The complete Semiannual Report to Congress can be viewed at http://oig.hhs.gov
Offi ce of Inspector General
April 1 - September 30, 2005
U.S. Department of 
Health and Human Services
 
Working Together to Promote, Preserve & Protect the Nations  Well-Being  This semiannual report
and other OIG publications and information
are on the Internet at http://oig.hhs.gov  Message from the Inspector General
This report, submitted pursuant to the Inspector General Act of 1978, as amended, summarizes 
the activities of the Office of Inspector General (OIG) for the 6-month reporting period that ended  
September 30, 2005.
OIG is dedicated to the mission of detecting fraud, waste, and abuse and promoting economy and efficiency 
in the programs of the Department of Health and Human Services (HHS). Oversight of the increasing 
costs associated with the Medicare and Medicaid programs, as well as the over 300 important discretionary 
programs administered by this Department, places significant responsibility on OIG to ensure that 
taxpayer dollars are spent wisely and appropriately. This charge expands with full implementation of the 
Medicare prescription drug program in January 2006.
Accountability for Medicaid funds and payment for Medicaid prescription drugs were focal points of 
OIG work during this reporting period. OIG continued its longstanding examination of State financing 
mechanisms used to maximize Medicaid payments. In addition, a series of three reports documented 
how the Medicaid program pays too much for prescription drugs compared with prices available in the 
marketplace. In June, OIG testified before the Senate Finance Committee on this Medicaid work. With 
the Federal share of Medicaid outlays expected to exceed $192 billion in fiscal year 2006, OIG work on 
issues related to Medicaid spending will continue to grow in importance and impact.
The biggest immediate challenge for both OIG and the Department is the implementation of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). In providing a new benefit 
to Medicare beneficiaries, this law creates the largest expansion of Medicare since its creation. Along 
with fulfilling its mandated MMA oversight responsibilities, OIG is diligently planning to ensure that we 
are fully prepared to prevent fraud, waste, and abuse in the new prescription drug program that will be 
operating in a dynamic marketplace. At the same time, expansion of health information technology and 
changes relating to how health care generally is delivered and paid for provide additional new oversight 
responsibilities and challenge OIG to stay current with rapid changes in program administration.
As the rollout of the new Medicare prescription drug program begins, OIG will work collaboratively 
with the Department, other Federal and State agencies, and the industry to ensure proper administration 
of this new benefit. In addition, OIG will continue to work closely with the Department to address the 
management challenges that lie ahead.
I want to express my appreciation to Congress, as well as to the senior management of the Department, 
for their support during my transition to the position of Inspector General at HHS. I am honored to be 
leading an organization of highly professional and talented employees who are committed to the mission 
of OIG and the important programs administered by the Department.
Daniel R. Levinson 
Inspector General  Highlights
Summary of Accomplishments
For fiscal year (FY) 2005, the Office of Inspector General (OIG) reported savings and expected 
recoveries of nearly $35.4 billion:  $32.6 billion in implemented recommendations and other actions to 
put funds to better use, $1.2 billion in audit receivables, and $1.6 billion in investigative receivables.
Also for this fiscal year, OIG reported exclusions of 3,806 individuals and entities for fraud or abuse 
of Federal health care programs and/or their beneficiaries; 537 criminal actions against individuals or 
entities that engaged in crimes against departmental programs; and 250* civil actions, which include 
False Claims Act and unjust enrichment suits filed in district court, Civil Monetary Penalties Law 
settlements, and administrative recoveries related to provider self-disclosure matters. 
HealthSouth Corporation
The nations largest provider of inpatient and outpatient rehabilitation services, HealthSouth 
Corporation, agreed to pay the Government $325 million plus interest and entered a company-wide 
5-year corporate integrity agreement with OIG. The settlement resolved allegations of Medicare 
Part A cost report fraud uncovered during the Governments investigation of the companys financial 
statements. The settlement also resolved allegations that the company submitted false claims to 
Medicare Part B for certain outpatient physical therapy services.
Medicaid Claims for School-Based Services
OIG published two audits of New York Citys Medicaid claims for school-based services. One report 
found that 86 percent of sampled claims for speech services did not comply with Federal and State 
requirements. Deficiencies included no or inadequate documentation to support the claims, lack 
of proper referrals, and services rendered by unqualified providers. In the second report, none of 
the sampled claims for transportation services complied with all Federal and State requirements. 
Deficiencies included lack of documentation to support services rendered, failure to render other 
Medicaid-covered school health services when transportation was billed, and failure to document the 
need for services. OIG recommended that the State refund $532 million to the Federal Government, 
resolve an additional $12 million in set-aside claims, provide proper and timely guidance on Federal 
Medicaid criteria to New York City, improve its monitoring of claims, and instruct New York City 
to bill its Medicaid school-based claims properly and maintain appropriate documentation to support 
the claims. 
Senate Testimony on Medicaid Financing Mechanisms
OIG testified before the Senate Finance Committee in late June regarding States use of Medicaid 
financing mechanisms. Intergovernmental transfers (IGT), one such mechanism, are transfers of non-
Federal public funds between local public Medicaid providers and State Medicaid agencies. Misuse of 
IGTs circumvents the Federal/State Medicaid partnership and increases Federal payments to States at 
*In the original publication of this report, 12 civil actions successfully completed by OIG in a prior reporting period were mistakenly 
included in this figure. On April 7, 2006, this figure was adjusted to reflect the actual number of civil actions completed during 
the time period October 1, 2004, to September 30, 2005.
Fall 2005 Semiannual Report to Congress iiii  ||  HHiigghhlliigghhttss 
the expense of the intended beneficiaries. One example of IGTs involves upper-payment-limit (UPL) 
funds, which are intended to reimburse Medicaid providers but are often retained by the States. OIG 
audits identified several nursing homes whose quality of care was adversely affected because they were 
not allowed to retain enough UPL funds to provide adequate staffing.
Another program that can be abused is the Medicaid disproportionate share hospital (DSH) program, 
which provides Federal funds to compensate hospitals that care for large percentages of Medicaid 
beneficiaries and uninsured patients. OIG audits in two States found that hospitals were returning  
80 to 90 percent of their DSH payments to the State, contrary to the programs purpose. OIG 
identified similar problems with Medicaid school-based health services. 
OIG stated that current policies and practices severely limit the ability of Congress, HHS, and State 
and local governments to manage, account for, and assess the benefits of Medicaid dollars, including 
dollars manipulated in Medicaid financing mechanisms. OIG recommended that State Medicaid 
programs improve their oversight and accountability procedures.  
Administrative Enforcement Actions
OIG has continued to increase administrative enforcement through the imposition of civil monetary 
penalties (CMPs) in a variety of circumstances. During this reporting period, OIG entered into 
several settlement agreements resolving CMP cases. These cases have included sanctions for alleged 
kickbacks, physician self-referral (the Stark statute) violations, and false claims. Cases have been 
settled with providers, suppliers, and individually with executive officers. Some of these settlements 
resulted from submissions by providers under the OIG self-disclosure protocol.
Medicaid Drug Price Comparisons 
A series of three inspection reports found that statutorily defined prices for prescription drugs in 
the Medicaid and Medicare programs based on actual sales were substantially lower than published 
prices (average wholesale price) and wholesale acquisition costs. Overall Federal upper limit amounts 
for generic drug products were five times higher than the average manufacturer price for the same 
products in the third quarter of 2004. The results of these studies were presented before the Senate 
Committee on Finance in June 2005.
Outside Activities of Senior-Level National Institutes of Health Employees
Between 2001 and 2003, 40 percent of senior-level National Institutes of Health (NIH) employees 
received approval for 319 outside activities. About half of these outside activities involved teaching 
or consulting and most were compensated. An OIG evaluation identified several vulnerabilities that 
inhibit NIHs ability to effectively review outside activities, which can potentially create real or 
apparent conflicts of interest for employees. NIH concurred with the findings and recommendations 
and has already taken steps to address the concerns.
Fall 2005 Semiannual Report to Congress Table of Contents
Centers for Medicare & Medicaid Services ...................................................................1
CMS-Related Reports .......................................................................................................................2
Hospital Compliance With Medicares Postacute Care Transfer Policy ...............................................2
Chiropractic Services in the Medicare Program:  Payment Vulnerability Analysis .................................2
Managed Care Payments .......................................................................................................2
Group Purchasing Organizations .............................................................................................3
Nurse Aide Registries:  Long Term Care Facility Compliance and Practices ........................................3
Medicare and Federal Employees Health Benefits Program Payment Rates for Home Oxygen Equipment ....4
Consecutive Medicare Inpatient Stays .......................................................................................4
Partial Hospitalization Services ...............................................................................................4
Medicare Graduate Medical Education Payments .........................................................................5
Effectiveness of Revised Medicare Outlier Payment Regulations ......................................................6
Medicare Beneficiary Telephone Customer Service .......................................................................6
Hospital Wage Data Used To Calculate Inpatient Prospective Payment System Wage Indexes ...................6
Outpatient Cardiac Rehabilitation ...........................................................................................7
Medicare Contractor Administrative Costs ................................................................................7
Organ Acquisition Costs .......................................................................................................7
Self-Declaration of U.S. Citizenship for Medicaid ........................................................................8
Self-Declaration of U.S. Citizenship for the State Childrens Health Insurance Program .........................8
Nursing Home Enforcement:  The Use of Civil Monetary Penalties ...................................................8
Nursing Facility Performance in Assessing Residents in a Timely Manner and Submitting Required Data ....9
Informal Dispute Resolution for Nursing Facilities .......................................................................9
Medicaid Hospital Outlier Payments in Illinois ............................................................................9
Medicaid Drug Rebate Program .............................................................................................10
Medicaid Drug Price Comparisons:  Average Manufacturer Price to Published Prices and Average  
  Sales Price to Average Wholesale Price ................................................................................10
Comparison of Medicaid Federal Upper Limit Amounts to Average Manufacturer Price ........................11
Children Enrolled in Separate State Childrens Health Insurance Programs and Medicaid Eligibility .........11
New York Citys Claims for Medicaid Speech Services ..................................................................11
New York Citys Claims for Medicaid Transportation Services ........................................................11
Iowas Adult Rehabilitation Services Program ............................................................................12
Upper Payment Limits ........................................................................................................12
Family Planning Service Costs ...............................................................................................13
Hospital Patient Transfers Paid as Discharges Under Medicaid ........................................................13
Oklahomas Medicaid Administrative Costs ...............................................................................14
Medicaid Provider Overpayments...........................................................................................14
Medicaid Payments for Skilled Professional Medical Personnel .......................................................15
Medicaid Payments for Deceased Beneficiaries ...........................................................................15
Status of Rural Health Clinic Program .....................................................................................15
CMS Oversight of Short-Term Acute Care Nonaccredited Hospitals.................................................16
Outreach ..........................................................................................................................................16
Advisory Opinions .............................................................................................................16
Provider Self-Disclosure Protocol ...........................................................................................16
Fall 2005 Semiannual Report to Congress iv | Table of Contents
Federal and State Partnership:  Joint Audits of Medicaid ..............................................................17
OIG Administrative Sanctions .........................................................................................................17
Program Exclusions ............................................................................................................17
Civil Monetary Penalties ......................................................................................................18
Kickbacks ........................................................................................................................18
Patient Dumping ...............................................................................................................19
Criminal and Civil Enforcement .....................................................................................................19
Hospitals .........................................................................................................................20
Home Health Agencies ........................................................................................................20
Medicare Contractors .........................................................................................................20
Durable Medical Equipment Suppliers .....................................................................................21
Prescription Drugs .............................................................................................................21
Nursing Homes .................................................................................................................21
Clinics ............................................................................................................................22
Practitioners .....................................................................................................................22
Medicaid Fraud Control Units ........................................................................................................22
Public Health Agencies .............................................................................................23
Public Health Agency-Related Reports ..........................................................................................24
Outside Activities of Senior-Level National Institutes of Health Employees ........................................24
Credentialing and Privileging at Indian Health Service Hospitals .....................................................24
Federal Efforts to Address Child Abuse and Sexual Abuse Reporting Requirements for Title X Grantees ....24
The Centers for Disease Control and Preventions Management of HIV/AIDS Grants............................25
Hospital Bioterrorism Surge Capacity:  Status of Early Implementation .............................................25
Health Education Assistance Loan Defaults ...............................................................................25
Public Health-Related Investigations .......................................................................................26
Administration for Children and Families and Administration on Aging ..........................29
Administration for Children and Families-Related Reports ..........................................................30
Ability of Noncustodial Parents To Contribute Toward Medicaid Costs .............................................30
Ability of Noncustodial Parents To Contribute Toward State Childrens Health Insurance Program Costs ....30
Childrens Use of Health Care Services While in Foster Care:  New York ..........................................30
Adoption Assistance Payments in Maine ...................................................................................31
Title IV-E Administrative and Training Costs in Delaware .............................................................31
Performance Data for Senior Medicare Patrol Projects .................................................................31
Undistributable Child Support Collections in Illinois ...................................................................32
Child Support Enforcement .............................................................................................................32
Task Forces ......................................................................................................................33
Task Force Table ................................................................................................................33
Investigations ....................................................................................................................33
Fall 2005 Semiannual Report to Congress Table of Contents | v
General Oversight ...................................................................................................35
Non-Federal Audits ..........................................................................................................................36
Resolving Recommendations ..........................................................................................................36
Table 1:  Reports With Questioned Costs .................................................................................37
Table 2:  Funds Recommended To Be Put to Better Use ................................................................38
Legislative and Regulatory Review and Development ...................................................................39
Regulatory Review Functions ................................................................................................39
Regulatory Development .....................................................................................................39
Employee Fraud and Misconduct ............................................................................................40
Prosecutions ....................................................................................................................................40
Appendixes.............................................................................................................41 
Appendix A:  Savings Achieved Through Policy and Procedural Changes Resulting From 
  Audits, Investigations, and Inspections April 1 Through September 30, 2005 ...........................43
Appendix B:  Unimplemented Office of Inspector General Recommendations to Put  
  Funds to Better Use ....................................................................................................................49
Appendix C:  Unimplemented Office of Inspector General Program and Management  
  Improvement Recommendations ...............................................................................................57
Appendix D:  Notes to Tables 1 and 2 ..............................................................................................67
Notes to Table 1 ................................................................................................................67
Notes to Table 2 ................................................................................................................76
Appendix E:  Reporting Requirements of the Inspector General Act of 1978, as Amended ..........79
Appendix F:  Status of Public Proposals for New and Modified Safe Harbors to the  
  Anti-Kickback Statute Pursuant to Section 205 of the Health Insurance Portability  
  and Accountability Act of 1996 ...................................................................................................81
Appendix G:  Summary of Sanction Authorities .............................................................................85
Program Exclusions ............................................................................................................85
Patient Dumping ...............................................................................................................85
Civil Monetary Penalties Law ................................................................................................85
Summary of Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities ........................86
Please note: Numerical information in this report is rounded.
Fall 2005 Semiannual Report to Congress Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services
The Centers for Medicare & Medicaid Services (CMS) administers the Medicare and Medicaid programs. 
Financed by the Federal Hospital Insurance Trust Fund, Medicare Part A provides hospital and other 
institutional insurance for individuals 65 years old or older and for certain disabled persons. Medicare 
Part B (Supplementary Medical Insurance) is an optional program that covers most of the costs of 
medically necessary physician and other services and is financed by participants and general revenues.
The Medicaid program provides funding to States for medical care and other support and services 
for low-income individuals. State expenditures for medical assistance are matched by the Federal 
Government using a formula that compares per capita income in each State relative to the national 
average. The State Childrens Health Insurance Program (SCHIP) expands health coverage to uninsured 
children whose families earn too much for Medicaid, but too little to afford private coverage.
The Office of Inspector General (OIG) devotes significant resources to investigating Medicare and 
Medicaid fraud, waste, and abuse and to monitoring these programs. These activities have helped 
ensure the cost-effective delivery of Medicare, Medicaid, and SCHIP services; safeguarded quality 
of care to beneficiaries of these programs; and reduced the potential for fraud, waste, and abuse. In 
addition, these efforts have led to criminal, civil, and/or administrative actions against perpetrators 
of fraud and abuse.
OIG also reports on audits of CMS financial statements, which currently account for more than  
82 percent of Department of Health and Human Services (HHS) net costs. In addition to issuing an 
opinion on the statements, auditors assess compliance with Medicare laws and regulations and the 
adequacy of internal controls.
1 Fall 2005 Semiannual Report to Congress 2 | Centers for Medicare & Medicaid Services
CMS-Related Reports
Hospital Compliance With Medicares Postacute Care Transfer Policy 
OIG examined whether acute care hospitals complied with Medicares postacute care transfer policy 
during fiscal years (FY) 2001 and 2002. Of the 400 claims sampled, 381 were improperly coded as 
discharges to home rather than transfers to postacute care. Medicare reimburses differently depending on 
whether a patient is discharged to home or transferred to certain postacute care settings, such as a skilled 
nursing facility. Some hospitals did not have the necessary controls to ensure the accuracy of discharge 
status codes, and CMS lacked adequate payment system edits at the time of OIGs review. As a result, 
OIG estimated that Medicare overpaid hospitals approximately $72.4 million in FYs 2001 and 2002.
OIG recommended that CMS instruct fiscal intermediaries to recover more than $1 million in 
overpayments identified in the sample, instruct the intermediaries to review the remaining claims in 
the sampling universe and recover any additional overpayments, and monitor hospitals that have a high 
number of claims adjusted as a result of recently implemented system edits. CMS generally agreed with 
the recommendations. (A-04-04-03000)
Chiropractic Services in the Medicare Program:  Payment Vulnerability Analysis
OIG found that approximately 67 percent of chiropractic services allowed by Medicare in 2001 did 
not meet Medicare coverage criteria and/or were miscoded or undocumented, potentially costing the 
program and its beneficiaries approximately $285 million. Chiropractors who reviewed patient records 
determined that more than 90 percent of this amount represented services that were not medically 
necessary. Most of the medically unnecessary services were maintenance or preventive treatments, 
which are not Medicare-covered benefits.
Beneficiaries use of chiropractic services continues to increase, making improper payments for these 
services a significant vulnerability for Medicare. OIG recommended that CMS ensure that chiropractic 
services comply with Medicare coverage criteria by establishing national frequency-based controls and 
funding service-specific reviews of chiropractic services. CMS should also require that its carriers 
educate chiropractors on Medicare Carriers Manual requirements for supporting documentation. 
CMS concurred with OIGs recommendations. (OEI-09-02-00530)
Managed Care Payments
Medicare+Choice organizations (MCO) are responsible for providing all Medicare-covered services, 
except hospice care, to enrollees in return for a predetermined capitation payment. MCOs with 
plans for which payment rates increased under the Benefits Improvement Protection Act (BIPA) of 
2000 were required to use the additional amounts to reduce beneficiary premiums or cost-sharing, 
enhance benefits, contribute to a stabilization fund for benefits in future years, or stabilize or enhance 
beneficiary access to providers. 
OIG issued reports on two MCOs modifications to their 2001 adjusted community rate proposals 
under BIPA:
  An MCO in Texas submitted a revised proposal that reflected an increase of $14.4 million in 
estimated direct medical care costs. About $7.8 million of the $14.4 million reflected an increase 
in Medicare capitation payments provided by BIPA, and $6.6 million was not related to the BIPA 
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 3
funding increase. Because $5.2 million of the $7.8 million BIPA capitation payment increase was 
not properly supported, OIG could not determine whether that part of the increase was used in 
a manner consistent with BIPA requirements. Also, $5.3 million of the $6.6 million increase not 
related to BIPA was unsupported.
  OIG recommended that the MCO work with CMS to make appropriate cost adjustments and ensure 
that estimated costs in future proposals are properly supported. The MCO did not directly respond 
to the recommendations. (A-06-03-00027)
  An MCO in Oregon submitted a revised proposal that reflected a $22.7 million increase in Medicare 
capitation payments. Approximately $6.8 million of the increase was not adequately supported. 
Therefore, OIG could not determine whether that part of the increase was used in a manner 
consistent with BIPA requirements. Also, $500,000 of the increase was supported but not used in 
a manner consistent with BIPA requirements.
  OIG recommended that the MCO work with CMS to make appropriate cost adjustments and ensure 
that estimated costs in future proposals are properly supported and used in a manner consistent 
with BIPA. The MCO generally disagreed. (A-10-03-00011)
Group Purchasing Organizations
Group purchasing organizations (GPO) are buying consortiums designed to leverage the purchasing 
power of members, primarily hospitals and other health care providers, and to allow them to obtain 
discounts on medical supplies. In exchange for administrative services and the ability to sell through 
a GPO to its members, vendors pay administrative fees to GPOs.
In January 2005, OIG issued an audit on three GPOs (A-05-03-00074). The current report contains 
the results of a second audit focusing on how much revenue three additional GPOs received from 
vendors and the disposition of that revenue. OIG found that one health care system representing six 
member hospitals did not fully account for net revenue distributions on Medicare cost reports and 
did not distribute all of its administrative fees to its member hospitals to be offset on the respective 
hospitals cost reports. As a result, administrative fees of about $5 million were not offset on Medicare 
cost reports. In addition, one GPO did not distribute all rebates received to its members. That GPO 
withheld $1.6 million of the total rebates.
OIG continued to recommend that CMS clarify instructions to hospitals on the proper Medicare cost 
report treatment of net revenue distributions. (A-05-04-00073)
Nurse Aide Registries:  Long Term Care Facility Compliance and Practices 
This report examined nursing homes compliance with Federal requirements that they verify the State 
registry status of a nurse aide before employing that individual. OIG found that the long term care 
facility administrators reported checking their State nurse aide registries prior to hiring nurse aides 
and that the registry search results affected hiring decisions. However, 55 percent of administrators 
reported that they checked their own States registry but not other State registries. Further, 17 percent 
of long term care facilities employed individuals as nurse aides without required registrations. Although 
85 percent of administrators reported establishing additional screening procedures for nurse aides, 
some of these methods may not be fully effective. 
Fall 2005 Semiannual Report to Congress 4 | Centers for Medicare & Medicaid Services
OIG recommended that CMS utilize existing communication channels to emphasize that long term 
care facilities must comply with Federal regulations addressing consulting out-of-state registries and 
nurse aide registration requirements and encourage long term care facilities to use available resources 
to screen nurse aides. CMS concurred with the reports recommendations. (OEI-07-04-00140)
Medicare and Federal Employees Health Benefits Program Payment Rates for Home  
Oxygen Equipment
This report updates OIGs September 2004 report on Medicare payments for home oxygen equipment. 
