OIG COMPONENTS Department of Health and Human Services
OIG HOTLINE: 800-HHS-TIPS
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services (HHS) 
programs, as well as the health and welfare of beneficiaries served by those programs. This statutory 
mission is carried out through a nationwide network of audits, investigations, and inspections 
conducted by the following operating components:
To report matters involving fraud, waste, abuse, and mismanagement in any departmental program(s)
S Office of Audit Services  The Office of Audit Services (OAS) provides auditing 
Phone:  1-800-HHS-TIPS TTY:  1-800-377-4950
services for HHS, either by conducting audits with its own audit resources or 
    1-800-447-8477 Fax:  1-800-223-8164
A by overseeing audit work done by others. Audits examine the performance of HHS 
programs and/or its grantees and contractors in carrying out their respective 
O responsibilities and are intended to provide independent assessments of HHS programs 
and operations. These assessments help reduce waste, abuse, and mismanagement 
and promote economy and efficiency throughout HHS.
E-Mail:  HHSTips@oig.hhs.gov
I Office of Evaluation and Inspections  The Office of Evaluation and Inspections 
E
(OEI) conducts national evaluations to provide HHS, Congress, and the public 
with timely, useful, and reliable information on significant issues. These evaluations 
O
focus on preventing fraud, waste, or abuse and promoting economy, efficiency, 
and effectiveness of departmental programs. To promote impact, OEI reports also 
Mail:  Office of Inspector General
present practical recommendations for improving program operations.
          Department of Health and Human Services
          Attn: Hotline
I Office of Investigations  The Office of Investigations (OI) conducts criminal, civil, 
O           PO BOX 23489
and administrative investigations of fraud and misconduct related to HHS programs, 
          Washington, DC 20026           
operations, and beneficiaries. With investigators working in all 50 States and the 
District of Columbia, OI utilizes its resources by actively coordinating with the 
Department of Justice (DOJ) and other Federal, State, and local law enforcement 
authorities. The investigative efforts of OI often lead to criminal convictions, 
administrative sanctions, and/or civil monetary penalties.
G Office of Counsel to the Inspector General  The Office of Counsel to the 
Inspector General (OCIG) provides general legal services to OIG, rendering 
advice and opinions on HHS programs and operations and providing all legal 
I
C support for OIGs internal operations. OCIG represents OIG in all civil 
and administrative fraud and abuse cases involving HHS programs, including 
False Claims Act, program exclusion, and civil monetary penalty cases. In 
O
connection with these cases, OCIG also negotiates and monitors corporate 
integrity agreements. OCIG renders advisory opinions, issues compliance 
program guidance, publishes fraud alerts, and provides other guidance to the 
health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities. October 1, 2007-March 31, 2008  TOP MANAGEMENT CHALLENGES
The programs of the Department of Health and Human Services (HHS) help fulfill the Presidents 
vision of a healthier, safer, and more hopeful America.  These essential programs bring with 
them a number of management challenges that have been identified by the Inspector General, 
as listed below.
1. Oversight of Medicare Part D
2. Integrity of Medicare Payments
3. Appropriateness of Medicaid and State Childrens Health Insurance 
    Program Payments
4. Medicaid Administration
5. Quality of Care
6. Public Health Emergency Preparedness and Response
7. Oversight of Food, Drug, and Medical Device Safety
8. Grants Management
9. Integrity of Information Technology Systems and Infrastructure
10. Ethics Program Oversight and Enforcement
The Office of Inspector Generals (OIG) assessment of the challenges is included in Section III of the 
HHS Fiscal Year 2007 Agency Financial Report.  The assessment is available on OIGs Web site at:
oig.hhs.gov/publications/challenges/files/TM_Challenges07.pdf  
 
Message from the Inspector General 
This report, which is submitted to Congress pursuant to the Inspector 
General Act of 1978, as amended, summarizes the activities of the 
Office of Inspector General (OIG) for the 6-month period ending 
March 31, 2008. 
As detailed in these pages, OIGs work during this period 
encompasses a broad range of audits, evaluations, and compliance 
and enforcement activities designed to protect the integrity and 
promote the efficiency and effectiveness of the programs of the Department of Health and 
Human Services (HHS).  Our efforts touch upon many of the 300 programs administered 
by HHS.  In accordance with OIGs statutory funding allocations, we have directed the 
majority of our resources toward safeguarding the Medicare and Medicaid programs and 
the health and welfare of beneficiaries. 
This report, consistent with our previous Semiannual Reports, reflects a robust oversight 
agenda and summarizes our achievements through successful case resolution and issuance 
of reports to the Department containing significant recommendations.  OIGs recent 
activities also reflect the expansion of HHS programs, which continue to grow in scope, 
size, and complexity.  We rely on our more than 1500 dedicated professionals to address 
both longstanding and emerging issues that collectively constitute the top management 
challenges of HHS.  Such issues of longstanding OIG focus include Medicare payment 
integrity, appropriateness of Medicaid and State Childrens Health Insurance Program 
(SCHIP) payments, Medicaid administration, quality of care, and grants management.  
Issues of more recent focus include oversight of Medicare Part D; public health emergency 
preparedness and response; oversight of food, drug, and medical device safety; integrity of 
information technology and systems; and ethics program oversight and enforcement. 
In addressing these challenges, I would like to underscore the importance that we attach to 
ensuring the quality, timeliness, and utility of our work.  Much of our success depends on 
building our institutional knowledge and expertise and working collaboratively with our 
multiple partners and stakeholders throughout Government and in the health care 
community. 
This year marks the 30th anniversary of the Inspector General Act of 1978, and with that 
important milestone in mind, I want to express my sincere appreciation to Congress and 
the Department for their support not just over the past 6 months, but for their sustained 
commitment to supporting the important mission of our Office. 
 
Daniel R. Levinson 
Inspector General 
    
Highlights 
Summary of Accomplishments 
For the first half of fiscal year (FY) 2008, the Department of Health and Human Services 
(HHS) Office of Inspector General (OIG) reported expected recoveries of $2.2  billion:  
$1.1 billion in audit receivables and $1.1 billion* in investigative receivables. 
Also for this semiannual period, OIG reported exclusions of 1,291 individuals and 
entities for fraud or abuse involving Federal health care programs and/or their 
beneficiaries; 293 criminal actions against individuals or entities that engaged in crimes 
against departmental programs; and 142 civil actions, which include False Claims Act 
and unjust enrichment suits filed in Federal district court, Civil Monetary Penalties Law 
(CMPL) settlements, and administrative recoveries related to provider self-disclosure 
matters. 
Medicare Part D Sponsors:  Estimated Reconciliation Amounts for 2006 
In our analysis of the Centers for Medicare and Medicaid Services (CMS) Medicare  
Part D preliminary reconciliation data estimates (as of August 2007) and data from  
16 sponsors with high enrollments, we estimated that Part D sponsors owed Medicare a 
net total of $4.4 billion for the 2006 program year.  Eighty percent of the sponsors owed 
CMS money and 20 percent were due money.  We also found that CMS had no 
mechanism to collect funds or adjust prospective payments prior to the reconciliation that 
is conducted after the close of the plan year.  As a result, sponsors had the use of billions 
of dollars for a significant length of time.  In response to our recommendations, CMS 
agreed to use data collected from 2006 and subsequent plan years in reviewing future 
bids, acknowledged its authority to change certain payment methodologies, and agreed to 
examine related options.  CMS did not agree to implement an interim process or to seek 
legislation delaying changes to risk corridors.  (Details on pages 9-10.) 
Medicare Part D Payments to Local, Community Pharmacies 
In our review of the relationship between Medicare Part D payments to local, community 
pharmacies and the pharmacies drug acquisition costs we found that in September 2006, 
pharmacies almost always (97 percent of the time) acquired drugs for less than the 
reimbursement amounts.  We performed this review at the request of 33 Senators who 
raised concerns about the sufficiency of reimbursement to local, community pharmacies.  
We estimated that, excluding dispensing fees and including rebates that drug wholesalers 
paid to pharmacies, Medicare Part D payments to local, community pharmacies exceeded 
the pharmacies drug acquisition costs by 18.1 percent.  We recommended that Congress 
and CMS consider the results of the review in deliberations regarding Medicare Part D 
reimbursement, and CMS agreed.  (Details on page 12.) 
                                                 
*This amount represents HHS investigative receivables only; receivables of other Federal agencies, States, 
and other entities are not included here.  
HHS OIG Semiannual Report to Congress  v   Highlights 
Spring 2008   
Tracking Beneficiaries True Out-of-Pocket Costs for the Part D Prescription Drug 
Benefit 
In our review of Medicare Part D plans tracking of True Out-of-Pocket (TrOOP) costs, 
we found that in 2006, 29 percent of Part D plans did not, as required, submit their 
enrollees additional prescription drug coverage information to Coordination of Benefits 
Contractors (COBC).  Accurate tracking of beneficiaries TrOOP costs is critical to 
ensuring appropriate cost sharing under the Part D program.  To track TrOOP costs 
accurately, Part D plans must have information on any prescription drug coverage that 
enrollees have in addition to Part D coverage.  We also found that 34 percent of Part D 
plans had not submitted prescription drug event data to CMS, 63 percent of the plans 
cited problems with transferring TrOOP balances when enrollees changed plans, and 
CMS had conducted limited oversight of Part D plans tracking of TrOOP costs.  Our 
recommendations addressed collecting and submitting data to track costs, increasing the 
number of COBC agreements, and expanding data collections and oversight authorities.  
CMS indicated it had taken or would take responsive steps.  (Details on pages 8-9.) 
Artificial-Joint Makers Pay $310 Million to Settle Kickback Case 
Medical device makers Zimmer Holdings, Inc.; DePuy Orthopaedics, Inc. (a unit of 
Johnson & Johnson); Smith & Nephew, Inc.; and Biomet, Inc., agreed to pay a total of 
approximately $310 million to resolve allegations of anti-kickback statute and FCA 
violations.  The four companies allegedly used consulting deals with orthopedic surgeons 
to induce the purchase of their respective artificial hip and knee products.  As part of the 
settlement, the companies entered into 5-year CIAs with OIG.  (Details on pages 28-29.) 
Payments for Outpatient Services in Skilled Nursing Facility Stays  
We found that Medicare Part B made a total of $106.9 million in potential overpayments 
to suppliers of outpatient services on behalf of beneficiaries in Part A-covered skilled 
nursing facilities (SNF) during calendar years (CY) 2001 and 2002.  These potential 
overpayments occurred because CMS did not have system edits in place during most of 
this period.  For CY 2003, when the edits were fully implemented, potential 
overpayments were reduced to $22.7 million.  CMS agreed with our recommendations 
about reviewing overpayments, testing and refining edits, and establishing recovery 
controls.  (Details on pages 6-7.) 
Bristol-Myers Squibb Co. Pays More Than $499 Million to Resolve Allegations of 
Illegal Drug Marketing and Pricing 
As part of a civil settlement, the Bristol-Myers Squibb Co. (BMS) and its wholly owned 
subsidiary, Apothecon, Inc., agreed to pay $499 million plus interest to resolve 
allegations relating to a variety of Federal and State claims.  The Government alleged that 
BMS fraudulently set and maintained inflated prices for a wide assortment of oncology 
and generic drug products, paid various forms of illegal kickbacks to physicians and 
pharmacies, promoted off-label uses of the antipsychotic drug Abilify, and knowingly 
misreported its best price for the antidepression drug Serzone.  BMS entered into a 5-year 
corporate integrity agreement (CIA) with OIG as part of the resolution of this FCA case.  
(Details on pages 26-27.)
HHS OIG Semiannual Report to Congress  v i  Highlights 
Spring 2008   
Dermatologist Sentenced for Upcoding Surgical Procedures 
A Michigan dermatologist was sentenced to 10 years and 6 months in prison and ordered 
to pay approximately $1.3 million in restitution and a $175,000 fine for upcoding surgical 
procedures, billing for medically unnecessary procedures, and improperly billing for 
follow-up office visits.  The dermatologist falsely informed patients that they had cancer 
when, in fact, laboratory results indicated that their tissue specimens were benign.  He 
then performed surgeries based on these false diagnoses.  (Details on page 30.) 
A California Laboratorys Compliance With Select Agent Regulations   
A California laboratory (Laboratory) agreed to resolve its liability for an alleged violation 
of the Select Agent Regulations.  OIG alleged that the Laboratory transferred vials of a 
select agent to two laboratories located in Florida and Virginia in a manner that violated 
the transfer requirements.  During the transfers, the select agent was released from the 
shipped vials.  An investigation of the packaging for the shipments revealed several 
violations of regulations governing the shipment of the select agent.  OIG specifically 
alleged that the Laboratory violated the transfer requirements of the select agent 
regulations by failing to comply with the applicable shipping and packaging laws when 
transferring a select agent.  In addition, OIG alleged that the Laboratory failed to comply 
with security and access requirements by allowing an individual not authorized to have 
access to select agents to package the shipments of the select agent and that the 
Laboratorys responsible official failed to ensure compliance with the shipping and 
packaging requirements of the select agent regulations.  Under the terms of the 
settlement, the Laboratory agreed to pay OIG $450,000 to resolve these allegations.  As a 
separate matter, the Laboratorys compliance is subject to monitoring by the Centers for 
Disease Control and Prevention (CDC).  (Details on page 41.) 
Temporary Assistance for Needy Families Improper Payment Pilot Reviews  
In our pilot reviews of Temporary Assistance for Needy Families (TANF) basic 
assistance payments during a 6-month period in 2005, we found that three States
Michigan, New York, and Pennsylvaniacollectively claimed an estimated $95 million 
in improper payments.  The estimated error rates ranged from 11.5 percent to 40 percent 
of the Federal dollars expended.  We found errors related to eligibility, calculations, and 
documentation.  The Administration for Children and Families (ACF) and the Office of 
Management and Budget (OMB) requested that OIG conduct these pilot reviews to 
develop a methodology for calculating a national TANF error rate for FY 2008.  Our 
recommendations focused on State compliance with requirements, enrollee eligibility, 
and recalculating improperly paid benefits.  Michigan disagreed, New York did not 
address the recommendations, and Pennsylvania agreed.  (Details on pages 42-43.) 
National Institutes of Health:  Conflicts of Interest in Extramural Research 
In our review of financial conflicts of interest reported by grantee institutions to the 
National Institutes of Health (NIH), we found that the agency needed to improve its 
oversight of such conflicts.  For FYs 20042006, NIH could not provide an accurate 
count of the financial conflicts of interest reports that it received from grantees; of  
438 financial conflicts of interest reports received from grantee institutions in 2006, at 
least 89 percent did not state the nature of the conflicts or the way in which they would be 
managed; for oversight, NIHs institutes most often relied on grantees assurances that 
HHS OIG Semiannual Report to Congress  vi i  Highlights 
Spring 2008   
financial conflict-of-interest regulations were being followed.  NIH agreed with our 
recommendations to increase oversight of grantee compliance with regulations, require 
Institutes to forward grantee conflict of interest reports, and ensure that all of the reports 
are included in its database.  NIH did not agree with our recommendation to require 
grantees to provide details about financial conflicts of interest.  (Details on page 38.) 
Departmental Financial Statement Audit 
Independent external auditors provided an unqualified opinion on the FY 2007 HHS 
consolidated/combined financial statements.  This means that for the ninth consecutive 
year, the statements were reliable and fairly presented.  However, the report on internal 
controls noted four material weaknesses:  financial reporting systems and processes, 
budgetary accounting, financial management information systems, and Medicare claim-
processing controls.  (Details on page 50.) 
HHS OIG Semiannual Report to Congress  vi ii  Highlights 
Spring 2008   
External Activities   
During this reporting period, OIG officials participated in a range of external activities to 
further the organizations mission.  Following are examples of such activities. 
Presidents Council on Integrity and Efficiency 
The Inspector General (IG) participates in the Presidents Council on Integrity and 
Efficiency (PCIE), a forum through which Inspectors General coordinate interagency 
policy issues, set professional standards for OIG work, coordinate studies on topics of 
governmentwide concern, and provide training for OIG executives and their staffs.  In 
addition, the IG serves as Chair of the PCIE Inspection and Evaluation Committee.  The 
IG also sits on the PCIEs Homeland Security Roundtable, a group comprising IGs with 
oversight responsibility for agency programs impacting our Nations safety and security. 
Congressional Testimony 
On February 27, 2008, Gregory Demske, Assistant Inspector General for Legal Affairs, 
testified before the Senate Special Committee on Aging regarding the financial 
relationships between physicians and the medical device industry.  The testimony 
described the risks associated with industry-physician financial relationships; highlighted 
some of OIGs recent investigations involving kickbacks from medical device companies 
to physicians; and indicated ways in which these risks can be mitigated through 
enforcement actions, outreach to promote compliance, and increased transparency. 
The full text of OIGs testimony provided at this hearing is available on OIGs Web site 
at http://oig.hhs.gov/testimony.html#1. 
Speeches 
On October 1, 2007, Stuart Wright, Deputy Inspector General for Evaluations and 
Inspections, made a presentation to the National Association of Medicaid Fraud and 
Control Units.  The topic of discussion was OIGs role in oversight of MFCUs. 
On December 45, 2007, Steven Lack, Assistant Special Agent in Charge from the  
San Francisco Region, presented, A Picture Is Worth a Thousand Words and a 
Prosecution to the National Health Care Anti-Fraud Institutes Annual Training 
Conference.  For an audience of over 200 health card fraud managers, investigators, 
attorneys, auditors, and other professionals, the presentation described case charting, an 
investigative tool used to plan and conduct health care fraud investigations for obtaining 
prosecutions and convictions. 
On December 8, 2007, Ann Maxwell, Regional Inspector General for Evaluation and 
Inspections in Chicago, addressed the Health Care Compliance Associations (HCCA) 
Medicare Prescription Drug Part D Compliance Conference.  She presented an overview 
of the evaluations, audits, investigations, and legal guidance that OIG has published 
related to Medicare Part D.  She also discussed planned work outlined in OIGs 2008 
Work Plan. 
HHS OIG Semiannual Report to Congress  ix   External Activities 
Spring 2008   
On March 11, 2008, Timothy Brady, Regional Inspector General for Evaluation and 
Inspections in San Francisco, and Scott Hutchison of his staff made a presentation to the 
American Society for Public Administration during its annual meeting in Dallas, Texas.  
The topic of discussion was reducing Medicare and Medicaid fraud, waste, and abuse in 
the 21st century. 
Events 
OIG officials participated in the following events: 
  OctoberNovember 2007, OIG sponsored Medicaid integrity training conferences 
in Pennsylvania, Florida, and California.  These 3-day conferences addressed 
requirements of the fraud and abuse provisions contained in section 6034 of the 
Deficit Reduction Act (DRA) of 2005.  The conferences were also tailored to 
address specific Medicaid integrity issues in the hosting States or regions and 
methods to better identify Medicaid program vulnerabilities.  Since March 2007, 
we have held nine Medicaid integrity training conferences for over 1,100 
attendees from a variety of Federal, State and local agencies, and 
independent/nonprofit health insurance associations. 
  On December 6, 2007, OIG and HCCA cosponsored a Government-industry 
roundtable, Driving for Quality in Long-Term Care:  A Board of Directors 
Dashboard.  The roundtable discussions provided representatives from the long-
term care industry with an opportunity to share experiences and inform OIG and 
HCCA of issues related to boards of directors oversight of quality of care.  On 
January 31, 2008, OIG and HCCA published a report summarizing the roundtable 
discussions.  The report is available on the OIG Web site at 
http://www.oig.hhs.gov/fraud/docs/complianceguidance/Roundtable013007.pdf 
Significant Awards From External Organizations 
The following OIG individuals and teams received 2007 PCIE Awards on October 23, 
2007: 
  Susan C. Callahan, Senior Counsel, Individual Accomplishment Award 
  Judith Holtz-Rock, Director, Public Affairs (retired), June Gibbs Brown Career 
Achievement Award 
  Vicki L. Robinson, Chief, Industry Guidance Branch, Law and Legislation Award 
for Excellence 
  Medicare Part D Team, Audit Award for Excellence 
  340B Drug Discount Program Team, Evaluation Award for Excellence 
  Purdue Pharma L.P. Team, Investigation Award for Excellence 
HHS OIG Semiannual Report to Congress  x   External Activities 
Spring 2008   
External Organizations 
The IG and Principal Deputy Inspector General are Invited Ethics Resource Center 
Fellows from the Government sector.  The Ethics Resource Center (ERC) is Americas 
oldest nonprofit organization devoted to the advancement of high ethical standards and 
practices in public and private institutions.  ERC serves as a resource for institutions 
committed to a strong ethics culture.  ERCs expertise also informs the public dialogue 
on ethics and ethical behavior. 
HHS OIG Semiannual Report to Congress  x i  External Activities 
Spring 2008    
Table of Contents 
Top Management Challenges.......................................................................................i 
Message from the Inspector General.........................................................................iii 
Highlights......................................................................................................................v 
External Activities........................................................................................................ix 
Centers for Medicare & Medicaid Services................................................................1 
Reports Related to CMSs Programs........................................................................................3 
Medicare-Related Reports...........................................................................................................3 
Hospital Wage Data..............................................................................................................................3 
Comparison of Average Sales Prices To Average Manufacturer Prices for Part B 
Prescription Drugs:  Impact on Medicare Reimbursement......................................................3 
Growth in Advanced Imaging Paid Under the Medicare Physician Fee Schedule......................4 
A Comparison of Medicare Program and Consumer Internet Prices for Power 
Wheelchairs.....................................................................................................................................5 
Los Angeles County Suppliers Compliance With Medicare Standards:  Results 
From Unannounced Visits............................................................................................................5 
Medicare Payments for Home Blood-Glucose Test Strip and Lancet Supplies...........................6 
Payments for Outpatient Services on Behalf of Beneficiaries in Skilled Nursing 
Facility Stays...................................................................................................................................6 
Excessive Payments for Outpatient Services.....................................................................................7 
Physician-Owned Specialty Hospitals Ability To Manage Medical Emergencies....................7 
Medicare Hospice Care:  A Comparison of Beneficiaries in Nursing Facilities and 
Beneficiaries in Other Settings.....................................................................................................8 
Tracking Beneficiaries True Out-of-Pocket Costs for the Part D Prescription Drug 
Benefit..............................................................................................................................................8 
Medicare Part D Sponsors:  Estimated Reconciliation Amounts for 2006...................................9 
Medicare Part D Prescription Drug Plan Sponsor Internet Web Sites:  Content and 
Accessibility.................................................................................................................................10 
Implementation of Safeguards During Fiscal Year 2006 To Prevent and Detect Fraud 
and Abuse in Medicare Prescription Drug Plans....................................................................11 
Relationship Between Medicare Part D Payments to Local, Community Pharmacies 
and the Pharmacies Drug Acquisition Costs.........................................................................12 
Generic Drug Utilization in the Medicare Part D Program..........................................................12 
1-800-MEDICARE:  Caller Satisfaction and Experiences..........................................................13 
Claim Payment Adjustments Identified by Quality Improvement Organizations....................13 
Fiscal Integrity of Quality Improvement Organizations...............................................................13 
Medicare Contractor Pension Reimbursement...............................................................................15 
   
