for State FYs 2005 and 2006, (5) notify 
CMS of any State changes to the provider tax program, and (6) develop policies and 
procedures to ensure that the provider tax program complies with all Federal and 
negotiated requirements for provider taxes when completing the waiver tests.  Missouri 
disagreed with our findings and recommendations.  (A-07-06-01029) 
State Childrens Health Insurance Program-Related Reports 
Fraud and Abuse Safeguards in Separate State Childrens Health Insurance 
Programs  
We found that State Children Health Insurance Programs (SCHIP) in six States had, as of 
September 2005, established methods and procedures to meet Federal requirements for 
protecting the programs against fraud and abuse.  One State, however, had not met the 
Federal requirements for investigating suspected cases of fraud and referring cases to law 
enforcement.  We also found that even though there were common State oversight 
 
HHS OIG Semiannual Report to Congress  20  The Centers for Medicare & Medicaid Services 
Fall 2007    
mechanisms addressing Federal requirements, these mechanisms did not always enable 
States to know the extent of fraud and abuse safeguarding activities on the part of the 
States contractors, such as health plans.   
To address the noncompliance by the one State identified in this report, we recommended 
that CMS direct the noncompliant State to institute procedures to meet Federal 
requirements for investigating cases of suspected SCHIP fraud and abuse and for 
referring cases to law enforcement.  To make other improvements, we also recommended 
that CMS strengthen Federal and State oversight of separate SCHIPs fraud and abuse 
safeguards.  CMS agreed with our findings and recommendations.  (OEI-06-04-00380)  
State Childrens Health Insurance Program Eligibility 
We found that all three States reviewed (1) made some SCHIP payments on behalf of 
beneficiaries who did not meet Federal and State eligibility requirements and (2) did not 
always adequately document eligibility determinations.  In each State, we reviewed a 
statistical sample of payments from January 1 through June 30, 2005.   
 California  Based on a statistical sample, we projected that the State made payments 
totaling between $2 million and $14.2 million (Federal share) on behalf of ineligible 
beneficiaries.  We also projected that case file documentation did not adequately support 
eligibility determinations for additional payments totaling $5 million to $21 million 
(Federal share).   
We recommended that the State use the results of this review to help ensure compliance 
with Federal and State SCHIP eligibility requirements by (1) reemphasizing to 
beneficiaries the need to provide accurate and timely information and (2) requiring 
contractor and county employees to verify eligibility information and maintain 
appropriate documentation in all case files.  The State agreed to do so.  (A-09-06-00022)   
 Florida  Based on a statistical sample, we projected that the State made payments 
totaling between $19 million and $33 million (Federal share) on behalf of ineligible 
beneficiaries.  We also projected that case file documentation did not adequately support 
eligibility determinations for additional payments totaling $4.1 million to $11.6 million 
(Federal share).   
We recommended that the State use the results of this review to help ensure compliance 
with Federal and State SCHIP eligibility requirements by (1) reemphasizing to contractor 
employees the need to adequately verify eligibility information, (2) minimizing the time 
period between determination of Medicaid eligibility and disenrollment of the applicant 
from SCHIP, and (3) reemphasizing to contractor employees the need to maintain 
appropriate documentation in all case files.  We also recommended that the State work 
with CMS to resolve the estimated improper payments identified in our review.  In its 
comments, the State did not specifically address our recommendations.  (A-04-06-00021) 
 New York  New York State operated both a separate childrens health program (Child 
Health Plus B) and an expanded Medicaid program through March 2005.  Beginning 
 
HHS OIG Semiannual Report to Congress  21  The Centers for Medicare & Medicaid Services 
Fall 2007    
April 2005 and for the remainder of the audit period, the State transitioned children in the 
expanded Medicaid program to the Child Health Plus B program.   
Based on a statistical sample, we projected that the State made Child Health Plus B 
payments totaling between $17.7 million and $32.9 million (Federal share) and expanded 
Medicaid payments totaling between $3.1 million and $13.5 million (Federal share) on 
behalf of ineligible beneficiaries.  We also projected that case file documentation did not 
adequately support eligibility determinations for payments totaling between $9.5 million 
and $20.2 million (Federal share).   
We recommended that the State use the results of this review to help ensure compliance 
with Federal and State SCHIP eligibility requirements by (1) reemphasizing to 
beneficiaries the need to provide accurate and timely information and (2) requiring 
employees of managed care organizations to verify eligibility information and maintain 
appropriate documentation in all case files.  We also recommended that the State work 
with CMS to resolve the estimated improper Child Health Plus B payments identified in 
our review.  The State disagreed with our findings.  (A-02-06-01003) 
Outreach 
As part of OIGs ongoing efforts to promote the highest level of ethical and lawful 
conduct by the health care industry, we have continued to issue advisory opinions and 
other guidance to educate industry and other stakeholders on how to avoid instances of 
waste, fraud, and abuse. 
Advisory Opinions 
In accordance with section 205 of the HIPAA, OIG, in consultation with the Department 
of Justice (DOJ), issues advisory opinions to outside parties regarding the interpretation 
and applicability of certain statutes relating to Federal health care programs.  This 
authority allows OIG to provide case-specific formal guidance regarding the application 
of the anti-kickback statute and safe harbor provisions and other OIG health care fraud 
and abuse sanctions.  For the period April 1 through September 30, 2007, OIG received  
27 advisory opinion requests and issued 7 advisory opinions.  OIG advisory opinions are 
available on the Internet at http://oig.hhs.gov/fraud/advisoryopinions.html. 
Provider Self-Disclosure Protocol 
OIG is committed to assisting health care providers and suppliers in detecting and 
preventing fraudulent and abuse practices.  Since 1998, we have made available 
comprehensive guidelines describing the process for providers to voluntarily submit to 
OIG self-disclosures of fraud, waste, or abuse.  The guidelines, entitled Provider      
Self-Disclosure Protocol, give providers an opportunity to minimize the potential costs 
and disruption that a full-scale OIG audit or investigation may entail if fraud is 
uncovered.  In doing so, the self-disclosure also enables the provider to negotiate a fair 
monetary settlement and potentially avoid being excluded from doing business with 
Federal health care programs.  The protocol guides providers and suppliers through the 
process of structuring a disclosure to OIG about matters that appear to constitute potential 
violations of Federal laws (as opposed to honest mistakes that may have resulted in  
 
HHS OIG Semiannual Report to Congress  22  The Centers for Medicare & Medicaid Services 
Fall 2007    
overpayments).  After making an initial disclosure, the provider or supplier is expected to 
undertake a thorough internal investigation of the nature and cause of the matters 
uncovered and make a reliable assessment of their economic impact (e.g., an estimate of 
the losses to Federal health care programs).  OIG evaluates the reported results of each 
internal investigation to determine the appropriate course of action.   
In addition, OIG issued an Open Letter to Providers in 2006 to promote the use of the 
self-disclosure protocol to resolve civil monetary penalty liability under the physician 
self-referral and anti-kickback statutes for financial arrangements between hospitals and 
physicians. 
The self-disclosure guidelines are available on the Internet at http://www.oig.hhs.gov in 
the Fraud Prevention & Detection section under Self-Disclosure Information. 
During this reporting period, self-disclosure cases resulted in $1.99 million in HHS 
receivables.  For example: 
 
 Massachusetts  To settle a matter reported under OIGs Provider Self-Disclosure 
Protocol, Tri-City Mental Health Center, Inc. (Tri-City), a community-based not-for-
profit mental health provider, agreed to pay $557,000 to resolve its liability under the 
False Claims Act (FCA).  In addition, Tri-City entered into a 3-year certification of 
compliance agreement.  Tri-City disclosed that as a result of improper actions taken by 
one of its employees, it billed Medicaid and the Massachusetts Department of Mental 
Health for services that were not supported by documentation or not provided at all.   
Tri-City terminated the employee who was allegedly responsible for the improper 
billings.   
Federal and State Partnership:  Joint Audits of 
Medicaid 
Another major OIG outreach initiative has been to work closely with State auditors in 
reviewing the Medicaid program.  To this end, a partnership plan was developed to foster 
joint reviews and provide broader coverage of the Medicaid program.  The partnership 
approach has helped ensure more effective use of scarce audit resources by both the 
Federal and the State audit sectors.  To date, partnerships have been developed in  
25 States. 
Reports issued to date have resulted in identification of more than $263 million in Federal 
and State savings and have led to joint recommendations for savings at the Federal and 
State levels, as well as improvements in internal controls and computer system 
operations. 
Office of Inspector General Administrative Sanctions 
OIG has the authority to impose administrative sanctions for instances of fraud or abuse 
or other activities that pose a risk to Federal health care programs and their beneficiaries 
(see Appendix E for an explanation of OIGs sanction authorities).  These sanctions  
 
HHS OIG Semiannual Report to Congress  23  The Centers for Medicare & Medicaid Services 
Fall 2007    
include the exclusion of individuals and entities from participating in Federal health care 
programs and imposing civil monetary penalties for submitting false or fraudulent claims 
to a Federal health care program or violating the anti-kickback statute, physician  
self-referral statute, or the patient dumping provision of the Social Security Act.  
During this reporting period, OIG administered 2,051 sanctions in the form of program 
exclusions or administrative actions for alleged fraud or abuse or other activities that 
posed a risk to Federal health care programs and their beneficiaries.  Details and 
examples of these sanctions follow.  
Program Exclusions 
During this reporting period, OIG excluded 2,030 individuals and entities from 
participating in Medicare, Medicaid, and other Federal health care programs.  Most of the 
exclusions resulted from convictions for crimes relating to Medicare or Medicaid, for 
patient abuse or neglect, or as a result of license revocation.  Examples include the 
following: 
 
 Georgia  Martin Bradley, III, owner of a pharmaceutical wholesale distributor, was 
excluded for a minimum period of 70 years based on his conviction related to a 
racketeering scheme involving prescription drugs that were unlawfully obtained and 
diverted from 1996 to 2003.  Bradley was sentenced to 20 years of incarceration and 
ordered to pay over $27 million in restitution.   
  
 Texas  Doris Blake, owner of a billing company, was excluded for a minimum period 
of 50 years based on her conviction related to a Medicaid fraud scheme.  Blake billed the 
Medicaid program from September 2001 to December 2003 for chemical dependency 
counseling services that were never rendered.  She was sentenced to 50 years of 
incarceration and ordered to pay $1 million in restitution.  
  
 Florida  Thomas Merrill, an osteopath, was excluded for a minimum period of  
50 years based on his conviction for wire fraud, health care fraud resulting in death, 
health care fraud and unlawful dispensing of numerous controlled substances.  From 
about January 2000 to about May 2004, Merrill submitted claims for medical services 
and procedures that were not provided or medically necessary.  In addition, he wrote 
prescriptions for controlled substances outside the usual course of professional practice, 
resulting in patient deaths.  He was sentenced to life in prison and ordered to pay 
approximately $115,000 in restitution.  
 
 Pennsylvania  Joseph Davidson, a chiropractor, was excluded for a minimum period 
of 40 years based on his conviction related to submitting false claims to private insurers 
for services that were double-billed, upcoded, or not provided.  In addition, Davidson and 
a codefendant agreed to stage phony automobile accidents to allow patients to falsely 
claim injuries and pursue fraudulent personal injury settlements.  Davidson was 
sentenced to 63 months of incarceration and ordered to pay approximately $7 million in 
restitution.   
 
 
HHS OIG Semiannual Report to Congress  24  The Centers for Medicare & Medicaid Services 
Fall 2007    
 Colorado  Brian OConnell was excluded for a minimum period of 20 years based on 
his conviction for the illegal practice of medicine, perjury, theft, assault (recklessly 
causing bodily harm), and criminally negligent homicide.  OConnell did not have a 
license to practice as a doctor of naturopathic medicine, yet he treated patients with 
illegal and unapproved substances and employed unapproved procedures for more than 
30 months.  His actions caused the death of a patient.  OConnell was sentenced to 
8 years of incarceration. 
Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose administrative 
penalties and assessments against a person who, among other things, submits claims to a 
Federal health care program that the person knows or should know are false or 
fraudulent.  During this reporting period, OIG concluded cases involving over $6 million  
in civil monetary penalties and assessments.  The following are among the civil monetary 
penalties actions resolved during this reporting period: 
 
 Texas  Advanced Neuromodulation Systems, Inc. (ANS), a medical device 
manufacturer, paid $2.95 million and entered into a 3-year CIA to resolve its liability 
under the CMPL to resolve allegations of paying kickbacks to physicians.  OIG alleged 
that from January 1999 through January 2005, ANS offered and paid remuneration to 
potential and existing referral sources in exchange for referrals to ANS for the 
purchasing, leasing, ordering, arranging for or furnishing of medical devices 
manufactured by ANS that were payable by a Federal health care program.  Specifically, 
ANS allegedly paid physicians $5,000 for every five patients who were retrialed with 
ANSs spinal cord stimulator as part of the Renew Retrial program.  In addition, OIG 
alleged that ANS provided physicians with sports tickets, free trips, free dinners, grants, 
and other gifts.  During the investigation, ANS was purchased by St. Jude Medical, Inc., 
a publicly traded company headquartered in St. Paul, Minnesota. 
 Illinois  To resolve its CMPL liability, Midwest Medical Laboratory, Inc. (Midwest) 
agreed to pay $711,000 and to be excluded from participating in all Federal health care 
programs for 5 years.  OIG alleged that Midwest submitted claims to Medicare Part B for 
services rendered to beneficiaries residing in SNFs.  These services were already covered 
as part of the beneficiaries Medicare Part A stay.  Medicare requires that outside 
suppliers providing services to beneficiaries in SNFs during stays covered by Medicare 
Part A bill only the SNFs, not Medicare.  Midwest also allegedly billed the same services 
under both its Illinois and Florida provider numbers.   
 
 Missouri  Two nursing facilities entered into settlements with OIG to resolve their 
CMPL liability for allegedly employing an excluded nurse.  Ashland Nursing and Rehab, 
LLC, doing business as Ashland Healthcare, agreed to pay $88,000, and Fulton Manor, 
Inc., doing business as Fulton Manor Care Center, agreed to pay $24,000.  Both entities 
agreed to enter into 3-year Certification of Compliance Agreement under which they will 
certify that screening and training policies are in place to preclude the hiring of ineligible 
persons.  The nurse was excluded in December 2004 after a conviction relating to 
improper treatment of disabled children in her care. 
 
 
HHS OIG Semiannual Report to Congress  25  The Centers for Medicare & Medicaid Services 
Fall 2007    
 New York  Candita Catucci, M.D., and Juan Carlos Acosta agreed to pay $75,000 and       
enter into a 5-year Integrity Agreement to resolve their liability under the CMPL for 
allegedly violating the anti-kickback statute.  Catucci has a small internal medicine 
practice and Acosta, her husband, acts as her office manager.  An investigation found that 
from February 28, 2005, to November 25, 2005, the two solicited and received 
remuneration in exchange for referring Medicare patients to a diagnostic imaging facility.  
They allegedly received $100 for each MRI referral and $50 for each CT referral. 
Patient Dumping 
Of the civil monetary penalties cases OIG collected between April 1 and September 30, 
2007, some were pursued under the Emergency Medical Treatment and Labor Act 
(EMTALA), a statute designed to ensure patient access to appropriate emergency medical 
services.  The following are examples of settlements involving alleged violations of that 
statute: 
 
 Arizona  Tempe St. Lukes Hospital paid $70,000 to resolve several allegations that it 
failed to meet its obligations under the EMTALA, including the failure to provide the 
services of an on-call specialist to two patients in need of such services.  One patient 
presented with acute onset of leg pain and extensive leg arterial occlusions and another 
was pregnant, complaining of vaginal bleeding, cramps, and decreased fetal movement. 
 
 Indiana  St. Marys Medical Center paid $40,000 to resolve allegations that it 
engaged in patient dumping.  A 46-year-old uninsured man came to the hospitals 
emergency department by ambulance and in an unresponsive state.  The on-call 
neurosurgeon was at the hospital but did not treat the patient.  Instead, he directed the 
emergency department physician to transfer the patient over 180 miles away.  The 
transfer was performed without stabilizing treatment, and the patient arrived at the second 
hospital brain dead. 
 
 Wisconsin  St. Joseph Regional Medical Center paid $40,000 to resolve an allegation 
that it failed to provide an adequate screening or stabilization to a patient who presented 
to the emergency department following a motor vehicle accident.  She had loss of 
memory and severe abdominal, hip, and thigh pain.  She was discharged with little 
evaluation and presented later that day to another hospital, where it was determined that 
she had a badly broken hip.  She underwent a 4-hour surgery and was hospitalized for  
8 days. 
 
 Texas  Medical Center of Arlington paid $30,000 to resolve allegations that it failed 
to adequately screen and stabilize a pregnant patient who presented to the hospitals 
emergency department in labor.  Instead, she was inappropriately transferred to another 
hospital 21 miles away. 
 