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) mandates 
that CMS use Federal Employees Health Benefits (FEHB) plans median payment rates to reduce 
Medicare fee schedule allowances for home oxygen equipment in 2005. Accordingly, OIG issued a 
report analyzing FEHB median payments for home oxygen equipment. Because questions were raised 
about the inclusion of oxygen contents for stationary and portable equipment in FEHB payment rates, 
OIG conducted additional work to clarify data in its earlier study. OIG found that plans median 
payment rates were 12.4 percent lower for stationary equipment and 10.8 percent lower for portable 
equipment. The greatest difference between the median FEHB payment rate and the median Medicare 
fee schedule allowances was for oxygen concentrators. (OEI-09-03-00160, revised)
Consecutive Medicare Inpatient Stays 
This inspection examined services to Medicare beneficiaries who had three or more inpatient stays, each 
within 1 day of discharge from the last facility. OIG found that the majority of such consecutive inpatient 
stays were appropriate. However, for 20 percent of the stays, medical records reviews showed that 
Medicare inpatient stays were associated with quality of care problems and/or unnecessary fragmentation 
of health care services across multiple inpatient stays. Medicare paid an estimated $267 million for these 
sequences of stays in FY 2002. This inspection also found that 10 percent of individual stays within 
consecutive inpatient stay sequences were associated with poor quality of patient care. 
OIG recommended that CMS direct quality improvement organizations and fiscal intermediaries, 
as appropriate, to monitor the quality, medical necessity, and appropriateness of inpatient services 
provided within the types of sequences of consecutive Medicare inpatient stays included in the 
review. 
CMS concurred with OIGs findings, but stated that periodic reviews of sequences of consecutive 
inpatient stays were not warranted. (OEI-03-01-00430)
Partial Hospitalization Services
Partial hospitalization is an intensive outpatient program of psychiatric services provided to patients 
instead of inpatient psychiatric care. Providers of these services receive a per diem payment under the 
Medicare hospital outpatient prospective payment system. In extraordinary cases, additional Medicare 
payments, called outlier payments, may be made if the cost of care is high in relation to the average cost of 
treating comparable conditions or illnesses. OIG issued two reports on partial hospitalization services:
  At a community mental health center in Texas, medical reviewers determined that none of the 
services on 100 sampled claims met Medicare reimbursement requirements. For example, for 99 
of the 100 claims, there was no evidence that the therapy sessions were active, intensive, and 
therapeutic. Based on its sample, OIG estimated that $12.5 million in Medicare payments was 
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 5
unallowable. OIG recommended that the center refund the overpayments and strengthen its 
procedures to ensure that future claims meet Medicare requirements. The center did not agree to 
make the refund but said that it would strengthen internal quality controls. (A-07-04-04034)
  Another review noted that the fiscal intermediary did not always follow Medicare reimbursement 
requirements when calculating outlier payments to this center. Because the fiscal intermediary 
used an outdated cost-to-charge ratio, it overpaid the center $8.8 million. This report provides 
an additional basis for recovering $7.2 million of the $12.5 million in unallowable payments noted 
above. OIG recommended that the intermediary recover the improper payments and ensure that 
future outlier payments are computed with the correct cost-to-charge ratio. The intermediary 
generally agreed. (A-07-04-04045)  
  OIG found that the fiscal intermediary did not follow Medicare reimbursement requirements when 
calculating Medicare outlier payments to another community mental health center in Texas. In 
computing the outlier payments, the intermediary used an incorrect cost-to-charge ratio based on a 
short-period Medicare cost report. As a result, the intermediary overpaid the center approximately 
$1.4 million. 
  OIG recommended that the intermediary recover the overpayment and ensure that the correct  
cost-to-charge ratios are used for future outlier payments. The intermediary partially agreed.  
(A-07-04-04035)
Medicare Graduate Medical Education Payments 
Medicare pays teaching hospitals for both direct graduate medical education (GME) costs and indirect 
graduate medical education (IME) costs. Hospitals claim reimbursement for these costs on their 
annual Medicare cost reports based on formulas that use fixed base costs and the number of full-time 
equivalent (FTE) residents. For payment purposes, the number of FTE residents is the average of the 
actual FTE count for the current year and the preceding two cost reporting periods. This is often 
described as the rolling average. 
OIG issued reports on two New York hospitals FTE calculations:
  One hospital did not fully comply with Federal requirements and therefore overstated its GME 
and IME FTEs on the 1999 Medicare cost report. These overstatements resulted in excess GME 
reimbursement of more than $1.25 million in 1999. Because Medicare reimburses hospitals based 
on a 3-year rolling average, the overstated FTEs on the 1999 cost report also resulted in excess 
GME and IME reimbursement totaling almost $7.2 million in 2000 and 2001. Thus, the hospital 
overstated its claim by a total of $8.4 million for the 3 years.
  OIG recommended that the hospital refund the overpayments, reduce the FTE counts reported on 
its 1999 Medicare cost report, and strengthen its procedures. The hospital disagreed with some of 
OIGs findings. (A-02-02-01011)
  OIG noted similar problems at the second hospital that resulted in $2.5 million in excess GME 
reimbursement in 1999. Because of the rolling average, the overstated FTEs on the 1999 cost report 
also resulted in almost $2.4 million in excess GME and IME reimbursement in 2000 and 2001. The 
total overstatement was almost $4.9 million for the 3 years.
Fall 2005 Semiannual Report to Congress  | Centers for Medicare & Medicaid Services
  OIG recommended that the hospital refund the overpayments, reduce the FTE counts reported  
on the 1999 Medicare cost report, and strengthen its procedures. The hospital generally disagreed. 
(A-02-02-01001)
Effectiveness of Revised Medicare Outlier Payment Regulations 
To reimburse hospitals for treating extremely costly patients, Medicare makes additional payments 
called outlier payments. In 2003, CMS revised its regulations to stop excessive growth of these 
payments. OIG determined that the revisions had reduced collective outlier payments to the 362 
hospitals reviewed; the average outlier payment per claim decreased by almost 43 percent. CMS 
estimated that the revised regulations would save Medicare at least $9 billion over 5 years. 
OIG recommended that CMS continue to monitor Medicare outlier payments to ensure that the 
payments comply with Medicare regulations. CMS agreed to do so. (A-07-04-04032)
Medicare Beneficiary Telephone Customer Service
This OIG study on telephone customer service found that, of the callers asked to rate satisfaction,  
84 percent were satisfied overall with the customer service they received. However, 44 percent of all 
callers had difficulty accessing information from call centers, reporting at least one of the following 
experiences:  (1) finding the interactive voice response (IVR) not easy to use, (2) not receiving an 
answer to their question or all the information they needed, or (3) not receiving an answer to their 
question as quickly as desired. Callers and call center managers both highly prioritized accuracy of 
answers, yet evidence suggests oversight of accuracy may be inadequate. Some call centers conducted 
quality assurance activities that exceeded CMS requirements, including activities that focused on 
accuracy.   
OIG recommended that CMS:  (1) strengthen current oversight to place greater emphasis on 
accuracy of answers given by customer service representatives, and (2) continue to seek ways to 
improve the national IVR system.The report noted that CMS is taking action to address issues raised 
in this report. (OEI-07-04-00030)
Hospital Wage Data Used To Calculate Inpatient Prospective Payment System Wage 
Indexes 
Under the acute care hospital inpatient prospective payment system, the Medicare base rate paid to 
participating hospitals includes a labor-related share. To reflect labor cost variations among localities, 
CMS adjusts the labor-related share by the wage index applicable to the metropolitan statistical area 
in which the hospital is located. The wage index values are based on wage data that hospitals include 
on their Medicare cost reports. 
This audit found that a hospital in Connecticut did not fully comply with Medicare requirements 
on the reporting of wage data. The hospital overstated its wage data by more than $404,000 for the 
Medicare FY 2000 cost report period. As a result, the FY 2004 Connecticut statewide rural wage index 
was overstated by about 1 percent, and the average payments to the 2 hospitals in the statewide rural 
area and to 17 additional hospitals in 2 urban metropolitan statistical areas were overstated by about  
$24 per hospital discharge. The hospital concurred with OIGs recommendation to strengthen financial 
reporting controls. (A-01-04-00511)
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 
Outpatient Cardiac Rehabilitation
This report consolidates audits of Medicare outpatient cardiac rehabilitation provided by 34 hospitals, 
as requested by CMS. Cardiac rehabilitation is a physician-supervised exercise program that includes 
specific types of exercises individually prescribed for each patient. To be covered by Medicare, 
outpatient cardiac rehabilitation services must be provided under the direct supervision of a physician 
and incident to a physicians professional services.
Among the hospitals reviewed, OIG found two very different sets of practices with respect to both the 
provision of direct physician supervision and the physician (referring or hospital) whose professional 
services the cardiac rehabilitation was provided incident to.  OIG attributed this situation to 
inconsistent guidance in three Medicare manuals that provided national guidance to health care 
providers. Most hospital officials believed that the guidance in the various manuals was confusing.
OIG recommended that CMS clarify national Medicare cardiac rehabilitation coverage requirements 
and direct fiscal intermediaries to educate hospitals on the clarified national Medicare coverage 
policy. CMS agreed to develop and publish provider education materials to clarify the direct physician 
supervision and incident to provisions of the cardiac rehabilitation benefit. (A-05-03-00102)
Medicare Contractor Administrative Costs
This audit disclosed that a Medicare contractor claimed almost $13 million in administrative costs that 
were not allowable for Medicare reimbursement, including excessive data costs, duplicate costs, and 
unallowable overhead. The contractor did not have adequate control procedures to ensure that only 
allowable costs were claimed. 
OIG recommended that the contractor make a $13 million cost adjustment. (OIG made no procedural 
recommendations because the contractor has terminated its Medicare contracts.) The contractor 
agreed with most, but not all, of the recommended cost adjustment. (A-01-02-00509)
Organ Acquisition Costs 
Medicare reimburses certified transplant centers for their proportionate share of costs associated with 
the acquisition of organs for transplant to beneficiaries. Reviews of two transplant centers focused on 
their compliance with Medicare requirements for claiming organ acquisition costs on Medicare cost 
reports:
  A transplant center in Texas did not have systems to accumulate certain costs of organ acquisition 
separately from the costs of posttransplant and other hospital activities. Noting unallowable and 
unsupported costs on the 1997 through 2001 cost reports, OIG recommended that the Medicare 
intermediary recover a $4.2 million overpayment, work with the transplant center to determine the 
allowable portion of $13.6 million in unsupported costs, monitor the centers future cost reports, 
and instruct the center to make procedural improvements. The Medicare intermediary agreed with 
all recommendations. (A-06-04-00017)
  OIG found similar problems in reviewing the 2000 cost report of a transplant center in Indiana. 
OIG recommended that the Medicare intermediary recover a $270,000 overpayment, work with the 
transplant center to determine the allowable portion of $2.5 million in unsupported costs, monitor 
the centers future cost reports, and instruct the center to make procedural improvements. The 
Fall 2005 Semiannual Report to Congress  | Centers for Medicare & Medicaid Services
intermediary stated that it had reopened the 2000 cost report to make adjustments and would make 
necessary adjustments to subsequent cost reports. (A-05-04-00049)
Self-Declaration of U.S. Citizenship for Medicaid
In an effort to simplify Medicaid application procedures, in recent years CMS has encouraged the 
practice of allowing self-declaration of U.S. citizenship in the Medicaid program. However, CMS 
has also encouraged States to maintain program integrity by verifying the accuracy of citizenship 
statements with other, nonapplicant sources, such as State vital statistics databases and/or by conducting 
posteligibility-focused reviews. This OIG report found that 47 States allow self-declaration of U.S. 
citizenship for Medicaid, but that 44 of these States require documentary evidence of citizenship if 
statements seem questionable. Twenty-seven States do not verify any U.S. citizenship statements as 
part of their posteligibility quality control activities. Further, some States use types of evidence to 
document citizenship for Medicaid that are not accepted by CMS or the Social Security Administration. 
Finally, OIG found that other programs related to Medicaid, including Temporary Assistance to Needy 
Families, Supplemental Security Income, and foster care, were more likely to document citizenship. 
OIG recommended that CMS strengthen posteligibility quality controls in States that allow self-
declaration, issue a complete list of evidence that States may reference when determining eligibility, 
and explore allowing State Medicaid staff to use citizenship verifications from other Medicaid-related 
programs. CMS concurred. (OEI-02-03-00190)  
Self-Declaration of U.S. Citizenship for the State Childrens Health Insurance Program
OIG issued this memorandum in response to a CMS request for information about States policies on 
self-declaration of U.S. citizenship for State Childrens Health Insurance Program (SCHIP) benefits.
OIG found that 49 of 50 States and the District of Columbia currently allow self-declaration of 
U.S. citizenship for SCHIP benefits. State SCHIP directors in these States report accepting a signed 
declaration of U.S. citizenship from parents or guardians seeking SCHIP benefits for children. In 
addition, nine States have policies on self-declaration for SCHIP eligibility that differ from their 
policies for Medicaid. (OEI-02-03-00191)
Nursing Home Enforcement: The Use of Civil Monetary Penalties
This inspection report revealed that although CMS imposed $81.7 million in civil monetary penalties 
(CMPs) during calendar years 2000 and 2001, only $34.6 million (42 percent) of that amount was paid 
as of December 2002. The difference was primarily attributable to reductions stipulated in regulations 
and delays resulting from appeals and bankruptcies.
OIG recommended that CMS provide additional written guidance to its regional offices and to State 
agencies regarding appropriate dollar ranges for individual ratings of scope and severity with regard 
to CMPs. OIG also recommended that CMS clarify staff responsibilities with respect to past-due 
CMPs and conduct an internal process review that would enable CMS and States to streamline CMP 
processing. CMS concurred with these recommendations. (OEI-06-03-00420)
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 9
Nursing Facility Performance in Assessing Residents in a Timely Manner and Submitting  
Required Data
The objectives of this review were to determine the extent to which Medicare/Medicaid-certified 
nursing facilities meet Federal requirements to assess residents according to the required time schedule, 
submit records to the Minimum Data Set (MDS) Repository within the prescribed timeframe, and 
submit records for all residents in Medicare/Medicaid beds. Overall, OIG found a high degree of 
facility performance resulting in a national MDS Repository that is current and representative of 
its intended resident population. Facilities completed 95 percent of resident assessments on time 
and submitted 94 percent of records in a timely manner. OIG also found that facilities submitted 
records for 99.9 percent of residents in Medicare/Medicaid-certified beds, as required. However, a 
subgroup of facilities incorrectly coded records for an estimated 1,812 residents in beds not certified 
for Medicare/Medicaid. As a result, these records were inappropriately included in the national MDS 
Repository.
OIG recommended that CMS ensure that nursing facilities correctly code records of residents in 
noncertified beds so that no such records are included in the national MDS Repository. In response, 
CMS explained its plans to ensure that records for residents in noncertified units are not transmitted 
and stored in the MDS Repository. (OEI-06-02-00730)
Informal Dispute Resolution for Nursing Facilities
As part of its ongoing evaluation of the quality of care provided to nursing facility residents, OIG 
examined States policies and practices for informal dispute resolution (IDR) of deficiencies in patient 
care discovered during State surveys. OIG found that States and nursing facilities substantially complied 
with requirements for IDR. Forty-eight of fifty States had written IDR policies, and all 14 States for 
which OIG reviewed case documentation largely followed proper procedures in conducting IDRs.  
In 45 percent of the cases reviewed, deficiencies cited were changed as a result of the reviews.
CMS concurred with our recommendations to ensure that all States had qualifying written 
policies and that States follow procedures for requesting IDRs and communicating their results.  
(OEI-06-02-00750)
Medicaid Hospital Outlier Payments in Illinois 
Illinois makes outlier payments to hospitals if the cost of treating a Medicaid patient is extraordinarily 
high compared with the average cost of treating comparable conditions. OIG found that Illinoiss method 
of computing inpatient hospital cost outlier payments did not result in reasonable payments. Illinois 
used an out-of-date factor to convert billed charges to costs and did not have adequate procedures to 
monitor cost outlier payments. As a result, cost outlier payments increased significantly and at a faster 
rate than other types of Medicaid payments. If Illinois had applied a more current factor to convert 
billed charges to costs, it could have saved approximately $56.5 million between 1998 and 2002 for the 
three hospitals that OIG reviewed.
OIG recommended that Illinois revise its method of computing cost outlier payments to ensure that 
payments are reasonable and that the State more closely monitor the payments. Although Illinois 
did not address the first recommendation, it outlined steps to strengthen its monitoring of outlier 
payments. (A-07-04-04031)
Fall 2005 Semiannual Report to Congress 10 | Centers for Medicare & Medicaid Services
Medicaid Drug Rebate Program
The Medicaid drug rebate program allows Medicaid to receive pricing benefits commensurate with 
its position as a high-volume purchaser of prescription drugs. Audits in 49 States and the District of 
Columbia found that only 4 States had no weaknesses in accountability and internal controls over 
their drug rebate programs. For the remaining 45 States and the District of Columbia, OIG identified 
weaknesses in the reliability of information submitted to CMS, accounting for interest on late rebate 
payments, rebate collection systems, and dispute resolution and collection processes. 
OIG recommended that CMS reemphasize that States must submit accurate and reliable information 
to CMS and place a priority on their billing for and collection of drug rebates. CMS agreed with the 
recommendations. (A-06-03-00048)
Medicaid Drug Price Comparisons: Average Manufacturer Price to Published Prices and 
Average Sales Price to Average Wholesale Price
During this reporting period, OIG released two companion reports on Medicaid prescription drug 
price comparisons. The reports found that statutorily defined prices for prescription drugs in the 
Medicaid and Medicare programs based on actual sales (average manufacturer price [AMP] and average 
sales price [ASP]) were substantially lower than published prices (average wholesale price [AWP]) 
and wholesale acquisition cost (WAC). Statutorily defined, sales-based prices were also lower than 
the States estimated acquisition cost formulas, which are based on AWP and WAC. In addition, the 
differences between statutorily defined, sales-based prices and published prices were particularly large 
for generic drugs compared to brand-name drugs. 
The first report, Medicaid Drug Price Comparisons:  Average Manufacturer Price to Published 
Prices, examined prices for Medicaid-reimbursed drugs (24,101 national drug codes). This report 
found that at the median, AMP was 59 percent lower than AWP. In comparison, the median AWP-
based State estimated acquisition cost formula was AWP minus 12 percent. The difference between 
AMP and published prices was greatest for generic drugs. For generic drugs, AMP was 70 percent 
lower than AWP at the median. In comparison, AMP was 23 percent lower than AWP at the median 
for single-source brands and 28 percent lower for multisource brands. (OEI-05-05-00240)
The second report, Medicaid Drug Price Comparison:  Average Sales Price to Average Wholesale 
Price, examined prices for Medicare-covered drugs (2,077 national drug codes), which may also be 
covered by the Medicaid program. This report found that ASP was 49 percent lower than AWP. The 
difference between ASP and AWP was also greatest for generic drugs, similar to the companion report. 
For single-source brand codes, ASP was 26 percent below AWP at the median, and for multisource 
brand codes, ASP was 30 percent below AWP at the median. For generic national drug codes, ASP 
was 68 percent less than AWP at the median. OIG also found that the differences between AWP and 
other prices analyzed were similar for both reports. OIG found that the difference between AMP and 
AWP for generic drugs was 72 percent for Medicare-covered drugs. For single-source and multisource 
brand drugs, this report found that the differences between AMP and AWP for Medicare-covered 
drugs were 22 and 25 percent, respectively. (OEI-03-05-00200)
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 11
Comparison of Medicaid Federal Upper Limit Amounts to Average Manufacturer Price
In another report on Medicaid prescription drug pricing, OIG found that overall Federal upper limit 
amounts for generic drug products were five times higher than the average AMP amounts for the same 
products in the third quarter of 2004. During the same period, the Federal upper limit amount was, on 
average, 22 times higher than the lowest reported AMP. If Medicaid based Federal upper limit amounts 
on reported AMPs, the program could save hundreds of millions of dollars per year. 
Although the purpose of the upper payment limit program was to ensure that the Federal Government 
acts as a prudent payer by taking advantage of market prices, Federal upper limit amounts are based 
on prices published in the national drug compendia. These published prices are often inflated and bear 
little or no resemblance to actual prices paid by providers. To correct this problem, OIG recommended 
that CMS work with Congress to set Federal upper limit amounts that more closely approximate 
acquisition costs. CMS concurred with OIGs recommendation. (OEI-03-05-00110)
Children Enrolled in Separate State Childrens Health Insurance Programs and Medicaid 
Eligibility
This report fulfills the congressional mandate under the Balanced Budget Refinement Act of 1999 
that OIG periodically determine the number of separate State Childrens Health Insurance Program 
(SCHIP) enrollees who are also eligible for Medicaid and who, therefore, should have been enrolled in 
Medicaid rather than SCHIP. OIG found that only 1 percent of children enrolled in separate SCHIPs 
were eligible for Medicaid. However, inconsistent income calculations and lack of documentation 
create vulnerabilities that, if not addressed, could result in a greater number of children enrolled in 
separate SCHIPs who are required to be in Medicaid. 
CMS concurred with OIGs findings and conclusions. It noted that current regulations support OIGs 
suggestion that CMS work closely with States to ensure that States maintain sufficient information in 
each applicants record to support the eligibility determination. (OEI-07-03-00220)
New York Citys Claims for Medicaid Speech Services 
OIG found that New York City improperly claimed almost $436 million in Federal Medicaid payments 
for speech services between September 1, 1993, and June 30, 2001. Of the 100 claims sampled, 86 did 
not comply with Federal and State requirements on, among other things, maintaining documentation 
to support services rendered, obtaining referrals from appropriate medical professionals, and meeting 
Federal standards on provider qualifications.
OIG recommended that the State refund the $436 million, provide proper and timely guidance on 
Federal Medicaid criteria to New York City, improve its monitoring of speech claims, and instruct 
New York City to maintain appropriate documentation to support its claims. State officials disagreed 
with most aspects of the report. (A-02-02-01029)
New York Citys Claims for Medicaid Transportation Services
OIG found that New York City improperly claimed more than $96 million in Federal Medicaid 
payments for transportation services between September 1, 1993, and June 30, 2001. None of the 
120 claims sampled complied with all Federal and State requirements. Deficiencies included lack of 
documentation to support services rendered, failure to render other Medicaid-covered school health 
services when transportation was billed, and failure to document the need for services.
