The complete Semiannual Report to Congress is also on the Internet at http://oig.hhs.gov
Office of Inspector General
October 1, 2004 - March 31, 2005
U.S. Department of 
Health and Human Services
 
Working Together to Promote, Preserve & Protect the Nations Well-Being Office of Inspector General Components
Office of Audit Services provides all auditing services for HHS, either through its 
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own resources or by overseeing audit work of others. Audits examine the performance of HHS 
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programs and/or its grantees and contractors in carrying out their respective responsibilities 
O and are intended to provide independent assessments of HHS programs and operations in 
order to reduce waste, abuse, and mismanagement and to promote economy and efficiency 
throughout the Department.   
Office of Investigations conducts criminal, civil, and administrative investigations 
I of allegations of wrongdoing in HHS programs or to HHS beneficiaries. Investigative efforts 
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lead to criminal convictions, civil judgements and settlements, administrative sanctions, and/
or civil monetary penalties. OI serves as liaison to the Department of Justice on all matters 
relating to investigations of HHS programs and personnel. 
Office  of  Evaluation  &  Inspections conducts short-term management and 
I program evaluations that focus on issues of concern to the Department, the Congress, and 
E the public. OEI generally focuses on programs with significant expenditures of funds and 
O services to program beneficiaries or in which important management issues have surfaced. The 
findings and recommendations contained in the reports generate rapid, accurate, and up-to-
date information on the efficiency, vulnerability, and effectiveness of departmental programs. 
In addition, OEI oversees State Medicaid Fraud Control Units that investigate and prosecute 
fraud and patient abuse in the Medicaid program.
G Office of Counsel to the Inspector General provides legal services to OIG, 
rendering advice and opinions on HHS programs and operations, imposes program exclusions 
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and civil monetary penalties on health care providers, and litigates those actions within the 
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Department. OCIG also represents OIG in the global settlement of cases arising under the civil 
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False Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, and renders advisory opinions on sanctions to the health care community.
P Office of Management and Policy provides mission support services to the 
IG and other components. OMP formulates and executes the budget, develops policy, 
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disseminates OIG information to the news media and public, liaises with the Department, 
Congress, and external organizations, and manages information technology resources. OMP 
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also conducts and coordinates reviews of existing and proposed legislation and regulations to 
assess implications and economic consequences for HHS programs and operations.  Message from the Inspector General
I am pleased to present this semiannual report, which outlines the activities and accomplishments 
of the Department of Health and Human Services (HHS) Office of Inspector General (OIG) for the 
6-month period ending March 31, 2005. 
OIG is responsible for protecting the integrity of HHS programs, as well as the health and 
welfare of beneficiaries of those programs. This office provides the Secretary and program managers 
with objective and independent findings and recommendations to improve program efficiency and 
effectiveness. OIG also undertakes investigations to identify and hold accountable those who defraud 
HHS programs and beneficiaries.
These responsibilities have expanded with enactment of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA), which establishes a voluntary drug benefit 
program for Medicares 41 million beneficiaries and modifies the prices of drugs currently paid by 
Part B of the Medicare program.
To fulfill the specific responsibilities mandated by Congress to OIG in the area of pharmaceuticals, 
work is underway to monitor market prices and trends of Medicare-covered drugs, audit drug 
manufacturers prices, establish a safe harbor related to the electronic transmission of drug prescriptions, 
assess the effects of Medicare payment rates on the availability of hematology and oncology drugs, and 
study prices of drugs included in the end stage renal disease composite rate. 
In addition to providing new responsibilities under MMA in the prescription drug area, Congress 
also directed OIG to review payment methods for training residents in nonhospital settings, and to 
assess notices to beneficiaries relating to hospital lifetime reserve days. OIG already has met the 
statutory deadlines for this work and is planning additional projects as part of its commitment to 
prudent oversight of the new law.
At the same time, OIG has continued its important work in other areas, with accomplishments 
including multi-million dollar recoveries from investigations of pharmaceutical companies as well 
as reviews of State Medicaid financing arrangements that revealed issues with multi-billion dollar 
implications.
The achievements of this office would not be possible without the dedication and professionalism 
of all OIG employees. I am confident that this organization will continue to produce high quality 
work that has a significant and positive impact on the vital programs and operations of this 
Department. 
Daniel R. Levinson 
Acting Inspector General Highlights
For the first half of fiscal year (FY) 2005, the Office of Inspector General (OIG) reported savings and 
expected recoveries of nearly $17 billion: $15.6 billion in implemented recommendations and other 
actions to put funds to better use, $266 million in audit receivables, and $1.1 billion in investigative 
receivables. (Details pp. 32-33, 35, and 39-42)
Also for this reporting period, OIG reported exclusions of 1,695 individuals and entities for fraud 
or abuse of Federal health care programs and/or their beneficiaries; 258 criminal actions against 
individuals or entities that engaged in crimes against departmental programs; and 105 civil actions, 
which include False Claims Act and unjust enrichment suits filed in district court, Civil Monetary 
Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters. 
(Details pp. 11-14)
Significant Investigative Results
Gambro Healthcare, Inc.
Gambro Healthcare, Inc., owner and operator of renal dialysis clinics across the United States, agreed 
to pay over $350 million in fines and penalties and entered a comprehensive corporate integrity 
agreement with OIG. The global settlement resolved civil and criminal allegations of health care fraud 
in the Medicare, Medicaid, and TRICARE programs. As part of the global resolution, Gambro agreed 
to pay $310.5 million to resolve its civil liability and must allocate $15 million to resolve potential 
liability with various State Medicaid programs. In addition to the civil settlement, Gambro Supply 
Corporation, a wholly owned subsidiary of Gambro, agreed to plead guilty to health care fraud, pay a 
$25 million criminal fine, and be permanently excluded from Medicare and other Federal health care 
programs. (Details p. 14-15) 
Schering-Plough Corporation
As part of a global settlement, Schering-Plough Corporation agreed to pay $345.5 million and entered 
a 5-year corporate integrity agreement with OIG. Of this amount, $293 million resolves Schering-
Ploughs civil and administrative liabilities in connection with alleged illegal and fraudulent pricing 
of its allergy drug Claritin under the Medicaid drug rebate program. In addition, the Schering Sales 
Corporation, a Schering-Plough subsidiary, pled guilty to a kickback charge and was sentenced to pay 
a $52.5 million criminal fine for paying a kickback of almost $2 million to keep Claritin on an HMO 
formulary. (Details p. 15)
PharMerica
In the largest OIG settlement of a civil monetary penalty kickback action, PharMerica, Inc., and 
PharMerica Drug Systems, Inc., (collectively, PharMerica) agreed to pay more than $5.9 million to 
settle allegations that it paid unlawful kickbacks in connection with its purchase of a small Virginia 
pharmacy. PharMerica, a leading supplier of pharmacy services to long term care institutions, allegedly 
overpaid for the pharmacy in return for a commitment from the seller, who also owned 17 nursing 
homes, to refer its Medicare and Medicaid pharmacy business to PharMerica for 7 years. PharMerica 
also entered a 5-year corporate integrity agreement. (Details p. 13) iiii  ||  HHiigghhlliigghhttss 
State Financing Mechanisms
A Review of Nursing Homes in Three States
OIG continues to review intergovernmental transfers of funds, a mechanism that some States use to 
maximize Federal Medicaid reimbursement. In a series of reviews, OIG studied the impact of this 
mechanism on three public nursing homes in the States of New York, Tennessee, and Washington. 
OIG found that the initial Medicaid payments made to the nursing homes were adequate to cover the 
facilities Medicaid-related costs. However, because the States and/or counties required the facilities 
to return 90 to 96 percent of the facilities enhanced funding (financial support in addition to the per 
diem payments), the nursing homes net retained funding did not meet their operating costs. Over 
a 3-year period, the funding deficits at the facilities ranged from $290,000 to $25 million, which 
may have affected the quality of care at the facilities. In each of these cases, the Federal Government 
contributed all or almost all of the nursing homes Medicaid funding, contrary to the Medicaid 
principle of Federal-State cost sharing. (Details p. 9)
Department Financial Statement Audit
Clean Opinion for Sixth Consecutive Year
For the sixth consecutive year, the Department received a clean opinion on its financial statement. 
However, auditors noted two continuing material weaknesses: deficiencies in the Departments 
financial systems and processes for producing financial statements, and inadequate internal controls 
over Medicare information systems. Material weaknesses are systemic problems that cut across a 
number of operating divisions or those of significant dollar amounts that affect an individual division.  
(Details p. 30)
Medicaid Fraud Control Units
A Year of Exceptional Achievement
Currently, 48 States and the District of Columbia have Medicaid Fraud Control Units (MFCUs), 
which investigate and prosecute (or refer for prosecution) providers charged with defrauding the 
Medicaid program or abusing or neglecting patients. In FY 2004, OIG provided oversight for and 
administration of approximately $131 million in Federal grants to the units.
FY 2004 was a year of exceptional achievement for the 49 MFCUs. Collectively, they obtained a total 
of 1,160 convictions and recovered over $572 millionmore than double the $268 million recouped 
in FY 2003. Most of the FY 2004 recoveries are attributable to global settlements reached with 
pharmaceutical companies, but the cases covered the gamut of fraud perpetrated against the Medicaid 
program, including billing for services not rendered, upcoding claims to indicate higher levels of 
service than provided, and other types of fraud. (Details p. 19)
Industry Guidance
Supplemental Compliance Program Guidance for Hospitals
OIG published a Supplemental Compliance Program Guidance (CPG) for Hospitals, which supplements 
OIGs original compliance guidance issued in 1998. The Supplemental CPG, together with the original 
guidance, is voluntary guidance designed to help hospitals and hospital systems prevent fraud, waste,  HHiigghhlliigghhttss  ||  iiiiii
and abuse by promoting a high level of ethical and lawful corporate conduct. The Supplemental CPG 
includes an expanded risk section that highlights areas of significant risk for hospitals and offers 
guidance designed to help hospitals identify potential problems. In addition, the Supplemental CPG 
sets forth practical questions that hospitals can use to gauge the effectiveness of their compliance 
programs. (Details p. 10)
Medicare Prescription Drug, Improvement,  
and Modernization Act of 2003
OIG continues to work on a variety of projects generated by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (known as the Medicare Modernization Act or MMA). 
This statute provided supplemental funding to OIG to handle substantial new oversight responsibilities 
including the following two mandated reports completed in this semiannual period: 
Training Medical Residents in Nonhospital Settings
Teaching hospitals are permitted to count the time medical residents spend training in approved 
programs in nonhospital settings as long as the hospitals pay all or substantially all of the training 
costs. Because supervisory physicians in nonhospital settings often volunteer their time, it is difficult 
to determine actual costs. This report described five alternative methods for paying these training 
costs. OIG recommended that the Centers for Medicare & Medicaid Services (CMS) and Congress 
work together to analyze the current financial arrangements among teaching hospitals, nonhospital 
settings, and supervisory physicians; study the impact of any revisions to the current policy; and clarify 
the definition of all or substantially all of the training costs in nonhospital settings. (Details p. 2)
Medicare Lifetime Reserve Days 
Medicare beneficiaries are entitled to coverage of 90 days of inpatient hospital care during any episode 
of an illness. If they need more care, the beneficiaries are eligible for 60 nonrenewable days of hospital 
care, called lifetime reserve days (LRDs). In this study, OIG found that 86 percent of hospitals provided 
written and/or verbal notices to beneficiaries who have used or will use 90 days of benefits, and that 
8 percent of hospitals do not provide any information about LRDs. Beneficiaries said that the LRD 
election is confusing and does not affect their decisions about their care, and hospitals and beneficiaries 
both agreed that an additional notice would not be feasible or appropriate. In response to this OIG 
report, CMS will issue written clarification to hospitals to explain the LRD benefit. (Details p. 2) Table of Contents
Centers for Medicare & Medicaid Services .....................................................................1
CMS-Related Reports ........................................................................................................................2
Medicare Payment Methodologies for Training Medical Residents in Nonhospital Settings ......................2
Medicare Lifetime Reserve Days .............................................................................................2
Fiscal Year 2004 Hospital Payment Monitoring Program  ...............................................................3
Fiscal Year 2004 Comprehensive Error Rate Testing Program  ........................................................3
Providers Responsiveness to Requests for Medical Records ............................................................3
Hospital Wage Data Used To Calculate Inpatient Prospective Payment System Wage Indices ....................3
Managed Care Payments .......................................................................................................4
Medicare Contractor Pensions  ...............................................................................................4
Revenue from Vendors at Group Purchasing Organizations and Their Members ...................................5
Applying the National Correct Coding Initiative to Medicaid Services ...............................................5
Upper-Payment-Limit Calculations ..........................................................................................5
Medicaid School-Based Health Services .....................................................................................6
Claims for Residents of Institutions for Mental Diseases .................................................................7
CMS Financial Statement Audit  ..............................................................................................8
Addition of Qualified Drugs to the Medicaid Federal Upper Limit List  .............................................8
Illinois Medicaid Disproportionate Share Hospital Payments ...........................................................8
State Financing Mechanisms: Nursing Homes .............................................................................9
Outreach........................................................................................................................................... 9
Advisory Opinions ..............................................................................................................9
Compliance Guidance .........................................................................................................10
Provider Self-Disclosure Protocol ...........................................................................................10
Federal and State Partnership: Joint Audits of Medicaid ...............................................................11
OIG Administrative Sanctions .........................................................................................................11
Program Exclusions ............................................................................................................11
Civil Monetary Penalties ......................................................................................................12
Kickbacks ........................................................................................................................13
Patient Dumping ................................................................................................................13
Criminal and Civil Enforcement .....................................................................................................14
Clinics ............................................................................................................................14
Prescription Drugs .............................................................................................................15
Hospitals .........................................................................................................................15
Durable Medical Equipment Suppliers .....................................................................................16
Medicare Contractors .........................................................................................................17
Home Health Agencies ........................................................................................................17
Nursing Homes .................................................................................................................18
Practitioners  ....................................................................................................................18
Medicaid Fraud Control Units ........................................................................................................19
v vi | Table of Contents
Public Health Agencies .................................................................................................21
Public Health Agency-Related Reports ..........................................................................................22
Select Agent Security at Universities .......................................................................................22
Food and Drug Administrations Bone Mass Study ......................................................................22
Credentialing and Privileging at Indian Health Service Hospitals .....................................................22
National Institute of Environmental Health Sciences Superfund ......................................................23
Health Education Assistance Loan Defaults ....................................................................................23
Administration for Children and Families and Administration on Aging .........................25
Administration for Children and Families-Related Reports ..........................................................26
Oversight of States Subgrantee Monitoring in the Foster Care Program ...........................................26
Title IV-E Training Costs in Maine .........................................................................................26
Child Support Enforcement  ............................................................................................................27
Task Forces ......................................................................................................................27
Task Force Table ................................................................................................................27
Investigations ....................................................................................................................28
General Oversight ......................................................................................................29
General Oversight-Related Reports ................................................................................................30 
Departmental Financial Statement Audit  ..................................................................................30
Departmental Service Organizations  ......................................................................................30
Non-Federal Audits ..........................................................................................................................31
Resolving Recommendations ..........................................................................................................31
Table 1: Reports with Questioned Costs ...................................................................................32
Table 2: Funds Recommended to be Put to Better Use .................................................................33
Legislative and Regulatory Review and Development ...................................................................34
Regulatory Review Functions ................................................................................................34
Regulatory Development ......................................................................................................34
Employee Fraud and Misconduct ....................................................................................................35
Prosecutions.................................................................................................................................... 35 Table of Contents | vii
Appendix A 
Savings Achieved Through Policy and Procedural Changes Resulting From Audits,  
  Investigations, and Inspections October 1, 2004, Through March 31, 2005 .......................39
Appendix B
Unimplemented Office of Inspector General Recommendations  
  to Put Funds to Better Use ...................................................................................43
Appendix C
Unimplemented Office of Inspector General Program and Management  
  Improvement Recommendations ............................................................................49
Appendix D
Notes to Tables 1 and 2 ...........................................................................................55
Appendix E
Reporting Requirements of the Inspector General Act of 1978, as Amended ..........................71
Appendix F
Summary of Sanction Authorities ..............................................................................73
Summary of Anti-Kickback Statute and Civil False Claims Act  
  Enforcement Authorities .....................................................................................74
Please note: Numerical information in this report is rounded. Centers for Medicare & Medicaid Services
The Centers for Medicare & Medicaid Services (CMS) administers the Medicare and Medicaid 
programs. Financed by the Federal Hospital Insurance Trust Fund, Medicare Part A provides hospital 
and other institutional insurance for individuals 65 years old or older and for certain disabled persons. 
Medicare Part B (Supplementary Medical Insurance) is an optional program that covers most of the 
costs of medically necessary physician and other services and is financed by participants and general 
revenues.
The Medicaid program provides funding to States for medical care and other support and services 
for low-income individuals. State expenditures for medical assistance are matched by the Federal 
Government using a formula that measures per capita income in each State relative to the national 
average. The State Childrens Health Insurance Program (SCHIP) expands health coverage to uninsured 
children whose families earn too much for Medicaid, but too little to afford private coverage.
The Office of Inspector General (OIG) devotes significant resources to investigating Medicare and 
Medicaid fraud and monitoring these programs. These activities have helped ensure the cost-effective 
delivery of Medicare, Medicaid, and SCHIP services, have safeguarded quality of care to beneficiaries 
of these programs, and have reduced the potential for fraud, waste, and abuse. In addition, these efforts 
have led to criminal, civil, and/or administrative actions against perpetrators of fraud and abuse.
OIG also reports on audits of CMS financial statements, which currently account for more than 
82 percent of Department of Health and Human Services (HHS) net costs. In addition to issuing an 
opinion on the statements, auditors assess compliance with Medicare laws and regulations and the 
adequacy of internal controls. 2 | Centers for Medicare & Medicaid Services
CMS-Related Reports
Medicare Payment Methodologies for Training Medical Residents  
in Nonhospital Settings
This report, required by the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA), presented alternative Medicare payment methodologies for the costs of training medical 
residents in nonhospital settings. The Balanced Budget Act of 1997 allowed teaching hospitals to count 
the time residents spent training in approved programs in nonhospital settings for Medicare direct and 
indirect graduate medical education payments as along as the hospitals paid all or substantially all of 
the training costs. Determining the actual costs of the training programs has been difficult because 
supervisory physicians in nonhospital settings often volunteer their time; that is, they do not bill for 
the time spent supervising residents.
In the report, OIG described five alternative methodologies for paying the training costs of such 
residents. Each of the five payment options has positive and negative aspects.
OIG recommended that CMS work with Congress to (1) analyze the current financial arrangements 
and incentives among teaching hospitals, nonhospital settings, and supervisory physicians in nonhospital 
settings; (2) study the potential impact of any revisions to the current policy; and (3) clarify the 
definition of all or substantially all of the costs associated with training residents in nonhospital 
settings. OIG also recommended that CMS work with Congress to extend a moratorium in place 
for calendar year 2004 to allow teaching hospitals to continue to claim Medicare reimbursement for 
osteopathic and allopathic family practice residents who train in nonhospital settings without regard 
to the financial arrangements between the hospitals and the supervisory physicians who practice at 
those settings.  (A-02-04-01012)
Medicare Lifetime Reserve Days
This report, required by MMA, focused on lifetime reserve days (LRDs). Medicare beneficiaries are 
entitled to coverage of 90 days of inpatient hospital care during any spell of illness. If they need more 
care, the beneficiaries are eligible for 60 nonrenewable days of inpatient hospital care, called LRDs. 
In a survey, OIG found that 86 percent of hospitals surveyed provide written and/or verbal notices 
to beneficiaries who have used or will use 90 days of benefits. Eight percent of hospitals that reported 
that they do not notify beneficiaries about LRDs indicated that they lacked timely information about 
the number of LRDs beneficiaries have available. While 64 percent of hospitals believed that a second 
notice could be helpful, 66 percent said an additional notice would affect operational costs and staff 
time. For their part, beneficiaries stated that the LRD election is confusing and does not affect their 
decisions about their care. Hospitals and beneficiaries agree that an additional notice may not be 
appropriate or feasible. 
In response to this OIG report, CMS will issue guidance to hospitals to clarify the LRD benefit. 
(OEI-09-04-00100) Centers for Medicare & Medicaid Services | 3
Fiscal Year 2004 Hospital Payment Monitoring Program 
The Hospital Payment Monitoring Program (HPMP) determines the Medicare fee-for-service 
paid claims error rate for inpatient acute care hospital services. For fiscal year (FY) 2004, HPMP 
contractors generally had appropriate controls to ensure that admission-necessity and diagnosis-related 
group (DRG) validation screenings and quality control reviews were performed in accordance with 
established procedures. Although the methodology for calculating the net error amounts was inaccurate 
for some of the claims that OIG reviewed, those inaccuracies were not significant in relation to the 
projection of erroneous Medicare payments for FY 2004.
OIG recommended that CMS direct the HPMP contractors to use the most current standard pricing 
information to calculate error amounts for DRGs revised by quality improvement organizations. CMS 
agreed with this recommendation.  (A-03-04-00008)
Fiscal Year 2004 Comprehensive Error Rate Testing Program 
The Comprehensive Error Rate Testing (CERT) program determines the Medicare fee-for-service 
paid claims error rate for Medicare services other than inpatient acute care hospital services. This 
review determined that the CERT contractor generally had appropriate controls in place to ensure 
that medical reviews were performed in accordance with established procedures and that the results 
of those reviews were adequately maintained, updated, and reported. However, the quality assurance 
program did not provide full assurance of the reliability of the claims review process. The CERT 
contractor completed only 984 of the required 2,587 FY 2004 quality assurance reviews by July 30, 
2004. Personnel from CERT stated that because of an overwhelming backlog of initial medical record 
reviews, management reallocated resources to complete those reviews and delayed the completion of 
the required quality assurance reviews. 
OIG recommended that CMS direct the CERT contractor to schedule and complete the required number 
of quality assurance reviews throughout the year. CMS officials agreed with the recommendation. 
(A-03-04-00007)
Providers Responsiveness to Requests for Medical Records
In developing the FY 2003 CERT portion of the Medicare payment error rate, CMS experienced 
a significant problem because many providers did not respond to requests for medical records. The  
FY 2004 review of the error rate process found that nonresponses had been reduced to less than  
1 percent of the total number of claims in the sample. The most common reasons for nonresponse that 
providers cited were that they did not receive request letters, had already provided the documentation, 
or did not have access to their records. 
CMS concurred with OIGs recommendations to further enhance its process for ensuring the timely 
receipt of medical records.  (A-01-04-00517)
Hospital Wage Data Used To Calculate Inpatient Prospective Payment System  
Wage Indices
Under the acute care hospital inpatient prospective payment system, the Medicare base rate paid to 
participating hospitals includes a labor-related share. To reflect labor cost variations among localities, 
CMS adjusts the labor-related share by the wage index applicable to the metropolitan statistical area 
in which the hospital is located. The wage index values are based on wage data that hospitals include 
on their Medicare cost reports. 4 | Centers for Medicare & Medicaid Services
An audit of a hospital in Massachusetts disclosed that the facility overstated its wage data by  
$4.2 million for the FY 2000 cost report period. As a result, the FY 2004 wage index for the hospital 
and the two other hospitals in this metropolitan statistical area was overstated by 1.1 percent, and the 
average payment to the two other hospitals was overstated by about $46 per hospital discharge. 