HHS OIG Semiannual Report to Congress  xiii  Table of Contents 
Spring 2008   
Medicaid-Related Reports.........................................................................................................16 
Generic Drug Price Increases............................................................................................................16 
Unit of Measure Inconsistencies in the Medicaid Prescription Drug Program.........................16 
Hurricane Katrina Uncompensated Care Costs Claimed by Two Mississippi Medical 
Facilities........................................................................................................................................17 
Medical Assistance to Hurricane Katrina Evacuees......................................................................17 
Medicaid Targeted Case Management Services Provided by Several States............................18 
Tennessee Home- and Community-Based Mental Retardation Services...................................19 
Medicaid School-Based Services in Utah.......................................................................................19 
Improper Payments for Medicaid Pediatric Dental Services.......................................................20 
New Jersey Medicaid Contingency Fee Contract Payments........................................................20 
Californias Medicaid Management Information System Expenditures....................................20 
State Childrens Health Insurance Program-Related Report.............................................21 
Assessing States Progress in Meeting SCHIP Goals...................................................................21 
Financial-Related Report..........................................................................................................21 
CMS Financial Statement Audit.......................................................................................................21 
Outreach.......................................................................................................................................21 
Advisory Opinions.............................................................................................................................22 
Provider Self-Disclosure Protocol....................................................................................................22 
Office of Inspector General Administrative Sanctions.........................................................23 
Program Exclusions............................................................................................................................23 
Civil Monetary Penalties Law..........................................................................................................24 
Patient Dumping.................................................................................................................................25 
Criminal and Civil Enforcement..............................................................................................25 
Pharmaceutical Manufacturers and Distributors............................................................................26 
Durable Medical Equipment Suppliers...........................................................................................27 
Hospitals..............................................................................................................................................29 
Home Health.......................................................................................................................................29 
Practitioners.........................................................................................................................................30 
Laboratories.........................................................................................................................................31 
Nursing Homes...................................................................................................................................31 
Medicaid Fraud Control Units.................................................................................................31 
Joint Investigations.....................................................................................................................32 
OIG Reviews of MFCUs...................................................................................................................32 
Public Health and Human Services Programs and Departmentwide Issues...........35 
Public Health Programs.....................................................................................................................35 
   
HHS OIG Semiannual Report to Congress  xiv  Table of Contents 
Spring 2008   
Human Services Programs................................................................................................................36 
Departmentwide Issues......................................................................................................................36 
Reports Related to Public Health Programs..........................................................................37 
Laboratory Preparedness for Pandemic Influenza.........................................................................37 
Superfund Financial Activities at the National Institute of Environmental Health 
Sciences........................................................................................................................................37 
Procurements Made by the National Institutes of Health for the Department of 
Defense.........................................................................................................................................37 
National Institutes of Healths Oversight of Conflicts of Interest in Extramural 
Research.......................................................................................................................................38 
State, Local, Private, and Commercial Laboratories Compliance With Select Agent 
Regulations...................................................................................................................................39 
Actions Related to Public Health Programs...........................................................................40 
Health Education Assistance Loan Defaults...................................................................................40 
Public Health-Related Investigations...............................................................................................41 
Reports Related to Human Service Programs.......................................................................42 
Division of Unaccompanied Childrens Services:  Efforts To Serve Children.........................42 
Improper Temporary Assistance for Needy Families Basic Assistance Payments in 
Three States..................................................................................................................................42 
Title IV-E Foster Care Costs Claimed by Two States..................................................................43 
Undistributable Child Support Collections.....................................................................................45 
State Use of Debt Compromise To Reduce Child Support Arrearages......................................46 
Child Support Enforcement......................................................................................................47 
Task Forces..........................................................................................................................................47 
Child Support Investigations.............................................................................................................48 
Misuse of ACF Grant Funds.............................................................................................................48 
Reports Related to Departmentwide Issues............................................................................50 
Departmental Financial Statement Audit........................................................................................50 
Departmental Service Organizations...............................................................................................50 
Non-Federal Audits............................................................................................................................50 
Resolving Recommendations....................................................................................................52 
Table 1:  Reports With Questioned Costs.......................................................................................52 
Table 2:  Funds Recommended To Be Put to Better Use.............................................................53 
Legislative and Regulatory Review and Development..........................................................54 
Regulatory Review Functions...........................................................................................................54 
Regulatory Development...................................................................................................................54 
Employee Fraud and Misconduct............................................................................................54 
   
HHS OIG Semiannual Report to Congress  xv  Table of Contents 
Spring 2008   
Appendixes...................................................................................................................................55 
Appendix A:  Notes to Tables 1 and 2.....................................................................................57 
Notes to Table 1..................................................................................................................................57 
Notes to Table 2..................................................................................................................................60 
Appendix B:  Reporting Requirements of the Inspector General Act of 1978, as 
Amended................................................................................................................................61 
Appendix C:  Summary of Sanction Authorities...................................................................63 
Program Exclusions............................................................................................................................63 
Patient Dumping.................................................................................................................................63 
Civil Monetary Penalties Law..........................................................................................................64 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities...........................64 
Appendix D:  Acronyms and Abbreviations..........................................................................67 
Please note:  Numerical information in this report is rounded. 
   
HHS OIG Semiannual Report to Congress  xvi  Table of Contents 
Spring 2008   
Centers for Medicare & Medicaid Services  
OIG allocates about 80 percent of its resources to work related to CMS, which 
administers the following programs: 
  Medicare provides health insurance for people 65 years old or older, people 
younger than 65 years old with certain disabilities, and people of any age with end 
stage renal disease (ESRD).  In FY 2007, Medicare served 43.9 million 
beneficiaries at a cost of $375.2 billion.  Medicare has four parts:  Hospital 
Insurance (Part A), which helps cover inpatient care in hospitals, including critical 
access hospitals, SNFs, and hospice and certain home health care; Supplementary 
Medical Insurance (Part B), which helps pay for physician services and outpatient 
care; Medicare Advantage (MA), which offers a range of prepaid managed health 
care choices; and the Medicare Prescription Drug Benefit (Part D), which 
provides an optional prescription drug benefit to individuals enrolled in Medicare, 
generally through private prescription drug plans. 
  Medicaid, a joint Federal-State program, supports States coverage of medical 
care and other support services for low-income individuals.  In FY 2007, 
Medicaid enrollment was estimated at 49 million people; total Federal and State 
outlays were $350 billion, of which the Federal share was $192 billion. 
  SCHIP, a joint Federal-State program established in 1997 under Title XXI of the 
Social Security Act (the Act), provides health insurance for children who do not 
qualify for Medicaid but whose families are not able to afford private coverage.  
In FY 2007, SCHIP served 7.5 million beneficiaries at a Federal cost of  
$6.1 billion. 
OIGs focus on these health care programs reflects the spending of HHS:  CMS 
expenditures have accounted for about 80 percent of the Departments budget over the 
last several years.  This focus is also rooted in legislative mandates and funding sources, 
including the following: 
  The Health Insurance Portability and Accountability Act of 1996 (HIPAA)  
(P.L. No. 104-191) established the Health Care Fraud and Abuse Control program 
(HCFAC) under the direction of the Attorney General and the Secretary of HHS 
to combat waste, fraud, and abuse in the Medicare and Medicaid programs.  
HCFAC funding constitutes a major portion of OIGs annual operating budget 
and must be used for work related to Medicare and Medicaid. 
  The DRA (P.L. No. 109-171) provides OIG annual funding of $25 million from 
FY 2006FY 2010 to undertake fraud and abuse control activities related to the 
Medicaid program. 
 
HHS OIG Semiannual Report to Congress  1  Centers for Medicare & Medicaid Services 
Spring 2008   
This chapter on CMS-related work summarizes OIGs findings and recommendations 
related to the Medicare, Medicaid, and SCHIP programs and provides examples of our 
outreach efforts, partnerships with States on Medicaid reviews, administrative sanctions, 
and criminal and civil enforcement activities. 
HHS OIG Semiannual Report to Congress  2  Centers for Medicare & Medicaid Services 
Spring 2008   
Reports Related to CMSs Programs  
Medicare-Related Reports 
Hospital Wage Data 
We found that two hospitals did not fully comply with Medicare requirements for 
reporting wage data in their Medicare cost reports.  Under the acute care hospital 
inpatient prospective payment system, CMS adjusts the Medicare base rate paid to 
participating hospitals by the wage index applicable to the area in which the hospitals are 
located.  CMS updates the wage indexes annually based on hospitals reported wage data. 
  Massachusetts:  A hospital in Massachusetts overstated the wage data included in 
its FY 2006 Medicare cost report by $13.4 million and 139,916 hours.  Correcting the 
hospitals errors reduced the average hourly wage rate from $41.45 to $40.  We 
recommended that the hospital submit a revised FY 2006 Medicare cost report to the 
fiscal intermediary and implement procedural improvements.  The hospital did not 
agree with all of our findings but said that it would resubmit its cost report and 
strengthen its procedures.  (A-01-07-00509) 
  New Jersey:  A hospital in New Jersey understated the wage data included in its  
FY 2005 Medicare cost report by $572,108 and 110,107 hours.  Correcting the 
hospitals errors reduced the average hourly wage rate from $36.51 to $35.76.  We 
recommended that the hospital submit a revised FY 2005 Medicare cost report to the 
fiscal intermediary and implement procedural improvements.  The hospital agreed.  
(A-02-07-01047) 
Comparison of Average Sales Prices To Average Manufacturer Prices for Part B 
Prescription Drugs:  Impact on Medicare Reimbursement  
During this semiannual period, we issued two reports related to our continuing work 
comparing average sales prices (ASP) with average manufacturer prices (AMP) for 
Medicare Part B prescription drugs.  From April 2006July 2007, we issued three reports 
of such comparisons.  Section 1847A(d)(2)(B) of the Act mandates that OIG perform 
these comparisons.  For instances in which the ASP for a drug exceeds the AMP by a 
certain threshold (currently 5 percent), section 1847A(d)(3) of the Act provides that the 
Secretary may disregard the ASP pricing methodology for that drug and that the 
Secretary shall substitute the payment amount for the drug code with the lesser of widely 
available market price for the drug (if any) or 103 percent of the AMP. 
Analyzing CMSs Healthcare Common Procedure Coding System (HCPCS) codes for 
drugs covered under Medicare Part B, we have identified in all five comparisons 
instances in which drug codes met the threshold for price adjustments.  We determined 
that such adjustments, if implemented by the Secretary, would save Medicare millions of 
dollars in Medicare costs.  Although these two reports did not include recommendations, 
CMS has commented on previous occasions that it would like to better understand 
fluctuating differences between ASPs and AMPs and that it intends to develop a process 
HHS OIG Semiannual Report to Congress  3  Centers for Medicare & Medicaid Services 
Spring 2008   
to adjust payment amounts based on the results of our pricing comparisons.  To date, no 
changes have been made to Part B reimbursement as a result our price comparisons. 
In the fourth and fifth comparisons, issued during this reporting period, we specifically 
found the following: 
  Comparison of First-Quarter 2007 Average Sales Prices to Average 
Manufacturer Prices for Part B Prescription Drugs:  Impact on Medicare 
Reimbursement for Third Quarter 2007For the first quarter of 2007, we found that 
34 of the 371 HCPCS codes included in our review were eligible for price adjustments 
and determined that such adjustments would have reduced Medicare third-quarter 
expenditures by $9 million.  Of these 34 codes, 20 had been identified in our previous 
comparisons as meeting the thresholds for price adjustment.  (OEI-03-07-00530) 
  Comparison of Second-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices for Part B Prescription Drugs:  Impact on Medicare 
Reimbursement for Fourth Quarter 2007For the second quarter of 2007, we found 
that 22 of the 292 HCPCS codes in our review were eligible for price adjustments and 
determined that such adjustments would have reduced Medicare fourth-quarter 
expenditures by $8 million.  Of these 22 codes, 16 had been identified in our previous 
comparisons as meeting the thresholds for price adjustment.  (OEI-03-08-00010) 
Growth in Advanced Imaging Paid Under the Medicare Physician Fee Schedule 
We reviewed the extent and nature of the growth in the use of advanced imaging that was 
paid under the Medicare Physician Fee Schedule (MPFS) from 19952005 and concluded 
that this area continues to warrant CMSs attention to ensure that Medicare beneficiaries 
receive reasonable, appropriate, and high-quality imaging services in all ambulatory 
settings, including independent diagnostic testing facilities (IDTF).  Advanced imaging 
enables doctors to diagnose and treat patients by providing detailed images of tissues 
deep inside the body.  Under the Medicare program, advanced imaging (e.g., magnetic 
resonance, computed tomography, and positron emission tomography) has proliferated in 
ambulatory settings, where services are paid for under MPFS. 
We found that: 
  Advanced imaging paid under the MPFS grew more than fourfold, from  
1.4 million to 6.2 million services; by 2005, advanced imaging billed under MPFS 
made up nearly one quarter of all advanced imaging covered by Medicare.  
Allowed charges and the utilization rate per beneficiary grew to $3.5 billion and 
163 services per 1,000 beneficiaries. 
  Services provided by IDTFs accounted for nearly 30 percent of the total growth in 
advanced imaging under the MPFS. 
  Growth varied widely among States, from 24 percent to over 1,000 percent. 
  In every year from 19952005, a small number of procedure codes consistently 
accounted for over half of all advanced imaging billed under MPFS. 
HHS OIG Semiannual Report to Congress  4  Centers for Medicare & Medicaid Services 
Spring 2008   
We recommended that CMS monitor the growth of advanced imaging in ambulatory 
settings.  In addition, in a related report issued in 2006, we found numerous problems 
with IDTFs, including noncompliance with Medicare requirements and services that were 
not reasonable and necessary.  Following our 2006 recommendation that CMS monitor 
IDTFs, the agency took certain actions, such as establishing IDTF performance standards, 
which partially addressed our earlier recommendation.  The rapid growth of advanced 
imaging provided by IDTFs reinforces the importance of implementing our prior 
recommendation to consider conducting site visits to monitor IDTFs compliance with 
Medicare requirements.  CMS concurred with our recommendation to monitor growth of 
advanced imaging and described steps taken to improve oversight of IDTFs; however, the 
agency stated that it lacked funding to support unannounced site visits to IDTFs.   
(OEI-01-06-00260) 
A Comparison of Medicare Program and Consumer Internet Prices for Power 
Wheelchairs  
In a review of power wheelchairs, for which Medicare and its beneficiaries spent over 
$900 million in 2006, we found that the Medicare fee schedule amounts were 45 percent 
higher than median Internet prices available to consumers in the first quarter of 2007.  
Medicare beneficiaries are eligible to receive power wheelchairs under Part B coverage 
of durable medical equipment (DME).  Medicare will pay up to 80 percent of the cost of 
a power wheelchair, up to the fee schedule amount, and beneficiaries are responsible for 
paying the remaining amounts.  Our 2004 review found that Medicare and its 
beneficiaries paid higher prices than consumers and suppliers.  In 2006, CMS revised the 
fee schedule for power wheelchairs as part of its strategy to reform payments for these 
devices.  For the period studied during this review, we determined that had suppliers been 
reimbursed for the same power wheelchairs at median Internet prices, Medicare and its 
beneficiaries would have spent 28 percent ($39 million) less than actual payments; on 
average, each beneficiary could have saved $233 in a power wheelchair copayment.  We 
recommended that CMS consider performing additional reviews to determine whether 
current power wheelchair schedule amounts are appropriate.  CMS concurred with our 
recommendation.  (OEI-04-07-00160) 
Los Angeles County Suppliers Compliance With Medicare Standards:  Results From 
Unannounced Visits 
In our review of suppliers of durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS) in Los Angeles County in September and October 2007, we found 
that 194 of 905 suppliers (22 percent) did not meet one or both of the two Medicare 
enrollment standards that we selected for review.  DMEPOS, which include items such as 
hospital beds, wheelchairs, respirators, walkers, and artificial limbs, are provided to 
Medicare beneficiaries by commercial suppliers, that are reimbursed by Medicare.  At the 
time of our review, suppliers had to comply with 21 Medicare DMEPOS enrollment 
standards.  During our unannounced site visits in Los Angeles County, where Medicare 
allowed $245 million  for these suppliers claims in the 12-month period beginning  
July 1, 2006, we found that: 
  Of 905 suppliers, 115 (13 percent) did not maintain physical facilities or were not 
open during posted business hours. 
HHS OIG Semiannual Report to Congress  5  Centers for Medicare & Medicaid Services 
Spring 2008   
  Another 79 suppliers (9 percent) were open but did not post hours of operation or 
their business names, as required. 
  An additional 124 suppliers (14 percent) met the requirements for the standards 
we reviewed, but we noted that they shared an atypical characteristic (i.e., more 
than half of Medicare beneficiaries did not receive other Medicare services, such 
as office visits by the physicians ordering the DMEPOS within the 6-month 
period preceding the claim). 
These findings demonstrated continued vulnerabilities in the Medicare DMEPOS benefit, 
consistent with our findings in a similar review conducted in South Florida in 2006.  In 
both reviews, we recommended that CMS strengthen the Medicare DMEPOS supplier 
enrollment process and ensure that suppliers meet Medicare supplier standards.  The 
report provides a number of specific recommendations to achieve these objectives.   
(OEI-09-07-00550) 
Medicare Payments for Home Blood-Glucose Test Strip and Lancet Supplies 
We found that a Florida DME supplier did not claim reimbursement for home blood-
glucose test strips and lancets provided in CYs 2002 and 2003 in accordance with 
Medicare requirements.  Medical reviewers under contract with OIG found that none of 
the suppliers claims for 100 sampled beneficiaries met Medicare requirements and that 
each service line item on each claim had one or more errors.  Errors included billing for 
medically unnecessary supplies and inadequate documentation.  We estimated that at 
least $8.2 million of the $8.7 million paid to the supplier for test strips and lancets was 
unallowable for Medicare reimbursement. 
We recommended that the supplier refund $8.2 million to the Medicare program and 
work with CMS to determine the allowability of test strips and lancets billed after  
CY 2003.  In its comments on our draft report, the supplier disagreed with our findings 
and recommendations but did not provide information that would cause us to revise them. 
(A-09-05-00063) 
Payments for Outpatient Services on Behalf of Beneficiaries in Skilled Nursing 
Facility Stays 
We found that for CYs 20012002, Medicare Part B made a total of $106.9 million in 
potential overpayments to suppliers of outpatient hospital, laboratory, and radiology 
services on behalf of beneficiaries in SNF stays during which these services were already 
covered by Part A.  The potential overpayments occurred because CMS did not have 
Common Working File (CWF) edits in place during most of this period.  Without these 
edits, fiscal intermediaries could not properly identify or recover potential overpayments.  
For CY 2003, when the edits were fully implemented, potential overpayments were 
reduced to $22.7 million.  We estimated that the fiscal intermediaries and carriers had not 
recovered $17.9 million of these CY 2003 potential overpayments.  Unrecovered 
overpayments continued to occur because the edits did not identify all overpayments or 
because the edits identified the overpayments, but contractors experienced claim-
processing system problems, misunderstood recovery instructions, or made errors during 
the recovery process. 
HHS OIG Semiannual Report to Congress  6  Centers for Medicare & Medicaid Services 
Spring 2008   
We recommended that CMS direct the fiscal intermediaries and carriers to review the 
$106.9 million in potential overpayments for CYs 20012002 and make appropriate 
recoveries, direct the fiscal intermediaries and carriers to initiate recovery of the 
estimated $17.9 million in unrecovered overpayments for CY 2003, continue to test and 
refine the CWF edits to ensure that they properly identify claims subject to consolidated 
billing, and ensure that all fiscal intermediaries and carriers have established proper 
controls to recover overpayments that the CWF edits identify.  CMS agreed with our 
recommendations.  (A-01-06-00503) 
Excessive Payments for Outpatient Services 
We reviewed 45 high-dollar payments (i.e., $50,000 or more) that a Medicare fiscal 
intermediary made to hospitals for outpatient services for CYs 2004 and 2005 and 
identified 44 overpayments.  These overpayments totaled $2.7 million that the hospitals 
had not refunded by the beginning of our audit in May 2007.  CMS contracts with fiscal 
intermediaries to process and pay Medicare Part B claims submitted by hospital 
outpatient departments.  We found that this fiscal intermediary incorrectly coded some 
claims and that the hospitals reported excessive units of service on other claims.  We also 
found that neither the Fiscal Intermediary Standard System, used to process claims, nor 
CMSs CWF had sufficient edits in place during CYs 2004 and 2005 to detect and 
prevent excessive payments.  The intermediary agreed with our recommendation to 
recover the overpayments.  (A-05-07-00066) 
Physician-Owned Specialty Hospitals Ability To Manage Medical Emergencies  
In our assessment of physician-owned specialty hospitals, we found deficiencies 
regarding the hospitals ability to manage medical emergencies.  The Senate Finance 
Committee requested that OIG evaluate patient care and safety in physician-owned 
specialty hospitals, which primarily perform cardiac, orthopedic, or surgical procedures 
and are partially or fully owned by physician investors.  In two recent cases at such 
hospitals, patients experienced complications following elective surgery and no 
physicians were on duty to treat the patients, who later died when they were transferred to 
community hospitals. 
We conducted a study of 109 physician-owned specialty hospitals between January and 
March 2007 with data from a sample of 8 days between July and December 2006 and 
found that: 
  About half of all such hospitals had emergency departments, the majority of 
which had only one emergency bed.   
  Not all of the hospitals had nurses on duty and physicians on call during the  
8 sampled days. 
  Less than one-third of the hospitals administrators reported having physicians 
onsite at all times. 
  Two-thirds of the hospitals instructed staff to call 9-1-1 as part of their emergency 
response procedures. 
HHS OIG Semiannual Report to Congress  7  Centers for Medicare & Medicaid Services 
Spring 2008   
  Some of the hospitals lacked basic information in their written policies about 
managing medical emergencies. 
To improve the ability of physician-owned specialty hospitals to manage medical 
emergencies, we recommended that CMS develop a system to identify and regularly 
track these hospitals, ensure that hospitals meet the Medicare Conditions of Participation 
for staffing, ensure that hospitals have capabilities for the appraisal and initial treatment 
of emergencies and that they are not relying on 9-1-1, and require hospitals to have 
written policies to manage medical emergencies.  CMS concurred with our 
recommendations.  (OEI-02-06-00310) 
Medicare Hospice Care:  A Comparison of Beneficiaries in Nursing Facilities and 
Beneficiaries in Other Settings 
We compared the characteristics of Medicare beneficiaries who receive hospice care in 
nursing facilities with beneficiaries who receive hospice care in other settings and found 
that beneficiaries in nursing facilities tended to be older and more likely to have ill-
defined conditions.  Studies by HHS and others have suggested that the use of hospice 
care is growing most rapidly in nursing facilities.  The Medicare hospice benefit allows 
terminally ill beneficiaries to forgo curative treatment for their illness and instead receive 
palliative care, which is the relief of pain and other uncomfortable symptoms. 
Our analysis of 2005 data found that: 
  A total of  871,437 Medicare beneficiaries received hospice care, with 28 percent 
residing in nursing facilities. 
  Medicare payments for hospice care for beneficiaries residing in nursing facilities 
amounted to $2.55 billion. 
  Hospice beneficiaries in nursing facilities were more than twice as likely as 
beneficiaries in other settings to have terminal diagnoses of ill-defined conditions, 
mental disorders, or Alzheimers disease. 
  On average, beneficiaries in nursing facilities spent more time in hospice care and 
were associated with higher Medicare reimbursements for hospice care than 
beneficiaries in other settings. 
CMS commented that our report provided a helpful general description of the current 
utilization patterns.  (OEI-02-06-00220) 
Tracking Beneficiaries True Out-of-Pocket Costs for the Part D Prescription Drug 
Benefit 
In our review of Medicare Part D plans tracking of TrOOP costs, we found that in 2006, 
29 percent of Part D plans did not, as required, submit their enrollees additional 
prescription drug coverage information to COBC.  CMS contracts with COBCs to 
consolidate the activities that support the collection, management, and reporting of other 
insurance coverage for Medicare beneficiaries.  Part D plans are responsible for tracking 
beneficiaries TrOOP costs, which are the prescription drug expenditures that count 
HHS OIG Semiannual Report to Congress  8  Centers for Medicare & Medicaid Services 
Spring 2008   
toward the annual out-of-pocket threshold that beneficiaries must reach before 
catastrophic drug coverage begins.  To track TrOOP costs accurately, Part D plans must 
have information on any prescription drug coverage that enrollees have in addition to  
Part D coverage.  We also found that: 
  Thirty-four percent of Part D plans did not submit prescription drug event data in 
accordance with CMS requirements.  Such data include prescription drug costs 
and payment data that enable CMS to make payments to the plans and otherwise 
administer the Part D benefit. 
  Sixty-three percent of Part D plans cited problems with transferring TrOOP 
balances when enrollees changed plans. 
  CMS had conducted limited oversight of Part D plans tracking of TrOOP costs. 
We recommended that CMS ensure that Part D plans collect, process, and submit all data 
required for the tracking of TrOOP costs; consider options for increasing the number of  
data-sharing agreements and seek to expand its authority to collect data under those 
agreements; and begin or complete planned oversight activities regarding tracking 
TrOOP costs.  Although CMS did not indicate whether it concurred with our 
recommendations, the agency noted that it had taken or would take steps in response to 
each of our recommendations.  (OEI-03-06-00360) 
Medicare Part D Sponsors:  Estimated Reconciliation Amounts for 2006 
Based on our analysis of CMSs Medicare Part D preliminary reconciliation data 
estimates (as of August 2007) and data from 16 sponsors with high enrollments, we 
estimated that Part D sponsors owed Medicare a net total of $4.4 billion for the 2006 
program year.  We also found that CMS had no mechanism to collect funds or adjust 
prospective payments prior to the reconciliation that is conducted after the close of the 
plan year.  As a result, sponsors had the use of billions of dollars for a significant length 
of time. 
CMS contracts with private Part D sponsors to provide prescription drug coverage for 
enrollees.  CMS approves the sponsors bids prior to the plan year and makes monthly 
prospective payments to the sponsors based on those bids.  After the close of the plan 
year, CMS must reconcile the prospective payments with sponsors actual costs and also 
determine whether risk-sharing payments are required.  Risk-sharing requires the Federal 
Government to share in sponsors unexpected profits and losses.  For the 2006 plan year, 
we found that 80 percent of the sponsors owed CMS money and 20 percent were due 
money.  Of the amount owed, almost two-thirds resulted from risk-sharing 
requirementsthese sponsors bids overestimated the costs of providing the benefit. 
 
