April 1, 2004 - September 30, 2004
U.S. Department of 
Health and Human Services
 
Working Together to Promote, Preserve & Protect the Nations  Well-Being  This semiannual report and other OIG materials 
may be accessed on the Internet 
at http://oig.hhs.gov   
Message from the Inspector General
This report, submitted pursuant to the IG Act of 1978, as amended, summarizes the
activities of the Office of Inspector General (OIG) for the 6-month reporting period that
ended September 30, 2004.
The OIG is responsible for detecting fraud, waste, and abuse and promoting the
economy, efficiency and effectiveness of programs within the Department of Health and
Human Services.  As indicated in our previous semiannual report, this charge has been
enlarged with the recent enactment of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), which represents some of the most significant changes
to the Medicare program since its inception in 1965.  
The MMA creates substantial new oversight responsibilities and contains a number
of provisions that direct specific work be conducted by OIG.  These include provisions
related to audits of drug manufacturers and surveys of market prices of Medicare Part B
drugs, safe harbor requirements, the effect of Medicare payments on the availability of
certain drugs, and a number of additional mandated studies.  Two mandated studies were
completed during this reporting period, one regarding the pricing of oxygen equipment and
the other on pricing of end-stage renal disease drugs.  In addition, work has been initiated
in several areas believed to contain the greatest potential vulnerabilities under the MMA.
With funding from the Health Care Fraud and Abuse Control (HCFAC) Program
statutorily capped at the fiscal year 2003 spending level, balancing the work this office
traditionally has done with new oversight responsibilities posed by the MMA presents a
unique challenge.  We must focus on setting priorities based on the added MMA
requirements, even as work continues to uncover occurrences of fraud, waste, and abuse
in other important Department programs.  Examples presented in this semiannual report
include significant investigations of fraud in the durable medical equipment industry,
particularly power wheelchairs, record recoveries from investigations of pharmaceutical
companies, and continued work in the area of nursing home quality of care.   
Continued cooperation between this office, the Congress, the Department, and the
health care industry are essential in order to fulfill our collective responsibilities under the
MMA and to address current challenges.  I am confident that this office will rise to the new
challenges while continuing to produce the high impact, high quality work that has marked its
success through the years. 
As I begin my tenure as Acting IG, I want to thank Acting Principal Deputy
Inspector General Dara Corrigan for her leadership during this transitional period for OIG.
I also wish to express my appreciation for the accomplishments of all OIG employees and
commend them for their continued professionalism and dedication.
Daniel R. Levinson
Acting Inspector General  Highlights
   
Summary of Accomplishments
For fiscal year 2004, the Office of Inspector General (OIG) reported savings
of approximately $30 billion:  $27.3 billion in implemented recommendations and
other actions to put funds to better use, $754.2 million in audit receivables, $8.3
million in additional audit recoveries, and $1.9 billion in investigative receivables.
(For figures for this semiannual reporting period, see pp. 53, 58, and 61.)
Also for this fiscal year, OIG reported exclusions of 3,293 individuals and
entities  for  fraud  or  abuse  of  Federal  health  care  programs  and/or  their
beneficiaries; 533 convictions of individuals or entities that engaged in crimes
against departmental programs; and 268 civil actions, which include False Claims
Act and unjust enrichment suits filed in district court, Civil Monetary Penalties
Law settlements, and administrative recoveries related to provider self-disclosure
matters.  (For figures for this reporting period, see pp. 20 and 22.)
Prescription Drugs
Pfizer  Inc.,  Warner-Lambert  Company  LLC,  and  the  Parke-Davis
DivisionPfizer Inc. (Pfizer), Warner-Lambert Company LLC (Warner-Lambert),
and the Parke-Davis Division entered a global settlement for $430 million plus
interest.  As part of the settlement, Pfizer subsidiary Warner-Lambert pled guilty
to violating the Food, Drug and Cosmetic Act, and Pfizer entered a 5-year
corporate integrity agreement with OIG.  The settlement resolved allegations that
by marketing the drug Neurontin for off-label uses not approved by the Food and
Drug Administration and by other conduct, Warner-Lambert caused the submission
of false and/or fraudulent claims to Medicaid.  (See p. 24.) 
Rite Aid CorporationFollowing three settlements with other companies
for similar conduct, the United States settled an additional case with a major retail
pharmacy chain related to allegations of improper billing to Federal health care
programs.  Rite Aid Corporation (Rite Aid) agreed to pay $7 million to resolve civil
and administrative liabilities for allegedly billing for full prescriptions when only
portions of the medications were delivered.  Rite Aid also entered settlements with
affected States and entered a corporate integrity agreement with OIG designed to
address prescription billing procedures and other compliance issues.  (See p. 25.)
i Reimbursement for End Stage Renal Disease (ESRD) DrugsIn an inspection
mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of
2003,  OIG  found  that,  in  2003,  the  Medicare  program  paid  significantly  higher
ratesbetween 5 and 68 percent higherfor 10 ESRD drugs than did dialysis providers
and facilities.  (See p. 3.)
State Financing Mechanisms
New  York,  Tennessee,  and  AlabamaOIG  is  continuing  to  look  at  the
mechanisms some States use to maximize Federal Medicaid reimbursement.  Most
recently, OIG focused on intergovernmental fund transfers and their impact on public
nursing homes and hospitals.  In one report, OIG examined the impact of such State
funding mechanisms on a nursing home in New York State.  The State and the county
required the home to return about 90 percent of its enhanced funding to the State.  As a
result, the home was unable to meet its operating costs and experienced a significant
staffing shortage, which may have contributed to poor quality of care.  Similarly,
Tennessees public nursing homes were required to return all of their enhanced funding,
and Alabamas public hospitals were required to return 86 percent of the payments they
received as reimbursement for serving disproportionate numbers of low-income people
with special needs.  In all of these cases, the Federal funds claimed by and paid to the
States benefited the States more than the Medicaid beneficiaries.  (See pp. 8 and 9.)
Durable Medical Equipment
Medicare Reimbursement for Power WheelchairsOIG published two related
inspections on Medicares reimbursement for the wheelchairs.  One report found that the
program paid significantly higher rates for power wheelchairs compared with suppliers and
consumers.  The second inspection report, an analysis of power wheelchair reimbursement,
found that Medicare is spending an estimated $178 million for wheelchairs that do not meet
Medicares coverage criteria.  OIG recommended that CMS take steps to improve
compliance with Medicares coverage criteria for power wheelchairs.  (See pp. 4 and 5.)
Home Oxygen EquipmentA study on Medicare payment rates for home oxygen
equipment found that the Federal Employees Health Benefits (FEHB) plans median
payment rates were between 10 and 20 percent lower than median Medicare fee schedule
allowances for stationary and portable equipment.  Medicare could have saved $499
million if payments had been based on the lowest FEHB rates.
OIG recommended that CMS use information collected by OIG to meet
requirements of the Medicare Prescription Drug, Improvement, and Modernization Act of
2003, reduce fee schedule payments for home oxygen equipment in 2005, and consider
alternate methods to determine payment rates for this equipment.  (See p. 4.) 
ii Hospitals
Redding Medical CenterIn its ongoing efforts to use its administrative authorities
to safeguard Federal health care programs and their beneficiaries, OIG settled an exclusion
case against Redding Medical Center (RMC), a 246-bed hospital in Redding, CA, formerly
owned by Tenet Healthcare Corporation, Inc. (Tenet).  OIG sought to exclude RMC
because, from at least May 1999 through May 2002, RMC allegedly furnished or caused
to be furnished to patients cardiac services that were medically unnecessary and of a
quality that failed to meet professionally recognized standards of health care.  Ultimately,
Tenet and RMC agreed to settle the matter by divesting RMC, and the assets of RMC were
sold to an unrelated party.  (See p. 21.)
iii iv Table of Contents
Centers for Medicare & Medicaid Services ....................................... 1
Skilled Nursing Facility Payments ............................................... 2
Comprehensive Error Rate Testing Improvements .................................. 2
Classification of Provider Tax Refunds ........................................... 3
Reimbursement for End Stage Renal Disease Drugs ................................. 3
Medicare Payment Rates for Home Oxygen Equipment .............................. 4
Payment for Power Wheelchairs ................................................ 4
Power Wheelchair Price Comparison ............................................ 5
Payments to Ambulatory Surgery Centers for Intraocular Lenses ....................... 5
Long Term Care Hospitals-Within-Hospitals ...................................... 6
Managed Care Payments ...................................................... 6
Medicare+Choice Organizations Related-Party Fees ................................ 7
Terminated Medicare Contractors ............................................... 7
Fiscal Intermediary Administrative Costs ......................................... 8
Intergovernmental Transfers ................................................... 8
Nursing Home Payments ...................................................... 8
Disproportionate Share Hospital Payments ........................................ 9
Variation in State Medicaid Drug Prices ......................................... 10
Medicaid Claims for Contractual Services........................................ 11
Claims for Residents of Institutions for Mental Diseases ............................ 11
Hospital Patient Transfers Paid As Discharges .................................... 12
Selective Provider Contracting Program ......................................... 12
Payments for Oxygen-Related Medical Equipment ................................. 12
School-Based Services ....................................................... 13
Rehabilitative Treatment Services .............................................. 14
Medicaid Fee-for-Service Payments for Medicare Managed Care Enrollees ............. 14
Physician Drug Rebates ...................................................... 14
New Yorks Drug Rebate Program  ............................................. 15
Incarcerated Beneficiaries .................................................... 16
Deceased Beneficiaries ...................................................... 16
SCHIP:  States Progress in Reducing the Number of Uninsured Children .............. 16
Outreach .................................................................. 17
Advisory Opinions ................................................... 17
Compliance Guidance ................................................. 17
Provider Self-Disclosure Protocol ....................................... 18
Federal and State Partnership:  Joint Audits of Medicaid ............................ 19
OIG Administrative Sanctions ................................................. 20
Program Exclusions .................................................. 20
Affirmative Exclusion Action ........................................... 21
Civil Monetary Penalties............................................... 22
Kickbacks .......................................................... 22
Patient Dumping ..................................................... 22
v Criminal and Civil Enforcement ............................................... 24
Prescription Drugs ................................................... 24
Practitioners ........................................................ 25
Hospitals ........................................................... 26
Medicare Contractors ................................................. 27
Laboratories ........................................................ 28
Home Health Agencies (HHAs) ......................................... 28
Ambulance Company ................................................. 29
Nursing Homes ...................................................... 29
Durable Medical Equipment (DME) Suppliers.............................. 30
Medicaid Fraud Control Units ................................................. 31
Public Health Agencies. ..................................................... 33
Select Agent Security at Universities ............................................ 34
State and Local Bioterrorism Preparedness and Response Funds ...................... 34
Deficiencies in the 340B Drug Discount Programs Database ........................ 35
NIH Grants Management ..................................................... 36
Health Education Assistance Loan Defaults ...................................... 37
Misuse of Public Health Grant Funds ........................................... 38
Ryan White CARE Act Grantees ............................................... 38
Monitoring Ryan White CARE Act Grantees ..................................... 39
Credentialing and Privileging at IHS Hospitals .................................... 40
Administrations for Children and Families and on Aging .......................... 41
Noncustodial Parents Contributions to SCHIP Costs ............................... 42
Health Care Services for Children in Foster Care .................................. 43
Child Support Enforcement ................................................... 44
Task Forces ......................................................... 45
Task Force Table..................................................... 45
Investigations ....................................................... 46
Misuse of ACF Grant Funds .................................................. 47
General Oversight .......................................................... 49
The Government Performance and Results Act of 1993 ............................. 50
Reasonableness of Pension Charges ............................................ 51
Non-Federal Audits ......................................................... 51
Resolving Recommendations .................................................. 52
Table 1:  Reports With Questioned Costs .................................. 53
vi Table 2:  Funds Recommended to Be Put to Better Use ....................... 54
Legislative and Regulatory Review and Development .............................. 55
Regulatory Review Functions ........................................... 55
Regulatory Development .............................................. 55
Employee Fraud and Misconduct .............................................. 57
Investigative Prosecutions .................................................... 58
Appendices ................................................................ 59
Appendix A: Savings Achieved Through Policy and Procedural Changes 
Resulting From Audits, Investigations, and Inspections ................ 61
Appendix B: Unimplemented Office of Inspector General Recommendations 
to Put Funds to Better Use ....................................... 67
Appendix C: Unimplemented Office of Inspector General Program and 
Management Improvement Recommendations ....................... 73
Appendix D: Notes to Tables 1 and 2 ......................................... 79
Appendix E: Reporting Requirements of the Inspector General Act of 
1978, as Amended  ............................................. 93
Appendix F: Summary of Sanction Authorities ................................. 95
Appendix G: Status of Public Proposals for New and Modified Safe Harbors 
to the Anti-Kickback Statute Pursuant to Section 205 of the 
Health Insurance Portability and Accountability Act of 1996 ............ 97
Appendix H: Performance Measures ......................................... 101
Please Note:  Figures in this document have been rounded for reporting purposes.
vii viii Centers for Medicare
& Medicaid Services
The Centers for Medicare & Medicaid Services (CMS) administers
the Medicare and Medicaid programs.  Financed by the Federal Hospital
Insurance  Trust  Fund,  Medicare  Part  A  provides  hospital  and  other
institutional insurance for persons aged 65 or older and for certain disabled
persons.  Medicare Part B (Supplementary Medical Insurance) is an optional
program which covers most of the costs of medically necessary physician
and other services and is financed by participants and general revenues.
The Medicaid program provides funding to States for medical care
and other support and services for low-income children, senior citizens, and
people with disabilities.  State expenditures for medical assistance are
matched by the Federal Government using a formula that measures per
capita income in each State relative to the national average.  The State
Childrens Health Insurance Program (SCHIP) expands health coverage to
uninsured children whose families earn too much for Medicaid, but too
little to afford private coverage.
The Office of Inspector General (OIG) devotes significant resources
to investigating and monitoring the Medicare and Medicaid programs.
These activities have helped ensure the cost-effective delivery of health
care; improved its quality; and reduced the potential for fraud, waste, and
abuse.  In addition, these efforts have often led to criminal, civil, and/or
administrative actions against perpetrators of fraud and abuse.
OIG also reports on the audits of CMS financial statementswhich
presently account for almost 82 percent of Department of Health and
Human Services (HHS) net costs.  In addition to issuing an opinion on the
statements, auditors assess compliance with Medicare laws and regulations
and the adequacy of internal controls. CENTERS FOR MEDICARE & MEDICAID SERVICES
Skilled Nursing Facility Payments
This  report  points  out  that  Medicare  sometimes  paid  twice  for  the  same
serviceonce to a skilled nursing facility (SNF) under the Medicare Part A prospective
payment system (PPS) and again to an outside supplier under Medicare Part B.  Under
current law, a SNF is reimbursed a prospective payment for SNF-covered services rendered
to Medicare beneficiaries in a Part A stay.
Under  consolidated  billing  requirements,
outside  suppliers  must  bill  the  SNF  (not
Medicare  Part  B)  for  SNF  services  and
supplies provided.  The improper Medicare
payments to Part B providers and suppliers
identified in the report totaled $108.3 million
during  1999  and  2000.    Moreover,  the
beneficiaries of these SNF services may have
incurred unnecessary charges of $33.1 million
in coinsurance and deductibles.  This problem
occurred because SNFs and suppliers had not
established  adequate  controls  to  prevent
improper billing for Part B services included
in the Part A SNF payment rate.  Following
OIGs review period, CMS established edits
in its claims processing systems to detect improperly billed Part B services.
OIG recommended that CMS recover the improper payments and instruct its
Medicare contractors to encourage SNFs and suppliers to establish and/or enhance billing
controls.  CMS generally concurred with the recommendations.  (A-01-02-00513)
Comprehensive Error Rate Testing Improvements    
During fiscal year (FY) 2003, CMS experienced a significant problem with
providers that did not respond to requests for medical records for use in developing the
Medicare payment error rate.  The objective of this review was to evaluate CMSs
corrective actions to improve the Comprehensive Error Rate Testing process for obtaining
medical records. 
__________________________________________________
   Indicates performance measure.  Details can be found in Appendix H.
2 CENTERS FOR MEDICARE & MEDICAID SERVICES
CMS has implemented a number of such corrective actions.  Based on OIGs review
of data for the first three quarters of the FY 2004 error rate sample, these corrective actions
appeared to have increased provider responsiveness to requests for medical records.
However, as of April 8, 2004, providers had still failed to submit medical records
supporting  2,239  of  the  126,618  claims,  despite  repeated  requests  for  the  records.
Therefore, OIG has initiated an indepth review to determine why providers failed to
respond.  Also, as part of a broader evaluation of the program, OIG will further assess the
impact of CMSs corrective actions.  (A-03-04-00005)
Classification of Provider Tax Refunds
The aim of this review was to determine whether Missouri hospitals properly
claimed provider tax refunds on their Medicare cost reports from January 1, 1997 to August
1, 2000.  This report points out that, contrary to Medicare regulations, 15 hospitals did not
properly record the refund of provider tax expenses on their costs reports and that 4
hospitals included donations to the Missouri Hospital Association, which are unallowable
expenses under Medicare regulations. Also, the fiscal intermediary, when settling cost
reports, inconsistently applied Medicare rules.  As a result, the hospitals received $8.4
million in excess Medicare reimbursement. 
OIG recommended that CMS instruct fiscal intermediaries to recover the excess
reimbursement from the hospitals.  OIG also recommended procedural improvements that
should preclude this problem in the future.  CMS concurred with these recommendations.
(A-07-02-04006)
Reimbursement for End Stage Renal Disease Drugs
This inspection was required by of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003.  OIG found that in 2003, the 4 largest dialysis providers
paid between 12 percent and 68 percent less than the current Medicare reimbursement
amount for the 10 End Stage Renal Disease (ESRD) drugs reviewed.  A sample of facilities
not owned or managed by the 4 largest providers paid between 5 percent and 58 percent
less than Medicare for the same 10 drugs.  In 2003, average sales prices for the drugs
under review were between 6 percent and 66 percent below the Medicare reimbursement
amount.  According to OIG projections, Medicare reimbursement for separately billable
drugs will rise by 11 percent between 2003 and 2005, and CMS plans to use data from this
report to set calendar year 2005 reimbursement rates for ESRD drugs.  (OEI-03-04-00120)
3 CENTERS FOR MEDICARE & MEDICAID SERVICES
Medicare Payment Rates for 
Home Oxygen Equipment
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003
requires CMS to reduce fee schedule payment amounts for home oxygen equipment in
2005.  The reduction will be based on the percentage difference between the Medicare fee
schedule amounts for each State and the median prices paid by Federal Employees Health
Benefits (FEHB) plans.  This OIG inspection found that in 2002, FEHB plans median
payment rates for home oxygen equipment were between 10 and 20 percent lower than
median Medicare fee schedule allowances for stationary and portable equipment.  OIG also
found that plans use alternative payment methods, including competitive bidding and
capped rental arrangements, to lower their costs.  
This report recommended that CMS use the pricing information OIG obtained to
reduce the rates Medicare pays for home oxygen equipment in 2005. OIG also recommended
that the agency consider alternative methods for determining future Medicare oxygen
payment rates.  The agency concurred with OIGs recommendations.  (OEI-09-03-00160)
Payment for Power Wheelchairs
In 2001, Medicare and its beneficiaries paid $513 million for all K0011 power
wheelchairs.  Payments for this procedure code have risen dramatically, increasing 43
percent from calendar year 2000 to 2001 alone.  To determine whether K0011 power
wheelchairs provided in 2001 met Medicares coverage and documentation requirements,
OIG selected a simple random sample of 300 claims.  OIG then contacted the suppliers,
ordering physicians, and beneficiaries associated with these claims, obtained relevant
medical documentation, and provided that documentation to an independent contractor for
a coverage review.  
OIG found that almost one-third of the claims reviewed did not meet Medicares
coverage criteria for any type of wheelchair.  An additional 45 percent of reviewed claims
did not meet Medicares coverage criteria for the K0011 power wheelchair but may have
met criteria for a less expensive mobility device.  Only 13 percent of reviewed claims
actually  met  the  coverage  criteria  for  the power  wheelchairs.    Due  to  insufficient
documentation, the reviewer could not determine whether the remaining 11 percent of
reviewed claims met the coverage criteria for the K0011 power wheelchair.  OIGs
coverage review indicated that Medicare and its beneficiaries are spending an estimated
$178 million for wheelchairs that do not meet Medicares criteria.  OIG also identified a
number of other problems with Medicare claims for the wheelchairs, including missing and
incomplete supporting documentation, and equipment that is not used by Medicare
4 CENTERS FOR MEDICARE & MEDICAID SERVICES
beneficiaries.  OIG recommended that CMS improve compliance with Medicares
coverage criteria for power wheelchairs.  OIG suggested that CMS require durable medical
equipment regional carriers to revise current coverage policies for power wheelchairs;
conduct  frequent  reviews  of  K0011  claims;  and  educate  ordering  physicians  and
beneficiaries  about  power  wheelchair  coverage  criteria.    CMS  concurred  with  the
recommendations.  (OEI-03-02-00600)
Power Wheelchair Price Comparison
In this report, OIG found that the median purchase prices for both consumers and
suppliers  were  lower  than  the  Medicare  reimbursement  amount  for  K0011  power
wheelchairs.  While a wide range of prices was collected, 94 percent of the prices were less
than the Medicare reimbursement amount.  Medicare and its beneficiaries could have saved
over $224 million in 2002, if the K0011 power wheelchair reimbursement amount were set
at the median prices available to consumers and suppliers. 
In order for CMS to determine whether the Medicare reimbursement amount for
K0011 power wheelchairs is appropriate, OIG recommended that CMS create a new coding
system that accounts for the variety in models and prices for power wheelchairs and/or use
the pricing information in this report to determine whether an inherent reasonableness
review for K0011 power wheelchairs is appropriate.  CMS believes OIGs recommendation
regarding coding warrants further consideration and agreed with OIGs recommendation
that it consider using its inherent reasonableness authority to reduce the reimbursement
amount for K0011 power wheelchairs.  (OEI-03-03-00460)
Payments to Ambulatory Surgery Centers for Intraocular Lenses
OIG found that the current $150 per lens Medicare payment to ambulatory surgical
centers (ASCs) for intraocular lenses (IOLs) is not reasonable and related to the cost, as
required by law.  For the 12 months ending June 2002, 40 percent of IOL payments by
Medicare and its beneficiaries were in excess of the ASCs IOL costs.  Overall, IOL costs
averaged $90.30 per lens, $59.70 below the $150 Medicare payment.  The IOL cost varied
significantly by lens type (grouped by lens material), with the highest cost IOL averaging
$125 per soft acrylic lens, followed by an average $69 per silicone lens, and an average $39
per polymethyl methacrylate lens.  The most frequently used lens type is the silicone lens
at a $69 average cost.  This report estimated that Medicare and its beneficiaries could have
achieved substantial savings through the use of alternative payment rates.  
OIG recommended that CMS reduce Medicare payment to ASCs for IOLs in a
manner that takes into account the different types and cost of IOLs.  CMS agreed to take
5 CENTERS FOR MEDICARE & MEDICAID SERVICES
into account OIGs recommendation and IOL cost data in developing the revised payment
system for ASCs, which the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 requires be implemented beginning on or after January 1, 2006 and not later
than January 1, 2008.  (OEI-06-02-00710)
 Long Term Care Hospitals-Within-Hospitals 
An OIG evaluation found that 19 of 87 hospitals-within-hospitals exceeded the
annual 5 percent threshold for readmissions from their host hospitals at least once during
their fiscal years ending in September 2000 through December 2002.  Currently, CMS
lacks a system to detect readmissions over the 5 percent threshold.  As Medicares
prospective payment system for long-term care hospitals is fully implemented, paying
hospitals-within-hospitals that are over the 5 percent readmission level could result in
increased costs to the Medicare program.  In addition, CMS has no ongoing mechanism to
determine whether hospitals-within-hospitals are financially and organizationally separate
from their host hospitals.  
OIG recommended that CMS develop a system to monitor hospitals-within-
hospitals compliance with the five percent readmission rule, and require hospitals-within-
hospitals to demonstrate their organizational and financial independence on a continuing
basis.  CMS supported the reports findings and the thrust of OIGs recommendations.  
(OEI-01-02-00630)
Managed Care Payments
Medicare+Choice organizations (MCO) are responsible for providing all Medicare-
covered services, except hospice care, in return for a predetermined capitation payment.
MCOs with plans for which payment rates increased under the Benefits Improvement
Protection Act of 2000 were required to submit a revised proposal to show how they would
use the increase during 2001.  They were also required to use the additional amounts to
reduce beneficiary premiums or cost-sharing, enhance benefits, contribute to a stabilization
fund for benefits in future years, or stabilize or enhance beneficiary access to providers.
This review found that about $5.2 million of the $16.4 million increase in one MCOs
revised proposal was not used in the required manner or its use was not adequately
supported.  
OIG  recommended  that  the  MCO  refund  the  $5.2  million  to  the  Federal
Government or, as an alternative, deposit this amount in a benefit stabilization fund for use
in future years and ensure that estimated costs in future proposals are properly supported.
The MCO did not agree.  (A-06-02-00060)
6 CENTERS FOR MEDICARE & MEDICAID SERVICES
Medicare+Choice Organizations Related-Party Fees
OIG reviewed four MCOs in a nationwide chain.  The MCOs reported to CMS
more than $100 million in related-party fees paid to their management company in return
for administrative services.  The review found that the MCOs failed to show that the
related-party fees did not exceed the costs that would have been incurred with an unrelated
party and that the MCOs did not have effective procedures to develop and allocate actual
costs.   OIG recommended that CMS take several steps, including applying administrative
sanctions, if appropriate, to ensure that MCOs  comply  with  related-party  financial
disclosure requirements.  CMS did not fully agree with the recommendations.  
(A-06-01-00033)
Terminated Medicare Contractors
Since its inception, Medicare has paid a portion of Medicare contractors annual
contributions to their pension plans.  OIG reviewed three insurance companies that
processed and paid Medicare fee-for-service claims until their contractual relationships
with CMS were terminated. 
' One company in New Jersey claimed more than $3.8 million in excess pension
assets.  Federal regulations and the Medicare contracts provide that pension gains
that exist when a Medicare segment of a pension plan closes are to be credited to
the Medicare program.  The company agreed in part with OIGs recommendation
to remit the excess amount.  (A-07-02-03028)
' Another company, located in North Carolina, claimed more than $2 million in
postretirement  benefit  costs.    OIG  determined  that  the  entire  amount  was
unallowable because the claim represented a retroactive change in the companys
accounting basis and a request for reimbursement of unfunded costs.  The company
disagreed with OIGs recommendation to withdraw the claim.  (A-07-04-00162)
' A third company, located in Texas, identified $11.2 million in excess pension
assets.  OIG determined that this figure was materially accurate and recommended
the company remit the excess to the Federal Government.  The company agreed.
In another audit, OIG determined that the same company had incorrectly calculated
over $3 million in pension costs and recommended that the company remit the
overpayment to the Federal Government.  The company disagreed.  
(A-07-02-03032, A-07-03-03046)
7 CENTERS FOR MEDICARE & MEDICAID SERVICES
Fiscal Intermediary Administrative Costs
The objectives of this review were to determine whether a Medicare fiscal
intermediary had effective controls over the accounting and reporting of administrative
costs and whether the costs it claimed complied with Federal regulations and contract
provisions.  The report identified $2.75 million in unallowable costs and recommended that
the company make a financial adjustment and revise its procedures to ensure that its future
proposals are accurate.  The company generally disagreed with the recommendations.  
(A-01-02-00525)
Intergovernmental Transfers
OIG has continued to focus on States use of intergovernmental transfers, a
mechanism by which some States claim the Federal share of Medicaid funds for payments
to public facilities and then require the facilities to return the funds to the State.  In one
report, OIG found that Tennessee used intergovernmental transfers to maximize Federal
Medicaid reimbursement at little or no cost to the State.  Moreover, Tennessee did not use
the funds primarily for the benefit of public nursing homes, for which the program was
designed.  Also, Tennessees upper-payment-limit calculations for State FYs 2001 and
2002 exceeded the Medicare upper payment limit (UPL) by $23.7 million.  Of this amount,
$21.8 million represented an overpayment, and the State had not yet claimed the balance
of $1.9 million. 
OIG recommended that Tennessee refund the overpayment and improve its review
procedures to ensure the accuracy of UPL calculations.  Tennessee concurred with the
recommendations.  (A-04-02-02018)
Nursing Home Payments
This report found that Medicaid payments to a county nursing home in New York
State were adequate to cover its operating costs, but that State requirements that the
home return a portion of those payments left the home without adequate funding.
During the 3 years that ended September 30, 2001, payments to the nursing home
totaled $132 million:  $41 million in Medicaid per diem payments and $91 million in
payments.  In the same period, the homes operating costs were about $70 million.
8 CENTERS FOR MEDICARE & MEDICAID SERVICES
However, because the State and county required the nursing home to return about 90
percent of its UPL funding, the home was allowed to retain only about $50
million$20 million less than its operating costs.  The
home was also significantly understaffed, which may have
In effect, the Federal
affected the quality of care provided to its residents.  In
Government provided
fact,  the  home  had  received  a  rating  from  the  State
almost all of the nursing
indicating that its residents were in immediate jeopardy.
homes Medicaid
The States UPL funding approach benefited the
funding, contrary to the
State and the county more than the nursing home: the State
principle that Medicaid
received $20 million more than it expended, and the county
is a shared Federal-
was fully reimbursed for its contribution.  In effect, the
State responsibility. 
Federal Government provided almost all of the nursing
homes Medicaid funding, contrary to the principle that
Medicaid is a shared Federal-State responsibility. 