OIG recommended that the hospital strengthen financial reporting controls to ensure that the wage 
data reported on its Medicare cost reports are accurate, supported, and in compliance with Medicare 
regulations. The hospital concurred.  (A-01-04-00501)
Managed Care Payments
Medicare+Choice (redesignated as Medicare Advantage) organizations (MCOs) are responsible 
for providing all Medicare-covered services, except hospice care, to enrollees in return for a 
predetermined capitation payment. MCOs with plans for which payment rates increased under the 
Benefits Improvement Protection Act (BIPA) of 2000 were required to use additional amounts to 
reduce beneficiary premiums or cost-sharing, enhance benefits, contribute to a stabilization fund for 
benefits in future years, or stabilize or enhance beneficiary access to providers. In this report, OIG 
found that of the $17 million capitation payment increase to one MCO, $12.5 million was used in a 
manner consistent with BIPA requirements and was properly supported. However, the MCO could 
not document, nor could OIG determine, how much of the remaining $4.5 million in estimated 
increased fee-for-service costs met BIPA requirements. Also, the MCO could not support the estimated  
$4.5 million increase in fee-for-service costs in its revised proposal. 
OIG recommended that the MCO work with CMS to determine how much of the $4.5 million increase 
in fee-for-service costs was used in a manner consistent with BIPA requirements. Funds not so used 
should be refunded to CMS or, as an alternative, deposited in a benefit stabilization fund for use in 
future years. OIG also recommended that the MCO ensure that estimated costs in future proposals 
are properly supported. The MCO disagreed with the reports findings and recommendations.  
(A-09-03-00051)
Medicare Contractor Pensions 
Since its inception, Medicare has paid a portion of Medicare contractors annual contributions to their 
pension plans. CMS requires that contractors separately identify the pension assets for the Medicare 
segment of their activities.
In one report, OIG reviewed an insurance company in Texas that processed and paid Medicare fee-
for-service claims until its contractual relationship with CMS was terminated. OIG found that the 
company had claimed $6 million in unallowable costs for Medicare reimbursement. Contrary to 
requirements, the claim represented an unauthorized retroactive change in accounting practice, did 
not appropriately amortize the transition obligation, and sought reimbursement for deposits made to a 
revocable trust fund. The company did not agree with OIGs recommendation to withdraw its claim 
for the $6 million.  (A-07-03-03040)
Two other reports noted that a contractor in Florida had understated Medicare segment assets 
by $1.3 million, had not implemented a prior OIG recommendation to increase those assets, and 
had understated accumulated allowable pension costs by $2.3 million. The contractor agreed 
with OIGs recommendations to increase the Medicare segment assets by $1.3 million, increase  Centers for Medicare & Medicaid Services | 5
accumulated  allowable  pension  costs  by  $2.3  million,  and  implement  procedural  controls.  
(A-07-04-00172; A-07-04-00179)
Revenue from Vendors at Group Purchasing Organizations and Their Members
Group purchasing organizations (GPOs) are buying consortiums designed to leverage the purchasing 
power of their members, primarily hospitals and other health care providers, and to allow the members 
to obtain discounts on medical supplies. In exchange for administrative services and the ability to sell 
through a GPO to its members, vendors pay administrative fees to GPOs.
The three GPOs reviewed collected $1.8 billion in administrative fee revenue during the audit 
period. Of this amount, $1.3 billion represented net revenue in excess of operating costs. The GPOs 
retained $415 million and distributed the remaining $898 million to members. OIG reviewed how  
21 members, who received $255 million of the $898 million distributed, accounted for the net revenue 
distributions. In total, the 21 members offset on their Medicare cost reports $200 million of the  
$255 million of the net revenue distributed by the GPOs. OIG also reviewed how the members offset 
rebates totaling $285 million received directly from vendors or passed from vendors through the 
GPOs. Seven of the 21 members did not offset rebates totaling about $3 million. 
OIG recommended that CMS provide specific guidance on the proper Medicare cost report treatment 
of net revenue distributions received from GPOs and remind institutional providers that all rebates 
from vendors must be shown as credits on their Medicare cost reports. CMS agreed to address the 
recommendations through frequently asked questions, emphasizing to providers that Medicare policy 
requires discounts, allowances, rebates, and refunds to be offset on cost reports and that this policy 
applies to offsets of net revenue distributions to GPO members.  (A-05-03-00074)
Applying the National Correct Coding Initiative to Medicaid Services
OIG studied whether State Medicaid agencies apply CMSs National Correct Coding Initiative (CCI), 
a set of automated edits used to evaluate Medicare or Medicaid claim submissions when a provider 
bills more than one service for the same beneficiary and same date of service.
Although use of the CCI edits is mandatory in the Medicare program, State Medicaid agencies are not 
required to use these edits in processing their claims. In a 2003 survey of all State Medicaid agencies, 
OIG found that most States do not use the Medicare CCI edits. In fact, only seven States use all or 
some of these CCI edits. Our review of the 2001 claims data that were available for 39 State Medicaid 
agencies found that these States paid $54 million for services that would have been detected and denied 
based on the CCI edits.
Because using these edits would promote correct coding by providers and reduce improper Medicaid 
expenditures, OIG recommended that CMS encourage States to consider using Medicare CCI edits 
in their Medicaid programs. CMS concurred with the recommendation. (OEI-03-02-00790)
Upper-Payment-Limit Calculations
The upper payment limit (UPL) is an estimate of the amount that would be paid for Medicaid services 
under Medicare payment principles. Earlier OIG reports identified situations where States were 
ableconsistent with UPL regulationsto effectively lower State and local expenditures and yet 
receive increased Federal matching payments. As a result of these abuses, revised UPL regulations  6 | Centers for Medicare & Medicaid Services
created transition periods in which eligible States were allowed to make payments up to the UPL for 
a specific category of providers, such as non-State government facilities, plus an excess amount that 
must not increase during the transition period. As part of a multistate initiative that CMS requested, 
OIG issued three reports on UPL calculations:
  Kansas  Kansas followed Federal regulations and its State plan amendment when calculating the 
category-specific UPL for non-State government nursing homes. Contrary to Federal regulations, 
however, Kansas increased the excess amount during its transition period. As a result, Kansas 
overclaimed expenses by more than $58.3 million ($35 million Federal share) for the period  
April 1, 2001, through September 30, 2002. 
OIG recommended that Kansas reduce claimed expenses on its quarterly expenditure reports by 
$58.3 million, and Kansas agreed to do so.  (A-07-03-02672) 
  Oregon  Oregon did not calculate the State FYs 2002 and 2003 UPLs for non-State government 
nursing homes in accordance with Federal regulations and its approved State plan amendments. 
Instead, Oregon calculated UPLs that combined non-State government and private facilities. 
A change in Oregons calculation method caused an increase in the excess amount during the 
transition period. As a result, Oregons payments to nursing homes exceeded the UPLs by more than  
$230.5 million ($137.2 million Federal share). In addition, Oregons estimated Medicaid payments 
for 2004 and 2005 could exceed projected UPLs by $76.3 million ($45.9 million Federal share). 
OIG recommended that Oregon reduce claimed expenses on its quarterly expenditure reports by 
$230.5 million and calculate UPLs in accordance with Federal regulations to prevent future Federal 
overpayments of $45.9 million. Oregon partially agreed with the first recommendation and fully 
agreed with the second.  (A-09-03-00055) 
  Oregon  Oregons calculations of the UPLs for non-State government inpatient hospitals generally 
complied with Federal regulations and its State plan amendment. However, Medicaid payments 
exceeded the UPLs by $5.7 million ($3.4 million Federal share) because Oregon applied a UPL rule 
before its effective date, did not refund a Medicaid overpayment, and used outdated Medicare rates 
in its UPL calculations. In addition, Oregon could not ensure that disproportionate share hospital 
(DSH) payments made to one hospital complied with Federal law and the State plan amendment. 
OIG recommended that Oregon refund the $3.4 million overpayment and improve its procedures 
for calculating UPLs and DSH limits. While the State did not concur with the recommended 
refund, it agreed to make procedural improvements.  (A-09-04-00023) 
Medicaid School-Based Health Services
A 1988 amendment to the Social Security Act allows Medicaid coverage of school-based health 
services for children with disabilities or special needs. During this reporting period, OIG conducted 
three reviews to determine whether claims for school-based services were allowable for Federal 
reimbursement.
  Maine  The State did not follow Federal regulations when it processed retroactive claims for 
Medicaid school-based health services. The State did not incur an expenditure because it did not  Centers for Medicare & Medicaid Services | 7
remit the Federal share received for these claims to the school districts. Rather, the State deposited 
the Federal share in the States general fund. As a result, the State was overpaid $8.8 million 
in Federal funds. The State made a subsequent adjustment of almost $5.8 million to reduce the 
overpayment. However, the States overpayment remains at $3 million.
OIG recommended that Maine refund the $3 million and ensure that it properly refunds the Federal 
share for uncashed or voided checks in accordance with Federal requirements. While the State did 
not agree to repay the overpayment, it agreed to improve its procedures for processing claims. 
(A-01-04-00004)
  Massachusetts  As a result of inadequate guidance and monitoring by the State, five of eight 
local education agencies reviewed did not accurately allocate administrative costs to reflect relative 
Medicaid benefits received. As a result, these agencies overstated their claims by almost $5 million. 
Also, one of the eight agencies double-counted salaries and fringe benefits when identifying costs to 
be allocated, resulting in an overstatement of $360,000. 
OIG recommended that Massachusetts, in addition to making financial adjustments, provide 
technical assistance to ensure that local education agencies strengthen internal controls over how 
they compute their Medicaid share percentages and implement a monitoring system to ensure 
that local education agencies properly calculate claims for Medicaid reimbursement. The State 
agreed to make procedural improvements but did not agree to refund the entire overpayment  
(A-01-02-00016)
  Vermont  Vermont and its school districts did not have controls in place to ensure that services 
billed were accurate and in accordance with childrens individualized education plans. On the basis 
of a statistical sample, OIG estimated that the State improperly claimed almost $1.5 million in 
Federal funds.
OIG recommended that Vermont refund the overpayment and establish procedures to ensure that 
future claims are in accordance with Federal and State requirements. Vermont said that it had made 
program improvements to comply with OIGs recommendations and agreed to refund part of the 
overpayment.  (A-01-03-00004)
Claims for Residents of Institutions for Mental Diseases
This report summarizes OIGs reviews of seven States Medicaid claims for medical and ancillary services, 
including inpatient psychiatric services, made on behalf of 21 to 64 year-old residents of private and 
county-operated institutions for mental diseases. OIG found that the effectiveness of controls to prevent 
such improper claims for those services varied widely among the States reviewed (California, Florida, 
Maryland, New Jersey, New York, Texas, and Virginia). In total, the seven States improperly claimed 
$6.1 million in Federal Medicaid funds.
OIG did not make any recommendations because the recommendations in a prior OIG report 
(A-02-03-01002) would also apply to medical and ancillary services for the excluded age group. CMS 
concurred with the recommendations in the prior report.  (A-02-04-01034) 8 | Centers for Medicare & Medicaid Services
CMS Financial Statement Audit 
The CMS FY 2004 financial statements received an unqualified audit opinion, which means that the 
statements were fairly presented in accordance with generally accepted accounting principles. However, 
auditors identified continuing material weaknesses in CMSs financial systems, analyses, and oversight 
of the Medicare and the health programs (Medicaid and SCHIP), as well as weaknesses in Medicare 
electronic data processing controls.  (A-17-04-02004)
Addition of Qualified Drugs to the Medicaid Federal Upper Limit List 
Under Medicaid, CMS is required to establish Federal upper payment limits for multiple source drugs. 
OIG found that CMS does not consistently add qualified drugs to the Federal upper limit list in a timely 
manner. Of the 252 first-time generic drugs approved between January 2001 and December 2003, 109 
products met the statutory and regulatory criteria for inclusion on the Federal upper limit list. However, 
only 25 were actually added to the Federal upper limit list. Of the 25 drugs that were added, CMS took 
an average of 36 weeks to place the products on the Federal upper limit list once the drugs were qualified 
for inclusion. As of July 15, 2004, the remaining 84 drugs that were not added had been qualified for an 
average of 55 weeks. Had the qualified drugs been added to the Federal upper limit list in a timely manner, 
OIG estimated that Medicaid would have saved $167 million between 2001 and 2003.
OIG recommended that CMS establish an administrative procedure and schedule to govern the 
determination and publication of Federal upper limits. CMS concurred with the OIG recommendation 
and stated that it had already taken steps to support this objective. However, CMS did not concur with 
OIGs methodology and its subsequent savings estimates.  (OEI-03-04-00320)
Illinois Medicaid Disproportionate Share Hospital Payments
Medicaid requires States to make additional payments, called disproportionate share hospital (DSH) 
payments, to hospitals for the uncompensated costs of serving disproportionate numbers of low-income 
patients with special needs. OIG issued two reports on DSH payments to hospitals in Illinois.
  In one report, OIG found that DSH payments to a hospital exceeded the hospital-specific limits 
imposed by the Social Security Act. The State paid about $140.3 million (Federal share) in excess of 
the hospitals costs of providing inpatient and outpatient services to Medicaid and uninsured patients 
during State FYs 1997 through 2000. The excessive payments occurred because the State did not have 
effective procedures to ensure compliance with the hospital-specific limits or with State plan and State 
Administrative Code requirements. 
OIG recommended that the State refund $140.3 million to the Federal Government; compare 
annual Medicaid payments with the actual cost of providing services to Medicaid and uninsured 
patients for all hospitals receiving DSH payments; and, if applicable, make retroactive adjustments. 
The State did not agree with these recommendations. However, the State agreed to provide clear 
guidelines on properly reporting uncompensated charity care charges.  (A-05-01-00099)
  At another Illinois hospital, OIG found that DSH payments exceeded the hospital-specific limits by 
about $9 million ($4.5 million Federal share) during State FYs 1997 through 2000. The State did 
not use actual cost data to calculate DSH payments, did not compare Medicaid payments (including  Centers for Medicare & Medicaid Services | 9
DSH payments) with the hospitals actual Medicaid and charity care costs, and did not adjust DSH 
payments as required by the State plan. 
OIG recommended that the State refund $4.5 million to the Federal Government; compare annual 
Medicaid payments (including DSH payments) with the actual cost of providing services to Medicaid 
and uninsured patients for all hospitals receiving DSH payments; and, if applicable, make retroactive 
adjustments. The State disagreed with these recommendations.  (A-05-01-00102)
State Financing Mechanisms: Nursing Homes
OIG issued three audit reports on public nursing homes in New York, Tennessee, and Washington. 
The objectives of these reviews were to determine whether (1) Medicaid payments to the nursing 
homes were adequate to cover their operating costs and (2) a link could be drawn between the quality 
of care provided to the facilities residents and the amount of Medicaid funding received. The homes 
had received ratings from the States indicating that residents were in immediate jeopardy. 
OIG found that initial Medicaid payments (which consisted of per diem and upper-payment-limit 
funds) to all three facilities were adequate to cover Medicaid-related costs. However, because the 
State and/or the county required the facilities to return 90 to 96 percent of the upper-payment-limit 
funding, the net Medicaid funding that the facilities were allowed to retain did not meet operating 
costs. Over a 3-year period, the funding deficits were $25 million, $22.8 million, and $290,000 for the 
New York, Tennessee, and Washington facilities, respectively. In all of these cases, the Federal funds 
claimed by and paid to the States ultimately benefited the States more than the Medicaid beneficiaries, 
contrary to the Medicaid principle of Federal/State cost sharing. In addition, during the audit period, 
the homes experienced staffing shortages, which may have affected quality of care. 
OIG recommended that the States consider revising the nursing homes Medicaid per diem rate to 
more closely reflect operating costs and allow the homes to retain sufficient funding to cover the 
costs of providing an adequate level of care to their residents. The States did not agree with the 
recommendations. (A-02-03-01044; A-04-03-03023; A-10-04-00001)
Outreach
OIG has continued to issue advisory opinions, compliance guidance, and other guidance as part of its 
ongoing effort to promote the highest level of ethical and lawful conduct by the health care industry.
Advisory Opinions
In accordance with section 205 of the Health Insurance Portability and Accountability Act of 1996, 
OIG, in consultation with the Department of Justice, may issue advisory opinions to outside parties 
regarding the interpretation and applicability of certain statutes relating to the Medicare and State 
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. From the period October 1, 2004, through March 31, 2005, OIG received  
25 advisory opinion requests and issued 14 advisory opinions. 10 | Centers for Medicare & Medicaid Services
Compliance Guidance
OIG works with the private sector to develop methods to prevent the submission of improper claims 
and inappropriate conduct. To date, OIG has released compliance program guidances (CPG) for 
clinical laboratories, hospitals, home health agencies, third-party billing companies, durable medical 
equipment, prosthetics, orthotics and supply industry, hospices, Medicare+Choice organizations that 
offer coordinated care plans, nursing homes, individual and small group physician practices, ambulance 
service providers, and pharmaceutical manufacturers. During this semiannual reporting period, OIG 
issued a supplemental guidance for the hospital industry and is developing a guidance for recipients of 
NIH research grants. 
The Supplemental CPG for Hospitals builds on OIGs original compliance program guidance 
for hospitals issued in 1998. In conjunction with the original guidance, the Supplemental CPG is 
voluntary guidance designed to help hospitals and hospital systems prevent fraud, waste, and abuse by 
promoting a high level of ethical and lawful corporate conduct. The Supplemental CPG is the most 
comprehensive OIG fraud and abuse guidance available to hospitals. It includes a section on expanded 
risk that highlights areas of significant risk for hospitals, and offers guidance designed to help them 
identify potential problems. 
In addition, the Supplemental CPG sets forth practical questions that hospitals can use to gauge the 
effectiveness of their compliance programs. Although these questions were drafted with hospitals 
in mind, many of them can also be used to gauge the effectiveness of compliance programs in 
other industry sectors. This and other OIG compliance program guidances are on the internet at  
http://oig.hhs.gov in the Fraud Prevention & Detection section. 
Provider Self-Disclosure Protocol
In keeping with a longstanding commitment to assist providers and suppliers in detecting and 
preventing fraudulent and abusive practices, OIG established a set of comprehensive guidelines for 
voluntary self-disclosures, titled Provider Self-Disclosure Protocol, available on the internet at  
http://oig.hhs.gov in the Fraud Prevention & Detection section. 
Essentially, the protocol guides providers and suppliers through the process of structuring a disclosure 
to OIG of matters that appear to constitute potential violations of Federal laws (as opposed to honest 
mistakes that may have resulted in overpayments). After making an initial disclosure, the provider 
or supplier is expected to undertake a thorough internal investigation of the nature and cause of 
the matters uncovered and make a reliable assessment of their economic impact (e.g., an estimate 
of the losses to Federal health care programs). OIG evaluates the reported results of each internal 
investigation to determine the appropriate course of action. 
To date, OIG has received 255 submissions. Self-disclosure cases have resulted in 53 recoveries and 40 
settlements, totaling $90.9 million collectively. Examples include the following:
  Florida  To resolve a matter reported under OIGs Provider Self-Disclosure Protocol, Wuesthoff 
Memorial Hospital, Inc., agreed to refund approximately $312,000 to Medicare and $1,300 to 
Medicaid for overpayments Wuesthoff received in connection with outpatient physician services. 
Wuesthoff operates a cardiology practice doing business as Brevard Cardiology Physicians, P.A. 
Based upon a self-assessment in accordance with the protocols guidelines, Wuesthoff determined  Centers for Medicare & Medicaid Services | 11
that it had been overpaid for certain diagnostic tests performed by Brevard physicians. Wuesthoff 
incorrectly marked up the technical component of tests that it purchased from a vendor and billed 
to Medicare. Wuesthoff also determined that it had billed Medicare and Medicaid for a limited 
number of services provided incident to the services of a physician, when, in fact, the presence of 
a physician was not adequately documented in the patients medical records. 
  Pennsylvania  Pursuant to the Provider Self-Disclosure Protocol, Marian Community Hospital 
agreed to pay $70,000 to resolve its liability under the False Claims Act. Between 1998 and 2001, the 
hospital allegedly billed for electromyography neurological testing services that were not properly 
documented to support the claims. 
Federal and State Partnership: Joint Audits of Medicaid
One of OIGs major outreach initiatives has been to work more closely with State auditors in reviewing 
the Medicaid program. To this end, a partnership plan was developed to foster joint reviews and provide 
broader coverage of the Medicaid program. The partnership approach has been an overwhelming 
success in ensuring more effective use of scarce audit resources by both the Federal and the State audit 
sectors. To date, partnerships have been developed in 25 States.
Reports issued to date have resulted in identifying over $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.
OIG Administrative Sanctions
During this reporting period, OIG administered 1,702 sanctions in the form of program exclusions or 
administrative actions for alleged fraud or abuse or other activities that posed a risk to Federal health 
care programs and their beneficiaries. A brief explanation of these sanction authorities can be found 
in Appendix F.
Program Exclusions
During this reporting period, OIG excluded 1,695 individuals and entities from participating in the 
Medicare and Medicaid programs and other federally sponsored 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:
  Oklahoma  A pediatrician was excluded for 50 years based on his conviction for a criminal offense 
related to the neglect or abuse of patients in connection with the delivery of a health care item or 
service. The crimes on which the conviction was based occurred over a period of 4 years; however, 
police records indicate that the physician confessed to abusing 18 children (all under the age of 16) 
over an approximate 20-year period. The physician was sentenced to serve 20 years incarceration, 
with all but the first 15 years suspended. His license to practice as a physician in the State of Oklahoma 
was also permanently revoked.  12 | Centers for Medicare & Medicaid Services
  California  A pharmacy owner/operator was excluded for 30 years based on his conviction for 
a criminal offense related to the delivery of a health care item or service under the Medicare or a 
State health care program. He was sentenced to 33 months incarceration. He was also ordered to 
pay $3.6 million in restitution jointly and severally for conspiracy to commit health care fraud and 
submitting false claims to Medi-Cal, Californias Medicaid program. 
Also in California, a laboratory owner was excluded for 25 years based on his conviction for a 
criminal offense related to the delivery of an item or service under the Medicare or a State health 
care program. He was sentenced to 33 months incarceration and ordered to pay approximately 
$2.3 million in restitution for committing health care fraud. The laboratory owner billed Medicare 
and Medi-Cal for laboratory tests that were never performed. 
  Florida  A durable medical equipment (DME) sales representative was excluded for 28 years 
based on his conviction for a criminal offense related to the delivery of items or services under the 
Medicare program. He participated in a large scheme that lasted for approximately 3 years and 
involved the filing of false claims for medically unnecessary DME items. The false claims were filed 
with Medicare and resulted in millions of dollars being fraudulently paid to the sales representative 
and his associates. For his part in the scheme, the sales representative was sentenced to 18 months 
in jail and ordered to pay more than $2 million in restitution jointly and severally.
  South Carolina  A medical doctor was excluded for 26 years based on his conviction for a 
criminal offense related to the unlawful manufacture, distribution, prescription, or dispensing of 
controlled substances. He was also sentenced to serve 235 months in prison. The doctor was part 
of a large scheme that occurred over a 4-year period and involved the selling of prescriptions for 
OxyContin, Percocet, and various other controlled substances. 
  Mississippi  A registered nurse was sentenced to 10 years in prison and excluded for 18 years 
based on his conviction for a criminal offense related to the neglect or abuse of patients. The nurse 
unlawfully, willfully, and feloniously sexually abused a patient who was physically helpless. 