We recommended that CMS ensure that sponsors bids accurately reflect the cost of 
providing the benefit to Medicare beneficiaries; consider implementing an interim 
reconciliation process to reduce the amounts owed to Medicare; better align monthly 
prospective payments with sponsors actual costs; and consider seeking legislative 
HHS OIG Semiannual Report to Congress  9  Centers for Medicare & Medicaid Services 
Spring 2008   
changes to delay the adjustments to the risk corridors as specified by the Medicare 
Prescription Drug, Improvement, and Modernization Act (MMA) of 2003. 
CMS agreed with the recommendation that data collected from 2006 and subsequent plan 
years be used in the review of future bid submissions, acknowledged having the authority 
to change certain payment methodologies, and stated that it was examining possible 
options.  CMS did not agree with our recommendations to implement an interim 
reconciliation process for 2007 or to seek legislation to delay changes to the risk 
corridors. 
In response to the recommendation that CMS consider conducting an interim 
reconciliation process, CMS stated that it believes bidding accuracy will improve in 
coming years, thus eliminating this as an issue.  Based on its interpretation of the statute, 
CMS also stated that there is no legal authority for an interim reconciliation of risk-
sharing payments.  In response to our recommendation that CMS consider seeking 
legislative changes to delay the adjustments to the risk corridors, CMS responded that it 
is only now able to analyze a full set of bidding and first-year utilization data and that it 
would be premature to make recommendations to Congress for statutory changes before 
having a more complete analytic picture of whether the Government would benefit or be 
harmed by a change in the risk corridors.   
We continue to recommend that CMS consider implementing an interim reconciliation 
process and consider seeking legislative changes to delay the adjustments to the risk 
corridors.  CMS could request that sponsors make interim reconciliation settlements on a 
voluntary basis, when appropriate.  Alternatively, CMS could consider pursuing statutory 
or regulatory changes necessary to implement a mandatory interim reconciliation process. 
Also, because only limited data are currently available, there remains a significant risk 
that plans will owe large sums of money back to Medicare for 2008 and beyond.   
(OEI-02-07-00460) 
Medicare Part D Prescription Drug Plan Sponsor Internet Web Sites:  Content and 
Accessibility 
In our review of Medicare Part D Prescription Drug Plan (PDP) sponsors Internet Web 
sites, we found that of the 84 PDP sponsors offering drug plans within the 50 States and 
the District of Columbia in 2007: 
  Thirty-three percent had Web sites that did not contain all federally required 
content.  The most commonly omitted content pertained to enrollee disenrollment 
rights and responsibilities, the potential for PDP contract termination, and 
information related to the formulary. 
  Eighty-five percent of the sponsors Web sites did not meet at least one of the 
four Federal requirements for Web site accessibility, potentially affecting 
Medicare beneficiaries access to content. 
Pursuant to Federal regulations, CMS must review and approve marketing material for 
Part D prescription drug plans, including materials provided through Part D sponsors 
HHS OIG Semiannual Report to Congress  10  Centers for Medicare & Medicaid Services 
Spring 2008   
Web sites, where an increasing number of adults aged 65 and older seek information on 
PDPs.  Our findings demonstrated the need for CMS to oversee the PDPs Web sites to 
ensure that all Medicare beneficiaries, including persons with disabilities, have access to 
federally required content to make informed decisions about their prescription drug 
coverage.  (OEI-06-06-00340) 
Implementation of Safeguards During Fiscal Year 2006 To Prevent and Detect Fraud 
and Abuse in Medicare Prescription Drug Plans 
In this early assessment, we found that CMS had made progress in implementing 
Medicare Part D fraud and abuse safeguards but that some safeguards had not been fully 
implemented by the end of FY 2006.  Based on a document review and interviews with 
agency staff, we identified six activities that comprised CMSs strategy for safeguarding 
Medicare Part D.  These strategies and their status are as follow: 
  Complaint process:  We determined that CMS relied largely on complaints to 
identify potential fraud and abuse; however, not all complaints were investigated 
in a timely manner  
  Data monitoring:  We found that neither CMS nor the Medicare Prescription Drug 
Integrity Contractor (MEDIC) had conducted any significant data analysis for 
fraud detection purposes.  According to CMS, data monitoring was delayed by a 
lag in data submissions. 
  Financial audits:  We found that CMS had awarded a contract to develop the 
financial audit program before the end of FY 2006, with an expectation that the 
first audits would be initiated in January 2008. 
  Monitoring PDP sponsor compliance:  CMSs routine account management 
activities and operational safeguards were in place prior to the first beneficiary 
enrollment period.  However, the agencys compliance audits, slated to be 
initiated in the summer of 2006, had not begun by the end of FY 2006 because 
CMS encountered problems with a data system used to track such audits. 
  Oversight of PDP efforts to reduce fraud and abuse:  CMS issued requirements 
for PDP sponsors fraud, waste, and abuse compliance plans before the benefit 
began and updated guidance in April 2006. 
  Education and guidance:  We were concerned that CMS had not completed the 
Prescription Drug Benefit Manual and had not issued more fraud alerts. 
We also found that CMSs efforts to safeguard Medicare Part D PDPs were complicated 
by limits to legal authority, jurisdiction, and the agencys inability to monitor enrollees 
who switch plans.  We recommended that CMS develop a comprehensive Medicare  
Part D safeguard strategy, ensure that all fraud complaints receive proper attention, and 
address legal concerns that may impede program integrity efforts.  CMS did not indicate 
whether it concurred with our recommendations but stated that many of its ongoing 
activities satisfied our recommendations.  (OEI-06-06-00280) 
HHS OIG Semiannual Report to Congress  11  Centers for Medicare & Medicaid Services 
Spring 2008   
Relationship Between Medicare Part D Payments to Local, Community Pharmacies 
and the Pharmacies Drug Acquisition Costs 
In our review of the relationship between Medicare Part D payments to local, community 
pharmacies and the pharmacies drug acquisition costs, we found that in September 2006, 
pharmacies almost always (97 percent of the time) acquired drugs for less than the 
reimbursement amounts.  We performed this review at the request of 33 Senators who 
raised concern about the sufficiency of reimbursement at local, community pharmacies.  
Under Medicare Part D, CMS contracts with PDPs and Medicare Advantage plans, which 
then act as the payers and insurers for prescription drug benefits.  The PDPs, referred to 
as sponsors, pay pharmacies a rate for ingredient costs (i.e., drug acquisition costs), 
which is usually a published average wholesale price of the drug minus some percentage, 
as well as a dispensing fee. 
We estimated that excluding dispensing fees and including rebates that drug wholesalers 
paid to pharmacies, Medicare payments to local, community pharmacies exceeded the 
pharmacies drug acquisition costs by 18.1 percent.  Excluding rebates, Part D payments 
exceeded drug acquisition costs by an estimated 17.3 percent.  The Part D payment for 
each prescription in our analysis exceeded the drug acquisition cost by an estimated 
$9.13, including rebates, and $8.78, excluding rebates.  We found that the percentage 
difference between Part D payments and drug acquisition costs was more than nine times 
higher for generic drugs than brand-name drugs.  We also estimated that the average 
Medicare Part D dispensing fee paid to local, community pharmacies was $2.27, which 
was about $2 less than the average Medicaid dispensing fee. 
We recommended that Congress and CMS consider the results of our review, including 
the data provided, in any deliberations regarding Medicare Part D reimbursement.  CMS 
concurred with the recommendation.  (A-06-07-00107) 
Generic Drug Utilization in the Medicare Part D Program 
Generic drugs, which are chemically identical to their brand-name counterparts and have 
the same therapeutic effects and risk-benefit profiles, are generally cheaper than brand-
name drugs.  Using generic drugs rather than brand-name drugs may lower the costs of 
Part D for the Federal Government and reduce beneficiaries out-of-pocket costs for 
premiums, copayments, or coinsurance.  In a congressionally requested review of generic 
drug utilization in the Medicare Part D program, we found that for the first two quarters 
of 2006, generic drugs were dispensed 88 percent of the time when generic substitutes 
were available.  Overall, 56 percent of all drugs dispensed were generic drugs.  Of the 
prescriptions issued during the review period, 37 percent were for drugs that had no 
generic substitutes.   
Without making recommendations, we concluded that prescribing drugs having no 
generic equivalent primarily accounted for variation in generic drug utilization.  We also 
concluded that, to achieve increases in generic drug utilization, Part D plans may realize 
gains by encouraging the prescribing of multisource drugs, which have generic 
equivalents.  We suggested that such efforts be undertaken with caution to ensure that 
beneficiaries maintain access to appropriate treatment.  In response to our draft report, 
CMS generally agreed with our findings.  (OEI-05-07-00130)  
HHS OIG Semiannual Report to Congress  12  Centers for Medicare & Medicaid Services 
Spring 2008   
1-800-MEDICARE:  Caller Satisfaction and Experiences 
In our review of callers satisfaction and experience with Medicares telephone customer 
service system, we found that 71 percent of callers who completed their calls during a  
1-week period in FY 2007 were satisfied with the customer service they received.  This 
represented a 13-percent decrease compared to the results from a prior OIG study of calls 
made in 2004.  Medicares telephone customer service system, which callers access by 
calling 1-800-MEDICARE, is the most commonly used communication channel in 
educating and assisting Medicares 42 million beneficiaries. 
Repeating a process used to collect the 2004 baseline data, we interviewed a random 
sample of callers during January 2226, 2007.  We found that 21 percent of callers hung 
up before receiving responses to their questions, compared to 12 percent of callers in 
2004.  Similar to the 2004 baseline data, 44 percent of callers in the 2007 evaluation 
reported difficulty in accessing information.  Thirty-one percent of these callers reported 
that the Interactive Voice Response (IVR) system, which provides information to callers 
or routes callers to customer service representatives, was not easy to use. 
We recommended that CMS reassess the level of resources directed toward improving 
the question-answering capabilities of the IVR system, ensure that callers receive all 
needed information, and continue to seek ways to reduce caller wait times.  CMS did not 
indicate whether it concurred with our recommendations; however, it described several 
actions that it had taken or planned that relate to our findings and recommendations.  
CMS also provided information on efforts underway or planned for the future that were 
aimed at improving call-center operations.  (OEI-07-06-00530) 
Claim Payment Adjustments Identified by Quality Improvement Organizations 
We found that fiscal intermediaries, which contract with CMS to process and pay 
inpatient provider claims, properly processed the majority of payment adjustments for 
claims referred to them by Quality Improvement Organizations (QIO) during the  
FY 2005 Hospital Payment Monitoring Program (HPMP).  CMS contracts with QIOs to, 
among other things, review and make a final determination on erroneous claims 
identified through the HPMP process and notify fiscal intermediaries to make claim 
adjustments.  Fiscal intermediaries properly processed 3,440 (96.4 percent) of the 3,568 
claims that QIOs referred, with net overpayments totaling $9.2 million.  However, fiscal 
intermediaries did not properly adjust 128 claims, with net overpayments totaling 
$416,000. 
We recommended that CMS instruct fiscal intermediaries to recover the $416,000 and 
follow up with QIOs and fiscal intermediaries when adjustments identified by the QIOs 
are not processed properly.  CMS agreed with the first recommendation and specified an 
alternative procedure that met the objective of the second recommendation.   
(A-03-06-00005) 
Fiscal Integrity of Quality Improvement Organizations 
At the request of the Senate Finance Committee, we assessed the fiscal integrity of QIOs 
in nine States with respect to the following specified areas:  board member and executive 
staff compensation and travel, legal fees, administrative and equipment charges, business 
HHS OIG Semiannual Report to Congress  13  Centers for Medicare & Medicaid Services 
Spring 2008   
relationships and conflicts of interest, and contract modifications.  We completed reviews 
of four QIOs during this reporting period.  Our findings were as follow: 
  Iowa:  Most of the $10.3 million in costs reviewed for the period February 2003
January 2006 appeared reasonable for Federal reimbursement.  However, the QIO 
incurred $209,000 of costs that were unallowable and $531,000 of costs that may not 
have complied with Federal requirements.  We recommended that the QIO make 
financial adjustments and work with CMS to resolve the potentially unallowable costs.  
In its comments on our draft report, the QIO disagreed with our findings and 
recommendations but did not provide information that caused us to revise our findings.  
(A-07-06-01035) 
  New York:  Of the $11.3 million of costs reviewed for the period August 2002 
July 2005, $11.1 million appeared reasonable for Federal reimbursement.  Of the 
remaining costs, the QIO incurred $77,000 of costs that were unallowable and $157,000 
of costs that may not have complied with Federal requirements.  We recommended that 
the QIO make financial adjustments and work with CMS to resolve the potentially 
unallowable costs.  Although it did not specifically agree to refund any costs, the QIO 
stated that it had reclassified or recharacterized costs associated with our recommended 
financial adjustments.  The QIO disagreed with our recommendation regarding 
potentially unreasonable conference-related costs.  Based on our evaluation of the 
QIOs comments, we revised our report regarding legal fees but did not find cause to 
alter any other conclusions and recommendations.  (A-02-06-01023) 
  Ohio:  Of the $7.7 million of costs reviewed for the period August 2002July 2005, 
$7.6 million appeared reasonable for Federal reimbursement.  Of the remaining costs, 
the QIO incurred $12,000 for costs that were unallowable and $78,000 for costs that 
may not have complied with Federal requirements.  We recommended that the QIO 
make financial adjustments, work with CMS to resolve the potentially unallowable 
costs, and maintain an accurate inventory of Government-owned equipment.  In its 
comments on our draft report, the QIO did not address our findings or 
recommendations related to unallowable costs and disagreed with our findings related 
to potentially unallowable costs.  However, the QIO did not provide information that 
caused us to revise our findings.  (A-05-06-00043) 
  Washington:  Of the $12.2 million of costs reviewed for the period  
November 2002October 2005, $12.1 million appeared reasonable for Federal 
reimbursement.  The remaining $74,000 represented unallowable indirect costs that the 
QIO allocated to subcontracts in excess of the allowable limit.  In addition, the QIO 
overstated its modified total direct cost bases by $404,000 and its indirect cost pool by 
$72,000.  We recommended that the QIO make financial adjustments.  In its comments 
on our draft report, the QIO agreed with the finding related to unallowable indirect 
costs but disagreed with the amount of the recommended refund.  Based on our 
evaluation of information provided by the QIO, we revised the recommended refund 
amount related to the indirect cost rates.  (A-09-06-00039) 
HHS OIG Semiannual Report to Congress  14  Centers for Medicare & Medicaid Services 
Spring 2008   
Medicare Contractor Pension Reimbursement 
During the semiannual period, we issued three reports related to unallowable pension 
costs claimed by a Medicare contractor.  Medicare reimburses a portion of the annual  
contributions that contractors make to their pension plans.  In claiming costs, contractors 
must follow cost reimbursement principles contained in the Federal Acquisition 
Regulation, Cost Accounting Standards, and Medicare contracts.  Our findings were as 
follow: 
  Excess Plan Costs:  For FYs 19962004, the contractor improperly based its Excess 
Plan costs on accrual accounting principles and, as a result, overclaimed $1.8 million.  
The Excess Plan is a nonqualified pension plan designed to restore benefits lost under 
the regular qualified plan as a result of certain sections of the Internal Revenue Code.  
We recommended that the contractor revise its final administrative cost proposals to 
reduce claimed Excess Plan costs by $1.8 million.  The contractor did not directly 
address our recommendation but stated that it would amend the Excess Plan to meet 
Federal requirements and work with CMS to resolve issues regarding costs previously 
claimed.  (A-07-07-00235) 
  Supplemental Executive Retirement Plan Costs:  For FYs 19992004, the 
contractors claim for Supplemental Executive Retirement Plan (SERP) costs included 
some costs that were unreasonable and therefore unallowable for Medicare 
reimbursement.  A SERP is a nonqualified pension plan designed to provide 
supplemental benefits to a select group of highly compensated employees.  However, 
the contractors executive salaries used to calculate SERP costs were $15.6 million 
greater than the executive compensation limits established in Federal regulations.  We 
were unable to determine the impact of these unallowable compensation costs on SERP 
costs because the contractor did not provide the necessary documentation.  We 
recommended that the contractor work with CMS to determine the allowability of  
$5.9 million in SERP costs.  The contractor concurred.  (A-07-07-00234) 
  Postretirement Benefit Costs:  The contractor overclaimed a subsidiarys accrued 
postretirement benefit (PRB) costs on the final administrative cost proposals for  
FYs 20002004.  We determined that the allowable accrued costs for this period were 
$2.4 million.  However, the contractor claimed accrued costs of $4 million because it 
did not compute the costs in accordance with its Medicare contract and an agreement 
with CMS.  We recommended that the contractor revise the subsidiarys proposals for 
FYs 20002004 to reduce its claimed PRB costs by $1.7 million and claim future PRB 
costs in accordance with the Medicare contract.  The contractor did not concur with our  
HHS OIG Semiannual Report to Congress  15  Centers for Medicare & Medicaid Services 
Spring 2008   
recommendations, stating that its understanding was that contributions in excess of the 
reimbursable limits created a prepayment credit that could be applied to future funding 
requirements.  However, we continue to support our recommendations.   
(A-07-07-00229) 
Medicaid-Related Reports 
Generic Drug Price Increases 
Our review of the Medicaid drug rebate program found that the program could have 
received $966 million in additional rebates for the top 200 generic drugs in 19912004 
had a rebate provision that applies to brand-name drugs been extended to generic drugs.  
For covered outpatient drugs to be eligible for Federal Medicaid funding, manufacturers 
must enter into rebate agreements with CMS and pay quarterly rebates to the States.  
Manufacturers are required to pay an additional rebate when the AMP for a brand-name 
drug increases more than a specified inflation factor.  There is no similar inflation-based 
rebate provision for generic drugs.  The Presidents budget request for FY 2001 sought 
extension of the rebate provision to generic drugs, but the proposal has not been adopted.  
In response to our recommendation to consider seeking legislative authority to extend the 
additional rebate provisions to generic drugs, CMS agreed to do so once it had sufficient 
time to assess the impact of recent changes to the Medicaid prescription drug program 
required by the DRA.  (A-06-07-00042) 
Unit of Measure Inconsistencies in the Medicaid Prescription Drug Program 
In our review of the impact of unit of measure inconsistencies on Medicaid rebate claims, 
we identified $11.8 million in inappropriately claimed Medicaid rebates during the first  
6 months of 2006.  The method for defining units determines the number of units in a 
package, or package size; the unit of measure and package size are used together to 
calculate the per unit reimbursement that Medicaid makes to retail pharmacies and per 
unit rebate amounts that prescription drug manufacturers pay to States. 
We specifically found that: 
  Most inconsistencies involved the unit type each. 
  On average, States converted 45 percent of their utilization data for drugs with 
unit of measure inconsistencies. 
  States could not use package size data from CMS to efficiently detect or correct 
for unit of measure inconsistencies. 
Inappropriately claimed Medicaid rebates can lead to incorrect rebate payments or 
disputes with manufacturers.  In addition, unit of measure inconsistencies have 
implications for future Medicaid reimbursement based on AMPs. 
We recommended that CMS provide more specific guidance to manufacturers regarding 
the unit type each and improve its guidance to States regarding detecting and 
HHS OIG Semiannual Report to Congress  16  Centers for Medicare & Medicaid Services 
Spring 2008   
converting unit of measure inconsistencies.  CMS disagreed, stating that unit of measure 
inconsistencies did not account for significant improper Medicaid rebate payments.  
However, we consider that the effects of unit of measure inconsistencies may increase as 
AMP data are increasingly used for Medicaid reimbursement.  (OEI-05-07-00050) 
Hurricane Katrina Uncompensated Care Costs Claimed by Two Mississippi Medical 
Facilities 
During this semiannual period, we issued reports on two Mississippi medical facilities 
claims, as of December 2006, for medically necessary uncompensated care furnished to 
Hurricane Katrina evacuees and other affected individuals without other coverage in 
eligible States.  In response to Hurricane Katrina, section 6201 of the DRA authorized 
Federal funding for such costs.  The findings of these reports were as follow: 
  Medical Center:  We found that the State appropriately claimed most of the  
$17.9 million in uncompensated care reimbursement for services provided by a medical 
center.  However, 4 of the 200 claims that we sampled, totaling $22,400, were improper 
because the individuals who received the services had health care coverage under other 
programs.  We recommended that the State refund to CMS the unallowable 
reimbursement and consider reviewing the medical centers claims that were not 
included in the sample to ensure that no other health care coverage was available and 
make refunds if appropriate.  The State did not fully agree with the recommendations 
but said that it would make the proper adjustments in cooperation with CMS.  The State 
also provided detailed explanations for three of the seven claims we originally 
questioned.  Based on this additional information, we allowed the three claims and 
amended our findings and recommendations accordingly.  (A-04-07-06004) 
  Hospital:  We found that the State appropriately claimed $7.9 million in 
uncompensated care reimbursement for services provided by a hospital.  This report 
had no recommendations.  (A-04-07-06017) 
Medical Assistance to Hurricane Katrina Evacuees 
We issued two reports on unallowable reimbursement claimed through section 1115 
demonstration projects for Hurricane Katrina evacuees.  Under section 1115 of the Act, 
CMS approved certain States requests for Medicaid demonstration authority to provide 
the benefits included in their Medicaid State plans to eligible evacuees.  Reimbursement 
consisted of the Federal Medicaid share and the non-Federal share authorized for Federal 
payment by section 6201 of the DRA.  The findings of these reports were as follow: 
  Delaware:  Delaware generally claimed reimbursement in accordance with its 
approved demonstration project.  However, we found no evidence that three applicants 
met displacement requirements.  As a result, the State claimed a net total of $9,300  
(of a total of $173,000) in unallowable reimbursement.  We recommended that the State 
refund the $9,300 and revise its claims by our audit adjustment amounts.  In its 
comments on our draft report, the State generally disagreed with our findings and 
recommendations but did not provide information that caused us to revise our findings.  
(A-03-07-00201) 
HHS OIG Semiannual Report to Congress  17  Centers for Medicare & Medicaid Services 
Spring 2008   
  District of Columbia:  The District of Columbia improperly claimed reimbursement 
for services provided to 18 applicants after their eligibility periods had expired and to  
3 applicants who did not meet eligibility requirements.  As a result, the District claimed 
a net total of $44,900 (of a total of $246,000) in unallowable reimbursement.  We 
recommended that the District refund the $44,900 and revise its claims by our audit 
adjustment amounts.  The District generally agreed.  (A-03-07-00202) 
Medicaid Targeted Case Management Services Provided by Several States 
During this semiannual period, we issued five reports on States claims for Medicaid 
targeted case management (TCM) services.  Such services help specific Medicaid 
populations gain access to medical, social, educational, and other services.  CMS has 
specified that TCM services not include direct medical, educational, or social services to 
which Medicaid eligibles have been referred.  All of the reports identified inappropriate 
claimed costs, as follow: 
  Georgia:  For FYs 2003 and 2004, we estimated that the State claimed  
$4.7 million ($2.8 million Federal share) in unallowable claims for TCM costs for 
individuals deemed at risk of incarceration.  Claims were unallowable because they 
were not supported as TCM in case records, were for TCM services provided to 
ineligible incarcerated juveniles, or had no supporting documentation.  We 
recommended that the State refund the estimated overpayment, examine later claims 
and refund any overpayment identified, and establish monitoring procedures to provide 
assurance that claims comply with Federal and State requirements.  The State said that 
it would refund the overpayment once a final determination had been made and that it 
would implement the other recommendations.  (A-04-06-00022) 
  Iowa:  For FYs 2003 and 2004, we estimated that the State improperly claimed  
$2.5 million ($1.5 million Federal share) in unallowable TCM costs.  The State 
provides TCM services to Medicaid-eligible pregnant women; recipients with a 
diagnosis of mental retardation, developmental disability, or chronic mental illness; 
eligibles under the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) 
program; and children from age 3 to 21 who meet the eligibility categories under  
Part B and Part C of the Individuals with Disabilities Education Act.  We questioned 
the costs because they lacked sufficient documentation or were for services that did not 
meet the definition of TCM services.  We also found that the State claimed direct 
medical services as TCM costs; because these costs may be allowable under other 
provisions of the Medicaid program, we set aside $303,000 ($196,000 Federal share) 
for CMS adjudication.  We recommended that the State refund $1.5 million to the 
Federal Government for unallowable TCM claims, work with CMS to determine the 
allowability of the $196,000 in direct medical services claimed as TCM services, and 
strengthen related internal controls.  The State partly agreed with the first two 
recommendations and fully agreed with the third.  (A-07-06-03078) 
  Kansas:  For State FYs 2001 and 2003, the State did not ensure that its  
$62 million ($37.2 million Federal share) in TCM claims for recipients of child welfare 
services was equal to or less than the limit specified in the States Medicaid plan.  
Because the State could not produce the rate and cost data necessary to apply the limit, 
HHS OIG Semiannual Report to Congress  18  Centers for Medicare & Medicaid Services 
Spring 2008   
we were unable to express an opinion on the reasonableness of the claim.  We 
recommended that the State work with CMS to determine the allowability of the  
$62 million claimed for the audit period, as well as claims for all subsequent periods, 
and strengthen internal controls to ensure that State plan requirements are followed in 
submitting future TCM claims.  The State generally agreed.  (A-07-06-03074) 
  Maine:  For FYs 2002 and 2003, the State overstated by a total of $44.2 million 
($29.8 million Federal share) the cost of Medicaid TCM services provided to recipients 
of family services because the State did not have procedures for ensuring that Medicaid 
TCM costs were reasonable, allowable, and allocable, in accordance with Federal 
requirements.  We were unable to express an opinion on the remaining $12.4 million 
($8.3 million Federal share) claimed for TCM-type activities that we were not able to 
separate from services provided by State family services programs.  We recommended 
that the State refund to the Federal Government $29.8 million in unallowable costs, 
work with CMS to determine the allowability of the $8.3 million for which we were 
unable to express an opinion, identify and refund any unallowable TCM costs 
reimbursed after the audit period, and establish procedures to ensure that claims for 
Medicaid TCM reimbursement include only allowable and adequately documented 
TCM costs.  The State disagreed with our findings and recommendations but did not 
provide information that would cause us to revise our findings.  (A-01-05-00004) 
  Minnesota:  For FYs 2003 and 2004, we estimated that the State claimed  
$7.3 million ($3.8 million Federal share) for various services for which the claims did 
not meet Federal and State documentation requirements.  We recommended that the 
State refund the $3.8 million overpayment and ensure that TCM services are properly 
documented.  The State did not address our recommendations but requested 
information about the claims that lacked documentation.  Based on a review of these 
claims, the State indicated that it may modify existing procedures or develop new ones 
to correct the problem.  (A-05-05-00059) 
Tennessee Home- and Community-Based Mental Retardation Services 
Based on our review of Tennessees claims for home- and community-based services 
(HCBS) provided to Medicaid beneficiaries with mental retardation and developmental  
disabilities during State FY 2003, we estimated that the State claimed approximately  
$11 million ($7 million Federal share) for HCBS that were not supported by provider 
records.  We recommended that the State refund the excess Federal reimbursement, 
establish certain HCBS controls and procedures, and review claims after the audit period 
and refund any overpayments.  The State did not address our recommended refund but 
agreed that additional oversight and controls were needed.  (A-04-03-03026) 
Medicaid School-Based Services in Utah 
We found that Utahs claims for Medicaid reimbursement of school-based services 
provided in FYs 20012005 generally did not comply with Federal requirements or the 
States Medicaid plan.  It was not possible to determine what portion of the $36.8 million 
Federal share claimed was allowable as final payments.  The State had not, as required by 
its plan, performed a cost settlement reconciling interim payments to actual costs to 
determine final payments.  The State concurred with our recommendations to work with 
HHS OIG Semiannual Report to Congress  19  Centers for Medicare & Medicaid Services 
Spring 2008   
CMS to determine the portion of the $36.8 million that was allowable and to perform cost 
settlements to ensure that final payments for school-based services are based on actual 
costs.  (A-07-06-04069) 
Improper Payments for Medicaid Pediatric Dental Services 
State MFCUs have periodically identified improper Medicaid payments for dental 
services.  We reviewed this area in five States and found that 31 percent of Medicaid 
pediatric dental services provided under the EPSDT program during 2003 did not meet 
Federal and State requirements, resulting in improper Medicaid payments of 
approximately $155 million ($96 million Federal share).  Documentation errors 
accounted for $138 million (89 percent) of the total improper payments identified.  Under 
this program, children and youth enrolled in Medicaid are eligible to receive routine and 
preventive health care services, including dental services.  Federal regulations require 
State Medicaid programs to ensure that claims for EPSDT services are accurate, are 
supported by documentation, and are provided as medically necessary.  We 
recommended that CMS increase its efforts to ensure that States enforce existing policies 
relating to the proper documentation of pediatric dental services and provide assistance to 
States to promote provider awareness and ensure compliance with documentation 
requirements.  CMS stated that it does not disagree with our recommendations and 
added that our recommendations dovetailed into the agencys Medicaid Integrity Groups 
charge to provide effective support and assistance to States.  (OEI-04-04-00210) 
New Jersey Medicaid Contingency Fee Contract Payments 
We found that New Jersey made improper claims of $16 million ($8 million Federal 
share) to the Medicaid program for contingency fees paid to two consultants.  The State 
had hired the consultants to generate increased Federal reimbursement by identifying and 
submitting to the Federal Government unclaimed State expenses.  According to the terms 
of the contracts, the consultants were paid fees contingent on additional Federal funds 
recovered.  OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal 
Governments, prohibits Federal reimbursement for consultant services that are 
contingent on recovery of costs from the Federal Government.  We recommended that the 
State refund $8 million to the Federal Government.  The State disagreed with our 
interpretation of the OMB circular, but we maintained that OMB Circular A-87 prohibits 
Federal reimbursement for consultant services when the costs of those services are 
contingent on recovery of costs from the Federal Government.  (A-02-06-01006) 
Californias Medicaid Management Information System Expenditures  
In a review of costs claimed by California for operating its Medicaid Management 
Information System (MMIS) from July 1, 2003, to June 30, 2005, we found that most 
costs were allowable.  However, $2.3 million was improperly claimed, mostly because 
the costs were not equitably allocated to all benefiting programs, were not related to the 
Medicaid program, or were claimed twice.  An MMIS is a system of software and 
hardware used to process Medicaid claims and manage information about beneficiaries 
and services.  States may receive Federal reimbursement from CMS for the operation of 
an MMIS at an enhanced rate of 75 percent.  We recommended that the State refund the 
improperly claimed costs, strengthen its internal controls, and review the appropriateness 
HHS OIG Semiannual Report to Congress  20  Centers for Medicare & Medicaid Services 
Spring 2008   
of costs claimed after the audit period.  The State generally agreed with our 
recommendations.  (A-09-06-00032) 
State Childrens Health Insurance Program-Related Report 
Assessing States Progress in Meeting SCHIP Goals 
We found that, nationally, the percentage of uninsured low-income children had a 
statistically significant decrease from 20 percent in 2002 to 18.5 percent in 2005.  
However, no State experienced a statistically significant change.  The Medicare, 
Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, P.L. No. 106-113, 
requires that, every 3 years, OIG assess States progress in reducing the number of 
uninsured low-income children, including their progress in meeting the strategic 
objectives and performance goals included in State plans. 
We also found that CMS had made improvements to the Annual Report template, which 
the agency developed for States to document their progress in reducing the number of 
uninsured and meeting goals.  However, States progress remains difficult to assess 
because of Census Bureau data limitations.  Additionally, States use of nondirectional 
performance goals and measures missing from the Annual Report limited the reports 
usefulness in assessing States progress in meeting performance goals. 
We recommended that CMS continue efforts to address concerns regarding Census 
Bureau data, provide guidance to States on developing directional performance goals 
with a target, and ensure that States report on all goals and measures.  CMS agreed with 
our description of the limitations of the census data and noted that it did not have 
accountability for or control over the Census Bureau data or funding.  (OEI-05-07-00330) 
Financial-Related Report 
CMS Financial Statement Audit 
The CMS FY 2007 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 a material weakness in CMSs 
Medicare claim-processing controls.  The weakness related primarily to direct update 
access to Medicare claim data, controls over edit settings in application systems, controls 
over the use of supplemental software used to process claims, and lack of CMS oversight.  
(A-17-07-02007) 
Outreach 
As part of OIGs ongoing efforts to promote the highest level of ethical and lawful 
conduct by the health care industry, we have continued to issue advisory opinions and 
other guidance to educate industry and other stakeholders on how to avoid instances of 
waste, fraud, and abuse. 
HHS OIG Semiannual Report to Congress  21  Centers for Medicare & Medicaid Services 
Spring 2008   
Advisory Opinions 
In accordance with section 205 of the HIPAA, OIG, in consultation with DOJ, issues 
advisory opinions to outside parties regarding the interpretation and applicability of 
certain statutes relating to Federal health care programs.  This authority allows OIG to 
provide case-specific formal guidance regarding the application of the anti-kickback 
statute and safe harbor provisions and other OIG health care fraud and abuse sanctions.  
For the period October 1, 2007March 31, 2008, OIG received 20 advisory opinion 
requests and issued 16 advisory opinions.  OIG advisory opinions are available on the 
Internet at http://oig.hhs.gov/fraud/advisoryopinions.html. 
Provider Self-Disclosure Protocol 
OIG is committed to assisting health care providers and suppliers in detecting and 
preventing fraudulent and abuse practices.  Since 1998, we have made available 
comprehensive guidelines describing the process for providers to voluntarily submit to 
OIG self-disclosures of fraud, waste, or abuse.  The guidelines, entitled Provider Self-
Disclosure Protocol, give providers an opportunity to minimize the potential costs and 
disruption that a full-scale OIG audit or investigation may entail if fraud is uncovered.  In 
doing so, the self-disclosure also enables the provider to negotiate a fair monetary 
settlement and potentially avoid being excluded from doing business with Federal health 
care programs.  The protocol guides providers and suppliers through the process of 
structuring a disclosure to OIG about matters that appear to constitute potential violations 
of Federal laws (as opposed to honest mistakes that may have resulted in 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. 
 