OIG recommended that the State (1) seek necessary authority to calculate the
nursing homes Medicaid per diem rate to more closely reflect operating costs and (2)
allow the nursing home to retain sufficient funding so that it can attract, hire, and retain
sufficient nursing staff to provide an adequate level of care to its residents.  The State did
not agree with the recommendations.  (A-02-02-01020)
  Disproportionate Share Hospital Payments
Medicaid requires States to make additional payments, called disproportionate share
hospital  (DSH)  payments,  to  hospitals  for  the  uncompensated  costs  of  serving
disproportionate numbers of low-income patients with special needs.  OIG recently issued
two DSH payment reports, one on Alabama and the other on Ohio. 
' AlabamaOIG found that Alabamas DSH payments did not comply with the
hospital-specific  payment  limits  mandated  by  the  Social  Security  Act.
Consequently, hospitals participating in the managed care arrangement were
overpaid about $66 million ($46 million Federal share) in FYs 1999 and 2000.
Also, hospitals were required to transfer about 86 percent of their DSH payments
back to the State via intergovernmental transfers.  The State made DSH payments
primarily to publicly owned hospitals because these hospitals could return the funds
to the State.  As a result, private hospitals were likely not reimbursed for all of their
uncompensated care costs.  
9 CENTERS FOR MEDICARE & MEDICAID SERVICES
OIG recommended that the State refund the $46 million, include an offset
for all enhanced payments in its DSH calculations, calculate uncompensated care
costs annually, and establish controls to ensure the reasonableness and allowability
of future uncompensated care costs.  The State disagreed.  (A-04-01-02006)
' OhioThis States DSH payments were in compliance with Federal requirements
and CMS policies, with one exception:  Ohio incorrectly included the 22- to 64-
year-old patient age group in the Medicaid inpatient utilization rate calculation for
its State-owned institutions for mental diseases (IMD).  As a result, Ohio made
approximately $80 million ($47 million Federal share) in DSH payments to seven
IMDs that did not meet the Medicaid inpatient utilization rate requirements.  
OIG recommended that Ohio revise its State plan to exclude the 22- to 64-
year-old age group in calculating the Medicaid IMD inpatient utilization rate for
future DSH reporting periods and refund the $47 million in Federal payments.  The
State disagreed with the recommendations.  (A-05-01-00058)
  Variation in State Medicaid Drug Prices
OIG  assessed  the  extent  to  which  States  vary  in  their  Medicaid  pharmacy
reimbursement for the same drugs.  This inspection found that the Medicaid program could
benefit from substantial savings if all States reimbursed pharmacies at prices closer to the
drug reimbursement prices paid by the lowest paying States.  OIG analyzed fiscal year
(FY) 2001 prescription drug reimbursement data for 28 drugs from 42 States.  The highest
paying States unit reimbursement price ranged from 12 to 4,073 percent more per drug
than the lowest paying State for the 28 drugs.  On average, the highest paying State paid
almost $200 more per package than the lowest paying State for these drugs.  Medicaid
could have saved $86.7 million in FY 2001 if all States had reimbursed at the same price
as the lowest paying State for each of the 28 drugs.  Multiple factors contributed to the
differences in drug prices across States.  Even States with the same formula for estimating
pharmacy acquisition costs demonstrated variation in their average annual reimbursement
prices.  
OIG recommended that CMS share average manufacturer price data with States,
conduct further research on the factors that affect States drug prices, and annually review
States reimbursement data to target technical assistance to higher paying States.  CMS
nonconcurred with the report due to concerns about the data but agreed with OIG that this
report raises serious issues that warrant attention.  (OEI-05-02-0068)
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  Medicaid Claims for Contractual Services
New Jersey contracted with a consulting firm to identify and submit to the Federal
Government unclaimed State expenses.  As a result of the firms efforts, the State claimed
$110.4 million for contractual service costs under the Medicaid DSH program.  OIG found
that $3.7 million ($1.8 million Federal share) was not eligible for Federal reimbursement
and that the State had not ensured the veracity of the claims prepared by the consulting
firm.    OIG  recommended  that  New  Jersey  refund  the  $1.8  million  to  the  Federal
Government, adhere to Federal and State guidelines when submitting future claims, and
review its consultants work.  The State agreed.  (A-02-03-01015)
Claims for Residents of Institutions for Mental Diseases
In two reports, OIG summarized its seven-State reviews of controls to preclude
States from claiming Federal Medicaid funds for services provided to 21- to 64-year-old
residents of IMDs.  The first report, which focused on residents who were temporarily
released to acute care hospitals for inpatient medical treatment, found that the seven States
(California, Florida, Maryland, New Jersey, New York, Texas, and Virginia) generally had
ineffective or no controls and, as a result, improperly claimed a total of $21.1 million in
Federal Medicaid funds.  The second report, which covered other medical and ancillary
services, noted that three States (Maryland, Texas, and Virginia) had no controls to prevent
Federal funding from being claimed, one State (New Jersey) had ineffective controls, two
States (New York and Florida) had generally adequate controls, and one State (California)
had effective controls and made no improper claims.  The remaining six States improperly
claimed a total of almost $2.5 million in Federal Medicaid funds.  
OIG recommended that CMS (1) reinforce to States that Federal Medicaid funds
may not be claimed for 21- to 64-year-old IMD residents, including those temporarily
released to acute care hospitals for inpatient medical treatment, (2) instruct States to
implement controls, where cost effective, to preclude such claims, and (3) advise States not
included in OIGs reviews of the audit findings and encourage them to review their
controls to prevent improper claims.  CMS concurred with the recommendations.  
(A-02-03-01002; A-02-03-01030)
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Hospital Patient Transfers Paid As Discharges
The objective of this review was to determine whether inpatient hospital claims for
patients transferred from one hospital to another on the same day were properly coded and
paid in accordance with North Carolinas Medicaid reimbursement requirements.  OIG
determined that 512 claims at 35 hospitals were for transfers incorrectly coded as
discharges.  OIG recommended that the State refund $1.85 million in overpayments and
establish procedures to prevent and detect coding errors.  The State agreed and took
appropriate corrective actions.  (A-05-03-00041)
Selective Provider Contracting Program
A portion of Californias Medicaid program operated under a Federal waiver known
as the Selective Provider Contracting Program.  The program allowed the State to contract
with selected hospitals to provide inpatient Medicaid services at rates typically lower than
those under traditional Medicaid rules.  The State used the rates to project savings under
the waiver and, based on those savings, made supplemental payments to hospitals. 
As a result of errors in the methods that the State used to project program savings,
the States savings were overstated.  Also, documentation did not adequately support
projected savings.  OIG recommended that the State revise its savings calculation methods;
recalculate program savings; determine whether supplemental payments exceeded the
recalculated  savings  and,  if  so,  refund  the  Federal  share;  and  maintain  adequate
documentation.  The State disagreed.  (A-09-02-00082)
Payments for Oxygen-Related Medical Equipment 
This report consolidates audits of 9 States and an analysis of the 41 other States and
the District of Columbia concerning Medicaid payments for oxygen-related durable
medical equipment (DME) and supplies.  Medicaid paid providers in six of the nine States
approximately $12.7 million ($7.3 million Federal share) more than Medicare would have
paid.  Specifically, four States with a requirement that Medicaid rates for oxygen-related
DME and supplies not exceed the Medicare rates overpaid Medicaid providers $10 million
($5.9 million Federal share).  Two States without that requirement could have saved
approximately $2.7 million ($1.4 million Federal share) if Medicaid rates had been limited
to the Medicare-allowable amounts.  In addition, OIGs analysis of data from the 41 other
States and the District of Columbia determined that 22 States and the District of Columbia
12 CENTERS FOR MEDICARE & MEDICAID SERVICES
could achieve significant savings by limiting Medicaid rates for oxygen-related DME and
supplies to the Medicare-allowable amounts.  
OIG recommended that CMS instruct those States that limit Medicaid rates to
Medicare reimbursement levels to apply the payment limits correctly and in a timely
manner and alert the remaining States to the opportunity to reduce Medicaid payments by
limiting reimbursement rates to the Medicare-allowable amounts.  CMS officials generally
agreed.  (A-05-03-00018)
School-Based Services
A 1988 amendment to the Social Security Act allows Medicaid coverage of school-
based health services, including transportation, for children with disabilities or special
needs.  OIG reviewed two States to determine whether claims for school-based services
were allowable for Federal reimbursement.
' New YorkOf 110 transportation claims sampled in this State, 97 did not comply
with Federal and State requirements and 96 had more than 1 deficiency.  The
deficiencies occurred because the State provided to its schools and preschools
improper guidance about CMSs requirement for documentation, school health
providers did not comply with other guidance they had received, and the State did
not adequately monitor transportation claims from providers.  As a result, over
$17.2 million in Federal funding was unallowable, and nearly $35.8 million was set
aside for further review.
OIG recommended that New York refund $17.2 million to the Federal
Government, work with CMS to resolve the set-aside claims, and improve its
guidance and oversight of school-based transportation claims.  New York disagreed
with the recommendations.  (A-02-03-01008)
' North CarolinaOf 200 sampled claims in North Carolina, 146 did not meet
Federal and State reimbursement requirements.  The State did not provide sufficient
guidance to local education agencies, have adequate policies to support Medicaid
billing rates, monitor local education agencies to ensure that the State share was
met, or have adequate controls to prevent improper payments for school-based
services.
OIG recommended that North Carolina refund $2.8 million to the Federal
Government and implement procedures to prevent improper payments.  North
Carolina generally disagreed with the recommendations.  (A-04-01-00005)
13 CENTERS FOR MEDICARE & MEDICAID SERVICES
Rehabilitative Treatment Services
At the request of CMS, OIG reviewed Iowas Rehabilitative Treatment Services
Group  Care  program,  which  provides  behavioral,  psychological,  and  psychosocial
treatment in a group care setting for Medicaid recipients age 20 or under.  Of the 100
claims sampled, 46 did not meet Medicaid reimbursement requirements.  Based on the
sample, OIG estimated that $3.3 million of the $14.4 million in Federal funds claimed for
FY 2001 was unallowable. 
OIG recommended that the State refund the $3.3 million and strengthen its policies
and procedures.  The State disputed some of the questioned claims.  After reviewing the
States additional documentation, OIG agreed that certain claims were allowable and
modified the refund recommendation.  (A-07-02-03026) 
Medicaid Fee-for-Service Payments for 
Medicare Managed Care Enrollees
This audit found that Ohio made unallowable Medicaid fee-for-service payments
for beneficiaries enrolled in Medicare managed care organizations.  Based on a statistical
sample, OIG estimated that the unallowable Medicaid payments totaled $4.6 million ($2.7
million Federal share) during the fiscal year ended June 30, 2001.  The States system for
processing Medicaid claims did not have controls to prevent such improper payments.  
OIG recommended financial adjustments and improvements in internal controls.
State officials did not concur.  (A-05-02-00085)
Physician Drug Rebates
OIG found that from 1997 to 2000, Medicaid spending for outpatient prescription
drugs grew twice as fast as total Medicaid spending.  In 2000, Medicaid expenditures for
these drugs were $21 billion.  Under the Medicaid drug rebate program, manufacturers are
required to provide rebates on drugs paid for by a State.  To receive rebates, States must
identify the drugs by their national drug code.  Most States, however, use procedure codes
to identify physician-administered drugs and have not developed crosswalks, which
identify the national drug codes that match procedure codes.  States that had crosswalks
as of 2001 and were able to provide data requested $23 million in rebates on these drugs.
OIG  found that in 2001, Medicaid could have added millions to its rebate savings,
14 CENTERS FOR MEDICARE & MEDICAID SERVICES
primarily from  single-source drugs, if every State had collected rebates for all single-
source and 40 multiple-source, physician-administered drugs.  The majority of savings was
from the single-source drugs.  As of March 2003, 24 States still did not collect rebates on
physician-administered drugs.  The study indicates
a States savings in a single year could exceed the
one-time costs of implementing system changes in OIG found that from 1997 to
order to collect rebates for these drugs.  2000, Medicaid spending for
OIG recommended that CMS continue to outpatient prescription drugs
encourage States to collect rebates for physician- grew twice as fast as total
administered drugs, especially single-source drugs. Medicaid spending.  In 2000,
To  facilitate  rebate  collection,  CMS  should Medicaid expenditures for these
encourage  cooperation  and  information  sharing drugs were $21 billion.  
between States that collect rebates for these drugs
and States that do not.  CMS could also inform
States of the availability of the Medicare programs crosswalk, which  States could use to
reduce the administrative costs of creating and/or updating their own crosswalks.  CMS
concurred with the recommendations.  (OEI-03-02-00660)
New Yorks Drug Rebate Program
Under  the  Medicaid  drug  rebate  program,  State  Medicaid  agencies  bill
manufacturers for rebates based on the States records of drugs dispensed during the
quarter.  The States are required to report their rebate activity and outstanding rebate
amounts to CMS.  This audit found that New York State could achieve additional savings
of $3.3 million ($1.65 million Federal share) a year by seeking rebates for section 340B
entities that do not bill the State at discounted prices. (The 340B Drug Discount Program
requires pharmaceutical manufacturers to sell their products to 340B entities, such as
public hospitals, at or below a specified ceiling price.)  In addition, OIG noted that the
State did not report to CMS an estimated balance of $350.6 million in outstanding rebates
and understated the Federal share of some drug rebates by approximately $730,000 per
year.  
OIG recommended that the State work with CMS to realize the additional savings,
improve the programs processes and controls, ensure that the Federal Government
receives its share of drug rebates, and use the estimate of outstanding rebates to develop
a viable accounts receivable system for the program.  The State generally concurred with
the recommendations.  (A-02-03-01009)
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Incarcerated Beneficiaries
Federal Medicaid payments are not available for services provided to incarcerated
beneficiaries except when an inmate becomes an inpatient in a medical institution.  This
review aimed to quantify the Medicaid funds, if any, improperly used to pay for inmates
outpatient health care services and the potential cost savings if Medicaid had not allowed
Federal funding of inmates inpatient services.  Based on statistical samples, OIG estimated
that improper Federal Medicaid payments for outpatient services totaled $1.5 million and
that Medicaid could have saved about $1.5 million (Federal share) if the Medicaid payment
policy on inmates inpatient services had been consistent with the policy on outpatient
services. 
OIG recommended that CMS ensure that States have effective procedures for
identifying incarcerated beneficiaries so that Federal funds are not claimed for outpatient
services.  OIG also recommended that CMS consider a policy change to exclude Federal
sharing of payments for inpatient services provided to incarcerated beneficiaries.  CMS
concurred with OIGs recommendations.  (A-04-02-06002)
  Deceased Beneficiaries
The Social Security Administration maintains a comprehensive file on all reported
deaths of people who have Social Security numbers.  This information is available to State
and Federal agencies as a way to prevent payments for services claimed to have been
rendered after a beneficiarys death.  However, based on a statistical sample covering a 3-
year period, OIG estimated that Tennessee paid $5 million ($3.2 million Federal share) for
Medicaid services claimed to have been rendered after beneficiaries deaths.  
OIG recommended that the State review the sampling universe to identify
and refund overpayments made on behalf of deceased beneficiaries, develop procedures
for identifying deceased enrollees and develop a policy to allow for the recovery of
capitation and fee-for-service overpayments.  The State partially agreed.  (A-04-02-07020)
SCHIP:  States Progress in Reducing 
the Number of Uninsured Children
Of the 46 States that submitted 2002 State Childrens Health Insurance Program
(SCHIP) Annual Reports as of June 1, 2003, this inspection found that 44 provided some
response to the requirement that all States describe their progress in reducing the number
16 CENTERS FOR MEDICARE & MEDICAID SERVICES
of uninsured, low-income children in their Annual Reports.  However, only 22 of these
States directly addressed the CMS regulation to report on change in the number of
uninsured children.  Of these 22 States, 17 reported a reduction in the number of uninsured
children, 3 reported an increase, and 2 reported no change.  National data indicate that the
rate of uninsured children nationally has declined.
Instead of measuring changes in insurance among children, 19 other States
responded to this requirement by reporting on SCHIP enrollment, and 3 States reported on
something other than the number of uninsured children or SCHIP enrollment.  Two States
submitted Annual Reports that did not provide any response to this requirement.  This
report recommended that CMS resolve the inconsistency between the requirement that
States report on changes in the number of uninsured children and the practice of accepting
enrollment data as a proxy.  In addition, CMS should ensure the integrity, validity, and
usefulness of the SCHIP Annual Report and SCHIP enrollment data.
This report fulfills the congressional mandate under SCHIP that OIG assess States
progress in reducing the number of uninsured, low-income children.  It also reviews States
self-assessment methods and CMSs oversight of them.  (OEI-05-03-00280)
      Outreach
OIG has continued to issue advisory opinions, special fraud alerts, special advisory
bulletins, and other guidance as part of its ongoing effort to promote the highest level of
ethical and lawful conduct by the health care industry.
Advisory Opinions
In  accordance  with  section  205  of  the  Health  Insurance  Portability  and
Accountability Act of 1996, OIG, in consultation with the Department of Justice, may issue
advisory opinions to outside parties regarding the interpretation and applicability of certain
statutes relating to the Medicare and State health care programs.  This authority allows OIG
to provide case-specific formal guidance regarding the application of the anti-kickback
statute and safe harbor provisions, and other OIG health care fraud and abuse sanctions.
From the period April 1, 2004,  through September 30, 2004, OIG received 27 advisory
opinion requests and issued 10 advisory opinions.
Compliance Guidance
Because the great majority of providers are honest and want to avoid fraud and
abuse, OIG is actively working with the private sector to develop methods to prevent the
submission of improper claims and inappropriate conduct.  OIG has already initiated
significant  outreach  efforts  with  the  private  sector  to  encourage  these  compliance
17 CENTERS FOR MEDICARE & MEDICAID SERVICES
endeavors.    OIGs  compliance  program  guidances  are  available  on  the  Internet  at
http://oig.hhs.gov in the Fraud Prevention & Detection section.
OIG has developed and released 11 compliance program guidances for: clinical
laboratories, hospitals, home health agencies, third-party billing companies, durable medical
equipment,  prosthetics,  orthotics  and  supply  industry,  hospices,  Medicare+Choice
organizations that offer coordinated care plans, nursing homes, individual and small group
physician practices, ambulance service providers, and pharmaceutical manufacturers.  OIG
issued a draft supplemental guidance for the hospital industry and is developing a guidance
for recipients of NIH research grants.
Provider Self-Disclosure Protocol
In keeping with a longstanding commitment to assist providers and suppliers in
detecting  and  preventing  fraudulent  and  abusive  practices,  OIG  established  a  set  of
comprehensive guidelines for voluntary self-disclosures, titled Provider Self- Disclosure
Protocol, available on the Internet at http://oig.hhs.gov in the Fraud Prevention &
Detection section. 
Essentially, the Protocol guides providers and suppliers through the process of
structuring a disclosure to OIG of matters that appear to constitute potential violations of
Federal laws (as opposed to honest mistakes that may have resulted in overpayments).  After
making an initial disclosure, the provider or supplier is expected to undertake a thorough
internal investigation of the nature and cause of the matters uncovered and make a reliable
assessment of their economic impact (e.g., an estimate of the losses to Federal health care
programs).  OIG evaluates the reported results of each internal investigation to determine
the appropriate course of action.  
To date, OIG has received 234 submissions.  Self-disclosure cases have resulted in
49 recoveries and 35 settlements, totaling over $86.8 million collectively.  Examples
include the following:
' North CarolinaSoutheastern Regional Medical Center voluntarily disclosed a
billing problem it discovered in the billing practices of a subsidiary, now closed.
Through an internal audit, Southeastern discovered that some claims for alcohol
and  drug  rehabilitation  services  were  submitted  with  an  incorrect  principal
diagnosis code.  All cases using the incorrect code were reviewed to determine the
overpayment.  The case was referred to the fiscal intermediary for resolution and
Southeastern paid $1.5 million in overpayments to resolve this matter.
18 CENTERS FOR MEDICARE & MEDICAID SERVICES
' South  CarolinaTo  resolve  a  self-disclosure  made  to  OIG,  Piedmont
Orthopaedics Associates, P.A., agreed to pay the Government $411,000 and enter
into a 3-year corporate integrity agreement for submitting improper claims between
May 2001 and May 2003.  Piedmont submitted claims to Medicare and Medicaid
for  occupational  therapy  services  which  were  not  supported  by  adequate
documentation and/or were for more units of therapy than were actually provided.
' VirginiaInova Health System paid $125,000 to resolve a self-disclosure matter
relating to the hospitals relationships with three excluded individuals.  The
hospital initially notified the OIG that it had hired two nursing employees who
were excluded individuals.  During the hospitals review of the facts surrounding
the initial disclosure, the hospital also identified an excluded physician who was
under contract to provide part-time house staff services.  As part of the settlement,
the hospital agreed to certify for 3 years that it is screening all prospective and
current employees, contractors, and physicians. 
' PennsylvaniaSt. Lukes Quakertown Hospital agreed to pay $52,000 and a
$10,000 civil monetary penalty to resolve issues raised in the hospitals self-
disclosure of its employment of an excluded individual.  After performing a routine
check of OIGs List of Excluded Individuals/Entities in 2003, St. Lukes identified
one employee, a registered nurse, who was excluded in 2001, almost a year after
she was hired.  The settlement agreement requires St. Lukes to submit an annual
certification for 3 years, indicating that the hospital is appropriately screening all
prospective and current employees, contractors, and physicians against the list. 
  Federal and State Partnership:  Joint Audits of Medicaid
One of OIGs major outreach initiatives has been to work more closely with State
auditors in reviewing the Medicaid program.  A Partnership Plan was developed to foster
these joint reviews and provide broader coverage of the Medicaid program.  The
partnership approach has been an overwhelming success in ensuring more effective use of
scarce audit resources by both the Federal and the State audit sectors.  To date, partnerships
have been developed in 25 States.
Reports issued to date have resulted in identifying over $262.8 million in Federal
and State savings and have led to joint recommendations for savings at the Federal and State
levels, as well as improvements in internal controls and computer system operations.
19 CENTERS FOR MEDICARE & MEDICAID SERVICES
  OIG Administrative Sanctions
During this reporting period, OIG administered 1,910 sanctions in the form of
program exclusions or administrative actions for alleged fraud or abuse or other activities
that posed a risk to Federal health care programs and their beneficiaries.  A brief
explanation of these sanction authorities can be found in Appendix F.
Program Exclusions
During this reporting period, OIG excluded 1,749 individuals and entities from
participating in the Medicare and Medicaid programs and other federally sponsored health
care programs.  Most of the exclusions resulted from convictions for crimes relating to
Medicare or Medicaid, for patient abuse or neglect, or as a result of license revocation.
Examples include the following:
' OhioA gynecologist was excluded for 60 years based on his conviction for rape,
sexual  battery,  and  sexual  imposition  against  15  separate  patients  over  an
approximate 16-month period.  He was sentenced to 20 years for rape and 25 years
for sexual battery.  
' TexasAn internist was excluded for 27 years based on his conviction for
electronically submitting, or causing to be submitted, false claims for medical
services and testing to Medicare, Medicaid, the Federal Employees Health Benefits
Program, and private health insurers during a 4-year period.  The internist not only
submitted false claims for allergy services that were not covered, but also had his
staff randomly select 13 to 15 patient files per week to create phantom billings
for patients he had not seen or treated on the claimed date of service.  The court
ordered him to pay more than $4 million in restitution and to serve 60 months in
jail.  In addition, his Texas license to practice medicine was revoked. 
' NevadaA  husband  and  wife  were  excluded  for  15  years  and  20  years,
respectively, for executing a Medicare fraud scheme over a 3-year period.  They
visited nursing homes and community centers in Utah, Nevada, and Arizona to find
Medicare beneficiaries to whom they could sell DME.  To get the beneficiaries to
release their names and Medicare identification numbers, the couple made many
misrepresentations, including that Congress had passed the Fair Foot Bill,
making shoes available to all Medicare beneficiaries at no charge.  Though the
couple  only  supplied  shoes  to  the  beneficiaries,  they  used  their  Medicare
information to fraudulently bill for numerous products.  The court ordered the 
20 CENTERS FOR MEDICARE & MEDICAID SERVICES
husband to be incarcerated for 21 months and the wife for 46 months.  They were
also ordered to pay $1.4 million in joint restitution.  
' FloridaA man was sentenced to 10 years in prison, lost his State nursing license,
and received a 20-year exclusion after being convicted of a criminal offense related
to the neglect or abuse of patients in connection with the delivery of a health care
item or service.  He committed sexual battery on a child less than 12 years of age.
' MichiganA nursing home was excluded for 5 years based on  its conviction for
involuntary manslaughter.  A resident at the Medicare facility had been found dead
outside after the resident left the facilitys Alzheimers unit unobserved. 
' WashingtonUnder the terms of a settlement agreement with OIG, the former
head of the Nephrology Division at a medical school agreed to be excluded from
participation in Federal health care programs for a 3-year period.  The settlement
resolved allegations that the physician submitted or caused to be submitted false or
fraudulent claims for nephrology services.  OIG alleged that the claims were false
because they reflected that the physician was present during dialysis treatments
when, in fact, the physician was not present. 
' FloridaIn a settlement with OIG, the former president and CEO of a small
hospital in Colorado agreed to be excluded for 3 years.  Previously, he was
convicted of theft of public funds involving his use of Department of Veterans
Affairs payments that were deposited into an account he held jointly with his
stepmother (the intended beneficiary of the funds).  The funds were deposited into
the account for 14 years following the stepmothers death. 
Affirmative Exclusion Action
' CaliforniaLast year, the United States entered into a civil settlement with
Redding Medical Center (RMC), a 246-bed hospital owned by Tenet Healthcare
Corporation, Inc. (Tenet). The settlement resolved RMCs liability under the False
Claims Act but did not resolve RMCs liability under OIGs permissive exclusion
authority.    OIG  issued  a  notice  of  intent  to  exclude  RMC  under  section
1128(b)(6)(B) of the Social Security Act. The basis for the Notice was OIGs initial
determination that from at least May 1999 through May 2002, RMC furnished or
caused to be furnished to patients cardiac services that were medically unnecessary
and of a quality which failed to meet professionally recognized standards of health
care. Tenet agreed to divest RMC to an unrelated third party and OIG agreed to
withhold issuing a formal notice of exclusion for the conduct at issue.
21 CENTERS FOR MEDICARE & MEDICAID SERVICES
Civil Monetary Penalties
The  Civil  Monetary  Penalties  Law  (CMPL)  authorizes  OIG  to  impose
administrative penalties and assessments against a person or entity that submits claims to
a Federal health care program that the person or entity knows or should know are false or
fraudulent.  During this reporting period, OIG collected over $874,000 in civil monetary
penalties and assessments.  For example: 
' OklahomaWadley Ambulance Service (WAS) agreed to pay $28,000 to resolve
its liability under the CMPL for employing an individual that WAS knew or should
have known was excluded from participation in Federal health care programs.  OIG
alleged that the owner of WAS employed his half-brother to work as an Emergency
Medical Technician for WAS.  Notwithstanding the half-brothers exclusion, WAS
continued to employ him for almost a year after the date of exclusion.  As part of
the settlement, WAS agreed to submit an annual certification to OIG for 3 years
attesting that it has a policy for screening all current and prospective employees and
contractors.
Kickbacks
Individuals or entities that engage in unlawful referral or kickback schemes may be
subject to criminal penalties under the Federal criminal anti-kickback statute, civil
monetary penalties under OIGs CMPL authority, and/or program exclusion under OIGs
permissive exclusion authority.  A description of these enforcement authorities can be
found in Appendix F.  The following is an example of a kickback enforcement action during
this reporting period:
' New JerseyAn internist agreed to pay $500,000 and enter a 5-year integrity
agreement to resolve his CMPL liability for allegedly violating the Stark Law and
anti-kickback statute.  The internist entered into two lease agreements with a home
health agency/durable medical equipment supplier to which he referred Federal
health care program beneficiaries.  The investigation uncovered that neither lease
was commercially reasonable and that both were shams to disguise kickbacks paid
to the internist in exchange for referrals. 
Patient Dumping
Between April 1, 2004, and September 30, 2004, OIG collected civil monetary
penalties of more than $237,000 from 11 hospitals and one physician under the Emergency
Medical  Treatment  and  Labor  Act,  a  statute  designed  to  ensure  patient  access  to
appropriate emergency medical services.  The following are examples of settlements
involving alleged violations of this statute:
22 CENTERS FOR MEDICARE & MEDICAID SERVICES
' LouisianaChristus Schumpert Health System paid $50,000 to resolve allegations
that it failed to screen or treat two pregnant women who presented to the hospitals
emergency department.  Both women were told to go to another hospital for help.
One delivered her baby in the parking lot of the second hospital.
In another Louisiana case, a doctor paid $10,000 to resolve allegations that
he refused to examine and treat a pregnant 17-year-old who presented to the
emergency department complaining of perineal numbness and vaginal bleeding.
The doctor mistakenly believed he could not examine or treat the patient without
parental consent.  The patient died the next day due to an ectopic pregnancy.
' MinnesotaSioux Valley Regional Health Services, doing business as Sioux
Valley Canby, paid $15,000 to resolve an allegation that it failed to provide an
appropriate medical screening and treatment to a baby who presented in the
evening with vomiting and a high fever.  The baby was taken to a hospital more
than 18 miles away where he was admitted and treated for pneumonia and
dehydration. 
' IllinoisGood Samaritan Regional Health Center paid $15,000 to resolve an
allegation that it failed to provide appropriate examination and treatment to a man
who presented by ambulance with the chief complaint of rectal bleeding.  He was
turned away because the hospital was on diversion status.  He proceeded to another
hospital where he was found to have a life-threatening upper gastrointestinal bleed.
Good Samaritan implemented a comprehensive corrective action plan immediately
after this incident. 
' IowaOttumwa Regional Health Center paid $15,000 to resolve an allegation that
it failed to provide an appropriate screening, treatment, or transfer of a 76-year-old
man who presented with complaints of severe pain and inability to urinate.  The
man went to another hospital where he was given pain relief and emergency
surgery. 
