U.S. Department of Justice U.S. Department of Health and Human Services
Office of the Attorney General Office of the Secretary
Annual Report of the
Departments of Health and
Human Services and Justice
Health Care Fraud and Abuse
Control Program FY 2014  
 
 
The Department of Health and  Human Services
  
 
  and 
 
  The Department of Justice 
 
  Health Care  Fraud and Abuse Control Program
  
  Annual Report  for Fiscal Year  2014 

 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 19, 2015  TABLE OF CONTENTS
  
 
   
I.   Executive Summary  	 1 

   
II.   Introduction	   3 

   
III.   Monetary Results 	  5 

   
IV. 	  Program Accomplishments   8 

Overall Recoveries   8 

Departmental Collaboration  8 

Health Care  Fraud Prevention & Enforcement Action Team   8 

Health Care  Fraud Prevention Partnership  9 

Medicare Fraud Strike Force   10 

Highlights of Successful Criminal and Civil Investigations   22 

 
V.  	 Department  of  Health and Human Services   42 

Office of  Inspector General      42 

Centers for Medicare &  Medicaid Services     51 

Administration on Community  Living  63 

Office of the General Counsel   66 

Food and Drug Administration  Pharmaceutical Fraud Program   69 

 
VI. 	  Department of Justice   72 

United States Attorneys     72 

Civil Division     73 

Criminal Division     76 

Civil Rights Division     80
 
   
VII. 	  Appendix  86 

Federal Bureau of Investigation    86 

Return on  Investment Calculation    89 

Total HCFAC  Resources   90 

 
VIII.   Glossary of Terms 	  91 
                                                                                             
   
 
 
 
  GENERAL NOTE    
   
All  years are fiscal  years unless otherwise 
noted in the text.   EXECUTIVE SUMMARY 
 
 
The Health  Insurance Portability and Accountability Act of 1996 (HIPAA) established a national  
Health Care  Fraud and Abuse Control Program (HCFAC or the Program) under the joint  
direction of the Attorney  General and the Secretary  of the  Department of Health and Human 
Services (HHS)1, acting through the  Inspector General, designed to coordinate  Federal, state and  
local law enforcement activities with respect to health care fraud  and abuse.   In its  eighteenth 
year of operation, the Programs continued success confirms the soundness  of a collaborative  
approach to identify  and prosecute the most egregious instances of health care fraud, to prevent  
future fraud and abuse, and to protect program beneficiaries. 
 
Monetary Results  
 
During  Fiscal Year (FY) 2014, the Federal  government  won or negotiated over $2.3 billion in 
health care fraud judgments and settlements2, and it attained additional administrative  
impositions in health care fraud cases  and proceedings.  As a result of these efforts, as well as  
those of preceding  years, in FY 2014, approximately $3.3 billion  returned to the Federal  
government or paid to private persons.  Of this $3.3 billion, the Medicare Trust Funds3  received  
transfers of approximately  $1.9 billion during this  period, and over $523 million in Federal 
Medicaid  money was similarly transferred separately to the Treasury as a result of these 
efforts.  The  HCFAC account has returned over $27.8 billion to the Medicare Trust Funds since  
the inception of the Program in 1997. 
 
Enforcement Actions  
 
In FY 2014, the  Department of Justice (DOJ) opened 924 new criminal health care fraud  
investigations.  Federal prosecutors  filed criminal charges  in  496 cases involving 805 defendants.  
A total of  734 defendants were convicted  of  health care fraud-related crimes during the year.   
Also in FY 2014, DOJ opened 782 new  civil health care fraud investigations  and had 957 civil 
health care fraud matters  pending  at the end of the fiscal  year.  In FY 2014, the FBI investigative  
efforts resulted in over 605 operational disruptions of criminal fraud organizations and the  
dismantlement of the criminal hierarchy of more than 142 health care fraud criminal enterprises.   
                      
In FY 2014, HHS Office of Inspector General  (HHS-OIG) investigations resulted in 867 
criminal actions against individuals or entities that engaged in crimes related to Medicare  and 
Medicaid, and 529 civil actions, which include false claims and unjust-enrichment lawsuits filed  
in Federal district court,  civil monetary penalties (CMP) settlements, and administrative  
recoveries related to provider self-disclosure matters.  HHS-OIG  also excluded  4,017 individuals  
                                                 
1  Hereafter, referred to as the Secretary.
  
2  The amount reported as  won  or negotiated only reflects the Federal recoveries and therefore does not reflect state 

Medicaid monies recovered as part of any global Federal-State settlements.
 
3  Also known as the Medicare Hospital Insurance (Part A) Trust Fund and the Supplemental Medical Insurance (Part 
 
B) Trust  Fund. 
 
 
  1 
 and entities from participation in Medicare, Medicaid, and other federal health care programs.  
Among these were exclusions based on criminal convictions for crimes related to Medicare and  
Medicaid (1,310) or to other health care programs (432), for patient abuse or neglect (189), and 
as a result of licensure revocations (1,744).  HHS-OIG also issued numerous audits and 
evaluations with recommendations that, when implemented, would correct  program  
vulnerabilities and save program funds.  
 
Sequestration  Impact  
  
Due to sequestration of mandatory funding in 2014, there were fewer resources for DOJ, FBI, 
HHS,  and HHS-OIG to fight fraud and abuses against Medicare, Medicaid,  and other health care  
programs.  A total of $31.5 million was sequestered from the HCFAC program in FY 2014, for a  
combined total of $62.1 million in the past two  years.   
 
 
  2 
 INTRODUCTION  

 
   
The Annual Report of the Attorney General and the Secretary detailing expenditures and  
revenues  under the  Health Care Fraud and Abuse  Control Program for Fiscal Year 2014 is  
provided as required by  Section 1817(k)(5) of the Social Security Act.  
 
  Statutory Background  
 
The Social Security Act  Section 1128C(a), as established by the Health Insurance Portability and 
Accountability  Act of 1996 (P.L. 104-191, HIPAA or the Act), created the Health Care  Fraud 
and Abuse Control Program, a far-reaching program to combat fraud and abuse in health care, 
including both public and private health plans.   
 
As was the case before HIPAA,  amounts paid to Medicare in restitution or for compensatory  
damages must be deposited in the  Medicare Trust Funds.  The Act requires  that an amount  
equaling  recoveries  from health care investigations  including criminal fines, forfeitures, civil 
settlements and judgments, and administrative penalties   also be deposited in the Trust Funds.   
 
The Act appropriates monies from the Medicare Hospital Insurance  Trust  Fund to an expenditure 
account, called the Health Care Fraud and Abuse  Control Account (the Account), in amounts that  
the Secretary and Attorney  General jointly certify as necessary to finance anti-fraud activities.   
The maximum amounts available for  certification are specified in the Act.  Certain of these sums  
are to be used only  for activities of the  HHS-OIG, with respect to the Medicare and Medicaid  
programs.  In FY 2006, the Tax Relief and Health Care Act (TRHCA) (P.L 109-432, 303)  
amended the Act so that funds allotted from the Account are available until expended.   
TRHCA also allowed for  yearly increases to the  Account based on the  change in the  consumer  
price index for all urban consumers (all items, United States city average) (CPI-U)  over the 
previous fiscal  year for fiscal  years for 2007 through 2010.4   In FY 2010, the  Patient Protection  
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act,  
collectively  referred to as the Affordable Care Act  (P.L. 111-148, ACA) extended permanently  
the  yearly increases to the Account based upon the change in the consumer price index for all  
urban consumers, or CPI-U.  
  
In FY 2014, the Secretary  and the  Attorney General certified $278.1 million  in mandatory  
funding to the Account after accounting for sequester reductions of $21.6 million to the total  
appropriation.  Additionally, Congress appropriated $293.6 million in discretionary funding.  A 
detailed breakdown of the allocation of these funds is set forth later in this report.  HCFAC  
appropriations  generally  supplement the direct appropriations of HHS and DOJ that are devoted 
to health care fraud enforcement and funded approximately  three-fourths of  HHS-OIGs 
                                                 
4  The CPI-U adjustment in TRHCA did not apply to the Medicare Integrity Program (MIP).  Section 6402 of the 
ACA indexed Medicare Integrity Program funding to inflation starting in FY 2010.  
3 

  appropriated budget in FY 2014.  (Separately, the FBI received $127.3 million from HIPAA 
after  accounting for $9.9 million in mandatory  sequester reductionswhich is discussed in the  
Appendix.)  
 
Under the joint direction of the Attorney General and the Secretary, the Programs  goals are:   
 
(1) 	  to coordinate  Federal, state and local law  enforcement efforts relating to health care fraud  
and abuse with respect to health plans;  
 
(2) 	  to conduct investigations, audits, inspections, and evaluations relating to the delivery of  
and payment for health care in the United States;  
 
(3) 	  to facilitate enforcement of all applicable remedies for such fraud;  and  
 
(4) 	  to provide education and guidance regarding  complying with current health  care law.  
 
The Act requires the Attorney General  and the Secretary to submit a joint annual report to the  
Congress  that  identifies both:  
 
(1) 	  the amounts appropriated to the Trust Funds for the previous fiscal  year under various  
categories  and the source of such amounts; and  
 
(2) 	  the amounts appropriated from the Trust Funds  for such year  for use by the  Attorney  
General and the Secretary  and the justification for the expenditure of such amounts. 
 
This annual report fulfills the above statutory requirements.   
 
Additionally, this report fulfills the requirement in the annual discretionary  HCFAC  
appropriation (Public  Law 113-76 Consolidated Appropriations Act, 2014) that this report 
include measures of the operational efficiency and impact on fraud, waste, and abuse in the 
Medicare, Medicaid, and CHIP programs for the  funds provided by this appropriation.    
 
 
 
4 

  MONETARY RESULTS 
 
 
 
 
As required by the Act, HHS and DOJ must detail in this Annual Report the amounts deposited 
to the Medicare Trust Funds and the source of such deposits.  In FY 2014, approximately  
$3.3 billion was deposited with the Department of the Treasury and CMS, transferred to other 
Federal agencies  administering health care programs, or paid to private persons during the fiscal  
   
year.  The following  chart provides a breakdown of the transfers/deposits:  
 
Total Transfers/Deposits by Recipient FY 2014  
Department of  the Treasury    
  Deposits to the Medicare Trust Funds, as  required by HIPAA  Amount  
            Gifts and Bequests   $7,117 
            Amount Equal to Criminal Fines   344,378,820 
            Civil Monetary Penalties   23,559,109 
            Asset Forfeiture   24,675,735 
            Penalties and Multiple Damages   807,446,537 
Subtotal   1,200,067,319 
   
Centers for Medicare & Medicaid Services    
  HHS-OIG  Audit Disallowances   Recovered - Medicare   102,159,881 
  Restitution/Compensatory Damages   608,811,471  
             Subtotal*  710,971,352 
     
  $1,911,038,671 
Total of Amounts Transferred to the Medicare Trust Funds  
Restitution/Compensatory Damages  to  Federal Agencies    
TRICARE   $23,393,642 
Department  of Veterans Affairs   52,352,227 
HHS-OIG Cost of Audits, Investigations and Compliance Monitoring  11,194,863 
Office  of Personnel Management   48,823,213 
Other Agencies   13,902,582 
   
Centers for Medicare and Medicaid Services    
Federal Share of Medicaid   522,788,332 
HHS-OIG  Audit Disallowances   Recovered - Medicaid   358,696,627 
Subtotal   1,031,151,487  
Relators=  Payments**   369,178,807  
      GRAND TOTAL ***   $3,311,368,964  
*Restitution, compensatory damages, and recovered audit disallowances include returns to both the Medicare
Hospital Insurance (Part A) Trust Fund and the Supplemental Medical Insurance (Part B) Trust Fund.
  
**These are funds awarded to private persons  who  file suits  on behalf of the Federal  government  under the  qui tam  

(whistleblower)  provisions of  the False Claims  Act, 31 U.S.C.  '  3730(b). 
 
***State funds are also collected on behalf of state Medicaid programs;  only the  Federal  share of Medicaid funds 
 
transferred to CMS are represented here.
  
5 
  The above transfers include certain collections, or  amounts equal to certain collections, required 
by HIPAA to be deposited directly into the Medicare Trust  Funds.  These amounts include:  
 
(1) 	  Gifts and bequests made  unconditionally to the Trust Funds, for the benefit of the Account  
or any activity financed through the Account;  
 
(2) 	  Criminal fines recovered in cases involving  a federal  health care offense, including  
collections under section 24(a) of Title 18, United States Code (relating to health care  
fraud);  
 
(3) 	  Civil monetary penalties in cases involving  a  federal  health care offense;  
 
(4) 	  Amounts resulting from the forfeiture of property  by reason of  a federal  health care 
offense, including collections under section 982(a)(7) of Title 18, United States Code; and  
 
(5) 	  Penalties and damages obtained and otherwise creditable to miscellaneous receipts of the 
general  fund of the Treasury obtained under sections 3729 through 3733 of  Title 31, 
United States Code (known as the False Claims Act, or FCA), in cases involving claims  
related to the provision of health care items and services (other than funds awarded to a  
relator, for restitution or otherwise authorized by law).  
 
 
6 

  Expenditures  
 
In  the eighteenth year  of operation, the Secretary  and the Attorney General  certified  
$278.1 million  in mandatory  funding  as necessary  for the Program, after  accounting for  
mandatory sequester reductions of $21.6 million  as required by law.  Additionally, Congress  
appropriated $293.6 million in discretionary funding.  The  chart below  gives the allocation by  
recipient:  
 
 
FY 2014  ALLOCATION OF HCFAC APPROPRIATION  
Mandatory  Discretionary   Funds   Total  
Organization  
Allocation5   Allocation   Sequester   Allocation  
Department of  Health and Human 
           
Services  
Office of Inspector General6   $199,330,986   $28,122,000   ($14,351,831)   $213,101,155   
Office of the General Counsel   13,000,000    0      13,000,000   
Administration for Community Living   6,590,974   0      6,590,974  
Food and Drug Administration   2,288,504   0      2,288,504  
Centers for  Medicare & Medicaid Services   13,500,000    237,344,000      250,844,000  
Unallocated Funding   2,744,960   0   (2,744,960)   0  
   Subtotal   237,455,424   265,466,000   (17,096,791)   485,824,633  
              
Department of Justice                   
United States Attorneys   31,400,000    9,332,010   0   40,732,010   
Civil Division   17,934,067    8,213,107   0   26,147,174  
Criminal Division   2,418,072   6,152,883   0    8,570,955  
Civil Rights Division   2,376,000   4,424,000   0   6,800,000  
Nursing Home and Elder  Justice Initiative   1,000,000   0   0   1,000,000  
Justice Management Division   200,000   0   0   200,000  
Department  of Justice - Other   6,908,482   0   (4,481,037)   2,427,445  
   Subtotal   62,236,621    28,122,000    (4,481,037)   85,877,584   
TOTAL7   $299,692,045   $293,588,000   ($21,577,828)   $571,702,217   
 
   
                                                 
5As of FY 2007,  mandatory  funds  are available until expended.    Discretionary funds are available for two  years.
   
6  In addition, HHS-OIG obligated $11.2 million in  funds received as  reimbursement  for the costs of conducting 

investigations and audits and for monitoring compliance plans  as authorized by section 1128C(b)  of the Social 
 
Security  Act, 42 U.S.C.   1320a-7c(b).
   
7Amounts only represent those that are provided by statute,  and do not include other  mandatory  sources or
  
discretionary appropriated sources provided through Departments annual appropriations.
   
7 

  PROGRAM ACCOMPLISHMENTS  

   
Overall Recoveries 
 
 
During this fiscal year, the  Federal  government won or negotiated approximately  $3.3 billion in  
judgments and settlements, and it attained additional administrative impositions in health care  
fraud cases and proceedings.  The Medicare Trust Funds  received transfers of approximately  
$1.9 billion during this period as a result of these efforts, as  well as those of preceding  years; and 
another $523 million in Federal Medicaid money  was transferred to the Treasury separately  as a 
result of these efforts.  8  
 
In addition to these enforcement actions, numerous audits, evaluations and other coordinated 
efforts  yielded recoveries of overpaid funds, and prompted changes in federal health care 
programs that reduce vulnerability to fraud.    
 
The return on investment (ROI) for the HCFAC program over the last three  years (2012-2014) is  
$7.70 returned for every  $1.00 expended.  This is $2 higher than the average ROI for the life of  
the HCFAC program since 1997 and the third highest ROI  overall.  Since  the annual ROI  can  
vary from  year to year depending on the number and type  of cases that are settled or adjudicated  
during that  year, DOJ and HHS  use a three-year rolling average ROI  for results contained in the  
report.  Additional information on how the ROI is calculated can be  found in the Appendix.  
 
Departmental Collaboration  
 
Health Care Fraud  Prevention & Enforcement Action Team (HEAT)  
 
The Attorney General and the Secretary maintain regular  consultation at both senior and staff  
levels to accomplish the  goals of the HCFAC Program.  On May 20, 2009, Attorney  General  
Holder and Secretary Sebelius announced the Health Care Fraud Prevention & Enforcement  
Action Team (HEAT),  a new effort with  increased  tools and resources,  and a  sustained focus by  
senior  level  leadership  to  enhance collaboration  between the Departments of  Health and Human  
Services and  Justice.   With the creation of the new  HEAT effort, DOJ and HHS pledged a 
Cabinet-level commitment to prevent and prosecute health care fraud.  HEAT, which is jointly led 
by the Deputy Attorney  General and HHS Deputy  Secretary, is comprised of top level law  
enforcement agents, prosecutors, attorneys, auditors, evaluators, and other  staff from DOJ and  
HHS and their operating  divisions, and is dedicated to joint efforts across  government to both 
prevent fraud and enforce current anti-fraud laws  around the country.  The Medicare Fraud Strike  
Force teams  are a key component of HEAT.     
   
                                                 
8  Note that some of the judgments, settlements, and administrative actions that occurred in FY 2014  will result in  
transfers in future years, just as some of the transfers in FY  2014  are attributable to actions from prior  years.  
8 

  The  mission of  HEAT is:  
 
   To marshal significant resources across government to prevent waste, fraud and 
abuse in the Medicare and Medicaid programs  and crack down on the fraud perpetrators 
who are  abusing the system and costing us  all billions of dollars. 
 
   To reduce skyrocketing health care costs and improve the quality of care  by ridding 
the system of perpetrators who are preying on Medicare and Medicaid beneficiaries.  
 
   To highlight best practices by providers and public  sector employees  who are 

dedicated to ending waste, fraud, and abuse in Medicare. 
 
 
   To build upon existing  partnerships  between DOJ and HHS, such as  our Medicare 
Fraud Strike Force  Teams,  to reduce fraud  and recover taxpayer dollars.  
 
Since its creation in May 2009, HEAT has focused on key  areas for  coordination and 
improvement.  HEAT members are  working to identify new enforcement initiatives and areas  for  
increased oversight and prevention to increase efficiency in areas such  as pharmaceutical and  
device investigations.  DOJ and HHS have expanded data sharing  and improved information 
sharing procedures in order to get critical data and information into the hands of law enforcement  
to track patterns of fraud and abuse and increase efficiency in investigating  and prosecuting  
complex health care fraud cases.  The departments established a cross-government health care 
fraud data intelligence sharing  workgroup to share fraud trends, new initiatives, ideas, and success  
stories to improve awareness across the  government of issues relating to health care  fraud.  
 
Both departments also have developed training  programs  to prevent honest mistakes and help stop 
potential fraud before it happens.  This includes CMS compliance training  for providers, HHS
OIGs HEAT Provider Compliance Training  initiative, on-going meetings  at U.S. Attorneys  
Offices  (USAOs)  with the public and private sector, and increased  efforts by  HHS to educate 
specific groups   including elderly and immigrant communities   to help protect them.  In  
addition, DOJ  conducts, with the support of HHS, a  Medicare Fraud Strike Force training  
program designed to teach the Strike Force concept and case model to prosecutors, law  
enforcement agents, and administrative support teams.   
 
Healthcare Fraud Prevention Partnership (HFPP)  
 
The Healthcare Fraud Prevention Partnership (HFPP) is the groundbreaking public/private  
partnership between the  government and private sector insurance payers.  The purpose of the  
partnership is to exchange data and information between the partners to help improve capabilities  
to fight fraud, waste  and abuse in the health care industry.  Current partners include  the Federal  
Government  (HHS-OIG,  DOJ, FBI,  and CMS), states, private plans and associations. Since  its  
inception, the number of  participants has increased to 37 public, private and state partner  
organizations.  The Partnership has completed several studies associated with fraud, waste or  
abuse that have yielded successful results for participating partners.  Studies have examined  
False Store Fronts or phantom providers, entity revocation/termination lists and top billing  
pharmacies.  Additional studies are underway  and the Partnership has established a Trusted Third 
Party (TTP)  which conducts HFPP data exchanges, research, data consolidation and aggregation, 
9 

  reporting, and analysis. The TTP will not share the source of the  data (i.e., which partner  
submitted what data) during an exchange in order  to keep the identity of the data source 
confidential. HFPP is continuing to expand with new partners.  
 
The Partnership  is a demonstrated example of effective departmental collaboration between  HHS  
and DOJ, working together to create  a strong partnership with the states and private payers to  
detect fraud, waste, and abuse.  In FY 2014, the Partnership hosted its fourth bi-annual Executive 
Board meeting.  The meeting focused on developing a strategy to ensure the productivity   
of the Partnership and highlighted achievements and progress since the last meeting including  
data exchanges, information sharing, and partnership growth.   
 
Medicare Fraud Strike Force  
 
The first  Medicare  Fraud Strike Force (Strike Force) was launched in March 2007 as part of the  
South Florida  Initiative, a joint investigative and  prosecutorial effort against Medicare fraud and  
abuse in South Florida.  The Strike Force is comprised of interagency  teams  made up of  
investigators and prosecutors that focus on the worse offenders engaged in fraud in the highest  
intensity  regions.  The Strike Force uses  advanced data analysis techniques to  identify  aberrant  
billing levels in health care fraud  hot spots  cities with high levels of billing fraud   and target 
suspicious billing patterns as well as  emerging schemes  and schemes that migrate from one  
community to another.  Based on the success of these efforts and increased appropriated funding  
for the HCFAC program  from Congress and the Administration, DOJ and HHS expanded Strike  
Force operations to a  total of  nine  areas   Miami, FL;  Los Angeles, CA; Detroit, MI; Houston, 
TX; Brooklyn, NY; Southern Louisiana;  Tampa, FL; Chicago, IL; and  Dallas, TX.     
 
Each Medicare Fraud Strike Force team  brings  the investigative  and analytical  resources of the 
FBI and HHS-OIG  and the prosecutorial resources of the Criminal Divisions  Fraud Section and 
the USAOs to analyze data obtained from CMS and bring cases in federal district court.  Strike  
Force accomplishments from cases prosecuted in  all  nine  areas during FY  2014 include9:  
 
 	  165 indictments, informations and complaints involving charges filed against  
353 defendants who  allegedly  collectively billed the Medicare program approximately  
$830 million;   
 
 	  304 guilty pleas negotiated and 38 jury trials litigated, with guilty verdicts against 

41 defendants; and 
  
 
 	  Imprisonment for 248 defendants sentenced during the fiscal  year, averaging more than  
50 months of incarceration.  
 
In the seven and a half  years since its inception, Strike Force prosecutors  filed more than 
963 cases charging more than 2,097 defendants who collectively billed the Medicare program  
                                                 
9  The accomplishments  figures presented in the bullets include all reported Strike force cases handled by DOJ  
Criminal Division attorneys and AUSAs in the respective USAOs during FY 2014.  
10 

  more than $6.5 billion; 1,443 defendants  pleaded guilty and 191 others were convicted in jury  
trials; and  1,197 defendants were sentenced to imprisonment for an average term of  
approximately  47 months.10  
 
Medicare  payment  trends demonstrate the  positive  impact of Strike Force enforcement and 
prevention efforts.  For example, Medicare payments for home health  care increased from 2006 
until 2010.  In 2009, CMS changed Medicares Home Health Agency (HHA) outlier coverage  
policy  following federal  enforcement actions initiated by  the HEAT  Strike Force  case  U.S.  v. 
Zambrana in Miami  and  HHS-OIG reports regarding home health outlier payments.  As  reflected 
on the chart below, since 2010, Medicare payments for home health  care nationally  decreased by  
more  than $300 million per quarter (or  more  than $1 billion annually).  In Miami,  payments for  
HHAs decreased by  $100 million per quarter  since the peak in 2009; in Dallas and McAllen, 
Texas, payments for HHAs  are down by  $30  million per quarter; while  in Detroit, payments for  
HHAs decreased by  $25 million per quarter  since  peak in 2009.  This may  suggest  that the home  
health  fraud convictions not  only  eliminated some of the bad actors but  also deterred other 
fraudsters from exploiting the outlier  coverage policy.  We have seen similar patterns of  
decreased Medicare payments  for DME and community  mental health services  (CMHC) 
following  concentrated  law enforcement initiatives and administrative fraud prevention efforts.  
 
 
 
   
                                                 
10  These statistics are for the period of May 7, 2007  through September 30, 2014.  
11 

  Examples of successful cases initiated or concluded in districts where Strike Force prosecution 
teams were operational during  FY 2014, as well as other successful cases are provided below.   
Summaries of additional successful prosecutions and settlements follow, organized by fraud type.  
 
Miami (Southern District of Florida)  
 
 	  In November 2013, the owners of Trust Care Health Services, Inc. and several other home  
health care companies were sentenced  for their  roles in a health care fraud  scheme with  
losses of approximately  $50 million.  According to court documents, the owners of these  
facilities paid kickbacks to patient recruiters in return for referring patients  for home  
health and therapy services that were not medically  necessary and were not  
provided.  Payments were also made to co-conspirators in doctors offices and clinics in 
exchange for fraudulent  home health and therapy  prescriptions and medical certifications, 
which were used to fraudulently bill the Medicare  program for home health  care services  
between 2007 and 2013.  The defendants were each sentenced to prison terms ranging  
from  60 to 120 months, and were  collectively ordered to pay more than $25 million in 
restitution.  
 
 	  In December 2013, the owner of Anna Nursing Services Corp. was sentenced to 
235 months in prison for her role in a health care fraud scheme with losses of  
approximately $7 million.  According to evidence  presented at trial, the owner operated 
this facility from 2010 to 2013 for the purpose of  billing the Medicare Program for, among  
other things, expensive physical therapy  and home health care services that were neither  
medically necessary nor  provided.  After trial, she was found guilty of conspiracy to 
commit health care fraud, conspiracy to pay health care kickbacks, conspiracy to commit  
money laundering, in addition to other related charges.  Other participants in the scheme  
were  also sentenced in December 2013 to prison terms ranging from 46 months to 
50 months in prison.   
 
 	  In March 2014, the owner of a health care clinic was sentenced to 108 months in prison 
for her  role in multiple health care fraud schemes  with estimated losses of more than  
$20 million.  The clinic, Merfi Corp., employed physicians, physician assistants, and other  
medical professionals who dispensed fraudulent prescriptions for, among other things, 
home health care services.  Through this company, the owner and her  co-conspirators  
provided home health prescriptions and medical  certifications to the owners and operators  
of home health care agencies and to patient recruiters in return for kickbacks and bribes.  
This documentation was  used to fraudulently bill the Medicare program for physical  
therapy and other home health care services.  
 
 	  In May 2014, the director of the outpatient facility at Hollywood Pavilion, LLC, which 
purportedly provided mental health services to Medicare beneficiaries, was sentenced to  
six  years in prison and was ordered to pay $39 million in joint and several restitution. 
According to court documents, the director and her co-conspirators  arranged for illegal  
bribes and kickbacks to be paid to patient brokers in return for referring  Medicare  
beneficiaries to Hollywood Pavilion.  The director  and her  co-conspirators  then caused the  
12 

  submission of fraudulent claims through Hollywood Pavilion and billed the Medicare  
program millions of dollars for services that were medically unnecessary and for services  
provided to patients who were not eligible for treatment.  In an attempt to conceal the  
fraud, the director  and her co-conspirators caused  false, inaccurate, and misleading  
information to be included in patient files and related documents for Medicare  
beneficiaries who were purportedly receiving mental health treatment at Hollywood  
Pavilion.  The director was convicted on charges of conspiracy to commit health care and 
wire fraud, wire  fraud, and conspiracy to pay  and receive kickbacks in connection with a  
federal health care benefit program.   
 
 	  In May 2014, two defendants  were indicted for their roles in a complex Medicare fraud 
and money laundering scheme in the Southern District of Florida.  The alleged schemes  
center on a corrupt relationship with a co-conspirator, the former owner and operator of  
Pharmovisa, Inc. and PharmovisaMD, Inc., a defunct pharmacy  and  DME  provider in 
Miami, Florida.  According to the indictment, this co-conspirator paid kickbacks to the 
defendants through shell companies under their control in order to gain access to patient  
information.  The information was later used to submit more than $23 million in 
fraudulent claims to the Medicare Part D program.  This co-conspirator previously pleaded 
guilty to conspiracy to commit health care fraud and conspiracy to pay  and receive health 
care kickbacks  and was sentenced to 168 months in prison.   
 
 	  In May 2013 and July 2014, an administrator and an owner  were convicted for their roles  
in a $74 million home health fraud scheme.  Two home health agencies, LTC Home Care  
Professionals, Inc. (LTC) and Professional Home  Care Solutions, Inc., purported to 
provide home  health care and physical therapy services to Medicare beneficiaries.  These 
two defendants  and their  co-conspirators paid kickbacks and bribes to patient recruiters, 
who provided patients to LTC and Professional Home Care, as  well as prescriptions, plans  
of care (POCs) and  certifications for medically unnecessary therapy and home health  
services for Medicare beneficiaries.  The defendants and their co-conspirators used these  
prescriptions, POCs and medical certifications to fraudulently bill the Medicare program  
for home health care services. From  approximately January 2006 to June 2012, LTC and 
Professional Home Care  submitted approximately  $74 million in claims for  home health  
services that were not medically necessary and/or  not provided, and Medicare paid 
approximately $45 million on those claims.   
 
Los Angeles (Central District of California)  
 
 	  In October 2013, three of four defendants pled guilty to conspiracy to commit health care  
fraud.  These charges stemmed from a $49 million fraud in which the defendants were 
providing medically unnecessary, non-emergency ambulance transportation services to  
Medicare beneficiaries, primarily to dialysis patients.  These three defendants were later  
sentenced to prison terms ranging  from 30 to 108 months.  The fourth defendant, a  
manager  at the ambulance company, went to trial in September 2014; he pled guilty  
midway through trial.  
 
13 

   	  In October 2013, five defendants were sentenced for their role in an extensive $11 million 
DME fraud conspiracy.  Each of the defendants  received sentences ranging from 12 to 
87 months in prison.  
 
