This semiannual report and other OIG materials may be 
accessed on the Internet at http://oig.hhs.gov   Message from the Inspector General 
For this past six-month period, as has been the case 
historically, the work of the Office of Inspector General (OIG), Department of Health 
and Human Services, has resulted in substantial savings and significant program 
improvements. 
A keystone of our work continues to be targeting potential financial vulnerabilities 
in the federal health care programs. Among many examples are our findings regarding 
the payment variations between ambulatory surgical centers and hospital outpatient 
departments. In just this area alone, we found that because of this payment variation, 
Medicare is overpaying for these services by more than $1 billion. 
Further substantial savings have been achieved through our work in the 
prescription drug industry.  Recent settlements include one with a national pharma
ceutical manufacturer who agreed to pay $49 million to resolve allegations of avoiding 
fully paying the rebates owed to the federal and state governments under the national 
Medicaid drug rebate program for a particular drug. More work is under way to deter-
mine the impact of the drug rebate program on the price of prescription drugs. 
We continue to be vigilant in examining the payments made to providers to ensure 
they are accurate and based on the provision of medically necessary services. As a result 
of our work on the Medicare fee-for-service error rate, we estimated improper payments 
of $13.3 billionabout 6.3 percent of the total $212.7 billion in fee-for-service payments. 
Our work with CMS in an effort to further decrease the fee-for-service error rate will 
continue. 
In light of significant international developments, our work in state and local 
bioterrorism preparedness is more important than ever.  In recent months, we have 
conducted evaluations of state and local preparedness for a bioterrorism event, particularly 
in reference to receiving and deploying the National Pharmaceutical Stockpile. Other 
critical areas of OIGs review are the security measures in place at laboratories containing 
dangerous pathogens, both within the department and externally. These efforts involve 
reviewing the Centers for Disease Control and Preventions regulatory oversight of 
facilities housing these pathogens, as well as the Food and Drug Administrations 
internal controls over anti-bioterrorism research, information and funding. 
The contributions of OIG in protecting the taxpayers through our financial, quality 
of care, and physical security oversight are significant.  While we continue to face 
challenges in this effort, our endeavors over the past six months illustrate the broad-
ranging impact our work has on the operations of the federal health care programs and 
their beneficiaries. This is an organization that truly does make a difference. 
Janet Rehnquist 
Inspector General    Highlights 
Summary Statistical Accomplishments 
For the first half of fiscal year 2003, OIG reported savings of over
$12 billion comprised of $11.6 billion in implemented recommendations 
and other actions to put funds to better use, $174 million in audit disallow-
ances, $40 million in additional recoveries, and over $187 million in 
investigative receivables.  (Details pp. 54, 59, and 63.) 
In addition, for this reporting period, OIG reported exclusions of
1,241 individuals and entities for fraud or abuse of the federal health care 
programs and/or their beneficiaries, 320 convictions of individuals or 
entities that engaged in crimes against departmental programs, and 106 
civil actions.  (Details pp. 16 and 59.) 
Payment Variations at Ambulatory Surgical Centers
and Hospital Outpatient Departments 
An OIG evaluation found that payment variations between 
ambulatory surgical centers (ASCs) and hospital outpatient departments 
have resulted in Medicare paying more than $1 billion in program pay
ments.  The study also found that failing to remove certain procedure 
codes from the ASC list of covered procedures has resulted in an estimated 
$8 million to $14 million in additional program payments.  (Details p. 4.) 
Bioterrorism Preparedness 
The OIG conducted evaluations of state and local preparedness for
a bioterrorism event, and their preparedness for receiving and deploying
the National Pharmaceutical Stockpile. In response to the issues raised,
CDC and HRSA have been actively working on implementing OIGs 
recommendations. 
In addition, OIG has reviewed the security measures in place at 
a number of the departments laboratories and at external laboratories 
receiving departmental funds.  Other efforts involve reviewing CDCs
regulatory oversight of certain sensitive facilities and FDAs internal 
controls over antibioterrorism research, information, and funding.
(Details pp. 32 and 33.) 
i
 Prescription Drugs 
Pfizer, Inc., and two of its subsidiaries agreed to pay $49 million 
to the government.  The settlement resolves allegations that the drug 
manufacturer avoided paying fully the rebates owed to the federal and 
state governments under the national Medicaid drug rebate program for 
the cholesterol-lowering drug Lipitor. (Details p. 22.) 
Hospital and Health Plan 
Lovelace Health Systems, Inc. (Lovelace), a New Mexico hospital
and health maintenance organization, agreed to pay the government 
$24.5 million in the largest settlement to date against a single hospital to
resolve allegations involving solely cost reporting fraud.  Lovelace 
allegedly submitted fraudulent claims in 10 years of Medicare cost reports
and reopening requests. (Details p. 19.) 
Disproportionate Share Hospital Payments 
The OIG continued its focus on Medicaid disproportionate share
hospital (DSH) payments, which are intended to counterbalance the un
compensated costs of serving large numbers of low-income patients.
Reviews in three states found that claims were duplicated or that payments 
exceeded the hospital-specific limits mandated by law.  Over a 3-year
period, one states payments exceeded the limits by more than $511 million 
($319 million federal share) as a result of inappropriate payment calculation 
methods and inadequate controls over the DSH program.  (Details p. 11.) 
Financial Accountability 
Having developed and tracked the Medicare fee-for-service 
payment error rate for the last 7 years, OIG noted sustained improvement 
in fiscal year 2002. Estimated improper payments made during the year 
amounted to $13.3 billion, or about 6.3 percent of the total $212.7 billion
in fee-for-service paymentsa significant drop from the $23.2 billion first 
reported for fiscal year 1996.  The 6.3-percent error rate matches last 
years lowest-ever rate and is less than half the 13.8-percent rate in 1996. 
The OIG developed the error rate in conjunction with its annual
audit of the departments financial statements. For the fourth consecutive 
year, the department received a clean opinion on those statements, 
indicating that they fairly presented financial information. However, 
serious weaknesses persisted in the financial systems and processes used
to produce financial statements and in Medicare information systems 
controls. (Details pp. 2 and 50.) 
ii
 Table  of  Contents

Centers for Medicare and Medicaid Services ................................. 1

FY 2002 Financial Statement Audit ......................................... 2

FY 2002 Medicare Error Rate  ............................................. 2

ProspectiveP  aymentS  ystem .............................................. 3

PaymentP  rocedures: O  utpatientD  epartmentsa ndA  mbulatoryS  urgicalC  enters ..... 4 

NurseA  ideT  raining..................................................... 4

Nursing Home Quality Assurance Committees ................................ 5

NursingH  omeM  edicalD  irectorsS  urvey  .................................... 5

PhysicianP  ayments ..................................................... 6

DurableM  edicalE  quipmentO  rders  ........................................ 6

Semi-ElectricH  ospitalB  eds  .............................................. 7

ManagedC  areA  dditionalB  enefits  ......................................... 7

MedicareI nformationS  ystemsC  ontrols ..................................... 8

Medicare Contractors Pension Assets....................................... 8

School-Based Health Services ............................................. 9

Residents of Institutions for Mental Diseases  ................................ 10

Disproportionate Share Hospital Payments .................................. 11

Outreach ............................................................. 13

Industry Guidance ............................................... 13

Compliance Activities ............................................ 13

ProviderS  elf-DisclosureP  rotocol  .................................. 13

TownH  allM  eetings ............................................. 15

Federala ndS  tateP  artnership: J ointA  uditso fM  edicaid  ....................... 15

MedicaidA  genciesa ndU  .S.T  erritories  .................................... 16

OIGA  dministrativeS  anctions ............................................ 16

ProgramE  xclusions  ............................................. 16

CivilM  onetaryP  enaltiesL  aw...................................... 18

CivilP  enaltiesf orP  atientD  umping ................................. 18

Criminala ndC  ivilE  nforcement  .......................................... 19

Hospitals ...................................................... 19

NursingH  omes ................................................. 21

Prescription Drugs  .............................................. 22

DurableM  edicalE  quipmentS  uppliers ............................... 23

HomeH  ealth ................................................... 24

Laboratories  ................................................... 24

AmbulanceS  uppliers  ............................................ 25

Contractors  .................................................... 26

Consultant ..................................................... 26

Practitioners  ................................................... 27

Kickbacks  ..................................................... 28

MedicaidF  raudC  ontrolU  nits ............................................ 29

iii  PublicH  ealthA  gencies.  ................................................ 31

Statea ndL  ocalB  ioterrorismP  reparedness .................................. 32

Other Antibioterrorism Activities  ......................................... 33

RyanW  hiteC  areA  ctG  rantees  ........................................... 33

HIVP  reventionG  rantee................................................. 34

Travel Conducted With HIV/AIDS Funds ................................... 34

Drug Manufacturers Charges to 340B Entities ............................... 34

National Institute of Environmental Health Sciences Superfund .................. 35

HealthE  ducationA  ssistanceL  oanD  efaults  ................................. 35

Misuse of Public Health Grant Funds  ...................................... 36

FinancialS  tatementA  udits  .............................................. 37

Administrationsf orC  hildrena ndF  amiliesa ndo nA  ging  ..................... 39

Access and Visitation Grant Programs  ..................................... 40

FosterC  areT  rainingC  osts  .............................................. 40

ChildC  areC  laims  ..................................................... 41

AutomatedC  hildW  elfareI nformationS  ystem ............................... 41

HeadS  tartP  rogramE  nrollment ........................................... 41

HeadS  tartG  rantee ..................................................... 42

Refunding AFDC Overpayments .......................................... 42

Child Support Enforcement .............................................. 43

TaskF  orces .................................................... 43

Investigations  .................................................. 44

Misuse of ACF and AoA Grant Funds ...................................... 46

Grants Awareness Training  .............................................. 46

FinancialS  tatementA  udit  ............................................... 47

General Oversight ..................................................... 49

Audito ft heD  epartmentsF  inancialS  tatements .............................. 50

DepartmentalS  erviceO  rganizations  ....................................... 50

GovernmentI nformationS  ecurityR  eformA  ct ............................... 51

NonfederalA  udits  ..................................................... 52

ResolvingR  ecommendations ............................................. 53

Table1 : R  eportsW  ithQ  uestionedC  osts ............................. 54

Table 2: Funds Recommended to Be Put to Better Use .................. 55

Legislativea ndR  egulatoryR  eviewa ndD  evelopment  ......................... 56

ReviewF  unctions ............................................... 56

DevelopmentF  unctions  .......................................... 56

Employee Fraud and Misconduct  ......................................... 58

AdditionalA  uditR  ecoveries  ............................................. 59

Investigative Prosecutions ............................................... 59

iv  Appendices ........................................................... 61 
Appendix A:	 Savings Achieved Through Policy and Procedural Changes 

ResultingF  romA  udits,I nvestigationsa ndI nspections ............ 63

Appendix B:	 Unimplemented Office of Inspector General Recommendations 

to Put Funds to Better Use .................................. 67

Appendix C:	 Unimplemented Office of Inspector General Program and 

ManagementI mprovementR  ecommendations  .................. 73

AppendixD  :  Notest oT  ables1  a nd2   .................................... 79

Appendix E:	 Reporting Requirements of the Inspector General Act of 1978, 

asA  mended  ............................................. 93

Appendix F:  Summary of Sanction Authorities  ............................ 95

Appendix G:  Performance Measure Reports ............................... 97

Please Note: 	Figures throughout the text have been 
rounded for reporting purposes. 
v
  Centers for Medicare 
and Medicaid Services 
The Centers for Medicare and Medicaid Services (CMS) administers 
the Medicare and Medicaid programs. Financed by the Federal Hospital 
Insurance Trust Fund, Medicare Part A provides hospital and other insti
tutional 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 grants to states for medical care 
for qualifying people with low incomes.  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), created under 
the new title XXI of the Social Security Act, 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) continues to devote significant 
resources to investigating and monitoring the Medicare and Medicaid pro-
grams.  These activities have helped ensure the cost-effective delivery of 
health care; improved the quality of health care; 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. 
The OIG also reports on the audits of CMS financial statements 
which presently account for more than 82 percent of Department of Health 
and Human Services (HHS) outlays.  In addition to issuing an opinion on 
the statements, auditors assess compliance with Medicare laws and 
regulations and the adequacy of internal controls. 
1
 Centers for Medicare and Medicaid Services 
FY 2002 FINANCIAL STATEMENT AUDIT     
To support its audit of the departments FY 2002 financial statements, 
OIG contracted with an independent certified public accounting firm to audit the 
CMS financial statements. The firm issued an unqualified, or clean, opinion on 
the FY 2002 statements, which means that they were reliable and fairly presented. 
While substantial progress has been made in providing reliable financial information, 
material internal control weaknesses continued in financial systems, analyses, and 
oversight and in Medicare electronic data processing (EDP) controls. 
The CMS was still impaired by the absence of a fully integrated financial 
management system to accumulate, analyze, and report financial information in a 
timely manner. The Medicare contractors lack of integrated, double-entry systems 
and use of ad hoc supporting schedules increased the risk that their reported infor
mation could be inconsistent, incomplete, or inaccurate. Additionally, numerous 
EDP general control weaknesses were noted at the Medicare contractors, system 
maintainers, and the CMS central office. Such weaknesses increase the risk of 
unauthorized access to and disclosure of sensitive information, malicious changes 
that could interrupt data processing or destroy files, improper Medicare payments, 
and disruption of critical operations. 
Officials of CMS agreed with these findings and are taking corrective 
action. Most significantly, they are proceeding with implementation of the 
Healthcare Integrated General Ledger Accounting System and anticipate that it 
will be fully operational in FY 2007.  (A-17-02-02002) 
FY 2002 MEDICARE ERROR RATE    
For the seventh and final year, OIG reported the extent of Medicare 
fee-for-service payments that did not comply with Medicare laws and regulations. 
Based on a statistical sample, OIG estimated that improper Medicare payments 
made during FY 2002 totaled $13.3 billion, or about 6.3 percent of the $212.7 billion 
in processed fee-for-service payments reported by CMS. These improper pay
ments could range from reimbursement for services provided but inadequately 
documented to inadvertent mistakes to outright fraud and abuse. The FY 2002 
estimate of improper payments is significantly less than the $23.2 billion first 
estimated for FY 1996.  As an error rate, the current 6.3-percent estimate is the 
   Indicates performance measure. Details can be found in Appendix G. 
2
 Centers for Medicare and Medicaid Services 
same as last years ratewhich was the lowest to dateand less than half the 
13.8 percent reported for FY 1996.  This reduction was attributed to CMS 
corrective actions; efforts by health care providers to comply with Medicare 
reimbursement regulations; and fraud and abuse initiatives on the part of CMS, 
the Congress, the Department of Justice, and OIG. 
Beginning in FY 2003, CMS will develop a national error rate through 
Comprehensive Error Rate Testing and the Hospital Payment Monitoring 
Program (formerly known as the Payment Error Prevention Program). The CMS 
initiated these programs in response to OIGs recommendation that CMS develop 
its own error rate process. (A-17-02-02202) 
PROSPECTIVE PAYMENT SYSTEM 
In this review, OIG found that routine statistical analysis and medical 
reviews of Prospective Payment System (PPS)-exempt inpatient services for 
medical necessity and reasonableness were not being conducted. Medicare paid 
approximately $8.7 billion to PPS-exempt hospitals in 2000.  The OIG audit 
report, Improper Fiscal Year 2000 Medicare Fee-for-Service Payments, 
attributed $800 million of improper payments to issues of medical necessity in 
PPS-exempt facilities. 
Shortly after OIG exited with CMS regarding this report, the agency 
released a transmittal notifying fiscal intermediaries that they may include PPS-
exempt hospitals in their reviews; however, no additional funding was provided 
for this expansion of review responsibility.  The OIG remains concerned that, 
given the lack of dedicated funding and an explicit level of effort or performance 
3
 Centers for Medicare and Medicaid Services 
goal, the amount of oversight that will occur remains unclear. Further, to the 
extent that fiscal intermediaries do review PPS-exempt hospital services, the 
review occurs at the expense of oversight of other Part A providers, such as 
nursing homes and home health agencies.  The OIG recommended that CMS 
ensure oversight of PPS-exempt hospital services. (OEI-12-02-00170) 
PAYMENT PROCEDURES:  OUTPATIENT DEPARTMENTS 
AND AMBULATORY SURGICAL CENTERS 
The OIG assessed the effect of payment variation between ambulatory 
surgical centers (ASCs) and hospital outpatient departments (OPDs) on the 
Medicare program.  This variation results in Medicare paying an estimated 
$1.1 billion more in program payments. In most cases (66 percent), OPD rates 
for the same service are higher than ASC rates. In addition, failing to remove 
certain procedure codes from the ASC list of covered procedures results in an 
estimated $8 to $14 million in additional program payments. 
The OIG reiterated the previous recommendation, with which CMS 
concurred, that rates between settings should be more uniform.  The OIG also 
recommended to CMS that: 1) rates reflect only the costs necessary for the 
efficient delivery of health services, 2) timely survey data be used to reevaluate 
ASC payment rates, and 3) procedure codes be removed from the list of ASC-
covered procedures using established criteria.  The CMS commented on the 
report, but neither concurred nor non-concurred with the recommendations. 
(OEI-05-00-00340) 
NURSE AIDE TRAINING    
Because nurse aides are responsible for providing 
routine care and social support to nursing home residents, 
For classroom training, 
their training is crucial to improving the quality of care nursing 
federal regulations require 
instruction in:  home residents receive. In this review of factors affecting 
#  Basic nursing skills  nurse aide training, OIG found that training has not kept pace 
#  Personal care skills  with the changing needs of nursing home residents who today 
#  Mental health and  are more ill and require more care. Teaching methods are often 
social service skills 
ineffective, and clinical exposure is too short and unrealistic. 
#  Caring for the 
cognitively impaired 
   Indicates performance measure. Details can be found in Appendix G. 
#  Basic restorative skills 
#  Residents rights 
4
 Centers for Medicare and Medicaid Services 
The OIG made several recommendations to improve the quality and 
effectiveness of nurse aide training. The CMS has agreed with the recommenda
tions and is taking steps to determine how best to improve nurse aide training. 
(OEI-05-01-00030) 
NURSING HOME QUALITY ASSURANCE COMMITTEES     
Nursing home quality assurance committees 
provide a key point of accountability for ensuring 
both quality of care and quality of life in nursing  Frequency of QA Committee Meetings 
homes.  The OIGs assessment of the role of 
these committees showed that nearly all nursing 
Monthly -53% 
homes meet CMS requirements for QA 
committee membership and frequency of 
meetings.  While QA committees can play a 
Biweekly -1% 
pivotal role in improving quality of care in 
their facilities, frequently they are not used 
Weekly - 7% 
effectively. QA committees have an array of 
data sources to target problem areas, but lack 
the ability to most effectively use the information 
Quarterly -39% 
available to them.  They could benefit from more 
direction and guidance on to effectively use CMS 

quality indicators and how to conduct QA committee work. QA committees are

an untapped resource for improving quality of care and quality of life in nursing

homes. (OEI-01-01-00090)