Fall 2005 Semiannual Report to Congress 12 | Centers for Medicare & Medicaid Services
OIG recommended that the State refund the $96 million, work with CMS to resolve an additional 
$12 million in set-aside claims, provide proper and timely guidance on Federal Medicaid criteria to 
New York City, improve its monitoring of transportation claims, and instruct New York City to bill its 
transportation claims properly and maintain appropriate documentation to support the claims. State 
officials disagreed with most aspects of the report. (A-02-03-01023)  
Iowas Adult Rehabilitation Services Program
Medicaid allows optional coverage of rehabilitation services. For FY 2002, Iowa claimed $10.5 million 
in Federal Medicaid funds for adult rehabilitation services. Concerned about the allowability of claims 
and rising program costs, CMS requested that OIG review Iowas program. Of the 100 claims sampled, 
65 were unallowable under Federal and State requirements. The errors occurred because the State 
lacked adequate controls over the adult rehabilitation services program to ensure that services claimed 
for Medicaid reimbursement met applicable requirements.
OIG recommended that the State refund over $6.2 million to the Federal Government and strengthen 
its policies and procedures. The State generally concurred with the recommendations. 
(A-07-03-03041)
Upper Payment Limits 
The upper payment limit (UPL) is an estimate of the amount that would be paid for Medicaid services 
under Medicare payment principles. The primary objective of the following reviews was to determine 
whether States calculated the UPLs for hospitals in accordance with Federal UPL regulations and the 
approved State plan amendments. 
  New Jersey  New Jersey did not calculate the State FY 2003 inpatient and outpatient UPLs as 
required. The State continued to make payments for hospitals inpatient services up to 150 percent 
of the UPL after the payment level had been reduced to 100 percent of the UPL, which resulted 
in unallowable Medicaid payments of $17.6 million ($8.8 million Federal share). The State also 
inadvertently applied an improper inflation factor in its outpatient UPL calculation, which resulted 
in unallowable Medicaid payments of $3.8 million ($1.9 million Federal share).
  OIG recommended that New Jersey refund overpayments totaling almost $10.7 million. New Jersey 
officials concurred with the recommendation. (A-02-03-01019)
  North Carolina  For State FY 2003, North Carolinas calculations of the UPLs for non-State 
government and private inpatient hospitals did not comply with its State plan amendments 
requirement that the UPL be calculated based on costs incurred. As a result, the State made 
unallowable UPL payments of about $42 million ($26 million Federal share). The $42 million is 
subject to adjustment during final cost settlement. Although the cost settlement process has been 
a State plan requirement since 1995, no final cost settlements have occurred since 1996. Also, 
contrary to Federal law and policy guidance, North Carolina did not include UPL payments in its 
calculation of State FY 2003 hospital-specific disproportionate share hospital (DSH) limits. Medicaid 
makes DSH payments to hospitals that serve disproportionate numbers of low-income patients with 
special needs. Although no DSH overpayment had occurred as of the end of OIGs audit period, the 
potential overpayment could have been at least $42 million considering the excessive UPL payments 
cited above. Determining the actual DSH overpayment would require a final cost settlement. 
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 13
  OIG recommended that North Carolina revise its UPL and DSH calculations to comply with Federal 
and State requirements. OIG also recommended that the State resolve with CMS all outstanding 
issues affecting final cost settlements and, upon resolution, perform annual final cost settlements 
and refund the Federal share of any UPL and DSH overpayments. The State said that any action 
must await the conclusion of discussions with CMS. (A-04-03-02028)
Family Planning Service Costs
The Federal Government reimburses the costs of family planning services provided pursuant to 
Medicaid State plans at an enhanced 90-percent matching rate. These services are intended to prevent 
or delay pregnancy or to otherwise control family size. In three reviews, OIG found that States did 
not always comply with Federal requirements for claiming these costs to Medicaid.
  Missouri  Missouri retroactively claimed the $11.1 million difference between the regular Federal 
matching rates and the enhanced 90-percent rate for prior family planning expenditures made since 
October 1995. The retroactive claim did not fully comply with Federal regulations, which generally 
limit reimbursement to claims filed within 2 years of the State expenditure. Of the $11.1 million 
claimed, more than $6.4 million did not meet this limitation and therefore was unallowable.
  OIG recommended that Missouri refund the overpayment and ensure that future retroactive claims 
comply with Federal regulations. Missouri did not agree that its retroactive claim was subject to the 
2-year rule. (A-07-04-01012)
  New York  New York States Medicaid Obstetrical Maternal Services (MOMS) program provides 
Medicaid-eligible pregnant women with improved access to maternity services. The MOMS services 
for which the State received Federal reimbursement at the enhanced 90-percent rate did not qualify 
as family planning services. As a result, the State improperly received almost $1.6 million in Federal 
Medicaid funds for calendar years 2000 and 2003. 
  OIG recommended that the State refund the overpayment, issue to MOMS providers clear guidance 
that any procedures provided to pregnant women may not be claimed as family planning services, 
and strengthen its system edits to properly identify claims that are not related to family planning. 
The State generally concurred. (A-02-05-01001)
  Virginia  Between April 2001 and March 2004, Virginia overstated its claims for family planning 
service costs by $3.7 million. Because the State claimed these costs at the enhanced family planning 
rate of 90 percent, rather than its regular Federal share of about 50 percent, Virginia received  
$1.4 million in unallowable Federal reimbursement. 
  OIG recommended that Virginia refund the overpayment, apply an OIG-calculated factor to claims 
after March 2004, and refund the Federal share of any additional overpayments. Virginia concurred. 
(A-03-04-00209)
Hospital Patient Transfers Paid as Discharges Under Medicaid 
This report summarized the results of audits in four States that had Medicaid payment provisions 
similar to the Medicare prospective payment system. OIG found $6.4 million ($3.6 million Federal 
share) in overpayments for hospital patient transfers incorrectly reported as discharges, as well as 
Fall 2005 Semiannual Report to Congress 14 | Centers for Medicare & Medicaid Services
potential overpayments of $3.7 million ($1.9 million Federal share) in these four States. In 25 other 
States and the District of Columbia, which prospectively pay for inpatient services and limit payments 
for transfers, OIG found that significant overpayments for transfers inappropriately billed as discharges 
could exist.
OIG recommended that CMS monitor the recovery of identified and potential overpayments described 
in the State-specific reports and encourage the 25 States and the District of Columbia to consider 
performing focused postpayment assessments of hospital discharges and to recover overpayments  
for transfers inappropriately billed as discharges. CMS agreed with the recommendations. 
(A-05-03-00014)
Oklahomas Medicaid Administrative Costs
At the request of CMS, OIG reviewed Medicaid administrative costs that Oklahoma claimed,  
as well as targeted case management costs claimed as administrative costs. OIG determined that 
almost $3.6 million ($1.8 million Federal share) in administrative costs claimed in one quarter and  
$79.5 million ($39.8 million Federal share) in targeted case management costs claimed over 5_ years 
were unallowable. The State should not have claimed targeted case management costs as administrative 
costs because they were separately reimbursed as a direct Medicaid service. Recognizing the error, the 
State made adjustments for most of the targeted case management costs; however, almost $18.2 million 
($9.1 million Federal share) remained an overpayment at the end of the audit period.
OIG recommended that the State refund the remaining overpayments, improve its procedures 
for claiming administrative costs, and discontinue claiming targeted case management costs as 
administrative costs. The State did not agree with some of the findings. (A-06-03-00046)
Medicaid Provider Overpayments
Two reviews focused on the reporting of Medicaid provider overpayments to CMS. An overpayment 
is a payment to a provider in excess of the allowable amount.
  District of Columbia  In FY 2002, the District did not report overpayments totaling almost  
$4 million ($2.2 million Federal share) because the overpayments were under appeal and had 
not been collected. In addition, the District did not report overpayments totaling $16.2 million  
($9.2 million Federal share) within the required timeframe because its practice was to report 
overpayments only after collecting them from providers. (A-03-03-00222)  
  West Virginia  OIG noted similar problems in West Virginia for FY 2003. The State did not report 
over $3.7 million in overpayments ($2.9 million Federal share) because it was waiting to implement 
changes to its Medicaid Management Information System. The State also did not report over  
$3.2 million ($2.5 million Federal share) in overpayments within the required timeframe due to an 
oversight and because it did not use the correct date for discovering the overpayments. 
  OIG recommended that the District and West Virginia make financial adjustments, determine the 
value of overpayments identified after the audit period that have not been reported and report these 
as well, and ensure that future overpayments are reported within 60 days. The District concurred 
with the audit results and West Virginia partially concurred. (A-03-04-00207)
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 15
Medicaid Payments for Skilled Professional Medical Personnel
Federal regulations provide an enhanced rate of 75 percent for the compensation and training of 
skilled professional medical personnel and their supporting staff. OIG found that California improperly 
claimed about $5.3 million in Federal Medicaid funding at the enhanced rate for FY 2003. The States 
controls did not ensure that only eligible costs were claimed at the enhanced rate. 
OIG recommended that the State refund the overpayments, strengthen controls to ensure that only 
eligible costs are claimed at the enhanced rate, and identify and refund costs improperly claimed at 
the enhanced rate after the audit period. The State did not comment on the recommended refund and 
partially agreed with the other recommendations. (A-09-04-00049)
Medicaid Payments for Deceased Beneficiaries
The Social Security Administration maintains a comprehensive file on all reported deaths of people 
who have Social Security numbers. This information is available to State and Federal agencies as a way 
to prevent payments for services rendered after a beneficiarys death. However, based on a statistical 
sample covering a 3-year period, OIG estimated that Florida paid $11.6 million ($6.5 million Federal 
share) for Medicaid services rendered after beneficiaries deaths.
OIG recommended that the State review the sampling universe to identify and recover overpayments 
made on behalf of deceased beneficiaries and improve its procedures for identifying deceased 
beneficiaries to prevent future overpayments. The State agreed to implement the recommendations. 
(A-04-03-07029)
Status of Rural Health Clinic Program 
In 1977, Congress created the Rural Health Clinic (RHC) Program to increase health services for 
Medicare and Medicaid beneficiaries living in rural underserved areas. To be eligible for RHC status, 
clinics must be located in areas that meet the RHC Acts definition of rural and underserved. Currently, 
279 RHCs are located in areas that do not meet the rural and underserved criteria. Another 946 are 
located in shortage-designated areas that HRSA has not reviewed or updated within a 3-year period. 
Despite the identification of problems with the rural and underserved criteria in previous OIG and 
Government Accountability Office reports, the RHC Program continues to rely on them. Current rural 
and underservice criteria result in RHC participation in areas with existing health care systems. Because 
of its involvement in the RHC Program, OIG made recommendations to both HRSA and CMS. 
OIG recommended that HRSA:  (1) review shortage designations within the requisite 3-year period 
and (2) publish regulations to revise its shortage-designation criteria. OIG recommended that CMS:  
(1) issue regulations to ensure that only RHCs determined to be essential providers remain certified 
as RHCs, and (2) seek legislative authority or administratively require RHC applicants to document 
need and impact on access to health care in rural underserved areas. Both CMS and HRSA concurred 
with the recommendations. (OEI-05-03-00170)
Fall 2005 Semiannual Report to Congress 1 | Centers for Medicare & Medicaid Services
CMS Oversight of Short-Term Acute Care Nonaccredited Hospitals
This report documents the extent to which the frequency of nonaccredited hospital surveys has 
changed since the 1999 OIG reports on the external review of hospital quality. Those reports found 
a large and growing number of short-term acute care nonaccredited hospitals that went 3 or more 
years without an oversight survey. In response, CMS committed to surveying nonaccredited hospitals 
every 3 years  the same frequency that the Joint Commission on Accreditation of Healthcare 
Organizations accredits hospitals. In this report, as in previous reports, we focused on short-term 
acute care nonaccredited hospitals, which now constitute 72 percent of all nonaccredited hospitals. 
OIG found that the percentage of short-term acute care nonaccredited hospitals surveyed within 3 
years had improved from 50 percent to 79 percent between 1997 and 2003. However, the national 
annual survey rate is too low to sustain this progress. That rate for short-term acute care nonaccredited 
hospitals declined to 21 percent in 2003, from 28 percent in 2002, and 25 percent in 2001. Unless the 
national annual survey rate for short-term acute care nonaccredited hospitals increases, States will 
be unable to ensure that these hospitals are surveyed once every 3 years. The attention and resources 
that States can spend is limited by the number of nonaccredited hospitals converting to critical access 
hospitals, a growing number of complaint surveys, as well as demands to survey other facilities. OIG 
had no recommendations for CMS. (OEI-01-04-00020)
Outreach
As part of its ongoing effort to promote the highest level of ethical and lawful conduct by the health care 
industry, OIG has continued to issue advisory opinions, compliance guidance, and other guidance.
Advisory Opinions
In accordance with section 205 of the Health Insurance Portability and Accountability Act of 1996, 
OIG, in consultation with the Department of Justice, may issue advisory opinions to outside parties 
regarding the interpretation and applicability of certain statutes relating to the Medicare and State 
health care programs. This authority allows OIG to provide case-specific formal guidance regarding 
the application of the anti-kickback statute and safe harbor provisions, and other OIG health care fraud 
and abuse sanctions. From the period April 1 through September 30, 2005, OIG received 29 advisory 
opinion requests and issued 4 advisory opinions.
Provider Self-Disclosure Protocol
In keeping with a longstanding commitment to assist providers and suppliers in detecting and preventing 
fraudulent and abusive practices, OIG established a set of comprehensive guidelines for voluntary self-
disclosures, entitled Provider Self-Disclosure Protocol, available on the internet at http://oig.hhs.gov 
in the Fraud Prevention & Detection section. 
Essentially, the protocol guides providers and suppliers through the process of structuring a disclosure 
to OIG of matters that appear to constitute potential violations of Federal laws (as opposed to honest 
mistakes that may have resulted in overpayments). After making an initial disclosure, the provider 
or supplier is expected to undertake a thorough internal investigation of the nature and cause of 
the matters uncovered and make a reliable assessment of their economic impact (e.g., an estimate 
of the losses to Federal health care programs). OIG evaluates the reported results of each internal 
investigation to determine the appropriate course of action. 
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 1
To date, OIG has received 275 submissions. Self-disclosure cases have resulted in 55 recoveries and  
55 settlements, totaling $99.9 million collectively. For example:
  Michigan  After it self-disclosed conduct to OIG, St. Joseph Mercy-Oakland agreed to pay  
$4 million to resolve its Civil Monetary Penalties Law (CMPL) liability for allegedly violating 
the Stark Law and anti-kickback statute. The hospital allegedly entered into improper financial 
arrangements with 14 different physicians and physician groups to induce patient referrals. 
Federal and State Partnership: Joint Audits of Medicaid
One of OIGs major outreach initiatives has been to work more closely with State auditors in reviewing 
the Medicaid program. To this end, a partnership plan was developed to foster 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 identification of more than $263 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.
OIG Administrative Sanctions
During this reporting period, OIG administered 2,135 sanctions in the form of program exclusions or 
administrative actions for alleged fraud or abuse or other activities that posed a risk to Federal health 
care programs and their beneficiaries. A brief explanation of these sanction authorities can be found 
in Appendix G.
Program Exclusions
During this reporting period, OIG excluded 2,111 individuals and entities from participating in the 
Medicare and Medicaid programs and other federally sponsored health care programs. Most of the 
exclusions resulted from convictions for crimes relating to Medicare or Medicaid, for patient abuse or 
neglect, or as a result of license revocation. Examples include the following:
  Colorado  A certified nurse aide was excluded for 25 years based on his conviction for sexual 
assault against a 77-year-old Alzheimers nursing home patient. The man was sentenced to serve  
15 years to life in prison. 
  Missouri  Two individuals were excluded based on their multiple convictions for abuse that took 
place at a home for children with mental retardation. One individual was an emergency medical 
technician who was sentenced to 12 years in prison and excluded for 20 years. The other individual 
was a licensed practical nurse who was sentenced to 5 years in prison and excluded for 15 years. 
  New York  A dentists license was revoked by the New York State Education Department after 
he sexually assaulted numerous minor patients. Based on the action, OIG excluded the dentist for 
an indefinite period. 
Fall 2005 Semiannual Report to Congress 1 | Centers for Medicare & Medicaid Services
Civil Monetary Penalties
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose administrative penalties and 
assessments against a person or entity that, among other reasons, submits claims to a Federal health care 
program that the person or entity knows or should know are false or fraudulent. During this reporting 
period, OIG collected $6.4 million in civil monetary penalties and assessments. For example:
  District of Columbia  MedStar Health Visiting Nurse Association, Inc., formerly known as The 
Visiting Nurse Association of Washington, D.C., and its home office, Visiting Nurse Association, 
Inc. (collectively, MedStar VNA), agreed to pay $1.36 million and enter into a 5-year corporate 
integrity agreement to resolve their liability under the CMPL. OIG alleged that MedStar VNA 
submitted cost reports to the Medicare program for fiscal years ending in June 1998, 1999, and 
2000 that contained claims that were false or fraudulent or that were not provided as claimed. In 
particular, OIGs investigation focused on fraud allegations that MedStar VNA failed to disclose 
certain costs or provide documentation associated with related third parties in the relevant cost 
reports. The settlement agreement included the resolution of nonfraudulent adjustments that 
resulted in an outstanding Medicare overpayment for the fiscal year June 2000 cost report. 
  Virginia  A practitioner agreed to pay $46,000 to resolve his liability under the CMPL for allegedly 
violating the terms of his exclusion. OIG alleged that despite his exclusion, he sought and received 
employment with a nonprofit provider of community-based physical disability, mental health, and 
mental retardation services. The man allegedly served as the medical director for two of the facilities 
that received reimbursements for items and services furnished or prescribed by him. OIG learned of 
the alleged violation when the matter was self-disclosed by the practitioners employer. 
Kickbacks
Individuals or entities that engage in unlawful referral or kickback schemes may be subject to criminal 
penalties under the Federal health care anti-kickback statute, civil monetary penalties under OIGs 
CMPL authority, and/or program exclusion under OIGs permissive exclusion authority. A description 
of these enforcement authorities can be found in Appendix G. The following are examples of kickback 
enforcement actions during this reporting period:
  Pennsylvania  Home Health Corporation of America (HHCA) agreed to pay $300,000 and enter 
into a 5-year integrity agreement to resolve its liability under the CMPL provisions applicable to 
kickbacks. OIG alleged that from February 1997 through May 1998, HHCA made payments in the form 
of loans, consulting fees, and monthly space rental payments to six physicians located in Pennsylvania 
and Florida in exchange for their referral of Medicare beneficiaries requiring home health services 
and/or durable medical equipment provided by HHCA and paid for by the Medicare program.
  Nebraska  A former hospital chief executive officer (CEO) agreed to pay $130,000 and to enter 
into a 3-year integrity agreement to resolve his liability under the CMP provisions applicable to 
kickbacks. OIG alleged that from September 1994 through October 1999, the former CEO provided 
financial assistance to a physician in the form of bank loan guarantees; payment of consultant fees; 
and the provision of discounted pharmaceuticals, biologicals, supplies, and medical equipment in 
exchange for her referral of Medicare beneficiaries requiring cardiology care to the hospital. As a 
result of the former CEOs alleged conduct, he allegedly received annual bonuses that reflected, in 
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 19
part, the referrals made by the physician to the hospital. The hospital previously entered into a False 
Claims Act settlement related to this conduct.
Patient Dumping
Of the total civil monetary penalties OIG collected between April 1 and September 30, 2005, $213,000 
represents collections from nine hospitals under the Emergency Medical Treatment and Labor Act, 
a statute designed to ensure patient access to appropriate emergency medical services. The following 
are examples of settlements involving alleged violations of this statute: 
  Alabama  Bessemer Carraway Medical Center - University of Alabama Medical West agreed to pay 
$40,000 to resolve its CMP liability under the patient dumping statute. OIG alleged that Bessemer 
failed to provide a complete medical screening examination for a female patient who presented to 
Bessemers emergency department complaining of a fever and chills related to a kidney infection 
that had lasted for 4 days. The patient was allegedly seen by the triage nurse, who took the patients 
vital signs and allegedly concluded that the patient should be classified as nonurgent. The triage nurse 
allegedly instructed the patient to go to the registration desk to pay $85. The patient allegedly left the 
hospital and went to another hospital where she was admitted and treated with IV antibiotics.
  Louisiana  St. James Psychiatric Hospital, Inc., agreed to pay $30,000 to resolve its liability for 
CMPs under the patient dumping statute. OIG alleged that the hospital failed to accept appropriate 
transfers of two patients with psychiatric emergencies who needed the specialized capabilities of 
the hospital.
Criminal and Civil Enforcement
One of the most common types of fraud perpetrated against Medicare, Medicaid, and other Federal health 
care programs involves the filing of false claims for reimbursement. False claims may be pursued under the 
civil False Claims Act and, in appropriate cases, under Federal and State criminal statutes. A description 
of these enforcement authorities can be found in Appendix G. The successful resolution of these matters 
often involves the combined investigative efforts and resources of OIG, Federal Bureau of Investigation, 
Medicaid Fraud Control Units (MFCUs), and a variety of other law enforcement agencies.
OIG has the responsibility to assist the Department of Justice in bringing and settling cases under 
the civil False Claims Act. Many providers elect to settle their cases prior to litigation. As part of 
their settlements, providers often agree to enter integrity agreements with OIG to avoid exclusions 
and to be permitted to continue participation in Medicare, Medicaid, and other Federal health care 
programs. These agreements are monitored by OIG and require the providers to enhance existing 
compliance programs or establish new ones. The compliance programs are designed, in part, to prevent 
a recurrence of the underlying fraudulent activities.
In the fiscal year ending September 30, 2005, the Government negotiated $1.4 billion in civil and 
administrative settlements related to Medicare, Medicaid, and other Federal health care programs. 
Some of these successful settlements, as well as notable criminal enforcement actions, are described 
below. Summaries are organized by the sector of the health care industry involved or by the nature 
of the offense.
Fall 2005 Semiannual Report to Congress 20 | Centers for Medicare & Medicaid Services
Hospitals
  Alabama  HealthSouth Corporation, the nations largest provider of inpatient and outpatient 
rehabilitation services, agreed to pay $325 million plus interest to resolve allegations of fraud related 
to Medicare Parts A and B. The settlement resolved allegations of Medicare Part A cost report fraud 
involving false entries on HealthSouths home office cost statements and unallowable expenses on 
Medicare cost reports. The settlement also resolved allegations of Medicare Part B fraud concerning 
false claims for outpatient physical therapy services. HealthSouth allegedly billed the Medicare 
program for outpatient physical therapy services provided without a physician-certified plan of care, 
physical therapy services not performed by licensed providers, and one-on-one physical therapy 
when HealthSouth provided therapy services to more than one patient at a time.