 	  In March 2014, an owner of a DME company  was  convicted after a jury  trial for his role  
in a $1.5 million Medicare fraud conspiracy.  He  was found guilty of one count of  
conspiracy to commit health care  fraud, six counts of health care fraud, and six counts of  
aggravated identity theft.  The evidence at trial established that the defendant and his co
conspirator operated a company  called Orthomed Appliance, Inc., and stole the personal  
identifying  information of Medicare beneficiaries  and doctors. The defendant used that  
stolen information to submit more than $1.5 million in fraudulent  claims to Medicare.   In  
July 2014, he was sentenced to 121 months in prison. 
 
 	  In July 2014, the owner  and operator of  Lutemi Medical Supply, a  DME  supply company, 
was convicted at trial for  conspiracy, health care fraud, and money laundering in 
connection with an $8.3 million, ten-year Medicare fraud scheme.  The evidence at trial  
showed that the defendant submitted fraudulent prescriptions for DME, primarily power  
wheelchairs and related accessories, by using street-level patient recruiters  or  marketers  
to find Medicare eligible beneficiaries. The marketers then took the beneficiaries to  
doctors who prescribed medically unnecessary prescriptions, and the defendant and her  
co-conspirators paid illegal kickbacks to the marketers and the doctors.  In total, the  
defendant submitted claims to Medicare for more  than 1,000 power wheelchairs.  
 
 	  In August 2014, the owner of a medical clinic management company pled  guilty to  
conspiracy for his role in a $3 million health care  fraud scheme that involved two medical  
clinics.  The defendant and his co-conspirators hired physician's assistants to sign 
prescriptions for medically unnecessary  power  wheelchairs, which the defendant and his  
co-conspirators then sold to multiple DME supply companies.  
 
Detroit (Eastern  District of Michigan)  
 
 	  The Detroit Strike Force  obtained significant post-trial sentences  against members of a 
$15 million home health care  fraud conspiracy in 2014.  In March 2014, the defendant, the  
part owner of a fraudulent home health care company  who hid his ownership and 
laundered the proceeds of the fraud through shell corporations, received a sentence of  
120 months  in prison. In June  2014, another  defendant, a patient recruiter  with a lengthy  
criminal history who promised patients cash and access to narcotic prescriptions in 
exchange for  agreeing to sign up for  fraudulent home health care services, received a 
sentence of 86 months in prison. This case was indicted in January 2010 and resulted in a 
total of  20 convictions through guilty pleas  and at  trial. 
 
 	  In April 2014, the owner  and operator of TGW Medical, Inc. and Caldwell  Thompson 
Manor, Inc.  (CTM), was  sentenced to 3 years and 4 months of incarceration and was  
ordered to pay $5 million in joint and several restitution. The two businesses purportedly  
provided psychotherapy  services  to Medicare beneficiaries. The owner and operator of  
14 

  P&C Adult Day Center, LLC, which also purportedly provided psychotherapy services, 
was  sentenced to 3 years  and 4 months of incarceration and was ordered to pay $599,438 
in joint and several restitution. According to the indictment, the owner of  TGW and CTM  
and her  co-conspirators signed patient charts  and progress notes for individual and group 
psychotherapy sessions purportedly performed at  TGW, Caldwell Thompson, and P&C  
that were not medically necessary and were not performed.   She used her own provider  
number as well as the provider number of  another social worker at TGW to cause the three  
clinics to bill Medicare approximately $20 million for psychotherapy visits.   The owner of  
CTM and TGW  pleaded guilty  to conspiracy  to commit health care fraud and, in addition 
to her sentencing, was excluded from participating in any federal health care programs for  
20 years. The  owner of P&C previously pleaded guilty to conspiracy to commit  health  
care  fraud and health care fraud.  
 
 	  Twenty individuals were  charged between 2011 and 2014 for their roles in a $13.8 million 
scheme to defraud Medicare by submitting fraudulent claims for home health care  
services.   Fourteen of the defendants pled guilty, and three others  were found guilty  after  
trial in April and May 2014. Three remain fugitives.  According to trial evidence, in  
exchange for kickbacks,  Medicare beneficiaries pre-signed forms  and visit sheets that 
were later falsified to indicate they received home health services they had  never received.  
The scheme  employed individuals who held themselves out to be doctors, but who were  
not, in fact, licensed in the state of Michigan to perform any medical services. The  
unlicensed doctors met and purported to examine non-homebound Medicare  
beneficiaries for home health care services, signed false paperwork so they  could be billed 
through four home health agencies  and provided the patients with narcotic prescriptions. 
The defendants  were  sentenced to  terms of imprisonment ranging  from 18 to 72 months.   
 
 	  In July 2014, the last defendants in a $67 million pharmacy health care fraud, drug  
diversion and kickback conspiracy were convicted at trial. Thirty-nine  defendants were 
charged in the investigation; all were convicted, except for one who is a fugitive.  The  
defendants, including owners, pharmacists, recruiters and doctors, were operating or  
helping to operate a chain of fraudulent pharmacies that illegally billed Medicare and  
Medicaid for  expensive drugs that were never dispensed and dispensed narcotic drugs to 
patient recruiters who sold them on the street for profit.  More than 250,000 dosage units  
of oxycodone  and four million dosage units of hydrocodone were diverted to the scheme  
between 2006 and 2011.  
 
 	  In September  2014, an  oncologist pled guilty to 16 felony  counts, including health care  
fraud, money laundering  and kickbacks, in connection with a health care fraud scheme  
involving fraudulent claims for medically unnecessary cancer treatments.   The defendant  
billed Medicare over $225 million during the scheme, as well as tens of millions more to 
private insurance companies.  In his  guilty plea, the defendant admitted to prescribing and 
administering aggressive  chemotherapy, cancer treatments, intravenous iron and other  
infusion therapies to patients who did not need them in order to increase his billings to the  
Medicare program and other insurance companies.   
 
15 

  Houston (Southern District of Texas)  
 
 	  In October 2013, the owner of an ambulance company  was convicted by a  federal jury of  
conspiracy to commit health care  fraud and a substantive charge of  health care fraud. 
According to court documents and trial evidence, the defendant submitted claims totaling  
approximately $2.4 million to Medicare for ambulance services that were medically  
unnecessary, and in some cases, never provided. On June 13, 2014, the defendant was  
sentenced to 97 months in prison. 
 
 	  In March 2014, a federal jury convicted seven individuals associated with a  mental health 
clinic, including the owner-physicians,  administrator, physicians assistant, clinical 
director, and patient recruiters. According to court documents and trial evidence, the  
defendants submitted claims to Medicare totaling approximately $97 million for  
psychiatric partial hospitalization program services that were medically unnecessary, and  
in some cases, never provided.  The sentencings  are scheduled for January  2015. 
 
 	  In April 2014, the owner  of a home health care company  and the owner of  a  
comprehensive health care clinic both pleaded guilty to one count of  conspiracy to commit  
health care fraud stemming from an $8.1 million Medicare home health care fraud  
scheme. The owner of the home health company  paid kickbacks to the health care clinic 
owner in addition to using her home health care companys Medicare provider number to 
submit claims to Medicare for home health services that were medically unnecessary, and  
in some cases, never provided. Sentencing is scheduled for September 2015. 
 
 	  In April 2014, the director of nursing  for  a home health agency pleaded guilty to an over
$4.5 million scheme to defraud Medicare.  Along  with the owner of the  agency, she also  
pleaded guilty to conspiring to structure over $1.8 million in bank withdrawals.  The 
director of nursing pleaded to billing Medicare for home health services that were not  
provided and not medically necessary, as well as to conspiring with the owner to structure  
cash withdrawals. Together, these two defendants used the withdrawals to pay illegal  
health care kickbacks to recruiters who referred patients to them and to doctors for  
authorizing home health care.  
 
 	  In June 2014, the owner  of a home health company  was sentenced to 151 months in prison 
and ordered to pay $3 million in restitution. Her sentence  was the result of  an October  
2013 conviction in connection with a $3 million Medicare fraud scheme. According to 
court  documents and trial evidence, the defendant  used her companys Medicare provider  
number to submit claims to Medicare  for home health services that were  medically  
unnecessary, and in some cases, never provided.  
 
Brooklyn (Eastern District of New  York)  
 
 	  In  November 2013, the  mastermind of a $77 million fraud scheme was sentenced to  
15 years in prison.  From 2005 to 2010, the defendant owned and operated a clinic in 
Brooklyn that billed Medicare under three corporate names: Bay Medical Care PC, SVS  
16 

  Wellcare Medical PLLC  and SZS Medical Care PLLC (collectively, Bay  Medical Clinic).   
The defendant and her employees  at the Bay Medical Clinic paid cash kickbacks to  
Medicare beneficiaries  and used the beneficiaries names to bill Medicare for more than  
$77 million in services that were medically unnecessary or never provided. The  
defendants billed Medicare for  a wide variety of fraudulent medical services and 
procedures, including physician office visits, physical therapy  and diagnostic tests. 
 
 	  In April  2014, the office managers at  URI Medical Service, PC, was sentenced to 12  
months in jail and, along  with the office manager  of  Sarang Medical, PC, was  ordered to 
pay $5.9 million in joint and several restitution.  URI  and Sarang purportedly provided 
physical therapy,  electric stimulation treatment, and other medical services to Medicare  
beneficiaries.  According to the indictment, from approximately March 2007 through May  
2012, the office managers and their co-conspirators artificially increased demand for  
medical services by providing Medicare beneficiaries with free  goods and services, such 
as massages, facials, lunches, gift  cards, and recreational classes.  They then submitted 
false claims to Medicare for medical services, such as office visits, physical therapy,  
lesion destruction, and electrical stimulation treatment, which were medically  
unnecessary, not provided, and otherwise did not  qualify  for reimbursement.  Once the  
beneficiaries arrived at the clinics, they were required to give their Medicare numbers to  
staff and to see a doctor, regardless of medical need, in order to receive the  free, non
medical inducements. The office managers acted as patient recruiters and were paid  for  
referring beneficiaries to the clinics.  Both pleaded guilty  to conspiracy to  commit health  
care  fraud and both were  excluded from participating in any  federal health care programs; 
the URI office manager  was excluded for 18 years and the Sarang office manager  was  
excluded for 10 years.  
 
 	  In May 2014, two individuals  were indicted and charged with health care fraud, 
conspiracy to commit health care  fraud, and illegal use of individually identifiable health 
information.  Since 2008, the defendants  allegedly  engaged in a long-running scheme to 
submit false claims for  DME to a government-sponsored organization for  managed care in 
New York.  The scheme  involved the defendants using information for  approved, in-
network equipment providers to obtain approvals that were then used to secure payments  
on behalf of sham companies that the defendants set up.  Companies believed to have been 
involved in the scheme submitted fraudulent claims to the managed care organization in 
amounts over $13 million since 2008; the organization paid out over $4 million in 
reimbursement of those  claims.    
 
 	  In May 2014, two defendants were indicted and charged with conspiracy to commit health 
care fraud, making  false statements relating to a health care matter, falsification of records  
in a federal investigation and money laundering.  Between approximately  October 2009 
and August 2012, the defendants owned and operated a series of medical  clinics that were  
used to submit more than $14.3 million in Medicare claims,  of which $5.3 million was  
paid.  The  indictment alleges that the  majority of  the claims were fraudulent because they  
were  for services such as vitamin infusions, physical and occupational therapy, and 
diagnostic tests that were medically unnecessary, not provided, or otherwise not  
17 

  reimbursable.  The defendants also allegedly  laundered the proceeds of the fraudulent  
scheme and falsified documents, which they then provided to Medicare auditors and FBI  
in order to conceal the fraudulent scheme.   
 
Southern Louisiana  (Middle  and Eastern  Districts  of Louisiana)  
 
 	  In May 2014, the two-year prosecution of a $258.5 million dollar Medicare fraud scheme,  
involving seventeen defendants, concluded when the medical director, on the eve of trial, 
pleaded guilty to conspiracy to commit health care fraud and when one owner and one  
patient recruiter, following a week-long jury trial, were  found guilty of  conspiring to 
commit health care  fraud, committing health care  fraud, and conspiring to pay  and receive  
kickbacks. The  fraud scheme, which spanned seven years, involved billing  Medicare  
$258.5 million dollars for psychotherapy services  that were  either not provided or  
medically unnecessary at three partial hospitalization programs located in Baton Rouge, 
Louisiana and Houston, Texas. In the  end, 17 individuals were  charged, and all 17 
individuals were convicted. To date, one owner has been sentenced to 102 months 
imprisonment and the medical director has been sentenced to 86 months imprisonment.  
 
Tampa (Middle District of Florida)  
 
 	  In October 2013, two defendants pleaded guilty to conspiracy to commit money  
laundering of over $1.8 million. All of the money they planned to launder  came from a  
rehabilitation therapy services fraud scheme.  Using shell companies such as Ariguanabo 
Investment Group, Inc. and IRE Diagnostic Center, Inc., the defendants received and 
disbursed substantial  proceeds stemming from fraudulent rehabilitation therapy services  
claims that had been submitted to Medicare through Renew Therapy Center of Port St. 
Lucie, LLC.  They were  sentenced in July 2014 to 24 months in prison each, and ordered 
to pay restitution  of over  $1.8 million.   
 
 	  In December 2013, a key operator of  a rehabilitation therapy services clinic who had 
submitted over $10.5 million in fraudulent reimbursement claims to Medicare pleaded 
guilty to conspiracy to commit health care fraud.  Over $10.5 million in fraudulent claims  
were submitted to Medicare through Renew Therapy Center of Port St. Lucie for therapy  
services that had not been legitimately prescribed or provided.  The defendant helped 
operate the  clinic and paid kickbacks to patient brokers and others to obtain and use  
Medicare beneficiary identifying information in the companys fraudulent  claims.  In July  
2014, he was sentenced to 48 months in prison and ordered to pay restitution, jointly  and 
severally, of over $6.2 million.  
 
 	  In January  and February  2014, the leader  and organizer of a $28 million health care  fraud 
scheme and  a disbarred attorney who played a central role in the scheme each pleaded  
guilty to conspiracy to commit health care fraud.  The leader of the  fraud scheme also 
pleaded  guilty to making  a false statement relating  to health care matters.  The fraud  
involved numerous comprehensive outpatient rehabilitation facilities and outpatient  
physical therapy  clinics as well as other entities that were used to submit over $28 million 
18 

  in fraudulent claims to Medicare. All of the claims sought reimbursement for therapy  
services that were not legitimately  prescribed and not provided.  The fraudulent claims  
resulted in payments of over $14 million by Medicare.  The disbarred attorney  was 
sentenced in August 2014 to 70 months in prison and ordered to pay restitution, jointly  
and severally, of $14.4 million.  A third defendant, who was a straw owner  of one of the  
clinics used in the fraud scheme and had previously  pleaded guilty to conspiracy to  
commit health care  fraud, was sentenced in March 2014 to 30 months in prison. 
 
 	  In May 2014, the former  president and owner of  a  rehabilitation therapy services clinic  
was charged with conspiracy to commit health care fraud and conspiracy to commit  
money laundering of health care fraud proceeds.  The defendant pled guilty  on October  
27, 2014. The defendant allowed over $2.5 million in fraudulent claims to be submitted 
through her clinic to Medicare seeking payment for rehabilitation therapy services  that 
were not legitimately prescribed and not provided.  Medicare paid approximately  
$1 million in reimbursement on the claims.   The defendant  admitted paying kickbacks in 
exchange for Medicare beneficiary identifying information and falsified medical records  
that were used to submit and support the fraudulent billing. 
 
Dallas (Northern District of Texas)  
 
 	  In October  2013, a  federal jury  in Texas convicted two defendants of conspiracy to 
commit health care  fraud and fourteen substantive counts of health care  fraud for falsely  
billing for physician care plan oversight. A third defendant, a doctor  and medical director  
of the company, pled guilty.  The trial defendants owned and operated  A  Medical,  a 
physician house call company that provided doctor visits to Medicare beneficiaries in their  
home.  During the trial the government proved that all billing for care plan oversight was  
fraudulent, and that the patient visits and home certifications were  fraudulent as well. The  
court found that the total  intended loss amount was over $11 million.  That figure included 
the intended loss billed by  A Medical, as well as all of the home health billing that 
stemmed from the fraudulent certifications.  The  judge sentenced the owners of the  
company to 262 months and 135 months in prison.  The medical director received a 
57 month prison sentence. All defendants  were ordered to pay, jointly  and severally, over  
$9 million in restitution to CMS.  
 
 	  In January 2014, a Texas jury convicted two defendants of conspiracy to commit health 
care  fraud and seven counts of substantive health care  fraud.  The defendants owned and 
operated a DME  company  called His Grace Medical Supplies and More (HGMS).  Over  
ninety percent of the claims submitted by HGMS were  for adult incontinence supplies.  
HGMS purchased  a list of Medicaid beneficiaries  that it used to file fraudulent claims with  
Medicaid.  Many of the patients did not need or receive the  adult incontinence supplies  
billed to Medicaid by HGMS.  In response to a  Medicaid audit, HGMS falsified medical  
paperwork by forging patient and doctor signatures to make it appear  as if the patients  
received the medical supplies and that a doctor had diagnosed the patient as being  
incontinent.  HGMS billed Medicaid in excess of  $2.3 million for adult incontinence  
supplies.   
19 

   	  In January 2014, two defendants were sentenced to 72 months each for their roles in a  
conspiracy to commit Medicare fraud.  The defendants were foreign medical school  
graduates who  were unlicensed to practice medicine in the United States.  Both defendants  
acted as physicians in a house call practice where no meaningful medical treatment was  
provided to patients.  More than $2.7 million was fraudulently billed to Medicare  for the  
house visits  and  diagnostic testing that was never  performed.  
 
 	  In May 2014, after a seven-day trial, a jury in the  Northern District of Texas found two  
defendants  guilty of conspiracy to commit health care fraud for their roles in a $4 million 
Medicare fraud scheme.  One defendant was  a doctor who certified hundreds of Medicare 
beneficiaries for home health care that was medically unnecessary  and often never  
provided.  The second defendant  was the Director  of Nursing at PTM Healthcare Services,  
Inc., a defunct home health care agency in  Irving,  Texas.  The scheme involved the  
manipulation of patient medical records, which are essential to submit and receive funds  
for home health services  rendered to Medicare beneficiaries in need of skilled nursing  
care.   The jury also  convicted  this defendant  for health care  fraud and making false  
statements related to health care matters.  
 
 	  In June 2014, two defendants were sentenced for their roles in fraudulently  operating  
hyperbaric oxygen therapy  companies in North Texas.  Both defendants admitted that they  
defrauded Medicare by billing for multiple sessions in one day when in actuality only one  
dive was performed.  The defendants were sentence to  60 months each and ordered to 
pay  restitution in the amount of $1.5 million.  
 
 	  In August  2014, a Dallas, Texas DME salesman was sentenced to 36 months in prison and 
ordered to pay $1.3 million in restitution.  The defendant pled guilty to one  count of false  
statements relating to health care matters in  connection with his practice of  supplying  
therapeutic shoes and shoe inserts to individuals with diabetes.  He routinely forged 
physician signatures, provided patients with off-the-shelf shoe inserts instead of the  
custom inserts billed, failed to obtain current and proper measurements, and in one case, 
billed for therapeutic shoes and shoe inserts on behalf of a double  amputee.  Between 
2010 and 2013, the defendant caused claims totaling more than $890,000 to be submitted 
to Medicare  and $440,000 to be submitted to Texas Medicaid.  He  admitted that he  
accurately and truthfully  completed all of the requirements for less than 10 percent of  
these claims.    
 
Chicago  (Northern District of  Illinois)   
 
 	  In October  2013, defendant a pharmacist in Chicago was convicted in connection with a  
$1.7 million fraud scheme.  The evidence at trial revealed that defendant submitted to two  
private insurance companies over 600 false claims for the drug Procrit, using patients  
names, dates of birth, and insurance information without their authorization.   After the 
defendant was initially indicted in this case on health care fraud charges, he created false 
documentsincluding forged prescriptions, forged patient receipts, and false invoicesto  
make the false claims look legitimate.   In total, defendant was convicted after a jury trial  
20 

  of six counts of health care fraud, three counts of  aggravated identity theft, and one count  
of obstruction of justice.  
 
 	  In December  2013, a  grand jury returned an indictment charging the CEO of Mobile  
Doctors, a company that  arranged for thousands of physician home visits in Illinois, 
Michigan, Indiana, Arizona, and Texas, and one of the Mobile Doctors physicians with 
health care fraud.  According to the indictment, the charges stemmed from  a Medicare  
fraud scheme regarding the billing of patient visits at inflated levels based on  the CEOs  
beliefs about what would avoid audits, rather than on what physicians actually did during  
the visits, as well as the false certification of patients for home health services provided by  
home health agencies.  From 2007 through August 2013, when the CEO was first charged  
by complaint, Medicare  paid Mobile Doctors more than $30 million for physician home  
visits, millions of which were the  result of the fraud scheme, according to the indictment.  
 
 	  In February 2014, a physician  was arrested  and charged by complaint with drug  and health 
care fraud charges.   In  addition, agents executed  a seizure warrant for  approximately  
$126,000 on his bank account.  On August 27, 2014, the defendant  was charged by  
information with participating in a health care fraud scheme, in violation of  18 U.S.C.   
1347, and with acquiring Schedule  II  controlled substances by fraud and 
misrepresentation, in violation of 21 U.S.C.   843(a)(2).   Approximately one week later,  
the defendant  pled guilty at arraignment.   As a part of the plea agreement,  he  admitted to  
engaging in a scheme to defraud Medicare out of  at least approximately $500,000, which 
spanned several  years, from November 2011 through February 2014.  Furthermore, he  
admitted to  knowingly prescribing controlled substances to patients who he had never  
seen or examined, and who he knew had never been examined by  a licensed medical  
professional.   
 
 	  In May 2014, a  grand jury  sitting in the Northern District of  Illinois charged an owner  and 
three former employees  of a now-closed Illinois hospice company, Passages Hospice, 
LLC, as well as the company itself, on  federal health care fraud  charges for  engaging in an  
extensive scheme to obtain higher Medicare and Medicaid payments by fraudulently  
elevating the level of hospice care for patients.   In many instances, the level of hospice  
care allegedly exceeded  what was medically necessary or actually provided, including for  
some patients who did not have terminal illnesses  or who were enrolled far  longer than the  
required life expectancy  of six months or less.  The defendants are charged  with  
fraudulently obtaining millions of dollars as a result of the scheme.  
 
 
   
21 

  Highlights of Successful Criminal and Civil Investigations  
 
In addition to the Medicare Fraud Strike  Force matters  summarized above, our respective  
Departments successfully  pursued criminal and  civil investigations in a wide range of other  areas:  
 
Medical  Device Companies  
 
 	  In October 2013, medical device manufacturer  Boston Scientific and its Guidant 
subsidiaries agreed to pay  $30 million to settle civil  FCA  allegations that from 2002 to  
2005, Guidant knowingly  sold defective heart devices to health care facilities that in turn 
implanted the devices into Medicare patients.   The  settlement resolves allegations  that two  
lines  of Guidants  implantable  defibrillators  contained a defect that resulted in arcing, 
which caused  the device  to short circuit.  The  government alleged that although Guidant  
took corrective action to fix the defects, the company  continued to sell its remaining stock 
of the old, defective versions of the devices  and took steps to hide the problem from  
patients, doctors and the  FDA.  In February 2010, Guidant pleaded guilty to criminal  
charges of misleading the FDA  and failing to submit a labeling change to the FDA  relating  
to the defective devices.  
 
 	  In December 2013, medical device manufacturer  Abbott  Laboratories, Inc. agreed to pay  
$5.5 million to resolve civil  FCA allegations that the company caused health care 
providers to submit false  claims to Medicare  for surgical procedures involving the  
companys carotid and peripheral vascular stents and biliary stents.  The  government  
alleged that Abbott knowingly paid prominent physicians unlawful kickbacks with the  
expectation that these key  physicians would  arrange  for the hospitals with which they  
were  affiliated to purchase Abbotts vascular products for use in treating Medicare  
beneficiaries.  
 
 	  In December  2013, medical device manufacturer  Genzyme Corp. agreed to pay  
$22.3 million to resolve civil  FCA  allegations relating to its marketing of  an unapproved 
version of Seprafilm, a thin film used to prevent adhesions after surgery.  The settlement 
resolves allegations  that  Genzyme sales representatives taught doctors and  other staff to  
dissolve  Seprafilm sheets  in saline to create a slurry for use in laparoscopic or key  
hole surgeries by inserting a  catheter filled with the mixture into the body  and squirting it 
into the abdominal cavity.  Seprafilm is FDA-approved for use in open abdominal surgery, 
but not for minimally invasive surgeries, such as laparoscopic or keyhole surgery.  As  a  
result of this conduct, Genzyme  allegedly caused hospitals and other purchasers of  
Seprafilm to submit false and fraudulent claims to federal health care programs for uses of  
Seprafilm that were not reimbursable.  
 
 	  In January 2014, CareFusion Corp. agreed to pay  $40.1 million to settle  civil FCA  
allegations that it paid kickbacks and promoted its products for uses that the  FDA had not  
approved.  The  settlement resolves allegations  that CareFusion paid kickbacks to the 
physician  co-chair of the  Safe Practices Committee at the National Quality  Forum, a non
profit organization that reviews, endorses, and recommends standardized health care  
22 

  performance measures  and practices;  and  that CareFusion knowingly promoted the sale of  
ChloraPrep for uses  that the  FDA had not approved, some of which were not medically  
accepted indications, and made unsubstantiated representations about the appropriate uses  
of ChloraPrep.  
 
 	  In May 2014, medical device manufacturer Medtronic, Inc. agreed to pay $9.98 million to 
resolve civil FCA allegations that the company paid kickbacks to induce physicians to use  
certain of the companys  cardiac rhythm management devices, including pacemakers and  
defibrillators.   The government  alleged  that Medtronic:  (1)  paid  implanting physicians to  
speak at events intended  to increase the flow of referral business;  (2) gave physicians  
tickets to sporting events; and (3)  developed marketing/business development plans for  
physicians  at no cost.  
 
 	  In August 2014, medical  device manufacturer  Smith & Nephew agreed to pay $8.3 million 
to settle civil FCA  allegations that the company  violated the Trade Agreements Act by  
selling medical devices to the government that had been manufactured in Malaysia, when 
they were  required to be  manufactured in the United States.  
 
 	  In August 2014, medical  device manufacturer Omni Surgical  L.P. (d/b/a Spine 360) and 
an Indiana spinal surgeon agreed to pay a combined $2.6 million to settle  civil FCA  
allegations that Spine 360 paid illegal kickbacks to the physician to induce him to use the  
companys products.  The government alleged that payments made by Spine 360 to an 
entity controlled by the physician pursuant to a series of intellectual property  agreements 
were actually  shams, and that the payments were intended to compensate the physician for  
using Spine 360 products in his surgeries.  
 
Pharmaceutical Companies  
 
 	  In November 2013, pharmaceutical company  Johnson & Johnson (J&J) and certain  
subsidiaries agreed to pay  over $2.2 billion to resolve criminal and civil allegations  
relating to the prescription drugs Risperdal, Invega, and Natrecor.  In a criminal  
information, the  United States alleged  that Janssen Pharmaceuticals,  Inc., a J&J  
subsidiary, marketed the  antipsychotic drug Risperdal off-label to control behavioral  
disturbances in non-schizophrenic dementia patients  at a time when  the drug was  
approved only  to treat schizophrenia.  Janssen pleaded  guilty to misbranding Risperdal in 
violation of the  FDCA  and paid  criminal fines and forfeiture totaling $400 million.   In  
addition, J&J and its subsidiaries agreed to pay $1.72 billion to resolve civil FCA  
allegations that they:   (1)  promoted Risperdal and Invega off-label to control behaviors in 
dementia patients, children, and the mentally impaired; made  false statements concerning  
the drugs safety and efficacy; and paid kickbacks to physicians; (2)  paid kickbacks to 
long-term care pharmacy Omnicare to promote Risperdal and other J&J drugs in nursing  
homes and to switch patients to J&Js drugs; and (3) promoted Natrecor off-label for  
serial, scheduled outpatient infusions of patients with congestive heart failure.  
   
23 

   	  In February 2014, pharmaceutical company Endo Health Solutions  Inc. and its subsidiary  
Endo Pharmaceuticals  Inc. (Endo) agreed to pay $192.7 million to resolve criminal and 
civil liability arising from Endos marketing of the prescription drug  Lidoderm for uses  
not approved by the  FDA.  During the relevant time period,  Lidoderm was approved only  
for the relief of pain associated with post-herpetic neuralgia (PHN), a complication of  
shingles.  However, the  government charged that  Endo introduced into interstate  
commerce Lidoderm that was misbranded because its labeling lacked adequate directions  
for use in the treatment of non-PHN related pain, including low back pain, diabetic  
neuropathy, and carpal tunnel syndrome.  These uses were intended by Endo but never  
approved by the  FDA.  The resolution included a  deferred prosecution agreement and 
forfeiture totaling $20.8  million and civil FCA settlements totaling $171.9 million.   
 
 	  In March 2014, Israeli pharmaceutical company, Teva Pharmaceuticals USA  Inc., agreed 
to pay $27.6 million to settle  civil FCA  allegations that it and a subsidiary paid kickbacks  
to a Chicago psychiatrist.  The United States alleged that the company, which 
manufactures the anti-psychotic drug clozapine, paid the psychiatrist kickbacks in the  
form of consulting  and speaking fees in exchange for his agreement to prescribe clozapine  
to several thousand patients over an eight-year period.  The United States also filed a civil  
suit against the psychiatrist which remains pending.  
 
 	  In  April 2014, pharmaceutical company Astellas  Pharma, US, Inc. agreed to pay  
$7.3 million to resolve civil FCA  allegations relating to  its promotion of the prescription 
drug Mycamine to treat pediatric patients, even though that use  was not a  medically  
accepted indication and, therefore, not covered by  government  health care  programs.  
 
 	  In September 2014, pharmaceutical company Shire Pharmaceuticals  LLC agreed to pay  
$56.5 million to resolve  civil FCA  allegations relating to its promotion of Adderall XR,  
Vyvanse and  Daytrana (which are approved for the treatment of  attention deficit  
hyperactivity disorder), and Pentasa and Lialda  (which are  approved for the treatment of  
mild to moderate active ulcerative  colitis).   The settlement resolves allegations that Shire  
(1) promoted Adderall XR for certain uses without clinical data to support such claims and 
overstated the drugs  efficacy; (2)  made false and  misleading statements about the efficacy  
and abuseability of Vyvanse to physicians and state Medicaid formulary  committees;  
(3) improperly marketed Daytrana, administered through a patch, as less abuseable than 
traditional, pill-based medications; and (4) promoted Lialda and Pentasa for off-label uses  
not approved by the  FDA and not covered by federal  health care  programs, including  the 
prevention of colorectal  cancer.  
 