NURSING HOME MEDICAL DIRECTORS SURVEY 
The OIG issued the results of a survey in which medical directors and 
nursing home staff reported functions their facilities required of them, the amount 
of time spent in their facilities, and their credential status.  Medical directors 
report numerous responsibilities in four key areas: quality improvement, patient 
services, residents rights, and administration.  Included in these leadership 
responsibilities are issues that ensure quality of care and quality of life in their 
facilities, including review and revision of existing medical and clinical policies, 
review and analysis of quality indicators for potential areas of concern, inter
   Indicates performance measure. Details can be found in Appendix G. 
5
 Centers for Medicare and Medicaid Services 
vening with attending physicians about patient care, and ensuring appropriateness 
of patients drug regimens. 
While reporting that a broad array of leadership responsibilities are expected 
or required of them, 86 percent of the directors who responded to the survey 
report that they spend 8 hours or less per week in their facilities. The ability of 
medical directors to meet their reported responsibilities would be difficult in the 
limited about of time they report spending in their facilities. 
(OEI-06-99-00300) 
PHYSICIAN PAYMENTS 
This OIG evaluation examined the differences in physician payment 
amounts between Medicare and private insurance companies based on a 
proprietary database. The study identified 217 procedure codes with consistent 
and substantial differences in relative value between Medicare and the proprietary 
database. These procedures represent 30 percent of the 681 codes analyzed.  The 
reasons for these differences are unclear and may be attributable to errors within 
the relative values themselves or to population differences. 
Although the Secretary is required to review codes for accuracy every 
5 years, only 20 of the 217 codes identified were included in the most recent 
5-year comprehensive review. The absence of these codes from the 2002 review 
suggests that augmenting the current system with one or more data-driven 
methods might help to assure appropriate relative value assessments. 
(OEI-06-00-00570) 
DURABLE MEDICAL EQUIPMENT ORDERS 
Physicians are assigned an individual unique physician identification 
number (UPIN) by Medicare, although a surrogate number may be used until the 
individual UPIN has been assigned.  This study examined a sample of services for 
which a surrogate number was used for claims for the purchase of durable medical 
equipment, prosthetics, orthotics, and supplies. The OIG found that 61 percent of 
services reviewed should have been ordered using the prescribing physicians 
permanent UPIN rather than a surrogate number. Physicians, for more than a third 
of services, had been issued a unique physician identification number at least 5 years 
prior to the dates of service on claims.  The OIG also found that supporting 
6
 Centers for Medicare and Medicaid Services 
documentation was missing or incomplete for 45 percent of the sampled services. 
Medicare paid an estimated $61 million for services billed with surrogate 
numbers that had missing or incomplete documentation in 1999. 
The OIG recommended that CMS perform targeted reviews of claims and 
continue to educate suppliers and ordering physicians about the use of accurate 
UPINs. The CMS concurred with the recommendations. (OEI-03-01-00270) 
SEMI-ELECTRIC HOSPITAL BEDS 
When a mattress and bedside rails are provided to a beneficiary at the same 
time as a semi-electric hospital bed, the suppliers are required to bill Medicare 
using an all-inclusive procedure code. Nationwide, Medicare reimbursement for 
this code during calendar year 2000 totaled $189 million. As OIG found in a prior 
review, fee schedule amounts for this code remain excessive when compared with 
combinations of other codes that cover the same equipment. The OIG estimates 
that using alternative coding could result in annual savings of over $34 million. 
Medicare beneficiaries, Medicaid programs, or supplemental insurers could also 
save nearly $9 million in coinsurance. 
In addition to discontinuing the problematic code, OIG recommended that 
CMS issue a final rule on the application of its inherent reasonableness authority 
so that it can be used to adjust the fee schedule amounts for this code. The CMS 
agreed in part with the recommendations. (A-09-01-00109) 
MANAGED CARE ADDITIONAL BENEFITS 
The objective of this audit was to assess whether additional benefits 
proposed in a Medicare+Choice organizations (M+CO) contract year 2000 
adjusted community rate proposal (ACRP) were available to Medicare bene
ficiaries as advertised and were comparable to costs actually incurred, and 
whether the actual additional benefits were properly valued. The review showed 
that the M+CO did provide the additional benefits proposed in its ACRP. 
However, OIG found that the M+CO distributed the incorrect prescription drug 
formulary guide to its Medicare enrollees, resulting in overpayment of pre
scription drug copayments totaling $4,000 by 104 enrollees.  The organization is 
refunding the overpayments. (A-06-01-00048) 
7
 Centers for Medicare and Medicaid Services 
MEDICARE INFORMATION SYSTEMS CONTROLS 
To accomplish its numerous missions, the department must rely on 
a distributed and open computing environment for information processing, 
knowledge sharing, and collaboration.  Included in this network are systems at 
CMS headquarters and approximately 50 Medicare contractors, which together 
process about $255 billion in Medicare payments each year.  Management 
therefore must ensure an integrated process to establish security policies for 
information technology and monitor compliance; this process is essential for an 
effective security program. 
To assess the control environment established by management, OIG 
completed more than 10 reviews at CMS headquarters and its Medicare contractors. 
Collectively, these reviews identified hundreds of information systems control 
vulnerabilities, primarily at the Medicare contractors, which were reported to both 
the contractors and CMS. These reviews covered general and application controls, 
which involve access controls; the entity-wide security program; service continuity; 
segregation of duties; and input, output, and processing controls related to specific 
applications. While OIG found no evidence that these weaknesses had been 
exploited, they could compromise the confidentiality, integrity, reliability, and 
availability of key departmental systems and/or applications. 
(Various reports) 
MEDICARE CONTRACTORS PENSION ASSETS 
Since its inception, Medicare has paid a portion of the annual contributions 
made by fee-for-service contractors to their pension plans. The CMS requires that 
contractors separately identify the pension assets for the Medicare segment of 
their activities. Any gains in pension assets should be credited to the Medicare 
program when the Medicare segment of a pension plan closes or terminates. 
The OIG reviews of two terminated contractors, one in North Carolina 
and one in Minnesota, identified excess pension assets totaling $5.3 million and 
$2 million, respectively, that should be remitted to the Medicare program.  While 
the North Carolina contractor disagreed with certain aspects of OIGs calculations, 
the Minnesota contractor agreed to refund the full amount recommended. 
(A-07-02-03017; A-07-01-03001) 
8
 Centers for Medicare and Medicaid Services 
SCHOOL-BASED HEALTH SERVICES 
The objective of these multistate reviews was to determine whether 
Medicaid payments for school-based health services and administrative claims 
were in accordance with laws and regulations. 
Internal control weaknesses should be corrected to 
Maryland  ensure that Marylands school-based payment rates are 
based on the actual costs of providing medical services 
and that providers appropriately submit and document 
Medicaid claims.  The fee-for-service rates used to bill for school-based 
health care services were overstated because they included basic costs of 
special education, which Medicaid does not reimburse. In addition, the 
largest local education agency subcontracted many of its health services to 
private contractors at rates below what it charged Medicaid. Based on a 
statistical sample, OIG estimated that the eight largest local education 
agencies were overpaid about $20 million in federal Medicaid funds. The 
state concurred with OIGs recommended procedural improvements but 
disagreed with the financial adjustment. (A-03-01-00224) 
Based on a statistical sample, OIG estimated that 
Massachusetts 
the Boston Public School System was overpaid at 
least $1.2 million in federal Medicaid funds for 
school-based health care services. The school 
system inappropriately claimed the cost of these services when documenta
tion was inadequate, when providers did not have the required qualifica
tions, and when schools were not open to students or students were absent. 
Among other things, OIG recommended financial adjustment and procedural 
improvements. The school system concurred with some of the procedural 
improvements but disagreed with most of the financial adjustment. 
(A-01-02-00001) 
In this follow-up on a state audit, OIG found that 
New York 
although the state had recouped over $30 million (over 
$15 million federal share) of duplicate claims made by 
the New York City Board of Education, the recoup
ments were not made timely. In addition, for periods prior to the state 
audit, the board submitted and was paid for duplicate claims; subsequently, 
state officials identified and recouped over $27 million (over $13 million 
federal share) for these payments. The OIG also identified an additional 
9
 Centers for Medicare and Medicaid Services 
$6 million ($3 million federal share) of duplicate claims that need to be 
recovered. The state concurred with OIG recommendations regarding 
repayment. (A-02-02-01018) 
In looking at whether school districts billed 
Oklahoma 
Medicaid for school-based health services that
were provided free to other students and not 
exempt under the Individuals with Disabilities 
Education Act (IDEA), OIG found that the state lacked procedures to 
ensure that such services were not provided free to all students. Services 
provided to the 100 beneficiaries selected were all incorrectly billed 
primarily because the services were provided free to other students and 
were not exempt under the IDEA program. The OIG estimated that nearly 
$2 million in federal funding was claimed for services not in compliance 
with federal guidelines and CMS policy. Among other things, OIG recom
mended financial adjustment and procedural improvements. The state did 
not concur. (A-06-01-00077) 
The OIG found that the state did not properly monitor 
Oregon 
the school-based health services administrative match 
program.  As a result, the state did not ensure that 
unallowable costs were excluded from reimbursement 
claims and allowed invalid time studies to be used for claims.  However, 
due to program reimbursement limits by the state, it appears that the 
unallowable costs were not claimed for federal funding.  Oregon would 
have been reimbursed between $3.5 million and $5.3 million in unallow
able costs if it had not limited reimbursement. The OIG made several 
recommendations concerning program oversight with which the state 
generally concurred. (A-10-02-00002) 
RESIDENTS OF INSTITUTIONS 
FOR MENTAL DISEASES 
The objective of these reviews was to determine if controls were in place 
to preclude states from claiming federal Medicaid funding for medical services 
provided to certain residents of psychiatric hospitals that are institutions for 
mental diseases (IMDs). Such funding is not permitted for 21- to 64-year-old 
IMD residents even if they are temporarily released to acute care hospitals for 
medical treatment. For residents under the age of 21, federal funding is permitted 
only for inpatient psychiatric services. 
10
 Centers for Medicare and Medicaid Services 
For the period July 1, 1997, through January 31, 2001, 
California 
the state claimed over $3 million in unallowable federal 
funding. In addition to recommending financial adjust
ment for the audit period and other periods as well, OIG 
recommended that the state establish controls to prohibit improper claims 
in the future. State officials generally agreed with the recommendations. 
(A-09-02-00061) 
One review found that Florida did not have adequate 
Florida  controls to preclude claiming federal funding for medical 
services provided to IMD residents under the age of 21. 
From July 1, 1997, through December 31, 2001, unallow
able claims amounted to $363,000. Another review indicated that for the 
period July 1, 1997, through June 30, 2001, the state inappropriately claimed 
$93,000 in federal funds for medical services provided to 21- to 64-year-
old IMD residents. While the state agreed to make a financial adjustment 
in the first case, it did not in the second. 
(A-04-02-02014; A-04-02-02009) 
For the period September 1, 1997, through August 31, 2000, 
Texas  OIG found that the state improperly claimed federal funding 
totaling about $555,000.  The OIG recommended that the 
improperly claimed amounts be refunded to the Federal 
Government irrespective of whether payments are recouped from 
providers. (A-06-02-00026) 
DISPROPORTIONATE SHARE HOSPITAL PAYMENTS 
Medicaid provides that states may make additional payments, called 
disproportionate share hospital (DSH) payments, to hospitals for the uncompen
sated costs of serving disproportionate numbers of low-income patients with 
special needs. The Omnibus Budget Reconciliation Act of 1993 mandates that 
these payments not exceed the individual hospitals uncompensated costs. 
Due to a contractor computer error, acute care DSH 
New Jersey 
claims totaling $54.9 million ($27.5 million federal 
share) were duplicated from April 1, 1997, through 
June 30, 2001. New Jersey relied solely on the con-
tractor to prepare and document these additional claims and, contrary to 
federal requirements, failed to ensure the veracity of the claims before 
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submitting them for federal reimbursement. The overpayment was 
deposited in the states general fund and earned interest, which OIG 
calculated at almost $3 million. In addition to recommending financial 
recovery, OIG recommended that the state thoroughly review all work 
performed by consultants to ensure the accuracy of future claims to the 
Federal Government. The state generally concurred with the recom
mendations; however, it did not concur with the interest charge. 
(A-02-01-01037) 
For hospital FYs 1996 through 1998, Texas made DSH 
Texas 
payments of approximately $511.4 million ($319.2 million 
federal share) in excess of hospital-specific limits. These 
excess payments occurred because the state limited nega
tive Medicaid shortfall amounts to zero, did not have controls to ensure 
that payments did not exceed the actual cost of providing services, and did 
not verify the accuracy of hospitals self-reported uninsured charges and 
payments. The state also used a proxy method to calculate uninsured 
patient charges for hospitals that did not provide, or were unable to 
accurately determine, charge and payment data. Additionally, incorrect 
cost report information was used to calculate uninsured patient costs of 
state mental hospitals, and costs from entities that provided nonhospital 
services were included in the cost-to-charge ratio for some hospitals 
reviewed. In addition to recommending that the state work with CMS to 
resolve the $511.4 million in excess DSH payments, OIG recommended 
procedural improvements. The state generally agreed with three of the six 
findings. (A-06-01-00041) 
The OIG found that the state made DSH payments that 
Washington  exceeded hospital-specific limits and were not in accor
dance with the approved state plan. Specifically, the 
state paid $43.9 million ($23.1 million federal share) 
in excess of hospital-specific limits and $0.4 million ($0.2 million federal 
share ) to six hospitals ineligible for some DSH programs. This problem 
occurred because the state did not reconcile DSH payments to actual costs, 
sometimes used billed charge amounts (instead of actual costs), and 
included unallowable bad debt amounts in its limits calculations. Also, 
the state did not review hospital eligibility for all DSH programs on an 
annual basis. In addition to recommending financial adjustments, OIG 
recommended procedural improvements intended to strengthen the states 
management controls. The state generally concurred with most of the 
findings. (A-10-01-00001) 
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OUTREACH 
Industry Guidance 
The OIG has continued to issue advisory opinions, special fraud alerts, 
special advisory bulletins and other guidance as part of its ongoing effort to pro-
mote the highest level of ethical and lawful conduct by the health care industry. 
For the period from October 1, 2002, through March 31, 2003, OIG accepted 15 
advisory opinion requests and issued 8 advisory opinions. 
Compliance Activities 
Because the great majority of providers are honest and wish to avoid fraud 
and abuse issues, OIG is actively working with the private sector to develop 
methods to prevent the submission of improper claims and inappropriate conduct. 
The OIG has already initiated significant outreach efforts with the private sector 
to encourage these compliance endeavors. The OIGs compliance program guide-
lines are available on the Internet at http://oig.hhs.gov in the Compliance Tools 
and Fraud Detection & Prevention sections. 
The OIG has developed and released 10 compliance program guidances 
for:  clinical laboratories, hospitals, home health agencies, third-party billing 
com-panies, durable medical equipment, prosthetics and orthotics suppliers, 
hospices, Medicare+Choice organizations that offer coordinated care plans, 
nursing homes, individual and small group physician practices, and ambulance 
service providers. The OIG is currently working on compliance guidance for the 
pharmaceutical industry, as well as a revised guidance for the hospital industry. 
Provider Self-Disclosure Protocol 
In keeping with a longstanding commitment to assist providers and suppliers 
in detecting and preventing fraudulent and abusive practices, OIG issued 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 
Compliance Tools section. In addition, it can be found in 63 Federal Register 
58,399 (October 30, 1998). 
Essentially, the Protocol guides providers and suppliers through the 
process of structuring a disclosure to OIG of matters that are uncovered that 
appear to constitute potential violations of federal laws (as opposed to innocent 
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mistakes that may have resulted in overpayments). Pursuant to the Protocol, an 
appropriate submission would include a thorough internal investigation as to the 
nature and cause of the matters uncovered and a reliable assessment of their 
economic impact (e.g., an estimate of the losses to the federal health care 
programs). The OIG evaluates each submission to determine the appropriate 
course of action. 
To date, OIG has received 174 submissions. Self-disclosure cases have 
resulted in 40 recoveries and 22 settlements collectively totaling over $60 million. 
The following are examples: 
'	 WashingtonInland Empire Lithotripsy, LLC, formerly known as Inland 
Empire Lithotripsy, Inc., (Inland), agreed to pay the government approxi
mately $405,000 and enter into a 3-year integrity agreement to resolve its 
Stark and kickback liability associated with a group of contracts it entered 
into with Holy Family Hospital in Spokane. The OIG contended that Holy 
Family Hospital paid remuneration to Inland in excess of the fair market 
value of the lithotripter rental and the lithotripsy services provided, in ex-
change for Inlands referral of Medicare patients to Holy Family Hospital. 
In addition, OIG alleged that Inland terminated some of its physician 
members in retaliation for the failure of these physicians to refer a suffi
cient number of patients to Holy Family Hospital. 
'	 PennsylvaniaEast Norriton Physician Services (ENPS), a wholly-
owned subsidiary of Mercy Health System that employs and manages 
physician practices, agreed to pay the government $56,000 for allegedly 
submitting false claims to Medicare. This case involved allegations that 
ENPS billed for services rendered by an excluded physician. The physician 
was referred to ENPS by a temporary staffing agency contracted by the 
practice. The settlement also requires ENPS to screen for ineligible 
persons, provide training regarding the screening requirements, and report 
annually to OIG for 3 years. 
'	 South CarolinaA former employee of an ambulance company was 
ordered to pay $43,000 in restitution for false statements relating to health 
care matters.  In a self-disclosure submitted to OIG, the ambulance 
company alleged that he and another employee falsified and destroyed 
ambulance trip reports to make it appear that Medicare beneficiaries were 
non-ambulatory. The government previously entered into a settlement 
agreement with the ambulance company to resolve its liability for 
submitting claims based on the falsified ambulance trip reports. 
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'	 ArizonaAmerican Physicians Incorporated (API) agreed to pay the 
government $20,000. The settlement agreement arose from a self-
disclosure submitted after an internal audit showed a pattern of upcoding 
for certain API physicians. Investigation by API determined a tran
scriptionist improperly transcribed certain physicians diagnoses to 
increase Medicare reimbursement. The physician practice found the 
transcriptionist was motivated to change codes by APIs method of 
compensating transcriptionists based on the amount of reimbursement 
received from Medicare for the diagnosis codes. In addition to other 
measures API has taken to correct the conduct, the practice now 
compensates transcriptionists at a fixed rate. 
TOWN HALL MEETINGS 
As part of its continued outreach efforts, OIG held two regional town hall 
meetings in Boston and Dallas, respectively.  These open meetings provided a 
forum by which providers could engage in a dialogue with OIG.  They also served 
as an educational tool to explain the role of OIG to the provider community by 
bringing senior auditors, evaluators, investigators and counsel from OIG together 
to speak about their work. The presentations were followed by a discussion 
session during which attendees were given the opportunity to ask questions and 
interact with OIG staff.  Based on the success of these meetings, OIG plans to 
hold town hall meetings in other regions throughout the coming year. 
FEDERAL AND STATE PARTNERSHIP: 
JOINT AUDITS OF MEDICAID 
One of OIGs major initiatives has been to work more closely with state 
auditors in reviewing the Medicaid program.  The 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 $254 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. 
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MEDICAID AGENCIES AND U.S. TERRITORIES 
The OIG assessed state Medicaid agencies level of readiness with Health 
Insurance Portability and Accountability Act (HIPAA) electronic transactions and 
code sets as of October 2002. Under Title II of HIPAA, the Secretary of Health 
and Human Services has the authority to mandate the use of standards for eight 
health-care transactions and specify what medical and administrative code sets 
should be used. Covered entities include health plans, health care clearinghouses, 
and those providers that conduct certain transactions electronically. State Medicaid 
agencies are defined as health plans.  The effective compliance date for covered 
entities that submitted an extension form to CMS is October 16, 2003. 
Of the 51 state Medicaid agencies, 42 expect to be fully compliant by 
October 2003. Twenty-nine states have developed specific contingency plans in 
the event that systems are not fully compatible. Among the obstacles facing 
states are code set conversions, state funding, ongoing standards modifications, 
and potential noncompliance of small and/or rural providers. 
On the other hand, only one of the five U.S. Territories anticipates being 
compliant by the October 2003 deadline. The territories have not developed 
compliance strategies, contingency plans or testing plans. The cap on federal 
matching funds is the major barrier to compliance. 
(OEI-09-02-00420; OEI-09-02-00423) 
OIG ADMINISTRATIVE SANCTIONS 
During this reporting period, OIG administered 1,347 sanctions, in the 
form of program exclusions or civil actions for alleged fraud or abuse or other 
activities that posed a risk to federal health care programs and/or their bene
ficiaries. These sanction authorities can be found in Appendix F. 
Program Exclusions 
During this reporting period, OIG excluded 1,241 individuals and entities 
from participating in the Medicare and Medicaid programs, or other federally 
sponsored health care programs, most as a result of convictions for crimes relating 
to Medicare or Medicaid, for patient abuse or neglect, or as a result of licensure 
revocation. These included the following: 