The self-disclosure guidelines are available on OIGs Web site at http://www.oig.hhs.gov 
in the Fraud Prevention & Detection section under Self-Disclosure Information. 
In addition, OIG issued an Open Letter to Providers in 2006 to promote the use of the 
self-disclosure protocol to resolve CMP liability under the physician self-referral and 
anti-kickback statutes for financial arrangements between hospitals and physicians. 
During this reporting period, self-disclosure cases resulted in $8.8 million in HHS 
receivables.  For example: 
  Pennsylvania:  Inglis House, a specialty nursing care facility for adults with 
physical disabilities, agreed to pay $5,547,940 to resolve its liability under the CMPL 
and Pennsylvania State law.  Inglis utilized OIGs Provider Self-Disclosure Protocol to 
report that it submitted eight types of false claims to Medicare and Medicaid.  
Violations included overly frequent comprehensive resident assessments, which 
improperly inflated Inglis Medicaid case mix index; billing Medicaid for services 
covered by Medicare Part A; billing Medicare Part B and Medicaid for services that 
should have been included in the Medicare Part A payment; and wrongful billing to 
HHS OIG Semiannual Report to Congress  22  Centers for Medicare & Medicaid Services 
Spring 2008   
Medicare and Medicaid for Certified Registered Nurse Practitioner services.  In 
addition to the monetary settlement, Inglis entered into a 5-year CIA with OIG. 
Office of Inspector General Administrative Sanctions 
OIG has the authority to impose administrative sanctions for instances of fraud or abuse 
or other activities that pose a risk to Federal health care programs and their beneficiaries 
(see Appendix C for an explanation of OIGs sanction authorities).  These sanctions 
include the exclusion of individuals and entities from participating in Federal health care 
programs and imposing CMPs for submitting false or fraudulent claims to a Federal 
health care program or violating the anti-kickback statute, physician self-referral statute, 
or the patient dumping provision of the Act. 
During this reporting period, OIG administered 1,330 sanctions in the form of program 
exclusions or administrative actions for alleged fraud or abuse or other activities that 
posed a risk to Federal health care programs and their beneficiaries.  Details and 
examples of these sanctions follow. 
Program Exclusions 
During this reporting period, OIG excluded 1,291 individuals and entities from 
participating in Medicare, Medicaid, and other Federal health care programs.  Most of the 
exclusions resulted from convictions for crimes relating to Medicare or Medicaid, for 
patient abuse or neglect, or as a result of license revocation.  Examples include the 
following: 
  California:  John Derrick Van Doren, an anesthesiologist, was excluded indefinitely 
based on the Medical Board of the State of Californias revocation of his license to 
practice medicine.  Van Dorens license was revoked based on his unlawful use of 
controlled substances, gross negligence, repeated negligent acts, incompetence, and 
unprofessional conduct.  It was discovered that over a 4-year period, Van Doren 
frequently used marijuana and cocaine; left the operating room to get food while a 
patient was under general anesthesia; and made sexual, offensive, and/or inappropriate 
remarks to staff. 
  Florida:  Yvonne May Richards, the business manager for a community mental 
health center, was excluded for a minimum period of 30 years based on her conviction 
related to a Medicare fraud scheme.  Richards billed Medicare from about February 
1996 to January 2003 for psychiatric services that were not rendered, were not needed, 
and/or were performed by unlicensed personnel.  Richards also conspired to pay 
kickbacks and launder money.  Richards was sentenced to 121 months of incarceration 
and ordered to pay more than $9.8 million in restitution. 
  New York:  Neil E. Norwood, a pharmacist, was excluded for a minimum period of 
25 years based on his conviction for his scheme to defraud Medicaid and a private 
insurer.  As part of the scheme, Norwood provided patients with less medication than 
prescribed but billed Medicaid and the private insurer as if the full prescription had 
HHS OIG Semiannual Report to Congress  23  Centers for Medicare & Medicaid Services 
Spring 2008   
been dispensed.  Norwood was sentenced from 2 to 6 years of incarceration and ordered 
to pay $3 million. 
  Utah:  J. Jesus Partida, a certified nurse aide, was excluded for a minimum period of 
20 years based on his conviction related to patient abuse or neglect.  For over 1 year, 
Partida sexually abused elderly patients suffering from dementia or Alzheimers disease 
at the care center where he was employed.  Partida was sentenced to an indeterminate 
term of from 5 years to life in prison. 
  Michigan:  Gordon Michael Ziegler, a licensed practical nurse and registered nurse, 
was excluded for a minimum period of 13 years based on his conviction related to 
patient abuse or neglect.  Ziegler engaged in criminal sexual conduct with multiple 
patients.  He was sentenced from 8 to 15 years of incarceration, and his licenses to 
practice as a practical nurse and as a registered nurse were revoked by the Michigan 
Bureau of Health Professions. 
  National:  Eight doctors were excluded for the minimum period of 5 years based on 
their convictions for conspiracy to distribute controlled substances over the Internet.  
The doctors dispensed, or caused to be dispensed, various controlled substances by 
means of electronic prescriptions that were issued outside the usual course of medical 
practice and without a legitimate medical purpose.  The doctors convicted as a result of 
this investigation were Michael Millette, an emergency medicine physician in Illinois; 
Edward Schwab, an osteopath in Louisiana; Absylom Nayamekye and Apryl McNeil, 
both family practitioners in New York; Thomas Hanny, a cardiologist in Connecticut; 
Rene Guerra, a doctor of internal medicine in Florida; Mario Diaz, an anesthesiologist 
in Florida; and Juan Gonzalez, a general practice medical doctor in Florida.  The 
doctors were sentenced to various prison or home detention terms, ranging from 8 to  
41 months.  In addition, based on Millettes exclusion, his business, Michael J. Millette, 
M.D., LLC, was excluded for a minimum period of 5 years. 
Civil Monetary Penalties Law 
The CMPL authorizes OIG to impose administrative penalties and assessments and 
exclusion against a person who, among other things, submits claims to a Federal health 
care program that the person knows or should know are false or fraudulent.  During this 
reporting period, OIG resolved cases involving over $6.9 million in CMPs and 
assessments.  The following are among the CMP actions resolved during this reporting 
period: 
  Florida:  To resolve its CMPL liability, Americas Health Choice Medical Plans, 
Inc. (AHC), agreed to pay $100,000.  The agreement settled allegations that as a 
participating provider in Medicare Advantage (formerly known as a Medicare+Choice 
organization), AHC misrepresented information furnished to HHS on at least  
10 occasions.  Specifically, on at least three occasions, AHC submitted expansion 
applications that allegedly misrepresented the academic credentials of an AHC 
employee.  In addition, AHC submitted at least seven effectuation notices to the Center 
for Health Care Dispute Resolution (CHCDR) in which dates of submission were 
allegedly falsified to appear in compliance with CHCDRs request for claims data. 
HHS OIG Semiannual Report to Congress  24  Centers for Medicare & Medicaid Services 
Spring 2008   
Patient Dumping 
Of the CMPs OIG collected between October 1, 2007, and March 31, 2008, some were 
pursued 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 two settlements in Texas and one settlement in Florida involving alleged 
violations of that statute: 
  Texas:  Brackenridge Hospital paid $25,000 to resolve allegations that it failed to 
provide an appropriate medical screening examination and stabilizing treatment to a  
49-year-old man who presented to its emergency department.  He complained of a 
severe headache for the past 4 days and was diagnosed as having a subarachnoid 
hemorrhage.  When the emergency departments physician called the on-call 
neurosurgeon to come in to examine and treat this patient, she refused.  The patient was 
then transferred to another hospital over 60 miles away to be treated by a neurosurgeon. 
  Texas:  Tomball Regional Hospital paid $32,500 to resolve allegations of patient 
dumping.  A 13-year-old boy was brought to the hospitals emergency department by 
his parents for examination and treatment.  The boy had recently taken drugs and was 
acting out, and among other things, the parents were concerned about a possible drug 
overdose.  While at the emergency department, the boy was extremely combative, 
uncooperative, and threatening (including threatening to kill his father).  The hospitals 
on-call psychiatrist was not called to evaluate and treat this patient.  Instead, the boy 
was discharged after he tested positive for marijuana and benzodiazepines and told to 
see his primary care doctor on Monday, over 2 days later.  This patient was 
immediately taken to another hospital where he was diagnosed with bipolar disorder 
and admitted for treatment and placed on assault, suicide, and elopement precautions. 
  Florida:  Orlando Regional Healthcare Systems (Orlando) paid $85,000 to resolve 
three allegations of patient dumping.  Two instances involved allegations that services 
were denied because of the patients insurance status.  A 27-year-old woman presented 
to the emergency department in active labor and was inappropriately transferred 
allegedly because of her insurance status.  Another violation occurred when Orlando 
refused to accept an appropriate transfer of a patient suffering from an acute episode of 
psychosis with delusions, allegedly because the patient did not have insurance.  The 
third allegation involved a 50-year-old woman being sent home before tests revealed 
that she was suffering from acute renal failure.  There was no evidence that the hospital 
made any attempt to contact the patient, who had been discharged approximately  
3 hours earlier. 
Criminal and Civil Enforcement 
One of the most common types of fraud perpetrated against Medicare, Medicaid, and 
other Federal health care programs involves filing false claims for reimbursement.  False 
claims may be pursued under Federal and State criminal statutes and, in appropriate 
cases, under the civil FCA.  A description of these enforcement authorities can be found 
in Appendix C. 
HHS OIG Semiannual Report to Congress  25  Centers for Medicare & Medicaid Services 
Spring 2008   
The successful resolution of false claims actionswhich may be brought under the  
qui tam provisions of the FCA by private persons (known as relators)often involves the 
combined investigative efforts and resources of OIG, the Federal Bureau of Investigation 
(FBI), MFCUs, and other law enforcement agencies.  OIG has the responsibility of 
assisting DOJ in bringing and settling cases under the FCA.  Many providers elect to 
settle their cases prior to litigation.  As part of their settlements, providers often agree to 
enter into CIAs with OIG to avoid exclusions and to be permitted to continue 
participating in Medicare, Medicaid, and other Federal health care programs.  Such 
agreements are monitored by OIG and require the providers to enhance existing 
compliance programs or establish new ones.  The compliance programs are designed, in 
part, to prevent a recurrence of the underlying fraudulent conduct. 
During this semiannual period, the Governments enforcement efforts resulted in  
223 criminal actions and 141 civil actions against individuals or entities that engaged in 
health-care-related crimes.  These efforts resulted in $1.1 billion in HHS investigative 
receivables, including civil and administrative settlements or civil judgments related to 
Medicare, Medicaid, and other Federal health care programs.  Some of these notable 
enforcement actions are described below.  Summaries are organized by the sector of the 
health care industry involved or by the nature of the offense. 
Pharmaceutical Manufacturers and Distributors 
  Illinois:  CVS Caremark Corporation (CVS) agreed to pay $36.7 million and enter 
into a 5-year CIA with OIG to resolve its FCA liability based on allegations that it 
fraudulently overcharged Medicaid programs in 23 States by improperly switching 
drugs it dispensed.  Specifically, the Government and relator alleged that CVS 
dispensed ranitidine (generic Zantac) capsules rather than tablets in order to increase its 
reimbursement from Medicaid.  As a result of dispensing and billing Medicaid for 
capsules, CVS was reimbursed, on average, four times what it would have been 
reimbursed had it dispensed tablets.  The CIA requires CVSs Board of Directors Audit 
Committee to oversee and evaluate CVSs Compliance program and requires annual 
reviews by an Independent Review Organization to determine whether similar conduct 
is occurring on an ongoing basis to avoid FUL and MAC prices.  No patient harm was 
alleged. 
  Massachusetts:  The Bristol-Myers Squibb Co. (BMS) and its wholly owned 
subsidiary, Apothecon, Inc., agreed to pay $499 million plus interest as part of the 
resolution of an FCA case associated with a variety of drug marketing and pricing 
practices.  The settlement and a 5-year CIA between BMS and OIG resolved, in whole 
or in part, allegations made in seven qui tam actions. 
The investigation revealed that BMS and Apothecon devised and implemented 
fraudulent marketing and pricing schemes aimed at inducing providers to purchase and 
prescribe their drugs.  First, BMS and Apothecon allegedly reported fraudulent and 
inflated prices for a wide assortment of oncology and generic drug products with the 
knowledge that Federal health care programs established reimbursement rates based on 
those prices.  This type of pricing scheme benefits providers by creating a spread 
HHS OIG Semiannual Report to Congress  26  Centers for Medicare & Medicaid Services 
Spring 2008   
between the reimbursement rates for Federal health care providers and the actual prices 
for the drugs charged to its customers.  Second, BMS allegedly paid illegal 
remuneration to physicians and other health care professionals in the form of consulting 
fees and expenses associated with certain consulting programs.  Third, the Government 
alleged that Apothecon knowingly and willfully paid illegal remuneration to retail 
pharmacy and wholesaler customers to induce them to purchase its products.  Fourth, 
allegations were made that BMS used fraudulent marketing tactics to promote the sale 
of the drug Abilify, an atypical antipsychotic drug, for pediatric uses and to treat 
dementia-related psychosisboth off-label uses.  Finally, BMS allegedly violated the 
requirements of the Federal Medicaid drug rebate statute by failing to accurately report 
the best price at which it sold its antidepression drug Serzone.  In this scheme, the 
Medicaid programs received fewer rebates for the drug than they would have received 
had BMS reported the discounted price given to Kaiser Permanente, a large commercial 
purchaser. 
  Michigan:  Four institutional pharmacies owned by Omnicare, Inc., agreed to pay 
$3,498,570 and enter into an amendment to a preexisting CIA to settle allegations of 
improper Medicaid billing.  The TCPI Acquisition Corp.; Specialized Pharmacy 
Services, Inc.; Specialized Pharmacy Services North, Inc.; and excellRx, Inc., 
(collectively, Specialized) allegedly double-billed Medicaid for drugs provided to 
hospice patients.  Specifically, in Michigan, Medicaid pays hospice providers a flat fee 
that includes all medications that are related to a hospice patients terminal diagnosis.  
Therefore, the pharmacy is required to bill the hospice provider directly for all drugs 
related to the patients terminal diagnosis.  Drugs not related to the terminal diagnosis 
are not included in this flat fee, and the pharmacy must bill Medicaid directly for these 
other drugs.  The qui tam relator in the case alleged that Specialized knowingly billed 
Medicaid for all drugs that it dispensed to hospice patients, including those unrelated to 
the patients terminal diagnoses.  Therefore, Specialized allegedly caused Medicaid to 
pay twice for the same drugsone payment to the hospice provider and another 
payment to the pharmacy. 
Durable Medical Equipment Suppliers 
  Florida:  The Medicare Fraud Strike Task Force (Strike Force) was launched in  
March 2007 as part of the South Florida Initiative (Initiative), a joint investigative and 
prosecutive effort against health care fraud in South Florida.  The Strike Force builds 
upon the Initiatives first two phases, Operation Equity Excise I (OEE I), also known as 
Operation Whack-a-Mole, and Operation Equity Excise II (OEE II).  Through  
OEE I, infusion clinics and DME companies suspected of fraud were identified, 
investigated, and pursued for civil violations.  Through OEE II, providers identified 
through the investigative efforts in OEE I were investigated and pursued for criminal 
violations.  As the third phase of the Initiative, the Strike Force is a multi-
organizational, multidisciplinary project that uses real-time analysis of Medicare billing 
data, as well as findings from OEE I and II investigations, in its ongoing efforts to 
identify, investigate, and prosecute individuals and companies that have committed 
DME fraud. 
HHS OIG Semiannual Report to Congress  27  Centers for Medicare & Medicaid Services 
Spring 2008   
During this reporting period, Strike Force efforts resulted in 46 convictions and  
$35.2 million in investigative receivables.  Also reported in this period, OEE II yielded 
9 convictions and $7.8 million in investigative receivables, and OEE I added  
$13.7 million in civil remedies. 
Examples of successful Strike Force efforts for OIG include the following:   
  DME company owner Nelson Valdes was sentenced to 151 months in prison and 
ordered to pay $3,467,083 in restitution.  Valdes was convicted by a Federal jury 
for his scheme involving fraudulent prescriptions for non-commercially-available 
aerosol medications so that they could be illegally compounded.  In this 
scheme, a pharmacist, as opposed to a pharmaceutical manufacturer, made the 
nonapproved medications.  The unapproved medications were then billed to the 
Medicare program.  Pharmacy owners involved in the scheme returned half of the 
Medicare reimbursement to the DME company owner for each fraudulent 
prescription.  Patients and physicians involved in the fraud scheme were also paid 
cash kickbacks. 
  Alfredo Gourrie, owner of a fraudulent DME company, was sentenced to  
51 months in prison and ordered to pay $853,062 in restitution.  Gourrie billed the 
Medicare program for diabetic supplies, pressure-reducing air mattresses, and 
other health care supplies purportedly provided to beneficiaries. 
  DME company owner William Garcia was sentenced to 41 months in prison and 
ordered to pay $503,740 in restitution.  Garcia billed the Medicare program for 
unnecessary wound care supplies, pressure-reducing mattresses, and oxygen 
concentrators. 
The following example was a result of OIGs efforts under OEE II: 
  DME company owner Alejandro De La Victoria was sentenced to 30 months 
incarceration and ordered to pay $1,465,000 in restitution for health care fraud.  
From April 2006 through October 2006, Victoria fraudulently billed Medicare for 
DME that was never ordered by physicians or provided to beneficiaries.   
  New Jersey:  Four of the Nations largest makers of artificial hip and knee orthotics 
entered into settlement agreements with the Government to resolve their liabilities 
under the anti-kickback statute and the FCA.  Zimmer Holdings, Inc.; DePuy 
Orthopaedics, Inc. (a unit of Johnson & Johnson); Smith & Nephew, Inc.; and Biomet, 
Inc., agreed to pay a total of more than $310 million to settle Federal allegations that 
they used consulting agreements with orthopedic surgeons to induce the purchase of 
their devices.  The investigation found that these companies entered into consulting 
agreements with hundreds of surgeons throughout the 20022006 timeframe.  In some 
instances, physicians allegedly performed little or no work for these financial 
inducements.  As part of the settlement, the four companies executed Deferred 
Prosecution Agreements (DPAs) with the United States Attorneys Office (USAO) for 
the District of New Jersey and entered into 5-year CIAs with OIG.  Under these 
HHS OIG Semiannual Report to Congress  28  Centers for Medicare & Medicaid Services 
Spring 2008   
agreements, the companies are required to implement new corporate compliance 
procedures and they have also agreed to 18 months of Federal monitoring.  Criminal 
complaints that were filed against the companies charging them with conspiring to 
violate the anti-kickback statute will be dismissed at the conclusion of the 18-month 
DPAs if the companies comply with their terms.  A fifth company, Stryker 
Orthopaedics (a unit of Stryker Corp.), did not enter into a civil settlement because it 
voluntarily cooperated with the Government.  Stryker executed a Non-Prosecution 
Agreement with the Government, under which it is required to implement the reforms 
imposed under the other companies DPAs. 
Hospitals 
  Georgia:  Saint Josephs Hospital of Atlanta, Inc., and St. Josephs Health System, 
Inc. (collectively, SJHS), agreed to pay $26 million, including interest, to resolve 
FCA allegations that from 20002005, the hospital improperly billed Medicare for 
inpatient admissions and other services.  The allegations concerned primarily the 
