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9 OIG COMPONENTS 
With more than 1,500 staff throughout the Nation, OIG plans and carries out audits, evaluations,  
investigations, and legal activities through the following four components: 
S Office of Audit Services  The Office of Audit Services (OAS) conducts financial  
and performance audits of departmental programs, operations, grantees, and 
A contractors following Government Auditing Standards issued by the Government 
Accountability Office. Financial audits principally provide reasonable assurance 
O about whether financial statements are presented fairly in all material respects; 
performance audits assess the achievement of objectives and identify the presence 
of systemic weaknesses giving rise to waste, fraud, or abuse. Recommendations 
address problems, such as improper payments and inefficient and ineffective use 
of resources. OAS performs audits or oversees the audit work of others through 
a nationwide network of auditors, information technology experts, and other 
professionals.   
I Office of Evaluation and Inspections  The Office of Evaluation and Inspections  
E
(OEI) conducts national evaluations to provide HHS, Congress, and the public 
with timely, useful, and reliable information on significant issues. These evaluations, 
O
conducted by a nationwide staff of evaluators and other professionals, focus on  
preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness  
of departmental programs. To promote impact, OEI reports also present practical 
recommendations for improving program operations. 
I Office of Investigations  The Office of Investigations (OI) conducts and coordinates  
O
investigations of fraud and misconduct related to the Departments programs, 
operations, and beneficiaries. With investigators working in all 50 States, OI leverages  
its resources by actively coordinating with the Department of Justice and other law 
enforcement authorities. OI identifies systemic weaknesses that leave Department 
programs vulnerable to fraud and recovers damages and penalties through civil and 
administrative proceedings. 
 
G Office of Counsel to the Inspector General  The Office of Counsel to the 
Inspector General (OCIG) provides legal advice and representation to OIG on 
matters relating to Medicare, Medicaid, and other HHS programs and operations, 
I
C administrative law issues, criminal procedure, and internal OIG management. 
OCIG represents OIG in all civil and administrative fraud and abuse cases involving 
HHS programs, including False Claims Act, program exclusion, and civil monetary 
O
penalty cases. In connection with these cases, OCIG also negotiates and monitors 
corporate integrity agreements. Finally, OCIG renders advisory opinions, issues fraud 
alerts, and provides other guidance to the health care industry concerning the Federal  
anti-kickback statute and OIG sanctions.  October 1, 2008March 31, 2009 Top Management Challenges   
Each year, based on its work and observations, OIG identifies the most significant management 
and performance challenges facing HHS in the coming year. OIG provides the Department 
with this assessment, which is included in the Departments annual Agency Financial Report 
(AFR) to Congress.   The FY 2008 top management challenges are listed below: 
Top Management Challenges 
 
1.  Medicare Part D Oversight 
2.  Medicare Integrity  
3.  Medicaid and State Childrens Health Insurance Program 
Integrity 
4.  Quality of Care 
5.  Emergency Preparedness and Response 
6.  Oversight of Food, Drugs, and Medical Devices 
7.  Grants Management 
8.  Integrity of Information Systems and the Implementation 
of Health Information Technology 
9.  Ethics Program Oversight and Enforcement  Message From the Inspector General 
This report, which is submitted to Congress pursuant to the Inspector 
General Act of 1978, as amended, summarizes the activities of the 
Office of Inspector General (OIG) for the 6-month period ending 
March 31, 2009.  
This has been an exceedingly busy and productive period for our 
Office in that each of our key components, often working 
collaboratively in a cross-disciplinary fashion, has achieved significant results on behalf 
of the Department of Health and Human Services (HHS) beneficiaries and American 
taxpayers.  For example, our investigators and attorneys were instrumental in the 
Governments $1.4 billion settlement with a pharmaceutical manufacturer for illegally 
promoting a drug for uses not approved by the Food and Drug Administration (FDA).  
Our Office completed significant evaluations of vulnerabilities in the oversight of 
Medicare Part D and in the way that the FDA and the National Institutes of Health 
address conflict-of-interest and ethics issues.  We also performed major audit work to 
establish payment error rates in the Temporary Assistance for Needy Families Program 
(TANF), as requested by the Office of Management and Budget, and examined Medicare 
payment issues, such as identifying overpayments associated with hospital transfers.   
This reporting period also has witnessed a significant restructuring of the 
governmentwide Inspector General (IG) corps, as well as major expansion of oversight 
responsibilities for many of the larger Offices of Inspector General.  The Inspector 
General Reform Act of 2008, enacted in October, established a new Council to help IGs 
develop a strengthened system for governmentwide accountability and oversight.   
This enhancement of OIG operations comes at an especially important time for the 
oversight community and for our Office in particular.  In February, the Congress passed 
and the President signed into law the American Recovery and Reinvestment Act of 2009 
(ARRA), which provides new funding for many existing as well as new program 
activities for Government agencies, including HHS.  New funding for Medicaid, health 
information technology, medical research, and the expansion of the public health safety 
net requires greater resources to protect public monies.  The ARRA established a 
Recovery Act Accountability and Transparency Board (the Board) consisting of a 
number of Inspectors General, including HHS/OIG.  The Board is responsible for 
coordinating and conducting oversight of Federal spending under the ARRA to prevent 
waste, fraud, and abuse.  As we do with all the programs administered by HHS, we look 
forward to fulfilling our responsibilities under the ARRA and appreciate the dedicated 
funding that Congress has furnished to our Office, and to the Board, to carry out our 
important work. 
As we address a very large and expanding mission to protect the vital health and human 
service programs of HHS, I would once again like to express my appreciation to the 
Congress and to the Department for their sustained commitment to supporting the 
important work of our Office. 
 
 
Daniel R. Levinson 
Inspector General     
Highlights 
Summary of Accomplishments 
For the first half of fiscal year (FY) 2009, the Department of Health and Human Services 
(HHS) Office of Inspector General (OIG) reported expected recoveries of more than 
$274.8 million in audit receivables and $2.2 billion in investigative receivables, including 
$551.7 million in non-HHS receivables resulting from OIG work (e.g., the States share 
of Medicaid restitution).  
For this semiannual period, OIG reported exclusions of 1,415 individuals and entities for 
fraud or abuse involving Federal health care programs and/or their beneficiaries; 
293 criminal actions against individuals or entities that engaged in crimes against 
departmental programs; and 243 civil actions, which included False Claims Act and 
unjust enrichment lawsuits filed in Federal district court, Civil Monetary Penalties Law 
settlements, and administrative recoveries related to provider self-disclosure matters. 
The following are highlights of some of the many significant OIG efforts during this 
semiannual period: 
Pharmaceutical and Medical Supply Manufacturers Settle Fraud Cases and 
Enter Corporate Integrity Agreements 
OIGs efforts to investigate allegations of the pharmaceutical and medical device 
manufacturers noncompliance with Federal laws led to the resolution of cases during this 
reporting period involving manufacturers that market pharmaceuticals and medical 
supplies prescribed to Medicare and Medicaid beneficiaries.  Details of two of these cases 
follow: 
 Eli Lilly and Company (Lilly), a drug manufacturer, agreed to plead guilty and pay 
approximately $1.4 billion to the Federal Government and participating States for 
promoting its antipsychotic drug Zyprexa for uses not approved by the Food and Drug 
Administration (FDA) and not covered by Medicaid or other Federal programs.  In its 
plea agreement, Lilly admitted to promoting Zyprexa in elderly populations for 
unapproved uses, such as treatment for dementia, including Alzheimers dementia.  
(Details on p. 37.)  
 Bayer HealthCare LLC (Bayer), a manufacturer of diabetic supplies, agreed to pay 
$97.5 million plus interest to settle allegations that it paid kickbacks to several durable 
medical equipment (DME) mail order suppliers and diabetic supply distributors, leading 
them to submit false claims to Medicare.  Bayer allegedly paid kickbacks to the suppliers 
and distributors to convert Medicare beneficiaries to Bayers products from diabetic 
supplies manufactured by its competitors or to provide Medicare beneficiaries with Bayer 
diabetic supplies.  (Details on p. 38.) 
HHS OIG Semiannual Report to Congress  v  Highlights 
Spring 2009  Both manufacturers entered into 5-year corporate integrity agreements (CIA) with OIG 
that included provisions to increase the accountability of the companies Boards of 
Directors and management. 
Skilled Nursing Facility Grant Park Care Center To Pay $2 Million To Settle 
False Claims Act Allegations   
The owners and operators of Grant Park Care Center, a 296-bed skilled nursing facility 
(SNF) in the District of Columbia (D.C.), agreed to pay the United States and D.C. 
$2 million to settle allegations regarding fraudulent billings to Medicare and Medicaid 
between 1998 and 2007.  The allegations involved providing compromised care to 
residents, reducing staffing levels to inadequate levels, and seeking reimbursement for 
services that were not provided or were of a quality that failed to meet professionally 
recognized standards of health care.  Grant Park Care Center and its management 
company, Grant Park Management, LLC, entered into a 5-year CIA with OIG that 
required them to establish a detailed compliance program and retain an independent 
monitor to assess their quality assurance and quality improvement systems.  (Details on 
p. 41.) 
Miami Physician Sentenced to 30 Years in Prison for Role in HIV Infusion 
Fraud Scheme   
Miami physician Ana Alvarez-Jacinto was sentenced to 30 years in prison and ordered to 
pay more than $8.2 million in joint and several restitution in connection with her role in 
an HIV infusion fraud scheme.  At the Saint Jude Rehab Center, Inc., clinic, HIV-positive 
Medicare patients were paid cash kickbacks in exchange for allowing Alvarez-Jacinto 
and her co-conspirators to prescribe unnecessary infusion treatments.  The case was 
brought by the Medicare Fraud Strike Force, a multiagency team of prosecutors and 
investigators that uses real-time analysis of Medicare billing data to assist in the 
identification, investigation, and prosecution of individuals and companies that have 
committed DME and infusion therapy fraud.  (Details on p. 36.) 
Administrative Law Judge Affirms OIGs Exclusion of Three Former 
Pharmaceutical Executives 
Administrative Law Judge (ALJ) Carolyn Cozad Hughes issued a decision on January 9, 
2009, affirming OIGs decision to exclude three former Purdue Frederick executives
Michael Friedman, Paul Goldenheim, M.D., and Howard Udellfrom participation in 
Federal health care programs for a period of 15 years.  The exclusions were based on the 
executives convictions for wrongful failure to prevent or correct fraudulent 
misbranding and distribution of OxyContin, a powerful narcotic.  In sustaining the 
exclusions, ALJ Hughes found that the executives fraud-related conduct endangered the 
health and safety of program beneficiaries and others and caused astronomical losses 
to Government programs. (Details on p. 33.) 
HHS OIG Semiannual Report to Congress  vi  Highlights 
Spring 2009      Deficiencies in Oversight of Medicare Part D Plan Sponsors 
During this semiannual period, we issued reports on three reviews related to oversight of 
the Medicare Part D program, as follows: 
 In our review of Medicare stand-alone prescription drug plan sponsors fraud and 
abuse programs, we found that 24 of 86 sponsors had not identified any potential fraud 
and abuse incidents in the first 6 months of 2007.  These sponsors, under contract with 
the Centers for Medicare & Medicare Services (CMS) to provide Part D drug coverage to 
Medicare beneficiaries, are required to have a comprehensive and effective program to 
detect and deter fraud and abuse.  The most prevalent type of potential fraud and abuse 
identified was inappropriate billing, such as submitting claims for drugs not provided.  
Further, not all plan sponsors that identified potential fraud and abuse incidents 
conducted inquiries, initiated corrective actions, or made referrals for further 
investigation.  (OEI-03-07-00380) (Details on p. 6.) 
 In a follow-up to a 2006 OIG report on sponsors compliance plans for preventing and 
detecting waste, fraud, and abuse, we found that in 2007, CMS had conducted only one 
audit of a sponsors compliance plan and had not verified sponsors compliance plan 
self-assessments.  (OEI-03-08-00230) (Details on p. 5.) 
 In our review of CMSs audits of Medicare Part D bids, we found that one-quarter of 
all bid audits completed for plan years 2006 and 2007 identified at least one material 
finding.  We also found that although bid amounts are the basis for payment to sponsors, 
bid audits are not designed to result in adjustments to bid amounts.  As of April 2008, 
only 4 percent of the required financial audits of plan year 2006 had begun. 
(OEI-05-07-00560) (Details on p. 7.) 
Among our recommendations was that CMS review Part D plan sponsors to determine 
why certain sponsors have especially high or low volumes of potential fraud and abuse 
and whether sponsors that have identified potential fraud and abuse have initiated 
inquiries and corrective actions and have made referrals for further investigation.  We 
also recommend that CMS modify the bid audit process to hold plan sponsors more 
accountable for material findings identified in bid audits and conduct the required number 
of financial audits in a timely manner.   
Results of Supplier Appeals Demonstrate Weakness in Appeals Process    
During this semiannual period, we updated a March 2007 OIG report on South Florida 
medical suppliers, focusing on the 491 suppliers that we identified during 1,581 
unannounced visits as failing to meet Medicare standards and that had their billing 
privileges revoked by CMS.  Nearly half of them appealed the revocations and received 
hearings.  At the time we issued our October 2008 report, of the 243 suppliers that 
appealed and received hearings, 91 percent had their billing privileges reinstated.  We 
found that without criteria regarding the types of evidence necessary to reinstate the 
billing privileges of suppliers, hearing officers reinstated the suppliers billing privileges 
based on a variety of evidence.  Following a review of reinstated suppliers by CMSs 
HHS OIG Semiannual Report to Congress  vii  Highlights 
Spring 2009      contractor, two-thirds of the reinstated billing numbers were revoked or inactivated, and 
some individuals connected to reinstated suppliers have been indicted.  CMS agreed with 
our recommendation to strengthen the appeal process by developing criteria regarding the 
types of evidence required for hearing officers to reinstate suppliers billing privileges.  
(OEI-03-07-00540) (Details on p. 19.) 
Prevalence of Adverse Events and the Efforts To Reduce Them  
During this semiannual period, we issued four reports related to adverse events and 
never events.  Adverse events are events that harm patients as a result of medical care, 
such as infection associated with use of a catheter; the term never events refers to a 
specific list of serious events, such as surgery on the wrong patient, that the National 
Quality Forum (NQF) has deemed should never occur in a healthcare setting.  The Tax 
Relief and Health Care Act of 2006 mandated that OIG report to Congress regarding the 
incidence of never events among Medicare beneficiaries, payment by Medicare or 
beneficiaries for services in connection with such events, and CMSs processes to 
identify never events and deny payment.  Our key findings included the following: 
 Reducing the incidence of adverse events in hospitals is a high priority within the 
industry, and new policies, such as Medicares nonpayment for care associated with 
adverse events and public disclosure of adverse events, strengthen hospitals incentives to 
develop safer practices.   
 As of December 2008, there was no national adverse event reporting system or Federal 
standards regarding State adverse event reporting systems.  We found variations among 
the 26 States that had adverse event reporting systems, making their data unsuitable for 
use in the aggregate to identify national incidence and trends.   
 Using physician reviewers, we found that during a 1-week period in August 2008, 
15 percent of hospitalized Medicare beneficiaries in two selected counties experienced an 
adverse event during their hospital stays.  Although not nationally representative, these 
results substantiate concerns about the incidence of adverse events in hospitals and the 
importance of safety initiatives to reduce occurrences.   
 Comparing beneficiaries of Medicare Advantage Special Needs Plans (SNP) with 
beneficiaries of Medicare Advantage Prescription Drug Plans (MA-PD) in 2006, we 
determined that both groups of beneficiaries were similarly exposed to potentially 
inappropriate drug pairs.  Severe and serious potential drug-drug interactions accounted 
for 17 percent of all potential drug-drug interactions for SNP and other MA-PD 
beneficiaries.  (OEI-06-07-00470; OEI-06-07-00471; OEI-06-08-00220;  
OEI-05-07-00490) (Details on p.11.) 
HHS OIG Semiannual Report to Congress  viii  Highlights 
Spring 2009      Handling of Conflicts of Interest and Ethics Issues at the Food and Drug 
Administration and the National Institutes of Health   
Adding to our previous work related to conflicts of interest in HHS programs, we issued 
reports on ethics issues at the National Institutes of Health (NIH) and FDA during this 
semiannual period, as follows: 
 FDA  In our review of disclosure of financial interests to FDA, we found that the 
agency did not have complete information about the financial interests of clinical 
investigators associated with the 118 marketing applications approved by the agency in 
FY 2007.  FDA regulations require sponsors to disclose in their marketing applications 
the financial interests of the primary clinical investigators who contributed data to 
covered clinical studies.  We recommended that FDA ensure that sponsors submit 
complete financial information for all clinical investigators, such as maintaining a full list 
of clinical investigators, checking that sponsors have submitted all required attachments 
to financial forms, updating guidance to sponsors, and adding a review of financial 
information to the onsite inspection protocol.  FDA generally agreed with our 
recommendations but did not agree with our recommendation to require sponsors to 
submit financial information for clinical investigators during the pretrial application 
process. 
 NIH  Of the allegations related to conflicts of interest and ethics violations received 
by NIH between January 1, 2006, and June 30, 2007, we found that the most common 
allegations involved employees failure to complete ethics training or ethics forms.  NIH 
employees are responsible for reporting allegations of noncriminal misconduct to the 
appropriate supervisor, to a higher level management official within the organization, or 
to the NIH Office of Management Assessment.  We also found that the majority of NIH 
Institutes did not have written procedures for handling allegations related to conflict-of-
interest statutes and ethics regulations or uniform procedures for conferring about such 
allegations with other NIH offices. We recommended that NIH develop a formal, written 
policy for the various ethics offices regarding the handling of allegations of conflicts of 
interest and ethics violations; and ensure that documentation is maintained on the 
resolution of allegations.  NIH concurred with our recommendations.   
(OEI-05-07-00730; OEI-03-07-00220) (Details on pp. 47 and 50.) 
Compliance With Medicares Postacute Care Transfer Policy 
In our nationwide review, we estimated that Medicare overpaid $24.8 million to hospitals 
that improperly coded claims as discharges to home rather than transfers to postacute care 
for the 3 years that ended September 30, 2005.  Under the postacute care transfer policy, 
Medicare pays more for inpatient discharges to home than it does for transfers to certain 
postacute care settings, such as skilled nursing facilities (SNF).  Most of the 
overpayments occurred before CMS had implemented a system edit to detect transfers 
improperly coded as discharges to home.  We recommended that CMS review the claims 
for the audit period, recover the overpayments, determine why the system edit did not 
detect all overpayments, and amend the edit as appropriate.  CMS agreed with our 
recommendations.  (A-04-07-03035) (Details on p. 18.) 
HHS OIG Semiannual Report to Congress  ix  Highlights 
Spring 2009      Improper Temporary Assistance for Needy Families Payments 
In our reviews of Temporary Assistance for Needy Families (TANF) basic assistance 
payments for the year that ended March 31, 2007, we found that four StatesIdaho, 
Minnesota, Pennsylvania, and Vermontcollectively claimed an estimated $30.5 million 
in improper payments.  TANF is a block grant program that provides funding to States to 
help families move from public assistance to self-sufficiency; TANFs basic assistance 
includes benefits designed to meet a familys ongoing basic needs.  The errors pertained 
to recipient eligibility, payment calculations, and documentation.  The estimated error 
rates ranged by State from 5.5 percent to 16.5 percent of the Federal dollars expended.  
These reviews, part of an eight-State series, were requested by the Administration for 
Children and Families and the Office of Management and Budget to determine the FY 
2008 national TANF error rate.  The four States agreed with our recommendations, which 
focused on State compliance with requirements, recipient eligibility, and payment 
calculations.  (A-06-07-00104; A-07-07-01045; A-03-07-00552; A-01-07-02504)   
(Details on p. 52.) 
Departmental Financial Statement Audit  
In an audit of the FY 2008 HHS financial statements, independent external auditors 
provided an unqualified opinion.  This is the 10th consecutive year that the statements 
were deemed reliable and fairly presented.  However, the report on internal controls 
noted two material weaknessesone pertaining to financial reporting systems, analyses, 
and oversight and the other to financial management information systems.  
(A-17-08-00001) (Details on p. 58.)
HHS OIG Semiannual Report to Congress  x  Highlights 
Spring 2009       
Table of Contents 
Centers for Medicare & Medicaid Services....................................................................1 
Reports Related to CMSs Programs....................................................................................3 
Medicare-Related Reports..............................................................................................3 
High-Dollar Medicare Inpatient Claims.......................................................................3 
High-Dollar Medicare Outpatient Claims.....................................................................4 
Provider Relationships and the Use of Magnetic Resonance Under the Medicare 
Physician Fee Schedule..........................................................................................5 
CMSs Oversight of Prescription Drug Plan Sponsors Compliance Plans..................5 
Medicare Drug Plan Sponsors Identification of Potential Fraud and Abuse...............6 
CMSs Audits of Medicare Part D Bids.......................................................................7 
Comparing Medicare Part D and Medicaid Pharmacy Reimbursement Amounts 
for Selected Drugs..................................................................................................8 
Medicare Payments on Behalf of Deceased Enrollees..................................................8 
Qualified Pension Plans of Terminated Medicare Contractors.....................................9 
Medicare Capital Disproportionate Share Payments..................................................10 
Trends in Nursing Home Deficiencies and Complaints..............................................10 
Prevalence of Adverse Events in Hospitals and the Efforts To Reduce Them...........11 
Medicare Payments in 2007 for Medical Equipment and Supply Claims With 
Invalid or Inactive Physician Identifiers...............................................................12 
Comparing Special Needs Plan Beneficiaries to Other Medicare Advantage 
Prescription Drug Plan Beneficiaries...................................................................13 
Emergency Health Services Furnished to Undocumented Aliens..............................14 
Hospital Reporting of Wage Data in Medicare Cost Reports.....................................14 
Comparison of Average Sales Prices to Average Manufacturer Prices and Widely 
Available Market Prices for Part B Prescription Drugs: Impact on Medicare 
Reimbursement.....................................................................................................15 
Payments to Medicare Suppliers and Home Health Agencies Associated With 
Currently Not Collectible Overpayments.........................................................18 
Compliance With Medicares Postacute Care Transfer Policy...................................18 
Results of Supplier Appeals Demonstrate Weakness in Appeals Process..................19 
Medicare Administrative Law Judge Hearings:  Update, 20072008........................19 
Medicaid-Related Reports....................................................................................................20 
Medicaid Outpatient Prescription Drug Expenditures................................................20 
Medicaid Overpayments in Indiana............................................................................21 
Ohio Medicaid Long-Term-Care Payments................................................................21 
Medicaid Payments for Personal Care Services.........................................................22 
Colorados Medicaid Mental Health Capitation and Managed Care Program...........22 
New Mexicos Medicaid Administrative Costs..........................................................23 
Connecticuts Community-Based Medicaid Administrative Claim...........................24 
Clinic and Practitioner Claims Billed as Family Planning Services Under the 
New York State Medicaid Program.....................................................................24 
Disproportionate Share Hospital Payments by Pennsylvania.....................................25 
HHS OIG Semiannual Report to Congress  xi  Table of Contents 
Spring 2009   
Audits Related to Hurricane Katrina..................................................................................25 
Audits of Hospitals in the New Orleans Area.............................................................25 
Louisianas Hurricane Katrina Health-Care-Related Provider Stabilization Grant....27 
Hurricane-Related Uncompensated Care Claims:  Louisiana.....................................27 
Other CMS-Related Reports...............................................................................................28 
Oversight of the Implementation of the Health Insurance Portability and 
Accountability Act of 1996..................................................................................28 
Financial Statement Audit...........................................................................................28 
Resolution of Audit Recommendations......................................................................29 
Outreach................................................................................................................................29 
Advisory Opinions......................................................................................................29 
Provider Self-Disclosure Protocol..............................................................................29 
Office of Inspector General Administrative Sanctions......................................................32 
Program Exclusions....................................................................................................32 
Civil Monetary Penalties Law....................................................................................34 
Patient Dumping.........................................................................................................34 
Criminal and Civil Enforcement.........................................................................................35 
Special Assistant United States Attorney Program.....................................................35 
Medicare Fraud Strike Force......................................................................................36 
Pharmaceutical Manufacturers and Distributors.........................................................37 
Durable Medical Equipment Suppliers.......................................................................38 
Hospice.......................................................................................................................39 
Clinics.........................................................................................................................39 
Contractors..................................................................................................................40 
Practitioners................................................................................................................40 
Nursing Homes...........................................................................................................41 
Medicaid Fraud Control Units............................................................................................41 
Joint Investigations.....................................................................................................42 
Public Health and Human Service Programs and Departmentwide Issues..............43 
Reports Related to Public Health Programs......................................................................45 
Public Health Laboratory Testing To Detect and Report Biological Agents..............45 
Bioterrorism and Public Health Response Funding....................................................45 
Safeguards Over Controlled Substances at the National Institutes of Health 
Clinical Center Pharmacy.....................................................................................46 
National Institutes of Healths Handling of Allegations Concerning Conflicts of 
Interest and Ethics Violations...............................................................................47 
Allowability of Costs Claimed Under the Bioterrorism Hospital Preparedness 
Program................................................................................................................48 
Puerto Ricos Compliance With the Ryan White CARE Act Payer-of-Last-Resort 
Requirement.........................................................................................................49 
Management of Information Technology Contracts at the Food and Drug 
Administrations Center for Drug Evaluation and Research................................49 
 
HHS OIG Semiannual Report to Congress  xii  Table of Contents 
Spring 2009   
The Food and Drug Administrations Oversight of Clinical Investigators 
Financial Information...........................................................................................50 
Legal Actions and Investigations Related to Public Health Programs............................51 
Health Education Assistance Loan Defaults...............................................................51 
Public-Health-Related Investigations.........................................................................52 
Reports Related to Human Service Programs...................................................................52 
Improper Temporary Assistance for Needy Families Payments.................................52 
New Mexicos Title IV-E Administrative and Training Costs...................................54 
Undistributable Child Support Collections in Tennessee...........................................55 
Child Support Enforcement.................................................................................................55 
Task Forces.................................................................................................................55 
Child Support Investigations.......................................................................................56 
Reports Related to Departmentwide Issues........................................................................56 
Grant Closeout Procedures at the Administration for Children and Families and 
the Centers for Disease Control and Prevention...................................................56 
University Administrative Costs.................................................................................57 
Departmental Financial Statement Audit....................................................................58 
Non-Federal Audits.....................................................................................................58 
Resolving Recommendations......................................................................................59 
Table 1:  Reports With Questioned Costs...................................................................60 
Table 2:  Funds Recommended To Be Put to Better Use...........................................61 
Regulatory Development......................................................................................................62 
Appendixes............................................................................................................................63 
Appendix A:  Notes to Tables 1 and 2.................................................................................65 
Table 1........................................................................................................................65 
Table 2........................................................................................................................70 
Appendix B:  Reporting Requirements of the Inspector General Act of 1978, as 
Amended.........................................................................................................................71 
Appendix C:  Summary of Sanction Authorities...............................................................73 
Program Exclusions....................................................................................................73 
Patient Dumping.........................................................................................................73 
Civil Monetary Penalties Law....................................................................................74 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities............74 
Appendix D:  Acronyms and Abbreviations.......................................................................77 
 
NOTE:  Summaries of OIG audit and evaluation reports in this publication contain 
rounded figures.  Monetary amounts in case narratives are rounded to the next lower 
dollar, where appropriate. 
 