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'	 KansasA physician was excluded for 25 years based on his conviction 
for fraud which resulted in serious bodily injury.  The scheme, which he 
perpetrated for approximately 15 years, involved defrauding Medicare and 
CHAMPUS/TRICARE. He did so by luring patients into surgery based on 
false representations and omissions of fact. The physician was also con
victed of perjury. The court sentenced him to 6 years in jail, and the state 
suspended and then summarily revoked his medical license. 
'	 ColoradoA certified nurse aide (CNA) was recently excluded for 35 years 
based on his conviction for sexual abuse. The court sentenced the CNA to 
a term of 16 years to life in prison, and the state revoked his nurse aide 
certificate. 
'	 CaliforniaA law student was convicted of theft of government property 
for his part in an improper billing scheme that resulted in a loss of approx
imately $9.2 million from the Medicaid program.  The student, who was 
aware of individuals involved in Medicaid fraud, received monies from 
two DME companies he knew falsely billed Medi-Cal from March 1996 
until May 1998. He was ordered to pay restitution of nearly $842,000 and 
was excluded for 18 years. 
The OIG excluded a DME company operator for 13 years. During the 
period of July 1997 through at least October 1998, he had knowledge of 
another individual falsely billing the Medi-Cal program for supplies, pro
cedures and services which were claimed to have been provided to Medi-
Cal recipients. As a result of the false statements, the DME company 
wrong fully obtained approximately $515,000. The company operator 
pled guilty to misprision of a felony and was sentenced to approximately 
1 year incarceration and ordered to pay restitution of nearly $515,000 to 
Medicaid. 
A physical therapist agreed to be excluded under section 1128(b)(7) of 
the Social Security Act for a period of 8 years for inflating the number 
of physical therapy services hours that the therapist and the therapists 
employees provided to Medicare residents at a skilled nursing facility. 
The skilled nursing facility, which was unaware that the time sheets were 
inaccurate, included the false time sheets in its Medicare cost reports to 
the fiscal intermediary in California. 
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Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose 
administrative penalties and assessments against a person who submits claims to 
a federal health care program that the person knows or should know are false or 
fraudulent. Civil monetary penalties and assessments may also be levied for other 
conduct proscribed by statute.  During this reporting period, OIG collected over 
$1.4 million in civil monetary penalties and assessments under the CMPL and 
other authorities, including the CMPL provision for kickbacks, discussed further 
in the Criminal and Civil Enforcement section. (This amount does not include 
civil monetary penalties for patient dumping, discussed below.) 
Civil Penalties for Patient Dumping 
Between October 1, 2002, and March 31, 2003, OIG collected civil 
monetary penalties of approximately $314,000 from 10 hospitals and physicians 
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 the alleged violations involved in the patient anti-dumping statute 
settlements from this reporting period: 
'	 New JerseyUnderwood Memorial Hospital agreed to pay $30,000 to 
resolve its liability. The OIG alleged that the hospital failed to provide 
an appropriate medical screening examination to a man who presented 
with head injury. The OIG alleged that several hours after the hospital 
discharged the man, he was unresponsive and was brought to another 
hospital, which performed an appropriate medical screening, identified 
an emergency medical condition, and performed necessary surgery. 
'	 CaliforniaEncino-Tarzana Regional Medical Center agreed to pay 
$35,000 to resolve its liability. The OIG alleged that the hospital failed to 
provide appropriate stabilizing treatment, within its capability, to a patient 
who presented to its emergency department with a ruptured appendix. 
The OIG alleged that the hospital denied the appropriate treatment to this 
individual based on her financial status. 
'	 South CarolinaHilton Head Medical Center and Clinics agreed to pay 
$17,000 to resolve its liability. The OIG alleged that the hospital failed to 
provide an appropriate medical screening examination to a 37-year-old 
pregnant woman in the process of giving birth. Additionally, the hospital 
allegedly inappropriately transferred the patient to another hospital. 
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'	 FloridaMemorial Regional Hospital, Hollywood, Florida, agreed to pay 
$120,000 to resolve its liability. The OIG alleged that on three separate 
dates, the hospital, which had a psychiatric assessment center, failed to 
provide an appropriate medical screening examination, stabilizing treat
ment, or an appropriate transfer to three individuals who presented to its 
emergency department with symptoms of a psychiatric emergency. The 
OIG alleged that the hospital denied the appropriate treatment to all three 
individuals based on their financial status. 
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 or statements. Such false claims may be pursued under the civil False 
Claims Act and, in appropriate cases, may also be prosecuted under federal and 
state criminal statutes. Enforcement authorities can be found in Appendix F.  The 
successful resolution of these matters often reflects the combined investigative 
efforts and resources of OIG, the FBI and other law enforcement agencies. 
One of OIGs responsibilities is to assist the Department of Justice (DOJ) 
in bringing and settling cases under the civil False Claims Act. Many providers 
elect to settle their cases prior to litigation. As part of the resolution of these cases, 
providers often agree to put in place compliance measures to avoid exclusions and 
to continue to participate in the Medicare program.  The integrity programs estab
lished by these agreements are designed to prevent a recurrence of the fraudulent 
activities that gave rise to the case at issue. 
In the six months ending March 31, 2003, the government recouped more 
than $156.7 million through False Claims Act civil settlements related to the 
Medicare and Medicaid 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. 
Hospitals 
'	 CaliforniaLovelace Health Systems, Inc. (Lovelace) agreed to pay the 
government $24.5 million and implement certain integrity requirements to 
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resolve its liability under the False Claims Act. The agreement settles 
allegations that Lovelace, a New Mexico hospital and health maintenance 
organization owned by Cigna Corporation, falsified its cost reports for the 
years 1988 through 1998. The investigation stemmed from a qui tam filed 
by an employee of Healthcare Financial Advisors, Inc. (HFA), a financial 
health care consultant that prepared and reopened cost reports for Lovelace. 
Among the allegations, Lovelace failed to report and reimburse over-
payments identified by HFA upon reopening of certain cost reports and 
knowingly used inaccurate square footage measurements on certain cost 
reports in order to inflate reimbursement. 
'	 South CarolinaMcLeod Regional Medical Center of the Pee Dee, Inc. 
(McLeod), agreed to pay the government $15.9 million and entered into a 
5-year corporate integrity agreement to resolve allegations that McLeod 
violated the False Claims Act. From April 1998 through May 1999, 
McLeod allegedly submitted claims to Medicare, Medicaid and TRICARE 
for services referred, ordered, or arranged for by physicians to whom 
McLeod paid greater than fair market value for acquiring their medical 
practices, and greater than fair market value in salaries once they were 
employed by McLeod. In addition, McLeod improperly included costs 
associated with the physician practice acquisitions and certain other 
physician-related costs in its cost reports. 
'	 South DakotaRapid City Regional Hospital (RCRH) agreed to pay the 
government $6 million to resolve its liability for allegedly violating the 
Stark and anti-kickback statutes.  A qui tam action filed against RCRH 
alleged that the hospital entered into an improper financial arrangement 
with Oncology Associates, LLP (OA), a radiation and oncology practice. 
In a separate settlement agreement, OA agreed to pay $525,000 for alleged 
upcoding of claims discovered during the course of the investigation. 
Both RCRH and OA entered into corporate integrity agreements. 
'	 New YorkColumbia University (Columbia) entered into a stipulation 
and order of settlement and dismissal, agreeing to pay $5.1 million to 
resolve the hospitals civil liability for submitting improper claims to 
Medicaid. The claims allegedly were false because Columbias employed 
physicians failed to appropriately document their presence during the 
provision of professional services by residents and interns.  Columbia also 
agreed to enter into a 5-year, comprehensive institutional compliance 
agreement. 
20
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'	 Rhode IslandRoger Williams Hospital and its parent Roger Williams 
Medical Center Corporation agreed to pay $400,000 plus interest to the 
government and to enter into a 3-year corporate integrity agreement to 
resolve its liability under the False Claims Act and the CMPL. From 
October 1992 through September 1995, the center allegedly improperly 
upcoded claims for the treatment of pneumonia. 
Nursing Homes 
'	 MississippiA physician agreed to pay the government $162,000 and to 
enter into a 5-year integrity agreement for allegedly submitting improper 
claims to Medicare. From 1996 through 2000, the physician allegedly 
submitted claims for evaluation and management services for nursing 
home patients, when he did not provide the length of examination or 
degree of medical decision-making required for reimbursement under this 
code. 
'	 MassachusettsQuality Care Centers of Massachusetts, Inc., doing 
business as Franvale Nursing Home (FNH), and its parent, PHC, Inc. 
(PHC), doing business as Pioneer Behavioral Health, agreed to pay the 
government $90,000 for allegedly submitting improper Medicare claims. 
From 1994 through 1996, FNH billed diapers and incontinence products 
provided to beneficiaries as durable medical supplies, when they were 
actually non-compensable services.  In 1986, PHC purchased FNH, and in 
1999, FNH filed for bankruptcy and ceased operations. 
'	 MissouriWoodbine Healthcare and Rehabilitation Centre, a nursing 
home owned by Centennial HealthCare Corporation, agreed to pay 
$25,000 and enter into a 3-year corporate integrity agreement to resolve its 
civil and administrative liability for allegedly submitting false claims to 
Medicare and Medicaid for grossly deficient care. The case involved 
allegations of multiple findings of maggot-infested wounds, substandard 
catheter care and significant staffing shortages in 1999. The corporate 
integrity agreement contains comprehensive quality of care provisions, 
including the appointment of an independent monitor. 
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Prescription Drugs 
'	 TexasPfizer, Inc. (Pfizer), Warner-Lambert Company (Warner-
Lambert) and Parke-Davis Division (Parke-Davis) agreed to pay the 
government $49 million to settle allegations of violating the False Claims 
Act. Pfizer is a pharmaceutical manufacturer that merged with Warner-
Lambert in 2000. Warner-Lambert, and now Pfizer, manufacture and 
market the cholesterol-lowering drug Lipitor. A qui tam complaint alleged 
that in 1999, Parke-Davis, a Warner-Lambert division, offered and paid 
educational grants to a managed care organization (MCO) in exchange for 
the MCOs agreement to extend unrestricted formulary status to Lipitor. 
Contrary to the requirements of the Medicaid drug rebate program, the 
value of the grants was not reported to CMS; and, ultimately, Warner-
Lambert underpaid rebates due the states by about $21 million. As part of 
the resolution of the case, Pfizer also agreed to enter a 5-year corporate 
integrity agreement. 
'	 MissouriA former pharmacist was sentenced to 30 years in prison and 
ordered to pay $10 million in restitution and a $25,000 fine for tampering, 
adulterating and misbranding of chemotherapy drugs he prepared for 
cancer patients.  The pharmacist diluted and tampered with the drugs 
Platinol and Paraplatin on an unspecified number of occasions; conspired 
to traffic in stolen drugs, including Taxol and Gemzar; and caused the 
filing of false Medicare claims by not disclosing to physicians who 
received the tampered and diluted drugs. 
'	 VirginiaA man was sentenced to 15 months incarceration and ordered 
to pay $126,000 in restitution for wire fraud and possession of a handgun 
by a convicted felon. He created bogus medical invoices and pharmacy 
receipts which he submitted to an insurance company for reimbursement. 
'	 IndianaIn connection with an investigation involving Medicaid fraud 
and the illegal distribution of controlled substances, five individuals 
were sentenced . One of the main participants in the scheme, a Medicaid 
recipient, was sentenced to 41 months incarceration and ordered to pay 
$42,000 in restitution; her husband was also sentenced for maintaining a 
common nuisance. Another individual was sentenced to 13 years incar
ceration, with 3 years suspended, for distributing OxyContin received 
through a chain of individuals that began with the Medicaid recipient and 
a physician who was sentenced to 51 months incarceration and ordered to 
22
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pay $29,000 in restitution.  A fifth individual was also sentenced for 
maintaining a common nuisance after his grandson operated an OxyContin 
distribution business out of his home. 
'	 North CarolinaThree individuals were sentenced for Medicaid fraud. 
The three belonged to a group of individuals who purchased Medicaid 
cards from recipients and used forged prescriptions in their names to 
obtain OxyContin, Xanax and Valium from pharmacies. 
Durable Medical Equipment Suppliers 
'	 PennsylvaniaMediq Incorporated, and its subsidiaries, (collectively, 
Mediq), agreed to pay $1 million to resolve their civil liability under the 
False Claims Act. This case stemmed from a qui tam lawsuit filed against 
Mediq and its wholly-owned subsidiaries, including Mediq Mobile X-Ray 
Services, Inc. (MMR).  Between 1992 and 1994, MMR allegedly billed 
Medicare for transtelephonic EKGs with rhythm strips and an interpre
tation when no such tests were performed. 
'	 FloridaIn restitution for health care fraud, a DME company owner was 
ordered to pay $73,000. After assessing the owner an overpayment, 
Medicare began offsetting his claims.  To avoid this, the owner solicited 
the help of his daughter to create a new DME company under her name. 
Although his daughters name was associated with the new company and 
the new Medicare provider number, all other aspects of the company 
remained the same and under her fathers direction. 
'	 GeorgiaA physician was sentenced to 33 months incarceration, ordered 
to pay a $7,500 fine and to be deported upon his release from prison for 
obstruction of justice and mail fraud. A fugitive since 1988, the physician 
was employed by a DME company for the purpose of visiting Medicare 
beneficiaries and performing the cursory physical exam needed to justify 
prescriptions for transcutaneous electrical nerve stimulation (TENS) units. 
The physician never:  1) actually performed the thorough exam required; 
2) documented the beneficiaries medical history; 3) explained to bene
ficiaries how to use the TENS units; or 4) informed them of the potential 
danger of the units. The physician also signed blank certificates of medical 
necessity so that the TENS units could be billed to Medicare.  His co
defendants were previously sentenced for their roles in the scheme. 
23
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Home Health 
'	 New YorkGentiva Health Services, Inc. (Gentiva), entered into a 
settlement agreement and release with the government. The settlement 
resolves allegations that Gentivas predecessor in interest, Olsten, sub
mitted false claims to Medicare by including non-covered costs of skilled 
nursing and home health aide services in cost reports. Gentiva agreed to 
pay $3 million to resolve its civil liability under the False  Claims Act and 
other statutes for engaging in this alleged conduct during the period from 
1995 to 1998. 
'	 MissouriSix co-defendants were sentenced for conspiring to defraud 
the government through a system of kickbacks for patient referrals and 
the filing of false claims that resulted in overpayments from Medicare and 
Medicaid. The individuals sentenced included a licensed medical doctor, 
a registered nurse, a billing service owner, an employee who provided 
medical billing services, and two owners of several residential care facilities 
and home health agencies (HHAs). The six were ordered to pay respective 
restitution amounts totaling $401,000, and five were sentenced to time in 
prison. 
'	 LouisianaThe owner and chief executive officer of an HHA was 
sentenced to 15 months imprisonment and ordered to pay $37,000 in 
restitution and a $10,000 fine for embezzlement and theft from an 
employee pension plan. Acting as fiduciary over the assets of the pension 
plan, she used the funds for personal purchases. 
Laboratories 
'	 Dianon Systems, Inc. (Dianon), an anatomic pathology laboratory, agreed 
to pay the government $4.8 million and maintain a corporate compliance 
program to resolve allegations the company improperly charged Medicare 
and TRICARE.  From January 1995 through July 2002, Dianon allegedly 
submitted claims for second opinion consultations and reports that were 
not performed; and, from July 1993 through July 2002, Dianon allegedly 
submitted claims for DNA analysis of urine cytology specimens that were 
not medically necessary. This case stemmed from a qui tam complaint 
filed in Connecticut alleging various billing schemes by Dianon. 
24
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'	 Dialysis Holdings, Inc. (DHI), agreed to pay $4.1 million to settle a qui tam 
civil action filed by the United States Attorneys Office in Massachusetts. 
Through its predecessor corporations, DHI entered into a joint venture 
agreement with another company to operate an independent clinical 
laboratory in Georgia. To increase profits from their joint venture, DHI 
allegedly conspired with the others to submit false Medicare claims in 
connection with medically unnecessary laboratory tests and blood draws 
performed on terminally-ill dialysis patients. 
'	 A part owner of a laboratory in Indiana and Pennsylvania was sentenced 
to 5 months incarceration and ordered to pay $2.4 million in restitution, 
$1 million of which is to be paid jointly with his co-defendants, for health 
care fraud and mail fraud. He participated in a Medicare fraud scheme 
involving owners of several laboratories across the country. Their scheme 
included double and triple billing for laboratory services, submitting claims 
for tests not ordered by physicians, falsifying unique physician identifica
tion identification numbers on claims, and using lost or stolen health 
insurance claim numbers. 
Ambulance Suppliers 
'	 North CarolinaThe director of a hospital-based ambulance service was 
sentenced to a year and 1 day in prison and ordered to pay $77,000 in resti
tution for theft or bribery concerning programs receiving federal funds. 
The director embezzled funds from the hospital. He created false invoices 
to document certain goods and services as operating expenses, when the 
expenditures were actually for his own personal benefit. 
'	 Pennsylvania A joint investigation with the Pennsylvania MFCU 
resulted in an excluded individual being sentenced to 15 months in prison 
and ordered to pay $30,000 in restitution for mail fraud and failure to file 
a tax return. Due to his exclusion for a previous fraud conviction, the 
individual used a straw party to start two ambulance companies and 
receive provider numbers for them. He also billed Medicare and Medicaid 
for non-compensable and medically unnecessary transports; additionally, 
he failed to file tax returns during the period of the investigation. 
25
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Contractors 
'	 Blue Cross of California (Blue Cross), a former Medicare fiscal 
intermediary, and its parent company, Wellpoint Health Networks, Inc., 
agreed to pay $9.3 million to resolve their potential liability under the 
False Claims Act and the CMPL. From 1990 through November 2000, 
Blue Cross allegedly falsified data regarding its performance of Medicare 
cost report audits while under contract with CMS. The intermediary 
primarily falsified audit start and completion dates entered into an audit 
tracking database. Blue Cross engaged in this alleged misconduct in an 
effort to mislead CMS regarding its performance of required audit work, 
to obtain a favorable annual evaluation, and to ensure renewal of its 
Medicare contract. 
'	 In Missouri, a director and manager for a former Medicare contractor were 
sentenced for conspiring to falsify and conceal from federal auditors infor
mation about payment and other errors made by the contractor. The director 
was sentenced to 27 months in prison and fined $6,000; the manager was 
sentenced to 3 months in prison. The former executives ordered the falsi
fication of records, beneficiary files, claims and other official documents, 
which, when reviewed by CMS, gave the contractor the appearance of 
performing at a higher level of efficiency and quality than was actually the 
case. This appearance of exemplary performance enabled the contractor 
to secure and maintain its contract with the government by being ranked 
for many years as one of the top 10 in the country.  In June 2002, the 
contractor agreed to pay the government $76 million for its alleged 
misconduct. 
Consultant 
'	 TexasEmergency Medicine Resources (EMR) agreed to pay the 
government $321,000 for alleged improper claims that were submitted to 
federal health care programs by a billing agency, Medical Consultants, 
Inc., doing business as Emergency Physicians Billing Services (EPBS). 
A qui tam complaint alleged that EMR employed EPBS to bill medical 
claims for them under an arrangement whereby EPBS received direct 
payment on behalf of EMR and negotiated a percentage of the total 
amount collected as EPBS fee.  EPBS routinely upcoded emergency 
26
 Centers for Medicare and Medicaid Services 
services to an unwarranted Level IV service.  As part of the resolution of 
this case, EMR also agreed to enter into a 3-year corporate integrity 
agreement. 
Practitioners 
'	 New YorkA psychologist and his practice entered into a stipulation and 
order of settlement and dismissal, agreeing to pay $4 million to the govern
ment and to be excluded for 5 years for allegedly submitting false claims 
to Medicare. The psychologist improperly submitted claims for psycho-
logical services by using a higher code than was necessary and/or by billing 
for services that could not be substantiated. 
'	 MichiganBased on a guilty verdict handed down by a jury in his trial, a 
podiatrist was sentenced to 51 months confinement and ordered to pay a 
total of $983,000 in restitution. The podiatrist was found guilty of health 
care fraud and mail fraud for billing routine foot care he provided at local 
homes and activity centers for seniors as though he performed more 
invasive procedures. 
'	 ConnecticutA physician agreed to pay the government $986,000 to 
resolve his liability under the False Claims Act. From January 1996 
through July 2002, the physician allegedly upcoded nursing home visits to 
a code requiring a longer and more comprehensive examination of patients 
than he provided. The settlement figure also includes an overpayment for 
services performed by another practitioner but billed to Medicare under 
the physicians provider number. 
A podiatrist surrendered his license and was fined almost $11,000 for wire 
fraud. He also agreed to pay the government $811,000 in a separate civil 
settlement. The podiatrist provided routine foot care to Medicare bene
ficiaries in various nursing homes, but electronically transmitted claims for 
the services as if he provided non-routine surgical procedures. 
'	 TexasA physician was sentenced to 57 months incarceration and ordered 
to pay $555,000 in restitution to Medicare and Medicaid for health care 
fraud. The physician billed for medical procedures he had not performed. 
His scheme involved bringing baked goods to Medicare beneficiaries 
residing in a local housing complex in order to obtain their Medicare num
bers and falsely bill for office visits and echocardiograms. 
27
 Centers for Medicare and Medicaid Services 
'	 MississippiA child psychiatrist was sentenced to 30 months in prison 
and fined $6,000 for money laundering. The psychiatrists son, who was 
responsible for his fathers electronic billing and computer record main
tenance, was fined $1,000 for misprision of a felony.  The two participated 
in a billing scheme which involved submitting claims for services the 
psychiatrist did not render and misrepresenting the nature of the services 
rendered. In addition, the psychiatrist allowed some services to be rendered 