submission of claims that should have been billed as outpatient visits but were 
instead billed at the higher rate as inpatient admissions.  Specifically, the 
Governments investigation revealed that, among other things, SJHS routinely admitted 
patients unnecessarily and discharged them the same day or the following day; admitted 
patients for 3-day lengths-of-stay without meeting the criteria for a covered admission 
so that the patients would qualify under Medicare payment rules for subsequent 
coverage for SNF services; and submitted claims for inpatient admissions relating to 
placement of carotid artery stents, which were not covered under Medicare benefits.  To 
address the inpatient admission problems, SJHS is instituting an experimental 
admission protocol, currently being tested by CMS and several QIOs, which shifts 
responsibility for admission status decisions from physicians to care managers.  SJHS 
also entered into a 5-year CIA that requires an independent review organization to 
review patients medical records and SJHSs initial decisions for admission.  In 
addition, under a separate agreement with the USAO, SJHS is expected to pay the 
Government between $3 million and $4 million to cover Medicare overpayments for  
1-day inpatient stays in 2006. 
  Texas:  Tomball Regional Hospital (Tomball) and Dr. Emanuel Paul Descant II 
agreed to pay $816,081 to resolve their liability for allegedly submitting false or 
fraudulent Medicare and Medicaid claims for hyperbaric oxygen (HBO) therapy.  
Tomball also entered into a 5-year CIA with OIG.  The investigation was predicated on 
information received from a whistleblower complaint filed by a former hospital 
employee.  Allegations asserted that the subjects submitted claims for HBO therapy 
when the patients conditions did not warrant payment by Medicare and Medicaid, the 
documentation failed to support the diagnosis code billed, and/or the services were not 
rendered. 
Home Health 
  Iowa:  Floyd Seibert, owner of a Medicare-certified home health business, and his 
lawyer, James Golden, were ordered to pay $5,719,340 in restitution for Medicare fraud 
HHS OIG Semiannual Report to Congress  29  Centers for Medicare & Medicaid Services 
Spring 2008   
and pension plan fraud.  Seibert was also sentenced to 46 months imprisonment.  The 
investigation found that Seibert accomplished the Medicare fraud in a variety of ways.  
He concealed his relationship with his various business entities, located across five 
States, even to the point of using one or more fictitious identities for his business 
dealings.  Seibert knowingly and willfully sold goods and services from one of his 
companies to another of his companies at inflated costs and improperly passed the 
inflated costs on to Medicare.  Seibert also fraudulently passed on to Medicare costs 
from his businesses which were not related to Medicare.  Golden assisted Seibert in his 
efforts to defraud the Government, pleaded guilty to misprision of a felony, and was 
sentenced to 3 years probation. 
Practitioners 
  Texas:  Dr. Raul Marquez, an orthopedic surgeon, agreed to pay $3,128,466 and 
enter into a CIA to resolve allegations of Medicare and Medicaid fraud brought against 
him and hospitals with which he was affiliated and in which he had an ownership 
interest.  The Governments investigation, initiated with information presented in a  
qui tam suit, found that Marquez and the Orthopedic Surgery Center and Sports 
Medicine billed Medicare and Medicaid programs for services not rendered as 
represented.  Also, the Government alleged that Marquez and Cornerstone Regional 
Hospital obtained inflated payments from the Medicare program by billing post-
surgical patients as though they had been discharged to home, when, in fact, they had 
been discharged to Cornerstone Rehabilitation Hospital for continuing treatment. 
  Michigan:  Dr. Robert Stokes, a licensed and board-certified dermatologist, was 
sentenced to 10 years and 6 months in prison and ordered to pay $1,315,682 in 
restitution and a $175,000 fine following his jury trial conviction for health care fraud.  
The evidence at trial showed that Dr. Stokes falsely informed patients that they had 
cancer and performed unnecessary procedures when, in fact, laboratory results 
indicated that their tissue specimens were benign.  In addition, he used fraudulent 
billing schemes, including upcoding surgical procedures to receive higher 
reimbursement rates and billing for follow-up office visits for which he was not entitled 
to reimbursement.  Dr. Stokes justified the unnecessary office visits by claiming that 
beneficiaries had developed postoperative infections, such as impetigo, a disease rarely 
seen in adults.  During trial preparation, it was discovered that Dr. Stokes reused single-
use needles and sutures without proper sterilization and failed to properly sterilize 
surgical equipment used in procedures.  OIG assisted the local health department in 
informing patients of their possible risk of contracting a blood-borne pathogen, such as 
hepatitis B or C or HIV, because of his unsanitary medical practices. 
  Pennsylvania:  Mamood Karimboccus, a physical therapist who operated Bustleton 
Aqua Therapy & Rehabilitation Center, Inc., was sentenced to 6 months incarceration 
and ordered to pay $1,201,982 in restitution for billing Medicare for work that was not 
performed.  Karimboccus billed 271 days for which he would have had to have worked 
in excess of 15 hours per day, billed 186 days for which he would have had to have 
worked in excess of 20 hours per day, and billed 145 days for which he would have had 
to have worked in excess of 24 hours per day. 
HHS OIG Semiannual Report to Congress  30  Centers for Medicare & Medicaid Services 
Spring 2008   
  Maryland:  Podiatrist LaVergne Andre-Hayes agreed to pay the Government 
$534,884 plus interest and entered into a 5-year integrity agreement with OIG to 
resolve allegations of false Medicare and Medicaid billing.  Dr. Andre-Hayes allegedly 
billed Medicare and Maryland Medicaid for separate evaluation and management 
services even though she performed no significant, separately identifiable evaluation 
and management service at the same time that she performed a procedure.   
Dr. Andre-Hayes also allegedly submitted claims to Medicare and Maryland Medicaid 
for services not rendered and for noncovered services.  The Maryland State Board of 
Podiatric Medical Examiners had also previously investigated Dr. Andre-Hayes and on 
February 8, 2007, suspended Dr. Andre-Hayess medical license in Maryland for  
2 years (with 1 year stayed). 
Laboratories 
  Connecticut:  Dianon Systems, Inc. (Dianon), agreed to pay $1.5 million to resolve 
FCA allegations that the company mischarged Medicare and the Department of 
Defenses (DOD) TRICARE program for certain tests that it performed.  Dianon is a 
reference laboratory that specializes in conducting tests to detect and stage various 
types of cancer.  A pathologist formerly employed by Dianon filed the original suit 
against the company.  The qui tam complaint alleged that Dianon billed Medicare and 
TRICARE for medically unnecessary tests in that it performed 26 flow cytometry tests 
on every sample sent to the company for diagnosis regardless of whether all 26 were 
medically necessary for a particular patient.  The complaint further alleged that Dianon 
knew that some of the antibody testing that it performed was unnecessary. 
Nursing Homes 
  Michigan:  Martin Luther Memorial Homes, Inc. (MLMH), agreed to pay $550,000 
to resolve its liability under the FCA.  The Government alleged that MLMH violated 
the FCA by creating another entity, Lutheran Ancillary Services (LAS), to provide 
physical, occupational, and speech therapy services, as well as pharmacy supplies, to 
the residents of MLMHs nursing homes and failing to disclose this relationship to 
Medicare.  LAS allegedly billed MLMH for those services, and MLMH submitted 1997 
and 1998 cost reports to Medicare failing to disclose and adjust claims for the cost of 
the services provided by LAS. 
The Government expressly reserved its exclusion authorities against defendants Lester 
Stauske and Roger McCaskey, the former owners and operators of MLMHs skilled 
nursing facilities.  McCaskey currently operates MLMH as a private-pay-only facility; 
it will enter a 5-year CIA if it becomes involved in any Federal health care business. 
Medicaid Fraud Control Units 
MFCUs are key partners in the fight against fraud, waste, and abuse in State Medicaid 
programs.  State MFCUs were created in 49 States and the District of Columbia pursuant 
to the Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977 (P.L. No. 95-142) 
with the objective of strengthening the Governments capability to detect, prosecute, and 
HHS OIG Semiannual Report to Congress  31  Centers for Medicare & Medicaid Services 
Spring 2008   
punish fraud against Medicaid programs.  MFCUs investigate and prosecute, or refer for 
prosecution, providers charged with defrauding the Medicaid program or abusing, 
neglecting, or financially exploiting Medicaid beneficiaries. 
Since 1979, OIG has been responsible for administering the Medicaid fraud control grant 
program and providing oversight and guidance to State MFCUs.  This involves 
administering Federal financial grants to MFCUs, assessing the performance of MFCUs, 
and partnering with MFCUs in conducting joint investigations and other outreach work.   
In this semiannual period, OIG provided oversight for and administration of 
approximately $92 million in Federal grants that were distributed to the 50 MFCUs. 
Joint Investigations 
Examples of cases conducted jointly by OIG and MFCUs during the semiannual period 
include the following: 
  Georgia:  Chiropractors Rafael Razuri and Eric Baty were sentenced to 5 years of  
imprisonment and 42 months of imprisonment, respectively, and ordered to pay  
$1.8 million in restitution on their convictions for conspiracy to commit health care 
fraud.  While owners and operators of Southside Medical & Rehabilitation Center, 
Razuri and Baty conspired to bill over $5 million in fraudulent physical therapy claims 
to Medicare and Georgia Medicaid.  The investigation involved OIG, FBI, and the 
Georgia MFCU. 
  Texas:  Psychologist Joe Lerma was sentenced to 4 years in Federal prison and 
ordered to pay $530,000 in restitution for fraudulently billing Medicare and Medicaid.   
A jury found Lerma guilty of billing Medicare and Medicaid for psychological 
interviews and testing as if he performed the services when, in fact, the services were 
performed by unlicensed technicians and associates.  The investigation involved OIG 
and the Texas MFCU. 
  Wisconsin:  Nicole Stewart was sentenced to 5 years in prison and ordered to pay 
$320,603 in restitution for defrauding the Wisconsin Medicaid program.  Stewart 
owned and operated Compassionate Mothers, a company she founded to provide 
prenatal and child care coordination services.  An investigation revealed that she billed 
the Medicaid program for services never rendered and for services not covered.  In 
addition, Stewart attempted to cover up the fraudulent billings by paying employees to 
fabricate records to support the claims submitted.  Four codefendants had been 
previously sentenced for their roles in fabricating documents.  The investigation 
involved OIG and the Wisconsin MFCU. 
OIG Reviews of MFCUs 
During the semiannual period, we conducted onsite reviews of seven selected MFCUs 
period to determine their compliance with the following:  (1) 42 CFR Part 1007, entitled, 
State Medicaid Fraud Control Units, containing OIGs regulations for MFCUs;  
(2) 45 CFR Part 92, entitled, Uniform Administrative Requirements for Grants and 
HHS OIG Semiannual Report to Congress  32  Centers for Medicare & Medicaid Services 
Spring 2008   
Cooperative Agreements to State and Local Governments, establishing uniform 
administrative rules for Federal grants; and (3) the 12 MFCU performance standards 
developed jointly by OIG and the National Association of Medicaid Fraud Control Units.  
As part of the onsite review process, we made recommendations and suggestions to 
improve the operation of the seven MFCUs reviewed. 
HHS OIG Semiannual Report to Congress  33  Centers for Medicare & Medicaid Services 
Spring 2008    
Public Health and Human Services Programs 
and Departmentwide Issues 
OIG allocates about 20 percent of its resources to reviews of 300 public health and 
human service programs and to departmentwide issues that affect more than one 
program.  OIG has discretion in allocating most of these resources.  However, a portion 
of these resources is used for mandatory reviews, including financial statement audits 
conducted pursuant to section 405(b) of the Government Management Reform Act of 
1994, the Chief Financial Officers Act (CFOA) of 1990, and information systems reviews 
required by the Federal Information Security Management Act. 
This chapter describes OIGs work related to the following areas: 
Public Health ProgramsSeveral HHS agencies perform a wide spectrum of public 
health activities.  Public health activities and programs represent this countrys primary 
defense against acute and chronic diseases and disabilities and provide the foundation for 
the Nations efforts to promote and enhance the health of the American people.  Public 
health agencies within the Department include the following: 
  The Centers for Disease Control and Prevention operates a system of health 
surveillance to monitor and prevent disease outbreaks, including those that would 
result from acts of bioterrorism; implements disease prevention strategies; and 
maintains national health statistics. 
  The Food and Drug Administration (FDA) is responsible for ensuring the safety 
of the Nations food, drugs, medical devices, biologics, cosmetics, and animal 
food and drugs. 
  The Health Resources and Services Administration (HRSA) maintains a safety net 
of health services for people who are low income or uninsured or who live in rural 
areas or urban neighborhoods where health care is scarce. 
  The Indian Health Service (IHS) provides or funds health care services for  
1.6 million American Indians and Alaska Natives. 
  The National Institutes of Health supports medical and scientific research 
examining the causes of and treatments for diseases such as cancer and 
HIV/AIDS. 
  The Substance Abuse and Mental Health Services Administration (SAMHSA) 
funds services to assist people with or at risk for mental and substance abuse 
disorders. 
HHS OIG Semiannual Report to Congress   35        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Human Services ProgramsSeveral HHS agencies support human services to assist 
vulnerable individuals of all ages, including the following: 
  The Administration for Children and Families operates over 60 programs that 
promote the economic and social well-being of children, families, and 
communities, including TANF; the Head Start program for preschool children; 
and programs relating to foster care and adoption services.  Within ACF, the 
Office of Child Support Enforcement (OCSE) Child Support Enforcement (CSE) 
Program, through a Federal-State-local partnership, promotes family self-
sufficiency and child well-being and ensures that assistance is available to 
children through locating parents, establishing paternity and support obligations, 
and enforcing those obligations. 
  The Administration on Aging, through a nationwide network, supports programs 
that provide services such as meals, transportation, and caregiver support to older 
Americans at home and in the community. 
Departmentwide IssuesCertain OIG work cuts across HHS programs, including 
financial accounting, information systems management, and oversight of grants and 
contracts.  Such work may relate to functions carried out by HHSs Program Support 
Center (PSC), which provides a wide range of administrative services to operating and 
staff divisions within the Department. 
In addition to summarizing OIGs reports related to public health and human service 
programs and departmentwide issues, this chapter provides statistics related to and 
examples of OIG actions and investigations related to public health and human service 
programs, describes actions taken on OIGs recommendations, and offers examples of 
OIGs review and clearance of regulations and guidance related to the Departments 
programs. 
HHS OIG Semiannual Report to Congress   36        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Reports Related to Public Health Programs 
Laboratory Preparedness for Pandemic Influenza 
In our review of laboratory preparedness for pandemic influenza, we found that there are 
opportunities to improve public health laboratory coordination with clinical laboratories 
to decrease the time needed to detect and report a pandemic influenza outbreak.  We 
surveyed public health laboratory pandemic influenza preparedness in all 50 States and 
the District of Columbia and found that most States had implemented several of the eight 
critical tasks for public health laboratory testing that are required by CDCs Pandemic 
Influenza Guidance Supplement to the 2006 Public Health Emergency Preparedness 
Cooperative Agreement, Phase II (Guidance).  For example, all States reported that their 
public health laboratories performed the requirement for year-round influenza testing.    
In addition to surveying the 210 public health laboratories in operation at the time of our 
survey, we asked States to report on the role of privately owned clinical laboratories, 
which play a key role in the States activities related to disease prevention, control, and 
surveillance.  Such coordination is essential because clinical laboratories are likely to be 
among the first to detect an influenza outbreak. 
For the critical tasks involving both public health and clinical laboratories, States 
reported performing the required activities for public health laboratories to a greater 
extent than for clinical laboratories.  For example, over 80 percent of States reported 
developing operational plans to augment public health laboratory capacity during an 
influenza pandemic, but 55 percent reported such preparation for their clinical 
laboratories.  This report did not have recommendations.  (OEI-04-07-00670) 
Superfund Financial Activities at the National Institute of Environmental Health 
Sciences 
Our review found that the Superfund financial transactions recorded by the National 
Institute of Environmental Health Sciences (NIEHS) for FY 2006 were allowable, 
allocable, and reasonable in accordance with applicable laws and regulations.  NIEHS, a 
component of NIH, receives funding to carry out certain functions of the Hazardous 
Substance Response Fund, commonly known as Superfund.  In general, NIEHS took 
appropriate action to ensure that its Superfund grantees submitted required audit reports.  
This report contained no recommendations.  (A-04-07-01050)   
Procurements Made by the National Institutes of Health for the Department of 
Defense 
In our review of 28 procurements made by NIH for DOD during FYs 20022006, we 
found that NIH had complied with appropriation statutes and financial regulations for  
13 procurements but may not have complied for the remaining 15.  NIH acquires certain 
IT equipment and services for Defense through task orders awarded using a 
governmentwide contract.  Pursuant to section 817 of the DOD Authorization Act for  
FY 2007 (P.L. 109-364), OIGs of both HHS and Defense are to jointly review the 
policies and procedures for these Defense purchases and assess compliance with 
applicable acquisition requirements. 
HHS OIG Semiannual Report to Congress   37        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Of the 28 procurements, totaling $183 million in Defense appropriated funds,  
4 procurements, totaling $11.8 million, were charged to the wrong appropriation 
category.  We also found that NIH did not always maintain adequate documentation with 
respect to acquisition planning, competition, award decisions, and contractor monitoring. 
We recommended that NIH work with Defense to resolve the obligation of $11.8 million 
in operations and maintenance funds instead of research, development, testing, and 
evaluation funds for 4 task orders; work with Defense to resolve the use of $25.4 million 
for equipment and services that were not provided during the period of performance for 
13 task orders; comply with Federal appropriation statutes and financial management 
regulations on obligating and expending funds; and improve controls for documenting the 
task order award and oversight processes.  NIH concurred with our recommendations.  
(A-03-07-03000) 
National Institutes of Healths Oversight of Conflicts of Interest in Extramural 
Research 
In our review of financial conflicts of interest reported by grantee institutions to NIH,  
we found that the agency needed to improve its oversight of such conflicts.  Federal 
regulations establish standards to ensure that the design, conduct, or reporting of research 
funded under Public Health Service grants not be biased by any conflicting financial 
interest of an investigator.  The regulations require each institution receiving NIH funds 
to have a written policy for identifying financial conflicts of interest and ensuring that 
such conflicts are managed, reduced, or eliminated.  Of NIHs 27 institutes and centers 
(Institutes), 24 have grant-making authority and are responsible for managing and 
overseeing their grants.  NIHs Office of Extramural Research (OER) provides grantees 
with information about relevant policies and regulations and develops and maintains 
information systems related to extramural research grants administration. 
 