HHS OIG Semiannual Report to Congress  xiii  Table of Contents 
Spring 2009   
   
Centers for Medicare & Medicaid Services  
The Office of Inspector General (OIG) allocates about 80 percent of its resources to work 
related to the Centers for Medicare & Medicaid Services (CMS), which administers the 
following programs:   
  Medicare, which provides health insurance for people 65 years of age or older, 
people younger than 65 years old with certain disabilities, and people of any 
age with end stage renal disease.  In fiscal year (FY) 2008, Medicare served 
an estimated 45 million enrollees at a cost of more than $460.9 billion.  
Medicare has four parts:  Part A (Hospital Insurance), which helps cover 
inpatient care in hospitals, including critical access hospitals, skilled nursing 
facilities (SNF), and hospice and certain home health care; Part B 
(Supplementary Medical Insurance), which helps pay for physician services, 
outpatient care, and other medical services that Part A does not cover, such as 
certain services offered by physical and occupational therapists; Part C 
(Medicare Advantage (MA)), which offers a range of prepaid managed health 
care choices; and Part D (the Medicare Prescription Drug Benefit), which 
provides an optional prescription drug benefit to individuals enrolled in 
Medicare, generally through private prescription drug plans (PDP).   
  Medicaid, a joint Federal-State program, supports States coverage of medical 
care and other support services for low-income individuals.  In FY 2008, the 
enrollment for Medicaid was estimated at 48.2 million beneficiaries; total 
Federal and State outlays were approximately $352 billion, of which the 
Federal share was $201.4 billion.   
  The State Childrens Health Insurance Program (SCHIP), a joint Federal-State 
program established in 1997 under Title XXI of the Social Security Act, 
provides health insurance for children who do not qualify for Medicaid but 
whose families are not able to afford private coverage.  In FY 2008, SCHIP 
served 7.4 million beneficiaries at a Federal cost of $6.9 billion.   
OIGs focus on these health care programs reflects the spending of the Department of 
Health and Human Services (HHS):  CMS expenditures account for more than  
80 percent of the Departments budget.  OIGs focus is also rooted in legislative 
mandates and funding sources, including the following:   
  The Health Insurance Portability and Accountability Act of 1996 (HIPAA), 
P.L. No. 104191, which established the Health Care Fraud and Abuse 
Control program (HCFAC) under the direction of the Attorney General and 
the Secretary of HHS to combat waste, fraud, and abuse in the Medicare and 
Medicaid programs.  HCFAC funding constitutes a major portion of OIGs 
annual operating budget and must be used for work related to Medicare and 
Medicaid. 
HHS OIG Semiannual Report to Congress  1  Centers for Medicare & Medicaid Services 
Spring 2009   
  The Deficit Reduction Act of 2005 (DRA), P.L. No. 109171, which provides 
OIG annual funding of $25 million in FYs 20062010 to undertake fraud and 
abuse control activities related to the Medicaid program. 
This chapter on CMS-related work summarizes OIGs findings and recommendations 
related to the Medicare, Medicaid, and SCHIP programs and provides examples of our 
outreach efforts, administrative sanctions, and criminal and civil enforcement activities.   
HHS OIG Semiannual Report to Congress  2  Centers for Medicare & Medicaid Services 
Spring 2009   
Reports Related to CMSs Programs  
Medicare-Related Reports 
High-Dollar Medicare Inpatient Claims 
During the semiannual period, we issued two reports on high-dollar payments made by 
fiscal intermediaries (intermediaries) to hospitals for inpatient services claimed under 
Medicare Part A.  We defined high-dollar Part A claims as those that were $200,000 or 
more each.  CMS contracts with intermediaries to, among other functions, process and 
pay Medicare Part A (inpatient) claims submitted by providers.  CMS guidance requires 
that hospital claims be completed accurately to be processed correctly. 
The results of these audits are as follows: 
 Intermediary for Wisconsin and Michigan  In our review of the intermediarys 
high-dollar payments made to hospitals in Wisconsin and Michigan for inpatient service 
claims processed during calendar years (CY) 2004 and 2005, we found that the 
intermediary had overpaid hospitals $1.6 million for 107 high-dollar claims.  After 
adjustments and refunds, 105 payments totaling $1.3 million remained outstanding at the 
start of our audit fieldwork.  The overpayments occurred because the hospitals claims 
contained inaccurate data and insufficient documentation, hospitals misunderstood how 
to report charges, and the claim-processing systems used by the intermediary did not have 
sufficient edits in place to detect and prevent overpayments.  
We recommended that the intermediary recover the identified overpayments, use the 
results of this audit in its provider education activities, and consider implementing 
controls to identify and review all high-dollar payments for inpatient services.  The 
intermediary agreed.  (A-05-07-00069) 
 Intermediary for Florida  In our review of the intermediarys high-dollar payments 
made to hospitals in Florida for inpatient service claims processed during CYs 2004 and 
2005, we found that the intermediary had overpaid hospitals $1.7 million for 125 high-
dollar claims.  The overpayments resulted mostly from the hospitals clerical errors, 
conversion of the pharmacy system from dispensing units to billing units, or outdated 
billing systems; in addition, the intermediarys claim-processing system did not have 
sufficient edits in place to detect and prevent the overpayments. 
We recommended that the intermediary recover the $1.7 million in identified 
overpayments, use the results of this audit in its provider education activities, and 
consider implementing controls to identify and review all payments greater than 
$200,000 for inpatient services.  The intermediary agreed to initiate recovery procedures 
for the overpayments that we identified and stated that it was redesigning its education 
HHS OIG Semiannual Report to Congress  3  Centers for Medicare & Medicaid Services 
Spring 2009   
materials to strengthen their effectiveness and that it would work with CMS to implement 
an edit for payments greater than $200,000.  (A-04-07-06020) 
High-Dollar Medicare Outpatient Claims 
During the semiannual period, we issued three reports on high-dollar payments made by 
intermediaries to hospitals for outpatient services claimed under Medicare Part B.  We 
defined high-dollar outpatient Part B claims as those that were $50,000 or more each.  
CMS contracts with intermediaries to, among other functions, process and pay Medicare 
institutional Part B claims submitted by providers.  Providers are required to use the 
appropriate procedure codes on their claims and to report units of service as the number 
of times that a service or procedure was performed.   
In January 2006, CMS required intermediaries to suspend high-dollar outpatient claims 
pending a determination of their legitimacy.  However, this control was not yet in place 
during our audit periods. 
The results of these audits are as follows: 
 Intermediary for Connecticut, Delaware, and New York  In our review of the 
intermediarys high-dollar payments made to hospitals in Connecticut, Delaware, and 
New York for outpatient service claims processed in CYs 200305, we found that the 
intermediary had overpaid hospitals $14.6 million for 38 claims.  Of the 166 payments in 
our review, 128 were appropriate; however, 38 resulted in overpayments because 
hospitals provided incorrect claim-related data or did not have documentation supporting 
the services billed.  Prior to our fieldwork, hospitals refunded $13.5 million for 17 of the 
38 overpayments.  Twenty-one overpayments totaling $1.1 million remained outstanding 
at the start of our fieldwork.   
We recommended that the intermediary inform us of the status of the recovery of the 
$1.1 million in overpayments and use the results of this audit in its provider education 
activities.  The intermediary agreed.  (A-02-07-01039) 
 Intermediary for Florida  In our review of the 40 high-dollar Medicare Part B 
payments that the intermediary made to hospitals in Florida for outpatient services in 
CYs 20042005, we identified 17 with overpayments totaling $1.5 million.  The hospitals 
received these overpayments by billing excessive units of service.   
We recommended that the intermediary recover the $1.5 million in identified 
overpayments.  The intermediary stated that it had adjusted the identified outpatient 
claims and initiated its standard overpayment recovery procedures to recover the 
overpayments.  (A-04-08-06008) 
 Intermediary for North Carolina  In our review of the 39 high-dollar payments that 
the intermediary made to hospitals for outpatient services for CYs 20042005, we 
HHS OIG Semiannual Report to Congress  4  Centers for Medicare & Medicaid Services 
Spring 2009   
identified 22 with overpayments totaling $1.8 million. The hospitals received these 
overpayments by billing excessive units of service.   
We recommended that the intermediary recover the $1.8 million in identified 
overpayments.  In its comments, the intermediary provided information on actions that it 
was taking to recoup the overpayments.  (A-04-08-06010) 
Provider Relationships and the Use of Magnetic Resonance Under the 
Medicare Physician Fee Schedule 
In our review of magnetic resonance (MR) services paid under the Medicare Physician 
Fee Schedule (MPFS) in 2005, we determined that when doctors who ordered MR 
services and the parties involved in providing them were connected through a medical 
practice or business relationship, those services were provided differently than other 
services.  MR enables doctors to diagnose and treat patients by providing detailed images 
of tissues and blood vessels deep inside the body.   
We found that MR services paid under the MPFS were similarly ordered, performed, and 
billed regardless of whether they were ordered by high users (doctors whose allowed 
charges for the MR services they ordered placed them in the 95th percentile among all 
doctors who ordered MR services).  For example, all MR services shared the same 
likelihood of being ordered by physicians within a small number of specialties and shared 
the same likelihood of being provided by the same entity receiving payment from 
Medicare.  However, one-quarter of MR services paid under the MPFS featured 
connections between the doctors who ordered services and the parties involved in 
providing them.  These services were more likely to have been ordered by high users of 
MR and differed from other services by which specialties ordered, performed, billed, and 
received Medicare payment for them.  They also were more likely to have been billed as 
the technical component only and to have had payment reassigned. 
We concluded that the complexity and limited transparency with which MR services are 
provided warranted continued attention to ensure that services are reasonable, necessary, 
and compliant with Medicare statutes and regulations.  Although the report did not have 
recommendations, CMS agreed with our findings and conclusion and outlined regulatory 
steps it had taken to address overutilization of diagnostic testing services.   
(OEI-01-06-00261) 
CMSs Oversight of Prescription Drug Plan Sponsors Compliance Plans   
We reviewed CMSs oversight of PDP sponsors compliance plans in a followup to a 
2006 OIG report and found that CMS conducted only one audit of a PDP sponsors 
compliance plan in 2007.  Part D sponsors, which provide prescription drug coverage to 
Part D beneficiaries under prescription drug plans, are required to have compliance plans 
addressing elements contained in regulations at 42 CFR  423.504(b)(4)(vi) and 
requirements in Chapter 9 of CMSs Prescription Drug Benefit Manualboth focused 
on preventing and detecting fraud, waste, and abuse in the Part D program.  The one audit 
HHS OIG Semiannual Report to Congress  5  Centers for Medicare & Medicaid Services 
Spring 2009   
that CMS had conducted was a focused audit; none of CMSs 17 routine audits included 
a compliance plan review.  In response to a prior OIG report issued in December 2006, 
CMS stated that it would conduct routine audits of Part D sponsors compliance plans 
and follow up with sponsors that we had identified as having compliance plan 
deficiencies.  However, our follow-up review of 2007 found that CMS conducted one 
focused audit of a sponsors compliance plan in 2007.  In April 2008, CMS reported to 
OIG that it planned to initiate audits of compliance plans in the summer of 2008; 
however, as of early August 2008, none had been conducted.  We also found that 
although sponsors completed a compliance plan self-assessment, CMS did not verify the 
sponsors responses. 
Further, CMS instructed all PDP sponsors to complete a compliance plan self-
assessment, but OIG found that CMS did not verify sponsors responses.  The self-
assessment was based on regulatory requirements and recommendations in Chapter 9 of 
the Prescription Drug Benefit Manual; however, not all of the compliance plan 
requirements were included in the self-assessment.  CMS followed up with 23 PDP 
sponsors that attested that they had not implemented one or more of the compliance plan 
requirements in the self-assessment.  However, CMS did not request supporting 
documentation to confirm that these PDP sponsors corrected their compliance plans. 
We recommended that CMS conduct audits to verify Part D sponsors compliance with 
all the elements and requirements contained in regulations and in the guidance Chapter 9 
of the Prescription Drug Benefit Manual and consider assessing the extent to which 
sponsors have also implemented specific recommendations described in Chapter 9 of the 
manual.  CMS stated that it agreed with our recommendation and would begin audits of 
Part D sponsors compliance plans in the near future.  (OEI-03-08-00230) 
Medicare Drug Plan Sponsors Identification of Potential Fraud and Abuse  
Our review of Medicare stand-alone prescription drug plan sponsors identification of 
potential fraud and abuse found that 24 of 86 sponsors had not identified any potential 
fraud and abuse incidents in the first 6 months of 2007.  Stand-alone prescription drug 
plan sponsors contract with CMS to provide Part D drug coverage to Medicare 
beneficiaries.  Sponsors are required to have a comprehensive and effective program to 
detect and deter fraud.  Potential fraud and abuse may be identified during internal claim 
reviews or through complaints or referrals from external sources, such as CMS, Medicare 
Drug Integrity Contractors (MEDIC), law enforcement agencies, beneficiaries, and 
pharmacy providers.  
Among our findings: 
 Of the 62 sponsors that identified incidents, 7 accounted for 90 percent of all incidents 
identified, 47 conducted inquiries, 32 initiated corrective actions, and 33 referred 
incidents to other entities for further investigation.  Overall, 17 plan sponsors initiated all 
three actions, 21 initiated two actions, 19 initiated one action, and 5 did not initiate any. 
HHS OIG Semiannual Report to Congress  6  Centers for Medicare & Medicaid Services 
Spring 2009   
 The most prevalent type of potential fraud and abuse incident identified was 
inappropriate billing, such as claims submitted for drugs not provided. 
We recommended that CMS do the following:   
 review Part D plan sponsors to determine why certain sponsors identified especially 
high or low volumes of potential fraud and abuse,  
 determine whether the Part D plan sponsors that identified potential fraud and abuse 
initiated inquiries and corrective actions and made referrals for further investigation as 
recommended by CMS,  
 require Part D plan sponsors to maintain and routinely report information related to the 
results of sponsors fraud and abuse programs, and  
 use this required information to help determine the effectiveness of sponsors fraud 
and abuse programs.   
In response to our first recommendation, CMS described its intentions to follow up with 
its MEDICs, revise reporting requirements, and provide guidance to PDP sponsors on 
incident tracking.  CMS also concurred with our second recommendation but did not 
indicate whether it concurred with our third or fourth recommendations.   
(OEI-03-07-00380) 
CMSs Audits of Medicare Part D Bids  
In our review of CMSs audits of Medicare Part D bids, we found that one-quarter of all 
bid audits completed for plan years 2006 and 2007 identified at least one material 
finding.  Bid amounts are the basis for payments to Part D plan sponsors.  Bid audits are 
in-depth reviews of the actuarial assumptions used to calculate a bid; CMS uses them in 
its oversight of Medicare Part D bidding.  CMS intends also to supplement its oversight 
with information gathered from financial audits, which verify the accuracy of plan 
sponsors financial data. 
Our findings included the following: 
 The largest number of bid audits with material findings identified findings involving 
nonpharmacy costs and methodology errors.  
 CMS has not adjusted plan sponsors bid amounts based on bid audit material 
findings.  Instead, it used bid audits to influence the submission, review, and audit of 
future bid amounts.   
 As of April 2008, only 4 percent of the required financial audits of plan year 2006 had 
begun.  Without financial audits, CMS will not be able to ensure the accuracy of the base 
period data used as the foundation of the bid amount. 
HHS OIG Semiannual Report to Congress  7  Centers for Medicare & Medicaid Services 
Spring 2009   
We recommended that CMS modify the bid audit process to hold plan sponsors more 
accountable for material findings identified in bid audits and conduct the required number 
of financial audits in a timely manner.  CMS agreed with the second recommendation and 
stated that it would carefully consider the first.  However, CMS also expressed concerns 
with how the bid audit findings were presented in the report and cited financial 
challenges in carrying out the audit requirements.  (OEI-05-07-00560) 
Comparing Medicare Part D and Medicaid Pharmacy Reimbursement 
Amounts for Selected Drugs 
In our comparison of Part D and Medicaid pharmacy reimbursement for 40 single-source 
and 39 multiple-source drugs in the third and fourth quarters of 2006, we found that 
Part D and Medicaid pharmacy reimbursement amounts for most of the single-source 
drugs that we reviewed were similar.  However, Medicaid reimbursement amounts for the 
multiple-source drugs that we reviewed were typically higher than the Part D amounts.  
Our study compared only the amount reimbursed to pharmacies by Part D and Medicaid; 
it did not compare total program expenditures, nor did it examine the impact of rebates or 
post-point-of-sale price concessions.   
For the five States selected for our review, we found that the Medicaid and Part D 
ingredient cost reimbursement amounts were similar for single-source drugs.  In all five 
States, the average Medicaid ingredient costs exceeded the average Part D ingredient 
costs for most multiple-source drugs under review.  In addition, Medicaid dispensing fees 
were substantially higher than average Part D dispensing fees for both the single-source 
and multiple-source drugs under review.   
Congress took action to reduce multiple-source drug prices in the Medicaid program 
through provisions in the Deficit Reduction Act of 2005.  These provisions would have 
expanded the number of drugs subject to Federal upper limits and reduced the Federal 
upper limit amounts for these multiple-source drugs.  These provisions would have also 
granted States access to average manufacturer price (AMP) data, which, in turn, would 
have allowed States to base Medicaid drug reimbursement on AMPs.  However, a 
Federal judge issued a preliminary injunction to prevent the implementation of AMP-
based Federal upper limits and AMP-based Medicaid reimbursement amounts.  In 
addition, because of the Medicare Improvements for Patients and Providers Act of 2008, 
CMS is prohibited from establishing Federal upper limit amounts based on AMPs or 
sharing AMP data with States prior to October 1, 2009.  As a result, Federal upper limits 
and Medicaid reimbursement amounts are still based on published prices, which previous 
OIG work has found to result in inflated payments for multiple-source drugs.  CMS 
agreed with the methodology and concurred with the findings in the report.   
(OEI-03-07-00350) 
Medicare Payments on Behalf of Deceased Enrollees 
In a review of Medicare payments to MA organizations on behalf of deceased enrollees, 
we found that CMS paid approximately $4.4 million for coverage periods after the 
HHS OIG Semiannual Report to Congress  8  Centers for Medicare & Medicaid Services 
Spring 2009   
enrollees months of death.  MA organizations provide managed care to enrollees under 
Medicare Part C.  Pursuant to Federal regulations, after an enrollee dies, the last 
allowable payment is for the month in which the enrollee died.  CMS made improper 
payments for 2,657 of the approximately 1.7 million deceased enrollees (far less than 
1 percent of the enrollees who died) between January 1, 2003, and April 30, 2007.  
Although CMS had correctly stopped payments for the vast majority of the deceased 
enrollees, its systems did not identify and prevent all improper payments.  
We recommended that CMS recoup the $4.4 million in unallowable payments and 
implement system enhancements to prevent and detect improper payments in the future.  
CMS responded that it had already recovered $3.5 million and would not recover the 
remainder because CMS stated that it has a time limit beyond which it does not adjust 
improper payments.  CMS separately provided detailed descriptions of its procedures to 
prevent and detect improper payments.  We revised our second recommendation after 
reviewing the procedures but continue to recommend that CMS recoup the full 
$4.4 million.  (A-07-07-01046)   
Qualified Pension Plans of Terminated Medicare Contractors  
Our reviews of two terminated Medicare contractors found that the contractors had not 
always complied with Federal requirements or the Medicare contracts pension 
segmentation requirements.  Medicare pays a portion of contractors contributions to their 
pension plans.  Because Medicare contracts specifically prohibit any profit (gain) from 
Medicare activities, contractors must credit to the Medicare program those pension gains 
(excess pension assets) that occur when a Medicare segment of its operations terminates.  
Our findings from these two reviews are as follows: 
 Ohio contractor  In our review of the contractors calculations for the period March 
1986 through June 2002, we determined that the contractor needed to refund the Federal 
Government $14.9 million.  The contractor did not correctly identify the initial allocation 
of pension plan assets to the Medicare segment or comply with the requirements for 
updating assets.  As a result, the contractor understated the Medicare segment assets by 
$2 million.  In addition, the contractor did not comply with Federal requirements when 
determining Medicares share of the Medicare segment excess pension assets as of the 
termination of the Medicare contracts.  As a result, the contractor understated Medicares 
share by $7.5 million. 
We recommended that the contractor increase the Medicare contractor segment pension 
assets as of June 30, 2002, by $2 million; increase Medicares share of the excess 
Medicare segment pension assets as of June 30, 2002, by $7.5 million; and refund to the 
Federal Government $14.9 million, which we calculated to be Medicares share of the 
Medicare segment excess pension assets as of the termination of the Medicare contracts.  
The contractor did not address our recommendations in its comments.  (A-07-07-00239) 
 Maryland contractor  We determined that the contractor overstated the excess 
Medicare segment pension assets as of December 31, 2005, by almost $11,000.  We also 
HHS OIG Semiannual Report to Congress  9  Centers for Medicare & Medicaid Services 
Spring 2009   
determined that the contractor had understated Medicares share of the Medicare segment 
excess pension assets by $512,000 by not fully complying with Federal requirements in 
its calculation.   
We recommended that the contractor decrease Medicare segment pension assets as of 
December 31, 2005, by $10,793; increase Medicares share of the excess Medicare 
segment pension assets as of December 31, 2005, by $512,000; and refund to the Federal 
Government $4,271,992, which we calculated to be Medicares share of the Medicare 
segment excess pension assets as of the termination of the Medicare contracts.  The 
contractor concurred with our first recommendation but disagreed with our second and 
third recommendations and with the applicability of some of our criteria.  The 
contractors comments did not provide additional information to cause us to change our 
findings or recommendations.  (A-07-07-00243)   
Medicare Capital Disproportionate Share Payments  
In our review of $1.6 billion in Medicare capital disproportionate share hospital (DSH) 
payments made between FYs 2000 and 2006, we found that $21.9 million was paid to 
397 hospitals that were not eligible for these payments.  To receive Federal 
reimbursement of capital-related costs of inpatient hospital services, hospitals must be 
classified as urban and have 100 or more beds.  The 397 hospitals were either rural or had 
fewer than 100 beds. 
We recommended that CMS take the following steps: 
 direct the intermediaries to recover $21.9 million in capital DSH payments made to 
ineligible hospitals and  
 determine whether capital DSH payments were made to ineligible hospitals for the  
period subsequent to our review, direct intermediaries to recover any unallowable 
payments, and conduct reviews on a recurring basis to determine whether capital DSH 
payments are being made to ineligible hospitals.   
CMS agreed with our recommendations.  (A-07-08-02735) 
Trends in Nursing Home Deficiencies and Complaints   
In our study of nursing home deficiencies and complaints, we found that in each of the 
CYs 20052007, over 91 percent of nursing homes surveyed were cited for deficiencies 
and a greater percentage of for-profit nursing homes were cited for deficiencies than were 
not-for-profit and government nursing homes.  The most common deficiency categories 
cited were quality of care, resident assessment, and quality of life.  Additionally, 17 
percent of nursing homes surveyed in 2007 were cited for actual harm or immediate 
jeopardy deficiencies, and 3.6 percent were cited for substandard quality-of-care 
deficienciesa slight increase since 2005.  Lastly, the number of substantiated 
HHS OIG Semiannual Report to Congress  10  Centers for Medicare & Medicaid Services 
Spring 2009   
complaints decreased nearly 3 percent since 2005.  This report contained no 
recommendations.  (OEI-02-08-00140) 
Prevalence of Adverse Events in Hospitals and the Efforts To Reduce Them  
During this semiannual period, we issued four reports related to adverse events and 
never events.  Adverse events are events that harm patients as a result of medical care, 
such as infection associated with use of a catheter, and the term never events refer to a 
specific list of serious events, such as surgery on the wrong patient, that the National 
Quality Forum (NQF) has deemed should never occur in a healthcare setting.  The Tax 
Relief and Health Care Act of 2006 mandated that OIG report to Congress regarding the 
incidence of never events among Medicare beneficiaries, payment by Medicare or 
beneficiaries for services in connection with such events, and CMSs processes to 
identify these events and deny payment.  We plan to continue additional work related to 
adverse events through 2009.   
The results of the reports issued during this semiannual period are as follows: 
 Overview of Key Issues  We found that reducing the incidence of adverse events is a 
high priority for policymakers, patients, and providers and that new policies, such as 
Medicares nonpayment for care associated with events and public disclosure of events, 
strengthen hospitals incentives to develop safer practices.  Based on interviews with 
stakeholders and a review of current literature, we identified several factors that are 
critical to understanding the landscape of adverse events in hospitals, including: 
  Estimates of the incidence of adverse events in hospitals vary widely and 
measurement is difficult. 
  Nonpayment policies for adverse events are gaining in prominence and are 
viewed as a powerful incentive to reduce incidence but raise potential 
drawbacks. 
  Hospitals rely on staff and managers to report adverse events internally, but 
barriers can inhibit reporting. 
  Hospitals report adverse events to various oversight entities, although 
stakeholders suspect substantial underreporting. 
  Public disclosure of adverse events can benefit patients but also raises legal 
concerns for patients and providers. 
  Information to help prevent adverse events is widely available, but some 
hospitals and clinicians may be slow to adopt or routinely apply recommended 
practices. 
  There are strategies that may accelerate progress in reducing the incidence of 
adverse events in hospitals.  (OEI-06-07-00470) 
HHS OIG Semiannual Report to Congress  11  Centers for Medicare & Medicaid Services 
Spring 2009   
 State Reporting Systems  We determined that as of January 2008, 26 States had 
adverse event reporting systems that collect data regarding adverse events that have taken 
place in hospitals and other health care settings.  In 2000, the Institute of Medicine 
recommended the creation of a nationwide system to provide for the collection of 
standardized data by State governments when adverse events occur.  As of the date of our 
review, there was no national adverse event reporting system nor any Federal standards 
regarding State systems.  We found variations among the 26 State systems, making their 
data unsuitable for use in the aggregate to identify national incidence and trends.  
However, 23 of the 26 States used the reported data in similar ways to hold individual 
hospitals accountable for their patient care performance, and 18 of the 26 States used the 
data to promote learning and prevent adverse events.  (OEI-06-07-00471) 
 Incidence Among Medicare Beneficiaries in Two Selected Counties  Using 
physician reviewers, we found that during a 1-week period in August 2008, 15 percent of 
hospitalized Medicare beneficiaries in 2 selected counties experienced an adverse event 
during their hospital stays.  This includes 1 percent of sampled beneficiaries who 
experienced an event that was a never event on the NQFs list.  One of these never 
events resulted in higher Medicare reimbursement to the hospital.  We identified another 
15 percent of Medicare beneficiaries who experienced events that resulted in temporary 
harm.  We excluded these temporary harm events from our overall rate of adverse events 
because they did not prolong the hospital stay, require life-saving intervention, or result 
in permanent harm.  Although not nationally representative, these results substantiate 
concerns about the incidence of adverse events in hospitals and the importance of safety 
initiatives to reduce occurrences.  (OEI-06-08-00220) 
Medicare Payments in 2007 for Medical Equipment and Supply Claims With 
Invalid or Inactive Physician Identifiers 
In our review of Medicare payments for medical equipment and supply claims, we found 
that Medicare allowed almost $34 million in 2007 for medical equipment and supply 
claims with unique physician identification numbers (UPIN) that had never been issued 
or had been deactivated by CMS.  We found that Medicare allowed over $6 million in 
2007 for claims with invalid UPINs that had never been issued by CMS.  During the 
same year, Medicare also allowed almost $28 million for claims with UPINs that CMS 
had deactivated, including $5 million for claims with a date of service after the physician 
identified on the claims had died.  Medicare also allowed over $300,000 for claims with 
invalid referring physician national provider identifiers (NPI) in 2007. 
We recommended that CMS determine why Medicare claims with identifiers associated 
with deceased referring physicians continue to be paid.  We encouraged CMS to 
implement changes to the claims-processing systems to ensure the validity of NPIs for 
both referring physicians and suppliers listed on claims.  In addition, we recommended 
that CMS emphasize to suppliers the importance of using accurate NPIs for both referring 
physicians and suppliers when submitting Medicare claims.  We suggested that CMS 
determine the earliest date to end its provision that allows suppliers to submit claims 
without referring physician NPIs, while maintaining beneficiary access to services.  CMS 
HHS OIG Semiannual Report to Congress  12  Centers for Medicare & Medicaid Services 
Spring 2009   
concurred with our recommendations, stating that it has already taken several important 
steps toward alleviating the problems identified and incorporating the recommendations 
from this report. (OEI-04-08-00470) 
Comparing Special Needs Plan Beneficiaries to Other Medicare Advantage 
Prescription Drug Plan Beneficiaries 
In our review comparing beneficiaries of Medicare Advantage Special Needs Plans 
(SNP) with beneficiaries of other Medicare Advantage Prescription Drug Plans (MA-PD) 
in 2006, we found that, on average, SNP beneficiaries had higher prescription drug 
utilization and costs than other MA-PD beneficiaries.  Congress created the SNP 
authority to allow MA managed care plans to develop targeted clinical programs to care 
more effectively for high-risk beneficiaries.  Concerns about SNPs include whether SNP 
beneficiaries, who are more likely to have complicated medical regimens, have an 
increased risk of exposure to therapeutic duplications (when two drugs that treat the same 