 Kansas  Western Plains Medical, paid $25,000 to resolve allegations that it failed to 
provide an appropriate medical screening examination, stabilizing treatment, or an 
appropriate transfer of a teenager who came to its emergency department seeking 
treatment for seizures.  A nurse instructed the patient to see her doctor in Wichita, 
 
HHS OIG Semiannual Report to Congress  26  The Centers for Medicare & Medicaid Services 
Fall 2007    
Kansas.  Her family drove for 3 hours to get her to the Wichita hospital, where she was 
admitted to the pediatric intensive care unit. 
Criminal and Civil Enforcement 
One of the most common types of fraud perpetrated against Medicare, Medicaid, and 
other Federal health care programs involves filing false claims for reimbursement.  False 
claims may be pursued under Federal and State criminal statutes and, in appropriate 
cases, under the civil FCA.  A description of these enforcement authorities can be found 
in Appendix E.   
The successful resolution of false claims often involves the combined investigative 
efforts and resources of OIG, the Federal Bureau of Investigation (FBI), Medicaid Fraud 
Control Units (MFCU), and other law enforcement agencies.  OIG has the responsibility 
of assisting DOJ in bringing and settling cases under the FCA.  Many providers elect to 
settle their cases prior to litigation.  As part of their settlements, providers often agree to 
enter into integrity agreements with OIG to avoid exclusions and to be permitted to 
continue participating in Medicare, Medicaid, and other Federal health care programs.  
Such agreements are monitored by OIG and require the providers to enhance existing 
compliance programs or establish new ones.  The compliance programs are designed, in 
part, to prevent a recurrence of the underlying fraudulent conduct. 
During FY 2007, the Governments enforcement efforts resulted in 302 criminal actions 
and 255 civil actions against individuals or entities that engaged in health-care-related 
crimes.  These efforts resulted in $2.17 billion in HHS investigative receivables, 
including civil and administrative settlements or civil judgments related to Medicare, 
Medicaid, and other Federal health care programs.  Some of these notable enforcement 
actions are described below.  Summaries are organized by the sector of the health care 
industry involved or by the nature of the offense. 
Pharmaceutical Companies 
 Virginia  As part of a global criminal, civil, and administrative settlement agreement, 
the Purdue Frederick Company, Inc., and Purdue Pharma L.P. (collectively, the Purdue 
Companies), and three top executives agreed to pay almost $635 million to resolve a 
variety of Federal, State, and private claims for fraudulently marketing OxyContin, a 
controlled-release formulation of Oxycodone, a powerful pain medication.  The 
investigation revealed that from December 1995 through June 2001, Purdue Frederick 
effectively undertook a fraudulent and deceptive marketing campaign aimed at 
convincing doctors nationwide that OxyContin, because of its time-release formula, was 
less prone to abuse and that it was less likely to cause addiction or to produce other 
narcotic side effects than competing immediate release opioids.  Purdue Frederick, along 
with its former president, Michael Friedman; Chief Legal Officer, Howard Udell; and 
former Chief Medical Officer, Paul Goldenheim, were sentenced for criminal violations 
of the Federal Food Drug and Cosmetic Act for the misbranding of the drug OxyContin.   
Each executive was sentenced to 3 years of probation, ordered to perform 400 hours of 
community service in a drug abuse or drug treatment program and pay a $5,000 fine.  
 
HHS OIG Semiannual Report to Congress  27  The Centers for Medicare & Medicaid Services 
Fall 2007    
Purdue Frederick was sentenced to 5 years of probation.  Pursuant to their plea 
agreements, the executives will pay a total of $34.5 million in penalties.  The Purdue 
Companies will pay a total of almost $600 million in settlement and restitution costs and 
pay a maximum statutory fine of $500,000.  Purdue Frederick will be subject to a 25-year 
exclusion; Purdue Pharma L.P. agreed to enter a 5-year CIA with OIG.   
 
 Massachusetts  Pharmacia & Upjohn Company, Inc., a subsidiary of Pfizer Inc., was 
ordered to pay a $19.7 million criminal fine for its guilty plea to offering a kickback to a 
pharmacy benefit manager (PBM).  The investigation revealed that Pharmacia offered to 
make payments on a distribution contract to a subsidiary of a PBM in the expectation of 
obtaining improved formulary positioning and improved ancillary benefits from the PBM 
for Pharmacias drug products.   
 
Also in Massachusetts, another Pfizer subsidiary, Pharmacia & Upjohn Company LLC, 
entered into a deferred prosecution agreement and will pay a $15 million penalty related 
to its illegal promotion and distribution of Genotropin for uses not approved by FDA.  To 
avoid prosecution, Pharmacia must comply with the 36-month deferred prosecution 
agreement which includes its cooperation in ongoing investigations related to its human 
growth hormone product, Genotropin.   
Billing Consultant 
 District of Columbia  Maximus, Inc., a revenue maximization consultant, entered 
into a $42.65 million settlement agreement with the United States to resolve that 
companys liability under the FCA.  Maximus allegedly filed false claims for Medicaid-
funded targeted case management services, which assist foster children in obtaining 
needed medical, social and educational, and other services.  Maximus submitted 
26,683 claims for Medicaid reimbursement that were not supported by documentation.  
The Federal Government contends that these services were never rendered.  As part of 
the global resolution of the case, Maximus also entered into a 5-year CIA with OIG, as 
well as a 24-month deferred prosecution agreement with the U.S. Attorneys Office.  In a 
novel provision, the CIA requires that OIGs Office of Audit Services perform the claims 
and contract reviews that are ordinarily performed by an Independent Review 
Organization.   
Durable Medical Equipment Suppliers 
 Florida  As part of the South Florida Initiative, Operation Equity Excise, also known 
as Operation Whack-a-Mole, was the first phase in a multiorganizational, multi- 
disciplinary project to prevent, identify and prosecute health care fraud.  Through the 
operation, clinics and DME companies were identified and suspicious providers were 
investigated resulting in receivables totaling over $50.1 million.   
The second phase of the Initiative, Operation Equity Excise 2, represents criminal 
investigations seeking indictments and convictions against providers that were identified 
through the investigative efforts in phase 1 of the Initiative.  During this reporting period, 
 
HHS OIG Semiannual Report to Congress  28  The Centers for Medicare & Medicaid Services 
Fall 2007    
nine DME providers and the owner of a billing company have been charged for 
defrauding Medicare.   
In March 2007, the Intensive Medicare Fraud Strike Task Force was initiated.  It was 
designed specifically to combat Medicare fraud through the use of real-time analysis of 
Medicare billing data.  The strike force identified fraudulent schemes involving clinics 
and DME suppliers.  As a result of this strike force, a DME company owner, Gisela 
Valladares, was convicted after a 3-day trial.  As part of the scheme, Valladares paid 
Medicare beneficiaries for the use of their Medicare information to fraudulently bill 
Medicare.  In addition, five defendants have been charged for defrauding Medicare, and 
$4.1 million was ordered to be returned or was returned. 
 
 Florida  A $21 million default judgment and permanent injunction was entered in 
favor of the Government against Q & Y Medical Equipment, Inc.  As part of the default 
judgment, approximately $300,000 previously frozen by the court was released to the 
Government.  An investigation revealed that the DME company was created for the sole 
purpose of committing fraud.  The investigation found that Q & Y billed Medicare for 
wound care products and power pressure-reducing mattresses that were not prescribed by 
physicians or provided to beneficiaries.  
 
 Florida  Rene Rodriguez, owner of DC Medical Services, Inc., was sentenced to  
4 years in prison and ordered to pay $2.2 million in restitution for health care fraud.  
From March 2006 to July 2006, Rodriguezs DME company billed Medicare for DME 
and supplies that had not been ordered by doctors or supplied to beneficiaries.  As a result 
of the investigation, approximately $1.4 million was seized from bank accounts.  At 
sentencing, the judge ordered that the seized money be forfeited to the Government. 
Hospitals 
 
 New Jersey  Raritan Bay Medical Center (RBMC) agreed to pay $7.5 million and 
enter into a 5-year CIA to resolve its liability for allegedly submitting false claims to 
Medicare and TRICARE from January 1998 to August 2003.  The Government alleged 
that RBMC artificially inflated its cost-to-charge ratio through its cost reports, triggering 
outlier payments to which it was not entitled.   
 
 California  Loma Linda University Behavioral Medicine Center (LLUBMC) and its 
related party, Loma Linda University Medical Center, agreed to pay $2 million plus 
interest to settle allegations that LLUBMC, a Medicare-certified inpatient psychiatric 
hospital, falsified its cost reports for fiscal years 1992 through 1996.  The Government 
alleged that the cost reports sought reimbursement for services unrelated to patient care, 
such as an employee assistance program.     
Home Health 
 
 California  A licensed vocational nurse, Sonia Ogbeni, was sentenced to 78 months 
in prison and ordered to pay $4.2 million in restitution for her health care fraud scheme.  
Investigation revealed that Ogbeni caused Medicare to pay for false or fraudulent home 
 
HHS OIG Semiannual Report to Congress  29  The Centers for Medicare & Medicaid Services 
Fall 2007    
health services between October 2001 and March 2005.  A review of records showed that 
Ogbeni, who worked for multiple home health agencies, submitted records that purported 
that she saw 58 patients on a single day, personally made visits that lasted from 30 to  
45 minutes each, saw patients every single day during a 2-year period, and saw multiple 
patients in different locations at the same time.   
 
 Georgia  Colquitt County Hospital Authority, Colquitt Regional Health, Inc., both 
doing business as Colquitt Regional Medical Center, and administrators Coleen Grimsley 
and James Lowry, (collectively, Colquitt), agreed to pay $475,000 to resolve their FCA 
liability.  The Government alleged that between January 2001 and December 2005, 
Colquitts home health agency located in Sylvester, Georgia, certified and recertified 
home health care patients for original and additional home health care episodes that 
patients did not need or for patients who were not home bound and upcoded initial 
certification diagnoses.   
Clinics 
 
 New Jersey  Chidi Ikeh, the owner of two physical therapy clinics, was sentenced to 
54 months in prison and ordered to pay almost $3.79 million in restitution for his guilty 
plea to health care fraud and wire fraud.  Ikeh, a resident of Texas, admitted that he 
defrauded the Government by billing for fraudulent physical therapy services.  From 
February 2002 through August 2005, Ikeh billed Medicare for physical therapy services 
that were not provided, were not supervised by a licensed physician, and/or were not 
performed by a qualified individual.  In fact, none of Ikehs employees had any 
qualifications or were licensed to provide physical therapy services.  
 
 California  Comprehensive Cancer Centers, Inc. (CCC), agreed to pay $900,000 to 
resolve its FCA liability for claims submitted to Medicare for services provided at its 
outpatient cancer facility located at the Desert Regional Medical Center (DRMC).  The 
investigation revealed that between 1997 and 2003, CCC allegedly used incorrect 
diagnostic codes and billing modifiers related to screening mammograms and diagnostic 
mammograms.  In addition, CCC allegedly caused DRMC to submit cost reports to 
Medicare that sought reimbursement for unreasonable management fees paid to CCC. 
Practitioners 
 
 Tennessee  East Tennessee Heart Consultants, P.C. (ETHC), a practice group of 
cardiology physicians, agreed to pay $1.7 million and enter into a 5-year CIA for 
allegedly failing to return overpayments owed to various payors, including Medicare and 
Medicaid.  In addition, ETHC entered into a pretrial diversion agreement whereby ETHC 
agreed to pay an additional $1.21 million in restitution.  Investigation revealed that 
ETHC had a long-standing policy of failing to return overpayments, which were 
allegedly created through data entry errors, deliberate manipulation of patient ledgers, 
double billing, or coordination of benefits errors. 
 
 New Jersey  Laxmipathi Garipalli, M.D., agreed to pay the Government $564,000 to 
resolve his liability under the FCA, the Stark statute, and certain common law causes of 
 
HHS OIG Semiannual Report to Congress  30  The Centers for Medicare & Medicaid Services 
Fall 2007    
action.  From March 2003 through June 2006, Garipalli, a cardiologist, allegedly received 
remuneration from a hospital in the form of a salary in exchange for referrals of cardiac 
patients to the hospital.  The investigation found that the physicians salary was 
ostensibly for clinical faculty services that he did not perform. 
 
 Maine  Dr. Mark Shinderman, a psychiatrist, was sentenced to 6 months confinement 
and 6 months home detention and ordered to pay $36,000 in restitution and fines.  In  
July 2006, a jury found Dr. Shinderman guilty of various charges relating to prescription 
drug fraud at a for-profit methadone clinic.  The investigation revealed that the 
psychiatrist wrote prescriptions for controlled substances using the name and Drug 
Enforcement Administration (DEA) registration number of another physician.  In 
addition, the psychiatrist created false prescription logs and progress notes indicating that 
another physician provided health care services to patients when, in fact, he provided the 
services himself. 
Group Homes 
 
 Pennsylvania  In a joint State and Federal investigation, Nancy Whary, the final 
defendant in the Federal case, was sentenced for her guilty plea to misprision of a felony.  
Whary was prosecuted for her knowledge of health care fraud and patient abuse and 
neglect that took place at a group home formerly operated by her daughter and son-in-
law, Tina and Clifford Fake.  The couple and others conspired to defraud health care 
benefit programs; diverted prescription drugs that were intended for dependent persons in 
the group home; and concealed the fraud, neglect, and abuse from family members of the 
dependent persons under their care.  The investigation was initiated after a resident was 
taken to the hospital with broken bones and bruising over 60 percent of his body.  The 
joint investigation revealed that more than 20 residents were abused and/or neglected.  
Residents were beaten, financially exploited, fed from items taken from waste 
receptacles, and forced to stuff inserts into newspapers.  Since 2000, three residents of the 
group home have died.  In early 2007, Clifford and Tina Fake were sentenced in Federal 
court to 218 months and 136 months in prison, respectively, and ordered to pay over 
$236,000 in restitution.  As a result of State charges, the couple received prison 
sentences, which will run concurrently with their sentence imposed in the Federal 
investigation.  In total, eight defendants were sentenced in the Federal case. 
Medicaid Fraud Control Units 
MFCUs are key partners in the fight against fraud, waste, and abuse in State Medicaid 
programs.  State MFCUs were created in 49 States and the District of Columbia pursuant 
to the Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977 (Pub. L.  
No. 95-142) with the objective of strengthening the Governments capability to detect, 
prosecute, and punish fraud against Medicaid programs.  MFCUs investigate and 
prosecute, or refer for prosecution, providers charged with defrauding the Medicaid 
program or abusing, neglecting, or financially exploiting beneficiaries in Medicaid-
sponsored facilities.   
Since 1979, OIG has been responsible for administering the Medicaid fraud control grant 
program and providing oversight and guidance to State MFCUs.  This involves 
 
HHS OIG Semiannual Report to Congress  31  The Centers for Medicare & Medicaid Services 
Fall 2007    
administering Federal financial grants to MFCUs, assessing the performance of MFCUs, 
and partnering with MFCUs in conducting joint investigations and other outreach work.  
During FY 2007, OIG provided oversight for and administration of approximately        
$169 million in Federal grants that were distributed to the 50 MFCUs.   
Investigations 
Examples of cases worked jointly by OIG with MFCUs during this semiannual period 
include the following: 
 
 Texas  The Scooter Store, Inc. (TSS) entered into a settlement agreement with the 
Government to resolve its FCA liability.  In the agreement, TSS agreed to pay $4 million 
and relinquish its right to approximately $13 million in claims initially denied for 
payment by CMS.  The Government alleged that TSS submitted false claims to Medicare 
and Medicaid for power wheelchairs that beneficiaries did not want, did not need, or 
could not use; submitted claims for used power wheelchairs, scooters, and accessories as 
though the equipment were new; submitted claims for power wheelchair accessories that 
were not ordered by a physician; and improperly induced beneficiaries by promising free 
mobility equipment.  TSS and its individual owner, Douglas Harrison, agreed to enter 
into a 5-year CIA.  The investigation involved OIG, the Texas MFCU, and the FBI, with 
the support of CMS and its contractors. 
 
 Virginia  Rebecca Conyer, the owner of a home health agency, and Donna Bates, her 
office manager, were sentenced for defrauding the Medicaid program.  Conyer was 
sentenced to 30 months incarceration and ordered to pay $923,000 in restitution.  Bates 
received a 24-month prison sentence and was held responsible for paying $713,000, a 
portion of the total restitution amount.  The investigation revealed that personal care 
services billed to the Medicaid program were either not performed at all, were not 
performed according to Medicaid standards, or were performed by personal care aides 
who were not adequately trained.  The investigation involved OIG, the Virginia MFCU, 
the FBI, and the U.S. Postal Inspection Service. 
 
 Oregon  The Medford School District agreed to pay $830,000 to resolve its liability 
for allegedly submitting fraudulent claims to the Medicaid program from January 1998 
through December 2001.  The school district allegedly submitted claims for school-based 
health services and transportation expenses that were not adequately documented.  The 
Government also alleged that claims submitted were for services that did not qualify for 
reimbursement or were for services that students did not actually receive.  Previously, 
two other school districts entered into similar settlements for a total recovery of  
$2.25 million.  The investigation involved OIG and the Oregon MFCU. 
OIG Reviews of MFCUs 
During FY 2007, OIG conducted 12 onsite reviews of MFCUs compliance with the 
following:  (1) 42 CFR Part 1007, entitled State Medicaid Fraud Control Units, 
containing OIGs regulations for MFCUs; (2) 45 CFR Part 92, entitled Uniform 
Administrative Requirements for Grants and Cooperative Agreements to State and Local  
 
HHS OIG Semiannual Report to Congress  32  The Centers for Medicare & Medicaid Services 
Fall 2007    
Governments, establishing uniform administrative rules for Federal grants; and (3) the 
12 MFCU performance standards developed jointly by OIG and the National Association 
of Medicaid Fraud Control Units.   
 