by unlicensed employees. 
Kickbacks 
Individuals and 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. Additional statutory 
information can be found in Appendix F. The following are examples of kick-
back enforcement actions during this time period: 
'	 DelawareCardiology Consultants, P.A., and its member physicians 
agreed to pay $611,000 to resolve their liability under the CMP provisions 
applicable to kickbacks and physician self-referrals.  This cardiology 
group paid hourly fees to physicians who were not members of the group 
to monitor cardiac stress tests at the cardiology groups testing facilities. 
The OIG alleged that the payments to these contracting physicians were in 
excess of fair market value and were not commercially reasonable. In 
addition to the settlement payment, the group agreed to lower its moni
toring fees and entered into a 3-year integrity agreement. 
'	 GeorgiaTwo individuals were sentenced to respective terms of 2 years 
and 4 months incarceration and ordered to pay joint restitution of $427,000. 
They defrauded Medicare by billing for physical therapy services which 
were medically unnecessary and not provided by a licensed medical doctor 
or physical therapist. They also obtained the Medicare numbers for bene
ficiaries residing at certain housing developments from a state employee 
who was subsequently ordered to pay $20,000 in restitution and a $1,500 
special assessment for receiving kickbacks. 
'	 OhioA comprehensive outpatient rehabilitation facility, its president 
and vice president were sentenced for their roles in a scheme to defraud 
Medicare and ordered to pay a total of $289,000 in joint restitution. The 
president, who was also sentenced to 4 months incarceration, submitted 
false claims to Medicare to bill for more physical, occupational and speech 
28
 Centers for Medicare and Medicaid Services 
therapy per beneficiary than authorized.  He also paid kickbacks to 
physicians in exchange for patient referrals. The vice presidents annual 
salary was also listed on the facilitys Medicare cost report, when he 
actually only worked sporadically. 
'	 PennsylvaniaPride Mobility Products Corporation, a DME company, 
agreed to pay $80,000 to resolve its liability for violations of the kickback 
provision of the CMPL.  An OIG investigation revealed that, through a 
marketing program, the company allegedly solicited and received monthly 
payments from suppliers in return for referring sales leads to those suppliers. 
In addition to the payment under the settlement agreement, the company 
was also required to adopt and implement certain compliance measures. 
'	 New JerseyPerformance Plus, Inc. (Performance), a DME supplier, and 
its owner agreed to pay $50,000 to resolve their liability under the CMP 
provisions applicable to kickbacks. The OIG alleged that Performance 
operated a program under which it offered and provided free devices to 
physicians who prescribed and ordered DME from them. 
'	 New Jersey/California/ColoradoFour physicians agreed to pay 
approximately $250,000 collectively to resolve their liability under the 
CMP provisions applicable to false claims and kickbacks. The OIG 
alleged that the physicians received free samples of the prostate cancer 
drug Lupron from TAP Pharmaceutical Products Inc. and billed at least 
some of those samples to Medicare and other payors. Three of the four 
physicians also agreed to enter into integrity agreements. 
MEDICAID FRAUD CONTROL UNITS 
At present, 47 states and the District of Columbia have established Medicaid 
Fraud Control Units (MFCUs) that investigate and prosecute providers charged 
with defrauding the Medicaid program or persons charged with patient abuse and 
neglect. Three statesIdaho, Nebraska and North Dakotahave sought and re
ceived waivers from the requirement that all states operate MFCUs.  The OIG 
annually certifies each MFCU as eligible to receive federal grant funds. 
During FY 2003, OIG is providing oversight for and administration of 
approximately $118.8 million in funds to the units. 
29
 Centers for Medicare and Medicaid Services 
'	 Through a joint investigation with the California MFCU, two individuals 
and four laboratories were sentenced in connection with a fraudulent 
clinical laboratory ring. The individuals were sentenced to 3 years and 
16 months prison, respectively, and ordered to pay a total of $88,000 in 
restitution and fines; the laboratories were ordered dissolved and to pay a 
total of $529,000 in restitution. The ring operated by purchasing labora
tories and using stolen physician identification numbers, patient identities, 
and health insurance information to generate unnecessary and false 
laboratory billings. 
'	 As the result of a joint investigation by OIG, the Washington MFCU, FBI 
and the Defense Criminal Investigative Service, a physician was ordered 
to pay $500,000 in restitution and a $4,000 fine for obstruction of criminal 
investigations of health care offenses. The investigation focused on the 
improper billing of surgical procedures performed by residents in training 
and for assistants at surgery. 
'	 As the result of a joint investigation with the Idaho MFCU and the FBI, 
a dentist was ordered to pay $75,000 in restitution and a $20,000 fine for 
obstructing a health care fraud investigation. The dentist defrauded 
Medicaid by billing for services not rendered, upcoding, reusing single use 
dental supplies, using previously exposed X-ray film, and administering 
expired analgesia.  During the investigation, she also instructed the 
deletion of computer files and alteration of medical records. 
'	 As the result of a joint investigation with the Wisconsin MFCU, a certified 
nursing assistant (CNA) was sentenced in state court to a total of 612 years 
in prison with an initial term of confinement of 212 years, followed by 
4 years of extended supervision, for uttering a forged instrument and 
operating as a registered nurse (RN) without a license. The CNA told a 
nursing facility that he graduated from nursing school as an RN.  Once 
hired, he sometimes worked as the only RN at the facility. Five months 
elapsed before the facility verified that his credentials were forged. A 
previous settlement was reached with the facility for its failure to verify 
the CNAs credentials in a timely manner. 
30
 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. These divisions within the department 
include the following: 
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) 
The OIG continues to examine policies and procedures throughout 
these agencies to determine whether proper controls are in place to guard 
against fraud, waste, and abuse.  These activities include pre-award and 
recipient capability audits. This oversight work has provided valuable 
recommendations to program managers for strengthening the integrity of 
agency policies and procedures. 
31
 Public Health Agencies 
STATE AND LOCAL BIOTERRORISM PREPAREDNESS     
The OIGs inspection of 12 state and 36 local health departments 
bioterrorism preparedness included in-depth discussions with public health 
officials, reviews of emergency response plans, and analysis of their comprehensive 
self-assessments. Although the OIG found that the public health infrastructure is 
under-prepared to detect and respond to bioterrorism, almost all health depart
ments are currently strengthening their bioterrorism preparedness programs. 
Recent increases in HHS funding, while not addressing all concerns, provide an 
opportunity for them to strengthen the public health infrastructure. 
Summary Report Card (100 point scale) 
Core Capacity Goal  State Score  Local Score 
#1  Surveillance and epidemiologic investigation: The public health system  61  64 
monitors community health status to detect the presence of critical bioterrorism 
agents and characterize the public health emergency. 
#2  Identification: The Laboratory Response Network for bioterrorism can rule out,  83  65 
refer, confirm, and characterize biological threat agents. 
#3  Communication: The public health system assures that information is collected, 
analyzed, and communicated effectively among the response community,  71  63 
decision-makers, and the general public during a public health emergency. 
#4  Mobilization: The public health system identifies, coordinates, and deploys public  70  65 
health assets to assure an effective emergency response. 
#5  Intervention: The public health system implements emergency health measures to  52  49 
control and contain an outbreak. 
These findings are evidence that further work is needed at federal, state, 
and local levels to ensure that the countrys public health system is fully prepared 
to respond to bioterrorism. Specifically, OIG recommended that CDC: 1) develop 
a monitoring system of bioterrorism preparedness funds; 2) work with SAMHSA 
to address community mental health needs; and 3) work with states to address 
tactical decisions related to bioterrorism response. In addition, OIG recommended 
that the Assistant Secretary for Health (ASH) work with states on strategies to 
sustain public health infrastructures. The CDC has already begun taking action on 
the first and third recommendations and is working with states to address tactical 
decisions. Further, CDC agrees that mental health issues need to be examined 
further. The ASH and SAMHSA also concur with OIGs recommendations. 
(OEI-02-01-00550) 
   Indicates performance measure. Details can be found in Appendix G. 
32  Public Health Agencies 
OTHER ANTIBIOTERRORISM ACTIVITIES 
The OIG has continued to assess the security of a number of departmental 
assets against terrorist threats, as well as the readiness and capacity of responders 
at all government levels to protect the public health in case of a bioterrorist attack. 
Included in this initiative are reviews of the activities and programs of several 
departmental operating divisions, including CDC, NIH and FDA. Using Department 
of Justice standards for physical security and additional criteria specifically 
focused on laboratory security, OIG reviewed the security measures in place at a 
number of the departments laboratories and at certain external laboratories that 
receive departmental funds. These efforts focused on laboratories that work with 
select agents because these substances could potentially be used in a bioterrorist 
attack. 
The OIG also reviewed CDCs regulatory oversight of facilities that 
transfer and receive select agents and FDAs internal controls over antibioterrorism 
research, information, and funding. (Various reports) 
RYAN WHITE CARE ACT GRANTEES 
At the request of the Senate Committee on Finance, OIG audited certain 
grantees and subrecipients of HRSAs Ryan White Comprehensive AIDS 
Resources Emergency (CARE) Act funds.  The objectives were to determine 
whether Title I funds were used for intended purposes and in accordance with 
federal guidelines. Reviews of two metropolitan areas determined that both had 
implemented programs for the delivery of health care and support services to 
AIDS patients. However, improvements were needed in administrative activities, 
such as fiscal and programmatic monitoring of subrecipients, quality-of-care 
reviews, cash management, and planning council involvement in funding 
allocations.  While audits at the subrecipient level are underway at a number of 
entities, one completed audit noted that the entity significantly overstated the 
number of clients served and did not provide supporting documentation for 
$15,000 of its $630,000 award for a 3-year period. 
(A-15-02-20005; A-07-02-00140; A-07-02-00147) 
33
 Public Health Agencies 
HIV PREVENTION GRANTEE 
This follow-up review of a San Francisco grantees HIV prevention 
program found that the grantee had taken several positive steps to resolve issues 
noted in the initial review.  For the period covered by the review, the grantee 
substantially complied with CDC guidance on submitting its AIDS-related 
educational materials (including curricula, workshop and event outlines, videos, 
advertisements, and photographs) to the local review panel for review and 
approval. In addition, the grantee had installed a software package to track costs 
by departments and by grants and was evaluating alternatives to implement an 
after-the-fact time and effort reporting system.  In commenting on OIGs draft 
report, grantee officials noted that they had implemented such a reporting system 
to support labor charges to federal awards effective October 1, 2002. 
(A-09-02-01005) 
TRAVEL CONDUCTED WITH HIV/AIDS FUNDS 
The OIGs review of foreign travel paid for with HIV/AIDS funds revealed 
no evidence of substantive violations of CDC or departmental regulations by 
CDC personnel.  However, the Office of the Secretary (OS) and the CDC Office 
of Global Health (OGH) were not always notified of foreign travel as required. 
For 81 percent of the trips tested, the OS was not notified, and for 34 percent of 
the trips tested, the OGH was not notified. This situation has improved since the 
requirement that OS approve foreign travel was implemented, but approval was 
still not obtained for about 5 percent of the trips tested. Additionally OIG noted 
problems concerning travel orders, travel vouchers, and appropriate embassy 
notification of travel. 
The OIG recommended procedural corrections and enforcement of policies. 
The CDC concurred with the recommendations and is taking steps to ensure 
adherence to all foreign travel policies and procedures in the future. 
(A-04-02-04004) 
DRUG MANUFACTURERS CHARGES TO 340B ENTITIES 
Administered by HRSA, the 340B discount drug program (named for 
its section in the Public Health Service Act) provides numerous departmental 
grantees, or covered entities, with access to discounted prescription drug 
34
 Public Health Agencies 
purchases. The OIG estimated that five pharmaceutical manufacturers over-
charged 340B-covered entities $6.1 million for 11 prescription drugs during the 
1-year period ended September 30, 1999. The overcharges occurred because the 
manufacturers inappropriately excluded sales to health maintenance organization 
repackagers from their best price determinations, thereby increasing their prices. 
The OIG recommended that HRSA require the five drug manufacturers to identify 
the exact amount of the overcharges for each of the affected 340B-covered entities 
and apply these amounts as offsets or credits to the entities future purchases. The 
HRSA concurred and developed a corrective action plan that includes determining 
if similar overcharges occurred in other time periods or for other drugs. 
(A-06-01-00060) 
NATIONAL INSTITUTE OF ENVIRONMENTAL 
HEALTH SCIENCES SUPERFUND 
Through an agreement with the Environmental Protection Agency, the 
National Institute of Environmental Health Sciences receives Superfund money to 
carry out health-related and other activities. As required by statute, OIG audited 
the institutes Superfund obligations and disbursements for FY 2001. The audit 
determined that these funds were administered in accordance with applicable laws 
and regulations. (A-04-02-08003) 
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 that it can to ensure repayment, 
some loan recipients ignore their indebtedness. 
After PSC has exhausted all efforts to secure repayment of these debts, 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. During this 6-month 
period, 35 individuals and related entities were excluded as a result of PSC 
referral of their cases to OIG. 
35
 Public Health Agencies 
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 their debt. If they default on these settlement 
agreements, they can then be excluded until their entire debt is repaid, and they 
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 1,739 
individuals have taken advantage of the opportunity to enter into settlement agree
ments or completely repay their debts. This figure includes the 61 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 almost $123 million. 
Of that amount, $5 million is attributable to this reporting period. 
In the following examples, each individual entered into a settlement 
agreement to repay the amount indicated: 
'  A Louisiana Podiatrist$202,000 
'  A California Dentist$159,000 
'  A California Physician$127,000 
MISUSE OF PUBLIC HEALTH GRANT FUNDS 
In Illinois, Northwestern University (Northwestern) agreed to pay the 
government $5.5 million to resolve allegations raised in a False Claims Act qui 
tam complaint about the universitys effort reporting under NIH and other extra-
mural research grants. The government alleged that in completing applications 
for the federal grants, Northwestern overstated the percentage of their researchers 
work effort devoted to the grant. Northwestern also allegedly knowingly failed to 
comply with federal requirements that a specified percentage of the researchers 
effort be devoted to the grant, and knowingly failed to ensure that total effort, 
broken down by activity, be reported on the universitys effort certification 
system.  The settlement, which stemmed from an OIG audit and investigation, 
constituted one of the largest settlements with a university for allegations of civil 
fraud on NIH research grants. 
36
 Public Health Agencies 
FINANCIAL STATEMENT AUDITS    
To support its audit of the departments financial statements, OIG 
contracted with independent certified public accounting firms to audit the 
FY 2002 financial statements of the major public health operating divisions. 
The following reports were issued during this semiannual period. Agency 
officials are taking corrective actions on most of the recommendations in these 
reports. 
'	 CDC and ATSDR: The accounting firm issued an unqualified opinion on 
the CDC and ATSDR financial statements, which means that they were 
reliable and fairly presented. No material weaknesses were noted in the 
system of internal controls. (A-17-02-00010) 
'	 FDA: The firm issued an unqualified opinion on the financial statements 
and noted no material weaknesses in the system of internal controls. 
(A-17-02-00008) 
'	 HRSA: The HRSA received an unqualified opinion on its financial 
statements. No material weaknesses were noted in the system of internal 
controls. (A-17-02-00005) 
'	 NIH: The accounting firm issued an unqualified opinion on the financial 
statements and noted a repeated material weakness for lack of an integrated 
financial system and insufficient financial analyses and reviews. 
(A-17-02-00009) 
   Indicates performance measure. Details can be found in Appendix G. 
37
 38
 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. 
The OIG reviews those programs serving children and families. 
Reports have focused on ways to increase the efficient use of program 
dollars; to more effectively implement programs; to better coordinate 
programs among the Federal Government, and state and local govern
ments; 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.  The 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. 
39
 Administrations for Children and Families and on Aging 
ACCESS AND VISITATION GRANT PROGRAMS 
This inspection reviewed the extent to which mediation programs, offered 
through the Access and Visitation Grant Program, increased access rights, visita
tion, and child support payment compliance for IV-D 
Change in Noncustodial Parent  participants in five states.  In four states, OIG found
Payment Compliance 
that the programs appear to facilitate and increase
After Mediation 
access rights as well as actual visitation. In 76 percent 
of cases, parents participating in mediation developed 
visitation plans. In 86 percent of these cases, the plan 
increased noncustodial parents allotted time with their 
61% Increased 
children. In addition, parents, in 42 percent of the cases 
who reached an agreement, reported that actual visits 
increased. Finally, in 61 percent of cases, noncusto
27% Decreased 
dial parents increased the percent of child support they 
paid following mediation; this increase would have 
12% No Change 
resulted in an estimated $230,000 in additional annual 
child support collections. 
Because the mediation programs in the fifth state focus primarily on 
increasing immediate visitation, as opposed to access rights, OIG analyzed their 
data separately.  Overall, the programs in this state appear to have similarly 
beneficial effects for visitation and payments. (OEI-05-02-00300) 
FOSTER CARE TRAINING COSTS 
The OIG reported that for the 5 years ended September 30, 1999, Nebraska 
overcharged training costs to the federally supported Title IV-E Foster Care pro-
gram by $19.3 million ($11.7 million federal share). Included in the erroneous 
charges were salaries and related overhead for staff who were not in training, 
unsupported costs, and program costs. In addition, the state did not identify and 
charge training costs to all benefitting programs and claimed allocated overhead 
costs at an unallowable enhanced federal matching rate. 
The state did not agree with OIGs recommendations to make financial 
adjustments and to allocate costs according to the approved state plan. 
(A-07-02-00138) 
40
 Administrations for Children and Families and on Aging 
CHILD CARE CLAIMS 
At the request of ACF, OIG audited North Carolinas child care claims for 
the period January 1, 1996, to March 31, 1999. The objective of the audit was to 
determine whether the state was paid for unallowable At-Risk, Child Care and 
Development Block Grant, Child Care and Development Fund, and Social Services 
Block Grant (Other Grants) child care claims.  The OIGs sample of 230 Other 
Grants child care line items showed that 26 did not meet the requirements for 
federal funding. As a result, the state was reimbursed $18.3 million in unallow
able payments. In OIGs opinion, the unallowable payments resulted from the 
states inadequate review of a consultants identification of children eligible for a 
specific grant. Although each grant had different requirements, the states 
accounting system did not identify which grant program was used to pay for a 
childs care. 
In addition to making procedural recommendations, OIG recommended 
federal reimbursement. State officials generally disagreed. (A-04-01-00006) 
AUTOMATED CHILD WELFARE INFORMATION SYSTEM 
The OIG determined that the majority of the $74.2 million in equipment 
and related costs claimed by New York for implementing and operating its State-
wide Automated Child Welfare Information System (SACWIS) were allowable. 
However, $947,000 ($687,000 federal share) of the claimed costs should not have 
been claimed to the SACWIS project, and $3.9 million ($2.9 million federal share) 
in equipment could not be properly identified or located. The OIG recommended 
that the state reduce its claim by $4.9 million ($3.6 million federal share) and 
improve its property management system.  The state generally disagreed with the 
financial adjustment but indicated that it was working to improve the accuracy 
and reliability of the SACWIS inventory system.  (A-02-01-02001) 
HEAD START PROGRAM ENROLLMENT    
At the request of ACF, OIG evaluated the enrollment and attendance 
levels of the Head Start program administered by a grantee in Connecticut from 
1999 through 2001. This review found that enrollment was lower than expected 
   Indicates performance measure. Details can be found in Appendix G. 
41
 Administrations for Children and Families and on Aging 
and that these missed enrollments had an associated value of about $6.5 million in 
federal funds received. Problems in the maintenance of records were also noted. 
Among factors contributing to the missed enrollments were inadequate recruiting 
methods and inefficiency in filling vacancies. 
Although the grantee made a credible effort to improve by the end of 2001, 
OIG believes that additional action is warranted and made several recommenda
tions accordingly. The grantee did not agree with the recommendations. 
(A-01-02-02500) 
HEAD START GRANTEE 
After noting deficiencies during a performance review at a Head Start 
grantee in Puerto Rico, ACF requested that OIG review the grant expenditures for 
the fiscal year ended February 28, 1999.  The review disclosed that the grantee 
had incorrectly charged $522,000 to the Head Start program because the method 
of allocating utility and rental costs to Head Start and other programs did not 
result in an equitable distribution.  In addition, the grantee charged Head Start for 
estimated instead of actual costs, claimed unsupported costs, and failed to credit 
the program for purchase orders that were subsequently cancelled. 
The OIG recommended that the grantee refund the overpayment to the 
Federal Government and develop a comprehensive cost allocation plan. The 
grantee disagreed with the refund but agreed that a cost allocation plan should be 
developed. (A-02-01-02002) 
REFUNDING AFDC OVERPAYMENTS 
As part of a nationwide initiative, OIG determined whether three states 
properly refunded Aid to Families with Dependent Children (AFDC) over-
payments collected after the AFDC program was replaced by Temporary 
Assistance to Needy Families (TANF). States are required to pursue AFDC 
overpayments made before October 1, 1996, and to make appropriate refunds to 
the Federal Government. Collections of overpayments occurring after that date 
are to be used to offset TANF expenditures in the year collected. 
The OIG found that the states had not refunded the governments 
proportionate share of overpayments collected. The OIG recommended that 