Civil Monetary Penalties
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose administrative penalties and 
assessments against a person or entity that, among other reasons, submits claims to a Federal health care 
program that the person or entity knows or should know are false or fraudulent. During this reporting 
period, OIG collected $6.6 million in civil monetary penalties and assessments. For example:
  Michigan  Lansing Surgery Center (LSC), a freestanding surgery clinic, agreed to pay $76,000 
and enter into a 3-year corporate integrity agreement to resolve its potential liability under the 
CMPL. The settlement resolved allegations that LSC submitted improper claims to Medicare and 
Medicaid for payment for pain management services provided by a staff physician. The physician 
was convicted in 1999 of felony counts of mail fraud, wire fraud, and health care fraud for providing 
medically unnecessary pain management services and upcoding of office visits at LSC and other 
Michigan hospitals. Centers for Medicare & Medicaid Services | 13
Kickbacks
Individuals or entities that engage in unlawful referral or kickback schemes may be subject to criminal 
penalties under the Federal health care anti-kickback statute, civil monetary penalties under OIGs 
CMPL authority, and/or program exclusion under OIGs permissive exclusion authority. A description 
of these enforcement authorities can be found in Appendix F. The following are examples of kickback 
enforcement actions during this reporting period:
  Florida  In the largest OIG settlement to date of a civil monetary penalty kickback action, 
PharMerica, Inc., and PharMerica Drug Systems, Inc., (collectively, PharMerica) agreed to pay more 
than $5.9 million to resolve allegations in connection with their 1997 purchase of a small Virginia 
pharmacy. The seller operated nursing homes and assisted living facilities with approximately 2,800 
beds. OIG alleged that PharMerica paid an excessive amount for the pharmacy in return for a 
commitment from the seller to refer its Medicare and Medicaid pharmacy business to PharMerica for 
the next 7 years. OIG alleged that this transaction violated the Anti-Kickback Statutes prohibition 
against the payment of remuneration to induce the referral of Federal health care business. PharMerica 
also entered into a 5-year corporate integrity agreement. Headquartered in Florida, PharMerica is 
one of the countrys largest institutional pharmacies and specializes in providing pharmacy supplies 
and services to long term care institutions. It is a wholly owned subsidiary of AmerisourceBergen 
Corporation.
Also in Florida, Tender Loving Care Health Care Services, Inc. (TLC), agreed to pay $130,000 to 
resolve its potential liability under the CMPL relating to the anti-kickback statute. Specifically, one 
of TLCs franchisees allegedly paid commissions to non-employees who were providing marketing 
services. TLC disclosed the potential kickback violation pursuant to an existing corporate integrity 
agreement. According to the disclosure, TLC allegedly made commission payments for each patient 
referred to TLC by independent contractor sales representatives. The alleged payments were based 
on the type of services utilized by the patients referred by the sales representatives (e.g., increased 
commissions for patients with high utilization of therapy services). Two of the sales representatives 
were health care providers, one of whom, a former owner of a home health agency, allegedly received 
the majority of the commission payments. In addition to the monetary settlement, the original 
corporate integrity agreement will continue to apply to TLC.
Patient Dumping
Between October 1, 2004, and March 31, 2005, OIG collected civil monetary penalties of more 
than $242,000 from nine hospitals under the Emergency Medical Treatment and Labor Act, a statute 
designed to ensure patient access to appropriate emergency medical services. The following are 
examples of settlements involving alleged violations of this statute: 
  California  Dameron Hospital Association paid $75,000 to resolve allegations that it failed to 
screen 16 individuals who went to the hospitals emergency department. These individuals had a 
variety of complaints, including chest pain, abdominal pain, and vaginal bleeding, but left after 3 to 
6 hours of waiting without being seen.
In another California case, Kaiser Foundation Hospital paid $10,000 to resolve an allegation that 
it failed to provide an appropriate medical screening examination to a pregnant woman who went  14 | Centers for Medicare & Medicaid Services
to the emergency department complaining of abdominal and back pain. A labor and delivery nurse 
allegedly told the woman to go to the hospital where her physician had privileges.
  Alabama  Baptist Health, doing business as Baptist Medical Center South, paid $45,000 to resolve 
an allegation that it refused to provide an appropriate medical screening examination and stabilizing 
treatment to a critically ill woman who went to its emergency department initially complaining 
of pain after having fallen on her knee. After x-rays of her knee, she was given morphine and 
discharged. It was alleged that while waiting for transport, she became ill and her son requested 
further medical assistance, but none was given. The family took the patient home, but she returned 
later by ambulance in respiratory arrest and died.
  Missouri  Bothwell Regional Health Center paid $22,500 to resolve an allegation that it failed 
to provide an appropriate medical screening exam and transfer an individual experiencing a severe 
psychotic episode who was brought to the emergency department by a deputy sheriff. A nurse 
allegedly told the sheriff that the hospital did not admit psychiatric patients for involuntary treatment 
and provided no further assistance. The patient waited in the emergency department while the 
sheriff made arrangements to take him to another hospital 90 miles away, where he was admitted 
and treated.
Criminal and Civil Enforcement
One of the most common types of fraud perpetrated against Medicare, Medicaid, and other Federal 
health care programs involves the filing of false claims for reimbursement. False claims may be pursued 
under the civil False Claims Act and, in appropriate cases, under Federal and State criminal statutes. 
A description of these enforcement authorities can be found in Appendix F. The successful resolution 
of these matters often involves the combined investigative efforts and resources of OIG, FBI, Medicaid 
Fraud Control Units (MFCUs), and a variety of other law enforcement agencies.
OIG has the responsibility to assist the Department of Justice in bringing and settling cases under 
the civil False Claims Act. Many providers elect to settle their cases prior to litigation. As part of 
their settlements, providers often agree to enter integrity agreements with OIG to avoid exclusions 
and to be permitted to continue participation in Medicare, Medicaid, and other Federal health care 
programs. These agreements are monitored by OIG and require the providers to establish new or 
enhance existing compliance programs. The compliance programs are designed, in part, to prevent a 
recurrence of the underlying fraudulent activities.
In the 6 months ending March 31, 2005, the Government negotiated $1 billion in civil and administrative 
settlements related to Medicare, Medicaid, and other Federal health care programs. Some of these 
successful settlements, as well as notable criminal enforcement actions, are described below. Summaries 
are organized by the sector of the health care industry involved or by the nature of the offense.
Clinics
  Missouri  As part of a global settlement with the Government, Gambro Healthcare, Inc., owner 
and operator of renal dialysis clinics, agreed to pay over $350 million to resolve civil and criminal 
fraud allegations in the Medicare, Medicaid, and TRICARE programs. To resolve its civil liability, 
Gambro paid $310.5 million for allegedly submitting false Medicare claims and paying physicians  Centers for Medicare & Medicaid Services | 15
improper remuneration related to their medical director services. Gambro also agreed to allocate 
$15 million to resolve potential liability related to State Medicaid program claims and entered 
a comprehensive corporate integrity agreement with OIG. In addition to the civil settlement, 
Gambro Supply Corporation (GSC), a wholly owned subsidiary of Gambro, agreed to plead guilty 
to health care fraud, pay a $25 million criminal fine, and be permanently excluded from Medicare 
and other Federal health care programs. To circumvent prohibitions applicable to DME supply 
companies, GSC made false statements to Medicare, enabling Gambro allegedly to bill end stage 
renal disease related services and equipment at a higher amount. 
Prescription Drugs
  Pennsylvania  Schering-Plough Corporation agreed to pay $345.5 million as part of a global 
settlement with the Government and entered a 5-year corporate integrity agreement with OIG. 
As part of the settlement, Schering-Plough agreed to pay $293 million to resolve its civil and 
administrative liabilities in connection with alleged underpayment of rebates owed for its allergy 
drug Claritin under the Medicaid drug rebate program. The civil portion of the case focused on 
Schering-Ploughs alleged failure to include the value of certain incentives offered to two HMOs 
in the companys determination of the best price reported for purposes of the Medicaid drug 
rebate program. In doing so, Schering-Plough allegedly underpaid rebates due to the States and 
overcharged entities (such as community health centers) that purchased drugs at ceiling prices that 
are based on Medicaid drug rebate prices.
With regard to the criminal portion of the case, a subsidiary of Schering-Plough, the Schering Sales 
Corporation, pled guilty to a kickback charge and was sentenced to pay a $52.5 million criminal 
fine. The Information charged that Schering Sales Corporation paid a kickback of almost $2 million 
to keep Claritin on the formulary of an HMO. 
  Rhode Island  A pharmacy owner was sentenced to 37 months in prison and ordered to pay a 
$45,000 fine and $431,000 in restitution to Medicaid and private payors in connection with a criminal 
plea for conspiring to sell prescription drug samples to customers at his pharmacy and committing 
health care fraud. Specifically, the owner engaged in a scheme through which his co-conspirator, a 
practitioner, diverted free drug samples to the pharmacy. The pharmacy owner filled prescriptions 
using these diverted drug samples and submitted fraudulent claims to payors for these prescriptions. 
The practitioner also pled guilty to conspiracy to sell drug samples and health care fraud and was 
sentenced to 37 months in prison, ordered to pay a $45,000 fine, and held jointly responsible for 
the restitution amount. In a related civil action, the practitioner agreed to pay $90,000 to resolve 
his civil liability under the False Claims Act for allegedly having caused false claims to be submitted 
to Medicaid. The same practitioner had previously been convicted of diluting vaccines administered 
to immigrant patients, for which he was sentenced to 10 years in prison and ordered to pay a  
$465,000 fine and $157,000 in restitution to the immigrant patients.
Hospitals
  Pennsylvania  Temple University Physicians (TUP) agreed to pay almost $1.9 million for allegedly 
submitting false claims to the Medicare program. The Government alleged that TUPs employed 
physicians did not document or inadequately documented their presence during the provision of 
professional services by residents and interns and allegedly submitted claims for improperly upcoded 
evaluation and management services. 16 | Centers for Medicare & Medicaid Services
Durable Medical Equipment Suppliers
  Illinois  Novartis Nutrition Corporation (NNC) and OPI Properties, Inc. (OPI), wholly 
owned subsidiaries of Novartis Finance Corporation, which is a wholly owned subsidiary of 
Novartis Corporation, entered into a global criminal, civil, and administrative settlement with the 
Government. The settlement resolved a kickback investigation in which the Government alleged 
that NNC and OPI offered free enteral feeding pumps to induce others to purchase different enteral 
nutrition products. (Enteral therapy products are nutritional formulas that provide nourishment 
directly to the digestive tract of patients who cannot otherwise ingest enough calories to maintain 
health.) The Government also contended that NNC and OPI caused others to submit false claims to 
Medicare for enteral pumps and related enteral therapy products. In response to the Governments 
allegations, OPI agreed to pay a $4.5 million criminal fine and to be permanently excluded from 
participation in all Federal health care programs, and NNC and OPI agreed to pay $44.7 million in 
civil damages. In exchange for OIGs release of claims under the CMPL, NNC also agreed to pay 
$160,000 for alleged conduct related to obstructing a Federal audit. In exchange for a release from 
OIGs permissive exclusion authority, NNC agreed to enter a 5-year corporate integrity agreement 
designed to reform the sales and marketing practices of its enteral nutrition operations. 
In a related case from the same undercover investigation, TBC Products Inc., a wholesale distributor 
of enteral therapy products, and its direct parent, McKesson Medical-Surgical Minnesota Inc., also 
entered into a global criminal, civil, and administrative settlement with the Government. TBC 
agreed to pay a $4 million criminal fine, $3.3 million in civil damages, and to be permanently 
excluded from participation in all Federal health care programs. In exchange for OIGs release of 
claims under the CMPL, TBC agreed to pay $100,000 for alleged conduct related to obstructing 
a Federal audit. The Government also alleged that TBC offered free enteral feeding pumps to 
induce others to purchase different enteral nutrition products and caused others to submit false 
claims to Medicare for medically unnecessary enteral pumps and related enteral therapy products. 
In exchange for a release from OIGs permissive exclusion authority, McKesson agreed to enter a 
5-year corporate integrity agreement designed to reform the sales and marketing practices of its 
enteral feeding operations. 
  Florida  Polymedica Corporation and its wholly owned subsidiaries Liberty Medical Supply, Inc., 
and Liberty Home Pharmacy Corporation (collectively, Polymedica) agreed to pay $35 million 
and enter a 5-year corporate integrity agreement for allegedly violating the False Claims Act by 
submitting claims for diabetes and nebulizer related products without proper documentation. From 
1998 to 2002, Polymedica allegedly submitted claims for these products without signed, written 
doctors orders; documentation of medical necessity or treatment; dispensing orders; proof of 
delivery of supplies to beneficiaries; documentation of actual use of certain products prescribed and 
dispensed in excess of utilization guidelines; or possession of a valid assignment of benefits form.
  Texas  A DME company owner was sentenced to 46 months incarceration and ordered to pay  
$1.8 million in restitution for conspiracy to commit health care fraud. Through her company, the 
owner improperly billed Medicare for power wheelchairs and accessories from December 2002 to 
August 2003. Her scheme entailed billing for more expensive equipment than was actually provided 
or for equipment not provided at all. Most of the claims that her company submitted involved 
certificates of medical necessity purchased from third party recruiters of Medicare beneficiaries.  Centers for Medicare & Medicaid Services | 17
  Kentucky  An owner of a DME company was ordered to pay a $1,000 special assessment for 
knowingly and willfully paying kickbacks and bribes. The owner paid a doctor and his associate 
kickbacks to induce them to refer and qualify patients for oxygen and oxygen-related products from 
his company. In a parallel civil proceeding, the owner and his company agreed to pay $708,000, 
and the owner agreed to be permanently excluded from Federal health care programs for allegations 
related to the kickback scheme. 
Medicare Contractors
  Connecticut and New York  The Travelers Insurance Company and United Healthcare Insurance 
Company agreed to pay a total of $20.6 million to settle civil charges of defrauding the Government 
in connection with cost reimbursement and other payments that the Government alleged the 
companies improperly sought and received under Medicare. From October 1988 to January 1995, 
Travelers acted under various contracts with the Government as the fiscal intermediary for the 
Medicare Part A program for portions of Connecticut, Michigan, and New York; the Medicare 
Part B carrier for Connecticut, Minnesota, Mississippi, and Virginia; the Railroad Retirement 
Board carrier nationwide; and the DME carrier for Region A. United Healthcare carried out 
the same contracts from January 1995 through December 2000. The Government alleged that 
beginning around October 1989, Travelers devised a scheme whereby it knowingly falsified financial 
information in an effort to obtain greater reimbursement and performance incentive payments. 
When United Healthcare took over the contracts from Travelers in 1995, the Government alleged 
that United Healthcare engaged in the same improper billing practices. 
Home Health Agencies
  Texas  Four individuals were ordered to pay $2.9 million in joint and several restitution for various 
offenses related to their conspiracy to defraud Medicare. Three of the four individuals were also 
sentenced to time in prison. One was sentenced to 102 months, and the other two were sentenced 
to 70 months in prison. From late 1995 through May 2002, the defendants engaged in a home health 
care fraud scheme through which they obtained and concealed Medicare funds to which they were 
not entitled. 
  Florida  Several home health agencies (HHAs), Home Health Care, Inc., Home Health Services 
of South Florida, Inc. doing business as USA Home Health, Inc., Medcare Home Health Service, 
Inc., South Eastern Health Management Associates, Inc., and their owner agreed to pay nearly 
$828,000 for allegedly submitting improper costs to Medicare on home health cost reports between 
1995 and 1997. The Government alleged that the HHAs billed Medicare for medically unnecessary 
home health visits and consulting services purportedly performed by a former owner, when in fact 
the former owner did not perform the services. In addition to the settlement agreement, the HHAs 
and their owner agreed to enter into a 5-year corporate integrity agreement.
  Wisconsin  The director of nursing/administrator for an HHA was sentenced to 7 months in 
jail and was ordered to pay a fine and special assessment totaling $1,600 for health care fraud. The 
director also agreed to pay $40,000 as part of a civil settlement and to be excluded for 10 years 
from all Federal health care programs. The HHA official was the 13th defendant sentenced for 
involvement in a scheme to defraud the Wisconsin Medicaid program. The other 12 defendants 
sentenced in this case were former HHA employees also guilty of health care fraud. The defendants 
scheme involved preparing fictitious time reports and charting forms indicating that personal care 
workers had provided home health services during periods when they had not. 18 | Centers for Medicare & Medicaid Services
Nursing Homes
  Illinois  Maxwell Manor Nursing Home, ABS Long-Term Care Management Co., Inc. (ABS), 
MBA-LTC, Inc., and four of their owners agreed to pay $1.6 million for alleged failure of care to 
their nursing home residents. Maxwell Manor is no longer in operation because CMS terminated 
the facility as a result of the poor care. In addition to the settlement agreement, ABS and its owners 
agreed to enter a 5-year corporate integrity agreement that requires them to pay for an outside 
expert to monitor the quality of care provided to the residents of their facilities.
  Louisiana  The former owner of a nursing home management company was sentenced to 37 months 
imprisonment for health care fraud and pension fraud. The Department of Justice obtained an order 
for the owner to forfeit his personal residence, retirement estate, and construction equipment used at 
his retirement estate. The court ordered that the amount of restitution owed by the owner is limited 
to the net proceeds from the sale of these properties forfeited to the Government. For his own 
personal use, the former owner diverted Medicare and Medicaid monies paid to his three nursing 
homes for residents care. Because of his diversion of these funds, the facilities were inadequately 
staffed and forced to do without certain medical and personal care items. In addition, he claimed 
on cost reports that he had paid vendors and liquidated liabilities for rehabilitation and pharmacy 
services when he had actually diverted these dollars for his own personal use. The former owner 
also failed timely to deposit funds withheld from employees paychecks, and as administrator of the 
pension plan, made unauthorized loans to himself to pay the debts of his construction company and 
retirement estate. 
Practitioners 
  Florida  Radiology Regional Center, P.A., agreed to pay $2.5 million and to enter a 5-year 
corporate integrity agreement for allegedly submitting false claims to Medicare between 1996 
and 2003. The claims involved alleged billing for services that were not ordered by the treating 
physicians, upcoding of claims, and unbundling of services billed. 
  Ohio  A podiatrist was sentenced to concurrent terms in prison, under which he will serve  
11 years and 3 months in a Federal detention facility, and was ordered to pay $1.8 million in restitution 
for conspiracy, health care fraud, false statements, and bank fraud. Following his 1998 conviction 
for health care fraud, the podiatrist structured and implemented a fictitious transaction for the 
purported sale of his podiatry practice to circumvent his exclusion and the reporting requirement of 
his court-ordered supervised release. He also created a management company, designating another 
individual as the owner so that he could covertly direct and receive income from the operation of 
both companies. The podiatrists conviction for bank fraud resulted from materials that he submitted 
under false pretenses and false representations he made to a mortgage company to purchase a new 
home. In addition, he used fraudulently obtained Medicare funds for the down payment and monthly 
mortgage payments. 
  California  A clinical psychologist was sentenced to 3 years in prison and ordered to pay $250,000 
in restitution and a $2,000 special assessment fee. The psychologist fraudulently billed Medicare 
for psychological testing, psychological evaluations, and psychotherapy services not rendered to 
Medicare beneficiaries with developmental disabilities. He submitted claims under both his own 
Medicare provider identity and a fraudulent group provider identity that he created in an attempt  Centers for Medicare & Medicaid Services | 19
to avoid detection. He also created four fictitious businesses that he used in an elaborate scheme to 
claim his Medicare earnings as business expenses and avoid paying income taxes. 
  Idaho  The owner and an employee of a mental health practice were sentenced for their roles in a 
scheme to bill Medicaid for services that were not provided and/or not provided in accordance with 
State law. The owner was sentenced for conspiracy to commit health care fraud, and the employee 
was sentenced to 21 months incarceration and ordered to pay $2,600 in special assessments for 
health care fraud and conspiracy. They were also ordered to pay $129,000 in joint and several 
restitution. The two conspired to bill Medicaid for case management services they did not render. To 
bill the program, they obtained Medicaid numbers from friends, neighbors, and family members. 
Medicaid Fraud Control Units
Currently, 48 States and the District of Columbia have Medicaid Fraud Control Units (MFCUs), which 
investigate and prosecute or refer for prosecution providers charged with defrauding the Medicaid 
program or abusing or neglecting patients. In FY 2004, OIG provided oversight for and administration 
of approximately $131 million in Federal grant awards to the units.
FY 2004 was a year of exceptional achievement for the 49 MFCUs. Collectively, they obtained a 
total of 1,160 convictions and recouped more than $572 million in monetary recoveriesmore than 
double the $268 million recouped in FY 2003. Most of the FY 2004 recoveries are attributable to 
global settlements reached with pharmaceutical companies, usually working in concert with OIG and 
the Department of Justice. However, the MFCUs cases cover the gamut of fraud perpetrated against 
the Medicaid program, including billing for services not rendered, paying kickbacks, upcoding claims 
to indicate higher levels of service than provided, and laundering Medicare and Medicaid proceeds 
obtained through the fraud. 
In FY 2005, OIG is providing oversight for and administration of approximately $143.9 million in 
Federal grant funds. Examples of cases worked jointly by OIG with MFCUs during this semiannual 
period include:
  Florida  The owner of a medical billing company was sentenced to 18 months in prison and 
ordered to pay over $2.4 million in restitution for health care fraud. The owner submitted claims 
to Medicare and Medicaid for physician evaluation and management services that were not rendered 
and subsequently submitted false medical records to Medicare documenting that the services 
were provided. The claims were submitted using the provider number of a physician without his 
knowledge. This investigation involved OIG and the Florida MFCU. 
  Ohio  A chiropractor was sentenced to 1 year incarceration and ordered to pay $79,000 in 
restitution for health care fraud. The chiropractor committed numerous fraudulent acts against the 
Medicare, Medicaid, and Ohio Bureau of Workers Compensation programs. Regardless of the actual 
service performed, he billed all services to Medicare as chiropractic manipulative treatments, the 
only service Medicare authorizes for reimbursement for chiropractors. He also had an extensive list 
of patients for whom he billed services but never actually treated, and provided medical excuses for 
patients to miss work in exchange for allowing him to bill their insurance carrier. This investigation 
involved OIG, the Ohio MFCU, the United States Postal Inspection Service, and the Ohio Bureau 
of Workers Compensation.  Public Health Agencies
The activities conducted and supported by HHS public health agencies represent this countrys primary 
defense against acute and chronic diseases and disabilities. These programs provide the foundation for 
the Nations efforts in promoting and enhancing the continued good health of the American people.
Public health agencies within the Department include:
National Institutes of Health (NIH)
Food and Drug Administration (FDA)
Centers for Disease Control and Prevention (CDC)
Health Resources and Services Administration (HRSA)
Indian Health Service (IHS)
Agency for Toxic Substances and Disease Registry (ATSDR)
Agency for Healthcare Research and Quality (AHRQ)
Substance Abuse and Mental Health Services Administration (SAMHSA)
OIG continues to examine the policies and procedures of these agencies to determine whether appropriate 
controls are in place to guard against fraud, waste, and abuse. These activities include preaward and 
recipient capability audits and evaluations. This oversight work has provided valuable recommendations 
to program managers for strengthening the integrity of agency policies and procedures and improving 
program performance.
21 22 | Public Health Agencies
Public Health Agency-Related Reports
Select Agent Security at Universities
In 2002, Federal regulations significantly expanded security requirements for institutions that handle 
deadly pathogens known as select agents. OIG is reviewing universities implementation of those 
requirements, including whether the universities have (1) designated a person with authority and 
responsibility to implement the regulations, (2) restricted access to individuals with approved risk 
assessments from the Department of Justice, (3) developed explicit security plans based on threat 
and risk assessments, and (4) maintained accountability over select agents using detailed access and 
inventory records.
To date, OIG has issued reports to five universities. After issuing reports to all 15 schools selected for 
review, OIG will develop a summary report for public dissemination. 
Food and Drug Administrations Bone Mass Study
In response to a request by the FDA Commissioner, OIG reviewed aspects of an FDA clinical study 
that examined dietary supplements ability to increase bone mass. (FDA had halted the study because 
of low participation.) OIG sought to determine if FDA could do more to locate the studys allegedly 
missing medical folders and whether there was an accurate and supportable financial report detailing 
the studys transactions. Regarding the medical folders, OIG concluded that additional search would 
not be useful. The exact number of folders and their contents may never be known because FDA did 
not establish clear responsibilities for creating, updating, or filing the folders in question. The lapse 
also poses an ongoing risk that medical information on the subjects involved in the study could be 
released without their authorization. Regarding the financial accounting issue, OIG found inaccurate 
and unsupported entries in information that FDA provided.