' New YorkCarthage Area Hospital paid $10,000 to resolve an allegation that it
failed  to  provide  an  appropriate  medical  screening  examination,  stabilizing
treatment, or transfer of a man who rolled over in an all-terrain vehicle.  He
complained of pain in his chest, neck, back, and shoulder blades, and of difficulty
breathing.  He was diagnosed with two fractures and allegedly discharged while he
was still in a great deal of pain. Within one hour of discharge he was taken by
ambulance to another hospital where he was found to have additional fractures of
ribs and his back, requiring surgery. 
23 CENTERS FOR MEDICARE & MEDICAID SERVICES
  Criminal and Civil Enforcement
One of the most common types of fraud perpetrated against Medicare, Medicaid,
and  other  Federal  health  care  programs  involves  the  filing  of  false  claims  for
reimbursement.  False claims may be pursued under the civil False Claims Act and, in
appropriate cases, under Federal and State criminal statutes.  A description of these
enforcement authorities can be found in Appendix F.  The successful resolution of these
matters often involves the combined investigative efforts and resources of OIG, the FBI,
Medicaid Fraud Control Units (MFCUs), and a variety of other law enforcement agencies.
OIG has the responsibility to assist the Department of Justice in bringing and
settling cases under the civil False Claims Act.  Many providers elect to settle their cases
prior to litigation.  As part of their settlements, providers often agree to enter integrity
agreements with OIG to avoid exclusions and be permitted to continue to participate in
Medicare, Medicaid, and other Federal health care programs.  These agreements are
monitored by OIG and require the providers to establish compliance programs.  The
compliance programs are designed, in part, to prevent a recurrence of the underlying
fraudulent activities.
In the 6 months ending September 30, 2004, the Government negotiated more than
$297 million in False Claims Act civil settlements related to Medicare,  Medicaid, and
other Federal health care programs.  Some of these successful settlements, as well as
notable criminal enforcement actions, are described below.  Summaries are organized by
the sector of the health care industry involved or by the nature of the offense.
Prescription Drugs
' MassachusettsAs part of a global settlement for $430 million plus interest, Pfizer
Inc.  (Pfizer),  Warner-Lambert  Company  LLC  (Warner-Lambert),  and  the
Parke-Davis Division agreed to pay $190 million in a civil False Claims Act
settlement relating to Warner-Lamberts promotion of the drug Neurontin.  Pfizer
acquired Warner-Lambert and its Parke-Davis Division in June 2000.  Between
July 1995 and June 2001, Neurontin was approved by FDA only for use in treating
epilepsy, but Warner-Lambert allegedly engaged in a wide-ranging program to
promote Neurontin for other uses.  The Government alleged that Warner-Lambert
promoted Neurontin for a variety of conditions for which FDA had not approved
the use; offered and paid illegal remuneration to doctors to induce them to promote
and prescribe Neurontin for off-label uses; and made and/or disseminated false
24 CENTERS FOR MEDICARE & MEDICAID SERVICES
statements about Neurontin in presentations and marketing literature provided to
doctors.  The Government alleged that these activities caused the submission of
false and/or fraudulent claims to Medicaid.  
To resolve its criminal liability, Warner-Lambert pled guilty to violating
the Federal Food, Drug and Cosmetic Act and agreed to pay a $240 million
criminal fine.  Pfizer entered a comprehensive 5-year corporate integrity agreement
with OIG which superceded an existing corporate integrity agreement. 
' PennsylvaniaRite Aid Corporation agreed to pay $7 million and enter a 4-year
corporate integrity agreement to resolve its civil and administrative liability relating
to the submission of claims to Medicaid and other Government health care
programs for partially-filled prescriptions for drugs that were not delivered to the
beneficiaries and, in some instances, were ultimately returned to stock.  In addition
to the settlement with the Federal Government, Rite Aid entered settlements with
28 States and the District of Columbia to resolve alleged liability to the States for
the Medicaid damages.  In a model of law enforcement cooperation, the Federal
Government worked jointly with the MFCUs on this case. 
  Practitioners
' WashingtonThe  Association  of  University  Physicians,  doing  business  as
University of Washington Physicians and as Childrens University Medical Group
(collectively referred to as the UW FPPs), agreed to pay $34.4 million and enter a
5-year corporate integrity agreement.  During the relevant time period, the UW
FPPs  employed  and/or  billed  for  the  services  of  teaching  physicians  who
supervised residents and interns at the University of Washington.  An audit and
investigation determined that the UW FPPs allegedly submitted false claims to the
Medicare, Medicaid, and TRICARE programs.  The claims were allegedly false
because the physicians failed to appropriately document their presence during the
rendering of professional services by residents and interns, and/or were not present
during the rendering of such services.  Other claims were for improperly upcoded
services. 
' AlabamaA psychologist was sentenced to 33 months in prison and ordered to
pay $1.8 million in restitution.  From 1998 to 2000, the psychologist allegedly
submitted false claims to Medicare for services performed primarily by masters-
level psychology graduate students as though he rendered the services himself.  He
also  allegedly  billed  Medicare  for  a  predetermined  number  of  hours  of
psychological testing services regardless of the actual amount of time spent with
patients. 
Another physician in Alabama was sentenced to 57 months imprisonment
25 CENTERS FOR MEDICARE & MEDICAID SERVICES
and ordered to pay $926,000 in restitution and a $557,000 fine for mail fraud.  The
physician  submitted  false  documentation  to  a  pharmaceutical  company  she
contracted with as an investigator in a clinical study conducted for FDA approval
of a new drug.  She falsely stated that certain persons participated in and completed
the study when they had not, and she submitted Medicare claims for subsequent
office visits to study patients when such visits never occurred.  
' New YorkA dentist was sentenced to 63 months in prison (16 months of which
was suspended) and ordered to pay $225,000 in restitution for false statements
relating to health care matters and mail fraud.  The dentist billed insurers for
services that were upcoded or never rendered.  To increase his earnings, the dentist
also performed oral surgeries on patients who did not need the treatments.  
' VirginiaA physician was sentenced to 18 months incarceration and ordered to
pay a $10,000 fine and $191,000 in restitution for health care fraud in connection
with false claims he submitted to Medicare and a private insurer.  The physician,
who operated a medical office, routinely submitted reimbursement forms reflecting
charges for patients who received no medical services or received services less
complex than those billed.  The investigation into his billing practices began when
the  private  insurer  observed  that  the  physicians  billing  submissions  were
inconsistent with the billings by other medical providers in the area.  Shortly after
the private insurer requested to review the physicians medical files, a fire occurred
at his medical office.  Officials determined the fire began by arson.  Although a
grand jury returned an indictment charging the physician with arson in connection
with the fire, the Government dismissed the charge in exchange for his guilty
plea to health care fraud. 
Hospitals
' FloridaThe  Government  entered  into  a  settlement  agreement  with  Tenet
Healthcare Corporation and several of its subsidiaries including AMISUB (North
Ridge Hospital), Inc., doing business as North Ridge Medical Center, and 106
Tenet hospitals to resolve two sets of allegations.  With regard to North Ridge
Medical Center, Tenet agreed to pay $22.5 million plus interest to settle allegations
that it falsely billed Medicare for medical services provided pursuant to referrals
by 11 physicians with whom Tenet had improper financial relationships under the
Stark Law, and that Tenet included various non-reimbursable costs on its cost
reports.  With regard to the group of 106 hospitals, Tenet agreed to pay $8.3 million
to settle allegations that from January 1992 through December 2000, the group of
106  hospitals  falsely  billed  Medicare  and  improperly  received  higher
reimbursement for inpatient discharges when the patients were actually transferred
to other hospitals.
26 CENTERS FOR MEDICARE & MEDICAID SERVICES
' WisconsinSt. Lukes Medical Center agreed to pay $2.2 million to resolve its
civil and administrative liabilities for submitting false claims involving cardiac
investigational devices and procedures performed by a hospital physician.  The
Government alleged that from March 1994 through February 2000, St. Lukes
submitted false claims to Medicare for aortic aneurysm repairs performed by the
physician  with  an  investigational  stent-graft  device,  when  the  devices  and
procedures were not covered by Medicare.  From March 1994 to January 1997, the
devices and procedures were not covered because they lacked FDA approval.  From
January 1997 through February 2000, the devices and procedures had FDA
approval but were not covered because the physician did not follow FDA and
Institutional Review Board protocols.  In addition to St. Lukes, Wisconsin Heart
and Vascular, S.C., agreed to pay $163,000 in a separate settlement to resolve
similar allegations.  
  Medicare Contractors
' CaliforniaAetna Life Insurance Company, CareFirst Blue Cross Blue Shield, and
Manor Care, Inc., entered into settlement agreements with the Government to settle
allegations relating to false skilled nursing facility cost reports submitted to
Medicare.  To resolve their False Claims Act liability, Aetna and CareFirst each
agreed to pay $3 million, and Manor Care agreed to pay $8.4 million.  At issue in
the three settlements was an agreement between Manor Care, a nursing home chain,
and its then fiscal intermediary (FI), Aetna, which set a ceiling and floor for nursing
ratios  that  determined  Manor  Cares  Medicare  reimbursement.    Under  the
agreement, which was in place from 1992 through 1998, Aetna agreed not to audit
Manor Cares cost reports.  In September 1997, CareFirst became the FI and
continued the agreement until 1998. 
' New YorkHealthNow New York, formerly known as BlueCross BlueShield of
Western New York, agreed to pay $2.6 million as part of a settlement agreement.
The government alleged that during the years 1990 through 1994, the Medicare
carrier  falsely  reported  certain  performance  information  to  CMS  and
inappropriately  charged  Medicare  for  costs  relating  to  its  private  insurance
business.  In October 1999, two corporate officers and two other employees were
sentenced for their involvement in this matter.*  
______________________________________________________
*  This narrative was revised in December 2004 to correct an error.
27 CENTERS FOR MEDICARE & MEDICAID SERVICES
  Laboratories
' CaliforniaHealth Line Clinical Laboratories, Inc., and two individual defendants
agreed to pay $10 million to the Government and the State of California to resolve
their False Claims Act liability.  From January 1996 through September 2003,
Health Line allegedly added certain esoteric and expensive laboratory tests to
commonly ordered laboratory panels, thereby enabling physicians to order the tests
unwittingly.  From September 1997 through September 2003, Health Line also
allegedly substituted the primary test used for syphilis screening with a more
expensive test not approved by the FDA and billed that test using a general code
to avoid detection by the Medicare carrier.  As part of the settlement, Health Line
also entered a comprehensive 5-year corporate integrity agreement that requires,
among other things, an independent annual review of the laboratorys billings to
both Medicare and Medi-Cal, Californias Medicaid program. 
' IllinoisA laboratory owner was sentenced to 5 years incarceration and ordered
to pay $2.5 million in restitution for mail fraud.  Through his laboratory which
provided services to more than 100 nursing homes, the owner billed Medicare and
Medicaid for tests not performed and fraudulently claimed mileage to obtain lab
specimens.  
Home Health Agencies (HHAs)
' WyomingBanner Health Systems Corporation agreed to pay $6.1 million to
resolve its civil and administrative liabilities for allegedly submitting improper
claims to Medicare.  Between 1995 and 1999, Banner billed Medicare for patients
who did not require skilled nursing services and for chronically ill patients for
whom no changes in their plans of care occurred to qualify them for home health
services.  All of the Banner-owned HHAs in Wyoming were included within the
settlement agreement.  Banner also agreed to maintain its corporate compliance
program and submit annual reports to OIG for 3 years. 
' MichiganThree individuals and an HHA were ordered to pay $866,000 in
restitution for conspiracy to commit health care fraud and mail  fraud.  The
president of the HHA and her husband, a director for the HHA, were sentenced to
respective terms of 48 months and 30 months in prison and were each ordered to
pay a $100,000 fine.  Through the HHAs cost reports, the two billed Medicare and
a private insurer for the construction of their luxury home, including contractors
salaries and building materials.  The general contractor, listed as a ghost employee
28 CENTERS FOR MEDICARE & MEDICAID SERVICES
on the HHAs cost reports, was also sentenced to 15 months in prison, and the
HHA was ordered to pay a $10,000 fine. 
' OhioA billing and payroll manager at an HHA was sentenced to 30 months
incarceration and ordered to pay $145,000 in restitution for wire fraud, mail fraud,
and health care fraud.  The manager made computer data entries representing home
health visits that never occurred.  These fabricated entries caused paychecks to be
improperly generated in the names of nurses and home health aides, and caused
programs, including Medicaid, to be inappropriately billed.  The manager deposited
these checks into her own bank account. 
Ambulance Company
' CaliforniaAmerican Medical Response West, Inc., an ambulance company,
agreed to pay the Government $3.5 million and enter a 5-year corporate integrity
agreement with OIG.  The settlement resolved the companys False Claims Act
liability for the submission of false claims for ambulance transport services from
January 1995 through December 1999.  The Government alleged that American
Medical Response West routinely billed Medicare for emergency transports that
originated with a 911 call and/or were scheduled critical care transports when, in
fact, the beneficiaries were in non-emergency conditions.  
Nursing Homes
' CaliforniaA 76-bed nursing home and its owner were sentenced for grossly
inflating the cost of nursing care rendered to the facilitys Medicare patients.  The
owner was sentenced to 78 months in prison and ordered to pay $1.6 million in
restitution for health care fraud, filing three false cost reports from 1996 to 1998,
making false statements to Medicare auditors, and obstructing a Federal audit. 
' GeorgiaWestbury Medical Care Home, Inc., and Brightmoor Health Care, Inc.,
agreed to pay the Government $430,000 to resolve the skilled nursing facilities
False Claims Act liability.  From January 1998 to July 1998, Westbury and
Brightmoor allegedly submitted false claims to Medicare in connection with
respiratory  services  that  were  not  actually  performed,  or  were  medically
unnecessary, substandard in quality, and/or provided under inadequate supervision.
In addition, Westbury and Brightmoor each agreed to enter a 5-year corporate
integrity agreement. 
29 CENTERS FOR MEDICARE & MEDICAID SERVICES
' VirginiaBeverly Enterprises, Inc., owner and operator of Beverly Healthcare at
Fredericksburg, agreed to pay the Government $315,000 for allegedly providing
inadequate care to Medicare and Medicaid residents from 1998 through 2003.  The
investigation found that the nursing home provided poor quality of care, resulting
in residents falling and suffering bone fractures.  Staff members at the home also
allegedly placed residents in physical restraints unnecessarily and failed to follow
doctors orders in procedures such as administering oxygen.  Part of the settlement
amount will be used to hire five new care givers, and another part will be set aside
for equipment to enhance the residents quality of life. 
' PennsylvaniaBrinton Manor Nursing Facility agreed to enter a False Claims Act
settlement to resolve allegations that it billed for poor quality services.  Although
Brinton had a history of poor quality of care at the facility, the case focused on one
resident whose care with respect to diabetes blood level monitoring resulted in her
death.  Brinton agreed in the settlement to pay at least $90,000 and hire a full-time
clinical practice nurse specialist for at least 2 years to work with staff to improve
care for residents with diabetes.  Brinton subsequently hired this specialist.  (If
Brinton had failed to hire the nurse specialist, it agreed to pay the Government an
additional $20,000.)  The nursing home also agreed to pay up to $40,000 for the
cost of a monitor for at least 1 year.  
Also in Pennsylvania, Majestic Oaks Nursing Home agreed to pay the
Government $50,000 to resolve its liability for providing poor quality services.
Based on a history of poor quality of care at the facility, the case involved
deficiencies stemming from a high turnover of personnel and a lack of proper
management and protocols.  The deficiencies included a  high number of resident
falls and inadequate services with respect to pressure ulcer care and the prevention
and treatment of wounds.  As part of the settlement, Majestic Oaks agreed to
establish a fund through which $25,000 will be expended within 1 year for
additional services to improve the quality of life of residents;  expend up to $50,000
on consultants chosen by the Government to ensure the facilitys compliance with
the terms of the settlement for a period of at least 1 year; and continue its corporate
compliance program incorporating principles and policies set forth by OIG.   
Durable Medical Equipment (DME) Suppliers
' PennsylvaniaInglis Durable Medical Equipment Company, Inc., agreed to pay
the Government $336,000 and enter a 3-year corporate integrity agreement to
resolve the companys liability under the False Claims Act.  Inglis allegedly billed
Medicare and other programs for highly specialized wheelchairs when different
30 CENTERS FOR MEDICARE & MEDICAID SERVICES
 motorized wheelchairs were actually provided;  upcoded accessories and other
equipment associated with motorized wheelchairs; billed used wheelchairs as new;
and improperly completed certificates of medical necessity. 
' TexasThe  owner  of  three  DME  companies  was  sentenced  to  13  months
incarceration and ordered to pay $104,000 in restitution for billing Medicare for
different power wheelchairs than he actually provided. 
' FloridaA DME company, its president, and general manager were sentenced for
their involvement in a fraud scheme.  As part of their sentences, the company and
its president were ordered to pay $63,000 in joint restitution and to forfeit $30,000.
The alleged fraudulent activities included the use of sham oxygen discontinue
orders to steal patients from competitors, illegal qualification of patients for home
oxygen, kickback violations, forgery/alteration of certificates of medical necessity,
unbundling of wheelchair accessories, and obstruction of justice. 
  Medicaid Fraud Control Units 
Currently, 48 States and the District of Columbia have Medicaid Fraud Control
Units (MFCUs), which  investigate and prosecute providers charged with defrauding the
Medicaid program or abusing or neglecting patients.  Forty-one of these MFCUs are
located within the Offices of State Attorneys General and the remaining seven MFCUs are
located in other State agencies.  Each MFCU operates within a framework of its respective
State laws and prosecutorial guidelines. 
OIG annually certifies each MFCU as eligible to receive Federal grant funds.  Two
StatesIdaho and North Dakotahave sought and received waivers from the requirement
that all States operate MFCUs. 
During FY 2004, OIG provided oversight for and administration of approximately
$131 million in funds to the units.  Examples of cases worked jointly by OIG with MFCUs
include the following: 
' TexasTwo individuals were sentenced to 60 months incarceration and ordered
to pay $4.5 million in joint restitution for their roles in a scheme to defraud
Medicare and Medicaid.  The two were among a group of conspirators who owned,
operated, and/or were employed by six physical therapy clinics.  Their scheme
involved billing for services not rendered; providing physical therapy treatments
to beneficiaries in their homes by unlicensed, unsupervised physical therapy
technician, paying kickbacks, and laundering Medicare and Medicaid proceeds
31 CENTERS FOR MEDICARE & MEDICAID SERVICES
 obtained through the fraud.  This investigation involved OIG, the Texas MFCU,
and the FBI. 
' OhioAs the result of a joint investigation by OIG and the Ohio MFCU, a clinic
owner was ordered to pay $3.4 million in restitution and fined $30,000 for charges
related to upcoded claims submitted to Medicare and Medicaid.  From September
2001 through May 2003, the clinic submitted upcoded claims for office visits that
were performed at a lower level of service.  The investigation found that patients
were seen for approximately 5 to 10 minutes on average but were billed for 40-
minute office visits. 
' IndianaThe billing clerk for a DME company was ordered to pay $460,000 in
restitution for health care fraud.  The billing clerk participated with the companys
operators in a scheme to submit false claims to Medicaid.  Her role involved
routinely upcoding and billing for more items than were actually provided.  The
companys  operators  have  pled  guilty  and  are  awaiting  sentencing.    This
investigation involved OIG, the Indiana MFCU, the FBI, and the IRS.  
' WashingtonThrough a joint effort by OIG and the Washington MFCU, a woman
was sentenced to 1 year in prison (335 days suspended) and ordered to pay $3,000
in restitution and related court costs for misdemeanor theft.  The woman submitted
false statements to the States Department of Social and Health Services for
payment under a medical care program for in-home services for her mother who
was actually hospitalized during the period the woman claimed to have rendered
the services.  This federally funded program is known as Community  Options
Program Entry System. 
32 Public Health Agencies
The activities conducted and supported by HHS public health agencies
represent this countrys primary defense against acute and chronic diseases and
disabilities.  These programs provide the foundation for the Nations efforts in
promoting and enhancing the continued good health of the American people.
Agencies within the Department include:
National Institutes of Health (NIH)
Food and Drug Administration (FDA)
Centers for Disease Control and Prevention (CDC)
Health Resources and Services Administration (HRSA)
Indian Health Service (IHS)
Agency for Toxic Substances and Disease Registry (ATSDR)
Agency for Healthcare Research and Quality (AHRQ)
Substance Abuse and Mental Health Services Administration (SAMHSA)
OIG continues to examine the policies and procedures of these agencies to
determine whether appropriate controls are in place to guard against fraud,
waste, and abuse.  These activities include preaward and recipient capability audits
and evaluations.  This oversight work has provided valuable recommendations to
program managers for strengthening the integrity of agency policies and procedures
and improving program performance.
33 PUBLIC HEALTH AGENCIES
Select Agent Security at Universities
This report consolidates OIGs select agent security reviews at 11 universities
during 2002 and 2003.  Select agents have the potential to pose a severe threat to public
health and safety and to be used as weapons by criminals or terrorists.  Serious weaknesses
compromised the security of select agents at all universities reviewed.  Physical security
weaknesses left select agents vulnerable to theft or loss, thus elevating the risk of public
exposure.  Poor inventory and recordkeeping procedures prevented OIG from concluding
that universities had complied with select agent transfer requirements.  Only 2 of the 11
universities had procedures to identify persons barred from accessing select agents as
required under the USA PATRIOT Act.  Finally, at the six universities that used
information technology resources for select agent data, OIG noted control weaknesses that
could compromise the security and integrity of the data.  
The universities generally agreed with OIGs recommendations, and all stated that
they had begun implementing corrective actions.  (A-04-04-02000)
State and Local Bioterrorism
Preparedness and Response Funds 
State and major local health departments receive funds from both CDC and HRSA
to improve their bioterrorism preparedness.  After a 2003 audit found deficiencies in
Californias accounting for CDC funds, OIG reviewed CDC-funded bioterrorism programs
in 13 additional States and 4 major metropolitan areas as well as HRSA-funded programs
in the same locations, plus California.  The audit objectives were to determine whether the
awardees correctly reported program transactions, established procedures to monitor
subrecipient expenditures, and had any unobligated fund balances.
' CDC FundsThree awardees did not report program transactions correctly, 10
needed to improve their monitoring of subrecipient expenditures, and 15 carried a
total of nearly $65 million in unobligated balances as of August 30, 2003.  Large
unobligated balances suggest that funds were not fully used to meet bioterrorism
preparedness goals.  
OIG recommended that CDC ensure awardee compliance with accounting
procedures,  provide  guidance  to  awardees  on  reviewing  and  assessing  sub-
recipients progress in improving bioterrorism preparedness, and  assist awardees
in reducing their unobligated balances.  CDC agreed with the recommendations.  
(A-05-04-00027)
34 PUBLIC HEALTH AGENCIES
' HRSA FundsNone of the awardees properly recorded program transactions, 12
needed to improve their monitoring of subrecipient expenditures, and all 18 had
unobligated balances totaling approximately $19.2 million as of August 30, 2003.
OIG recommended that HRSA take steps similar to those recommended for
CDC, and HRSA agreed to do so.  (A-05-04-00028)
Deficiencies in the 340B Drug Discount 
Programs Database
Section 340B of the Public Health Service Act (the PHS Act) created the 340B
Drug Discount Program to lower drug prices for over 10,500 entities, including community
health  centers,  public  hospitals,  and  various  Federal  grantees.  Pharmaceutical
manufacturers calculate a 340B ceiling price using a specified formula and must sell their
products at or below this price to continue to receive reimbursement from Medicaid.
This  report examined deficiencies in the 340B drug discount programs database.
OIG found that the poor quality of the Pharmacy Affairs Branchs database interferes with
the successful administration of the 340B program. Thirty-eight percent of the sampled
entities listed as enrolled in the 340B database reported that they do not participate in the
program. The database had incorrect addresses for 43 percent of sampled entities and does
not provide essential information on the entities billing and shipping arrangements.
According to interviews with nine major pharmaceutical corporations, the extent of
incorrect addresses listed in the database hinders their ability to effectively identify entities
eligible for the discount program.
OIG recommended HRSA develop a strategic plan for improved management of
the 340B database, including a revalidation of current information in the database, an
annual recertification process for entities participating in the discount program, a separate
listing of newly added or deleted entities, a standard reporting format for entities
addresses,  and  an  additional  field  to  designate  entities  with  contracted  pharmacy
arrangement. HRSA commented about actions already performed to improve the 340B
database, but stated that budgetary limitations prevent the agency from committing to a
timetable for full implementation. OIG encouraged HRSA to optimize its Pharmacy
Services Support Center contract as a means to move toward complete action. 
(OEI-05-02-00071)
35 PUBLIC HEALTH AGENCIES
  NIH Grants Management    
Grants management is a priority area for both the Department and OIG.  During this
reporting period, OIG issued two reports relating to NIH grants management issues:  late
awards and late closeouts.
' Late AwardsThis report found that NIH awarded 35 percent of awards late for
3 common funding mechanisms of noncompeting continuation awards in fiscal
years 2000 through 2002, totaling $9.2 billion in late funding.  Noncompeting
continuation awards account for about 70 percent of NIHs extramural research
funding.  Potential factors contributing to late awards were late or incomplete
applications from grantees, process delays at NIH, and late congressional budget
appropriations.  For example, 55 percent of awards that were 30 days or more late
at 3 institutes had late applications, 39 percent had incomplete applications, and 12
percent had process delays.  Late awards can create problems at NIH and, to some
extent, at grantee institutions.  NIH has several initiatives planned or underway
to help facilitate timely awards.  
OIG recommended that NIH develop a centralized system to monitor late
awards and address late awards more systematically by focusing on grantee
institutions.  NIH concurred with the recommendations.  (OEI-01-03-00020)
' Late CloseoutsThis report found that 88 percent of all grants in the computer
system module that NIH uses to monitor grant closeouts were closed out late.  The
primary cause of late closeouts is grantees submitting closeout documents late.  
Tracking down these late closeout documents requires significant time and effort
for NIH staff.  While the closeout module is a promising tool to help NIH monitor
closeouts, it has some limitations.  OIG recommended that NIH develop an
automated reminder system to alert grantees about upcoming due dates for closeout
documents, facilitate the electronic submission of all closeout documents, enhance
the closeout modules capabilities, and address late closeouts more systematically
by focusing on grantee institutions.  NIH is taking several steps toward addressing
late closeouts, including developing the closeout module and planning to manage
the closeout function from a central office.  (OEI-01-03-00021)
_________________________________________________
   Indicates performance measure.  Details can be found in Appendix H.
36 PUBLIC HEALTH AGENCIES
  Health Education Assistance Loan Defaults
Through  the  Health  Education  Assistance  Loan  (HEAL)  program,  HRSA
guarantees commercial loans to students seeking education in health-related fields of study.
The students are allowed to defer repayment of these loans until after they have graduated
and begun to earn an income.  Although the Departments Program Support Center (PSC)
takes all steps it can to ensure repayment, there are loan recipients who ignore their
indebtedness.
After PSC has exhausted efforts to secure repayment of a debt, it declares the
individual in default.  Thereafter, the Social Security Act permits, and in some instances
mandates, exclusion from Medicare, Medicaid, and all Federal health care programs for
nonpayment of these loans.  Exclusion means that the individual may not receive
reimbursement under these programs for professional services rendered.  During the
6-month period from April 1, 2004, to September 30, 2004, 45 individuals and related
entities were excluded as a result of PSC referral of their cases to OIG.
Individuals who have been excluded as a result of their default may enter into
settlement agreements, whereby the exclusion is stayed while they pay specified amounts
each month to satisfy the debt.  If they default on these settlement agreements, the
individuals can then be excluded until the entire debt is repaid and cannot appeal these
exclusions.  Some health professionals, upon being notified of their exclusion,
immediately repay their HEAL debts. 
After being excluded for nonpayment of their HEAL debts, a total of 1,851
individuals have taken advantage of the opportunity to enter into settlement agreements or
completely repay their debts.  This figure includes the 62 individuals who have entered into
such a settlement agreement or completely repaid their debts during this reporting period.
The amount of money being repaid through settlement agreements or through complete
repayment totals over $132.4 million.  Of that amount, $5.4 million is attributable to this
reporting period.  
In the following examples, each individual entered into a settlement agreement
to repay the amount indicated:
' Arizona Osteopath$366,000
' New Jersey Dentist$347,000
' Florida Medical Doctor$244,000
' New York Chiropractor$165,000
37 PUBLIC HEALTH AGENCIES
Misuse of Public Health Grant Funds
OIG also investigates cases involving the misuse of HHS grant funds.  Resolution
of allegations involving the improper use of funds granted by HHS public health agencies
occurred in the following examples during this reporting period:
' MassachusettsHarvard College and Beth Israel Deaconess Medical Center
agreed to pay the Government a total of $2.4 million, in addition to $850,000
Harvard previously paid, for alleged improprieties in the administration of four
grants to Harvard from the National Institute on Aging (NIA).  Harvard and Beth
Israel voluntarily disclosed the grant mismanagement issues to NIA.  The issues
involved improperly charging a variety of salary and equipment expenses to the
grants, including salaries of physician scientists who did not work on the grant,
expenses that were incurred in the course of other research, and expenses of
physician scientists who were not eligible to work on the charged grants.  
' MontanaA former university professor was sentenced to 10 months confinement
and ordered to pay $39,000 in restitution for embezzling funds from an HHS grant-
funded program.  While a professor of marketing for the university, he received
grant funds to coordinate a community campaign against teen drug, alcohol, and
tobacco use.  He failed to complete the grant project and used the funds for his own
personal expenses and accounts.  