  In addition, HealthSouth entered into a 5-year corporate integrity agreement. Through a separate 
settlement with CMS, the company also resolved outstanding administrative issues relating to 
Medicare cost reports.
  Pennsylvania  Abington Memorial Hospital agreed to pay $4.2 million and enter a 5-year corporate 
integrity agreement. Over a 9-year period, Abington allegedly submitted claims to Medicare for 
clinical laboratory services that were unbundled, upcoded, and/or double billed. In addition to the 
requirements of the corporate integrity agreement, the settlement agreement itself required the 
hospital to implement other specific compliance provisions, including the obligation to hire a new 
compliance team.
Home Health Agencies
  Minnesota  Intrepid USA Inc. agreed to pay $8 million and enter a 5-year corporate integrity 
agreement to resolve its liability for allegedly submitting false claims to Medicare, Medicaid, 
TRICARE, and CHAMPUS between February 1997 and October 2004. Intrepid, a Minnesota-
based corporation, owns and operates home health care and supplemental medical staffing businesses 
throughout the country. The Government alleged that Intrepid and certain affiliated entities 
submitted claims for home health services that were not provided by a qualified person, lacked 
physician orders and plans of care, lacked sufficient documentation of the patients homebound 
status, lacked an Outcome Assessment and Information Set evaluation, and/or were improperly 
coded. In addition, the Government alleged that during January 2002 through June 2003, Intrepid 
submitted claims to Medicaid for home health services that were not provided. 
  Louisiana  A former owner of a home health agency was sentenced to 27 months in prison and 
ordered to pay $2 million in restitution and a $50,000 fine for defrauding the Medicare program. 
As part of the scheme, he diverted employees pension funds and bonuses paid by Medicare for his 
own personal use. Investigation revealed that Medicare funds were used to pay for lawn services at 
his home and for personal travel expenses.
Medicare Contractors
  Pennsylvania  United Healthcare Insurance Company agreed to pay $3.5 million to resolve 
allegations that the contractor defrauded the Medicare program from 1996 to 2000. The Government 
alleged that United Healthcares telephone response unit mishandled beneficiary and provider phone 
inquiries and falsely reported its performance information to CMS while under contract with CMS 
as a regional carrier for durable medical equipment (DME) claims.
Fall 2005 Semiannual Report to Congress Centers for Medicare & Medicaid Services | 21
Durable Medical Equipment Suppliers
  Texas  The owner of a DME company was sentenced to 41 months imprisonment and ordered to 
pay $2.2 million in restitution for health care fraud and money laundering. As part of the scheme, 
the man paid recruiters for locating Medicare patients and paid physicians for fraudulent certificates 
of medical necessity (CMNs) and prescriptions for wheelchairs. Though Medicare was billed for 
motorized wheelchairs, beneficiaries either never received wheelchairs at all or were provided with 
much less expensive scooters.
  Oregon  A DME supplier and its owner were sentenced for charges related to paying business 
associates to induce Medicare referrals. The company received reimbursements from Medicare for 
wheelchairs and accessories, hospital beds, and enteral nutrition that were not medically necessary. 
A $2 million settlement agreement was previously reached, resolving their liability for DME that 
was allegedly either not provided or medically necessary and for allegedly using CMNs that were 
false, fraudulently obtained, or forged. 
Prescription Drugs
  Virginia  A physician specializing in pain management was sentenced to 25 years imprisonment 
and ordered to pay a $1 million fine for his conviction on illegal drug distribution charges. The 
physician was convicted following a 6-week jury trial on numerous charges of illegal drug distribution, 
including conspiracy to distribute controlled substances, and charges relating to drug trafficking 
that resulted in one death and serious bodily injury to others. The physician was also convicted for 
abusing a position of public and private trust and using a special skill in facilitating the commission 
and concealment of the offense. During the trial, the Government demonstrated that the physician 
knew his patients were selling and distributing the prescribed medications, including OxyContin. 
The physician performed perfunctory exams on patients then facilitated the patients demand for 
excessive amounts of controlled substances. A narcotic drug approved for the treatment of moderate 
to severe pain, OxyContin is covered under the Virginia Medicaid program.
Nursing Homes
  Connecticut  Hillcrest Healthcare, Inc., agreed to pay $750,000 to resolve its liability for 
the alleged failure to adequately oversee the management operations of the nursing home. The 
Government alleged that the nursing home submitted claims to Medicare and Medicaid from 
January 2002 through July 2004 for skilled nursing services provided to 22 beneficiaries that were 
not rendered in accordance with applicable laws, regulations, or rules, or were so inadequate as 
to constitute services that are not reimbursable under Medicare or Medicaid. Prior to the civil 
settlement, the State of Connecticut required Hillcrest to surrender its nursing home license, sell 
the facility, and pay a $200,000 penalty. In addition, Hillcrest pled nolo contendere in January 2005 
to second-degree manslaughter involving the death of a beneficiary and was ordered to pay a $10,000 
fine. 
  District of Columbia  An owner of a nursing agency was sentenced to 15 months incarceration 
and ordered to pay $74,000 in restitution for health care fraud. Beginning in January 2000, the 
woman engaged in a scheme to defraud Medicare and Medicaid by placing Certified Nurses Aides 
(CNAs) who she knew were not qualified or certified to work in various nursing facilities within the 
District of Columbia. The owner was able to accomplish her scheme by providing false and fictitious 
CNA registration cards.
Fall 2005 Semiannual Report to Congress 22 | Centers for Medicare & Medicaid Services
Clinics
  Washington  Seattle Cancer Treatment and Wellness Center (SCTWC), an affiliate of 
Cancer Treatment Centers of America, agreed to pay $478,000 and enter a 5-year corporate 
integrity agreement. SCTWC specializes in combining conventional oncology treatment with 
nonconventional medical treatments such as massage, acupuncture, and herbal medicine. The 
Government alleged that SCTWC submitted improper claims to Medicare and TRICARE for 
upcoded evaluation and management services and billed take-home oncology drugs as if they were 
physician administered. 
Practitioners 
  Massachusetts  An endocrinologist agreed to pay $447,000 and enter a 5-year integrity agreement 
for allegedly submitting false claims to Medicare between January 1998 and December 2003. The 
Government alleged that the endocrinologist improperly billed cholesterol measurement services 
and also billed office visits as consultations and routine blood draws as critical care blood draws.  
  Tennessee  A licensed social worker was sentenced to 6 months in jail and ordered to pay $45,000 
in restitution for health care fraud and false statements. The social worker administered a weekly 
program for a non-profit community mental health center. Though the program ended in 1999,  
the woman began to submit fraudulent claims to Medicare, Medicaid and TennCare for monthly 
and/or weekly individual psychotherapy services which were not provided for patients of the center. 
The center agreed to pay $493,000 plus interest and enter a 5-year certification of compliance 
agreement to resolve its liability in the matter which it self-disclosed to OIG. 
Medicaid Fraud Control Units
Currently, 48 States and the District of Columbia have Medicaid Fraud Control Units (MFCUs), which 
investigate and prosecute or refer for prosecution providers charged with defrauding the Medicaid 
program or abusing, neglecting, or financially exploiting beneficiaries in Medicaid-sponsored facilities. 
In FY 2004, OIG provided oversight for and administration of approximately $131 million in Federal 
grant awards to the units. In FY 2005, OIG provided oversight for and administration of approximately 
$149 million in Federal grant funds. 
An example of a case worked jointly by OIG with the MFCU during this semiannual period follows:
  South Dakota  A retail pharmacy owner was ordered to pay $83,000 in restitution for diverting 
pharmaceuticals from a nonprofit hospital. The owner used the illegally received pharmaceuticals to 
fill prescriptions for Medicaid patients. In November 2004, the pharmacy owner signed a stipulation 
and agreement with the South Dakota MFCU through which he agreed to pay $9,000, the amount 
of unjust Medicaid reimbursements. This investigation involved OIG, the South Dakota MFCU, 
and the Food and Drug Administration. 
Fall 2005 Semiannual Report to Congress 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.
  Public health agencies within the Department include:
  National Institutes of Health (NIH)
  Food and Drug Administration (FDA)
  Centers for Disease Control and Prevention (CDC)
  Health Resources and Services Administration (HRSA)
  Indian Health Service (IHS)
  Agency for Toxic Substances and Disease Registry (ATSDR)
  Agency for Healthcare Research and Quality (AHRQ)
  Substance Abuse and Mental Health Services Administration (SAMHSA)
OIG continues to examine the policies and procedures of these agencies to determine whether 
appropriate controls are in place to guard against fraud, waste, and abuse. These activities include 
preaward and recipient capability audits and evaluations. This oversight work has provided valuable 
recommendations to program managers for strengthening the integrity of agency policies and 
procedures and improving program performance.
23 Fall 2005 Semiannual Report to Congress 24 | Public Health Agencies
Public Health Agency-Related Reports
Outside Activities of Senior-Level National Institutes of Health Employees
OIG identified several vulnerabilities that inhibit National Institutes of Healths (NIH) ability to 
effectively review outside activities of senior-level employees. Departmental employees are allowed, 
with approval, to work privately with non-Federal entities on their personal time through outside 
activities. However, these activities must not conflict with employees official duties. Although outside 
activities can offer many benefits, they can potentially create real or apparent conflicts of interest for 
employees. Between 2001 and 2003, 40 percent of NIH senior-level employees received approval for 
319 outside activities. About half of these outside activities involved teaching or consulting and most 
were compensated. Vulnerabilities noted by OIG include the finding that employees submitted limited 
information regarding their outside activities. There are also several problems in the review process 
itself, such as approvals after the start date, limited use of written recusals, and inadequate followup 
of ongoing outside activities. To address these vulnerabilities, OIG recommended that NIH improve 
the quality and extent of information it receives about outside activities, and address inadequacies in 
the review process for outside activities. NIH concurred with the findings and recommendations. 
(OEI-01-04-00150)
Credentialing and Privileging at Indian Health Service Hospitals
Industry-wide standards and Indian Health Service (IHS) policy require credentialing and privileging 
reviews of medical practitioners, and the Indian Child Protection and Family Violence Prevention 
Act requires background investigations of all IHS employees and contractors. Concluding a series of 
reviews requested by IHS, OIG issued reports on two IHS-operated hospitals in Montana:  
  One hospital did not verify the credentials of three-quarters of the sampled practitioners before they 
provided patient care, did not issue current privileges for 20 percent, and did not have information 
indicating that it had requested background investigations for 55 percent of practitioners.  
(A-07-03-00159)
  Another hospital did not verify the credentials of 55 percent of the sampled practitioners before they 
provided patient care, did not issue current privileges for 6 percent, and did not have information 
indicating that it had requested background investigations for 52 percent of practitioners.  
(A-07-03-00152)
  OIG recommended that IHS direct both hospitals to complete credentialing and privileging reviews 
in a timely manner and to initiate the required background investigations for their practitioners. 
IHS stated that all recommended corrective actions had been taken. 
Federal Efforts to Address Child Abuse and Sexual Abuse Reporting Requirements for Title X 
Grantees
Prompted by a congressional request, OIG studied whether and how the Office of Population Affairs 
(OPA) informs its Title X Family Planning program grantees of their obligations under State laws 
requiring the reporting of child abuse, child molestation, sexual abuse, rape (including statutory 
rape), and incest for Title X grantees. OIG also reviewed how OPA monitors its grantees regarding 
these requirements.
Fall 2005 Semiannual Report to Congress Public Health Agencies | 25
OIG found that OPA informed and periodically reminded Title X grantees of their responsibilities 
regarding State child abuse and sexual abuse reporting requirements. Furthermore, OPA included 
State reporting requirements in its reviews and site visits of grantees. (OEI-02-03-00530)
The Centers for Disease Control and Preventions Management of HIV/AIDS Grants
The Centers for Disease Control and Preventions (CDC) management of HIV/AIDS prevention grants 
during FYs 1999 through 2003 did not always comply with Federal requirements. OIGs review of 
CDC records on 15 grants  including 5 grants to State agencies and 10 grants to community-
based organizations  identified deficiencies in the preaward, award, and postaward phases of grants 
management. The deficiencies existed because CDC management had not provided appropriate 
guidance to employees; the guidance in CDCs grants manual was not always consistent with laws, 
regulations, and departmental policies. 
Given the extent of deficiencies identified, OIG concluded that CDC could not ensure that its grants 
management operations provided appropriate direction to and oversight of HIV/AIDS prevention 
grantees. Following the audit fieldwork, CDC rescinded the agencys grants manual and adopted an 
HHS-wide policy manual. (A-04-03-08011)  
Hospital Bioterrorism Surge Capacity: Status of Early Implementation
In response to the fall 2001 terrorist attacks, Health Resources and Services Administration (HRSA) 
established the National Bioterrorism Hospital Preparedness Program Cooperative Agreement. The 
agreement includes critical benchmarks to increase hospital surge capacity in the event of another 
attack. As of spring 2004, OIG measured State achievement of surge capacity critical benchmarks 
based on State program officials self-assessments gathered during site visits and telephone interviews. 
Of the 50 States, the District of Columbia, and the 3 municipalities OIG reviewed, 50 reported 
shortcomings in meeting the critical benchmarks. OIG also concluded that the failure to meet even 
one critical benchmark could undermine a hospitals ability to achieve overall surge capacity. To the 
extent that the barriers identified in this report still exist, HRSA can assist States in achieving hospital 
surge capacities by appropriately focusing future years Cooperative Agreement guidance on those 
barriers. In addition, this report could help HRSA project officers better assist States by understanding 
the barriers individual States face in developing surge capacities. (OEI-04-03-00500)
Health Education Assistance Loan Defaults
Through the Health Education Assistance Loan (HEAL) program, HRSA guarantees commercial 
loans to students seeking education in health-related fields of study. The students are allowed to defer 
repayment of these loans until after they have graduated and begun to earn an income. Although the 
Departments Program Support Center (PSC) takes all steps it can to ensure repayment, there are 
loan recipients who ignore their indebtedness.
After PSC has exhausted efforts to secure repayment of a debt, it declares the individual in default. 
Thereafter, the Social Security Act permits, and in some instances mandates, exclusion from Medicare, 
Medicaid, and all Federal health care programs for nonpayment of these loans. Exclusion means that 
the individual may not receive reimbursement under these programs for professional services rendered. 
During the period covered by this report, 26 individuals and related entities were excluded as a result 
of PSC referral of their cases to OIG.
Fall 2005 Semiannual Report to Congress 2 | Public Health Agencies
Individuals who have been excluded as a result of default may enter into settlement agreements, 
whereby the exclusion is stayed while they pay specified amounts each month to satisfy the debt. If 
they default on these settlement agreements, the individuals can then be excluded until the entire debt 
is repaid and cannot appeal these exclusions. Some health professionals, upon being notified of their 
exclusion, immediately repay their HEAL debts. 
After being excluded for nonpayment of their HEAL debts, a total of 1,939 individuals have taken 
advantage of the opportunity to enter into settlement agreements or completely repay their debts. This 
figure includes the 47 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 $139.9 million. Of that amount, $3.2 million is 
attributable to this reporting period. 
In the following examples, each individual entered into a settlement agreement to repay the amount 
indicated:
  A California chiropractor  $224,000
  A Colorado dentist  $155,000
  A Florida chiropractor  $110,000
Public Health-Related Investigations
OIG also investigates allegations involving improper use of HHS grant funds. The following are 
examples of cases resolved during this reporting period:
  Maryland  Harlan Sprague Dawley, Inc. (HSD), agreed to pay $7.2 million plus interest to resolve 
its liability for allegedly supplying researchers with genetically nonconforming lab mice. HSD, an 
Indiana-based supplier of laboratory rodents, was under two contracts with the National Institute on 
Aging, an institute within the National Institutes of Health, to supply rodents with certain genetic 
characteristics for use in age related research. The Government alleged that the C57 breeder mice 
HSD provided did not conform to the known C57 genetic profile. This called into question the 
genetic integrity of mice used for the two contracts and, in some cases, the validity of the age-related 
studies performed by researchers.
  Alabama  The University of Alabama at Birmingham (UAB) and its related parties agreed to 
pay $3.4 million to resolve allegations concerning an NIH grant. The Government alleged that 
UAB misrepresented the amount of time to be spent by researchers on grant work and that UAB 
double-billed Medicare for medical services that were also paid through the grant. The agreement 
also requires UAB to submit a detailed compliance certification to OIG for a term of 3 years.
Fall 2005 Semiannual Report to Congress Public Health Agencies | 2
  Pennsylvania  The University of Pennsylvania (Penn), Childrens National Medical Center 
(CNMC), and three physician researchers entered into settlement agreements to resolve their 
liability for allegedly engaging in grant fraud in the course of conducting NIH- and FDA-funded 
clinical research on an investigational drug to treat a certain enzyme deficiency. As part of these 
settlements, Penn and CNMC agreed to pay $517,000 and $515,000, respectively. The three physician 
researchers agreed to substantial compliance obligations including training and the appointment of 
a medical monitor. Among other allegations, the Government contended that adverse reactions of 
patients were not reported, that the study continued when it should have been terminated, and that 
one patient died during the course of the research. 
  Massachusetts  A former medical student was sentenced to 364 days in prison and ordered to 
pay $304,000 in restitution on charges of loan and scholarship fraud. Originally in the United States 
on a student visa that later expired, the man used a false identity to obtain a bachelors degree and 
a medical degree using federally guaranteed loans and scholarships including a scholarship from 
the HHSs Scholarships for Disadvantaged Students (SDS) program. SDS provides scholarships to 
full-time, financially needy students from disadvantaged backgrounds who are enrolled in health 
professions and nursing programs.
Fall 2005 Semiannual Report to Congress  Administration for Children and Families  
and Administration on Aging
The Administration for Children and Families (ACF) provides direction and funding for programs 
designed to promote stability, economic security, responsibility, and self-support for the Nations 
families. Some of the major programs include Temporary Assistance for Needy Families (TANF), Child 
Support Enforcement, Foster Care, Family Preservation and Support, Head Start, and the Child Care 
and Development Block Grant. OIG reviews of these programs focus on ways to increase the efficient 
use of program dollars; to more effectively implement programs; to better coordinate programs among 
the Federal, State, and local governments; and to strengthen States financial management practices.
The Administration on Aging (AoA) awards grants to States for establishing comprehensive community-
based systems that assist the elderly in maintaining their independence and in remaining in their homes 
as long as possible. Socially and economically disadvantaged elderly and low-income minority elderly 
are targeted for assistance, including supportive and nutrition services, education and training, low-
cost transportation, and health promotion. OIG has reported opportunities for program improvements 
to target the neediest for services, expand available financial resources, upgrade data collection and 
reporting, and enhance program oversight. 
29 Fall 2005 Semiannual Report to Congress 30 | Administration for Children and Families and Administration on Aging
Administration for Children and Families-Related Reports
Ability of Noncustodial Parents To Contribute Toward Medicaid Costs 
This eight-State review found that States could reduce State and Federal Medicaid costs by increasing 
the number of noncustodial parents who provide medical support for their children pursuant to Title 
IV-D. For the 1-year period tested, 27 percent of Title IV-D children who were enrolled in Medicaid 
had noncustodial parents who were financially able to contribute toward their childrens Medicaid 
costs. These noncustodial parents could contribute an estimated $99 million of the Medicaid costs for 
the Title IV-D children reviewed in the eight States.
OIG recommended that ACF and CMS (1) provide specific guidance to States on collecting Medicaid 
costs from noncustodial parents who have the financial ability to pay and who do not have affordable 
employer-sponsored health coverage available, (2) clarify third-party liability regulations to assist 
State Medicaid agencies in coordinating with State Title IV-D agencies to collect Medicaid costs from 
noncustodial parents with medical support orders, and (3) seek legislation that would allow States 
to accumulate medical support payments to offset Medicaid fee-for-service costs for a reasonable 
period. The agencies generally agreed, though CMS believed that existing regulations and guidance 
provided sufficient authority for State Medicaid agencies to coordinate with State Title IV-D agencies.  
(A-01-03-02501)
Ability of Noncustodial Parents To Contribute Toward State Childrens Health Insurance 
Program Costs 
In this eight-State review, OIG estimated that 425,752 uninsured children whose noncustodial parents 
were unable to provide court-ordered medical support would have been eligible to receive State 
Childrens Health Insurance Program (SCHIP) benefits during the audit period if no other health 
insurance had been available. An estimated 228,907 of these children had noncustodial parents who 
could have contributed $130 million toward the $214 million in costs that would have been incurred 
if the children had been enrolled. OIG also determined that 120,356 Title IV-D children received 
SCHIP benefits during the audit period. An estimated 34,066 of these children had noncustodial 
parents who could have contributed $14 million toward the $22 million in SCHIP premiums paid on 
behalf of their children.
OIG recommended that CMS issue program guidance to advise States of their authorities under Federal 
law to collect SCHIP costs from noncustodial parents and determine whether additional Federal funds 
are needed to assist States in interfacing their Title IV- D and SCHIP databases and in implementing 
a process to collect SCHIP costs from noncustodial parents and, as appropriate, provide such funds. 
CMS did not believe that formal guidance was necessary but agreed to informally alert States of their 
authority to collect SCHIP costs. CMS also commented that States already have the ability, under their 
10-percent administrative SCHIP cap, to build the necessary infrastructure. (A-01-03-02502)
Childrens Use of Health Care Services While in Foster Care: New York
OIG assessed whether sampled New York children in foster care have Medicaid coverage and are 
receiving health care services. OIG found that all 50 children in the sample have Medicaid coverage and 
access to health care services. However, many foster caregivers said they are not taught how to navigate 
the Medicaid system, in that they are not given an explanation of covered services or a schedule of 
Fall 2005 Semiannual Report to Congress Administration for Children and Families and Administration on Aging | 31
necessary doctors appointments. As examples, 21 caregivers had not heard of Medicaids Early and 
Periodic Screening, Diagnosis, and Treatment (EPSDT) program, which requires each State to make 
preventive and follow-up care available to children receiving Medicaid, and 28 caregivers reported that 
they did not receive important information about their childrens medical history.
OIG recommended that ACF and CMS work with New York to further promote access by addressing the 
caregivers limited knowledge of Medicaid and the EPSDT. CMS concurred. OIG also recommended 
that ACF help the State ensure that the most complete medical histories are shared with the childrens 
caregivers. ACF noted that New Yorks Program Improvement Plan contains action steps that address 
the gathering of medical information and the physical and mental health needs of children served by 
New Yorks child welfare system. (OEI-02-00-00362)
Adoption Assistance Payments in Maine
The adoption assistance program helps States to encourage the adoption of hard-to-place children. The 
Federal Government shares in the cost of adoption assistance maintenance payments for children who 
meet Federal eligibility requirements. The maintenance payments are based on a daily rate that varies 
depending on whether a child has special needs. 