Examples of unmet requirements OIG found during these reviews include the following: 
  MFCU professional staff were not permanent employees working full-time on 
Medicaid provider fraud and patient abuse and neglect matters.  
  The MFCU was not a single identifiable entity of the State government. 
  The MFCU did not employ sufficient professional, administrative, and 
support staff to carry out its duties and responsibilities in an effective and 
efficient manner.  
  The MFCU was not organized to promote the effective and efficient conduct 
of its activities. 
As part of the onsite review process, OIG also made recommendations and suggestions to 
improve operation of MFCUs. 
 
 
HHS OIG Semiannual Report to Congress  33  The Centers for Medicare & Medicaid Services 
Fall 2007    
   
Public Health and Human Service Programs 
and Departmentwide Issues 
The Office of Inspector General (OIG) allocates about 20 percent of its resources to 
reviews of the Department of Health and Human Services (HHS) 300 public health and 
human service programs and to departmentwide issues that affect more than one 
program.  OIG has discretion in allocating most of these resources.  However, a portion 
of these resources is used for mandatory reviews, including financial statement audits 
conducted pursuant to section 405(b) of the Government Management Reform Act 
(GMRA) of 1994 and the Chief Financial Officers Act of 1990 (CFO Act) and 
information systems reviews required by the Federal Information Security Management 
Act (FISMA). 
This chapter describes OIGs work related to following areas:   
Public Health Programs  Several HHS agencies perform a wide spectrum of public 
health activities.  Public health activities and programs represent this countrys primary 
defense against acute and chronic diseases and disabilities and provide the foundation for 
the Nations efforts to promote and enhance the health of the American people.  Public 
health agencies within the Department include the following:  
  The Centers for Disease Control and Prevention (CDC) operates a system of 
health surveillance to monitor and prevent disease outbreaks, including those that 
would result from acts of bioterrorism; implements disease prevention strategies; 
and maintains national health statistics.  
  The Food and Drug Administration (FDA) is responsible for ensuring the safety 
of the Nations food, drugs, medical devices, biologics, cosmetics, and animal 
food and drugs and for ensuring the efficacy of the Nations drug, medical device, 
biologics, and animal drugs. 
  The Health Resources and Services Administration (HRSA) maintains a safety net 
of health services for people who are low-income or uninsured or who live in 
rural areas or urban neighborhoods where health care is scarce. 
  The Indian Health Service (IHS) provides or funds health care services for 
1.6 million American Indians and Alaska Natives. 
  The National Institutes of Health (NIH) supports medical and scientific research 
examining the causes of and treatments for diseases such as cancer and 
HIV/AIDS. 
HHS OIG Semiannual Report to Congress  35  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
  The Substance Abuse and Mental Health Services Administration (SAMHSA) 
funds services to assist people with or at risk for mental and substance abuse 
disorders.  
Human Services Programs  Several HHS agencies support human services to assist 
vulnerable individuals of all ages, including the following:  
  The Administration for Children and Families (ACF) operates over 
60 programs that promote the economic and social well-being of children, 
families and communities, including Temporary Assistance for Needy 
Families, the national child support enforcement system, the Head Start 
program for pre-school children, and programs relating to foster care and 
adoption services.  
  The Administration on Aging (AoA) supports programs that provide services, 
such as meals, transportation, and caregiver support, to older Americans at 
home and in the community through a nationwide network of services for the 
aging. 
This chapter summarizes OIGs reports related to public health and human service 
programs and departmentwide issues, including the efforts to respond to Hurricanes 
Katrina and Rita.  It also provides statistics related to and examples of OIG actions and 
investigations related to public health and human service programs, describes actions 
taken on OIGs recommendations, and offers examples of OIGs review and clearance of 
regulations and guidance related to the Departments programs.   
HHS OIG Semiannual Report to Congress  36  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
Reports Related to Public Health Programs 
Unobligated Funds Provided by the Ryan White Comprehensive AIDS Resources 
Emergency Act 
We found that, during grant years 19992002, HRSA did not fully comply with 
applicable requirements or use its offset authority in managing millions of dollars in 
unobligated grant funds.  Pursuant to Title II of the Ryan White Comprehensive AIDS 
Resources Act (CARE Act, Pub. L. No. 101-381), HRSA provides funds to States to pay 
for medications and support services for people who have HIV/AIDS and who have no 
health insurance or are underinsured.     
Contrary to the CARE Act, HRSA did not recoup $10.6 million in Title II funds from 
States that had not obligated at least 75 percent of their grant awards within 120 days and 
reallot those funds to other States in proportion to their original grants.  Contrary to HHS 
policy, HRSA authorized States to carry over $48.7 million in unobligated Title II funds 
beyond one budget period.  Additionally, HRSA did not use the offset authority provided 
by the CARE Act and HHS grants policy to manage States unobligated balances.  The 
agency could have carried over balances from the prior year and offset the amount of 
current-year funds needed for the grant awards, which would have made available a 
larger amount of current-year funds to address certain States unmet program needs.   
We recommended that HRSA (1) monitor the States compliance with CARE Act 
requirements; (2) comply with the current carryover policy; (3) examine the reasons for 
some States large unobligated balances; and (4) analyze each States unobligated 
balance from the preceding grant year to determine whether the balance should be 
deobligated or carried over and, if carried over, determine whether the amount should be 
an addition to the States full amount of funding approved for the current grant year or, 
instead, whether the amount should be offset from the States current-year grant award.  
HRSA generally disagreed with our findings but provided information on actions it had 
taken or planned to take to address the first three recommendations.  HRSA offered 
several reasons for not using its offset authority.  The Ryan White HIV/AIDS Treatment 
Modernization Act of 2006, which was enacted after we issued the draft report, may 
address HRSAs concerns about offsetting future grant awards.  (A-06-04-00060) 
 
FDAs Oversight of Clinical Trials Through Its Inspection Processes  
We found that data limitations and other factors affect FDAs ability to effectively 
manage its Bioresearch Monitoring (BiMo) program.  The Federal Food, Drug, and 
Cosmetic Act requires all new drugs and medical devices to undergo trials to demonstrate 
their safety and efficacy before they are approved for sale.  The sponsors, clinical 
investigators, and institutional review boards (IRB) that conduct and oversee these trials 
must comply with FDA regulations designed to protect the human subjects participating 
in them.  Three FDA centers monitor and approve medical investigational products for 
human use.  FDAs BiMo Program is a cross-center program that conducts inspections to 
verify clinical trial data and confirm that human subjects are adequately protected.  
HHS OIG Semiannual Report to Congress  37  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
FDAs Office of Regulatory Affairs conducts onsite BiMo inspections of sponsors, 
clinical investigators, and IRBs as assigned by the centers.  OIG received a congressional 
request to evaluate FDAs oversight of clinical trials after a series of news articles 
highlighted vulnerabilities.   
We found that FDA is unable to identify all clinical trials and IRBs and lacks a single 
database for tracking its own inspections.  Furthermore, the three FDA centers and the 
Office of Regulatory Affairs do not uniformly track or categorize inspections.  In 
addition, FDA guidance and regulations do not reflect current clinical trials practices.  
Finally, we estimate that FDA inspected about 1 percent of clinical trials for the fiscal 
year (FY) 20002005 period.  We recommend that FDA take the following steps to 
improve its information systems and processes:  (1) develop a clinical trial database that 
includes all clinical trials, (2) create an IRB registry, (3) create a cross-center database 
that allows complete tracking of BiMo inspections, (4) establish a mechanism to provide 
feedback to BiMo investigators on their inspection reports and findings, and (5) seek 
legal authority to provide oversight that reflects current clinical trial practices.  In its 
comments, FDA concurred with four of our five recommendations but did not address 
our recommendation to establish a mechanism to provide feedback to BiMo investigators 
on their inspection reports and findings.  FDA also emphasized the importance of risk-
based approaches to BiMo inspections rather than committing to a specified percentage 
of clinical trials.  (OEI-01-06-00160)  
Unobligated Balances of Funds Awarded Under the Bioterrorism Hospital 
Preparedness Program 
Following previous OIG reviews showing that grantees had unobligated balances of 
funds granted through HRSAs Bioterrorism Hospital Preparedness program 
(Bioterrorism Program), we found that the percentage of unobligated funds had decreased 
from program year 2002 to program year 2004.  The Bioterrorism Program provides 
funding to State, territorial, and municipal governments or health departments to upgrade 
the preparedness of hospitals and collaborating entities to respond to bioterrorism and 
other public health emergencies.  The Pandemic and All Hazards Preparedness Act  
(Pub. L. No. 109-417, December 19, 2006) transferred responsibility for the Bioterrorism 
Program from HRSA to the Assistant Secretary for Preparedness and Response.   
Our review of program years 2002 through 2004, with approximately $1.1 billion in grant 
funds awarded, determined that unobligated Bioterrorism Program balances declined 
from 15.7 percent of the awarded funds for program year 2002 to 5.1 percent for program 
year 2004.  We attributed this reduction to HRSAs strengthened oversight, training, 
onsite monitoring of awardees, and use of available enforcement actions.   
We recommended that HRSA continue to use available monitoring tools and enforcement 
actions to reduce unobligated funds until the Assistant Secretary for Preparedness and 
Response assumes responsibility for the Bioterrorism Program.  HRSA concurred with 
our recommendation.  (A-05-06-00024) 
HHS OIG Semiannual Report to Congress  38  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
Graduate Student Compensation Costs Charged to National Institutes of Health 
Research Grants 
We found that, between October 2004 and September 2005, graduate student 
compensation costs charged to NIH research grants to colleges and universities had 
appropriately limited compensation charges to both the amount paid to a first-year, 
postdoctoral scientist performing comparable work at the same institution and the 
National Service Award stipend in effect when NIH awarded the grants.  Compensation 
charges for the 97 grants we sampled met the requirements set forth by the Office of 
Management and Budget (OMB) Circular A-21 and NIH guidelines.  The report, 
prepared for two members of Congress, contained no recommendations.   
(A-05-06-00046) 
Safeguards Over Controlled Substances at Indian Health Service Facilities  
During this semiannual period, we issued four reports identifying weaknesses in IHS 
facilities safeguards over controlled (addictive) substances at IHS facilities.  IHS 
maintains pharmacies that dispense controlled substances, the possession and use of 
which are regulated by the Drug Enforcement Administration (DEA) pursuant to the 
Controlled Substances Act of 1970.  These pharmacies must follow DEA and other 
requirements to secure, account for, and maintain internal controls over controlled 
substances.  Our reviews, conducted in 2004 and 2005, focused on Schedule II controlled 
substances, which have the highest potential for abuse among controlled substances with 
accepted medical uses. 
 New Mexico  We found that a hospital located in New Mexico had not instituted all 
recommended security precautions, internal controls, or accountability controls over 
Schedule II substances.  We recommended that IHS direct the hospital to consider 
monitoring Schedule II substances with an alarm system after pharmacy hours; divide 
key duties and responsibilities among pharmacists; ensure that pharmacists account for 
all on-hand Schedule II substances on monthly inventory reports; and ensure that the 
disposal of wasted Schedule II substances is appropriately documented.  IHS concurred 
with our recommendations.  (A-06-06-00032) 
In addition, we found that a health center located in New Mexico had not instituted all 
recommended security precautions for, or internal controls over, Schedule II substances.  
We recommended that IHS direct the center to consider monitoring its alarm system after 
pharmacy hours and establish a control to compensate for a lack of separation of duties 
related to the receipt of controlled substances.  IHS agreed with the recommendations.  
(A-06-07-00049) 
 Oklahoma  We found that a health center located in Oklahoma did not always 
comply with applicable requirements to secure, or have adequate internal controls over, 
Schedule II substances.  We recommended that IHS direct the center to store Schedule II 
substances in a locked safe and lock the door to the pharmacy during pharmacy hours, 
supervise pharmacy visitors at all times, ensure that the pharmacy is reserved only for  
HHS OIG Semiannual Report to Congress  39  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
official pharmaceutical business, and consider monitoring Schedule II substances with an 
alarm system after pharmacy hours.  IHS concurred with our recommendations.   
(A-06-06-00034) 
In addition, we found that a hospital located in Oklahoma did not have adequate internal 
controls over its Schedule II substances.  We recommended that IHS direct the hospital to 
establish and enforce written polices and procedures that divide key duties and 
responsibilities related to Schedule II substances among pharmacists.  IHS concurred 
with our recommendation.  (A-06-07-00048) 
Indian Health Services Resolution of Audit Recommendations 
We found that, as of December 31, 2005, IHS had not resolved 6,653 audit 
recommendations, of which 94 percent were past due for resolution.  As a result, IHS did 
not have reasonable assurance that it was exercising proper stewardship over Federal 
dollars.  Audit recommendations stem from OIGs reviews of IHS activities and those of 
its grantees and contractors and from single audits, generally conducted by public 
accounting firms pursuant to OMB Circular A-133.  OMB Circular A-50 requires Federal 
agencies to resolve audit recommendations within 6 months. 
We determined that IHS had not resolved all audit recommendations in a timely manner 
because it did not follow departmental policies and procedures.  Based on the backlog of 
outstanding audit recommendations, we raised a concern that IHS might not resolve 
future recommendations in a timely manner.  We recommended that IHS resolve the 
backlog of outstanding audit recommendations and resolve all audit recommendations 
within 6 months of receiving the audit reports as required.  IHS concurred with our 
recommendations.  (A-07-06-03077) 
Security of Stockpile Sites 
During this semiannual period, we issued reports on the security of the Strategic National 
Stockpile at selected sites and identified ways to increase the sites protection against 
theft, tampering, destruction, or other loss.  CDC manages the stockpile to provide ready 
access to drugs and medical supplies during public emergencies.  CDC responded that it 
was actively addressing the concerns raised.  Site reports are considered sensitive and 
thus are not publicly available. 
Actions and Investigations Related to Public Health 
Programs 
OIG excludes individuals who fail to pay HHS-secured educational loans and 
investigates specific allegations of fraud, waste, and abuse affecting public health and 
human service programs.  These investigations are often complex and can include 
allegations such as misuse or theft of grant funds, conflict of interest, and kickbacks. 
Health Education Assistance Loan Defaults   
OIG excludes from participating in Federal health care programs individuals who have 
defaulted on loans obtained through the Health Education Assistance Loan (HEAL) 
program.  Through the HEAL program, HRSA guarantees commercial loans to students 
HHS OIG Semiannual Report to Congress  40  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
seeking education in health-related fields of study.  The students are allowed to defer 
repayment of the loans until after they have graduated and begun to earn an income.  
Although the Departments Program Support Center (PSC) takes steps to ensure 
repayment, some loan recipients ignore 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, and in some instances mandates, 
exclusion from Medicare, Medicaid, and all Federal health care programs for 
nonpayment of these loans.  Exclusion means that the individual may not receive 
reimbursement under these programs for professional services rendered.  During the 
period covered by this report, 39 individuals and related entities were excluded as a result 
of PSC referral of their cases to OIG. 
Individuals who have been excluded as a result of default may enter into settlement 
agreements whereby the exclusion is stayed while they pay specified amounts each 
month to satisfy their debts.  If they default on these settlement agreements, they may be 
excluded until the entire debts are repaid, and they cannot appeal the exclusions.  Some 
health professionals, upon being notified of their exclusion, immediately repay their 
HEAL debts. 
After being excluded for nonpayment of their HEAL debts, a total of 2,099 individuals 
have taken advantage of the opportunity to enter into settlement agreements or 
completely repay their debts.  That figure includes the 29 individuals who have entered 
into such settlement agreements or completely repaid their debts during this reporting 
period.  The amount of money being repaid through settlement agreements or through 
complete repayment is $151 million.  Of that amount, $3.7 million is attributable to this 
reporting period. 
In the following examples, each individual entered into a settlement agreement to repay 
the amount indicated: 
 Georgia physician Joyce Rawls  $156,000 
 Texas podiatrist Rickey Watson  $66,000 
 District of Columbia chiropractor Debra Epard  $53,000 
Public Health-Related Investigations 
OIG investigates cases involving the misuse of public health agency funds and threats to 
public health and safety, such as the improper use of select agents.  The following is an 
example of a case involving improper use of HHS grant funds resolved during this 
reporting period: 
 