' South CarolinaThe former executive director of a rural health clinic that
received  HRSA  grant  funds  was  ordered  to  pay  $30,000  in  restitution  for
embezzlement and theft.  While working at the clinic, the director used her
corporate credit card to make frequent cash withdrawals and to purchase shoes,
automobile repairs, and other items for personal use. 
Ryan White CARE Act Grantees    
  At the request of the Senate Committee on Finance, OIG audited Ryan White
Comprehensive AIDS Resources Emergency (CARE) Act Title I and II grantees and their
__________________________________________________
    Indicates performance measure.  Details can be found in Appendix H.
38 PUBLIC HEALTH AGENCIES
subgrantees.  The CARE Act, which is administered by HRSA, funds health and social
services for HIV/AIDS patients who are uninsured or underinsured.
Two metropolitan areas that received Title I funds (Miami-Dade, FL, and San
Francisco, CA) provided poor oversight of their subgrantees.  As a result, neither
metropolitan area had identified the program and financial deficiencies of the subgrantees
that OIG audited.  For example, a Miami subgrantee did not always have documentation
to support services claimed, and a San Francisco subgrantee offered emergency housing
services beyond reasonable time limitsin some cases up to 8 years.  Also, contrary to
Federal requirements, neither subgrantees accounting system could accurately identify the
costs of Title I activities.  Miami-Dade agreed with OIGs findings and recommendations
and pledged to take corrective actions.  San Francisco generally disagreed, particularly
with regard to amounts recommended for refund.  (A-04-03-01001; A-09-03-01017)
Three States that received Title II funds (Florida, New York, and Texas) exceeded
or substantially met their service delivery performance goals in terms of the number of
clients served and drug prescriptions provided while complying with other CARE Act
requirements.  OIG noted, however, that Texas needed to improve its monitoring of
subgrantees.  (A-04-03-08014; A-02-03-02008; A-06-03-00010)
Monitoring Ryan White CARE Act Grantees    
In response to a Senate Finance Committee request, OIG issued three inspection
reports on the monitoring of Ryan White CARE Act Title I and Title II grantees by HRSA.
The first report found weak oversight due to HRSAs limited support of systematic
monitoring by project officers.  The second report found that sampled grantees are not
adequately or consistently monitoring their subgrantees, but that they are aware of some
subgrantee issues.  HRSA allows grantees to establish their own monitoring standards, but
does not always require grantees to report these standards.  Finally, the third report found
that HRSAs oversight of the AIDS Drug Assistance Program (ADAP) is weak. 
Based on these findings, OIG recommended that HRSA should strengthen its
oversight of Ryan White CARE Act Title I and Title II grantees and its monitoring of the
ADAP portion of the Title II grant.  Furthermore, OIG recommended that HRSA should
also ensure the adequacy of Title I and Title II grantees monitoring of subgrantees.  OIG
is aware that HRSA has made changes that may enable the agency to address the grantee
monitoring  issues  discussed  in  OIG  reports.    HRSA  has  consolidated  its  grants
management offices, relocated most Title II monitoring responsibilities from regional
offices to headquarters, and refocused the Office of Field Operations, now called the Office
of Performance Review.  (OEI-02-01-00640; OEI-02-01-00641; OEI-02-01-00642)
__________________________________________________
    Indicates performance measure.  Details can be found in Appendix H.
39 PUBLIC HEALTH AGENCIES
Credentialing and Privileging at IHS Hospitals
At the request of IHS, OIG reviewed credentialing, privileging, and personnel
suitability practices at several hospitals.  Industry-wide standards and IHS policy require
credentialing and privileging reviews of medical practitioners, and the Indian Child
Protection and Family Violence Prevention Act requires background investigations of all
IHS employees and contractors.  
At an IHS-operated hospital in New Mexico, OIGs review of 84 practitioners
revealed that the hospital had not verified the credentials of 32 practitioners before they
provided patient care.  In addition, the hospital had failed to ensure that 67 practitioners
had current privileges, with lapsed periods as long as 3 years, and had not requested
background investigations on 41 practitioners.  In response to OIGs recommendations to
assign sufficient resources to, and otherwise strengthen, the credentialing, privileging, and
personnel suitability processes, IHS stated that it had taken all recommended actions.  
(A-06-04-00023)
Two tribally operated hospitals in Oklahoma had effective controls in place to
ensure that credentialing and privileging reviews were completed at practitioners initial
appointments and reappointments.  Although these hospitals had not performed the
required background investigations, both immediately initiated such investigations during
OIGs review to ensure compliance with the law.  (A-06-04-00039; A-06-04-00040)
40 Administrations for 
Children and Families 
and on Aging
The Administration for Children and Families (ACF) provides direction
and  funding  for  programs  designed  to  promote  stability,  economic  security,
responsibility, and self-support for the Nations families.  Some of the major
programs include Temporary Assistance for Needy Families (TANF), Child
Support Enforcement, Foster Care, Family Preservation and Support, Head Start,
and the Child Care and Development Block Grant. OIG reviews of these programs
focus on ways to increase the efficient use of program dollars; to more effectively
implement programs; to better coordinate programs among the Federal, State, and
local governments; and to strengthen States financial management practices.
The Administration on Aging (AoA) awards grants to States for establishing
comprehensive community-based systems that assist the elderly in maintaining their
independence and in remaining in their homes as long as possible.  Socially and
economically disadvantaged elderly and low-income minority elderly are targeted
for assistance, including supportive and nutrition services, education and training,
low-cost transportation, and health promotion.  OIG has reported opportunities for
program  improvements  to  target  the  neediest  for  services,  expand  available
financial resources, upgrade data collection and reporting, and enhance program
oversight.
41 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING
Noncustodial Parents Contributions to SCHIP Costs    
Some children who receive child support services (Title IV-D children) are enrolled
in  the  State  Childrens  Health  Insurance  Program  (SCHIP)  because  neither  their
noncustodial nor their custodial parents have access to affordable private health insurance.
An OIG seven-State initiative was designed to determine, through statistical samples, the
number of Title IV-D children whose noncustodial parents could have contributed toward
their childrens SCHIP costs and the amount that they could have potentially contributed.
The  reports  found  that  States  could  increase  SCHIP  enrollment  and  have
noncustodial  parents  pay  part  of  the  costs  incurred  by  the  States  and  the  Federal
Government.  OIG recommended that each State take steps to recover SCHIP premiums
from noncustodial parents with medical support orders and the ability to pay for their
dependent children.  The States were generally responsive.  
' IndianaThe noncustodial parents of 10,900 children eligible for, but not enrolled
in, SCHIP could have potentially contributed $6.4 million toward the $10.7 million
in SCHIP costs that would have been incurred had the children been enrolled.
More than 400 other children who received SCHIP benefits had noncustodial
parents  who  could  have  potentially  contributed  about  $163,000  toward  the
$247,000 in SCHIP premiums paid on their childrens behalf.  (A-05-02-00073) 
' MichiganThe noncustodial parents of 22,700 children eligible for SCHIP
benefits could have potentially contributed $9.8 million toward the $22.5 million
in SCHIP costs that would have been incurred.  The noncustodial parents of more
than 400 other children who received SCHIP benefits could have potentially
contributed $168,000 toward SCHIP premiums totaling $289,000.  
(A-05-02-00076) 
' New JerseyThe noncustodial parents of 37,200 children eligible for SCHIP could
have potentially contributed $17.5 million toward potential SCHIP costs of $28.2
million that would have been incurred.  Also, about 2,200 children who received
SCHIP benefits had noncustodial parents who could have potentially contributed
more than $961,000 toward the $1.3 million in premiums.  (A-02-02-02007) 
__________________________________________________
    Indicates performance measure.  Details can be found in Appendix H.
42 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING
 ' New YorkThe noncustodial parents of almost 36,900 children eligible for SCHIP
could have potentially contributed about $22.3 million toward the $40.7 million in
premiums that would have been incurred.  Also, the noncustodial parents of an
estimated 12,300 children who received SCHIP benefits could have potentially
contributed about $5.1 million toward the $9.3 million in SCHIP premiums. 
(A-02-02-02005)
' North CarolinaAbout 20,600 SCHIP-eligible children had noncustodial parents
who could have potentially contributed $16.4 million toward the $24.9 million in
potential SCHIP premiums.  The noncustodial parents of almost 3,700 other
children who received SCHIP benefits could have potentially contributed $1.9
million toward the $3.6 million in SCHIP premiums.  (A-04-02-00014)  
' TexasThe noncustodial parents of more than 81,000 children eligible for SCHIP
could have potentially contributed $39.7 million toward the $65.1 million in
premiums that would have been incurred.  In addition, almost 14,300 children who
received SCHIP benefits had noncustodial parents who could have potentially
contributed more than $5 million toward the $6.5 million in SCHIP premiums paid
on their childrens behalf.  (A-06-02-00068)
' VirginiaThe noncustodial parents of almost 10,000 children eligible to receive
SCHIP benefits could have potentially contributed $5.2 million toward the $7.3
million in premiums that would have been incurred.  Additionally, more than 400
children who received SCHIP benefits had noncustodial parents who could have
potentially contributed $193,000 toward the $303,000 in SCHIP premiums paid on
behalf of their children.  (A-03-02-00203)
Health Care Services for Children in Foster Care    
Federal  Early  and  Periodic  Screening,  Diagnosis,  and  Treatment  (EPSDT)
guidelines require each State to provide coverage of preventive health care services to
Medicaid-eligible individuals under the age of 21, at intervals which meet reasonable
standards of medical and dental practice as established by statute.  These multi-state reports
aimed to assess the extent to which children in foster care were receiving Medicaid health
services in accordance with Federal and State requirements. 
__________________________________________________
    Indicates performance measure.  Details can be found in Appendix H.
43 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING
OIG reviewed a random sample of 50 children in foster care in Oregon
Oregon and found that the children in the sample had Medicaid coverage and
access to services.  Targeted case management, the most common and
most costly Medicaid claim for children in the sample, is designed to
enable eligible individuals to gain access to needed medical services.  Yet, this study found
that targeted case management did not result in recipients receiving additional health care.
Twenty of the fifty sampled foster care children did not have preventive care claims during
the study period.  This lack of preventive care may be due, in part, to the mistaken belief
of some Oregon officials that Oregon is not bound by EPSDT requirements.  In fact,
Oregon is bound by EPSDT requirements and is only relieved from its obligation to pay
for services required to treat a condition identified in an EPSDT screening when such
services are beyond the scope of the benefits package available to an individual receiving
Medicaid.  Some caregivers had difficulty obtaining medical records and accessing dental
and medical health services for foster children in their care.  Sampled children placed in
homes outside of the State experienced problems obtaining medical coverage.  
CMS and ACF concurred with OIG recommendations that:  CMS review the use
of targeted case management and clarify the intent of the EPSDT portion of Oregons 1115
waiver; ACF and CMS promote preventive health care consistent with EPSDT; and ACF
address the health care needs of foster care children placed across State lines.  
(OEI-02-00-00363)
OIG found that all 50 sampled children in the North Dakota foster
care program had Medicaid coverage and claims.  Thirty-five
North Dakota
received their most recent required EPSDT examinations and 30 of
38 children required to receive dental services had received their
most recent EPSDT dental service.  Some children waited months after entering foster care
to receive a comprehensive medical examination recommended by the State.  Nine of 48
foster care providers (foster parents or residential care facility staff) reported never
receiving a medical history for the sampled child in their care, and mental health needs
were undocumented in the case plans for 12 of the 34 sampled children receiving mental
health services, both of which are required under Federal regulations.  
OIG recommended that ACF and CMS work with the North Dakota Department
of Human Services to address these shortcomings.  (OEI-07-00-00643)
  Child Support Enforcement
The detection, investigation, and prosecution of noncustodial parents who fail to
pay court-ordered child support is a priority for OIG.  Working with the Office of Child
Support Enforcement (OCSE), the Department of Justice, U.S. Attorneys Offices, U.S.
44 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING
Marshals Service, and other Federal, State, and local partners, OIG develops ways to
expedite the collection of child support.  Since 1995, OIG has opened 2,712 investigations
of child support cases nationwide, which have resulted in 981 convictions and court-
ordered criminal restitution and settlements of over $51 million.
Task Forces
In 1998, OIG and OCSE initiated Project Save Our Children (PSOC), a child
support initiative made up of multiagency, multijurisdictional investigative task forces.
The task forces are designed to identify, investigate, and prosecute egregious criminal
nonsupport  cases  both  on  the  Federal  and  State  levels  through  coordinating  law
enforcement, criminal justice, and child support office resources.
Task Force Table
      Task Force        Task Force                Task Force 
        Regions     Headquarters                    States
       Mid-Atlantic    Baltimore, Maryland Delaware, District of Columbia,
Maryland, Pennsylvania, Virginia,
West Virginia
       Midwest    Columbus, Ohio Illinois, Indiana, Michigan,
Minnesota, Ohio, Wisconsin
       Northeast    New York, New York New Jersey, New York, Puerto Rico
       Southeast    Atlanta, Georgia Alabama, Florida, Georgia,
Kentucky, North Carolina, South
Carolina, Tennessee
       Southwest    Dallas, Texas Arkansas, Louisiana, Mississippi,
New Mexico, Oklahoma, Texas
       West Coast    Sacramento, California Arizona, California, Hawaii, Nevada
       New England    Boston, Massachusetts Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island,
Vermont
       Great Plains    Topeka, Kansas Iowa, Kansas, Missouri, Nebraska,
North Dakota, South Dakota
       Rocky Mountains    Denver, Colorado Colorado, Montana, Utah, Wyoming
       Pacific North    Olympia, Washington Alaska, Idaho, Oregon, Washington
45 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING
Central to the task forces are the screening units located in each task force region
and staffed by Investigative Analysts from OIG and OCSE.  The units receive child support
cases from the States, conduct pre-investigative analyses of these cases through the use of
databases, and then forward the cases to the investigative task force units where they are
assigned and investigated.  The task force approach streamlines the process by which the
cases best suited for criminal prosecution are identified, investigated, and resolved.
At this point, the task force units have received over 8,200 cases from the States.
As a result of the work of the task forces, 494 Federal arrests have been executed and 458
individuals  sentenced.    The  total  ordered  amount  of  restitution  related  to  Federal
investigations is over $22.8 million.  There have been 352 arrests at the State level and
310 convictions or civil adjudications to date, resulting in over $17.3 million in restitution
being ordered.
Investigations
OIG investigations of child support cases, nationwide, resulted in 86 convictions
and court-ordered criminal restitution of over $4.3 million during this semiannual period.
Examples of the Federal arrests, convictions, and sentences for failure to pay child support
include the following:
' MarylandA former United States professional basketball player was sentenced
to 12 months and 1 day in prison and 12 months supervised release.  During his
period of release, he was ordered to remain current on his court-ordered support
payments as well as pay $2,000 a month toward his arrearage of $128,000.  His
sentencing  was  the  culmination  of  a  5-year  investigation  during  which  the
basketball player lived in Spain.  Proof of his sizeable professional earnings in three
foreign ball clubs was obtained, establishing his ability to support his son during
the same years in which he benefitted from declaring the boy as a dependent on his
income taxes. 
' MinnesotaA former attorney once responsible for overseeing the States child
support enforcement division was sentenced to 10 months time served, 1 year
supervised release and ordered to pay $109,000 in restitution.  Since approximately
1996, his whereabouts had been unknown after he fled New York to avoid paying
child support.  The subsequent investigation found he was living and working
under an alias in Nevada and had received in excess of $30,000 from his fathers
estate. 
' LouisianaA man was sentenced to 2 years probation and ordered to pay a $2,500
fine.  Prior to sentencing, he paid his former wife almost $65,000 for nearly 11
46 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING
years of arrearage due at the time.  He also paid all future support payments that
will accrue from the present to his daughters age of majority.  The man operated
a successful business, earning a taxable annual income of $184,000 in 2002, and
a greater income in 2003.  Meanwhile, his former wife and minor daughter were
living in Government subsidized housing. 
' NevadaA man was sentenced and fined $5,000.  When his plea agreement was
entered, he paid his arrearage of $46,000 in full.  This individual was the chief
executive officer of a medical supply company in New York. 
' VirginiaA man was sentenced to 24 months in prison, 1 year supervised release
and ordered to pay $47,000 in restitution.  Although gainfully employed during the
charging period, he made no payments in support of his 9-year-old son.  At the time
of  sentencing,  this  individual,  who  has  an  extensive  criminal  history,  was
completing a term of incarceration in Florida on an unrelated conviction. 
' South DakotaA man was sentenced to 18 months confinement, 1 year supervised
release and ordered to pay $23,000 in restitution.  This individual, who never paid
any support, failed to appear in this matter and was a fugitive from May 2003 to
January 2004.  With assistance from OIG and the PSOC task force in Denver, the
U.S. Marshals Service located and arrested him in Missouri where he lived under
an assumed name. 
  Misuse of ACF Grant Funds
In addition to investigating the misuse of public health grant funds (details on page
p. 38), OIG also investigates cases involving the misuse of ACF grant funds.  Resolution
of charges involving the improper use of these funds occurred in the following example
during this reporting period:
' GeorgiaA former supervisor at a county family and children services agency and
two day care owners were sentenced for their involvement in creating false invoices
submitted to the agency for day care reimbursement.  The former supervisor was
sentenced for conspiracy, bribery, false claims, and Social Security fraud to 40
months incarceration and ordered to pay $150,000 in joint restitution with the day
care owners and a $5,000 special assessment fee.  One of the day care owners was
sentenced for conspiracy, false claims, and Social Security fraud to 20 months
incarceration and held jointly responsible for paying $129,000 of the restitution
figure with the former supervisor, a $5,000 fine, and a $4,000 special assessment
fee.  The other owner was held jointly responsible for paying $21,000 of the
47 AADDMMIINNIISSTTRRAATTIIOONNSS  FFOORR  CCHHIILLDDRREENN  AANNDD  FFAAMMIILLIIEESS  AANNDD  OONN  AAGGIINNGG
restitution figure with the former supervisor for conspiracy to defraud the United
States.  Through an ACF block grant, the agency provided funding for the State of
Georgia  Childcare  and  Parent  Services  (CAPS)  program  which  assists
low-income families with the costs of childcare.  The co-defendants scheme
caused CAPS funds to be paid to the day care owners for the care of fictitious
children.  The former supervisor created false documents using fictitious Social
Security numbers, initialed final invoices approving payment, and directed staff to
process final invoices for fictitious children.  The day care owners, in turn, paid the
supervisor for her services. 
48  
General Oversight 
The Office of the Assistant Secretary for Budget, Technology and Finance
(ASBTF) is responsible for developing and executing the Department of Health and
Human Servicess (HHS) budget; ensuring that HHS performance measurement
and reporting are in compliance with the Government Performance and Results
Act; establishing and monitoring departmental policy for financial management
(including debt collection, audit resolution, cost policy, and financial reporting);
and developing and monitoring HHS information technology policy (including IT
security). The Assistant Secretary is the Departments Chief Financial Officer and
oversees the Departments Chief Information Officer.  The Department also has the
responsibility, by virtue of the magnitude of its funding, to negotiate the payment
rates and methods that many outside entities, such as State and local governments,
charge for administering HHS and other Federal programs.
The Office of the Assistant Secretary for Administration and Management
(ASAM) is responsible for HHS policies regarding human resources, grants, and
acquisition management.  This office also oversees the Program Support Center,
which provides a range of administrative services, such as human resources,
financial management, and administrative operations.
OIG has oversight responsibility for these activities at the departmental
level.  A related major responsibility flows from Office of Management and Budget
Circular A-133, under which HHS is the cognizant agency to audit the majority of
Federal funds awarded to major research schools, State and local government cost
allocation plans, and separate indirect cost plans of State agencies and local
governments.  OIG also oversees the work of non-Federal auditors of Federal
money at some 6,700 entities, such as community health centers and Head Start
grantees, as well as at State and local governments, colleges and universities, and
other nonprofit organizations.  In addition, OIG is responsible for auditing the
Departments financial statements.
OIG also reviews audits, inspections, and studies performed by others, such
as the Office of Management and Budgets Program Assessment and Rating Tool and
reports of the General Accounting Office.  It takes these studies into account when
planning its own work and examines management actions designed to correct the
deficiencies cited in these prior studies.
49 GENERAL OVERSIGHT
The Government Performance and Results Act of 1993    
 
The Government Performance and Results Act of 1993 mandates that Federal
agencies  establish  strategic  planning,  prepare  annual  performance  plans  that    set
measurable goals for the years accomplishments, and compare those goals with actual
performance.  OIGs audits, inspections, and investigations identifies performance results
and recommend improvements, focusing on measures related to mission-critical issues and
areas at high risk of fraud, waste, and abuse. 
An important part of OIGs previous work was the estimate of Medicare fee-for-
service  payment  errors,  which  CMS  used  to  set  performance  goals  and  measure
performance.  Beginning in FY 2003, CMS assumed responsibility for developing the error
rate, and OIG became responsible for assessing the validity and reliability of CMSs
estimate.  During the FY 2003 error rate process, CMS experienced a significant problem
with providers that failed to respond to requests for medical records.  OIG later reported
that CMSs corrective actions appeared to have increased provider responsiveness during
FY 2004 and initiated an indepth review to determine the reasons for the remaining
nonresponses.
OIG also evaluates progress in achieving other HHS strategic goals.  For example,
OIG conducted numerous reviews of the Departments bioterrorism preparedness efforts,
including the security of select agents at university laboratories and State and local
preparedness and response programs.  Future projects in this area will cover the safety and
distribution  of  pharmaceutical  stockpiles,  State  bioterrorism  alert  systems,  and  the
Biowatch warning system.  To assess the Departments efforts to improve health care
services for Americans, OIG reviewed the performance of Medicare-approved heart
transplant centers and the impact of intergovernmental transfers of Medicaid funds on
public nursing facilities.  Future work will address levels of care in long-term hospitals and
working disabled individuals eligibility for Medicaid.  As part of the Departments push
to ensure the healthy development of the Nations children, OIG reviewed noncustodial
parents contributions to their childrens Medicaid and SCHIP costs.  Future work will
address State investigations of abuse and neglect, Head Start enrollment, and foster care
requirements.
__________________________________________________
    Indicates performance measure.  Details can be found in Appendix H.
50 GENERAL OVERSIGHT
Reasonableness of Pension Charges
OIG found that North Carolina claimed Federal reimbursement for $127.4 million
($7.8 million Federal share) in unfunded retirement contributions.  Under Federal cost
principles, States are not entitled to seek reimbursement from the Federal Government for
pension costs until such costs are funded.  In a related matter, OIG noted that retirement
fund assets exceeded actuarial liabilities by $4.4 billion ($315 million Federal share)
as of  December 31, 2001.  Although North Carolina had taken steps to address the
actuarial surplus, the surplus continued.  
OIG recommended that North Carolina refund the $7.8 million to the Federal
Government, but the State did not concur with the recommendation.  (A-04-02-00011)
  Non-Federal Audits
OMB  Circular  A-133  establishes  audit  requirements  for  State  and  local
governments, colleges and universities, and nonprofit organizations receiving Federal
awards.  Under this circular, covered entities are required to have an annual organization-
wide audit of all Federal money they receive.  These audits are conducted by non-Federal
auditors, such as public accounting firms and State auditors.  OIG reviews the quality of
these audits and assesses the adequacy of the entitys management of Federal funds.  In the
second half of FY 2004, OIGs National External Audit Review Center reviewed 960
reports that covered $908.6 billion in audited costs.  Federal dollars covered by these audits
totaled $324.9 billion, about $132.8 billion of which was HHS money.
OIGs oversight of non-Federal audit activity informs Department managers about the
soundness of management of Federal programs and identifies any significant areas of
internal control weakness, noncompliance, and questioned costs that require formal
resolution by Federal officials.  OIG identifies entities for high-risk monitoring, alerts
program officials to any trends that could indicate problems in HHS programs, and profiles
non-Federal audit findings of a particular program or activity over time to identify systemic
problems.  OIG also provides training and technical assistance to grantees and the auditing
profession.
OIG maintains a quality control review process to assess the quality of the non-
Federal reports received and the audit work that supports selected reports.  The non-Federal
audit reports reviewed and issued during this reporting period are categorized on the
next page.
51 GENERAL OVERSIGHT
Reports issued:
Without changes or with minor changes 841
With major changes 89
With significant inadequacies 30
                                                       Total 960
The 960 reports included recommendations for HHS program officials to take
action on cost recoveries totaling $3.6 million, as well as 4,367 recommendations for
improving management operations.  In addition, these audit reports provided information
for 103 special memorandums that identified concerns for increased monitoring by
departmental management.
  Resolving Recommendations
The tables that appear on the following pages are provided in accordance with section 5 of
the  Inspector  General  Act  and  indicate  the  dollar  value  of  actions  taken  on  OIG
recommendations.
52 GENERAL OVERSIGHT
Table 1:  Reports With Questioned Costs*
Reports Number of Dollar Value Dollar Value
Reports Questioned Unsupported
Section 1
For which no management decision 
had been made by the beginning of
the reporting period1 519 2,013,452,000 $256,302,000
Issued during the reporting period 84 $366,414,000 $38,317,000
          Total Section 1 603 $2,379,866,000 $294,619,000
Section 2
For which management decision was
made during the reporting period2,3,4
     Disallowed costs $539,582,000 $300,000
     Costs not disallowed $27,910,000 $0
          Total Section 2 170 $567,492,000 $300,000
Section 3
For which no management decision 
had been made by the end of the
reporting period
          Total Section 1 minus
          Total Section 2 433 $1,812,374,000 $294,319,000
Section 4
For which no management decision
was made within 6 months of  issuance5 340 $1,365,588,000 $136,559,000
*Details concerning footnotes can be found in Appendix D.
53 GENERAL OVERSIGHT
Table 2:  Funds Recommended To Be Put to Better Use*
Reports Number of      Dollar Value
   Reports
Section 1
For which no management decision had been made
by the beginning of reporting period1 69 $8,867,257,000
Issued during the reporting period 10 $163,503,000
            Total Section 1 73 $9,030,760,000
Section 2
For which management decision was
made during the reporting period
Value of recommendations that 
were agreed to by management
Based on proposed 
management action 7 $1,337,920,000
Based on proposed 
legislative action
Value of recommendations that 
were not agreed to by management $0
            Total Section 2 7 $1,337,920,000
Section 3
For which no management decision had been made by
the end of the reporting period2
            Total Section 1 minus
            Total Section 2 72 $7,692,840,000
*Details concerning footnotes can be found in Appendix D.
54 GENERAL OVERSIGHT
Legislative and Regulatory 
Review and Development
Regulatory Review Functions
Section 4(a) of the Inspector General Act of 1978 requires that the Inspector
General  review  existing  and  proposed  legislation  and  regulations  and  make
recommendations in this report concerning the impact on the economy and efficiency of
the administration of the Departments programs and on the prevention of fraud and abuse.
In reviewing regulations and legislative proposals, OIG uses as the primary basis for its
comments the audits, inspections, investigations, and other activities highlighted in this and
previous semiannual reports.
Regulatory Development
OIG is responsible for the development and publication of a variety of sanction
regulations addressing civil money penalty and program exclusion authorities administered
by the Inspector General, as well as advisory opinions and safe harbor regulations related
to the anti-kickback statute.  During this reporting period, OIG:
! Developed and published, in accordance with section 1860D-31 of the Social
Security Act, interim final rulemaking setting forth OIGs new authority for
imposing civil money penalties against endorsed sponsors under the Medicare
prescription  drug  discount  program  that  knowingly  (1)  engage  in  false  or
misleading marketing practices; (2) overcharge program enrollees in violation of
the terms of an endorsement contract; or (3) misuse transitional assistance funds.
In each instance, OIG may impose CMPs of no more that $10,000 for each of these
violations.  During this period, OIG also continued to work on the issuance of a
final rule in this area to address public comments received in response to the
interim final rule.  (69 FR 28842; May 19, 2004) 
! Developed and published final rulemaking setting forth technical revisions to the
Healthcare  Integrity  and  Protection  Data  Bank  data  collection  reporting
requirements by clarifying the types of personal numeric identifiers that may be
reported to the data bank in connection with adverse actions.  Specifically, the final
rule clarified that in lieu of a Social Security Number (SSN), an individual taxpayer
identification number may be reported to the data bank when an individual does not
have an SSN.  The interim final rulemaking was published on June 17, 2004 (69 FR
33866) and final rulemaking was published on September 21, 2004 (69 FR 56364).
55 GENERAL OVERSIGHT
 ! Coordinated regulatory development activities with the Centers for Disease Control
and  Prevention  with  regard  to  the  issuance  of  revised  final  regulations
implementing Public Law 107-88, the Public Health Security and Bioterrorism Act.
An interim final rule was published on December 13, 2002 in the Federal Register
(67 FR 76886) and an amended second interim final rule was published in the
Federal Register on November 3, 2002 (68 FR 62245).  Among other things, the
revised final rule makes technical revisions to OIGs civil money penalties for
violations of section 351A of the Public Health Service Act with respect to the
control and transfer of listed biological agents and toxins.
! In accordance with section 949 of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003, continued to develop proposed rulemaking to
revise OIGs waiver of exclusion authority to permit any Federal health care
program  to  request  a  waiver  of  an  OIG  exclusion  imposed  under  sections
1128(a)(1), (a)(3) or (a)(4) of the Social Security Act.
! Continued to develop final rulemaking to clarify the Secretarys authority to
exclude providers and suppliers from the Medicare and Medicaid programs that
charge  the  programs  substantially  in  excess  of  their  usual  charges  to  other
customers.  The rule is intended to amend OIGs exclusion regulations at 42
CFR 1001 by setting forth definitions for the terms substantially in excess and
usual charges, and by clarifying the good cause exception now contained in the
regulations. 