42
 Administrations for Children and Families and on Aging 
Michigan return $15.3 million to the Federal Government, that Nebraska return 
an estimated $2 million, and that New York return $1.8 million for collections by 
five counties. While New York agreed to make the refund, the other states did 
not. (A-05-02-00060; A-07-02-03013; A-02-02-02001) 
CHILD SUPPORT ENFORCEMENT 
The OIG has made the detection, investigation and prosecution of absent 
parents who fail to pay court-ordered child support a priority. The OIG continues 
to work with the Office of Child Support Enforcement (OCSE), DOJ, U.S. 
Attorneys Offices, U.S. Marshals Service, and other federal, state and local 
partners to develop programmatic and operational procedures to expedite the 
collection of child support and to bring to justice those who willfully disregard 
their obligations. 
Since 1995, OIG has opened 2,181 investigations of child support cases 
nationwide, which have resulted in 1,727 convictions and court-ordered criminal 
restitution and settlements of almost $39 million. 
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a criminal 
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 
the coordination of law enforcement, criminal justice and child support office 
resources. 
Central to the task forces are the screening units located in each task force 
region and staffed by analysts and auditors from OIG and OCSE.  The units re
ceive child support cases from the states, conduct preinvestigative analyses of these 
cases through the use of databases, and then forward the cases to the investigative 
task force units where they are assigned and investigated. The task force approach 
streamlines the process by which the cases best suited for criminal prosecution are 
identified, investigated and brought to fruition. A table of the task forces appears 
on the following page. 
43
 Administrations for Children and Families and on Aging 
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, Mississippi, North 
Carolina, South Carolina, Tennessee 
Southwest  Dallas, Texas  Arkansas, Louisiana, 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 
At this point, the task force units have received over 6,100 cases from the 
states. As a result of the work of the task forces, 342 federal arrests have been 
executed and 290 individuals sentenced. The total ordered amount of restitution 
related to federal investigations is over $16 million. There have been 316 arrests 
at the state level and 290 convictions or civil adjudications to date, resulting in 
over $10 million in restitution being ordered. 
Investigations 
During this period, OIG investigations of child support cases, nationwide, 
resulted in 120 convictions and court-ordered criminal restitution of almost 
$6 million. Examples of the federal arrests, convictions and sentences for failure 
to pay child support include the following: 
44
 Administrations for Children and Families and on Aging 
'	 VirginiaA man was sentenced to 18 months imprisonment, 1 year of 
supervised release, and ordered to pay $245,000 in restitution.  In 1988, 
he was ordered to pay $1,000 (later reduced to $800) a month in support 
of his five children, but he never made any voluntary payments.  To evade 
his obligation, he remained underemployed and frequently changed jobs. 
'	 CaliforniaA man was sentenced to 5 years probation and ordered to pay 
$160,000 in restitution.  In 1993, he was ordered to pay $743 a month in 
support for his three children. Although he demonstrated income in excess 
of $40,000 a year, he never made any payments. 
'	 IllinoisA former stockbroker was sentenced to 2 years in prison and 
ordered to pay $125,000 in restitution.  He failed to pay child support 
even though he had in excess of $100,000 in unreported income in several 
different checking accounts. 
'	 North CarolinaA man was sentenced to 5 months incarceration, as well 
as 5 months home detention, 1 year supervised release, and ordered to pay 
$91,000 in restitution. Employed as an attorney until his disbarment in 
1996, the man remained unemployed but received monthly income from 
a pension. 
'	 IowaIn Iowa, the first person to be tried, convicted and sentenced to 
prison on state charges of failure to pay child support was sentenced at the 
federal level based on the same conduct. He was sentenced to 27 months 
incarceration, with 12 months subtracted for time served in connection with 
the state conviction, 1 year supervised release, and ordered to pay $87,000 
in restitution. The father of seven children, the man left his position as a 
mathematics professor to avoid paying support through a wage with-
holding order. 
'	 WyomingA man was sentenced to 5 years supervised probation and 
ordered to pay his arrearage of $57,000. In addition to this sentence, the 
judge ordered him to pay the court-ordered child support owed his second 
wife for their three children; his arrearage totals over $30,000. 
'	 ArizonaA man was sentenced to 2 years supervised probation.  Prior to 
appearing in court, he fully paid his restitution of $32,000. Following court 
proceedings, he also made a $450 child support payment for the months of 
October, November and December 2002. 
45
 Administrations for Children and Families and on Aging 
'	 OhioIn one of the states most egregious cases, a man was sentenced to 
5 years probation with confinement in jail every weekend for a year, ordered 
to pay $23,000 in restitution, required to continue alcohol and drug treat
ment, and to participate in an outpatient mental health program. 
MISUSE OF ACF AND AoA GRANT FUNDS 
'	 PennsylvaniaAs the result of an OIG audit and investigation, the former 
director of a non-profit financial institution was sentenced to 2 years 
imprisonment and ordered to pay $348,000 in restitution for conspiracy, 
theft and embezzlement from an organization receiving federal funds, mail 
fraud and obstruction of a federal audit.  The director misused HHS grant 
funds intended for a program to create sustainable communities through 
the use of business tax incentives and economic development programs in 
distressed urban communities. 
'	 MontanaThe former assistant director and contract bookkeeper for an 
agency funded by AoA were sentenced.  The agency received AoA funds 
to provide aging services to Native American tribes. For more than 4 years, 
the two embezzled funds from the agency by issuing themselves checks. 
The contract bookkeeper also created a fraudulent work contract and sub
mitted claims falsely indicating that work had been performed.  The 
assistant director was ordered to pay $107,000 for embezzlement and tax 
fraud; and the contract bookkeeper was sentenced to 18 months incarcer
ation and ordered to pay $216,000 in restitution for embezzlement and tax 
evasion. 
GRANTS AWARENESS TRAINING 
In October 2002, during a two-week period, 300 team leaders and program 
and grant specialists at 10 different sites throughout the country received fraud 
awareness training concerning the Head Start program.  A program administered 
by HHS Administration for Children and Families, Head Start provides develop-
mental and social services for low-income, preschool children from birth to 5 years 
old. The training was developed and conducted by Head Start officials and OIG 
auditors and investigators.  The two-hour training session included discussion of 
the elements of fraud, the environment for fraud, and the strategies to detect 
fraud. 
46
 Administrations for Children and Families and on Aging 
FINANCIAL STATEMENT AUDIT    
To support its audit of the departments FY 2002 financial statements, 
OIG contracted with an independent certified public accounting firm to audit 
ACFs financial statements. The firm issued an unqualified opinion on the 
FY 2002 statements, which means that they were reliable and fairly presented. 
No material weaknesses were noted in ACFs system of internal controls. 
(A-17-02-00003) 
   Indicates performance measure. Details can be found in Appendix G. 
47
 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 Services (HHS) budget; ensuring that 
HHS performance measurement and reporting are in compliance with the 
Government Performance and Results Act; establishing and monitoring 
departmental policy for financial management (including debt collection, 
audit resolution, cost policy, and financial reporting); and developing and 
monitoring HHS information technology policy (including IT security). 
The Assistant Secretary is the departments Chief Financial Officer and 
oversees the departments Chief Information Officer. The department also 
has the responsibility, by virtue of the magnitude of its funding, to nego
tiate 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 acquisitions management. This office also oversees 
the Program Support Center, which provides a range of administrative 
services, such as human resources, financial management, and adminis
trative operations. 
The OIG has oversight responsibility for these activities at the 
departmental level. A related major responsibility flows from Office of 
Management and Budget (OMB) 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. Also, 
OIG oversees the work of nonfederal 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. The OIG is also responsible for auditing 
the departments financial statements. 
49
 General Oversight 
AUDIT OF THE DEPARTMENTS 
FINANCIAL STATEMENTS    
As required by the Government Management Reform Act of 1994, OIG 
audited the departments consolidated/combined financial statements for FY 2002 
and issued three reports: the audit opinion, the report on internal controls, and the 
report on compliance with laws and regulations. This effort encompassed individual 
audits of nine operating divisions financial statements and reviews of four service 
organizations by independent certified public accounting firms. 
Included in OIGs reports, which can be found in the departments 
Performance and Accountability Report, was a clean, or unqualified, opinion 
on the financial statements. This means that, for the fourth consecutive year, the 
statements were reliable and fairly presented. 
However, OIG noted two continuing material internal control weaknesses 
defined as problems that are systemic across a number of operating divisions or 
significant dollar issues affecting an individual division. First, serious weaknesses 
persisted in the departments financial systems and processes for producing fin
ancial statements. These weaknesses related to financial management systems, 
financial analyses and reporting, and grant accounting.  Second, Medicare infor
mation systems lacked adequate controls to ensure the security and integrity of 
data processing operations and data files.  As discussed in OIGs report on com
pliance with laws and regulations, weaknesses in the departments financial 
management systems and in Medicare information systems also represented 
departures from certain federal requirements. (A-17-02-00001) 
DEPARTMENTAL SERVICE ORGANIZATIONS     
To support its audit of the departments FY 2002 financial statements, 
OIG contracted for examinations of four service organizations that provide 
common administrative, data processing, and accounting services to the operating 
divisions. In accordance with Statement on Auditing Standards No. 70, indepen
dent certified public accounting firms examined the organizations controls and 
tested their operating effectiveness. 
   Indicates performance measure. Details can be found in Appendix G. 
50
 General Oversight 
'	 Center for Information Technology, National Institutes of Health:  The 
accounting firm concluded that controls were suitably designed and 
operating with sufficient effectiveness. No significant exceptions were 
noted. (A-17-02-00012) 
'	 Human Resources Service, Program Support Center: The firm concluded 
that controls were suitably designed and operating with sufficient effec
tiveness except for certain weaknesses in access controls and application 
development and change controls. (A-17-02-00014) 
'	 Division of Financial Operations, Program Support Center: The firm 
concluded that controls were suitably designed and operating with suffi
cient effectiveness but noted exceptions in access and system software 
controls. (A-17-02-00014) 
'	 Division of Payment Management, Program Support Center: According 
to the firm, controls were suitably designed and operating with sufficient 
effectiveness.  No significant exceptions were noted.  (A-17-02-00013) 
GOVERNMENT INFORMATION 
SECURITY REFORM ACT 
As required by the Government Information Security Reform Act (GISRA), 
OIG conducted independent evaluations of information systems security pro-
grams at 13 HHS operating and staff divisions.  The results were reported to 
management and summarized in a report to the Office of Management and 
Budget. 
While progress had been made in securing critical systems, numerous 
general control weaknesses were identified in entity-wide security program 
planning and management, access controls, service continuity, and segregation of 
duties. The OIG noted that about two-thirds of the findings from the previous 
year had not been resolved and that several of the identified weaknesses were 
considered to be significant under GISRA guidelines.  The underlying cause for 
most weaknesses was that the department did not have an effective information 
security management program structure in place to ensure that sensitive data and 
critical operations received adequate attention and that appropriate security con
trols were implemented to protect them.  For the most part, the operating and staff 
divisions concurred with the findings and recommendations and are developing 
corrective action plans.  (Various reports) 
51
 General Oversight 
NONFEDERAL AUDITS 
The 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 which includes all federal money they receive. These 
annual audits are conducted by nonfederal auditors, such as public accounting 
firms and state auditors. As cognizant auditor, OIG reviews the quality of these 
audits and assesses the adequacy of the entitys management of federal funds. In 
the first half of FY 2003, OIGs National External Audit Review Center reviewed 
about 1,300 reports that covered $526.5 billion in audited costs. Federal dollars 
covered by these audits totaled $104.4 billion, about $43.9 billion of which was 
HHS money. 
The OIGs oversight of nonfederal audit activity not only provides 
department managers with assurances about the management of federal programs 
but also identifies any significant areas of internal control weakness, noncom
pliance, and questioned costs that require formal resolution by federal officials. 
By taking a proactive stance, OIG identifies entities for high-risk monitoring and 
any trends that could indicate problems in HHS programs. In addition, OIG 
profiles nonfederal audit findings of a particular program or activity over time to 
identify systemic problems. As a further enhancement of audit quality, OIG 
provides training and technical assistance to grantees and the auditing profession. 
To rely on the work of nonfederal auditors, OIG maintains a quality 
control review process which assesses the nonfederal reports received and the 
audit work that supports selected reports. The nonfederal audit reports reviewed 
and issued during this reporting period fall into the following categories: 
Reports issued: 
Without changes or with minor changes  1,180 
With major changes  69 
With significant inadequacies  51 
Total  1,300 
52
 General Oversight 
The 1,300 reports included recommendations for HHS program officials 
to take action on cost recoveries totaling $5.6 million, as well as 5,220 recom
mendations for improving management operations. In addition, these audit reports 
provided information for 91 special memoranda which 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. 
In Table 1, Dollar Value Questioned costs are those challenged because 
of violation of law, regulation, grant conditions, etc. Dollar Value Unsupported 
costs are those not supported by adequate documentation. Additional audit 
recoveries are discussed on page 59. 
Table 2 summarizes recommendations that funds be put to better use 
through cost avoidances, budget savings, etc.  These costs are separate from the 
amount ordered or returned as a result of OIG investigations. 
53
 General Oversight 
Table 1:  Reports With Questioned Costs* 
Reports  Number of  Dollar Value  Dollar Value 
Reports  Questioned  Unsupported 
Section 1 
For which no management  477  $1,503,561,000  $250,653,000 
decision had been made by 
the beginning of the reporting 
period1 
Issued during the reporting  144  $311,849,000  $19,303,000 
period 
Total Section 1  621  $1,815,410,000  $269,956,000 
Section 2 
For which management 
decision was made during 
the reporting period2,3,4 
Disallowed costs  $174,294,000  $12,263,000 
Costs not disallowed  $19,251,000  $377,000 
Total Section 2  140  $193,545,000  $12,640,000 
Section 3 
For which no management 
decision had been made by 
the end of the reporting period 
Total Section 1 minus 
Total Section 2  481  $1,621,865,000  $257,316,000 
Section 4 
For which no management 
decision was made within 
6 months of issuance5  346  $1,345,827,000  $134,582,300 
*Details concerning footnotes can be found in Appendix D. 
54
 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  53  $8,362,486,000 
Issued during the reporting period  9  $517,772,000 
Total Section 1  62  $8,880,258,000 
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  5  $233,086,000 
Based on proposed 
legislative action  0  $0 
Value of recommendations that 
were not agreed to by management  2  $2,816,000 
Total Section 2  7  $235,902,000 
Section 3 
For which no management decision had 
been made by the end of the reporting 
period2 
Total Section 1 minus 
Total Section 2  55  $8,644,356,000 
*Details concerning footnotes can be found in Appendix D. 
55
 General Oversight 
LEGISLATIVE AND REGULATORY 
REVIEW AND DEVELOPMENT 
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 recom
mendations 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. 
Development Functions 
The OIG is responsible for the development and public announcement 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: 
!	 Published, in coordination with the Centers for Disease Control and 
Prevention, interim final regulations that serve to implement the require
ments set forth in Public Law 107-88, the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002.  Specifically, OIGs 
portion of this interim final rulemaking amends 42 CFR part 1003 by 
adding new CMPs for violations relating to the possession, use, or transfer 
of certain designated biological agents and toxins. 
(December 13, 2002; 67 FR 76886) 
!	 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, this regulation is intended to protect waivers of 
coinsurance and deductible amounts under Part A or Part B of the Medicare 
program owed by beneficiaries covered by 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 
56
 General Oversight 
or supplier offering the waiver.  The OIG proposed rulemaking was 
published in the Federal Register (67 FR 60202) on September 25, 2002. 
!	 Continued to develop draft proposed rulemaking to revise OIGs authority 
to propose the imposition of CMPs and assessments, by reorganizing and 
simplifying existing regulatory text and eliminating obsolete references 
contained in the current regulations. Among the proposed revisions, this 
rule would establish separate subparts within 42 CFR part 1003 for various 
categories of violations; modify the current definition for the term claim; 
update various references to managed care organization authorities; and 
clarify the application of section 1140 of the Act with respect to the misuse 
of certain departmental symbols, emblems, or names through Internet and 
e-mail communications. 
Also, during this period, OIG continued to develop and publish several 
Federal Register notices that serve to reflect OIG policy and procedures with 
regard to compliance program guidance, Special Fraud Alerts, Special Advisory 
Bulletins, and continued OIG regulations.  Specifically, OIG: 
!	 Published draft Compliance Program Guidance for Pharmaceutical 
Manufacturers. Through this draft, OIG set forth its general views 
on the value and fundamental principles of compliance programs for 
pharmaceutical manufacturers and the specific elements that pharma
ceutical manufacturers should consider when developing and imple
menting a compliance program. 
(October 3, 2002; 67 FR 62057) 
!	 Published a notice of intent to develop regulations, in accordance with 
section 205 of the Health Insurance Portability and Accountability Act of 
1996, that solicits proposals and recommendations for developing new and 
modifying existing safe harbors provisions under the anti-kickback statute, 
as well as developing new OIG Special Fraud Alerts. In addition, this 
notice solicited specific comments on developing possible guidance to 
address certain hospital credentialing practices. 
(December 9, 2002; 67 FR 72894) 
!	 Published a notice soliciting comments on the possible development of 
exceptions under section 1128A(a)(5) of the Social Security Act, the CMP 
prohibition on offering inducements to Medicare and Medicaid benefi
ciaries to influence their selection of a provider, practitioner, or supplier. 
Specifically, the notice focused on complimentary local transportation, 
57
 General Oversight 
inducements related to clinical trials, and inducements of nominal value. 
(December 9, 2002; 67 FR 72892) 
!	 Published a newly-developed Special Fraud Alert addressing telemarketing 
practices by durable medical equipment (DME) suppliers. This notice 
specifically highlights the statutory provision prohibiting DME suppliers 
from making unsolicited telephone calls, either directly or indirectly, to 
Medicare beneficiaries regarding the furnishing of a covered item. 
(March 4, 2003; 68 FR 10254) 
!	 Developed and published the final Compliance Program Guidance for 
Ambulance Suppliers. The Guidance sets forth OIGs general views and 
the value and fundamental principles for ambulance providers and sup-
pliers that are developing compliance programs. 
(March 24, 2003; 68 FR 14245) 
EMPLOYEE FRAUD AND MISCONDUCT 
Most of the persons employed by HHS are dedicated, honest civil servants. 
Occasionally, however, individuals violate their fiduciary responsibilities. The 
OIG conducts or oversees investigations of serious allegations of wrongdoing by 
department employees, as in the following examples: 
'	 MontanaA former IHS nurse was sentenced for dispensing a Schedule 
II controlled substance without a written prescription. She was the last of 
seven defendants sentenced for her involvement in a prescription drug fraud 
scheme.  As part of this scheme, a former IHS nurse practitioner over-
prescribed and prescribed unnecessary narcotics for others, then had all or 
a portion of the narcotics returned for her personal use. 
'	 New York A former department employee was sentenced to 27 months in 
prison, 3 years probation and ordered to cooperate in the collection of DNA 
and participate in a sex offender treatment program for possession of child 
pornography in a federally-controlled building. He is also subject to regular 
monitoring of computer use and is barred from jobs, activities, or events 
in which minors participate.  The employee used his federally-owned 
computer to find sexually explicit material on the Internet; and the investi
gation revealed that the hard drives from both his work and home com
puters contained images of child pornography. 
58
 General Oversight 
'	 MarylandA former NIH employee was sentenced to 18 months in 
prison, with all but one month suspended, and ordered to pay $4,600 in 
restitution for theft. The employee submitted false travel vouchers to the 
Office of Workers Compensation that included trips to the doctor that 
never occurred and inflated the number of miles to doctors offices. 
'	 South DakotaA tribal court sentenced a former IHS employee for theft. 
The employee took possession of an IHS-owned cellular telephone during 
her employment and used the telephone service for a 4-month period after 
her employment with the government had been terminated. 
ADDITIONAL AUDIT RECOVERIES 
Based on OIG recommendations, the department realized $40 million in 
additional recoveries, beyond the disallowances reported in Table 1 (p. 54), during 
this semiannual period.  In one instance, Pennsylvania refunded $39 million in 
overcharges for Medicaid supplementation payments to county nursing homes. In 
another, California refunded $1 million that state hospitals had overcharged for 
Medicare Part B services. (A-03-00-00211; A-09-98-00072) 
INVESTIGATIVE PROSECUTIONS 
During this semiannual reporting period, OIG investigations resulted in 320 
successful criminal actions. Also during this period, 782 cases were presented for 
criminal prosecution to DOJ and, in some instances, to state and local prosecutors. 
Criminal charges were brought by prosecutors against 357 individuals and 
entities. 
In addition to terms of imprisonment and probation imposed in the judicial 
processes, over $187 million was ordered or returned as a result of OIG investi
gations during this reporting period. Civil settlements from investigations result
ing from audit findings are included in this figure. 
59
 60
 Appendices 
61
 62
 Appendix A