Hospitals  
 
 	  In January 2014, St. Joseph Health System, Inc., of London, Kentucky, agreed to pay  
$16.5 million to resolve  civil FCA  allegations that it  submitted false claims to  federal  
health care  programs for  medically unnecessary cardiac procedures, including stents, 
pacemakers, and  catheterizations.   The settlement also resolved allegations of  Anti-
Kickback  Statute  (AKS) and Stark Law violations arising out of  contractual relationships  
24 

  between the hospital and the owners of Cumberland Clinic, the physicians  practice group 
alleged to have performed the  unnecessary services.  
 
 	  In March 2014, Halifax Hospital Medical Center, which operates a hospital and outpatient  
clinics in the Daytona  Beach, Florida area, agreed to pay $85 million to resolve  civil FCA  
allegations that Halifax entered into certain prohibited contracts with oncologists and 
neurosurgeons in violation of the Stark Law.  The  government alleged that between 2004 
and 2010 Halifax entered into employment contracts with neurosurgeons that greatly  
exceeded fair market value and varied with the volume and value of the referrals or other  
business generated.   Further,  Halifax allegedly  entered into employment contracts with  
oncologists that included operating margin bonuses based on the volume or value of the  
referrals or other business generated by the physicians.  The  government  alleged that  
because of the prohibited relationship between  Halifax and these physicians, the claims  
that Halifax submitted for their referrals were false.  This settlement followed a district 
court  ruling granting  the United States partial summary judgment motion and finding that 
the Medical Centers contracts with the medical oncologists violated the Stark  Law.  As  
part of the settlement, Halifax entered into an enhanced CIA with HHS-OIG that includes  
requiring Halifax to  retain an independent  compliance  expert to provide annual reviews of  
the effectiveness of its compliance program and to hire a legal  independent  review  
organization to review Halifaxs contracts with physicians  and other health care providers.   
 
 	  In March  2014, Memorial Hospital, an Ohio nonprofit corporation that operates an acute  
care hospital in Fremont, Ohio, agreed to pay $8.5 million to settle  civil FCA  allegations  
that it engaged in improper financial relationships  with referring physicians in violation of  
the AKS and Stark Law.  The settlement involved self-disclosed allegations that financial 
relationships that Memorial had with two physicians   a joint venture between Memorial  
and a pain management physician and an arrangement under which an ophthalmologist 
purchased intraocular lenses and then resold them to Memorial at inflated prices  - violated 
statutory requirements.  
 
 	  In May 2014, Ashland Hospital Corporation d/b/a Kings Daughters Medical Center  
(KDMC), a Kentucky corporation based in Ashland, Kentucky, agreed to pay  
$40.9 million to resolve civil FCA  allegations that it billed for medically unnecessary  
coronary stents  and diagnostic catheterizations performed on Medicare and Medicaid 
patients.  The settlement also resolves allegations that KDMC  violated the Stark  Law by  
paying  certain  cardiologists salaries that exceeded  fair market value.  In addition to 
payment of the settlement amount, KDMC agreed to enter into a comprehensive 5-year  
CIA with HHS-OIG that  includes enhanced provisions to address patient care issues and  
KDMCs relationships with referral sources.  
 
 	  In  July 2014, Community  Health Systems, Inc., based in Franklin, Tennessee, and its  
affiliated hospitals (collectively, CHS) agreed to pay  a total payment of $98.2 million to  
resolve allegations that:  (1) CHS knowingly admitted patients who presented to CHS  
hospital emergency departments as inpatients when they should have been treated as  
outpatients or provided observation care; (2)  a CHS hospital, Laredo Medical Center, 
25 

  presented false claims to Medicare for  certain inpatient procedures that should have  
performed on an outpatient basis; and (3) CHS improperly billed Medicare  for services  
referred to  Laredo  Medical Center by a physician  who was offered  a medical directorship  
at the hospital in violation of the Stark law.    
 
 	  In August 2014, Arizona non-profit corporation Carondelet Health Network, d/b/a  
Carondelet St. Marys Hospital and Carondelet St. Josephs Hospital, agreed to pay  
$35 million to resolve civil FCA  allegations that the  hospitals billed federal health care  
programs for inpatient rehabilitation facility services when  an inpatient setting was not 
appropriate.  
 
Physicians  
 
 	  In November 2013, a cardiologist was sentenced to six-and-a-half  years in prison and 
ordered to pay $19 million in restitution after pleading  guilty to charges of  attempt and  
conspiracy to commit health care  fraud and false  or fraudulent  claims.  According to 
published reports, the physician-owner of two companies spent more than $6 million in 
advertising on Spanish-language media to entice patients to visit his clinics. The  New 
Jersey and  New York  clinics, Cardio Med Services  LLC (Cardio-Med) and  
Comprehensive  Health care  & Medical Services  LLC (Comprehensive), purported to 
provide cardiology, internal medicine, and other  medical services to Medicare and  
Medicaid beneficiaries.   During the visits, the physician-owner  ordered and performed 
essentially the same diagnostic tests for nearly  all the patients he treated, regardless of  
their symptoms.  He also  instructed his non-physician employees to order and perform  
diagnostic tests for patients of other doctors working at his companies, even though he had 
not examined those patients and the other physicians had not ordered the unnecessary  
tests.  He admitted that he falsified patient  charts  and falsely diagnosed  a majority of his  
patients with coronary  artery disease  and debilitating and inoperable  angina to justify  
prescribing and administering unnecessary treatment, therefore subjecting them to serious  
risk of injury or death.   
 
 	  In January 2014, the physicians group Hematology and Oncology Center  PLLC of  
Somerset, Kentucky, its oncologist owner, and its  office manager  agreed to pay $2 million 
to resolve  civil  FCA  allegations that they purchased non-FDA approved chemotherapy  
drugs  at steep discounts from a foreign distributor  known as Quality Specialty Products  
and submitted or caused the submission of false claims to Medicare  for those drugs.  The  
practice group and office manager pleaded  guilty to misdemeanors under the  FDCA and  
agreed to a voluntary exclusion from the Medicare program for six  years.   
 
 	  In  March 2014, a licensed psychiatrist formerly employed by the Department of Veterans  
Affairs  was sentenced to  a year-and-a-half in jail and was ordered to pay $1.2 million in 
restitution.  According to court documents, the psychiatrist  billed Medicare approximately  
$4 million for home treatment of beneficiaries.  However, many  of those visits never  
occurred.  On a number of occasions, he  submitted claims to Medicare for home medical  
visits at locations within New York City, even though he  was physically located in China  
26 

  at the time of these purported home visits.  Additionally, he submitted claims to Medicare  
for 55 home medical visits to beneficiaries  who were hospitalized on the date of the  
purported visits.  In addition to the sentencing, the psychiatrist was excluded from  
participating in  any  federal health care programs for 15  years.   
 
 	  In April  2014, a doctor of osteopathic medicine  who owned the dermatological practices  
AGS,  Inc. and Central West Virginia Dermatology Associates,  Inc., was sentenced to  
eight years and three months of incarceration and was ordered to pay $265,330 in 
restitution and a $2.6 million fine. Between May 1998 and June 2004, the doctor  allegedly  
submitted false claims to Medicare and Medicaid and, as a result, he reached a settlement  
with the United States in August 2005 that included his voluntary exclusion from all  
federal health care programs for 10  years.  According to the  government, after his  
voluntary exclusion the doctor  arranged  an elaborate scheme to hide his involvement with  
his dermatology  clinics and continue billing and receiving payment from  Medicare and 
Medicaid, which included sham sales of the clinics.  He  later lied  in Federal bankruptcy  
court, lied to a Federal investigator, stole the identity of another physician, and obstructed 
an IRS investigation.  The doctor  was  convicted by  a jury on charges of health care fraud,  
bankruptcy fraud, identity  theft, and the filing  of false tax returns.  
 
 	  In April 2014, Hope Cancer  Institute, Kansas-based practice, and its oncologist owner  
agreed to pay $2.95 million to settle  civil FCA  allegations that they  submitted false claims  
to federal health care  programs  for the  administration of the cancer drugs Rituxan, 
Avastin, and Taxotere at  higher dosages  than  were actually provided to the  beneficiaries.  
As part of  the settlement, the doctor agreed to a ten-year  exclusion from  all federal  health  
care programs.  
 
 	  In June 2014, a North Carolina physician pled guilty to criminal health care fraud and tax  
evasion and agreed to pay  $6.2 million to settle  civil FCA  allegations  that he submitted  
claims  to federal health care  programs for medically unnecessary tests and procedures and 
for services never provided.  The  government alleged that  the physician and his medical  
practice  submitted  claims  for  echocardiograms, allergy tests, hemorrhoidectomies,  
Enhanced External Counterpulsation (EECP) therapy  and other tests and procedures that  
were never provided or, if provided, were not medically necessary.  
Pharmacies  
 
 	  In November 2013, Caremark L.L.C., a pharmacy benefit manager  (PBM)  operated by  
CVS Caremark Corporation, agreed to pay $4.3 million to settle civil FCA  allegations that 
it wrongfully avoided repayment for prescription drug  costs that Medicaid incurred for  
beneficiaries who also were covered by private health insurance plans  for  whom Caremark  
administered prescription benefits.  The government  alleged that Caremark  used a 
computer claims  processing platform called  Quantum  Leap to deny claims for  
reimbursement submitted by Medicaid, which is the payer of last resort when the  
beneficiary is also covered by private insurance.  
 
   
27 

   	  In February 2014, long-term care pharmacy provider  Omnicare, Inc. agreed to pay  
$4.2 million to  resolve  civil  FCA  allegations that it knowingly caused false  claims for the  
drug  Aranesp to be submitted to federal health care programs.  The settlement resolves  
allegations  that Omnicare solicited and received kickbacks from the drug  manufacturer  
Amgen Inc. in return for  implementing therapeutic interchange programs designed to 
switch beneficiaries from a competitor drug to Aranesp.  Amgen previously paid $24.9 
million to resolve allegations relating to payments to  Omnicare and other  pharmacies.  
 
 	  In March  2014, Sears Holdings Corporation and Kmart Corporation (collectively, Kmart)  
agreed to pay $3.3 million to settle allegations that Kmart offered and paid remuneration 
in the form of  gift cards and coupons to beneficiaries of  federal health care programs to  
induce the beneficiaries to transfer or fill their prescriptions at Kmart pharmacies.  The 
government alleged that, as a result of this conduct, Kmart violated the  FCA  by submitting  
improper claims for payment to Medicare, TRICARE, the Veterans Affairs program, and 
Medicaid.  Sears  wholly  owns Kmart, which operates retail stores  containing pharmacies  
throughout the United States. 
 
 	  In June 2014, long-term  care pharmacy provider  Omnicare  Inc. agreed to pay $124 million 
to resolve  civil FCA  allegations that it offered  improper financial incentives to skilled  
nursing facilities to  select Omnicare to supply drugs to elderly Medicare and Medicaid  
beneficiaries.  The government alleged  that Omnicare entered into below-cost contracts to  
supply prescription medication and other pharmaceutical drugs to skilled nursing facilities  
and their resident patients in order  to induce the  facilities to select Omnicare as their  
pharmacy provider.  
 
 	  In September 2014, CVS Caremark  agreed to pay  $6 million to settle civil FCA  
allegations that it failed to reimburse Medicaid for prescription drug costs paid on behalf  
of Medicaid beneficiaries who also were eligible for drug benefits under Caremark
administered private health plans.  The settlement  resolved allegations that CVS Caremark  
improperly deducted  certain co-payments  and deductible amounts  from payments that  
Medicaid was  entitled to receive, causing Medicaid to incur prescription drug costs that  
should have been paid for by the Caremark-administered private health plans.  
 
Prescription Drug Fraud   
 
 	  In October 2013, the manager and registered agent of  Miami-Dade County  based 
Greenwall Pharmacy  Discount,  Inc.  (Greenwall Pharmacy)  was sentenced  to  five  years  
and three months of incarceration. The defendant  and his co-conspirators paid recruiters to 
refer Medicare beneficiaries to Greenwall Pharmacy,  where their Medicare numbers were 
used to file false  claims for various health care benefits, primarily prescription drugs.  The  
manager  also purchased false invoices from  a pharmaceutical wholesaler.   Medicare Part  
D plan sponsors paid Greenwall Pharmacy  approximately $6.8 million in reimbursement  
for the false claims.   In addition to his term in prison, the defendant was ordered to pay  
$6.8 million in restitution after pleading  guilty to conspiracy to commit health care  fraud.    
 
28 

   	  In October 2013, National Respiratory Services, LLC (NRS), a  Louisville-based mail-
order pharmacy, was ordered to pay  restitution in the amount of $2 million for FDA  
violations and health care fraud.  In July 2006, Medicare drastically reduced the  
reimbursement rate for  compounded drugs to discourage companies from using those  
particular  codes.  On July  1, 2007, Medicare began denying  all claims for inhalation 
compounded drugs, deeming them medically unnecessary.  According to the indictment, 
NRS allegedly marketed  directly to doctors who specialized in treating respiratory  
illnesses, and solicited business from these doctors to supply their patients  with the drugs  
that the  doctors prescribed to treat asthma, emphysema, and other  respiratory illnesses.  
Between July 2006 and June 2008, NRS compounded drugs and then falsely  represented 
that the drugs  were FDA-approved when, in fact, these drugs were not  FDA approved, 
were of various potencies, were non-sterile, and therefore were adulterated and  
misbranded. NRS was ordered to pay $2 million in restitution, joint and several, after  
pleading  guilty to health care  fraud charges.  NRSs vice  president  and two pharmacists  
were all sentenced in connection with this case.   
 
 	  In December 2013, a Kansas  radiologic  technician was sentenced to serve 39  years in  
prison and ordered to pay $22,680 in restitution after pleading  guilty to charges of  
tampering  with a consumer product  and fraudulently obtaining controlled substances. 
According to court documents, while employed at Hays Medical Center in Kansas in June  
2010, the defendant  became aware that he was infected with Hepatitis C.  Notwithstanding  
that knowledge, he injected himself with syringes of the anesthetic fentanyl, which were 
intended for patients who were undergoing medical procedures.  He  added saline to the  
same syringes, which were then administered unknowingly by nurses to the patients.  
Consequently, instead of  receiving the  prescribed  dose of fentanyl, the patients received  
saline that was tainted with the Hepatitis C virus.  The  defendant  repeated this pattern of 
behavior at other hospitals where he worked, which investigators determined, caused at  
least 45 patients to become infected with Hepatitis C.  Some of these patients experienced  
very serious health complications, including one death in which Hepatitis  C was a 
contributing factor.   
 
 	  In December 2013, a Philadelphia doctor was sentenced to 30 years in prison, ordered to 
forfeit $200,000 and fined $50,000 for operating  a pill mill out of his clinic.  The defendant  
was the physician owner  of Family Medical Society,  a division of Womens Medical  
Society, Inc. (Womens  Medical Society).  According to the indictment, the physician and  
his co-conspirators  allegedly ran  a pill mill out of Womens Medical Society.  His  
customers purchased prescriptions for controlled prescription drugs without any legitimate  
medical purpose.  The United States charged  that the defendant used his practice to  
distribute over 500,000 pills containing oxycodone, 400,000 pills containing alprazolam, 
and over 19,000 ounces  of cough syrup containing codeine. Many of the illegal  
prescriptions and some office visits were paid for  by Pennsylvania Medicaid, Medicare 
Part D, and other insurers.   
 
 	  In February 2014, a resident of Allegheny County, Pennsylvania, was sentenced in federal  
court to six months imprisonment, six  months of home confinement, three  years of  
29 

  supervised release, and forfeiture of $56,000, on his conviction of unlawfully selling drug  
samples. The defendant  met his supplier in various grocery store parking lots late at night  
to receive  garbage bags  filled with the samples.  The samples had the lot numbers and 
expiration dates removed from  the pill packaging  making it impossible to know if the  
drugs had expired or had been recalled. Over the time period charged, the defendant  
collected a total of $181,108.   
 
 	  In August 2014, the leader of a $20 million drug-diversion scheme was sentenced to  eight  
years in prison and ordered to pay more than $9 million in restitution.  The sentence  
followed a  February 2014 jury verdict against three defendants charged with participating  
in a conspiracy to defraud Medicare and Medi-Cal through the issuance of  thousands of  
fraudulent prescriptions  of anti-psychotic drugs out of a sham medical  clinic in Glendale, 
California.  The drugs would be filled at pharmacies by recruited beneficiaries and then 
returned to the  clinic, where the drugs would be diverted to the black market, sold back to 
pharmacies, made to look like new bottles, and re-billed again in a repeating cycle.   In  
November 2011, a total of 18 defendants were indicted in connection with the scheme, of  
which 16 have been convicted to date.   
 
Medical  Clinics  
 
 	  In October 2013, the operator of several medical clinics in and around Houston, Texas, 
was sentenced to  six  years of incarceration and ordered to pay $4.3 million in restitution, 
joint and several, after pleading  guilty to conspiracy to commit health care fraud. The 
defendant had been excluded from participation in all Federal health care programs on the  
basis of an earlier health care  fraud conviction in California.  To conceal his involvement  
with the clinics, the operator registered the clinics in the names of other individuals, 
known as straw owners, including the mother of his child and employees  at the clinics.  
According to court documents, he allegedly paid individuals to recruit Medicare  
beneficiaries, including some residing in homeless shelters, to visit the clinics to receive  
medically unnecessary diagnostic tests.  He partnered with another individual, who acted 
as the medical director  of the clinics, though he  did not see or evaluate patients.  The  
two conspirators then billed Medicare more than $15 million for the unnecessary tests, 
using the second individuals Medicare provider  number. The co-defendant  was sentenced  
to four  years and  four months in prison and ordered to pay $6.9 million in restitution.  
 
 	  In February 2014, two physicians who owned a chain of addiction treatment clinics and a 
clinical laboratory  agreed to pay $15.8 million to resolve civil FCA  allegations relating to  
fraudulent urine testing.  The government  alleged  that the lab (PremierTox  2.0 LLC)  
submitted false claims to  federal health care  programs  for medically unnecessary  
quantitative urine drug tests referred to it by the treatment clinic  (Addixxion Recovery of  
Kentucky, LLC (d/b/a  SelfRefind)).   PremierTox allegedly misidentified the class of drug  
that was tested for  and, as a result, obtained greater reimbursement than it  was entitled to 
receive. As part of the settlement, the laboratory entered into a five-year CIA with HHS
OIG that obligates PremierTox to undertake substantial internal compliance reforms and 
commit to third-party reviews of claims submitted to  federal health care programs. 
30 

   	  In March 2014, Valley Heart Consultants  and two of its physicians agreed to pay  
$3.9 million to settle civil FCA  allegations that they  billed  Medicare for nuclear stress  
tests that were substandard and, in many cases, unnecessary.  The  government also alleged 
that the  nuclear medicine used in the tests was injected by personnel who lacked the  
requisite license.  
 
 	  In April 2014, CRC Health Corp. (CRC), a national substance abuse and mental health  
treatment provider, agreed to pay $9.3 million to settle civil FCA allegations that it 
submitted false claims for substandard treatment of adult and adolescent Medicaid patients  
suffering from alcohol and drug  addiction.  The  government alleged that CRC billed for  
substance abuse therapy  services at New  Life Lodge, its facility in  Burns,  Tennessee, that  
were not provided or were provided by therapists who were not properly licensed by the  
state of Tennessee.  The government also alleged  that CRC failed to make a licensed  
psychiatrist available to  patients at New  Life  Lodge,  failed to maintain required patient-
staffing  ratios, and exceeded the state-licensed bed capacity  at the facility.  In addition, the  
government alleged that CRC double-billed Medicaid for prescription substance abuse  
medications given to New  Life  Lodge  residents.  
 
 	  In May 2014, Massachusetts-based Calloway Laboratories, Inc. (Calloway Labs)  agreed to 
pay $4.7 million to settle civil FCA  allegations that it submitted  false claims  in connection 
with unnecessary urine drug testing.  
 
Dental Practices  
 
 	  In October 2013, a  Connecticut resident was sentenced to  eight  years and  one month in 
jail and ordered to pay $5.2 million in restitution  after pleading  guilty to charges of health  
care fraud  and tax evasion.  He had been excluded by  HHS-OIG  from participating in  
Federal health care programs (including Medicaid) partnered with a dentist to fraudulently  
open three dental practices in Connecticut.  In the applications to enroll the entities as  
Medicaid providers, this  defendant  failed to disclose that he had an ownership interest in 
the dental practices, that  he was the subject of prior disciplinary  and criminal actions, or  
that he was excluded from the Medicaid program.  He concealed his involvement in the  
dental practices by having other licensed dentists, including his business partner act as  
nominal heads of the clinics.   
 
Medical Equipment and Supplies  
 
 	  In October  2013, a Los  Angeles-area  church pastor was sentenced to 87 months in prison 
for conspiring to defraud Medicare. The defendant owned and operated the  DME  
company Bonfee, Inc.  His daughter owned and operated the  DME company  Ibon, Inc.  
According to the indictment, two other co-conspirators acted  as marketers  who solicited  
and obtained Medicare beneficiaries information by offering them medically unnecessary  
medical equipment.  The  information was used by  a physician and others to create  
fraudulent prescriptions and medical documents.  The two DME owners then used the  
information to submit or cause the submission of  more than $11 million in false claims to 
31 

  Medicare for power wheelchairs and other medical equipment that had not been provided 
or were medically unnecessary.  Four of the  conspirators previously  pleaded guilty and 
were sentenced to a combined 14 years  and nine  months of incarceration and were ordered 
to pay joint and several restitution of $6.3 million.  The fifth  was  convicted  at trial and is  
awaiting sentencing.    
 
 	  In November 2013, the Richmond, Texas owner  of a DME  company was sentenced to  
four  years in prison and ordered to pay nearly $1.5 million in restitution following his  
conviction for conspiracy to commit health care fraud and health care fraud aiding and 
abetting. Spectrum Foundation, Inc. (Spectrum)  was a Texas business that purportedly  
provided Medicare and Medicaid beneficiaries with orthotics and other DME.  According  
to the indictment, Spectrums owner and his co-conspirators used Spectrum to submit  
claims for DME that were medically unnecessary  or were not provided at all and claims  
for DME that were intentionally miscoded.  Spectrum then submitted claims to Medicare  
in excess of $3.4 million for these and other items, including 157 unpaid claims on behalf  
of deceased beneficiaries.  The owner  also owned and operated an ambulance  
transportation company and submitted or caused the submission of claims to Medicare for  
ambulance services that  had not been provided or for instances when the beneficiaries had  
been transported in a standard minivan.   
 
 	  In February 2014, a Houston, Texas defendant was sentenced to 87 months in federal  
prison for his role in a multi-state health care fraud scheme involving unnecessary  
motorized wheelchairs.  The defendant was ordered to pay restitution in the amount of  
$1.6 billion to the Medicare and Medicaid programs and a fine of $12,500.  According to 
the indictment, from May  2002 to June 2003, the defendant  conspired with others to 
defraud Medicare and Medicaid through the mass  marketing of motorized wheelchairs. As  
part of the scheme, the defendant  and his co-conspirators recruited Medicare and Medicaid 
beneficiaries and would secure the beneficiaries protected health information. The  
defendant  and his co-conspirators created false medical necessity certificates, drafted  
prescriptions from doctors who had never examined those beneficiaries, and then billed 
Medicare for motorized  wheelchairs.  He then delivered less expensive scooters to the 
beneficiaries instead, and in other instances, did not deliver anything  even though 
Medicare had paid for a motorized wheelchair.   
 
 	  In April  2014, the owner  and managing employee  of Midvalley Medical Supply who also  
worked as  an office manager  under a different name at the Vermont Clinic in Los  
Angeles, was sentenced to  six  years and  four months of incarceration and ordered to pay  
$9.6 million in joint and several restitution.  According to the indictment, the managing 
employee, along with a physicians assistant at  the  Vermont Clinic  and others, recruited  
and transported Medicare beneficiaries to the Vermont Clinic, often with the promise of  
free, medically unnecessary DME.  Some of these beneficiaries lived hundreds of miles  
away.  The beneficiaries  were often prescribed  DME and underwent  medically  
unnecessary tests, including nerve conduction tests and ultrasounds.  The managing 
employee then  used the patient information  obtained from beneficiaries at the Vermont  
Clinic  to bill for medically  unnecessary DME prescriptions through her DME company, 
32 

  Midvalley. In addition to her sentencing, the managing employee was excluded from  
participating in  any  federal health care programs for 30  years. The physicians assistant  
pleaded guilty to charges of health care fraud and conspiracy to commit health care  fraud 
and is awaiting sentencing.   
 
 	  In  June 2014, following their convictions at trial, two Los Angeles area  DME supply  
owners and a San Francisco based recruiter were sentenced to 144 months, 51 months, 
and one  year and  one day, respectively, for their roles in a $3.2 million health care  fraud 
and kickback conspiracy.  A San Francisco physician and another  recruiter, both of whom  
pled guilty and testified at trial, were sentenced to 24 months in prison and three  years 
probation, respectively.  The lead defendants were also ordered to forfeit $1,577,426 and 
pay  restitution of the same amount to CMS. The investigation showed that from  
approximately December 2006 and continuing through July 2011, the owners submitted 
over 400 false and fraudulent power wheelchair claims to Medicare in the names  of 
beneficiaries identified by  recruiters using  fraudulent prescriptions and medical records  
prepared by the physician.  After the recruiters identified beneficiaries, the physician  
conducted sham examinations to obtain background information for the required Medicare 
paperwork and gave the information and bogus prescriptions to the owners.  The owners  
paid the physician a $100 kickback for each power wheelchair prescription.   
 
Skilled Nursing Facilities  
 
 	  In October 2013, the Ensign Group, LLC  agreed to pay $48 million to resolve claims that 
between 1999 and 2011, six of its  skilled nursing facilities submitted false claims to the  
government for physical, occupational, and speech therapy services that were not  
medically necessary to treat the conditions of Medicare beneficiaries  or  were not  provided. 
The Government also alleged that the Ensign facilities had a corporate culture that  
improperly incentivized therapists and others to increase the amount of therapy provided 
to patients to meet allegedly planned targets for Medicare revenue that were set without  
regard to patients individual therapy needs and could be achieved only by upcoding  
and/or providing unnecessary  services.   
 
 	  In  December 2013 and January 2014, two former executives  of HealthEssentials  
Solutions, Inc., a now-defunct provider of  primary medical care to patients  in  long-term 
care  facilities, agreed to  pay  a combined $1 million to resolve civil FCA  allegations that 
between 1999 and 2004 they caused  HealthEssentials  to  bill for services that were inflated  
or not medically necessary  and pressured employees to conduct special medical  
assessments on patients without regard to whether the patients required the assessments, 
solely to increase the  amount that HealthEssentials could bill for the visits.  
HealthEssentials and another executive previously pleaded  guilty to  criminal charges  
arising out of their role in the companys billing scheme.  
 
 	  In June 2014, Foundation Health Services, its affiliated nursing facilities, and its President  
and Chief Executive Officer agreed to pay  a combined $750,000 to resolve  civil  FCA  
33 

  allegations that they submitted false claims for payment to Medicare  and  Medicaid for  
materially substandard  and/or worthless skilled nursing facility services.   
 
Home Health Care  
 
 	  In December 2013, five  Miami, Florida based patient-recruiters were sentenced to a 
combined 20 years  and 4 months in prison and ordered to pay  a combined $30.6 million in 
restitution.  Caring Nurse  Home Health, Corp. and Good Quality Home Health, Inc., were  
Florida-based businesses  that purportedly provided home health care and physical therapy  
services to eligible Medicare beneficiaries.   According to the indictment, the companies  
presidents and co-conspirators allegedly paid kickbacks to individuals to recruit  
beneficiaries as patients.  The companies then billed Medicare for home health services,  
including diabetic injections, skilled nursing visits, and physical therapy, which were not  
medically necessary and/or had not been provided.  The defendants also sent patient 
recruiters and beneficiaries to doctors to obtain prescriptions for home health services that  
were not medically necessary.  The two companies submitted about $52.5 million in 
claims to Medicare  for home health services purportedly provided to about 1,300 
beneficiaries. The presidents of the two companies were previously sentenced to a 
combined 13 years and three months in prison and ordered to pay $35 million in 
restitution. 
 
 	  In January 2014, nine individuals were sentenced to a combined 26 years and 11 months  
of incarceration and ordered to pay a  combined $29.9 million in restitution, joint and 
several, for their connections to a Medicare fraud scheme.  The owners of five home health 
companies, located in Oak Park, Michigan, and later Troy, Michigan,  created fictitious  
therapy files, appearing to document physical and occupational therapy services provided 
to Medicare beneficiaries when, in fact, no such services were provided.  According to 
court documents, the owners hired patient  recruiters, who offered cash and the promise of  
prescriptions drugs to Medicare beneficiaries in return for their Medicare identification 
numbers.  Physical therapists and physical therapist assistants at the companies used the  
Medicare information to  create false physical therapy  files using blank, pre-signed forms  
to make it appear  as if physical therapy services had been rendered.  The forms were then  
used to bill Medicare nearly $20 million for services that had not been rendered and were  
medically unnecessary.   
 
 	  In April 2014, Amedisys  Inc. and its affiliates, a Louisiana-based for-profit company that 
is one of the nations largest providers of home health services, agreed to pay $150 million 
to resolve  civil FCA  allegations that they submitted false home  health care  billings to the  
Medicare program.  The settlement resolved allegations that between 2008 and 2010 
certain Amedisys offices  improperly billed Medicare for ineligible patients  and services.   
Amedisys allegedly billed Medicare for nursing  and therapy services  that  were medically  
unnecessary or provided to patients who were not  homebound, and otherwise  
misrepresented patients  conditions to increase its  Medicare payments.  Additionally, the  
settlement resolved certain allegations that Amedisys  financial relationship with a private  
oncology practice  whereby  Amedisys  employees provided patient care  coordination 
34 

  services to the oncology  practice at below-market prices   violated the Anti-Kickback  
Statute  and Stark  Law. As part of  the settlement,  Amedisys agreed  to enter into a  
comprehensive  five-year  CIA with HHS-OIG.  
 
 	  In June 2014, four defendants involved in a home health care fraud scheme  were 
sentenced to a  combined 13 years and seven months in prison and were ordered to pay  
more than $5.5 million in joint and several restitution. The defendants were a doctor of  
osteopathic medicine and medical director  for the home health agencies Jackson Home 
Healthcare,  Inc. (JHH) and Prestige Health Services,  Inc. (PHS); the director of JHH;  a 
registered nurse, PHSs director of nursing, and director of the home health agencies  
Houston Compassionate Care, Inc. (HCC) and Texas Comprehensive Healthcare  
Resources, Inc. (TCHR); and a local hospital worker.  According to the indictment, the 
local hospital worker  accessed hospital files without authorization and obtained personal  
health information of hospital patients, which he then provided to the director of JHH in 
return for payment.  Employees of TCHR then used the stolen information to contact  
beneficiaries and solicit them for home health care services, including falsely  stating that 
the beneficiaries physicians referred them for  a home health evaluation when, in fact, the 
physicians never made a referral, did not establish a plan of care,  and were unaware that  
the beneficiaries were being contacted by a home health agency.  JHH, PHS, and HCC  
billed Medicare more than $12 million for home health services allegedly provided to 
beneficiaries who had been solicited.  The services did not qualify for payment because  
the patients:  (a) were not under the care of a physician who had established the plan of  
care, (b) were not  confined to the home, and (c) were not in need of skilled nursing care.   
 