! Continued to develop final rulemaking designed to expand the existing safe harbor
for certain waivers of beneficiary coinsurance and deductible amounts to benefit
the policyholders of Medicare SELECT supplemental insurance.  Specifically, the
final safe harbor regulation will serve to protect waivers of coinsurance and
deductible amounts under Part A or Part B of the Medicare program owed by
beneficiaries covered under a Medicare SELECT policy issued in accordance with
section 1882(t)(1) of the Social Security Act, if the waiver is in accordance with a
price reduction agreement covering such policyholders between the Medicare
SELECT issuer and the provider or supplier offering the waiver.   
In addition, during this period, OIG continued to develop and publish Federal
Register notices that serve to reflect OIG policy and procedures with regard to compliance
program guidance and other OIG administrative matters.  During this period, OIG:
56 GENERAL OVERSIGHT
! Published  a  Federal  Register  notice  seeking  public  comments  on  draft
supplemental compliance program guidance for hospitals designed to provide
voluntary  guidelines  to  assist  hospitals  and  hospital  systems  in  identifying
significant  risk  areas  and  in  evaluating  and,  as  necessary,  refining  ongoing
compliance efforts (69 FR 32012; June 8, 2004).  
! Issued a revised OIG Statement of Organization, Functions, and Delegations of
Authority to reflect the realignment of functions within OIG and the current work
environment and priorities within the organization 
(69 FR 40386, July 2, 2004).
! Prepared and published a Federal Register notice regarding a change in the user
fees for self-queries for information in conjunction with the Healthcare Integrity
and Protection Data Bank (69 FR 25408; May 6, 2004).
  Employee Fraud and Misconduct
Most  individuals  employed  by  HHS  are  dedicated,  honest  civil  servants.
Occasionally, however, individuals violate their fiduciary responsibilities.  OIG conducts
or  oversees  investigations  of  serious  allegations  of  wrongdoing  by  Department
employees, as in the following examples:
' MarylandAn administrative officer for NIH was ordered to pay $24,000 in
restitution for theft of Government property.  The administrative officer used her
Government travel card to pay for unauthorized personal travel and cash advances,
then submitted fraudulent travel vouchers for reimbursement.  In submitting, 
processing, and approving the vouchers, she used the ID and passwords of her
supervisor and administrative assistant without their knowledge or approval. 
Also in Maryland, a former FDA employee was sentenced for possession
of child pornography to 27 months in prison followed by 3 years supervised release
during which he may not possess any devices with Internet access without prior
permission from the United States Probation Office.  He must also register as a
sexual offender and forfeit his computer and several accompanying electronic
goods seized during the investigation.  The investigation found that the employee
viewed, downloaded, and stored hundreds of images of child pornography while
at work.  A search of his residence also revealed more child exploitation evidence.
57 GENERAL OVERSIGHT
' New MexicoA former nurse at an IHS hospital was sentenced for unlawful
possession of a controlled substance.  On numerous occasions, she removed
narcotics from the hospitals emergency room without physician orders. 
  Investigative Prosecutions
During this semiannual reporting period, OIG investigations resulted in 299
successful criminal actions.  Also during this period, 680 cases were presented for
criminal prosecution to the Department of Justice and, in some instances, to State and local
prosecutors.  Criminal charges were brought by prosecutors against 325 individuals
and entities.
In  addition  to  terms  of  imprisonment  and  probation  imposed  in  the  judicial
processes, over $673 million was ordered or returned as a result of OIG investigations
during this reporting period.  Civil settlements from investigations resulting from audit
findings are included in this figure.
58    Appendices
59 60 Appendix A
Savings Achieved Through Policy and Procedural Changes Resulting From Audits,
Investigations, and Inspections 
April 1, 2004, Through September 30, 2004
The following schedule highlights savings resulting from Office of Inspector General (OIG)
efforts to prevent unnecessary obligations for expenditures of Federal funds or to improve agency
systems and operations.  These achievements depend greatly on the contributions of others, such
as partners within the Department.  The amounts shown represent funds or resources that will be
available for better use as a result of documented measures taken by the Congress or by
management in response to OIG audits, investigations, and inspections, including actual reductions
in unnecessary budget outlays; deobligations of funds; reductions in costs incurred or preaward
grant reductions from agency programs or operations; and reduction and/or withdrawal of the
Federal portion of interest subsidy costs on loans or loan guarantees, insurance, or bonds.
Legislative savings are annualized amounts based on Congressional Budget Office (CBO)
fiscal year estimates for the related legislation.  OIG calculates the administrative savings based on
departmental figures, where available, for the year in which the change is affected or for multiple
years, if applicable.  A new table has been added at the end of this appendix to reflect OIGs policy
of recognizing adjustments from prior periods not previously reported. 
Total savings from these sources amount to $11,893.4 million for this semiannual period.
Savings
OIG Recommendation  Implementing Action  (millions)
Centers for Medicare  & Medicaid Services    
Medicare Home Health Payments:    $5,970
CMS should restructure the payment Chapter 1 of Subtitle G of the BBA of 1997 (as
system for home health care to amended by the Omnibus Consolidated and
eliminate inappropriate incentives Emergency Supplemental Appropriations Act of
which unnecessarily increase cost 1998), which pertains to home health benefits,
and utilization; prevent addresses OIGs concerns regarding the need to
unscrupulous providers from gaining restructure and control the payment system for
entry into the program; and improve these services.  For example, it mandates that a
program controls, such as eligibility prospective payment system be developed and that
determinations and approval of the total payments in fiscal year (FY) 2000 be equal
plans of care and services. to the amount that would have been paid under the
(OEI-04-93-00260; prior system if cost limits were reduced by 15
OEI-09-96-00110; A-04-96-02121) percent.  It also eliminated periodic interim
payments to home health agencies.
Medicare Indirect Medical    $2,210
Education: Section 4621 of the BBA (as amended by the
CMS should base the indirect BBRA of 1999) reduced the indirect teaching
medical education adjustment factor adjustment factor from 7.7 percent in FY 1997 to
on the level support by CMSs 7.0 percent in FY 1998, 6.5 percent in FY 1999,
empirical data.  (A-07-88-00111) 6.0 percent in FY 2000, and 5.5 percent in FY
2001 and thereafter. 
61 APPENDIX  A
Medicaid Enhanced Payments to $1,900
Local Providers: On January 18, 2002, CMS issued a final rule that
CMS should reconsider capping the modified the Medicaid UPL provisions to remove
aggregate upper payment limit (UPL) the 150 percent UPL for services furnished by
at 100 percent for all facilities rather non-State-owned or operated hospitals.  The rule
than the 150 percent allowance for became effective on May 15, 2002.
non-State-owned government
hospitals.  (A-03-00-00216)
Graduate Medical Education     $480
Payments: Sections 4623 and 4626 of the BBA provided for
CMS should reevaluate Medicares limits in the number of residents counted for
policy of paying graduate medical purposes of Medicare GME payments and
education (GME) costs for all offered payments for voluntary reductions in the
physician specialities and should number of residents to limit Medicares share of
consider submitting legislation to GME costs.
reduce Medicares investment in
GME to arrive at a more accurate and
representative sharing of GME costs. 
(A-06-92-00020)
Medicare Secondary Payer:   $400
CMS should ensure sufficient Section 301 of the Medicare Prescription Drug,
resources and contractor training for Improvement, and Modernization Act of 2003
retroactively examining paid claims (MMA) clarifies, retroactively, the Secretarys
to identify other payer sources and authority to make certain reimbursable conditional
initiating recovery action on all payments and take recovery actions against all
related overpayments, establish responsible entities, including collection of
penalties, etc.  damages, under Medicares secondary payer
(Multiple reports and testimonies, provisions.  This action builds on other program
including A-02-98-01036; improvements related to OIGs work that were
A-04-92-02057; A-09-89-00162; implemented by the BBA of 1997, OBRA 1993,
A-10-86-62005) OBRA 1990, and OBRA 1989.
Payment Reform for Part B Drugs $200
and Biologicals:   Sections 303-305 of the MMA revised the current
CMS should reexamine drug payment methodology for Part B covered drugs
reimbursement methodologies based and biologicals which were not paid on a cost or
on AWP with the goal of reducing prospective payment basis.  Under the MMA, most
payments in both Medicare and drugs were to be paid at 85 percent of the April 1,
Medicaid.   2003 average wholesale price (AWP) effective
(Multiple reports and testimony January 1, 2004, unless they fell under certain
including OEI-03-96-00420; exceptions.  CBO specifically attributed the FY
OEI-03-97-00290; 2004 savings to sections 304 and 305.  After 2004,
OEI-03-00-00310;  most drug prices are to be based on the average
OEI-03-97-293;  sales price or competitive acquisition instead of
A-06-00-00023;  AWP.  
A-06-01-00053; 
A-06-02-00041).
62 APPENDIX  A
Medicare Home Health Payments: $200
The home health agency update Section 701 of the MMA changes the updates of
factor should be reduced to account home health rates from fiscal year to calendar year
for the high error rate found in beginning in 2004, with the update for the last 3
OIGs review.  The annual update quarters of 2004 equal to the market basket
was defined as the home health increase minus 0.8 percent.
market basket percentage increase. 
(A-04-99-01194)
Clinical Diagnostic Laboratory $100
Tests:   Section 628 of the MMA froze annual updates for
 CMS should seek legislation to FY 2004 through FY 2008.  This action builds on
allow across-the-board adjustments prior legislative actions in the BBA of 1997,
in Medicare laboratory fee OBRA 1993, OBRA 1990, and legislation in 1984
schedules, bringing them in line that were also responsive to OIGs
with the prices that laboratories recommendations to curb excessive clinical
charge physicians in a competitive laboratory test reimbursements by Medicare. 
marketplace and periodically
evaluate the national fee schedule
levels.  (A-09-89-00031;
A-09-93-00056)
Hospice Certification:       $80
CMS should restructure hospice Sections 4441-4449 of the BBA contained
benefit policies to curb inappropriate provisions to control hospice payments and
growth in the program, particularly practices, such as replacing the current unlimited
with regard to the fourth benefit fourth benefit period with an unlimited number of
period.  (OEI-05-95-00250; 60-day benefit periods (each requiring
A-05-96-00023) recertification).
Fraud and Abuse Provisions of the        $70
Balanced Budget Act: Subtitle D of the BBA contained a number of
CMS should require durable medical provisions that corresponded to and were supported
equipment (DME) suppliers and home by OIG work.  For example, the BBA authorized the
health agencies to provide Social Secretary to collect Social Security numbers and
Security numbers and employee employer identification numbers from entities under
identification numbers (OEI-04-96- Medicare, Medicaid, and Title V; authorized the
00240; OEI-09-96-00110); refuse to Secretary to refuse to enter into contracts with
enter into a provider agreement with physicians or suppliers that have been convicted of
any home health agency whose felonies; authorized the exclusion of entities owned
owners or principals have prior or controlled by the family or household members of
criminal records or are the relatives of excluded individuals; authorized CMS to make
owners of a provider that had inherent reasonableness adjustments up to 15
defrauded Medicare percent to all Part B services except physician
(OEI-09-96-00110); apply inherent services; authorized up to five demonstration
reasonableness provisions when projects to be completed by December 31, 2002 (one
assessing the appropriateness of must be oxygen and oxygen equipment) which can
Medicare payments have multiple sites, to allow competitive bidding;
(OEI-03-94-00392); authorize and prohibited reasonable cost payments for items
competitive bidding as a means of such as entertainment, gifts and donations, education
providing Medicare services  expenses, and personal use of automobiles.
continued
63 APPENDIX  A
Fraud and Abuse Provisions of the
Balanced Budget Act (continued):
(OEI-03-94-00021;
OEI-06-92-00866;
 OEI-03-96-00230).  Also, CMS
should clarify which general and
administrative and fringe benefit
costs at hospitals and home health
agencies are related to patient care;
specifically, distinguish between
employee benefits and/or
prerequisites to entertainment and
patient care, and specify that the
cost of entertainment, goods or
services for personal use, alcohol,
all fines and penalties and associated
interest, dues, and membership costs
associated with civic and community
organizations are not allowable.
(A-03-92-00017; A-04-93-02067)
Rural Health Clinics:       $70
The oversight and functioning of the Section 4205 of the BBA extended the per-visit
current cost reimbursement system payment limits to provider-based clinics and
should be improved by stipulated that the shortage area requirements
implementing caps on provider- designation be reviewed triennially.
based rural health clinics and
allowing States to do so, or finding
other ways to make reimbursement
between provider-based and
independent clinics more equitable. 
In addition, the certification process
should be modified to increase State
involvement and placement of the
clinics.  Recertification should be
required within a specific time limit
(for example, 5 years), applying new
criteria to document the need and
impact on access. 
(OEI-05-94-00040)
Hospital Sales:        $60
CMS should eliminate the Section 4404 of the BBA eliminated the
requirement that Medicare adjust for requirement that Medicare make adjustments by
gains and losses when hospitals setting the Medicare capital asset sales price equal
undergo changes of ownership. to the net book value.
(OEI-03-96-00170)
64 APPENDIX  A
Single Drug Pricer for $50
Medicare-Covered Drugs: CMS issued Program Memorandum AB 02-174
CMS should establish a uniform (Change Request 2381) establishing a single drug
allowed amount for each Common pricer for all drugs for which payment was based
Procedural Coding System (HCPCS) on a percentage of the AWP, making
drug code.  (OEI-03-00-00310; reimbursement consistent among all carriers. 
OEI-03-97-00290) Payments in 2004 are based on the April 1, 2003
single pricer.  
Payment for Durable Medical Section 302 of the MMA froze payments for $40
Equipment (DME):   certain DME items, including prosthetic devices,
CMS should take steps to reduce prosthetics, and orthotics effective January 1,
payments for a variety of DME and 2004. CBO scored the FY 2004 savings at less
related supplies.  (Multiple reports than $50 million and the FY 2005 savings at $400
including OEI-03-01-00680;  million.  OIG is conservatively reporting $40
OEI-03-02-00700; OEI-07-96-00221;  million in savings from the effect of this change on
OEI-03-96-00230; OEI-03-94-0021; DME payments in the last 3 quarters of FY 2004. 
OEI-06-92-00861; 
OEI-06-92-00866)
Payment for Services Furnished in $40
Ambulatory Surgical Centers
(ASC):  CMS should set rates that Section 626 of the MMA limited the ASC update
are consistent across sites and reflect starting April 1, 2004, then freezes updates for a
only the costs necessary for the period beginning the last quarter of FY 2005. 
efficient delivery of health services CBO scored the savings at less than $50 million
and establish parity among ASCs for FY 2004 and estimated savings in FY 2005 at
and outpatient departments.  $100 million.  Therefore, OIG is conservatively
(OEI-05-00-00340; OEI-09-88-01003; reporting $40 million in section 626 savings for
A-14-98-00400; A-14-89-00221)  the last 2 quarters of FY 2004.
Payments for Ambulance $10
Services: Section 4531 of the BBA of 1997 made interim
CMS should seek legislative reductions in ambulance payments by limiting the
authority to develop a fee schedule allowed rate of increase and mandated the
for ambulance transportation and establishment of a fee schedule by January 1,
examine the inherent reasonableness 2000.  Such fee schedule is to be set so that
of current allowable charges.  aggregate payments are reduced by 1 percent.
(OEI-05-95-00300)
Various Operating Divisions
Results of Investigations:  $7.7
In addition to restitution, fines, settle- The operating division takes action, based on the
ments, judgments, or other monetary results of the OIG investigation, to suspend or
amounts resulting from successful terminate payments to the offending individual or
investigations, additional monetary entity.
losses are avoided through timely
communication of  investigative
results to the operating division.
65 APPENDIX  A
Administration for Children and Families
Availability of Health Insurance  $5.7
for Title IV-D Children: The BBA of 1997 established Title XXI of the
Connecticut should either implement Social Security Act, known as the State Childrens
policies and procedures to require Health Insurance Program (SCHIP), to enhance
noncustodial parents to pay all or Medicaid coverage provided to children and allow
part of the Medicaid costs for their States to create insurance options for families who
dependent children or establish a exceed Medicaid resource and income limits.  
statewide health insurance plan that Connecticut received CMS approval in April 1998
provides reasonably priced, to initiate a child health program.  Under
comprehensive coverage for  children, Connecticut law, applicants include noncustodial
with costs paid by noncustodial parents under court orders to provide health
parents.  (A-01-97-02506) insurance.
Adjustments from Prior Periods Not Previously Reported 
Single Drug Pricer for $37.5
Medicare-Covered Drugs:   The savings total for FY 2003 has been adjusted
CMS should establish a uniform upward to reflect a previously unreported
allowed amount for each Common administrative change.  CMS issued Program
Procedural Coding System Memorandum AB 02-174 (Change Request 2381)
(HCPCS) drug code.  establishing a single drug pricer for all drugs for
(OEI-03-00-00310; which payment was based on a percentage of the
OEI-03-97-00290) AWP to make reimbursement consistent among
all carriers effective January 1, 2003.  The
adjustment is for 3 fiscal quarters based on CMS
estimate of $50 million in savings annually.  The
annualized total for FY 2004 is reported in the
current period savings section above.
Hospital Outpatient Policy: ($640)
Sections 4421 - 4523 of the BBA The savings total for FY 2003 has been adjusted
eliminated formula-driven downward to reflect Congressional Budget Office
overpayments in FY 1998, estimates for related provisions of the Balanced
extended reductions in payments Budget Refinement Act of 1999 (BBRA), Title II,
for costs of hospital outpatient Subtitle A.
services, and established a
prospective payment system for
hospital outpatient
services beginning FY 1999.
Payments for Skilled Nursing ($200)
Facilities:  The savings total for FY 2003 has been adjusted
Section 4432 of the BBA of 1997 downward to reflect Congressional Budget Office
(as amended by the BBRA of 1999 estimates for increases in rates provided in the
and the BIPA of 2000) required a BBRA, Title I, Subtitle A.  
PPS for Part A  SNF care.
66 Appendix B
Unimplemented Office of Inspector General Recommendations 
to Put Funds to Better Use
This schedule represents potential annual savings or one-time recoveries which could be
realized if OIG recommendations were enacted by the Congress or the Department through
legislation, regulation, or management action.  In some cases, these recommendations are beyond
the direct authority of the departmental operating division.  The Congress develops savings over
a 5- or 10-year budget cycle which results in far greater dollar impact than the annual estimates
shown in the table below.  The same can be said for regulations issued and management actions
taken by the Department.  Savings are based on preliminary OIG estimates and reflect economic
assumptions which are subject to change.  The magnitude of the savings may increase or decrease
due to interactive effects if enacted together.
More detailed information may be found in OIGs Red Book, which can be found on the
Internet at http://oig.hhs.gov.
Savings
OIG Recommendation Status (millions)
Centers for Medicare & Medicaid Services
Clinical Laboratory Tests:        $1,130*
CMS should develop a methodology and CMS initially agreed with the first
legislative proposal to pay for tests ordered as recommendation but not the second. 
custom panels at substantially less than the full The BBA required the Secretary to
price for individual tests, and study reinstating request that the Institute of Medicine
the beneficiary coinsurance and deductible (IOM) study Part B laboratory test
provisions for laboratory services as a means payments.  As a result of the IOMs
of controlling utilization.  (A-09-89-00031; recommendations, the Medicare
A-09-93-00056) Prescription Drug, Improvement, and
Modernization Act of 2003 mandates
that CMS conduct a demonstration that
applies competitive bidding for clinical
laboratory services.  The initial report to
Congress is due by December 31, 2005.
Outpatient Surgery Rates:      $1,100
CMS should seek authority to set rates that are CMS agreed to consider seeking
consistent across sites and reflect only the authority to set rates that are consistent
costs necessary for the efficient delivery of across sites as it develops its legislative
health services and remove the procedure program.  CMS also issued a notice of
codes that meet its criteria for removal from proposed rulemaking, which has not
the Ambulatory Surgery Center list of covered been finalized, that would  remove
procedures.  (A-14-89-00221; A-14-98-00400; certain procedure codes from the ASC
OEI-09-88-01003; OEI-05-00-00340) list of covered procedures. 
*This savings estimate would result from the copayment; the savings estimate for panels has yet to be
determined.
67 APPENDIX B
Medicare Payments for Mental Health        $676
Services: CMS concurred and has initiated some
CMS should ensure mental health services are efforts, particularly regarding
medically necessary, reasonable, accurately community mental health centers.  OIG
billed, and ordered by an authorized is reviewing this area to determine if
practitioner by using a comprehensive program substantial errors are still present.
of targeted medical reviews, provider
education, improved documentation
requirements, and increased surveillance of
mental health services.  (OEI-02-99-00140; 
OEI-03-99-00130;  A-04-98-02145; 
A-01-99-00507; A-01-99-00530)
Payment Policy for Medicare Bad Debts:        $340
OIG presented four options for CMS to The BBA of 1997 provided for some
consider, including the elimination of a reduction of bad debt payments to
separate payment for bad debts, the offset of providers.  The Benefits Improvement
Medicare bad debts against beneficiary Social and Protection Act of 2000 subsequently
Security payments, the limitation of bad debt adjusted upwards the percentage of total
payments to prospective payment system hospital bad debt that would be
hospitals that are profitable, and the inclusion reimbursed.  However, additional
of a bad debt factor in the diagnosis- related legislative changes are needed to
group rates.  CMS should seek legislative implement the modifications that OIG
authority to further modify bad debt policies.  recommended.
(A-14-90-00339)
Cost Effectiveness of Pay and Chase         $185
Methods for Medicaid Pharmacy Third- CMS agreed that States cost-avoidance
Party Liability Recoveries: waivers should be reexamined and has
CMS should determine whether States cost- made a concerted effort to track States
avoidance waivers for pharmacy claims are pay- and-chase activities.  The CMS
meeting the cost-effectiveness criterion.  CMS central office asked the regional offices
can ascertain cost-effectiveness by requiring to identify any waivers that have been
States to track dollars that they pay and chase granted, any pending waiver requests,
and the amounts that they recover.  CMS and situations where a State is using
should also review States policies to pay-and-chase without an approved
determine if they are paying and chasing waiver.  CMS is also working with
pharmacy claims without waivers.   States that cost-avoid pharmacy claims
(OEI-03-00-00030) and with the National Association of
Chain Drug Stores in developing
guidance to assist States in
implementing cost avoidance.
Graduate Medical Education:        $157.3
CMS should revise the regulations to remove CMS did not concur with the
from a hospitals allowable graduate medical recommendations.  Although the BBA
education (GME) base-year costs any cost of 1997 and the BBRA of 1999
center with little or no Medicare utilization contained provisions to slow the growth
and submit a legislative proposal to compute in Medicare spending on GME, OIG
Medicares percentage of participation under believes that its recommendations
the former, more comprehensive system.  should be implemented and that further
(A-06-92-00020) savings can be achieved. 
68 APPENDIX B
Medicaid Drug Rebate Program:      $123
The best price calculation in the Medicaid CMS continues to disagree with the
drug rebate program should be indexed to the recommendation.  OIG continues to
consumer price index-urban.  (A-06-94-00039) monitor the drug rebate program; audits
will continue to focus on enhancing the
collection of rebates and providing
potential savings to the rebate program.
Inappropriate Payments for Nail       $96.8
Debridement: CMS concurred; the agency planned to
CMS should require Medicare carriers to continue to maximize the effectiveness
recoup the overpayments found in OIGs of its medical review strategy, collect
sample and to carefully scrutinize payments the overpayments identified in OIGs
for nail debridement services through medical sample, and educate podiatrists on
reviews, require podiatrists to adequately Medicare policy for paying nail
document the medical necessity of all nail debridement claims.
debridement services, and require CMS
regional offices and carriers to educate
podiatrists on Medicare payment policies for
nail debridement claims.  
(OEI-04-99-00460)
Medical Equipment/Supply Claims Lacking         $91
Valid, Active UPINs: CMS concurred and implemented an
CMS should create edits to identify medical edit to reject claims listing a deceased
equipment and supply claims that do not have physicians UPIN beginning in April
a valid and active unique physician
2002.  CMS decided not to implement
identification number (UPIN) listed for the
edits for inactive and invalid UPINs. 
ordering physician.  (OEI-03-01-00110)
Instead, the agency initiated provider
education efforts and issued two
program memorandums.
Medicare Orthotics:          $43 
CMS should take action to improve Medicare CMS generally concurred with OIGs
billing for orthotic devices.  CMS should also original recommendations.  The agency
require standards for suppliers of is working on a proposed rule regarding
custom-molded and custom-fabricated orthotic orthotics and intends to put in place
devices. standards for custom orthotics.
(OEI-02-95-00380; OEI-02-99-00120;
OEI-02-99-00121)
Expansion of the DRG Payment Window:          $37
CMS should propose legislation to expand the CMS did not concur with the
DRG payment window to at least 7 days recommendation and has not pursued a
immediately before the day of admission.   legislative proposal.
(A-01-02-00503)
69 APPENDIX B
End Stage Renal Disease Payment Rates:          $22**
CMS should reduce the payment rates for CMS agreed, and the BIPA of 2000
outpatient dialysis treatments to reflect current required the Secretary to develop a
efficiencies and economies in the marketplace.  composite rate that includes, to the
(A-14-90-00215) extent feasible, payment for laboratory
tests and drugs that are routinely used in
dialysis treatments but are now
separately billable.  The Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 requires the
Secretary to establish a case-mix
adjusted composite rate for 2005 and to
conduct a demonstration of a bundled
case-mix adjusted prospective payment
system.  The Act also directs CMS to
use the results of an OIG study on
separately billable end stage renal disease
(ESRD) drug payments and costs to set
the 2005 composite payment rate.
Respiratory Assist Devices With a Back-Up        $11.5
Rate: CMS concurred and published a
CMS should reclassify bi-level respiratory assist proposed rule in August 2003 clarifying
devices with a back-up rate from the frequent that bi-level respiratory assist devices
and substantial servicing category to the with a back-up rate be paid as capped
capped rental category under the durable rental items.
medical device benefit.  
(OEI-07-99-00440)
Indirect Medical Education: TBD***
CMS should reduce the indirect medical CMS agreed with the recommendation.
education (IME) adjustment factor to the level The BBA of 1997, as amended by the
supported by CMSs empirical data and BBRA of 1999, reduced the IME
initiate further studies to determine whether adjustment to 5.5 percent in 2002 and
different adjustment factors are warranted for thereafter.  OIG thinks the factor should
different types of teaching hospitals. be further reduced to eliminate overlap
(A-07-88-00111) with the disproportionate share
adjustment.
Medicare Secondary PayerEnd Stage TBD
Renal Disease Time Limit: CMS was concerned that an indefinite
CMS should extend the Medicare secondary MSP provision might encourage
payer (MSP) provisions to include ESRD insurers to drop uneconomical services,
beneficiaries without a time limitation. namely facility dialysis and
(A-10-86-62016)  transplantation.  OIG continues to
advocate that when Medicare eligibility
is due solely to ESRD, the group health
plan should remain primary until the
beneficiary becomes entitled to
Medicare based on age or disability.  At
that point, Medicare would become the
primary payer.
**This estimate represents annual program savings of $22 million for each dollar reduction in the
composite rate, given the population of ESRD beneficiaries at the time of OIGs review.
70 APPENDIX B
***To be determined.
Inpatient Psychiatric Care Limits:   TBD
CMS should develop new limits to deal with CMS agreed with OIGs findings but
the high cost and changing utilization patterns stated that further analysis would be
of inpatient psychiatric services and apply a required before any legislative changes
60-day annual and a 190-day lifetime limit to could be supported.
all psychiatric care regardless of the place of
service.  (A-06-86-62045)
Hospital Capital Costs: TBD
CMS should determine the extent that capital CMS did not agree with the
reductions are needed to fully account for recommendation.  Although the BBA of
hospitals excess bed capacity and report the 1997 reduced capital payments, it did
percentage to the Congress. not include the effect of excess bed
(A-09-91-00070; A-14-93-00380) capacity and other elements included in
the base-year historical costs. 
Connection Between the Calculation of TBD
Medicaid Drug Rebates and Drug CMS agreed to pursue a change in the
Reimbursement: rebate program similar to that recom-
CMS should seek legislation that would mended.  The Presidents FY 2003
require participating manufacturers to pay budget proposed a legislative change
Medicaid drug rebates based on average that would base the drug rebate on the
wholesale price (AWP) or study other viable difference between the AWP and the
alternatives to the current program of using best price for a drug.  That legislative
average manufacturer price to calculate the change was ultimately dropped, and
rebates.  This legislation would have resulted none of the subsequent Presidential
in about $1.15 billion in additional rebates for budgets included a similar proposal. 
100 brand-name drugs with the highest total
Medicaid reimbursements in calendar years
1994-96.  (A-06-97-00052)
Home Health Agencies: TBD
CMS should revise Medicare regulations to Although the BBA of 1997 included
require the physician to examine the patient provisions to restructure home health
before ordering home health services. benefits, CMS still needs to revise
(OEI-04-93-00262; OEI-04-93-0026; Medicare regulations to require that
OEI-12-94-00180; OEI-02-94-00170; physicians examine Medicare patients
A-04-95-01103; A-04-95-01104; before ordering home health services. 
A-04-94-02087; A-04-94-02078; Subsequent to the BBA, OIGs
A-04-96-02121; A-04-97-01169; four-State review found that unallowable
A-04-97-01166; A-04-97-01170; services continued to be provided
A-04-99-01195) because of inadequate physician
involvement.  While agreeing in
principle, CMS said it would continue to
examine both coverage rules and
conditions of participation to develop
the discipline necessary for ensuring
proper certification.  CMS also provided
additional payments for physician care
plan oversight and education for
physicians and beneficiaries. 