medical condition, taken together, increase the risk of toxicity) or drug-drug interactions 
(when two drugs taken together lead to increased toxicity or changes in the efficacy of 
one or both drugs).  Despite SNP beneficiaries higher rates of drug utilization, we 
determined that SNP beneficiaries and other MA-PD beneficiaries were similarly 
exposed to potentially inappropriate drug pairs.  The majority of potentially inappropriate 
drug pairs for both SNP and other MA-PD beneficiaries were potential drug-drug 
interactions, most of which were of moderate risk.  Severe and serious drug-drug 
interactions accounted for 17 percent of all potential drug-drug interactions for SNP and 
other MA-PD beneficiaries. 
Other specific findings included the following: 
 SNP beneficiaries filled 11 percent more prescriptions than other MA-PD 
beneficiaries. 
 The average annual prescription cost per SNP beneficiary was 49 percent higher 
compared to that of other MA-PD beneficiaries.   
We recommended that CMS help SNPs and other MA-PDs to provide physicians and 
pharmacists with the information needed to prevent inappropriate drug pairs leading to 
adverse drug events, specifically by:  continuing to encourage plans to fully implement 
e-prescribing programs that improve information physicians and pharmacists have about 
beneficiaries medication histories; providing plans with information on inappropriate 
drug pairs most likely to lead to severe or serious adverse drug events in the Medicare 
population; and encouraging plans to provide tools to assist physicians and pharmacists 
so they can appropriately analyze and use the information they receive.   
 CMS concurred with our recommendation to help SNPs and other MA-PDs to provide 
physicians and pharmacists with the information needed to prevent inappropriate drug 
pairs that could lead to adverse drug events.  It noted that Part D sponsors are required to 
maintain systems to monitor drug utilization, including the use of potentially 
HHS OIG Semiannual Report to Congress  13  Centers for Medicare & Medicaid Services 
Spring 2009   
inappropriate drug pairs.  In addition, it cited a number of efforts it supports aimed at 
preventing inappropriate drug pairs that could lead to adverse drug events. 
(OEI-05-07-00490) 
Emergency Health Services Furnished to Undocumented Aliens 
 Medicare-participating hospitals are required to provide an appropriate medical 
screening examination to any person, regardless of ability to pay, who comes to the 
hospital emergency department to determine whether an emergency medical condition 
exists.  In our review of a Florida hospitals claims for payment for emergency health 
services furnished to undocumented aliens covered by section 1011 of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), we found that 
the hospital had received $17,000 in unallowable payments for these services furnished 
from May 10 to September 30, 2005.   
 Section 1011 of the MMA, Federal Reimbursement of Emergency Health Services 
Furnished to Undocumented Aliens, provided $250 million per year for FYs 20052008 
for payments to eligible providers for emergency health services provided to 
undocumented aliens and other specified aliens pursuant to Emergency Medical 
Treatment and Labor Act requirements.   
 The payments were unallowable because they were for claims for services that went 
beyond patient stabilization, lacked supporting documentation, were not offset by 
payments by third-party payers, or were for services for nonemergency conditions.  Had 
the hospital followed its own policies or procedures, it might have precluded some of 
these errors.  Furthermore, the hospitals written policies and procedures did not address 
section 1011 requirements regarding reimbursements from third-party payers. 
 We recommended that the hospital refund $17,000 received for services that did not 
meet section 1011 reimbursement requirements; that it review the remaining claims for 
our audit period and claims for subsequent periods and submit adjustments for any claims 
that did not meet section 1011 reimbursement requirements; that it follow its existing 
policies and procedures to ensure that future section 1011 program claims meet 
reimbursement requirements; and that it develop and implement procedures to ensure that 
reimbursements for services are made to the extent that a third-party payer did not 
otherwise reimburse care.  The hospital agreed with our recommendations.  
 (A-04-07-07030)  
Hospital Reporting of Wage Data in Medicare Cost Reports 
In our reviews of hospitals compliance with Medicare requirements for reporting wage 
data in their Medicare cost reports, we found that three hospitals did not fully comply 
with the requirements.  Under the acute-care hospital inpatient prospective payment 
system (PPS), CMS adjusts the Medicare base rate paid to participating hospitals by the 
wage index applicable to the area in which each hospital is located.  CMS updates the 
HHS OIG Semiannual Report to Congress  14  Centers for Medicare & Medicaid Services 
Spring 2009   
wage indexes annually based on hospitals wage data reported 4 years earlier.  Our 
specific findings, by hospital, follow: 
 A hospital in Pennsylvania overstated its wage data by $12.2 million and 412,397 
hours for the FY 2006 Medicare cost report period.  Correcting the hospitals errors 
increased the average hourly wage rate from $35.25 to $35.45.  We recommended that 
the hospital implement review and reconciliation procedures to ensure that the wage data 
reported in future Medicare cost reports are accurate, supportable, and in compliance with 
Medicare requirements.  The hospital agreed with or accepted most of our findings; 
however, it disagreed in part with our finding regarding $4.2 million in pension benefit 
costs and the need to submit a revised FY 2006 cost report to correct the wage data 
overstatements.  The hospital said that it would work to strengthen its review and 
reconciliation procedures.  Our conclusion regarding overstated pension costs remains 
unchanged.  After reviewing the hospitals comments and information provided by the 
intermediary, we deleted our recommendation to submit a revised cost report.  
(A-03-07-00024) 
 A hospital in California overstated its wage data by $11.8 million and more than 
250,000 hours in its FY 2005 Medicare cost report.  Correcting the hospitals errors 
increased the average hourly wage rate from $49.75 to $50.17.  We recommended that 
the hospital submit a revised FY 2005 Medicare cost report to the intermediary to correct 
the wage data overstatements and that it strengthen review and reconciliation procedures 
to ensure that the wage data reported in future Medicare cost reports are accurate, 
supportable, and in compliance with Medicare requirements.  In its comments, the 
hospital provided information on actions taken to implement our recommendations.  
(A-09-07-00083) 
 A hospital in Kansas overstated its wage data by $634,000 and understated its wage 
data by more than 12,000 hours in its FY 2005 Medicare cost report.  Correcting the 
hospitals errors decreased the average hourly wage rate from $29.14 to $29.  We 
recommended that the hospital submit a revised FY 2005 Medicare cost report to the 
intermediary to correct the wage data overstatement and understatement and that it 
implement review and reconciliation procedures to ensure that the wage data reported in 
future Medicare cost reports are accurate, supportable, and in compliance with Medicare 
requirements.  The hospital concurred with three of our findings but did not concur with 
two other findings.  Based on discussions with the hospital after the issuance of our draft 
report but before our receipt of the hospitals written comments, we revised our finding 
on overstated contract labor costs, on the recommended adjustment amount, and on the 
wage rate calculation.  (A-07-07-02726) 
Comparison of Average Sales Prices to Average Manufacturer Prices and 
Widely Available Market Prices for Part B Prescription Drugs: Impact on 
Medicare Reimbursement 
During this semiannual period, we issued three reports related to our continuing work 
comparing average sales prices (ASP) with average manufacturer prices (AMP) and 
HHS OIG Semiannual Report to Congress  15  Centers for Medicare & Medicaid Services 
Spring 2009   
widely available market prices (WAMP) for Medicare Part B prescription drugs.  From 
April 2006 through January 2009, we issued 11 reports of such comparisons.  Section 
1847A(d)(2)(B) of the Social Security Act (the Act) mandates that OIG perform these 
comparisons.  For instances in which the ASP for a drug exceeds the AMP or WAMP by 
a certain threshold (currently 5 percent), section 1847A(d)(3) of the Act provides that the 
Secretary may disregard the ASP pricing methodology for that drug and that the 
Secretary substitute the payment amount for the drug code with the lesser of the WAMP 
(if any) or 103 percent of the AMP (for the drug). 
In December 2007, the Medicare, Medicaid, and SCHIP Extension Act of 2007 (the 
Extension Act), P.L. No. 110173, amended section 1847A(b) of the Act and changed the 
way that CMS calculates volume-weighted ASPs, effective April 1, 2008.  Analyzing 
CMSs Healthcare Common Procedure Coding System (HCPCS) codes for drugs covered 
under Medicare Part B, we identified in both the previous comparisons and those issued 
during this semiannual period instances in which drug codes met the threshold for price 
adjustments.  We determined that such adjustments, if implemented by the Secretary, 
would save Medicare millions of dollars in Part B drug costs.  Although these reports did 
not include recommendations, CMS has commented previously that it would like to 
better understand fluctuating differences between ASPs and AMPs and that it intends to 
develop a process to adjust payment amounts based on the results of our pricing 
comparisons.  To date, no changes have been made to reimbursement for drugs covered 
under Part B as a result of our price comparisons. 
In the three comparisons issued during this reporting period, we specifically found the 
following: 
 Comparison of First-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2008  Using a revised payment methodology implemented by CMS in April 2008, we 
identified a total of 41 HCPCS drug codes with an ASP that exceeded the AMP by at 
least 5 percent in the first quarter of 2008.  If reimbursement amounts for these 41 codes 
had been based on 103 percent of the AMPs, Medicare expenditures would have been 
reduced by $7.8 million during the third quarter of 2008 alone.  Of the 41 drug codes that 
met the threshold for price adjustment, 16 had AMP data for every National Drug Code 
(NDC) that CMS used to establish reimbursement amounts.  In addition, 8 of these 16 
codes were previously eligible for price adjustment under the revised payment 
methodology, and 3 of the codes would have met the 5-percent threshold in each of the 
past five quarters had the revised ASP methodology been in effect since the beginning of 
2007.  The remaining 25 of 41 drug codes also met the 5-percent threshold in the first 
quarter of 2008 but did not have AMP data for every NDC that CMS used when 
calculating reimbursement.  We could not compare ASPs and AMPs for 76 HCPCS drug 
codes because AMP data were not submitted for any of the NDCs that CMS used to 
calculate reimbursement.  Manufacturers for over one-fifth of these NDCs had Medicaid 
drug rebate agreements and were therefore generally required to submit AMPs.  We are 
working with CMS to evaluate and pursue appropriate actions against those 
manufacturers that fail to submit required data.  (OEI-03-08-00530) 
HHS OIG Semiannual Report to Congress  16  Centers for Medicare & Medicaid Services 
Spring 2009   
 Comparison of Second-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth Quarter 
2008  Using a revised payment methodology recently implemented by CMS, we 
identified a total of 31 HCPCS drug codes with an ASP that exceeded the AMP by at 
least 5 percent in the second quarter of 2008.  If reimbursement amounts for these 31 
drug codes had been based on 103 percent of the AMPs, Medicare expenditures would 
have been reduced by $3.5 million during the fourth quarter of 2008. 
Of the 31 HCPCS drug codes that met the threshold for price adjustment, 10 had AMP 
data for every drug product that CMS used to establish reimbursement amounts.  Eight of 
the 10 HCPCS codes were previously eligible for price adjustment under the revised 
payment methodology, with 3 codes meeting the 5-percent threshold in each of the past 
six quarters, dating back to the first quarter of 2007.  The remaining 21 of 31 HCPCS 
codes also met the 5-percent threshold in the second quarter of 2008 but did not have 
AMP data for every drug product that CMS used when calculating reimbursement.  We 
could not compare ASPs and AMPs for 68 HCPCS codes because AMP data were not 
submitted for any of the drug products that CMS used to calculate reimbursement.  
Manufacturers for almost one-fifth of these drug products had a Medicaid drug rebate 
agreement and were therefore generally required to submit AMPs.  OIG continues to 
work with CMS to evaluate and pursue appropriate actions against manufacturers that fail 
to submit required data.  (OEI-03-09-00050) 
 Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2007  In our comparison of average sales prices and average manufacturer 
prices, we identified 71 Medicare Part B drug codes that would have been eligible for 
price adjustment in one or more quarters of 2007 if the revised payment methodology 
recently implemented by CMS had been in effect throughout 2007.  Additional codes 
may have been eligible for price adjustments; however, we could not examine certain 
drug codes because pricing data were missing or unavailable.   
Of the 71 drug codes that met the threshold for price adjustment during 2007, one-fourth 
would have met the 5-percent threshold during more than one quarter of 2007.  Because 
some drug products did not have AMP data, we could not compare prices for 25 percent 
of drug codes in each of the first and third quarters and for over 40 percent of codes in 
each of the second and fourth quarters.   
Consistent with statutory requirements, we recommended that CMS develop a process to 
adjust payment amounts based on the results of OIGs pricing comparisons, lower 
Medicare reimbursement amounts for drugs that meet the 5-percent threshold, and ensure 
that drug manufacturers submit the required AMP data in a timely manner.  CMS 
concurred with our recommendation to develop a process for adjusting payment amounts 
but did not specifically concur with our recommendation to lower Medicare 
reimbursement for drugs that meet the 5-percent threshold.  CMS stated that it would 
continue its efforts to ensure that manufacturers submit required AMP data in a timely 
manner.  (OEI-03-08-00450) 
HHS OIG Semiannual Report to Congress  17  Centers for Medicare & Medicaid Services 
Spring 2009   
Payments to Medicare Suppliers and Home Health Agencies Associated 
With Currently Not Collectible Overpayments  
In our review of 10 suppliers of durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS) with total outstanding Medicare debt of $7.3 million, we found that 
6 suppliers were associated with 15 other DMEPOS suppliers and home health agencies 
(HHA) that collectively received $58 million in Medicare payments during 20022007.  
The associations are of interest because Federal investigators suspect that principals of 
DMEPOS suppliers with outstanding Medicare debt may be benefitting from Medicare 
payment through businesses publicly fronted by associates or family members.  Most of 
the DMEPOS suppliers associated with the six suppliers had themselves lost billing 
privileges by January 2005 and had collectively accumulated $6.2 million of their own 
currently not collectible debt to Medicare; however, most associated HHAs received 
Medicare payments as recently as December 2007.  This suggests that associations 
among DMEPOS suppliers and HHAs may be less frequently detected than those among 
DMEPOS suppliers alone.  The sample DMEPOS suppliers we reviewed were most 
frequently connected with their associated DMEPOS suppliers and HHAs through shared 
owners or managers.  Further, 11 of the 15 associated businesses enrollment applications 
did not include the name of at least one individual listed as an owner or a manager in 
public records.  These results suggest that suppliers associated with Medicare debt could 
inappropriately receive Medicare payments by omitting owner/manager information on 
their enrollment applications and working through other DMEPOS suppliers and HHAs. 
Given these associations, CMS may deem it appropriate to conduct a similar review of 
DMEPOS suppliers with outstanding Medicare debt to identify associations with other 
suppliers or HHAs receiving Medicare payment and take appropriate action if it confirms 
that ownership or management information was misreported on these associated 
businesses enrollment applications.  We issued this early alert memorandum without 
recommendations and without comment from CMS; we intend to conduct follow-up 
work regarding these issues and vulnerabilities.  (OEI-06-07-00080) 
Compliance With Medicares Postacute Care Transfer Policy 
In our nationwide review of hospital compliance with Medicares postacute care transfer 
policy, we estimated that for the 3-year period that ended September 30, 2005, hospitals 
improperly coded 15,051 claims, resulting in Medicare overpayments of $24.8 million.  
Under the postacute care transfer policy, Medicare pays full prospective payments to 
hospitals that discharge inpatients to their homes.  For specified diagnosis-related groups, 
Medicare generally pays a lesser amount to hospitals that transfer inpatients to certain 
postacute care settings, such as SNFs or home health care.  Of the 150 claims in our 
sample, hospitals improperly coded 92 claims, totaling $137,000, as discharges to home 
rather than transfers to postacute care.   
Most of the overpayments occurred because CMS lacked adequate payment system 
controls before implementing a system edit on January 1, 2004, to detect transfers 
improperly coded as discharges to home.  Although overpayments were significantly 
HHS OIG Semiannual Report to Congress  18  Centers for Medicare & Medicaid Services 
Spring 2009   
reduced after implementation of the edit, the edit did not detect 12 overpayments in our 
sample. 
We recommended that CMS (1) instruct the fiscal intermediaries to recover $137,000 in 
overpayments identified in our sample, review the remaining claims in our sampling 
frame, and identify and recover additional overpayments estimated at $24.7 million and 
(2) determine why the system edit did not detect 12 overpayments and amend the edit as 
appropriate.  CMS concurred with our recommendations.  (A-04-07-03035)  
Results of Supplier Appeals Demonstrate Weakness in Appeals Process    
For a March 2007 report, we made unannounced visits to 1,581 South Florida medical 
equipment suppliers, determining that 491 failed to meet Medicare supplier standards.  
These suppliers had their billing privileges revoked by CMS, and nearly half of them 
appealed the revocations and received hearings.  As of October 2008, 91 percent of the 
suppliers that appealed and received hearings had their billing privileges reinstated.  We 
found that without criteria regarding the types of evidence necessary to reinstate the 
billing privileges of suppliers, hearing officers reinstated the suppliers billing privileges 
based on a variety of evidence.  Following a review of reinstated suppliers, two-thirds of 
the reinstated billing numbers were revoked or inactivated, and some individuals 
connected to reinstated suppliers have been indicted.   
We recommended that CMS strengthen the appeal process by developing criteria 
regarding the types of evidence required for hearing officers to reinstate suppliers billing 
privileges.  CMS agreed.  (OEI-03-07-00540) 
Medicare Administrative Law Judge Hearings:  Update, 20072008 
At the request of the Senate Finance Committee, we updated a previous review of the 
early implementation of administrative law judge (ALJ) hearings by the Office of 
Medicare Hearings and Appeals (OMHA).  In 2005, when assuming responsibility from 
the Social Security Administration (SSA) for certain Medicare administrative appeals, 
OMHA became subject to a new statutory requirement that certain cases be decided 
within 90 days.  In contrast to SSAs mostly in-person hearings, OMHA planned to use 
primarily telephone and video conferences to conduct ALJ hearings.  Our previous 
review, which examined the first 13 months of OMHAs operation, found that an 
estimated three-quarters of the hearings were conducted by telephone, that most 
appellants were satisfied with their hearing format, that incomplete and inaccurate data 
limited OMHAs ability to manage its caseload, and that a number of cases were not 
decided in a timely manner.  
In our updated review, which examined OMHAs first through third years of operation 
(20072008), we found the following: 
 OMHAs caseload increased 37 percent and the proportion of cases subject to the 90-
day decision requirement also increased.   
HHS OIG Semiannual Report to Congress  19  Centers for Medicare & Medicaid Services 
Spring 2009   
 There was little change in the hearing formats used and in the types of primary 
appellants.   
 OMHA improved the timeliness of its decisions during this time.  For cases that had a 
90-day decision requirement, OMHA decided 94 percent on time in its third year, 
compared to 85 percent in its first year of operation.   
 For cases without the 90-day decision requirement, OMHA decided a slightly greater 
percentage of cases within 6 months; however, there was also a slight increase in the 
average number of days to decide these cases.  
 OMHA improved the quality of the data in the appeals system. 
This report had no recommendations.  (OEI-02-06-00111) 
Medicaid-Related Reports 
Medicaid Outpatient Prescription Drug Expenditures 
In our reviews of the Medicaid outpatient prescription drug expenditures in two States, 
we found that both States had claimed Federal Medicaid reimbursement for prescription 
drug expenditures that did not fully comply with Federal requirements.  Medicaid 
generally covers outpatient drugs if the drug manufacturers have rebate agreements with 
CMS and pay rebates to the States.  Under the Medicaid drug rebate program, CMS 
provides the States with a quarterly Medicaid drug tape, which lists all covered outpatient 
drugs, indicates a drugs termination date if applicable, and specifies whether FDA has 
determined the drug to be less than effective.  CMS guidance instructs the States to use 
the tape to verify coverage of the drugs for which they claim reimbursement. 
Our specific findings were as follows: 
 Tennessee  In our review of Tennessees claims for reimbursement of Medicaid 
outpatient drug expenditures for FYs 20042005, we determined that of the $4.5 billion 
($3 billion Federal share) claimed, $8 million (Federal share) represented expenditures 
for drug products that were not eligible for Medicaid coverage because their termination 
dates had passed or because the drugs were determined to be less than effective.  An 
additional $13.2 million (Federal share) represented expenditures for drug products that 
were not listed on CMSs quarterly drug tapes; because the State did not verify that the 
drugs missing from the tapes were eligible for Medicaid coverage, some of the 
expenditures may not have been allowable for Medicaid reimbursement.  
We recommended that the State refund $8 million to the Federal Government for drug 
expenditures that were not eligible for Medicaid coverage; that it work with CMS to 
determine whether the $13.2 million in payments for drugs not listed on the quarterly 
drug tapes was eligible for Medicaid coverage; and that it strengthen internal controls to 
ensure that claimed Medicaid drug expenditures comply with Federal requirements.  The 
HHS OIG Semiannual Report to Congress  20  Centers for Medicare & Medicaid Services 
Spring 2009   
State agreed in part with our first recommendation but did not directly address our second 
or third recommendations.  (A-04-07-00027) 
 Pennsylvania  Our review of Pennsylvanias claims for reimbursement of Medicaid 
outpatient drug expenditures for FYs 2004 and 2005 found that the State had not fully 
complied with Federal requirements.  Of the States $1.96 billion ($1.1 billion Federal 
share) in Medicaid outpatient claims, $4.4 million (Federal share) represented 
expenditures for drug products that were not eligible for Medicaid coverage because, for 
example, the drugs were terminated or the drug expenditures were not supported by 
adequate documentation.  An additional $5.9 million (Federal share) represented 
expenditures for drug products that were not listed on the quarterly drug tapes.  Because 
the State had not verified whether these drugs were eligible for Medicaid coverage, the 
drug expenditures may not have been allowable for Medicaid reimbursement.   
We recommended that the State refund $4.4 million to the Federal Government, that it 
work with CMS to resolve $5.9 million in payments for drugs that were not listed on the 
quarterly drug tapes, and that it strengthen internal controls to ensure that claimed 
Medicaid drug expenditures comply with Federal requirements.  The State generally 
agreed with our recommendations and provided additional documentation to support 
$958,000 (Federal share) of its claim.  We modified our finding accordingly.   
(A-03-07-00203) 
Medicaid Overpayments in Indiana 
In our review of Indianas Medicaid Rehabilitation Option Program for FYs 20002005, 
we found that the State did not report overpayments totaling $23.4 million ($14.5 million 
Federal share) and interest earned on the overpayments totaling $130,000 ($82,000 
Federal share) in accordance with Federal requirements.  States are required to refund the 
Federal share of Medicaid overpayments and to report to CMS any interest earned on 
overpayments each quarter.  
We recommended that the State (1) report to CMS Medicaid overpayments totaling 
$23.4 million and refund $14.5 million, (2) report interest earned on Medicaid recoveries 
totaling $130,000 and refund $82,000, and (3) make procedural improvements.  The State 
disagreed with our first and third recommendations and did not address our second 
recommendation.  After reviewing the States comments, we maintain that our findings 
and recommendations are valid.  (A-05-07-00072)   
Ohio Medicaid Long-Term-Care Payments  
In our review of Ohios Medicaid claims for payments to long-term-care providers, we 
determined that the State overpaid more than $18 million ($10.5 million Federal share) 
from FYs 19992005 for long-term-care services claimed by more than one provider for 
the same services to the same beneficiary on the same date.  As of the start of our audit in 
July 2007, the State had reported and refunded $8.4 million ($4.9 million Federal share) 
of the unallowable payments through adjustments, decreasing its Medicaid claims for 
HHS OIG Semiannual Report to Congress  21  Centers for Medicare & Medicaid Services 
Spring 2009   
prior quarters on its report to CMS for the quarter ended June 30, 2005.  However, the 
State had not reported and refunded $9.6 million ($5.6 million Federal share).  
We recommended that the State (1) refund to the Federal Government $5.6 million for 
unallowable Medicaid reimbursements and (2) review payments totaling $31.9 million 
($18.6 million Federal share) made to the providers that we did not review and refund to 
the Federal Government any unallowable Medicaid reimbursements.  The State 
commented that it would need to complete an analysis before agreeing to a final refund 
amount.  Regarding the second recommendation, the State said that it had initiated a 
review and would refund overpayments after completing the review.  (A-05-07-00074) 
Medicaid Payments for Personal Care Services 
In our review of Medicaid payments for personal care services (PCS) made by five State 
Medicaid programs from October 1 through December 31, 2005, we found that four 
States paid 871 claims to providers that had billed for more than 24 hours of PCS in a 
day.  PCSsuch as dressing, bathing, cooking, and light housekeepinghelp 
beneficiaries stay in their homes rather than receive constant care in more expensive 
institutional settings.  A related OIG report issued in August 2008 focused on Medicaid 
payments for beneficiaries with overlapping institutional and PCS claims.  
Additional findings of this review included the following: 
 Medicaid programs in all five States paid 2,324 PCS claims, totaling $3 million, which 
were associated with billings of between 16 and 24 hours of services per day.   
 Three State Medicaid programs allowed providers to bill for PCS in date ranges that 
included days on which no services were provided, a practice that makes it difficult to 
identify the number of PCS hours billed on any given day in a date range. 
Although the report had no recommendations, we suggested that CMS consider providing 
States with information regarding the vulnerability associated with claims for PCS billed 
more than 24 hours per day or claims for date ranges that include days on which no 
services were provided.  (OEI-07-06-00621) 
Colorados Medicaid Mental Health Capitation and Managed Care Program  
In our review of Colorados supplemental Medicaid payments made from 20012004 for 
mental health services provided to foster care children in child placement agencies, we 
determined that these payments were not fully consistent with Federal and State 
requirements.  Because of unanticipated stresses on Medicaid funding for these services, 
the State began making supplemental payments (i.e., payments in addition to the monthly 
capitation payments) to its contracted mental health assessment and service agencies 
(MHASA) in 2001.  Of the $23 million ($11.7 million Federal share) in supplemental 
payments, $3.3 million (Federal share) was unallowable because the State had not 
obtained, as required, CMSs approval of contracts covering the supplemental payments 
HHS OIG Semiannual Report to Congress  22  Centers for Medicare & Medicaid Services 
Spring 2009   
for a portion of the audit period.  In addition, the State did not provide documentation that 
the remaining $8.4 million (Federal share) in supplemental payments had been removed 
from the capitation payments that the State made to MHASAs.   
We recommended that the State refund $3.3 million to the Federal Government and work 
with CMS to resolve $8.4 million.  The State disagreed with our findings and 
recommendations.  After reviewing the States comments, we modified our report and 
removed the finding on unallowable costs related to the failure to comply with State 
contract provisions.  We also modified our report to set aside, rather than question, the 
$8.4 million in potentially unallowable supplemental payments.  (A-07-06-04067) 
New Mexicos Medicaid Administrative Costs  
In our review of New Mexicos claimed Medicaid administrative costs for the quarter 
ending September 30, 2004, we found that the State claimed $1.5 million ($1.1 million 
Federal share) of unallowable costs.  The Federal share of Medicaid administrative costs 
is typically 50 percent, but enhanced rates of 75 or 90 percent may be claimed for some 
costs.  For the period reviewed, the State claimed administrative costs totaling 
$16.3 million ($10.3 million Federal share). 
The $1.5 million of unallowable costs consisted of $1.1 million ($883,000 Federal share) 
for costs claimed because of errors in compiling the Federal claim and $374,000 
($187,000 Federal share) resulting from errors in the random moment timestudy base that 
was used to allocate eligibility fieldworker costs.  The State also claimed $509,000 at 
unallowable enhanced Federal funding rates (75 or 90 percent).  Although these costs 
were eligible for Federal reimbursement at the standard 50-percent rate, they did not meet 
enhanced-rate guidelines; therefore, the State improperly received $128,000 in enhanced 
funding.  We could not determine what portion of $772,000 ($386,000 Federal share) in 
salary costs for medical assistance workers and temporary assistance for needy families 
(TANF) and what portion of $8.5 million ($6.4 million Federal share) in TANF transition 
costs were allowable because these costs benefited other programs.  
We recommended that the State (1) refund $1.2 million to CMS, (2) work with CMS to 
identify the allowable portion of the $772,000 ($386,000 Federal share) in costs for 
medical assistance workers and TANF program employees, (3) work with CMS to 
identify the allowable portion of the $8.5 million ($6.4 million Federal share) adjustment 
made to claim TANF transition costs at an enhanced Federal funding rate, and (4) make 
administrative changes related to our findings.  The State agreed with most of our 
findings and recommendations.  The State said that it would refund to CMS $1.18 million 
of the $1.2 million in unallowable costs and enhanced Federal funding rate costs but 
disagreed with findings totaling $22,000 in the Miscellaneous Overcharges section of 
the report.  After reviewing the States comments and the documentation that it provided, 
we maintain that our findings and recommendations are valid.  (A-06-07-00072) 
HHS OIG Semiannual Report to Congress  23  Centers for Medicare & Medicaid Services 
Spring 2009   
Connecticuts Community-Based Medicaid Administrative Claim  
In this CMS-requested review of Connecticuts claims for community-based Medicaid 
administrative costs for State FY 2004, we found that the States $9.3 million claim may 
not have fully complied with Federal requirements.  The State claimed reimbursement 
from CMS for administrative case management activities provided by contracted 
organizations.  Because the State made omissions and deviations from acceptable 
practices when calculating its claim and was unable to provide adequate documentation, 