Maine did not consistently comply with Federal eligibility requirements in claiming adoption assistance 
maintenance payments during State FYs 2001 through 2003. For example, the State did not, in all 
cases, meet program income eligibility requirements or satisfy judicial determination requirements 
demonstrating that continuation in the home would be contrary to the childs welfare. As a result, the 
State claimed $4.2 million (Federal share) in unallowable payments.
OIG recommended that the State make financial adjustments and claim future adoption assistance 
payments only for children meeting Federal eligibility requirements. The State concurred with the 
recommendations. (A-01-04-02503)
Title IV-E Administrative and Training Costs in Delaware
Title IV-E of the Social Security Act, as amended, authorizes Federal funds for States to provide foster care 
and adoption assistance for children. ACF provides funding at a 50-percent rate for State administrative 
expenditures and at an enhanced 75-percent rate for certain State training expenditures. 
In this report, OIG expressed concerns about the allowability of $6.2 million in Federal funding that 
Delaware claimed for administrative and training costs. The State allocated to the Title IV-E program 
a disproportionate share of costs for case management of Title IV-E candidates and used incorrect 
salaries to allocate costs to the claim. Also, contrary to Federal regulations, the State claimed indirect 
costs at the enhanced 75-percent Federal funding rate rather than the allowable 50-percent rate. 
OIG recommended that the State make financial adjustments, improve its cost allocation plan, and 
strengthen its procedures. The State concurred with the recommendations. (A-03-03-00562)
Performance Data for Senior Medicare Patrol Projects
Senior Medicare Patrol Projects receive grants from AoA to recruit retired professionals to serve as 
educators and resources in assisting Medicare beneficiaries to detect and report fraud, waste, and 
abuse in the Medicare program. This report aimed to track performance data, perform comparative 
Fall 2005 Semiannual Report to Congress 32 | Administration for Children and Families and Administration on Aging
data analysis, and verify documentation of overpayments recovered as a result of these projects. From 
July through December 2004, the 57 projects in operation educated over 179,600 beneficiaries in 
over 79,700 group training sessions and one-on-one sessions. As a result of these educational efforts, 
the projects received over 6,300 complaints, of which 559 were referred to Medicare contractors for 
followup. A total of 328 complaints resulted in money recouped to Medicare or other action taken, 
for a total of over $27,200 recouped to the program. In addition, OIG documented savings of over 
$149,100 to individuals, $17,100 to Medicaid, and $9,300 to beneficiaries. (OEI-02-04-00361)
Undistributable Child Support Collections in Illinois
ACFs Office of Child Support Enforcement (OCSE) requires States to offset Child Support Enforcement 
program costs by recognizing and reporting program income from undistributable child support 
collections and interest earned on program funds. OIG found that Illinois did not report program 
income for almost $1.7 million in undistributable child support collections for the quarters ended 
December 1998 through December 2003. Illinois stated that it did not report this income because it 
was unaware of the reporting requirement. In addition, OIG was unable to determine the Federal 
program income portion of more than $1.7 million in outstanding Cook County child support checks 
because data on the check register were insufficient to link checks to child support cases.
OIG recommended that Illinois make financial adjustments, work with OCSE to negotiate the Federal 
share of program income for the outstanding child support checks, and improve its procedures. Illinois 
agreed with most of the recommendations. (A-05-04-00039) 
Child Support Enforcement 
The detection, investigation, and prosecution of noncustodial parents who fail to pay court-ordered 
child support is a priority for OIG. Working with the OCSE, the Department of Justice, U.S. 
Attorneys Offices, U.S. Marshals Service, and other Federal, State, and local partners, OIG develops 
ways to expedite the collection of child support. Since 1995, OIG has opened 2,986 investigations of 
child support cases nationwide, which have resulted in 1,106 convictions and court-ordered restitution 
and settlements of $57 million. 
Task Forces
In 1998, OIG and OCSE initiated Project Save Our Children, a child support initiative made up of 
multiagency, multijurisdictional investigative task forces for child support enforcement. The task forces 
are designed to identify, investigate, and prosecute egregious criminal nonsupport cases on both the 
Federal and State levels by coordinating law enforcement, criminal justice, and child support office 
resources. See the child support task forces table below.
Fall 2005 Semiannual Report to Congress Administration for Children and Families and Administration on Aging | 33
Task Force Table
Task Force Regions Task Force Headquarters Task Force States
Great Plains Topeka, Kansas Iowa, Kansas, Missouri, Nebraska, North 
Dakota, South Dakota
Mid-Atlantic Baltimore, Maryland  Delaware, District of Columbia, Maryland, 
Pennsylvania, Virginia, West Virginia
Midwest Columbus, Ohio Illinois, Indiana, Michigan, Minnesota, Ohio,  
Wisconsin
New England Boston, Massachusetts Connecticut, Maine, Massachusetts, New 
Hampshire, Rhode Island, Vermont
Northeast New York, New York   New Jersey, New York, Puerto Rico, Virgin 
Islands
Pacific North Olympia, Washington  Alaska, Idaho, Oregon, Washington
Rocky Mountains  Denver, Colorado   Colorado, Montana, Utah, Wyoming
Southeast Atlanta, Georgia Alabama, Florida, Georgia, Kentucky, North 
Carolina, South Carolina, Tennessee
Southwest Dallas, Texas Arkansas, Louisiana, Mississippi,
New Mexico, Oklahoma, Texas
West Coast Sacramento, California Arizona, California, Hawaii, Nevada
Central to the task forces are the screening units located in each task force region and staffed by 
investigative analysts from OIG and OCSE. The units receive child support cases from the States, 
conduct 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 resolved.
At this point, the task force units have received over 9,030 cases from the States. As a result of the work 
of the task forces, 550 Federal arrests have been executed and 529 individuals sentenced. The total 
ordered amount of restitution related to Federal investigations is $25.4 million. There have been 366 
arrests at the State level and 343 convictions or civil adjudications to date, resulting in $18.2 million 
in restitution being ordered. 
Investigations
OIG investigations of child support cases, nationwide, resulted in 63 convictions and court-ordered 
restitution and settlements of $3.6 million during this semiannual period. Examples of the Federal 
arrests, convictions, and sentences for failure to pay child support include the following:
  New Jersey  A man was sentenced to 24 months incarceration, 1 year of probation and ordered 
to pay $145,000 in restitution for failure to pay child support. The man, who holds a masters degree 
in electrical engineering, was found guilty at the conclusion of his jury trial. 
Fall 2005 Semiannual Report to Congress 34 | Administration for Children and Families and Administration on Aging
  Ohio  A man was sentenced to 5 years probation and ordered to pay $52,000 in restitution for 
failure to pay child support. In 1988, the man was ordered to pay support for his three children. He 
made sporadic payments until May 1997 at which time he stopped paying completely. As part of his 
probation, he was ordered to participate in a drug treatment program for 3 years.
  Florida  A man was sentenced to 5 years probation and ordered to pay $47,000 in restitution 
for failure to pay child support. Since 1986, the man made only two support payments for his two 
children who are now emancipated. A fugitive from justice for years, the man was arrested in 
Tennessee and extradited back to Florida in 2004. As part of his sentence, the man was ordered to 
enroll in an alcohol treatment program.
  South Dakota  A man was sentenced to 5 years probation and ordered to pay $6,000 for failure to 
pay child support; prior to sentencing, he paid $19,000. The man used numerous alias names, Social 
Security numbers, and dates of birth to avoid paying child support. In a bankruptcy proceeding, 
which was revealed during the investigation, the man listed himself as the owner of a California-
based company with assets of over $15 million.
Fall 2005 Semiannual Report to Congress 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 information technology security). The Assistant Secretary is 
the Departments Chief Financial Officer and oversees the Departments Chief Information Officer. 
The Department also has the responsibility, by virtue of the magnitude of its funding, to negotiate the 
payment rates and methods that many outside entities, such as State and local governments, charge for 
administering HHS and other Federal programs.
The Office of the Assistant Secretary for Administration and Management (ASAM) is responsible 
for HHS policies regarding human resources, grants, and acquisition management. This office also 
oversees the Program Support Center, which provides a range of administrative services, such as 
human resources, financial management, and administrative operations.
OIG has general oversight responsibility for these activities. A related major responsibility derives 
from Office of Management and Budget Circular A-133, under which HHS is the cognizant agency to 
audit the majority of Federal funds awarded to major research schools and State and local government 
cost allocation plans. OIG also oversees the work of non-Federal auditors of Federal money at some 
6,700 entities, such as community health centers and Head Start grantees, as well as at State and local 
governments, colleges and universities, and other nonprofit organizations. OIG also is responsible for 
auditing the Departments financial statements.
OIG reviews audits, inspections, and studies performed by others, such as the Office of Management 
and Budgets Program Assessment and Rating Tool and reports of the Government Accountability 
Office. It takes these studies into account when planning its own work and examines management 
actions designed to correct the deficiencies cited in these prior studies.
35 Fall 2005 Semiannual Report to Congress 3 | General Oversight
Non-Federal Audits
OMB Circular A-133 establishes audit requirements for State and local governments, colleges and 
universities, and nonprofit organizations receiving Federal awards. Under this circular, covered entities 
are required to have an annual organization-wide audit of all Federal money they receive. These audits 
are conducted by non-Federal auditors, such as public accounting firms and State auditors. OIG reviews 
the quality of these audits and assesses the adequacy of the entitys management of Federal funds. In 
the second half of FY 2005, OIGs National External Audit Review Center reviewed 977 reports that 
covered $1.2 trillion in audited costs. Federal dollars covered by these audits totaled $423.4 billion, 
about $189.9 billion of which was HHS money.
OIGs oversight of non-Federal audit activity informs Department managers about the soundness of 
management of Federal programs and identifies any significant areas of internal control weakness, 
noncompliance, and questioned costs that require formal resolution by Federal officials. OIG identifies 
entities for high-risk monitoring, alerts program officials to any trends that could indicate problems in 
HHS programs, and profiles non-Federal audit findings of a particular program or activity over time 
to identify systemic problems. OIG also provides training and technical assistance to grantees and the 
auditing profession.
OIG maintains a quality control review process to assess the quality of the non-Federal reports received 
and the audit work that supports selected reports. The non-Federal audit reports reviewed and issued 
during this reporting period are categorized in the box below:
Reports issued:
Without changes or with minor changes                               829
With major changes  110
With significant inadequacies  38
                     Total:  977
The 977 reports included recommendations for HHS program officials to take action on cost recoveries 
totaling $1.3 billion, as well as 4,049 recommendations for improving management operations. In 
addition, these audit reports provided information for 84 special memorandums that identified 
concerns for increased monitoring by departmental management.
Resolving Recommendations
The following tables are provided in accordance with section 5 of the Inspector General Act and 
indicate the dollar value of actions taken on OIGs recommendations.
Fall 2005 Semiannual Report to Congress General Oversight | 3
Table 1: Reports with Questioned Costs*
Number of  Dollar Value  Dollar Value 
Reports
Reports Questioned Unsupported
Section 1
For which no management decision  729 $2,289,132,000 $299,806,000
had been made by the beginning of the 
1
reporting period
Issued during the reporting period 66 $733,742,000 $85,379,000
Total Section 1 795 $3,022,874,000 $385,185,000
  
Section 2
For which a management decision was 
2,3
made during the reporting period  
Disallowed costs 430 $952,435,000 $122,888,000
Costs not disallowed 63 $30,477,000 $128,000
Total Section 2 493 $982,912,000 $123,016,000
Section 3
For which no management decision had 
been made by the end of the reporting 
period
Total Section 1   302 $2,039,962,000 $262,169,000
minus Total Section 2
Section 4
For which no management decision was  230 $1,312,335,000 $131,233,500
4
made within 6 months of issuance
* Details concerning footnotes can be found in Appendix D.
Fall 2005 Semiannual Report to Congress 3 | General Oversight
Table 2: Funds Recommended to be Put to Better Use*
Number of 
Reports Dollar Value 
Reports
Section 1
For which no management decision had been made by the   59 $7,331,320,000
1
beginning of the reporting period
Issued during the reporting period 6 $72,665,000
Total Section 1 65 $7,403,985,000
  
Section 2
For which a management decision was made during the  
reporting period 
Value of recommendations that were agreed to  
by management
Based on proposed management action 23 $6,439,478,000
Based on proposed legislative action
Value of recommendations that were not agreed to  
by management 3 $14,357,000
Total Section 2 26 $6,453,835,000
Section 3
For which no management decision had been made by the 
2
end of the reporting period
Total Section 1 minus Total Section 2 39 $950,150,000
* Details concerning footnotes can be found in Appendix D.
Fall 2005 Semiannual Report to Congress General Oversight | 39
Legislative and Regulatory Review and Development
Regulatory Review Functions
Section 4(a) of the Inspector General Act of 1978 requires that the Inspector General review existing 
and proposed legislation and regulations and make recommendations in this report concerning the 
impact on the economy and efficiency of the administration of the Departments programs and on 
the prevention of fraud and abuse.  In reviewing regulations and legislative proposals, OIG uses as the 
primary basis for its comments the audits, inspections, investigations, and other activities highlighted 
in this and previous semiannual reports.
During the fiscal year 2005 reporting period, OIG was involved in the review and clearance of the 
implementing regulations resulting from the various Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) provisions.  OIG took part in the multiple review and submittal of 
substantial comments and recommendations relating to potential fraud and abuse issues in conjunction 
with implementation of the regulations for the Medicare Part D Prescription Drug Benefit, establishment 
of the Medicare Advantage program, and e-prescribing standards for the prescription drug program.  
OIGs general concerns have been with reviewing vulnerabilities and ensuring OIGs ability to conduct 
effective oversight.
Regulatory Development
OIG is responsible for the development and publication of a variety of sanction regulations addressing 
civil money penalty and program exclusion authorities administered by the Inspector General, as well 
as regulations promulgating safe harbors related to the anti-kickback statute.  During this semiannual 
reporting period, OIG:
  Published final regulations addressing OIGs authority to impose civil money penalties against 
endorsed sponsors under the Medicare prescription drug discount card program that knowingly 
engage in false or misleading marketing practices, overcharge program enrollees, or misuse 
transitional assistance funds.
  Finalized and published revised Healthcare Integrity and Protection Data Bank regulations addressing 
data collection reporting requirements.  The rule specifically clarified the types of personal numeric 
identifiers that may be reported to the data bank in connection with adverse actions.
  Developed and published proposed rulemaking in accordance with section 431 of MMA establishing 
regulatory standards for a new safe harbor under the Federal anti-kickback statute for certain goods, 
items, services, donations, and loans provided by individuals and entities to certain health centers 
funded under section 330 of the Public Health Service Act.
  In accordance with the Public Health Security and Bioterrorism Preparedness and Response Act of 
2002, published revised final regulations addressing OIGs authority to impose civil money penalties 
against any individual or other person involved in the possession, use, and transfer of prohibited 
select agents and toxins as set forth in 42 CFR part 73.
Fall 2005 Semiannual Report to Congress 40 | General Oversight
  Prepared and published a corrections amendment to the Healthcare Integrity and Protection Data 
Bank regulations in 45 CFR part 61 to clarify the existing definition for the term any other negative 
action or finding.
In addition, during fiscal year 2005, OIG continued to develop and publish a number of Federal 
Register notices that serve to reflect OIG policy and procedures with regard to compliance program 
guidance and other OIG administrative matters.  During this semiannual period, OIG:
  Developed and published final Supplemental Compliance Program Guidance for Hospitals that 
provided voluntary guidelines to assist hospitals and hospital systems in identifying significant risk 
areas and in evaluating and, as necessary, refining ongoing compliance efforts.
  In accordance with section 205 of the Health Insurance Portability and Accountability Act, published 
the OIG annual notice soliciting proposals and recommendations for developing new and modifying 
existing safe harbor provisions under the Federal anti-kickback statute, as well as developing new 
OIG Special Fraud Alerts.
  Developed and published a Federal Register notice setting forth specific revisions to Part A, Chapter 
AF of OIGs Statement of Organization, Functions, and Delegations of Authority.  The revised 
organizational statement reflects a recent realignment of certain functions for carrying out the 
statutory requirements for operating OIG.
Employee Fraud and Misconduct
Most individuals employed by HHS are dedicated, honest civil servants.  Occasionally, however, 
individuals violate their ethical and fiduciary responsibilities.  OIG conducts or oversees investigations 
of serious allegations of wrongdoing by Department employees.  For example:
  Arizona  A former Indian Health Service employee was sentenced to concurrent terms of 5 years 
in prison for theft and 3 years in prison for forgery and ordered to pay $770,000 in restitution.  
During a 5-year period, the long-time Federal employee deposited State Medicaid program insurance 
checks made payable to IHS into his personal bank account.  
Prosecutions
During this semiannual reporting period, OIG investigations resulted in 279 successful criminal 
actions.  Also during this semiannual period, 780 cases were presented for criminal prosecution to 
the Department of Justice and, in some instances, to State and local prosecutors.  Criminal charges 
were brought by prosecutors against 350 individuals and entities.
In addition to terms of imprisonment and probation imposed in the judicial processes, $522 million 
was ordered to be returned or returned as a result of OIG investigations during this reporting period.  
Civil settlements from investigations resulting from audit findings are included in this figure.
Fall 2005 Semiannual Report to Congress Appendixes
41 Fall 2005 Semiannual Report to Congress Fall 2005 Semiannual Report to Congress Appendix A
Savings  Achieved  Through  Policy  and  Procedural  Changes  
Resulting From Audits, Investigations, and Inspections April 1 Through  
September 30, 2005
The following schedule highlights savings resulting from Office of Inspector General (OIG) efforts to 
prevent unnecessary obligations for expenditures of Federal funds or to improve agency systems and 
operations. These achievements depend greatly on the contributions of others, such as partners within 
the Department. The amounts shown represent funds or resources that will be available for better use 
as a result of documented measures taken by Congress or by management in response to OIG audits, 
investigations, and inspections, including actual reductions in unnecessary budget outlays; deobligations of 
funds; reductions in costs incurred or preaward grant reductions from agency programs or operations; and 
reduction and/or withdrawal of the Federal portion of interest subsidy costs on loans or loan guarantees, 
insurance, or bonds. 
Legislative savings are annualized amounts based on Congressional Budget Office (CBO) fiscal year estimates 
for the related legislation. OIG calculates annualized administrative savings based on departmental figures, 
where available, for the year in which the change is effected or for multiple years, if applicable. The savings 
listed on the table below represent approximately one-half of the annualized savings. 
Total savings from these sources were nearly $16.686 billion ($16,685,700,000) for this semiannual 
period.
Savings
OIG Recommendation Implementing Action (millions)
CENTERS FOR MEDICARE & MEDICAID SERVICES
Medicare Home Health Payments: Chapter 1 of Subtitle G of the Balanced  $6,630
CMS should restructure the payment system for home  Budget Act of 1997 (BBA) (as amended by 
health care to eliminate inappropriate incentives  the Omnibus Consolidated and Emergency 
that unnecessarily increase cost and utilization;  Supplemental Appropriations Act of 1998), 
prevent unscrupulous providers from gaining entry  which  pertains  to  home  health  benefits, 
into the program; and improve program controls,  addresses  OIGs  concerns  regarding  the 
such  as  eligibility  determinations  and  approval  need to restructure and control the payment 
of plans of care and services. (OEI-04-93-00260   system for these services. For example, it 
OEI-09-96-00110, A-04-96-02121) mandates that a prospective payment system 
be developed and that the total payments 
in fiscal year (FY) 2000 be equal to the 
amount that would have been paid under the 
prior system if cost limits were reduced by  
15 percent. It also eliminates periodic interim 
payments to home health agencies.
 43 Fall 2005 Semiannual Report to Congress 44 | Appendix A 
Savings
OIG Recommendation Implementing Action (millions)
Medicare Indirect Medical Education: Section 4621 of the BBA (as amended by the  $2,440
CMS should base the indirect medical education  Balanced  Budget  Refinement  Act  of  1999) 
adjustment factor on the level support by CMSs  reduced the indirect teaching adjustment factor 
empirical data.  (A-07-88-00111) from 7.7 percent in FY 1997 to 7.0 percent in 
FY 1998, 6.5 percent in FY 1999, 6.0 percent 
in FY 2000, and 5.5 percent in FY 2001 and 
thereafter.
Medicaid  Enhanced  Payments  to  Local  On January 18, 2002, CMS issued a final rule  $2,400
Providers: that modified the Medicaid UPL provisions 
CMS should reconsider capping the aggregate upper  to remove the 150-percent UPL for services 
payment limit (UPL) at 100 percent for all facilities rather  furnished by non-State-owned or -operated 
than the 150 percent allowance for non-State-owned  hospitals.    The  rule  became  effective  on  
government hospitals.   May 15, 2002.
(A-03-00-00216)
Payment  Reform  for  Part  B  Drugs  and  Sections 303-305 of the MMA revised the current  $800
Biologicals: payment methodology for Part B covered drugs 
CMS  should  reexamine  drug  reimbursement  and biologicals that were not paid on a cost or 
methodologies based on average wholesale price (AWP)  prospective payment basis.  Under the MMA, 
with the goal of reducing payments in both Medicare  most drugs were to be paid at 85 percent of the 
and  Medicaid.  (Multiple  reports  and  testimony,  April 1, 2003, AWP effective January 1, 2004, 
including  OEI-03-96-00420,  OEI-03-97-00290,   unless they fell under certain exceptions. CBO 
OEI-03-00-00310, OEI-03-97-293, A-06-00-00023, A-06- specifically attributed the FY 2004 savings to 
01-00053, A-06-02-00041) sections 304 and 305.  After 2004, most drug 
prices are to be based on the average sales price 
or competitive acquisition instead of AWP.
Medicare Secondary Payer: Section 301 of the Medicare Prescription Drug,  $600
CMS should ensure sufficient resources and contractor  Improvement, and Modernization Act of 2003 
training for retroactively examining paid claims to identify  (MMA) clarifies, retroactively, the Secretarys 
other payer sources and initiating recovery action on all  authority  to  make  certain  reimbursable 
related overpayments.  (Multiple reports and testimonies,  conditional payments and take recovery actions 
including A-02-98-01036, A-04-92-02057, against  all  responsible  entities,  including 
A-09-89-00162, A-10-86-62005) collection  of  damages,  under  Medicares 
secondary payer provisions.  This action builds 
on other program improvements related to 
OIGs work that were implemented by the BBA 
of 1997, OBRA 1993, OBRA 1990, and OBRA 
1989.