71 APPENDIX B
Various Operating Divisions
Recharge Center Costs:          $1
The Assistant Secretary for Administration The Department concurred and has
and Management should propose changes to worked with OMB on a revision to A-
OMB Circular A-21 to improve guidance on 21.  The proposed revision, which was
the financial management of recharge centers.  published in the Federal Register in
The revision should include criteria for August 2002, would require that
establishing, monitoring, and adjusting billing adjustments to a recharge centers
rates to eliminate accumulated surpluses and billing rate take into account
deficits; preventing the use of recharge funds for overrecoveries and/or underrecoveries
unrelated purposes and excluding unallowable from previous periods.  Rate
costs from the calculation of recharge rates; adjustments would be required at least
ensuring that Federal projects are billed every 2 years.  The final rule is expected
equitably; and excluding recharge costs from the to be issued in FY 2004.  
recalculation of facilities and administrative cost
rates.  (A-09-96-04003)
72 Appendix C
Unimplemented Office of Inspector General Program
and Management Improvement Recommendations
This schedule outlines Office of Inspector General (OIG) findings and recommendations
which, if implemented, would result in substantial benefits.  The benefits relate primarily to
effectiveness rather than cost-efficiency.
More detailed information can be found in OIGs Orange Book, which can be found on
the Internet at http://oig.hhs.gov. 
OIG Recommendation Status
Centers for Medicare & Medicaid Services
Accountability Over Billing and Collection of
Medicaid Drug Rebates: CMS concurred with the recommendation and set
CMS should ensure that States implement up a reporting mechanism to capture rebate
accounting and internal control systems in information.  The agency still needs to ensure that
accordance with  Federal regulations for the States establish adequate accounting and internal
Medicaid drug rebate program.  Such systems control systems to obtain reliable information. 
must provide for accurate, current, and complete Current audit results have shown that this remains
disclosure of drug rebate transactions and provide a problem in most States.
CMS with the financial information it needs to
effectively monitor and manage the Medicaid
drug rebate program.  (A-06-92-00029)
Fairly Presenting the Medicare Accounts
Receivable Balance: CMS hired consultants to assist in validating
CMS should require Medicare contractors to accounts receivable reported by Medicare
implement or improve internal controls and contractors and provided comprehensive
systems to ensure that reported accounts instructions to contractors. For the long term,
receivable are valid and documented.  CMS is developing an integrated general ledger
(A-17-95-00096; A-17-97-00097; system as the cornerstone of its financial
A-17-98-00098; A-17-00-00500; A-17-00-02001; management controls.
A-17-01-02001; A-17-02-02002; A-17-03-03003)
Guidance to Drug Manufacturers To Better
Implement the Medicaid Drug Rebate CMS did not concur, stating that the drug law
Program: and the rebate agreements already established a
CMS should survey manufacturers to identify the methodology for computing AMP.  OIG disagrees
various calculation methods used to determine because the rebate law and agreements defined
average manufacturer price (AMP).  CMS should AMP but did not provide specific written
also develop a more specific policy for calculating methodology for computing it.
this price which would protect the interests of the
Government and which would be equitable to the
manufacturers.  (A-06-91-00092) 
73 APPENDIX C
Accuracy of Carrier Payment Data:
CMS should conduct a review of carriers claims CMS stated that a review is under way to compare
processing data to examine the scheduled date of data contained in the National Claims History File
payment entered on claims sent to the Common with data at the carrier level.  CMS has also
Working File (CWF).  If there is no correlation approved two new edits which will enforce the
between the claims payment date variable and the payment floor standards on claims sent to the CWF.
actual date of payment, CMS should define what
data should be entered into this field and how it
should be calculated, and/or revise the current
variable definition to clarify for National Claims
History data users that the scheduled date of
payment is not an accurate reflection of the actual
claim payment date.  CMS should also review the
carriers claims processing data to determine the
accuracy of the information contained in the
CROWD system.  
(OEI-03-00-00350)
Duplicate Payments for the Same Service by
Multiple Carriers: CMS concurred with OIGs recommendations and
CMS should revise CWF edits to detect and deny will reexamine existing criteria regarding duplicate
duplicate billings to individual carriers or to more editing in the CWF system to determine the cost-
than one carrier, or increase postpayment reviews effectiveness of including the carrier number in the
if such edits are determined not to be cost match criteria.  CMS entered a contract to study
effective.   duplicate billing.
(OEI-03-00-00090; OEI-03-00-00091)
Inappropriate Payments for Blood Glucose Test
Strips: CMS concurred with the recommendations and
CMS should alert suppliers of the importance of noted a number of initiatives that have reduced the
properly completed documentation to support incidence of improper payments in recent years.
their claims for test strips; require suppliers to
indicate actual and accurate start and end
dates on claim forms; promote supplier
concurrence and cooperation with OIGs recently
issued compliance guidelines; and advise
beneficiaries to report any instances of fraudulent
or abusive practices involving their home blood
glucose monitors, test strips, or related supplies to
their DMERCs.  
(OEI-03-98-00230)
Educating Beneficiaries on Reducing Financial
Liability for Durable Medical Equipment: CMS concurred with OIGs recommendations and
CMS should educate beneficiaries on ways to has undertaken a number of efforts to increase
reduce financial liability for medical equipment beneficiary education and awareness about the
and supplies and reevaluate Medicare fee consequences of assigned and nonassigned claims.
schedules for ostomy supplies.  
(OEI-07-99-00510)
74 APPENDIX C
Resident Assessment Instruments:
CMS should more clearly define minimum data CMS generally concurred with OIGs
set (MDS) elements and work with States to train recommendations for improved data definitions and
nursing home staff.  OIG recommended that CMS training, but did not concur with the
establish an audit trail to validate the 108 MDS recommendation to establish an audit trail.
elements that affect facility reimbursement by
Medicare.  (OEI-02-99-00040; OEI-02-99-0041)
Assessments of Mental Illness:
CMS should work with States to improve the CMS concurred with most of OIGs
assessment of persons with serious mental illness recommendations and has made revisions to its
and use survey and certification to monitor training curriculum for nursing home surveyors.
compliance.  OIG also recommended that CMS
define specialized services that are to be provided
by the State to nursing home residents with
mental illness.  (OEI-05-99-00700)
Nursing Home Residents With Serious Mental
Illness: Except for reporting MDS records by primary,
CMS should improve the quality and usefulness secondary, and tertiary diagnoses, CMS concurred
of its data sources by requiring the use of a unique with most of OIGs recommendations.  CMS does
provider number across systems, requiring not feel that adding space to the MDS to record
reporting of resident data by age and diagnosis, diagnoses would solve the problem. 
and encouraging States to use these data in
demonstrating their progress in placing disabled
persons in the most integrated settings.  OIG also
recommended training to improve data collection
and accurate coding.  (OEI-05-99-00701) 
Payments for Mental Health Services:
CMS should promote provider awareness of CMS generally concurred with the
documentation and medical necessity requirements, recommendations, plans to explore a variety of
develop a comprehensive list of psychological educational efforts, and will refer the reports to the
testing tools that can be correctly billed, target carrier clinical workgroup on psychiatric services. 
problematic services for prepayment edits or Carriers will conduct data analysis of
postpayment medical review, and encourage psychological testing and psychotherapy claims
carriers to take advantage of the MDS, especially and will conduct medical review, if indicated.
for its assessment of patient cognitive level. 
(OEI-03-99-00130;  OEI-02-99-00140)
Public Health Agencies
Organ Donation:
CMS should revise the Medicare conditions for CMS concurred with the recommendations and
coverage for Organ Procurement Organizations indicated it will explore ways in which additional
(OPOs) to make them more accountable for data can be used to assess OPO effectiveness and
implementing the new donation rule and require hospital compliance with the donation rule.  CMS
OPOs to provide hospital-specific data on has prepared a draft regulation that would address
referrals and on organ recovery.  HRSA should many of OIGs concerns; the regulation is
require that OPOs submit hospital-specific data on currently passing through HHS clearance.  HRSA
referrals and on organ recovery and support also concurred with the recommendations.
demonstration projects on how to effectively train
and make use of designated requestors.  
(OEI-01-99-00020)
75 APPENDIX C
Oversight of Tissue Banking:
FDA should expedite publication of its regulatory The Deputy Secretary concurred that FDA should
agenda requiring registration of tissue banks, expedite its planned rulemaking activities related
enhanced donor suitability screening and testing to tissues, specifically the final rule to require
the use of good tissue practices.  FDA should set a registration of tissue banks.  The Department also
realistic, yet aggressive date by which it would found considerable merit in OIGs
complete an initial inspection of all tissue banks.   recommendation for an intensified inspection
FDA should determine the appropriate minimum program directed towards entities that procure, 
cycle for tissue bank inspections, and work with process, and store human tissues.  In congressional
States and professional associations to determine testimony, FDA said that all three of the proposed
in what areas oversight activities could be rules have been published, and one rule
coordinated.   (Establishment Registering and Listing) was
(OEI-01-00-00441) finalized. FDA has completed contacting the 36
uninspected tissue banks.   The results were: 31
inspections were completed, 3 firms were out of
business, 1 firm could not be located, and 1 firm
was not an FDA obligation since it handles only
vascularized organs.  As of March 2004, FDA had
not issued the final regulation on good
manufacturing practices.
Effectiveness of FDAs Adverse Event
Reporting System for Dietary Supplements: FDA has begun to address a number of the
FDA should (1) facilitate greater detection of recommendations from the OIG report. The Center
adverse events by requiring dietary supplement for Food Safety and Applied Nutrition is
manufacturers to report serious events to FDA for developing a system for entering adverse event
some products, (2) obtain more information on and consumer complaint reports involving foods,
adverse event reports by requiring manufacturers cosmetics, and dietary supplements. This system
to register themselves and their products with went operational in a limited manner in June 2003.
FDA, (3) notify manufacturers when FDA FDA published proposed current Good
receives a serious adverse event report and Manufacturing Practices regulations for dietary
develop a new computer database to track and supplements in March 2003 and is now preparing
analyze adverse event reports, (4) expedite the the final regulation. Pursuant to the requirement
development and implementation of good for food facility registration in the Public Health
manufacturing practices for dietary supplement Security and Bioterrorism Preparedness and
manufacturers, and (5) disclose more useful Response Act of 2002, FDA requires facilities that
information to the public about dietary manufacture, process, pack, or hold dietary
supplement adverse events.   supplements to be registered with the FDA.  FDA
(OEI-01-00-00180) strives to inform the public of current
developments with respect to dietary supplements
through its dietary supplement Web site.
76 APPENDIX C
Protection for Research Subjects in Foreign
Clinical Trials: FDA supported OIGs recommendations, but
FDA should examine ways to obtain more noted that in most cases it did not have the
information about the performance of non-U.S. resources to implement the recommendations. 
Institutional Review Boards (IRBs) and help those FDA has published a proposed rule to revise its
inexperienced IRBs build their capacities; regulations pertaining to foreign clinical studies
encourage all non-U.S. investigators participating that are not conducted under an Investigational
in research to sign attestations upholding human New Drug Application (IND).  The proposed
subject protections; and develop a database to revision would require that studies be conducted in
track the growth and location of foreign research.  accordance with good clinical practice (GCP),
OHRP should exert leadership in developing including review and approval by an independent
strategies to ensure adequate human subject ethics committee (IEC).  The proposed rule also
protections for non-U.S. clinical trials funded by specifically recommends that sponsors collect
the Federal Government and those that contribute attestations by clinical investigators that the
data to new drug applications.   studies were conducted in compliance with GCP. 
(OEI-01-00-00190) OHRP published proposed rules for a single HHS
IRB registration system. 
Managed Care Organizations Reporting to the
National Practitioner Data Bank: Under contract to HRSA, PricewaterhouseCoopers
The Agency for Healthcare Research and Quality recently completed a  study on hospital and
should devote attention to the kind of educational managed care reporting to the National
and remedial efforts that could be directed to Practitioner Data Bank (NPDB).  The study
practitioners who have been experiencing recommended that HRSA try to facilitate reporting
performance problems.  HRSA should conduct an by:  seeking legislative authority and funding for
outreach program to inform managed care conducting compliance reviews of clinical
organizations of their reporting responsibilities, privileges reporting including authority to access
 and CMS should examine its practitioner peer review records; developing a strategy for
monitoring systems.  (OEI-01-99-00690)  communicating to key stakeholders, including trade
associations and accrediting organizations
(American Medical Association, American Hospital
Association, etc.); linking communication strategies
to quality of care and patient safety initiatives; and
consider focus groups as a vehicle for garnering
support for the NPDB.  HRSA did not agree with the
recommendation to do compliance reviews. 
However, HRSA has taken steps to implement the
other recommendations.  HRSA and AHRQ plan to
address outreach issues at a conference in the Fall of
2004.
77 APPENDIX C
Administration for Children and Families
Child Support Orders for Low-Income 
Noncustodial Parents: ACF is helping nine States test approaches to
ACFs Office of Child Support Enforcement serving young, never-married fathers who may
should work with States to emphasize parental have obstacles to employment and who do not
responsibility and improve the ability of low- have a child support order.  ACF has granted a
income noncustodial parents to meet their contract to determine how computerized income
obligations.  ACF should facilitate and support data can be used by local child support offices to
State experiments to test the payment effects of independently verify the income of noncustodial
using various periods of retroactivity in parents and be used in the establishment or
determining the amount of support owed and modification of child support orders where income
facilitate and support State experiences to test documentation or verification is lacking or
negotiating child support debt owed to the States incomplete.  
in exchange for improved payment compliance.  
(OEI-05-99-00391)
General Oversight
Cost Principles for Federally Sponsored
Research Activities: The Department circulated several draft iterations
The Department should modernize and strengthen of the hospital cost principles to internal users for
cost principles applicable to hospitals by either comment.  Many of the policies in the outdated
revising existing guidelines to conform with document have been updated in the draft
Office of Management and Budget (OMB) regulation.  The target date for issuing the draft
Circular A-21 or working with OMB to extend regulation as a notice of proposed rulemaking is
Circular A-21 coverage to all hospitals.  December 31, 2004.  Once the formal notice and
(A-01-92-01528) rulemaking process is complete, the updated cost
principles will be issued.
78 Appendix D
Notes to Tables 1 and 2
Notes to Table 1
1 The opening balance was adjusted downward $59.8 million.
2 During the period, revisions to previously reported management decisions included:
CIN:  02-02-05001 REVIEW OF RYAN WHITE TITLE I FUNDS RECEIVED BY
RYDER MEMORIAL HOSPITAL:  The auditee identified additional
overpayments of $274,070.
CIN:  04-02-02017  MEDICARE COST FOR ORGAN ACQUISITIONS AT TAMPA
GENERAL HOSPITAL:  The provider agreed to re-file the FY 1999
cost report with an adjustment of $220,425.
CIN:  06-03-75044  CEN-TEX FAMILY SERVICES INC.:  The grantee has submitted
additional information to support the questioned cost of $140,115. 
CIN:  10-02-71415  NOOKSACK  INDIAN  TRIBE:    Settlement  was reached on a
Department Appeals Board Decision which resulted in an adjustment of
$292,886.
Note: revisions to previously disallowed management decisions totaled $1.7 million.
3Included are management decisions to disallow $51 million that was identified in non-Federal audit reports.
4During this reporting period, DCAA issued reports that included $3,376 in questioned costs.
5A. 
Due to administrative delays, many of which are beyond management control, resolution of the
following 340 audits was not completed within 6 months of issuance.
CIN: A-04-00-02171 REV. AL MEDICAID INTERGOVERNMENTAL TRANSFERS-HOSP.
ENHANC, MAY 2001, $236,983,528 
CIN: A-02-02-01030  REVIEW OF SPEECH SCHOOL HEALTH CLAIMS - REST OF STATE,
FEBRUARY 2004,  $172,553,831 
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DSH PROGRAM FOR FY 1998, MAY
2003,  $128,269,448 
CIN: A-04-99-05561  AUDIT ADMIN COST PROPOSALS FY95-98, BCBSFL, JAX, JULY 2002,
$101,671,328 
CIN: A-09-02-00071  AUDIT OF CA DSH PROGRAM FOR FY 1998 - LA COUNTY, MAY 2003,
$98,190,042 
CIN: A-04-00-01220  IMPLE. MEDICARES POSTACUTE CARE TRANSFER POLICY, OCTOBER
2001,  $52,311,082 
CIN: A-05-02-00083  REVIEW OF INELIGIBLE SNF PAYMENTS PROCESSED AT MUTUAL OF
OMAHA, MARCH 2003,  $41,500,000 
CIN: A-07-01-02093  MISSOURI DSH - UNALLOWABLE COSTS, AUGUST 2002,  $36,200,000 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID SCHOOL
BASED HEALTH SERVICES - CT, MAY 2003,  $32,780,146 
CIN: A-04-02-02022  REVIEW OF CIGNAS MEDICARE FACPS FOR 1996-2001, DECEMBER
2003,  $31,061,144 
CIN: A-05-02-00086  REVIEW  OF  INELIGIBLE  SNF  PAYMENTS PROCESSED AT
ADMINASTAR FEDERAL, MARCH 2003,  $25,300,000 
CIN: A-05-02-00087  REVIEW OF INELIGIBLE SNF PAYMENTS PROCESSED AT UNITED
GOVERNMENT SERVICES, MARCH 2003,  $23,300,000 
79 APPENDIX D
CIN: A-10-01-00001  REVIEW  OF  WA  COMPLIANCE  W/MEDICAID  HOSP DSH PYMT,
OCTOBER 2002,  $23,291,531 
CIN: A-07-01-00125  TRANSAMERICA (TOLIC) - PENSION SEGMENT CLOSING AUDIT, MAY
2002,  $20,227,001 
CIN: A-03-01-00224  MEDICAID  SCHOOL-BASED  SERVICES/MARYLAND, MARCH 2003,
$19,954,944 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE
HOSPITAL PAYMENTS FOR FY 1998, SEPTEMBER 2002,  $19,446,435 
CIN: A-06-00-00051  AUDIT OF MEDICARE REHAB AGENCY COSTS IN TX, RHS, I, JUNE
2001,  $18,394,465 
CIN: A-05-01-00052  DME REVIEW IN INDIANA, OCTOBER 2001,  $16,377,560 
CIN: A-06-01-00035  COLLECTION OF AFDC OVERPAYMENTS, JANUARY 2002,  $13,800,000
CIN: A-01-01-02502  REVIEW OF UNCOLLECTED AFDC OVERPAYMENTS, AUGUST 2001,
$12,400,000 
CIN: A-02-02-01028  REVIEW  OF  RETRO  ACUTE  CARE  HOSPITAL  DSH CLAIMS FOR
INMATE COSTS, JANUARY 2004,  $11,114,820 
CIN: A-05-02-00031  AFDC OVERPAYMENTS - WISCONSIN, AUGUST 2002,  $10,711,338 
CIN: A-01-01-00513  MEDICARE PT B PMT FOR DME I/P PRTL MNTH STAYS SNF, OCTOBER
2001,  $10,500,000 
CIN: A-05-03-00022  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMISTRATIVE
RESPONSIBILITY OF EMPIRE BLUE CROSS, MAY 2003,  $9,700,000 
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PYMTS @
SCOTT & WHITE, MAY 2003,  $8,229,574 
CIN: A-05-03-00026  REVIEW  OF  INELIGIBLE  SNF  PAYMENTS UNDER THE
ADMINISTRATIVE RESPONSIBILITY OF CARE FIRSE (MARYLAND),
MARCH 2003,  $8,100,000 
CIN: A-09-01-00085  AUDIT  OF  UCSDMC  DISPROPORTIONATE SHARE HOSPITAL
PAYMENTS FOR SFYE 1998, SEPTEMBER 2002,  $7,999,212 
CIN: A-02-02-01024  IMD UNDER 21 AUDIT IN NEW YORK, FEBRUARY 2004,  $7,642,194 
CIN: A-09-97-44262  STATE OF CALIFORNIA, APRIL 1997,  $7,300,000 
CIN: A-07-02-03033  CAREFIRST SEGMENTATION AUDIT, MAY 2003,  $6,788,644 
CIN: A-03-91-00552  INDEPENDENT  LIVING  PROGRAM  --  NATIONAL, MARCH 1993,
$6,529,545 
CIN: A-03-01-00222  MEDICAL  COLLEGE  OF  VIRGINIA/DSH/MEDICAID, APRIL 2003,
$6,324,796 
CIN: A-05-03-00035 REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE
ADMINISTRATIVE  RESPONSIBILITY  OF  VERITUS  MEDICARE
SERVICES, JULY 2003,  $6,300,000 
CIN: A-05-02-00049  MEDICAL  SERVICE  COSTS  UNDER ILLINOIS SCHOOL-BASED
MEDICAID, DECEMBER 2003,  $6,067,669 
CIN: A-07-03-04021  HOME HEALTH PPS SYSTEM CONTROLS 14 DAY PAYMENT, MARCH
2004,  $5,675,661 
CIN: A-03-99-00052  ALLEGHENY/CHESAPEAKE ORF, SEPTEMBER 2001,  $5,540,344 
CIN: A-04-00-02161  MEDICAID  SCHOOL-BASED  SERVICES  IN NORTH CAROLINA,
NOVEMBER 2001,  $5,344,160 
CIN: A-09-03-00042  REVIEW OF HHA PRECEDING HOSPITAL STAY UNDER PPS - UGS,
FEBRUARY 2004,  $5,306,825 
CIN: A-01-97-00516  ADMIN. COSTS-PART A&B, RAILROAD RETIRE BOARD, JUNE 1999,
$4,939,184 
CIN: A-03-01-00226  UVA  MEDICAL  CENTER/DSH/MEDICAID/VIRGINIA, MAY 2003,
$4,760,385 
CIN: A-05-01-00023  ADMINISTRATIVE  COSTS  REVIEW  - ADMINASTAR FEDERAL,
JANUARY 2002,  $4,694,863 
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL, MARCH 2002,  $4,505,051 
80 APPENDIX D
CIN: A-07-98-01263  DENVER CMHC, MAY 2000,  $4,447,607 
CIN: A-07-02-00144  IV-E FOSTER CARE ADMINISTRATIVE COSTS CLAIMED, AUGUST 2003,
$4,335,542 
CIN: A-01-02-00015  REVIEW OF MA MEDICAID USE OF REVISED FEE SCHEDULES FOR
CLINICAL DIAGNOSTIC LABORATORY SERVICES, JANUARY 2004,
$4,100,000 
CIN: A-07-00-00108  RURAL HEALTH CENTER REVIEW, OCTOBER 2001,  $4,087,929 
CIN: A-07-04-03053  REVIEW OF CAHABAS UNFUNDED PENSION COSTS, FEBRUARY 2004,
$4,006,541 
CIN: A-03-01-00225  VIRGINIA IMD UNDER 21, MARCH 2004,  $3,948,532 
CIN: A-05-01-00068  PARTNERSHIP  PLAN  -  ILLINOIS PHYSICIAN BILLING-FAMILY
DYNAMICS, JULY 2002,  $3,790,846 
CIN: A-02-02-01014  UNLICENSED  PROVIDERS  IN  PUERTO  RICO, SEPTEMBER 2003,
$3,607,820 
CIN: A-04-01-05002  AUDIT  MEDICAID  PAYMENTS  FOR CLINICAL LABORATORIES,
JANUARY 2002,  $3,522,639 
CIN: A-02-95-01019  STAFF BUILDERS HOME OFFICE MEDICARE COST REV. ORT, AUGUST
1998,  $3,434,274 
CIN: A-07-99-01298  DATE OF DEATH - 2, MAY 2001,  $3,200,000 
CIN: A-05-98-00042  ADMINISTAR INS. CO.--ADMIN. COSTS AUDIT, SEPTEMBER 1999,
$3,111,728 
CIN: A-06-99-00057  AUDIT  OF  MEDICARE  REHAB  AGENCY  SRVCS  IN TX, RHS,IN,
JANUARY 2001,  $3,097,201 
CIN: A-09-02-00061  REVIEW  OF  MEDICAL  CLAIMS  FOR  PRIVATE IMD PATIENTS,
DECEMBER 2002,  $3,083,389 
CIN: A-07-02-03007  COSTS CLAIMED FOR POST RETIREMENT BENEFITS BY TOLIC, MAY
2002,  $3,060,873 
CIN: A-09-98-50183  STATE OF CALIFORNIA, MARCH 1998,  $3,000,000 
CIN: A-01-02-00508  REVIEW OF MEDICARE CONTRACT TERMINATION COSTS - UNITED
HEALTHCARE, NOVEMBER 2003,  $2,894,010 
CIN: A-01-96-00508  MEDICARE ADMIN COSTS PARTS A&B AND RRB - TRAVELERS,
MARCH 1996,  $2,803,260 
CIN: A-07-03-03039  CAREFIRST OF MARYLAND UNFUNDED PENSION COSTS, MAY 2003,
$2,611,100 
CIN: A-05-97-00005  ADMINISTRATIVE  COSTS  CLAIMED  UNDER  MEDICARE  A & B,
FEBRUARY 1998,  $2,569,067 
CIN: A-05-92-00026  ASSOCIATED INSURANCE CO. - MEDICARE ADMIN, FEBRUARY 1992,
$2,530,409 
CIN: A-09-02-72300  STATE OF CALIFORNIA , JULY 2002,  $2,400,000 
CIN: A-05-03-00062  REVIEW  OF  INELIGIBLE  SNF  PAYMENTS UNDER THE
ADMINISTRATIVE  RESPONSIBILITY  OF  NORIDIAN  MUTUAL
INSURANCE COMPANY, JUNE 2003,  $2,400,000 
CIN: A-02-91-01006  BLUE  SHIELD  OF  WESTERN  NY  MEDICARE  ADM CTS PORTER,
SEPTEMBER 1991,  $2,379,239 