 Texas  Iyad El-Hawa and Martha Gonzales were sentenced for fraud related to their  
scheme to administer fake flu vaccines at several Houston-area locations.  El-Hawa  
owned a home health care business, and Gonzales claimed to be a licensed nurse. 
HHS OIG Semiannual Report to Congress  41  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
El-Hawa, who pled guilty to health care fraud and misbranding of a drug, was sentenced 
to 46 months in prison and ordered to pay a $15,000 fine.  For her guilty plea to health 
care fraud, Gonzales was sentenced to 6 months home detention and ordered to pay a  
$5,000 fine.  The investigation revealed that over 1,000 fake flu vaccines had been 
administered to employees of a refinery during a health fair and that senior citizens had 
been given the fake vaccines at local nursing homes.  El-Hawa and Gonzales actually 
inoculated individuals with vaccines filled with sterile water with the intent to bill 
Medicare and private insurers.   
Reports Related to Human Service Programs  
Enrollment Levels in Head Start 
Head Start is a nationwide program designed to increase school readiness in children 
from low-income families.  Within ACF, the Office of Head Start administers the 
program.  In FY 2005, ACF provided $6.8 billion in funding to grantees for 
approximately 900,000 Head Start enrollees.  Head Start regulations require grantees to 
maintain enrollment at 100 percent of their funded enrollment levels.  We evaluated the 
enrollment levels of Head Start grantees, ACFs program monitoring, and the challenges 
associated with maintaining enrollment. 
In our review of Head Start enrollment in the 2006 program year, we found the 
following: 
  Ninety-one percent of the 200 Head Start grantees sampled had enrollments in 
excess of 90 percent.  Forty percent met the Federal regulatory requirement to 
be fully enrolled.  Sample results translated nationwide to 5 percent of slots 
that were funded but not filled.   
  Fifty-five percent of the grantees sampled reported difficulty maintaining full 
enrollment, primarily due to difficulty in filling 90 percent of enrollment slots 
with children from families with low incomes, competition with other 
childcare programs, and the lack of or obstacles in providing transportation.   
  There were inconsistencies in the data grantees reported on actual enrollment 
levels and the data on funded enrollment maintained by ACF.  Only 
11 percent of the grantees (200 sampled) reported data to ACF that matched 
their actual enrollment levels; the majority of those misreporting data 
overreported enrollment.  Twenty-six of the grantees sampled were not able to 
readily produce accurate attendance counts.  
  For grantees without full enrollment, ACF had increased the number of 
fund-reducing or withholding enforcement actions overall since 2003.  
However, there were differences across regions due to variations in the levels 
of underenrollment prompting funding reductions and in the amounts of the 
reductions.  ACF had also increased its use of supplemental monitoring and 
technical assistance enforcement actions.  
HHS OIG Semiannual Report to Congress  42  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
We recommended that ACF address grantee challenges to maintain full enrollment, 
ensure that enrollment data are accurate, and issue guidance concerning the use of 
funding reductions for grantees not fully enrolled.  ACF indicated general support for our 
recommendations but pointed out problems with implementing our suggestions to address 
the requirement for grantees to fill 90 percent of slots with children from low-income 
families.  ACF stated that changing income guidelines is outside its purview.  It did not 
agree with our suggestion to amend regulations to increase the allowable percentage of 
eligible Head Start families that exceed low-income guidelines, stating that this change 
would allow grantees to enroll higher income children without ensuring participation by 
the neediest children.  We continued to recommend that ACF address grantees reported 
challenges to maintaining full enrollment, including challenges related to current income-
eligibility guidelines.  (OEI-05-06-00250) 
Aid to Families With Dependent Children Overpayment Recoveries 
Our review of 43 States found that 24 States complied with Federal requirements and 
reimbursed ACF $59 million for the Federal share of Aid to Families With Dependent 
Children (AFDC) overpayment recoveries from July 2002 through June 2006.  Although 
the remaining 19 States and the District of Columbia continued to recover overpayments 
from former AFDC recipients after the program ended in 1996, these governments did 
not reimburse ACF $28.7 million for the Federal share of their recoveries.  We 
determined that 19 States and the District of Columbia did not reimburse ACF as required 
because they did not follow ACFs program instruction.  In addition, ACF did not have 
monitoring procedures to ensure that the Federal Government received its share of AFDC 
overpayment recoveries from all States. 
We recommended that ACF (1) collect from the 19 States and the District of Columbia 
the Federal share of AFDC overpayment recoveries totaling $28.7 million and 
(2) establish monitoring procedures to ensure that the Federal Government receives its 
share of future State-recovered AFDC overpayments in a timely manner.  ACF agreed 
with the recommendations.  (A-01-06-02510)   
Costs Claimed for the Statewide Automated Child Welfare Information 
System in California 
ACF requested that we audit the costs that Sacramento County, California, claimed under 
Title IV-E of the Social Security Act for the Statewide Automated Child Welfare 
Information System (SACWIS).  SACWIS is a comprehensive case management tool that 
supports social workers foster care and adoption assistance case management. 
For the period January 1, 1999, through June 30, 2003, the county claimed $11.2 million 
as SACWIS-related operating costs.  We found that almost $4 million ($2 million Federal 
share) was not allowable under Federal and State regulations, and we could not determine 
the allowability of the remaining $7.2 million ($3.6 million Federal share).  We 
determined that the costs were unallowable because they were not related to the operation 
of the automated system, did not receive the required approval, or were not adequately 
documented.  
HHS OIG Semiannual Report to Congress  43  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
We recommended that California (1) refund the Federal share of the unallowable costs 
claimed, (2) work with ACF to determine what portion of the $7.2 million is allowable 
for reimbursement under Title IV-E and refund the Federal share of any unallowable 
costs identified, (3) review costs that the county claimed for reimbursement subsequent to 
the audit period for issues similar to those we identified and refund the Federal share of 
any unallowable costs identified, and (4) instruct the county to strengthen its internal 
controls.  California partially agreed with our first two recommendations and did not 
directly comment on our final two recommendations.  (A-09-05-00060) 
Undistributable Child Support Collections in Indiana 
Between October 1998 and December 2005, Indiana did not appropriately recognize or 
report $2 million in undistributable child support collections and interest earned on those 
collections.  ACFs Office of Child Support Enforcement (OCSE) oversees the Child 
Support Enforcement Program, which collects payments from noncustodial parents for 
distribution to custodial parents.  OCSE requires States to offset program costs by 
recognizing and reporting income from undistributable child support collections and 
interest earned on the collections.     
We recommended that the State report the program income identified in our work, review 
undistributable child support collections to ensure proper reporting of program income, 
and implement procedures and training to ensure future identification and reporting of 
program income.  The State agreed with our recommendations.  (A-05-06-00038) 
Child Support Enforcement  
The detection, investigation, and prosecution of noncustodial parents who fail to pay 
court-ordered child support are priorities for OIG.  OIG works closely with OCSE, the 
Department of Justice (DOJ), U.S. Attorneys Offices, the U.S. Marshals Service, and 
other Federal, State, and local partners to expedite the collection of child support.  Since 
1995, OIG has opened 3,397 investigations of child support cases nationwide, resulting in 
1,323 convictions and court-ordered restitution and settlements of $71.6 million. 
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a child support initiative 
made up of multiagency, multijurisdictional investigative task forces for child support 
enforcement.  The task forces are designed to identify, investigate, and prosecute 
egregious criminal nonsupport cases on both the Federal and State levels by coordinating 
law enforcement, criminal justice, and child support office resources.  Task force 
screening units receive child support cases from the States, conduct preinvestigative 
analyses, and forward the cases to the investigative task force units, wherein they are 
assigned and investigated.  The task force approach streamlines the process by which the 
cases best suited for criminal prosecution are identified, investigated, and resolved. 
To date, the task force units have received more than 12,000 cases from the States.  As a 
result of the work of the task forces, 930 Federal arrests have been made and 880 
individuals have been sentenced.  The total ordered amount of restitution related to 
Federal investigations is $62.3 million. 
HHS OIG Semiannual Report to Congress  44  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
Investigations to date at the State level have led to 523 arrests and 497 convictions or 
civil adjudications, resulting in $37.2 million in restitution ordered.   
Overall, more than $44.9 million of court-ordered restitution has actually been collected 
and distributed to families. 
Child Support Investigations 
Nationwide, OIG investigations of child support cases resulted in 47 convictions and 
court-ordered restitution and settlements of $2.9 million during this semiannual period.  
Examples of OIGs enforcement results for failure to pay child support include the 
following: 
 
 Indiana  James Andrews was sentenced to 24 months imprisonment and 1 year of 
probation and was ordered to pay $218,000 in restitution for failure to pay child support.  
In 1999, Andrews was ordered to pay $500 a week to support his six children.  The 
investigation revealed that Andrews, who was formerly a chiropractic doctor, sold two 
chiropractic clinics and moved to Massachusetts.  He later moved to Florida where he 
was working as a substitute teacher.   
 
 Missouri  Craig McCallum was sentenced to 3 months imprisonment and 1 year of 
supervised release and was ordered to pay $190,000 in restitution for failure to pay child 
support.  The restitution amount includes over $5,000 that he took from his childrens 
personal bank accounts and includes an amount that he owed for spousal support.  The 
investigation revealed that from 1996 to 2004, McCallum earned a six-figure income yet 
made only minimal support payments, some of which were as little as $32 a month.  In 
addition, to avoid paying child and spousal support, McCallum liquidated or concealed 
assets.  In 2006, McCallum was arrested in New Mexico where he was working as a 
bartender at a golf resort.     
 
 Georgia  Richard Stillmank was sentenced to 5 years probation and ordered to pay 
$52,000 in restitution for failure to pay child support.  In 1992, Stillmank received a 
passport and moved with his second wife to Bulgaria, where he owned a toy train 
company that manufactured toy train parts.  The investigation revealed that Stillmanks 
passport expired in 2002.  In July 2006, Stillmank went to the U.S. Embassy in Bulgaria 
to obtain a passport to return to the United States.  In August 2006, he was arrested upon 
his arrival at an Illinois airport. 
 
 South Dakota  Pursuant to his guilty plea, Joseph Tippmann was sentenced to time 
served of 8 days for failure to pay child support.  Prior to sentencing, he paid his full 
arrearage amount of $18,000.  In 1990, Tippmann was ordered to pay $205 a month for 
his child who is now 18 years old.  Since 2001, only three involuntary payments totaling 
less than $2,000 were received.  An investigation revealed that Tippmann, living in 
Colorado, was a self-employed sculptor who displayed his pieces priced from $18,000 to 
$56,000 on an Internet Web site.   
 
HHS OIG Semiannual Report to Congress  45  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
Misuse of ACF Grant Funds 
OIG also investigates cases involving the misuse of ACF grant funds as in the following 
example: 
 
 Missouri  Pursuant to their guilty pleas, Angela Allen and Pamela Harden were each 
sentenced to 1 day in jail and ordered to pay $92,000 in joint and several restitution.  The 
two women defrauded the States Independent Living Program (ILP), a federally funded 
program administered through the States Department of Social Services intended to 
provide independent living skills training and support for foster and former foster youth.  
The women created shell companies purportedly to provide ILP services.  Investigations 
revealed that during a 2-year period, fraudulent invoices were submitted resulting in the 
companies being paid for services that were never performed. 
Reports Related to Departmentwide Issues  
Departmental Processes for Awarding Hurricane Contracts 
During this semiannual period, we issued 30 reports addressing the Departments 
processes for awarding contracts in response to Hurricanes Katrina and Rita.  For 27 of 
these procurements, which provided almost $50 million, we determined that the 
Department entered into the respective contracts in compliance with applicable 
requirements, including the Federal Acquisition Regulation, the Health and Human 
Services Acquisition Regulation, and a waiver issued by the Departments Office of 
Acquisition Management and Policy to temporarily suspend competitive procurement 
requirements with respect to urgently needed items and services.  Most of these 
procurements17 of the 27were made by PSC, which provides administrative services 
throughout the Department; the others were made by SAMHSA (4), FDA (3), HRSA (2), 
and NIH (1).  The contracts covered a broad range of items and services, such as medical 
supplies and services, travel for personnel and evacuees, lodging for displaced Federal 
Government employees, mental health services and training, and various types of 
equipment.   
 
For the remaining three contracts, PSC did not document the results of its determinations 
that no other contract types were suitable.  PSC agreed with the recommendation in each 
of these reports to execute a written determination when awarding time-and-materials 
contracts.  (Multiple Reports) 
Hurricane-Related Costs Billed to a Contract 
Our audit found that a transportation company billed to HHS costs that did not fully 
comply with the contract terms.  In October 2005, PSC entered into a $21 million  
cost-plus-fixed-fee contract with the company to arrange for the transportation of 
returning evacuees requiring medical care following Hurricanes Katrina and Rita.   
 
We determined that of the $5.8 million in costs that the company billed to the Department 
between October 2005 and April 2006, charges totaling $2 million did not fully comply 
with the contract terms.  For example, the company did not always arrange for the most 
HHS OIG Semiannual Report to Congress  46  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
economical transportation or arrange the transportation mode selected by the discharge 
planners and documented on the patient medial record necessity forms.   
We recommended that the company work with HHS to determine the allowability of the 
costs billed without having determined the most economical transportation, ensure that 
future transports are arranged in the most economical fashion, refund the excess costs 
resulting from arranging transports at a higher level of care than was medically necessary, 
and ensure that future transports are arranged using the transportation modes indicated on 
the medical necessity forms.  The company disagreed with our findings and 
recommendations.  (A-06-07-00009) 
Emergency Response to Hurricane Katrina:  Use of the Government Purchase Card 
Our review of HHSs Hurricane Katrina purchase card transactions found that 15 percent 
did not meet selected purchasing requirements.  These transactions lacked proof that 
approving officials had reviewed the procurements, were made by unauthorized 
personnel, or did not have the required documentation.   
Between August 28 and December 14, 2005, HHS used purchase cards for 1,139 
transactions totaling more than $2.1 million to procure supplies and services supporting 
Hurricane Katrina rescue and relief operations.  Purchase cards were designed to save the 
Government money by avoiding costly paperwork and to expedite the purchasing 
process.  
We also found that cardholders had questions and concerns regarding some purchases, 
with over half of cardholders expressing the need for additional written guidance 
regarding emergency purchasing procedures; there were some inaccuracies related to 
Hurricane Katrina purchase data.  
We recommended that the Assistant Secretary for Administration and Management 
(ASAM) provide additional written guidance on emergency purchasing procedures, 
require training on emergency purchasing procedures, and develop a tracking system for 
monitoring Government purchase card transactions during emergency situations.  ASAM 
agreed with the recommendations and stated that it had established a course of action to 
strengthen the purchase card program, including additional written guidance for and 
training in emergency purchasing procedures and a tracking system for monitoring 
purchases during emergency situations.  (OEI-07-06-00150) 
Non-Federal Audits 
OMB Circular A-133 establishes audit requirements for State and local governments, 
colleges and universities, and nonprofit organizations receiving Federal awards.  Under 
this circular, covered entities must conduct annual organizationwide single audits of all 
Federal money they receive.  These audits are conducted by non-Federal auditors, such as 
public accounting firms and State auditors.  OIG reviews the quality of these audits and 
assesses the adequacy of the entitys management of Federal funds.  In FY 2007, OIGs 
National External Audit Review Center reviewed 1,395 reports that covered $1.59 trillion 
HHS OIG Semiannual Report to Congress  47  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
in audited costs.  Federal dollars covered by these audits totaled $468 billion, about 
$219 billion of which was HHS money. 
OIGs oversight of non-Federal audit activity informs Department managers about the 
soundness of management of Federal programs and identifies any significant areas of 
internal control weakness, noncompliance, and questioned costs that require formal 
resolution by Federal officials.  We identify entities for high-risk monitoring, alert 
program officials to any trends that could indicate problems in HHS programs, and 
profile non-Federal audit findings of a particular program or activity over time to identify 
systemic problems.  We also provide training and technical assistance to grantees and 
members of the auditing profession. 
OIG maintains a quality control review process to assess the quality of the non-Federal 
reports received and the audit work that supports selected reports.  The non-Federal audit 
reports reviewed and issued during this reporting period are categorized in the box below. 
 
 
Reports issued:   
 
Without changes or with minor changes  1,173
With major changes  145
With significant inadequacies  77
  Total  1,395 
 
The 1,395 reports included 6,142 recommendations for improving management 
operations.  In addition, these audit reports provided information for 124 special 
memoranda that identified concerns for increased monitoring by management. 
Resolving Recommendations 
The following tables are provided in accordance with section 5 of the Inspector General 
Act and indicate the dollar value of actions taken on OIGs recommendations. 
HHS OIG Semiannual Report to Congress  48  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
 
Table 1:  Reports With Questioned Costs 
 
Number of  Dollar Value  Dollar Value 
Reports 
Reports  Questioned  Unsupported 
Section 1       
For which no management decision  
had been made by the beginning of the 
reporting period1  267 $1,525,118,000  $119,646,000
Issued during the reporting period  67 $289,461,000  $113,117,000
  Total Section 1  334 $1,814,579,000  $232,763,000
Section 2    
For which a management decision was 
made during the reporting period2,3    
  Disallowed costs  179 $470,276,000  $3,350,000
  Costs not disallowed  8 $ 72,937,000   $546,000
  Total Section 2  187 $543,213,000  $3,896,000
Section 3    
For which no management decision had 
been made by the end of the reporting 
period    
  Total Section 1 
  minus Total Section 2  147 $1,271,366,000  $228,867,000
Section 4    
For which no management decision was 
made within 6 months of issuance4  100 $1,052,370,000  $105,237,000
 
                                                 
Supporting notes and list of reports are in Appendix B. 
HHS OIG Semiannual Report to Congress  49  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
Table 2:  Funds Recommended To Be Put to Better Use 
 
Number of 
Reports  Dollar Value 
Reports 
Section 1     
For which no management decision had been made by the 
beginning of the reporting period1  45  $1,252,792,000
Issued during the reporting period  6  $83,265,000
  Total Section 1  51  $1,336,057,000
  
Section 2   
For which a management decision was made during the 
reporting period   
  Value of recommendations agreed to by management   
  Based on proposed management action  16  $721,534,000
  Based on proposed legislative action   
  Value of recommendations not agreed to by management  2  $25,758,000
  Total Section 2  18  $747,292,000
  
Section 3   
For which no management decision had been made by the 
end of the reporting period2   
  Total Section 1  
              minus Total Section 2  33  $588,765,000
 
                                                 
Supporting notes and list of reports are in Appendix B. 
HHS OIG Semiannual Report to Congress  50  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
Legislative and Regulatory Review and Development 
Regulatory Review Functions 
Section 4(a) of the Inspector General Act of 1978 requires that based on a review of 
regulations and legislation the Inspector General (IG) make recommendations in this 
report concerning the impact on the economy and efficiency of the administration of the 
Departments programs and on the prevention of fraud and abuse. 
During this reporting period, OIG was involved in the review and clearance of the 
implementing regulations and other policy guidance from the various provisions of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and the 
Deficit Reduction Act of 2005.  
Regulatory Development 
OIG is responsible for the development and publication of a variety of sanction 
regulations addressing civil money penalty and program exclusion authorities 
administered by the IG, as well as regulations promulgating safe harbors related to the 
anti-kickback statute.  During this semiannual reporting period, we continued to develop 
final rulemaking addressing a new safe harbor for Federally Qualified Health Centers, as 
well as new proposed rulemaking addressing the reorganization and revisions to  
42 CFR part 1003, which sets forth OIGs regulatory authorities for imposing civil 
monetary penalties and assessments.  We are also in the process of updating the 
regulations at 42 CFR part 1001, regarding mandatory and permissive exclusions. 
In addition, OIG periodically publishes Federal Register notices that, among other things, 
offer guidance to alert program beneficiaries, health care providers, and other entities 
about potential problems or areas of special interest.  During this semiannual period, we 
developed a Federal Register notice, announcing the availability of a Proactive 
Disclosure Service (PDS) Prototype for customers of the Healthcare Integrity and 
Protection Data Bank (June 11, 2007; 72 FR 32126).  The PDS was developed in 
conjunction with National Practitioner Data Bank efforts to be more responsive to 
customers interest in real-time monitoring of practitioners and credentials. 
Employee Fraud and Misconduct 
Most people employed by HHS are dedicated, honest civil servants.  Occasionally, 
however, employees violate their ethical and fiduciary responsibilities.  OIG conducts or 
oversees investigations of serious allegations of wrongdoing by Department employees, 
as in the following examples: 
 
 Maryland  McClellan Walther, a former NIH senior researcher, was sentenced to  
4 years in prison followed by supervised release for life, fined $12,500 and ordered to 
register as a sex offender for possession of child pornography.  The investigation revealed 
that Walther used his NIH e-mail account to order child pornography videos.  In a search 
HHS OIG Semiannual Report to Congress  51  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
of Walthers home, child pornography videos, as well as a home computer containing 
over 600 child pornographic images, were discovered. 
 