Our examination of all available financial conflict of interest reports and related 
documentation for FYs 20042006 revealed that NIH could not provide an accurate count 
of the financial conflict of interest reports that it received from grantees; the regulations 
do not explicitly require the nature of the conflicts or other details to be reported; and the 
institutes primary method of oversight was to rely on grantees assurances that financial 
conflict of interest regulations were being followed. 
We recommended that NIH increase oversight of grantee institutions to ensure their 
compliance with Federal financial conflict of interest regulations; require Institutes to 
forward to OER all financial conflict of interest reports received from grantee institutions 
and ensure that OERs conflict of interest database contains information on all conflict of 
interest reports provided by grantee institutions; and require grantee institutions to 
provide details regarding the nature of financial conflict of interest and the way in which 
they are managed, reduced, or eliminated.  NIH agreed with our first two 
recommendations but did not concur with our recommendation to require grantee 
institutions to provide details about financial conflicts of interest and the way in which 
they are managed, reduced, or eliminated.  (OEI-03-06-00460) 
HHS OIG Semiannual Report to Congress   38        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
State, Local, Private, and Commercial Laboratories Compliance With Select Agent 
Regulations 
This report summarizes eight reviews of State, local, private, and commercial 
laboratories compliance with Federal select agent regulations.  Select agents are 
materials that not only have the potential to pose a severe threat to public health and 
safety, but also to animal and plant health and animal and plant products.  CDC oversees 
select agents and registers entities that possess, use, or transfer these agents that pose a 
severe threat to public health and safety.  The report pointed out that the eight entities had 
weaknesses in at least one of the following areas:  accountability for select agents, 
restricted access to select agents, security plans, training, and incident response plans.  
Individual reports that we issued to the laboratories included recommendations to 
strengthen security controls.  In responding to our draft report, CDC stated that it had 
resolved our recommendations at five of the eight entities and that the remaining three 
entities had withdrawn their certificates of registration and no longer possessed select 
agents.  CDC attached audit clearance documents resolving the recommendations in our 
report to all eight entities.  Therefore, this final report contains no recommendation.   
(A-04-06-01033) 
HHS OIG Semiannual Report to Congress   39        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Actions Related to Public Health Programs 
OIG excludes individuals who fail to pay HHS-secured educational loans and 
investigates specific allegations of fraud, waste, and abuse affecting public health and 
human service programs.  These investigations are often complex and can include 
allegations such as misuse or theft of grant funds, conflict of interest, and kickbacks. 
Following are statistics related to and descriptions of these efforts: 
Health Education Assistance Loan Defaults   
OIG excludes from participating in Federal health care programs individuals who have 
defaulted on loans obtained through the Health Education Assistance Loan (HEAL) 
program.  Through the HEAL program, HRSA guarantees commercial loans to students 
seeking education in health-related fields of study.  The students are allowed to defer 
repayment of the loans until after they have graduated and begun to earn an income.  
Although PSC takes steps to ensure repayment, some loan recipients ignore their 
indebtedness. 
After PSC has exhausted efforts to secure repayment of a debt, it declares an individual in 
default.  Thereafter, the 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,  
17 individuals and related entities were excluded as a result of PSCs referral of their 
cases to OIG. 
Individuals who have been excluded as a result of default may enter into settlement 
agreements whereby the exclusion is stayed while they pay specified amounts each 
month to satisfy their debts.  If they default on these settlement agreements, they may be 
excluded until the entire debts are repaid and they may not appeal the exclusions.  Some 
health professionals, upon being notified of their exclusion, immediately repay their 
HEAL debts. 
After being excluded for nonpayment of their HEAL debts, a total of 2,128 individuals 
have taken advantage of the opportunity to enter into settlement agreements or 
completely repay their debts.  That figure includes the 29 individuals who have entered 
into such settlement agreements or completely repaid their debts during this reporting 
period.  The amount of money being repaid through settlement agreements or through 
complete repayment is $153.2 million.  Of that amount, $2.2 million is attributable to this 
reporting period. 
HHS OIG Semiannual Report to Congress   40        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
In the following examples, each individual entered into a settlement agreement to repay 
the amount indicated: 
  Illinois dentist Byron Thompson$317,000 
  California osteopathic physician Kenneth Williams$176,000 
  New York chiropractor Christina Roesler-Sirlin$128,000 
  Georgia chiropractor Stephanie OBrien$88,000 
Public Health-Related Investigations 
  Select Agents and Toxins:  A California laboratory (Laboratory) agreed to resolve 
its liability for an alleged violation of the Select Agent Regulations.  OIG alleged that 
the Laboratory transferred vials of a select agent to two laboratories located in Florida 
and Virginia in a manner that violated the transfer requirements.  During the transfers, 
the select agent was released from the shipped vials.  An investigation of the packaging 
for the shipments revealed several violations of regulations governing the shipment of 
the select agent.  OIG specifically alleged that the Laboratory violated the transfer 
requirements of the select agent regulations by failing to comply with the applicable 
shipping and packaging laws when transferring a select agent.  In addition, OIG alleged 
that the Laboratory failed to comply with security and access requirements by allowing 
an individual not authorized to have access to select agents to package the shipments of 
the select agent and that the Laboratorys responsible official failed to ensure 
compliance with the shipping and packaging requirements of the select agent 
regulations.  Under the terms of the settlement, the Laboratory agreed to pay OIG 
$450,000 to resolve these allegations.  As a separate matter, the Laboratorys 
compliance is subject to monitoring by CDC. 
HHS OIG Semiannual Report to Congress   41        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Reports Related to Human Service Programs  
Division of Unaccompanied Childrens Services:  Efforts To Serve Children  
In our case file reviews of unaccompanied children apprehended by the Department of 
Homeland Security (DHS), we found that most children were placed in and released from 
facilities funded by ACF's Division of Unaccompanied Childrens Services (DUCS) in 
accordance with Federal standards.  However, we determined from our file reviews and 
facility visits that improvements were needed with respect to case file documentation, 
DUCSs program oversight, and the delineation of responsibilities for DHS and HHS. 
Federal standards for the placement, care, and release to sponsors of unaccompanied alien 
children in Federal custody are set forth in the Flores Agreement, so named for a class 
action law suit challenging detention policies and procedures for children in Federal 
custody.  Pursuant to the Homeland Security Act of 2002, the Director of the Office 
Refugee Resettlement (ORR), which oversees DUCS, is responsible for the care and 
custody of unaccompanied alien children and DHS is responsible for immigration 
benefits and enforcement.   
We recommended that ACF enforce documentation requirements to ensure that 
childrens needs are assessed and care provided, enhance and define field staff role in 
ongoing oversight, and establish a memorandum of understanding between HHS and 
DHS.  ACF did not indicate in its comments whether it concurred with our 
recommendations; however, it agreed that increased monitoring of facility documentation 
and practices was needed.  ACF also stated that ORRs statutory mandate to ensure the 
well-being of an unaccompanied alien child ends at the time the child is released from 
ORRs care  (OEI-07-06-00290) 
Improper Temporary Assistance for Needy Families Basic Assistance Payments in 
Three States 
We found that three States did not fully comply with Federal requirements pertaining to 
the basic assistance portion of TANF for the period July 1 through December 31, 2005.  
TANF is a block grant program that provides funding to States to help families move 
from welfare to self-sufficiency; TANFs basic assistance includes benefits designed to 
meet a familys ongoing basic needs.  Our pilot reviews, conducted at the request of ACF 
and OMB, tested a methodology that OIG is using to calculate a national TANF error rate 
in FY 2008.  Pursuant to the Improper Payments Information Act of 2002 (P.L. No. 107-
300), Federal agencies must estimate and report to Congress on the annual amount of 
improper payments in their high risk programs.  The results of our reviews are as follow: 
  Michigan:  We estimated that the overall TANF improper payment rate was 
40 percent of the Federal dollars expended and 34 percent of the number of payments 
made for basic assistance.  These improper payments totaled an estimated  
$36.3 million (Federal share).  The payments were improper because they were for 
families who were ineligible for TANF basic assistance, were calculated or disbursed 
improperly, or did not have required documentation. 
HHS OIG Semiannual Report to Congress   42        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
We recommended that the State develop criteria specifying the circumstances that 
warrant a hardship exception for extending TANF basic assistance payments beyond 
the 60-month Federal lifetime limit, ensure compliance with Federal and State TANF 
requirements, determine the current eligibility of all recipients identified as improperly 
enrolled in the TANF program and deny further assistance to those who remain 
ineligible, and recalculate assistance budgets for all recipients identified as having 
received improperly calculated payments.  In its comments on our draft report, the State 
disagreed with our findings and recommendations but did not provide information that 
caused us to revise our findings.  (A-05-06-00068) 
  New York:  We estimated that the overall TANF improper payment rate was  
28.5 percent of the Federal dollars expended and 46 percent of the number of payments 
made for basic assistance.  These improper payments totaled an estimated $46.7 million 
(Federal share).  The payments were improper because they were for families who were 
ineligible for TANF basic assistance, were calculated improperly, or did not have 
required documentation.  In addition, the State reported to ACF $576 million in Federal 
and State basic assistance expenditures, but its payment system, which we verified, 
showed payments of $327.8 milliona $248.2 million difference. 
We recommended that the State ensure compliance with Federal and State TANF 
requirements, consider conducting quality control reviews of TANF basic assistance 
eligibility and payment processes, determine the current eligibility of all recipients 
identified as improperly enrolled in the TANF program and deny further assistance to 
those who remain ineligible, recalculate assistance budgets for all recipients identified 
as having received improperly calculated payments, and ensure that TANF basic 
assistance expenditures are accurately reported to ACF.  The State did not specifically 
address the recommendations.  (A-02-06-02015) 
  Pennsylvania:  We estimated that the overall TANF improper payment rate was  
11.5 percent of the Federal dollars expended and 16 percent of the number of payments 
made for basic assistance.  These improper payments represented an estimated  
$12.2 million (Federal share).  The payments were improper because they were for 
families who were ineligible for TANF basic assistance, were calculated improperly, or 
did not have required documentation. 
We recommended that the State ensure compliance with Federal and State TANF 
requirements, determine the current eligibility of all recipients identified as improperly 
enrolled in the TANF program and deny further assistance to those who remain 
ineligible, and recalculate assistance budgets for all recipients identified in this review 
as having received improperly calculated payments.  The State concurred with our 
recommendations.  (A-03-06-00566) 
Title IV-E Foster Care Costs Claimed by Two States 
We found that two StatesPennsylvania and Virginiadid not fully comply with 
Federal requirements pertaining to Federal foster care claims.  Title IV-E of the Act, as 
amended, authorizes States to claim Federal funding for maintenance costs through ACF.  
HHS OIG Semiannual Report to Congress   43        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
The funding covers room and board payments to licensed foster care providers, 
administrative costs, and training.  The results of our reviews follow. 
Two reviews in Pennsylvania identified a number of improper claims for the 19972002 
period:   
  Claims for Castille Contracted Detention Facilities:  We estimated that of the 
total $28.4 million (Federal share) that Pennsylvania claimed, an estimated  
$11.6 million was unallowable.  The Castille program is a court-ordered program for 
the placement of children convicted of delinquent acts in facilities under contract with 
the State.  States may claim maintenance costs on behalf of adjudicated children if the 
childrens care is provided by an approved facility other than one operated primarily for 
the detention of delinquent children.  Over half of the claims that we sampled were 
improper because they were for services that were not provided or were provided to 
children whose situations did not meet the programs eligibility requirements.  Because 
the Castille per diem rates did not distinguish between services that were eligible or 
ineligible for Title IV-E reimbursement, we were unable to determine the allowability 
of the remaining $16.8 million claimed; however, the documentation indicated that 
some of this amount was for noneligible services, such as education and rehabilitation.  
We recommended that the State refund $11.6 million, work with ACF to determine the 
allowability of the remaining $16.8 million claimed, identify and resolve any 
unallowable claims made after the audit period and refund the appropriate amount, and 
discontinue claiming Title IV-E reimbursement for ineligible services and children.  
The State disagreed with our findings and recommendations and provided additional 
documentation on 45 of the 72 claims questioned in our draft report.  Based on this 
documentation, we determined that 20 of these claims were allowable and revised the 
report.  (A-03-05-00550) 
  Philadelphia Countys Claims for Per Diem Rates Exceeding $300:  We 
estimated that the State improperly claimed at least $11.7 million of the total  
$33.3 million of administrative costs (Federal share).  Claims were unallowable 
because the services were provided by unlicensed foster care facilities or provided to 
children whose situations did not meet eligibility requirements.  We were unable to 
determine the allowability of the remaining amount claimed because the contractors 
per diem rates did not distinguish between services that were eligible or ineligible for 
Title IV-E reimbursement.  We recommended that the State refund $11.7 million and 
work with ACF to determine the allowability of the remaining $21.6 million claimed; 
work with ACF to identify and resolve any unallowable claims made after the audit 
period and refund the appropriate amount; discontinue claiming Title IV-E 
reimbursement for unlicensed facilities and ineligible children and services; and direct 
Philadelphia County to develop rate-setting procedures that separately identify 
maintenance and other costs, including related administrative costs, so that claims are 
readily allocable to the appropriate Federal, State, and local funding sources.  The State 
disagreed with all of the recommendations but did not provide additional 
documentation or explain its disagreement.  (A-03-06-00564) 
HHS OIG Semiannual Report to Congress   44        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Two reviews in Virginia identified a number of improper claims for the period  
April 2002 through March 2005: 
  Fairfax County:  We estimated that Virginia improperly claimed administrative 
costs totaling $5.6 million (Federal share) on behalf of Fairfax County.  The costs  
were unallowable because the States cost allocation plan did not describe, as required 
by Federal regulations, the methodology used to identify, measure, and allocate  
these costs; the State also did not equitably allocate costs between Title IV-E and  
non-Title IV-E programs, as directed by Federal policy.  We recommended that the 
State refund $2.4 million ($5.6 million less $3.2 million previously disallowed by ACF) 
in unallowable Title IV-E administrative costs.  The State concurred with our 
recommendation but requested that repayment not be required in light of a June 2006 
settlement agreement between the State and ACF.  We noted, however, that the  
$2.4 million was not included in that settlement agreement.  (A-03-04-00585) 
  Arlington County:  We estimated that Virginia had improperly claimed 
administrative costs totaling $1.7 million (Federal share) on behalf of Arlington 
County.  The costs were unallowable because the States cost allocation plan did not 
describe, as required by Federal regulations, the methodology used to identify, measure, 
and allocate these costs; the State also did not equitably allocate costs between  
Title IV-E and non-Title IV-E programs, as directed by Federal policy.  We 
recommended that the State refund $1.3 million ($1.7 million less $417,000 previously 
disallowed by ACF) in unallowable Title IV-E administrative costs.  The State 
concurred with our recommendation but requested that repayment not be required in 
light of a June 2006 settlement agreement between the State and ACF.  We noted, 
however, that the $1.3 million was not included in that settlement agreement.   
(A-03-06-00562) 
Undistributable Child Support Collections 
We found that four States did not fully comply with Federal requirements pertaining to 
undistributable child support collections.  Undistributable collections result when States 
receive child support payments but cannot identify or locate the custodial parents or 
return the funds to the noncustodial parents.  States are required to offset CSE program 
costs, for which they receive Federal matching funds, by recognizing and reporting 
undistributable collections and interest earned on collections as program income.  The 
results of these reviews are as follow: 
  Florida:  During 19822005, Florida accumulated about $31 million in child 
support collections.  However, in October 1998December 2005, the State reported 
only $1.4 million as program income as a result of an OCSE audit.  We found that the 
large accumulation of collections was possible because the State had exempted 
outstanding checks from its abandoned property laws, had not established a rule for 
determining when child support collections are considered undistributable, and had no 
policy to deal with child support checks that are characterized as distributed but remain 
uncashed indefinitely.  We also found that the State improperly reversed $697,000 
($460,000 Federal share) of program income related to outstanding checks.  We 
recommended that the State report $697,000 as program income and develop a rule, as 
HHS OIG Semiannual Report to Congress   45        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
directed by Florida statutes, defining when a collection is deemed undistributable.   
The State partially agreed with our recommendation.  (A-04-06-03508) 
  Georgia:  During 19982001, Georgia appropriately recognized and reported 
program income for undistributable child support collections; however, in  
20022005, the State did not report program income totaling $360,300 ($237,800 
Federal share) for undistributable collections that it had recognized as abandoned.   
We recommended that the State report the $360,300 in undistributable collections as 
program income and provide guidance and training to its accounting personnel on 
accurately reporting undistributable collections.  The State agreed with our 
recommendation.  (A-04-06-03506) 
  Kentucky:  During 19982005, Kentucky did not recognize any undistributable 
child support collections nor did it report program income totaling $2.7 million  
($1.8 million Federal share) for undistributable child support collections and interest on 
collections.  We recommended that the State recognize and report program income 
totaling $2.7 million and ensure that undistributable collections and interest are 
reported as program income in the future. The State agreed with our recommendation.  
(A-04-06-03507) 
  Maryland:  During 19982005, Maryland did not report $3.3 million ($2.2 million 
Federal share) in program income from undistributable child support collections.  The 
State properly reported program income for interest earned on collections.  We 
recommended that the State report the $3.3 million as program income, modify its 
system to recognize and report undistributable child support collections as program 
income, and provide training to ensure that State officials follow policies and 
procedures for identifying and reporting abandoned collections as program income.  
The State agreed with our recommendation.  (A-03-06-00565) 
State Use of Debt Compromise To Reduce Child Support Arrearages 
We found that, in 2005, 43 States had in place some form of debt management to reduce 
the amount of unpaid child support, referred to as arrearages.  As arrearage debt has 
continued to rise, States have implemented a number of strategies, including debt 
compromise, to reduce such debt.  Debt compromise involves the State settling a portion 
or all of the child support debt owed to the State by a noncustodial parent.  At the Federal 
level, OCSE provides funding to State child support programs, establishes policies and 
guidance, and oversees and monitors States compliance with Federal requirements.  Our 
findings follow. 
  Of the 43 States using debt management, 20 had fully implemented or pilot debt 
compromise programs and 23 were settling arrearage debt on a case-by-case 
basis. 
  Officials in 17 of the 20 States with debt management programs expressed 
positive views of debt compromise practices, and officials in the remaining  
3 States expressed concern that settling debt is contrary to the enforcement 
process. 
HHS OIG Semiannual Report to Congress   46        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
  The average arrearage amount, $22,029, was reduced through debt compromise 
agreements by an average of $9,383 per case. 
  Noncustodial parents in 45 percent of the cases made lump-sum payments 
averaging $5,515 at the time of the debt compromise agreements.  
  Forty-one percent of the cases closed following debt compromise, either after 
lump-sum payments or with all debt settled. 
  Four of the five States we reviewed in-depth did not routinely follow up when 
noncustodial parents paid irregularly. 
We recommended that OCSE issue guidance encouraging States to routinely monitor 
cases that remain open following debt compromise agreements to ensure that 
noncustodial parents meet the provisions of their agreements.  Because of the high level 
of interest in the use of debt compromise, we suggested that OCSE also consider issuing 
guidance regarding the administration of debt compromise programs to assist States that 
are considering new programs or revising current practices.  ACF concurred with our 
recommendation and suggestion.  (OEI-06-06-00070) 
Child Support Enforcement  
The detection, investigation, and prosecution of noncustodial parents who fail to pay 
court-ordered child support are priorities for OIG.  OIG works closely with OCSE; DOJ; 
USAO; the U.S. Marshals Service; and other Federal, State, and local partners to expedite 
the collection of child support.  Since 1995, OIG has opened 3,503 investigations of child 
support cases nationwide, resulting in 1,380 convictions and court-ordered restitution and 
settlements of $73.9 million. 
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a child support initiative 
made up of multiagency, multijurisdictional investigative task forces for child support 
enforcement.  The task forces are designed to identify, investigate, and prosecute 
egregious criminal nonsupport cases on both the Federal and State levels by coordinating 
law enforcement, criminal justice, and child support office resources.  Task force 
screening units receive child support cases from the States, conduct preinvestigative 
analyses, and forward the cases to the investigative task force units, wherein they are 
assigned and investigated.  The task force approach streamlines the process by which the 
cases best suited for criminal prosecution are identified, investigated, and resolved. 
To date, the task force units have received more than 13,760 cases from the States.  As  
a result of the work of the task forces, 1,106 Federal arrests have been made and  
1,080 individuals have been sentenced.  The total ordered amount of restitution related to 
Federal investigations is $68.4 million. 
Investigations to date at the State level have led to 633 arrests and 602 convictions or 
civil adjudications, resulting in $53.1 million in restitution ordered. 
HHS OIG Semiannual Report to Congress   47        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Overall, more than $48.2 million of court-ordered restitution has actually been collected 
and distributed to families. 
Child Support Investigations 
Nationwide, OIG investigations of child support cases resulted in 57 convictions and 
court-ordered restitution and settlements of $2.5 million during this semiannual period.  
Examples of OIGs enforcement results for failure to pay child support include the 
following.  
  New York:  David Martin was sentenced to 5 years probation and ordered to pay 
$296,935 in restitution for failure to pay child support.  As conditions of probation, 
Martin must make restitution at a rate of 25 percent of his monthly net income; disclose 
his monthly finances to the U.S. Probation Department; and participate in outpatient 
and inpatient drug treatment, if necessary, with random drug testing.  Special conditions 
of his probation include no contact with his ex-wife and their children and no 
medications unless prescribed by a medical doctor. 
  Nevada:  Pursuant to his guilty plea for failure to pay child support, Michael 
Reymann was sentenced to 5 years probation and 6 months home detention.  He was 
also ordered to pay $82,731 in restitution.  After his indictment, Reymann remained a 
fugitive for more than 18 months before a fugitive investigation by OIG, along with the 
U.S. Marshals Service, led Reymann to turn himself in.  Thereafter, Reymann made 
several regular payments.  The investigation revealed that Reymann earned a six-figure 
salary during his nonpayment period.   
  Pennsylvania:  Scott Frederick Kapp, who pleaded guilty to charges of failure to 
register as a sex offender and failure to pay court-ordered child support, was ordered to 
pay $50,672 in restitution for back child support, as well as funds owed because of the 
placement of his children in foster care.  For periods of time, Kapp paid toward his 
court-ordered child support but ultimately quit his job and left Pennsylvania.  After 
moving to Florida and finding a job, he failed to pay child support or register as a sex 
offender.  Kapp was also sentenced to time served of over 11 months.  He had 
previously served time for charges stemming from rape and aggravated assault.   
Misuse of ACF Grant Funds 
OIG also investigates cases involving the misuse of ACF grant funds as in the following 
example: 
  Maine:  Barbara Pearson, former president, Chief Executive Officer, and owner of 
the Cold Stream Oil Co., was sentenced to 21 months in prison and ordered to pay 
$14,594 in restitution for theft of public funds.  Pearson pleaded guilty to making false 
statements in her companys bankruptcy case and to her theft of more than $1,000 from 
the HHSs Low Income Home Energy Assistance Program (LIHEAP).  LIHEAP funds 
that had been received by Cold Stream Oil, as a LIHEAP vendor, were allegedly  
HHS OIG Semiannual Report to Congress   48        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
converted by Pearson for personal use and for non-LIHEAP-related business use.  
Specifically, the investigation revealed that Pearson had been gambling online with 
LIHEAP money that had been sent to Cold Stream Oil, for the purchase of fuel for use 
by low-income individuals and households. 
HHS OIG Semiannual Report to Congress   49        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Reports Related to Departmentwide Issues  
Departmental Financial Statement Audit  
The Chief Financial Officers 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.  Independent external auditors provided an 
unqualified opinion on the FY 2007 HHS consolidated/combined financial statements.  
This means that for the ninth consecutive year, the statements were reliable and fairly 
presented.  However, the report on internal controls noted four material weaknesses: 
  Financial Reporting Systems and ProcessesHHS continued to have internal 
control weaknesses in its financial management systems and reporting processes.  
Substantial manual procedures, numerous adjusting entries, and untimely and 
incomplete reconciliations and accrual processes hindered HHS ability to 
produce timely and reliable financial statements. 
  Budgetary AccountingHHS lacked sufficient controls over its accounting and 
business processes to ensure that budgetary transactions were properly recorded, 
monitored, and reported. 
  Financial Management Information SystemsGeneral control issues in both the 
design and the operation of key controls were noted.  For example, weaknesses 
were reported in policies for the control and use of passwords. 
  Medicare Claim-Processing ControlsAlthough improvements were made, HHS 
continued to have weaknesses in Medicare claim-processing controls.   
(A-17-07-00001) 
Departmental Service Organizations 
To support the audit of the Departments FY 2007 financial statements, we 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.  Auditors 
found that controls were suitably designed and operating with sufficient effectiveness, 
with the exception of certain conditions at the following service organizations:  NIHs 
Center for Information Technology and PSCs Division of Payment Management and 
Enterprise Support Service.  (A-17-07-00009, A-17-07-00010, A-17-07-00012) 
Non-Federal Audits 
OMB Circular A-133 establishes audit requirements for State and local governments, 
colleges and universities, and nonprofit organizations receiving Federal awards.  Under 
this circular, covered entities must conduct annual organizationwide single audits of all 
Federal money they receive.  These audits are conducted by non-Federal auditors, such as 
public accounting firms and State auditors.  OIG reviews the quality of these audits and 
assesses the adequacy of the entities management of Federal funds.  In this semiannual 
HHS OIG Semiannual Report to Congress   50        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
period, OIGs National External Audit Review Center reviewed 1,417 reports that 
covered $437.5 billion in audited costs.  Federal dollars covered by these audits totaled 
$86.3 billion, about $35.1 billion of which was HHS money. 
OIGs oversight of non-Federal audit activity informs Department managers about the 
soundness of management of Federal programs and identifies any significant areas of 
internal control weakness, noncompliance, and questioned costs that require formal 
resolution by Federal officials.  We identify entities for high-risk monitoring, alert 
program officials to any trends that could indicate problems in HHS programs, and 
profile non-Federal audit findings of a particular program or activity over time to identify 
systemic problems.  We also provide training and technical assistance to grantees and 
members of the auditing profession. 
OIG maintains a quality control review process to assess the quality of the non-Federal 
reports received and the audit work that supports selected reports.  The non-Federal audit 
reports reviewed and issued during this reporting period are categorized in the box below. 
 