Savings Achieved through Policy and Procedural Changes Resulting from Audits,

Investigations and Inspections 

October 1, 2002, through March 31, 2003

The following schedule highlights savings resulting from Office of Inspector General (OIG) efforts 
to prevent unnecessary obligations for expenditures of agency funds or to improve agency systems and 
operations. These achievements depend greatly on the contributions of others, such as partners within 
the department and elsewhere. The amounts shown represent funds or resources that will be used more 
efficiently 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 pre-award 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, or insurance or bonds. 
Legislative savings are annualized amounts based on Congressional Budget Office (CBO) estimates 
consistent with CBO savings. In keeping with OIG policy, savings from the Medicare provisions of the 
Balanced Budget Act (BBA) of 1997 were adjusted downward to reflect CBO estimates for related pro-
visions of the Balanced Budget Refinement Act (BBRA) of 1999 and BIPA of 2000. Administrative 
savings are calculated by OIG using departmental figures, where available, for the year in which the 
change is effected or for multiple years, if applicable. 
Total savings from these sources amount to $11,675 million for this reporting period. 
Savings 
OIG Recommendation  Status  (millions) 
Centers for Medicare and Medicare Services 
Medicare Part A Payments for Skilled Nursing  $3,760 
Facilities:  Section 4432 of the BBA of 1997 
Services should be bundled into Medicare and Medicaids  (as amended by the BBRA of 1999 
payments to nursing homes; Part B payments for services  and the BIPA of 2000) required a 
normally included in the extended care benefit should  PPS for Part A SNF care. Covered 
continue to be examined for appropriateness; and a  services include Part A SNF benefits 
legislative recommendation should be developed to  and all services for which payment 
prohibit entities other than the skilled nursing facility  may be made under Part B (except 
(SNF) from seeking coverage on behalf of persons in part  physician, certain other professional 
A covered SNF stays for enteral nutrition, incontinence  services, and other specifically 
care, and surgical dressings, and limit Medicare coverage  excluded items or services) during 
of these services to Part A. In 1997 congressional  the period when the beneficiary is 
testimony, OIG supported establishing a prospective  provided covered Part A SNF care. 
payment system (PPS) and consolidated billing. 
(OEI-03-94-00790; OEI-06-92-00863; OEI-06-92-00864; 
A-17-95-00096; A-14-98-00350) 
State Enhanced Payments Under Medicaid Upper  $2,500 
Payment Limit Requirements:  On January 12, 2001, CMS issued 
States are allowed to make enhanced payments to local  revisions to the upper payment limit 
government providers as long as aggregate state payments  regulations which, among other 
continued 
63
 Appendix A 
State Enhanced Payments Under Medicaid Upper 
Payment Limit Requirements (continued):  things, created new payment limits 
for each class of service do not exceed the amount that  for local government-owned 
would have been paid under Medicare cost principles.  providers. This final rule will 
The OIG found that states use of intergovernmental  significantly affect a states ability to 
transfers maximized federal Medicaid reimbursements.  reap windfall revenues by reducing 
The OIG also found that enhanced payments were not  the available funding pool from 
based on the cost of providing the service nor did OIG  which to make enhanced payments to 
find a direct relationship in the use of these funds to  local government-owned providers. 
increase the quality of care. (A-03-00-00216) 
Medicare Secondary Payer Extensions:  $2,110 
Establish a centralized database of information about  The database capacity was achieved 
private insurance coverage of Medicare beneficiaries.  through the authorization of a data 
Extend the Medicare secondary payer (MSP) provision to  exchange between the Social 
include end stage renal disease (ESRD) beneficiaries as  Security Administration and the 
long as the individual has employer based coverage  Centers for Medicare and Medicaid 
available.  Services (CMS) and between the 
(OEI-07-90-00760; OEI-03-90-00763;  Internal Revenue Service and CMS. 
A-10-86-62016; A-09-89-00100; A-09-91-00103;  Section 4631 of the BBA of 1997 
A-14-94-00391; A-14-94-00392)  permanently extended current MSP 
policies for beneficiaries who are 
disabled and have ESRD. For ESRD 
beneficiaries, the statute also in-
creased the time period Medicare is 
secondary payer from 18 to 30 
months. 
Capital-Related Costs of Hospital Services:  $1,220 
Extend congressionally mandated reductions in hospital  Section 4402 of the BBA of 1997 
costs. The CMS should seek legislative authority to  provided for rebasing of capital 
continue mandated reductions in capital payments; excess  payment rates for an additional 
capacity was not considered in the capital cost policy.  reduction in the rate of 2.1 percent. 
(A-09-91-00070; A-07-95-01127) 
Medicare Payments for Oxygen:  $700 
The CMS should reduce Medicare payments for oxygen  Section 4552(a) of the BBA of 1997 
concentrators and ensure that beneficiaries receive  reduced Medicare reimbursement for 
necessary care and support in connection with their  oxygen 25 percent until 1999 and by 
oxygen therapy.  30 percent for each subsequent year; 
(OEI-03-91-00711; OEI-03-91-001710)  section 4552(c) mandated that the 
Secretary develop service standards 
for oxygen provided in the home. 
Medicare Laboratory Reimbursements:  $700 
In July 1989, OIG recommended that CMS take advantage  Section 4553 of the BBA of 1997 
of economies of scale present in the laboratory industry by  provided for reducing fee schedule 
considering competitive bidding or making reductions to  payments by lowering the cap to 74 
the fee schedule amounts. In January 1990, OIG  percent of the median for payment 
recommended that CMS seek legislation to allow across  amounts, with no inflation update for 
the board adjustments in Medicare laboratory fee  1998 through 2002. 
schedules, bringing them in line with the prices which 
continued 
64
 Appendix A 
Medicare Laboratory Reimbursements (continued): 
laboratories charge physicians in a competitive 
marketplace. In a January 1996 follow-up, OIG found that 
Medicare continued to pay more to clinical laboratories 
than physicians for the same tests. Although the Omnibus 
Budget Reconciliation Act of 1993 reduced the fee 
schedule to 76 percent of the average in 1996, OIG 
recommended that CMS periodically evaluate the national 
fee schedule to ensure that it is in line with the prices 
physicians pay for the same clinical laboratory services. 
(OEI-02-89-01910; A-09-89-00031; A-09-93-00056) 
Payments for Durable Medical Equipment:  $400 
Excessive Medicare Part B payments for enteral and  Section 4551(b) of the BBA of 1997 
parenteral nutrition, equipment and supplies should be  froze Medicare payments for enteral 
reduced, or competitive acquisition strategies should be  and parenteral nutrition and supplies 
employed.  for 1998 through 2002 and simplified 
(OEI-03-94-00021; OEI-06-92-00866; OEI-03-96-00230;  the process used to reduce inherently 
OEI-06-92-00861)  unreasonable prices by 15 percent. 
Medicare Payments to Hospitals for Bad Debt:  $150 
The CMS should seek legislative authority to modify the  Section 4451 of the BBA of 1997 
bad debt payment policy.  reduced bad debt payment to 
(A-14-90-00039)  providers by 25 percent in FY 1998, 
40 percent in FY 1999, and 45 
percent in later years. The Benefits 
Improvement and Protection Act of 
2000 subsequently reduced the 
reduction to 30 percent. 
Medicaid Drug Rebates-Sales to Repackagers  $80.7 
Excluded from Best Price Determinations:  The CMS issued Medicaid Drug 
Medicaid rebates were lost because sales to HMOs were  Rebate Program Release #47 in July 
improperly excluded from drug manufacturers best price  2000 to make it clear to manufac
determinations in FYs 1998 and 1999. The CMS should  turers to not inappropriately exclude 
require drug manufacturers who excluded sales to HMOs  other prices from best prices, as 
from their best price calculations to repay the rebates and  required by section 1927 of the 
evaluate the policy guidance relating to exclusion of sales  Social Security Act. 
to other (non-HMO) repackagers from best price 
determinations. 
(A-06-00-00056) 
Medicare Payments for Prescription Drugs:  $30 
The CMS should reexamine its Medicare drug  Section 4556 of the BBA of 1997 
reimbursement methodologies, with a goal of reducing  reduced Medicare payments for 
payments as appropriate.  drugs, which are paid based on 
(OEI-03-95-00420; OEI-03-94-00390; OEI-03-97-00290)  the average wholesale price, by 
5 percent. 
65
 Appendix A 
Various Operating Divisions 
Results of Investigations:  $24.3 
In addition to any restitution, fines, settlements or  The operating division takes action 
judgments, or other monetary amounts resulting from  based on the results of OIG 
successful investigations, additional monetary losses are  investigation to suspend or terminate 
avoided through timely communication of the  payments to the offending individual 
investigative results to the operating division.  or entity. 
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 Office of Inspector General (OIG) recommendations were enacted by the Congress and the administration 
through legislative or regulatory action, or policy determinations by management. (In many cases, these 
recommendations are beyond the direct authority of the departmental operating division.) It should be 
noted, however, that the Congress normally develops savings over a budget cycle which results in far 
greater dollar impact statements. Savings are based on preliminary OIG estimates and reflect economic 
assumptions which are subject to change. The magnitude of the savings may also increase or decrease as 
some of the proposals could have interactive effects if enacted together. 
More detailed information may be found in OIGs Red Book which can be accessed on the 
Internet at http://oig.hhs.gov. 
Savings 
OIG Recommendation  Status  (millions) 
Centers for Medicare and Medicaid Services 
Excessive Medicare Payments for Prescription 
Drugs:  The CMS concurred; they have attempted 
$1,900 
The CMS should examine its Medicare drug  administrative remedies to lower payments 
reimbursement methodologies.  for some drugs using inherent reasonable
(OEI-03-00-00310; OEI-03-97-00292;  ness, but Congress suspended use of this 
OEI-03-97-00293; OEI-03-97-00390;  authority pending issuance of a final rule. 
OEI-03-95-00420; OEI-03-94-00390) 
Medicare Coverage of State and Local  $1,559 
Government Employees:  In responding to OIGs report, CMS agreed 
The CMS should require Medicare coverage and  with the recommendation to mandate 
hospital insurance contributions for all state and  Medicare coverage for all state and local 
local employees, including those hired prior to  government employees. However, this 
April 1, 1986. If this proposal is not enacted, CMS  proposal was not included in the Presidents 
should seek legislation making Medicare the  FY 2003 budget. The CMS did not agree 
secondary payer for retirees of exempt state and  with the recommendation to make Medicare 
local government agencies. (A-09-88-00072)  the secondary payer. 
Clinical Laboratory Tests:  $1,130* 
The CMS should develop a methodology and  The CMS initially agreed with the first 
legislative proposal to pay for tests ordered as  recommendation but not the second. The 
custom panels at substantially less than the full  BBA required the Secretary to contract with 
price for individual tests, and study reinstating the  the Institute of Medicine for a study of Part 
beneficiary coinsurance and deductible provisions  B laboratory test payments. The CMS may 
for laboratory services as a means of controlling  use the results to develop new payment 
utilization. (A-09-89-00031; A-09-93-00056)  methodologies. 
Hospital Capital Costs:  $820 
The CMS should determine the extent that capital  The CMS did not agree with the 
reductions are needed to fully account for hospitals  recommendation. Although the BBA of 
continued 
*This savings estimate would result from the copayment; the savings estimate for panels has yet to be determined. 
67  Appendix B 
Hospital Capital Costs (continued): 
excess bed capacity and report the percentage to the  1997 reduced capital payments, it did not 
Congress.  include the effect of excess bed capacity 
(A-09-91-00070; A-14-93-00380)  and other elements included in the base-
year historical costs. The Presidents FY 
2001 budget would have reduced capital 
payments and saved $630 million in FY 
2001 through FY 2005. 
Ensure Appropriateness of Medicare Payments  $676 
for Mental Health Services:  The CMS concurred and has initiated some 
The CMS should ensure mental health services are  efforts, particularly regarding community 
medically necessary, reasonable, accurately billed,  mental health centers. 
and ordered by an authorized practitioner by using a 
comprehensive program of targeted medical 
reviews, provider education, improved documenta
tion 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 
The OIG presented four options for CMS to  In responding to OIGs report, CMS agreed 
consider, including the elimination of a separate  with the recommendation to include a bad 
payment for bad debts, the offset of Medicare bad  debt factor in the DRG rates. The BBA of 
debts against beneficiary Social Security payments,  1997 provided for some reduction of bad 
the limitation of bad debt payments to prospective  debt payments to providers. The Benefits 
payment system hospitals that are profitable, and  Improvement and Protection Act (BIPA) of 
the inclusion of a bad debt factor in the diagnosis- 2000 subsequently increased bad debt 
related group (DRG) rates. The CMS should seek  reimbursement. However, additional 
legislative authority to further modify bad debt  legislative changes are needed to implement 
policies. (A-14-90-00339)  the modifications that OIG recommended. 
Review Cost Effectiveness of Pay and Chase  $185 
Methods for Medicaid Pharmacy Third-Party  The CMS agreed that states cost-avoidance 
Liability Recoveries:  waivers should be reexamined and is 
The CMS should determine whether states cost- directing the regional offices to reevaluate 
avoidance waivers for pharmacy claims are meeting  the waivers and determine if states are 
the cost-effectiveness criterion. The CMS can  paying and chasing claims without waivers. 
ascertain cost effectiveness by requiring states to  In addition, CMS is working with states that 
track dollars that they pay and chase and the  currently cost-avoid pharmacy claims and is 
amounts that they recover. The CMS should also  developing guidance to assist them in 
review states policies to determine if they are  implementing cost-avoidance. 
paying and chasing pharmacy claims without 
waivers. (OEI-03-00-00030) 
Graduate Medical Education:  $157.3 
The CMS should revise the regulations to remove  The CMS did not concur with the 
from a hospitals allowable graduate medical  recommendations. Although the BBA of 
education (GME) base-year costs any cost center  1997 and the BBRA of 1999 contained 
with little or no Medicare utilization and submit a  provisions to slow the growth in Medicare 
continued  spending on GME, OIG believes that 
68
 Appendix B 
Graduate Medical Education (continued): 
legislative proposal to compute Medicares per its recommendations should be imple
centage of participation under the former, more  mented and that further savings can be 
comprehensive system. (A-06-92-00020)  achieved. 
Review Medicaid Reimbursement Methodology  $140 
for HIV/AIDS Drugs:  The CMS no longer believes the 
The CMS should review the current reimbursement  recommended change is necessary and 
methodology and work with states to more accu believes that reimbursement changes will 
rately estimate pharmacy acquisition costs for 16  occur through revised AWPs, based on the 
HIV/AIDS drugs examined and initiate a review of  Presidents budget proposal for a legislative 
Medicaid rebates for them. (OEI-05-99-00611)  change that would base the Medicaid drug 
rebate on the difference between AWP and 
the best price for a drug. 
Medicaid Drug Rebate Program:  $123 
The best price calculation in the Medicaid drug  Disagreeing with the recommendation, 
rebate program should be indexed to the consumer  CMS believes that savings will be achieved 
price index-urban. (A-06-94-00039)  through the Presidents budget proposal to 
enact a legislative change that would base 
the drug rebate on the difference between 
the AWP and the best price for a drug. 
Identify Medical Equipment/Supply Claims  $91 
Lacking Valid, Active UPINs:  The CMS concurred. The agency planned 
The CMS should create edits to identify medical  to implement an edit to reject claims listing 
equipment and supply claims that do not have a  a deceased physicians UPIN beginning in 
valid and active unique physician identification  April 2002 and later expand this to include 
number (UPIN) listed for the ordering physician.  all inactive and invalid UPINs. 
(OEI-03-01-00110) 
Expansion of the DRG Payment Window:  $83.5 
The CMS should propose legislation to expand the  The CMS did not concur with the 
DRG payment window to at least 7 days  recommendation, and no legislative 
immediately prior to the day of admission.  proposal was included in the Presidents 
(A-01-92-00521)  budget for any fiscal year. 
Inpatient Psychiatric Care Limits:  $47.6 
The CMS should develop new limits to deal with  The CMS agreed with OIGs findings but 
the high cost and changing utilization patterns of  stated that further analysis would be 
inpatient psychiatric services and apply a 60-day  required before any legislative changes 
annual and a 190-day lifetime limit to all  could be supported. 
psychiatric care regardless of the place of service. 
(A-06-86-62045) 
Medicare Orthotics:  $43 
The CMS should take action to improve Medicare  Although CMS concurred with OIGs 
billing for orthotic devices. The CMS should also  original recommendations, problems 
require standards for suppliers of custom-molded  continue. 
and custom-fabricated orthotic devices. 
(OEI-02-95-00380; OEI-02-99-00120; 
OEI-02-99-00121) 
69
 Appendix B 
Reimbursement for Hospital Beds:  $40 
The CMS should take immediate steps to reduce  The CMS concurred and is considering 
Medicare payments for hospital beds used in the  options to determine the best approach to 
home. This should include seeking legislation to  achieve a fair price for hospital beds. The 
eliminate the higher reimbursement rate currently  CMS is examining payment allowances and 
paid during the first 3 months of rental.  methodologies at other payers and is review-
(A-06-91-00080; OEI-07-96-00221;  data to determine if Medicare payments are 
OEI-07-96-00222)  excessive. The BIPA of 2000 increased 
DME payments by 3.7 percent for 2001. 
End Stage Renal Disease Payment Rates:  $22** 
The CMS should reduce the payment rates for  The CMS agreed that the composite 
outpatient dialysis treatments to reflect current  payment rates should reflect the costs of 
efficiencies and economies in the marketplace.  outpatient dialysis treatment in efficiently 
(A-14-90-00215)  operated facilities, and the BBA of 1997 
required the Secretary to audit the cost 
reports of each dialysis provider at least 
once every 3 years. The BBRA of 1999 
increased each composite rate payment for 
dialysis services furnished during 2000 by 
1.2 percent above the payment for services 
provided on December 31, 1999. The BIPA 
of 2000 increased the rate for services 
provided in 2001 by 2.4 percent and 
required the Secretary to develop a 
composite rate that includes, to the extent 
feasible, payment for clinical diagnostic 
laboratory tests and drugs that are routinely 
used in dialysis treatments but are currently 
separately billable. 
Reclassify Respiratory Assist Devices with a  $11.5 
Back-Up Rate:  The CMS concurred. 
The CMS should reclassify bi-level respiratory 
assist devices with a back-up rate from the 
frequent and substantial servicing category to the 
capped rental category under the durable medical 
device benefit. (OEI-07-99-00440) 
Medicare Claims for Railroad Retirement  $9.1 
Beneficiaries:  The Presidents FY 2002 and 2003 budgets 
The CMS should discontinue use of a separate  did not include this type of legislative 
carrier to process Medicare claims for railroad  proposal. 
retirement beneficiaries. (A-14-90-02528) 
Indirect Medical Education:  TBD*** 
The CMS should reduce the indirect medical  The CMS agreed with the recommendation, 
continued  and the BBA of 1997, as amended by the 
**This estimate represents annual program savings of $22 million for each dollar reduction in the composite 
rate, given the population of ESRD beneficiaries at the time of OIGs review. 
***To be determined. 
70
 Appendix B 
Indirect Medical Education (continued): 
education (IME) adjustment factor to the level  BBRA of 1999, reduced the IME adjustment 
supported by CMS empirical data and initiate  to 5.5 percent in 2002 and thereafter. The 
further studies to determine whether different  OIG believes the factor should be further 
adjustment factors are warranted for different types  reduced to eliminate any overlap with the 
of teaching hospitals. (A-07-88-00111)  disproportionate share adjustment. 
Medicare Secondary PayerEnd Stage Renal  TBD 
Disease Time Limit:  The CMS was concerned that an indefinite 
The CMS should extend the Medicare secondary  MSP provision might encourage insurers to 
payer (MSP) provisions to include end stage renal  drop uneconomical services, namely facility 
disease (ESRD) beneficiaries without a time  dialysis and transplantation. The OIG 
limitation. (A-10-86-62016)  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. 
Home Health Agencies:  TBD 
The CMS should revise Medicare regulations to  Although the BBA of 1997 included 
require the physician to examine the patient before  provisions to restructure home health 
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; A-04-94-02087;  before ordering home health services. 
A-04-94-02078; A-04-96-02121; A-04-97-01169;  Subsequent to the BBA, OIGs four-state 
A-04-97-01166; A-04-97-01170; A-04-99-01195)  review found that unallowable services 
continued to be provided 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. Also, CMS provided 
additional payments for physician care plan 
oversight and education for physicians and 
beneficiaries. 
Connection Between the Calculation of Medicaid  TBD 
Drug Rebates and Drug Reimbursement:  The CMS agreed to pursue a change in the 
The CMS should seek legislation that would require  rebate program similar to that recom
participating manufacturers to pay Medicaid drug  mended. The Presidents FY 2003 budget 
rebates based on average wholesale price (AWP) or  proposed a legislative change that would 
study other viable alternatives to the current  base the drug rebate on the difference 
program of using average manufacturer price  between the AWP and the best price for a 
(AMP) to calculate the rebates. This legislation  drug. 
would have resulted in about $1.15 billion in 
additional rebates for 100 brand-name drugs with 
the highest total Medicaid reimbursements in 
calendar years 1994-96. (A-06-97-00052) 
71
 Appendix B 
Various Operating Divisions 
Medicare Rates for Indian Health Service  $8.2 
Contracted Health Services:  The IHS concurred with OIGs 
The Indian Health Service (IHS) should revise its  recommendations. However, the proposal 
legislative proposal to incorporate OIGs updated  was not included in the Presidents 
savings figures and should identify elements to be  FY 2003 budget. 
included in the implementing regulations. Also, 
IHS should continue to pursue the most favorable 
rates at hospitals that have previously offered less 
than Medicare rates and should strategically 
identify and pursue other opportunities where lower 
rates may be negotiated. (A-15-97-50001) 
Recharge Center Costs:  $1 
The Assistant Secretary for Administration and  The department concurred and is working 
Management should propose changes to OMB  with OMB on a revision to A-21. The 
Circular A-21 to improve guidance on the financial  proposed revision, which was published in 
management of recharge centers. The revision  the Federal Register in August 2002, would 
should include criteria for establishing, monitoring,  require that adjustments to a recharge 
and adjusting billing rates to eliminate accumulated  centers billing rate take into account 
surpluses and deficits; preventing the use of recharge  overrecoveries and /or underrecoveries from 
funds for unrelated purposes and excluding unal previous periods. Rate adjustments would 
lowable costs from the calculation of recharge rates;  be required at least every 2 years. The final 
ensuring that federal projects are billed equitably;  rule is expected to be issued in FY 2003. 
and excluding recharge costs from the 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 represents 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 may be found in OIGs Orange Book which can be accessed on the 
Internet at http://oig.hhs.gov. 
OIG Recommendation  Status 
Centers for Medicare and Medicaid Services 
Accountability Over Billing and Collection of 
Medicaid Drug Rebates:  The CMS concurred with the recommendation. States 
The CMS should ensure that states implement  will now be required to maintain detailed supporting 
accounting and internal control systems in accordance  records of all rebate amounts invoiced to drug companies 
with applicable federal regulations for the Medicaid  using a formal accounts receivable system. The CMS 
drug rebate program. Such systems must provide for  issued a notice of proposed rulemaking in FY 1996. 
accurate, current, and complete disclosure of drug 
rebate transactions and provide CMS with the financial 
information it needs to effectively monitor and manage 
the Medicaid drug rebate program. 
(A-06-92-00029) 
Fairly Presenting the Medicare Accounts 
Receivable Balance:  The CMS hired consultants to assist in validating the 
The CMS should require Medicare contractors to  FY 1999 accounts receivable activity and balance, as 
implement or improve internal controls and systems to  well as the activity for the first 6 months of FY 2000. 
ensure that reported accounts receivable are valid and  The Presidents FY 2001 budget included funding to 
documented.  establish financial management controls at the con-
(A-17-95-00096; A-17-97-00097; A-17-98-00098;  tractors and to hire contractor staff to implement the 
A-17-00-00500; A-17-00-02001)  controls. For the long term, CMS is developing an 
integrated general ledger system as the cornerstone of 
its financial management controls. 
Safeguards Over Medicaid Managed Care 
Programs:  Although CMS initially concurred with some specific 
The CMS should consider safeguards available to  recommendations, the agency believes that section 
reduce the risk of insolvency and to ensure consistent  4706 of the BBA of 1997 sets forth congressional 
and uniform state oversight.  expectations on this issue in specifically requiring 
(A-03-93-00200)  managed care organizations to meet the solvency 
standards established by the state for private health 
maintenance organizations. 
Guidance to Drug Manufacturers to Better 
Implement the Medicaid Drug Rebate Program:  The CMS did not concur, stating that the drug law 
The CMS should survey manufacturers to identify the  and the rebate agreements already established a 
various calculation methods used to determine average  methodology for computing AMP. The OIG disagreed 
manufacturer price (AMP). The CMS should also  because the rebate law and agreement defined AMP 
develop a more specific policy for calculating AMP  but did not provide specific written methodology for 
continued  computing AMP. 
73
 Appendix C 
Guidance to Drug Manufacturers to Better 
Implement the Medicaid Drug Rebate Program 
(continued): 
which would protect the interests of the government 
and which would be equitable to the manufacturers. 
(A-06-91-00092) 
Ensure Accuracy of Carrier Payment Data: 
The CMS should conduct a review of carriers claims  The 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 with 
payment entered on claims sent to the Common  data at the carrier level. In addition, CMS has 
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 schedule date of payment is not an accurate 
reflection of the actual claim payment date. The 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) 
Prevent Duplicate Payments for the Same Service 
by Multiple Carriers:  The CMS concurred with OIGs recommendations and 
The CMS should revise CWF edits to detect and deny  will re-examine existing criteria regarding duplicate 
duplicate billings to individual carriers or to more than  editing in the CWF system to determine the cost 
one carrier, or increase post-payment reviews if such  effectiveness of including the carrier number in the 
edits are determined not to be cost effective.  match criteria. The CMS entered a contract to study 
(OEI-03-00-00090; OEI-03-00-00091)  duplicate billing. 
Prevent Inappropriate Payments for Blood Glucose 
Test Strips:  The CMS concurred with the recommendations and 
The CMS should alert suppliers of the importance of  noted a number of initiatives that have reduced the 
properly completed documentation to support their  incidence of improper payments in recent years. 
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) 
Educate Beneficiaries on Reducing Financial 
Liability for DME:  The CMS concurred with OIGs recommendations and 
The CMS should educate beneficiaries on ways to  has undertaken a number of efforts to increase 
reduce financial liability for medical equipment and  beneficiary education and awareness about the 
supplies and re-evaluate Medicare fee schedules for  consequences of assigned and non-assigned claims. 
ostomy supplies. 
(OEI-07-99-00510) 
74
 Appendix C 
Improve Resident Assessment Instruments: 
The CMS should more clearly define minimum data set  The CMS generally concurred with OIGs 
(MDS) elements and work with states to train nursing  recommendations for improved data definitions and 
home staff. The OIG also recommend that CMS  training, but did not concur with the recommendation 
establish an audit trail to validate the 108 MDS  to establish an audit trail. 
elements that affect facility reimbursement by 
Medicare. 
(OEI-02-99-00040; OEI-02-99-0041) 
Improve Assessments of Mental Illness: 
The OIG recommended that CMS work with states to  The CMS concurred with most of OIGs 
improve the assessment of persons with serious mental  recommendations and has made revisions to its training 
illness and use survey and certification to monitor  curriculum for nursing home surveyors. 
compliance. The 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) 
Identify Nursing Home Residents with Serious 
Mental Illness:  Except for reporting MDS records by primary, 
The CMS should improve the quality and usefulness of  secondary, and tertiary diagnoses, CMS concurred with 
these data sources by requiring the use of a unique  most of OIGs recommendations. The CMS does not 
provider number across systems, requiring reporting of  feel that adding space to the MDS to record diagnoses 
resident data by age and diagnosis, and encouraging  would solve the problem. 
states to use these data in demonstrating their progress 
in placing disabled persons in the most integrated 
settings. The OIG also recommends training to 
improve data collection and accurate coding. 
(OEI-05-99-00701) 
Eliminate Inappropriate Payments for Mental 
Health Services:  The CMS generally concurred with the 
The CMS should promote provider awareness of  recommendations and plans to explore a variety of 
documentation and medical necessity requirements,  educational efforts and will refer the reports to the 
develop a comprehensive list of psychological testing  carrier clinical workgroup on psychiatric services. 
tools that can be correctly billed, target problematic  Carriers will conduct data analysis of psychological 
services for pre-payment edits or post-payment medical  testing and psychotherapy claims and will conduct 
review, and encourage carriers to take advantage of the  medical review, if indicated. 
MDS, especially for its assessment of patient cognitive 
level. 
(OEI-03-99-00130; OEI-02-99-00140) 
Increase Organ Donation: 
The CMS should revise the Medicare conditions for  The CMS concurred with the recommendations and 
coverage for Organ Procurement Organizations  indicated it will explore ways in which additional data 
(OPOs) to make them more accountable for imple can be used to assess OPO effectiveness and hospital 
menting the new donation rule and require OPOs to  compliance with the donation rule. The HRSA also 
provide hospital-specific data on referrals and on organ  concurred with the recommendations. 
recovery. The HRSA should require that OPOs submit 
hospital-specific data on referrals and on organ 
recovery and support demonstration projects on how to 
effectively train and make use of designated 
requestors. (OEI-01-99-00020) 
75
 Appendix C 
Various Public Health Agencies 
Improve Oversight of Tissue Banking: 
The FDA should expedite publication of its regulatory  The Deputy Secretary concurred that FDA should 
agenda requiring registration of tissue banks, enhanced  expedite its planned rulemaking activities related to 
donor suitability screening and testing, and the use of  tissues, specifically the final rule to require registration 
good tissue practices. The FDA should set a realistic,  of tissue banks. The department also found 
yet aggressive, date by which it would complete an  considerable merit in OIGs recommendation for an 
initial inspection of all tissue banks. The FDA should  intensified inspection program directed towards entities 
determine the appropriate minimum cycle for tissue  that procure, process, and store human tissues. In 
bank inspections, and work with states and  congressional testimony, FDA said that all three of the 
professional associations to determine in what areas  proposed rules have been published, and one rule 
oversight activities could be coordinated.  (Establishment Registering and Listing) was finalized. 
(OEI-01-00-00441)  The FDA also worked to inspect all 36 identified, 
uninspected tissue banks. 
Improve Effectiveness of the FDAs Adverse Event 
Reporting System for Dietary Supplements:  The FDA agreed with the majority of OIGs 
The OIG recommends that FDA should: 1) facilitate  recommendations. The Center for Food Safety and 
greater detection of adverse events by requiring dietary  Applied Nutrition (CFSAN) indicated that it has 
supplement manufacturers to report serious events to  embarked on significant efforts to enhance its adverse 
FDA for some products; 2) obtain more information on  event reporting system through development of a new 
adverse event reports by requiring manufacturers to  system called the CFSAN Adverse Event Reporting 
register themselves and their products with FDA;  System. 
3) notify manufacturers when FDA receives a serious 
adverse event report and develop a new computer 
database to track and analyze adverse event reports; 
4) expedite the development and implementation of 
good manufacturing practices for dietary supplement 
manufacturers; and 5) disclose more useful information 
to the public about dietary supplement adverse events. 
(OEI-01-00-00180) 
Improve Protection for Research Subjects in 
Foreign Clinical Trials:  The FDA supported OIGs recommendations, but 
The FDA should examine ways to obtain more  noted that in most cases it did not have the resources to 
information about the performance of non-U.S.  implement the recommendations. The OHRP concurs 
Institutional Review Boards (IRBs) and help those  with the recommendations and emphasized that its new 
inexperienced IRBs build their capacities; encourage  Office of International Activities will serve as a focal 
all non-U.S. investigators participating in research to  point and coordinating center for the departments 
sign attestations upholding human subject protections;  efforts to improve human subject protection. 
and develop a database to track the growth and location 
of foreign research. The OHRP should exert 
leadership in developing strategies to ensure adequate 
human subject protections for non-U.S. clinical trials 
funded by the Federal Government and those that 
contribute data to new drug applications. 
(OEI-01-00-00190) 
76
 Appendix C 
Improve Managed Care Organizations Reporting to 
the National Practitioner Data Bank:  The HRSA awarded a contract to Pricewaterhouse-
The Agency for Health Care Research and Quality  Coopers to look at the feasibility study for assessing 
should devote attention to the kind of educational and  compliance with the NPDB reporting requirements. 
remedial efforts that could be directed to practitioners  The feasibility study addresses both hospital and 
who have been experiencing performance problems.  managed care organizations reporting. 
The HRSA should conduct an outreach program to 
inform managed care organizations of their reporting 
responsibilities, and CMS should examine its 
practitioner monitoring systems. 
(OEI-01-99-00690) 
Administration for Children and Families 
Improve the Establishment of Child Support 
Orders for Low-Income Noncustodial Parents:  The ACF is helping 10 states test approaches to 
The ACFs Office of Child Support Enforcement  serving young, never-married fathers who may have 
should work with states to emphasize parental  obstacles to employment and who do not have a child 
responsibility and improve the ability of low-income  support order. The ACF has granted a contract to 
noncustodial parents to meet their obligations. The  determine how computerized income data can be used 
ACF should facilitate and support state experiments to  by local child support offices to independently verify 
test the payment effects of using various periods of  the income of noncustodial parents and be used in the 
retroactivity in determining the amount of support  establishment or modification of child support orders 
owed; facilitate and support state experiences to test  where income documentation or verification is lacking 
negotiating child support debt owed to the states in  or incomplete. 
exchange for improved payment compliance. 
(OEI-05-99-00391) 
General Oversight 
Cost Principles for Federally Sponsored Research 
Activities:  The department intends to update its regulations to be 
The department should modernize and strengthen cost  consistent with changes in OMB cost principles found 
principles applicable to hospitals by either revising  in A-21, A-87, and A-122, as appropriate. Upon final 
existing guidelines to conform with Office of  issuance of the revised OMB cost principles, the 
Management and Budget (OMB) Circular A-21 or  department will propose appropriate changes in a 
working with OMB to extend Circular A-21 coverage  notice of proposed rulemaking. 
to all hospitals. 
(A-01-92-01528) 
77
 78
 Appendix D

Notes to Tables 1 and 2

Notes to Table 1 
1. The opening balance was adjusted upward $52 million. 
2. During the period, revisions to previously reported management decisions included: 
CIN: A-06-97-00055  Review of Medicaid Payments Made For Dual Eligible Beneficiary:

Based on additional documentation, additional funds were recovered. The Cost Question amended 

amount is $118,490.

CIN: A-06-00-62271  New Mexico Human Services Department:

Based on additional work with external auditors, additional funds will be recovered. The Cost 

Question amended amount is $20,053. 