Graduate Medical Education Payments: Sections 4623 and 4626 of the BBA provided  $590
CMS should reevaluate Medicares policy of paying graduate  for limits in the number of residents counted 
medical education (GME) costs for all physician specialties  for purposes of Medicare GME payments and 
and consider backing legislation to reduce Medicares  offered payments for voluntary reductions in 
investment in GME for a more accurate and representative  the number of residents to limit Medicares 
sharing of GME costs.  (A-06-92-00020) share of GME costs.
Fall 2005 Semiannual Report to Congress Appendix A | 45
Savings
OIG Recommendation Implementing Action (millions)
Payment for Durable Medical Equipment: Section 302 of the MMA froze payments for  $400
CMS should take steps to reduce payments for a variety  certain DME items, including prosthetic devices, 
of DME and related supplies. (Multiple reports including  prosthetics, and orthotics, effective January 1, 
OEI-03-01-00680, OEI-03-02-00700,  2004.
OEI-07-96-00221, OEI-03-96-00230, 
OEI-03-94-0021, OEI-06-92-00861, 
OEI-06-92-00866)
Medicare Home Health Payments: Section 701 of the MMA changes the updates of  $300
The home health agency update factor should be  home health rates from fiscal year to calendar 
reduced to account for the high error rate found in  year beginning in 2004, with the update for the 
OIGs review. The annual update was defined as  last 3 quarters of 2004 equal to the market basket 
the home health market basket percentage increase.   increase minus 0.8 percent.
(A-04-99-01194)
Clinical Diagnostic Laboratory Tests: Sections  628  of  the  MMA  froze  annual  $200
CMS should seek legislation to allow across-the-board  updates  for  FY 2004  through  FY 2008.  
adjustments in Medicare laboratory fee schedules,  This action builds on prior legislative actions 
bringing them in line with the prices that laboratories  in the BBA of 1997, OBRA 1993, OBRA 1990, 
charge physicians in a competitive marketplace and  and legislation in 1984 that were also responsive 
periodically evaluate the national fee schedule levels.  to OIGs recommendations to curb excessive 
(A-09-89-00031, A-09-93-00056) clinical laboratory test reimbursements by 
Medicare.
Payment for Services Furnished in Ambulatory  Section 626 of the MMA limited the ASC update  $200
Surgical Centers: starting April 1, 2004, then freezes updates for a 
CMS should set rates that are consistent across sites and  period beginning the last quarter of FY 2005.
reflect only the costs necessary for the efficient delivery 
of health services and establish parity among Ambulatory 
Surgery Centers (ASC) and outpatient departments. 
(OEI-05-00-00340, OEI-09-88-01003, 
A-14-98-00400, A-14-89-00221)
Hospice Certification: Sections 4441-4449 of the BBA contained  $80
CMS  should  restructure  hospice  benefit  policies  provisions to control hospice payments and 
to  curb  inappropriate  growth  in  the  program,  practices, such as replacing the current unlimited 
particularly with regard to the fourth benefit period.   fourth benefit period with an unlimited number 
(OEI-05-95-00250, A-05-96-00023) of  60-day  benefit  periods  (each  requiring 
recertification).
Fall 2005 Semiannual Report to Congress 4 | Appendix A 
Savings
OIG Recommendation Implementing Action (millions)
Fraud and Abuse Provisions of the Balanced  Subtitle D of the BBA contained a number  $80
Budget Act: of provisions that corresponded to and were 
CMS  should  require  durable  medical  equipment  supported by OIG work. For example, the BBA 
(DME) suppliers and home health agencies to provide  authorized the Secretary to collect Social Security 
Social Security numbers and employee identification  numbers and employer identification numbers 
numbers  (OEI-04-96-00240,  OEI-09-96-00110);  from entities under Medicare, Medicaid, and 
refuse to enter into provider agreement with any  Title V; authorized the Secretary to refuse to 
home  health  agency  whose  owners  or  principals  enter into contracts with physicians or suppliers 
have prior criminal records or are the relatives of  that have been convicted of felonies; authorized 
owners of a provider that had defrauded Medicare   the exclusion of entities owned or controlled by 
(OEI-09-96-001100); apply inherent reasonableness  the family or household members of excluded 
provisions  when  assessing  the  appropriateness  of  individuals; authorized CMS to make inherent 
Medicare payments (OEI-03-94-00392); and authorize  reasonableness adjustments up to 15 percent 
competitive bidding as a means of providing Medicare  to all Part B services except physician services; 
services  (OEI-03-94-00021,  OEI-06-92-00866,   authorized up to five demonstration projects 
OEI-03-96-00230). Also, CMS should clarify which  to be completed by December 31, 2002 (one 
general and administrative and fringe benefit costs at  must be oxygen and oxygen equipment) which 
hospitals and home health agencies are related to patient  can have multiple sites to allow competitive 
care; specifically, distinguish between employee benefits  bidding;  and  prohibited  reasonable  cost 
and/or prerequisites to entertainment and patient care,  payments for items such as entertainment, gifts 
and specify that the cost of entertainment, goods or  and donations, education expenses, and personal 
services for personal use, alcohol, all fines and penalties  use of automobiles.
and associated interest, dues, and membership costs 
associated with civic and community organizations are 
not allowable. (A-03-92-00017, A-04-93-02067)
Rural Health Clinics: Section 4205 of the BBA extended the per-visit  $80
The oversight and functioning of the current cost  payment limits to provider-based clinics and 
reimbursement  system  should  be  improved  by  stipulated that the shortage area requirements 
implementing caps on provider-based rural health  designation be reviewed triennially.
clinics and allowing States to do so, or finding other 
ways to make reimbursement between provider-based 
and independent clinics more equitable. In addition, the 
certification process should be modified to increase State 
involvement and ensure more strategic placement of rural 
health clinics. Recertification should be required within 
a specific time limit (for example, 5 years), applying new 
criteria to document the need and impact on access. 
(OEI-05-94-00040)
Hospital Sales: Section  4404  of  the  BBA  eliminated  the  $60
CMS should eliminate the requirement that Medicare  requirement that Medicare make adjustments 
adjust for gains and losses when hospitals undergo  by setting the Medicare capital asset sales price 
changes of ownership. (OEI-03-96-00170) equal to the net book value.
Fall 2005 Semiannual Report to Congress Appendix A | 4
Savings
OIG Recommendation Implementing Action (millions)
Payments for Ambulance Services: Section 4531 of the BBA of 1997 made interim  $20
CMS should seek legislative authority to develop a fee  reductions in ambulance payments by limiting 
schedule for ambulance transportation and examine the  the allowed rate of increase and mandated 
inherent reasonableness of current allowable charges.  the establishment of a fee schedule by January 
(OEI-05-95-00300) 1, 2000. Such fee schedule is to be set so that 
aggregate payments are reduced by 1 percent.
ADMINISTRATION FOR CHILDREN AND FAMILIES
Availability of Health Insurance for Title IV-D  The BBA of 1997 established Title XXI of the  $5.7
Children: Social Security Act, known as the State Childrens 
Connecticut  should  either  implement  policies  and  Health Insurance Program (SCHIP), to enhance 
procedures to require noncustodial parents to pay all or  Medicaid coverage provided to children and 
part of the Medicaid costs for their dependent children or  allow States to create insurance options for 
establish a statewide health insurance plan that provides  families who exceed Medicaid resource and 
reasonably priced, comprehensive coverage for children,  income  limits.  Connecticut  received  CMS 
with costs paid by noncustodial parents. (A-01-97-02506) approval in April 1998 to initiate a child health 
program. Under Connecticut law, applicants 
include noncustodial parents under court orders 
to provide health insurance.
 
PRIOR SEMIANNUAL REPORTING  PERIOD CORRECTION
Medicare Outlier Payments: CMS issued new regulations on June 9, 2003.  $1,800
To prevent future inappropriate outlier payments, CMS  As a result of the new regulations, the Medicare 
should focus its attention on (1) determining how to limit,  program is estimated to save at least $9 billion from 
if not eliminate, the policy which allows for the use of  2004 to 2008. 
the statewide rate in place of a hospital-specific rate, (2) 
dramatically reducing the time lag between the payment  Note: This item of savings was unintentionally 
of outliers and the actual closing of a specific hospitals  omitted from the spring 2005 Semiannual Report. 
cost report, particularly for the hospitals that the fiscal  It is included here to correct that omission.
intermediary identify as having significantly increased 
their charges, and (3) eliminating the hospitals ability to 
construct and manipulate charges to determine whether 
an outlier payment is warranted in a specific medical case 
without regard to the actual costs involved in that case. 
(A-07-02-04007)
Fall 2005 Semiannual Report to Congress 4 |
Fall 2005 Semiannual Report to Congress Appendix B
Unimplemented Office of Inspector General Recommendations to Put 
Funds to Better Use
This schedule represents potential annual savings or one-time recoveries that could be realized if OIG 
recommendations were enacted by Congress or the Department through legislation, regulation, 
or management action. In some cases, these recommendations are beyond the direct authority of the 
departmental operating division. Congress develops savings over a 5- or 10-year budget cycle that result 
in far greater dollar impact than the annual estimates shown in the table below. The same can be said for 
regulations issued and management actions taken by the Department. Savings are based on preliminary 
OIG estimates and reflect economic assumptions that are subject to change. The magnitude of the savings 
may increase or decrease because of interactive effects if changes are enacted together.
More detailed information may be found in OIGs Red Book. (See http://oig.hhs.gov.)
Savings
OIG Recommendation Status (millions)
CENTERS FOR MEDICARE & MEDICAID SERVICES
Clinical Laboratory Tests:   CMS  initially  agreed  with  the  first  $1,130*
CMS should develop a methodology and legislative  recommendation but not the second. The 
proposal to pay for tests ordered as custom panels  BBA required the Secretary to request that 
at substantially less than the full price for individual  the Institute of Medicine (IOM) study Part B 
tests and study reinstating the beneficiary coinsurance  laboratory test payments. As a result of IOMs 
and deductible provisions for laboratory services as a  recommendations, the Medicare Prescription 
means of controlling utilization. (A-09-89-00031,  Drug, Improvement, and Modernization Act 
A-09-93-00056) of 2003 (MMA) mandates that CMS conduct 
a demonstration that applies competitive 
bidding  for  clinical  laboratory  services.  
The initial report to Congress is due by 
December 31, 2005.
Outpatient Surgery Rates: CMS agreed to consider seeking authority  $1,100
CMS should seek authority to set rates that are  to set rates that are consistent across sites 
consistent across sites and reflect only the costs  as it develops its legislative program. CMS 
necessary for the efficient delivery of health services  also issued a notice of proposed rulemaking, 
and remove the procedure codes that meet its criteria  which has not been finalized, that would 
for removal from the Ambulatory Surgery Center  remove certain procedure codes from the 
(ASC) list of covered procedures.  ASC list of covered procedures.
(A-14-89-00221, A-14-98-00400, 
OEI-05-00-00340)
*This savings estimate would result from the copayment; the savings estimate for panels has yet to be determined.
 49 Fall 2005 Semiannual Report to Congress 50 | Appendix B 
Savings
OIG Recommendation Status (millions)
Medicaid Reimbursement for Brand-Name  CMS concurred with OIGs recommendation  $1,080
Drugs:  and is working with States to review their 
CMS should encourage States to bring pharmacy  estimates of acquisition costs in light of OIGs 
reimbursement  more  in  line  with  pharmacies  findings. In addition, the Presidents FY 2006 
actual acquisition cost of brand-name drugs. OIG  budget proposed a legislative change that 
recommended a four-tier approach to reimbursement:   would limit the Federal reimbursement to 
single-source innovator drugs, all drugs without  States for Medicaid pharmacy payments to the 
Federal  upper payment limits (UPL), multiple-source  amount that the State would have paid, in the 
drugs without Federal UPLs, and multiple-source  aggregate, for covered outpatient drugs based 
drugs with Federal upper limits. (A-06-00-00023,  on the manufacturers average sales price.
A-06-02-00041)
Medicare Payments for Mental Health Services: CMS concurred and has initiated some efforts,  $676
CMS should ensure that mental health services are  particularly regarding community mental health 
medically necessary, reasonable, accurately billed,  centers. OIG is reviewing this area to determine 
and ordered by an authorized practitioner by using a  if substantial errors are still present.
comprehensive program of targeted medical reviews, 
provider  education,  improved  documentation 
requirements, and increased surveillance of mental 
health services. 
(OEI-02-99-00140, OEI-03-99-00130, 
A-04-98-02145, A-01-99-00507, A-01-99-00530)
Medicaid Reimbursement for   CMS concurred with OIGs recommendation.  $470
Generic Drugs: The agency is working with States to strongly 
CMS should encourage States to bring pharmacy  encourage them to review their estimates of 
reimbursement more in line with pharmacies actual  acquisition costs and will follow up to ensure 
acquisition cost of generic drugs. OIG recommended  that they take OIGs findings into account. 
a four-tier approach to reimbursement:  single-source  In addition, the Presidents FY 2006 budget 
innovator drugs, all drugs without Federal UPLs,  proposed a legislative change that would 
multiple-source drugs without Federal UPLs, and  limit the Federal reimbursement to States for 
multiple-source drugs with Federal upper limits.  Medicaid pharmacy payments to the amount 
(A-06-01-00053, A-06-02-00041) that the States would have paid, in aggregate, 
for covered outpatient drugs based on the 
manufacturers average sales price. OIG will 
continue to monitor the pricing of Medicaid 
reimbursements for generic drugs.
Payment Policy for Medicare Bad Debts: The Balanced Budge Act of 1997 (BBA)  $340
OIG presented four options for CMS to consider,  provided for some reduction of bad debt 
including the elimination of a separate payment for  payments  to  providers.  The  Benefits 
bad debts, the offset of Medicare bad debts against  Improvement  Protection  Act  of  2000 
beneficiary Social Security payments, the limitation  subsequently adjusted upwards the percentage 
of bad debt payments to prospective payment system  of total hospital bad debt that would be 
hospitals that are profitable, and the inclusion of a bad  reimbursed. However, additional legislative 
debt factor in the diagnosis- related group rates. CMS  changes  are  needed  to  implement  the 
should seek legislative authority to further modify  modifications that OIG recommended.
bad debt policies. (A-14-90-00339)
Fall 2005 Semiannual Report to Congress Appendix B | 51
Savings
OIG Recommendation Status (millions)
Cost Effectiveness of Pay and Chase Methods  CMS  agreed  that  States  cost-avoidance  $185
for Medicaid Pharmacy Third-Party Liability  waivers should be reexamined and has made 
Recoveries: a concerted effort to track States pay-and-
CMS  should  determine  whether  States  cost- chase activities. The concept of cost avoidance 
avoidance waivers for pharmacy claims are meeting  involves returning a claim to the provider so 
the cost-effectiveness criterion. CMS can ascertain  that the provider can seek recovery from a 
cost-effectiveness by requiring States to track dollars  liable third party. The CMS central office 
that they pay and chase and the amounts that they  asked the regional offices to identify any 
recover. CMS should also review States policies to  waivers that have been granted, any pending 
determine if they are paying and chasing pharmacy  waiver requests, and situations in which 
claims without waivers. (OEI-03-00-00030) a State is using pay-and-chase without an 
approved waiver. CMS is also working with 
States that cost-avoid pharmacy claims (and 
with the National Association of Chain Drug 
Stores in developing guidance to assist States 
in implementing cost avoidance.
Graduate Medical Education:  CMS did not concur with the recommendations.  $157.3
CMS should revise the regulations to remove from  Although the BBA of 1997 and the Balanced 
a hospitals allowable graduate medical education  Budget Refinement Act of 1999 contained 
(GME) base-year costs any cost center with little  provisions to slow the growth in Medicare 
or no Medicare utilization and submit a legislative  spending on GME, OIG believes that its 
proposal  to  compute  Medicares  percentage  of  recommendations should be implemented and 
participation under the former, more comprehensive  that further savings can be achieved.
system. (A-06-92-00020)
Medicaid Drug Rebate Program: CMS  continues  to  disagree  with  the  $123
The best-price calculation in the Medicaid drug  recommendation. OIG continues to monitor 
rebate program should be indexed to the consumer  the drug rebate program; audits will continue 
price index-urban. (A-06-94-00039) to focus on enhancing the collection of rebates 
and providing potential savings to the rebate 
program.
Inappropriate Payments for Nail  CMS concurred; the agency plans to continue  $96.8
Debridement: to maximize the effectiveness of its medical 
CMS should require Medicare carriers to recoup  review strategy, collect the overpayments 
the overpayments found in OIGs sample and to  identified  in  OIGs  sample,  and  educate 
carefully scrutinize payments for nail debridement  podiatrists on Medicare policy for paying nail 
services through medical reviews, require podiatrists  debridement claims.
to adequately document the medical necessity of 
all nail debridement services, and require CMS 
regional offices and carriers to educate podiatrists 
on Medicare payment policies for nail debridement 
claims. (OEI-04-99-00460)
Fall 2005 Semiannual Report to Congress 52 | Appendix B 
Savings
OIG Recommendation Status (millions)
Medical Equipment/Supply Claims Lacking  CMS concurred and implemented an edit to  $91
Valid, Active Unique Physician Identification  reject claims listing a deceased physicians 
Numbers: UPIN beginning in April 2002. CMS decided 
CMS  should  create  edits  to  identify  medical  not to implement edits for inactive and invalid 
equipment and supply claims that do not have a  UPINs. Instead, the agency initiated provider 
valid  and  active  unique  physician  identification  education efforts and issued two program 
number (UPIN) listed for the ordering physician.   memorandums.
(OEI-03-01-00110)
Expansion of the Diagnosis Related Group  CMS did not concur with the recommendation  $37
Payment Window:  and has not pursued a legislative proposal.
CMS  should  propose  legislation  to  expand  the 
diagnosis related group (DRG) payment window to at 
least 7 days immediately before the day of admission. 
(A-01-02-00503)
End-Stage Renal Disease Payment Rates:  CMS agreed, and the  Benefits Improvement  $22**
CMS should reduce the payment rates for outpatient  Protection Act of  2000 (BIPA) required the 
dialysis treatments to reflect current efficiencies and  Secretary to develop a composite rate that 
economies in the marketplace. (A-14-90-00215) includes, to the extent feasible, payment 
for  laboratory  tests  and  drugs  that  are 
routinely used in dialysis treatments but are 
now separately billable. MMA requires the 
Secretary to establish a case-mix adjusted 
composite rate for 2005 and to conduct a 
demonstration of a bundled case-mix adjusted 
prospective payment system. The Act also 
directs CMS to use the results of an OIG 
study on separately billable end-stage renal 
disease (ESRD) drug payments and costs to 
set the 2005 composite payment rate.
Respiratory Assist Devices With a Backup  CMS concurred and published a proposed  $11.5
Rate: rule in August 2003 clarifying that bilevel 
CMS  should  reclassify  bilevel  respiratory  assist  respiratory assist devices with a backup rate 
devices with a backup rate from the frequent and  be paid as capped rental items.
substantial servicing category to the capped rental 
category under the durable medical device benefit. 
(OEI-07-99-00440)
** 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.
Fall 2005 Semiannual Report to Congress Appendix B | 53
Savings
OIG Recommendation Status (millions)
Indirect Medical Education: CMS agreed with the recommendation. The  TBD***
CMS should reduce the indirect medical education  BBA of 1997, as amended by the Balanced 
(IME) adjustment factor to the level supported by  Budget Refinement Act of 1999, reduced the 
CMSs empirical data and initiate further studies to  IME adjustment to 5.5 percent in 2002 and 
determine whether different adjustment factors are  thereafter. OIG believes that the factor should 
warranted for different types of teaching hospitals.  be further reduced to eliminate overlap with 
(A-07-88-00111) the disproportionate share adjustment.
Medicare Secondary PayerEnd-Stage Renal  CMS was concerned that an indefinite MSP  TBD
Disease Time Limit: provision might encourage insurers to drop 
CMS should extend the Medicare secondary payer  uneconomical  services,  namely  facility 
(MSP) provisions to include ESRD beneficiaries  dialysis and transplantation. OIG continues 
without a time limitation. (A-10-86-62016)  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.
Inpatient Psychiatric Care Limits:   CMS agreed with OIGs findings but stated  TBD
CMS should develop new limits to deal with the high  that further analysis would be required before 
cost and changing utilization patterns of inpatient  any legislative changes could be supported.
psychiatric  services  and  apply  a  60-day  annual 
and a 190-day lifetime limit to all psychiatric care 
regardless of the place of service. (A-06-86-62045)
Hospital Capital Costs: CMS did not agree with the recommendation.  TBD
CMS  should  determine  the  extent  that  capital  Although the BBA of 1997 reduced capital 
reductions are needed to fully account for hospitals  payments, it did not include the effect of 
excess bed capacity and report the percentage to  excess  bed  capacity  and  other  elements 
Congress. (A-09-91-00070, A-14-93-00380) included in the base-year historical costs.
Connection Between the Calculation  CMS agreed to pursue a change in the rebate  TBD
of Medicaid Drug Rebates and Drug  program  similar  to  that  recommended. 
Reimbursement: The Presidents FY 2003 budget proposed a 
CMS should seek legislation that would require  legislative change that would base the drug 
participating manufacturers to pay Medicaid drug  rebate on the difference between the AWP 
rebates based on average wholesale price (AWP) or  and the best price for a drug. That legislative 
study other viable alternatives to the current program  change was ultimately dropped and none of 
of using average manufacturer price to calculate  the subsequent Presidential budgets included 
the rebates. This legislation would have resulted  a similar proposal.
in about $1.15 billion in additional rebates for 100 
brand-name drugs with the highest total Medicaid 
reimbursements in calendar years 1994-1996. 
(A-06-97-00052)
*** To be determined.
Fall 2005 Semiannual Report to Congress 54 | Appendix B 
Savings
OIG Recommendation Status (millions)
Home Health Agencies: Although the BBA of 1997 included provisions  TBD
CMS should revise Medicare regulations to require  to restructure home health benefits, CMS 
the physician to examine the patient before ordering  still needs to revise Medicare regulations to 
home health services. require that physicians examine Medicare 
(OEI-04-93-00262, OEI-04-93-0026,  patients  before  ordering  home  health 
OEI-12-94-00180, OEI-02-94-00170,  services. Subsequent to the BBA, OIGs 
A-04-95-01103,  A-04-95-01104,  A-04-94-02087,  four-State review found that unallowable 
A-04-94-02078, A-04-96-02121, A-04-97-01169, A- services continued to be provided because 
04-97-01166, A-04-97-01170, A-04-99-01195) of inadequate physician involvement. CMS 
  agreed in principle, stating that it recognized 
the need for physician involvement in home 
health care planning and was considering 
new approaches to fostering the coordination 
of home health care across disciplines in 
the Medicare home health conditions of 
participation. CMS also provided additional 
payments for physician care plan oversight and 
education for physicians and beneficiaries.