 
Reports issued:   
 
Without changes or with minor changes  1,182 
With major changes  196 
With significant inadequacies  39 
  Total  1,417 
 
 
The 1,417 reports included 5,108 recommendations for improving management 
operations.  In addition, these audit reports provided information for 105 special 
memoranda that identified concerns for increased monitoring by management. 
HHS OIG Semiannual Report to Congress   51        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Resolving Recommendations 
The following tables are provided in accordance with section 5 of the Inspector General 
Act and indicate the dollar value of actions taken on OIGs recommendations. 
Table 1:  Reports With Questioned Costs 
Number of  Dollar Value  Dollar Value 
Reports 
Reports  Questioned  Unsupported 
Section 1       
For which no management decision  
had been made by the beginning of the 
reporting period1  224  $  1,653,866,000  $   222,015,000 
Issued during the reporting period   65  $     660,608,000  $   167,096,000 
  Total Section 1  289  $  2,314,474,000  $   389,111,000 
 
Section 2       
For which a management decision was 
made during the reporting period2,3       
  Disallowed costs  170  $   1,050,374,000  $   324,647,000 
  Costs not disallowed     4  $        22,072,000  $          113,000 
  Total Section 2  174  $   1,072,446,000  $   324,760,000 
 
Section 3       
For which no management decision had 
been made by the end of the reporting 
period       
  Total Section 1 
  Minus Total Section 2  115  $   1,242,028,000  $     64,351,000 
 
Section 4       
For which no management decision was 
made within 6 months of issuance4  72  $      756,960,000  $     75,696,000 
                                                 
Supporting notes and list of reports are in Appendix A. 
HHS OIG Semiannual Report to Congress   52        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Table 2:  Funds Recommended To Be Put to Better Use 
Number of 
Reports  Dollar Value 
Reports 
Section 1     
For which no management decision had been made by the 
beginning of the reporting period1  24  $     586,317,000 
Issued during the reporting period    9  $     987,833,000 
  Total Section 1  33  $  1,574,150,000 
     
Section 2     
For which a management decision was made during the 
reporting period     
  Value of recommendations agreed to by management    4  $       55,664,000 
  Based on proposed management action     
  Based on proposed legislative action     
  Value of recommendations not agreed to by management    4  $       74,432,000 
  Total Section 2    8  $     130,096,000 
     
Section 3     
For which no management decision had been made by the 
end of the reporting period2     
  Total Section 1 Minus Total Section 2  25  $  1,444,054,000 
                                                 
Supporting notes and list of reports are in Appendix A. 
HHS OIG Semiannual Report to Congress   53        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Legislative and Regulatory Review and Development 
Regulatory Review Functions 
Section 4(a) of the Inspector General Act of 1978 requires that based on a review of 
regulations and legislation, the IG make recommendations in this report concerning the 
impact on the economy and efficiency of the administration of HHSs programs and on 
the prevention of fraud and abuse. 
During this reporting period, OIG was involved in the review and clearance of the 
implementing regulations and other policy guidance from the various provisions of the 
MMA and DRA. 
Regulatory Development 
OIG is responsible for the development and publication of a variety of sanction 
regulations addressing CMP and program exclusion authorities administered by the IG, as 
well as regulations promulgating safe harbors related to the anti-kickback statute.  During 
this semiannual reporting period, we continued to develop new proposed rulemaking 
addressing the reorganization of, and revisions to, 42 Code of Federal Regulations (CFR)  
part 1003, which sets forth OIGs regulatory authorities for imposing CMPs and 
assessments.  We published an interim final rulemaking to implement electronic payment 
of fees owed for OIG advisory opinions. 
In addition, OIG periodically publishes Federal Register notices that, among other things, 
offer guidance to alert program beneficiaries, health care providers, and other entities 
about potential problems or areas of special interest.  During this period, OIG prepared 
and published in the Federal Register a notice soliciting recommendations for updating 
the OIGs Compliance Program Guidance for Nursing Facilities (January 24, 2008;  
73 Federal Register 4248).  This notice was published in connection with ongoing work 
to develop new compliance guidance for nursing facilities. 
Employee Fraud and Misconduct 
Most people employed by HHS are dedicated, honest civil servants.  Occasionally, 
however, employees violate their ethical and fiduciary responsibilities.  OIG conducts or 
oversees investigations of serious allegations of wrongdoing by HHS employees, as in 
the following example: 
  Maryland:  Charrisse Fairfax-Brown, a former NIH employee, was sentenced to  
45 days in prison, followed by 3 years of supervised release and ordered to pay over 
$24,221 in restitution for theft of Government property related to her unauthorized use 
of a Government credit card.  From November 2004September 2006, Fairfax-Brown 
was authorized to use an NIH commercial credit card to purchase approved supplies 
and services.  During this period, she made more than $24,000 in unauthorized charges, 
including purchases of travel services, a laptop computer, shoes, clothes, DIRECTV 
service, jewelry, furniture, and household items. 
HHS OIG Semiannual Report to Congress   54        Public Health and Human Services Programs 
Spring 2008    and Departmentwide Issues   
Appendixes 
 
HHS OIG Semiannual Report to Congress  55  Appendixes 
Spring 2008    
Appendix A:  Notes to Tables 1 and 2 
Notes to Table 1 
1The opening balance was adjusted upward $382.5 million. 
2During the period, revisions to previously reported management decisions included: 
Central Identification Number (CIN): A-03-01-00224 MEDICAID SCHOOL-BASED 
SERVICES/MARYLANDThe Departmental Appeals Board overruled part of the original 
$19.9 million disallowance.  $4,950,270 
CIN: A-06-07-86409 NEW MEXICO HUMAN SERVICE DEPT.Based on a review of supporting 
documentation provided by the State agency, CMS determined that previously disallowed costs 
were allowable.  $78,379,881    
CIN:  A-09-95-00072 CA DEPT OF HEALTH SVS, REVIEW OF MEDICAID LABSBased on 
reconsideration of the reimbursement requirements with respect to clinical laboratory services, 
CMS withdrew its disallowance.  $4,013,490 
CIN: A-10-03-00011 REGENCE HMO BIPA MODIFICATION TO CY 2001 ACRPCMS subsequently 
determined that it did not have legal authority to recover the disallowance.  $7,320,614 
Not detailed are revisions to previously disallowed management decisions totaling $1.2 million. 
3Included are management decisions to disallow $365.7 million that was identified in nonfederal audit 
reports. 
 