3. Included are management decisions to disallow $19.7 million that was identified in nonfederal audit reports. 
4. During this reporting period DCAA did not issue reports with monetary recommendations. 
5. A.  Due to administrative delays, many of which are beyond management control, resolution of the following 
345 audits were not completed within 6 months of issuance; however, based upon discussions with 
management, resolution is expected before the end of the next semiannual reporting period: 
CIN: A-04-00-02171  REV. AL MEDICAID INTERGOTAL TRANSFERS-HOSP. 
ENHANC, MAY 2001, $236,983,528 
CIN: A-06-00-00041  INCORRECTLY REPORTED PPS TRANSFERS-CMS/OIG 
PROJECT, NOVEMBER 2001, $163,900,000 
CIN: A-06-00-00056  MEDICAID DRUGS-REVIEW OF REPACKAGED DRUGS EX 
FROM, MARCH 2001, $108,000,000 
CIN: A-04-99-05561  AUDIT ADMIN COST PROPOSALS FY95-98, BCBSFL, JAX, 
JULY 2002, $101,671,328 
CIN: A-04-00-01220  IMPLE. MEDICARES POSTACUTE CARE TRANSFER POLICY, 
OCTOBER 2001, $52,311,082 
CIN: A-04-98-00123  REVIEW FOSTER CARE PAYMENTS-CHILD CARE IN NC, 
APRIL 2001, $48,183,445 
CIN: A-01-00-00538  NATIONAL IDENTIFICATION OF SNF CONSOLIDATED BILLNG, 
JUNE 2001, $47,633,686 
CIN: A-07-01-02086  CARMICHAEL CPA REPORT- GALIC MEDICARE ADMIN COSTS, 
APRIL 2002, $42,481,466 
CIN: A-07-01-02093  MISSOURI DSH - UNALLOWABLE COSTS, AUGUST 2002, 
$36,200,000 
CIN: A-01-00-00509  M/C PART B PMTS FOR DME PROVIDED TO SNF PATIENTS, 
JULY 2001, $35,000,000 
CIN: A-04-00-65030  STATE OF SOUTH CAROLINA, JULY 2000, $31,755,510 
CIN: A-07-01-00125  TRANSAMERICA (TOLIC) - PENSION SEGMENT CLOSING AUDIT, 
MAY 2002, $20,227,001 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE 
HOSPITAL PAYMENTS FOR FY 1998, SEPTEMBER 2002, $19,446,435 
CIN: A-07-99-01279  OUTPATIENT PSYCH, JANUARY 2001, $18,515,190 
79
 Appendix D 
CIN: A-06-00-00051  AUDIT OF MEDICARE REHAB AGENCY COSTS IN TX, RHS, I, 
JUNE 2001, $18,394,465 
CIN: A-05-01-00101  OHIO - TITLE IV-A AFDC OVERPAYMENTS, JUNE 2002, $17,184,240 
CIN: A-05-01-00052  DME REVIEW IN INDIANA, OCTOBER 2001, $16,377,560 
(Related Table II recommendation of $4,400,000 is also outstanding.) 
CIN: A-05-94-00064  MI BLUE CROSS/BLUE SHIELD, AUDIT OF ADMIN COSTS, 
JUNE 1996, $15,609,718 
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-07-96-01176  MEDICARE EXCESS PENSION ASSETS - BC MICH, 
NOVEMBER 1996, $11,904,263 
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-05-00-00045  OIG PARTNERSHIP: STATE AUDITOR REPORT ON MEDICAID, 
MAY 2000, $8,500,000 
CIN: A-09-01-00085  AUDIT OF UCSDMC DISPROPORTIONATE SHARE HOSPITAL 
PAYMENTS FOR SFYE 1998, SEPTEMBER 2002, $7,999,212 
CIN: A-09-97-44262  STATE OF CALIFORNIA, APRIL 1997, $7,300,000 
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM -- NATIONAL, MARCH 1993, 
$6,529,545 (Related Table II recommendation of $10,161,742 is also outstanding.) 
CIN: A-03-99-00052  ALLEGHENY/CHESAPEAKE ORF, SEPTEMBER 2001, $5,540,344 
(Related Table II recommendation of $467,646 is also outstanding. ) 
CIN: A-04-00-02161  MEDICAID SCHOOL-BASED SERVICES IN NORTH CAROLINA, 
NOVEMBER 2001, $5,344,160 

CIN: A-07-99-02537  BLUE CROSS & BLUE SHIELD OF MASSACHUSETTS,

NOVEMBER 1999, $5,270,461

CIN: A-05-96-00058  CLOSE-OUT AUDIT OF MEDICARE CONTRACT-BCBS-MI, 
DECEMBER 1997, $5,226,443 
CIN: A-01-00-00506  DIAGNOSIS-RELATED GROUP PAYMENT WINDOW, JULY 2001, $5,042,207 
CIN: A-01-97-00516  ADMIN. COSTS-PART A&B, RAILROAD RETIRE BOARD, JUNE 1999, 
$4,939,184 
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 
CIN: A-07-96-02001  MEDICARE PART B ADMIN COSTS AT BC/BS COLORADO, 
DECEMBER 1996, $4,483,104 
CIN: A-07-98-01263  DENVER CMHC, MAY 2000, $4,447,607 
CIN: A-07-00-00108  RURAL HEALTH CENTER REVIEW, OCTOBER 2001, $4,088,929 
CIN: A-05-01-00068  PARTNERSHIP PLAN - ILLINOIS PHYSICIAN BILLING-FAMILY 
DYNAMICS, JULY 2002, $3,790,846 
CIN: A-04-01-05002  AUDIT MEDICAID PAYMENTS FOR CLINICAL LABORATORIES, 
JANUARY 2002, $3,522,639 
CIN: A-07-00-00109  MEDICARE CONTRACT TERM. & SEG. CLOSING- GALIC, 
SEPTEMBER 2000, $3,505,560 
CIN: A-03-00-00002  TRIGON PT-A AND TERMINATION, SEPTEMBER 2001, $3,464,705 
CIN: A-02-95-01019  STAFF BUILDERS HOME OFFICE MEDICARE COST REV. ORT, 
AUGUST 1998, $3,434,274 
CIN: A-05-93-00054  IL-ASSOCIATED INSURANCE GROUP-CONTRACT AUDIT, 
OCTOBER 1993, $3,355,560 
80
 Appendix D 
CIN: A-07-99-01283  HMO - AFTER DEATH PAYMENTS, FEBRUARY 2000, $3,250,000 
CIN: A-07-99-01298	 DATE OF DEATH - 2, MAY 2001, $3,200,000 (Related Table II recommendation of 
$700,000 is also outstanding.) 
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 SERVICES IN TX, 
JANUARY 2001, $3,097,201 
CIN: A-07-02-03007	 COSTS CLAIMED FOR POST RETIREMENT BENEFITS BY TOLIC, 
MAY 2002, $3,060,873 
CIN: A-05-93-00013	 MI-BLUE CROSS/BLUE SHIELD-CONTRACT MEDICARE AUDIT, 
APRIL 1993, $3,010,916 
CIN: A-09-98-50183  STATE OF CALIFORNIA, MARCH 1998, $3,000,000 
CIN: A-07-01-00132	 INDEPENDENCE BLUE CROSS -PENSION SEGMENT CLOSING 
AUDIT, FEBRUARY 2002, $2,913,129 
CIN: A-01-96-00508	 MEDICARE ADMIN COSTS PARTS A&B AND RRB - TRAVELERS, 
MARCH 1996, $2,803,260 
CIN: A-05-97-00005	 ADMINISTRATIVE COSTS CLAIMED UNDER MEDICARE A & B, 
FEBRUARY 1998, $2,569,067 
CIN: A-07-92-00579	 BC/BS OF MICHIGAN INC -UNFUNDED PENSION COSTS, 
OCTOBER 1992, $2,535,698 
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-02-91-01006	 BLUE SHIELD OF WESTERN NY MEDICARE ADM CTS PORTER, 
SEPTEMBER 1991, $2,379,239 
CIN: A-04-00-01209	 OUTPATIENT PSYCHIATRIC SERVICES AT HOLLYWOOD PAV.HOSP, 
APRIL 2001, $2,366,287 
CIN: A-03-99-00038	 EDGEWATER PSYC HOSPITAL, MARCH 2001, $2,348,604 
(Related Table II recommendation of $208,731 is also outstanding.) 
CIN: A-04-97-01166	 REV. HOME HEALTH SERVICES BY STAFF BUILDERS HOME HEALTH, 
APRIL 1999, $2,300,000 
CIN: A-07-97-01247  DUPLICATE PAYMENTS - HMO/FFS, OCTOBER 1999, $2,300,000 
CIN: A-04-97-01170	 REVIEW HOME HEALTH SERVICES BY MEDICARE HOME HEALTH SERVICES, 
APRIL 1999, $2,200,000 
CIN: A-09-01-00056	 PACIFICARE-CALIFORNIA JAN 1998 INSTITUTIONAL PMTS, 
SEPTEMBER 2001, $2,158,577 
CIN: A-07-01-68554  STATE OF NEBRASKA, JUNE 2001, $2,113,388 
CIN: A-04-00-02162	 REVIEW TREATMENT OF QUALIFIED DISCHRGS @ FCSO, 
FEBRUARY 2001, $2,042,060 
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-03-00-00003  XACT PT-B ADMIN COSTS, APRIL 2002, $1,922,950 
CIN: A-04-97-01169	 REVIEW HOME HEALTH SERVICES BY MEDTECH HOME HEALTH SERVICES 
APRIL 1999, $1,900,000 
CIN: A-06-96-00009	 NEW MEXICO BC/BS ADMIN COST - CONTRACTED, 
NOVEMBER 1997, $1,879,366 
CIN: A-01-02-72211  STATE OF CONNECTICUT, JUNE 2002, $1,860,148 
CIN: A-05-01-00105	 REVIEW OF MEDICAID DME CLAIMS - PENNSYLVANIA, 
SEPTEMBER 2002, $1,813,649 
CIN: A-05-97-00014	 GROUP HEALTH PLAN INC.(HEALTHPARTNERS) INST. BENES, 
JUNE 1998, $1,808,308 
81
 Appendix D 
CIN: A-05-95-00059  AUDIT OF ADMINISTRATIVE COSTS --BC/BS MICHIGAN, 
JANUARY 1997, $1,787,345 
CIN: A-03-00-00007  REVIEW OF 1-DAY DISCHARGES--PA., APRIL 2001, $1,649,411 
(Related Table II recommendation of $6,300,000 is also outstanding.) 
CIN: A-04-97-02143  REVIEW THERAPY SERVICES IN LIFE CARE SNFS IN TN, 
DECEMBER 1999, $1,638,025 
CIN: A-02-97-01039  MEDASSIST - ORT ORTHOTICS PROVIDER TARGET, NOVEMBER 1999, 
$1,616,222 
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  BC/BSM PT-B NON-RENEWAL COSTS, AUGUST 1998, $1,557,459 
CIN: A-05-93-00057  MI-BLUE CROSS & BLUE SHIELD OF MI-CONTRACT AUDIT, JULY 1993, 
$1,409,954 
CIN: A-09-96-00064  ORT - HOSPICE - CALIFORNIA, MARCH 1997, $1,350,000 
CIN: A-10-91-00011  WPS - KEYSTONE COMPUTER ACQUISITION, OCTOBER 1992, $1,346,681 
CIN: A-09-02-00057  REVIEW OF MEDICARE BAD DEBTS AT THE UNIV. OF CA SAN 
FRANCISCO, JULY 2002, $1,338,058 
CIN: A-05-95-00042  BC/BSA ADMINISTRATIVE COSTS - CONTRACTED AUDIT, 
DECEMBER 1995, $1,333,598 
CIN: A-07-01-02089  MISSOURI DSH DUPLICATE COSTS AND ACCOUNTING ERRORS, 
MAY 2002, $1,300,000 
CIN: A-05-01-00064  REVIEW OF OUTPATIENT REHABILITATION CLAIMS REIMBURSED BY 
MEDICARE DURING CALENDAR YEAR 1999, FEBRUARY 2002, $1,235,892 
CIN: A-04-02-72903  STATE OF TENNESSEE, SEPTEMBER 2002, $1,213,353 
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-05-98-00050  FOLLOW-UP MEDICAID CLINICAL LABORATORIES, JULY 1999, $1,097,036 
CIN: A-06-01-00044  AUDIT OF ADMINISTRATIVE COSTS PART A & PART B - TRAILBLAZER 
BC/BS, APRIL 2002, $1,091,848 
CIN: A-02-94-01029  HOSPICE ELIGIBILITY RVW IN PR - SAN GERMAN - ORT, JUNE 1995, 
$1,070,814 
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-04-99-01199  REV. PSYCHIATRIC OUTPATIENT SRVCS-CORAL GABLES HOSPITAL, 
APRIL 2001, $1,031,497 
CIN: A-01-98-00500  PAYMENT EDITS FOR PSYCHIATRIC AT MA PART B CARRIER, 
SEPTEMBER 1998, $1,000,000 
CIN: A-09-94-01010  CLOSEOUT AUDIT  CONT NO. N01-ES-75196 (STRATAGENE), MARCH 1994, 
$983,208 
CIN: A-04-00-01210  REVIEW TREATMENT-QUALIFIED DISCHRGS-BC/BSGA, DECEMBER 2000, 
$891,000 
CIN: A-05-92-00060  CONTRACTOR AUDIT - BCBS - ADMIN, FEBRUARY 1993, $879,609 
CIN: A-02-97-01034  DR. PILA FOUNDATION HOME CARE PRORAM (PONCE), SEPTEMBER 1999, 
$857,208 
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-06-99-00013  MEDICARE PART A ADMIN NM BLUE CROSS BLUE SHIELD, 
DECEMBER 1999, $817,487 
82
 Appendix D 
CIN: A-02-98-01040  NIAGARA CTY DEPT. OF HLTH-#337001-HHS ELIG REVIEW, 
DECEMBER 1999, $807,679 
CIN: A-09-01-00094  PACIFICARE CORPORATE JANUARY 1998 MEDICARE INSTITUTIONAL 
STATUS, FEBRUARY 2002, $786,003 
CIN: A-05-01-00073  REVIEW OF ADMINISTRATION OF RYAN WHITE (AIDS) FUNDS - INDIANA, 
MAY 2002, $784,499 
CIN: A-07-99-00981  ASSIST REVIEW OF MEDICARE A/R HCFA RO DENVER, JANUARY 2000, 
$754,926 
CIN: A-06-01-00027  REVIEW PALMETTOS HH-PPS RAP POLICIES & PROCEDURES, 
SEPTEMBER 2001, $743,917 
CIN: A-09-00-00103  PACIFICARE HMO - MEDICARE DUAL ELIGIBLES, MAY 2001, $720,858 
CIN: A-05-91-00136  COMMUNITY MUTUAL INS CO. ADMIN COSTS, AUGUST 1992, $720,668 
CIN: A-03-02-72100  EAST COAST MIGRANT HEAD START PROJECT , JUNE 2002, $701,523 
CIN: A-09-97-00078  PHYSICIAN BILLINGS DR. SPENCER, JANUARY 1999, $683,264 
CIN: A-02-01-01007  REVIEW OF ADMINISTRATIVE COST AT COOPERATIVA (CARMICHAEL & CO, 
CPA), MAY 2002, $679,487 
CIN: A-06-01-00090  PREAWARD-APASS MAINTAINER DATA PROCESSING SERVICES - ABC/BS, 
SEPTEMBER 2001, $678,651 
CIN: A-01-02-73084  STATE OF MAINE, SEPTEMBER 2002, $677,855 (Related Table II 
recommendation of $149,082 is also outstanding.) 
CIN: A-05-00-64226  ILLINOIS DEPT. OF PUBLIC AID, MAY 2000, $654,017 
CIN: A-01-98-00503  PSYCHIATRIC OUTPT SERVICES AT THE FRANKLIN MED CENTER, 
NOVEMBER 1998, $646,517 
CIN: A-02-02-69503  PUERTO RICO DEPT. OF THE FAMILY, SEPTEMBER 2002, $629,136 
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-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 BC/BSSC, JULY 1994, 
$594,092 
CIN: A-04-93-01069  MONITORING ADMIN COST AUDIT MCARE PART A BC/BSSC, JULY 1994, 
$590,844 
CIN: A-04-01-01007  ABC/BS MEDICARE PART A ADMINISTRATIVE COST AUDIT, 
NOVEMBER 2001, $575,471 
CIN: A-09-00-00067  COLLEGE HOSPITAL - O/P PSYCH SVCS, APRIL 2001, $567,888 
CIN: A-01-02-70271  STATE OF MAINE, DECEMBER 2001, $561,697 
CIN: A-09-01-00055  REVIEW OF IMD CLAIMS - STATE OF CALIFORNIA, MARCH 2002, $551,394 
CIN: A-05-02-72811  COMMUNITY ACTION OF GREATER INDIANAPOLIS INC., AUGUST 2002, 
$547,899 
CIN: A-10-01-00011	 REVIEW OF WASHINGTON MEDICAID SCHOOL BASED HEALTH 
SERVICES - REIMBURSEMENT OF ADMINISTRATION CLAIMS, MAY 2002, 
$527,102 
CIN: A-01-01-00542	 REVIEW OF CLAIMS FOR ANESTHESIA, PHARMACY, AND SUPPLY SERVICES 
USED INCIDENT TO OTHER OUTPATIENT DIAGNOSTIC SERVICES 
PROCESSED BY ASSOCIATED HOSPITAL SERVICE, JUNE 2002, $518,981 
CIN: A-05-00-00011  LIBERTYVILLE MANOR SNF - THERAPY SERVICES, SEPTEMBER 2001, 
$506,937 
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-05-02-72298  STATE OF WISCONSIN, AUGUST 2002, $491,120 
83
 Appendix D 
CIN: A-07-01-03004  TRIGON BC/BS - PENSION SEGMENT CLOSING AUDIT, JULY 2002, $487,254 
CIN: A-05-01-67384  MICHIGAN DEPT. OF COMMUNITY HEALTH, FEBRUARY 2001, $481,693 
CIN: A-04-98-01192  REVIEW AMERICAS BEHAV. HEALTH CARES PART.HOSPITALIZ, 
DECEMBER 1999, $452,928 
CIN: A-07-01-00120  REVIEW OF UNFUNDED PENSION COCST AT BCBS OF OK, JULY 2001, 
$413,800 
CIN: A-05-97-00013  PACIFICARE OF CA-HMO INSTITUTIONAL STATUS PROJECT, APRIL 1998, 
$407,784 
CIN: A-02-01-67912  STATE OF NEW YORK , MARCH 2001, $389,622 (Related Table II 
recommendation of $19,000,000 is also outstanding.) 
CIN: A-05-00-00030  CONTRACTED AUDIT-NATIONWIDE INS.-MEDICARE ADMIN., 
OCTOBER 2000, $385,081 
CIN: A-04-00-01208  OUTPATIENT CLINIC COSTS, CORAL GABLES HOSPITAL, FL, 
FEBRUARY 2001, $384,295 
CIN: A-06-01-00087  AUDIT OF OBSERVATION SERVICE BILLING BY PRESBYTERIAN 
HOSPITAL OF DALLAS, JUNE 2002, $361,832 
CIN: A-05-02-70413  SOKAOGON CHIPPEWA COMMUNITY MOLE LAKE BAND, JUNE 2002, $345,125 
CIN: A-01-99-00518  PSYCHIATRIC OUTPATIENT SVCS AT DANBURY HOSPITAL, MAY 2000, 
$342,168 
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-06-01-00028  AUDIT OF OBSERVATION SERVICE BILLINGS BY PPS HOSPITALS, 
FEBRUARY 2002, $298,549 
CIN: A-05-96-00069	 CPA AUDIT OF HOOPER HOLMES HHA G&A -OI CASE OPEN, 
FEBRUARY 1998, $280,515 (Related Table II recommendation of $17,555 is also 
outstanding.) 
CIN: A-06-97-00015  NEW MEXICO PRO CLOSE OUT AUDIT, SEPTEMBER 1999, $268,844 