Payments Returned by Public Providers:   In April 2004, CMS testified before the  TBD
CMS should propose legislation to require that  House Energy and Commerce Committee 
Medicaid payments that public providers return to  and  indicated  that  it  supports  declaring 
States be declared a refund to be used to offset or  returned funds as credits or refunds to offset 
credit the Federal financial participation that the  the original State payment. The Federal 
original payment generated.   share would then be calculated based on 
(A-03-00-00216) the net Medicaid payment that the provider 
retained. In addition, the Presidents FY 2006 
budget proposed a legislative change that 
would disallow State Medicaid payments not 
retained by public providers.
Definitive Guidance on Calculating Upper  CMS  partially  concurred  with  OIGs  TBD
Payment Limits and Use of Facility-Specific  recommendations.  CMS  agreed  that  it 
Limits Based on Actual Costs: should provide more guidance on calculating 
CMS should provide States with definitive guidance  the  UPL.  In  addition,  the  Presidents  
on calculating upper payment limits (UPL) so that  FY 2006 budget proposed a legislative change 
a uniform standard is applied to all States. This  that would limit reimbursement levels to 
guidance could be provided through a letter to the  government providers to no more than the 
Medicaid Directors. OIG also believes that States  cost of providing services.
should use facility-specific UPLs that are based on 
actual cost report data. 
(A-03-00-00216)
Fall 2005 Semiannual Report to Congress Appendix B | 55
Savings
OIG Recommendation Status (millions)
Excessive Medicaid Disproportionate Share  CMS has begun taking action in individual  TBD
Hospital Payments: States to recover overpayments. It is currently 
CMS should ensure that the monetary recommendations  developing a regulation on the Medicaid DSH 
made to individual States have been resolved regarding  program.
Disproportionate Share Hospital (DSH) payments that 
exceeded the hospital-specific limits. CMS should also 
establish regulations requiring States to
(1) implement procedures to ensure that future DSH 
payments are adjusted to actual incurred costs, (2) 
incorporate the procedures into their approved 
State plans, and (3) include only allowable costs as 
uncompensated care costs in their DSH calculations. 
Finally, CMS should strengthen its review and 
approval of State plans to ensure consistency with 
Federal requirements and use the results of audits 
conducted under MMA as part of its review process. 
(Various audit reports)
Compliance With Requirements for Medicaid  CMS has begun taking action in individual  TBD
School-Based Health Services: States  to  recover  overpayments.  OIG 
CMS should recover the overpayments identified  will provide CMS with a summary report 
during OIGs individual State audits of school-based  on its work in this area with additional 
health claims. In addition, States should disseminate  recommendations  involving  school-based 
CMS  guidance  and  other  information  to  local  health services.
education agencies in a timely manner, monitor 
local education agencies to ensure compliance with 
Federal and State requirements, and assist local 
education agencies in developing written policies 
and procedures that require service providers to 
document all health services and to retain those 
records for review. (Various audit reports)
Eliminate or Reduce Transition Periods for  CMS  did  not  concur  with  OIGs  TBD
Compliance With Revised Medicaid Upper  recommendation. According to CMS, the 
Payment Limits: transition periods were established pursuant 
CMS should seek authority to eliminate or reduce the  to either notice-and-comment rulemaking or 
8-year transition period included in the revised UPL  legislation, and offering new proposals at this 
regulation. (A-03-00-00216) time would undermine the consensus reached 
through those processes. CMS anticipates no 
further action on OIGs recommendation.
Fall 2005 Semiannual Report to Congress 5 | Appendix B 
Savings
OIG Recommendation Status (millions)
VARIOUS OPERATING DIVISIONS
Recharge Center Costs: The Department concurred and has worked  $1
The Assistant Secretary for Administration and  with OMB on a revision to A-21. The proposed 
Management  should  propose  changes  to  OMB  revision, which was published in the Federal 
Circular A-21 to improve guidance on the financial  Register in August 2002, would require that 
management  of  recharge  centers.  The  revision  adjustments to a recharge centers billing 
should include criteria for establishing, monitoring,  rate take into account overrecoveries and/or 
and adjusting billing rates to eliminate accumulated  underrecoveries  from  previous  periods. 
surpluses  and  deficits;  preventing  the  use  of  Rate adjustments would be required at least 
recharge funds for unrelated purposes and excluding  every 2 years. The final circular was issued in  
unallowable costs from the calculation of recharge  May 2004.
rates; ensuring that Federal projects are billed 
equitably; and excluding recharge costs from the 
recalculation of facilities and administrative cost 
rates.  (A-09-96-04003)
Fall 2005 Semiannual Report to Congress Appendix C
Unimplemented Office of Inspector General Program and Management 
Improvement Recommendations
This schedule represents Office of Inspector General (OIG) findings and recommendations that, if 
implemented, would result in substantial benefits. The benefits relate primarily to effectiveness rather 
than cost-efficiency.
More detailed information can be found in OIGs Orange Book, which is available on the Internet at 
http://oig.hhs.gov.
OIG Recommendation Status
CENTERS FOR MEDICARE & MEDICAID SERVICES
Accountability Over Billing and Collection of  CMS concurred with the recommendation and set up 
Medicaid Drug Rebates: a reporting mechanism to capture rebate information. 
The Centers for Medicare and Medicaid Services (CMS)  The agency still needs to ensure that States establish 
should ensure that States implement accounting and  adequate accounting and internal control systems to 
internal control systems in accordance with Federal  obtain reliable information. Current audit results have 
regulations for the Medicaid drug rebate program.  shown that this remains a problem in most States.
Such systems must provide for 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, A-06-03-00048)
Fairly  Presenting  the  Medicare  Accounts  CMS hired consultants to assist in validating accounts 
Receivable Balance: receivable  reported  by  Medicare  contractors  and 
CMS should require Medicare contractors to implement  provided comprehensive instructions to contractors. 
or improve internal controls and systems to ensure  For the long term, CMS is developing an integrated 
that  reported  accounts  receivable  are  valid  and  general ledger system as the cornerstone of its financial 
documented.  management controls.
(A-17-95-00096,  A-17-97-00097,  A-17-98-00098,  
A-17-00-00500,  A-17-00-02001,  A-17-01-02001,  
A-17-02-02002, A-17-03-03003)
 5 Fall 2005 Semiannual Report to Congress 5 | Appendix C 
OIG Recommendation Status
Guidance  to  Drug  Manufacturers  To  Better  CMS did not concur, stating that the drug law and the 
Implement the Medicaid Drug Rebate Program: rebate agreements already established a methodology 
CMS  should  survey  manufacturers  to  identify  the  for computing AMP. OIG disagrees because the rebate 
various calculation methods used to determine average  law and agreements defined AMP but did not provide 
manufacturer price (AMP). CMS should also develop a  specific written methodology for computing it.
more specific policy for calculating this price that would 
protect the interests of the Government and that would 
be equitable to the manufacturers. (A-06-91-00092)
Accuracy of Carrier Payment Data: CMS stated that a review is under way to compare data 
CMS should conduct a review of carriers claims  contained in the National Claims History File with data 
processing  data  to  examine  the  scheduled  date  of  at the carrier level. CMS has also approved two new 
payment  entered  on  claims  sent  to  the  Common  edits, which will enforce the payment floor standards 
Working File (CWF). If there is no correlation between  on claims sent to the CWF.
the claims payment date variable and the actual date 
of payment, CMS should define what data should be 
entered into this field and how it should be calculated, 
and/or revise the current variable definition to clarify 
for National Claims History data users that the scheduled 
date of payment is not an accurate reflection of the 
actual claim payment date. CMS should also review 
the carriers claims processing data to determine the 
accuracy of the information contained in the Contractor 
Reporting of Operational and Workload Data system.  
(OEI-03-00-00350)
Resident Assessment Instruments: CMS generally concurred with OIGs recommendations 
CMS should more clearly define minimum data set  for improved data definitions and training, but did not 
(MDS) elements and work with States to train nursing  concur with the recommendation to establish an audit 
home staff. OIG recommended that CMS establish an  trail. In 1998, CMS devoted significant resources to 
audit trail to validate the 108 MDS elements that impact  the development of an accuracy improvement program 
facility reimbursement by Medicare.  by letting a contract develop MDS accuracy review 
(OEI-02-99-00040, OEI-02-99-0041) protocols. Once the protocols were developed, CMS 
funded a program safeguard contractor in September 
2001, known as the data assessment and verification 
system (DAVE), to audit and verify MDS data. In 
January 2004, CMS developed and implemented the 
DAVE project onsite and offsite audit process of the 
MDS in long term care facilities to assess the accuracy 
and reliability of assessment data submitted.
Fall 2005 Semiannual Report to Congress Appendix C | 59
OIG Recommendation Status
Assessments of Mental Illness: CMS concurred with most of OIGs recommendations 
CMS should work with States to improve the assessment  and has made revisions to its training curriculum for 
of persons with serious mental illness and use survey  nursing home surveyors. In addition, CMS offered 
and certification to monitor compliance. OIG also  several national satellite broadcasts in 2001 and 2004 to 
recommended that CMS define specialized services that  increase surveyor knowledge and ability to recognize 
are to be provided by the State to nursing home residents  mental illness, to educate surveyors on Pre-Admission 
with mental illness. (OEI-05-99-00700) Screening and Resident Review (PASRR) implementation 
and oversight, and to improve surveyors abilities to 
determine facility compliance with assessment and 
care requirements. CMS has also held several training 
conferences for Resident Assessment Instrument (RAI) 
coordinators to improve the identification of mental 
illness symptoms in patients in nursing facilities. CMS 
will convene an expert panel of PASRR in 2005 to assess 
the PASRR program and determine what opportunities 
may exist through guidance or interpretation of statute 
and regulations to help States. CMS is also exploring the 
role State surveyors may have in identifying compliance 
with PASRR Level II assessment requirements.
Nursing Home Residents With Serious   CMS concurred with most of OIGs recommendations, 
Mental Illness: except for reporting the MDS records by primary, 
CMS should improve the quality and usefulness of its  secondary, and tertiary diagnoses. In February 2005, 
data sources by requiring the use of a unique provider  CMS issued a letter to State Medicaid directors indicating 
number across systems, requiring reporting of resident  that it will begin to release MDS data to States with 
data by age and diagnosis, and encouraging States to use  Americans with Disabilities Act compliance activities. 
these data in demonstrating their progress in placing  CMS will also require States to evaluate the PASRR 
disabled persons in the most integrated settings. OIG  outcomes, further obligating States to develop accurate 
also recommended training to improve data collection  data systems useful for identifying serious mental illness 
and accurate coding. (OEI-05-99-00701) in nursing facility residents. In addition, CMS is planning 
to implement the use of a unique provider number on or 
before May 2007.
Payments for Mental Health Services: CMS generally concurred with OIGs recommendations. 
CMS  should  promote  provider  awareness  of  It plans to explore a variety of educational efforts and will 
documentation and medical necessity requirements,  refer the reports to the carrier clinical workgroup on 
develop a comprehensive list of psychological testing  psychiatric services. Carriers will conduct data analysis 
tools that can be correctly billed, target problematic  of  psychological  testing  and  psychotherapy  claims 
services for prepayment edits or postpayment medical  and will conduct medical reviews, if indicated. CMS 
review, and encourage carriers to take advantage of the  provided training for providers concerning Medicare 
MDS, especially for its assessment of patient cognitive  payments for Part B mental health services via Medlearn 
level. (OEI-03-99-00130, OEI-02-99-00140) in April 2003.
Fall 2005 Semiannual Report to Congress 0 | Appendix C 
OIG Recommendation Status
Organ Donation: CMS concurred with the recommendations and indicated 
CMS should revise the Medicare conditions for coverage  that it will explore ways in which additional data can be used 
for organ procurement organizations (OPOs) to make  to assess OPO effectiveness and hospital compliance with 
them more accountable for implementing the new donation  the donation rule. CMS published a Notice of Proposed 
rule and require OPOs to provide hospital-specific data  Rule-Making on February 4, 2005, establishing new 
on referrals and on organ recovery. HRSA should require  conditions of coverage regarding OPOs. That proposed 
that OPOs submit hospital-specific data on referrals and  regulation requires OPOs to report hospital-specific organ 
on organ recovery and support demonstration projects  donation, including organ donor potential and the number 
on how to effectively train and make use of designated  of actual donors, at least annually to the public. The 
requestors. (OEI-01-99-00020) Health Resources and Services Administration, through 
its contract for operation of the Organ Procurement 
and Transplantation Network, requires OPOs to submit 
hospital-specific data on organ recovery.
Outpatient Surgery Rates: Section 626 of Public Law 108-173 mandates that the 
CMS should (1) seek authority to set rates that are  Government Accountability Office conduct a study that 
consistent across sites and reflect only the costs necessary  compares the relative costs of procedures furnished 
for the efficient delivery of health services and (2) remove  in ambulatory surgical centers to the relative costs of 
the procedure codes that meet its criteria for removal  procedures furnished in hospital outpatient departments. 
from the Ambulatory Surgery Center (ASC) list of  The report will include recommendations that advise 
covered procedures. (OEI-05-00-00340) CMS  regarding  payments  to  ambulatory  surgical 
centers and CMS will implement a new payment system 
for ambulatory surgical centers beginning on or after 
January 1, 2006, and not later than January 1, 2008. 
CMS issued a proposed rule on November 26, 2004, 
to update the list of Medicare-approved ambulatory 
surgical centers procedures in 2005. CMS proposed 
to remove from the ambulatory surgical centers list a 
number of the codes recommended for deletion by OIG. 
Nearly 500 comments were submitted timely and CMS 
is reviewing those comments and preparing a final rule 
for implementation in the summer of 2005.
Medicare-Approved Heart Transplant Centers:  On February 4, 2005, CMS published proposed rule 
CMS should develop standards for continuing approved  (70 FR 6140), Hospital Conditions of Participation:  
centers as well as guidelines for what levels of performance  Requirements for Approval and Reapproval of Transplant 
trigger specific responses from CMS. In the short term,  Centers to Perform Organ Transplant.  The notice of 
OIG also recommends that CMS improve its oversight of  proposed rulemaking established the requirements for 
centers by entering into an arrangement with the HRSA  approval and reapproval of transplant centers to perform 
for the regular exchange of volume and survival rate  organ transplants. The approval requirements include data 
data. (OEI-01-02-00520) submission, outcome measures, and process requirements. 
CMS expects to publish the final rule within 1 to 1.5 years. 
HRSA has partnered with CMS in developing outcome 
measures for the proposed rule and will continue to act 
as a liaison between CMS and the Scientific Registry of 
Transplant Recipients to provide assistance to review data 
on transplant center(s) performance.
Fall 2005 Semiannual Report to Congress Appendix C | 1
OIG Recommendation Status
Quality  Improvement  Processes  in  Dialysis  CMS concurred with most of OIGs recommendations. 
Facilities: The Conditions of Coverage proposed rule was published 
We recommended that CMS revise the Conditions of  in February 2005 and has a 90-day public comment 
Coverage, examine ways to foster the commitment of  period. The proposed conditions would require a facility-
attending physicians to performance measures, develop  level data driven Quality Assessment and Performance 
more effective intervention strategies for facilities, and  Improvement program (QAPI), increased participation 
work with the corporations to share experiences and  of attending physicians in patient care and in supporting 
minimize reporting burdens on dialysis facilities.  the facility QAPI program, increased medical director 
(OEI-01-99-00052) role, and electronic clinical measure reporting.
End-Stage Renal Disease Data Management: CMS concurred with OIGs recommendations. As of 
OIG recommends that CMS develop a strategic plan  February 15, 2005, CMS along with the ESRD networks, 
for addressing End-Stage Renal Disease (ESRD) data  its contractors, and the renal community worked together 
management, including creating short- and long-term  to consolidate its three ESRD systems now referred to 
remedies for current data problems, reassessing the  as the Consolidated Renal Operations in a Web-enabled 
data needs of users, improving the efficiency of data  Network (CROWN). The three systems include:  (1) the 
distribution, improving ongoing communication with  Renal Management Information System (REMIS), (2) the 
users and data contributors, and better coordinating  Standard Information Management System (SIMS), and 
with the Social Security Administration.  (3) the Vital Information System to Improve Outcomes 
(OEI-07-01-00250)  in Nephrology (VISION). SIMS went into production 
on January 1, 2000, and REMIS went into production on 
July 13, 2003. The REMIS application directly addresses 
concerns raised by OIG. The CROWN is the automated 
system that combines all of CMSs electronic data on 
ESRD benefits and utilization. The CROWN provides 
for the collection, validation, and storage of information 
about the national ESRD program, its beneficiaries, and 
the services provided to them.
Accuracy of Nursing Home Compare: CMS agreed with the first recommendation. CMS will 
OIG recommends that CMS require State agencies  consider adding regional office contact information to 
to  verify  that  the  most  recent  inspection  results  the Nursing Home Compare to facilitate corrections to 
are in CMS databases and establish a single point of  the Web site. CMS is currently working with the Web 
contact for reporting discrepancies on the Web site.   site designers and the regional offices to develop the 
(OEI-01-03-00130)  most efficient means of providing CMS oversight over 
State survey agency data entry.
Variation in State Medicaid Drug Prices: CMS plans to follow up with States that paid higher 
OIG  recommends  that  CMS  share  more  accurate  relative drug prices, particularly States with prices above 
drug pricing information with States, conduct further  the UPL.
research on the factors that affect States drug prices, 
and annually review States reimbursement data to target 
technical assistance to higher paying States. 
(OEI-05-02-00681)
Fall 2005 Semiannual Report to Congress 2 | Appendix C 
OIG Recommendation Status
CMS Oversight of Cost-Avoidance Waivers: CMS concurred with OIGs recommendation that it 
OIG recommends that CMS approve only waivers that  approve only cost-effective waivers. CMS continues to 
meet the criteria for cost-effectiveness as set forth by  address the oversight of and/or need for cost-avoidance 
Federal regulations, strengthen oversight activities  waivers. CMS central and regional offices continue to 
through improved document retention, and collect  work closely with States to identify circumstances for 
information  from  States  regarding  recovery  rates  which cost-avoidance waivers are not necessary (i.e., 
from pay-and-chase activities. Cost avoidance involves  Medicaid services not covered by third parties or 
returning claims to providers so that the providers can  benefits not directly available to the provider). CMS has 
bill the liable third parties. (OEI-03-00-00031)  also worked with States to diminish the need for waivers 
by frequently encouraging States to eliminate paying and 
chasing of claims and relying instead on cost-avoidance. 
CMS  has  made  substantial  progress  on  Medicaid 
pharmacy claims. In August 2001, OIG reported that 
only 17 States were cost-avoiding (in part or whole) 
pharmacy claims. A recent CMS survey indicated that 40 
States currently meet that description and an additional 
4 States are planning systems conversions. CMS plans to 
follow up with remaining States to consider what further 
assistance should be offered. Where waivers continue 
to be necessary, CMS will continue to emphasize cost-
effectiveness and proper document retention.
Uninsured Children Through State Childrens  CMS  concurred  with  several  of  OIGs  specific 
Health Insurance Programs: recommendations and has already implemented steps 
CMS should resolve the inconsistency between the  to improve the integrity of the State Annual Report 
requirement that States report on changes in the number  submissions. In addition, CMS has taken steps to 
of uninsured children and the practice of accepting  enhance technical assistance (TA) to States to improve 
enrollment data as a proxy, and ensure the integrity,  their measurement capabilities and held a TA session at 
validity, and usefulness of the State Childrens Health  the National Academy for State Health Policys annual 
Insurance Program (SCHIP) Annual Report and SCHIP  conference in August 2004. CMS is currently reviewing 
enrollment data. (OEI-05-03-00280) all State reports on progress towards covering the 
uninsured and providing State-specific TA to the States 
not measuring progress.
Fall 2005 Semiannual Report to Congress Appendix C | 3
OIG Recommendation Status
PUBLIC HEALTH AGENCIES
Oversight of Tissue Banking: The Deputy Secretary concurred that FDA should 
The Food and Drug Administration (FDA) should  expedite its planned rulemaking activities related to 
expedite publication of its regulatory agenda requiring  tissues, specifically the final rule to require registration 
registration of tissue banks, enhanced donor suitability  of tissue banks. The Department also found considerable 
screening, and testing the use of good tissue practices.  merit in OIGs recommendation for an intensified 
FDA should set a realistic yet aggressive date by which it  inspection program directed toward entities that procure, 
would complete an initial inspection of all tissue banks.  process, and store human tissues. In congressional 
FDA should determine the appropriate minimum cycle  testimony, FDA said that all three of the proposed 
for tissue bank inspections and work with States and  rules have been published and one rule (Establishment 
professional associations to determine in what areas  Registration  and  Listing)  was  finalized.  FDA  has 
oversight activities could be coordinated.  completed contacting the 36 uninspected tissue banks. 
(OEI-01-00-00441) The results were:  31 inspections were completed, 3 
firms were out of business, 1 firm could not be located, 
and 1 firm was not an FDA obligation because it handled 
only vascularized organs. In 2004, FDA finalized donor 
eligibility and good tissue practices regulations, which 
will become effective on May 25, 2005. This completes 
the rulemaking activities related to human tissues.
Effectiveness of FDAs Adverse Event Reporting  In response, the Center for Food Safety and Applied 
System for Dietary Supplements: Nutrition  (CFSAN)  developed  a  new  system  for 
FDA should (1) facilitate greater detection of adverse  entering  adverse  events  and  consumer  complaint 
events by requiring dietary supplement manufacturers  reports involving foods, the CFSAN Adverse Event 
to report serious events to FDA for some products,  Reporting Sytem (CAERS), which became partially 
(2) obtain more information on adverse event reports  operational in June 2003. The new system incorporates 
by requiring manufacturers to register themselves and  all existing adverse event reporting systems into one 
their products with FDA, (3) notify manufacturers  state-of-the-art  reporting  and  monitoring  system. 
when FDA receives a serious adverse event report and  CAERS staff work closely with program experts as well 
develop a new computer database to track and analyze  as external stakeholders. FDA intends to improve data 
adverse event reports, (4) expedite the development  links to the Center for Drug Evaluation and Research as 
and implementation of good manufacturing practices  funds become available. FDA also published proposed 
for dietary supplement manufacturers, and (5) disclose  Good Manufacturing Practices regulations for dietary 
more useful information to the public about dietary  supplements in March 2003 and is now preparing the 
supplement adverse events. (OEI-01-00-00180) final regulation. In response to the requirement for 
food facility registration in the Public Health Security 
and Bioterrorism Preparedness Act of 2002, FDA now 
requires facilities that manufacture, process, pack, or 
hold dietary supplements to be registered with the FDA. 