 South Dakota  Clinton Swallow, a former IHS employee, was ordered to pay $1,700 
in restitution and fines for his guilty plea to theft or embezzlement in connection with 
health care.  While working as a maintenance worker at the Pine Ridge Indian Hospital, 
Swallow illegally took possession of Government property, including tools, a snow 
blower, a refrigerator, ladders, and other items.  Many of the stolen items were recovered 
at Swallows residence. 
HHS OIG Semiannual Report to Congress  52  Public Health and Human Service Programs 
Fall 2007    and Departmentwide Issues   
Appendixes 
 
HHS OIG Semiannual Report to Congress  53  Appendixes 
Fall 2007     
Appendix A:  Savings Achieved Through 
Implementation of Recommendations in Audits and 
Evaluations for Fiscal Year 2007 
 
The Congressional Budget Office (CBO) estimates annual Federal savings expected to 
result from the enactment of legislation as part of the process of informing Congress of 
the potential impact of legislation under consideration.  After laws involving HHS 
programs have been enacted, OIG analyzes them to identify provisions that were 
recommended in OIG-issued reports.  A similar process occurs with respect to 
administrative changes recommended by OIG and implemented by HHS management.   
In the latter cases, the savings estimated to accrue are developed by the relevant HHS 
operating or staff division or by OIG. 
Savings of this kind depend greatly on the contributions of others, such as other HHS 
divisions and the Department of Justice.  The savings stated in this appendix represent 
funds that will be available for better use as a result of documented actions taken, 
including reductions in budget outlays, deobligations of funds, reductions in costs 
incurred, preaward grant reductions, and reductions and/or withdrawal of the Federal 
portion of interest subsidy costs of loans or loan guarantees, insurance, or bonds. 
Total estimated savings from implemented recommendations and other actions to put 
funds to better use was $39,016.7 million ($39 billion) for the fiscal year (FY) that ended 
September 30, 2007. 
 
Savings 
OIG Recommendation  Implementing Action  (millions) 
 
Centers for Medicare & Medicaid Services (CMS) 
Medicare Home Health Payments:  Chapter 1 of Subtitle G of the Balanced  $8,070 
CMS should restructure the payment system for  Budget Act of 1997 (BBA) (as amended 
home health care to eliminate inappropriate  by the Omnibus Consolidated and 
incentives that unnecessarily increase cost and  Emergency Supplemental Appropriations 
utilization; prevent unscrupulous providers from  Act of 1998), which pertains to home 
gaining entry into the program; and improve program  health benefits, addresses OIGs concerns 
controls, such as eligibility determinations and  regarding the need to restructure and 
approval of plans of care and services.  control the payment system for these 
(OEI-04-93-00260; OEI-09-96-00110;   services.  For example, it mandates that a 
A-04-96-02121)  prospective payment system (PPS) be 
developed and that the total payments in 
FY 2000 be equal to the amount that 
would have been paid under the prior 
system if cost limits were reduced by  
15 percent.  It also eliminates periodic 
interim payments to home health 
agencies (HHA). 
HHS OIG Semiannual Report to Congress  55  Appendix A 
Fall 2007    
Savings 
OIG Recommendation  Implementing Action  (millions) 
State-Enhanced Payments Under Medicaid  On January 12, 2001, CMS issued  $6,300  
Upper Payment Limit Requirements:  revisions to the UPL regulations that, 
CMS should move as quickly as possible to issue  among other things, created new payment 
regulatory changes to the upper payment limit (UPL)  limits for local government-owned 
rules governing enhanced payments to local  providers.  This final rule significantly 
government providers.  (A-03-00-00216)  affects a States ability to reap windfall 
revenues by reducing the available 
funding pool from which to make 
enhanced payments to local government-
owned providers.  
Medicare Part A Payments for Skilled Nursing  Section 4432 of the BBA (as amended by  $5,480 
Facilities:  the Balanced Budget Refinement Act of 
Services should be bundled into Medicare and  1999, or BBRA) established a 
Medicaids payments to nursing homes; Part B  prospective payment for SNF care.  
payments for services normally included in the  Covered services include Part A SNF 
extended care benefit should continue to be examined  benefits and all services for which 
for appropriateness; and legislation should prohibit  payment may be made under Part B 
entities other than skilled nursing facilities (SNF)  (except physician and certain other 
from seeking payment on behalf of persons in Part A- professional services) during the period 
covered SNF stays for enteral nutrition, incontinence  when the beneficiary is provided covered 
care, and surgical dressings and limit Medicare  SNF care.  
coverage of these services to Part A.  In 1997 
congressional testimony, OIG supported establishing 
a PPS and consolidated billing.  (OEI-03-94-00790; 
OEI-06-92-00863; OEI-06-92-00864;  
A-17-95-00096; A-14-98-00350) 
Medicare Indirect Medical Education:  Section 4621 of the BBA (as amended by  $2,920 
CMS should base the indirect medical education  the BBRA)  reduced the indirect teaching   
adjustment factor on the level supported by CMSs  adjustment factor from 7.7 percent in  
empirical data.  (A-07-88-00111)  FY 1997 to 7 percent in FY 1998,  
6.5 percent in FY 1999, 6 percent in  
FY 2000, and 5.5 percent in FY 2001 and 
thereafter. 
Medicaid Enhanced Payments to Local  CMS issued a final rule that modified the  $2,800 
Providers:  Medicaid UPL provisions to remove the 
CMS should reconsider capping the aggregate UPL  150-percent UPL for services furnished 
at 100 percent for all facilities, rather than the   by non-State-owned or -operated 
150-percent allowance for non-State-owned  hospitals.  The rule became effective in 
Government hospitals.  (A-03-00-00216)  spring 2002. 
Medicare Secondary Payer Extensions:  The database capacity was achieved  $2,580 
CMS should establish a centralized database of  through the authorization of a data 
information about private insurance coverage of  exchange between the Social Security 
Medicare beneficiaries.  CMS should also extend the  Administration and CMS and between 
Medicare secondary payer (MSP) provision to  the Internal Revenue Service and CMS.  
include end stage renal disease (ESRD) beneficiaries  Section 4631 of the BBA permanently 
as long as they have employer-based coverage  extended current MSP policies for 
available.  (OEI-07-90-00760; OEI-03-90-00763;   beneficiaries who are disabled and have 
A-10-86-62016; A-09-89-00100; A-09-91-00103;   ESRD.  For ESRD beneficiaries, the 
A-14-94-00391; A-14-94-00392)   statute also increased the time period 
Medicare is secondary payer from 18 to 
30 months. 
HHS OIG Semiannual Report to Congress  56  Appendix A 
Fall 2007    
Savings 
OIG Recommendation  Implementing Action  (millions) 
Medicare Outlier Payments:  CMS issued new regulations in  $1,800  
To prevent future inappropriate outlier payments,  summer 2003.  The new regulations 
CMS should focus its attention on the following:    restricted the use of the statewide rate, 
(1) determining how to limit, if not eliminate, the  reduced the timelag between the payment 
policy that allows for the use of the statewide rate in  of outliers and the closing of a hospitals 
place of a hospital-specific rate; (2) dramatically  cost report, and established a 
reducing the timelag between the payment of outliers  reconciliation process for outlier 
and the actual closing of a specific hospitals cost  calculations that prevented hospitals from 
report, particularly with regard to the hospitals that  benefiting from manipulating their 
the fiscal intermediary identifies as having  charges.  As a result of these regulations, 
significantly increased their charges; and   it is estimated that the Medicare program 
(3) eliminating the hospitals ability to construct and  will save at least $9 billion from 2004 
manipulate charges to determine whether an outlier  to 2008. 
payment is warranted in a specific medical case 
without regard to the actual costs involved in that 
case.  (A-07-02-04007) 
Capital-Related Costs of Hospital Services:  Section 4402 of the BBA provided for  $1,200 
CMS should extend congressionally mandated  rebasing of capital payment rates for an 
reductions in capital-related hospital costs.  OIG  additional reduction in the rate 
believes that CMS should seek legislative authority  of 2.1 percent. 
to continue mandated reductions in capital payments; 
excess capacity was not considered in the capital cost 
policy.  (A-09-91-00070; A-07-95-01127)  
Medicare Payments for Oxygen:  Section 4552(a) of the BBA reduced  $1,100 
CMS should reduce Medicare payments for oxygen  Medicare reimbursement for oxygen by 
concentrators and ensure that beneficiaries receive  25 percent until 1999 and by 30 percent 
necessary care and support in connection with their  for each subsequent year.   
oxygen therapy.  (OEI-03-91-00710;  
OEI-03-91-00711)  
Payment Reform for Part B Drugs and  Sections 303 through 305 of the  $1,100 
Biologicals:  Medicare Prescription Drug, 
CMS should reexamine drug reimbursement  Improvement, and Modernization Act of 
methodologies based on average wholesale price  2003 (MMA) revised the current 
(AWP) with the goal of reducing payments in both  payment methodology for Part B-covered 
Medicare and Medicaid.  (Multiple reports and  drugs and biologicals that were not paid 
congressional testimony, including   on a cost or prospective payment basis.  
OEI-03-96-00420; OEI-03-97-00290;   Under the MMA, most drugs were to be 
OEI-03-00-00310; OEI-03-97-00293;   paid at 85 percent of the April 1, 2003, 
A-06-00-00023; A-06-01-00053;   AWP effective January 1, 2004, unless 
A-06-02-00041)  they meet certain exceptions.  CBO 
specifically attributed the FY 2004 
savings to sections 304 and 305.  Since 
2004, most drug prices have been based 
on the average sales price or competitive 
acquisition instead of AWP. 
HHS OIG Semiannual Report to Congress  57  Appendix A 
Fall 2007    
Savings 
OIG Recommendation  Implementing Action  (millions) 
Medicare Laboratory Reimbursements:  Section 4553 of the BBA provided for  $1,000 
In 1989, OIG recommended that CMS take  reducing fee schedule payments by 
advantage of economies of scale present in the  lowering the cap to 74 percent of the 
laboratory industry by considering competitive  median for payment amounts, with no 
bidding or making reductions to the fee schedule  inflation update for 1998 through 2002.  
amounts.  In 1990, OIG recommended that CMS  The MMA mandated that the annual 
seek legislation to allow across-the-board  adjustment to the clinical laboratory fee 
adjustments in Medicare laboratory fee schedules,  schedule for 2007 through 2008 be 
bringing them in line with the prices that laboratories  0 percent. 
charge physicians in a competitive marketplace.  In a 
1996 followup, OIG found that Medicare continued 
to pay more to clinical laboratories than to physicians 
for the same tests.  Although the Omnibus Budget 
Reconciliation Act (OBRA) of 1993 reduced the fee 
schedule to 76 percent of the average in 1996, OIG 
recommended that CMS periodically evaluate the 
national fee schedule to ensure that it is in line with 
the prices that physicians pay for the same clinical 
laboratory services.  (OEI-02-89-01910;  
A-09-89-00031; A-09-93-00056)  
Medicare Secondary Payer:  Section 301 of the MMA clarifies the  $800 
CMS should ensure sufficient resources and  Secretarys authority to make certain 
contractor training for retroactively examining paid  reimbursable conditional payments and 
claims to identify other payer sources and initiating  to take recovery actions against all 
recovery action on all related overpayments.   responsible entities, including collection 
(Multiple reports and testimonies, including   of damages, under MSP provisions.  This 
A-02-98-01036; A-04-92-02057; A-09-89-00162;   builds on other program improvements 
A-10-86-62005)  related to OIGs work that were 
implemented by the BBA, OBRA 1993, 
OBRA 1990, and OBRA 1989. 
Graduate Medical Education Payments:  Sections 4623 and 4626 of the BBA  $760 
CMS should reevaluate Medicares policy of paying  provided for limits in the number of 
graduate medical education (GME) costs for all  residents counted for purposes of 
physician specialties and consider backing legislation  Medicare GME payments and offered 
to reduce Medicares investment in GME for a more  payments for voluntary reductions in the 
accurate and representative sharing of GME costs.    number of residents to limit Medicares 
(A-06-92-00020)  share of GME costs. 
Payments for Durable Medical Equipment:  Section 302 of the MMA froze payments  $700 
CMS should take steps to reduce payments for a  for certain DME items, including 
variety of durable medical equipment (DME) and  prosthetics and orthotics, effective 
related supplies.  (Multiple reports, including   January 1, 2004.   
OEI-03-01-00680; OEI-03-02-00700;  
OEI-07-96-00221; OEI-03-96-00230;  
OEI-03-94-0021; OEI-06-92-00861;  
OEI-06-92-00866) 
HHS OIG Semiannual Report to Congress  58  Appendix A 
Fall 2007    
Savings 
OIG Recommendation  Implementing Action  (millions) 
Clinical Diagnostic Laboratory Tests:  Section 628 of the MMA froze annual  $600 
CMS should seek legislation to allow across-the- updates for FY 2004 through FY 2008.  
board adjustments in Medicare laboratory fee  This action builds on prior legislative 
schedules, bringing them in line with the prices that  action in the BBA, OBRA 1993,  
laboratories charge physicians in a competitive  OBRA 1990, and legislation in 1984 that 
marketplace, and periodically evaluate the national  was also responsive to OIGs 
fee schedule levels.  (A-09-89-00031;   recommendations to curb excessive 
A-09-93-00056)  clinical laboratory test reimbursements 
by Medicare. 
Payments for Durable Medical Equipment:  Section 4551(b) of the BBA froze  $500 
Excessive Medicare Part B payments for enteral and  Medicare payments for enteral and 
parenteral nutrition, equipment, and supplies should  parenteral nutrition and supplies for 1998 
be reduced, or competitive acquisition strategies  through 2002 and simplified the process 
should be employed.    used to reduce inherently unreasonable 
(OEI-03-94-00021; OEI-06-92-00866;   prices by 15 percent. 
OEI-03-96-00230; OEI-06-92-00861) 
Medicare Home Health Payments:  Section 701 of the MMA changed the  $500 
The HHA update factor should be reduced to account  updates of home health rates from fiscal 
for the high error rate found in OIGs review.  The  year to calendar year beginning in 2004, 
annual update was defined as the home health market  with the update for the last 3 quarters of 
basket percentage increase.    2004 equal to the market basket increase 
(A-04-99-01194)  minus 0.8 percent. 
Payment for Services Furnished in Ambulatory  Section 626 of the MMA limited the  $200 
Surgical Centers:  ASC update starting April 1, 2004, then 
CMS should set rates that are consistent across sites  froze updates for a period beginning the 
and reflect only the costs necessary for the efficient  last quarter of FY 2005.   
delivery of health services and establish parity among   
ambulatory surgical centers (ASC) and outpatient 
departments.  (OEI-05-00-00340; OEI-09-88-01003; 
A-14-98-00400; A-14-89-00221) 
Medicare Payments to Hospitals for Bad Debt:  Section 4451 of the BBA reduced bad  $170 
CMS should seek legislative authority to modify the  debt payments to providers by 25 percent 
bad debt payment policy.  in FY 1998, 40 percent in FY 1999, and 
(A-14-90-00039)  45 percent in later years.  The Benefits 
Improvement and Protection Act of 2000 
reduced bad debt payments further to 
30 percent. 
Hospice Certification:  Sections 4441- 4449 of the BBA  $90 
CMS should restructure hospice benefit policies to  contained provisions to control hospice 
curb inappropriate growth in the program,  payments and practices, such as replacing 
particularly with regard to the fourth benefit period.   the current unlimited fourth benefit 
(OEI-05-95-00250; A-05-96-00023)  period with an unlimited number of 
60-day benefit periods (each requiring 
recertification). 
HHS OIG Semiannual Report to Congress  59  Appendix A 
Fall 2007    
Savings 
OIG Recommendation  Implementing Action  (millions) 
Rural Health Clinics:  Section 4205 of the BBA extended the  $90 
The oversight and functioning of the current cost  per-visit payment limits to provider-
reimbursement system should be improved by  based clinics and mandated that the 
implementing caps on provider-based rural health  shortage area requirements designation 
clinics and allowing States to do so or finding other  be reviewed triennially. 
ways to make reimbursement between provider-
based and independent clinics more equitable.   
In addition, the certification process should be 
modified to increase State involvement in the 
placement of the clinics.  Recertification should be 
required within a specific time limit (for example, 
5 years), applying new criteria to document the  
need and impact on access.  (OEI-05-94-00040)  
Medicaid Drug RebatesSales to Repackagers  CMS issued Medicaid Drug Rebate  $81  
Excluded From Best Price Determinations:  Program Release #47 in July 2000 to 
Medicaid rebates were lost because sales to health  make it clear that manufacturers should 
maintenance organizations (HMO) were improperly  not exclude other prices from best prices, 
excluded from drug manufacturers best price  as required by section 1927 of the Social 
determinations in FYs 1998 and 1999.    Security Act.  
CMS should require drug manufacturers that 
excluded sales to HMOs from their best price 
calculations to repay the rebates and evaluate the 
policy guidance relating to exclusion of sales to other 
(non-HMO) repackagers from best price 
determinations.  (A-06-00-00056) 
Fraud and Abuse Provisions of the Balanced  A number of provisions in Subtitle D of  $80 
Budget Act:  the BBA corresponded to and were 
CMS should require DME suppliers and HHAs to  supported by OIG work.  For example, 
provide Social Security numbers and employee  the BBA authorized the HHS Secretary 
identification numbers; refuse to enter into a provider  to collect Social Security numbers and 
agreement with any HHA whose owners or  employer identification numbers from 
principals have prior criminal records or are the  entities under Medicare, Medicaid, and 
relatives of owners of providers that have defrauded  Title V; authorized the Secretary to 
Medicare, apply inherent reasonableness  refuse to enter into contracts with 
provisions when assessing the appropriateness of  physicians or suppliers that have been 
Medicare payments, and authorize competitive  convicted of felonies; authorized the 
bidding as a means of providing Medicare services.   exclusion of entities owned or controlled  
  by the families or household members of 
Moreover, CMS should clarify which general,  excluded individuals; authorized CMS to 
administrative, and fringe benefit costs at hospitals  make inherent reasonableness 
and HHAs are related to patient care.    adjustments of up to 15 percent to all 
  Part B services except physician services; 
HHS OIG Semiannual Report to Congress  60  Appendix A 
Fall 2007    
Savings 
OIG Recommendation  Implementing Action  (millions) 
Specifically, CMS should distinguish between  authorized up to five demonstration   
employee benefits and/or prerequisites to  projects to be completed by 
entertainment and patient care; and specify that the  December 31, 2002 (one was required to 
cost of entertainment, goods, or services for personal  be oxygen and oxygen equipment), 
use, and alcohol, all fines, penalties and associated  which can have multiple sites, to allow 
interest, dues, and membership costs associated with  competitive bidding; and prohibited 
civic and community organizations are not allowable.   reasonable cost payments for items 
(OEI-04-96-00240; OEI-09-96-00110;   such as entertainment, gifts and 
OEI-09-96-00110; OEI-03-94-00392;   donations, education expenses, and 
OEI-03-94-00021; OEI-06-92-00866;   personal use of automobiles. 
OEI-03-96-00230; A-03-92-00017;  
A-04-93-02067) 
Hospital Sales:  Section 4404 of the BBA eliminated the  $70 
CMS should eliminate the requirement that Medicare  requirement that Medicare make 
adjust for gains and losses when hospitals undergo  adjustments by making the Medicare 
changes of ownership.    capital asset sales price equal to the net 
(OEI-03-96-00170)  book value. 
Payments for Ambulance Services:  Section 4531 of the BBA made interim  $20 
CMS should seek legislative authority to develop a  reductions in ambulance payments by   
fee schedule for ambulance transportation and  limiting the allowed rate of increase and   
examine the inherent reasonableness of current  mandated the establishment of a fee    
allowable charges.  (OEI-05-95-00300)  schedule by January 1, 2000.  The fee   
  schedule was to be set so that aggregate   
  payments would be reduced by 1 percent.   
 