we were unable to express an opinion on the claims allowability.  
We recommended that the State draft its future contracts to identify and properly value 
the amount of administrative case management activities and that it work with CMS to 
determine what portion of the $9.3 million was allowable under Federal requirements.  
The State generally agreed with our recommendations.  (A-01-06-00008)   
Clinic and Practitioner Claims Billed as Family Planning Services Under the 
New York State Medicaid Program  
In our review of New Yorks claims for Federal Medicaid reimbursement for family 
planning services from April 2003 through March 2007, we estimated that the State 
improperly received $17.2 million for improperly claiming enhanced 90-percent Federal 
reimbursement.  The Federal share of the Medicaid program was 52.95 percent or 
50 percent for New York during our audit period.  Under Federal law, a State may 
provide family planning services and supplies to individuals of childbearing age who are 
eligible under the State Medicaid plan and receive enhanced 90-percent Federal 
reimbursement for items and procedures that are clearly furnished or provided for family 
planning purposes.   
Our specific findings included the following: 
 Of our 119 sampled claims, 17 qualified as family planning services that were eligible 
for enhanced 90-percent Federal reimbursement. 
 Of the 102 claims that did not qualify for the 90-percent Federal reimbursement rate, 
33 were not eligible for any Federal Medicaid reimbursement, including 27 claims for 
abortion procedures and 63 were eligible for reimbursement at the applicable matching 
rate of 50 or 52.95 percent.  The remaining six claims were unallowable for reasons 
including lack of adequate or required documentation. 
The overpayment occurred because providers incorrectly claimed services as family 
planning, and the States Medicaid Management Information System (MMIS) edit 
routines did not adequately identify claims unrelated to family planning.  We 
recommended that the State refund $17.2 million to the Federal Government, 
reemphasize to providers that only services directly related to family planning should be 
billed as family planning, ensure that MMIS edits use all appropriate claim information to 
identify claims that are ineligible for enhanced 90-percent Federal reimbursement, and 
HHS OIG Semiannual Report to Congress  24  Centers for Medicare & Medicaid Services 
Spring 2009   
determine the amount of Federal Medicaid funds improperly reimbursed for claims 
unrelated to family planning subsequent to our audit period and refund that amount to the 
Federal Government.  The State generally concurred with our recommendations.   
(A-02-07-01037) 
Disproportionate Share Hospital Payments by Pennsylvania  
For State FYs 20052006 and 20062007, we reviewed whether three hospitals 
associated with universities in Pennsylvania retained Medicaid DSH payments that are 
authorized by CMS to ensure that services are provided to the medical assistance 
population and help offset medical education costs incurred.  States are required to make 
Medicaid DSH payments to hospitals that serve a disproportionately large number of 
low-income patients.  As recommended by a contractor retained by the State to generate 
Federal funding, the State submitted State plan amendments (SPA) that authorized DSH 
payments limited to the three hospitals in our review.  This report was part of an OIG 
initiative to determine the extent to which State Medicaid agencies have contracted with 
consultants through contingency fee arrangements and the effect of those arrangements 
on the submission of questionable or improper claims to the Federal Government.  
We determined that two of the three hospitals did not retain their DSH payments but 
instead redirected payments totaling $35.1 million (Federal share) to their university 
medical schools.  Because the two hospitals did not require the medical schools to 
account for how they used the funds, we could not determine whether the schools used 
the DSH funds in compliance with the SPAs.  
We recommended that the State work with CMS to resolve $35.1 million (Federal share) 
in DSH payments redirected to university medical schools in State FYs 20052006 and 
20062007 and DSH payments redirected to university medical schools after our review 
period, including any portion of the $25.5 million estimated Federal share for State 
FY 20072008.  The State agreed to work with CMS on any future SPA pertaining to 
academic medical centers but said that it was not aware of any Federal regulation or 
legislation that requires the hospitals to retain their DSH payments.  We revised our 
second recommendation to acknowledge CMSs approval of the SPA for State FY 2007
2008 subsequent to our review.  We support our recommendations, as revised.  
(A-03-07-00222) 
Audits Related to Hurricane Katrina 
Audits of Hospitals in the New Orleans Area 
During this semiannual period, we issued two reports related to five hospitals in the 
New Orleans region that had requested additional assistance following Hurricane Katrina.  
Officials of five hospital groups (the testifying hospitals) appeared at an August 1, 2007, 
post-Katrina health care hearing held by the Subcommittee on Oversight and 
Investigations, House Committee on Energy and Commerce (Committee), and testified 
that their hospitals had experienced significant post-Katrina operating losses, due largely 
HHS OIG Semiannual Report to Congress  25  Centers for Medicare & Medicaid Services 
Spring 2009   
to the increased costs of providing hospital care following the August 2005 hurricane.  
Using a summary of financial data compiled by the Louisiana Hospital Association 
comparing pre-Katrina (January through May 2005) with post-Katrina (January through 
May 2007) expenses and revenues, the officials requested Federal financial assistance for 
the recovery of the health care delivery system in the New Orleans area, including 
additional grant funds from HHS.  In a September 27, 2007, letter, the Committee 
requested that OIG review the more significant operating loss items cited by the 
testifying hospitals in their testimony and also perform a profitability analysis of them.  
Related audits issued during this semiannual reporting period are as follows: 
 Profitability Analysis of New Orleans Hospitals  Our analysis of the testifying 
hospitals profitability trends for FYs 20022006 showed that each hospital had a 
different profitability trend.  The testifying hospitals cumulative results, broken down 
into four measures of profitability, varied by type of expenditure and fiscal year.  
Patient-related care margin (revenues and expenses related to day-to-day patient 
care):  For FYs 2002 and 2003, the testifying hospitals had cumulative positive 
patient-related care margins; for FYs 20042006, they had cumulative negative 
patient-related care margins.  
Total margin (all revenues and expenses):  For FYs 2002 and 2003, the testifying 
hospitals had cumulative positive total margins; for FYs 2004 and 2005, they had 
cumulative negative total margins.  For FY 2006, the hospitals had a cumulative 
positive total margin, which included additional funding from Business Interruption 
insurance payments and additional Federal funding for hurricane damage.  
Medicare program margin (payments received from Medicare):  For FY 2002, 
the testifying hospitals had a cumulative positive Medicare program margin; for FYs 
20032006, they had cumulative negative Medicare program margins.  
Medicaid program margin (payments received from Medicaid):  For FYs 2002
2006, the testifying hospitals had cumulative negative Medicaid program margins. 
As this was an informational report, we made no recommendations.  (A-07-07-02733) 
 Profitability Analysis of New Orleans Hospitals Compared With Peer Hospitals  
We compared profitability trends and characteristics of the testifying hospitals with three 
sets of peer hospitals in the FY after Hurricane Katrina.  We determined that the 
testifying hospitals profitability trends differed from those of the peer hospitals and 
reflected both the adverse financial impact of Hurricane Katrina and subsequent financial 
improvements after the testifying hospitals received Business Interruption insurance 
payments and additional Federal funding because of their hurricane damage.  As this was 
an informational report, we made no recommendations.  (A-07-07-02734) 
HHS OIG Semiannual Report to Congress  26  Centers for Medicare & Medicaid Services 
Spring 2009   
Louisianas Hurricane Katrina Health-Care-Related Provider Stabilization 
Grant 
In our review of Louisianas computation of Hurricane Katrina Health-Care-Related 
Provider Stabilization grant payments made following Hurricane Katrina to hospitals and 
other providers, we found that the State had followed the approved methodology for 
computing the grant payments but made data entry errors on grant payment spreadsheets 
that resulted in most of the hospitals receiving incorrect grant amounts.  In 2007, 
Louisiana received a total of $97.9 million in grant funding, which was available to 
Katrina-affected States to make payments to hospitals and other providers facing wage 
rates that had not yet been reflected in Medicare prospective payment system 
methodologies.  We determined that the data entry errors led to incorrect grant payments, 
ranging from a $60,162 overpayment to a $60,942 underpayment.  We recommended that 
the State use the results of our review to adjust incorrect grant payments received by the 
hospitals.  The State agreed with our recommendation.  (A-06-08-00025) 
Hurricane-Related Uncompensated Care Claims:  Louisiana  
Under section 1115 of the Social Security Act, CMS authorized certain States to operate 
an uncompensated care pool (UCCP) to reimburse providers for medically necessary 
services provided to Hurricane Katrina evacuees and affected individuals and to 
Hurricane Rita evacuees without other coverage.  The pool, which was 100 percent 
federally funded, was generally limited to services that were covered under the State 
Medicaid plan and provided within a specified period.   
In this review, we found that Louisiana did not comply with applicable Federal and State 
laws and regulations or with the approved provisions of the States UCCP plan in 
claiming, as of December 31, 2006, an estimated $19.8 million for services provided by 
one hospital to Hurricane Katrina and Rita evacuees.  Of the $8 million in costs claimed 
for services provided to 100 sampled patients, we determined that $7.8 million claimed 
for 98 patients was unallowable.  The reasons for services being unallowable included the 
following:  care was not covered under the State Medicaid plan, services were not 
received on the dates claimed, costs were paid by other sources, or costs were reimbursed 
from the Hurricane Rita UCCP for patients who were not evacuees.   
We recommended that the State refund to CMS the estimated $19.8 million in 
unallowable costs claimed.  The State did not address our recommendation but disagreed 
with our findings.  Nothing in the States comments caused us to revise our findings or 
recommendation.  (A-06-07-00024) 
HHS OIG Semiannual Report to Congress  27  Centers for Medicare & Medicaid Services 
Spring 2009   
Other CMS-Related Reports 
Oversight of the Implementation of the Health Insurance Portability and 
Accountability Act of 1996 
In our review of CMSs oversight of the implementation of the HIPAA, we found that the 
agency had taken limited actions between October 2003 and August 2007 to ensure that 
covered entities adequately implemented requirements of the Security Rule.  The HIPAA 
Security Rule requires a covered entity, such as a health plan or health care provider that 
transmits any health information in electronic form, to ensure the integrity and 
confidentiality of the information, to protect against any reasonably anticipated threats or 
risks to the security or integrity of the information, and to protect against unauthorized 
uses or disclosures of the information.  HHS has delegated to CMS the authority and 
responsibility to interpret, implement, and enforce HIPAA Security Rule provisions.   
Our findings included the following: 
 CMS had no effective mechanism to ensure that covered entities were complying with 
the HIPAA Security Rule or that electronic health information was being adequately 
protected.  The agency had not conducted any HIPAA Security Rule compliance reviews 
of covered entities, relying instead on complaints to identify noncompliant entities that it 
might investigate.  
 CMS had not established any policies or procedures for conducting compliance 
reviews at covered entities. 
 CMS had an effective process for receiving, categorizing, tracking, and resolving 
complaints.   
We recommended that CMS establish policies and procedures for conducting HIPAA 
Security Rule compliance reviews of covered entities.  CMS agreed with our 
recommendation; however, it did not agree with our findings and indicated that the 
agencys complaint-driven enforcement process had furthered the goal of voluntary 
compliance.  We continue to recommend that CMS add compliance reviews to its 
oversight process.  (A-04-07-05064) 
Financial Statement Audit 
The CMS FY 2008 financial statements received an unqualified audit opinion, which 
means that the statements were fairly presented in accordance with generally accepted 
accounting principles.  However, auditors identified a material weakness in CMSs 
information systems controls.  The weakness related primarily to CMS oversight of 
information security, access to programs, and control over application configuration 
management for shared systems.  (A-17-08-02008) 
HHS OIG Semiannual Report to Congress  28  Centers for Medicare & Medicaid Services 
Spring 2009   
Resolution of Audit Recommendations  
In our review of CMSs resolution of audit recommendations during FYs 2006 and 2007, 
we determined that the agency had resolved 3,462 of the 4,650 audit recommendations 
that were outstanding during this period.  However, the agency did not resolve 2,813 of 
the 3,462 recommendations within the required 6-month period.  Office of Management 
and Budget Circular A-50 requires prompt resolution and corrective actions on audit 
recommendations; resolution is to be made within a maximum of 6 months after the 
issuance of a final report.   
We also found that as of September 30, 2007, CMS had not resolved 1,188 audit 
recommendations that were past due for resolution.  The dollar amounts associated with 
these recommendations totaled $1.165 billion.   
By not resolving audit recommendations in a timely manner, CMS did not have 
reasonable assurance that it was exercising proper stewardship over Federal dollars.  
During the audit period, CMS revised its audit resolution procedures and made progress 
resolving outstanding audit recommendations in a more timely manner.  We 
recommended that CMS resolve all audit recommendations within the required 6-month 
audit resolution period and resolve the 1,188 outstanding audit recommendations that 
were past due as of September 30, 2007.  CMS concurred with our recommendations. 
(A-07-07-04112) 
Outreach 
As part of OIGs ongoing efforts to promote the highest level of ethical and lawful 
conduct by the health care industry, we have continued to issue advisory opinions and 
other guidance to educate industry and other stakeholders on how to avoid instances of 
waste, fraud, and abuse. 
Advisory Opinions 
In accordance with section 205 of HIPAA, OIG, in consultation with the Department of 
Justice (DOJ), issues advisory opinions to outside parties regarding the interpretation and 
applicability of certain statutes relating to Federal health care programs.  This authority 
allows OIG to provide case-specific formal guidance regarding the application of the 
anti-kickback statute and safe harbor provisions and other OIG health care fraud and 
abuse sanctions.  For the period October 1, 2008, through March 31, 2009, OIG received 
33 advisory opinion requests and issued 12 advisory opinions.  OIG advisory opinions are 
available at http://oig.hhs.gov/fraud/advisoryopinions.asp. 
Provider Self-Disclosure Protocol 
OIG is committed to assisting health care providers and suppliers in detecting and 
preventing fraudulent and abusive practices.  Since 1998, we have made available 
comprehensive guidelines describing the process for providers to voluntarily submit to 
HHS OIG Semiannual Report to Congress  29  Centers for Medicare & Medicaid Services 
Spring 2009   
OIG self-disclosures of fraud, waste, or abuse.  The guidelines, entitled Provider 
Self-Disclosure Protocol, give providers an opportunity to minimize the potential costs 
and disruption that a full-scale OIG audit or investigation may entail if fraud is 
uncovered.  In doing so, the self-disclosure also enables the provider to negotiate a fair 
monetary settlement and potentially avoid being excluded from doing business with 
Federal health care programs.  The protocol guides providers and suppliers through the 
process of structuring a disclosure to OIG about matters that appear to constitute potential 
violations of Federal laws (as opposed to honest mistakes that may have resulted in 
overpayments).  After making an initial disclosure, the provider or supplier is expected to 
undertake a thorough internal investigation of the nature and cause of the matters 
uncovered and make a reliable assessment of their economic impact (e.g., an estimate of 
the losses to Federal health care programs).  OIG evaluates the reported results of each 
internal investigation to determine the appropriate course of action.   
In addition, OIG issued an Open Letter to Health Care Providers in 2006 to promote the 
use of the self-disclosure protocol to resolve civil monetary penalty (CMP) liability under 
the physician self-referral and anti-kickback statutes for financial arrangements between 
hospitals and physicians. 
On April 15, 2008, OIG published another Open Letter to Health Care Providers.  The 
letter sets forth certain refinements to the October 1998 Self-Disclosure Protocol.  To 
improve the self-disclosure process, OIG, among other steps, streamlined its internal 
procedures regarding self-disclosures.  In addition, OIG explained that it will generally 
not require a self-disclosing entity to enter into a corporate integrity agreement (CIA) or 
certification of compliance agreement (CCA) when a resolution has been negotiated 
pursuant to the protocol.  A CIA is an agreement between the provider and OIG that is 
entered into in exchange for the OIGs agreement not to seek an exclusion of that 
provider from participation in Medicare, Medicaid, and other Federal health care 
programs.  CIAs are monitored by OIG and require providers to enhance existing 
compliance programs or establish new ones.  The compliance programs are designed, in 
part, to prevent a recurrence of the underlying fraudulent conduct.  OIG may also 
negotiate a CCA in lieu of a comprehensive CIA, under appropriate circumstances.  The 
CCA requires that the provider maintain its existing compliance program and agree to 
certain compliance obligations that mirror those found in a comprehensive CIA. 
OIG published another Open Letter to Health Care Providers on March 24, 2009, which 
narrowed the scope of the self-disclosure protocol regarding violations of the physician 
self-referral (Stark) law and explained that OIG will no longer accept disclosure of a 
matter that involves only liability under the Stark law in the absence of a colorable anti-
kickback statute violation.  The Open Letter also established a minimum settlement 
amount for anti-kickback disclosures of $50,000.    
The self-disclosure guidelines are available on the OIG Web site at 
http://www.oig.hhs.gov/fraud/selfdisclosure.asp.   
HHS OIG Semiannual Report to Congress  30  Centers for Medicare & Medicaid Services 
Spring 2009   
During this reporting period, self-disclosure cases resulted in $17.5 million in HHS 
receivables.  The following are examples:  
 Illinois  To resolve a matter reported under OIGs Provider Self-Disclosure Protocol, 
the City of Chicago (City) agreed to pay $6.9 million to resolve its Civil Monetary 
Penalties Law (CMPL) liability for submitting false claims to Medicare.  The City 
allegedly submitted claims to Medicare for ambulance services that were not medically 
necessary, billed at the wrong level of service, or submitted without the patients or other 
appropriate persons signature, as required by CMS regulations. 
 Pennsylvania  Milton S. Hershey Medical Center (Hershey) agreed to pay the 
Government approximately $3,174,224 to settle its False Claims Act (FCA) liability for 
improperly classifying certain costs for organ transplants.  Specifically, as disclosed 
under OIGs Provider Self-Disclosure Protocol, Hershey inappropriately included costs 
unrelated to organ acquisition on its 20002005 Cost Reports received by Medicare.  The 
fraud allegedly resulted because Hershey shifted from post-transplant to pre-transplant 
activities.  Hershey, already operating under a CIA for the submission of false claims for 
infusion therapy services, agreed to CIA amendments relating to policies and procedures 
for the proper allocation of transplant costs. 
 Michigan  Courtyard Manor of Farmington Hills, Inc. (Courtyard Manor), an adult 
foster care facility, agreed to pay $1.7 million to resolve its CMPL liability for receiving 
Federal health care program funds while being subject to a 10-year exclusion from 
participation in all Federal health care programs.  The company also agreed to an 
additional 2-year period of exclusion.  The original exclusion, imposed in August 2002, 
was the result of a May 2001 no contest plea to a charge of involuntary manslaughter 
after the death of a Courtyard Manor resident.  As disclosed under OIGs Provider Self-
Disclosure Protocol, Courtyard Manor discovered in May 2007 that it had contracted 
with several agencies that were funded, in part, by the Michigan Medicaid Program.  
 Wisconsin  To resolve a matter reported under OIGs Provider Self-Disclosure 
Protocol, ShopKo Stores Operating Co., LLC, and its predecessor, ShopKo Stores, Inc. 
(ShopKo), agreed to pay $669,824 to resolve its CMPL liability in connection with its 
employment of an excluded pharmacist, John M. Tuckett, RPh.  In November 1987, 
Tuckett was excluded from participation in Federal health care programs for a period of 
5 years.  At the conclusion of the exclusion period, Tuckett failed to seek reinstatement to 
participate in Federal health care programs.  In November 2006, as part of the 
implementation of its new exclusion compliance policy, ShopKo began performing 
annual exclusion searches for all of its pharmacy employees.  The initial search pursuant 
to this new policy revealed Tucketts exclusion.  
 California  Alliance Nursing and Rehabilitation Center (Alliance) agreed to pay 
$500,000 to settle its liability under the OIGs CMPL authority for allegedly submitting 
false claims to Medicare.  Pursuant to OIGs Provider Self-Disclosure Protocol, Alliance 
disclosed that, from January 2001 through July 2005, it presented or caused to be 
HHS OIG Semiannual Report to Congress  31  Centers for Medicare & Medicaid Services 
Spring 2009   
presented claims for wound care supplies using incorrect billing codes, which resulted in 
receipt of reimbursements in excess of amounts to which it was entitled.   
 Hawaii  To resolve a matter reported under the OIGs Provider Self-Disclosure 
Protocol, Queens Medical Center (QMC) agreed to pay $150,500 to resolve its CMPL 
liability related to the inappropriate disclosure of confidential information from the 
National Practitioner Data Bank (NPDB).  The NPDB is an information clearinghouse 
used to collect and release information related to the professional competence and 
conduct of health care practitioners, providers, and suppliers.  QMC allegedly sent 
confidential NPDB reports on over 250 of its medical staff members to its insurance 
carrier, which, in turn, sent the reports to the carriers insurance broker and underwriter.   
Office of Inspector General Administrative Sanctions 
OIG has the authority to impose administrative sanctions for instances of fraud or abuse 
or other activities that pose a risk to Federal health care programs and their beneficiaries 
(see Appendix C for an explanation of OIGs sanction authorities).  These sanctions 
include the exclusion of individuals and entities from Federal health care programs and 
the imposition of CMPs for submitting false or fraudulent claims to a Federal health care 
program; or for violating the anti-kickback statute, the physician self-referral statute, or 
the patient dumping provision of the Social Security Act.  
During this reporting period, OIG administered 1,450 sanctions in the form of program 
exclusions or administrative actions for alleged fraud or abuse or other activities that 
posed a risk to Federal health care programs and their beneficiaries.  Details and 
examples of these sanctions follow.  
Program Exclusions 
During this reporting period, OIG excluded 1,415 individuals and entities from 
participating in Medicare, Medicaid, and other Federal health care programs.  Most of the 
exclusions resulted from convictions for crimes relating to Medicare or Medicaid, for 
patient abuse or neglect, or as a result of license revocation.  Examples include the 
following: 
 Florida  Angel Castillo, Jr., who owned or controlled several durable medical 
equipment (DME) companies, was excluded for a minimum period of 50 years based on 
his conviction for a health care fraud and money-laundering scheme.  From August 2005 
to October 2006, Castillos DME companies submitted false claims to Medicare for DME 
items and services that were not provided to beneficiaries.  Castillo then laundered the 
proceeds obtained through the scheme.  Castillo was sentenced to 235 months of 
incarceration and was ordered to pay $7,236,992 in restitution.  
 Michigan  Robert Stokes, an osteopath, was excluded for a minimum period of 50 
years based on his conviction for health care fraud.  From August 2001 to December 
2004, Stokes submitted claims to Medicare, TRICARE (the militarys health insurance 
HHS OIG Semiannual Report to Congress  32  Centers for Medicare & Medicaid Services 
Spring 2009   
program), and private insurance companies for upcoded surgical procedures and 
medically unnecessary procedures.  Stokes, who lied to patients about their medical 
conditions, was sentenced to 126 months of incarceration, was ordered to pay $1,315,682 
in restitution, and had his osteopath license revoked by the Michigan Board of 
Osteopathic Medicine. 
 Kansas  Momodou Alieu Jallow, a nurse aide, was excluded for a minimum of 25 
years based on his conviction for rape and attempted rape of patients in a nursing home 
where he was employed.  Jallow was sentenced to 226 months of incarceration. 
 Colorado  Raymond Francis Armelino, a physical therapist, was excluded for a 
minimum of 20 years based on his conviction for sexual assault on a child by one in a 
position of trust and for unlawful sexual contact.  During therapy sessions, Armelino 
sexually assaulted patients, including a teenage girl.  Armelino received a sentence of 
between 8 years and life in prison. 
 Rhode Island  John Montecalvo, a nursing home executive, was excluded for a 
minimum period of 17 years based on two convictionsone for equity skimming and the 
other for embezzlement, conspiracy, and patient neglect.  From January 1998 to May 
2004, Montecalvo used monies that had been issued by the United States Department of 
Housing and Urban Development for the operation of nursing homes for purposes other 
than what was reasonable and necessary.  He was sentenced to 24 months of 
incarceration and was ordered to pay $780,539 in restitution.  In a related State case, 
Montecalvo was sentenced to 10 years in prison with 9 years suspended, to be served 
concurrently with the Federal sentence, for his involvement in a Medicaid fraud scheme 
and for failing to provide treatment and care to patients at a nursing home.   
 Connecticut  ALJ Carolyn Cozad Hughes issued a decision on January 9, 2009, 
affirming OIGs determination to exclude former Purdue Frederick executives Michael 
Friedman, Paul Goldenheim, M.D., and Howard Udell from participation in Federal 
health care programs for a period of 15 years.  The exclusions were based on the 
executives convictions for their failureas responsible corporate officers of Purdue 
Frederickto prevent or correct the fraudulent misbranding and distribution of 
OxyContin.  In July 2007, when Purdue Frederick pleaded guilty to felony misbranding 
of OxyContin, the three executives pleaded guilty to related misdemeanor misbranding in 
their role as responsible corporate officers.  In sustaining the 15-year period of exclusion, 
ALJ Hughes found that the executives fraud-related conduct endangered the health and 
safety of program beneficiaries and others and caused astronomical losses to 
Government programs.  ALJ Hughes also considered the long-running nature of the 
misbranding activities in determining that a 15-year period of exclusion was warranted.  
Michael Friedman is the former Chief Operating Officer and Chief Executive Officer, 
Paul Goldenheim the former Chief Scientific Officer, and Howard Udell the former 
General Counsel at Purdue Frederick.  
HHS OIG Semiannual Report to Congress  33  Centers for Medicare & Medicaid Services 
Spring 2009   
Civil Monetary Penalties Law 
The CMPL authorizes OIG to impose administrative penalties and assessments against a 
person who, among other things, submits or causes to be submitted claims to a Federal 
health care program that the person knows or should know are false or fraudulent.  
During this reporting period, OIG concluded cases involving more than $11.8 million in 
CMPs and assessments.  The following are among the CMP actions resolved during this 
reporting period: 
 Tennessee  Methodist Health Care-Memphis Hospitals (Methodist) agreed to pay 
$136,627 to resolve its CMPL liability for allegedly employing an excluded nurse.  On 
January 19, 2005, Lee Ann McCain was excluded from participation in the Federal health 
care programs; on June 12, 2006, Methodist hired her as a full-time registered nurse 
despite a pre-employment sanction check that revealed McCains exclusion.  As part of 
the settlement, Methodist certified that it has policies and procedures in place to prevent 
the hiring or contracting with any ineligible person or entity.  
 Mississippi  Valerie Tolley, doing business as Health Care Medical (HCM), agreed 
to pay $100,000 and enter into a 3-year CCA to resolve its CMPL liability arising from 
HCMs payment and attempted payment of kickbacks in exchange for direct and indirect 
patient referrals.  HCM, a DME supplier, allegedly arranged for Sherrie Alexander, a 
nurse employed at Sta-Home Home Health Agency (Sta-Home), to obtain patient census 
rosters.  HCM allegedly used the rosters to solicit DME sales and paid Alexander for 
every completed sale.  This arrangement ended in June 2003, when Sta-Home fired 
Alexander after learning of the arrangement.  HCM also allegedly offered sales personnel 
kickbacks if they obtained patient information that HCM could use in making targeted 
DME sales.   
Patient Dumping 
Some of the CMP cases that OIG resolved between October 1, 2008, and March 31, 
2009, were pursued under the Emergency Medical Treatment and Labor Act, a statute 
designed to ensure patient access to appropriate emergency medical services.  The 
following is an example of a settlement under this statute: 
 California  On January 30, 2009, ALJ Steven T. Kessel sustained OIGs 
determination to impose a $50,000 CMP against St. Josephs Medical Center 
(St. Josephs) for failure to provide a medical screening examination or stabilizing 
treatment to an individual who presented to the emergency department (ED) with an 
acute emergency medical condition.  The patient complained of general weakness or a 
possible stroke and presented with a swollen tongue, slurred speech, and abnormal vital 
signs.  The patients condition deteriorated after waiting several hours in the ED, and 
despite his familys repeated requests for help, the patient did not receive a medical 
screening examination.  Approximately 312 hours after arriving at St. Josephs, the patient 
went into cardiopulmonary arrest and subsequently died.  ALJ Kessel found St. Josephs 
failures shocking and characterized St. Josephs treatment of the patient as 
HHS OIG Semiannual Report to Congress  34  Centers for Medicare & Medicaid Services 
Spring 2009   
constituting a complete collapse of the system of care it purported to offer emergency 
patients.  ALJ Kessel found that St. Josephs conduct warranted the maximum penalty. 
Criminal and Civil Enforcement 
One of the most common types of fraud perpetrated against Medicare, Medicaid, and 
other Federal health care programs involves filing false claims for reimbursement.  False 
claims may be pursued under Federal and State criminal statutes and, in appropriate 
cases, under the civil FCA.  A description of these enforcement authorities can be found 
in Appendix C.   
The successful resolution of false claims often involves the combined investigative 
efforts and resources of OIG, the Federal Bureau of Investigation (FBI), Medicaid Fraud 
Control Units (MFCU), and other law enforcement agencies.  OIG is responsible for 
assisting DOJ in bringing and settling cases under the FCA.  Many providers elect to 
settle their cases prior to litigation.  As part of their settlements, providers often agree to 
enter into integrity agreements with OIG to avoid exclusions and to be permitted to 
continue participating in Medicare, Medicaid, and other Federal health care programs.  
Such agreements are monitored by OIG and require the providers to enhance existing 
compliance programs or establish new ones.  The compliance programs are designed, in 
part, to prevent a recurrence of the underlying fraudulent conduct. 
During this semiannual period, the Governments enforcement efforts resulted in 