OIG recommended a series of steps to correct some of the accounting deficiencies in the study. OIG 
also recommended that FDA develop and implement management controls to properly record and 
report costs of studies similar to the bone mass study. FDA concurred with OIGs recommendations 
to correct these issues. (A-03-03-00378)
Credentialing and Privileging at Indian Health Service Hospitals
At the request of IHS, OIG reviewed credentialing, privileging, and personnel suitability practices 
at three IHS-operated hospitals. Industry-wide standards and IHS policy require credentialing and 
privileging reviews of medical practitioners, and the Indian Child Protection and Family Violence 
Prevention Act requires background investigations of all IHS employees and contractors. 
  For the 52 practitioners reviewed, a hospital in New Mexico did not verify the credentials for 26 
practitioners to determine their current competence, did not ensure that 14 practitioners had 
current privileges (lapsed periods ranged from 6 days to 6 months), and did not request a background 
investigation of 23 practitioners. (A-06-04-00024)
  At a hospital in Oklahoma, OIG found that, for the 23 practitioners reviewed, the hospital did not 
verify the credentials for 7 to determine their current competence or ensure that 17 had current 
privileges, with lapsed periods ranging from 2 days to 34 months. (A-06-04-00038) Public Health Agencies | 23
  At another hospital in Oklahoma, OIGs review of 34 practitioners found that the hospital did 
not verify the credentials for 11 practitioners before they provided patient care or ensure that 
25 practitioners had current privileges, with lapsed periods ranging from 3 days to 4 years.  
(A-06-04-00037)
In each of these cases, the hospitals management had not ensured that the credentialing and privileging 
review processes received the necessary level of priority in terms of management attention and other 
resources. OIG recommended that IHS ensure that the hospitals establish a system to complete 
credentialing and privileging reviews in a timely manner and assign sufficient resources to those 
reviews. IHS agreed with the OIG recommendations and implemented corrective actions.
National Institute of Environmental Health Sciences Superfund
The National Institute of Environmental Health Sciences receives Superfund money to carry out training 
and research functions mandated by the Comprehensive Environmental Response, Compensation, and 
Liability Act. Pursuant to the Act, OIG audited the Institutes Superfund obligations and disbursements 
for FY 2003. The audit determined that these funds were administered in accordance with applicable 
laws and regulations. (A-04-04-01004)
Health Education Assistance Loan Defaults
Through the Health Education Assistance Loan (HEAL) program, HRSA guarantees commercial 
loans to students seeking education in health-related fields of study. The students are allowed to defer 
repayment of these loans until after they have graduated and begun to earn an income. Although the 
Departments Program Support Center (PSC) takes all steps it can to ensure repayment, there are 
loan recipients who ignore their indebtedness.
After PSC has exhausted efforts to secure repayment of a debt, it declares the individual in default. 
Thereafter, the Social Security Act permits, and in some instances mandates, exclusion from 
Medicare, Medicaid, and all Federal health care programs for nonpayment of these loans. Exclusion 
means that the individual may not receive reimbursement under these programs for professional 
services rendered. During the period covered by this report, 44 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 their default may enter into settlement agreements, 
whereby the exclusion is stayed while they pay specified amounts each month to satisfy the debt. If 
they default on these settlement agreements, the individuals can then be excluded until the entire debt 
is repaid and cannot appeal these 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 1,892 individuals have taken 
advantage of the opportunity to enter into settlement agreements or completely repay their debts. This 
figure includes the 49 individuals who have entered into such a settlement agreement or completely 
repaid their debts during this reporting period. The amount of money being repaid through settlement 
agreements or through complete repayment totals $136.6 million. Of that amount, $4 million is 
attributable to this reporting period.  24  | Public Health Agencies
In the following examples, each individual entered into a settlement agreement to repay the amount 
indicated:
  Texas Osteopath  $363,000
  New York Podiatrist  $362,000
  Louisiana Osteopath  $302,000
  Massachusetts Dentist  $202,000
  California Dentist  $201,000 Administration for Children and Families  
and Administration on Aging
The Administration for Children and Families (ACF) provides direction and funding for programs 
designed to promote stability, economic security, responsibility, and self-support for the Nations 
families. Some of the major programs include Temporary Assistance for Needy Families (TANF), Child 
Support Enforcement, Foster Care, Family Preservation and Support, Head Start, and the Child Care 
and Development Block Grant. OIG reviews of these programs focus on ways to increase the efficient 
use of program dollars; to more effectively implement programs; to better coordinate programs among 
the Federal, State, and local governments; and to strengthen States financial management practices.
The Administration on Aging (AoA) awards grants to States for establishing comprehensive community-
based systems that assist the elderly in maintaining their independence and in remaining in their homes 
as long as possible. Socially and economically disadvantaged elderly and low-income minority elderly 
are targeted for assistance, including supportive and nutrition services, education and training, low-
cost transportation, and health promotion. OIG has reported opportunities for program improvements 
to target the neediest for services, expand available financial resources, upgrade data collection and 
reporting, and enhance program oversight. 
25 26 | Administration for Children and Families and Administration on Aging
Administration for Children and Families-Related Reports
Oversight of States Subgrantee Monitoring in the Foster Care Program
OIG reviewed monitoring files and interviewed staff in six States that administer over 45 percent of 
the $5 billion that ACF awards annually for the foster care program. OIG found that the monitoring 
systems used by three of the six States were inadequate, based on criteria OIG developed for this study. 
In addition, three of the six States did not communicate required information to subgrantees. Further, 
OIG found that oversight of States systems for monitoring subgrantees received minimal attention 
by ACF. In fact, ACFs only direct tool for overseeing States monitoring of subgrantees is the single 
audit (under 31 U.S.C.  7502), and this inspection found major concerns with its scope, quality, and 
functioning as a tool for assessing States subgrantee monitoring. 
OIG recommended that ACF hold States accountable for adhering to grants management requirements 
relating to the oversight of subgrantees by developing a system for routinely communicating 
grants management responsibilities to States, developing specific requirements that clarify States 
responsibilities for monitoring of subgrantees, and utilizing existing oversight mechanisms to ensure 
States have systems in place to adhere to grants management requirements. OIG also recommended that 
ACF work with HHS to make the single audit a more effective tool for overseeing States monitoring of 
subgrantees by supporting and promoting intergovernmental initiatives to improve the single audit.
A companion report on monitoring subgrantees found that States program monitoring typically 
consisted of an onsite visit to subgrantees, and fiscal monitoring typically consisted of an independent 
audit. All six States relied on rate setting to manage foster care expenditures. In some States, these 
monitoring mechanisms are minimal or not implemented as intended. Given the extent to which States 
appear to be using subgrantees to carry out fundamental foster care services, lax monitoring can have 
a significant impact. 
OIG suggested that States with limited monitoring systems consider bolstering their program and 
fiscal monitoring. Also, ACF could consider assisting States by providing expertise and guidance on 
subgrantee monitoring and facilitating communication among States. 
A third report outlined measurable criteria OIG developed in order to assess States monitoring of foster 
care subgrantees. The report explained the process OIG undertook to develop these criteria, which was 
based on Federal grants management requirements. It also explained the methodology that OIG used to 
apply the criteria to States monitoring of subgrantees in the foster care program. OIG anticipates that 
this protocol might be useful to ACF, as well as other grants managers in HHS, in their efforts to oversee 
and assess States subgrantee monitoring. 
In response to the reports, ACF concurred with the objectives of the OIGs recommendations and noted 
its intended actions. (OEI-05-03-00060; OEI-05-03-00061; OEI-05-03-00062)
Title IV-E Training Costs in Maine
Maine did not comply with guidelines for claiming Federal reimbursement for maintenance, administrative, 
and training costs for the Title IV-E foster care and adoption assistance programs. Specifically, State 
officials did not follow ACFs policies on allocating training costs and calculating the Federal share of  Administration for Children and Families and Administration on Aging | 27
indirect costs and did not establish correct procedures for claiming costs. As a result, the State made a 
net overstatement of $3 million in its Federal claim.
OIG recommended that Maine make a $3 million adjustment, comply with ACF guidance on cost 
calculation and allocation, and improve its procedures for preparing claims. The State agreed with the 
recommendations. (A-01-03-02503) 
Child Support Enforcement 
The detection, investigation, and prosecution of noncustodial parents who fail to pay court-ordered 
child support is a priority for OIG. Working with the Office of Child Support Enforcement (OCSE), 
the Department of Justice, U.S. Attorneys Offices, U.S. Marshals Service, and other Federal, State, 
and local partners, OIG develops ways to expedite the collection of child support. Since 1995, OIG has 
opened 2,844 investigations of child support cases nationwide, which have resulted in 1,043 convictions 
and court-ordered restitution and settlements of $53 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 through coordinating law enforcement, criminal justice, and child support 
office resources. See the child support task forces table below.
 Task Force Table
Task Force Regions Task Force Headquarters Task Force States
Great Plains Topeka, Kansas Iowa, Kansas, Missouri, Nebraska, North 
Dakota, South Dakota
Mid-Atlantic Baltimore, Maryland  Delaware, District of Columbia, Maryland, 
Pennsylvania, Virginia, West Virginia
Midwest Columbus, Ohio Illinois, Indiana, Michigan, Minnesota, Ohio,  
Wisconsin
New England Boston, Massachusetts Connecticut, Maine, Massachusetts, New 
Hampshire, Rhode Island, Vermont
Northeast New York, New York   New Jersey, New York, Puerto Rico, Virgin 
Islands
Pacific North Olympia, Washington  Alaska, Idaho, Oregon, Washington
Rocky Mountains  Denver, Colorado   Colorado, Montana, Utah, Wyoming
Southeast Atlanta, Georgia Alabama, Florida, Georgia, Kentucky, North 
Carolina, South Carolina, Tennessee
Southwest Dallas, Texas Arkansas, Louisiana, Mississippi,
New Mexico, Oklahoma, Texas
West Coast Sacramento, California Arizona, California, Hawaii, Nevada 28| Administration for Children and Families and Administration on Aging 
Central to the task forces are the screening units located in each task force region and staffed by 
investigative analysts from OIG and OCSE. The units receive child support cases from the States, 
conduct preinvestigative analyses of these cases through the use of databases, and then forward the 
cases to the investigative task force units, where they are assigned and investigated. The task force 
approach streamlines the process by which the cases best suited for criminal prosecution are identified, 
investigated, and resolved.
At this point, the task force units have received over 8,350 cases from the States. As a result of the work 
of the task forces, 517 Federal arrests have been executed and 489 individuals sentenced. The total 
ordered amount of restitution related to Federal investigations is $24.1 million. There have been 358 
arrests at the State level and 323 convictions or civil adjudications to date, resulting in $17.9 million 
in restitution being ordered. 
Investigations
OIG investigations of child support cases, nationwide, resulted in 62 convictions and court-ordered 
restitution and settlements of $2.4 million during this semiannual period. Examples of the Federal 
arrests, convictions, and sentences for failure to pay child support include the following:
  Missouri  A man was sentenced to 2 years in prison, 1 year probation, and ordered to pay $63,000 
in restitution for failure to pay child support for his two children since his 1990 divorce. To disguise 
his location and income, the individual used numerous aliases and Social Security numbers. He had 
been steadily employed since his divorce and in the last few years had earned annual incomes of 
approximately $100,000. He was also the co-owner of real property worth over $400,000, had 
received payouts from his 401(k) plan, and was part owner in an Internet art decal company. 
  Kentucky  A man was sentenced to 18 months incarceration with credit for time served while in 
Federal custody, 1 year supervised release, and ordered to pay $50,000 in restitution for failure to 
pay child support. The individual, whose child resides with the custodial parent in Virginia, moved 
and changed jobs frequently to avoid paying support. For over a year, he evaded two warrants from 
the State of Kentucky before his June 2004 arrest on a Federal warrant. 
  Alabama  A man was sentenced to 6 months home detention, 2 years probation, and ordered 
to pay $35,000 in restitution for failure to pay child support. While earning income in Alabama 
as a subcontractor and log home builder, he failed to pay support for his two children who live in 
Virginia. 
  Ohio  A man was sentenced to 5 years probation and ordered to pay $30,000 in restitution. In 
March 2003, he was charged in Ohio with failure to pay child support and later arrested in Arizona 
where he was living. At the time of his arrest, he was a self-employed document courier, although 
he previously worked as an optometrist. He had not made a support payment since July 1989. 
  West Virginia  A man was sentenced to 4 months imprisonment with credit toward his sentence 
for time served and 1 year supervised release for failure to pay child support. The individual, who is 
licensed by the State of Pennsylvania as a psychologist, was also ordered to pay $25,000 in restitution 
to the custodial parent of his four children.  General Oversight
 The Office of the Assistant Secretary for Budget, Technology and Finance (ASBTF) is responsible for 
developing and executing the Department of Health and Human Services (HHS) budget; ensuring that 
HHS performance measurement and reporting are in compliance with the Government Performance 
and Results Act; establishing and monitoring departmental policy for financial management (including 
debt collection, audit resolution, cost policy, and financial reporting); and developing and monitoring 
HHS information technology policy (including IT security). The Assistant Secretary is the Departments 
Chief Financial Officer and oversees the Departments Chief Information Officer. The Department 
also has the responsibility, by virtue of the magnitude of its funding, to negotiate the payment rates 
and methods that many outside entities, such as State and local governments, charge for administering 
HHS and other Federal programs.
The Office of the Assistant Secretary for Administration and Management (ASAM) is responsible 
for HHS policies regarding human resources, grants, and acquisition management. This office also 
oversees the Program Support Center, which provides a range of administrative services, such as human 
resources, financial management, and administrative operations.
OIG has general oversight responsibility for these activities. A related major responsibility derives 
from Office of Management and Budget Circular A-133, under which HHS is the cognizant agency to 
audit the majority of Federal funds awarded to major research schools and State and local government 
cost allocation plans. OIG also oversees the work of non-Federal auditors of Federal money at some 
6,700 entities, such as community health centers and Head Start grantees, as well as at State and local 
governments, colleges and universities, and other nonprofit organizations. OIG also is responsible for 
auditing the Departments financial statements.
OIG reviews audits, inspections, and studies performed by others, such as the Office of Management and 
Budgets Program Assessment and Rating Tool and reports of the Government Accountability Office. It 
takes these studies into account when planning its own work and examines management actions designed 
to correct the deficiencies cited in these prior studies.
29 30 | General Oversight
General Oversight-Related Reports
Departmental Financial Statement Audit 
The Chief Financial Officers Act (the Act) of 1990, as amended, requires OIG or an independent 
external auditor, as determined by OIG, to audit the HHS financial statements in accordance with 
applicable standards. Pursuant to the Act, auditors provided an unqualified opinion on the FY 2004 
HHS consolidated/combined financial statements. This means that for the sixth consecutive year, the 
statements were reliable and fairly presented. However, the report on internal controls noted two 
continuing material weaknesses: 
  Financial Systems and Processes  While the auditors observed some progress in preparing 
financial statements, the lack of an integrated financial management system(s) and weaknesses 
in internal controls made it difficult for HHS to prepare timely and reliable financial statements. 
Substantial manual processes, significant adjustments to reported balances, and numerous accounting 
entries recorded outside HHSs general ledger system were necessary. In addition, deficiencies were 
noted in the oversight of managed care organizations and financial data provided by the States for 
the Medicaid program. 
  Medicare Information Systems Controls  To administer the Medicare program and to process 
and account for Medicare expenditures, CMS relies on extensive information systems operations 
at its central office and Medicare contractor sites. Although improvement since the FY 2003 audit 
was noted, numerous general and application control weaknesses were identified in areas such as 
entity-wide security programs and access and change controls. 
As discussed in the financial statement report on compliance with laws and regulations, these material 
weaknesses also represented departures from certain Federal requirements. (A-17-04-00001)
Departmental Service Organizations 
To support the audit of the Departments FY 2004 financial statements, OIG contracted for examinations 
of several service organizations that provide common administrative, data processing, and accounting 
services to the operating divisions. In accordance with Statement on Auditing Standards No. 70, 
independent certified public accounting firms examined the organizations controls and tested their 
operating effectiveness. The results follow:
  Division of Payment Management, Program Support Center  Controls were suitably 
designed and operating with sufficient effectiveness. No significant exceptions were noted.  
(A-17-04-00009)
  Division of Financial Operations, Program Support Center  Controls were suitably 
designed and operating with sufficient effectiveness, with the exception of controls over the 
Information Technology Service Centers security program. (A-17-04-00011)
  Human Resources Service, Program Support Center  Controls were suitably designed and 
operating with sufficient effectiveness, with the exception of password controls on the computer 
network and certain deficiencies in the entity-wide security program. (A-17-04-00012) General Oversight | 31
  Center for Information Technology, National Institutes of Health  Controls were 
suitably designed and operating with sufficient effectiveness, with the exception of documentation 
and logging of change requests, authorizations, testing, and approval on Windows host platforms. 
(A-17-04-00010)
[Note: NIH is currently evaluating alternatives for correcting the Windows host deficiencies.]
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 
are required to have an annual organization-wide audit of all Federal money they receive. These audits 
are conducted by non-Federal auditors, such as public accounting firms and State auditors. OIG reviews 
the quality of these audits and assesses the adequacy of the entitys management of Federal funds. In 
the first half of FY 2004, OIGs National External Audit Review Center reviewed 1,117 reports that 
covered $772.7 billion in audited costs. Federal dollars covered by these audits totaled $230.3 billion, 
about $113 billion of which was HHS money.
OIGs oversight of non-Federal audit activity informs Department managers about the soundness of 
management of Federal programs and identifies any significant areas of internal control weakness, 
noncompliance, and questioned costs that require formal resolution by Federal officials. OIG identifies 
entities for high-risk monitoring, alerts program officials to any trends that could indicate problems in 
HHS programs, and profiles non-Federal audit findings of a particular program or activity over time 
to identify systemic problems. OIG also provides training and technical assistance to grantees and 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                               988
With major changes  90
With significant inadequacies  39
                     Total:  1,117
The 1,117 reports included recommendations for HHS program officials to take action on cost 
recoveries totaling $816,000, as well as 4,555 recommendations for improving management operations. 
In addition, these audit reports provided information for 83 special memorandums that identified 
concerns for increased monitoring by departmental management.
Resolving Recommendations
The tables that appear on the following pages are provided in accordance with section 5 of the Inspector 
General Act and indicate the dollar value of actions taken on OIG recommendations. 32 | General Oversight
Table 1: Reports with Questioned Costs
Number of  Dollar Value  Dollar Value 
Reports
Reports Questioned Unsupported
Section 1
For which no management decision  498 $1,882,675,000 $1,537,931,000
had been made by the beginning of the 
1
reporting period
Issued during the reporting period 91 $417,678,000 $7,475,000
Total Section 1 589 $2,300,353,000 $1,545,406,000
  
Section 2
For which a management decision was 
2,3
made during the reporting period  
Disallowed costs $265,990,000 $601,000
4
Costs not disallowed $178,418,000 $0
Total Section 2 161 $444,408,000 $601,000
Section 3
For which no management decision had 
been made by the end of the reporting 
period
Total Section 1   428 $1,855,945,000 $1,544,805,000
minus Total Section 2
Section 4
For which no management decision was  340 $1,450,505,000 $301,141,000
5
made within 6 months of issuance
* Details concerning footnotes can be found in Appendix D. General Oversight | 33
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   66 $7,657,216,000
1
beginning of the reporting period
Issued during the reporting period 11 $346,000,000
Total Section 1 77 $8,003,216,000
  
Section 2
For which a management decision was made during the  
reporting period 
Value of recommendations that were agreed to  
by management
Based on proposed management action 9 $510,765,000
Based on proposed legislative action
Value of recommendations that were not agreed to  
by management 2 $168,023,000
Total Section 2 11 $678,788,000
Section 3
For which no management decision had been made by the 
2
end of the reporting period
Total Section 1 minus Total Section 2 66 $7,324,428,000
* Details concerning footnotes can be found in Appendix D. 34 | General Oversight
Legislative and Regulatory Review and Development
Regulatory Review Functions
Section 4(a) of the Inspector General Act of 1978 requires that the Inspector General review existing 
and proposed legislation and regulations and make recommendations in this report concerning the 
impact on the economy and efficiency of the administration of the Departments programs and on 
the prevention of fraud and abuse. In reviewing regulations and legislative proposals, OIG uses as the 
primary basis for its comments the audits, inspections, investigations, and other activities highlighted 
in this and previous semiannual reports.
During this reporting period, OIG participated in the review and clearance of regulations relating to 
various provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA), including the Medicare Part D Prescription Drug Benefit, the Medicare Advantage program, 
and the electronic prescribing initiative. OIG offered comments and recommendations relating to 
potential fraud and abuse issues
Regulatory Development
OIG is responsible for the development and publication of a variety of sanction regulations addressing 
civil money penalty and program exclusion authorities administered by the Inspector General, as well 
as regulations governing the advisory opinion process and safe harbors related to the anti-kickback 
statute. During this semiannual reporting period, OIG:
  Published revised final regulations addressing OIGs authority to impose civil money penalties 
against endorsed sponsors under the Medicare prescription drug discount card program that 
knowingly engage in false or misleading marketing practices, overcharge program enrollees, or 
misuse transitional assistance funds.
  Finalized and published revised Healthcare Integrity and Protection Data Bank regulations addressing 
data collection reporting requirements. The rule specifically clarified the types of personal numeric 
identifiers that may be reported to the data bank in connection with adverse actions. 
  In accordance with section 431, developed interim final regulations establishing regulatory standards 
for a new safe harbor under the Federal anti-kickback statute for certain goods, items, services, 
donations, and loans provided by individuals and entities to certain health centers funded under 
section 330 of the Public Health Service Act. 
In addition, during this period, OIG continued to develop and publish Federal Register notices that 
serve to reflect OIG policy and procedures with regard to compliance program guidance and other 
OIG administrative matters. During this semiannual period, OIG:
  Developed and published final Supplemental Compliance Program Guidance for Hospitals that 
provides voluntary guidelines to assist hospitals and hospital systems in identifying significant risk 
areas and in evaluating and, as necessary, refining ongoing compliance efforts (see p. 10).  General Oversight | 35
  In accordance with section 205 of the Health Insurance Portability and Accountability Act, published 
OIGs annual solicitation notice soliciting proposals and recommendations for developing new 
and modifying existing safe harbor provisions under the Federal anti-kickback statute, as well as 
developing new OIG Special Fraud Alerts.
  Developed and cleared a Federal Register notice setting forth specific revisions to part A, chapter 
AF of OIGs Statement of Organization, Functions, and Delegations of Authority. The revised 
organizational statement reflects a recent realignment of certain functions for carrying out the 
statutory requirements for operating OIG. 
Employee Fraud and Misconduct
Most individuals employed by HHS are dedicated, honest civil servants. Occasionally, however, 
individuals violate their ethical and fiduciary responsibilities. OIG conducts or oversees investigations 
of serious allegations of wrongdoing by Department employees. For example:
  South Dakota  A former IHS medical records technician was fined $6,000 for false statements 
involving Federal health care programs. In an apparent attempt to save time and avoid workload 
backlogs, the technician falsified diagnosis codes and electronic patient information for patients 
treated by health care providers at the IHS hospital where she worked. The majority of these patients 
were Medicare and Medicaid beneficiaries. 
Prosecutions
During this semiannual reporting period, OIG investigations resulted in 258 successful criminal 
actions. Also during this semiannual period, 755 cases were presented for criminal prosecution to the 
Department of Justice and, in some instances, to State and local prosecutors. Criminal charges were 
brought by prosecutors against 268 individuals and entities.