CIN: A-03-99-00038  EDGEWATER PSYC HOSPITAL, MARCH 2001,  $2,348,604 
CIN: A-06-01-00083  AUDIT OF MEDICAID SCHOOL-BASED SERVICES IN OKLAHOMA,
APRIL 2003,  $2,332,774 
CIN: A-07-97-01247  DUPLICATE PAYMENTS - HMO/FFS, OCTOBER 1999,  $2,300,000 
CIN: A-10-02-00008  REVIEW OF WASHINGTON STATES MEDICAL ASSISTANCE COSTS
CLAIMED  FOR  SCHOOL-BASED  HEALTH  SERVICES,  JULY  2003,
$2,279,752 
CIN: A-04-02-07007  MEDICAID FEE FOR SERVICE PAYMENTS FOR DUALLY ELIGIBLE
MEDICARE MANAGED CARE ENROLLEES, FEBRUARY 2003,  $2,231,100
81 APPENDIX D
CIN: A-04-97-01170  REVIEW HOME HLTH SRVCS BY MEDCARE HOME HLTH SRVCS,
APRIL 1999,  $2,200,000 
CIN: A-09-01-00056  PACIFICARE-CALIFORNIA  JAN  1998 INSTITUTIONAL PMTS,
SEPTEMBER 2001,  $2,158,577 
CIN: A-05-03-00063  REVIEW  OF  INELIGIBLE  SNF  PAYMENTS UNDER THE
ADMINISTRATIVE  RESPONSIBILITY  OF  MEDICARE  NORTHWEST
(BLUE CROSS BLUE SHIELD OF OREGON), OCTOBER 2003,  $2,100,000
CIN: A-07-01-03001  BCBS OF MN PENSION SEGMENT CLOSING, JANUARY 2003,  $2,003,341
CIN: A-05-00-00034  PROVENA ST. JOSEPH HOSPITAL-O/P PSYCH SERVICES, NOVEMBER
2000,  $1,978,583 
CIN: A-05-02-00048  REVIEW OF MEDICAID DME CLAIMS - TEXAS, SEPTEMBER 2002,
$1,969,704 
CIN: A-01-03-00500  HOME HEALTH PPS SYSTEM CONTROLS 14 DAY PAYMENT-WHEN
PRECEDED BY A HOSPITAL DISCHARGE, JULY 2003,  $1,861,857 
CIN: A-05-97-00014   GROUP HEALTH PLAN INC.(HEALTHPARTNERS) INST. BENES, JUNE
1998,  $1,808,308 
CIN: A-05-03-00071  REVIEW  OF  INELIGIBLE  SNF  PAYMENTS UNDER THE
ADMINISTRATIVE RESPONSIBILITY OF ANTHEM HEALTH PLANS OF
MAINE, INC., OCTOBER 2003,  $1,800,000 
CIN: A-01-02-00516  REVIEW OF POTENTIALLY EXCESSIVE MEDICARE PAYMENTS FOR
OUTPATIENT SERVICES UNITED GOVERNMENT SERVICES, MARCH
2003,  $1,768,783 
CIN: A-09-00-00127  BLUE CROSS OF CALIF - MEDICARE ADMIN COSTS, DECEMBER 2002,
$1,677,822 
CIN: A-04-99-01196  OIG-HCFA JOINT REVIEW OF JMV MEDICAL CORP., DECEMBER 2000,
$1,600,417 
CIN: A-03-00-00215  ANNABURG MANOR NURSING HOME COST REPORT, MARCH 2002,
$1,582,079 
CIN: A-03-96-00012  BCBSM PT-B NON-RENEWAL COSTS, AUGUST 1998,  $1,557,459 
CIN: A-01-01-00547  REVIEW  OF  GRADUATE  MEDICAL  EDUCATION AND INDIRECT
MEDICAL EDUCATION AT THE HARTFORD HOSPITAL, OCTOBER 2003,
$1,530,441 
CIN: A-04-01-05011  REVIEW  OF  FLORIDA  MEDICAID  PAYMENTS FOR SERVICES
PROVIDED TO INMATES, OCTOBER 2002,  $1,450,077 
CIN: A-07-02-03022  WELLMARK PENSION SEGMENT CLOSING, MARCH 2003,  $1,353,036 
CIN: A-07-02-03021  ANTHEM BCBS OF CT - PENSION SEGMENT CLOSING, FEBRUARY
2004,  $1,351,284 
CIN: A-04-03-02024  REVIEW OF BCBSFL RESPONSE TO SET-ASIDE COSTS IN PRIOR FACP
AUDIT, APRIL 2003,  $1,277,247 
CIN: A-05-01-00064  REVIEW OF OUTPATIENT REHABILITATION CLAIMS REIMBURSED BY
MEDICARE  DURING  CALENDAR  YEAR  1999,  FEBRUARY  2002,
$1,235,892 
CIN: A-03-01-00251  AFDC OVERPAYMENTS - VIRGINIA, MARCH 2003,  $1,221,494 
CIN: A-04-02-72903  STATE OF TENNESSEE , SEPTEMBER 2002,  $1,213,353 
CIN: A-01-02-00014  REVIEW OF MEDICAID SCHOOL-BASED HEALTH SERVICES-RHODE
ISLAND, FEBRUARY 2004,  $1,201,193 
CIN: A-05-00-00004  NEW CENTER COMMUNITY MENTAL HEALTH CENTER, JUNE 2000,
$1,181,000 
CIN: A-05-00-00049  PARTNERSHIP PLAN - IL HOSPITAL TRANSFERS, JUNE 2001,  $1,150,113
CIN: A-02-97-01026  EDDY VNA (#337152) HHA ELIGIBILITY REVIEW, SEPTEMBER 1999,
$1,131,593 
CIN: A-05-03-00086  REVIEW  OF  INELIGIBLE  SNF  PAYMENTS UNDER THE
ADMINISTRATIVE RESPONSIBILITY OF ARKANSAS BLUE CROSS AND
BLUE SHIELD, OCTOBER 2003,  $1,100,000 
82 APPENDIX D
CIN: A-05-98-00050  FOLLOW-UP  MEDICAID  CLINICAL  LABORATORIES, JULY 1999,
$1,097,036 
CIN: A-09-98-00052  CALIFORNIA  MEDICAL  REVIEW  INC.  (CA.  PRO), JANUARY 1999,
$1,067,991 
CIN: A-05-01-00037  BC/BS  OF  MN.  ADMIN  COSTS--LEON  SNEAD  &  CO., JUNE 2001,
$1,037,090 
CIN: A-01-98-00500  PAYMENT  EDITS  FOR  PSYCHIATRIC  AT  MA  PART B CARRIER,
SEPTEMBER 1998,  $1,000,000 
CIN: A-02-04-77762  MONTCLAIR  CHILD  DEVELOPMENT  CENTER  INC., MARCH 2004,
$992,617 
CIN: A-09-94-01010  CLOSEOUT AUDIT--CONT NO. N01-ES-75196 (STRATAGENE), MARCH
1994,  $983,208 
CIN: A-06-02-00027  TEXAS MEDICARE BAD DEBT COLLECTIONS, OCTOBER 2002,  $919,331
CIN: A-05-92-00060  CONTRACTOR AUDIT - BCBS - ADMIN, FEBRUARY 1993,  $879,609 
CIN: A-05-04-77356  TRI-VALLEY OPPORTUNITY COUNCIL INC., FEBRUARY 2004,  $866,666
CIN: A-07-98-02533  TRAVELERS FACP, DECEMBER 1998,  $854,214 
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES, MARCH
2002,  $836,711 
CIN: A-02-98-01040  NIAGARA  CTY  DEPT.  OF  HLTH-#337001-HHS ELIG REVIEW,
DECEMBER 1999,  $807,679 
CIN: A-06-03-00013  MEDICARE ADMINISTRATIVE COST PROPOSAL-ARKANSAS BCBS,
OCTOBER 2003,  $759,748 
CIN: A-07-99-00981  ASSIST REVIEW OF MEDICARE A/R HCFA RO DENVER, JANUARY 2000,
$754,926 
CIN: A-01-04-76290  STATE OF MAINE, JANUARY 2004,  $735,765 
CIN: A-05-02-00041  INDIANA MEDICAID HOSPITAL PATIENT TRANSFERS, JANUARY 2003,
$730,061 
CIN: A-09-00-00103  PACIFICARE HMO - MEDICARE DUAL ELIGIBLES, MAY 2001,  $720,858
CIN: A-07-02-03035  COSTS  CLAIMED  FOR  PRBS  BY  WELLMARK, FEBRUARY 2003,
$717,106 
CIN: A-09-97-00078  PHYSICIAN BILLINGS DR. SPENCER, JANUARY 1999,  $683,264 
CIN: A-06-01-00090  PREAWARD-APASS  MAINTAINER DATA PROCESSING
SERVICES-ABCBS, SEPTEMBER 2001,  $678,651 
CIN: A-05-00-64226  NA-ILLINOIS DEPT. OF PUBLIC AID, MAY 2000,  $654,017 
CIN: A-01-99-00535  AUDIT OF M/C PART A ADMIN COSTS-ANTHEM BC/BS CT, AUGUST
2000,  $621,256 
CIN: A-04-00-00138  MEDICAID  ESCHEATED  WARRANTS  -  FLORIDA, JANUARY 2002,
$613,891 
CIN: A-02-02-01025  NEW YORK NURSING HOME DUPLICATE PAYMENTS, SEPTEMBER
2003,  $606,403 
CIN: A-06-98-00066  ORT REVIEW OF ULTIMATE HOME HEALTH CARE INC., OCTOBER
1999,  $602,982 
CIN: A-04-94-01078  MONITORING ADMIN COST - AUDIT MEDICARE P.B BCBSSC, JULY
1994,  $594,092 
CIN: A-04-93-01069  MONITORG ADMIN COST AUDIT MCARE PART A BCBSSC, JULY 1994,
$590,844 
CIN: A-04-01-01007  GABCBS  MEDICARE  PART  A  ADMINISTRATIVE COST AUDIT,
NOVEMBER 2001,  $575,471 
CIN: A-09-01-00055  REVIEW OF IMD CLAIMS - STATE OF CALIFORNIA, MARCH 2002,
$551,394 
CIN: A-07-02-03015  BCBS  OF  MN  PENSION  COSTS  CLAIMED FOR MEDICARE
REIMBURSEMENT, FEBRUARY 2003,  $550,083 
CIN: A-05-02-72811  COMMUNITY ACTION OF GREATER INDIANAPOLIS INC. , AUGUST
2002,  $547,899 
83 APPENDIX D
CIN: A-07-02-03029  WELLMARK  -  PENSION  COSTS  CLAIMED FOR MEDICARE
REIMBURSEMENT, FEBRUARY 2003,  $547,053 
CIN: A-05-99-00062  AMERICARE  PHYSICAL  THERAPY  SERVICES, DECEMBER 2000,
$503,619 
CIN: A-09-99-56858  HAWAII DEPT. OF HUMAN SERVICES, FEBRUARY 1999,  $502,000 
CIN: A-03-92-16229  STATE OF PENNSYLVANIA, MARCH 1992,  $496,876 
CIN: A-02-02-01004  MEDICAID PPS TRANSFERS, MAY 2003,  $493,158 
CIN: A-05-01-67384  MICHIGAN  DEPT.  OF  COMMUNITY  HEALTH  , FEBRUARY 2001,
$481,693 
CIN: A-07-01-00120  REVIEW OF UNFUNDED PENSION COCST AT BCBS OF OK, JULY 2001,
$413,800 
CIN: A-05-03-00053  ESRD PRICING ERRORS AT INDEPENDENT FACILITIES, NOVEMBER
2003,  $407,300 
CIN: A-02-01-67912  STATE OF NEW YORK, MARCH 2001,  $389,536 
CIN: A-05-00-00030  CONTRACTED  AUDIT-NATIONWIDE INS.-MEDICARE ADMIN.,
OCTOBER 2000,  $385,081 
CIN: A-04-02-02014  MEDICAID CLAIMS FOR IMD RESIDENTS UNDER AGE 21, FEBRUARY
2003,  $362,931 
CIN: A-01-02-73084  STATE OF MAINE , SEPTEMBER 2002,  $362,326 
CIN: A-06-01-00087  AUDIT OF OBSERVATION SERVICE BILLING BY PRESBYTERIAN HOSP
OF DALLAS, JUNE 2002,  $361,832 
CIN: A-07-03-02653  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION BC/BS
ARKANSAS, JANUARY 2003,  $344,883 
CIN: A-10-01-00005  AUDIT OF ADMIN COSTS AT MEDICARE NORTHWEST, SEPTEMBER
2001,  $332,274 
CIN: A-07-01-02630  REVIEW  OF  MUTUALS  SETTLEMENT  OF  HHA COST REPORTS,
JANUARY 2002,  $319,949 
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES,
MAY 2002,  $319,355 
CIN: A-09-03-00032  BLUE CROSS OF CALIFORNIA, MEDICARE, TERMINATION COSTS,
OCTOBER 2003,  $319,187 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN,
MARCH 2003,  $315,474 
CIN: A-03-03-72652  NATIONAL  ASSOCIATION  FOR  EQUAL  OPPORTUNITY IN HIGH,
OCTOBER 2002,  $313,256 
CIN: A-06-01-00028  AUDIT OF OBSERVATION SERVICE BILLINGS BY PPS HOSPITALS,
FEBRUARY 2002,  $298,549 
CIN: A-09-03-00050  OREGON MEDICAID REIMBURSEMENT RATE FOR NURSING FACILITY
ADMINISTRATIVE COSTS, OCTOBER 2003,  $290,769 
CIN: A-05-96-00069  CPA  AUDIT  OF  HOOPER  HOLMES  HHA  G&A  -OI CASE OPEN,
FEBRUARY 1998,  $280,515 
CIN: A-09-94-30178  STATE OF ARIZONA, JUNE 1994,  $267,021 
CIN: A-05-02-00047  UNITED GOVERNMENT SERVICES, MEDICARE PART A ADMIN. COSTS
FY 1999-2001, JUNE 2003,  $260,831 
CIN: A-07-03-02662  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION
NORDIAN, DECEMBER 2002,  $258,112 
CIN: A-02-03-04001  AUDIT OF RUTGERS CONTRACT NO. SPO 103-96-D-0016/0001, AUGUST
2003,  $249,381 
CIN: A-05-01-00094  PAYMENTS  TO  KAISER  OF  OAKLAND FOR INSTITUTIONAL
BENEFICIARIES, OCTOBER 2002,  $229,656 
CIN: A-04-00-01222  CAPITAL  HLTH  PLAN,  COST-BASED  MANAGED CARE PLAN,
SEPTEMBER 2001,  $221,952 
CIN: A-01-00-00549  BETH ISRAEL AUDIT OF OUTPATIENT PHARMACY SVC, MARCH 2001,
$221,905 
84 APPENDIX D
CIN: A-05-99-00067  WPS PART B ADMINISTRATIVE COSTS, NOVEMBER 2000,  $221,644 
CIN: A-02-03-04006  GRANT REVIEW DAAG 55-97-1-0281, MARCH 2004,  $221,365 
CIN: A-02-01-65217  PUERTO RICO DEPT. OF THE FAMILY , DECEMBER 2000,  $213,264 
CIN: A-05-01-00103  PAYMENTS  FOR  SERVICES  TO  DECEASED BENEFICIARIES -
MICHIGAN, OCTOBER 2003,  $211,894 
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT, OCTOBER 2002,  $208,271 
CIN: A-06-96-00064  ORT SNF RESEARCH AT METHODIST HOSPITAL, JANUARY 1997,
$200,000 
CIN: A-07-01-02631  REVIEW OF HOSPITAL OBSERVATION BEDS, MAY 2002,  $197,773 
CIN: A-07-03-02656  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION
KANSAS, DECEMBER 2002,  $190,106 
CIN: A-03-01-00555  PDPI INC. -- HEAD START, JUNE 2001,  $185,577 
CIN: A-07-02-03016  TRANSAMERICA SUPPLEMENTAL PENSION PLAN COSTS, MARCH
2002,  $180,244 
CIN: A-05-02-73374  STATE OF OHIO , SEPTEMBER 2002,  $179,797 
CIN: A-10-01-00006  REVIEW OF OREGON MEDICAID SCHOOL BASED HEALTH SERVICES
- REIMBURSEMENT OF DIRECT SERVICES, AUGUST 2002,  $166,671 
CIN: A-07-01-02094  SURVEY OF OUTPATIENT OBSERVATION SERVICES, OCTOBER 2002,
$165,125 
CIN: A-03-98-00034  FREESTATE HP/INSTITUTIONAL STATUS/MEDICARE, MARCH 1999,
$156,987 
CIN: A-01-02-01504  REVIEW  OF  CDCS  HIV  PROGRAMS  AT FENWAY COMMUNITY
HEALTH CENTER, JUNE 2003,  $151,912 
CIN: A-07-03-02664  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION
TRAILBLAZERS, DECEMBER 2002,  $140,202 
CIN: A-08-03-74616  OGLALA SIOUX TRIBAL DEPT. OF PUBLIC SAFETY, MARCH 2003,
$136,764 
CIN: A-02-98-01002  IPRO CLOSEOUT AUDIT - CPA CONTRACT MONITORING, DECEMBER
1998,  $135,492 
CIN: A-05-00-00060  MEDICA FOLLOW-UP, REIMB. RATES FOR INSTI. BENES, JUNE 2001,
$133,795 
CIN: A-06-00-00014  REV OF INFUSION THERAPY CLAIMS @ DOCTORS HEALTHCAR, JUNE
2000,  $132,238 
CIN: A-07-03-02661  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION NHIC,
JANUARY 2003,  $129,748 
CIN: A-02-01-04000  INTERIM AUDIT OF RUTGERS CONTRACT NO.SP0103-96-D-, JANUARY
2002,  $125,415 
CIN: A-05-01-00069  MERITER - MC/MA CREDIT BALANCES, JULY 2002,  $122,713 
CIN: A-05-01-00091  PAYMENTS  TO  UNITED  HC  OF  FLA FOR INSTITUTIONAL
BENEFICIARIES, SEPTEMBER 2002,  $121,023 
CIN: A-09-99-52846  INTER-TRIBAL  COUNCIL  OF  CALIFORNIA  INC., FEBRUARY 1999,
$119,099 
CIN: A-02-02-71384  STATE OF NEW YORK , MARCH 2002,  $118,773 
CIN: A-02-96-02001  INTERNATIONAL  RESCUE  COMMITTEE  - REFUGEE PROGRAM,
JANUARY 1998,  $114,631 
CIN: A-09-02-71247  WATTSHEALTH FOUNDATION INC. , APRIL 2002,  $113,000 
CIN: A-03-01-00001  EASTERN SHORE AMBULANCE CO., AUGUST 2001,  $110,417 
CIN: A-01-02-00527  REVIEW  OF  ANTHEM  BLUE  CROSS/BLUE SHIELD MEDICARE
CONTRACT TERMINATION AND SEVERANCE COSTS, SEPTEMBER
2003,  $104,468 
CIN: A-01-02-01502  NORTHEASTERN UNIVERSITY DHHS CONTRACT COSTS, JUNE 2003,
$102,378 
CIN: A-05-01-00079  PAYMENTS  TO  BLUE  CARE  MID-MI FOR INSTITUTIONAL
BENEFICIARIES, JUNE 2002,  $100,692 
85 APPENDIX D
CIN: A-04-03-06007  NURSING  HOME  QUALITY  OF  CARE  SANCTIONS - FLORIDA,
FEBRUARY 2004,  $99,957 
CIN: A-05-00-65775  STATE OF WISCONSIN, SEPTEMBER 2000,  $98,586 
CIN: A-05-02-00067  REVIEW  OF  MEDICARE  FEE-FOR-SERVICE  PAYMENTS & COST
REPORTS @ WELBORN, JUNE 2003,  $97,623 
CIN: A-09-97-00066  WALTER MCDONALD - INDIRECT COST RATE AUDIT, MARCH 1998,
$95,733 
CIN: A-10-97-00003  BCWAAK-ADM COSTS REMOTE NETWORK ACTIVITIES FY93&94,
FEBRUARY 1998,  $94,643 
CIN: A-06-03-00021  CMS FY 02 MEDICARE ERROR RATE - TRAILBLAZER REPORT QTR 1
(NOV-DEC), JULY 2003,  $93,863 
CIN: A-07-95-01164  MEDICARE ADMIN COSTS - GENERAL AMERICAN, DECEMBER 1995,
$89,929 
CIN: A-05-02-00074  IL PARTNERSHIP PLAN - TRANSPORTATION DURING AN INPATIENT
STAY, APRIL 2003,  $89,147 
CIN: A-05-01-00090  PAYMENTS TO AETNA OF FOR INSTITUTIONAL BENEFICIARIES, JULY
2002,  $87,516 
CIN: A-07-00-00118  REVIEW OF KANSAS RURAL HEALTH CENTER, MAY 2001,  $87,493 
CIN: A-08-99-56914  RURAL AMERICA INITIATIVES, JULY 1999,  $87,468 
CIN: A-04-01-01006  MBCBS  MEDICARE  PART  A  ADMINISTRATIVE COST AUDIT,
NOVEMBER 2001,  $87,042 
CIN: A-01-04-77722  STATE OF RHODE ISLAND & PROVIDENCE PLANTATIONS, JANUARY
2004,  $86,792 
CIN: A-05-01-00071  PAYMENTS TO HUMANA-K.C. FOR INSTITUTIONAL BENEFICIARIES,
DECEMBER 2001,  $84,808 
CIN: A-02-03-74061  PUERTO RICO DEPT. OF THE FAMILY, AUGUST 2003,  $80,001 
CIN: A-05-01-00089  ADDITIONAL  BENEFITS  REVIEW  ON MANAGED CARE
ORGANIZATION, OCTOBER 2002,  $77,000 
CIN: A-01-99-00530  NATIONWIDE  REV  OF  O/P  PSYCH  SVCS  @ PSYCH HOSPITALS,
DECEMBER 2000,  $75,413 
CIN: A-01-03-75448  STATE OF NEW HAMPSHIRE, APRIL 2003,  $65,917 
CIN: A-08-03-74429  PORCUPINE CLINIC, JULY 2003,  $65,027 
CIN: A-04-03-73667  MANATEE OPPORTUNITY COUNCIL INC. , OCTOBER 2002,  $63,321 
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PA FOR INSTITUTIONAL BENEFICIARIES,
MAY 2002,  $62,432 
CIN: A-05-99-00045  KAISER HEALTH PLAN OF OHIO - INSTITUTIONAL STATUS, MAY 2000,
$61,177 
CIN: A-05-02-72716  SOKAOGON  CHIPPEWA  COMMUNITY  MOLE  LAKE BAND ,
SEPTEMBER 2002,  $60,378 
CIN: A-05-96-00072  MI  DEPT.  OF  COMMUNITY  HEALTH/MEDICAID LAB SERVICES,
AUGUST 1997,  $59,956 
CIN: A-06-01-68876  STATE OF LOUISIANA , JUNE 2001,  $59,914 
CIN: A-01-96-00505  CFO AUDIT OF HCFAS FINANCIAL STATEMENTS, JULY 1997,  $59,327
CIN: A-09-97-00059   HEALTH  SERVICES  ADVISORY  GROUP,  INC PRO-AZ, MAY 1997,
$57,925 
CIN: A-06-00-00053  OIG HCFA NEBULIZER PROJECT - NATIONAL ERROR RATE, OCTOBER
2001,  $52,550 
CIN: A-08-00-60687  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, NOVEMBER
1999,  $52,536 
CIN: A-04-02-68936  STATE OF TENNESSEE , JUNE 2002,  $50,717 
CIN: A-05-00-00059  TITLE XIX - MEDICAID ESCHEATED WARRANTS, MARCH 2001,  $50,162
CIN: A-05-02-00054  UNITED GOVERNMENT SERVICES, Y2K COSTS FY 1998 & 1999, APRIL
2003,  $49,923 
86 APPENDIX D
CIN: A-02-99-58263  PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD, JULY
1999,  $49,684 
CIN: A-09-95-00095  HEALTH SERVICES ADVISORY GROUP, INC (HSAG), DECEMBER 1995,
$49,585 
CIN: A-03-93-03306  SURVEY RESEARCH ASSOC. CACS NO1-ES-45067, DECEMBER 1993,
$48,779 
CIN: A-06-03-75523  UNITED STATES-MEXICO BORDER HEALTH ASSOCIATION, JUNE 2003,
$48,400 
CIN: A-02-04-76883  UNIV. OF PUERTO RICO-SYSTEM, OCTOBER 2003,  $47,532 
CIN: A-03-02-00373  REVIEW OF US HELPING US, DECEMBER 2003,  $45,558 
CIN: A-07-00-00106  PENSION SEGMENTATION AUDIT AT BCBS OF OKLAHOMA, JULY
2001,  $45,508 
CIN: A-10-03-00004  REVIEW  OF  OUTLIER  PAYMENT  MADE  TO VIRGINIA MASON
MEDICAL CENTER, OCTOBER 2003,  $44,631 
CIN: A-09-99-52845  INTER-TRIBAL  COUNCIL  OF  CALIFORNIA  INC., FEBRUARY 1999,
$43,315 
CIN: A-09-99-57306  PICAYUNE  RANCHERIA  OF  THE  CHUKCHANSI INDIAN TRIBE,
SEPTEMBER 1999,  $43,159 
CIN: A-07-01-00121  REVIEW OF PEN. COSTS FOR MED. REIMB. FOR BCBS OF OK, JULY
2001,  $42,463 
CIN: A-03-99-00017  PSU-HERSHEY/PHY CREDIT BALANCES/MEDICARE, DECEMBER 1999,
$41,712 
CIN: A-01-03-01500  REVIEW  OF  CDC  HIV  PROGRAMS  AT GREATER BRIDGEPORT
ADOLESCENT PREGNANCY PROGRAM, JULY 2003,  $41,088 
CIN: A-10-02-72331  IDAHO MIGRANT COUNCIL INC. , JULY 2002,  $40,541 
CIN: A-05-00-00017  INDIANA MEDICAID TRANSPORTATION SERVICES, MARCH 2001,
$39,735 
CIN: A-10-03-00003  REVIEW OF DUPLICATE MEDICARE FEE-FOR-SERVICE PAYMENTS AT
REGENCE BLUESHIELD OF IDAHO, OCTOBER 2003,  $39,660 
CIN: A-10-04-76879  STATE OF ALASKA, DECEMBER 2003,  $37,372 
CIN: A-08-00-65136  STATE OF SOUTH DAKOTA, JUNE 2000,  $36,380 
CIN: A-06-03-00020  CMS FY 02 MEDICARE ERROR RATE - TRAILBLAZER REPORT QTR 3
(APR-JUN), JULY 2003,  $35,474 
CIN: A-02-00-65502  ABYSSINIAN DEVELOPMENT CORP., AUGUST 2000,  $34,737 
CIN: A-06-03-74833  AMIGOS VOLUNTEERS IN EDUCATION & SERVICES INC. (AV, APRIL
2003,  $31,180 
CIN: A-05-02-69155  STATE OF WISCONSIN , DECEMBER 2001,  $30,900 
CIN: A-04-01-01005  REVIEW DUPLICATE MEDICARE FEE-FOR-SERVICE PAYMENTS AT
CAPITAL HEALTH PLAN, NOVEMBER 2001,  $30,293 
CIN: A-06-02-00018  GRADUATE MEDICAL EDUCATION COST AT METHODIST HOSP IN
HOUSTON, JUNE 2002,  $30,230 
CIN: A-03-00-00209  STATE SURVEY AND CERTIFICATION COSTS - VA, AUGUST 2001,  $29,298
CIN: A-01-02-71527  STATE OF MASSACHUSETTS , APRIL 2002,  $29,260 
CIN: A-04-02-72213  STATE OF FLORIDA , JUNE 2002,  $28,612 
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JANUARY 2003,
$28,573 
CIN: A-03-98-03301  AAUAP  INCURRED COST REVIEW - HHS 105-95-7011, APRIL 1998,
$28,289 
CIN: A-05-03-00097  MEDICARE OUTPATIENT CARDIAC REHAB - NORTHFIELD HOSPITAL,
NOVEMBER 2003,  $27,013 
CIN: A-04-03-01004  OUTPATIENT CARDIAC REHAB SERVICES - HEALTHSOUTH SEA PINES
REHAB HOSPITAL, DECEMBER 2003,  $26,279 
CIN: A-07-02-00150  PAYMENTS  TO  COVENTRY  -  PITTSBURG FOR INSTITUTIONAL
BENEFICIARIES, JUNE 2003,  $26,000 
87 APPENDIX D
CIN: A-06-02-70732  UNITED STATES-MEXICO BORDER HEALTH ASSOCIATION , JANUARY
2002,  $23,483 
CIN: A-04-00-01206  BCBSNC - MEDICARE PART A ADMIN COST AUDIT-CARMICHAEL,
SEPTEMBER 2000,  $21,302 
CIN: A-05-01-00078  PAYMENTS TO HEALTH NET-TUCSON, AZ.- FOR INSTITUTIONAL
BENEFICIARIES, APRIL 2002,  $21,233 
CIN: A-02-03-04004  CONTRACT CLOSING - NAS 9-19441, JULY 2003,  $20,595 
CIN: A-05-02-72480  HANSEL NEIGHBORHOOD SERVICE CENTER INC., SEPTEMBER 2002,
$20,266 
CIN: A-05-02-00079  MEDICAID  FFS  PAYMENTS  FOR  MEDICAID MANAGED CARE
ENROLLEES, SEPTEMBER 2003,  $20,165 
CIN: A-05-02-70624  STATE OF OHIO , JANUARY 2002,  $19,970 
CIN: A-04-01-67441  CATAWBA INDIAN NATION , APRIL 2001,  $19,204 
CIN: A-08-04-76779  COLORADO  FOUNDATION  FOR  MEDICAL  CARE, DECEMBER 2003,
$18,925 
CIN: A-05-01-00100  PAYMENTS  TO  FALLON  HEALTH FOR INSTITUTIONALIZED
BENEFICIARIES, MAY 2002,  $18,842 
CIN: A-04-97-01163  VIMI MEDICARE PRO CONTRACT AUDIT, SEPTEMBER 1997,  $18,758 
CIN: A-05-01-00095  PAYMENTS  TO  HUMANA  OF  ARIZONA FOR INSTITUTIONAL
BENEFICIARIES, JUNE 2002,  $18,645 
CIN: A-07-03-00151  REVIEW  OF  MEDICARE  PAYMENTS  FOR BENEFICIARIES WITH
INSTITUTIONAL STATUS, JUNE 2003,  $18,400 
CIN: A-03-97-00007  NE  HEALTH  CARE  QUALITY FOUNDATION/CCAS/N HAMPSHIRE,
MARCH 1997,  $17,045 
CIN: A-07-00-00117  REV. OF PENSION COSTS FOR MED. REIMB. BC/BS OF ND, JANUARY
2001,  $16,863 
CIN: A-05-03-75408  MICHIGAN DEPT. OF COMMUNITY HEALTH, APRIL 2003,  $16,645 
CIN: A-01-99-55594  STATE OF VERMONT, NOVEMBER 1998,  $16,623 
CIN: A-01-97-44143  BRANDEIS UNIV., JANUARY 1997,  $16,602 
CIN: A-06-01-68297  NATIVE AMERICAN CENTER OF RECOVERY INC. , MAY 2001,  $16,314
CIN: A-03-03-00006  CARDIAC REHABILITATION - WASHINGTON ADVENTIST HOSPITAL,
AUGUST 2003,  $15,946 
CIN: A-03-04-77692  AMERICAN  ASSOCIATION  OF  POISON  CONTROL CENTERS INC,
FEBRUARY 2004,  $15,060 
CIN: A-06-04-77400  UNIV.  OF  ARKANSAS  FOR  MEDICAL  SCIENCES, JANUARY 2004,
$14,989 
CIN: A-05-01-00044  MINNESOTA MEDICAID PERSONAL CARE SERVICES REVIEW, APRIL
2002,  $14,844 
CIN: A-03-97-00008  NE HEALTH CARE QUALITY FOUNDATION/CCAS/VERMONT, MARCH
1997,  $14,596 
CIN: A-09-00-00104  PACIFICARE OF CALIFORNIA - INSTITUTIONAL STATUS, MARCH 2001,
$14,278 
CIN: A-05-03-73921  NATIONAL  ASSOCIATION  OF  LOCAL  BOARDS OF HEALTH,
NOVEMBER 2002,  $13,317 
CIN: A-03-03-72847  DISTRICT OF COLUMBIA DEPT. OF HEALTH , OCTOBER 2002,  $12,850
CIN: A-06-03-74511  SOUTHERN UNIV. SYSTEM, FEBRUARY 2003,  $12,693 
CIN: A-08-03-74361  PORCUPINE CLINIC, JULY 2003,  $12,611 
CIN: A-07-02-04002  FY 2002 CFO/CMS/MEDICARE ERROR RATE MUTUAL OF OMAHA,
OCTOBER 2002,  $12,070 
CIN: A-05-03-00012  FROEDTERT MEDICAID CREDIT BALANCES, FEBRUARY 2003,  $12,066
CIN: A-03-04-76133  MINORITY ACCESS INC., OCTOBER 2003,  $11,141 
CIN: A-05-01-00070  PAYMENTS  TO  GHP  MCO/ST  LOUIS FOR INSTITUTIONAL
BENEFICIARIES, JANUARY 2002,  $11,089 
88 APPENDIX D
CIN: A-03-01-00513  IRSA - KOSOVO ASSISTANCE GRANT 90-ZK-0002/01, DECEMBER 2001,
$10,913 
CIN: A-03-02-71608  SUPPORTIVE CHILD ADULT NETWORK INC. , APRIL 2002,  $10,561 
CIN: A-03-04-75382  NATIONAL  HISPANIC  MEDICAL  ASSOCIATION, JANUARY 2004,
$10,505 
CIN: A-09-02-71757  PYRAMID LAKE PAIUTE TRIBE , MAY 2002,  $9,857 
CIN: A-10-97-00002  GROUP HEALTH INSTITUTIONALIZED, NOVEMBER 1997,  $9,769 
CIN: A-06-02-00032  CMS  FY  01  MEDICARE  ERROR  RATE  -  ARK BC/BS REPORT,
NOVEMBER 2002,  $9,655 
CIN: A-02-01-02003  FORDHAM UNIVERSITY - DISCRETIONARY GRANT REVIEW, MAY
2002,  $9,451 
CIN: A-03-03-00004  MEDICARE AUDIT CARDIAC REHABILITATION CENTERS - SHADY
GROVE, OCTOBER 2003,  $9,127 
CIN: A-02-01-66887  PUERTO  RICO  ADMINISTRATION  OF  CHILDREN & FAMILIES,
FEBRUARY 2001,  $9,000 
CIN: A-05-01-67360  MICHIGAN FAMILY INDEPENDENCE AGENCY , FEBRUARY 2001,
$8,708 
CIN: A-02-02-70019  SENECA NATION OF INDIANS , DECEMBER 2001,  $8,706 
CIN: A-03-03-74002  MINORITY ACCESS INC., NOVEMBER 2002,  $8,113 
CIN: A-07-97-01231  PROWEST-DOSHI WASHINGTON, JUNE 1997,  $8,027 
CIN: A-03-02-72715  DISTRICT OF COLUMBIA DEPT. OF HEALTH , JULY 2002,  $7,851 
CIN: A-05-01-68270  LAKE COUNTY COMMUNITY ACTION PROJECT , MAY 2001,  $7,614 
CIN: A-03-03-00007  CARDIAC REHABILITATION - HOLY CROSS HOSPITAL, NOVEMBER
2003,  $7,470 
CIN: A-03-98-00045  TEMPLE UNIV/PHYSICIAN CREDIT BALANCES/MEDICARE, JULY 1999,
$7,280 
CIN: A-10-03-74448  K-12 WASHINGTON EDUCATION SYSTEM, JULY 2003,  $7,180 
CIN: A-01-97-49174  BRANDEIS UNIV., AUGUST 1997,  $7,068 
CIN: A-04-04-77116  MOORE COMMUNITY HOUSE INC., JANUARY 2004,  $6,521 
CIN: A-07-95-01167  PENSION COSTS CLAIMED NEBRASKA BC/BS, JANUARY 1996,  $6,075
CIN: A-06-97-48062  SER-JOBS FOR PROGRESS NATIONAL INC., MAY 1997,  $5,924 
CIN: A-15-02-20006  REVIEW  OF  CDC  COOPERATIVE  AGREEMENT  AND HRSA RYAN
WHITE  ACTIVITIES  AT  HEALTH  EDUCATION  RESOURCE
ORGANIZATION (HERO), INC. (BALTIMORE EMA/BALTIMORE CITY
HEALTH DEPT), MARCH 2003,  $5,010 
CIN: A-01-00-60299  INDIAN TOWNSHIP TRIBAL GOVERNMENT PASSAMAQUODDY TR,
JANUARY 2000,  $4,597 
CIN: A-04-03-01006  OUTPATIENT  CARDIAC  REHAB  SERVICES  AT MORTON PLANT
HOSPITAL, JANUARY 2004,  $4,426 
CIN: A-07-03-00158  REVIEW OF CARDIAC REHABILITATION SERVICES - SPENCE, IOWA,
JANUARY 2004,  $4,026 
CIN: A-07-02-04001  FY-2002 CFO/CMS MEDICARE ERROR RATE NORIDIAN (ND B/C),
OCTOBER 2002,  $3,999 
CIN: A-03-03-00011  CARDIAC REHABILITATION - ANNE ARUNDLE HOSPITAL, JANUARY
2004,  $3,997 
CIN: A-02-02-01035  EVALUATION OF BID PROPOSAL - MEDICARE HELP LINE, AUGUST
2002,  $3,760 
CIN: A-05-03-00084  MEDICARE OUTPATIENT CARDIAC REHAB - NORTHERN MICHIGAN
HOSPITAL, OCTOBER 2003,  $3,738 
CIN: A-02-03-01013  HORTON MEDICAL CENTER MEDICARE CARDIAC REHAB SERVICES,
JANUARY 2004,  $3,485 
CIN: A-09-01-00067  EAST BAY NEPHROLOGY MEDICAL GROUP, AUGUST 2001,  $3,418 
CIN: A-03-01-03303  JOHNS HOPKINS UNIVERSITY/KPMG/NIDA/N01DA-3-7301, FEBRUARY
2001,  $3,347 
89 APPENDIX D
CIN: A-05-02-69215  ONEIDA TRIBE OF INDIANS OF WISCONSIN, OCTOBER 2001,  $3,109 
CIN: A-02-01-66889  PUERTO  RICO  ADMINISTRATION  OF  CHILDREN  & FAMILIES ,
FEBRUARY 2001,  $3,103 
CIN: A-03-95-03318  TRANS-MANAGEMENT SYSTEMS 105-92-1527 (CCO), MAY 1996,  $3,016
CIN: A-02-01-66888  PUERTO  RICO  ADMINISTRATION  OF  CHILDREN  & FAMILIES ,
FEBRUARY 2001,  $2,883 
CIN: A-07-98-02502  CT. BC/BS PENSION COSTS CLAIMED, MARCH 1998,  $2,725 
CIN: A-03-98-51505  ALLIEDSIGNAL TECHNICAL SERVICES CORP., APRIL 1998,  $2,722 
CIN: A-01-97-45487  ABT ASSOCIATES INC., JANUARY 1997,  $2,596 
CIN: A-02-03-04002  GRANT REVIEW DAAH 04-93-G-0234, SEPTEMBER 2003,  $2,576 
CIN: A-02-02-01037  MSP PROCESSES AT MAIMONIDES MEDICAL CENTER, FEBRUARY
2004,  $2,315 
CIN: A-04-03-01002  OUTPATIENT HOSPITAL CARDIAC REHAB - MEMORIAL HOSPITAL
JACKSONVILLE, FLORIDA, NOVEMBER 2003,  $2,123 
CIN: A-04-03-01005  OUTPATIENT  CARDIAC  REHAB  SERVICES CENTRAL FLORIDA
REGIONAL HOSPITAL, NOVEMBER 2003,  $2,003 
CIN: A-05-97-00013  PACIFICARE OF CA-HMO INSTITUTIONAL STATUS PROJECT, APRIL
1998,  $2,000 
CIN: A-02-03-01026  MEADOWLANDS HOSPITAL MEDICAL CENTER CARDIAC REHAB
SERVICES, JANUARY 2004,  $1,703 
CIN: A-07-97-01232  PROWEST - DOSHI ALASKA, JUNE 1997,  $1,473 
CIN: A-09-03-00043  AUDIT OF OUTPATIENT CARDIAC REHABILITATION SERVICES AT
REDDING MEDICAL CENTER, OCTOBER 2003,  $1,239 
CIN: A-05-03-00070  MEDICARE OUTPATIENT CARDIAC REHAB - ST. CHARLES MERCY
HOSPITAL, OCTOBER 2003,  $1,158 
CIN: A-03-03-00393  AUDIT OF CDC HIV/AIDS GRANT TO SEXUAL MINORITY YOUTH
ASSISTANCE LEAGUE, OCTOBER 2003,  $1,155 
CIN: A-01-03-00514  REVIEW  OF  CARDIAC  REHABILITATION SERVICES- BERKSHIRE
MEDICAL CENTER, DECEMBER 2003,  $1,138 
CIN: A-07-00-02082  REVIEW OF A COST HMO - IOWA, FEBRUARY 2002,  $1,006 
5B.