222 criminal actions and 239 civil actions against individuals or entities that engaged in 
health-care-related offenses.  These efforts resulted in $1.6 billion in HHS and 
$540.8 million in non-HHS investigative receivables, including civil and administrative 
settlements or civil judgments related to Medicare; Medicaid; and other Federal, State, 
and private health care programs.  Some of the notable enforcement actions are described 
below.  Summaries are organized by the sector of the health care industry involved or by 
the nature of the offense. 
Special Assistant United States Attorney Program 
DOJ and OIG launched a program in which OIG attorneys serve as Special Assistant 
United States Attorneys (SAUSA).  OIG attorneys are detailed full-time to DOJs 
Criminal Division, Fraud Section, for 6-month assignments, such as with the Medicare 
Fraud Strike Force described below; others prosecute matters on a case-by-case basis.  
Both arrangements offer excellent litigation training for OIG attorneys and enhance 
collaboration between the departments in fighting fraud.   
Under this program, OIG attorneys have successfully litigated important criminal cases 
relating to DME, infusion therapy, physical therapy, and other Medicare and Medicaid 
fraud.  In one detail, beginning in May 2007, OIG partnered with the United States 
Attorneys Office for the Southern District of Mississippi to focus on physical therapy 
and physical medicine fraud enforcement.  The detail focused on physical therapy clinics 
believed to be submitting false and fraudulent claims to the Medicare and Medicaid 
HHS OIG Semiannual Report to Congress  35  Centers for Medicare & Medicaid Services 
Spring 2009   
programs.  The scheme involved the use of unlicensed individuals, often with little or no 
training, to render unsupervised in-home physical therapy services to beneficiaries.  The 
services were billed under a physicians provider number as if the physician personally 
rendered the services or directly supervised a licensed physical therapist rendering the 
services.  
 Mississippi  Neil Lenwood Lanning, owner of Progressive Physical Medicine, Inc. 
(PPM), was sentenced to 3 years in prison and ordered to pay $1,026,555 in restitution 
following his guilty plea to making a false statement in a health care matter.  Beginning 
in approximately April 2003 and continuing through May 2005, Lanning submitted 
claims to the Medicare program falsely claiming that in-home physical therapy/physical 
medicine services had been rendered by PPMs medical director or by a licensed clinic 
employee under the physicians direct supervision.  In fact, the services were provided by 
unlicensed and unsupervised employees. 
 Mississippi  Morris Pernell Richardson, Zackery Paul Bennett, and Venus Jeanette 
Callahan (collectively the Defendants), owners of Southeastern Rehab Professionals, Inc., 
each pleaded guilty to misprision of a felony.  Callahan was sentenced to 6 months in prison, 
while Richardson and Bennett were each sentenced to 5 years probation.  The Defendants 
were also held jointly and severally liable for $102,639 in court-ordered restitution.  The 
Defendants concealed from authorities the fact that, from May 2004April 2005, their 
company fraudulently submitted claims to the Medicare program for physical 
therapy/physical medicine services that were not rendered by qualified or licensed 
individuals. 
Medicare Fraud Strike Force 
The Medicare Fraud Strike Force (Strike Force) uses real-time analysis of Medicare 
billing data to assist in the identification, investigation, and prosecution of individuals 
and companies that have committed DME and infusion therapy fraud.  The Strike Force 
continues to yield convictions throughout South Florida and is also proving to be a 
valuable fraud detection tool in Los Angeles.   
During this reporting period, Strike Force efforts in South Florida resulted in 48 
convictions and $135.9 million in investigative receivables and efforts in Los Angeles 
resulted in the filing of charges against 14 individuals or entities.  Examples of Strike 
Force efforts during this reporting period include the following: 
 Florida  Miami physician Ana Alvarez-Jacinto was sentenced to 30 years in prison 
and ordered to pay $8,289,286 in joint and several restitution in connection with her role 
in an HIV infusion fraud scheme.  The Strike Force found that in a 5-month period 
between June and November 2003, Alvarez-Jacinto ordered hundreds of medically 
unnecessary HIV infusion treatments at the Saint Jude Rehab Center, Inc. (Saint Jude), 
clinic.  HIV-positive Medicare patients at Saint Jude were allegedly paid cash kickbacks 
of approximately $150 per visit in exchange for allowing Alvarez-Jacinto and her co-
conspirators to prescribe the unnecessary treatments.  After her 2-week trial, the judge 
HHS OIG Semiannual Report to Congress  36  Centers for Medicare & Medicaid Services 
Spring 2009   
found her trial testimony to be perjurious and enhanced her sentence for obstruction of 
justice.   
 Florida  Jorge Infante, owner of DME providers F.A. Medical Supply & Equipment 
Inc. (F.A. Medical) and Unique Medical Equipment and Supply Inc. (Unique Medical), 
was sentenced to 39 months imprisonment and ordered to pay $2,004,230 in restitution 
following his guilty plea to health care fraud.  From February through October 2007, 
Infante caused the submission of false and fraudulent claims to Medicare on behalf of 
F.A. Medical and Unique Medical for wound care and suction pump supplies that were 
neither prescribed by physicians nor received by beneficiaries. 
 Florida  Reinel Pulido was sentenced to 36 months incarceration and ordered to pay 
$1,565,410 in restitution for health care fraud.  The Strike Force found that Soroa 
Medical Services, Inc., an infusion clinic owned and operated by Pulido, billed Medicare 
for infusion-related therapies that had not been ordered by a physician and were never 
provided to beneficiaries. 
 Florida  Jose Perez Morales was sentenced to 30 months imprisonment and ordered 
to pay $786,749 in restitution for health care fraud.  Perez Morales controlled and 
operated Med Life Supplies Inc. (Med Life), a DME provider, from May 18 through 
November 28, 2007.  During that time, Med Life billed Medicare for enteral nutrition and 
infusion supplies that were neither prescribed by physicians nor received by beneficiaries. 
Pharmaceutical Manufacturers and Distributors 
 Pennsylvania  Eli Lilly and Company (Lilly) entered an approximately $1.4 billion 
global criminal, civil, and administrative settlement to resolve allegations that it illegally 
marketed its antipsychotic drug Zyprexa.  Under the civil settlement agreement, Lilly 
agreed to pay the Federal Government $438,171,544 and participating States up to 
$361,828,456 to resolve FCA allegations that by marketing Zyprexa for certain 
unapproved uses, it caused false claims for payment to be submitted to Federal health 
care programs, such as Medicaid, from September 1999 to the end of 2005.  The civil 
allegations were originally brought in four separate qui tam lawsuits.  Lilly will also pay 
a criminal fine of $515 million and forfeit assets of $100 million.  In its plea agreement, 
Lilly admitted that from September 1999 to March 31, 2001, it promoted Zyprexa for 
unapproved uses in elderly populations as treatment for dementia, including Alzheimers 
dementia.  Lilly entered a 5-year CIA with several unique provisions, including (1) a 
requirement that Lilly notify doctors about the settlement and provide a means by which 
the physicians may report questionable conduct by sales representatives; (2) a 
requirement that Lilly post on its Web site information about payments made to 
physicians; and (3) flexible audit provisions, which allow for additional audits to be 
conducted throughout the term of the CIA at OIGs discretion and with limited advance 
notice .  The CIA also provides for increased accountability by Lillys board of directors 
and management in the form of an annual resolution by a board committee and annual 
certifications from managers about compliance. 
HHS OIG Semiannual Report to Congress  37  Centers for Medicare & Medicaid Services 
Spring 2009   
 Florida  Bayer HealthCare LLC (Bayer) agreed to pay $97.5 million plus interest to 
settle allegations that it paid kickbacks to several DME mail order suppliers and 
diabetic supply distributors, to induce them to convert Medicare beneficiaries to Bayer 
diabetic supplies from diabetic supplies manufactured by Bayers competitors or to 
provide Bayer diabetic supplies to Medicare beneficiaries.  The United States alleged 
that this conduct caused the suppliers and distributors to submit false claims to 
Medicare from January 1998December 2007 for certain diabetic supplies 
manufactured by Bayer.   
Bayer also executed a 5-year CIA in connection with the settlement.  The CIA, which 
also applies to Bayer affiliates, requires the company to establish a database to manage 
certain arrangements with sources of Federal health care program business.  It also 
includes (1) flexible audit provisions, which allow for additional audits to be conducted 
throughout the term of the CIA at OIGs discretion and with limited advance notice; (2) 
requirements for increased accountability by Bayers board of directors in the form of an 
annual resolution by the board (with input from and a compliance program review to be 
conducted by a three-party independent Compliance Expert Panel engaged by Bayer); 
and (3) annual certifications from managers regarding compliance. 
 Texas  Abbott Laboratories Inc. (Abbott), an Illinois-based pharmaceutical company, 
agreed to pay the State of Texas and the Federal Government a total of $28 million in a 
Medicaid fraud settlement to resolve its civil liabilities related to the false pricing of 
certain intravenous drugs and blood products.  Under Texas law, drug manufacturers 
participating in Medicaid are required to report their wholesale and other prices to the 
Medicaid program. These prices are the basis on which the Texas Medicaid program 
calculates reimbursement to Medicaid providers.  The Government alleged that Abbott 
falsified price reports and inflated its prices for products that it submitted to the Texas 
Medicaid program.  As a result of the alleged illegal pricing, Texas Medicaid allegedly 
overreimbursed providers for Abbotts drugs.   
 Minnesota  Walgreen Co. (Walgreens) agreed to pay the United States $9.9 million 
to resolve allegations that it overcharged the Medicaid program in Minnesota, Michigan, 
Florida, and Massachusetts for prescription drugs by charging Medicaid for the difference 
between the Medicaid negotiated amounts and the third-party primary insurer negotiated 
amounts for the drugs.  The Government alleged that Walgreens charged Medicaid a 
larger amount when it should have charged Medicaid only for the co-pay after the 
primary payers payment.  In addition to agreeing to the monetary settlement, Walgreens 
agreed to enter into an amendment to its June 2008 CIA.  Under the amendment, 
Walgreens must train its pharmacists regarding the importance of billing Medicaid 
appropriate amounts and hire an independent review organization to annually audit its 
Medicaid claims in each of the four States. 
Durable Medical Equipment Suppliers 
 Florida  Abner and Mabel Diaz, owners of the medical billing company All Med 
Billing Corp. (All Med), were each sentenced to 168 months in prison for health care 
HHS OIG Semiannual Report to Congress  38  Centers for Medicare & Medicaid Services 
Spring 2009   
fraud and conspiracy to commit health care fraud.  In addition, Suleidy Cano, an All Med 
employee, was sentenced to 132 months in prison for aggravated identity theft and 
conspiracy to commit health care fraud.  The Diazes were ordered to pay $125,762,489 in 
joint and several restitution and forfeit various pieces of real estate.  All Med submitted 
claims to Medicare on behalf of suppliers who purportedly provided DME to Medicare 
beneficiaries.  These claims were for equipment that had not been ordered by physicians 
or delivered to the beneficiaries as claimed.  All Med facilitated the fraudulent billings by 
assisting in the concealment of the true owners of the DME companies, forging 
prescriptions, forging certificates of medical necessity, improperly acquiring the 
identities of Medicare beneficiaries, and directing the DME companies to use certain 
billing codes. 
Hospice 
 Alabama  SouthernCare, Inc. (SCI); SouthernCare Holdings, Inc.; SouthernCare 
Carry, LLC; and Michael Pardy agreed to pay the United States $24.7 million and enter 
into a 5-year CIA to resolve their FCA liability for allegedly submitting false claims to 
Medicare.  Operating in locations in 15 States, SCI allegedly submitted claims for 
treating patients who did not meet Medicares hospice eligibility criteria.  This settlement 
resolved allegations in two qui tam lawsuits filed by former SCI employees.  
Clinics 
 California  Goar Gina Alibalian, the owner and operator of a medical clinic, was 
ordered to pay $4,676,647 in restitution and was sentenced to 72 months of incarceration 
following her guilty plea to health care fraud.  The clinic paid a kickback to every patient 
or marketer bringing a patient into the clinic, billed for patients who never came to the 
clinic, and created patient files with falsified notes to support the fraudulent claims.   
 Connecticut  Carlson Therapy Network, P.C. (Carlson), a network of 20 physical 
therapy clinics in Connecticut and Rhode Island, agreed to pay $1,886,834 and enter into 
a 5-year CIA to resolve its FCA liability.  The Government alleged that from October 
2002 through December 2005, Carlson submitted false or fraudulent claims for 
individual, one-on-one physical therapy services when, in fact, group physical therapy 
services were provided.   
 Georgia  Fernando, Michael, and Ricardo Visbal, owners of Savannah Medical 
Services Inc. (SMS), were ordered to serve prison terms of 47, 20, and 6 months, 
respectively, and pay a total of $423,596 in restitution for their involvement in an 
infusion fraud scheme.  SMS billed Medicare for infusion therapy and gamma globulin 
that were not provided to patients.  The investigation also revealed that SMS paid patients 
to receive treatment at the facility. 
HHS OIG Semiannual Report to Congress  39  Centers for Medicare & Medicaid Services 
Spring 2009   
Contractors 
 Massachusetts  Medical transcription service provider MedQuist Inc. agreed to pay 
the United States $6.6 million to resolve FCA allegations that it overbilled Federal 
Government clients.  The Government alleged that from approximately 1998 through 
2004, the New Jersey-based company knowingly overbilled the Department of Veterans 
Affairs, the Department of Defense, and the Public Health Service for medical 
transcription services by inflating the number of lines billed to the Government instead of 
applying the contractually prescribed method.  The settlement resolves in whole or in part 
allegations made in two qui tam actions. 
Practitioners 
 California  Dr. Paul Lessler agreed to pay $2.18 million to resolve FCA allegations 
that between 2002 and 2006, he inappropriately allowed his UPIN to be used to bill 
Medicare for respiratory therapy.  The United States alleged that the claims were billed 
incident to Dr. Lesslers services when he did not provide direct supervision and as if 
they were performed at his office instead of the noncovered board and care facilities.  The 
United States also alleged that Dr. Lessler paid kickbacks to marketing coordinators, 
who recruited patients at the board and care facilities.  As part of the settlement, Dr. 
Lessler also agreed to be excluded for 15 years. 
 Nevada  Physicians Wen Liang, Craig M. Jorgenson, Robert Schreck, Tony Q.F. 
Chin, Mohammed Najmi, and Edmund Pasimio agreed to pay $212,515, $133,110, 
$94,574, $70,640, $60,451, and $54,440, respectively, for allegedly violating the FCA 
and other statutes.  The agreement resolved allegations that the physicians received 
kickbacks in exchange for patient referrals made to a nurse practitioner.    
 Maryland  Virginia Vought Acree, a State-licensed clinical specialist in child and 
adolescent psychiatric and mental health nursing, was sentenced to 36 months of 
imprisonment and ordered to pay restitution in the amount of $390,000 following her 
guilty plea to health care fraud.  Acree falsely billed Medicare, Medicaid, and private 
health care plans for services that she did not provide on hundreds of occasions from 
January 2003 to November 2007.  Acree often billed for face-to-face psychotherapy 
services on dates when she was on vacation in other States or countries or attending out-
of-town conferences. 
 Illinois  Podiatrist Ernest A. Nwani was sentenced to 12 months and 1 day of 
imprisonment and ordered to pay $109,127 in restitution following his guilty plea to 
health care fraud.  From 2002 to 2006, Dr. Nwani billed Medicare for surgical procedures 
that he had not actually performed, including the permanent removal of partial or 
complete toenails, bunion corrections, and the removal of bones from patients feet.   
HHS OIG Semiannual Report to Congress  40  Centers for Medicare & Medicaid Services 
Spring 2009   
Nursing Homes 
 District of Columbia  Grant Park Care Center (GPCC), a 296-bed skilled nursing 
facility, agreed to pay to pay the United States and the District of Columbia $2 million to 
settle FCA allegations.  GPCC is owned and managed by Centennial HealthCare 
Corporation, Grant Park Nursing Home Limited Partnership, Grant Park Management 
LLC, Centennial Service Corporation-Grant Park, Centennial Acquisition Corporation, 
Centennial Healthcare Management Corporation, Centennial Employee Management 
Corporation, Hilltopper Acquisition Corporation, Hilltopper Holding Corporation, 
Shoreline HealthCare Management LLC, and Coastal Administrative Services LLC 
(collectively, Centennial).  Centennial is one of the largest nursing home owners in the 
United States. 
The United States alleged that from January 1998 through December 2007, Centennial 
submitted claims to the Medicare and Medicaid programs for services that failed to meet 
the needs of the residents at GPCC in one or more of the following areas:  resident 
nutrition and hydration; needs assessments and evaluations; care planning and nursing 
interventions; medication management; fall prevention and management; and pressure 
ulcer care, including the prevention and treatment of wounds.  In addition, the United 
States alleged that Centennial understaffed GPCC during the covered period with 
knowledge that resident care would be compromised. 
As part of the settlement, Grant Park Nursing Home Limited Partnership and Grant Park 
Management, LLC, agreed to enter into a 5-year CIA with OIG that required them to 
establish a detailed compliance program and retain an independent monitor to assess their 
quality assurance and quality improvement systems. 
Medicaid Fraud Control Units 
MFCUs are key partners in the fight against fraud, waste, and abuse in State Medicaid 
programs.  State MFCUs operate in 49 States and the District of Columbia pursuant to the 
Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977 (P.L. No. 95142) with 
the objective of strengthening the Governments capability to detect, prosecute, and 
punish fraud against Medicaid programs.  MFCUs investigate and prosecute, or refer for 
prosecution, providers charged with defrauding the Medicaid program or abusing, 
neglecting, or financially exploiting beneficiaries in Medicaid-sponsored facilities.   
Since 1979, OIG has been responsible for administering the Medicaid fraud control grant 
program and providing oversight and guidance to State MFCUs.  This involves 
administering Federal financial grants to MFCUs, assessing the performance of MFCUs, 
and partnering with MFCUs in conducting joint investigations and other outreach work.  
During FY 2008, OIG provided oversight for and administration of approximately 
$185 million in Federal grants that were distributed to the 50 MFCUs.   
HHS OIG Semiannual Report to Congress  41  Centers for Medicare & Medicaid Services 
Spring 2009   
Joint Investigations 
 Texas  Ihem Wilson was sentenced to 5 years and 10 months of imprisonment and 
was ordered to pay $3,217,579 in joint and several restitution following his guilty plea to 
health care fraud and wire fraud.  Wilsons codefendant, Theresa Peter, had previously 
been sentenced in July 2008 to 1 year and 1 day of incarceration and held responsible for 
paying $1,582,277, a portion of the restitution figure, for conspiracy.  According to 
allegations in a 35-count indictment, Wilson and Peter owned or operatedin whole or 
in partAccess Medical Supply, a DME company that billed Medicare for motorized 
wheelchairs but routinely provided less expensive motorized scooters.  The investigation 
involved OIG, the FBI, and the Texas MFCU. 
 Indiana  Gabriele Reginald Harden was sentenced to 41 months of imprisonment 
and ordered to pay restitution in the amount of $1,683,412, following a guilty plea to 
health care fraud and money laundering.  Harden owned and operated a mobile dental 
unit, Dental Express, which operated out of a recreational vehicle and focused primarily 
on low-income, Medicaid-eligible children.  The mobile unit arranged for visits, typically 
to inner city schools, day care facilities, and subsidized housing projects.  He routinely 
billed Medicaid for fillings when sealants were actually applied to primary teeth, a 
procedure not covered by Medicaid.  He also improperly billed for x-rays that were not 
taken at the direction of a dentist, were not diagnostic, or were developed long after the 
patient was seen on the mobile unit.  Harden had ceased billing for sealants as fillings 
because of mounting pressures from staff and an investigation in Ohio, but he restarted 
the scheme after the staff had either quit or been fired.  The investigation involved OIG, 
the FBI, the Internal Revenue Service, and the Indiana MFCU. 
HHS OIG Semiannual Report to Congress  42  Centers for Medicare & Medicaid Services 
Spring 2009   
Public Health and Human Service Programs 
and Departmentwide Issues 
Based on our available resources each fiscal year (FY), we allocate about 20 percent of 
our appropriations to reviews of the Department of Health and Human Services (HHS) 
approximately 300 public health and human service programs and to departmentwide 
issues that affect more than one program.  However, a portion of these resources is used 
for mandatory reviews, including financial statement audits conducted pursuant to section 
405(b) of the Government Management Reform Act of 1994, the Chief Financial Officers 
Act of 1990, and information systems reviews required by the Federal Information 
Security Management Act. 
This chapter describes the Office of Inspector Generals (OIG) work related to the 
following areas:   
Public health programs  Several HHS agencies perform a wide spectrum of public 
health activities.  Public health activities and programs represent this countrys primary 
defense against acute and chronic diseases and disabilities and provide the foundation for 
the Nations efforts to promote and enhance the health of the American people.  Public 
health agencies within HHS include the following:  
  The Centers for Disease Control and Prevention (CDC) operates a system of 
health surveillance to monitor and prevent disease outbreaks, including those 
that would result from acts of bioterrorism; implements disease-prevention 
strategies; and maintains national health statistics.  
  The Food and Drug Administration (FDA) is responsible for ensuring the 
safety of the Nations food, drugs, medical devices, biologics, cosmetics, and 
animal food and drugs; and for ensuring the efficacy of the Nations drugs, 
medical devices, biologics, and animal drugs. 
  The Health Resources and Services Administration (HRSA) maintains a 
safety net of health services for people who have low incomes, are uninsured, 
or live in rural areas or urban neighborhoods where health care is scarce. 
  The Indian Health Service provides or funds health care services for 
1.6 million Native Americans and Alaska Natives. 
  The National Institutes of Health (NIH) supports medical and scientific 
research examining the causes of and treatments for diseases such as cancer 
and HIV/AIDS. 
HHS OIG Semiannual Report to Congress  43  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
  The Substance Abuse and Mental Health Services Administration funds 
services to assist people with or at risk for mental and substance abuse 
disorders.  
Human services programs  Several HHS agencies support human services to assist 
vulnerable individuals of all ages, including the following:  
  The Administration for Children and Families (ACF) operates more than 
60 programs that promote the economic and social well-being of children, 
families, and communities, including Temporary Assistance for Needy 
Families (TANF), the national child support enforcement system, the Head 
Start program for preschool children, and programs relating to foster care and 
adoption services.  
  The Administration on Aging supports programs that provide services such as 
meals, transportation, and caregiver support to older Americans at home and 
in the community through a nationwide network of services for the aging. 
Departmentwide issues  Certain OIG work cuts across HHS programs, including 
financial accounting, information systems management, and oversight of grants and 
contracts.  Such work may relate to functions carried out by HHSs Program Support 
Center (PSC), which provides a wide range of administrative support to operating and 
staff divisions within the Department. 
This chapter summarizes OIGs reports related to public health and human service 
programs and departmentwide issues.  It also provides statistics related to and examples 
of OIG actions and investigations related to public health and human service programs, 
describes actions taken on OIGs recommendations, and offers examples of OIGs review 
and clearance of regulations and guidance related to the Departments programs. 
HHS OIG Semiannual Report to Congress  44  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Reports Related to Public Health Programs 
Public Health Laboratory Testing To Detect and Report Biological Agents  
In our review of laboratory pandemic influenza preparedness, we found that as of 
June 2007, all States reported meeting at least three of nine CDC public health laboratory 
testing and reporting requirements included in our review, but no State reported meeting 
all nine.  CDC Preparedness Goal 3:  Detect and Report is the only goal that focuses on 
public health laboratory testing and reporting of biological threats.  Our review focused 
only on 9 of the 11 requirements of Goal 3.  State public health laboratories coordinate 
with private clinical laboratories, known as sentinel laboratories, which perform 
preliminary testing and then ship specimens to the State, and they test patient specimens 
to identify the agents that cause illness.  In 2006, through its Public Health Emergency 
Preparedness Cooperative Agreement (Cooperative Agreement), CDC allocated 
approximately $766 million to 62 awardees to meet specific goals by 2010.  We reviewed 
the extent to which 9 of the 11 requirements were met.   
Among our findings related to the nine requirements in our review:   
 At least 87 percent of States reported meeting all elements in four requirements.  
These requirements related to the availability of biosafety testing facilities, the capacity 
to test and report on specific viruses, the performance of required laboratory tests, and the 
training of public health laboratory personnel on shipping-related tasks.   
 Less than 65 percent of States reported meeting all elements in the other five 
requirements.  These requirements related to planning, training, compliance monitoring, 
testing of laboratories abilities, and identification of sentinel laboratories.   
We recommended that CDC continue to assist States in meeting the Cooperative 
Agreement requirements that are intended to decrease the time needed to detect and 
report biological public health threats.  We specifically recommended that the agency 
focus on improving performance in two requirement areas that less than 10 percent of the 
States reported meeting.  CDC concurred with our overall recommendation that it 
continue to assist States in meeting the Cooperative Agreement requirements intended to 
decrease the time needed to detect and report biological public health threats.   
(OEI-04-07-00750) 
Bioterrorism and Public Health Response Funding 
Pursuant to the Public Health Service Act, CDC provides funds to State and major local 
health departments to improve preparedness and response capabilities for bioterrorism 
and other public health emergencies.  From 1999 to 2005, CDC provided this funding 
through the Public Health Preparedness and Response for Bioterrorism Program.  
Beginning in 2005, CDC has provided funding through the Public Health Emergency 
Preparedness Program.  We refer to these two programs collectively as the Program.  
HHS OIG Semiannual Report to Congress  45  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
We reviewed costs claimed for Program reimbursement in two States.  The results were 
as follows: 
 Florida  We found that of the $75 million that the State claimed for reimbursement 
for the period August 31, 2004, through August 30, 2006, $71,000 was unallowable 
because the costs were improperly charged to the Program or inadequately documented.  
In addition, approximately $3.6 million may be unallowable because the costs may not be 
authorized by Florida statutes limiting the number of authorized positions.  These 
deficiencies occurred because the State did not have adequate policies and procedures to 
ensure that all costs claimed for reimbursement complied with applicable laws, 
regulations, and program guidance. 
We recommended that the State refund $71,000; determine whether it bypassed the 
position limitations imposed by State law and, if so, refund the approximately 
$3.6 million in unallowable costs; and improve policies and procedures to ensure that all 
costs claimed for reimbursement comply with applicable laws, regulations, and program 
guidance.  The State generally agreed with our findings and said that it was pursuing 
resolution of the $3.6 million with the State agency that oversees the administration of 
State contract procurement and statutes.  We modified our second recommendation in 
response to the States comments.  (A-04-07-01046)  
 New Hampshire  We found that $9.2 million of the $9.6 million in employee 
compensation costs charged to the Program for State FYs 20042007 were unallowable 
because the costs were not supported by the required employee certifications.  In 
addition, the State claimed $99,000 in compensation costs for an employee who had been 
transferred out of the Program. 
We recommended that the State either refund $9.2 million in compensation costs claimed 
for employees who may have worked on multiple programs or provide documentation to 
CDC to support these charges; refund $99,000 in compensation costs for an employee 
who had been transferred out of the Program; and follow Federal requirements for 
charging compensation costs to the Program.  The State disagreed with our findings and 
recommendations, saying that it had followed Federal requirements for charging 
compensation costs to the Program and that efforts that benefited other public health 
programs were allowable under the Program.  We maintain the validity of our 
recommendations.  (A-01-07-01502)  
Safeguards Over Controlled Substances at the National Institutes of Health 
Clinical Center Pharmacy  
Our review of NIHs handling of Schedule II controlled substances found that between 
May 2006 and June 2007, NIH complied with requirements to account for these 
substances but did not always appropriately secure or have adequate internal controls 
over the substances.  Schedule II substances (e.g., OxyContin) have the highest potential 
for abuse among controlled substances with an accepted medical use.  NIHs Clinical 
HHS OIG Semiannual Report to Congress  46  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Center Pharmacy (Pharmacy) dispenses Schedule II and other substances to inpatients 
and outpatients participating in intramural research protocols.   
We concluded that the Pharmacys Schedule II substances were vulnerable to loss, 
diversion, or mismanagement because:   
 Schedule II substances were stored in an unlocked storage cabinet and in an unlocked 
lockbox located in a refrigerator with no lock. 
 The Pharmacy did not always segregate the duties and responsibilities for ordering and 
receiving shipments of Schedule II substances among pharmacists.  
We discussed our findings with the chief pharmacist, who concurred and immediately 
implemented corrective actions.  We recommended that NIH ensure that the Pharmacy 
continues to enforce its policies and procedures to control Schedule II substances.  NIH 
concurred with our recommendation.  (A-03-07-00353)  
National Institutes of Healths Handling of Allegations Concerning Conflicts 
of Interest and Ethics Violations 
Our review of allegations related to conflicts of interest and ethics violations received by 
the National Institutes of Health (NIH) between January 1, 2006, and June 30, 2007, 
found that the most common such allegations involved employees failure to complete 
required ethics training or ethics forms.  NIH employees are responsible for reporting 
allegations of noncriminal misconduct to the appropriate supervisor, to a higher level 
management official within the organization, or to NIHs Office of Management 
Assessment.  Other components handling conflict-of-interest and ethics allegations 
include the NIH Ethics Office; individual ethics offices within each of the Institutes and 
Centers (Institutes) at NIH; and the Office of the General Counsel, Ethics Division, at 
NIH.   
We also found that the majority of Institutes did not have written procedures for the 