 
 
 
Administration for Children and Families 
Availability of Health Insurance for Title IV-D  The BBA established the State Childrens  $5.7 
Children:  Health Insurance Program to enhance 
Connecticut should either implement policies and  Medicaid coverage provided to children 
procedures to require noncustodial parents to pay all  and to allow States to create insurance 
or part of the Medicaid costs for their dependent  options for families who exceed 
children or establish a statewide health insurance plan  Medicaid resource and income limits.  
that provides reasonably priced, comprehensive  Under Connecticut law, applicants 
coverage for children, with costs paid by  include noncustodial parents ordered to 
noncustodial parents.  provide health insurance. 
(A-01-97-02506) 
HHS OIG Semiannual Report to Congress  61  Appendix A 
Fall 2007     
Appendix B:  Notes to Tables 1 and 2 
Notes to Table 1  
1The opening balance was adjusted upward $1.4 million.  
 
2During the period, revisions to previously reported management decisions included: 
 
Central Identification Number (CIN): A-02-03-01019 UPPER PAYMENT LIMIT CALCULATIONS  
NEW JERSEY  Additional unallowable costs of $8.06 million were recovered.     
 
CIN: A-04-05-81819 STATE OF KENTUCKY  Estimated disallowance of $5 million reported in a prior  
semiannual period was resolved in a subsequent OIG audit.   
 
CIN: A-09-03-00053 AUDIT OF ORGAN ACQUISITION COSTS AT CPMC  Based on a subsequent  
review, CMS determined that $2.3 million previously disallowed costs were allowable. 
 
CIN: A-04-03-06003 MEDICAID ACCOUNTS RECIEVABLE OVERPAYMENTS IN FLORIDA  
Based on a subsequent review, CMS determined that $1.5 million previously disallowed costs 
were allowable.      
 
Not detailed are revisions to previously disallowed management decisions totaling $3.4 million. 
 
3Included are management decisions to disallow $216.9 million that was identified in nonfederal audit 
reports. 
 
4Because of administrative delays, many of which are beyond management control, resolution of the 
following 100 audits were not completed within 6 months of issuance; however, based upon discussions 
with management, resolution is expected before the end of the next semiannual reporting period:  
 
CIN: A-02-03-01029  REVIEW OF RETROACTIVE SCHOOL HEALTH CLAIMS - 
NEW YORK CITY DEPT. OF EDUCATION, OCT 2006, 
$259,433,325 
CIN: A-05-01-00099  U OF I HOSPITAL-DSH PAYMENT LIMITS, OCT 2004, $140,281,912 
CIN: A-04-03-02027  REVIEW OF MEDICIAD UPPER PAYMENT LIMIT CALCULATIONS IN  
ALABAMA, DEC 2005, $73,432,381 
CIN: A-04-04-03000  COMPLIANCE WITH MEDICARES POSTACUTE CARE TRANSFER  
POLICY - FY 01 & 02, APR 2005, $72,369,964 
CIN: A-03-03-00002  NATIONWIDE REVIEW OF IDTF SERVICES AND PROVIDERS,  
JUN 2006, $71,664,839 
CIN: A-02-04-01021  REVIEW OF RETROACTIVE SCHOOL HEALTH CLAIMS - REST OF  
STATE (ROS), OCT 2006, $60,188,395 
CIN: A-01-04-00527  REVIEW OF HOME HEALTH AGENCIES BILLING FOR SERVICES  
PRECEDED BY A HOSPITAL DISCHARGE, MAR 2006, 
$48,135,395 
CIN: A-05-01-00058  OHIO MEDICAID HOSPITAL-SPECIFIC DSH PAYMENT LIMITS,  
JUN 2004, $47,000,000 
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DSH PROGRAM FOR FY 1998,  
MAY 2003, $33,318,976 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID  
SCHOOL BASED HEALTH SERVICES - CONNECTICUT, 
MAY 2003, $32,780,146 
CIN: A-01-04-00513  REVIEW OF MEDICARE PART B PAYMENTS FOR AMBULANCE  
SERVICES RENDERED TO BENEFICIARIES DURING AN 
INPATIENT STAY, MAR 2006, $21,705,010 
HHS OIG Semiannual Report to Congress  63  Appendix B 
Fall 2007    
CIN: A-01-04-00528  REVIEW OF MEDICARE PART B PAYMENTS FOR RADIOLOGY  
SERVICES RENDERED DURING AN INPATIENT STAY, 
AUG 2006, $20,011,162 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE  
HOSPITAL PAYMENTS FOR FY 1998, SEP 2002, $14,165,950 
CIN: A-01-04-00006  REVIEW OF TARGETED CASE MANAGEMENT SERVICES RENDERED  
BY THE MASSACHUSETTS DEPARTMENT OF SOCIAL 
SERVICES DURING FEDERAL FISCAL YEARS 2002 AND 2003, 
MAY 2006, $13,460,989 
CIN: A-01-02-00509  REVIEW OF MEDICARE ADMINSITRATIVE COSTS - PART A & B   
UNITED HEALTHCARE INSURANCE COMPANY, MAR 2005, 
$12,991,420 
CIN: A-04-04-00008  PPS PAYMENTS TO REHABILITATIVE HOSPITALS FOR TRANSFERS,  
SEP 2006, $11,967,555 
CIN: A-06-03-00027  REVIEW OF HUMANAS BIPA MODIFICATIONS, JUL 2005, $10,500,000 
CIN: A-03-06-00563  MARYLAND TITLE IV-E ADMIN AND TRAINING COST, FEB 2007,  
$8,317,637 
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PYMTS @  
SCOTT & WHITE, MAY 2003, $8,229,574 
CIN: A-01-04-00525  REVIEW OF INTERRUPTED STAYS AT INPATIENT REHABILITATION  
FACILITIES, DEC 2005, $5,868,697 
CIN: A-09-05-00060  REVIEW OF CALIFORNIAS STATEWIDE AUTOMATED CHILD  
WELFARE INFORMATION SYSTEM, SACRAMENTO COUNTY, 
MAR 2007, $5,590,709 
CIN: A-06-02-00060  REVIEW PACIFICARE OK BIPA MODIFICATIONS TO CY 2001 ACRP,  
JUN 2004, $5,204,042 
CIN: A-05-03-00096  REVIEW OF ADMINISTRATIVE COSTS FOR ADMINASTAR FEDERAL,  
AUG 2004, $5,000,598 
CIN: A-04-04-02003  MEDICARE OUTLIER PAYMENTS TO COMMUNITY MENTAL HEALTH  
CENTERS, APR 2006, $4,762,036 
CIN: A-02-03-01020  REVIEW OF ADMINISTRATIVE COSTS CLAIMED BY EMPIRE  
MEDICARE SERVICES, MAR 2006, $4,686,611 
CIN: A-09-03-00051  REVIEW OF BLUE SHIELD CALIFORNIA BIPA MODIFICATIONS TO  
CY 2001 ACRP, OCT 2004, $4,555,992 
CIN: A-07-05-01016  MEDICARE FEE-FOR-SERVICE PROGRAM FOR BENEFICIARIES  
ENROLLED IN AN MCO, NOV 2006, $4,553,997 
CIN: A-05-01-00102  MT. SINAI HOSPITAL-DSH PAYMENT LIMITS, OCT 2004, $4,516,112 
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL, MAR 2002, $4,505,051 
CIN: A-01-06-02506  REVIEW OF CONNECTICUT'S IV-E ADOPTION ASSISTANCE COSTS,  
FEB 2007, $4,300,000 
CIN: A-09-01-00085  AUDIT OF UCSDMC DISPROPORTIONATE SHARE HOSPITAL  
PAYMENTS FOR SFYE 1998, SEP 2002, $3,776,054 
CIN: A-07-06-00210  REVIEW OF PRB COSTS CLAIMED BY BLUE CROSS BLUE SHIELD OF  
RHODE ISLAND, OCT 2006, $3,558,976 
CIN: A-06-04-00076  MEDICAL REVIEW OF SYNERGYS PHP CLAIMS, MAR 2006, $3,098,296 
CIN: A-01-04-00004  REVIEW OF MAINES MEDICAID RETROACTIVE CLAIMS FOR  
SCHOOL-BASED HEALTH SERVICES  JANUARY 2001 
THROUGH JUNE 2003, JAN 2005, $3,044,211 
CIN: A-03-03-00220  DELAWARE MEDICAID MANAGED CARE FAMILY PLANNING  
FACTOR VALIDATION AUDIT, JAN 2006, $2,916,288 
CIN: A-04-04-00013  INPATIENT REHAB. FACILITY PATIENT TRANSFERS TO HOME 
HEALTH AGENCIES, NOV 2006, $2,331,042 
CIN: A-07-05-04048  MEDICAID DRUG REBATE FOLLOW-UP - COLORADO, NOV 2005,  
$1,925,367 
HHS OIG Semiannual Report to Congress  64  Appendix B  
Fall 2007     
 
   
CIN: A-05-06-00047  ESRD #11 PRE-AWARD AUDIT, MAY 2006, $1,420,997 
CIN: A-07-02-03021  ANTHEM BCBS OF CT - PENSION SEGMENT CLOSING, FEB 2004,  
$1,351,284 
CIN: A-01-06-02500  REVIEW OF UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS IN  
MASSACHUSETTS FROM OCTOBER 1, 1998, THROUGH 
SEPTEMBER 30, 2005, DEC 2006, $1,300,000 
CIN: A-06-06-00045  AUDIT OF NEW MEXICO TITLE IV-E CONTRACTED  
ADMINISTRATIVE & UNIVERSITY TRAINING COSTS, 
FEB 2007, $1,235,888 
CIN: A-01-06-02502  CONNECTICUT REVIEW OF UNDISTRIBUTABLE CHILD SUPPORT  
COLLECTIONS, JAN 2007, $1,066,738 
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES,  
MAR 2002, $836,711 
CIN: A-01-06-02504  REVIEW OF AFDC OVERPAYMENT COLLECTIONS IN MAINE,  
DEC 2006, $669,522 
CIN: A-06-05-00062  MEDICARE PRESCRIPTION DRUG DISCOUNT CARD PROGRAM,  
JUL 2006, $652,135 
CIN: A-07-06-01020  REVIEW OF NON-RISK MANAGED CARE CONTRACT  
ADMINISTRATIVE FEES IN UTAH, MAR 2007, $625,489 
CIN: A-06-06-00112  MEDICARE PRESCRIPTION DRUG CARD PROGRAM: COMPUTER  
SCIENCES CORPORATION, DEC 2006, $606,824 
CIN: A-05-02-72811  COMMUNITY ACTION OF GREATER INDIANAPOLIS INC., AUG 2002,  
$547,899 
CIN: A-05-06-00038  INDIANA-UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS,  
MAR 2007, $461,430 
CIN: A-07-05-03069  MISSOURI UNDISTRIBUTABLE CHILD SUPPORT PAYMENTS,  
JUL 2006, $457,128 
CIN: A-03-04-00205  MEDICAID PROVIDER OVERPAYMENTS--DELAWARE, OCT 2004,  
$437,592 
CIN: A-01-04-00506  REVIEW OF DISPROPORTIONATE SHARE HOSPITAL PAYMENTS  
CLAIMED BY SAINT MARYS HOSPITAL FOR FISCAL YEAR 
ENDING DECEMBER 31, 2002, MAY 2004, $433,502 
CIN: A-04-04-02010  REVIEW OF COMPREHENSIVE OUTPATIENT REHABILITATION  
THERAPY SERVICES PROVIDED BY ABSOLUTE THERAPY 
INC., NOV 2006, $414,712 
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES,  
MAY 2002, $319,355 
CIN: A-06-06-00022  MEDICARE PRESCRIPTION DRUG CARD PROGRAM, SEP 2006,  
$311,526 
CIN: A-07-06-03085  NEBRASKA UNDISTRIBUTABLE CHILD SUPPORT PAYMENTS,  
MAR 2007, $308,841 
CIN: A-07-05-01013  PAYMENTS FOR M+C ORGANIZATION FOR INSTITUTIONAL  
BENEFICIARIES, OCT 2005, $293,885 
CIN: A-05-06-00048  EVALUATION OF ESRD NO. 9 PRE-AWARD AUDIT, MAY 2006,  
$289,883 
CIN: A-09-04-00068  REVIEW OF CALIFORNIAS STATE AUTOMATED CHILD WELFARE  
INFORMATION SYSTEM (SACWIS) AT SANTA CLARA 
COUNTY, APR 2006, $286,464 
CIN: A-05-05-00033  MICHIGAN-UNDISTRIBUTED CHILD SUPPORT COLLECTIONS,  
AUG 2006, $257,859 
CIN: A-03-04-00353  ACCOUNTABILITY OVER CDC BT FUNDS, JUN 2005, $238,537 
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL  
BENEFICIARIES, OCT 2002, $229,656 
 