Counseling  
 
 	  In December 2013, a licensed professional  counselor in Oklahoma was sentenced to 21 
months in prison and ordered to pay $147,184 in restitution for presenting  false claims  
against the Medicaid Program for services not provided.  The defendant pled guilty to 
presenting false  claims to the Oklahoma Health Care Authority.  
 
 	  In April 2014, two women who defrauded North Carolina Medicaid using stolen 
therapists identities were sentenced in Charlotte, North Carolina.  One defendant was  
sentenced to 111 months  in prison and her co-conspirator was sentenced to 102 months, 
and they were both ordered to pay a combined $10.1 million in restitution, jointly  and 
severally.  From 2008 to 2012, both defendants operated a series of afterschool and 
summer child care programs.  They recruited juvenile Medicaid beneficiaries and their  
families to participate in the programs by promising that the programs would be free for  
Medicaid recipients.  Thereafter, the defendants and others stole the Medicaid 
identification numbers of the children and used those numbers to submit false claims for  
mental health services that were never provided.  The two also stole the identities of  
licensed and approved clinicians in order to submit the claims.  One defendant was  also  
excluded from participating in any  federal health care program for 28 years.  This was a 
joint investigation by the  HHS-OIG,  the IRS and the North Carolina Medicaid 
Investigations Division. 
35 

   	  In May 2014, a licensed professional counselor in Oklahoma was sentenced to three  years  
of probation, ordered to complete 104 hours of community service, and ordered to pay  
$98,003 in restitution for submitting false and fraudulent claims against the Medicaid  
Program for services not  provided.  From November 2009 through April 2011, the  
defendant  claimed Medicaid reimbursement for behavioral counseling services for 
Medicaid-eligible children, which was never actually provided.  
 
Managed Care Organizations  
 
 	  In August 2014, the City  of New York agreed to pay  $2 million to resolve  civil FCA  
allegations that the New  York City Human Resources Administration (HRA) caused  
various managed care organizations to provide health care  coverage to individuals that  
were ineligible to receive Medicaid benefits through New York States Medicaid program.  
As part of the settlement, HRA accepted responsibility for failing to timely  review and  
close certain Medicaid  cases after being provided information that those beneficiaries may  
have moved outside of New York City, and it admitted that its inaction caused one or  
more MCOs  to receive payments to insure individuals who were ineligible  for benefits  
through New York States Medicaid program.  HRA also agreed as part of the settlement  
to establish a process to investigate and close Medicaid cases  whenever it learns that a 
Medicaid beneficiary no longer  resides within its coverage area.   
 
Chiropractic Services   
 
 	  In May 2014, the  owner  of Sylmar Physician Medical Group,  Inc., a chiropractic clinic 
located in a strip mall in San Fernando Valley, California, was sentenced to  five  years and 
three months in jail, was ordered to pay $1 million in restitution, and had more than 
$300,000 in assets seized.  According to court documents, the owner  billed  Medicare for  
chiropractic manipulations purportedly provided to beneficiaries when, in fact, the  
treatments were either merely massages and not reimbursable by Medicare or were never  
actually provided.  In an effort to conceal his fraud from  HHS-OIG investigators, the 
owner  falsely  reported to the Los Angeles Police Department that he had been carjacked  
and that the requested patient files had been stolen.  The owner  billed Medicare more than  
$1.7 million for purported chiropractic treatments  between 2005 and 2012, for which he  
was paid more than $1 million.  
 
Physical Therapy  
 
 	  In December 2013, three  individuals doing business in Houston, TX locations as the  
Lymphedema  & Wound Care  Institute  Inc. agreed pay $4.3 million to settle  civil FCA  
allegations that they submitted false claims for physical therapy treatments provided by  
unqualified therapists.  The government alleged that from  January  2006 through 
September  2012, the defendants billed the Medicare program for providing  manual  
lymphatic drainage therapy using massage therapists as opposed to physical therapists, as  
required under Medicare  rules and regulations.  As part of the settlement, one of the  
individuals agreed to a 10-year  exclusion  from all federal health programs.  
36 

   	  In January 2014, contract therapy providers RehabCare Group, Inc. and RehabCare Group 
East,  Inc. (collectively, RehabCare); Rehab Systems of Missouri (RSM); and management  
company Health Systems, Inc. (HSI)  agreed to pay $30 million to resolve  civil FCA  
allegations that, between March 2006 and December 2011, RehabCare arranged with 
RSM to obtain RSMs contracts to provide therapy  to federal health care program  
beneficiaries residing in 60 nursing homes  controlled by RSMs majority owner and 
managed by HSI.   In  exchange for this stream of referrals, RehabCare allegedly paid RSM  
an upfront payment of  as much as $600,000, plus a percentage of the revenue generated by  
each referral.  
 
 	  In March 2014, the co-owners of  Flores Home Health Care Inc. were sentenced to a 
combined 12 years in prison and ordered to pay $8.4 million in joint and several  
restitution for their involvement in the fraud scheme. From approximately  October 2009 
through June 2012, the co-owners of  this Miami home health care agency  billed Medicare 
and were paid approximately $8 million for physical therapy and home health services that  
were not medically necessary and/or had not been provided.   
 
 	  In April 2014, physical therapy clinics Alliance Rehabilitation,  LLC and Active Physical 
Therapy Services, LLC agreed to pay $2. 8 million to settle civil FCA allegations that they  
submitted claims falsely  representing that the physical therapy services being billed were  
either rendered or directly  supervised by the physical therapist identified on the claims.  In 
fact, the physical therapist identified on the claims allegedly had no involvement in the  
services rendered.   
 
Hospice Care  
 
 	  In November 2013, Hospice of the Comforter Inc. (HOTCI) agreed to pay $3 million to 
resolve civil FCA allegations that it provided hospice services  to patients who were not  
terminally ill and not eligible for the Medicare hospice benefit.  Specifically, HOTCI  
allegedly directed its staff to admit all referred patients without regard to whether they  
were eligible for the Medicare hospice benefit, falsified medical records to  make it appear  
that certain patients were eligible, employed  field  nurses without hospice training,  
established procedures to limit physicians  roles in assessing patients terminal status and  
delayed discharging patients when they became ineligible for the benefit.  
 
 	  In March 2014, CLP Healthcare Services, the parent company of Hospice Compassus, of 
Bretwood, Tennessee,  agreed  to pay $3.9 million to settle civil FCA  allegations that it 
submitted false claims for patients treated  at its hospice facilities.  The government alleged  
that Hospice Compassus was submitting false  claims for hospice care  for patients who 
were not eligible for such care.  
 
 	  In May 2014, the operator of  Home Care Hospice,  Inc. (HCH),  a for-profit hospice  
provider that purportedly provided hospice services for patients at nursing homes, 
hospitals, and private residences, in the Philadelphia, Pennsylvania area,  was sentenced to  
14 years and eight months in prison and ordered to pay $16.2 million in restitution, joint  
37 

  and several.  According to the indictment, the operator and his co-conspirators billed 
Medicare more than $14 million for alleged services provided by HCH, even though:  (1)  
some patients were ineligible and inappropriate for hospice care; and (2) some services  
were billed at a higher reimbursement level, but still not provided to the patients.   In order 
to increase HCHs patient census, the operator authorized payments to certain physicians  
and other health care professionals  as an incentive to refer patients to HCH and to certify  
that they were  appropriate for hospice  care, even though they were not eligible.  He also 
paid physicians  and other health care professionals to serve as HCH medical directors,  
hospice physicians, and advisors when, in reality, the contracts for these positions were to 
mask payments for patient referrals.  The operator  directed employees  to maintain  
ineligible patients who were not terminally ill on hospice care, in some instances  for more  
than one  year, and he  authorized the fabrication of supporting documentation for patient  
files to substantiate  approximately $12.8 million in fraudulent claims billed to Medicare.  
The operator was  found guilty by  a jury on charges of conspiracy to commit health care  
fraud, health care fraud, money laundering, and mail fraud.  Ten other defendants have  
been sentenced to a combined  eight  years in prison in connection with this scheme.  
 
Identity Theft  
 
 	  In December 2013, an undocumented alien residing in Wisconsin was sentenced to six  
months in prison and ordered to pay $231,920 in restitution after pleading  guilty to a  
charge of theft of  government funds. The defendant  falsely used the identifying  
information of another person to obtain federally  funded health care benefits and Social  
Security disability benefits.  From 2004 to 2009, she received health care items and 
services, including a liver transplant, for  which Medicaid and Medicare collectively paid a 
total of $165,463.  From  2005 through 2011, she used the same false identity  to 
fraudulently qualify for about $66,457 in Social Security disability benefits, which she  
converted to her own use knowing she  was not entitled to them.   
 
Ambulance Transportation Fraud  
 
 	  In November 2013, Filyn Corporation, the  owner  and operator  of California-based  Lynch  
Ambulance, paid more than $3 million to resolve civil FCA allegations that  from  
approximately 2001 through 2007, Filyn regularly billed Medicare  and TRICARE for 
non-emergency, basic life support transports of beneficiaries who were not  bed-confined 
at the time of transport or whose transports were otherwise not medically necessary.  
 
 	  In November 2013, Pacific Ambulance,  Inc. (Pacific) and  Bowers  Companies, Inc. 
(Bowers), both California ambulance companies, agreed to pay $8 million to resolve  civil 
FCA  allegations that between 2004 and 2011, they  entered into numerous  below-cost  
contracts with skilled nursing facilities.  The Government alleged  that  the  contracts  
constituted prohibited swapping arrangements, wherein Pacific and Bowers offered 
prices to the skilled nursing facilities that were below their total costs of providing  
ambulance transport services in return for referrals of future Medicare business.  
 
38 

   	  In January 2014, a husband and wife team who owned and operated the Murfreesboro  
Ambulance Service (MAS)  in Tennessee, were sentenced to a combined  12 years and one  
month of incarceration after being convicted by  a jury on charges of conspiracy, Medicare 
fraud, making false statements related to health care matters, wire fraud, and aggravated  
identity theft.   The defendants ambulance company transported Medicare and Medicaid  
patients to and from dialysis treatments who were not qualified to receive ambulance 
transportation.  According to evidence presented at trial, for more than a decade, the  
couple submitted and caused MAS to submit about $1.2 million in false claims to  
Medicare and Medicaid.  The claims falsely represented that beneficiaries  were on  
stretchers when, in fact, they  were actually transported in the front seat of the ambulance 
or in a seat in the back of the ambulance  and that  patients were transported individually  
when, in fact, two patients were transported simultaneously in one ambulance.  To conceal  
the fraud, the husband and wife and their  co-conspirators allegedly omitted  facts and/or  
provided vague descriptions on records that were  used to falsely bill Medicare.  In  
addition to their prison sentences, they were also ordered to pay $457,730 in restitution.   
 
 	  In May 2014, the president  and vice president  of Alpha  Ambulance, Inc., an ambulance 
transportation company located in Los Angeles, California, were sentenced to a combined  
15 years and 3 months in jail and were ordered to pay $1.6 million in joint and several  
restitution. According to the indictment,  the defendants, along  with their co-conspirators, 
provided ambulance transportation services to Medicare beneficiaries, knowing that their  
medical condition did not necessitate the transportation services.  The co-conspirators  
instructed Alpha employees to document a  reason justifying  ambulance transportation 
services on run sheets even if a justification did not exist.  Between June 2008 and July  
2012, Alpha submitted approximately $49 million in claims to Medicare  for purported  
ambulance transportation and related services.    
 
 	  In July 2014, the owner  and operator of Penn Choice Ambulance  Inc., an  ambulance 
transportation company  based in Philadelphia, Pennsylvania, was sentenced to  eight  years  
in prison and ordered to pay $1.8 million in joint and several restitution.  According to 
court records, the owner  and her co-conspirators transported by  ambulance Medicare  
beneficiaries who could walk or be safely transported by other means, falsely representing  
to Medicare that these patients required transportation by ambulance.  The  defendants  also 
targeted and  recruited patients who attended dialysis treatment, which is typically  required  
three  times per week, thereby allowing Penn Choice to bill extensively  for  these patients.  
To induce Medicare beneficiaries to be transported by Penn Choice  even though such 
ambulance transport was  not medically necessary, the defendants paid beneficiaries  
kickbacks of between $100 and $500 a month.  Penn Choice billed Medicare  
approximately $3.6 million for these false claims, which resulted in a more  than 
$1.5 million loss  to Medicare.  Three other defendants were sentenced to a  combined nine  
years in prison in connection with this scheme. 
 
 	  In  August 2014, former  Texas EMS officials were sentenced for their roles in a health care  
fraud conspiracy involving unnecessary ambulance services following their conviction 
after  a jury trial in 2013.  The former owners and operators of  North East Texas EMS, 
39 

  and, a supervisor  employed by  North East Texas  EMS, carried out a scheme to defraud 
Medicare and Medicaid through the submission of false and fraudulent  claims for  
nonemergency, scheduled, repetitive ambulance services which did not meet Medicare 
program coverage criteria. The owners were sentenced to imprisonment of 27 months, and 
12 months and one day. Both were ordered to pay more than $787,000 in restitution. The  
supervisor was sentenced to a five  year term of probation with a condition requiring him  
to serve weekends in jail  for the first  year. He was  also ordered to pay more  than $93,000 
in restitution. The case was investigated by  HHS-OIG, Texas Office of the Attorney  
General  Medicaid Fraud Control Unit, and the United States Department  of  Labor  
Employee Benefits Security Administration.   
 
Other Medicare/Medicaid Matters  
 
 	  In February 2014, Diagnostic  Imaging Group and its subsidiary, Doshi Diagnostic  
Imaging Service, P.C., agreed to pay $15.5 million  to resolve  civil FCA  allegations that 
the defendants billed federal health care programs for diagnostic tests that were not  
performed and/or not medically necessary and paid kickbacks to physicians in exchange  
for referrals.   
 
 	  Between February and April 2014, three defendants involved in a health care fraud  
scheme were sentenced to a combined 14 years of incarceration and were ordered to pay  
more than $2.1 million in restitution, joint and several.  The defendants were the owner  
and Chief Executive Officer of  New Century  Adult Day Program Services, LLC; the  
Medicare provider  and director  at New Century;  and an employee at  New  Century.  
According to evidence presented at trial, the defendants and their co-conspirators lured 
mentally disabled  residents of local adult foster care homes, as well as people seeking  
narcotic drugs, to New Century  with the promise that they  could see  a doctor who would 
prescribe them the narcotics they  wanted if they signed up for New Centurys  
psychotherapy program.  New Century used the signatures and Medicare information of  
these individuals to claim that it was providing them psychotherapy  when, in fact, it was  
not.  Between March 2010 and April 2012, New Century billed Medicare approximately  
$3.2 million for psychotherapy services.  In addition to the sentencing, the  three  
defendants  were all excluded from participating in  any  federal health care programs for a 
combined 48 years.    
 
 	  In March  2014, three defendants involved in a health care fraud scheme were sentenced to 
a combined 17 years and six  months in jail and ordered to pay  a combined $3.5 million in 
joint and several restitution.  One defendant owned and operated Helping  Hands Youth 
and Family Services, a South Carolina business that purportedly provided rehabilitative  
behavioral health services  to  Medicaid beneficiaries.   Her brother and his  wife  also  
worked in various management roles at Helping Hands.  According to court records, 
Helping Hands management directed employees to fabricate and sign progress notes for  
mentoring services  allegedly performed by other  Helping Hands  employees  or former 
employees when, in fact, these services were not provided.  Between January  2009 and 
October 2010, Medicaid paid more than $8.9 million to Helping Hands  for services  
40 

  purportedly rendered.  In addition to the sentencing, the three defendants were excluded  
from participating in any  Federal health care programs for a combined 60  years.  This case 
was worked jointly with the  IRS and South Carolina Medicaid Fraud Control Unit.   
 
 	  In May 2014, a licensed dietitian who owned and operated Hope Nutritional Services, 
LLC (HNS), of  Brunswick, Georgia, was sentenced to 16 years in prison and ordered to 
pay $4.3 million in restitution, joint and several.  HNS purportedly provided nutrition 
services and counseling almost exclusively for  children, most of whom were enrolled in 
the Government-funded Head Start  program.  A co-conspirator who was a licensed  
dietician  and owned and operated Quality Nutrition Services (QNS), pleaded guilty to one 
count of conspiracy and was ordered to pay $159,273 in joint and several restitution.  
According to evidence presented at trial and at sentencing, from 2005 through 2011, the 
owner of HNS misappropriated the identities of thousands of children who were  enrolled 
in Head Start programs located throughout the  State of Georgia.  Once she obtained the  
identities of these children, she fabricated patient files, falsified prescriptions from 
doctors, and submitted $4 million worth of bogus  claims to Medicaid for nutritional  
services that were not provided.  As the co-conspirator, the owner of QNS  allowed the 
submission of false and fraudulent claims under her provider number at QNS and 
transferred payment to the owner of HNS when Medicaid reimbursed her  company.  Both 
defendants were excluded from participating in any  federal health care programs for a 
combined 50 years.  This case was worked jointly  with the FBI, Georgia Medicaid Fraud  
Control Unit, and the Georgia  Department of Community Health.   
 
 	  In  August 2014, pharmaceutical distributor McKesson Corp. agreed to pay  $18 million to 
resolve civil FCA allegations relating to its shipping of vaccine provided under  its  contract  
with Centers for Disease  Control and Preventions Vaccines for Children Program.  
Specifically, McKesson allegedly  failed to set temperature monitors included in the boxes  
at the ranges specified in  the contract.  
 
 	  In September 2014, a  Glendale, California man, was sentenced to seven  months in prison 
followed by  seven months electronic home monitoring for his role in an expansive  
phantom provider  fraud scheme, after pleading  guilty to conspiracy to commit health care  
fraud in the District of North Dakota.  According  to court documents, the defendant  
caused over $3 million in losses to the Medicare program over  a period of approximately  
three years in which he supervised and managed a scheme that involved the creation of  
phantom medical providers across the  United States.  Conspirators hired foreign students  
who travelled to the United States on temporary J1 summer work/travel visas.  Those  
students were  employed to open up bank accounts  and commercial mail boxes on behalf  
of phantom medical providers.  Sometime after the students left the United States,  
members of the conspiracy used the fake providers to submit over $13 million in 
fraudulent claims to  Medicare.   Medicare proceeds were laundered through check  cashing  
businesses to disguise the recipients identities.   The defendants case is set for a 
sentencing hearing on February 2015.  
 
   
41 

  DEPARTMENT OF HEALTH AND HUMAN SERVICES 
 
  
Office  of Inspector  General  
 
A certain portion of the funds appropriated under  HIPAA are, by law, set  aside for Medicare  and 
Medicaid activities of  HHS-OIG.   In FY  2014, the Secretary and the Attorney  General jointly  
allotted $199 million to  HHS-OIG.  Additionally, Congress  appropriated $28 million in  
discretionary funding for  HHS-OIG HCFAC activities.  Of these amounts, over $14 million was  
sequestered in  FY  2014 and thus unavailable to HHS-OIG to fight fraud and abuse in Medicare  
and Medicaid.   
 
In FY  2014, HHS-OIG investigations resulted in 867 criminal actions against individuals or  
entities that engaged in crimes related to Medicare and Medicaid; and  529 civil actions, which 
include false  claims and unjust-enrichment lawsuits filed in Federal district court, civil monetary 
penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure 
matters.   In addition, during FY  2014, HHS-OIG excluded a total of 4,017 individuals and 
entities, the details of which are below.  
 
In FY  2014, HHS-OIG  continued to staff and support Medicare Strike Force operations worked in 
conjunction with DOJ Criminal Divisions Fraud Section, local USAOs, the FBI, and State  and 
local law enforcement agencies.   HHS-OIG has  assigned agents to Strike Forces  in Miami, New  
York City, Houston, Tampa, Detroit, Los Angeles, Southern Louisiana, Dallas, and Chicago.  
HHS-OIG has supported Strike Force operations by  providing investigative, analytic, and forensic  
resources.  These Strike Forces have effectively investigated  and prosecuted individuals and 
entities that do not provide legitimate health care  services, but exist solely  for the purpose of  
defrauding Medicare and other Government health care programs.  The continued support of  
Medicare Strike Force operations is a top priority for  HHS-OIG.   
 
Program Savings  
 
Investigations, audits, and evaluations  frequently  reveal vulnerabilities or incentives for  
questionable or fraudulent practices in agency programs or administrative  processes.  As  required 
by  the Inspector General Act,  HHS-OIG  makes recommendations to agency  managers to address  
these vulnerabilities.  In turn, agency managers recommend legislative proposals or other  
corrective actions that, when enacted or implemented, close loopholes and reduce improper  
payments or conduct.  The savings  from these joint efforts toward program improvements can be  
substantial.  For FY 2014, potential savings from legislative  and administrative actions that were  
supported by  HHS-OIG recommendations were estimated by third parties, such as the 
Congressional  Budget Office or  actuaries within  HHS, to be $15.7 billion   $14.4 billion in  
Medicare savings and $1.3 billion in savings to the Federal share of Medicaid.   
 
Additional information about savings achieved through such policy  and procedural  changes may  
be found in the  HHS-OIG fall Semiannual Report to Congress, on-line at http://oig.hhs.gov.  
42 

  Exclusions  
 
One important mechanism for safeguarding the care provided to program beneficiaries is through 
exclusion of providers and suppliers who have  engaged in the abuse or neglect of patients or  fraud 
from participation in Medicare, Medicaid, and other federal  health care programs.  During   
FY  2014, HHS-OIG  excluded a total of  4,017 individuals and entities.  Among  these were 
exclusions based on criminal convictions for crimes related to Medicare and Medicaid (1,310) or 
to other health care programs (432); for patient abuse or neglect (189); or as a result of licensure 
revocations (1,744).  This list of conduct is not meant to be exhaustive, but identifies the most  
prevalent causes underlying  HHS-OIGs  exclusions of individuals or entities in FY 2014.  In  
addition to those mentioned in the Program Accomplishments section above, exclusion actions by  
HHS-OIG included:  
 
 	  California  A physician  was excluded from  federal health care programs for a minimum  
period of 35 years on the  basis of her conviction on counts of wire fraud, mail fraud, tax  
evasion, and witness tampering.  The physician was sentenced to 14 years  of incarceration  
and her license to practice as a medical doctor was suspended indefinitely  by the Medical  
Board of California.  According to court documents, she concocted a product that she  
labeled, described, and promoted under several different names.  She  and her employees  
falsely claimed that the product could cure or treat many human diseases and conditions, 
including cancer, and falsely represented that the  product was made of herbs from around 
the world and that the product was manufactured according to the needs of each patient.   
She caused the product to be shipped to customers throughout the United States, and 
customers traveled to her facility to receive treatment.  Depending on the purported 
product strength, the physician charged between $750 and $4,270 for about a weeks  
supply. In reality, her  product did not have the represented  cancer cure rate, was not made 
of herbs from around the  world, and was not manufactured by  her in a laboratory  for each 
patient.  She was also suspended indefinitely from  participation in the California Medi-Cal  
program.     
 
 	  Pennsylvania  A physician was excluded for a minimum period of 20 years on the basis  
of his conviction for conspiracy to distribute controlled substances and distribution of  
controlled substances.  According to court documents, from about January  2005 to about  
September 2010, the physician sold controlled substances and prescriptions for controlled 
substances to cash-paying customers outside the usual course of professional practice and 
with no legitimate medical purpose.  He purchased the controlled substances from  
pharmaceutical supply companies and had the drugs shipped to his office, where he  
packaged the drugs into small boxes for resale to his customers.  He  falsified medical 
records to make it  appear as if his customers received medical exams and treatment.  The 
physician  was sentenced  to seven  years of incarceration, and the Pennsylvania State Board 
of Medicine suspended his license to practice medicine for at least 10 years.  Additionally, 
he was indefinitely precluded from participating in the Pennsylvania Medicaid program. 
 
 	  Texas   A specialist in neurological surgery was  excluded based on the revocation of his  
medical license to practice in the State of Texas, for so long as his license remains  
43 

  revoked.  The Texas Medical Board revoked his license after finding that his treatment of  
several patients represented a pattern of  failing to follow appropriate preoperative  
planning standards  and failing to recognize and respond to complications during surgery  
and postoperatively.  One patient suffered complications from surgery performed by  the 
specialist that resulted in excessive blood loss and quadriparesis.  Another patient  suffered  
a complication of retroperitoneal hemorrhage that  was not addressed by the specialist.  A 
third patient suffered excessive blood loss during  surgery and had bone removed 
unnecessarily, which resulted in injury to the vertebral artery.  Those issues led to a series  
of events that included a  stroke, which ultimately  resulted in the patients death.  The 
specialist also failed to manage severe post-operative complications suffered by a  fourth 
patient, including an esophageal injury and a retained sponge, which was evident during  
an early post-operative x-ray.  
 
 	  Oregon  An  anesthesiologist was excluded for a  minimum period of 50 years based on 
his conviction of 11 counts of first-degree sexual abuse and one  count of first-degree rape.  
From about September 2007 to about July 2011, he  engaged in sexual contact and sexual  
intercourse with patients  who were incapacitated and under the influence of anesthetics at  
the time.  The anesthesiologist  was sentenced to 23  years and  four  months of  
incarceration, and his medical licenses were permanently surrendered and revoked in the  
States of Oregon and California, respectively.  
 
 	  New York   A physician  was excluded for  a minimum period of 50 years  based on his  
conviction for conspiracy to commit health care fraud and health care fraud.  From about  
March 2005 to about July  2010, the physician  participated in a scheme in  which  cash  
kickbacks were paid to Medicare beneficiaries to induce them to receive medically  
unnecessary  physician services, physical therapy, and diagnostic testing.  The physician  
was sentenced to 12 years and seven months of incarceration and was ordered to pay  
approximately $50 million in restitution, joint and several.  In addition, his  licenses to  
practice medicine in New York and New Jersey  were both revoked, and the New York 
State Office of the Medicaid  Inspector  General excluded  him  from participation in  
Medicaid.   
 
Civil Monetary Penalties  
 
HHS-OIG has the authority to impose civil monetary penalties (CMPs) against providers and 
suppliers who knowingly submit false claims to the Federal  government, who participate in 
unlawful patient referral  or kickback schemes, who fail to appropriately treat or refer patients at  
hospital emergency  rooms, or who engage in other activities prescribed in statute.  HHS-OIG  
continues to pursue its affirmative enforcement  actions under  these authorities.  Examples  
include:    
 
 	  New York  Henry Schein, Inc., a medical and dental equipment supplier, agreed to pay  
more than $1.1 million to resolve allegations under the  Civil Monetary Penalties  Law  
(CMPL) provisions applicable to kickbacks.  HHS-OIG alleged that Henry  Schein, Inc., 
awarded customers, who  were members of its Medical Privileges Program,  points for  
44 

  every item purchased electronically through the company  and allowed customers to 
redeem those points for  an array of items, including travel, hotel stays, iPads, gift cards, 
toasters, toys, and medical office products and supplies.  However, HHS-OIG alleged that 
this type of remuneration was improper  and did not qualify as  a discount  or rebate  
under the anti-kickback statute.  
 
 	  Louisiana  Humana, Inc., agreed to pay $1.8 million for allegedly violating the CMPL.  
HHS-OIG  contended that Humana improperly submitted prescription drug  event claims to 
the Medicare Part D program that included sales tax from Louisiana pharmacies, despite 
the fact that Medicare Part D drugs were not taxable under  Louisiana law as of July 1,  
2006.   This case represents the first CMPL settlement with a Medicare Part  D plan.    
 
 	  North Carolina  Carolinas Medical Center (Carolinas) agreed to pay $50,000 to resolve 
its liability under EMTALA.   HHS-OIG  alleged that Carolinas failed to provide an 
appropriate medical screening  examination or stabilizing treatment to a patient who  
arrived  at its emergency  department with complaints of homicidal ideation and acute  
depression.  The patient also stated that he feared harming himself  and his wife and that he  
had visual hallucinations.  The patient had visited Carolinas approximately  two  weeks  
earlier  with similar complaints, at which time Carolinas learned the patient had  access to  
firearms.  Following  a cursory examination, the patient was discharged from the  
emergency department with a prescription for  a mild anti-depressant, and, shortly after  
discharge, the patient killed his wife, two of his four children, and himself.  
 
 	  Texas   Medicus  Laboratories, LLC  agreed to pay  $5 million for allegedly violating the  
CMPL.   HHS-OIG  contended that Medicus submitted claims to Medicare that it knew or  
should have known were  false by:  (1) using Modifier 59 to bill for multiple units  of a 
particular drug test when applicable rules only permitted for a single unit to be billed per  
patient encounter;  and (2) billing for certain urinalysis codes  when the testing was for  
screening purposes only  and was not medically reasonable and necessary.  In addition to 
payment of the settlement amount, Medicus agreed to enter into a  five-year CIA with  
HHS-OIG.  This settlement was the result of a cooperative effort between  HHS-OIGs  
Office of Audit Services  and its Office of Counsel to the Inspector General  as part of a 
cross-component initiative focusing on the urine drug testing industry.  
  
 	  Texas   CVS Pharmacy, Inc. agreed to pay more than $1.2 million for allegedly violating  
the CMPL.  HHS-OIG contended that CVS Pharmacy knowingly presented or caused to 
be presented false or fraudulent claims by billing both Medicare Part B  and  Medicare Part  
D plan sponsors for immunosuppressant drugs provided to the same beneficiary on the  
same date of service.     
 
Audits  and Evaluations  
 
The focus of  HHS-OIGs audits and evaluations is determined through a dynamic process  and  
adjustments are made to  HHS-OIGs  work plan throughout the  year to meet priorities and to 
anticipate and respond to emerging issues with the resources available. HHS-OIG  assesses 
45 

  relative risks in Medicare and Medicaid (as well as the hundreds of other programs for which 
HHS-OIG has oversight  authority) to identify the  areas most in need of attention and, 
accordingly, to set priorities for the sequence  and proportion of resources to be allocated. In 
assessing this relative risk,  HHS-OIG  considers a  number of factors, including:   
 
 	  mandatory requirements  for  HHS-OIG reviews, as set forth in laws, regulations, or other  
directives;  
 	  requests made or concerns raised by Congress, HHS management, or the Office of  

Management and Budget (OMB);
   
 	  top management and performance challenges  facing HHS;   
 	  work to be performed in collaboration with partner organizations;   
 	  managements  actions to implement our recommendations from previous reviews; and  
 	  timeliness. 
 