handling of allegations related to conflict-of-interest statutes and ethics regulations or 
uniform procedures for conferring about such allegations with other NIH offices.  We 
noted that the various responsible offices at NIH coordinated the handling of allegations, 
but there is no written policy for such coordination. 
We recommended that NIH develop a formal, written policy for the various ethics offices 
regarding the handling of allegations of conflicts of interest and ethics violations and that 
it ensures that documentation is maintained on the resolution of allegations.  NIH 
concurred with our recommendations.  In addition, in its comments on the report, NIH 
stated that it issued a new chapter in the NIH Policy Manual on August 15, 2008, 
which it considers to have addressed OIGs recommendation regarding the NIH ethics 
offices handling of noncompliant behavior.  (OEI-03-07-00220) 
HHS OIG Semiannual Report to Congress  47  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Allowability of Costs Claimed Under the Bioterrorism Hospital Preparedness 
Program  
Under section 319 of the Public Health Service Act, the Bioterrorism Hospital 
Preparedness Program (the program) provides funds to State, territorial, and municipal 
governments or health departments to upgrade the preparedness of hospitals and 
collaborating entities to respond to bioterrorism and other public health emergencies.  We 
examined the allowability of costs claimed under two States programs.  During our audit 
period, HRSA administered the program. 
 Alabama  Our review of $12.1 million in selected costs claimed for reimbursement 
under Alabamas program between September 2004 and August 2006 found that 
$5.7 million was unallowable.  The costs were unallowable because the State had 
advanced funds to a subrecipient that did not obligate and disburse the funds within the 
specified program period.  In addition, the subrecipient earned interest totaling $216,000 
on program funds that it did not remit to the Federal Government as required.   
We recommended that the State refund $5.7 million in unallowable costs, remit interest 
earned on program funds during our audit period and remit any additional interest earned 
after the completion of our fieldwork, and institute procedures to ensure that 
subrecipients obligate and expend funds within the periods specified in the grant awards.  
The State partly agreed with our finding and recommendations, but its comments did not 
cause us to change our conclusions.  (A-04-07-01049) 
 Florida  Of the $53.4 million that the State claimed for reimbursement for the period 
September 1, 2004, through August 31, 2006, $51,000 was unallowable.  In addition, 
$1.3 million may have been unallowable because the costs may not have been authorized 
by Florida statutes. These deficiencies occurred because the State agency did not have 
adequate policies and procedures to ensure that all costs claimed for reimbursement 
complied with applicable laws, regulations, and program guidance. 
We recommended that the State (1) refund $51,000 for costs that were improperly 
charged to the program; (2) determine whether the States initiation of staffing contracts 
bypassed the Florida Legislatures position limitations and, if so, refund the $1.3 million 
in unallowable costs and stop initiating staffing contracts; and (3) improve policies and 
procedures to ensure that all costs claimed for reimbursement comply with applicable 
laws, regulations, and program guidance.  The State agreed with our findings regarding 
the $51,000 in unallowable costs and said that it was pursuing the $1.3 million in 
potentially unallowable costs with the States Department of Management Services.  We 
modified our second recommendation in response to the States comments.  
(A-04-07-01048) 
HHS OIG Semiannual Report to Congress  48  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Puerto Ricos Compliance With the Ryan White CARE Act Payer-of-Last-
Resort Requirement 
In our review of Puerto Ricos compliance with the Ryan White Comprehensive AIDS 
Resources Emergency (CARE) Act payer-of-last-resort requirement, we estimated that 
for grant years 20022004, Puerto Rico inappropriately claimed $24.3 million of CARE 
Act funding to pay for HIV/AIDS drugs that should have been covered by other sources.  
The CARE Act, which is administered by HRSA, funds health care and support services 
for more than 500,000 individuals each year who have HIV/AIDS and who either have 
no health insurance or are underinsured.  Title II of the CARE Act provides grants to 
States and territories to fund the purchase of medications to treat HIV/AIDS.  Grantees 
are required to use CARE Act funding as the payer-of-last-resort for HIV/AIDS drugs or 
services that are eligible for coverage by other Federal, State, or private health insurance.  
We recommended that Puerto Rico refund $24.3 million and develop procedures to bill 
HIV/AIDS drugs to the Federal, State, or private health insurance plans with primary 
payment responsibility.  Puerto Rico did not directly address our recommendations but 
said that it was not willing to accept our findings because of unresolved issues concerning 
patients eligibility status.  Puerto Rico also disputed some of our error determinations.  
Based on additional documentation provided, we revised four of our original error 
determinations and the refund amount.  (A-02-06-02000) 
Management of Information Technology Contracts at the Food and Drug 
Administrations Center for Drug Evaluation and Research 
In our congressionally requested review of the management of information technology 
(IT) contracts at FDAs Center for Drug Evaluation and Research (CDER), we found that 
CDER had demonstrated limited IT planning and inconsistently used quality assurance 
(QA) and monitoring plans.  For the FYs 20042007 period, we reviewed CDERs 
process and monitoring for 28 CDER contract actions related to IT purchases valued at 
$250,000 or more.  Pursuant to the Federal Acquisition Regulation, agencies must 
establish procedures to select qualified contractors while protecting the Government from 
unnecessary financial risk.  Agencies must perform acquisition planning, clearly define 
what they are buying in the requirements section of a statement of work, and select an 
appropriate contract type and method.  Agencies must also monitor contractors to ensure 
quality results. 
We found that CDER relied primarily on acquisition methods that emphasized speed and 
flexibility over planning and on time-and-materials contract actions that increased the 
risk for the Government.  Also, because it did not clearly define its requirements or 
performance measures, CDER did not establish consistent QA plans.  We recommended 
that FDA minimize its contract risk by defining IT requirements more clearly, converting 
ongoing time-and-materials contract actions to fixed-price contract actions when 
appropriate, using performance incentive plans when appropriate, and using documented 
QA plans.   
HHS OIG Semiannual Report to Congress  49  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
FDA neither agreed nor disagreed with our first recommendation to define its IT 
requirements more clearly but specified actions that it was taking that support the 
recommendation.  The agency agreed with our other recommendations.  
(OEI-01-07-00450)  
The Food and Drug Administrations Oversight of Clinical Investigators 
Financial Information 
In our review of disclosure of financial interests to FDA, we found that the agency did 
not have complete information about the financial interests of clinical investigators 
associated with the 118 marketing applications approved by the agency in FY 2007.  In 
1999, FDA issued regulations requiring sponsors to disclose in their marketing 
applications the financial interests of the primary clinical investigators who contributed 
data to covered clinical studies.  Such studies are relied upon to demonstrate product 
efficacy and safety.  Our findings included the following: 
 Of the 29,691 clinical investigators listed in the 118 marketing applications approved 
in 2007, 1 percent (206) disclosed a financial interest. 
 FDA could not systematically check whether marketing applications had financial 
information for all clinical investigators because the agency did not maintain a complete 
list of clinical investigators. 
 Of the 118 FDA-approved marketing applications, 42 percent did not have complete 
financial information, including required financial forms.   
 FDA did not document a review of any financial information for 31 percent of the 
marketing applications.   
 Neither FDA nor the sponsors had taken action for 20 percent of the approved 
marketing applications for which the sponsor disclosed financial interests but had not 
taken action to minimize potential bias.   
We recommended that FDA ensure that sponsors submit complete financial information 
for all clinical investigators.  To ensure that FDA reviewers consistently review financial 
information and take action in response to disclosed financial interests, we recommended 
that FDA use a review template and provide guidance and training to reviewers.  Lastly, 
we recommended that FDA require that sponsors submit financial information as part of 
the pretrial application process.  FDA generally agreed with our recommendations but did 
not agree with our final recommendation to require sponsors to submit financial 
information for clinical investigators during the pretrial application process.  We continue 
to support our recommendation because having financial information before the start of a 
clinical trial could help FDA to identify and manage potential conflicts and ensure that 
human subjects are protected and data are reliable.  (OEI-05-07-00730) 
HHS OIG Semiannual Report to Congress  50  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Legal Actions and Investigations Related to Public 
Health Programs 
OIG excludes from participating in Federal health care programs individuals who fail to 
repay HHS-secured educational loans and investigates specific allegations of fraud, 
waste, and abuse affecting public health and human service programs.  These 
investigations are often complex and can include allegations of misuse or theft of grant 
funds, conflict of interest, and kickbacks. 
The following paragraphs provide descriptions and statistics related to these efforts. 
Health Education Assistance Loan Defaults   
OIG excludes from participating in Federal health care programs individuals who have 
defaulted on loans obtained through the Health Education Assistance Loan (HEAL) 
program.  Through the HEAL program, HRSA guarantees commercial loans to students 
seeking education in health-related fields of study.  The students are allowed to defer 
repayment of the loans until after they have graduated and begun to earn an income.  
Although the Departments PSC takes steps to ensure repayment, some loan recipients 
ignore their indebtedness. 
After PSC has exhausted efforts to secure repayment of a debt, it declares an individual in 
default.  Thereafter, the Social Security Act permits, and in some instances mandates, 
exclusion from Medicare, Medicaid, and all other Federal health care programs for 
nonpayment of these loans.  Exclusion means that the individual may not receive 
reimbursement under these programs for professional services rendered.  During the 
period covered by this report, 87 individuals and related entities were excluded as a result 
of PSC referral of their cases to OIG. 
Individuals who have been excluded as a result of default may enter into settlement 
agreements whereby the exclusions are stayed while they pay specified amounts each 
month to satisfy their debts.  If they default on these settlement agreements, they may be 
excluded until the entire debts are repaid and they may not appeal the exclusions.  Some 
health professionals, upon being notified of their exclusion, immediately repay their 
HEAL debts. 
After being excluded for nonpayment of their HEAL debts, 2,188 individuals have 
chosen to enter into settlement agreements or completely repay their debts.  That figure 
includes the 35 individuals who have entered into such settlement agreements or 
completely repaid their debts during this reporting period.  The amount of money being 
repaid through settlement agreements or through complete repayment is $159.9 million.  
Of that amount, $3.7 million is attributable to this reporting period. 
Each of the following individuals entered into a settlement agreement to repay the 
amount indicated: 
HHS OIG Semiannual Report to Congress  51  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
 Florida  Podiatrist Patricia Rosas-Guyon:  $132,946  
 California  Medical Doctor Hanh-Nguyen Do:  $116,441  
 Massachusetts  Optometrist Robert Kupsc:  $77,670  
 Puerto Rico  Optometrist Aixa Rivera-Lopez:  $73,117  
Public-Health-Related Investigations   
OIG investigates cases involving the misuse of public health agency funds as well as the 
improper possession, use, and transfer of biological agents and toxins, called select 
agents, that the Department has determined to pose a severe threat to public health.  The 
following are examples of cases involving improper use of grant funds resolved during 
this reporting period: 
 Connecticut  Yale University (Yale) agreed to pay $7.6 million to resolve its liability 
under the FCA for improper management of Federal grants, most of which were awarded 
by NIH, between January 1, 2000, and December 31, 2006.  The Government alleged that 
Yale was using Federal grants to pay for various expenses that were unrelated to the 
research approved for these particular grants.  Yale also allegedly had irregularities in its 
reporting of the time and effort spent related to Federal grants.  Specifically, the 
Government alleged that principal investigators who had 3-month summer research 
grants were performing portions of their research outside the 3-month timeframe, while 
improperly reporting and certifying that the work was done within the 3 months required 
by the grant.  As a result of its unauthorized cost transfers and improper time and effort 
reporting, Yale allegedly submitted improper claims under Federal grants and collected 
reimbursement that was in excess of the amounts that it was entitled to claim and receive 
under these grants. 
 Virginia  Francis H. George, a licensed medical doctor, was sentenced to 21 months 
in prison and ordered to pay $173,918 in restitution following his guilty plea to wire 
fraud and tax perjury.  George had received a $393,426 grant from HRSA to be used 
specifically to renovate the building that housed his medical practice.  To obtain the grant 
fund money, George used a computer program to initiate payments through wire transfers 
from the Federal Reserve Bank in Richmond to his business account.  He received a total 
of $327,000 in grant funds, most of which he used improperly for expenses, including 
mortgage payments; his childs college tuition, room, and board; credit card payments; 
and personal legal fees.  George also committed tax perjury in 2005 for calendar year 
2004 by submitting a false tax return. 
Reports Related to Human Service Programs  
Improper Temporary Assistance for Needy Families Payments 
In our reviews of four States TANF basic assistance payments, we sampled payments for 
the period April 1, 2006, through March 31, 2007, to estimate the payment error rates 
associated with noncompliance with Federal and State eligibility, payment, and 
documentation requirements.  TANF is a block grant program that provides funding to 
HHS OIG Semiannual Report to Congress  52  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
States to help families move from public assistance to self-sufficiency; TANFs basic 
assistance includes benefits designed to meet a familys ongoing basic needs.  These 
reviews, part of an eight-State series, were requested by ACF and the Office of 
Management and Budget (OMB) to determine the FY 2008 national TANF error rate.  
Pursuant to the Improper Payments Information Act of 2002 (P.L. No. 107-300), Federal 
agencies must estimate and report to Congress on the annual amount of improper 
payments in their high-risk programs. 
 Idaho  Based on our sample results, we estimated that the overall TANF improper 
payment rate was 16.45 percent of the Federal dollars expended and 18 percent of the 
number of basic assistance payments made for the 1-year audit period.  These improper 
payments totaled an estimated $1 million (Federal share).  The payments were improper 
because they were for families who were ineligible for TANF basic assistance or because 
the required documentation was lacking.   
We recommended that the State use the results of this review to help ensure compliance 
with Federal and State TANF requirements and consider conducting quality control 
reviews of TANF basic assistance eligibility and payment processes.  The State agreed 
with our recommendations.  (A-06-07-00104)   
 Minnesota  We estimated that the overall TANF improper payment rate was 
5.5 percent of the Federal dollars expended and 9.3 percent of the number of basic 
assistance payments made for the 1-year audit period.  These improper payments totaled 
an estimated $4.8 million (Federal share).  The payments were improper because the 
recipient families were ineligible for TANF basic assistance or because the State 
improperly calculated the payments.   
We recommended that the State use the results of this review to help ensure compliance 
with Federal and State TANF requirements; that it determine the current eligibility of all 
recipients identified in this review as improperly enrolled in the TANF program and 
ensure that further assistance is denied for those who remain ineligible; and that it 
recalculate assistance payments for all recipients who received improperly calculated 
payments.  The State agreed with our recommendations and provided information on 
steps that it had taken.  (A-07-07-01045) 
 Pennsylvania  We estimated that the overall TANF improper payment rate was 
11.7 percent of the Federal dollars expended and 16 percent of the number of basic 
assistance payments made for the 1-year audit period. The improper payments totaled an 
estimated $23.7 million (Federal share).  The payments were improper because they were 
for recipient families who were ineligible for TANF basic assistance, were calculated 
improperly, or lacked required documentation.   
We recommended that the State use the results of this review to help ensure compliance 
with Federal and State TANF requirements; that it determine the eligibility of all 
recipients identified in this review as improperly enrolled in the TANF program and 
ensure that further assistance is denied for those who remain ineligible; and that it 
HHS OIG Semiannual Report to Congress  53  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
recalculate assistance budgets for all recipients identified in this review as having 
received improperly calculated payments.  The State concurred with our 
recommendations.  (A-03-07-00552) 
 Vermont  We estimated that the overall TANF improper payment rate was 
5.85 percent of the Federal dollars expended and 10 percent of the number of basic 
assistance payments made for the 1-year audit period.  These improper payments totaled 
an estimated $956,000 (Federal share).  The payments were improper because they were 
for recipient families who were ineligible for TANF basic assistance, were calculated 
improperly, or lacked required documentation.   
We recommended that the State use the results of this review to help ensure compliance 
with Federal and State TANF requirements; that it determine the current eligibility of all 
recipients identified in this review as improperly enrolled in the TANF program and 
ensure that further assistance is denied for those who remain ineligible; and that it 
recalculate assistance budgets for all recipients identified in this review as having 
received improperly calculated payments.  In its comments on our draft report, the State 
provided information on steps that it planned to take to implement the recommendations.  
(A-01-07-02504) 
New Mexicos Title IV-E Administrative and Training Costs  
Title IV-E of the Social Security Act, as amended, authorizes Federal funds for States to 
provide, under an approved State plan, foster care and adoption assistance for children.  
States may be reimbursed for certain Title IV-E administrative and training costs.  In our 
review of New Mexicos Title IV-E administrative and training costs claimed for the 2 
years that ended September 30, 2002, we determined that $1.7 million ($1.1 million 
Federal share) of the $35.1 million that we reviewed was unallowable.  The State did not 
claim training costs in accordance with its approved cost allocation plan, claimed 
administrative and training costs that were not reimbursable under Title IV-E, and used 
inaccurate data to allocate training costs. 
Federal regulations require that administrative and training costs be allocated to the Title 
IV-E program, which is administered at the Federal level by ACF, in accordance with a 
cost allocation plan approved by HHSs Division of Cost Allocation (DCA).  We could 
not determine what portion of the remaining $33.4 million ($17.6 million Federal share) 
in Title IV-E costs was allowable because the State agency did not use the timestudy 
methodology included in its approved cost allocation plan to allocate costs; could not 
produce sufficient documentation to support claimed costs; or did not sufficiently 
describe training course content in the State plan for us to determine whether the content 
was closely related to allowable Title IV-E activities.  
We recommended that the State (1) refund the $1.1 million Federal share of unallowable 
costs; (2) work with DCA and ACF to determine the allowable portion of the 
$17.6 million Federal share of potentially unallowable costs and refund any unallowable 
costs; (3) work with DCA and ACF to revise its cost allocation plan to describe Title IV-
HHS OIG Semiannual Report to Congress  54  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
E training and a method for allocating the costs of part-time and full-time training 
programs in accordance with Federal requirements; and (4) implement procedures to 
ensure that it follows the allocation methods in the approved cost allocation plan, 
documents and verifies the allocation methods used, claims only reimbursable costs, and 
maintains records and data used to allocate costs in accordance with Federal regulations.  
The State did not specifically address our recommendations.  It agreed with our findings 
on costs that were not claimed in accordance with the approved cost allocation plan and 
on training costs that were not reimbursable at the enhanced rate.  The State disagreed 
with, or did not express an opinion on, the remaining findings but did not provide any 
additional information that would lead us to change our findings or recommendations. 
(A-06-06-00105) 
Undistributable Child Support Collections in Tennessee 
In our review of Tennessees reporting of program income from undistributable child 
support collections and interest earned on collections, we found that from October 1998 
through December 2007, the State did not recognize and report as program income 
$8.7 million ($5.8 million Federal share) in undistributable child support collections that 
met the States definition of abandoned property.  In addition, the State reported incorrect 
amounts for undistributed collections.  Undistributable collections result when States 
receive child support payments but cannot identify or locate the custodial parents or 
return the funds to the noncustodial parents.  Within ACF, the Office of Child Support 
Enforcement (OCSE) oversees the Child Support Enforcement program.  OCSE requires 
States to offset program costs by recognizing and reporting income from undistributable 
child support collections.   
We recommended that the State report as program income undistributable child support 
collections totaling $8.7 million ($5.8 million Federal share), that it ensure future 
compliance with State laws regarding abandoned property, and that it correct reporting 
errors on the next quarterly Federal filing.  The State said that it would implement our 
recommendations.  (A-04-08-03521)  
Child Support Enforcement  
The detection, investigation, and prosecution of noncustodial parents who fail to pay 
court-ordered child support are priorities for OIG.  OIG works closely with the OCSE; 
DOJ; U.S. Attorneys Offices; the U.S. Marshals Service; and other Federal, State, and 
local partners to expedite the collection of child support.   
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a child support initiative 
that united the efforts of multiagency, multijurisdictional investigative task forces for 
child support enforcement.  The task forces are designed to identify, investigate, and 
prosecute egregious criminal nonsupport cases on both the Federal and State levels by 
coordinating law enforcement, criminal justice, and child support office resources.  Task 
HHS OIG Semiannual Report to Congress  55  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
force screening units receive child support cases from the States; conduct preinvestigative 
analyses; and forward the cases to the investigative task force units, where they are 
assigned and investigated.  The task force approach streamlines the process by which the 
cases best suited for criminal prosecution are identified, investigated, and resolved. 
Child Support Investigations 
OIG investigations of child support cases, nationwide, resulted in 54 convictions and 
court-ordered restitution and settlements of $3.1 million during this semiannual period.  
Examples of OIGs enforcement results for failure to pay child support include the 
following: 
 Virginia  Jonathan Novak was sentenced to 24 months of incarceration and was 
ordered to pay $229,958 in restitution for failure to pay child support.  Novak was found 
guilty after a 2-day jury trial in which he gave fraudulent testimony.  Typically working 
as a self-employed forensic accountant earning more than $200,000 a year, Novak, who 
has six children with three different women, collectively owed more than $300,000 in 
child support.  The investigation revealed that from August 2004 through July 2005, 
Novak earned over $146,000, yet willfully chose not to pay a $658 per month obligation 
pursuant to a California support order. 
Also in Virginia, Thomas Noden was sentenced to 5 years of probation and ordered to 
pay $138,776 in restitution for failure to pay child support.  In 1992, Noden had been 
directed to pay $900 per month in support of his three children; however, the only 
payments made resulted from involuntary wage garnishments, which proved difficult to 
collect, as Noden changed employers once a garnishment was established. 
 North Dakota  Kurt Dean Johnson was sentenced to 3 years of probation and 
ordered to pay $66,116 in restitution for failure to pay child support.  At the time of his 
indictment, Johnson, a father of three by two women, was more than $127,000 in arrears.  
Subsequent to his arrest and prior to his sentencing, he had paid $70,000 toward his 
outstanding child support. 
Reports Related to Departmentwide Issues  
Grant Closeout Procedures at the Administration for Children and Families 
and the Centers for Disease Control and Prevention 
During this semiannual period, we issued two reportsone to ACF and the other to 
CDCas part of a series of reviews focused on grant closeout procedures within HHS.  
HHS agencies are responsible for initiating the closeout of their various grants and for 
instructing the PSC, Division of Payment Management (DPM), to close grants in the 
Payment Management System.  As a general rule, grants must be closed within 180 days 
after the end of the grant period (the cutoff date).   
HHS OIG Semiannual Report to Congress  56  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
 ACF  In our review of ACF grants identified by DPM as eligible for closeout as of 
September 30, 2006, we found that 9,877 grants with unexpended balances totaling more 
than $472 million remained open in the payment system for several reasons.  The grants 
remained open after the cutoff dates because of staffing shortages; differences among the 
grant award, expenditure, and drawdown amounts in the payment system; or a lack of 
grant closeout procedures.  Also, ACF and PSCs Division of Financial Operations  
lacked follow-up procedures to determine whether DPM had actually closed grants for 
which closeout had been initiated. 
We recommended that ACF use the information in our report to ensure that grants are 
closed in a timely manner and to eliminate the backlog of grants eligible for closeout.  In 
its comments, ACF described actions that it had taken or planned to take to implement 
our recommendation.  ACF did not say that it concurred.  (A-02-07-02000)   
 CDC  In our review of CDC grants identified by DPM as eligible for closeout as of 
March 31, 2007, we found that 2,740 grants with unexpended balances totaling more than 
$245 million remained open in the payment system for several reasons.  The grants 
remained open after the cutoff dates because CDC had allowed a backlog of grants 
awaiting closeout to develop; differences existed among the grant award, expenditure, 
and drawdown amounts; or the closeout code was not the final transaction in the payment 
system.   
We recommended that CDC use the information in our report to ensure that grants are 
closed in a timely manner and to eliminate the backlog of grants eligible for closeout.  In 
its comments, CDC concurred with our recommendation and described actions that it had 
taken or planned to take.  (A-02-07-02014)   
University Administrative Costs 
In a review of administrative and clerical costs at a university in North Carolina, we 
estimated that the university claimed $1.7 million in unallowable charges as direct costs 
to grants, contracts, and other agreements with HHS components during FYs 2003 and 
2004.  These unallowable charges occurred because the university had not established 
adequate controls to ensure consistent compliance with Federal requirements.  The 
universitys policies essentially allowed direct charges to any project needing any 
administrative or clerical support. 
We recommended that the university refund $1.7 million to the Federal Government and 
revise its policies as needed to comply with Federal requirements and to ensure consistent 
treatment of administrative and clerical costs.  The university partially agreed with our 
first recommendation and disagreed with our second recommendation.  Based on a 
review of additional documentation that the university provided, we revised the 
recommended refund amount.  (A-04-05-01014)   
HHS OIG Semiannual Report to Congress  57  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Departmental Financial Statement Audit 
The Chief Financial Officers Act of 1990, as amended, requires OIG or an independent 
external auditor, as determined by OIG, to audit the HHS financial statements in 
accordance with applicable standards.  Independent external auditors provided an 
unqualified opinion on the FY 2008 HHS financial statements.  This means that for the 
10th consecutive year, the statements were reliable and fairly presented.  However, the 
report on internal controls noted two material weaknesses: 
 Financial Reporting Systems, Analyses, and Oversight  HHS continued to have 
internal control weaknesses in its financial management systems and financial analyses 
and oversight.  The lack of an integrated financial management system, substantial 
manual procedures, and untimely or inadequate reconciliations and account analyses 
hindered HHSs ability to produce financial statements. 
 Financial Management Information Systems  Weaknesses in both the design and 
the operation of key general controls were noted in the areas of security management and 
access controls.  General controls are necessary to safeguard data, protect business 
application programs, and ensure continued computer operations in case of unexpected 
interruptions.  In addition, weaknesses were noted in business process controls and data 
management system controls for specific financial applications.   
(A-17-08-00001) 
Non-Federal Audits 
OMB Circular A-133 establishes audit requirements for State and local governments, 
colleges and universities, and nonprofit organizations receiving Federal awards.  Under 
this circular, covered entities must conduct annual organizationwide single audits of all 
Federal money they receive.  These audits are conducted by non-Federal auditors, such as 
public accounting firms and State auditors.  OIG reviews the quality of these audits and 
assesses the adequacy of the entitys management of Federal funds.  In this semiannual 
period, OIGs National External Audit Review Center reviewed 1,193 reports that 
covered $723 billion in audited costs.  Federal dollars covered by these audits totaled 
$190 billion, about $99.5 billion of which was HHS money. 
OIGs oversight of non-Federal audit activity informs Department managers about the 
soundness of management of Federal programs and identifies any significant areas of 
internal control weakness, noncompliance, and questioned costs that require formal 
resolution by Federal officials.  We identify entities for high-risk monitoring, alert 
program officials to any trends that could indicate problems in HHS programs, and 
profile non-Federal audit findings of a particular program or activity over time to identify 
systemic problems.  We also provide training and technical assistance to grantees and 
members of the auditing profession. 
HHS OIG Semiannual Report to Congress  58  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
OIG maintains a process to assess the quality of the non-Federal reports received and the 
audit work that supports selected reports.  The non-Federal audit reports reviewed and 
issued during this reporting period are categorized in the box below. 
 