HHS OIG Semiannual Report to Congress  65  Appendix B  
Fall 2007     
 
   
CIN: A-05-06-00049  EVALUATION OF ESRD NO. 10 PRE-AWARD AUDIT, MAY 2006,  
$210,049 
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT, OCT 2002, $208,271 
CIN: A-01-05-00509  REVIEW OF MEDICARE CONTRACT TERMINATION/SEVERANCE  
COSTS CLAIMED BY BLUE CROSS & BLUE SHIELD OF RHODE 
ISLAND (RIBCBS), SEP 2005, $205,384 
CIN: A-05-06-00052  REVIEW OF SAMHSA GRANT, SEP 2006, $203,112 
CIN: A-01-04-01501  NORTHEASTERN UNIVERSITY DHHS GRANT COSTS GRANT #S 9274,  
4000 AND 4111, JAN 2005, $194,890 
CIN: A-06-05-00066  MEDICARE PRESCRIPTION DRUG CARD PROGRAM, SEP 2006,  
$168,782 
CIN: A-07-06-00216  PENSION COSTS CLAIMED AT BLUE CROSS BLUE SHIELD OF  
ARIZONA, AUG 2006, $142,343 
CIN: A-09-05-00077  REVIEW OF PACIFICARES USE OF ADDITIONAL CAPITATION  
UNDER THE MMA OF 2003, MAR 2006, $135,000 
CIN: A-05-06-00029  AUDIT OF COST-BASED HMOS FOR OVERPAYMENTS MADE TO  
CAPITATED PROVIDERS, SEP 2006, $132,075 
CIN: A-01-03-00010  MEDICAID SCHOOL-BASED HEALTH SERVICES ADMINISTRATIVE  
CLAIMING REVIEW - RHODE ISLAND, JUN 2004, $123,010 
CIN: A-05-06-00031  AUDIT OF COST-BASED HMOS FOR OVERPAYMENTS MADE TO  
CAPITATED PROVIDERS, SEP 2006, $122,130 
CIN: A-05-01-00091  PAYMENTS TO UNITED HC OF FLA FOR INSTITUTIONAL  
BENEFICIARIES, SEP 2002, $121,023 
CIN: A-05-05-00044  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH  
MAINTENANCE ORGANIZATION PLAN - ARNETT HEALTH 
PLANS, INC. FOR FISCAL YEARS 2000, THROUGH 2003, 
SEP 2005, $111,862 
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL  
BENEFICIARIES, JUN 2002, $100,692 
CIN: A-04-04-01002  USE OF CDC BIOTERRORISM GRANT FUNDS, JUL 2005, $98,929 
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS & COST  
REPORTS @ WELBORN, JUN 2003, $97,623 
CIN: A-05-05-00042  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH  
MAINTENANCE ORGANIZATION PLAN- DEAN HEALTH 
PLANS, INC. FOR FISCAL YEARS 2000, THROUGH 2003, 
AUG 2005, $91,710 
CIN: A-05-01-00090  PAYMENTS TO AETNA FOR INSTITUTIONAL BENEFICIARIES,  
JUL 2002, $87,516 
CIN: A-05-05-00043  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH  
MAINTENANCE ORGANIZATION PLAN - JOHN DEERE 
HEALTH PLANS, INC.FOR FISCAL YEARS 2000 THROUGH 
2003, SEP 2005, $78,799 
CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW OF MANAGED CARE  
ORGANIZATION, OCT 2002, $77,000 
CIN: A-04-05-02000  AUDIT OF HHA THERAPY BILLINGS, SEP 2005, $63,425 
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PA FOR INSTITUTIONAL BENEFICIARIES,  
MAY 2002, $62,432 
CIN: A-03-02-00373  REVIEW OF US HELPING US, DEC 2003, $45,558 
CIN: A-01-03-01500  REVIEW OF CDC HIV PROGRAMS AT GREATER BRIDGEPORT  
ADOLESCENT PREGNANCY PROGRAM, JUL 2003, $41,088 
CIN: A-02-06-02010  ACF REQUEST FOR LIMITED REVIEW OF HEAD START GRANTEE   
CONCERNED PARENTS, SEP 2006, $32,490 
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JAN 2003,  
$28,573 
HHS OIG Semiannual Report to Congress  66  Appendix B  
Fall 2007     
 
   
CIN: A-07-02-00150  PAYMENTS TO COVENTRY--PITTSBURG FOR INSTITUTIONAL  
BENEFICIARIES, JUN 2003, $26,000 
CIN: A-05-01-00078  PAYMENTS TO HEALTH NET-TUCSON, ARIZONA- FOR  
INSTITUTIONAL BENEFICIARIES, APR 2002, $21,233 
CIN: A-08-04-76779  COLORADO FOUNDATION FOR MEDICAL CARE, DEC 2003, $18,925 
CIN: A-05-01-00100  PAYMENTS TO FALLON HEALTH FOR INSTITUTIONALIZED  
BENEFICIARIES, MAY 2002, $18,842 
CIN: A-05-01-00095  PAYMENTS TO HUMANA OF ARIZONA FOR INSTITUTIONAL  
BENEFICIARIES, JUN 2002, $18,645 
CIN: A-07-03-00151  REVIEW OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH  
INSTITUTIONAL STATUS, JUN 2003, $18,400 
CIN: A-01-02-01504  REVIEW OF CDCS HIV PROGRAMS AT FENWAY COMMUNITY  
HEALTH CENTER, JUN 2003, $18,028 
CIN: A-07-04-01011  PAYMENTS FOR UNITED HEALTHCARE FOR INSTITUTIONAL  
BENEFICIARIES, MAR 2005, $13,128 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL  
BENEFICIARIES, JAN 2002, $11,089 
CIN: A-09-05-00058  WEDGE: HAWAII MEDICAID NURSING FACILITIES EXPENDITURES,  
FEB 2006, $9,562 
CIN: A-06-06-00014  MEDICARE PRESCRIPTION DRUG CARD PROGRAM: ACCLAIM,  
SEP 2006, $8,800 
CIN: A-03-03-00393  AUDIT OF CDC HIV/AIDS GRANT TO SEXUAL MINORITY YOUTH  
ASSISTANCE LEAGUE, OCT 2003, $1,155 
 
Total CINs:  100  
Total Amount:  $1,052,370,139 
Notes to Table 2 
 
1The opening balance was adjusted upward by $74.8 million. 
 
2Management decision has not been made within 6 months on 29 reports.   
 
A.  Discussions with management are ongoing and it is expected that the following audits will be 
resolved by the next semiannual reporting period: 
 
CIN: A-09-04-00038  WEDGE: LA COUNTY 1115 WAVIER, OCT 2006, $285,200,000 
CIN: A-05-05-00053  REVIEW OF LAYERED GPOs -- ROLL-UP, JUN 2006, $59,000,000 
CIN: A-07-04-04031  MEDICAID HOSPITAL OUTLIER PAYMENTS IN ILLINOIS, MAY 2005,  
$56,449,668 
CIN: A-04-01-02006  MEDICAID DISPROPORTIONATE SHARE PAYMENTS IN ALABAMA,  
JUN 2004, $45,763,327 
CIN: A-01-02-00503  FURTHER EXPANSION OF THE DRG PAYMENT WINDOW, AUG 2003,  
$37,000,000 
CIN: A-05-02-00078  ROLLUP OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH  
INSTITUTIONAL STATUS, FEB 2004, $12,764,202 
CIN: A-05-04-00073  ROLL-UP OF ADDITIONAL GPOs, MAY 2005, $6,600,000 
CIN: A-05-02-00077  MICHIGAN MEDICAID/SCHIP REVIEW, NOV 2003, $5,908,350 
CIN: A-03-02-00203  VIRGINIA - SCHIP/TITLE IV - D SURVEY, JUL 2004, $5,402,491 
CIN: A-05-05-00033  MICHIGAN - UNDISTRIBUTED CHILD SUPPORT COLLECTIONS,  
AUG 2006, $4,397,133 
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR,  
MAR 2002, $4,000,000 
 
HHS OIG Semiannual Report to Congress  67  Appendix B  
Fall 2007     
 
   
CIN: A-01-05-02502  REVIEW OF CONNECTICUTS TRAINING AND IV-E ADOPTION  
ASSISTANCE COSTS, JUL 2006, $2,400,000 
CIN: A-05-02-00075  INDIANA MEDICAID/SCHIP REVIEW, NOV 2003, $1,885,708 
CIN: A-05-06-00038  INDIANA - UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS,  
MAR 2007, $871,677 
CIN: A-05-02-00082  BID PROPOSAL FOR 1-800 MEDICARE HOTLINE ADMINISTRATION,  
AUG 2002, $609,950 
CIN: A-05-03-00021  CIMRO PRO PRE-AWARD AUDIT FOR NEBRASKA, NOV 2002, $504,650 
CIN: A-05-06-00020  MEDICAID PAYMENTS FOR SERVICES TO BENEFICIARIES WITH  
CONCURRENT ELIGIBILITY IN MICHIGAN AND OHIO - 
MICHIGAN REPORT, AUG 2006, $467,317 
CIN: A-04-06-07004  ESRD BID PROPOSAL BY NETWORK ORGANIZATION NO. 8,  
MAY 2006, $415,630 
CIN: A-07-04-01008  FAMILY PLANNING - FEE-FOR-SERVICE - COLORADO, JAN 2005,  
$269,024 
CIN: A-04-06-07003  ESRD BID PROPOSAL BY NETWORK ORGANIZATION NO. 7,  
MAY 2006, $235,966 
CIN: A-01-05-00512  REVIEW OF 2004 ACRP MODIFICATION SUBMITTED AS A RESULT OF  
MMA FOR THE FALLON COMMUNITY HEALTH PLAN, 
JAN 2006, $154,970 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN,  
MAR 2003, $144,909 
CIN: A-05-03-00059  ESRD #9 PRE-AWARD AUDIT (RFP-CMS-03-001/JAC), MAY 2003,  
$139,816 
CIN: A-04-03-08013  ESRD NETWORK COST PROPOSAL, MAY 2003, $116,085 
CIN: A-05-03-00060  ESRD #10 PREAWARD AUDIT (RFP-CMS-03-001/JAC), MAY 2003,  
$114,289 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL  
BENEFICIARIES, JAN 2002, $98,698 
CIN: A-04-06-07005  ESRD BID PROPOSAL FOR NETWORK ORGANIZATION NO. 17,  
MAY 2006, $43,435 
CIN: A-05-06-00023  MINNESOTA - UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS,  
SEP 2006, $28,240 
CIN: A-05-04-00051  ALLOWABILITY OF CDC BIOTERRORISM COSTS - OHIO  
DEPARTMENT OF HEALTH, FEB 2005, $4,154 
 
Total CINS:  29 
Total Amount:  $530,989,689   
 
 
 
HHS OIG Semiannual Report to Congress  68  Appendix B  
Fall 2007     
 
   
Appendix C:  Reporting Requirements of the Inspector 
General Act of 1978, as Amended 
 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed 
in the following table along with the location of the required information.  Where there 
are no data to report under a particular requirement, the word None appears.   
A complete listing of audit and evaluation reports is furnished to Congress under separate 
cover.  Copies are available upon request. 
 
Section of 
the Act  Requirement  Location 
Section 4(a)(2)  Review of legislation and regulations  p. 51 
Section 5     
  (a)(1)  Significant problems, abuses, and  Throughout this report 
deficiencies 
  (a)(2)  Recommendations with respect to  Throughout this report 
significant problems, abuses, and 
deficiencies 
  (a)(3)  Prior significant recommendations on  See the Compendium of Unimplemented 
which corrective action has not been  Office of Inspector General 
completed   Recommendations at 
http://www.oig.hhs.gov/publications.html. 
  (a)(4)  Matters referred to prosecutive authorities  p. 27 
  (a)(5)  Summary of instances in which  None  
information was refused  
  (a)(6)  List of audit reports  Under separate cover 
  (a)(7)  Summary of significant reports  Throughout this report 
  (a)(8)  Statistical Table 1  Reports With  p. 49 
Questioned Costs 
  (a)(9)  Statistical Table 2  Funds Recommended  p. 50 
To Be Put to Better Use 
  (a)(10)  Summary of previous audit reports  Appendix B 
without management decisions 
  (a)(11)  Description and explanation of revised  Appendix B 
management decisions 
  (a)(12)  Management decisions with which the IG  None  
is in disagreement 
 
HHS OIG Semiannual Report to Congress  69  Appendix C  
Fall 2007     
Appendix D:  Status of Public Proposals for New and 
Modified Safe Harbors to the Anti-Kickback Statute  
 
Pursuant to section 205 of the Health Insurance Portability and Accountability Act of 
1996 (HIPAA, Pub. L. No. 104191), the Inspector General (IG) is required to solicit 
proposals annually via Federal Register notice for developing new and modifying 
existing safe harbors to the anti-kickback statute, section 1128B(b) of the Social Security 
Act, and for developing special fraud alerts.  The IG also is required to report annually to 
Congress on the status of the proposals received related to new or modified safe harbors. 
In crafting safe harbors for a criminal statute, it is incumbent upon OIG to engage in a 
complete and careful review of the range of factual circumstances that may fall within the 
proposed safe harbor subject area, so as to uncover all potential opportunities for fraud 
and abuse by unscrupulous providers.  Having done so, OIG must then determine, in 
consultation with the Department of Justice, whether it can develop effective regulatory 
limitations and controls not only to foster beneficial or innocuous arrangements but also 
to protect the Federal health care programs and their beneficiaries from abusive practices. 
In response to the 2006 annual solicitation, OIG received the following proposals related 
to safe harbors: 
 
Proposal   OIG Response 
New safe harbors for various types of patient  OIG is considering these suggestions.  OIG has 
assistance programs (PAP) for financially needy  issued guidance on this topic through a Special 
beneficiaries, including charity models, pharmaceutical  Advisory Bulletin (70 FR 20623) and numerous 
company models, Part B wraparound assistance,  advisory opinions. 
medication therapy management programs, and others. 
Modification of the safe harbor for electronic health  These suggestions require further study.  With 
records (EHR) arrangements to (i) exclude commercial  respect to the first suggestion, in the preamble to the 
laboratories and laboratory operators from the category  final rule, OIG expressed concern about potential 
of protected EHR software donors and (ii) to provide  abuses by laboratories and indicated that we would 
that donors cannot tie the donation of qualifying  revisit the determination to protect laboratory donors 
software to the acceptance and use of donor-specific  if abuses occurred.  With respect to the second 
interfaces, upgrades, or modifications.  suggestion, we note that the regulations already 
require interoperability and restrict donors from 
inhibiting the use, compatibility, or interoperability of 
donated items and services with other EHR systems. 
Modification of the group purchasing organization  This suggestion requires further study.   
(GPO) safe harbor to clarify the scope and nature of 
protected payments. 
Modification of GPO safe harbor to (i) establish a  OIG is not adopting these suggestions.  The 
presumption that vendor fees are for the benefit of the  arrangements described pose a risk of abuse under 
GPO and need not satisfy additional discount safe  the anti-kickback statute and should be evaluated on 
harbor standards and (ii) protect arrangements  a case-by-case basis, such as under the advisory 
whereby vendors make case-by-case determinations  opinion procedures. 
regarding whether administrative fees represent 
indirect discounts to GPO members. 
HHS OIG Semiannual Report to Congress  71  Appendix D  
Fall 2007    
Proposal   OIG Response 
A new safe harbor protecting certain programs under  OIG is considering these suggestions. 
which beneficiaries may receive a coupon for a limited 
quantity of a manufacturers product for free, as well 
as clarification of the treatment of patient coupons 
under the existing discount safe harbor. 
Modification of an existing safe harbor to prohibit  OIG is not adopting this suggestion.  It is unclear 
surgeons from hiring in-house anesthesiologists and  which safe harbor the commenter wants modified, 
certified registered nurse anesthetists (CRNA).  although we interpret the comment to seek 
  modification of the safe harbor for investments in 
group practices.  We are not persuaded that the 
modification is necessary or feasible.  Safe harbor 
compliance is voluntary; therefore, no added safe 
harbor condition would prohibit surgeons from 
employing anesthesiologists or CRNAs.  Further, 
modifying the safe harbor to exclude certain groups 
based on their specific physician composition would 
introduce additional complexity into the regulatory 
scheme without significant additional protection 
against abuse. 
A new safe harbor for arrangements that offer  OIG continues to consider generally the issue of 
complimentary local transportation to beneficiaries to  complimentary local transportation for beneficiaries.  
enable them to obtain in-person medical necessity  However, the described arrangements pose a risk of 
determinations for power mobility devices (PMD), as  abuse under the anti-kickback statute and should be 
required under 42 C.F.R. 410.38(c)(2)(i).  evaluated on a case-by-case basis, such as under the 
advisory opinion procedures. 
In addition to considering the proposals in the preceding table (some of which duplicate 
proposals from past years), OIG has had under consideration a number of suggestions 
submitted in prior years.  The following table updates the status of those suggestions:
   