As a consequence of this work planning process, HHS-OIG  identified questionable or improper  
conduct in Medicare and Medicaid, and recommended corrective  actions that, when implemented, 
will return misspent funds and prevent  future wasteful or improper payments.  Among  HHS
OIGs audit and evaluation findings in FY 2014 were  the following:  
 
Full Vials of Herceptin  
HHS-OIG found that most payments that Medicare contractors made to providers for full vials of  
Herceptin, a drug used to treat breast cancer that has spread to other parts of the body, were  
incorrect and included overpayments of  about $24.2 million. On nearly all of the incorrect line  
items, the providers reported the units of service for the entire  content of one or more vial(s), each 
containing 440 mg of Herceptin, rather than reporting the units of service for the amount actually  
administered.   
 
Medicare Administrative Contractors (MACs) 
  
Through statements of work, CMS assigns functions to MACs and outlines performance 
 
standards for those  functions. Performance standards include timeliness requirements for appeals, 

clean audits of financial  management, and  an effective strategy for medical reviews.  HHS-OIG  

found that MACs did not meet all quality control standards, or had not resolved all unmet 

standards, and that CMS did not require action on all unmet standards. 
 
 
Medicare Advantage Organizations (MAOs)   
CMS requires that MA organizations have effective procedures to compile and report statistics  
regarding utilization, health status, operational costs, and other matters.  Although CMS regularly  
reviews data that MAOs  submit pursuant to Medicare Part C reporting requirements, its follow-up 
and uses of the data are limited.   
 
Medicare Part D Sponsors   
More than half of Part D  sponsors did not voluntarily report data on potential fraud and abuse  
and, further, 28 percent of sponsors did not report  performing any  corrective actions in response  
to incidents of potential fraud and abuse between 2010 and 2012.  
 
46 

  Beneficiaries Not  Lawfully Present in the United  States   
HHS-OIG identified $91.6 million in improper payments on behalf of unlawfully present  
beneficiaries in Part A and Part B during CYs 2009 through 2011.  For the  same period, HHS
OIG estimated $29 million in unallowable  gross  drug  costs on behalf of unlawfully present  
beneficiaries in Part D.   
 
Incarcerated Beneficiaries   
HHS-OIG identified nearly $33.6 million in improper payments made on behalf of incarcerated 
beneficiaries in Part A and Part B during CYs 2009 through 2011.   In addition, HHS-OIG  
estimated that CMS accepted PDE records with gross drug  costs totaling an additional $11.7 
million for incarcerated beneficiaries in Part D for  CYs 2006 through 2010.  
 
Medicare Lump Sum Payments   
Expanding the window of time covered by Medicares lump sum payments for inpatient care  
would result in cost savings;  HHS-OIG  reviewed outpatient services that the admitting hospitals  
provided during the 11 days prior to the existing window and found that in 2011 Medicare and its  
beneficiaries paid an  estimated $263 million for such services.  
 
Adverse Events   
An estimated 22 percent  of Medicare beneficiaries experienced adverse events during skilled 
nursing facility  (SNF) stays; an additional 11 percent experienced temporary  harm events during  
SNF stays. Physician  reviewers determined that 59 percent of the adverse events and temporary  
harm events were clearly or likely preventable.  
 
Hospitalization of Nursing Home Residents   
In FY 2011, nursing homes transferred one-quarter of their Medicare  residents to hospitals for  
inpatient admissions and Medicare spent $14.3 billion on these hospitalizations. High rates of  
hospitalizations by individual nursing homes  could signal quality problems within those homes. 
 
Inappropriate Use of HIV Drugs  
HHS OIG found that almost 1,600 Medicare Part D beneficiaries had questionable utilization 
patterns for HIV drugs in 2012.  Medicare paid $32 million for HIV drugs for these beneficiaries.  
These beneficiaries had no indication of HIV in their medical histories, received an excessive 
dose or supply of HIV drugs, received HIV drugs  from a high number of pharmacies or  
prescribers, or received contraindicated drugs. These patterns may indicate that a beneficiary is  
receiving inappropriate drugs  and diverting them  for illegal sale, that a pharmacy is billing for  
drugs that beneficiary never received, or that a beneficiarys identification  number was stolen.  
 
Coupons as  Improper  Inducement to Purchase Drugs  
Pharmaceutical manufactures may not use copayment coupons to induce the purchase of drugs  
paid for by federal health care programs, including Medicare Part D.   HHS-OIG found that  
manufacturers  current safeguards may  not prevent all copayment coupons from being used for  
drugs paid for by Part D, and that Part D plans and other entities cannot identify coupon use  
within pharmacy claims.   
 
47 

  Ambulatory Surgical Services Payment Differential in Medicare  
HHS-OIG found that Medicare  and beneficiaries could save $12 billion during CYs 2012 through 
2017 if CMS reduces hospital outpatient department payment rates for ambulatory surgical center  
(ASC)-approved procedures to the same level as ASC payment rates.  In addition, Medicare could 
generate savings of as much as $15 billion for CYs 2012 through 2017 if CMS reduces outpatient 
department payment  rates for ASC-approved procedures to ASC payment levels for procedures  
performed on beneficiaries with low-risk and no-risk clinical needs.   
 
Drug Dispensing and Supplying Fee  Payment Rates  
HHS-OIG found that Medicare Part B would have saved more than $100 million in 2011 if  
dispensing fees for  certain  inhalation drugs  and supplying fees for  certain  immunosuppressive  
drugs had been  aligned with the rates that Part D or State Medicaid programs paid.    
 
Improper Payments for E&M Services  
HHS-OIG found that Medicare inappropriately paid $6.7 billion for claims for E/M services in 
2010 that were incorrectly  coded and/or lacking documentation, representing 21 percent of  
Medicare payments for  E/M services that  year.  E/M services are 50 percent more likely to be  
paid for in error than other Part B services and most improper payments result from errors in 
coding  and from insufficient documentation.   
 
Post-Acute Care Transfers  
Medicare inappropriately paid hospital inpatient claims subject to  its postacute care transfer  
policy, resulting in overpayments totaling approximately $19.5 million over four  years.  Medicare  
overpaid the hospitals because the Common Working File  edits related to postacute care transfers  
were not working properly.    
 
Electronic Health Record (EHR) Fraud Vulnerabilities   
Although EHR technology  may make it easier to commit fraud, CMS and its contractors have not  
adjusted their practices for identifying  and investigating fraud in EHRs. Furthermore, only about  
one quarter of hospitals had policies on the use of the copy-paste feature in EHR technology, 
which, if used improperly, could pose a fraud vulnerability.  
 
Inefficient Residential Habilitation Payments   
HHS-OIG found that payment rates for  residential habilitation services provided at State-operated  
residences did not meet the Federal  requirement that payment for services  be consistent with  
efficiency  and economy. For State FY  2010, Federal Medicaid payments  exceeded actual costs  
for providing these services by approximately $320 million (57 percent more than actual costs). 
Further, the payment rate for supervised  residential habilitation services at State-operated  
residences was more than double the average  rate for privately operated residences that offered 
the same services.  
 
High Payments to Dentists   
HHS-OIG identified 23 general dentists and six orthodontists in New York with questionable  
billing  and who represented extreme outliers. Medicaid paid the providers $13.2 million for  
pediatric dental services in 2012.  
48 

  Unsupported Medicaid Matching  Funds   
The Maryland Medicaid program obtained Federal Medicaid funds for  FYs 2009 through 2011 
that were not supported by  net  expenditures. The State agency obtained $12.9 billion in Federal  
Medicaid funds, but CMS awarded the State agency only $12.8 billion for  Medicaid expenditures. 
Maryland inappropriately  withdrew the difference of $115.3 million.  
 
Incorrect Application of the Medicaid  Federal Matching Assistance Percentage  
The Massachusetts Medicaid agency did not always  use the correct  Federal medical assistance 
percentages (FMAPs) when processing  claim adjustments. As a result, the State agency received  
approximately $106 million (Federal share) more than it was entitled to. The State agency used 
incorrect FMAPs because it processed adjusted claims as current expenditures for both public and 
private providers.   
 
Impermissible Health Care Related Tax  
Pennsylvanias Gross Receipts Tax on Medicaid managed care organizations appeared to be a 
health-care-related tax that is  impermissible for Medicaid funding.  Through this tax, 
Pennsylvania collected $1.8 billion from its Medicaid managed care organizations over  three  
years and used that money  to pay some of its share of capitation payments.   
 
Other HHS-OIG  Fraud and Abuse Prevention Activities  
 
HCFAC funding also supported  HHS-OIGs  continued enhancement of data analysis and mining  
capabilities for detecting  health care fraud, including tools that allow for  complex data  
analysis.   The HHS-OIG  continues to use data mining, predictive analytics, trend evaluation, and 
modeling approaches to better analyze and target  the oversight of HHS programs.   Analysis teams  
use near-time data to examine Medicare claims for known fraud patterns, identify suspected fraud  
trends, and to calculate ratios of allowed services  as compared with national averages, as well as  
other assessments.  When united with the expertise of  HHS-OIG agents, auditors, and evaluators, 
as well as our HEAT partners,  HHS-OIGs data analysis fosters a highly  effective combination of  
technologies and traditional skills to the fight against fraud, waste, and abuse.  
 
Industry Outreach and Guidance  
 
Advisory Opinions    
Central to the HIPAA  guidance initiatives is an advisory opinion process through which parties  
may obtain binding legal  guidance as to whether their existing or proposed health care business  
transactions run afoul of  the  Anti-Kickback Statute, the CMP laws, or the exclusion provisions.  
During FY 2014, the  HHS-OIG, in consultation with DOJ, issued 15 advisory opinions.  A total  
of 314 advisory opinions have been issued during the 18 years of the HCFAC program.  
 
Corporate  Integrity Agreements  
Many health care providers elect to settle their cases before litigation.  As  part of the settlements,  
providers often agree to enter into Corporate  Integrity Agreements (CIA) with HHS-OIG to avoid 
exclusions from Medicare, Medicaid, and other federal health care programs.  Under a CIA,  a 
provider commits to establishing a program and taking other specified steps to ensure future  
49 

  compliance with Medicare and Medicaid rules.  The compliance programs are designed, in part, 
to prevent future  fraud.  HHS-OIG monitors providers compliance with these agreements.  HHS
OIG may impose penalties on entities that fail to comply with the requirements of their CIAs, as  
shown in the examples below:  
 
Tennessee  CSHM, LLC, formerly known as  FORBA Holdings and Church Street Health 
Management (CSHM), agreed to be  excluded for  five  years based upon its  alleged material  
breaches of its CIA.  CSHM manages and operates the national chain of Small Smiles Dental  
Centers, which provides  services primarily to children on Medicaid.  CSHMs corporate  
predecessor entered into the CIA in 2010 as part of the resolution of a  FCA  case involving  
allegations that the company provided dental services to children on Medicaid that were  
medically unnecessary or failed to meet professionally recognized standards of care.    
 
This exclusion marked the culmination of a series  of alleged failures by CSHM and its corporate 
predecessors to comply  with its CIA.  Since the 2010 settlement, HHS-OIG had repeatedly cited  
CSHM and taken actions to address alleged violations of the CIA, including imposing stipulated 
penalties and forcing the  divestiture of one of CSHMs clinics.  Despite these actions, CSHM  
remained in material breach of its CIA, and  HHS-OIG issued Notices of  Intent to Exclude to the  
company in December 2013 and January 2014.  Specifically, HHS- OIG found that CSHM had, 
among other things, failed to report serious quality-of-care reportable events, take corrective 
action, or make  appropriate notifications of those  events to the State dental boards, as required by  
the CIA.  Although CSHM represented to HHS-OIG that it would cure the material breaches,  
HHS-OIG determined through meetings with CSHM and its Board of Directors and review of its  
written submissions that  CSHM had failed to cure the material breaches and proceeded with the 
exclusion.   
 
Florida  HHS-OIG imposed stipulated penalties  totaling $15,000 against  Exactech,  Inc., based  
upon the device manufacturers failure to comply  with certain requirements of its CIA.  
Specifically, Exactech failed to:  (1) timely screen new Covered Persons to ensure they were 
not excluded or otherwise ineligible to participate in the federal health care programs; (2)  
distribute revised policies and procedures to Covered Persons whose job functions related to 
those policies and procedures; and (3) provide copies of Exactechs Code of Conduct and Anti-
Kickback Statute policies and procedures to parties entering into new or renewed agreements with 
Exactech.  
 
Florida  HHS-OIG imposed stipulated penalties  totaling $5,000 against American Sleep 
Medicine, Inc. (ASM) based upon its failure to satisfy certain reporting requirements under its  
CIA.  Specifically, ASM  failed to timely notify  HHS-OIG of two incidents involving probable  
violations of the Anti-Kickback Statute that had been reported to ASMs internal compliance 
hotline.    
   
50 

  Centers for Medicare & Medicaid Services
  
 
In  FY 2014, CMS was allocated $13.5 million by  HHS, and appropriated $237.3 million in 
discretionary funds by Congress to support its comprehensive program integrity strategy for  
Medicare, Medicaid  and  the Childrens Health  Insurance Program (CHIP).  With these funds, 
CMS is working to ensure that public funds are not diverted from their intended purpose:  to make  
accurate payments to legitimate entities for allowable services or activities  on behalf of  eligible  
beneficiaries of federal health care programs.  CMS  also performs many program integrity  
activities that are beyond the scope of this report because they are not funded directly by the  
HCFAC Account or discretionary HCFAC funding.  Medicare Fee-for-Service error rate 
measurement  and activities, Recovery  Audit activities, and prior authorization initiatives  are 
discussed in separate reports, and CMS will submit a combined Medicare and Medicaid Integrity  
Program report to Congress later this  year.    
 
CMS approach is  guided by four major principles that support the strategic goal of improving  
program integrity:  
 
1.   Prevention 
2.   Detection  
3.   Transparency  and Accountability  
4.   Recovery  
 
1.    Prevention  
Moratoria  
Building on strong anti-fraud efforts already underway in the home health provider and 
ambulance supplier  arenas, CMS in July 2013 announced the first use of its temporary moratoria  
authority  granted by the Affordable Care Act.  The moratoria stops the enrollment of new home  
health and ambulance enrollments in Medicare, Medicaid and the Childrens Health  Insurance 
Program (CHIP) in fraud hot spot areas of the  country with demonstrated oversupply of certain 
types of providers. In January 2014, CMS extended the original  enrollment moratoria for these  
locations and expanded to include HHAs in Broward county  Florida, the  Michigan counties of  
Wayne, Macomb, Monroe, Oakland, and Washtenaw and the Texas counties of Dallas, Collin, 
Denton, Ellis, Kaufman, Rockwall, Tarrant, Harris, Brazoria, Chambers, Fort Bend, Galveston, 
Liberty, Montgomery, and Waller. CMS also expanded the  moratorium on ground ambulance  
suppliers in the Philadelphia area at the same time. All of these moratoria  actions were extended  
an additional six months  with the latest notice effective July 2014. The focus of these efforts is to 
prevent and deter fraud, waste, and abuse in problematic services and areas across the country  
while ensuring beneficiary  access to care.   
  
Under the moratoria, existing providers  and suppliers can continue to deliver and bill for services, 
but no new provider  and supplier applications will be approved in these areas, allowing CMS and 
its law enforcement partners to remove bad actors from the program while  blocking provider  
entry or re-entry into these already over-supplied markets.  CMS is required to re-evaluate the 
need for such moratoria  every six months.  
51 

  One Program  Integrity  
In FY 2014, CMS continued making improvements and changes to One Program  Integrity (One  
PI), CMS centralized portal that provides CMS contractors and law enforcement with a single  
access point to Medicare data as well as  analytic tools to review the data. CMS moved from an  
integration contractor to a system support  contractor while continuing to enhance the  existing  
analytic tools.  One PI improves CMS ability to detect fraud, waste, and abuse with consistent, 
reliable, and timely analytics.  
 
One PI users have access to the CMS  Integrated Data Repository  (IDR) to perform data analytics.  
The IDR contains a comprehensive and accurate set of Medicare provider, beneficiary and  claims  
data from Medicare Parts  A, B, and D back to January 2006.  The  IDR includes claims data at  
three distinct points in the claim life-cycle: at the time the claims are  enumerated, the time claims  
are adjudicated, and  at the time the claims have payment data posted.  This access allows users to 
perform pre-payment analytics on historical data  and develop models that can be applied in CMS  
predictive analytics system, the Fraud Prevention System. With claims available from 2006, 
ZPICs will also be able to improve their analytics  for post-payment detection of fraud, waste, and 
abuse.  
In order to streamline access for our law enforcement partners, CMS transitioned STARS, a  
healthcare fraud, waste, and abuse analytics tool to the One PI suite tools in 2013.  The One PI  
team is also replacing on-site instructor led training with virtual instructor led training to  reduce  
training costs and provide better access to training for law enforcement  
Compromised Number Checklist  
Since January 2010, CMS has maintained a national database of compromised Medicare 
beneficiary and provider  ID numbers called the Compromised Number Checklist (CNC). This  
database is populated by  monthly submissions from CMS program integrity  contractors.  The  
purpose of the CNC is to share compromised ID numbers and any  associated corrective actions  
that have been taken among CMS staff and contractors.  CMS uses this national CNC database to 
enhance efforts to detect  and prevent  fraud  and abuse in Medicare.    
 
The compromised numbers list is updated on an ongoing, real-time basis by  the PSCs/ZPICs and  
MEDIC.  
The Command Center  
CMS opened its state-of-the-art Command Center  on July 31, 2012 to facilitate improvements in 
health care fraud detection and investigation, drive innovation, and help reduce fraud and 
improper payments in the Medicare and Medicaid programs.  CMS is using the Command Center  
to collaborate in unprecedented ways with the private sector, law enforcement, and our State  
partners. The Command Centers advanced technologies and collaborative environment allow  
multi-disciplinary teams  of experts and decision  makers to more efficiently  coordinate policies  
and case  actions, reduce  duplication of efforts, and streamline fraud investigations for more  
immediate administrative action. These  collaborative activities enable CMS to take administrative  
actions, such as revocations of Medicare billing privileges  and payment suspensions, more  
quickly and efficiently.   
 
52 

  In FY 2014, the Command Center conducted 40 missions that included participants from CMS  
and our partners, including the  HHS-OIG  and FBI  that are designed to lead to improvements in  
the fraud prevention and detection process. Missions are facilitated collaboration sessions that  
bring together experts from various disciplines to improve the processes for fraud prevention in 
Medicare and Medicaid.  CMS is also working with FBI,  HHS-OIG and other Federal agencies in  
the Command Center to pool resources to tackle cross-cutting issues surrounding fraud 
prevention.  
DME Initiatives  
DME suppliers pose a high risk of  fraud to the Medicare Program and CMS has undertaken  an  
aggressive strategy to address this risk. Through the DME Stop Gap Project, initiated in 2009, 
ZPICs/PSCs have increased site visits and interviews of DME suppliers, providers, and 
beneficiaries receiving  DME products in high billing areas  for DME supplies and products.  In  
FY 2014, these  additional funds supported DME investigations which included site visits to, and 
interviews of, suppliers, doctors and patients that  were identified as potentially suspicious or high 
risk.  
 
Correct Coding  Initiative  
In FY 2014, CMS continued to work with states to fully and correctly implement the Medicaid 
NCCI methodologies in their Medicaid programs, to add new Medicare  and Medicaid NCCI edits  
to the quarterly Medicaid NCCI edit files, and to update the technical  guidance document for  
states.    
 
State Readiness  
Todays modern design of  IT systems encompasses the use of current technologies that span 
across the entire Medicaid Enterprise. These systems work in concert with one another  and must  
adhere to certain regulations and guidance including the Medicaid Information Technology  
Architecture (MITA) framework; and, the Seven Standards and Conditions. Adhering to these  
mandates will promote consistency of business and technical processes,  and  IT platforms as well  
as standards across the Medicaid Enterprise.    
 
The project includes independent technical assistance for  IT and policy requirements, including  
monitoring and oversight, in working with state-specific system requirements, IT system builds, 
and associated interfaces  for all states and the territories.   All fifty states  and the territories  
received technical assistance with moving through the Enterprise Life Cycle (ELC) Gate Review  
Process including  any associated consults.  States received assistance with project management,  
implementation and operations.  Technical  artifacts required by statute were analyzed and tracked  
to assess state progress. Gap analyses  were done on a regular basis and risk registers were studied  
to identify opportunities  for improvement.  
 
2.    Detection   
 
Strengthened Program  Integrity Activities in Medicare Advantage and Medicare Part D  
In FY 2014, the  National Benefit  Integrity (NBI)  MEDIC  received on average approximately 591 
actionable complaints per month; processed 39 requests for information from law enforcement  
per month; and referred an average of 40 cases to law enforcement per month.  NBI MEDIC 
53 

  referrals have resulted in restitution of  $33,680,679; forfeitures of $6,925,049; and $50,000 in 
civil settlements.  The NBI MEDIC was responsible for assisting the  HHS-OIG and DOJ, through 
data analysis and investigative  case development, in achieving 54 convictions, 26 arrests, and 36 
indictments. One particular pharmacy fraud case resulted in the arrest, indictment, and conviction 
of a Pennsylvania physician, pharmacist and more than 50 other individualsincluding office  
staff, pseudo-patients, Medicare patients, and drug dealers in a large prescription drug conspiracy.   
 
The physician was sentenced to 25 years in prison for distribution of a controlled substance  
resulting in death from his pill mill operation. The  pharmacist was sentenced to 72 months of  
imprisonment and three  years of probation.  This case was predicated on information that the  
physician was identified for prescribing a high volume of controlled substances. He prescribed 
over 46,800 units of controlled substances, which equaled 84 percent of his total prescribed 
medications. The investigation revealed the physician worked with drug  traffickers who recruited  
large numbers of pseudo-patients. With the help of his office staff, those patients were 
transported to his medical office for cursory  examinations. The patients paid an office visit fee, 
usually $150, by cash, check, or money order. The physician wrote prescriptions for them to 
obtain oxycodone-based drugs without a legitimate medical purpose and outside the usual course  
of professional practice. The patients were driven to a particular pharmacy, to have their  
prescriptions filled. The  drugs were then turned over to the drug dealers so their organizations  
could sell the narcotics to other drug dealers who resold the drugs on the street.  
 
In FY 2014, the  Outreach and Education (O&E)  MEDIC  facilitated the CMS Parts C & D Fraud  
Waste and Abuse (FWA) training sessions which offer Medicare Advantage organizations and 
Prescription Drug plans an opportunity to collaborate and discuss techniques on how to prevent  
and detect fraud, waste, and abuse in the Medicare Advantage  and Part D programs.  These FWA  
training sessions are designed to educate Medicare Advantage organization and Prescription Drug  
plan staff through enhanced collaboration, information sharing, data analytics and 
communication.  FWA training session stakeholders include plan sponsors, Pharmacy Benefit  
Managers  (PBMs), representatives from law  enforcement agenciesincluding HHS-OIG, U.S. 
DOJ, and other state and  local law enforcement entities.  These FWA training sessions provide  a  
forum for stakeholders to learn about the most recent fraud schemes and fraud prevention best  
practices to assist in developing effective  fraud prevention programs.  
 
The O&E MEDIC is also responsible for many other outreach activities in 2014.  In March, the 
CMS-Center for Program  Integrity  released its most comprehensive fraud fighting tools to date, 
the Medicare Advantage  and Part D Fraud Handbook: Practical Techniques and Approaches on 
Detecting and Preventing Fraud, and an Online Training Module for Medicare Advantage  
organizations (MAOs) and Part D sponsors. The handbook is a modular online reference  
providing MAOs  and Part D sponsors with industry  best practices regarding processes, methods, 
and resources to support  fraud prevention, detection, corrective action, preliminary investigation, 
and referral activities. The training is  an online presentation covering each chapter of the  Fraud 
Handbook in an on-demand webcast format.  
 
Through rulemaking finalized in 2014, CMS will require that physicians and eligible  
professionals who write  prescriptions for  covered Part D drugs must be enrolled in Medicare, or  
54 

  have a valid record of opting out of Medicare  for their prescriptions to be covered under Part D.  
This requirement will help CMS ensure that Part D drugs are only prescribed by qualified 
individuals.  This provision is effective  December 1, 2015.   
 
Marketing Surveillance Activities  
 
CMS also strengthened program integrity in MA and Part D through marketing surveillance  
activities and compliance actions based on surveillance activities.   In FY  2014, CMS conducted 
marketing surveillance activities, such as secret shopping and examining newspaper ads for  
unreported marketing events and content. These activities have improved plan sponsor oversight  
of marketing and lessened incidents of agent/broker misconduct.  
 
Secret Shopping 
Secret shopping provides undercover surveillance  of formal  Medicare Advantage (MA), Medicare 
Advantage  and Prescription Drug (MA-PD), and prescription drug provider (PDP)  marketing  
events.  Plan sponsors report formal sales/marketing events to CMS from which contractors and 
CMS identify  a sampling of events to secret shop.  Shoppers use a CMS developed tool to 
facilitate and  electronically record their  evaluations of marketing events  compliance with CMS  
requirements.  The tool is designed to  capture various compliance aspects of the representatives  
or agents presentations, actions and provided materials.  Additionally, it collects general  
information about the event, such as the number of people in attendance, the type of venue where 
the event was held, and the language in which the agent presented the event. 
 
For the 2014 Annual Enrollment Period (AEP), CMS completed 1,320 secret shopping events.  Of 
the events shopped, 1,133 (85.5 percent) had no validated deficiencies and  were considered  
entirely  compliant with Medicare regulations.    
 
Of the 101 parent organizations shopped, 42 (or 41.6 percent) had no validated deficiencies noted.  
These 42 parent organizations represented 211 shops or approximately 16 percent  of the total 
completed shops.  Ninety-one (nearly  seven percent) of the completed shops were presented in  a 
language other than English, including:   
 
   65 events presented in Spanish;  
   18 events presented in Cantonese or Mandarin;  
   four events presented in Korean;   
   two events presented in both English and Spanish;
  
   one event presented in English, Spanish, and Mandarin/Cantonese; and,
  
   one event presented in English, Spanish, and Tagalog. 
 
 
Compliance Actions Based on Surveillance Activities  
CMS issues the following types of letters to sponsors who have had deficiencies related to our  
surveillance:   
 
   Technical Assistance Letters (TAL)  (not formal compliance notices);  
   Notices of Non Compliance (NONC);  
   
55 

     Warning  Letters with a Request for  Business Plan; and, 
   Ad-hoc Corrective Action Plans (CAPs). 
 
To determine the  appropriate action for deficiencies identified by secret shopping, CMS  
developed an objective, data-driven, and performance-based model.  This  model not only  
automated the review process, but also accounted for the seriousness of  each deficiency to 
develop proper compliance action for identified deficiencies.  Within this  model, CMS  
categorized each deficiency  and assigned  a weighted value: administrative errors  (one point), 
errors of omission (two points), undue beneficiary  influence or harm (four points), and marketing  
misrepresentations (six points).  To determine a plan sponsors overall performance score  (OPS), 
CMS added the total number of points for all shops for each plan sponsor  and divided by the total  
number of shops conducted for that plan sponsor.  
 
The following three tables provide additional information on our process and findings.  The  first  
table shows how the OPS score is determined, while the second table is CMS tool to determine  
what type of compliance  action should be issued based on the OPS score. Finally, the Compliance  
Action table provides a break out of the types of compliance actions taken and how many of  each 
action were taken.  
 
 
 
 
 
 
OPS Ranges and Corresponding Compliance Actions  
 
 
Overall Shopping Performance   Compliance Action  Taken  
 
Score Range  
 
0.01   1.49   Technical Assistance Letter  
 
1.50   3.49   Notice of Non-Compliance  
 
3.50   6.99   Warning Letter with Business Plan  
 
7.00+   Adhoc CAP  
 
 
Compliance Actions Taken by Risk Level  for Secret  Shopping  
 
Action  b   High   Medium   Low   Total  
 
Technical Assistance Letter   105   72   13   108  
 
Notice of Non-Compliance   2   1   1   6  
 
Warning Letter   2   0   0   0  
 
Total Letters Issued   109   73   14   114  
 
 
56 

  The unreported marketing events initiative is an attempt to determine  if plan sponsors  
appropriately reports and represented their sales events activity to CMS.  Daily and weekly print  
publications in U.S. domestic markets nationwide, including advertisements in several non-
English languages are reviewed.  CMS conducted reviews of 4,743 Medicare advertisements  
representing more than 16,000 total advertised events.   
 
Of those advertisements reviewed, CMS identified 298 marketing  events that were unreported, 
indicating a deficiency for each plan sponsor that  had failed to submit a marketing  event.   Based  
on the results, CMS issued 16 TALs  and six NONCs to plan sponsors related to unreported 
marketing  events.  NONCs were issued to plan sponsors that incurred deficiency rates of  five 
percent  or higher.  
 
Medicare Advantage Encounter Data Processing System Contract  
The Medicare Advantage (MA) Encounter Data Processing System (EDPS) is currently being  
maintained and modified out of guidance published in the final FY 2009 inpatient prospective  
payment system (IPPS) rule.  In that rule,  CMS revised regulations to clarify  that CMS has the  
authority to require MA  organizations to submit encounter data  for each item and service  
provided to MA plan enrollees.  Consistent with this authority, CMS is requiring MA  
organizations to submit encounter data  for dates of service January 3, 2012 and later. MA plans  
are required to submit data for all institutional, professional and DME services provided to MA  
plan enrollees on or  after that date.   
 
Over the past several  years there has been dramatic growth in the Medicare Advantage program.   
Today,  one-fourth of Medicare beneficiaries are enrolled in Medicare Advantage plans.  CMS  
pays Medicare Advantage organizations approximately $145 billion per  year for the care provided 
to these 15 million beneficiaries.    
      
To better ensure that CMS is a more prudent purchaser, in January 2012 agency launched an 
initiative to collect encounter data from Medicare  Advantage organizations.  The encounter data  
detail each item and service provided to enrollees  of  Medicare Advantage organizations.  These  
records  are  comparable in format and detail to claims submitted to the MACs by FFS providers.  
The encounter data  collected by EDPS will allow CMS to recalibrate the risk adjustment payment 
model, so that MA payments more accurately  reflect the demographics, patterns of care,  and the 
predicted costs of diseases for MA enrollees.  Recalibrating the model on MA diagnoses and 
expenditures, rather than using the  FFS experience, will result in payments that are more accurate 
to MA organizations.  CMS would also be able to evaluate  coverage, profile and analyze service  
utilization, assess quality of care, with the  goal of  reducing fraud, waste and abuse and improving  
Medicare programs and  healthcare in  general.    
 