In addition to terms of imprisonment and probation imposed in the judicial processes, $1.1 billion was 
ordered or returned as a result of OIG investigations during this reporting period. Civil settlements 
from investigations resulting from audit findings are included in this figure. Appendixes Appendix A
Savings  Achieved  Through  Policy  and  Procedural  Changes 
Resulting  From  Audits,  Investigations,  and  Inspections  
October 1, 2004, Through March 31, 2005
This schedule highlights savings resulting from the Office of Inspector General (OIG) efforts to prevent 
unnecessary obligations for expenditures of agency funds or to improve agency systems and operations. These 
achievements depend greatly on the contributions of and actions by others, such as departmental officials and 
Congress. The amounts shown represent funds or resources that will be available to be used more efficiently 
as a result of documented measures taken in response to OIG audits, investigations, and inspections. Those 
include actual reductions in unnecessary budget outlays; deobligations of funds; reductions in costs incurred 
or preaward reductions in grants or contracts; and reduction and/or withdrawal of the Federal portion of 
interest subsidies on loans or loan guarantees, insurance, or bonds. 
Legislative savings are annualized amounts based on Congressional Budget Office (CBO) estimates consistent 
with CBO savings. Savings from the Medicare provisions of the Balanced Budget Act (BBA) of 1997 were 
adjusted downward to reflect related provisions of the Balanced Budget Refinement Act (BBRA) of 1999. 
Administrative savings are calculated based on departmental estimates, where available, for the year in 
which the change is effected and for subsequent years, if applicable.
Total savings from these sources amount to $15,593.8 million for this semiannual period.
Savings
OIG Recommendation Implementing Action (millions)
CENTERS FOR MEDICARE & MEDICAID SERVICES
State Enhanced Payments Under Medicaid  On January 12, 2001, CMS issued revisions  $5,100
Upper Payment Limit Requirements: to the upper payment limit regulations which, 
States are allowed to make enhanced payments to  among other things, created new payment 
local government providers as long as aggregate  limits for local government-owned providers. 
State payments for each class of service do not  This final rule will significantly affect a States 
exceed the amount that would have been paid under  ability to reap windfall revenues by reducing
Medicare cost principles. OIG found that States use  the available funding pool from which to make 
of intergovernmental transfers maximized Federal  enhanced payments to local government-
Medicaid reimbursements. OIG also found that  owned providers.
enhanced payments were not based on the cost of 
providing the service, nor did OIG find a direct 
relationship in the use of these funds to increase the 
quality of care.  (A-03-00-00216)
 39 40 | Appendix A 
Savings
OIG Recommendation Implementing Action (millions)
Medicare Part A Payments for Skilled  Section  4432  of  the  BBA  of  1997  (as  $4,550
Nursing Facilities: amended by the BBRA of 1999) established a 
Services  should  be  bundled  into  Medicare  and  prospective payment for SNF care. Covered 
Medicaids payments to nursing homes; Part B  services include Part A SNF benefits and all 
payments for services normally included in the  services for which payment may be made 
extended  care  benefit  should  continue  to  be  under Part B (except physician and certain 
examined for appropriateness; and legislation should  other professional services) during the period 
prohibit entities other than the skilled nursing facility  when the beneficiary is provided covered SNF 
(SNF) from seeking payment on behalf of persons  care.
in Part A covered SNF stays for enteral nutrition, 
incontinence care, and surgical dressings, and limit 
Medicare coverage of these services to Part A. In 1997 
congressional testimony, OIG supported establishing 
a prospective payment system and consolidated 
billing.  (OEI-03-94-00790; OEI-06-92-00863; 
OEI-06-92-00864; A-17-95-00096;  A-14-98-00350)
Medicare Secondary Payer Extensions: The database capacity was achieved through  $2,340
Establish a centralized database of information  the authorization of a data exchange between 
about  private  insurance  coverage  of  Medicare  the Social Security Administration and CMS 
beneficiaries. Extend the Medicare secondary payer  and between the Internal Revenue Service 
(MSP) provision to include end stage renal disease  and CMS. Section 4631 of the BBA of 1997 
(ESRD) beneficiaries as long as the individual has  permanently extended current MSP policies 
employer-based coverage available.   for beneficiaries who are disabled and have 
(OEI-07-90-00760;OEI-03-90-00763; A-10-86-62016;  ESRD. For ESRD beneficiaries, the statute 
A-09-89-00100; A-09-91-00103; A-14-94-00391;  also increased the time period Medicare is 
A-14-94-00392) secondary payer from 18 to 30 months.
Capital-Related Costs of Hospital Services: Section 4402 of the BBA of 1997 provided  $1,220
Extend  congressionally  mandated  reductions  in  for rebasing of capital payment rates for 
rehospital costs. CMS should seek legislative authority  an  additional  reduction  in  the  rate  of  
to continue mandated reductions in capital payments;  2.1 percent.
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 of 1997 reduced  $900
CMS  should  reduce  Medicare  payments  for  Medicare  reimbursement  for  oxygen  
oxygen concentrators and ensure that beneficiaries  25 percent until 1999 and by 30 percent 
receive necessary care and support in connection  for each subsequent year; section 4552(c) 
with their oxygen therapy.  (OEI-03-91-00711;   mandated that the Secretary develop service 
OEI-03-91-001710) standards for oxygen provided in the home. Appendix A | 41
Savings
OIG Recommendation Implementing Action (millions)
Medicare Laboratory Reimbursements: Section 4553 of the BBA of 1997 provided for  $700
In July 1989, OIG recommended that CMS take  reducing fee schedule payments by lowering 
advantage of economies of scale present in the  the cap to 74 percent of the median for 
laboratory  industry  by  considering  competitive  payment amounts, with no inflation update 
bidding or making reductions to the fee schedule  for 1998 through 2002. The MMA of 2003 
amounts.  In  January  1990,  OIG  recommended  mandated that the annual adjustment to the 
that CMS seek legislation to allow across-the-board  clinical laboratory fee schedule for 2007 
adjustments in Medicare laboratory fee schedules,  through 2008 shall be 0 percent.
bringing them in line with the prices that laboratories 
charge physicians in a competitive marketplace. In a 
January 1996 followup, OIG found that Medicare 
continued to pay more to clinical laboratories than 
physicians for the same tests. Although the Omnibus 
Budget Reconciliation Act 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 physicians pay for the same clinical 
laboratory services.  (OEI-02-89-01910; 
A-09-89-00031; A-09-93-00056)
Payments for Durable Medical Equipment: Section 4551(b) of the BBA of 1997 froze  $500
Excessive Medicare Part B payments for enteral and  Medicare payments for enteral and parenteral 
parenteral nutrition, equipment, and supplies should  nutrition  and  supplies  for  1998  through 
be reduced, or competitive acquisition strategies  2002 and simplified the process used to 
should be employed.  (OEI-03-94-00021;  reduce inherently unreasonable prices by  
OEI-06-92-00866; OEI-03-96-00230;  15 percent.
OEI-06-92-00861)
Medicare Payments to Hospitals for Bad  Section 4451 of the BBA of 1997 reduced bad  $160
Debt: debt payment to providers by 25 percent in  
CMS should seek legislative authority to modify the  FY 1998, 40 percent in FY 1999, and 45 percent 
bad debt payment policy.  (A-14-90-00039) in later years. The Benefits Improvement and 
Protection Act of 2000 subsequently reduced 
the reduction to 30 percent.
Medicaid Drug RebatesSales to  CMS issued Medicaid Drug Rebate Program  $80.7
Repackagers Excluded From Best Price  Release #47 in July 2000 to make it clear to 
Determinations: manufacturers not to inappropriately exclude 
Medicaid rebates were lost because sales to HMOs  other prices from best prices, as required by 
were improperly excluded from drug manufacturers  section 1927 of the Social Security Act.
best price determinations in FYs 1998 and 1999. CMS 
should require drug manufacturers who 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) 42 | Appendix A 
Savings
OIG Recommendation Implementing Action (millions)
Medicare Payments for Prescription Drugs: Section 4556 of the BBA of 1997 reduced  $30
CMS  should  reexamine  its  Medicare  drug  Medicare payments for drugs, which are 
reimbursement  methodologies,  with  a  goal  of  paid based on the average wholesale price, by  
reducing payments as appropriate.  5 percent.
(OEI-03-95-00420; OEI-03-94-00390; 
OEI-03-97-00290)
VARIOUS OPERATING DIVISIONS
Results of Investigations: The operating division took action, based on  $13.1
In addition to any restitution, fines, settlements or  the results of OIG investigations, to suspend 
judgments, or other monetary amounts resulting  or  terminate  payments  to  the  offending 
from successful investigations, additional monetary  individual or entity.
losses are avoided through timely communication of 
the investigative results to the operating division. Appendix B
Unimplemented Office of Inspector General Recommendations 
to Put Funds to Better Use
This schedule represents potential annual savings or one-time recoveries that could be realized if OIG 
recommendations were enacted by Congress or the Department through legislation, regulation, or 
management action. In some cases, these recommendations are beyond the direct authority of the 
departmental operating division. Congress develops savings over a 5- or 10-year budget cycle that result 
in far greater dollar impact than the annual estimates shown in the table below. The same can be said for 
regulations issued and management actions taken by the Department. Savings are based on preliminary OIG 
estimates and reflect economic assumptions that are subject to change. The magnitude of the savings may 
increase or decrease because of interactive effects if changes are enacted together.
More detailed information may be found in OIGs Red Book. (See http://oig.hhs.gov.)
Savings
OIG Recommendation Status (millions)
CENTERS FOR MEDICARE & MEDICAID SERVICES
Clinical Laboratory Tests:  CMS  initially  agreed  with  the  first  $1,130*
CMS should develop a methodology and legislative  recommendation but not the second. The 
proposal to pay for tests ordered as custom panels  BBA required the Secretary to request that 
at substantially less than the full price for individual  the Institute of Medicine (IOM) study Part B 
tests and study reinstating the beneficiary coinsurance  laboratory test payments. As a result of IOMs 
and deductible provisions for laboratory services as a  recommendations, the Medicare Prescription 
means of controlling utilization.  (A-09-89-00031;  Drug,  Improvement,  and  Modernization 
A-09-93-00056) Act of 2003 mandates that CMS conduct 
a demonstration that applies competitive 
bidding  for  clinical  laboratory  services. 
The initial report to Congress is due by  
December 31, 2005.
Outpatient Surgery Rates: CMS agreed to consider seeking authority  $1,100
CMS should seek authority to set rates that are  to set rates that are consistent across sites as 
consistent across sites and reflect only the costs  it develops its legislative program. CMS also 
necessary for the efficient delivery of health services  issued a notice of proposed rulemaking, which 
and remove the procedure codes that meet its criteria  has not been finalized, that would remove 
for removal from the Ambulatory Surgery Center list  certain procedure codes from the ASC list of 
of covered procedures.  (A-14-89-00221;  covered procedures. 
A-14-98-00400; OEI-05-00-00340)
*This savings estimate would result from the copayment; the savings estimate for panels has yet to be determined.
 43 44 | Appendix B 
Savings
OIG Recommendation Status (millions)
Medicare Payments for Mental Health  CMS  concurred  and  has  initiated  some  $676
Services: efforts, particularly regarding community 
CMS should ensure that mental health services are  mental health centers. OIG is reviewing this 
medically necessary, reasonable, accurately billed,  area to determine if substantial errors are still 
and ordered by an authorized practitioner by using a  present.
comprehensive program of targeted medical reviews, 
provider  education,  improved  documentation 
requirements, and increased surveillance of mental 
health services.  (OEI-02-99-00140; OEI-03-99-00130;
A-04-98-02145; A-01-99-00507; A-01-99-00530)
Payment Policy for Medicare Bad Debts: The BBA of 1997 provided for some reduction  $340
OIG presented four options for CMS to consider,  of bad debt payments to providers. The BIPA 
including the elimination of a separate payment for  of 2000 subsequently adjusted upwards the 
bad debts, the offset of Medicare bad debts against  percentage of total hospital bad debt that 
beneficiary Social Security payments, the limitation  would be reimbursed. However, additional 
of bad debt payments to prospective payment system  legislative changes are needed to implement 
hospitals that are profitable, and the inclusion of a bad  the modifications that OIG recommended.
debt factor in the diagnosis- related group rates. CMS 
should seek legislative authority to further modify 
bad debt policies. 
(A-14-90-00339)
Cost Effectiveness of Pay and Chase  CMS  agreed  that  States  cost-avoidance  $185
Methods for Medicaid Pharmacy Third- waivers should be reexamined and has made 
Party Liability Recoveries: a concerted effort to track States pay-and-
CMS  should  determine  whether  States  cost- chase activities. The CMS central office 
avoidance waivers for pharmacy claims are meeting  asked the regional offices to identify any 
the cost-effectiveness criterion. CMS can ascertain  waivers that have been granted, any pending 
cost-effectiveness by requiring States to track dollars  waiver requests, and situations where a State 
that they pay and chase and the amounts that they  is using pay-and-chase without an approved 
recover. CMS should also review States policies to  waiver. CMS is also working with States that 
determine if they are paying and chasing pharmacy  cost-avoid pharmacy claims and with the 
claims without waivers.  (OEI-03-00-00030) National Association of Chain Drug Stores 
in developing guidance to assist States in 
implementing cost avoidance.
Graduate Medical Education:  CMS did not concur with the recommendations.  $157.3
CMS should revise the regulations to remove from  Although the BBA of 1997 and the BBRA 
a hospitals allowable graduate medical education  of 1999 contained provisions to slow the 
(GME) base-year costs any cost center with little  growth in Medicare spending on GME, OIG 
or no Medicare utilization and submit a legislative  believes that its recommendations should be 
proposal  to  compute  Medicares  percentage  of  implemented and that further savings can be 
participation under the former, more comprehensive  achieved. 
system.  (A-06-92-00020) Appendix B | 45
Savings
OIG Recommendation Status (millions)
Medicaid Drug Rebate Program: CMS  continues  to  disagree  with  the  $123
The best price calculation in the Medicaid drug  recommendation. OIG continues to monitor 
rebate program should be indexed to the consumer  the drug rebate program; audits will continue 
price index-urban.  (A-06-94-00039) to focus on enhancing the collection of rebates 
and providing potential savings to the rebate 
program.
Inappropriate Payments for Nail  CMS  concurred;  the  agency  planned  to  $96.8
Debridement: continue  to  maximize  the  effectiveness 
CMS should require Medicare carriers to recoup  of its medical review strategy, collect the 
the overpayments found in OIGs sample and to  overpayments identified in OIGs sample, 
carefully scrutinize payments for nail debridement  and educate podiatrists on Medicare policy 
services through medical reviews, require podiatrists  for paying nail debridement claims.
to adequately document the medical necessity of 
all nail debridement services, and require CMS 
regional offices and carriers to educate podiatrists 
on Medicare payment policies for nail debridement 
claims.  (OEI-04-99-00460)
Medical Equipment/Supply Claims Lacking  CMS concurred and implemented an edit to  $91
Valid, Active UPINs: reject claims listing a deceased physicians 
CMS should create edits to identify medical equipment  UPIN beginning in April 2002. CMS decided 
and supply claims that do not have a valid and active  not to implement edits for inactive and invalid 
unique physician identification number (UPIN) listed  UPINs. Instead, the agency initiated provider 
for the ordering physician.  education efforts and issued two program 
(OEI-03-01-00110) memorandums.
Medicare Orthotics: CMS generally concurred with OIGs original  $43
CMS should take action to improve Medicare billing  recommendations. The agency is working 
for  orthotic  devices.  CMS  should  also  require  on a proposed rule regarding orthotics and 
standards  for  suppliers  of  custom-molded  and  intends to put in place standards for custom 
custom-fabricated orthotic devices.  orthotics.
(OEI-02-95-00380; OEI-02-99-00120;
OEI-02-99-00121)
Expansion of the DRG Payment Window:  CMS did not concur with the recommendation  $37
CMS should propose legislation to expand the DRG  and has not pursued a legislative proposal.
payment window to at least 7 days immediately 
before the day of admission. 
(A-01-02-00503) 46 | Appendix B 
Savings
OIG Recommendation Status (millions)
End Stage Renal Disease Payment Rates:  CMS agreed, and the BIPA of 2000 required  $22**
CMS should reduce the payment rates for outpatient  the Secretary to develop a composite rate 
dialysis treatments to reflect current efficiencies and  that includes, to the extent feasible, payment 
economies in the marketplace.  (A-14-90-00215) for  laboratory  tests  and  drugs  that  are 
routinely used in dialysis treatments but are 
now separately billable. MMA requires the 
Secretary to establish a case-mix adjusted 
composite rate for 2005 and to conduct a 
demonstration of a bundled case-mix adjusted 
prospective payment system. The Act also 
directs CMS to use the results of an OIG 
study on separately billable end stage renal 
disease drug payments and costs to set the 
2005 composite payment rate.
Respiratory Assist Devices With a Backup  $11.5
Rate: CMS concurred and published a proposed 
CMS  should  reclassify  bilevel  respiratory  assist  rule in August 2003 clarifying that bilevel 
devices with a backup rate from the frequent and  respiratory assist devices with a backup rate 
substantial servicing category to the capped rental  be paid as capped rental items.
category under the durable medical device benefit.  
(OEI-07-99-00440)
Indirect Medical Education: TBD***
CMS should reduce the indirect medical education  CMS agreed with the recommendation. The 
(IME) adjustment factor to the level supported by  BBA of 1997, as amended by the BBRA of 
CMSs empirical data and initiate further studies to  1999, reduced the IME adjustment to 5.5 
determine whether different adjustment factors are  percent in 2002 and thereafter. OIG believes 
warranted for different types of teaching hospitals.   that the factor should be further reduced to 
(A-07-88-00111) eliminate overlap with the disproportionate 
share adjustment.
Medicare Secondary PayerEnd Stage  TBD
Renal Disease Time Limit: CMS was concerned that an indefinite MSP 
CMS should extend the Medicare secondary payer  provision might encourage insurers to drop 
(MSP) provisions to include end stage renal disease  uneconomical  services,  namely  facility 
beneficiaries without a time limitation.  dialysis and transplantation. OIG continues 
(A-10-86-62016)  to advocate that, when Medicare eligibility 
is due solely to ESRD, the group health plan 
should remain primary until the beneficiary 
becomes entitled to Medicare based on age 
or disability. At that point, Medicare would 
become the primary payer.
**This estimate represents annual program savings of $22 million for each dollar reduction in the composite rate
given the population of ESRD beneficiaries at the time of OIGs review.
***To be determined Appendix B | 47
Savings
OIG Recommendation Status (millions)
Inpatient Psychiatric Care Limits:  CMS agreed with OIGs findings but stated  TBD
CMS should develop new limits to deal with the high  that further analysis would be required before 
cost and changing utilization patterns of inpatient  any legislative changes could be supported.
psychiatric  services  and  apply  a  60-day  annual 
and a 190-day lifetime limit to all psychiatric care 
regardless of the place of service.  (A-06-86-62045)
Hospital Capital Costs: CMS did not agree with the recommendation.  TBD
CMS  should  determine  the  extent  that  capital  Although the BBA of 1997 reduced capital 
reductions are needed to fully account for hospitals  payments, it did not include the effect of 
excess bed capacity and report the percentage to  excess  bed  capacity  and  other  elements 
Congress.  (A-09-91-00070; A-14-93-00380) included in the base-year historical costs. 
Connection Between the Calculation  CMS agreed to pursue a change in the rebate  TBD
of Medicaid Drug Rebates and Drug  program similar to that recommended. The 
Reimbursement: Presidents  FY  2003  budget  proposed  a 
CMS should seek legislation that would require  legislative change that would base the drug 
participating manufacturers to pay Medicaid drug  rebate on the difference between the AWP 
rebates based on average wholesale price (AWP) or  and the best price for a drug. That legislative 
study other viable alternatives to the current program  change was ultimately dropped, and none of 
of using average manufacturer price to calculate  the subsequent Presidential budgets included 
the rebates. This legislation would have resulted  a similar proposal. 
in about $1.15 billion in additional rebates for 100 
brand-name drugs with the highest total Medicaid 
reimbursements  in  calendar  years  1994-1996.   
(A-06-97-00052)
Home Health Agencies: Although the BBA of 1997 included provisions  TBD
CMS should revise Medicare regulations to require  to restructure home health benefits, CMS 
the physician to examine the patient before ordering  still needs to revise Medicare regulations to 
home health services.  (OEI-04-93-00262;  require that physicians examine Medicare 
OEI-04-93-0026; OEI-12-94-00180;  patients  before  ordering  home  health 
OEI-02-94-00170;  A-04-95-01103; A-04-95-01104;  services.  Subsequent  to  the  BBA,  OIGs 
A-04-94-02087; A-04-94-02078; A-04-96-02121;  four-State review found that unallowable 
A-04-97-01169; A-04-97-01166; A-04-97-01170;  services continued to be provided because 
A-04-99-01195) of inadequate physician involvement. CMS 
  agreed in principle, stating that it recognized 
the need for physician involvement in home 
health care planning and was considering new 
approaches to fostering the coordination of 
home health care across disciplines, including 
physicians, in the Medicare home health 
conditions of participation. CMS also provided 
additional payments for physician care plan 
oversight and education for physicians and 
beneficiaries.  48 | Appendix B 
Savings
OIG Recommendation Status (millions)
VARIOUS OPERATING DIVISIONS
Recharge Center Costs: The Department concurred and has worked  $1
The Assistant Secretary for Administration and  with OMB on a revision to A-21. The proposed 
Management  should  propose  changes  to  OMB  revision, which was published in the Federal 
Circular A-21 to improve guidance on the financial  Register in August 2002, would require that 
management  of  recharge  centers.  The  revision  adjustments  to  a  recharge  centers  billing 
should include criteria for establishing, monitoring,  rate take into account overrecoveries and/or 
and adjusting billing rates to eliminate accumulated  underrecoveries from previous periods. Rate 
surpluses  and  deficits;  preventing  the  use  of  adjustments would be required at least every 
recharge funds for unrelated purposes and excluding  2 years. The final circular was issued in May 
unallowable costs from the calculation of recharge  2004. 
rates; ensuring that Federal projects are billed 
equitably; and excluding recharge costs from the 
recalculation of facilities and administrative cost 
rates.  (A-09-96-04003)  Appendix C
Unimplemented  Office  of  Inspector  General  Program  and 
Management Improvement Recommendations
This schedule represents Office of Inspector General (OIG) findings and recommendations that, if 
implemented, would result in substantial benefits. The benefits relate primarily to effectiveness rather 
than cost-efficiency.
More detailed information can be found in OIGs Orange Book, which can be found on the Internet at  
http://oig.hhs.gov.
OIG Recommendation Status
CENTERS FOR MEDICARE & MEDICAID SERVICES
Accountability Over Billing and Collection of  CMS concurred with the recommendation and set up 
Medicaid Drug Rebates: a reporting mechanism to capture rebate information. 
CMS should ensure that States implement accounting  The agency still needs to ensure that States establish 
and internal control systems in accordance with Federal  adequate accounting and internal control systems to 
regulations for the Medicaid drug rebate program. Such  obtain reliable information. Current audit results have 
systems must provide for accurate, current, and complete  shown that this remains a problem in most States.
disclosure of drug rebate transactions and provide CMS 
with the financial information it needs to effectively 
monitor and manage the Medicaid drug rebate program.  
(A-06-92-00029)
Fairly Presenting the Medicare Accounts  CMS hired consultants to assist in validating accounts 
Receivable Balance: receivable  reported  by  Medicare  contractors  and 
CMS should require Medicare contractors to implement  provided comprehensive instructions to contractors. 
or improve internal controls and systems to ensure that  For the long term, CMS is developing an integrated 
reported accounts receivable are valid and documented.   general ledger system as the cornerstone of its financial 
(A-17-95-00096; A-17-97-00097; A-17-98-00098;  management controls.