The following audits are open pending the resolution of the contractors termination audit, related
termination agreements and pending lawsuits:
CIN: A-05-95-00042   BCBSA ADMINISTRATIVE COSTS - CONTRACTED AUDIT, DECEMBER
1995,  $1,333,598
Notes to Table 2
1The opening balance was adjusted downward by $62 million.
2Management decision has not been made within 6 months on 72 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-03-00-00203  PA/INTERGOVERNMENTAL TRANSFERS/MEDICAID, FEBRUARY 2001,
$3,700,000,000 
CIN: A-05-00-00056  MEDICAID INTERGOVERNMENTAL TRANSFERS - IDPA, MARCH 2001,
$1,870,000,000 
CIN: A-06-00-00023  MEDICAID  PHARMACY/PHYSICIAN  ACTUAL ACQUISITION COST,
AUGUST 2001,  $1,080,000,000 
CIN: A-10-00-00011  MEDICAID  INTERGOVERNMENTAL  TRANSFERS - WASHINGTON
STATE, MARCH 2001,  $475,000,000 
90 APPENDIX D
CIN: A-06-01-00069  EVALUATION OF LEGISLATION TO INCREASE MEDICAID HOSP-SPEC
DSH PYMT LIMITS, DECEMBER 2001,  $380,000,000 
CIN: A-06-01-00041  AUDIT OF THE TX DISPROPORTIONATE SHARE HOSP PROG PAYMENT
METHODLOGY, FEBRUARY 2003,  $319,200,000 
CIN: A-01-99-00507  NAT-WIDE REF OPNT PSYCH SVC AT ACUTE CARE HOSPITLS, MARCH
2000,  $224,466,692 
CIN: A-04-00-02165  REVIEW  OF  AL  MEDICAID INTERGOVERNMENTAL TRANSFERS,
MARCH 2001,  $147,500,000 
CIN: A-06-00-00053  OIG HCFA NEBULIZER PROJECT - NATIONAL ERROR RATE, OCTOBER
2001,  $133,960,552 
CIN: A-04-00-02169   REV. AL MEDICAID INTERGOVERNMENTAL TRANSFERS-HOSPITAL
ENHANCE, MAY 2001,  $63,000,000 
CIN: A-01-99-00530  NATIONWIDE  REV  OF  O/P  PSYCH  SVCS  @ PSYCH HOSPITALS,
DECEMBER 2000,  $56,936,287 
CIN: A-07-98-02534  EMPIRE  BC/BS  PENSION  PLAN  TERMINATION, MARCH 2000,
$38,626,351 
CIN: A-01-02-00503  FURTHER EXPANSION OF THE DRG PAYMENT WINDOW, AUGUST
2003,  $37,000,000 
CIN: A-02-03-73313  CITY  OF  NEW  YORK  ADMINISTRATION  FOR CHILDRENS SERV,
JANUARY 2003,  $22,203,439 
CIN: A-02-01-67912  STATE OF NEW YORK, MARCH 2001,  $19,000,000 
CIN: A-06-99-00060  REVIEW OF AN HMO UNDERPAYMENT CLAIM OF 21 MILLION, JUNE
2001,  $12,191,579 
CIN: A-01-00-00502  REV OF EXORBITANT MEDICARE PMTS FOR O/P SVCS, MAY 2001,
$12,100,000 CIN: A-03-91-00552 
CIN: A-03-91-00552 INDEPENDENT  LIVING  PROGRAM  -  NATIONAL,  MARCH 1993,
$10,161,742 
CIN: A-07-96-01177  MEDICARE POST RETIREMENT CLAIM BC MICH, NOVEMBER 1996,
$8,978,998 
CIN: A-06-99-00045  MEDICARE LEFT AGAINST MEDICAL ADVICE DISCHARGES, MARCH
2002,  $6,800,000 
CIN: A-03-00-00007  REVIEW OF 1-DAY DISCHARGES-PA., APRIL 2001,  $6,300,000 
CIN: A-01-99-00506  FOLLW-UP  REVIEW  OF  SEPRTLY  BILLABLE  ESRD LAB TESTS,
JANUARY 2001,  $6,100,000 
CIN: A-01-97-02506  REVIEW OF THE AVAIL OF MEDICAL COVERAGE/CSE SUPORT, JUNE
1998,  $5,704,585 
CIN: A-05-01-00052  DME REVIEW IN INDIANA, OCTOBER 2001,  $4,400,000 
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR, MARCH
2002,  $4,000,000 
CIN: A-02-02-01026  NEW JERSEY PARTNERSHIP - NURSING HOME DAY CARE SERVICES,
MARCH 2003,  $3,500,000 
CIN: A-04-98-01188  REVIEW  ADMIN.  COSTS  @  MEDICARE  MANAGED RISK PLAN,
AUGUST 1999,  $2,559,357 
CIN: A-05-00-00083  REVIEW OF MEDICAID DME CLAIMS - MICHIGAN, OCTOBER 2001,
$2,500,000 
CIN: A-05-02-00066  REVIEW OF RFP CMS-02-001/ELH1, MAY 2002,  $1,885,793 
CIN: A-09-95-00095  HEALTH SERVICES ADVISORY GROUP, INC (HSAG), DECEMBER 1995,
$1,389,723 
CIN: A-05-01-00031  WI MEDICAID - DME, OCTOBER 2001,  $1,250,000 
CIN: A-07-99-01298  DATE OF DEATH - 2, MAY 2001,  $700,000 
CIN: A-05-02-00082  BID  PROPOSAL  FOR  1-800  MEDICARE HOTLINE ADMINISTRATION,
AUGUST 2002,  $609,950 
CIN: A-05-02-00080  SINAI - MC/MA CREDIT BALANCES, JANUARY 2003,  $515,942 
91 APPENDIX D APPENDIX D
CIN: A-05-03-00021  CIMRO PRO PRE-AWARD AUDIT FOR NEBRASKA, NOVEMBER 2002,
$504,650 
CIN: A-03-99-00052  ALLEGHENY/CHESAPEAKE ORF, SEPTEMBER 2001,  $467,646 
CIN: A-05-00-00057  REVIEW  OF  MEDICAID  MUTUALLY  EXCLUSIVE  CODES - OH,
NOVEMBER 2001,  $450,000 
CIN: A-05-01-00074  REVIEW OF BID PROPOSAL RFP HCFA-01-0003, JUNE 2001,  $282,049 
CIN: A-03-99-00038  EDGEWATER PSYC HOSPITAL, MARCH 2001,  $208,731 
CIN: A-07-97-01230  OFMQ - DOSHI OKLAHOMA, JUNE 1997,  $203,510 
CIN: A-07-97-01231  PROWEST-DOSHI WASHINGTON, JUNE 1997,  $163,552 
CIN: A-01-02-73084  STATE OF MAINE , SEPTEMBER 2002,  $149,082 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN,
MARCH 2003,  $144,909 
CIN: A-05-03-00059  ESRD  #9  PRE-AWARD  AUDIT  (RFP-CMS-03-001/JAC), MAY 2003,
$139,816 
CIN: A-04-03-08013  ESRD NETWORK COST PROPOSAL, MAY 2003,  $116,085 
CIN: A-05-03-00060  ESRD  #10  PRE-AWARD  AUDIT  (RFP-CMS-03-001/JAC), MAY 2003,
$114,289 
CIN: A-05-01-00070  PAYMENTS  TO  GHP  MCO/ST  LOUIS FOR INSTITUTIONAL
BENEFICIARIES, JANUARY 2002,  $98,698 
CIN: A-02-96-02001  INTERNATIONAL  RESCUE  COMMITTEE  - REFUGEE PROGRAM,
JANUARY 1998,  $90,528 
CIN: A-05-02-00089  REVIEW OF RFP CMS-500-97-0408/0008, NOVEMBER 2002,  $84,457 
CIN: A-05-02-00084  MEDICARE OUTPATIENT CARDIAC REHAB - ST. LUKES MEDICAL
CENTER, JULY 2003,  $47,247 
CIN: A-07-97-01232  PROWEST - DOSHI ALASKA, JUNE 1997,  $21,218 
CIN: A-05-96-00069  CPA  AUDIT  OF  HOOPER  HOLMES  HHA  G&A  -  OI CASE OPEN,
FEBRUARY 1998,  $17,555 
CIN: A-07-95-01164  MEDICARE ADMIN COSTS - GENERAL AMERICAN, DECEMBER 1995,
$16,632 
CIN: A-01-97-00526  PSYCHIATRIC OUTPATIENT SERVICES, MARCH 1998,  $7,245 
CIN: A-06-03-00033  REVIEW  OF  GOOD  SHEPHERD  MEDICAL CENTER CARDIAC
REHABILITATION SERVICE, JULY 2003,  $3,737 
CIN: A-01-98-00506  PSYCHIATRIC  OUTPATIENT  AT NEWTON-WELLESLEY HOSPITA,
MARCH 1998,  $1,120 
92 Appendix E
Reporting Requirements of the Inspector General Act of 1978, as Amended
The reporting requirements of the Inspector General Act of 1978, as amended, are listed
below with reference to the page in the semiannual report on which each is addressed.  Where there
are no data to report under a particular requirement, the word none appears in the column.  A
complete listing of audit and inspection reports is being furnished to the Congress under separate
cover.  Copies are available upon request.
                                              
Section of the Act Requirement Page
Section 4(a)(2) Review of legislation and regulations 55
Section 5
(a)(1) Significant problems, abuses, and deficiencies throughout
(a)(2) Recommendations with respect to significant problems, throughout
abuses, and deficiencies
(a)(3) Prior significant recommendations on which corrective Appendices B & C
action has not been completed
(a)(4) Matters referred to prosecutive authorities 58
(a)(5) Summary of instances where information was refused none
(a)(6) List of audit reports under separate
cover
(a)(7) Summary of significant reports throughout
(a)(8) Statistical Table 1Reports With Questioned Costs 53
(a)(9) Statistical Table 2Funds Recommended To Be Put to
Better Use 54
(a)(10) Summary of previous audit reports without management
decisions Appendix D
(a)(11) Description and explanation of revised management Appendix D
decisions
(a)(12) Management decisions with which the Inspector General none
is in disagreement
93 94 Appendix F
Summary of Sanction Authorities
The Inspector General Act of 1978 (Public Law 95-452), as amended, sets forth specific
requirements for semiannual reports to be made to the Secretary for transmittal to the Congress. 
A selection of other authorities appears below:
Program Exclusions
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds
for excluding individuals and entities from participation in Medicare, Medicaid, and other Federal
health care programs.  Exclusions are required for individuals and entities convicted of the
following types of criminal offenses:  (1) Medicare or Medicaid fraud; (2) patient abuse or neglect;
(3) felonies for other health care fraud; and (4) felonies for illegal manufacture, distribution,
prescription or dispensing of controlled substances.  OIG has the discretion to exclude individuals
and entities on several other grounds, including:  misdemeanors for other health care fraud (other
than Medicare or Medicaid) or for illegal manufacture, distribution, prescription or dispensing of
controlled substances; suspension or revocation of a license to provide health care for reasons
bearing on professional competence, professional performance, or financial integrity; provision of
unnecessary or substandard services; submission of false or fraudulent claims to a Federal health
care program; and engaging in unlawful kickback arrangements.
Providers subject to exclusion are granted due process rights (such as including a hearing
before an HHS administrative law judge and appeals to the HHS Departmental Appeals Board and
Federal district and appellate courts) regarding whether the basis for the exclusion exists and the
length of the exclusion is reasonable. 
Patient Dumping
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an
individual presents to the emergency room of a Medicare-participating hospital, the hospital must
provide an appropriate medical screening examination to determine whether that individual has an
emergency medical condition.  If an individual has such a condition, the hospital must provide
either treatment to stabilize the condition or an appropriate transfer to another medical facility.
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to
minimize the risks of transfer and must ensure that the receiving hospital agrees to the transfer and
has available space and qualified personnel to treat the individual.  In addition, the transferring
hospital must effect the transfer through qualified personnel and transportation equipment.  Further,
a participating hospital with specialized capabilities or facilities may not refuse to accept an
appropriate transfer of an individual who needs services if the hospital has the capacity to treat the
individual.
OIG is authorized to collect civil monetary penalties of up to $25,000 against small
hospitals  (less than 100 beds) and up to $50,000 against larger hospitals (100 beds or more) for
each instance in which the hospital negligently violated any of the section 1867 requirements.  In
addition, OIG may collect a penalty of up to $50,000 from a responsible physician for each
negligent violation of any of the section 1867 requirements and, in some circumstances, may
exclude a responsible physician.
95 APPENDIX F
Civil Monetary Penalties Law
Under the Civil Monetary Penalties Law (CMPL), section 1128A of the Social Security
Act, 42 U.S.C.  1320a-7a, a person is subject to penalties, assessments, and exclusion from
participation in Federal health care programs for engaging in certain activities.  For example, a
person who submits to a Federal health care program a claim for items and services that the person
knows or should know is false or fraudulent is subject to a penalty of up to $10,000 for each item
or service falsely or fraudulently claimed, an assessment of up to three times the amount falsely or
fraudulently claimed, and exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The CMPL also
authorizes actions for a variety of other violations, including submission of claims for items or
services furnished by an excluded person, requests for payment in violation of an assignment
agreement, and payment or receipt of remuneration in violation of the anti-kickback statute (42
U.S.C.  1320a-7b(b)). 
Anti-Kickback Statute
The anti-kickback statute authorizes penalties against anyone who knowingly and willfully
solicits, receives, offers or pays remuneration, in cash or in kind, to induce or in return for (1)
referring an individual to a person or entity for the furnishing, or arranging for the furnishing, of
any item or service payable under the Federal health care programs; or (2) purchasing, leasing or
ordering, or arranging for or recommending the purchasing, leasing or ordering of any good,
facility, service, or item payable under the Federal health care programs (Section 1128B(b) of the
Social Security Act, 42 U.S.C.  1320a-7b).
Individuals and entities that engage in unlawful referral or kickback schemes may be
subject to criminal penalties under the general criminal anti-kickback statute, civil monetary
penalties under OIGs CMPL authority (Section 1128A(a)(7) of the Social Security Act, 42 U.S.C.
 1320a-7a) and/or program exclusion under OIGs permissive exclusion authority (Section
1128(b)(7) of the Social Security Act, 42 U.S.C.  1320a-7(b)(7)).
False Claims Act
Under the Federal civil False Claims Act (FCA), 31 U.S.C.  3729-3733, a person or
entity is liable for up to treble damages and up to $11,000 for each false claim it knowingly submits
or causes to be submitted to a Federal program.  Similarly, a person or entity is liable under the
FCA if it knowingly makes or uses, or causes to be made or used, a false record or statement to
have a false claim paid.
The FCA defines knowing to include not only the traditional definition, but also
instances when the person acted in deliberate ignorance of the truth or falsity of the information or
in reckless disregard of the truth or falsity of the information.  Under the FCA, no specific intent
to defraud is required.  Further, the FCA contains a qui tam or whistleblower provision that allows
private individuals to file suit on behalf of the United States and entitles that whistleblower to a
percentage of any fraud recoveries.
96 Appendix G
Status of Public Proposals for New and Modified Safe Harbors to the Anti-Kickback
Statute Pursuant to Section 205 of the Health Insurance Portability and
Accountability Act of 1996
Pursuant to section 205 of the Health Insurance Portability and Accountability Act of 1996
(HIPAA), Public Law 104-191, the Inspector General is required annually to solicit proposals via
Federal Register notice for developing new, and modifying existing, safe harbors to the anti-
kickback statute and for developing special fraud alerts.  The Inspector General is also required
annually to report to Congress on the status of the proposals received.
In crafting safe harbors for a criminal statute, it is incumbent upon OIG to engage in a
complete and careful review of the range of factual circumstances that may fall within the proposed
safe harbor subject area, so as to uncover all potential opportunities for fraud and abuse by
unscrupulous providers.  Having done so, OIG must then determine, in consultation with the
Department of Justice, whether it can develop effective regulatory limitations and controls that will
permit beneficial or innocuous arrangements, but also protect the Federal health care programs and
their beneficiaries from abusive practices.
In response to the 2003 annual solicitation, OIG received the following proposals related
to safe harbors: 
  Proposal         OIG Response
New safe harbor for post-marketing research for OIG is not adopting this suggestion.  Industry-
medical products. sponsored post-marketing studies are subject to
abuse and should be evaluated on a case-by-case
basis, such as under OIGs advisory opinion
procedures. 
New safe harbor for chronic disease management OIG is not adopting this suggestion.  The
programs sponsored by providers or suppliers of arrangements described are subject to abuse and
medical items and/or services. should be evaluated on a case-by-case basis, such
as under OIGs advisory opinion procedures.
New safe harbor to protect arrangements:  OIG is not adopting this suggestion.  The
(1) between Indian health providers; (2) between suggestion lacks specificity.  The arrangements
Indian health providers and their patients; and  described are subject to abuse and should be
(3) between Indian health providers and third evaluated on a case-by-case basis, such as under
parties that enhance the services provided. OIGs advisory opinion procedures.
New safe harbor for manufacturer donations to OIG is considering this suggestion. 
charitable organizations that provide items or
services to financially needy patients, including
copayment assistance.
New safe harbor to exclude from the definition of OIG is not adopting this suggestion.  OIG
remuneration under the anti-kickback statute any believes the suggestion is not consistent with the
payments or exchanges that are made between advisory opinion statute.
parties who have obtained a favorable advisory
opinion in accordance with an arrangement that is
the subject of such favorable advisory opinion.
97 APPENDIX G
Modification of the discount safe harbor to clarify This suggestion requires further study.
its application to the additional entities with
which pharmaceutical manufacturers may
contract under MMA (e.g., discount drug card
sponsors, pharmacy benefits managers, retail
pharmacies, and Part D drug plan sponsors).
Modification of the discount safe harbor to allow OIG is not adopting this suggestion.  The
explicitly for hospital purchasers to bundle capital arrangements described are subject to abuse and
and non-capital items together at a single should be evaluated on a case-by-case basis, such
purchase price. as under the advisory opinion procedures.
Rescission of the safe harbor for group OIG is not adopting this suggestion.  The GPO
purchasing organizations (GPOs). safe harbor is statutory.
New safe harbor for patronage dividends paid by OIG is not adopting this suggestion.  The
GPOs that operate as Subchapter T cooperative arrangements described are subject to abuse and
organizations. should be evaluated on a case-by-case basis, such
as under OIGs advisory opinion procedures.
In addition to the proposals in the preceding table (some of which duplicate proposals from past
years), OIG has had under consideration a number of suggestions reported in prior years.  The following table
updates the status of those suggestions:
New safe harbor for certain practices related to OIG received a substantial number of public
economic credentialing of physicians by comments from a cross-section of interested
hospitals. parties in response to OIGs specific solicitation
of comments on this topic.  The public comments
variously suggest issuance of different types of
guidance; some comments suggest that OIG take
no action.  OIG is reviewing the comments and
studying the issue.
Modification of the Medicare SELECT safe These suggestions require further study.  In
harbor to cover (1) coinsurance waivers for September 2002, OIG issued a notice of proposed
inpatient services negotiated between a hospital rulemaking to make certain modifications to the
and an ERISA employee welfare benefit plan that safe harbor.  The public comments to that
covers retirees and (2) Part B waivers for rulemaking are under review.
employer group plans.
New safe harbor for inducements offered to OIG is considering this suggestion.
beneficiaries that fit in an exception to the
beneficiary inducements statute at section 42
U.S.C. 1320a-7a(a)(5).
Modification of the existing shared risk exception OIG is considering this suggestion.
to cover (1) second tier contractors of Federally
qualified health centers (FQHCs) and (2) the
TriCare program.
New safe harbor for certain fee-for-service OIG is developing a proposed rule on this
arrangements between FQHCs and other suggestion in accordance with the provisions in
providers, practitioners and suppliers. MMA.
98 APPENDIX G
Modification of the discount safe harbor to OIG is considering this suggestion.
include a discount obtained by a commercial
health plan that does not file claims with the
Federal health care programs, where the discount
otherwise meets the safe harbor conditions.
Modification of the discount safe harbor to clarify This suggestion requires further study.  
its application to discounts applied to a
manufacturers full product line.
Modification of  the discount safe harbors This suggestion requires further study.  
reporting requirements. 
Modification of the existing safe harbors to OIG is considering making some conforming
conform them to the final regulations under the changes with respect to the group practice safe
physician self-referral statute published by the harbor.  With respect to other safe harbors, the
Centers for Medicare & Medicaid Services statutes generally serve somewhat different
(CMS), and new safe harbors analogous to the purposes and conforming the safe harbors to the
new self-referral exceptions created by the CMS self-referral exceptions may not be appropriate.
regulations.
Modification of the ambulatory surgical center OIG is considering this suggestion.
(ASC) safe harbor to address protection of start-
up multi-specialty ASCs that otherwise comply
with the current safe harbor conditions.
Modification of the safe harbor for ASCs jointly OIG is considering this suggestion.
owned by hospitals and physicians to add
conditions under which a hospital would not be in
a position to make or influence referrals.
Modification of the ASC safe harbor to indicate OIG is considering this suggestion.
whether an ASC can require investors to comply
with safe harbor conditions.
Modification of the ASC safe harbor to clarify  OIG is considering these suggestions.
(1) the use of pass-through entities to hold
ownership interests and (2) the treatment of
physician investors who invest at different times.
New safe harbor for rural health networks This suggestion requires further study.  
operating pursuant to the Medicare Rural
Hospital Flexibility Program.
New safe harbor for arrangements that comply This suggestion requires further study.  
with section 513 of the IRS Code pertaining to
the provision of certain supporting goods and
services by tax-exempt hospitals to other tax-
exempt hospitals. 
99 100 Appendix H
Performance Measures
Performance measures are used to evaluate the achievement of a program goal, such as
the efficiency of an immunization program measured by the number of inoculations provided per
dollar of cost.  OIG has identified some items throughout this report as performance measures by
following the item with the symbol   .  In OIGs opinion, the audits, inspections, and
investigations identified with the performance measure symbol offer management information
about whether some aspect or all of the programs or activities reviewed are achieving their missions
and goals.  These proposals are provided to management for their consideration as they develop
their performance measures.  
The reports listed in each of the following sections warrant the performance measure
symbol:
Centers for Medicare & Medicaid Services:
Comprehensive Error Rate Testing Improvements 
Public Health Agencies:
NIH Grants Management
Ryan White CARE Act Grantees
Monitoring Ryan White CARE Act Grantees
Administrations for Children and Families and on Aging:
Noncustodial Parents Contributions to SCHIP Costs
Health Care Services for Children in Foster Care
General Oversight:
The Government Performance and Results Act of 1993
101