Proposal   OIG Response 
Modification of the existing GPO safe harbor to  OIG is considering these suggestions. 
clarify:  (i) the application of the safe harbor to 
pharmacy benefit managers, (ii) the application of the 
wholly owned standard, and (iii) the treatment of 
administrative fees distributed by a GPO to its 
members. 
Modification of the discount safe harbor with respect  OIG is considering these suggestions as we gain 
to Medicare Part D plans to (i) incorporate  experience with the Part D program. 
documentation and disclosure standards for 
manufacturers, Part D plans, and certain other business 
relationships; and (ii) clarify its application to the 
additional entities with which manufacturers may 
contract under the MMA (e.g., pharmacy benefits 
managers, retail pharmacies, and Part D drug plan 
sponsors). 
New safe harbor for implementation of a  OIG is considering this suggestion as we gain 
communitywide health information network.  experience with the new safe harbor for EHR 
arrangements.  OIG previously solicited comments 
regarding this suggestion (70 FR 59015). 
HHS OIG Semiannual Report to Congress  72  Appendix D  
Fall 2007    
Proposal   OIG Response 
Modification of the existing safe harbor for obstetrical  This suggestion requires further study. 
malpractice insurance subsidies to include 
(i) additional types of physicians and (ii) subsidies for 
which there is documented need and the amounts are 
limited in scope and duration. 
New safe harbor for manufacturer donations to PAPs  OIG is considering this suggestion. 
(see similar suggestions above). 
New safe harbor for certain practices related to  OIG is not adopting this suggestion.  This issue was 
economic credentialing of physicians by hospitals.  addressed in the OIG Supplemental Compliance 
Guidance for Hospitals issued in 2005.  Comments 
previously received in response to a solicitation for 
public comments on this subject variously suggested 
issuance of different types of guidance; some 
comments requested that OIG take no action.  OIG 
continues to consider generally the issues raised by 
economic credentialing. 
A new Medicare SELECT safe harbor to cover  These suggestions require further study. 
(i) coinsurance waivers for inpatient services 
negotiated between a hospital and an Employee 
Retirement Income Security Act employee welfare 
benefit plan that covers retirees and (ii) Part B waivers 
for employer group plans. 
New safe harbor for inducements offered to  OIG is considering this suggestion. 
beneficiaries that fit in an exception to the beneficiary 
inducements civil monetary penalties statute at 
42 U.S.C.  1320a-7a(a)(5). 
Modification of the existing shared risk exception to  OIG is considering this suggestion. 
cover (i) second-tier contractors of Federally-qualified 
health centers (FQHC) and (ii) the TRICARE 
program. 
New safe harbor for certain fee-for-service  OIG published a final safe harbor addressing this 
arrangements between FQHCs and other providers,  suggestion.  See 72 FR 56632 (Oct. 4, 2007). 
practitioners, and suppliers. 
Modification of the discount safe harbor to include a  OIG is considering this suggestion. 
discount that is both obtained by a commercial health 
plan that does not file claims with the Federal health 
care programs and otherwise meets the safe harbor 
conditions. 
Modification of the discount safe harbor to (i) clarify  OIG is considering generally the issues raised by 
its application to discounts applied to a manufacturers  these suggestions. 
full product line, (ii) modify the reporting and 
disclosure requirements, and (iii) standardize the 
requirements for offerors and sellers. 
Modification of existing safe harbors to conform them  OIG is considering making some conforming 
to the final regulations under the physician self-referral  changes with respect to the group practice 
statute published by the Centers for Medicare &  investments safe harbor.  With respect to other safe 
Medicaid Services (CMS) and new safe harbors  harbors, the self-referral and anti-kickback statutes 
analogous to new self-referral exceptions created by  are different in nature and scope, and it may not be 
the CMS regulations.  appropriate to conform the safe harbors to the  
self-referral exceptions. 
Modification of the ambulatory surgical centers (ASC)  OIG is considering this suggestion. 
safe harbor to address protection of startup  
multispecialty ASCs that otherwise comply with the 
current safe harbor conditions. 
HHS OIG Semiannual Report to Congress  73  Appendix D  
Fall 2007    
Proposal   OIG Response 
Modification of the safe harbor for ASCs jointly  OIG is considering this suggestion. 
owned by hospitals and physicians to add conditions 
under which hospitals would not be in positions to 
make or influence referrals. 
Modification of the ASC safe harbor to specify  OIG is considering this suggestion. 
whether an ASC can require investors to comply with 
safe harbor conditions. 
Modification of the ASC safe harbor to clarify (i) the  OIG is considering this suggestion. 
use of pass-through entities to hold ownership 
interests and (ii) the treatment of physician investors 
who invest at different times. 
New safe harbor for rural health networks operating  This suggestion requires further study. 
pursuant to the Medicare Rural Hospital Flexibility 
Program. 
New safe harbor for arrangements that comply with  This suggestion requires further study. 
section 513 of the IRS Code pertaining to the provision 
of certain supporting goods and services by tax-exempt 
hospitals to other tax-exempt hospitals. 
 
HHS OIG Semiannual Report to Congress  74  Appendix D  
Fall 2007    
Appendix E:  Summary of Sanction Authorities  
 
The Inspector General Act of 1978 (Pub. L. No. 95-452), as amended, sets forth specific 
requirements for semiannual reports to be made to the Secretary for transmittal to 
Congress.  A selection of other authorities appears below. 
Program Exclusions 
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds 
for excluding individuals and entities from participation in Medicare, Medicaid, and other 
Federal health care programs.  Exclusions are required for individuals and entities 
convicted of the following types of criminal offenses:  (1) Medicare or Medicaid fraud; 
(2) patient abuse or neglect; (3) felonies for other health care fraud; and (4) felonies for 
illegal manufacture, distribution, prescription, or dispensing of controlled substances.  
OIG has the discretion to exclude individuals and entities on several other grounds, 
including misdemeanors for other health care fraud (other than Medicare or Medicaid) or 
for illegal manufacture, distribution, prescription, or dispensing of controlled substances; 
suspension or revocation of a license to provide health care for reasons bearing on 
professional competence, professional performance, or financial integrity; provision of 
unnecessary or substandard services; submission of false or fraudulent claims to a Federal 
health care program; or engaging in unlawful kickback arrangements. 
Providers subject to exclusion are granted due process rights (including a hearing before 
an HHS administrative law judge and appeals to the HHS Departmental Appeals Board 
and Federal district and appellate courts) regarding whether the basis for the exclusion 
exists and the length of the exclusion is reasonable. 
Patient Dumping 
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an 
individual presents to the emergency room of a Medicare-participating hospital, the 
hospital must provide an appropriate medical-screening examination to determine 
whether that individual has an emergency medical condition.  If an individual has such a 
condition, the hospital must provide either treatment to stabilize the condition or an 
appropriate transfer to another medical facility. 
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to 
minimize the risks of transfer and must ensure that the receiving hospital agrees to the 
transfer and has available space and qualified personnel to treat the individual.  In 
addition, the transferring hospital must effect the transfer through qualified personnel and 
transportation equipment.  Further, a participating hospital with specialized capabilities or 
facilities may not refuse to accept an appropriate transfer of an individual who needs 
services if the hospital has the capacity to treat the individual. 
 
OIG is authorized to collect civil monetary penalties of up to $25,000 against small 
hospitals (fewer than 100 beds) and up to $50,000 against larger hospitals (100 beds or  
HHS OIG Semiannual Report to Congress  75  Appendix E 
Fall 2007  
 
   
more) for each instance in which the hospital negligently violated any of the section 1867 
requirements.  In addition, OIG may collect a penalty of up to $50,000 from a responsible 
physician for each negligent violation of any of the section 1867 requirements and, in 
some circumstances, may exclude a responsible physician. 
Civil Monetary Penalties Law 
Under the Civil Monetary Penalties Law (CMPL), section 1128A of the Social Security 
Act (42 U.S.C.  1320a-7a), a person is subject to penalties, assessments, and exclusion 
from participation in Federal health care programs for engaging in certain activities.  For 
example, a person who submits to a Federal health care program a claim for items and 
services that the person knows or should know is false or fraudulent is subject to a 
penalty of up to $10,000 for each item or service falsely or fraudulently claimed, an 
assessment of up to three times the amount falsely or fraudulently claimed, and 
exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The CMPL 
also authorizes actions for a variety of other violations, including submission of claims 
for items or services furnished by an excluded person; requests for payment in violation 
of an assignment agreement; violations of rules regarding the possession, use, and 
transfer of biological agents and toxins; and payment or receipt of remuneration in 
violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)). 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities 
 The Anti-Kickback Statute  The anti-kickback statute authorizes penalties against 
anyone who knowingly and willfully solicits, receives, offers, or pays remuneration, in 
cash or in kind, to induce or in return for (1) referring an individual to a person or entity 
for the furnishing, or arranging for the furnishing, of any item or service payable under 
the Federal health care programs; or (2) purchasing, leasing or ordering, or arranging for 
or recommending the purchasing, leasing, or ordering of any good, facility, service, or 
item payable under the Federal health care programs (section 1128B(b) of the Social 
Security Act, 42 U.S.C.  1320a-7b). 
Individuals and entities that engage in unlawful referral or kickback schemes may be 
subject to criminal penalties under the general criminal anti-kickback statute, civil 
monetary penalties under OIGs CMPL authority (section 1128A(a)(7) of the Social 
Security Act, 42 U.S.C.  1320a-7a), and/or program exclusion under OIGs permissive 
exclusion authority (section 1128(b)(7) of the Social Security Act, 42 U.S.C. 
 1320a-7(b)(7)). 
 
 False Claims Amendments Act of 1986  Under the Federal civil False Claims 
Amendments Act of 1986 (FCA) (31 U.S.C.  3729-3733), a person or entity is liable 
for up to treble damages and a penalty between $5,500 and $11,000 for each false claim  
 
 
HHS OIG Semiannual Report to Congress  76  Appendix E 
Fall 2007  
 
   
it knowingly submits or causes to be submitted to a Federal program.  Similarly, a person 
or entity is liable under the FCA if it knowingly makes or uses, or causes to be made or 
used, a false record or statement to have a false claim paid. 
The FCA defines knowing to include not only the traditional definition but also 
instances in which the person acted in deliberate ignorance or reckless disregard of the 
truth or falsity of the information.  Under the FCA, no specific intent to defraud is 
required.  Further, the FCA contains a qui tam, or whistleblower, provision that allows a 
private individual to file suit on behalf of the United States and entitles that 
whistleblower to a percentage of any fraud recoveries.
HHS OIG Semiannual Report to Congress  77  Appendix E 
Fall 2007  
 
    
Appendix F:  Acronyms and Abbreviations  
 
The following is a list of acronyms and abbreviations used in this publication.  
ACF    Administration for Children and Families 
AFDC   Aid to Families With Dependent Children 
AMP    average manufacturer price 
AoA    Administration on Aging 
ASAM   Assistant Secretary for Administration and Management 
ASC    ambulatory surgical center 
ASP    average sales price 
AWP    average wholesale price 
BBA    Balanced Budget Act of 1997 
BBRA   Balanced Budget Refinement Act of 1999 
BiMo    Bioresearch Monitoring Program 
CARE   Comprehensive AIDS Resources Emergency Act 
CBO    Congressional Budget Office 
CCC    Comprehensive Cancer Centers, Inc. 
CDC    Centers for Disease Control and Prevention 
CFO    Chief Financial Officers Act of 1990 
CFR    Code of Federal Regulations 
CIA     corporate integrity agreement 
CMHC   community mental health center 
CMP    civil monetary penalty 
CMPL   Civil Monetary Penalties Law 
CMS    Centers for Medicare & Medicaid Services 
CRNA   certified registered nurse anesthetist 
CSE    child support enforcement  
CY    calendar year 
DEA     Drug Enforcement Administration 
DMEPOS   durable medical equipment, prosthetics, orthotics, and supplies 
DMERC  durable medical equipment regional carrier 
DOJ    Department of Justice 
DRA    Deficit Reduction Act of 2005 
DSH    disproportionate share hospital 
EHR    electronic health record 
EMS    emergency medical services 
EMTALA  Emergency Medical Treatment and Active Labor Act 
ERC    Ethics Resource Center 
ESRD   end stage renal disease 
FBI    Federal Bureau of Investigation 
FCA    False Claims Act 
FDA    Food and Drug Administration 
 
HHS OIG Semiannual Report to Congress  79  Appendix F 
Fall 2007  
 
   
FISMA  Federal Information Security Management Act 
FQHC   federally qualified health center 
FR    Federal Register 
FUL    Federal upper limit 
FY    fiscal year 
GAO    Government Accountability Office 
GME    graduate medical education 
GMRA   Government Management Reform Act of 1994 
GPO    group purchasing organization 
HCFAC  Health Care Fraud and Abuse Control Program 
HCPCS  Healthcare Common Procedure Coding System 
HEAL   Health Education Assistance Loan 
HHA    home health agency 
HHS    Department of Health and Human Services 
HIE    health information exchange 
HIPAA  Health Insurance Portability and Accountability Act  
HIT    health information technology 
HMO    health maintenance organization 
HRSA   Health Resources and Services Administration 
ID    identification number 
IG    Inspector General 
IHS    Indian Health Service 
ILP    Independent Living Program 
IRB    institutional review board 
IRF    inpatient rehabilitation facility 
IT    information technology 
IVIG    intravenous immune globulin 
LCD    local coverage determination 
MFCU   Medicaid Fraud Control Unit 
MITA   Medicaid Information Technology Architecture 
MMA  Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 
MMIS   Medicaid Management Information System 
MPFS   Medicare Physician Fee Schedule 
MRO    Medicaid Rehabilitation Option 
MSP    Medicare Secondary Payer 
NDC    National Drug Codes 
NIH     National Institutes of Health 
OAS     Office of Audit Services 
OBRA   Omnibus Budget Reconciliation Act of 1990, 1993 
OCIG    Office of Counsel to the Inspector General 
OCSE    Office of Child Support Enforcement  
OEI     Office of Evaluation and Inspections 
OI     Office of Investigations 
 
HHS OIG Semiannual Report to Congress  80  Appendix F 
Fall 2007  
 
   
OIG     Office of Inspector General 
OMB    Office of Management and Budget 
PAP    patient assistance program 
PBM    Pharmacy Benefit Manager 
PCIE    Presidents Council on Integrity and Efficiency 
PDIG    Principal Deputy Inspector General 
PDP    prescription drug plan 
PDS    Proactive Disclosure Service 
PECOS  Provider Enrollment, Chain and Ownership System 
PMD    power mobility device 
PPS    prospective payment system 
PSC    Program Safeguard Contractor/Program Support Center 
Pub. L.   Public Law 
QIO    Quality Improvement Organization 
RSP    retail sales price 
SACWIS  Statewide Automated Child Welfare Information System 
SAMHSA  Substance Abuse and Mental Health Administration 
SCHIP   State Childrens Health Insurance Program 
SNF    skilled nursing facility 
UPL    upper payment limit 
U.S.C.   United States Code 
WAMP  widely available market price 
 
HHS OIG Semiannual Report to Congress  81  Appendix F 
Fall 2007  
 
  OIG COMPONENTS Department of Health and Human Services
OIG HOTLINE: 800-HHS-TIPS
With more than 1,500 staff throughout the Nation, OIG plans and carries out audits, evaluations, 
investigations, and legal activities through the following four components:
S Office of Audit Services  The Office of Audit Services (OAS) conducts financial  To report matters involving fraud, waste, abuse, and mismanagement in any departmental program(s)
and performance audits of departmental programs, operations, grantees, and 
A contractors following Government Auditing Standards issued by the Government 
Accountability Office. Financial audits principally provide reasonable assurance 
O about whether financial statements are presented fairly in all material respects;  Phone:  1-800-HHS-TIPS TTY:  1-800-377-4950
performance audits assess the achievement of objectives and identify the presence      1-800-447-8477 Fax:  1-800-223-8164
of systemic weaknesses giving rise to waste, fraud, or abuse. Recommendations 
address problems, such as improper payments and inefficient and ineffective use 
of resources. OAS performs audits or oversees the audit work of others through 
a nationwide network of auditors, information technology experts, and other 
professionals.  
E-Mail:  HHSTips@oig.hhs.gov
I Office of Evaluation and Inspections  The Office of Evaluation and Inspections 
E
(OEI) conducts national evaluations to provide HHS, Congress, and the public 
with timely, useful, and reliable information on significant issues. These evaluations, 
O
conducted by a nationwide staff of evaluators and other professionals, focus on 
Mail:  Office of Inspector General
preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness 
          Department of Health and Human Services
of departmental programs. To promote impact, OEI reports also present practical 
          Attn: Hotline
recommendations for improving program operations. 
          PO BOX 23489
I Office of Investigations  The Office of Investigations (OI) conducts and coordinates            Washington, DC 20026           
O
investigations of fraud and misconduct related to the Departments programs, 
operations, and beneficiaries. With investigators working in all 50 States, OI leverages 
its resources by actively coordinating with the Department of Justice and other law 
enforcement authorities. OI identifies systemic weaknesses that leave Department 
programs vulnerable to fraud and recovers damages and penalties through civil and 
administrative proceedings. 
G Office of Counsel to the Inspector General  The Office of Counsel to the 
Inspector General (OCIG) provides legal advice and representation to OIG on 
matters relating to Medicare, Medicaid, and other HHS programs and operations, 
I
C administrative law issues, criminal procedure, and internal OIG management. 
OCIG represents OIG in all civil and administrative fraud and abuse cases involving 
HHS programs, including False Claims Act, program exclusion, and civil monetary 
O
penalty cases. In connection with these cases, OCIG also negotiates and monitors 
corporate integrity agreements. Finally, OCIG renders advisory opinions, issues fraud 
alerts, and provides other guidance to the health care industry concerning the Federal 
anti-kickback statute and OIG sanctions.