A-17-00-00500; A-17-00-02001; A-17-01-02001; 
A-17-02-02002; A-17-03-03003)
Guidance to Drug Manufacturers To Better  CMS did not concur, stating that the drug law and the 
Implement the Medicaid Drug Rebate  rebate agreements already established a methodology 
Program: for computing AMP. OIG disagrees because the rebate 
CMS  should  survey  manufacturers  to  identify  the  law and agreements defined AMP but did not provide 
various calculation methods used to determine average  specific written methodology for computing it.
manufacturer price (AMP). CMS should also develop a 
more specific policy for calculating this price that would 
protect the interests of the Government and that would 
be equitable to the manufacturers.  (A-06-91-00092) 
 49 50 | Appendix C 
OIG Recommendation Status
Accuracy of Carrier Payment Data: CMS stated that a review is under way to compare data 
CMS should conduct a review of carriers claims  contained in the National Claims History File with data 
processing data to examine the scheduled date of payment  at the carrier level. CMS has also approved two new 
entered on claims sent to the Common Working File  edits, which will enforce the payment floor standards 
(CWF). If there is no correlation between the claims  on claims sent to the CWF.
payment date variable and the actual date of payment, 
CMS should define what data should be entered into 
this field and how it should be calculated, and/or revise 
the current variable definition to clarify for National 
Claims History data users that the scheduled date of 
payment is not an accurate reflection of the actual claim 
payment date. CMS should also review the carriers 
claims processing data to determine the accuracy of the 
information contained in the CROWD system. 
(OEI-03-00-00350)
Duplicate Payments for the Same Service by  CMS concurred with OIGs recommendations and will 
Multiple Carriers: reexamine existing criteria regarding duplicate editing 
CMS should revise CWF edits to detect and deny  in the CWF system to determine the cost- effectiveness 
duplicate billings to individual carriers or to more than  of including the carrier number in the match criteria. 
one carrier, or increase postpayment reviews if such  CMS entered a contract to study duplicate billing.
edits are determined not to be cost effective. 
(OEI-03-00-00090; OEI-03-00-00091)
Inappropriate Payments for Blood Glucose Test  CMS concurred with the recommendations and noted a 
Strips: number of initiatives that have reduced the incidence of 
CMS should alert suppliers of the importance of properly  improper payments in recent years.
completed documentation to support their claims for test 
strips; require suppliers to indicate actual and accurate 
start and end dates on claim forms; promote supplier 
concurrence and cooperation with OIGs recently issued 
compliance guidelines; and advise beneficiaries to report 
any instances of fraudulent or abusive practices involving 
their home blood glucose monitors, test strips, or related 
supplies to their Durable Medical Equipment Regional 
Contractors (DMERCs).  (OEI-03-98-00230)
Educating Beneficiaries on Reducing Financial  CMS concurred with OIGs recommendations and has 
Liability for Durable Medical Equipment:  undertaken a number of efforts to increase beneficiary 
CMS should educate beneficiaries on ways to reduce  education and awareness about the consequences of 
financial liability for medical equipment and supplies  assigned and nonassigned claims. 
and reevaluate Medicare fee schedules for ostomy 
supplies.  (OEI-07-99-00510) Appendix C | 51
OIG Recommendation Status
Resident Assessment Instruments: CMS generally concurred with OIGs recommendations 
CMS should more clearly define minimum data set  for improved data definitions and training, but did not 
(MDS) elements and work with States to train nursing  concur with the recommendation to establish an audit 
home staff. OIG recommended that CMS establish  trail.
an  audit  trail  to  validate  the  108  MDS  elements 
that  affect  facility  reimbursement  by  Medicare.   
(OEI-02-99-00040; OEI-02-99-0041)
Assessments of Mental Illness: CMS concurred with most of OIGs recommendations 
CMS should work with States to improve the assessment  and has made revisions to its training curriculum for 
of persons with serious mental illness and use survey  nursing home surveyors.
and certification to monitor compliance. OIG also 
recommended that CMS define specialized services that 
are to be provided by the State to nursing home residents 
with mental illness.  (OEI-05-99-00700)
Nursing Home Residents With Serious Mental  Except for reporting MDS records by primary, secondary, 
Illness: and tertiary diagnoses, CMS concurred with most of 
CMS should improve the quality and usefulness of its  OIGs recommendations. CMS does not feel that adding 
data sources by requiring the use of a unique provider  space to the MDS to record diagnoses would solve the 
number across systems, requiring reporting of resident  problem. 
data by age and diagnosis, and encouraging States to use 
these data in demonstrating their progress in placing 
disabled persons in the most integrated settings. OIG 
also recommended training to improve data collection 
and accurate coding.  (OEI-05-99-00701) 
Payments for Mental Health Services: CMS generally concurred with the recommendations, 
CMS  should  promote  provider  awareness  of  plans to explore a variety of educational efforts, and will 
documentation and medical necessity requirements,  refer the reports to the carrier clinical workgroup on 
develop a comprehensive list of psychological testing  psychiatric services. Carriers will conduct data analysis 
tools that can be correctly billed, target problematic  of psychological testing and psychotherapy claims and 
services for prepayment edits or postpayment medical  will conduct medical review, if indicated.
review, and encourage carriers to take advantage of the 
MDS, especially for its assessment of patient cognitive 
level.  (OEI-03-99-00130; OEI-02-99-00140) 52 | Appendix C 
OIG Recommendation Status
Organ Donation: CMS concurred with the recommendations and indicated 
CMS should revise the Medicare conditions for coverage  that it will explore ways in which additional data can be 
for organ procurement organizations (OPOs) to make  used to assess OPO effectiveness and hospital compliance 
them more accountable for implementing the new  with the donation rule. CMS published a Notice of 
donation rule and require OPOs to provide hospital- Proposed Rule-Making (NPRM) on February 4, 2005, 
specific data on referrals and on organ recovery. HRSA  establishing  new  conditions  of  coverage  regarding 
should require that OPOs submit hospital-specific  OPOs. That proposed regulation requires OPOs to 
data on referrals and on organ recovery and support  report hospital-specific organ donation, including organ 
demonstration projects on how to effectively train and  donor potential and the number of actual donors, at least 
make use of designated requestors.  annually to the public. HRSA, through its contract for 
(OEI-01-99-00020) operation of the Organ Procurement and Transplantation 
Network, requires OPOs to submit hospital-specific 
data on organ recovery. 
PUBLIC HEALTH AGENCIES
Oversight of Tissue Banking: The Deputy Secretary concurred that FDA should 
FDA should expedite publication of its regulatory agenda  expedite  its  planned  rulemaking  activities  related 
requiring registration of tissue banks, enhanced donor  to  tissues,  specifically  the  final  rule  to  require 
suitability screening, and testing the use of good tissue  registration of tissue banks. The Department also 
practices. FDA should set a realistic yet aggressive date  found considerable merit in OIGs recommendation 
by which it would complete an initial inspection of all  for an intensified inspection program directed toward 
tissue banks. FDA should determine the appropriate  entities that procure, process, and store human tissues. 
minimum cycle for tissue bank inspections and work  In congressional testimony, FDA said that all three of 
with States and professional associations to determine  the proposed rules have been published, and one rule 
in what areas oversight activities could be coordinated.   (Establishment Registration and Listing) was finalized. 
(OEI-01-00-00441) FDA has completed contacting the 36 uninspected tissue 
banks. The results were: 31 inspections were completed, 
3 firms were out of business, 1 firm could not be located, 
and 1 firm was not an FDA obligation because it handled 
only vascularized organs. In 2004, FDA finalized donor 
eligibility and good tissue practices regulations, which 
will become effective on May 25, 2005. This completes 
the rule making activities related to human tissues. Appendix C | 53
OIG Recommendation Status
Effectiveness of FDAs Adverse Event Reporting  FDA has addressed a number of the recommendations 
System for Dietary Supplements: from the OIG report. The Center for Food Safety and 
FDA should (1) facilitate greater detection of adverse  Applied Nutrition (CFSAN) is continuing to improve 
events by requiring dietary supplement manufacturers  its Adverse Events Reporting System (CAERS), a new 
to report serious events to FDA for some products,  single system for entering adverse event and consumer 
(2) obtain more information on adverse event reports  complaint  reports  involving  foods,  cosmetics,  and 
by requiring manufacturers to register themselves and  dietary supplements. CAERS has been operational in 
their products with FDA, (3) notify manufacturers  a limited manner since June 2003, and CAERS staff 
when FDA receives a serious adverse event report and  work closely with program experts as well as external 
develop a new computer database to track and analyze  stakeholders. CFSAN also plans to improve data links 
adverse event reports, (4) expedite the development  to the FDA Center for Drug Evaluations adverse 
and implementation of good manufacturing practices  event  reporting  system.  FDA  published  proposed 
for dietary supplement manufacturers, and (5) disclose  current Good Manufacturing Practices regulations for 
more useful information to the public about dietary  dietary supplements in March 2003 and as in 2004 is 
supplement adverse events.  (OEI-01-00-00180) now preparing the final regulation. Pursuant to the 
requirement for food facility registration in the Public 
Health Security and Bioterrorism Preparedness and 
Response Act of 2002, FDA requires facilities that 
manufacture, process, pack, or hold dietary supplements 
to be registered with FDA. FDA strives to inform the 
public of current developments with respect to dietary 
supplements through its dietary supplement Web site.
Protection for Research Subjects in Foreign  FDA supported OIGs recommendations, but noted that 
Clinical Trials: in most cases it did not have the resources to implement 
FDA should examine ways to obtain more information  the recommendations. FDA has published a proposed 
about the performance of non-U.S. Institutional Review  rule to revise its regulations pertaining to foreign clinical 
Boards (IRBs) and help those inexperienced IRBs build  studies that are not conducted under an Investigational 
their capacities, encourage all non-U.S. investigators  New Drug Application. The proposed revision would 
participating in research to sign attestations upholding  require that studies be conducted in accordance with good 
human subject protections, and develop a database to  clinical practice (GCP), including review and approval 
track the growth and location of foreign research. The  by an independent ethics committee. The proposed 
Office for Human Research Protections (OHRP) should  rule also specifically recommends that sponsors collect 
exert leadership in developing strategies to ensure  attestations by clinical investigators that the studies were 
adequate human subject protections for non-U.S. clinical  conducted in compliance with GCP. OHRP provides 
trials funded by the Federal Government and those that  quality improvement consultation and research ethics 
contribute data to new drug applications.  training to domestic and foreign institutions involved in 
(OEI-01-00-00190) international biomedical and behavioral research to help 
ensure that recognized ethical protections are afforded to 
persons participating in research conducted in countries 
outside the United States. 54 | Appendix C 
OIG Recommendation Status
ADMINISTRATION FOR CHILDREN AND FAMILIES
Child Support Orders for Low-Income  ACF is helping nine States test approaches to serving 
Noncustodial Parents: young, never-married fathers who may have obstacles 
ACFs Office of Child Support Enforcement should work  to employment and who do not have a child support 
with States to emphasize parental responsibility and  order. ACF has granted a contract to determine how 
improve the ability of low-income noncustodial parents  computerized income data can be used by local child 
to meet their obligations. ACF should facilitate and  support offices to independently verify the income of 
support State experiments to test the payment effects  noncustodial parents and be used in the establishment 
of using various periods of retroactivity in determining  or modification of child support orders where income 
the amount of support owed and facilitate and support  documentation or verification is lacking or incomplete. 
State experiences to test negotiating child support debt 
owed to the States in exchange for improved payment 
compliance.  (OEI-05-99-00391)
GENERAL OVERSIGHT 
Cost Principles for Federally Sponsored  The Department circulated several draft iterations
Research Activities:  of the hospital cost principles to internal users for 
The Department should modernize and strengthen  comment. Many of the policies in the outdated document 
cost principles applicable to hospitals by either  have been updated in the draft regulation. The target date 
revising existing guidelines to conform with Office  for issuing the draft regulation as a notice of proposed 
of Management and Budget (OMB) Circular A-21 or  rulemaking was December 31, 2004. Once the formal 
working with OMB to extend Circular A-21 coverage  notice and rulemaking process is complete, the updated 
to all hospitals.  (A-01-92-01528) cost principles will be issued. Appendix D
Notes to Tables 1 and 2
Notes to Table 1
1The opening balance was adjusted upward $70.3 million.
2During the period, revisions to previously reported management decisions included:
 
CIN: A-03-00-00002   TRIGON PT-A AND TERMINATION: The recommended disallowance for $700,885 
was included in a global settlement.
CIN: A-06-01-00039  REV OF THE TX STAR PLUS MEDICAID MANAGED CARE PROGRAM: Additional 
documentation was provided by the State supporting $15,483 of questioned costs.
CIN: A-02-02-69503  PUERTO RICO DEPT. OF THE FAMILY: Additional documentation was provided by 
State supporting $121,569 of questioned costs.
3Included are management decisions to disallow $41.9 million that was identified in nonfederal audit reports.
4Most of these nonconcurrences relate to a series of reports where, after our reports were issued, the OPDIV decided to 
reexamine existing policy and therefore concluded it would not be appropriate to collect identified overpayments.
5A. 
Due to administrative delays, many of which are beyond management control, resolution of the following 340 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-04-00-02171  REV. AL MCAID INTERGOVTAL TRANSFERS-HOSP. ENHANC, MAY 2001, 
$236,983,528
CIN: A-02-02-01030  REVIEW OF SPEECH SCHOOL HEALTH CLAIMS - REST OF STATE, FEB 2004, 
$172,553,831
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DSH PROGRAM FOR FY 1998, MAY 2003, 
$128,269,448
CIN: A-04-99-05561  AUDIT  ADMIN  COST  PROPOSALS  FY95-98,  BCBSFL,  JAX,  JUL  2002, 
$101,671,328
CIN: A-09-02-00071  AUDIT OF CA DSH PROGRAM FOR FY 1998 - LA COUNTY, MAY 2003, 
$98,190,042
CIN: A-02-03-01008  REVIEW OF TRANSPORTATION SCHOOL HEALTH CLAIMS - REST OF STATE, 
AUG 2004, $53,037,302
CIN: A-04-00-01220  IMPLE.  MCARES  POSTACUTE  CARE  TRANSFER  POLICY,  OCT  2001, 
$52,311,082
CIN: A-05-01-00058  OHIO MEDICAID HOSPITAL-SPECIFIC DSH PAYMENT LIMITS, JUN 2004, 
$47,000,000
CIN: A-04-01-02006  MEDICAID DISPROPORTIONATE SHARE PAYMENTS IN ALABAMA, JUN 2004, 
$45,763,327
 55 56 | Appendix D 
CIN: A-07-01-02093  MISSOURI DSH - UNALLOWABLE COSTS, AUG 2002, $36,200,000
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID SCHOOL BASED 
HEALTH SERVICES - CT, MAY 2003, $32,780,146
CIN: A-07-01-00125  TRANSAMERICA (TOLIC) - PENSION SEGMENT CLOSING AUDIT, MAY 2002, 
$20,227,001
CIN: A-03-01-00224  MEDICAID SCHOOL-BASED SERVICES/MARYLAND, MAR 2003, $19,954,944
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE HOSPITAL 
PAYMENTS FOR FY 1998, SEP 2002, $19,446,435
CIN: A-05-01-00052  DME REVIEW IN INDIANA, OCT 2001, $16,377,560
CIN: A-06-01-00035  COLLECTION OF AFDC OVERPAYMENTS, JAN 2002, $13,800,000
CIN: A-01-01-02502  REVIEW OF UNCOLLECTED AFDC OVERPAYMENTS, AUG 2001, $12,400,000
CIN: A-07-02-03032  MEDICARE  SEGMENT  CLOSING  AUDIT  OF  TRAILBLAZERS,  JUN  2004, 
$11,152,093
CIN: A-02-02-01028  REVIEW OF RETRO ACUTE CARE HOSPITAL DSH CLAIMS FOR INMATE 
COSTS, JAN 2004, $11,114,820
CIN: A-05-02-00031  AFDC OVERPAYMENTS - WISCONSIN, AUG 2002, $10,711,338
CIN: A-01-01-00513  MEDICARE PT B PMT FOR DME I/P PRTL MNTH STAYS SNF, OCT 2001, 
$10,500,000
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PYMTS @ SCOTT & 
WHITE, MAY 2003, $8,229,574
CIN: A-09-01-00085  AUDIT OF UCSDMC DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FOR 
SFYE 1998, SEP 2002, $7,999,212
CIN: A-02-02-01024  IMD UNDER 21 AUDIT IN NEW YORK, FEB 2004, $7,642,194
CIN: A-09-97-44262  STATE OF CALIFORNIA, APR 1997, $7,300,000
CIN: A-07-02-03033  CAREFIRST SEGMENTATION AUDIT, MAY 2003, $6,788,644
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM -- NATIONAL, MAR 1993, $6,529,545
CIN: A-03-01-00222  MEDICAL COLLEGE OF VIRGINIA/DSH/MEDICAID, APR 2003, $6,324,796
CIN: A-05-02-00049  MEDICAL SERVICE COSTS UNDER ILLINOIS SCHOOL-BASED MEDICAID, DEC 
2003, $6,067,669
CIN: A-02-04-02006  REVIEW OF IFCP DRAWDOWNS AND FINANCIAL POSITION, JUL 2004, 