CIN: A-09-94-30178  STATE OF ARIZONA, JUNE 1994, $267,021

CIN: A-09-00-00089  COMMUNITY URGENT CARE MEDICAL GROUP, NOVEMBER 2001, $266,236

CIN: A-03-98-00027  KHPW/INSTITUTIONAL STATUS/MEDICARE, NOVEMBER 1998, $263,573 

CIN: A-04-02-00010  AUDIT OF EWCDCS OFFICE OF COMMUNITY SERVICES DISCRETIONARY

GRANT, AUGUST 2002, $250,000 
CIN: A-03-01-00010  CAREFIRST OF MD - PT-A ADMIN - FYS 1996-1999, FEBRUARY 2002, $225,302 
CIN: A-04-00-01222  CAPITAL HEALTH 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 
CIN: A-05-99-00067  PART B ADMINISTRATIVE COSTS, NOVEMBER 2000, $221,644 
CIN: A-01-01-00523  REVIEW OF OUTPATIENT PHARMACY SERVICES AT NOBLE 
HOSPITAL, NOVEMBER 2001, $216,797 
CIN: A-02-01-65217  PUERTO RICO DEPT. OF THE FAMILY, DECEMBER 2000, $213,264 
CIN: A-05-96-00052  ORT ASSIST-ANCILLARY COSTS-NW COM. HOSP., JUNE 1997, 
$206,508 
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 
84
 Appendix D 
CIN: A-04-01-00002	 TITLE IV-E FOSTER CARE PMTS-CHILD CARE CLAIMS-NC-2, 
NOVEMBER 2001, $186,282 
CIN: A-03-01-00555  PDPI INC. -- HEAD START, JUNE 2001, $185,577 
CIN: A-06-02-72614  STATE OF TEXAS, AUGUST 2002, $183,400 
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-02-00-01020  BC/BS OF WESTERN NY (CARMICHAEL & CO., CPA, APRIL 2001, $171,631 
CIN: A-04-01-07004	 OI ASSIST: SELF DISCLOSURE AUDIT OF HEALTHPRIME, INC., APRIL 2002, 
$169,401 
CIN: A-10-01-00006	 REVIEW OF OREGON MEDICAID SCHOOL BASED HEALTH SERVICES -
REIMBURSEMENT OF DIRECT SERVICES, AUGUST 2002, $166,671 
CIN: A-03-98-00034  FREESTATE HP/INSTITUTIONAL STATUS/MEDICARE, MARCH 1999, $156,987 
CIN: A-09-01-00084  VISTA DEL MAR NEPHROLOGY GROUP, NOVEMBER 2001, $151,566 
CIN: A-05-00-00031	 CONTRACTED AUDIT OF UGS--MEDICARE ADMIN. COSTS, 
NOVEMBER 2000, $138,182 
CIN: A-09-99-52846  INTER-TRIBAL COUNCIL OF CALIFORNIA INC., FEBRUARY 1999, $136,360 
CIN: A-03-01-00219	 NATIONAL ASSOCIATION OF PROTECTION & ADVOCACY -NAPAS, 
SEPTEMBER 2001, $136,181 
CIN: A-02-98-01002	 PRO CLOSEOUT AUDIT - CPA CONTRACT MONITORING, DECEMBER 1998, 
$135,492 
CIN: A-02-00-01019  HORIZON BC/BS (LEON SNEAD & CO., CPA, SEPTEMBER 2001, $134,584 
CIN: A-05-00-00060	 MEDICA FOLLOW-UP, REIMB. RATES FOR INSTITUTIONALIZED 
BENEFICIARIES, JUNE 2001, $133,795 
CIN: A-06-00-00014	 REV OF INFUSION THERAPY CLAIMS @ DOCTORS HEALTHCARE, 
JUNE 2000, $132,238 
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-02-02-71384  STATE OF NEW YORK, MARCH 2002, $118,773 
CIN: A-05-97-00023	 KAISER FOUNDATION-HMO INSTITUTIONAL STATUS PROJECT, 
APRIL 1998, $116,096 
CIN: A-02-96-02001	 INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM, 
JANUARY 1998, $114,631 (Related Table II recommendation of $90,528 is also 
outstanding.) 
CIN: A-03-99-00003	 AETNA-US HEALTHCARE/INSTITUTIONAL STATUS/MEDICARE, 
JULY 1999, $113,993 
CIN: A-09-02-71247  WATTSHEALTH FOUNDATION INC., APRIL 2002, $113,000 
CIN: A-02-01-01006	 IMD-REVIEW OF AGE 21 - 64 IN NEW YORK'S PRIVATE PSYCH 
HOSPITALS, MAY 2002, $112,925 
CIN: A-03-01-00001  EASTERN SHORE AMBULANCE CO., AUGUST 2001, $110,417 
CIN: A-02-99-58263	 PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD, JULY 1999, 
$101,799 
CIN: A-09-01-00080	 NEPHROLOGY ASSOCIATES MEDICAL GROUP - RIVERSIDE, 
NOVEMBER 2001, $100,788 
CIN: A-05-01-00079	 PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL 
BENEFICIARIES, JUNE 2002, $100,692 
CIN: A-05-00-65775  STATE OF WISCONSIN, SEPTEMBER 2000, $98,586 
CIN: A-07-99-01287  WELLMARK ADMIN COSTS 98, NOVEMBER 1999, $95,990 
85
 Appendix D 
CIN: A-09-97-00066  WALTER MCDONALD - INDIRECT COST RATE AUDIT, MARCH 1998, $95,733 
CIN: A-09-01-00096	 AUDIT OF VERMONT SLAUSON ECONOMIC DEVELOPMENT CORP. GRANT 
AWARD NUMBER 90EE0153, DECEMBER 2001, $95,560 
CIN: A-09-98-00065	 CSBG DISC. GRANT #90EE004901 - LATINO RESOURCES, JANUARY 1999, 
$95,102 
CIN: A-01-99-00507	 NAT-WIDE REF OPNT PSYCH SVC AT ACUTE CARE HOSPITALS, 
MARCH 2000, $94,716 (Related Table II recommendation of $244,446,692 is also 
outstanding.) 
CIN: A-10-97-00003	 BCWAAK-ADM COSTS REMOTE NETWORK ACTIVITIES FYS 93&94, 
FEBRUARY 1998, $94,643 
CIN: A-04-02-02009	 MEDICAID IMDS - PRIVATE FACILITIES IN FLORIDA, SEPTEMBER 2002, 
$92,726 
CIN: A-06-02-72136  STATE OF LOUISIANA, JUNE 2002, $92,044 
CIN: A-07-95-01164	 MEDICARE ADMIN COSTS - GENERAL AMERICAN, DECEMBER 1995, $89,929 
(Related Table II recommendation of $16,632 is also outstanding.) 
CIN: A-06-00-00013	 REVIEW OF INFUSION THERAPY CLAIMS @ SPRING CREEK N, JUNE 2000, 
$89,288 
CIN: A-01-01-00503	 REVIEW OF O/P MEDICAL SUPPLIES AT MERCY HOSPITAL, JULY 2001, 
$88,904 
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	 BC/BS MEDICARE PART A ADMINISTRATIVE COST AUDIT, NOVEMBER 2001, 
$87,042 
CIN: A-04-02-72118  STATE OF NORTH CAROLINA, MAY 2002, $84,932 
CIN: A-05-01-00071	 PAYMENTS TO HUMANA-K.C. FOR INSTITUTIONAL BENEFICIARIES, 
DECEMBER 2001, $84,808 
CIN: A-02-01-01014  IMD - NEW YORK - MEDICAL AND ANCILLARY SERVICES, JULY 2002, $84,077 
CIN: A-02-01-01026	 FY 2001 MEDICARE ERROR RATE - EMPIRE - 3RD QUARTER, JULY 2002, 
$82,625 
CIN: A-03-02-00550  CENTRAL PIEDMONT ACTION COUNCIL - HEAD START, APRIL 2002, $79,777 
CIN: A-10-01-67562  KENAITZE INDIAN TRIBE, MARCH 2001, $79,533 
CIN: A-04-94-02080  FINALIZATION OF BCBSFL DATA MATCH, JUNE 1995, $79,316 
CIN: A-04-01-02003  REVIEW FLORIDA MEDICAID CLAIMS - IMDS, MARCH 2002, $78,880 
CIN: A-04-96-01137	 PARTIC. PART OF HCFA SURV.TEAM-DAYTONA NURSG-ORT, 
DECEMBER 1996, $76,130 
CIN: A-01-99-00530	 NATIONWIDE REV OF O/P PSYCH SVCS @ PSYCH HOSPITALS, 
DECEMBER 2000, $75,413 (Related Table II recommendation of $56,936,287 is also 
outstanding.) 
CIN: A-02-02-01016	 MEDICARE BAD DEBTS AT ST. LUKES-ROOSEVELT HOSPITAL CENTER, 
SEPTEMBER 2002, $74,412 
CIN: A-04-02-72213  STATE OF FLORIDA, JUNE 2002, $73,239 
CIN: A-01-00-00503	 REVIEW OF MEDICARE OUTLIER PAYMENTS-MASS GENERAL, 
DECEMBER 2000, $73,019 
CIN: A-04-01-02008	 ANCILLARY CLAIMS PAID FOR MEDICAID BENEFICIARIES WHILE IN IMDS, 
JULY 2002, $71,406 
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 
86
 Appendix D 
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-02-00-62534  CITY OF NEW YORK NEW YORK, JANUARY 2000, $58,309 
CIN: A-05-96-00051  ORT ASSIST-ANCILLARY COSTS-ST JOSEPH, JUNE 1997, $58,008 
CIN: A-09-97-00059  HEALTH SERVICES ADVISORY GROUP, INC PRO-AZ, MAY 1997, $57,925 
CIN: A-08-99-54138  ROSEBUD SIOUX TRIBE, NOVEMBER 1998, $56,223 
CIN: A-07-97-01206  PENSION - WASHINGTON/ALASKA - UNFUNDED, MARCH 1997, $4,000 
CIN: A-06-00-00053  OIG HCFA NEBULIZER PROJECT - NATIONAL ERROR RATE,OCTOBER 2001, 
$52,550 (Related Table II recommendation of $133,960,552 is also outstanding.) 
CIN: A-08-00-60687  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, NOVEMBER 1999, 
$52,536 
CIN: A-04-00-01223  REV. MGMT FEES - ONCOLOGY CLINIC-PKWY REG'L MCAL,OCTOBER 2001, 
$52,000 
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-02-02-70019  SENECA NATION OF INDIANS, DECEMBER 2001, $50,083 
CIN: A-09-95-00095  HEALTH SERVICES ADVISORY GROUP, INC (HSAG), 
DECEMBER 1995, $49,585 (Related Table II recommendation of $1,389,723 is also 
outstanding.) 
CIN: A-03-93-03306  SURVEY RESEARCH ASSOC. CACS NO1-ES-45067, DECEMBER 1993, $48,779 
CIN: A-07-02-73024  STATE OF MISSOURI, JULY 2002, $46,902 
CIN: A-07-00-00106  PENSION SEGMENTATION AUDIT AT BCBS OF OKLAHOMA, JULY 2001, 
$45,508 
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  REV. OF PEN. COSTS FOR MED. REIMB. FOR BC/BS OF OK, JULY 2001, $42,463 
CIN: A-01-02-71892  STATE OF VERMONT, APRIL 2002, $42,037 
CIN: A-03-99-00017  PSU-HERSHEY/PHY CREDIT BALANCES/MEDICARE, DECEMBER 1999, $41,712 
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-06-01-00026  JOINT FED/ST AUDIT OF MEDICAID CLINICAL LAB SRVCS IN OK, 
JULY 2002, $38,690 
CIN: A-05-02-72003  STATE OF OHIO, JULY 2002, $37,808 
CIN: A-07-98-53295  WINNEBAGO TRIBE OF NEBRASKA, SEPTEMBER 1998, $36,808 
CIN: A-10-00-63008  STATE OF IDAHO, MARCH 2000, $36,800 
CIN: A-08-00-65136  STATE OF SOUTH DAKOTA, JUNE 2000, $36,380 
CIN: A-03-00-00010  PS GEISINGER HMO/INSTITUTIONAL STATUS/MEDICARE, JANUARY 2001, 
$35,639 (Related recommendation of $306,269 outstanding on Table II.) 
CIN: A-06-02-70441  FIVE SANDOVAL INDIAN PUEBLOS INC., JUNE 2002, $35,441 
CIN: A-02-00-65502  ABYSSINIAN DEVELOPMENT CORP., AUGUST 2000, $34,737 
CIN: A-04-00-60897  STATE OF FLORIDA, MARCH 2000, $33,397 
CIN: A-09-01-00050  BALBOA NEPHROLOGY MEDICAL GROUP, APRIL 2001, $32,568 
CIN: A-03-99-00008  BLUE CROSS BLUE SHIELD OF DELAWARE - PART A, JANUARY 2000, $32,176 
CIN: A-07-97-01199  BC/BS NEW MEXICO UNFUNDED PENSION COST, FEBRUARY 1997, $31,372 
CIN: A-05-02-69155  STATE OF WISCONSIN, DECEMBER 2001, $30,900 
87
 Appendix D 
CIN: A-04-01-01005  REVIEW DUPLICATE MEDICARE FEE-FOR-SERVICE PAYMENTSAT CAPITAL 
HEALTH PLAN, NOVEMBER 2001, $30,293 
CIN: A-06-02-00018  GRADUATE MEDICAL EDUCATION COST AT METHODIST HOSPITAL 
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-03-98-03301  AAUAP -- INCURRED COST REVIEW -- HHS 105-95-7011, APRIL 1998, $28,289 
CIN: A-03-00-64076  NATIONAL MEDICAL ASSOCIATION, APRIL 2000, $27,106 
CIN: A-10-02-69837  NATIVE VILLAGE OF TYONEK , DECEMBER 2001, $26,848 
CIN: A-06-00-00020  REV OF INFUSION THERAPY CLAIMS @ VISTA CONTINUING, JUNE 2000, 
$25,008 
CIN: A-03-00-00004  GUTHRIE CLINIC/PHYSICIAN CREDIT BALANCES/MEDICARE, 
DECEMBER 1999, $23,759 
CIN: A-06-02-70732  UNITED STATES-MEXICO BORDER HEALTH ASSOCIATION, JANUARY 2002, 
$23,483 
CIN: A-06-02-71744  SENECA-CAYUGA TRIBE OF OKLAHOMA , MARCH 2002, $21,376 
CIN: A-04-00-01206  BC/BS NC - 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-05-02-72480  HANSEL NEIGHBORHOOD SERVICE CENTER INC., SEPTEMBER 2002, $20,266 
CIN: A-06-02-72610  STATE OF OKLAHOMA, AUGUST 2002, $19,992 
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-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-05-93-21928  WRIGHT STATE UNIV., JULY 1993, $18,308 
CIN: A-03-01-00018  WASHINGTON HOSPITAL CENTER GRADUATE MEDICAL EDUCATION 
COSTS, MAY 2002, $18,000 
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-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-01-02-70440  UNIV. OF MASSACHUSETTS , JANUARY 2002, $16,031 
CIN: A-10-00-59080  NORTON SOUND HEALTH CORP., DECEMBER 1999, $15,000 
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-08-01-67689  FORT BELKNAP INDIAN COMMUNITY, SEPTEMBER 2001, $14,340 
CIN: A-09-00-00104  PACIFICARE OF CALIFORNIA -INSTITUTIONAL STATUS, MARCH 2001, 
$14,278 
CIN: A-09-96-00050  CFO - HCFA 1996, NOVEMBER 1997, $13,924 
CIN: A-10-02-72976  STATE OF IDAHO, AUGUST 2002, $13,000 
CIN: A-03-98-50338  NATIONAL MEDICAL ASSOCIATION, FEBRUARY 1998, $12,968 
88
 Appendix D 
CIN: A-15-01-20002	 CONGRESS HEIGHTS TRAINING CENTER, INC. -- FINANCIAL AUDIT N OMH 
GRANT AWARD, SEPTEMBER 2001, $11,300 
CIN: A-05-01-00070	 PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL BENEFICIARIES, 
JANUARY 2002, $11,089 (Related Table II recommendation of $98,698 is also 
outstanding.) 
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-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-02-01-02003  FORDHAM UNIVERSITY - DISCRETIONARY GRANT REVIEW, MAY 2002,

$9,451 
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-07-97-01231  PROWEST-DOSHI WASHINGTON, JUNE 1997, $8,027 (Related Table II 
recommendation of $163,552 is also outstanding.) 
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-05-02-72464  ST. MARYS DULUTH CLINIC HEALTH SYSTEM, SEPTEMBER 2002, $7,412 
CIN: A-03-98-00045  TEMPLE UNIV/PHYSICIAN CREDIT BALANCES/MEDICARE, JULY 1999, $7,280 
CIN: A-01-97-49174  BRANDEIS UNIV., AUGUST 1997, $7,068 
CIN: A-07-95-01167  PENSION COSTS CLAIMED NEBRASKA BC/BS, JANUARY 1996, $6,075 
CIN: A-01-02-00502  REVIEW FO INTERNAL CONTROL PROCEDURES A RENEX DIALYSIS CLINICS 
OF NORTH ANDOVER AND AMESBURY FOR THE ADMINISTRATION OF 
EPOGEN FOR CALENDAR YEAR 1999, SEPTEMBER 2002, $6,016 
CIN: A-06-97-48062  SER-JOBS FOR PROGRESS NATIONAL INC., MAY 1997, $5,924 
CIN: A-01-02-72476  UNIV. OF MASSACHUSETTS, SEPTEMBER 2002, $5,012 
CIN: A-01-00-60299  INDIAN TOWNSHIP TRIBAL GOVERNMENT PASSAMAQUODDY 
TR, JANUARY 2000, $4,597 
CIN: A-04-01-68839  STATE OF FLORIDA, JUNE 2001, $4,169 
CIN: A-03-02-73128  MAGEE-WOMENS HEALTH CORP. & SUBSIDIARY, AUGUST 2002, $4,155 
CIN: A-04-97-01162  HMSA MEDICARE PRO CONTRACT AUDIT, SEPTEMBER 1997, $3,871 
CIN: A-01-01-00510  REASONABLENESS & RCVRY OF EPO AT FMC, AUGUST 2002, $3,585 
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 
CIN: A-02-01-01038  EMPIRE BLUE CROSS AND BLUE SHIELD - PARTS A & B (CONRAD & 
ASSOCIATES), FEBRUARY 2002, $3,250 
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-06-01-00086  DISCRETIONARY GRANT-HUCKLEBERRY HOUSE BASIC CENTER 
IN CA, JANUARY 2002, $2,783 
CIN: A-07-98-02502  CT. BC/BS PENSION COSTS CLAIMED, MARCH 1998, $2,725 
CIN: A-03-98-51505  ALLIED SIGNAL TECHNICAL SERVICES CORP., APRIL 1998, $2,722 
CIN: A-01-97-45487  ABT ASSOCIATES INC., JANUARY 1997, $2,596 
CIN: A-03-97-43996  ACTUARIAL RESEARCH CORP., OCTOBER 1996, $2,561 
89
 Appendix D 
CIN: A-09-01-00068  ROLLUP REPORT CALIFORNIA INPATIENT HEMODIALYSIS SERVICES, 
MARCH 2002, $1,858 
CIN: A-07-97-01232  PROWEST - DOSHI ALASKA, JUNE 1997, $1,473 (Related Table II 
recommendation of $21,218 is also outstanding.) 
CIN: A-07-00-02082  REVIEW OF A COST HMO - IOWA, FEBRUARY 2002, $1,006 
CIN: A-07-01-00134  REVIEW OF THE CALCULATION OF DISPROPORTIONATE SHARE 
PAYMENTS ATR MUTUAL OF OMAHA, JULY 2002, ($2,345) 
B.	 One report is under appeals and resolution is expected before the end of the next semiannual reporting 
period: 
CIN: A-05-94-00047	 NATIONWIDE INS., MEDICARE PART B ADMIN. COSTS, 
SEPTEMBER 1995, $1,049,309 
Notes to Table 2 
Table II 
1. The opening balance was adjusted upward by $61 million. 
2. Management decision has not been made within 6 months on 28 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 COS, 
AUGUST 2001, $1,080,000,000 
CIN: A-10-00-00011  MEDICAID INTERGOVERNMENTAL TRANSFERS - WA STATE, MARCH 2001, 
$475,000,000 
CIN: A-06-01-00069  EVALUATION OF LEGISLATION TO INCREASE MEDICAID HOSP-SPEC DSH 
PAYMENT LIMITS, DECEMBER 2001, $380,000,000 
CIN: A-04-00-02165  REVIEW OF AL MEDICAID INTERGOVERNMENTAL TRANSFERS, 
MARCH 2001, $147,500,000 
CIN: A-04-00-02169  ALABAMA MEDICAID INTERGOVERNMENTAL TRANSFERS-HOSPITAL 
ENHANCE, MAY 2001, $63,000,000 
CIN: A-07-98-02534  EMPIRE BC/BS PENSION PLAN TERMINATION, MARCH 2000, $38,626,351 
CIN: A-04-97-00109  EMERGENCY ASSISTANCE CLAIMS - NC, JULY 1998, $13,000,000 
CIN: A-01-99-00506  FOLLOW-UP REVIEW OF SEPARATELY BILLABLE ESRD LAB TESTS, 
JANUARY 2001, $12,200,000 
CIN: A-06-99-00060  REVIEW OF HMO UNDERPAYMENT CLAIM OF $21 MILLION, JUNE 2001, 
$12,191,579 
CIN: A-01-00-00502  REV OF EXORBITANT MEDICARE PMTS FOR OUTPATIENT SERVICES, 
MAY 2001, $12,100,000 
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 
90
 Appendix D 
CIN: A-01-97-02506  REVIEW OF THE AVAILABILITY OF MEDICAL COVERAGE/CSE SUPPORT, 
JUNE 1998, $5,704,585 
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR, MARCH 2002, 
$4,000,000 
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-05-01-00031  WI MEDICAID - DME, OCTOBER 2001, $1,250,000 
CIN: A-05-02-00082  BID PROPOSAL FOR 1-800 MEDICARE HOTLINE ADMINISTRATION, 
AUGUST 2002, $609,950 
CIN: A-05-00-00057  REVIEW OF MEDICAID MUTUALLY EXCLUSIVE CODES - OH, 
NOVEMBER 2001, $450,000 
CIN: A-03-02-72239  STATE OF DELAWARE, JULY 2002, $336,316 
CIN: A-05-01-00074  REVIEW OF BID PROPOSAL RFP HCFA-01-0003, JUNE 2001, $282,049 
CIN: A-07-97-01230  OFMQ - DOSHI OKLAHOMA, JUNE 1997, $203,510 
CIN: A-03-01-00022  UNITED HOSPITAL CENTER BAD DEBT REVIEW, JULY 2002, $42,328 
CIN: A-01-97-00526  PSYCHIATRIC OUTPATIENT SERVICES, MARCH 1998, $7,245 
CIN: A-01-98-00506  PSYCHIATRIC OUTPATIENT AT NEWTON-WELLESLEY HOSPITAL, 
MARCH 1998, $1,120 
91
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 Appendix E

Reporting Requirements of the Inspector General Act of 1978, as Amended

The specific 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  56 
Section 5 
(a)(1)  Significant problems, abuses and deficiencies  Throughout 
(a)(2)	 Recommendations with respect to significant problems, 
abuses and deficiencies  Throughout 
(a)(3)	 Prior significant recommendations on which corrective 
action has not been completed  Appendices B & C 
(a)(4)  Matters referred to prosecutive authorities  59 
(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  54 
(a)(9)	 Statistical Table 2Funds Recommended to Be Put to 
Better Use  55 
(a)(10)  Summary of previous audit reports without management 
decisions  Appendix D 
(a)(11)  Description and explanation of revised management 
decisions  Appendix D 
(a)(12)  Management decisions with which the Inspector 
General is in disagreement  None 
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. The 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 who are subject to exclusion are granted due process rights, including a hearing before 
an HHS administrative law judge and appeals to the HHS Departmental Appeals Board and the 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 appro
priate 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: 1) treatment to stabilize 
the condition; or 2) 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. 
The 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 col
lect 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)). The authority 
to bring CMPL cases has been delegated to the Inspector General. 
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 statue, 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

Performance Measure Reports

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. The OIG has identified some items throughout this report as performance measures by placing the 
symbol    following the items. 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 and Medicaid Services: 
FY 2002 Financial Statement Audit

FY 2002 Medicare Error Rate

Nurse Aide Training

Nursing Home Quality Assurance Committees

Public Health Agencies: 
State and Local Bioterrorism Preparedness 
Financial Statement Audits 
Administrations for Children and Families and on Aging: 
Head Start Program Enrollment 
Financial Statement Audit 
General Oversight: 
Audit of the Departments Financial Statements 
Departmental Service Organizations 
97
 98
  Office of Inspector General Components 
Office of Audit Services (OAS)provides all auditing services for HHS, either through its 
own resources or by overseeing audit work of others. Audits examine the performance of 
HHS programs and/or its grantees and contractors in carrying out their respective responsibilities 
and are intended to provide independent assessments of HHS programs and operations in 
order to reduce waste, abuse and mismanagement and to promote economy and efficiency 
throughout the Department. 
Office of Investigations (OI)conducts criminal, civil and administrative investigations of 
allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 
by providers. Investigative efforts lead to criminal convictions, administrative sanctions or civil 
monetary penalties. The OI serves as liaison to the Department of Justice on all matters relating to 
investigations of HHS programs and personnel. The OI also oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 
Office of Evaluation & Inspections (OEI)conducts short-term management and program 
evaluations that focus on issues of concern to the Department, the Congress and the public. 
The OEI generally focuses on programs with significant expenditures of funds and services to 
program beneficiaries or in which important management issues have surfaced. The findings 
and recommendations contained in the reports generate rapid, accurate, and up-to-date 
information on the efficiency, vulnerability and effectiveness of departmental programs. 
Office of Counsel to the Inspector General (OCIG)provides legal services to OIG, 
rendering advice and opinions on HHS programs and operations, imposes program exclusions 
and civil monetary penalties on health care providers and litigates those actions within the 
Department. The OCIG also represents OIG in the global settlement of cases arising under the 
Civil False Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, and renders advisory opinions on sanctions to the health care community. 
Office of Management and Policy (OMP)provides mission support services to the IG and 
other components. The OMP formulates and executes the budget, develops policy, disseminates 
OIG information to the news media and public, liaises with the Department, Congress, and 
external organizations and manages information technology resources. The OMP also conducts 
and coordinates reviews of existing and proposed legislation and regulations to assess 
implications and economic consequences for HHS programs and operations. 
99