CMS will use encounter data to determine the  risk adjustment factors used to adjust payments, as  
required under CMS regulations at 42 CFR 422.304, to update risk adjustment models, to 
calculate Medicare Disproportionate Share Hospital percentages, for Medicare coverage purpose  
and to conduct quality review and improvement activities.  
 
   
57 

  Medicaid/CHIP  Financial Management Project  
Under this project, funding specialists, including  accountants and financial analysts, worked to 
improve CMSs financial oversight of the Medicaid program and CHIP.  In  FY 2014 through the  
continued efforts of these specialists, CMS  removed an estimated $2.4 billion (with  
approximately $727 million recovered and $1.7 billion resolved) of approximately $10.7 billion  
identified in questionable Medicaid costs.    
 
Furthermore,  an  estimated $228 million in questionable reimbursement was actually averted due  
to the funding specialists preventive  work with states to promote proper state Medicaid 
financing.   The funding specialists activities included reviews of proposed Medicaid state plan 
amendments that related  to reimbursement; development of financial management reviews; 
research regarding state Medicaid financing policy  and practices; collaboration with states to  
resolve the Medicaid and CHIP portions of the A-133 Single State  audits; and identification of  
sources of the non-Federal share of Medicaid program payments to ensure proper financing of  
Medicaid program costs.    
HHS-OIG Hotline Database   
CMS and its contractor use the  HHS-OIG Hotline  database to perform program integrity  
activities. Specifically, the contractor currently receives and processes the complaints  HHS-OIG  
refers to CMS. CMS with the contractor resolves  issues assigned through the  HHS-OIG hotline.  
 
3.    Transparency and Accountability  
Healthcare Fraud Prevention Partnership  
One of the Secretarys key  health care fraud prevention initiatives is  to establish an ongoing  
partnership with the private sector to fight fraud across the health care system. Data collected and  
shared across payers can assist payers in evaluating trends, recognizing patterns consistent with 
potential fraud, and potentially uncover schemes or bad actors they could not otherwise identify  
using only their own information. Such collaboration is the purpose of  the Healthcare Fraud  
Prevention Partnership (HFPP) which brings together both public and private, federal  and state-
level individuals and organizations combatting health care  fraud across all payers.  
 
The legal authority for the Partnership is 42 U.S.C.  1320a-7c. The delegated authority  allows  
for the Partnership to consult with, and arrange  for the collection of data  from, and sharing of data  
with representatives of health plans under the  HCFAC program. 
 
CMS added additional partners to the HFPP and is targeting  further expansion of the partnership 
to include additional willing public and private payers once the technical and legal components of  
the program are in place.  The increase in members providing data will increase the resources  
necessary for the trusted third party  contractor to process and store the increased number of  
claims data from the new members.    
 
   
58 

  The studies currently underway  and listed below are the first  conducted since receiving approval 
 
through Paperwork Reduction Act:11 
 
Study 2, Iteration 2: Non-Operational Providers:
                                 
The objective of this study  is to create  an aggregate list of non-operational  provider entities for 
 
use in investigations. Possible impact includes stopping payments to non-operational providers
  
after  confirmation and referring providers to law enforcement. 

Study 5: Urine Drug Screens:
                                                                                        
The objective of this study  is to identify providers  who may be billing qualitative and quantitative 
 
urine drug screens inappropriately. Payers will be  asked to provide claims billing data by provider 
 
for the qualitative and quantitative urine drug screens. Possible impact includes identifying  cases
  
for medical review, potential for edit development, overpayment collection, and referrals to law 
 
enforcement. 
 
 
Study 1, Iteration 2: Misused Codes and Fraud Schemes:
                                
The objective of this study  is to share information on misused codes and fraud schemes to 
 
improve overall awareness of fraud patterns and trends. Possible impact includes recovering 
 
overpayments, referring  providers to law enforcement, and closing vulnerabilities. 

 
Improper Payment Error  Rate Measurement and  Increased Accountability in  Medicaid and CHIP 
 
Programs 
 
The  Improper Payments Information Act (IPIA) of 2002, amended by the  Improper Payments
  
Elimination and Recovery  Act of 2010 (IPERA), amended by the  Improper Payments Elimination 

and Recovery  Improvement Act of 2012 (IPERIA) requires  each agency to periodically review  

programs it administers, identify programs that may  be susceptible to significant improper 
 
payments, estimate the amount of improper payments, submit those estimates to Congress, and 

report on actions the Agency is taking to reduce improper payments.  
 
 
The Medicaid program and CHIP have been identified as at risk for significant improper  
payments.  To comply  with the  IPIA, IPERA  and IPERIA, CMS established  the Payment Error 
Rate Measurement program (PERM) to estimate improper payment  error  rates in Medicaid and 
CHIP.  The error rates are based on reviews of the fee-for-service (FFS), managed  care, and  
eligibility components of Medicaid and CHIP in the fiscal  year under review.  CMS measures  
Medicaid and CHIP error rates using a 17-state rotation so that each state is  reviewed once every  
three years.  After several  years of development, the PERM error rate was published for the first  
time in FY 2008.  
 
CMS reported in the FY  2014 Agency  Financial  Report the national Medicaid error rate that is  
based on measurements that were conducted in  FYs 2012, 2013, and 2014.  The FY 2014 national  
Medicaid error rate is  6.7  percent,  representing $17.5 billion in estimated improper payments  
compared to the  FY 2013 improper payment rate of 5.8 percent or $14.4 billion in improper  
                                                 
11  Other studies conducted by the HFPP include Study 3Revoked and Terminated Providers and Study 4High Risk 
Pharmacy.  
59 

  payments.  The national  component error rates are as follows:   Medicaid FFS   5.1 percent, 
Medicaid managed care  0.2 percent,  and Medicaid eligibility   3.1 percent.   The major cause of  
error in fee-for-service was state claims processing systems not being fully compliant with new  
requirements. These new requirements include:  all referring or ordering providers must be  
enrolled in Medicaid, states must screen providers  under a risk-based screening process prior to 
enrollment, and attending providers must include  their National Provider  Identifier on all  
electronically filed institutional claims. While these requirements will ultimately strengthen  
Medicaids integrity, they  require systems changes that many states have not fully implemented.   
   
Section 601 of the Childrens Health Insurance Program Reauthorization Act of 2009 (CHIPRA)  
prohibited HHS from calculating or publishing any  national or state-specific error rates for CHIP  
until six months after a new PERM final rule was  effective.  In addition, Section 205(c) of the  
Medicare and Medicaid Extenders Act of 2010 exempted HHS from reporting a 2011 CHIP  
improper payment rate. On August 11, 2010, as part of enhanced efforts to reduce improper  
payments in federal programs, HHS issued the final regulations that fully implemented  
improvements to the PERM program. HHS commenced CHIP error rate reporting in FY 2012 
and, therefore, CMS reported the first baseline CHIP error  rate in the  FY 2014 Agency  Financial  
Report  as all three cycles of states have now been  reviewed.   
 
CMS reported in the FY  2014 Agency  Financial  Report the national CHIP error  rate that is based 
on measurements that were conducted in FYs 2012, 2013, and 2014. The  FY 2014 national CHIP  
error rate  is 6.5 percent, representing $0.6 billion in estimated improper payments. The national 
component error rates are as follows: CHIP  FFS6.2 percent, CHIP managed care0.2 percent, 
and CHIP  eligibility4.2 percent. The main sources  of error  are  beneficiaries found to be  
ineligible for CHIP  and errors related to state claims processing systems.  
 
CMS is currently measuring cycles that will be reported in  FYs 2015 and 2016.     
 
Error Rate Measurement  and  Increased  Accountability in Medicare Advantage (Part C)  and  
Medicare Prescription Drug  Benefit Program (Part D)  
In  compliance with  IPIA, as amended by  IPERA  and IPERIA, CMS has implemented a 
systematic plan regarding improper payments for  Part C and D programs.  Unlike Medicare fee-
for-service, CMS makes  prospective, monthly per-capita payments to Part C organizations and 
Part D plan sponsors.  Each per-person payment is based on a bid amount, approved by CMS, that  
reflects the plan's estimate of average costs to provide benefit coverage to  enrollees.  CMS risk-
adjusts these payments to take into account the  cost associated with treating  individual 
beneficiaries based on health status.  In addition, certain Part D prospective  payments are  
reconciled  against actual costs, and risk-sharing rules set in law are applied  to further mitigate  
plan risk.  
 
The Part C payment error estimate reported for  FY 2014 (based on calendar  year CY 2012) is 9.0 
percent, or $12.2 billion.  The Part C payment error estimate has decreased from the FY 2013 
estimate of 9.5 percent or $11.8 billion.  The Part C payment error is driven by errors in risk 
adjustment data (clinical  diagnosis data) submitted by Part C plans to CMS for payment purposes.  
Specifically, the Part C payment error estimate reflects the extent to which diagnoses that plans  
60 

  report to CMS are not supported by medical record documentation.   
 
In an effort to improve the Part C error  rate, CMS  has implemented two key  specific corrective 
actions described below:  contract level audits and new regulatory provisions. 
 
 	  Contract-Level Audits: HHS is proceeding with the RADV contract-level audits to recover  
overpayments. RADV verifies, through medical record review, the accuracy  of  enrollee  
diagnoses submitted by  MA organizations for risk adjusted payment. RADV audits are  
HHSs primary  corrective action to recoup improper payments. HHS expects that payment  
recovery will have  a sentinel effect on the quality  of risk adjustment data submitted by  
plans for payment. HHS expects to conduct RADV audits for approximately 30 MA  
contracts annually. RADV audits of payment  year 2011, which began in FY 2014, will be  
the first HHS reviews to recoup funds based on extrapolated estimates.  
 
 	  New Regulatory Provisions:  In CMS-4159-F, Policy  and Technical Changes to the  
Medicare Advantage and the Medicare Prescription Drug Benefit Program (79 FR 100), 
HHS codified the Affordable Care  Act requirement that MA organizations must report and 
return overpayments that they identify. In CMS-1613-FC, Hospital Outpatient 
Prospective Payment and Ambulatory Surgical  Center Payment Systems and Quality  
Reporting Programs; Physician-Owned Hospitals: Data Sources  for Expansion Exception;  
Physician Certification of  Inpatient Hospital Services; Medicare Advantage Organizations  
and Part D Sponsors: CMS-Identified Overpayments Associated with Submitted Payment 
Data (79 FR 66769), HHS also established a payment recovery and appeal mechanism to 
be applied when HHS identifies erroneous payment data submitted by an MA  
organization. 
 
The Part D payment  error estimate reported for  FY 2014 (based on CY 2012) is 3.3 percent, or  
$1.9 billion.  The FY 2014 Part D error estimate represents the combined impact on Part D  
payments of four sources of error: Payment error related to low income subsidy status; payment  
error  related to Medicaid  status; payment error  related to prescription drug event data validation;  
and payment error related to direct and indirect remuneration.       
 
In  an effort to improve the Part D error rate, CMS has implemented two key  specific corrective 
actions described below:  outreach to plan sponsors and new regulatory provisions.  
 
 	  Outreach:  Formal outreach to plan sponsors will continue for invalid/incomplete 
 
documentation. 

 	  New Regulatory Provisions: HHS codified the ACA requirement that Part D sponsors  
must report and return overpayments that they identify. CMS also proposed a payment  
recovery and appeal mechanism to be applied when CMS identifies erroneous payment  
data submitted by a Part  D sponsor. 
Probable Fraud Measurement Pilot    
There is no reliable estimate of the amount of  fraud in the Medicare program.  Documenting the  
baseline amount of fraud  in Medicare is of  critical importance, as it allows  officials to better  
evaluate the success of ongoing fraud prevention activities.   In collaboration with the HHS Office 
61 

  of the Assistant Secretary  for Planning  and Evaluation (ASPE), CMS developed the methodology  
for the first nationally representative  estimate of the extent of probable fraud in the Medicare fee-
for-service program in FY 2011.  In FY 2012, CMS developed the measurement tools for the  
pilot, and collaborated with government partners, including ASPE, on the strategy for  
implementation.  CMS received OMB approval in May 2013.  
 
This project will estimate probable fraud in the Home Health benefit to pilot test  the measurement  
approach and  calculate a service-specific estimate.  This pilot is measuring probable  fraud  
rather than  fraud because fraud is a legal determination that involves establishing intent   a 
determination that is made through the judicial system.   A review panel of  experienced health care 
analysts, clinicians, policy  experts, and fraud investigators will review all collected data and 
determine if there is sufficient evidence to warrant a referral to law enforcement.   After the 
completion of this pilot, CMS will assess the value of expanding the measurement to other areas  
of Medicare. CMS will begin collecting data on probable fraud and have an estimate of probable  
fraud within HHAs in 2015.  
 
4.    Recovery   
Suspension 
CMS in FY 2014 continued its use of the new  Affordable Care Act authority  to suspend payments  
to providers during an investigation of  a credible  allegation of fraud. CMS also has authority to 
suspend payment if reliable information of an overpayment  exists.  During  FY 2014, there  were 
507 payment suspensions that were  active at some  point during the fiscal year.  Of the 507 
payment suspensions, 207 new payment suspensions were imposed during FY 2014.  This means  
that 300 were  approved prior to FY 2014, but still active at some point during  FY 2014.  Lastly,  
during  FY 2014, we terminated 191 payment suspensions.     
 
Field Offices  
CMS has designated program integrity  field offices located in or near the  HEAT cities of Miami,  
Los Angeles, and Brooklyn that provide  a CMS presence in high risk fraud areas of the country.  
All three field offices have staff that are designated CMS Strike Force Liaisons, who coordinate 
with law enforcement, facilitate data analysis, and expedite suspension requests.  The field offices  
also work with CMS central office and the  ZPICs to conduct data  analysis to proactively identify  
targets and to coordinate  efforts among various contractors and agencies to identify local issues  
and vulnerabilities with national or regional impact.    
 
The field office staff performs outreach and education to partners in their areas, including law  
enforcement, Senior Medicare Patrol  and state Medicaid agencies. The field offices train US  
Attorneys, HHS-OIG and FBI agents, analysts and forensic accountants on Medicare policy and 
coding  clarification, as well as provide data and billing analysis for specific cases.  These staff  
also provides significant  support during the prosecution of health care fraud cases through 
testimony, depositions and victim impact statements.  
 
The field  offices develop solutions to the most challenging program integrity  issues in their  
region. In Miami, for example, the field office has  boots on the ground working to root out fraud 
in home health by performing provider  and beneficiary interviews.  This has resulted in 105 
62 

  revocations from the Miami Field office  for  FY 2014.  The  Los Angeles staff is working with 
county Emergency Medical Service licensing authorities, CMS contractors and local law  
enforcement to address emerging schemes in ambulance providers.    
 
Enrollment Special Study  
This is a project designed to utilize and expand the existing programmatic infrastructures to take  
administrative actions under existing CMS authorities by conducting site verifications of  
potentially high risk providers and suppliers. The information obtained during site verifications is  
used to determine if provider enrollment requirements are met  and to calculate a fraud level  
indicator.  
 
Since inception in July 2009, this project has produced significant results; including an increased  
number of revocations, deactivations, and prepay  edit savings. The project  has also provided 
valuable information which CMS has used to identify and implement programmatic changes that  
have proven successful to deter and prevent Medicare fraud.  
 
As of June 30, 2014, the Medicare Administrative Contractor covering Florida, (First Coast  
Service Operations) had conducted 6,254 site verifications to verify providers and suppliers  
operational status, deactivated 16 practice locations, and revoked or  denied 219 providers. CMS  
saved $10,848,246 from  prepayment medical record review  
 
Administration  for Community Living  
 
The mission of the Senior Medicare Patrol (SMP)  program is to empower  and assist Medicare  
beneficiaries, their  families, and caregivers to prevent, detect, and report health care fraud, errors, 
and abuse through outreach, counseling, and education. In FY  2014, the  Administration for  
Community  Living (ACL)  was allocated $3.4 million in HCFAC funding  by HHS to support  
infrastructure, technical assistance, and other SMP program support. In addition to this funding, 
ACL was allocated $3.2  million for capacity-building activities designed to enhance the  
effectiveness of state-wide SMP programs.  During  FY 2010 and FY 2011, CMS had provided 
this capacity funding to ACL for the SMP projects. In FY 2012 and FY 2013 HCFAC funding  
was allocated  directly to  ACL. The base SMP project  grant is funded from  a separate 
Congressional appropriation.  
 
SMP  Project Activities  and Outcomes  
 
ACL funds 54 SMP statewide projects (each state, Guam, Puerto Rico, US Virgin Islands and 
D.C.) with funds authorized in the Older American Act and the HCFAC Wedge. In addition to the  
projects base  grants, funded from the Older American Act, the SMP program offers HCFAC  
funds to each grantee so that they  can expand their program. Prior to FY 2013, the additional  
funding was based largely  on the known fraud prevalence  within each state. However, in  
FY 2013, the program moved to a formula-driven allocation taking into account the number of  
Medicare beneficiaries living in each state and the ruralness of the state. The new formula is  
intended to provide a more equitable  allocation of  funds and reflects the reality that the  
prevalence of  fraud is much broader than a few selected states.  
63 

  According to the most recent annual performance  report from  HHS-OIGs Deputy  Inspector  
General for Evaluation and Inspections, issued June 2014, a total of 5,406 active volunteers  
served SMP projects during 2013. These volunteers performed an essential  function of this  
program, contributing 105,235 hours and conducting over 148,000 one-on-one counseling  
sessions in efforts to educate beneficiaries about how to prevent and detect  Medicare fraud within  
local communities.  
 
Outreach to Medicare beneficiaries is a key element of the SMP program. During 2013, SMP  
projects held 10,545 community outreach education events reaching more than 1,048,000 people, 
and were responsible  for  over 181,143 media airings to increase beneficiary awareness about  
issues  related to Medicare fraud. In addition, over  501,400 beneficiaries were educated through  
14,924 group educational sessions conducted by SMP programs in local communities.  
 
SMP projects nationwide received 114,625 inquiries for information or assistance in 2013 from or 
on behalf of beneficiaries. This included receipt of 1,674 complex issues, i.e., beneficiary  
complaints requiring further research, assistance,  case development, and/or referral.    SMP 
projects reported that 1,526 complex issues were resolved for beneficiaries  during 2013, while  
698 complex issues with  an estimated dollar value of over $976,400, were referred to law  
enforcement, CMS integrity contractors, state Medicaid Fraud Control Units, or other entities for  
further  action.  During this period, HHS-OIG documented that $143,282 in health care 
expenditures were  avoided and nearly $9.1 million in Medicare, Medicaid and other savings  
resulted from actions taken by the SMP program.  
 
Since the programs inception, the program has educated over 5.9 million beneficiaries in group 
or one-on-one counseling sessions and has reached more than 29 million people through 
community education outreach events. While SMPs make numerous referrals of potential fraud to 
investigators, it is still difficult to measure the outcome of these cases without a tracking  
mechanism. Therefore, we have no specific measure of these outcomes, though we anticipate that  
they would demonstrate  an additional benefit of the SMP programs ability  to detect and prevent  
fraud and abuse in the Medicare program.  In addition, the impact of the SMP programs primary  
activities  education of  beneficiaries to prevent health care fraud  is extremely  difficult to  
quantify in dollars  and cents.  As  HHS-OIG indicated in the June 2014 report:  
 
We continue to emphasize that  it  is not always possible to track referrals to Medicare  
contractors or law  enforcement from beneficiaries who have learned to detect fraud, waste, 
and abuse from  the projects. Therefore, the projects  may not be receiving full credit for 
savings attributable to their work. In addition, the projects are unable to track the substantial  
savings derived from a sentinel effect whereby  fraud and errors are reduced by Medicare  
beneficiaries scrutiny of their bills.    
 
ACL recognizes the importance of measuring the  value of the SMP program impact to the fullest 
degree possible. Toward that end, in 2012, ACL  contracted for the first-ever SMP program  
evaluation that  assessed the national design and implementation of the SMP program, the 
adequacy of current SMP performance measures, and sought  to determine the most appropriate  
measures of SMP program value (benefits, results  and impact).  The  contract concluded in 
December 2013 and ACL is reviewing the evaluation recommendations for implementation in   
64 

  FY 2015. In addition, in FY 2013, the SMP program issued a  three-year  research  grant designed  
to measure the value of prevention activities. As the SMP program is focused on education and 
prevention, the true value of the program comes from  beneficiaries avoiding fraud in the first  
place. This  grant is intended help the program identify a  way to measure that effect.   
 
Despite the factors that have limited ACLs ability  to quantify the value of the SMP program in  
preventing, identifying, and reporting health care fraud, HHS-OIG has documented over   
$121 million in savings attributable to the program as a result of beneficiary  complaints since its  
inception in 1997.  
 
SMP Infrastructure and Program Support   
 
SMP Resource Center  
In FY 2014, the SMP Resource Centers  grant was up for competition and a new three-year grant  
was awarded. The SMP Resource Center, established October 1, 2003, provides technical  
assistance, support and training to the SMP projects, ensuring  a fully  consolidated national  
approach to reaching Medicare  and Medicaid beneficiaries.  The  goal of the Center is to provide  
professional expertise and technical support, serve as an accessible and responsive central source 
of information, and maximize the effectiveness of  the SMP projects in  health care  integrity  
outreach and education.  The Center has been instrumental in supporting ACL efforts to forge  
national visibility for the  SMP program.    
 
SMP Data System  
The SMP program issued a contract in FY 2014 for the development of  a new data system  
designed to support the evolving needs of the SMP program. The previous system, SMART  
FACTS, has been in operation for seven years  and is at the end of its functionality. The new  
system will be operational in late FY 2015 and is expected to last at least 10  years.   
 
Integration Project Grants  
The  goal of the SMP program is to provide education to all Medicare beneficiaries. However, 
there are specific populations that are historically  hard  to reach. Three of these populations-
Medicare beneficiaries under age 65;  Lesbian, Gay,  Bisexual and Transgender (LGBT) Medicare 
beneficiaries; and American  Indian/Alaska Native (AI/AN) Medicare beneficiaries--were 
specifically identified as  target populations. In FY 2013, ACL awarded five grants to 
organizations  that  have initiated  seventeen-month projects seeking  to increase awareness,  
empowerment, and actions to prevent  health care  fraud amongst these  generally underserved 
populations. The goal of  these grants is  to develop new, efficient, and sustainable  approaches for  
ensuring high-quality  and culturally  competent service delivery and help educate consumers to 
prevent health care fraud.  This work continued in FY 2014.  
 
Prevention Research Grant   
As mentioned above in FY 2013, the SMP program issued a three-year  research  grant to identify a 
way to measure the overall impact of the SMP program. Specifically, the  grantee will develop and 
test an evaluation method to determine how to best measure the  effects of  the SMP programs  
community education techniques on health care fraud prevention. This work continued in FY 2014.  
65 

  Office of the General Counsel
   
 
In FY 2014, the Office of the General Counsel (OGC) was allocated approximately $13 million in  
HCFAC funding by HHS to supplement OGCs efforts to support program integrity activities.   
Many of  OGCs efforts in FY 2014 were focused heavily on program integrity review, in which 
OGC reviews CMS programs and HCFAC activities in order to strengthen them against potential 
fraud, waste, and abuse.  OGC also continued its active litigation role in order to assist in the  
recovery of program funds.  During  FY 2014, OGC was involved in a wide range of  HCFAC  
efforts that resulted in Government recoveries of  over $2.5 billion in judgments, settlements, or  
other types of recoveries, savings, or  receivables as described elsewhere in this report.     
 
The Affordable Care Act  
The ACA significantly amended existing anti-fraud statutes. These provisions established 
fundamental expectations for compliance, disclosure, transparency, and quality of care, and are  
matched by corresponding enforcement provisions. Some specific provisions of the ACA that  
particularly support HCFAC priorities include amending Medicare and Medicaid 
provider/supplier enrollment requirements, overpayment provisions to specifically invoke the  
FCA, strengthening the anti-kickback statute, and creating a statutory disclosure protocol for  
violations of the physician self-referral prohibition known as the Stark law. During FY 2014, as  
new ACA programs  continued to be   implemented, OGC spent significant time and resources  
working  with the relevant CMS client components  to ensure that program integrity issues were 
reviewed and resolved, and assisted the  client in addressing program integrity and compliance  
problems as they occurred.   
 
HEAT  
During  FY 2014, OGC was involved in HEAT initiatives and worked closely  with other  HEAT  
members to combat fraud, waste, and abuse in the Medicare and Medicaid programs by providing  
advice on the myriad legal issues presented  as the government works to initiate innovative anti
fraud programs in various hotspots throughout the country. OGC continued to assist DOJ in 
pursuing both criminal and civil cases involving individuals and entities seeking to defraud the  
Medicare and Medicaid  programs and to defend any  Federal court challenges that are brought as a  
result of HEAT initiatives.  OGCs involvement in HEAT also included advising CMS on 
provider and supplier  revocations, payment suspensions, recoupments, and defending the  
administrative appeals that resulted.   
  
FCA and Qui Tam Actions  
OGC  supported DOJ in  assessing qui tam  actions filed under the FCA by interpreting complex  
Medicare and Medicaid rules and policies to assist DOJ in discerning which allegations were 
program violations and should be pursued, and to help DOJ focus government resources on those  
matters which were most likely to result in a recovery of money  for the  government. When DOJ  
filed or intervened in a FCA matter, OGC provided litigation support, including interviewing and  
preparing witnesses and responding to requests for documents and information. OGC also  
expended considerable resources in responding to requests for information and witness testimony  
in declined qui tams that were litigated by relators.   In  FY 2014, OGC participated in FCA and 
related matters that recovered over $2.2 billion for the government. The types of FCA  cases that  
66 

  OGC  worked collaboratively with DOJ on included: drug  pricing manipulation, illegal marketing  
activity by pharmaceutical manufacturers that resulted in Medicare and Medicaid paying for drugs  
for indications not covered, physician self-referral violations, and provider upcoding  cases.   
     
Provider/Supplier Suspensions and Enrollment Revocations or Denials  
Suspensions play a  critical role in protecting against the abuse of program  funds.  OGC advised 
CMS on whether to suspend payments to Medicare providers and suppliers and defended the  
suspensions when challenged through the appeal  process. In FY  2014, OGC attorneys  were 
involved in a myriad of suspension and recoupment actions, which involved fraudulent billings  by 
many different segments  of the health care industry, including DME suppliers, ambulance  
companies, physicians, infusion clinics, therapists, home health agencies, and diagnostic testing  
facilities. OGC also represented CMS when a provider or supplier appealed  a denial of enrollment  
or revocation. In FY 2014, OGC represented CMS in appeals before the Departmental Appeals  
Board (DAB) and often  resolved these cases without formal hearings. OGC also continued to 
advise CMS on the interpretation of enrollment regulations and reviewed proposed enrollment  
rules and manual  changes.   
 
Medicare Prescription Drug Program (Part D)  &  Medicare Advantage (Part C) Compliance  
During  FY 2014, OGC continued to provide extensive advice to CMS on a variety of Part D and 
MA-related contract compliance issues, including  identifying enforcement  options against  
sponsors that are noncompliant or violate program  rules, such as the Marketing Guidelines. OGC  
reviewed compliance-related correspondence that  CMS issued to Part D sponsors and MA plans  
in the form of warning letters, corrective action plan letters, intermediate sanctions, CMP notices, 
and non-renewal or termination notices.    
 
Civil Monetary Penalties  
CMS has the responsibility for  administering numerous CMP provisions enacted by Congress to 
combat fraud, waste, and abuse by enforcing program compliance  and payment integrity. In FY  
2014, OGC provided legal advice to CMS regarding the development and imposition of CMPs  
and defended CMS in many administrative  appeals and judicial litigation resulting from these  
cases.  
 
Petitions for Remission  
OGC collaborated  with Federal law enforcement, including the FBI, the USAOs, the Secret  
Service, U.S. Postal Service, and the U.S. Marshals Service in filing petitions for remission 
directed to recover assets subject either to administrative forfeiture by  Federal law enforcement or  
civil judicial forfeiture by  DOJ. Each petition set forth the background of the fraudulent scheme, 
the history of Medicares payments, and how the fraudulently induced payments could be traced 
to the seized assets. During  FY 2014, OGC petitioned these agencies to recover funds in both 
criminal and civil litigation matters  in which Medicare was a victim of fraud.  
 
Regulatory Review and  Programmatic Advice  
In FY  2014, OGC advised CMS on a  vast  variety  of regulatory  and program issues, all to assist  
CMS in strengthening its programs and activities against fraud and to prevent the wrongful  
disbursement of program funds in the first instance.  Some highlights of OGC efforts include: 
67 

  providing counsel to the CMS Innovation Center regarding new payment and delivery models  
to improve the quality of  care  and reduce  costs to the Medicare and Medicaid programs, working  
with CMS to implement the agencys second notice related to provider and supplier enrollment  
moratoria, and providing  counsel on a proposed rule updating survey procedures and alternative  
sanctions available for HHAs that are not meeting program participation requirements. Further, 
OGC worked with several CMS components on a final rule issued in May  2014 that implemented 
certain ACA program integrity provisions. The final rule requires physicians and practitioners  
who write prescriptions for covered Part D drugs to be enrolled in Medicare, established new  
authority to revoke a prescribers Medicare enrollment in certain situations, and implemented  
ACA requirements regarding reporting  and returning of overpayments by  Part C and D plans. In  
addition, OGC routinely  works with CMS to review legislative proposals regarding program  
integrity matters.   
 
Medicaid Integrity  
Continuing recent trends, OGC saw continued increasing involvement in FY 2014 in Medicaid  
integrity issues as CMS devoted more resources to financial reviews and oversight  and as states  
continued to present innovative proposals to reconfigure their  Medicaid  programs.  For example,  
OGC assisted CMS with  an advocacy  groups administrative complaint filed against Ohios  
Medicaid  fair hearing  appeals process.  OGC is also opposing the Detroit-Wayne Mental Health  
Authoritys  challenge before the Departmental Appeals Board of the  Division of Cost  
Allocations denial of the Authoritys request to use $4.8 million of unspent Medicaid funds to 
reduce its pension obligations. OGC also assisted CMS with the  Indiana Medicaid Programs  
pilot project to recover  Medicare overpayments through the offset of the Federal Financial  
Participation (FFP) portion of Medicaid payments. To date, the pilot project has recovered over  
$900,000. OGC anticipates  providing similar support to CMS with a recently launched initiative  
with the State of Ohio Medicaid Program.    
  
Physician Self-Referral  
OGC provided valuable  assistance to CMS and DOJ in navigating the  complexities of the Stark  
physician self-referral law. This consultation helps to build stronger cases  and focus investigatory  
efforts, leading to successful results for the  government. In FY 2014, OGC provided extensive  
counsel to CMS in its ongoing implementation of  the Medicare Physician Self-Referral  
Disclosure Protocol (SRDP)created under the  ACA to enable Medicare providers to self-
disclose technical violations of the Stark laws physician self-referral prohibition.  OGC advised 
CMS  regarding numerous matters disclosed under this protocol, now numbering over 300.   
 