 
Reports issued:   
 
Without changes or with minor changes  1,041
With major changes  131
With significant inadequacies  21
  Total  1,193 
 
The 1,193 reports included 4,179 recommendations for improving management 
operations.  In addition, these audit reports provided information for 72 special 
memoranda that identified concerns for increased monitoring by management. 
Resolving Recommendations 
The following tables are provided in accordance with section 5 of the Inspector General 
Act and indicate the dollar value of actions taken on OIGs recommendations. 
 
HHS OIG Semiannual Report to Congress  59  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
 
Table 1:  Reports With Questioned Costs  
 
Number of  Dollar Value  Dollar Value 
Reports 
Reports  Questioned  Unsupported 
Section 1       
For which no management decision  
had been made by the beginning of the 
reporting period1 204 $1,279,916,000  $34,687,000
 
Issued during the reporting period  102 $245,222,000  $61,990,000
  Total Section 1  306 $1,525,138,000  $96,677,000
Section 2     
For which a management decision was 
made during the reporting period2 3    
 
  Disallowed costs  174 $274,860,000  $2,917,000
  Costs not disallowed  6 $3,268,000  0
  Total Section 2  180 $278,128,000  $2,917,000
Section 3     
For which no management decision had 
been made by the end of the reporting 
period   
  Total Section 1 
  minus Total Section 2  126 $1,247,010,000  $93,760,000
Section 4    
For which no management decision was 
made within 6 months of issuance4 70 $1,074,139,000  $107,414,000
 
 
                                                 
  Footnotes can be found in Appendix A. 
HHS OIG Semiannual Report to Congress  60  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
 
Table 2:  Funds Recommended To Be Put to Better Use  
 
Number of 
Reports  Dollar Value 
Reports 
Section 1     
For which no management decision had been made by the 
beginning of the reporting period1 32  $2,665,951,000
 
Issued during the reporting period  5  $904,102,000
  Total Section 1  37  $3,570,053,000
  
Section 2   
For which a management decision was made during the 
reporting period   
  Value of recommendations agreed to by management  17  $1,610,347,000
  Based on proposed management action   
  Based on proposed legislative action   
  Value of recommendations not agreed to by management  2         $999,000 
  Total Section 2  19  $1,611,346,000
  
Section 3   
For which no management decision had been made by the 
end of the reporting period2  
 
  Total Section 1  
 minus Total Section 2  18  $1,958,707,000
 
                                                 
  Footnotes can be found in Appendix A. 
HHS OIG Semiannual Report to Congress  61  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Regulatory Development 
OIG is responsible for the development and publication of a variety of sanction 
regulations addressing CMPs and program exclusion authorities administered by the 
Inspector General, as well as regulations promulgating safe harbors related to the anti-
kickback statute. 
OIG periodically publishes Federal Register (FR) notices that, among other things, offer 
guidance to alert program beneficiaries, health care providers, and other entities about 
potential problems or areas of special interest.  During this semiannual period, we 
published the following FR notices: 
 New OIG Privacy Act System of Records:  Consolidated Data Repository (73 Fed. 
Reg. 66648 (Nov. 10, 2008)). 
 Solicitation of New Safe Harbors and Special Fraud Alerts (73 Fed. Reg. 76575  
(Dec. 17, 2008)).   
HHS OIG Semiannual Report to Congress  62  Public Health and Human Service Programs 
Spring 2009    and Departmentwide Issues   
Appendixes
HHS OIG Semiannual Report to Congress  63  Appendixes 
Spring 2009     
Appendix A:  Notes to Tables 1 and 2 
Table 1 
1 The opening balance was adjusted upward by $22.4 million. 
2 During the period, revisions to previously reported management decisions included: 
Central Identification Number (CIN): A-01-02-00509, UNITED HEALTH CARE 
INSURANCE COMPANY.  The Centers for Medicaid & Medicare Services (CMS) 
stated that it executed a global closing agreement with the company that reduced its 
original disallowance by $6,344,219. 
CIN: A-04-05-81883, STATE OF FLORIDA.  CMS subsequently determined that 
previously disallowed costs had been recouped in the resolution of another audit.  As a 
result, CMS reversed its original disallowance of $2,773,667.  
CIN: A-01-92-00523, BLUE CROSS AND BLUE SHIELD OF MASSACHUSETTS.  
CMS stated that it had been unable to determine whether claims for clinical laboratory 
services were recovered and was prohibited from reopening the claims at this point.  
CMS reversed its original disallowance of $2,250,000. 
CIN: A-01-02-00508, UNITED HEALTH CARE INSURANCE COMPANY.  CMS 
stated that it executed a global closing agreement with the company that reduced its 
original disallowance by $1,549,677.  
CIN: A-10-05-82644, STATE of ALASKA.   Based on a review of actual claims, CMS 
reduced the estimated disallowance by $1,155,982. 
Not detailed are net reductions to previously disallowed management decisions totaling 
$2,685,702. 
3 Included are management decisions to disallow $13.1 million that was identified in 
non-Federal audit reports. 
4 Because of  administrative delays, many of which are beyond management control, 
resolution of the following 70 audits were not completed within 6 months of issuance; 
however, based upon discussions with management, resolution is expected before the 
end of the next semiannual reporting period: 
 
CIN: A-06-07-00041 REVIEW OF AMP CALCULATION - MFR A, MAR 
 
2008, $268,000,000
 
CIN: A-02-03-01029 REVIEW OF RETROACTIVE SCHOOL HEALTH 
 
CLAIMS - NEW YORK CITY DEPT. OF EDUCATION, 
OCT 2006, $259,433,325
 
CIN: A-06-07-00039 REVIEW OF AMP CALCULATION - MFR C, MAR 
 
2008, $101,000,000
 
HHS OIG Semiannual Report to Congress  65  Appendix A  
Spring 2009    
CIN: A-04-03-02027 REVIEW OF MEDICIAD UPPER PAYMENT LIMIT 
 