4Because of administrative delays, many of which are beyond management control, resolution of the 
following 72 audits were not completed within 6 months of issuance; however, based upon discussions 
with management, resolution is expected before the end of the next semiannual reporting period:  
CIN: A-02-03-01029  REVIEW OF RETROACTIVE SCHOOL HEALTH CLAIMS  NEW YORK 
CITY DEPT. OF EDUCATION, OCT 2006, $259,433,325 
CIN: A-05-01-00099  U OF I HOSPITAL-DSH PAYMENT LIMITS, OCT 2004, $140,281,912 
CIN: A-04-03-02027  REVIEW OF MEDICAID UPPER PAYMENT LIMIT CALCULATIONS IN 
ALABAMA, DEC 2005, $73,432,381 
CIN: A-02-04-01021  REVIEW OF RETROACTIVE SCHOOL HEALTH CLAIMS  REST OF 
STATE (ROS), OCT 2006, $60,188,395 
CIN: A-05-01-00058  OHIO MEDICAID HOSPITAL-SPECIFIC DSH PAYMENT LIMITS,  
JUN  2004, $47,000,000 
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DSH PROGRAM FOR FY 1998,  
MAY 2003, $33,318,976 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID  
SCHOOL BASED HEALTH SERVICES - CT, MAY 2003, $32,780,146 
CIN: A-01-04-00513  REVIEW OF MEDICARE PART B PAYMENTS FOR AMBULANCE 
      SERVICES RENDERED TO BENEFICIARIES DURING AN INPATIENT 
STAY, MAR 2006, $21,705,010 
CIN: A-06-99-00070  HIGHLAND COMMUNITY BANK PROCESSING OF MEDICARE DEP,  
MAY 2000, $18,839,909 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE  
HOSPITAL PAYMENTS FOR FY 1998, SEP 2002, $14,165,950 
CIN: A-03-05-00550  AUDIT OF PA FOSTER CARE MAINTENANCE PAYMENTS -  
CASTILLE SAMPLE, SEP 2007, $11,611,822 
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PYMTS @  
SCOTT & WHITE, MAY 2003, $8,229,574 
CIN: A-04-04-02003  MEDICARE OUTLIER PAYMENTS TO COMMUNITY MENTAL HEALTH 
CENTERS, APR 2006, $4,762,036 
HHS OIG Semiannual Report to Congress  5 7  Appendix A  
Spring 2008   
CIN: A-05-01-00102  MT. SINAI HOSPITAL-DSH PAYMENT LIMITS, OCT 2004, $4,516,112 
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL, MAR 2002, $4,505,051 
CIN: A-09-01-00085  AUDIT OF UCSDMC DISPROPORTIONATE SHARE HOSPITAL  
PAYMENTS FOR SFYE 1998, SEP 2002, $3,776,054 
CIN: A-07-06-00210  REVIEW OF PRB COSTS CLAIMED BY BLUE CROSS BLUE SHIELD OF 
RHODE ISLAND, OCT 2006, $3,558,976 
CIN: A-06-04-00076  MEDICAL REVIEW OF SYNERGYS PHP CLAIMS, MAR 2006, $3,098,296 
CIN: A-10-96-00001  REVIEW OF GROUP HEALTHS GHCPS REPORTING OF ESRD,  
APR 1997, $2,763,498 
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES,  
MAR 2002, $836,711 
CIN: A-06-05-00062  MEDICARE PRESCRIPTION DRUG DISCOUNT CARD PROGRAM,  
JUL 2006, $652,135 
CIN: A-06-06-00112  MEDICARE PRESCRIPTION DRUG CARD PROGRAM: COMPUTER  
SCIENCES CORPORATION, DEC 2006, $606,824 
CIN: A-05-02-72811  COMMUNITY ACTION OF GREATER INDIANAPOLIS INC., AUG 2002,  
$547,899 
CIN: A-05-06-00038  IN-UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, MAR 2007, 
      $461,430 
CIN: A-07-05-03069  MISSOURI UNDISTRIBUTABLE CHILD SUPPORT PAYMENTS, 
      JUL 2006, $457,128 
CIN: A-04-04-02010  REVIEW OF COMPREHENSIVE OUTPATIENT REHABILITATION 
      THERAPY SERVICES PROVIDED BY ABSOLUTE THERAPY INC., 
      NOV 2006, $414,712 
CIN: A-02-07-02003  REVIEW OF ACCOUNTING SYSTEM AT SANTA ISABEL HEAD START, 
      JUL 2007, $396,078 
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES,  
MAY 2002, $319,355 
CIN: A-06-06-00022  MEDICARE PRESCRIPTION DRUG CARD PROGRAM, SEP 2006,  
$311,526 
CIN: A-07-06-03085  NEBRASKA UNDISTRIBUTABLE CHILD SUPPORT PAYMENTS, 
      MAR 2007, $308,841 
CIN: A-07-05-01013  PAYMENTS FOR M+C ORGANIZATION FOR INSTITUTIONAL 
      BENEFICIARIES, OCT 2005, $293,885 
CIN: A-09-04-00068  REVIEW OF CAS STATE AUTOMATED CHILD WELFARE 
      INFORMATION SYSTEM (SACWIS) AT SANTA CLARA COUNTY, 
      APR 2006, $286,464 
CIN: A-05-05-00033  MI-UNDISTRIBUTED CHILD SUPPORT COLLECTIONS, AUG 2006, 
      $257,859 
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL  
BENEFICIARIES, OCT 2002, $229,656 
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT, OCT 2002, $208,271 
CIN: A-01-04-01501  NORTHEASTERN UNIVERSITY DHHS GRANT COSTS GRANT #s 9274, 
4000 AND 4111, JAN 2005, $194,890 
CIN: A-06-05-00066  MEDICARE PRESCRIPTION DRUG CARD PROGRAM, SEP 2006,  
$168,782 
CIN: A-09-05-00077  REVIEW OF PACIFICARES USE OF ADDITIONAL CAPITATION 
UNDER THE MMA OF 2003, MAR 2006, $135,000 
CIN: A-05-06-00029  AUDIT OF COST-BASED HMOS FOR OVERPAYMENTS MADE TO 
CAPITATED PROVIDERS, SEP 2006, $132,075 
CIN: A-05-06-00031  AUDIT OF COST-BASED HMOS FOR OVERPAYMENTS MADE TO  
CAPITATED PROVIDERS, SEP 2006, $122,130 
CIN: A-05-01-00091  PAYMENTS TO UNITED HC OF FLA FOR INSTITUTIONAL  
BENEFICIARIES, SEP 2002, $121,023 
HHS OIG Semiannual Report to Congress  5 8  Appendix A  
Spring 2008   
CIN: A-05-05-00044  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN- ARNETT HEALTH PLANS, 
INC. FOR FISCAL YEARS 2000, THROUGH 2003, SEP 2005, $111,862 
CIN: A-05-97-00017  FHP, INC. - HMO INSTITUTIONAL STATUS PROJECT, JUN 1998,  
$109,114   
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL  
BENEFICIARIES, JUN 2002, $100,692 
CIN: A-04-04-01002  USE OF CDC BIOTERRORISM GRANT FUNDS, JUL 2005, $98,929 
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS & COST  
REPORTS @ WELBORN, JUN 2003, $97,623 
CIN: A-05-05-00042  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
      MAINTENANCE ORGANIZATION PLAN - DEAN HEALTH PLANS, INC. 
      FOR FISCAL YEARS 2000, THROUGH 2003, AUG 2005, $91,710 
CIN: A-05-01-00090  PAYMENTS TO AETNA OF FOR INSTITUTIONAL BENEFICIARIES,  
JUL 2002, $87,516 
CIN: A-05-05-00043  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN  JOHN DEERE HEALTH 
PLANS, INC. FOR FISCAL YEARS 2000 THROUGH 2003, SEP 2005, 
$78,799 
CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW ON MANAGED CARE  
ORGANIZATION, OCT 2002, $77,000 
CIN: A-05-07-00049  REBATES PAID TO HOSPITALS  UNIVERSITY OF IOWA, MAY 2007, 
      $70,056 
CIN: A-06-07-00009  REVIEW OF CAREFLITE CONTRACT, JUN 2007, $68,841 
CIN: A-04-05-02000  AUDIT OF HHA THERAPY BILLINGS, SEP 2005, $63,425 
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PA FOR INSTITUTIONAL BENEFICIARIES,  
MAY 2002, $62,432 
CIN: A-03-02-00373  REVIEW OF US HELPING US, DEC 2003, $45,558 
CIN: A-05-07-00045  REBATES PAID TO HOSPITALS  OPTION CARE, AUG 2007, $43,451 
CIN: A-01-03-01500  REVIEW OF CDC HIV PROGRAMS AT GREATER BRIDGEPORT  
ADOLESCENT PREGNANCY PROGRAM, JUL 2003, $41,088 
CIN: A-05-07-00051  REBATES PAID TO HOSPITALS  KAISER FOUNDATION HOSPITAL, 
      JUN 2007, $35,438 
CIN: A-03-06-00352  AUDIT ASSISTANCE TO OI ON THE BLACK EDUCATIONAL AIDS 
      PROJECT, JUN 2007, $31,078 
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JAN 2003,  
$28,573 
CIN: A-07-02-00150  PAYMENTS to COVENTRY--PITTSBURG FOR INSTITUTIONAL  
BENEFICIARIES, JUN 2003, $26,000 
CIN: A-05-01-00078  PAYMENTS TO HEALTH NET-TUCSON, AZ.- FOR INSTITUTIONAL  
BENEFICIARIES, APR 2002, $21,233 
CIN: A-08-04-76779  COLORADO FOUNDATION FOR MEDICAL CARE, DEC 2003, $18,925 
CIN: A-05-01-00100  PAYMENTS TO FALLON HEALTH FOR INSTITUTIONALIZED  
BENEFICIARIES, MAY 2002, $18,842 
CIN: A-05-01-00095  PAYMENTS TO HUMANA OF ARIZONA FOR INSTITUTIONAL  
BENEFICIARIES, JUN 2002, $18,645 
CIN: A-07-03-00151  REVIEW OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH 
INSTITUTIONAL STATUS, JUN 2003, $18,400 
CIN: A-01-02-01504  REVIEW OF CDCS HIV PROGRAMS AT FENWAY COMMUNITY  
HEALTH CENTER, JUN 2003, $18,028 
CIN: A-07-04-01011  PAYMENTS FOR UNITED HEALTHCARE FOR INSTITUTIONAL  
BENEFICIARIES, MAR 2005, $13,128 
CIN: A-05-07-00047  REBATES PAID TO HOSPITALS  METHODIST HOSPITAL  
      GERMANTOWN, APR 2007, $12,621 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL  
BENEFICIARIES, JAN 2002, $11,089 
HHS OIG Semiannual Report to Congress  5 9  Appendix A  
Spring 2008   
CIN: A-06-06-00014  MEDICARE PRESCRIPTION DRUG CARD PROGRAM: ACCLAIM,  
SEP 2006, $8,800 
CIN: A-03-03-00393  AUDIT OF CDC HIV/AIDS GRANT TO SEXUAL MINORITY YOUTH 
      ASSISTANCE LEAGUE, OCT 2003, $1,155 
Total CINs:  72 
Total Amount:  $756,960,148 
 
Notes to Table 2 
 
1The opening balance was adjusted downward by $ 2.4 million. 
2Management decision has not been made within 6 months on 17 reports. 
Discussions with management are ongoing and it is expected that the following audits will be  
resolved by the next semiannual reporting period: 
 
CIN: A-09-04-00038  WEDGE: LA COUNTY 1115 WAVIER, OCT 2006, $285,200,000 
CIN: A-05-05-00053  REVIEW OF LAYERED GPOs -- ROLL-UP, JUN 2006, $59,000,000 
CIN: A-04-01-02006  MEDICAID DISPROPORTIONATE SHARE PAYMENTS IN  
ALABAMA, JUN 2004, $45,763,327 
CIN: A-01-02-00503  FURTHER EXPANSION OF THE DRG PAYMENT WINDOW,  
AUG 2003, $37,000,000 
CIN: A-05-02-00078  ROLLUP OF MEDICARE PAYMENTS FOR BENEFICIARIES  
WITH  INSTITUTIONAL STATUS, FEB 2004, $12,764,202 
CIN: A-05-04-00073  ROLL-UP ON ADDITIONAL GPOs, MAY 2005, $6,600,000 
CIN: A-05-02-00077  MICHIGAN MEDICAID/SCHIP REVIEW, NOV 2003, $5,908,350 
CIN: A-03-02-00203  VIRGINIA - SCHIP/TITLE IV - D SURVEY, JUL 2004, $5,402,491 
CIN: A-05-05-00033  MI-UNDISTRIBUTED CHILD SUPPORT COLLECTIONS, AUG 2006,  
$4,397,133 
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR,  
MAR 2002, $4,000,000 
CIN: A-05-02-00075  INDIANA MEDICAID/SCHIP REVIEW, NOV 2003, $1,885,708 
CIN: A-05-06-00038  IN-UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, MAR 2007,  
$871,677 
CIN: A-05-06-00020  MEDICAID PAYMENTS FOR SERVICES TO BENEFICIARIES WITH 
CONCURRENT ELIGIBILITY IN MI AND OH  MICHIGAN REPORT, 
AUG 2006, $467,317 
CIN: A-01-06-02509  REVIEW OF TRAINING COSTS FOR TITLE IV-E FOSTER CARE AND 
ADOPTION ASSISTANCE PROGRAM IN RHODE ISLAND FOR STATE 
FISCAL YEARS 2003 THROUGH 2005, JUL 2007, $238,411 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL  
BENEFICIARIES, JAN 2002, $98,689 
CIN: A-05-06-00023  MN  UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, SEP 2006,  
$28,240 
CIN: A-05-04-00051  ALLOWABILITY OF CDC BIOTERRORISM COSTS  OHIO 
      DEPARTMENT OF HEALTH, FEB 2005, $4,154 
Total:  17  
Amount:  $469,629,699
HHS OIG Semiannual Report to Congress  6 0  Appendix A  
Spring 2008   
Appendix B:  Reporting Requirements of the Inspector 
General Act of 1978, as Amended 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed 
in the following table along with the locations of the required information.  Where there 
are no data to report under a particular requirement, the word None appears. 
A complete listing of audit and evaluation reports is furnished to Congress under separate 
cover.  Copies are available upon request. 
 
Section of 
the Act  Requirement  Location 
Section 4(a)(2)  Review of legislation and regulations  p. 54 
Section 5     
  (a)(1)  Significant problems, abuses, and  Throughout this report 
deficiencies 
  (a)(2)  Recommendations with respect to  Throughout this report 
significant problems, abuses, and 
deficiencies 
  (a)(3)  Prior significant recommendations on  See the Compendium of Unimplemented 
which corrective action has not been  Office of Inspector General 
completed   Recommendations at 
http://www.oig.hhs.gov/publications.html. 
  (a)(4)  Matters referred to prosecutive authorities  p. 26 
  (a)(5)  Summary of instances in which  None  
information was refused  
  (a)(6)  List of audit reports  Under separate cover 
  (a)(7)  Summary of significant reports  Throughout this report 
  (a)(8)  Statistical Table 1  Reports With  p. 52 
Questioned Costs 
  (a)(9)  Statistical Table 2  Funds Recommended  p. 53 
To Be Put to Better Use 
  (a)(10)  Summary of previous audit reports  Appendix A 
without management decisions 
  (a)(11)  Description and explanation of revised  Appendix A 
management decisions 
  (a)(12)  Management decisions with which the IG  None  
is in disagreement 
 
HHS OIG Semiannual Report to Congress  6 1  Appendix B  
Spring 2008    
Appendix C:  Summary of Sanction Authorities  
The Inspector General Act of 1978 (P.L. No. 95-452), as amended, sets forth specific 
requirements for semiannual reports to be made to the Secretary for transmittal to 
Congress.  A selection of other authorities appears below. 
Program Exclusions 
Section 1128 of the Social Security Act (the 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 health care fraud other than Medicare or Medicaid 
or for illegal manufacture, distribution, prescription, or dispensing of controlled 
substances; suspension or revocation of a license to provide health care for reasons 
bearing on professional competence, professional performance, or financial integrity; 
provision of unnecessary or substandard services; submission of false or fraudulent 
claims to a Federal health care program; or engaging in unlawful kickback arrangements. 
Providers subject to exclusion are granted due process rights (including a hearing before 
an HHS administrative law judge and appeals to the HHS Departmental Appeals Board 
and Federal district and appellate courts) regarding whether the basis for the exclusion 
exists and the length of the exclusion is reasonable. 
Patient Dumping 
Section 1867 of the 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. 
HHS OIG Semiannual Report to Congress  63  Appendix C 
Spring 2008   
OIG is authorized to collect civil monetary penalties of up to $25,000 against small 
hospitals (fewer than 100 beds) and up to $50,000 against larger hospitals (100 beds or 
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 Act (42 U.S.C.  
 1320a-7a), a person is subject to penalties, assessments, and exclusion from 
participation in Federal health care programs for engaging in certain activities.  For 
example, a person who submits to a Federal health care program a claim for items and 
services that the person knows or should know is false or fraudulent is subject to a 
penalty of up to $10,000 for each item or service falsely or fraudulently claimed, an 
assessment of up to three times the amount falsely or fraudulently claimed, and 
exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The CMPL 
also authorizes actions for a variety of other violations, including submission of claims 
for items or services furnished by an excluded person; requests for payment in violation 
of an assignment agreement; violations of rules regarding the possession, use, and 
transfer of biological agents and toxins; and payment or receipt of remuneration in 
violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)). 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities 
 The Anti-Kickback StatuteThe anti-kickback statute authorizes penalties against 
anyone who knowingly and willfully solicits, receives, offers, or pays remuneration, in 
cash or in kind, to induce or in return for (1) referring an individual to a person or an 
entity for the furnishing, or arranging for the furnishing, of any item or service payable 
under the Federal health care programs or (2) purchasing, leasing 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 
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 Act,  
42 U.S.C.  1320a-7a), and/or program exclusion under OIGs permissive exclusion 
authority (section 1128(b)(7) of the Act, 42 U.S.C.  1320a-7(b)(7)). 
 False Claims Amendments Act of 1986Under the Federal civil False Claims Act 
(FCA) (31 U.S.C.  3729-3733), a person or an entity is liable for up to treble damages 
and a penalty between $5,500 and $11,000 for each false claim that it knowingly submits 
or causes to be submitted to a Federal program.  Similarly, a person or an entity is liable 
HHS OIG Semiannual Report to Congress  64  Appendix C 
Spring 2008   
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. 
FCA defines knowing to include not only the traditional definition but also instances in 
which the person acted in deliberate ignorance or reckless disregard of the truth or falsity 
of the information.  Under the FCA, no specific intent to defraud is required.  Further, the 
FCA contains a qui tam, or whistleblower, provision that allows a private individual to 
file suit on behalf of the United States and entitles that whistleblower to a percentage of 
any fraud recoveries.
HHS OIG Semiannual Report to Congress  65  Appendix C 
Spring 2008    
Appendix D:  Acronyms and Abbreviations  
The following is a list of acronyms and abbreviations used in this publication.  
 
ACF    Administration for Children and Families 
AHC    Americas Health Choice Medical Plans, Inc. 
AMP    average manufacturer price 
ASP    average sales price 
BMS    Bristol-Myers Squibb Co. 
CDC    Centers for Disease Control and Prevention 
CFOA    Chief Financial Officers Act of 1990 
CFR    Code of Federal Regulations 
CHCDR    Center for Health Care Dispute Resolution  
CIA     corporate integrity agreement 
CMP    civil monetary penalty 
CMPL    Civil Monetary Penalties Law 
CMS    Centers for Medicare & Medicaid Services 
COBC    Coordination of Benefits Contractors 
CSE    child support enforcement  
CWF    Common Working File 
CY    calendar year 
DHS    Department of Homeland Security 
Dianon    Dianon Systems, Inc. 
DME    durable medical equipment 
DMEPOS     durable medical equipment, prosthetics, orthotics, and supplies 
DOJ    Department of Justice 
DPA    Deferred Prosecution Agreement 
DRA    Deficit Reduction Act of 2005 
DUCS    Division of Unaccompanied Childrens Services 
EPSDT    Early and Periodic Screening, Diagnostic, and Treatment 
ERC    Ethics Resource Center 
ESRD    end stage renal disease 
FBI    Federal Bureau of Investigation 
FCA    False Claims Act 
FDA    Food and Drug Administration 
FR    Federal Register 
FY    fiscal year 
Guidance    Pandemic Influenza Guidance supplement to the 2006 Public 
    Health Emergency Preparedness Cooperative Agreement, Phase II 
HBO    hyperbaric oxygen 
HCBS    home- and community-based services 
HCCA    Health Care Compliance Association 
HCFAC    Health Care Fraud and Abuse Control Program 
HCPCS    Healthcare Common Procedure Coding System 
HEAL    Health Education Assistance Loan 
HHS    Department of Health and Human Services 
HHS OIG Semiannual Report to Congress  67  Appendix D 
Spring 2008   
HIPAA    Health Insurance Portability and Accountability Act  
HPMP    Hospital Payment Monitoring Program 
HRSA    Health Resources and Services Administration 
IDTFs    independent diagnostic testing facilities 
IG    Inspector General 
IHS    Indian Health Service 
IT    information technology 
IVR    Interactive Voice Response 
LAS    Lutheran Ancillary Services 
LIHEAP    Low Income Energy Assistance Program 
MA    Medicare Advantage 
MEDIC    Medicare Prescription Drug Integrity Contractor 
MFCU     Medicaid Fraud Control Unit 
MLMH    Martin Luther Memorial Homes, Inc. 
MMA     The Medicare Prescription Drug, Improvement, and Modernization 
Act of 2003 
MMIS     Medicaid Management Information System 
MPFS    Medicare Physician Fee Schedule 
NIEHS    National Institute of Environmental Health Sciences 
NIH     National Institutes of Health 
OAS     Office of Audit Services 
OCIG    Office of Counsel to the Inspector General 
OCSE     Office of Child Support Enforcement  
OEE I    Operation Equity Excise I 
OEE II    Operation Equity Excise II 
OEI     Office of Evaluation and Inspections 
OER    Office of Extramural Research 
OI     Office of Investigations 
OIG     Office of Inspector General 
OMB    Office of Management and Budget 
OMP    Office of Management and Policy 
Orlando    Orlando Regional Healthcare Systems 
ORR    Office of Refugee Settlement 
PCIE    Presidents Council on Integrity and Efficiency 
PDP    prescription drug plan 
PRB    postretirement benefits 
PSC    Program Support Center 
P.L.    Public Law 
QIO    Quality Improvement Organization 
SAMHSA    Substance Abuse and Mental Health Services Administration 
SCHIP    State Childrens Health Insurance Program 
SERP    Supplemental Executive Retirement Plan 
SJHS    Saint Josephs Hospital of Atlanta, Inc., and St. Josephs Health 
System, Inc. 
SNF    skilled nursing facility 
SSA    the Act 
Strike Force    Medicare Fraud Strike Task Force 
TANF    Temporary Assistance for Needy Families 
HHS OIG Semiannual Report to Congress  68  Appendix D 
Spring 2008   
TCM    targeted case management 
the Act    Social Security Act 
Tomball    Tomball Regional Hospital 
TrOOP    True Out-of-Pocket 
USAO    United States Attorneys Office 
U.S.C.     United States Code 
HHS OIG Semiannual Report to Congress  69  Appendix D 
Spring 2008  OIG COMPONENTS Department of Health and Human Services
OIG HOTLINE: 800-HHS-TIPS
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services (HHS) 
programs, as well as the health and welfare of beneficiaries served by those programs. This statutory 
mission is carried out through a nationwide network of audits, investigations, and inspections 
conducted by the following operating components:
To report matters involving fraud, waste, abuse, and mismanagement in any departmental program(s)
S Office of Audit Services  The Office of Audit Services (OAS) provides auditing 
Phone:  1-800-HHS-TIPS TTY:  1-800-377-4950
services for HHS, either by conducting audits with its own audit resources or 
    1-800-447-8477 Fax:  1-800-223-8164
A by overseeing audit work done by others. Audits examine the performance of HHS 
programs and/or its grantees and contractors in carrying out their respective 
O responsibilities and are intended to provide independent assessments of HHS programs 
and operations. These assessments help reduce waste, abuse, and mismanagement 
and promote economy and efficiency throughout HHS.
E-Mail:  HHSTips@oig.hhs.gov
I Office of Evaluation and Inspections  The Office of Evaluation and Inspections 
E
(OEI) conducts national evaluations to provide HHS, Congress, and the public 
with timely, useful, and reliable information on significant issues. These evaluations 
O
focus on preventing fraud, waste, or abuse and promoting economy, efficiency, 
and effectiveness of departmental programs. To promote impact, OEI reports also 
Mail:  Office of Inspector General
present practical recommendations for improving program operations.
          Department of Health and Human Services
          Attn: Hotline
I Office of Investigations  The Office of Investigations (OI) conducts criminal, civil, 
O           PO BOX 23489
and administrative investigations of fraud and misconduct related to HHS programs, 
          Washington, DC 20026           
operations, and beneficiaries. With investigators working in all 50 States and the 
District of Columbia, OI utilizes its resources by actively coordinating with the 
Department of Justice (DOJ) and other Federal, State, and local law enforcement 
authorities. The investigative efforts of OI often lead to criminal convictions, 
administrative sanctions, and/or civil monetary penalties.
G Office of Counsel to the Inspector General  The Office of Counsel to the 
Inspector General (OCIG) provides general legal services to OIG, rendering 
advice and opinions on HHS programs and operations and providing all legal 
I
C support for OIGs internal operations. OCIG represents OIG in all civil 
and administrative fraud and abuse cases involving HHS programs, including 
False Claims Act, program exclusion, and civil monetary penalty cases. In 
O
connection with these cases, OCIG also negotiates and monitors corporate 
integrity agreements. OCIG renders advisory opinions, issues compliance 
program guidance, publishes fraud alerts, and provides other guidance to the 
health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.