Medicare Secondary Payer (MSP) Workload  
OGCs efforts to recover  conditional payments by  Medicare that are the primary  responsibility of  
other payers directly supports the  HCFAC statutory  goal of facilitating the  enforcement of all 
applicable legal  remedies for program fraud and abuse.  During FY 2014, OGC has been 
successful in establishing the right to recover over  $6.5 million for Medicare under the MSP  
program. Further,  statutory  changes implementing mandatory insurance reporting requirements to  
the MSP law have strengthened and expanded OGCs efforts in this area  to the benefit of the  
Medicare Trust Funds  including the  authority  for CMS to impose  substantial CMPs for failure  
to report.   
68 

  Bankruptcy Litigation  
OGC protects Medicare funds from waste in bankruptcy  cases by  asserting  CMS recoupment  
rights to collect overpayments, arguing to continue suspension or termination actions against  
debtors, seeking adequate assurances from the bankruptcy  court that CMS interests in the debtors  
estate will be protected, arguing for the assumption of the Medicare provider agreement  as an 
executory  contract, and petitioning for administrative costs where appropriate. In FY 2014, OGC 
asserted CMS interests in numerous bankruptcy  and receivership actions involving physicians, 
hospitals, independent diagnostic test facilities, DME suppliers, nursing homes, and nursing home  
chains, collecting or  establishing the right to collect over $900,000 in recoveries involving  
bankrupt providers.  
 
Denial of Claims and Payments  
CMS and its contractors engaged in various activities and initiatives to detect and prevent abusive  
and fraudulent billing practices. These measures included provider  and beneficiary education, use 
of claim sampling techniques, and a more rigorous scrutiny of  claims with increased medical 
review. In FY  2014, OGC played a major role in advising CMS regarding  the development and 
implementation of these types of program integrity measures and defended CMS in litigation 
brought by providers and suppliers who challenged these efforts. OGC continued to aggressively  
defend CMS and its contractors in cases seeking damages for the alleged wrongful denial of  
claims, for being placed on payment suspension, and for not being  granted extended repayment  
plans.   
 
In summary, OGCs work in support of CMS  advances  the specific goals of the HCFAC  program, 
including program integrity, fraud prevention, and fraud response. Most CMS operations have a 
fraud/abuse component, and OGCs work supporting all CMS substantive program areas directly  
supports  the HCFAC  programs  goals of fraud and abuse prevention in those operational  program  
areas.  
 
Food and Drug  Administration Pharmaceutical  Fraud Program  
 
In FY 2014, $3.4 million in HCFAC funding was  made available for  the FDA Pharmaceutical 
Fraud Program  (PFP).   The PFP  was instituted to  enhance the health care fraud-related 
activities of FDA's Office of Criminal  Investigations (OCI)  and the  Office of the  General  
Counsel (OGC) Food and Drug Division.  OCI, with the support of OGC, investigates  criminal 
violations of the Federal  Food, Drug, and Cosmetic Act (FFDCA), the  Prescription Drug  
Marketing  Act, the  Federal Anti-Tampering Act,  and related Federal statutes.  
 
The PFP  is designed to detect, prosecute, and prevent pharmaceutical, biologic,  and medical 
device fraud.  The PFP  gathers information  from sources inside and outside FDA and focuses on 
fraudulent marketing  schemes,  application fraud, clinical trial fraud, and flagrant manufacturing- 
related violations concerning biologics, drugs, and  medical devices.  The  goal of the  program is  
the early  detection and prosecution of such fraudulent  conduct  and furthers  FDAs  public health 
mission by helping to reduce health care costs, in most cases before they are incurred, and deter 
future violators.  By initiating investigations of pharmaceutical fraud schemes earlier in  their  
lifecycle, FDA is able to preclude potential public harm by barring medical products, which 
69 

  have not followed the  legal FDA approval processes and do not  meet FDA standards, from  
making it to market while saving valuable healthcare dollars from being spent on these bogus  
products.   
  
As described below, the  PFP has identified multiple alleged medical product fraud schemes 
through various avenues.  
 
Since the inception of the PFP, OCI has opened a total of eighty-nine criminal investigations.  In 
FY 2014, FDAs fourth full fiscal  year of HCFAC Program activity, OCI, through its PFP, 
opened twenty-four criminal investigations, described below:  
 
 	  Two  investigations  involving  misbranding  allegations by drug manufacturers, 
including minimization of risk and marketing for  unapproved uses. These 
investigations involve marketing of the drugs  for  conditions not indicated in the  
approved labeling  and for deceptive marketing practices regarding the safety of the 
products. 
 
 	  Four investigations involving  allegations of misbranding  by medical device manufacturers  
for selling or distributing devices for  conditions which are not  FDA  cleared and for  
making misleading representations about the device benefits and efficacy.  
 
 	  Six investigations involving allegations of flagrant manufacturing practices  concerning  
both drugs and devices  causing those products to be misbranded or  adulterated and 
resulting in a safety risk to the public. 
 
 	  Twelve investigations involving  allegations of clinical trial or application fraud.  These 
investigations consist in part of individuals suspected of improperly  commencing and 
conducting  clinical trials, falsifying  clinical trial data, forging signatures of clinical 
investigators, and enrolling ineligible or non-existent subjects in clinical trials, as well as  
falsifying  approval or  clearance applications made to the FDA.  
 
In regards to judicial action, the types of criminal  investigations conducted through the  PFP  tend to 
be complex in nature requiring extensive  document  review and coordination with the affected FDA  
Center.  It is not unusual for these complex fraud investigations  to last  five  years or more from  
initiation to conclusion.  Nevertheless, in January  and February 2014, an application fraud 
investigation, opened in FY 2011, obtained three  guilty pleas for submitting a  report to the  FDA  
which was materially  false or misleading during the device  approval process.  Two individuals  
and the corporation were  sentenced to a total of 84 months of probation and were ordered to pay  
fines and restitution totaling approximately $343,000.  Additionally, in August 2014, a  clinical  
trial coordinator who  falsified patient data, pled  guilty to making false statements in a matter  
within the jurisdiction of the FDA  and is awaiting  sentencing.  
 
Furthermore, FDA believes that various investigations already initiated under the PFP show  
promise of future judicial action that may include  criminal prosecution and monetary  
recoveries. These cases include several investigations of large international drug  
70 

  manufacturers whose active pharmaceutical ingredients are destined  for the  U.S. market for  
serious and pervasive manufacturing violations, as well as several investigations of clinical 
trial organizations, study  coordinators, principal investigators  and sponsors  who have  
allegedly fabricated study  subjects, omitted exclusion and inclusion criteria and caused false 
data to be submitted to the FDA  which represented the investigational products were safe  and 
effective when, in fact, they  are not.  
 
In addition to these investigative activities, FDA conducted a three day training session in early  
May 2014 for criminal investigators  and supervisors covering PFP related topics.  The instruction 
consisted of legal training provided by OGC on the FFDCA in areas relevant to PFP cases, 
investigative scenario training on relevant PFP investigations and case presentations on successful  
prosecutions involving misbranding  and other fraud schemes encompassing both drugs and 
medical devices.  The training also provided background on FDAs participation in the HCFAC  
Program and resources available to assist in investigations being conducted under the PFP.  Due  
to this training, FDA has  seen a measurable increase in HCFAC Program awareness, interest, and  
level of skill in conducting the investigations.  
   
71 

  DEPARTMENT OF JUSTICE 
 
 
United States Attorneys  
 
In FY 2014, the  United States Attorneys  Offices  (USAOs) were allocated approximately  
$40.7 million in HCFAC funding to support civil  and criminal health care  fraud and abuse  
litigation, as exemplified in the Program Accomplishments section.  The USAOs dedicated  
substantial district resources to combating health care fraud and abuse in 2014, and HCFAC  
allocations have supplemented those resources by  providing funding for attorneys, paralegals, 
auditors and investigators, as well as funds for litigation of  resource-intensive health care fraud  
cases.  
 
The 93 United States Attorneys and their  assistants, or AUSAs, are the nations principal  
prosecutors of  Federal  crimes, including health care fraud.  Each district has a designated 
Criminal Health Care  Fraud Coordinator and a Civil Health Care  Fraud Coordinator.  Civil and 
criminal health care fraud referrals are often made to USAOs through the law enforcement  
network described herein, and these cases are usually handled primarily by the USAOs, although 
the civil referrals are sometimes handled jointly with the Civil Divisions  Commercial Litigation  
Branch (Fraud Section).  The other principal source of referrals of civil cases for USAOs is  
through the  filing of qui tam (or whistleblower) complaints.  These cases  are often handled jointly  
with trial attorneys in the Fraud Section. USAOs also handle most criminal and civil appeals at 
the Federal appellate level.  
 
USAOs play  a major role in health care fraud enforcement by bringing criminal and affirmative 
civil cases to recover  funds wrongfully taken from the Medicare Trust Funds and other taxpayer-
funded health care systems as a result of fraud, waste, and abuse.  Civil and criminal AUSAs  
litigate a wide variety of  health care fraud matters, including false billings by  physicians  and other  
providers of medical services, overcharges by hospitals, Medicaid fraud, and kickbacks to induce  
referrals of Medicare or  Medicaid patients, fraud  by pharmaceutical and medical device 
companies, home health and hospice fraud, and failure of care allegations against nursing home  
owners.  Working  closely  with their partners in the Civil Division, several civil health care fraud 
AUSAs have focused their efforts on pharmaceutical fraud, resulting in significant recoveries.  
Most notably, health care giant Johnson & Johnson agreed to pay $2.2 billion to resolve criminal  
and civil liability  arising  from allegations relating  to the prescription drugs  Risperdal,  Invega  and  
Natrecor, including promotion for uses not approved as safe and effective by  the  Food and Drug  
Administration (FDA)  and payment of kickbacks to physicians  and to the nations largest long-
term care pharmacy provider.     
 
Other major pharmaceutical cases included:  Endo Health Solutions  Inc., which agreed to pay to 
pay $192.7 million to resolve criminal and civil liability arising from Endos marketing of the  
prescription drug  Lidoderm for uses not approved as safe  and effective by the FDA;  and Teva  
Pharmaceuticals USA  Inc., which  agreed to pay the government and the State of Illinois  
$27.6 million for allegedly  violating the  FCA  by  making payments to induce prescriptions of an 
anti-psychotic drug for  Medicare and Medicaid beneficiaries.  Most of the  major civil settlements  
72 

  were part of a  global resolution, which also addressed the criminal liabilities, resulting in criminal 
pleas, as well as significant fines and forfeitures.  The criminal portion of these investigations and 
resolutions was handled by criminal health care fraud AUSAs, often working with their  
counterparts at the Consumer Protection Branch of the Civil Division.  These global settlements  
resolved allegations including, reporting of false  and inflated drug prices, manufacturing  and 
distributing adulterated drugs, off-label marketing  and kick-backs.  These cases are detailed  
earlier in this report.  
   
The USAOs partner with the Criminal Division in the  Medicare Fraud Strike Forces   currently  
operating in nine  areas  across the country.  Each USAO has dedicated several AUSAs and 
support personnel to work with Criminal Division attorneys in this important initiative.  The  
Strike Forces use data  analysis to identify high-billing levels in health care  hot spots so that 
emerging or migrating schemes can be targeted.  The significant successes  of the Strike Forces  are  
detailed earlier in this report.    
 
In addition to the positions funded by HCFAC, the Executive Office for United States Attorneys  
Office of  Legal Education (OLE) uses HCFAC funds to train AUSAs and other DOJ attorneys, as  
well as paralegals, investigators, and auditors in the investigation and prosecution of health care  
fraud.  In 2014, OLE offered a Current Trends in Health Care Fraud Seminar, which was attended 
by over 70 AUSAs and DOJ trial attorneys.  Many  USAO  attorneys, investigators, auditors, and 
paralegals serve as faculty  at these OLE trainings, and also participate in other Federal, state, and 
private health care fraud  seminars.  
 
Criminal Prosecutions12  
 
In FY 2014, the  USAOs  received  924 new  criminal matters.  During FY 2014, the USAOs filed  
criminal charges in  496 cases involving 805 defendants, and obtained 734 federal health care 
fraud related convictions. 
 
Civil Matters and Cases13  
 
In FY 2014, the  USAOs  had opened 782 new civil health care fraud investigations.  At the end of  
FY 2014, the USAOs had  957 civil health care fraud investigations pending.  
 
Civil Division  
 
In FY 2014, the Civil Division received approximately $27.1 million in  FY 2014 HCFAC funding  
to support the health care fraud activities of the Commercial  Litigation Branchs Fraud Section 
and the Consumer Protection Branch.  This  amount also included funding to support the  
Department of Justices  Elder Justice  Initiative.    
                                                 
12  FY 2014 numbers are  actual data through the end of September 2014.  This data includes records classified either
  
with the primary or tertiary 03G    Health Care Fraud program code.
   
13  FY 2014 numbers  are actual data through the end of September 2014.  This data includes those records classified
  
under with the FRHC    Health Care Fraud civil code.
  
73 

  The Commercial Litigation Branchs Fraud Section  
 
The Civil Divisions Commercial Litigation  Branch (Fraud Section) investigates  complex  health  
care fraud  allegations and files suit under the FCA to recover money on behalf of defrauded 
federal health care programs including Medicare,  Medicaid, TRICARE, and the FEHBP.  The 
Fraud Section works closely with the Consumer Protection Branch, United  States Attorneys  
Offices, HHS-OIG, state  Medicaid Fraud Control  Units and other law enforcement agencies.  As  
a result of these  efforts, the Fraud Section has obtained settlements and judgments  in health care 
cases  of over $1 billion almost every  year since 2000 and over $2.3 billion in FY 2014 alone.  
 
The Fraud Section investigates  and resolves matters against a wide array of health care providers  
and suppliers.  Matters involving  pharmaceutical and device manufacturers  have historically been 
some of  the most complex and resource intensive  cases handled by the Fraud Section.  These  
matters commonly involve nationwide conduct, raise legally and factually  complicated issues, and 
demand significant resources to investigate, resolve, and litigate, if necessary.  Many of these 
casesincluding  the Johnson & Johnson, Shire, and Endo matters discussed aboveinvolved 
allegations that the pharmaceutical manufacturer  improperly promoted its drug  for uses not  
approved by the  FDA  and not covered by  federal  health care  programs.  Other cases, like the  
CareFusion  and Gensyme matters,  involved allegations relating to the manufacture and 
distribution of medical devices that were misbranded or not approved by the FDA.  Lastly, many  
pharmaceutical and medical device fraud  cases involve allegations that the drug or device  
manufacturer paid  kickbacks to physicians to prescribe  its products.  These cases are significant  
not only because of the significant dollars involved, but  also because they  protect Medicare and  
Medicaid beneficiaries by  preserving the integrity of the FDAs approval process as well as the 
doctor-patient relationship.     
 
In addition to pharmaceutical fraud, the  Fraud Section also investigated and resolved matters  
involving hospitals and physicians.  For  example, the Fraud Section resolved allegations that  
hospitals overbilled Medicare by treating patients  on an inpatient basis when they should have  
been treated as observation patients or on an outpatient basis (e.g.,  the Community Health  
Systems, Inc. and Carondelet Health Network matters discussed above) and allegations that  
hospitals performed medically unnecessary coronary stenting procedures (e.g., the Kings  
Daughter Medical Center and St. Joseph Medical Center matters discussed  above).  Likewise, on 
the eve of trial, the Fraud Section successfully resolved  litigation  against Halifax Hospital 
involving allegations that its contracts with employed medical oncologists  and neurosurgeons  
violated the Stark  Law.  As a result of its investigation, the government recovered $85 million. 
 
Because the Fraud Section receives every FCA  complaint filed across the country by  
whistleblowers (otherwise known as relators), it has a unique vantage point over health care  
fraud trends  and developments nationwide and therefore regularly  handles some of the most  
complex matters and  takes the lead on coordinating national investigations with its law  
enforcement partners.  Likewise, given the diversity  of health care fraud cases pursued by the  
Fraud Section, it frequently provides training  and guidance to AUSAs and agents on the FCA  and 
health care fraud issues.   The Section works closely  with HHS-OIG, Office  of General Counsel, 
in all settlements of health care  fraud  allegations in order to ensure that the  administrative  
74 

  remedies possessed by  HHS are appropriately considered and to enable the  negotiation of  
compliance terms that diminish the risk that the offending conduct will be repeated.  The Section 
also collaborates with and counsels CMS and HHS-OIG  on interagency initiatives and proposed 
rules and regulations.   
 
The Elder Justice  Initiative, which is housed in the Civil Division, coordinates and supports law  
enforcement efforts to combat elder abuse, neglect, and financial  exploitation.  The  Initiative  
supports law enforcement efforts by maintaining an information bank of Elder Justice related  
materials (including briefs, opinions, indictments, plea agreements, subpoena templates); funding  
medical reviewers, auditors, and other  consultants to assist DOJ attorneys  and AUSAs  in their  
nursing home and/or long term  care facility cases; hosting quarterly teleconferences with DOJ  
attorneys and AUSAs  across the country to discuss issues or developments in connection with our  
nursing home  and failure of care cases; and coordinating  nationwide investigations of skilled  
nursing facilities.  In addition to supporting law enforcement efforts, the  Initiative continues to 
fund research projects awarded by the Office of Justice Programs, National  Institute of Justice, to 
study the abuse, neglect, and exploitation of elderly  individuals and residents of residential care  
facilities.  Elder Justice  Initiative members represent the Justice Department  on Interagency  
Working Groups such as  the Elder Justice Coordinating Councils Working  Group.  In  September  
2014, the Civil Division launched the Elder Justice Website (www.justice.gov/elderjustice), a 
valuable resource for elder abuse victims and their families, state and local prosecutors, elder  
abuse researchers,  as well as practitioners.  The  website will also serve as  a forum for law  
enforcement and elder justice policy  communities to share information and enhance public  
awareness about elder abuse.  
 
The Consumer Protection Branch  
 
The Consumer Protection Branch (CPB) investigates and prosecutes manufacturers and  
individuals who are illegally promoting and distributing unapproved, misbranded, and adulterated 
drugs  and devices in violation of the Food, Drug, and Cosmetic Act (FDCA).  CPB works closely 
with the Commercial  Litigation Branchs  Fraud Section, the USAOs, and the FDA on a wide  
variety of health care fraud matters.  Because of the complex nature of these  investigations, they 
demand significant resources.   They often require in-depth analyses of manufacturers clinical  
studies, manufacturing practices, or  commercial activities.   In recent  years,  CPB has  prosecuted 
dozens of companies and individuals for FDCA and related violations.  These prosecutions  have 
resulted in significant jail terms  and fines, penalties, and forfeitures; since 2009, these fines, 
penalties, and forfeitures  have totaled more than $6.4 billion.  
 
In the area of pharmaceutical and medical device fraud, CPB  has been actively involved in several  
significant settlements in FY 2014.  In the Johnson & Johnson (J&J) matter, CPB, in partnership 
with the USAO, prosecuted J&J subsidiary Janssen for its misbranding of the antipsychotic drug  
Risperdal.  Although Risperdal was  approved only  to treat schizophrenia, Janssens sales  
representatives promoted Risperdal to physicians  and other prescribers who treated elderly  
dementia patients by urging the prescribers to use Risperdal to treat symptoms such as anxiety,  
agitation, depression, hostility and confusion.  Members of Janssens ElderCare sales force used  
company created written  sales aids that emphasized symptoms and minimized any mention of the  
75 

  FDA-approved use, treatment of schizophrenia.  In a plea agreement resolving these charges,  
Janssen admitted that it promoted Risperdal to health care providers for treatment of psychotic  
symptoms and associated behavioral disturbances  exhibited by  elderly, non-schizophrenic  
dementia patients.  Under the terms of the plea agreement, Janssen paid a total of $400 million, 
including a  criminal fine  of $334 million and forfeiture of $66 million.   
 
In addition to prosecuting major pharmaceutical  and medical device  companies and responsible  
individuals for health care offenses, CPB prosecutes  dangerous schemes involving  the online sale 
of pharmaceuticals.   For  example, in FY 2014, CPB brought charges  against fifteen individuals in 
connection with a  global  Internet pharmacy organization which unlawfully  sold prescription drugs  
over the  Internet through a network of  websites and affiliates.  This pharmaceutical drug  
trafficking organization facilitated the illegal distribution of prescription drugs, including Soma  
(containing Carisoprodol), Ultram (containing Tramadol), and Fioricet (containing butalbital, 
acetaminophen and caffeine), and their  generic  equivalents, based on invalid prescriptions, to 
customers throughout the United States.  To date, five individuals have pled guilty.   
 
The Consumer Protection Branch also prosecutes  individuals who are purveyors of unapproved 
drugs, which are sold to consumers as purported cures for diseases.  For instance, CPB worked 
with the U.S. Attorneys  Office in Houston, Texas, to prosecute two individuals  who were 
sentenced to 60 months and 78 months in prison, respectively, for their roles in  a conspiracy to 
introduce unapproved drugs into interstate commerce.  The defendants  advertised and promoted 
unapproved stem cell treatments to individuals who had serious illnesses, such as amyotrophic  
lateral sclerosis (Lou Gehrigs disease), multiple  sclerosis, and Parkinsons disease  diseases for  
which there is no FDA-approved cure.  During the conspiracy, one defendant  falsely represented  
to victims that he was a physician licensed to practice medicine in Texas and that he had  
extensive experience in carrying out stem cell procedures.   Victims were  falsely told by  the 
second defendant  that the stem cell procedures were FDA  approved and would effectively treat  
their diseases.   Cases such as these  are significant  because of the public health and safety issues  
that they implicate.   
 
Criminal Division  
 
In FY  2014, the Criminal Division was  allocated $8.6 million  in  FY  2014 HCFAC funding to 
support criminal health care fraud litigation and interagency coordination, which is carried out  
primarily by the  Fraud Section and, to a lesser extent,  the Organized Crime and Gang Section.   
 
The Fraud Section  
 
The Fraud Section  in the  Criminal Division prosecutes  health care fraud cases, initiates and  
coordinates complex health care fraud prosecutions, and supports the USAOs with legal and 
investigative  guidance and training.  Beginning in March 2007, the  Fraud Section, working with 
the local USAOs, the FBI, HHS-OIG,  and state and local law enforcement  agencies, launched the 
Medicare Fraud Strike Force in Miami-Dade County, Florida.  Since 2007, DOJ and HHS have  
expanded Strike Force operations to nine  areas.  In FY 2014, the  Fraud Section continued to 
provide attorney staffing, litigation support, and leadership and management oversight  for  
76 

  numerous Strike Force prosecutions in each Strike Force area.  A summary  of the Fraud Sections  
key litigation accomplishments in FY  2014 follows:   
 
 	  Filed  165 new health care fraud  cases involving charges against  353 defendants who 
collectively billed the Medicare and Medicaid programs  approximately $830 million;  
 	  Obtained 304 guilty pleas and litigated  38 jury trials, winning  guilty verdicts against 
41 defendants;  14  and  
 	  Secured prison sentences in health care fraud cases averaging more than  50 months.  
 
Fraud Section attorneys staffed and coordinated the  Divisions health care fraud litigation through 
the existing  nine  Medicare Fraud Strike Force teams. 
 
Fraud Section attorneys coordinated a major multi-district Strike Force initiative  during the fiscal 
year and handled many of the investigations and indictments that were filed in this operation. On  
May 13, 2014, Fraud Section and USAO Strike Force prosecutors in nine  cities executed a 
nationwide operation that resulted in charges against 90 individuals, including doctors, nurses, 
and other medical professionals, for their alleged  participation in Medicare fraud schemes  
involving approximately  $260 million in false billings.   
 
In addition to Medicare  Fraud Strike Force  cases, the Fraud Section handles other complex  
corporate  criminal health care fraud matters.  Often, such cases  are handled  with AUSAs from  
USAOs or coordinated with parallel proceedings by  DOJ Civil Division attorneys.  Below are 
some representative cases:  
 
 	  On October 23, 2013, the former CEO  and co-owner of Orbit Medical, Inc. was indicted 
as part of a $45 million scheme involving the falsification of medical  records to support  
fraudulent claims for power wheelchairs.   Orbit has been a major supplier  of  DME  to 
Medicare.  The defendant  directed Orbit sales representatives in falsifying  patient  records  
to make it appear that particular Medicare beneficiaries qualified  for power  wheelchairs  
under Medicares regulations when in fact, they did not.  Prior to  defendants indictment,  
three Orbit sales  representatives had also pleaded  guilty to  charges of one  count of health 
care fraud  conspiracy related to their roles in the scheme at Orbit.    
 
 	  In August 2014, a patient referral source for  a major hospital chain  pleaded guilty to  
conspiracy to pay  and receive health care bribes and kickbacks.  Specifically, from  
approximately 2000 through 2012, the defendant received over $1,000,000 in bribes and 
kickbacks from the hospitals in exchange  for referring Medicaid patients.  The hospitals  
submitted over $400,000,000 in false and fraudulent claims to government  health care 
programs.   
 
 	  In August 2014, the Chief Executive Officer of  a  hospital owned and operated by  a major  
hospital chain pled guilty to conspiracy to pay health care bribes and kickbacks in 
                                                 
14  Fraud Section attorneys  were responsible for  many of the cases summarized in the Medicare Fraud Strike Force 
section of this report.  
77 

  exchange for Medicaid patient referrals.   The hospital  submitted hundreds of thousands of  
dollars in false and fraudulent claims to government  health care programs.       
 
In addition to health care fraud litigation, the Fraud Section also provided legal  guidance to FBI  
and HHS-OIG agents, health program agency staff, AUSAs, and other Criminal Division 
attorneys on criminal, civil, and administrative tools to combat health care fraud.  Throughout    
FY 2014, Fraud Section prosecutors met with federal prosecutors and agents across the United 
States to provide training, investigative leads based on data analysis, and related support.  The  
Fraud Section also provided support in the following areas, among others:  provided advice and  
written materials on issues including patient medical record confidentiality and disclosure;  
coordinated referrals of possible criminal HIPAA  privacy violations from the HHS Office for  
Civil Rights; monitored and coordinated DOJ responses to legislative proposals, major regulatory  
initiatives, and enforcement policy matters; reviewed and  commented on health care provider  
requests to the HHS-OIG for advisory opinions and consulted with the HHS-OIG on draft  
advisory opinions; coordinated with CMS  concerning fraud detection of Medicare contractors, 
referrals to law  enforcement for investigation, and case development; and prepared and 
distributed to all USAOs and FBI field offices periodic summaries of recent and significant health 
care fraud cases.  The Fraud Section also held a National Health Care Fraud Training Conference 
in September 2014 that was attended by 260 criminal and civil prosecutors (representing 50 U.S. 
Attorneys Offices)  and law enforcement personnel.  
 
The Organized Crime and Gang Section (OCGS)  
The Criminal Divisions Organized Crime and Gang Section (OCGS) supports  and participates in  
investigations and prosecutions of fraud and abuse targeting the 2.5 million private sector health  
plans sponsored by employers and/or unions, as well as investigations and prosecutions of health 
care frauds perpetrated by  domestic and international organized crime  groups. OCGS also works  
to improve strategic coordination in the identification and prosecution of domestic and 
international organized crime groups engaged in sophisticated frauds posing a threat to the health 
care industry.  
Despite continuing budgetary austerity in FY 2014, four OCGS attorneys  were  assigned to health  
care fraud prosecutions.  Two OCGS attorney worked  with  the Organized  Crime Strike Force in 
the Philadelphia United States Attorneys Office  on prosecutions of Medicare fraud in the  
operation of a hospice and ambulance  companies.  A third OCGS attorney  worked with the  
United States Attorneys  Office in the  District of  Columbia on an investigation and prosecution of  
health care fraud involving a private employee health plan. The fourth OCGS attorney handled 
the investigation and prosecution of an employer  who created false documents to conceal the  
companys underpayment of required contributions for employee benefits in the District of  
Maryland.   
 
In Philadelphia, one OCGS attorney worked on prosecutions involving multiple indictments  
which charged a total of  eight defendants in connection with a scheme to defraud Medicare by  
submitting $14.3 million in fraudulent medical claims for hospice services  provided to patients  
who did not receive services or were ineligible for the benefits claimed. The scheme was  
78 

  successful because nurses and other staff participated in the massive fraud that involved altering  
patient records to make patients appear eligible  for hospice  services  when, in reality, they were  
not. To build up patient enrollment, the hospice co-owners paid health care  professionals, 
including  doctors, for referring patients even when those patients were not  eligible or  appropriate  
for hospice services. In October 2013, a co-owner of the hospice  was convicted after a four-week  
jury trial on 35 counts of  health care fraud, conspiracy to commit health care fraud and money  
laundering. He  was sentenced in May 2014 to more than 14 years imprisonment and ordered to 
make $16.2 million in restitution. A doctor who served as the medical director of the  hospice was  
sentenced in October 2013 to 51 months imprisonment for receiving more than $300,000 in 
illegal payments for regularly  referring Medicare and Medicaid patients to the hospice. The  
conviction resulted in the doctors mandatory  exclusion from participation in any  federal health 
care program  and  will likely result in the loss of his  medical license. One hospice nurse was  
convicted following a jury  trial in connection with a conspiracy to defraud Medicare by  
fabricating  and falsifying documents in support of hospice care for patients  who were not eligible  
for hospice care, or for a  higher, more costly level  of care than was actually  provided to the  
patients. The scheme involved the submission of approximately $9,328,000 in fraudulent claims  
to Medicare and creation of  fraudulent nursing notes for approximately 150 patients indicating  
that services were being  provided, when, in reality, they were not. She was sentenced in June  
2014 to 15 months imprisonment and more than $250,000 in restitution. Three additional hospice  
nurses pleaded guilty to conspiracy to defraud Medicare.  One was sentenced in May 2014 to 
probation and restitution of $189,000. One additional hospice nurse and one doctor await trial.  
  
A second OCGS attorney worked with an AUSA in Philadelphia on prosecutions involving  
schemes to defraud Medicare through the operation of ambulance  companies  that billed Medicare 
for unnecessary services.  In May 2014, the operator of one ambulance  company moved the court  
to vacate his sentence of  92 months imprisonment and set aside his guilty  plea to a scheme to 
defraud Medicare of  approximately $5.4 million by  billing for ambulance services  that were not  
medically necessary.  The Government has filed an opposition and the matter remains under  
consideration at the close of the fiscal  year.  
 
The District of Columbia prosecution involved theft from a collectively bargained health care  
benefit plan by a union officer  and benefit plan trustee.  The defendant  entered a  guilty plea in 
June 2014 to embezzlement from a health plan funded by  employers pursuant to collective  
bargaining agreements with the union.  He admitted to embezzling more than $85,000 from the  
health fund, which was established to pay for the  health benefits of union member employees.  In  
September 2014, he was  sentenced to nine months in a community corrections facility  and 
ordered to pay $85,000 in restitution to the health plan and $107,000 in restitution to the union.  
As a result of this conviction, he is prohibited from serving  as a health care benefit plan trustee, 
fiduciary or  consultant or as a union officer for thirteen years from the date  of his sentencing.  
 