CALCULATIONS IN ALABAMA, DEC 2005, 
$74,529,029
 
CIN: A-02-04-01021 REVIEW OF RETROACTIVE SCHOOL HEALTH 
 
CLAIMS - REST OF NEW YORK STATE, OCT 2006, 
$60,188,395
 
CIN: A-03-07-00560 PA FOSTER CARE MAINTENANCE PAYMENTS 
 
PHILADELPHIA UNDER $300, MAY 2008, 
$56,513,439
 
CIN: A-05-01-00058 OHIO MEDICAID HOSPITAL-SPECIFIC DSH 
 
PAYMENT LIMITS, JUN 2004, $47,000,000
 
CIN: A-09-02-00054 AUDIT OF STATE OF CALIFORNIA DSH PROGRAM 
 
FOR FY 1998, MAY 2003, $33,318,976
 
CIN: A-01-02-00006 REVIEW OF RATE SETTING METHODOLOGY FOR 
 
MEDICAID SCHOOL BASED HEALTH SERVICES - 
CT, MAY 2003, $32,780,146
 
CIN: A-06-07-00040 REVIEW OF AMP CALCULATION - MFR B, MAR 
 
2008, $27,700,000
 
CIN: A-02-06-02000 RYAN WHITE - PAYER OF LAST RESORT, SEP 2008, 
 
$24,340,789
 
CIN: A-09-01-00098 AUDIT OF KERN MEDICAL CENTER 
 
DISPROPORTIONATE SHARE HOSPITAL 
PAYMENTS FOR FY 1998, SEP 2002, $14,165,950
 
CIN: A-03-06-00564 PA FOSTER CARE MAINTENANCE PAYMENT 
 
PHILADELPHIA OVER $300/DAY, DEC 2007, 
$11,693,989
 
CIN: A-03-05-00550 AUDIT OF PA FOSTER CARE MAINTENANCE 
 
PAYMENTS - CASTILLE SAMPLE, SEP 2007, 
$11,611,822
 
CIN: A-01-07-01502 REVIEW OF NEW HAMPSHIRES PUBLIC HEALTH 
 
PREPAREDNESS FUNDS, SEP 2008, $9,266,749
 
CIN: A-06-02-00034 COST REPORTS & MEDICARE FEE-FOR-SERVICE 
 
PYMTS - SCOTT & WHITE, MAY 2003, $8,229,574
 
CIN: A-01-06-00007 REVIEW OF RHODE ISLANDS MEDICAID 
 
ADMINISTRATIVE COST CLAIMS - FY 2004  FY 
2005, MAR 2008, $5,092,735
 
CIN: A-04-04-02003 MEDICARE OUTLIER PAYMENTS TO COMMUNITY 
 
MENTAL HEALTH CENTERS, APR 2006, $4,762,036
 
CIN: A-09-01-00085 AUDIT OF UCSDMC DISPROPORTIONATE SHARE 
 
HOSPITAL PAYMENTS FOR SFY 1998, SEP 2002, 
$3,776,054
 
CIN: A-04-07-01046 FL/CDC - ALLOWABILITY OF COSTS CLAIMED 
 
FOR REIMBURSEMENT UNDER BIOTERRORISM 
AND EMERGENCY PREPAREDNESS PROGRAM 
GRANTS, SEP 2008, $3,633,671
 
HHS OIG Semiannual Report to Congress  66  Appendix A  
Spring 2009    
CIN: A-07-07-00231 REVIEW OF INFANT AND TODDLER EARMARK 
 
ALLOTMENTS CLAIMED BY THE IOWA 
DEPARTMENT OF HUMAN SERVICES, AUG 2008, 
$3,311,258
 
CIN: A-06-04-00076 MEDICAL REVIEW OF SYNERGYS PARTIAL 
 
HOSPITALIZATION SERVICES CLAIMS, MAR 2006, 
$3,098,296
 
CIN: A-10-96-00001 REVIEW OF GROUP HEALTHS GHCPS REPORTING 
 
OF ESRD, APR 1997, $2,763,498
 
CIN: A-05-07-00062 OHIO - TITLE IV-E FOSTER CARE PAYMENTS FOR 
 
DELINQUENT YOUTH, AUG 2008, $689,720
 
CIN: A-04-07-03515 UNDISTRIBUTABLE CHILD SUPPORT 
 
COLLECTIONS - MISSISSIPPI, AUG 2008, $674,578
 
CIN: A-04-07-01047 AL/CDC - ALLOWABILITY OF COSTS CLAIMED 
 
FOR REIMBURSEMENT UNDER BIOTERRORISM 
AND ENERGENCY PREPAREDNESS GRANT 
PROGRAMS, SEP 2008, $570,400
 
CIN: A-05-02-72811 COMMUNITY ACTION OF GREATER 
 
INDIANAPOLIS INC., AUG 2002, $547,899
 
CIN: A-05-06-00038 IN - UNDISTRIBUTABLE CHILD SUPPORT 
 
COLLECTIONS, MAR 2007, $461,430
 
CIN: A-04-04-02010 REVIEW OF COMPREHENSIVE OUTPATIENT 
 
REHABILITATION THERAPY SERVICES PROVIDED 
BY ABSOLUTE THERAPY INC., NOV 2006, $414,712
 
CIN: A-06-06-00072 REVIEW OF COST FOR TEXAS MEDICAL 
 
FOUNDATION AUDITEE, MAY 2008, $403,581
 
CIN: A-02-07-02004 FOLLOW-UP REVIEW OF AFDC OVERPAYMENTS - 
 
UPSTATE NY, OCT 2007, $347,375
 
CIN: A-05-01-00096 PAYMENTS TO INTER VALLEY FOR 
 
INSTITUTIONAL BENEFICIARIES, MAY 2002, 
$319,355
 
CIN: A-07-06-03085 NEBRASKA UNDISTRIBUTABLE CHILD SUPPORT 
 
PAYMENTS, MAR 2007, $308,841
 
CIN: A-07-05-01013 PAYMENTS FOR M+C ORGANIZATION FOR 
 
INSTITUTIONAL BENEFICIARIES, OCT 2005, 
$293,885
 
CIN: A-05-05-00033 MI - UNDISTRIBUTED CHILD SUPPORT 
 
COLLECTIONS, AUG 2006, $257,859
 
CIN: A-05-01-00094 PAYMENTS TO KAISER OF OAKLAND FOR 
 
INSTITUTIONAL BENEFICIARIES, OCT 2002, 
$229,656
 
CIN: A-07-06-01035 AUDIT OF QUALITY IMPROVEMENT 
 
ORGANIZATION - IOWA, OCT 2007, $208,974
 
CIN: A-02-06-02005 UNDISTRIBUTABLE CHILD SUPPORT PAYMENTS - 
 
NEW JERSEY, FEB 2008, $186,113
 
HHS OIG Semiannual Report to Congress  67  Appendix A  
Spring 2009    
CIN: A-09-05-00077 REVIEW OF PACIFICARES USE OF ADDITIONAL 
 
CAPITATION UNDER THE MMA OF 2003, MAR 
2006, $135,000
 
CIN: A-05-06-00029 AUDIT OF COST-BASED HMOS FOR 
 
OVERPAYMENTS MADE TO CAPITATED 
PROVIDERS, SEP 2006, $132,075
 
CIN: A-05-06-00031 AUDIT OF COST-BASED HMOS FOR 
 
OVERPAYMENTS MADE TO CAPITATED 
PROVIDERS, SEP 2006, $122,130
 
CIN: A-05-01-00091 PAYMENTS TO UNITED HC OF FLA FOR 
 
INSTITUTIONAL BENEFICIARIES, SEP 2002, 
$121,023
 
CIN: A-05-05-00044 DUPLICATE MEDICARE PAYMENTS TO COST-
 
BASED HEALTH MAINTENANCE ORGANIZATION 
PLAN - ARNETT HEALTH PLANS, INC. FOR FYS 
2000 - 2003, SEP 2005, $111,862
 
CIN: A-05-97-00017 FHP, INC. - HMO INSTITUTIONAL STATUS 
 
PROJECT, JUN 1998, $109,114
 
CIN: A-05-01-00079 PAYMENTS TO BLUE CARE MID-MI FOR 
 
INSTITUTIONAL BENEFICIARIES, JUN 2002, 
$100,692
 
CIN: A-04-04-01002 USE OF CDC BIOTERRORISM GRANT FUNDS, JUL 
 
2005, $98,929
 
CIN: A-05-02-00067 REVIEW OF MEDICARE FEE-FOR-SERVICE 
 
PAYMENTS & COST REPORTS - WELBORN, JUN 
2003, $97,623
 
CIN: A-05-05-00042 DUPLICATE MEDICARE PAYMENTS TO COST-
 
BASED HEALTH MAINTENANCE ORGANIZATION 
PLAN - DEAN HEALTH PLANS, INC. FOR FYS  
20002003, AUG 2005, $91,710
 
CIN: A-05-01-00090 PAYMENTS TO AETNA U.S. HEALTHCARE PA FOR 
 
INSTITUTIONAL BENEFICIARIES, JUL 2002, $87,516
 
CIN: A-05-05-00043 DUPLICATE MEDICARE PAYMENTS TO COST-
 
BASED HEALTH MAINTENANCE ORGANIZATION 
PLAN - JOHN DEERE HEALTH PLANS, INC. FOR 
FYS 20002003, SEP 2005, $78,799
 
CIN: A-02-06-01023 AUDIT OF QUALITY IMPROVEMENT 
 
ORGANIZATION - NEW YORK, MAR 2008, $77,358
 
CIN: A-05-01-00089 ADDITIONAL BENEFITS REVIEW ON MANAGED 
 
CARE ORGANIZATION, OCT 2002, $77,000
 
CIN: A-09-06-00039 MEDICARE INTEGRITY - AUDIT OF QUALITY 
 
IMPROVEMENT ORGANIZATION - WASHINGTON 
STATE, FEB 2008, $73,636
 
CIN: A-06-07-00009 REVIEW OF CAREFLITE CONTRACT, JUN 2007, 
 
$68,841
 
HHS OIG Semiannual Report to Congress  68  Appendix A  
Spring 2009    
CIN: A-04-05-02000 AUDIT OF HHA THERAPY BILLINGS, SEP 2005, 
 
$63,425
 
CIN: A-05-01-00086 PAYMENTS TO HMO OF NE PA FOR 
 
INSTITUTIONAL BENEFICIARIES, MAY 2002, 
$62,432
 
CIN: A-03-02-00373 REVIEW OF US HELPING US, DEC 2003, $45,558
   
CIN: A-04-06-00023 REVIEW OF QUALITY IMPROVEMENT 
 
ORGANIZATIONS - TENNESSEE, JUL 2008, $30,654
 
CIN: A-01-02-01504 REVIEW OF CDCS HIV PROGRAMS AT FENWAY 
 
COMMUNITY HEALTH CENTER, JUN 2003, $30,095
 
CIN: A-08-03-73541 SOUTH DAKOTA FOUNDATION FOR MEDICAL 
 
CARE, JAN 2003, $28,573
 
CIN: A-07-02-00150 PAYMENTS TO COVENTRYPITTSBURG FOR 
 
INSTITUTIONAL BENEFICIARIES, JUN 2003, 
$26,000
 
CIN: A-05-01-00078 PAYMENTS TO HEALTH NET-TUCSON, AZ.- FOR 
 
INSTITUTIONAL BENEFICIARIES, APR 2002, 
$21,233
 
CIN: A-08-04-76779 COLORADO FOUNDATION FOR MEDICAL CARE, 
 
DEC 2003, $18,925
 
CIN: A-05-01-00100 PAYMENTS TO FALLON HEALTH FOR 
 
INSTITUTIONALIZED BENEFICIARIES, MAY 2002, 
$18,842
 
CIN: A-05-01-00095 PAYMENTS TO HUMANA OF ARIZONA FOR 
 
INSTITUTIONAL BENEFICIARIES, JUN 2002, 
$18,645
 
CIN: A-07-03-00151 REVIEW OF MEDICARE PAYMENTS FOR 
 
BENEFICIARIES WITH INSTITUTIONAL STATUS, 
JUN 2003, $18,400
 
CIN: A-07-04-01011 PAYMENTS FOR UNITED HEALTHCARE FOR 
 
INSTITUTIONAL BENEFICIARIES, MAR 2005, 
$13,128
 
CIN: A-01-07-00603 REVIEW OF RETIREE DRUG SUBSIDY PLAN 
 
SPONSOR BLUE CROSS BLUE SHIELD OF 
MASSACHUSETTS, INC., FOR PLAN YEAR ENDED 
DECEMBER 31, 2006, JAN 2008, $12,798
 
CIN: A-05-06-00043 REVIEW OF OHIO KEPRO, FEB 2008, $11,874
   
CIN: A-05-01-00070 PAYMENTS FOR BENEFICIARIES WITH 
 
INSTITUTIONAL STATUS - MISSOURI GROUP 
HEALTH PLAN, JAN 2002, $11,089
 
TOTAL REPORTS :   70 
TOTAL AMOUNT :   $1,074,139,088 
HHS OIG Semiannual Report to Congress  69  Appendix A  
Spring 2009    
Table 2 
1 The opening balance was adjusted downward by $91.1 million. 
2 Management decision has not been made within 6 months on 13 reports.  Discussions 
with management are ongoing, and it is expected that the following audits will be 
resolved by the next semiannual reporting period: 
 
CIN: A-06-07-00042  INDEXING THE REBATE FOR GENERIC DRUGS, 
OCT 2007, $966,000,000 
CIN: A-04-01-02006  MEDICAID DISPROPORTIONATE SHARE 
PAYMENTS IN ALABAMA, JUN 2004, $45,763,327 
CIN: A-09-07-00083  MEDICARE INTEGRITY - REVIEW OF KAISER 
FOUNDATION HOSPITAL WAGE DATA USED FOR 
FY 2009 WAGE INDEXES, SEP 2008, $11,762,404 
CIN: A-04-06-03508  UNDISTRIBUTABLE CHILD SUPPORT 
COLLECTIONS - FLORIDA, JAN 2008, $7,881,447 
CIN: A-05-02-00077  MICHIGAN MEDICAID/SCHIP REVIEW, NOV 2003, 
$5,908,350 
CIN: A-03-02-00203  VIRGINIA - SCHIP/TITLE IV - D, JUL 2004, $5,402,491 
CIN: A-05-05-00033  MI - UNDISTRIBUTED CHILD SUPPORT 
COLLECTIONS, AUG 2006, $4,397,133 
CIN: A-06-00-00073  MANAGED CARE ADDTL BENEFITS - NYLCARE 
HEALTH PLANS OF THE SOUTHWEST - CY 2000, 
MAR 2002, $4,000,000 
CIN: A-05-02-00075  INDIANA MEDICAID/SCHIP REVIEW, NOV 2003, 
$1,885,708 
CIN: A-05-06-00038  IN - UNDISTRIBUTABLE CHILD SUPPORT 
COLLECTIONS, MAR 2007, $871,677 
CIN: A-01-08-00513  REVIEW OF TOURO INFIRMARYS REPORTED 
FISCAL YEAR 2005 WAGE DATA, JUL 2008, $605,419 
CIN: A-05-01-00070  PAYMENTS FOR BENEFICIARIES WITH 
INSTITUTIONAL STATUS - MISSOURI GROUP 
HEALTH PLAN, JAN 2002, $98,689 
CIN: A-05-06-00023  MN - UNDISTRIBUTABLE CHILD SUPPORT 
COLLECTIONS, SEP 2006, $28,240 
 
TOTAL REPORTS:   13 
TOTAL AMOUNT:   $1,054,604,885
HHS OIG Semiannual Report to Congress  70  Appendix A  
Spring 2009    
Appendix B:  Reporting Requirements of the Inspector 
General Act of 1978, as Amended 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed 
in the following table along with the location of the required information.  Page numbers 
in the table indicate pages in this report.  The word None appears where there are no 
data to report under a particular requirement.   
A complete listing of audit and evaluation reports is furnished to Congress under separate 
cover.  Hard copies are available upon request. 
 
Section of 
the Act  Requirement  Location 
Section 4  (a)(2)  Review of legislation and regulations  p. 62
 
Section 5     
   (a)(1)  Significant problems, abuses, and  Throughout this report 
deficiencies 
   (a)(2)  Recommendations with respect to  Throughout this report 
significant problems, abuses, and 
deficiencies 
   (a)(3)  Prior significant recommendations on  See the Compendium of Unimplemented 
which corrective action has not been  Office of Inspector General 
completed  Recommendations at 
http://www.oig.hhs.gov/publications.html. 
   (a)(4)  Matters referred to prosecutive  p. 35
 
authorities 
   (a)(5)  Summary of instances in which  None 
information was refused 
   (a)(6)  List of audit reports  Under separate cover 
   (a)(7)  Summary of significant reports  Throughout this report 
   (a)(8)  Statistical Table 1  Reports With  p. 60
 
Questioned Costs 
   (a)(9)  Statistical Table 2  Funds  p. 61
 
Recommended To Be Put To Better Use 
   (a)(10)  Summary of previous audit reports  Appendix A 
without management decisions 
   (a)(11)  Description and explanation of revised  Appendix A 
management decisions 
   (a)(12)  Management decisions with which the  None 
Inspector General is in disagreement 
 
 
HHS OIG Semiannual Report to Congress  71  Appendix B 
Spring 2009    
 
    
Appendix C:  Summary of Sanction Authorities  
The Inspector General Act of 1978 (P.L. No. 95452), as amended, sets forth specific 
requirements for semiannual reports to be made to the Secretary for transmittal to 
Congress.  A selection of other authorities appears below. 
Program Exclusions 
Section 1128 of the Social Security Act (42 U.S.C.  1320a7) provides several grounds 
for excluding individuals and entities from participation in Medicare, Medicaid, and other 
Federal health care programs.  Exclusions are required for individuals and entities 
convicted of the following types of criminal offenses:  (1) Medicare or Medicaid fraud; 
(2) patient abuse or neglect; (3) felonies for other health care fraud; and (4) felonies for 
illegal manufacture, distribution, prescription, or dispensing of controlled substances.  
The Office of Inspector General (OIG) has the authority to exclude individuals and 
entities on several other grounds, including misdemeanors for other health care fraud 
(other than Medicare or Medicaid) or for illegal manufacture, distribution, prescription, 
or dispensing of controlled substances; suspension or revocation of a license to provide 
health care for reasons bearing on professional competence, professional performance, or 
financial integrity; provision of unnecessary or substandard services; submission of false 
or fraudulent claims to a Federal health care program; or engaging in unlawful kickback 
arrangements. 
Providers subject to exclusion are granted due process rights.  These include a hearing 
before an administrative law judge and appeals to the Department of Health and Human 
Services Departmental Appeals Board and Federal district and appellate courts regarding 
the basis for the exclusion and the length of the exclusion. 
Patient Dumping 
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an 
individual presents to the emergency room of a Medicare-participating hospital, the 
hospital must provide an appropriate medical screening examination to determine 
whether that individual has an emergency medical condition.  If an individual has such a 
condition, the hospital must provide either treatment to stabilize the condition or an 
appropriate transfer to another medical facility. 
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to 
minimize the risks of transfer and must ensure that the receiving hospital agrees to the 
transfer and has available space and qualified personnel to treat the individual.  In 
addition, the transferring hospital must effect the transfer through qualified personnel and 
transportation equipment.  Further, a participating hospital with specialized capabilities or 
facilities may not refuse to accept an appropriate transfer of an individual who needs 
services if the hospital has the capacity to treat the individual. 
HHS OIG Semiannual Report to Congress  73  Appendix C 
Spring 2009    
OIG is authorized to collect civil monetary penalties (CMP) of up to $25,000 against 
small hospitals (fewer than 100 beds) and up to $50,000 against larger hospitals 
(100 beds or more) for each instance in which the hospital negligently violated any of the 
section 1867 requirements.  In addition, OIG may collect a penalty of up to $50,000 from 
a responsible physician for each negligent violation of any of the section 1867 
requirements and, in some circumstances, may exclude a responsible physician. 
Civil Monetary Penalties Law 
Under the Civil Monetary Penalties Law (CMPL), section 1128A of the Social Security 
Act (42 U.S.C.  1320a7a), a person is subject to penalties, assessments, and exclusion 
from participation in Federal health care programs for engaging in certain activities.  For 
example, a person who submits or causes to be submitted to a Federal health care 
program a claim for items and services that the person knows or should know is false or 
fraudulent is subject to a penalty of up to $10,000 for each item or service falsely or 
fraudulently claimed, an assessment of up to three times the amount falsely or 
fraudulently claimed, and exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The CMPL 
and its implementing regulations also authorize actions for a variety of other violations, 
including submission of claims for items or services furnished by an excluded person; 
requests for payment in violation of an assignment agreement; violations of rules 
regarding the possession, use, and transfer of biological agents and toxins; and payment 
or receipt of remuneration in violation of the anti-kickback statute (42 U.S.C.  1320a
7b(b)). 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities 
 The Anti-Kickback Statute  The anti-kickback statute authorizes penalties against 
anyone who knowingly and willfully solicits, receives, offers, or pays remuneration, in 
cash or in kind, to induce or in return for (1) referring an individual to a person or an 
entity for the furnishing, or arranging for the furnishing, of any item or service payable 
under the Federal health care programs or (2) purchasing, leasing, or ordering, or 
arranging for or recommending the purchasing, leasing, or ordering of any good, facility, 
service, or item payable under the Federal health care programs (section 1128B(b) of the 
Social Security Act, 42 U.S.C.  1320a7b(b)). 
Individuals and entities that engage in unlawful referral or kickback schemes may be 
subject to criminal penalties under the general criminal anti-kickback statute; a CMP 
under OIGs CMPL authority (section 1128A(a)(7) of the Social Security Act, 42 U.S.C. 
 1320a7a); and/or program exclusion under OIGs permissive exclusion authority 
(section 1128(b)(7) of the Social Security Act, 42 U.S.C.  1320a7(b)(7)). 
 False Claims Amendments Act of 1986  Under the Federal civil False Claims 
Amendments Act of 1986 (FCA) (31 U.S.C.  37293733), a person or an entity is 
liable for up to treble damages and a penalty between $5,500 and $11,000 for each false 
HHS OIG Semiannual Report to Congress  74  Appendix C 
Spring 2009    
claim it knowingly submits or causes to be submitted to a Federal program.  Similarly, a 
person or an entity is liable under the FCA if it knowingly makes or uses, or causes to be 
made or used, a false record or statement to have a false claim paid. 
The FCA defines knowing to include not only the traditional definition but also 
instances in which the person acted in deliberate ignorance or reckless disregard of the 
truth or falsity of the information.  Under the FCA, no specific intent to defraud is 
required.  Further, the FCA contains a qui tam, or whistleblower, provision that allows a 
private individual to file a lawsuit on behalf of the United States and entitles that 
whistleblower to a percentage of any fraud recoveries. 
 
HHS OIG Semiannual Report to Congress  75  Appendix C 
Spring 2009    
    
Appendix D:  Acronyms and Abbreviations  
The following is a list of acronyms and abbreviations used in this publication.  
 
ACF  Administration for Children and Families 
ALJ  Administrative Law Judge 
AMP  average manufacturer price 
ASP  average sales price 
CARE  Comprehensive AIDS Resources Emergency Act 
CCA  certification of compliance agreement 
CDC  Centers for Disease Control and Prevention 
CDER  Center for Drug Evaluation and Research 
CIA   corporate integrity agreement 
CMP  civil monetary penalty 
CMPL  Civil Monetary Penalties Law 
CMS  Centers for Medicare & Medicaid Services 
CY  calendar year 
DCA  Division of Cost Allocation 
DME  durable medical equipment 
DMEPOS  durable medical equipment, prosthetics, orthotics, and supplies 
DOJ  Department of Justice 
DPM  Division of Payment Management 
DRA  Deficit Reduction Act of 2005 
DSH  disproportionate share hospital 
FBI  Federal Bureau of Investigation 
FCA  False Claims Act 
FDA  Food and Drug Administration 
FY  fiscal year 
HCFAC  Health Care Fraud and Abuse Control Program 
HCPCS  Healthcare Common Procedure Coding System 
HEAL  Health Education Assistance Loan 
HHS  Department of Health and Human Services 
HIPAA  Health Insurance Portability and Accountability Act  
HRSA  Health Resources and Services Administration 
IG  Inspector General 
IT  information technology 
MA  Medicare Advantage 
MA-PD  Medicare Advantage Prescription Drug 
MEDIC  Medicare drug integrity contractors 
MFCU   Medicaid Fraud Control Unit 
MHASA  mental health assessment and service agencies 
MMA  Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 
MMIS  Medicaid Management Information System 
MPFS  Medicare Physician Fee Schedule 
HHS OIG Semiannual Report to Congress  77  Appendix D 
Spring 2009    
MR  magnetic resonance 
NDC  National Drug Code 
NIH   National Institutes of Health 
NPI  national provider identifier 
NQF  National Quality Forum 
OCSE   Office of Child Support Enforcement 
OIG   Office of Inspector General 
OMHA  Office of Medicare Hearings and Appeals 
PCS  personal care service 
PDP  prescription drug plan 
PHS  Public Health Service 
P.L.  Public Law 
PPS  prospective payment system 
PSC  Program Support Center 
QA  quality assurance 
SCHIP  State Childrens Health Insurance Program 
SNF  skilled nursing facility 
SNP  special needs plan 
SPA  State plan amendment 
SSA  Social Security Administration 
TANF  Temporary Assistance for Needy Families 
UCCP  uncompensated care pool 
U.S.C.  United States Code 
WAMP  widely available market price 
HHS OIG Semiannual Report to Congress  78  Appendix D 
Spring 2009   Department of Health and Human Services 
OIG HOTLINE: 800-HHS-TIPS 
To report matters involving fraud, waste, abuse, and mismanagement in any departmental program(s) 
Phone: 1-800-HHS-TIPS  TTY: 1-800-377-4950 
    1-800-447-8477  Fax:   1-800-223-8164 
E-Mail:  HHSTips@oig.hhs.gov 
Mail:  Office of Inspector General 
          Department of Health and Human Services 
          Attn: Hotline 
          PO BOX 23489 
          Washington, DC 20026