$5,696,132
CIN: A-07-03-04021  HOME HEALTH PPS SYSTEM CONTROLS 14 DAY PAYMENT, MAR 2004, 
$5,675,661
CIN: A-03-99-00052  ALLEGHENY/CHESAPEAKE ORF, SEP 2001, $5,540,344
CIN: A-04-00-02161  MEDICAID SCHOOL-BASED SERVICES IN NORTH CAROLINA, NOV 2001, 
$5,344,160
CIN: A-01-02-00016  MEDICAID SCHOOL-BASED HEALTH SERVICE ADMINISTRATIVE CLAIMING 
REVIEW-MASSACHUSETTS, SEP 2004, $5,312,447
CIN: A-09-03-00042  REVIEW OF HHA PRECEEDING HOSPITAL STAY UNDER PPS - UGS, FEB 2004, 
$5,306,825
CIN: A-06-02-00060  REVIEW PACIFICARE OK BIPA MODIFICATIONS TO CY 2001 ACRP, JUN 2004, 
$5,204,042 Appendix D | 57
CIN: A-05-03-00096  REVIEW OF ADMINISTRATIVE COSTS FOR ADMINASTAR FEDERAL, AUG 
2004, $5,000,598
CIN: A-01-97-00516  ADMIN. COSTS-PART A&B, RAILROAD RETIRE BOARD, JUN 1999, $4,939,184
CIN: A-03-01-00226  UVA MEDICAL CENTER/DSH/MEDICAID/VIRGINIA, MAY 2003, $4,760,385
CIN: A-05-01-00023  ADMINISTRATIVE COSTS REVIEW - ADMINASTAR FEDERAL, JAN 2002, 
$4,694,863
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL, MAR 2002, $4,505,051
CIN: A-07-98-01263  DENVER CMHC, MAY 2000, $4,447,607
CIN: A-07-02-00144  IV-E  FOSTER  CARE  ADMINISTRATIVE  COSTS  CLAIMED,  AUG  2003, 
$4,335,542
CIN: A-01-02-00015  REVIEW OF MA MEDICAID USE OF REVISED FEE SCHEDULES FOR CLINICAL 
DIAGNOSTIC LABORATORY SERVICES, JAN 2004, $4,100,000
CIN: A-07-04-03053  REVIEW OF CAHABAS UNFUNDED PENSION COSTS, FEB 2004, $4,006,541
CIN: A-03-01-00225  VIRGINIA IMD UNDER 21, MAR 2004, $3,948,532
CIN: A-05-01-00068  PARTNERSHIP PLAN - ILLINOIS PHYSICIAN BILLING-FAMILY DYNAMICS, JUL 
2002, $3,790,846
CIN: A-04-01-05002  AUDIT MEDICAID PAYMENTS FOR CLINICAL LABORATORIES, JAN 2002, 
$3,522,639
CIN: A-02-95-01019  STAFF BUILDERS HOME OFFICE MEDICARE COST REV. ORT, AUG 1998, 
$3,434,274
CIN: A-01-02-00525  MAINE ANTHEM BCBS - MEDICARE ADMINISTRATIVE COSTS, APR 2004, 
$3,389,716
CIN: A-07-99-01298  DATE OF DEATH - 2, MAY 2001, $3,200,000
CIN: A-05-98-00042  ADMINISTAR INS. CO.--ADMIN. COSTS AUDIT, SEP 1999, $3,111,728
CIN: A-09-02-00061  REVIEW OF MEDICAL CLAIMS FOR PRIVATE IMD PATIENTS, DEC 2002, 
$3,083,389
CIN: A-04-01-00005  MEDICAID FFS PAYMENTS TO LEAS IN NORTH CAROLINA, MAY 2004, 
$3,066,806
CIN: A-07-02-03007  COSTS CLAIMED FOR POST RETIREMENT BENEFITS BY TOLIC, MAY 2002, 
$3,060,873
CIN: A-07-03-03046  TRAILBLAZERS - REVIEW OF PENSION COSTS CLAIMED FOR MEDICARE 
REIMBURSEMENT, JUL 2004, $3,023,483
CIN: A-09-98-50183  STATE OF CALIFORNIA, MAR 1998, $3,000,000
CIN: A-01-02-00508  REVIEW  OF  MEDICARE  CONTRACT  TERMINATION  COSTS  -  UNITED 
HEALTHCARE, NOV 2003, $2,894,010
CIN: A-01-96-00508  MEDICARE ADMIN COSTS PARTS A&B AND RRB - TRAVELERS, MAR 1996, 
$2,803,260
CIN: A-05-02-00085  MEDICAID FFS PAYMENTS FOR OHIO BENEFICARIES ENROLLED IN MEDICARE 
MCOS, JUN 2004, $2,700,000
CIN: A-01-04-78839  STATE OF NEW HAMPSHIRE, JUN 2004, $2,631,648
CIN: A-07-03-03039  CAREFIRST  OF  MARYLAND  UNFUNDED  PENSION  COSTS,  MAY  2003, 
$2,611,100 58 | Appendix D 
CIN: A-05-97-00005  ADMINISTRATIVE COSTS CLAIMED UNDER MEDICARE A & B, FEB 1998, 
$2,569,067
CIN: A-05-03-00062  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF NORIDIAN MUTUAL INSURANCE COMPANY, JUN 
2003,$2,400,000
CIN: A-09-02-72300  STATE OF CALIFORNIA, JUL 2002, $2,400,000
CIN: A-02-91-01006  BLUE SHIELD OF WESTERN NY MEDICARE ADM CTS PORTER, SEP 1991, 
$2,379,239
CIN: A-04-04-01001  INTERIM CONTRACT AUDIT, AUG 2004, $2,352,388
CIN: A-03-99-00038  EDGEWATER PSYC HOSPITAL, MAR 2001, $2,348,604
CIN: A-06-01-00083  AUDIT OF MEDICAID SCHOOL-BASED SERVICES IN OKLAHOMA, APR 2003, 
$2,332,774
CIN: A-07-97-01247  DUPLICATE PAYMENTS - HMO/FFS, OCT 1999, $2,300,000
CIN: A-10-02-00008  REVIEW OF WASHINGTON STATES MEDICAL ASSISTANCE COSTS CLAIMED 
FOR SCHOOL-BASED HEALTH SERVICES, JUL 2003,$2,279,752
CIN: A-04-02-07007  MEDICAID FEE FOR SERVICE PAYMENTS FOR DUALLY ELIGIBLE MEDICARE 
MANAGED CARE ENROLLEES, FEB 2003, $2,231,100
CIN: A-04-97-01170  REVIEW HOME HLTH SRVCS BY MEDCARE HOME HLTH SRVCS, APR 1999, 
$2,200,000
CIN: A-09-01-00056  PACIFICARE-CALIFORNIA  JAN  1998  INSTITUTIONAL  PMTS,  SEP  2001, 
$2,158,577
CIN: A-05-03-00041  HOSPITAL TRANSFERS NORTH CAROLINA, MAY 2004, $2,151,055
CIN: A-05-03-00063  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF MEDICARE NORTHWEST (BLUE CROSS BLUE SHIELD 
OF OREGON),OCT 2003, $2,100,000
CIN: A-07-04-00162  AUDIT OF BCBS NORTH CAROLINAS CLAIM FOR POST RETIREMENT BENEFIT 
COSTS TO BE INCURRED AFTER TERMINATION OF ITS MEDICARE CONTRACT 
ANDCLOSING OF ITS MEDICARE SEGMENT, JUN 2004, $2,074,473
CIN: A-07-01-03001  BCBS OF MN PENSION SEGMENT CLOSING, JAN 2003, $2,003,341
CIN: A-05-00-00034  PROVENA  ST.  JOSEPH  HOSPITAL-O/P  PSYCH  SERVICES,  NOV  2000, 
$1,978,583
CIN: A-05-02-00048  REVIEW OF MEDICAID DME CLAIMS - TEXAS, SEP 2002, $1,969,704
CIN: A-01-03-00500  HOME HEALTH PPS SYSTEM CONTROLS 14 DAY PAYMENT-WHEN PRECEDED 
BY A HOSPITAL DISCHARGE, JUL 2003, $1,861,857
CIN: A-05-97-00014  GROUP HEALTH PLAN INC.(HEALTHPARTNERS) INST. BENES, JUN 1998, 
$1,808,308
CIN: A-05-03-00071  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY  OF  ANTHEM  HEALTH  PLANS  OF  MAINE,  INC.,  OCT 
2003,$1,800,000
CIN: A-01-02-00516  REVIEW  OF  POTENTIALLY  EXCESSIVE  MEDICARE  PAYMENTS  FOR 
OUTPATIENT  SERVICES  UNITED  GOVERNMENT  SERVICES,  MAR  2003, 
$1,768,783 Appendix D | 59
CIN: A-09-00-00127  BLUE CROSS OF CALIF - MEDICARE ADMIN COSTS, DEC 2002, $1,677,822
CIN: A-03-00-00215  ANNABURG MANOR NURSING HOME COST REPORT, MAR 2002, $1,582,079
CIN: A-04-01-05011  REVIEW OF FLORIDA MEDICAID PAYMENTS FOR SERVICES PROVIDED TO 
INMATES, OCT 2002, $1,450,077
CIN: A-07-02-03021  ANTHEM BCBS OF CT - PENSION SEGMENT CLOSING, FEB 2004, $1,351,284
CIN: A-05-95-00042  BCBSA  ADMINISTRATIVE  COSTS  -  CONTRACTED  AUDIT,  DEC  1995, 
$1,333,598
CIN: A-04-03-02024  REVIEW OF BCBSFL RESPONSE TO SET-ASIDE COSTS IN PRIOR FACP AUDIT, 
APR 2003, $1,277,247
CIN: A-05-01-00064  REVIEW  OF  OUTPATIENT  REHABILITATION  CLAIMS  REIMBURSED  BY 
MEDICARE DURING CALENDAR YEAR 1999, FEB 2002,$1,235,892
CIN: A-03-01-00251  AFDC OVERPAYMENTS - VIRGINIA, MAR 2003, $1,221,494
CIN: A-04-02-72903  STATE OF TENNESSEE, SEP 2002, $1,213,353
CIN: A-05-00-00004  NEW  CENTER  COMMUNITY  MENTAL  HEALTH  CENTER,  JUN  2000, 
$1,181,000
CIN: A-04-03-01000  REVIEW OF HOME HEALTH SERVICES CLAIMED BY LIFELINE HEALTH GROUP, 
INC, JUN 2004, $1,173,330
CIN: A-05-00-00049  PARTNERSHIP PLAN - IL HOSPITAL TRANSFERS, JUN 2001, $1,150,113
CIN: A-02-97-01026  EDDY VNA (#337152) HHA ELIGIBILITY REVIEW, SEP 1999, $1,131,593
CIN: A-05-98-00050  FOLLOW-UP MEDICAID CLINICAL LABORATORIES, JUL 1999, $1,097,036
CIN: A-09-02-01004  USC GRANTS MANAGEMENT REVIEW, JUL 2004, $1,082,554
CIN: A-09-98-00052  CALIFORNIA MEDICAL REVIEW INC. (CA. PRO), JAN 1999, $1,067,991
CIN: A-05-01-00037  BC/BS OF MN. ADMIN COSTS--LEON SNEAD & CO., JUN 2001, $1,037,090
CIN: A-01-98-00500  PAYMENT EDITS FOR PSYCHIATRIC AT MA PART B CARRIER, SEP 1998, 
$1,000,000
CIN: A-02-04-77762  MONTCLAIR CHILD DEVELOPMENT CENTER INC., MAR 2004, $992,617
CIN: A-09-94-01010  CLOSEOUT AUDIT--CONT NO. N01-ES-75196 (STRATAGENE), MAR 1994, 
$983,208
CIN: A-05-01-00059  ILLINOIS MEDICAID HOSPITAL-SPECIFIC DSH PAYMENT LIMITS, AUG 2004, 
$972,810
CIN: A-06-02-00027  TEXAS MEDICARE BAD DEBT COLLECTIONS, OCT 2002, $919,331
CIN: A-05-92-00060  CONTRACTOR AUDIT - BCBS - ADMIN, FEB 1993, $879,609
CIN: A-05-04-77356  TRI-VALLEY OPPORTUNITY COUNCIL INC., FEB 2004, $866,666
CIN: A-07-98-02533  TRAVELERS FACP, DEC 1998, $854,214
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES, MAR 2002, 
$836,711
CIN: A-02-98-01040  NIAGARA CTY DEPT. OF HLTH-#337001-HHS ELIG REVIEW, DEC 1999, 
$807,679
CIN: A-05-04-00032  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF PREMERA BLUE CROSS, AUG 2004, $786,442 60 | Appendix D 
CIN: A-06-03-00013  MEDICARE ADMINISTRATIVE COST PROPOSAL-ARKANSAS BCBS, OCT 2003, 
$759,748
CIN: A-07-99-00981  ASSIST REVIEW OF MEDICARE A/R HCFA RO DENVER, JAN 2000, $754,926
CIN: A-01-04-76290  STATE OF MAINE, JAN 2004, $735,765
CIN: A-05-02-00041  INDIANA MEDICAID HOSPITAL PATIENT TRANSFERS, JAN 2003, $730,061
CIN: A-09-00-00103  PACIFICARE HMO - MEDICARE DUAL ELIGIBLES, MAY 2001, $720,858
CIN: A-09-03-00046  AUDIT OF ORGAN ACQUISITION COSTS AT ST VINCENT, JUL 2004, $683,315
CIN: A-06-01-00090  PREAWARD-APASS MAINTAINER DATA PROCESSING SERVICES-ABCBS, SEP 
2001, $678,651
CIN: A-05-00-64226  NA-ILLINOIS DEPT. OF PUBLIC AID, MAY 2000, $654,017
CIN: A-06-03-00032  AUDIT OF ADMIN COSTS PART A & PART B OF MEDICARE PROGRAM-
TRAILBLAZERS, APR 2004, $622,078
CIN: A-01-99-00535  AUDIT OF M/C PART A ADMIN COSTS-ANTHEM BC/BS CT, AUG 2000, 
$621,256
CIN: A-04-00-00138  MEDICAID ESCHEATED WARRANTS - FLORIDA, JAN 2002, $613,891
CIN: A-06-98-00066  ORT REVIEW OF ULTIMATE HOME HEALTH CARE INC., OCT 1999, $602,982
CIN: A-07-04-00170  REVIEW OF PENSION COSTS CLAIMED FOR MEDICARE REIMBURSEMENT 
FOR VERITUS, AUG 2004, $594,806
CIN: A-04-94-01078  MONITORING  ADMIN  COST  -  AUDIT  MCARE  P.B  BCBSSC,  JUL  1994, 
$594,092
CIN: A-04-93-01069  MONITORG  ADMIN  COST  AUDIT  MCARE  PART  A  BCBSSC,  JUL  1994, 
$590,844
CIN: A-04-01-01007  GABCBS MEDICARE PART A ADMINISTRATIVE COST AUDIT, NOV 2001, 
$575,471
CIN: A-05-04-00033  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF BLUE CROSS AND BLUE SHIELD OF KANSAS, INC., JUN 
2004, $559,282
CIN: A-09-01-00055  REVIEW OF IMD CLAIMS - STATE OF CALIFORNIA, MAR 2002, $551,394
CIN: A-07-02-03015  BCBS OF MN PENSION COSTS CLAIMED FOR MEDICARE REIMBURSEMENT, 
FEB 2003, $550,083
CIN: A-05-02-72811  COMMUNITY  ACTION  OF  GREATER  INDIANAPOLIS  INC.,  AUG  2002, 
$547,899
CIN: A-05-99-00062  AMERICARE PHYSICAL THERAPY SERVICES, DEC 2000, $503,619
CIN: A-09-99-56858  HAWAII DEPT. OF HUMAN SERVICES, FEB 1999, $502,000
CIN: A-03-92-16229  STATE OF PENNSYLVANIA, MAR 1992, $496,876
CIN: A-02-02-01004  MEDICAID PPS TRANSFERS, MAY 2003, $493,158
CIN: A-05-01-67384  MICHIGAN DEPT. OF COMMUNITY HEALTH, FEB 2001, $481,693
CIN: A-01-04-00506  REVIEW OF DISPROPORTIONATE SHARE HOSPITAL PAYMENTS CLAIMED BY 
SAINT MARYS HOSPITAL FOR FISCAL YEAR ENDING DECEMBER 31, 2002, 
MAY2004, $433,502
CIN: A-07-01-00120  REVIEW OF UNFUNDED PENSION COCST AT BCBS OF OK, JUL 2001, 
$413,800 Appendix D | 61
CIN: A-05-03-00053  ESRD PRICING ERRORS AT INDEPENDENT FACILITIES, NOV 2003, $407,300
CIN: A-02-01-67912  STATE OF NEW YORK, MAR 2001, $389,536
CIN: A-05-00-00030  CONTRACTED AUDIT-NATIONWIDE INS.-MEDICARE ADMIN., OCT 2000, 
$385,081
CIN: A-01-02-73084  STATE OF MAINE, SEP 2002, $362,326
CIN: A-07-03-02653  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION BC/BS ARKANSAS, 
JAN 2003, $344,883
CIN: A-10-01-00005  AUDIT OF ADMIN COSTS AT MEDICARE NORTHWEST, SEP 2001, $332,274
CIN: A-07-01-02630  REVIEW OF MUTUALS SETTLEMENT OF HHA COST REPORTS, JAN 2002, 
$319,949
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES, MAY 
2002, $319,355
CIN: A-09-03-00032  BLUE CROSS OF CALIFORNIA, MEDICARE, TERMINATION COSTS, OCT 2003, 
$319,187
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN, MAR 
2003, $315,474
CIN: A-06-01-00028  AUDIT OF OBSERVATION SERVICE BILLINGS BY PPS HOSPITALS, FEB 2002, 
$298,549
CIN: A-09-03-01017  REVIEW OF RYAN WHITE TITLE I SF CONTRACTOR - BAKER PLACES, AUG 
2004, $297,237
CIN: A-09-03-00050  OREGON  MEDICAID  REIMBURSEMENT  RATE  FOR  NURSING  FACILITY 
ADMINISTRATIVE COSTS, OCT 2003, $290,769
CIN: A-01-04-00522  THE MID COAST HOSPITAL IN MANIE DSH PAYMENT, SEP 2004, $289,936
CIN: A-05-96-00069  CPA AUDIT OF HOOPER HOLMES HHA G&A -OI CASE OPEN, FEB 1998, 
$280,515
CIN: A-09-94-30178  STATE OF ARIZONA, JUN 1994, $267,021
CIN: A-05-02-00047  UNITED GOVERNMENT SERVICES, MEDICARE PART A ADMIN. COSTS FY 
1999-2001, JUN 2003, $260,831
CIN: A-07-03-02662  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION NORDIAN, 
DEC 2002, $258,112
CIN: A-02-03-04001  AUDIT OF RUTGERS CONTRACT NO. SPO 103-96-D-0016/0001, AUG 2003, 
$249,381
CIN: A-01-03-01503  NORTHEASTERN UNIVERSITY DHHS CONTRACT COSTS - GRANT #59307, 
JUN 2004, $245,174
CIN: A-06-04-79691  GULF COAST COMMUNITY SERVICES ASSOCIATION, AUG 2004, $230,618
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL BENEFICIARIES, 
OCT 2002, $229,656
CIN: A-04-00-01222  CAPITAL HLTH PLAN, COST-BASED MANAGED CARE PLAN, SEP 2001, 
$221,952
CIN: A-01-00-00549  BETH ISRAEL AUDIT OF OUTPATIENT PHARMACY SVC, MAR 2001, $221,905
CIN: A-05-99-00067  WPS PART B ADMINISTRATIVE COSTS, NOV 2000, $221,644 62 | Appendix D 
CIN: A-02-03-04006  GRANT REVIEW DAAG55-97-1-0281, MAR 2004, $221,365
CIN: A-02-01-65217  PUERTO RICO DEPT. OF THE FAMILY, DEC 2000, $213,264
CIN: A-05-01-00103  PAYMENTS FOR SERVICES TO DECEASED BENEFICIARIES - MICHIGAN, OCT 
2003, $211,894
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT, OCT 2002, $208,271
CIN: A-05-04-00058  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF ANTHEM HEALTH PLANS OF NEW HAMPSHIRE, INC., 
JUL 2004, $206,495
CIN: A-01-04-00504  REVIEW OF MEDICARE INPATIENT REHABILITATION FACILITY PROSPECTIVE 
PAYMENTS AT WELDON REHABILITATION HOSPITAL FOR FISCAL YEAR 2003, 
JUL 2004, $202,872
CIN: A-07-03-02656  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION KANSAS, DEC 
2002, $190,106
CIN: A-04-04-78917  STATE OF FLORIDA, AUG 2004, $186,096
CIN: A-03-01-00555  PDPI INC. -- HEAD START, JUN 2001, $185,577
CIN: A-07-02-03016  TRANSAMERICA  SUPPLEMENTAL  PENSION  PLAN  COSTS,  MAR  2002, 
$180,244
CIN: A-07-01-02094  SURVEY OF OUTPATIENT OBSERVATION SERVICES, OCT 2002, $165,125
CIN: A-03-98-00034  FREESTATE HP/INSTITUTIONAL STATUS/MEDICARE, MAR 1999, $156,987
CIN: A-07-03-02664  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION TRAILBLAZERS, 
DEC 2002, $140,202
CIN: A-08-03-74616  OGLALA SIOUX TRIBAL DEPT. OF PUBLIC SAFETY, MAR 2003, $136,764
CIN: A-02-98-01002  IPRO  CLOSEOUT  AUDIT  -  CPA  CONTRACT  MONITORING,  DEC  1998, 
$135,492
CIN: A-05-00-00060  MEDICA FOLLOW-UP, REIMB. RATES FOR INSTI. BENES, JUN 2001, $133,795
CIN: A-07-04-03051  MEDICAID PROVIDER OVERPAYMENTS IN UTAH, AUG 2004, $132,749
CIN: A-06-00-00014  REV OF INFUSION THERAPY CLAIMS @ DOCTORS HEALTHCAR, JUN 2000, 
$132,238
CIN: A-07-03-02661  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION NHIC, JAN 2003, 
$129,748
CIN: A-05-03-00067  ADMINISTRATIVE COSTS - WI MEDICAID WAIVERS, JUN 2004, $129,663
CIN: A-02-01-04000  INTERIM AUDIT OF RUTGERS CONTRACT NO.SP0103-96-D-, JAN 2002, 
$125,415
CIN: A-01-03-00010  MEDICAID SCHOOL-BASED HEALTH SERVICES ADMINISTRATIVE CLAIMING 
REVIEW - RHODE ISLAND, JUN 2004, $123,010
CIN: A-05-01-00069  MERITER - MC/MA CREDIT BALANCES, JUL 2002, $122,713
CIN: A-02-02-69503  PUERTO RICO DEPT. OF THE FAMILY, SEP 2002, $121,569
CIN: A-05-01-00091  PAYMENTS TO UNITED HC OF FLA FOR INSTITUTIONAL BENEFICIARIES, SEP 
2002, $121,023
CIN: A-09-99-52846  INTER-TRIBAL COUNCIL OF CALIFORNIA INC., FEB 1999, $119,099
CIN: A-02-02-71384  STATE OF NEW YORK, MAR 2002, $118,773 Appendix D | 63
CIN: A-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM, JAN 1998, 
$114,631
CIN: A-09-02-71247  WATTSHEALTH FOUNDATION INC., APR 2002, $113,000
CIN: A-01-02-00527  REVIEW OF ANTHEM BLUE CROSS/BLUE SHIELD MEDICARE CONTRACT 
TERMINATION AND SEVERANCE COSTS, SEP 2003, $104,468
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL BENEFICIARIES, 
JUN 2002, $100,692
CIN: A-04-03-06007  NURSING HOME QUALITY OF CARE SANCTIONS - FLORIDA, FEB 2004, 
$99,957
CIN: A-05-00-65775  STATE OF WISCONSIN, SEP 2000, $98,586
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS & COST REPORTS @ 
WELBORN, JUN 2003, $97,623
CIN: A-09-97-00066  WALTER MCDONALD - INDIRECT COST RATE AUDIT, MAR 1998, $95,733
CIN: A-10-97-00003  BCWAAK-ADM COSTS REMOTE NETWORK ACTIVITIES FY93&94, FEB 1998, 
$94,643
CIN: A-06-03-00021  CMS FY 02 MEDICARE ERROR RATE - TRAILBLAZER REPORT QTR 1 (NOV-
DEC), JUL 2003, $93,863
CIN: A-05-02-00074  IL PARTNERSHIP PLAN - TRANSPORTATION DURING AN INPATIENT STAY, 
APR 2003, $89,147
CIN: A-05-01-00090  PAYMENTS TO AETNA OF FOR INSTITUTIONAL BENEFICIARIES, JUL 2002, 
$87,516
CIN: A-07-00-00118  REVIEW OF KANSAS RURAL HEALTH CENTER, MAY 2001, $87,493
CIN: A-08-99-56914  RURAL AMERICA INITIATIVES, JUL 1999, $87,468
CIN: A-04-01-01006  MBCBS MEDICARE PART A ADMINISTRATIVE COST AUDIT, NOV 2001, 
$87,042
CIN: A-01-04-77722  STATE OF RHODE ISLAND & PROVIDENCE PLANTATIONS, JAN 2004, $86,792
CIN: A-05-01-00071  PAYMENTS TO HUMANA-K.C. FOR INSTITUTIONAL BENEFICIARIES, DEC 
2001, $84,808
CIN: A-02-03-74061  PUERTO RICO DEPT. OF THE FAMILY, AUG 2003, $80,001
CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW ON MANAGED CARE ORGANIZATION, OCT 
2002, $77,000
CIN: A-01-99-00530  NATIONWIDE REV OF O/P PSYCH SVCS @ PSYCH HOSPITALS, DEC 2000, 
$75,413
CIN: A-05-03-00085  NURSING HOME QUALITY OF CARE SANCTIONS - ILLINOIS, MAY 2004, 
$69,892
CIN: A-01-03-75448  STATE OF NEW HAMPSHIRE, APR 2003, $65,917
CIN: A-08-03-74429  PORCUPINE CLINIC, JUL 2003, $65,027
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PA FOR INSTITUTIONAL BENEFICIARIES, MAY 
2002, $62,432
CIN: A-05-04-78989  STATE OF WISCONSIN, JUL 2004, $61,505
CIN: A-05-99-00045  KAISER HEALTH PLAN OF OHIO - INSTITUTIONAL STATUS, MAY 2000, 
$61,177 64 | Appendix D 
CIN: A-05-02-72716  SOKAOGON CHIPPEWA COMMUNITY MOLE LAKE BAND, SEP 2002, $60,378
CIN: A-05-96-00072  MI DEPT. OF COMMUNITY HEALTH/MEDICAID LAB SERVICES, AUG 1997, 
$59,956
CIN: A-01-96-00505  CFO AUDIT OF HCFAS FINANCIAL STATEMENTS, JUL 1997, $59,327
CIN: A-03-99-00036  VERITUS MEDICARE SERVICES/Y2K COST AUDIT, DEC 1999, $53,267
CIN: A-08-00-60687  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, NOV 1999, $52,536
CIN: A-04-02-68936  STATE OF TENNESSEE, JUN 2002, $50,717
CIN: A-05-00-00059  TITLE XIX - MEDICAID ESCHEATED WARRANTS, MAR 2001, $50,162
CIN: A-05-02-00054  UNITED GOVERNMENT SERVICES, Y2K COSTS FY 1998 & 1999, APR 2003, 
$49,923
CIN: A-02-99-58263  PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD, JUL 1999, 
$49,684
CIN: A-09-95-00095  HEALTH SERVICES ADVISORY GROUP, INC (HSAG), DEC 1995, $49,585
CIN: A-03-93-03306  SURVEY RESEARCH ASSOC. CACS NO1-ES-45067, DEC 1993, $48,779
CIN: A-06-03-75523  UNITED  STATES-MEXICO  BORDER  HEALTH  ASSOCIATION,  JUN  2003, 
$48,400
CIN: A-02-04-76883  UNIV. OF PUERTO RICO-SYSTEM, OCT 2003, $47,532
CIN: A-03-03-00378  REVIEW OF FDAS USNA BONE MASS CLINICAL STUDY, SEP 2004, $46,907
CIN: A-03-02-00373  REVIEW OF US HELPING US, DEC 2003, $45,558