The District of Maryland case involved the victimization of a union health care plan by an 
employer who underpaid contributions to the plan which were required by  a  collective bargaining  
agreement and concealed the underpayment in plan records  and reports.  In August 2014, the  
company owner pleaded  guilty to making false statements in documents required by the  
Employee Retirement  Income Security Act  from  January 2009 through December 2011.    
79 

  In addition to conducting health care fraud investigations and prosecutions, OCGS attorneys  
routinely provide litigation support and advice to AUSAs and criminal investigative  agencies in 
the investigation and prosecution of corruption and abuse of private employment-based  group 
health plans covered by the Employee Retirement  Income Security Act (ERISA).  Such private 
sector employment-based group health plans are the leading source of health care coverage for  
individuals not covered by  Medicare or Medicaid.  OCGS attorneys  also provide support to 
investigations of fraud schemes by  corrupt entities that sell unlicensed health insurance products  
as well as fraud schemes  by corrupt employers that cheat workers out of health benefits required  
by the prevailing wage laws and regulations.   
 
OCGS attorneys  regularly  provide health care  fraud and abuse training  and legal guidance to  
AUSAs and to criminal investigators  and agents of the Department of  Labors Employee  Benefits  
Security  Administration and Office of  Inspector  General.  Such training and guidance covers  
prosecutions involving abuse of private sector employee health plans subject to ERISA and health 
plans sponsored by labor  organizations as well as fraud and abuse committed in connection with 
the operation of multiple employer welfare  arrangements.   OCGS also drafts and reviews  criminal  
legislative proposals affecting employee health benefit plans.   In addition, OCGS provides legal  
guidance to prosecutors and required approvals in the use of the Racketeer  Influenced and Corrupt  
Organizations (RICO) statute in prosecutions of  Medicare and Medicaid frauds as  well as private 
sector health care frauds.    
 
Civil Rights Division  
 
  In FY 2014, the Civil Rights Division was allocated approximately $6.8 million in FY 2014 
HCFAC funding to support Civil Rights Division  litigation activities related to health care fraud 
and abuse.  The Civil Rights Division pursues relief affecting public, residential and non
residential health care  facilities and service systems.  The Division conducts investigations to  
eliminate abuse and grossly substandard care in public, Medicare and Medicaid funded long-term 
care  facilities.  Consistent with the Supreme Courts decision in  Olmstead v. L.C., 527 U.S. 581 
(1999), the Division has  also undertaken initiatives to eliminate the needless institutionalization of  
individuals who require  health care supports and services.  
   
  The Division plays a  critical role in the HCFAC Program.  The Special Litigation Section of the  
Civil Rights Division is the sole DOJ component responsible for the Civil Rights of  
Institutionalized Persons Act, 42 U.S.C. ' 1997 (CRIPA).  CRIPA authorizes the investigation of  
conditions of confinement at state and local residential institutions (including facilities for persons  
with developmental disabilities or mental illness,  and nursing homes) and initiation of civil action 
for injunctive relief to remedy  a pattern or practice of violations of the Constitution or Federal  
statutory rights.  The  review of conditions in facilities for persons who have mental illness, 
facilities for persons with developmental disabilities, and nursing homes  is  an element of the  
program.   
 
The Disability Rights Section of the Civil Rights Division has primary  enforcement authority for  
the Americans  with Disabilities Act (ADA).  Title  II of the ADA authorizes investigation of  
allegations of discrimination by public entities against individuals with disabilities, including  
80 

  discrimination in the form of needless institutionalization of persons who require health care  
supports and services.  See Olmstead, 527 U.S. 581.  Title  II  also authorizes the  initiation of civil 
action to remedy discrimination in violation of the ADA.  In addition to violating the civil rights  
of individuals with disabilities, such unnecessary institutionalization often results in unnecessarily  
increased Medicaid  costs inconsistent with the Medicaid requirements for home and community-
based services.  Both the Special  Litigation Section and the Disability Rights Section have  
undertaken initiatives to combat the use of Medicaid funding  for the unjustified 
institutionalization of persons with disabilities.  In addition, the Educational Opportunities Section 
initiated HCFAC Program participation during this fiscal year to address the use of Medicaid 
funding for unnecessary institutionalization of  youth with disabilities in segregated education 
placements in violation of the ADA.  
  
  The Special Litigation, Educational Opportunities, and Disability Rights Sections work 
collaboratively with the  USAOs and with  HHS.   
 
Fiscal Year 2014 Accomplishments  
 
Special Litigation Section staff conducted preliminary reviews of conditions and services  
involving more than one hundred  health care facilities in  five states during  FY 2014.  The task in 
preliminary inquiries is to determine whether there is sufficient information supporting allegations  
of unlawful conditions and needless institutionalization to warrant formal investigation under  
CRIPA and/or the ADA.  The Section reviews information pertaining to areas such as  abuse and 
neglect, medical  and mental health care, use of  restraints, fire and  environmental safety, and 
provision of services in the most integrated setting appropriate to individual needs.  Separately, in 
FY 2014, the Section opened or continued formal investigations, entered remedial agreements, or  
monitored existing remedial agreements  encompassing more than one thousand health care 
facilities in  sixteen  states  and  the District of Columbia.  The large number  of health care facilities  
reflects the Sections expanded focus on whether  States are ensuring that nursing homes  and other  
institutional settings  do not inappropriately admit persons who should be served in more  
integrated settings.  
 
In  FY  2014, the Section entered into a letter agreement with the State of Mississippi outlining  
immediate steps the State must take toward resolving  the Divisions findings that practices  at 
twelve  state facilities for  persons with intellectual and developmental disabilities and/or mental 
illness violate the residents  statutory rights.  Those facilities are:  Boswell Regional Center, in  
Magee, Mississippi; Ellisville State School, in Ellisville, Mississippi; Hudspeth Regional Center,  
in Pearl, Mississippi; Southern Mississippi Regional Center, in  Long Beach, Mississippi; 
Mississippi Adolescent Center, in Brookhaven, Mississippi; North Mississippi Regional Center,  
in Oxford, Mississippi; Mississippi State Hospital, in Whitfield, Mississippi; South Mississippi 
State Hospital, in Purvis,  Mississippi; Central Mississippi Residential Center, in Newton,  
Mississippi; East Mississippi State Hospital, in Meridian, Mississippi; North Mississippi State  
Hospital, in Tupelo, Mississippi; and the Specialized Treatment Center, in Gulfport, Mississippi.  
Further,  the Section, along with a  coalition of private plaintiff organizations, entered into a  
comprehensive settlement agreement with the State of New Hampshire in  Amanda D. v. Hassan, 
(D. N.H.).  The Settlement Agreement will significantly  expand and enhance mental health  
81 

  services in integrated community settings over the next six  years.   The Agreement will enable a 
class of thousands of adults with serious mental illness to receive services in the community, 
which will foster their independence and enable them to participate more  fully in community  
life.   It will significantly  reduce visits to hospital emergency  rooms and will avoid unnecessary  
institutionalization at State mental health facilities, including New Hampshire Hospital (the  
States only psychiatric hospital) and the Glencliff Home (a State-owned and -operated nursing  
facility  for persons with mental illness).  
 
The Section oversaw the  implementation of an interim settlement agreement in  Steward v. Perry, 
(W.D. Tex.), to resolve a suit against the State of  Texas for its failure to provide adequate  
community-based services to persons with intellectual disabilities residing in as many  as 1,200 
nursing homes  across the State.  Negotiations continued throughout the  fiscal  year  to resolve all 
issues pursuant to a comprehensive  agreement.  
 
Also in FY 2014, the Section opened an investigation into South Dakotas  utilization of nursing  
facilities  across the state to serve seniors and people with disabilities. The Section also opened an 
investigation into West Virginias use of multiple congregate settings to serve children with  
mental health and other needs.  
    
The Section also  continued its  collaboration with the Office of United States Attorney  for the  
Eastern District of New  York in the  investigation of one facility for persons with mental illness, 
Kingsboro Psychiatric Center, in Brooklyn, New  York, and continued its investigation of Utah 
State Hospital, in Provo, Utah, and Utahs community service system for  children with mental  
health needs.  
 
The Section  monitored the implementation  of remedial agreements encompassing twenty  
facilities, and community service options, for persons with intellectual and developmental 
disabilities:  Beatrice State Developmental Center, in Beatrice, Nebraska; Clover Bottom  
Developmental Center in Nashville, Tennessee; Greene Valley Developmental Center in  
Greeneville, Tennessee;  Lubbock State Supported  Living Center, in Lubbock, Texas; Denton 
State Supported Living Center, in Denton, Texas; Abilene State Supported Living Center, in 
Abilene, Texas; Austin State Supported Living Center, in Austin, Texas; Brenham State  
Supported Living  Center, in Brenham, Texas; Corpus Christi State Supported Living Center, in 
Corpus Christi, Texas; El Paso State Supported Living Center, in El Paso, Texas;  Lufkin State  
Supported Living Center, in Lufkin, Texas; Mexia State Supported Living Center, in Mexia,  
Texas; Richmond State Supported Living Center, in Richmond, Texas; Rio Grande State  
Supported Living Center, in Harlingen, Texas; San Angelo State Supported Living Center, in 
Carlsbad, Texas; San Antonio State Supported Living Center, in San Antonio, Texas; Central  
Virginia Training Center, in Lynchburg, Virginia;  Northern Virginia Training Center, in Fairfax, 
Virginia; Southeastern Virginia Training Center, in Chesapeake, Virginia; and Southwestern 
Virginia Training Center, in Hillsville, Virginia.  These remedial agreements include the 
provision of adequate  community supports and services.  The Section successfully concluded its  
monitoring of the three remaining  Georgia State hospitals that serve  both persons with mental 
illness and persons with intellectual  or developmental disabilities, pursuant to the terms of its  
settlement with the State.  The Section continued enforcement of a separate settlement that  
82 

  requires the State to develop community  resources to serve people  with mental illness, and  
persons with intellectual or developmental  disabilities, who were formerly institutionalized or at 
risk of institutionalization in the State Hospital facilities.   
 
The Section brought  to a successful close two decades of litigation regarding the rights of  
formerly institutionalized individuals with intellectual disabilities in West Tennessee, in United 
States v. Tennessee, (W.D. Tenn.).   After the State expanded home-and-community-based  
services, changed the  emphasis of its day services  to supported employment and took other steps  
to successfully implement an agreed-upon Exit Plan, the court granted the parties joint request  
to dismiss this case.    
 
The Section continued monitoring the implementation of various court orders in Evans v. Gray, 
(D. D.C.) intended to ensure that former residents of the District of Columbias Forest Haven 
institution for persons with intellectual or developmental disabilities receive appropriate  
community-based services, to prevent  needless  hospitalization or institutionalization.  
 
The Section also  monitored the implementation  of remedial agreements regarding  six  state-
operated  residential facilities for persons with mental illness:  Kings County Hospital Center, in 
Brooklyn, New York; Delaware State Psychiatric Center, in New Castle, Delaware; Connecticut  
Valley Hospital, in Middletown, Connecticut; New Hampshire Hospital, in Concord, New  
Hampshire; Glencliff Home for the Elderly, in Benton, New Hampshire;  and Oregon State  
Hospital, in Portland, Oregon.  These remedial agreements include the provision of adequate  
supports  and services to enable individuals to live successfully in the community.   
 
The Section successfully  concluded its monitoring of six residential facilities for persons with 
mental illness in Georgia, three of which, as noted above, also have served persons with 
intellectual or developmental disabilities.  The Section  continued enforcement of a separate  
settlement that requires the State to develop community  resources to serve people with serious  
mental illness who are at risk of institutionalization in the State Hospital facilities. 
 
Separately, the Section  asked a federal  court to dismiss a consent decree addressing  conditions of  
confinement and the  ADA at Saint Elizabeths Hospital in Washington, D.C., after the District of 
Columbia complied with  the decree by significantly  improving conditions at the facility  and  
implementing processes to transition individuals to more integrated settings that met their needs.   
That case was  dismissed in September 2014.  In addition, the Section monitored a remedial  
agreement at one nursing facility: the Maple  Lawn Nursing Home, in Palmyra, Missouri. 
In  FY 2014, the  Disability  Rights Section continued to monitor the implementation of its eight-
year settlement agreement with the State  of North Carolina resolving the Sections  Olmstead  
investigation of North Carolinas mental health service system, which currently serves thousands  
of individuals with mental illness in large,  costly institutional settings known as adult care  
homes.  Under the  agreement, North Carolina is providing opportunities to individuals with 
mental illness in adult care homes to transition to less costly, supported housing settings  
integrated housing that promotes inclusion and independence and enables individuals  with mental 
83 

  illness to participate fully in community life.  To date, more than 250 individuals have moved 
from institutions to community-based settings.  
The Section continued to litigate  Lane v. Kitzhaber  (D. Or.), a class action in which it intervened.  
The case was brought on behalf of persons with intellectual and developmental disabilities  
alleging that Oregon is in violation of Title  II of the ADA and  Olmstead  by unnecessarily  
segregating individuals with disabilities in sheltered workshops, and placing other individuals at  
risk of unnecessary segregation in sheltered workshops, when such individuals can and want to 
work in more integrated supported employment settings.  The litigation is ongoing.   
 
The Section also continued to litigate  United States v. Florida (S.D. Fla. 2013), a case in which 
the United States alleges  that the State of Florida  administers its service system for children with  
significant medical needs in violation of the ADA and Olmstead  by unnecessarily segregating  
them in nursing facilities, when they could, and want to, be served at home  or in other  
community-based settings.   
 
The Section also entered  into the nations first statewide settlement agreement, in  United States v. 
Rhode Island, addressing the unnecessary segregation of  individuals with disabilities in  
segregated institutional sheltered workshops  and facility-based day programs.  Under the  
agreement, the State will provide community-based  supported employment placements to roughly  
2,000 individuals with intellectual and developmental disabilities, including at least 700 people  
currently in sheltered workshops, at least 950 people in facility-based day  programs, and 
approximately 300-350 students leaving high school.  The Section continues to monitor its  
previously entered, interim settlement agreement with the State of Rhode  Island and the City of  
Providence.   
 
The Section also monitored its settlement agreement with the State of New  York and private  
plaintiffs regarding New  Yorks mental health service system, in  United States v. New York  
(E.D.N.Y. 2013).  The  agreement remedies discrimination by the State in the administration of its  
mental health service system and ensures that individuals with mental illness who reside in 23 
large adult homes in New York City receive services in the most integrated setting appropriate to  
their needs consistent with the ADA and Olmstead. Under the agreement, such individuals will  
have the opportunity to live and receive services in the community such that  they  are able to live,  
work, and participate fully  in community life.   The Section also continued to monitor proceedings  
relating to the placement of children with disabilities at a restrictive facility  that employs aversive  
treatment as a form of therapy.  
 
In FY 2014, the Educational Opportunities Section (EOS), began its participation in the HCFAC  
Program and extended its investigation of the Georgia Network of  Educational and Therapeutic  
Services (GNETS) program, which provides educational services  for approximately 5000 students  
with emotional and behavioral disabilities.  GNETS is funded and operated by the State of  
Georgia and provides educational services to most of the students in the program in segregated 
GNETS Centers that exist throughout the  State of  Georgia.   
   
84 

  EOS has also  begun to evaluate complaints from  families of students in segregated educational  
facilities, including alternative schools, residential schools for students with disabilities, and  
residential treatment facilities.   In August, the Section was co-counsel on a Statement  of Interest  
in S.S. v. City of Springfield, MA  (D. Ma), challenging placement of students with disabilities in  
alternative schools that exclusively educate students with disabilities who  are often placed there  
after they  exhibit challenging behaviors.  
 
In addition to the  City  of Springfield  matter, the  Division filed  four  statements of interest or  
amicus briefs in litigation raising issues of needless segregation in Pennsylvania, Mississippi, and 
the U.S. Court of Appeals for the Third and Eleventh Circuits.  These briefs have addressed issues  
relating to the unnecessary  institutionalization of individuals in state-run and private, state-funded 
institutions.    
 
 
 
 
85 

  APPENDIX
  
 
Federal Bureau  of Investigation  
 
In FY 2014, the FBI was allocated $127.3 million in funding  from HIPAA to support the facilitation, 
coordination and accomplishment of the goals of the  HCFAC Program. This yearly appropriation was  
used to support 797 positions (476 Agent, 321 Support).  
 
In FY 2014, the FBI initiated 602 new health care fraud investigations and had 2,771 pending  
investigations. Investigative efforts produced 730 criminal health care fraud convictions and 
849 indictments and informations. In addition, investigative  efforts resulted in over 605 
operational disruptions of criminal fraud organizations and the dismantlement of the criminal 
hierarchy of more than 140 health care fraud criminal enterprises.   
 
The FBI is the primary investigative  agency involved in the fight against health care  fraud that 
has jurisdiction over both the Federal and private insurance programs. Health care fraud  
investigations are considered a high priority within the FBIs Complex Financial Crime Program.  
Each of the 56  FBI field  offices has personnel  assigned specifically to investigate health care 
fraud matters.   
 
The FBI leverages its resources in both the private and public arenas through investigative  
partnerships with other federal  agencies such as  HHS-OIG, the  FDA, the  DEA, the Defense  
Criminal Investigative Service, the Office of Personnel Management-OIG, the Internal Revenue 
Service-CI, state Medicaid Fraud Control Units, and other state and local agencies. On the private  
side, the FBI is actively involved in the Healthcare Fraud Prevention Partnership, an effort to 
exchange facts  and information between the public and private sectors in order to reduce the  
prevalence of health care fraud. These efforts will enable members to share successful anti-fraud  
practices  and effective methodologies and strategies for detecting  and preventing health care 
fraud. In addition, the FBI maintains significant liaison with private insurance national  groups, 
such as the National Health Care Anti-Fraud Association, the National  Insurance Crime  Bureau, 
and private insurance investigative units.  
 
In addition to being a partner in the majority of investigations listed in the body of this report, FBI  
field offices throughout the U.S. have proactively  addressed significant health care fraud threats  
through joint investigative efforts; intelligence collection, sharing, and analysis; and the  
utilization of advanced and sophisticated investigative techniques. Each FBI field office is  
involved in a health care  fraud Task Force  and/or  working  group. Members of the groups include  
U.S. Attorneys  Office and HHS-OIG personnel, and in many  cases  also include other federal, 
state, local, and private insurance personnel. Based on information sharing  and coordination, 
additional cases are vetted and identified for investigation. These  activities seek to identify and 
pursue investigations against the most egregious offenders involved in health care  fraud and 
abuse, including  criminal enterprises  and other crime groups;  corporations; companies; and 
providers whose schemes affect public safety.  
   
 
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 In an effort to ensure sufficient FBI health care fraud resources are dedicated to address priority  
threats within the health care system  for which the FBI has  responsibility, the FBI provides  
oversight  and guidance to field offices. The  guidance has included three initiatives to combat the  
crime problem, including the Health Care Fraud Prevention &  Enforcement Action Team  
(HEAT), Large Scale Conspiracies, and Major Provider Fraud.  
 
A description of, and examples of results obtained by, the HEAT  Initiative  are contained in the  
body of this report. Contained within the HEAT section of the report is a description of, and 
examples of results obtained by, the Medicare  Fraud Strike Forces, a key  component of HEAT. 
The FBI  coordinates with the DOJ and HHS-OIG on all HEAT aspects including funding, 
resource allocation, Strike Force expansion, target identification, training, and operations. The  
FBI has 62 agents assigned to the nine Strike Forces in Miami, New York City, Houston, Tampa, 
Detroit, Los  Angeles, Southern Louisiana, Dallas, and Chicago. In addition to funding agent  
resources, the FBI  funded undercover operation expenses, financial and investigative  analysis  
support, offsite and evidence storage locations, and other investigative costs. These Strike Forces  
have effectively investigated and prosecuted individuals and entities that do not provide  
legitimate health care services, but exist solely for the purpose of defrauding Medicare and other  
Federal  government health care programs. The continued support of Medicare Fraud Strike  Force 
operations is a top priority  for the FBI.  
The Large Scale Conspiracies  Initiative seeks to identify  and target criminal enterprises  and other  
groups whose schemes result in significant losses to health care benefit programs. Intelligence  
efforts for this initiative include information sharing and analysis of billing data with health care  
fraud enforcement partners. As the FBI  continues to focus efforts on these  groups, statistical  
accomplishments associated with the operational disruptions of criminal fraud organizations and 
the dismantlement of the criminal hierarchy of criminal enterprises have steadily increased.   
Investigative assistance provided to field offices as part of the initiative can include support for  
undercover operations, source identification and support, and funding of investigative  costs. An 
example of these types of cases was the investigation into three community  mental health centers  
 Shifa Community Mental Health Center of  Baton Rouge, Serenity Center of Baton Rouge  and 
Shifa Community Mental Health Center of  Texas  which resulted in 17 convictions of  
individuals employed by  the facilities, including therapists, marketers, administrators, owners and 
the medical director. The companies billed Medicare for partial hospitalization program services  
for the mentally ill which were unnecessary or never provided over a period of approximately  
seven years. The  companies, collectively, submitted more than $258 million in claims to 
Medicare for partial hospitalization program services during this period. Medicare paid 
approximately $43.5 million on those claims. The FBI is committed to addressing this type of  
crime problem through the disruption, dismantlement and prosecution of those involved in 
criminal enterprises and  other organized criminal activities.  
The Major Provider  Fraud Initiative seeks to identify and target  corporations, companies, and 
other corporate-level  groups involved in fraud schemes with significant billing to government  and 
private healthcare benefit programs. The related  schemes are frequently complex, challenging to  
identify, and can involve  conduct that is nationwide in scope. Extensive resources and 
coordination are frequently required due to the  complexity and scope of the schemes. Qui  tams  
 
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 (whistleblowers) are a significant intelligence source for these types of cases. These investigations  
frequently involve pharmaceutical manufacturers, hospital corporations, and regional or national  
home health agencies. In addition to the work completed at the field office level, and in response  
to this substantial threat, the FBI has  established a centralized support team to provide  
investigative assistance on these cases nationwide. Examples of significant  major provider  
investigations have included Omnicare  Inc., the nations largest provider of pharmaceuticals and 
pharmacy services to nursing homes, and Amedisys  Inc.  Omincare agreed to pay $124.2 million 
for allegedly offering improper financial incentives  to skilled nursing facilities in return for their  
continued selection of  Omnicare to supply drugs to elderly Medicare and  Medicaid beneficiaries.  
Amedisys  Inc. and its affiliates agreed to pay $150 million to the federal government to resolve  
allegations they violated the  FCA  by submitting false home healthcare billings to the  Medicare 
program. The  FBI coordinates efforts against the crime problem with our law enforcement  
partners, such as DOJ components, HHS-OIG, and FDA.    
 
The FBI  actively provides training and  guidance on health care matters. The FBI has teamed with  
the DOJ, HHS, and private insurance organizations to provide training in the priority threat areas  
of health care fraud. Funded training has included innovative methods of employing  advanced 
investigative techniques; basic health care fraud training for FBI special agent and professional  
staff newly assigned to investigate health care fraud; and sessions on new and current health care 
fraud trends  and issues. FBI personnel training opportunities included sessions offered by the FBI, 
other government  agencies and the private sector. In FY 2014, more than 275 FBI health care  
fraud investigators and analysts received training. FBI personnel also conducted a wide  range of  
training for external audiences, including personnel involved in the investigation of health care  
fraud matters  and medical industry representatives.  
 
Funding  received by the  FBI is used to pay direct and indirect personnel-related costs associated  
with the 797 funded positions. Funds not used directly for personnel matters, are used to provide  
operational support for health care fraud investigations, national initiatives, training, specialized 
equipment, expert witness testimony, and Strike Force operations.  
 
  88 
 Return  on  Investment Calculation 
 
 
 	  The return on investment (ROI) for the HCFAC program is calculated by dividing the total 
monetary results to the Federal  government (not including relator payments) by the  annual  
appropriation for the HCFAC Account in a  given year (not including portions of CMS  
funding dedicated to the  Medicare  Integrity Program, listed in the table on page 90).   
 
 	  The monetary results include deposits and transfers to the Medicare Part A  Trust Fund and the  
Treasury,  as well as  restitution and compensatory  damages to Federal agencies.  
 
 	  The HCFAC Account is made up of three funding sources: mandatory  funding for  HHS and 
DOJ, including  HHS-OIG, appropriated through Section 1817(k)(3)(A) of the Social Security  
Act; mandatory funding for FBI activities appropriated through Section 1817(k)(3)(B) of the  
Social Security Act; and  discretionary funding for the HCFAC Account appropriated through 
the annual  Labor-HHS-Education appropriation.   
 
 	  FBI mandatory  HIPAA funding is included in ROI  calculations  given the important role the  
FBI plays in achieving the monetary results reflected in the HCFAC annual report and 
because that statute states that the funds are  for the same purposes as the funds provided for  
HHS and DOJ under the  Social Security Act, even though FBI spending and monetary results  
are not required to be  reported per the statute.   
 
 	  Only certain portions of  discretionary HCFAC Account funding  are  included in the ROI  
calculation.  All discretionary HCFAC funding  for  HHS-OIG  and DOJ are included in the  
HCFAC report ROI since they spend their discretionary  funding on the same types of  
activities that they support with mandatory funding.  Only the portion of CMS Medicare  
discretionary HCFAC funding that supports law enforcement is included in the HCFAC report  
ROI.  The remainder of  CMSs HCFAC Medicare discretionary  funding supports activities in  
the Medicare Integrity Program (MIP) that are included in the MIP ROI,  which is calculated  
separately  and outside of  the HCFAC report.  Impacts of CMS Medicaid  and Medicare 
program integrity funding are included in a separate report.  
   
 
  89 
 Total Health Care Fraud and Abuse Control Resources  

 
The table below sets forth HCFAC funding, by agency, for health care  fraud and abuse control  
activities in FY 2014, including sequester reductions.  The FBI also receives a stipulated amount  
of HIPAA funding for use in support of the Fraud and Abuse Control Program, which is shown 
below.  Separately, CMS receives additional Mandatory Resources under the Medicare Integrity  
Program (section 1817(k)(4) of the Social Security  Act).  The inclusion of  the activities supported  
with these funds is not required in this report, and this information is included for informational  
purposes.   
 
Since 2009, Congress has also appropriated annual amounts to help carry out health care fraud 
and abuse control activities within DOJ and HHS.  Those amounts are set forth as Discretionary  
Resources in the table below and the results of the efforts supported with these funds are  
contained within this report.  
 
Mandatory Resources   Fiscal Year 2014  
Office of  Inspector General   $184,979,155  
Health and Human Services Wedge1   35,379,478  
Medicare Integrity Program2   858,345,774  
MIP/Medicare (non-add)   792,319,176  
Medi-Medi (non-add)   66,026,598  
Department of Justice Wedge1   57,755,584  
Federal Bureau of Investigation3   127,318,870  
Subtotal, Mandatory  HCFAC   1,263,778,861  
Discretionary Resources    
Office of  Inspector General   28,122,000  
CMS Program  Integrity   237,344,000  
Medicare Program  Integrity (Non-Add)   207,636,000  
Medicaid Program Integrity (Non-Add)4   29,708,000  
Department of Justice   28,122,000  
Subtotal, Discretionary HCFAC   293,588,000  
Grand Total, HCFAC   $1,557,366,861 
   
                                                 
1  The HHS and DOJ Wedge funds are divided among multiple agencies  within HHS and  DOJ. Page 7  of this report  
includes the allocations of the HHS and DOJ Wedge by agency or activity. 
2  Medicare Integrity Program  (MIP) and Medi-Medi fund fraud prevention and detection activities  within Medicare 
and Medicaid,  which are not included in this report to Congress. There is another  mandatory report due to Congress 
regarding MIP activities. 
3  The FBI receives funding annually to conduct anti-fraud activities authorized by HIPAA.  This funding is included  
in the HCFAC  ROI calculation for this report.   
4  This  does not include the Medicaid Integrity Program authorized in the Deficit Reduction  Act of 2005, which  
receives  funding separately from the HCFAC account.  
 
  90 
 Glossary of  Terms 
 
 
The Account  The Health Care Fraud and Abuse  Control Account  
 
ACA  Affordable Care Act  
 
AoA  Department of Health and Human Services, Administration on Aging  
 
ACL  Department of  Health and Human Services, Administration for Community  Living 
 
ASPA  Assistant Secretary for Public Affairs (HHS)  
 
AUSA  Assistant United States Attorney  
 
CHIP  Childrens Health  Insurance Program  
 
CIA  Corporate Integrity Agreement  
 
CMP  Civil Monetary Penalty  
 
CMPL  Civil Monetary Penalties Law  
 
CMS  Department of Health and Human Services, Centers for Medicare & Medicaid Services     
 
CNC  Compromised Number Contractors  
 
CPI  Center  for Program Integrity  
 
CRIPA  Civil Rights of Institutionalized Persons Act  
 
CY  Calendar Year  
 
D.XX or X.D.Xx   Federal judicial district of a state, which may include north, south, east, west   
 
DME  Durable Medical  Equipment  
 
DOJ  The Department of Justice  
 
FEHBP   Federal Employee Health Benefits Program  
 
FBI  Federal Bureau of  Investigation  
 
FCA  False Claims Act  
 
FDA  Food and Drug Administration  
 
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 FDCA  Food, Drug, and Cosmetic Act  
 
FY   Fiscal Year  
 
HCFAC  Health Care Fraud and Abuse Control Program or the Program  
 
HEAT  Health Care  Fraud Prevention & Enforcement Action Team  
 
HFPP  Healthcare Fraud Prevention Partnership   
 
HHA  Home Health Agency  
 
HHS   The Department  of Health and  Human Services  
 
HHS-OIG  The Department of Health and Human Services  - Office of the Inspector  General  
 
HI  Hospital Insurance Trust  Fund  
 
HIPAA  The Health Insurance Portability and Accountability Act of 1996, P.L. 104-191  
 
HIV  Human Immunodeficiency Virus  
 
MEDIC  Medicare Drug  Integrity Contractors  
 
MFCU   Medicaid Fraud Control Unit  
 
OCGS  Organized Crime and Gang  Section  
 
OGC  Office of the General Counsel, Department of Health and Human Services   
 
PERM  Program Error  Rate Measurement  
 
PFP  Pharmaceutical  Fraud Pilot Program  
 
The Program  The  Health Care Fraud and Abuse  Control Program  
 
Secretary  The Secretary  of the Department of Health and Human Services  
 
SMP  Senior Medicare Patrol  
 
USAO  United States Attorneys Office  
 
ZPIC  Zone Program  Integrity Contractor  
 
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