CIN: A-07-00-00106  PENSION SEGMENTATION AUDIT AT BCBS OF OKLAHOMA, JUL 2001, 
$45,508
CIN: A-10-03-00004  REVIEW OF OUTLIER PAYMENTS MADE TO VIRGINIA MASON MEDICAL 
CENTER, OCT 2003, $44,631
CIN: A-09-99-57306  PICAYUNE RANCHERIA OF THE CHUKCHANSI INDIAN TRIBE, SEP 1999, 
$43,159
CIN: A-07-01-00121  REV. OF PEN. COSTS FOR MED. REIMB. FOR BCBS OF OK, JUL 2001, $42,463
CIN: A-03-99-00017  PSU-HERSHEY/PHY CREDIT BALANCES/MEDICARE, DEC 1999, $41,712
CIN: A-01-03-01500  REVIEW OF CDC HIV PROGRAMS AT GREATER BRIDGEPORT ADOLESCENT 
PREGNANCY PROGRAM, JUL 2003, $41,088
CIN: A-10-02-72331  IDAHO MIGRANT COUNCIL INC., JUL 2002, $40,541
CIN: A-05-00-00017  INDIANA MEDICAID TRANSPORTATION SERVICES, MAR 2001, $39,735
CIN: A-10-03-00003  REVIEW  OF  DUPLICATE  MEDICARE  FEE-FOR-SERVICE  PAYMENTS  AT 
REGENCE BLUESHIELD OF IDAHO, OCT 2003, $39,660
CIN: A-03-03-00211  MEDICAID DENIAL OF PAYMENT REMEDY FOR SANCTIONED NURSING 
HOMES - PA, JUN 2004, $39,074
CIN: A-08-00-65136  STATE OF SOUTH DAKOTA, JUN 2000, $36,380
CIN: A-06-03-00020  CMS FY 02 MEDICARE ERROR RATE - TRAILBLAZER REPORT QTR 3 (APR-
JUN), JUL 2003, $35,474
CIN: A-02-00-65502  ABYSSINIAN DEVELOPMENT CORP., AUG 2000, $34,737
CIN: A-06-03-74833  AMIGOS VOLUNTEERS IN EDUCATION & SERVICES INC. AV, APR 2003, 
$31,180 Appendix D | 65
CIN: A-05-02-69155  STATE OF WISCONSIN, DEC 2001, $30,900
CIN: A-04-01-01005  REVIEW DUPLICATE MEDICARE FEE-FOR-SERVICE PAYMENTS AT CAPITAL 
HEALTH PLAN, NOV 2001, $30,293
CIN: A-03-00-00209  STATE SURVEY AND CERTIFICATION COSTS - VA, AUG 2001, $29,298
CIN: A-01-02-71527  STATE OF MASSACHUSETTS, APR 2002, $29,260
CIN: A-04-02-72213  STATE OF FLORIDA, JUN 2002, $28,612
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JAN 2003, $28,573
CIN: A-03-98-03301  AAUAP -- INCURRED COST REVIEW -- HHS 105-95-7011, APR 1998, $28,289
CIN: A-05-03-00097  MEDICARE OUTPATIENT CARDIAC REHAB - NORTHFIELD HOSPITAL, NOV 
2003, $27,013
CIN: A-04-03-01004  OUTPATIENT CARDIAC REHAB SERVICES - HEALTHSOUTH SEA PINES REHAB 
HOSPITAL, DEC 2003, $26,279
CIN: A-07-02-00150  PAYMENTS TO COVENTRY--PITTSBURG FOR INSTITUTIONAL BENEFICIARIES, 
JUN 2003, $26,000
CIN: A-01-04-78952  STATE OF CONNECTICUT, AUG 2004, $24,457
CIN: A-06-02-70732  UNITED  STATES-MEXICO  BORDER  HEALTH  ASSOCIATION,  JAN  2002, 
$23,483
CIN: A-04-00-01206  BCBSNC - MCARE PART A ADMIN COST AUDIT-CARMICHAEL, SEP 2000, 
$21,302
CIN: A-05-01-00078  PAYMENTS  TO  HEALTH  NET-TUCSON,  AZ.-  FOR  INSTITUTIONAL 
BENEFICIARIES, APR 2002, $21,233
CIN: A-02-03-04004  CONTRACT CLOSING - NAS 9-19441, JUL 2003, $20,595
CIN: A-05-02-72480  HANSEL NEIGHBORHOOD SERVICE CENTER INC., SEP 2002, $20,266
CIN: A-05-02-00079  MEDICAID FFS PAYMENTS FOR MEDICAID MANAGED CARE ENROLLEES, SEP 
2003, $20,165
CIN: A-05-02-70624  STATE OF OHIO, JAN 2002, $19,970
CIN: A-04-01-67441  CATAWBA INDIAN NATION, APR 2001, $19,204
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
  VIMI MCARE PRO CONTRACT AUDIT, SEP 1997, $18,758
CIN: A-05-01-00095  PAYMENTS TO HUMANA OF ARIZONA FOR INSTITUTIONAL  
  REVIEW OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH INSTITUTIONAL 
STATUS, JUN 2003, $18,400
CIN: A-10-04-76879  STATE OF ALASKA, DEC 2003, $18,226
CIN: A-04-04-78287  MONTGOMERY COMMUNITY ACTION COMMITTEE INC., APR 2004, $18,175
CIN: A-01-02-01504  REVIEW OF CDCS HIV PROGRAMS AT FENWAY COMMUNITY HEALTH 
CENTER, JUN 2003, $18,028
CIN: A-05-03-00037  NURSING HOME QUALITY OF CARE SANCTIONS - OHIO, MAY 2004, $17,796
CIN: A-05-03-00052  NURSING HOME QUALITY OF CARE SANCTIONS - MICHIGAN, APR 2004, 
$17,564 66 | Appendix D 
CIN: A-03-97-00007  NE HEALTH CARE QUALITY FOUNDATION/CCAS/N HAMPSHIRE, MAR 1997, 
$17,045
CIN: A-07-00-00117  REV. OF PENSION COSTS FOR MED. REIMB. BC/BS OF ND, JAN 2001, $16,863
CIN: A-05-03-75408  MICHIGAN DEPT. OF COMMUNITY HEALTH, APR 2003, $16,645
CIN: A-01-99-55594  STATE OF VERMONT, NOV 1998, $16,623
CIN: A-01-97-44143  BRANDEIS UNIV., JAN 1997, $16,602
CIN: A-06-01-68297  NATIVE AMERICAN CENTER OF RECOVERY INC., MAY 2001, $16,314
CIN: A-03-03-00006  CARDIAC REHABILITATION--WASHINGTON ADVENTISIT HOSPITAL, AUG 
2003, $15,946
CIN: A-03-04-77692  AMERICAN ASSOCIATION OF POISON CONTROL CENTERS INC, FEB 2004, 
$15,060
CIN: A-06-04-77400  UNIV. OF ARKANSAS FOR MEDICAL SCIENCES, JAN 2004, $14,989
CIN: A-05-01-00044  MINNESOTA MEDICAID PERSONAL CARE SERVICES REVIEW, APR 2002, 
$14,844
CIN: A-03-97-00008  NE HEALTH CARE QUALITY FOUNDATION/CCAS/VERMONT, MAR 1997, 
$14,596
CIN: A-05-03-73921  NATIONAL ASSOCIATION OF LOCAL BOARDS OF HEALTH, NOV 2002, 
$13,317
CIN: A-03-03-72847  DISTRICT OF COLUMBIA DEPT. OF HEALTH, OCT 2002, $12,850
CIN: A-08-03-74361  PORCUPINE CLINIC, JUL 2003, $12,611
CIN: A-04-04-79536  STATE OF SOUTH CAROLINA, AUG 2004, $12,154
CIN: A-05-03-00012  FROEDTERT MEDICAID CREDIT BALANCES, FEB 2003, $12,066
CIN: A-03-04-76133  MINORITY ACCESS INC., OCT 2003, $11,141
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL BENEFICIARIES, 
JAN 2002, $11,089
CIN: A-03-01-00513  IRSA - KOSOVO ASSISTANCE GRANT 90-ZK-0002/01, DEC 2001, $10,913
CIN: A-03-02-71608  SUPPORTIVE CHILD ADULT NETWORK INC., APR 2002, $10,561
CIN: A-03-04-75382  NATIONAL HISPANIC MEDICAL ASSOCIATION, JAN 2004, $10,505
CIN: A-05-92-00026  ASSOCIATED INSURANCE CO. - MEDICARE ADMIN, FEB 1992, $10,000
CIN: A-09-02-71757  PYRAMID LAKE PAIUTE TRIBE, MAY 2002, $9,857
CIN: A-10-97-00002  GROUP HEALTH INSTITUTIONALIZED, NOV 1997, $9,769
CIN: A-06-02-00032  CMS FY 01 MEDICARE ERROR RATE - ARK BC/BS REPORT, NOV 2002, $9,655
CIN: A-03-03-00004  MEDICARE AUDIT CARDIAC REHABILITATION CENTERS-SHADY GROVE, 
OCT 2003, $9,127
CIN: A-02-01-66887  PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES, FEB 2001, 
$9,000
CIN: A-05-01-67360  MICHIGAN FAMILY INDEPENDENCE AGENCY, FEB 2001, $8,708
CIN: A-02-02-70019  SENECA NATION OF INDIANS, DEC 2001, $8,706
CIN: A-03-03-74002  MINORITY ACCESS INC., NOV 2002, $8,113 Appendix D | 67
CIN: A-03-02-72715  DISTRICT OF COLUMBIA DEPT. OF HEALTH, JUL 2002, $7,851
CIN: A-06-03-00040  LONG-TERM CARE TEXAS MEDICAID PAYMENTS FOR DUAL ELIGIBLES, MAR 
2004, $7,801
CIN: A-05-01-68270  LAKE COUNTY COMMUNITY ACTION PROJECT, MAY 2001, $7,614
CIN: A-03-03-00007  CARDIAC REHABILITATION---HOLY CROSS HOSPITAL, NOV 2003, $7,470
CIN: A-01-97-49174  BRANDEIS UNIV., AUG 1997, $7,068
CIN: A-04-04-77116  MOORE COMMUNITY HOUSE INC., JAN 2004, $6,521
CIN: A-07-95-01167  PENSION COSTS CLAIMED NEBRASKA BC/BS, JAN 1996, $6,075
CIN: A-06-97-48062  SER-JOBS FOR PROGRESS NATIONAL INC., MAY 1997, $5,924
CIN: A-15-02-20006  REVIEW OF CDC COOPERATIVE AGREEMENT AND HRSA RYAN WHITE 
ACTIVITIES AT HEALTH EDUCATION RESOURCE ORGANIZATION (HERO), 
INC. (BALTIMORE EMA/BALTIMORE CITY HEALTH DEPT), MAR 2003, 
$5,010
CIN: A-04-03-01006  OUTPATIENT CARDIAC REHAB SERVICES AT MORTON PLANT HOSPITAL, 
JAN 2004, $4,426
CIN: A-07-03-00158  REVIEW OF CARDIAC REHABILITATION SERVICES--SPENCE IOWA, JAN 2004, 
$4,026
CIN: A-07-02-04001  FY-2002 CFO/CMS MEDICARE ERROR RATE NORIDIAN (ND B/C), OCT 2002, 
$3,999
CIN: A-02-02-01035  EVALUATION OF BID PROPOSAL - MEDICARE HELP LINE, AUG 2002, $3,760
CIN: A-05-03-00084  MEDICARE  OUTPATIENT  CARDIAC  REHAB  -  NORTHERN  MICHIGAN 
HOSPITAL, OCT 2003, $3,738
CIN: A-09-01-00067  EAST BAY NEPHROLOGY MEDICAL GROUP, AUG 2001, $3,418
CIN: A-02-04-04001  GRANT REVIEW N00014-93-1-1380, MAY 2004, $3,376
CIN: A-03-01-03303  JOHNS HOPKINS UNIVERSITY/KPMG/NIDA/N01DA-3-7301, FEB 2001, $3,347
CIN: A-02-01-66889  PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES, FEB 2001, 
$3,103
CIN: A-03-95-03318  TRANS-MANAGEMENT SYSTEMS 105-92-1527 (CCO), MAY 1996, $3,016
CIN: A-02-01-66888  PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES, FEB 2001, 
$2,883
CIN: A-07-98-02502  CT. BC/BS PENSION COSTS CLAIMED, MAR 1998, $2,725
CIN: A-03-98-51505  ALLIEDSIGNAL TECHNICAL SERVICES CORP., APR 1998, $2,722
CIN: A-01-97-45487  ABT ASSOCIATES INC., JAN 1997, $2,596
CIN: A-02-03-04002  GRANT REVIEW DAAH04-93-G-0234, SEP 2003, $2,576
CIN: A-04-03-01002  OUTPATIENT  HOSPITAL  CARDIAC  REHAB  -  MEMORIAL  HOSPITAL 
JACKSONVILLE, NOV 2003, $2,123
CIN: A-04-03-01005  OUTPATIENT CARDIAC REHAB SERVICES CENTRAL FL REGIONAL HOSPITAL, 
NOV 2003, $2,003
CIN: A-05-97-00013  PACIFICARE OF CA-HMO INSTITUTIONAL STATUS PROJECT, APR 1998, 
$2,000
CIN: A-02-03-01026  MEADOWLANDS HOSPITAL MEDICAL CENTER CARDIAC REHAB SERVICES, 
JAN 2004, $1,703 68 | Appendix D 
CIN: A-04-04-02002  MEDICAID PAYMENTS TO SNFS FOR MEDICARE COVERED SERVICES, AUG 
2004, $1,554
CIN: A-09-03-00043  AUDIT OF OUTPATIENT CARDIAC REHABILITATION SERVICES AT REDDING 
MEDICAL CENTER, OCT 2003, $1,239
CIN: A-09-04-79874  TULARE COMMUNITY HEALTH CLINIC INC., SEP 2004, $1,173
CIN: A-05-03-00070  MEDICARE OUTPATIENT CARDIAC REHAB - ST.CHARLES MERCY HOSP, OCT 
2003, $1,158
CIN: A-03-03-00393  AUDIT OF CDC HIV/AIDS GRANT TO SEXUAL MINORITY YOUTH ASSISTANCE 
LEAGUE, OCT 2003, $1,155
CIN: A-01-03-00514  REVIEW OF CARDIAC REHABILITATION SERVICES- BERKSHIRE MEDICAL 
CENTER, DEC 2003, $1,138
CIN: A-07-00-02082  REVIEW OF A COST HMO - IOWA, FEB 2002, $1,006
4B.
The following audits are open pending the resolution of the contractors termination audit, related termination agreements 
and pending lawsuits:
CIN: A-05-95-00042   BCBSA ADMINISTRATIVE COSTS - CONTRACTED AUDIT, DECEMBER 1995,  
$1,333,598
Notes to Table 2
1The opening balance was adjusted upward by $368.4 million.
2Management decision has not been made within 6 months on 66 reports.
Discussions with management are on going and it is expected that the following audits will be resolved by the next 
semiannual reporting period:
CIN: A-03-00-00203  PA/INTERGOVERNMENTAL  TRANSFERS/MEDICAID,  FEB  2001, 
$3,700,000,000
CIN: A-05-00-00056  MEDICAID  INTERGOVERNMENTAL  TRANSFERS  -  IDPA,  MAR  2001, 
$1,870,000,000
CIN: A-10-00-00011  MEDICAID INTERGOVERNMENTAL TRANSFERS - WA STATE, MAR 2001, 
$475,000,000
CIN: A-06-01-00069  EVALUATION OF LEGISLATION TO INCREASE MEDICAID HOSP-SPEC DSH 
PYMT LIMITS, DEC 2001, $380,000,000
CIN: A-06-01-00041  `AUDIT OF THE TX DISPROPORTIONATE SHARE HOSP PROG PAYMENT 
METHODLOGY, FEB 2003, $319,200,000
CIN: A-04-00-02165  REVIEW OF AL MEDICAID INTERGOVERNMENTAL TRANSFERS, MAR 2001, 
$147,500,000
CIN: A-04-00-02169  REV. AL MCAID INTERGOVTAL TRANSFERS-HOSPITAL ENHANCE, MAY 
2001, $63,000,000
CIN: A-01-99-00530  NATIONWIDE REV OF O/P PSYCH SVCS @ PSYCH HOSPITALS, DEC 2000, 
$56,936,287 Appendix D | 69
CIN: A-07-98-02534  EMPIRE BC/BS PENSION PLAN TERMINATION, MAR 2000, $38,626,351
CIN: A-01-02-00503  FURTHER  EXPANSION  OF  THE  DRG  PAYMENT  WINDOW,  AUG  2003, 
$37,000,000
CIN: A-02-01-67912  STATE OF NEW YORK, MAR 2001, $19,000,000
CIN: A-05-02-00078  ROLLUP  OF  MEDICARE  PAYMENTS  FOR  BENEFICIARIES  WITH  
INSTITUTIONAL STATUS, FEB 2004, $12,764,202
CIN: A-06-99-00060  REVIEW OF AN HMO UNDERPAYMENT CLAIM OF 21 MILLION, JUN 2001, 
$12,191,579
CIN: A-01-00-00502  REV  OF  EXORBITANT  MEDICARE  PMTS  FOR  O/P  SVCS,  MAY  2001, 
$12,100,000
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM -- NATIONAL, MAR 1993, $10,161,742
CIN: A-01-99-00506  FOLLW-UP REVIEW OF SEPRTLY BILLABLE ESRD LAB TESTS, JAN 2001, 
$6,100,000
CIN: A-05-02-00077  MICHIGAN MEDICAID/SCHIP REVIEW, NOV 2003, $5,908,350
CIN: A-01-97-02506  REVIEW OF THE AVAIL OF MEDICAL COVERAGE/CSE SUPORT, JUN 1998, 
$5,704,585
CIN: A-05-02-00076  MICHIGAN SCHIP REVIEW, AUG 2004, $5,623,491
CIN: A-03-02-00203  VIRGINIA - SCHIP/TITLE IV - D SURVEY, JUL 2004, $5,402,491
CIN: A-05-02-00073  INDIANA SCHIP REVIEW, AUG 2004, $4,824,112
CIN: A-05-01-00052  DME REVIEW IN INDIANA, OCT 2001, $4,400,000
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR, MAR 2002, 
$4,000,000
CIN: A-04-98-01188  REVIEW ADMIN. COSTS @ MCARE MANAGED RISK PLAN, AUG 1999, 
$2,559,357
CIN: A-05-00-00083  REVIEW OF MEDICAID DME CLAIMS - MICHIGAN, OCT 2001, $2,500,000
CIN: A-05-02-00066  REVIEW OF RFP CMS-02-001/ELH1, MAY 2002, $1,885,793
CIN: A-05-02-00075  INDIANA MEDICAID/SCHIP REVIEW, NOV 2003, $1,885,708
CIN: A-09-95-00095  HEALTH SERVICES ADVISORY GROUP, INC (HSAG), DEC 1995, $1,389,723
CIN: A-05-01-00031  WI MEDICAID - DME, OCT 2001, $1,250,000
CIN: A-07-99-01298  DATE OF DEATH - 2, MAY 2001, $700,000
CIN: A-05-02-00082  BID PROPOSAL FOR 1-800 MEDICARE HOTLINE ADMINISTRATION, AUG 2002, 
$609,950
CIN: A-05-02-00080  SINAI - MC/MA CREDIT BALANCES, JAN 2003, $515,942
CIN: A-05-03-00021  CIMRO PRO PRE-AWARD AUDIT FOR NEBRASKA, NOV 2002, $504,650
CIN: A-03-99-00052  ALLEGHENY/CHESAPEAKE ORF, SEP 2001, $467,646
CIN: A-05-00-00057  REVIEW OF MEDICAID MUTUALLY EXCLUSIVE CODES - OH, NOV 2001, 
$450,000
CIN: A-05-01-00074  REVIEW OF BID PROPOSAL RFP HCFA-01-0003, JUN 2001, $282,049
CIN: A-05-03-00052  NURSING HOME QUALITY OF CARE SANCTIONS - MICHIGAN, APR 2004, 
$280,879 70 | Appendix D 
CIN: A-03-99-00038  EDGEWATER PSYC HOSPITAL, MAR 2001, $208,731
CIN: A-01-02-73084  STATE OF MAINE, SEP 2002, $149,082
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-05-01-00087  ST.  VINCENT  HOSPITAL-SPECIFIC  DSH  PAYMENT  LIMITS,  MAR  2004, 
$115,000
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-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM, JAN 1998, 
$90,528
CIN: A-05-02-00089  REVIEW OF RFP CMS-500-97-0408/0008, NOV 2002, $84,457
CIN: A-05-02-00084  MEDICARE OUTPATIENT CARDIAC REHAB - ST.LUKES MEDICAL CENTER, 
JUL 2003, $47,247
CIN: A-04-04-76753  PUTNAM COUNTY BOARD OF EDUCATION, DEC 2003, $19,925
CIN: A-05-96-00069  CPA AUDIT OF HOOPER HOLMES HHA G&A -OI CASE OPEN, FEB 1998, 
$17,555
CIN: A-01-97-00526  PSYCHIATRIC OUTPATIENT SERVICES, MAR 1998, $7,245
CIN: A-03-03-00378  REVIEW OF FDAS USNA BONE MASS CLINICAL STUDY, SEP 2004, $6,144
CIN: A-06-03-00041  REVIEW OF WILSON N JONES MEDICAL CENTER CARDIAC REHABILITATION 
SERVICE, NOV 2003, $4,656
CIN: A-06-03-00033  REVIEW OF GOOD SHEPHERD MEDICAL CENTER CARDIAC REHABILITATION 
SERVICE, JUL 2003, $3,737
CIN: A-01-98-00506  PSYCHIATRIC OUTPATIENT AT NEWTON-WELLESLEY HOSPITAL, MAR 1998, 
$1,120 Appendix E
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 below with reference to the page 
in the semiannual report on which each is addressed. Where there are no data to report under a particular requirement, 
the word none appears in the column. A complete listing of audit and inspection reports is being furnished to Congress 
under separate cover. Copies are available upon request.
Section of the Act  Requirement Page
Section 4(a)(2) Review of legislation and regulations 34
Section 5
(a)(1) Significant problems, abuses, and deficiencies Throughout
(a)(2) Recommendations with respect to significant  Throughout
problems, abuses, and deficiencies
(a)(3) Prior significant recommendations on which  Appendixes B & C
corrective action has not been completed 
(a)(4) Matters referred to prosecutive authorities 35
(a)(5) Summary of instances where information was  None
refused 
(a)(6) List of audit reports Under separate cover
(a)(7) Summary of significant reports Throughout
(a)(8) Statistical Table 1Reports With Questioned Costs 32
(a)(9) Statistical Table 2Funds Recommended To Be Put  33
to Better Use
Summary of previous audit reports without 
(a)(10) Appendix D
management decisions
Description and explanation of revised management 
  (a)(11) Appendix D
decisions
Management decisions with which the Inspector 
  (a)(12) None
General is in disagreement
 71 Appendix F
Summary of Sanction Authorities
The Inspector General Act of 1978 (Public Law 95-452), as amended, sets forth specific requirements for 
semiannual reports to be made to the Secretary for transmittal to Congress. A selection of other authorities 
appears below:
Program Exclusions
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds for excluding 
individuals and entities from participation in Medicare, Medicaid, and other Federal health care programs. 
Exclusions are required for individuals and entities convicted of the following types of criminal offenses: 
(1) Medicare or Medicaid fraud; (2) patient abuse or neglect; (3) felonies for other health care fraud; and  
(4) felonies for illegal manufacture, distribution, prescription, or dispensing of controlled substances. OIG 
has the discretion to exclude individuals and entities on several other grounds, including misdemeanors 
for other health care fraud (other than Medicare or Medicaid) or for illegal manufacture, distribution, 
prescription, or dispensing of controlled substances; suspension or revocation of a license to provide health 
care for reasons bearing on professional competence, professional performance, or financial integrity; 
provision of unnecessary or substandard services; submission of false or fraudulent claims to a Federal 
health care program; or engaging in unlawful kickback arrangements.
Providers subject to exclusion are granted due process rights (such as 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.
 73 74 | Appendix F 
OIG is authorized to collect civil monetary penalties of up to $25,000 against small hospitals (less than 100 
beds) and up to $50,000 against larger hospitals (100 beds or more) for each instance in which the hospital 
negligently violated any of the section 1867 requirements. In addition, OIG may collect a penalty of up to 
$50,000 from a responsible physician for each negligent violation of any of the section 1867 requirements 
and, in some circumstances, may exclude a responsible physician.
Civil Monetary Penalties Law
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)).
Summary of Anti-Kickback Statute and Civil False Claims Act 
Enforcement Authorities
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)). Appendix F | 75
False Claims Act
Under the Federal civil False Claims Act (FCA), 31 U.S.C.  3729-3733, a person or entity is liable for up 
to treble damages and up to $11,000 for each false claim it knowingly submits or causes to be submitted to 
a Federal program. Similarly, a person or entity is liable under the FCA if it knowingly makes or uses, or 
causes to be made or used, a false record or statement to have a false claim paid.
The FCA defines knowing to include not only the traditional definition, but also instances when the 
person acted in deliberate ignorance of the truth or falsity of the information or in 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 private individuals to file suit on behalf of 
the United States and entitles that whistleblower to a percentage of any fraud recoveries.