FDA informs the public of new developments through its 
dietary supplements Web site.
Fall 2005 Semiannual Report to Congress 4 | Appendix C 
OIG Recommendation Status
Protection for Research Subjects in Foreign  OHRP concurred with OIGs recommendations and 
Clinical Trials: emphasized that its new International Activities Program 
FDA should examine ways to obtain more information  will serve as a focal point and coordinating center for 
about the performance of non-U.S. Institutional Review  HHSs efforts to improve human subject protection. In 
Boards  (IRBs)  and  help  inexperienced  IRBs  build  collaboration with the FDA and the Fogarty International 
their capacities, encourage all non-U.S. investigators  Center, OHRP is working with a variety of national, 
participating in research to sign attestations upholding  regional, and international organizations with a goal of 
human subject protections, and develop a database to  establishing effective education and review processes 
track the growth and location of foreign research. The  around the world. In 2004, OHRP sponsored capacity-
Office for Human Research Protections (OHRP) should  building workshops for IRB members, gave presentations 
exert leadership in developing strategies to ensure  at international conferences, and began translating 
adequate human subject protections for non-U.S. clinical  key guidance documents into foreign languages.  FDA 
trials funded by the Federal Government and those that  published a proposed rule in 2004, Human Subject 
contribute data to new drug applications.  Protection:  Foreign Clinical Studies Not Conducted 
(OEI-01-00-00190) Under  an  Investigational  New  Drug  Application 
(21 CFR 312.120), to promote good clinical practice 
regardless of the location of the clinical trial. FDA 
and OHRP have contributed to efforts to strengthen 
research investigation and harmonize standards through 
collaboration with the World Health Organization, the 
Pan American Health Organization, the Council for 
International Organizations of Medical Sciences, and 
other organizations. FDA also contributed to the HHS/
OHRP/National Institutes of Health Working Group for 
Equivalent Protections in developing a HHS report and 
Federal Register Notice announcing proposed criteria 
for clinical trials conducted outside of the United States. 
In addition, FDA has assisted other countries with 
capacity-building activities for international good clinical 
practices (GCP) inspectorates, including Singapore and 
Australia.  An ongoing FDA initiative to develop better 
communication with the European Medicines Agency 
will  improve  coordination  between  the  respective 
European and FDA programs involving clinical trials. 
FDA has also provided staff as faculty to professional 
associations for outreach training programs, as well as 
creating a GCP Web site for current information about 
FDA clinical trial requirements.
Fall 2005 Semiannual Report to Congress Appendix C | 5
OIG Recommendation Status
ADMINISTRATION FOR CHILDREN AND FAMILIES
Childrens Use of Health Care Services While in  CMS  and  ACF  generally  concurred  with  the 
Foster Care: recommendations and in many cases are actively working 
OIG conducted a series of inspections examining the  with the State and local entities to improve access, 
access of foster care children in a number of individual  clarify obligations, and educate all the parties involved 
states to Medicaid health care services. The study found  regarding Medicaid health care services.
that access varied in each state, and the reports generally 
recommended that CMS and the Administration for 
Children and Families (ACF) work with the States to 
increase access to health care services for eligible foster 
care children and educate foster parents on available 
services. (OEI-02-00-00360, OEI-02-00-00363, 
OEI-07-00-00640, OEI-07-00-00642, 
OEI-07-00-00643)
GENERAL OVERSIGHT 
Cost Principles for Federally Sponsored Research  The Department circulated several draft iterations
Activities: of the hospital cost principles to internal users for 
The Department should modernize and strengthen cost  comment. Many of the policies in the outdated document 
principles applicable to hospitals by either revising existing  have been updated in the draft regulation. The target date 
guidelines to conform with Office of Management and  for issuing the draft regulation as a notice of proposed 
Budget (OMB) Circular A-21 or working with OMB to  rulemaking was December 31, 2004. Once the formal 
extend Circular A-21 coverage to all hospitals.  notice and rulemaking process is complete, the updated 
(A-01-92-01528) cost principles will be issued.
Fall 2005 Semiannual Report to Congress  |
Fall 2005 Semiannual Report to Congress Appendix D
Notes to Tables 1 and 2
Notes to Table 1
1The opening balance was adjusted downward $443 million.
2During the period, revisions to previously reported management decisions included:
Central Identification Number (CIN): A-06-05-78935 STATE OF LOUISIANA:
The Division of Cost Allocation issued a determination to obtain a refund of Federal funds used to pay claims in 
lines of insurance.
Not detailed are revisions to previously disallowed management decisions totaling $124,941 million.
3Included are management decisions to disallow  $427.8 that was identified in nonfederal audit reports.
4Due to administrative delays, many of which are beyond management control, resolution of the following 230 audits 
were not completed within 6 months of issuance: 
CIN: A-02-02-01030  REVIEW OF SPEECH SCHOOL HEALTH CLAIMS - REST OF STATE,  FEB 2004, 
$172,553,831
CIN: A-05-01-00099  U OF I HOSPITAL-DSH PAYMENT LIMITS,  OCT 2004,  $140,281,912
CIN: A-09-03-00055  AUDIT OF OREGONS MEDICAID UPPER PAYMENT LIMITS FOR NON-STATE 
GOVERNMENT NURSING FACILITIES FOR STATE FISCAL YEARS 2002 AND 
2003,  FEB 2005,  $137,219,260
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DSH PROGRAM FOR FY 1998,  MAY 2003,  
$128,269,448
CIN: A-04-99-05561  AUDIT  ADMIN  COST  PROPOSALS  FY95-98,  BCBSFL,  JAX,    JUL  2002,  
$101,671,328
CIN: A-09-02-00071  AUDIT OF CA DSH PROGRAM FOR FY 1998 - LA COUNTY,  MAY 2003,  
$98,190,042
CIN: A-02-03-01008  REVIEW OF TRANSPORTATION SCHOOL HEALTH CLAIMS - REST OF STATE,  
AUG 2004,  $53,037,302
CIN: A-05-01-00058  OHIO MEDICAID HOSPITAL-SPECIFIC DSH PAYMENT LIMITS,  JUN 2004,  
$47,000,000
CIN: A-04-01-02006  MEDICAID DISPROPORTIONATE SHARE PAYMENTS IN ALABAMA,  JUN 2004,  
$45,763,327
CIN: A-07-01-02093  MISSOURI DSH - UNALLOWABLE COSTS,  AUG 2002,  $36,200,000
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID SCHOOL BASED 
HEALTH SERVICES - CT,  MAY 2003,  $32,780,146
 
Fall 2005 Semiannual Report to Congress  | Appendix D 
CIN: A-03-01-00224  MEDICAID SCHOOL-BASED SERVICES/MARYLAND,  MAR 2003,  $19,954,944
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE HOSPITAL 
PAYMENTS FOR FY 1998,  SEP 2002,  $19,446,435
CIN: A-01-02-00509  REVIEW OF MEDICARE ADMINSITRATIVE COSTS - PART A & B - UNITED 
HEALTHCARE INSURANCE COMPANY,  MAR 2005,  $12,991,420
CIN: A-07-02-03032  MEDICARE SEGMENT CLOSING AUDIT OF TRAILBLAZERS,  JUN 2004,  
$11,152,093
CIN: A-02-02-01028  REVIEW OF RETRO ACUTE CARE HOSPITAL DSH CLAIMS FOR INMATE 
COSTS,  JAN 2004,  $11,114,820
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PYMTS @ SCOTT & 
WHITE,  MAY 2003,  $8,229,574
CIN: A-09-01-00085  AUDIT OF UCSDMC DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FOR 
SFYE 1998,  SEP 2002,  $7,999,212
CIN: A-02-02-01024  IMD UNDER 21 AUDIT IN NEW YORK,  FEB 2004,  $7,642,194
CIN: A-09-97-44262  STATE OF CALIFORNIA,  APR 1997,  $7,300,000
CIN: A-07-02-03033  CAREFIRST SEGMENTATION AUDIT,  MAY 2003,  $6,788,644
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM -- NATIONAL,  MAR 1993,  $6,529,545
CIN: A-03-01-00222  MEDICAL COLLEGE OF VIRGINIA/DSH/MEDICAID,  APR 2003,  $6,324,796
CIN: A-07-03-03041  ADULT REHABILITATION SERVICES IN IOWA,  MAR 2005,  $6,244,154
CIN: A-05-02-00049  MEDICAL SERVICE COSTS UNDER ILLINOIS SCHOOL-BASED MEDICAID,  DEC 
2003,  $6,067,669
CIN: A-07-03-03040  PRB COSTS CLAIMED FOR MEDICARE REIMBURSEMENT BY TRAILBLAZERS,  
OCT 2004,  $6,000,000
CIN: A-04-00-02161  MEDICAID SCHOOL-BASED SERVICES IN NORTH CAROLINA,  NOV 2001,  
$5,344,160
CIN: A-01-02-00016  MEDICAID SCHOOL-BASED HEALTH SERVICE ADMINISTRATIVE CLAIMING 
REVIEW-MASSACHUSETTS,  SEP 2004,  $5,312,447
CIN: A-09-03-00042  REVIEW OF HHA PRECEEDING HOSPITAL STAY UNDER PPS - UGS,  FEB 2004,  
$5,306,825
CIN: A-06-02-00060  REVIEW PACIFICARE OK BIPA MODIFICATIONS TO CY 2001 ACRP,  JUN 2004,  
$5,204,042
CIN: A-05-03-00096  REVIEW OF ADMINISTRATIVE COSTS FOR ADMINASTAR FEDERAL,  AUG 
2004,  $5,000,598
CIN: A-03-01-00226  UVA MEDICAL CENTER/DSH/MEDICAID/VIRGINIA,  MAY 2003,  $4,760,385
CIN: A-09-03-00051  REVIEW OF BLUE SHIELD CALIFORNIA BIPA MODIFICATIONS TO CY 2001 
ACRP,  OCT 2004,  $4,555,992
CIN: A-05-01-00102  MT. SINAI HOSPITAL-DSH PAYMENT LIMITS,  OCT 2004,  $4,516,112
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL,  MAR 2002,  $4,505,051
CIN: A-07-02-00144  IV-E  FOSTER  CARE  ADMINISTRATIVE  COSTS  CLAIMED,    AUG  2003,  
$4,335,542
CIN: A-01-02-00015  REVIEW OF MA MEDICAID USE OF REVISED FEE SCHEDULES FOR CLINICAL 
DIAGNOSTIC LABORATORY SERVICES,  JAN 2004,  $4,100,000
Fall 2005 Semiannual Report to Congress Appendix D | 9
CIN: A-07-04-03053  REVIEW OF CAHABAS UNFUNDED PENSION COSTS,  FEB 2004,  $4,006,541
CIN: A-03-01-00225  VIRGINIA IMD UNDER 21,  MAR 2004,  $3,948,532
CIN: A-05-01-00068  PARTNERSHIP PLAN - ILLINOIS PHYSICIAN BILLING-FAMILY DYNAMICS,  JUL 
2002,  $3,790,846
CIN: A-09-03-00053  AUDIT OF ORGAN ACQUISITION COSTS AT CPMC,  JAN 2005,  $3,731,752
CIN: A-04-01-05002  AUDIT MEDICAID PAYMENTS FOR CLINICAL LABORATORIES,  JAN 2002,  
$3,522,639
CIN: A-09-04-00023  AUDIT OF OREGONS MEDICAID UPPER PAYMENT LIMITS FOR NON-STATE 
GOVERNMENT INPATIENT HOSPITALS FOR STATE FISCAL YEAR 2003,  FEB 
2005,  $3,412,987
CIN: A-01-02-00525  MAINE ANTHEM BCBS - MEDICARE ADMINISTRATIVE COSTS,  APR 2004,  
$3,389,716
CIN: A-09-02-00061  REVIEW OF MEDICAL CLAIMS FOR PRIVATE IMD PATIENTS,  DEC 2002,  
$3,083,389
CIN: A-04-01-00005  MEDICAID FFS PAYMENTS TO LEAS IN NORTH CAROLINA,  MAY 2004,  
$3,066,806
CIN: A-01-04-00004  REVIEW OF MAINES MEDICAID RETROACTIVE CLAIMS FOR SCHOOL-
BASED HEALTH SERVICES - JANUARY 2001 THROUGH JUNE 2003,  JAN 2005,  
$3,044,211
CIN: A-07-03-03046  TRAILBLAZERS - REVIEW OF PENSION COSTS CLAIMED FOR MEDICARE 
REIMBURSEMENT,  JUL 2004,  $3,023,483
CIN: A-09-98-50183  STATE OF CALIFORNIA,  MAR 1998,  $3,000,000
CIN: A-01-02-00508  REVIEW  OF  MEDICARE  CONTRACT  TERMINATION  COSTS  -  UNITED 
HEALTHCARE,  NOV 2003,  $2,894,010
CIN: A-05-02-00085  MEDICAID FFS PAYMENTS FOR OHIO BENEFICARIES ENROLLED IN MEDICARE 
MCOS,  JUN 2004,  $2,700,000
CIN: A-01-04-78839  STATE OF NEW HAMPSHIRE,  JUN 2004,  $2,631,648
CIN: A-07-03-03039  CAREFIRST  OF  MARYLAND  UNFUNDED  PENSION  COSTS,    MAY  2003,  
$2,611,100
CIN: A-09-02-72300  STATE OF CALIFORNIA,  JUL 2002,  $2,400,000
CIN: A-07-04-03050  PENSION SEGMENTATION REVIEW AT HIGHMARK, INC. OF PA,  JAN 2005,  
$2,394,501
CIN: A-04-04-01001  INTERIM CONTRACT AUDIT,  AUG 2004,  $2,352,388
CIN: A-10-02-00008  REVIEW OF WASHINGTON STATES MEDICAL ASSISTANCE COSTS CLAIMED 
FOR SCHOOL-BASED HEALTH SERVICES,  JUL 2003,  $2,279,752
CIN: A-04-02-07007  MEDICAID FEE FOR SERVICE PAYMENTS FOR DUALLY ELIGIBLE MEDICARE 
MANAGED CARE ENROLLEES,  FEB 2003,  $2,231,100
CIN: A-07-04-00173  REVIEW OF UNFUNDED PENSION COSTS FOR PENNSYLVANIA BLUE SHIELD,  
NOV 2004,  $2,154,481
CIN: A-05-03-00041  HOSPITAL TRANSFERS NORTH CAROLINA,  MAY 2004,  $2,151,055
CIN: A-05-03-00063  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF MEDICARE NORTHWEST (BLUE CROSS BLUE SHIELD 
OF OREGON),  OCT 2003,  $2,100,000
Fall 2005 Semiannual Report to Congress 0 | Appendix D 
CIN: A-07-01-03001  BCBS OF MN PENSION SEGMENT CLOSING,  JAN 2003,  $2,003,341
CIN: A-05-02-00048  REVIEW OF MEDICAID DME CLAIMS - TEXAS,  SEP 2002,  $1,969,704
CIN: A-01-02-00516  REVIEW  OF  POTENTIALLY  EXCESSIVE  MEDICARE  PAYMENTS  FOR 
OUTPATIENT SERVICES UNITED GOVERNMENT SERVICES,  MAR 2003,  
$1,768,783
CIN: A-09-00-00127  BLUE CROSS OF CALIF - MEDICARE ADMIN COSTS,  DEC 2002,  $1,677,822
CIN: A-10-03-00010  REVIEW OF ORGAN ACQUISITION COSTS CLAIMED BY VIRGINIA MASON 
MEDICAL CENTER FOR THE PERIOD JANUARY 1, 1997 THROUGH DECEMBER 
31, 1999,  MAR 2005,  $1,579,782
CIN: A-02-04-01010  REVIEW OF PHYSICIAN PLACE OF SERVICE CODING FOR AMBULATORY 
SURGICAL AND RELATED PROCEDURES,  JAN 2005,  $1,467,318
CIN: A-01-03-00004  REVIEW OF VERMONT MEDICAID SCHOOL-BASED SERVICES FOR THE 
PERIOD OCTOBER 2001-SEPTEMBER 2002,  JAN 2005,  $1,463,395
CIN: A-04-01-05011  REVIEW OF FLORIDA MEDICAID PAYMENTS FOR SERVICES PROVIDED TO 
INMATES,  OCT 2002,  $1,450,077
CIN: A-05-03-00094  REVIEW OF ADMINISTRATIVE AND TERMINATION COSTS FOR NATIONWIDE 
INSURANCE,  NOV 2004,  $1,426,267
CIN: A-07-02-03021  ANTHEM BCBS OF CT - PENSION SEGMENT CLOSING,  FEB 2004,  $1,351,284
CIN: A-04-03-02024  REVIEW OF BCBSFL RESPONSE TO SET-ASIDE COSTS IN PRIOR FACP AUDIT,  
APR 2003,  $1,277,247
CIN: A-05-01-00064  REVIEW  OF  OUTPATIENT  REHABILITATION  CLAIMS  REIMBURSED  BY 
MEDICARE DURING CALENDAR YEAR 1999,  FEB 2002,  $1,235,892
CIN: A-03-01-00251  AFDC OVERPAYMENTS - VIRGINIA,  MAR 2003,  $1,221,494
CIN: A-07-04-00169  PENSION SEGMENTATION REVIEW AT PBS,  NOV 2004,  $1,214,985
CIN: A-04-02-72903  STATE OF TENNESSEE,  SEP 2002,  $1,213,353
CIN: A-04-03-01000  REVIEW OF HOME HEALTH SERVICES CLAIMED BY LIFELINE HEALTH GROUP, 
INC,  JUN 2004,  $1,173,330
CIN: A-09-04-00047  WEDGE: REVIEW OF ALASKAS ACCOUNTS RECEIVABLE SYSTEM FOR 
MEDICAID PROVIDER OVERPAYMENTS,  OCT 2004,  $1,092,663
CIN: A-09-02-01004  USC GRANTS MANAGEMENT REVIEW,  JUL 2004,  $1,082,554
CIN: A-02-04-77762  MONTCLAIR CHILD DEVELOPMENT CENTER INC.,  MAR 2004,  $992,617
CIN: A-09-94-01010  CLOSEOUT AUDIT--CONT NO. N01-ES-75196 (STRATAGENE),  MAR 1994,  
$983,208
CIN: A-05-01-00059  ILLINOIS MEDICAID HOSPITAL-SPECIFIC DSH PAYMENT LIMITS,  AUG 2004,  
$972,810
CIN: A-05-04-77356  TRI-VALLEY OPPORTUNITY COUNCIL INC.,  FEB 2004,  $866,666
CIN: A-02-03-01028  IMD UNDER 21 AUDIT IN NEW JERSEY,  OCT 2004,  $848,374
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES,  MAR 2002,  
$836,711
CIN: A-06-03-00013  MEDICARE ADMINISTRATIVE COST PROPOSAL-ARKANSAS BCBS,  OCT 2003,  
$759,748
Fall 2005 Semiannual Report to Congress Appendix D | 1
CIN: A-09-04-00040  WEDGE:  REVIEW  OF  ALASKAS  MEDICAID  PAYMENTS  FOR  SKILLED 
PROFESSIONAL MEDICAL PERSONNEL REIMBURSED AT THE ENHANCED 
RATE,  NOV 2004,  $758,215
CIN: A-05-02-00041  INDIANA MEDICAID HOSPITAL PATIENT TRANSFERS,  JAN 2003,  $730,061
CIN: A-09-03-00046  AUDIT OF ORGAN ACQUISITION COSTS  AT ST VINCENT,  JUL 2004,  
$683,315
CIN: A-06-03-00032  AUDIT OF ADMIN COSTS PART A & PART B OF MEDICARE PROGRAM-
TRAILBLAZERS,  APR 2004,  $622,078
CIN: A-04-00-00138  MEDICAID ESCHEATED WARRANTS - FLORIDA,  JAN 2002,  $613,891
CIN: A-07-04-00170  REVIEW OF PENSION COSTS CLAIMED FOR MEDICARE REIMBURSEMENT 
FOR VERITUS,  AUG 2004,  $594,806
CIN: A-02-03-01024  MEDICAID  DRUG  REBATE  COLLECTIONS  -  NEW  JERSEY,    OCT  2004,  
$567,186
CIN: A-09-01-00055  REVIEW OF IMD CLAIMS - STATE OF CALIFORNIA,  MAR 2002,  $551,394
CIN: A-07-02-03015  BCBS OF MN PENSION COSTS CLAIMED FOR MEDICARE REIMBURSEMENT,  
FEB 2003,  $550,083
CIN: A-05-02-72811  COMMUNITY  ACTION  OF  GREATER  INDIANAPOLIS  INC.,    AUG  2002,  
$547,899
CIN: A-01-04-00008  AUDIT OF MEDICAID PAYMENTS FOR SKILLED PROFESSIONAL MEDICAL 
PERSONNEL REIMBURSED AT ENHANCED RATES OCTOBER 1, 2002 THROUGH 
SEPTEMBER 30, 2003 OFFICE OF VERMONT HEALTH ACCESS,  MAR 2005,  
$534,438
CIN: A-05-04-00034  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF RHODE ISLAND MEDICARE SERVICES,  NOV 2004,  
$510,163
CIN: A-03-92-16229  STATE OF PENNSYLVANIA,  MAR 1992,  $496,876
CIN: A-02-02-01004  MEDICAID PPS TRANSFERS,  MAY 2003,  $493,158
CIN: A-03-04-00205  MEDICAID PROVIDER OVERPAYMENTS--DELAWARE,  OCT 2004,  $437,592
CIN: A-01-04-00506  REVIEW OF DISPROPORTIONATE SHARE HOSPITAL PAYMENTS CLAIMED  BY 
SAINT MARYS HOSPITAL FOR FISCAL YEAR ENDING DECEMBER 31, 2002,  
MAY 2004,  $433,502
CIN: A-05-03-00053  ESRD PRICING ERRORS AT INDEPENDENT FACILITIES,  NOV 2003,  $407,300
CIN: A-02-01-67912  STATE OF NEW YORK,  MAR 2001,  $389,536
CIN: A-01-02-73084  STATE OF MAINE,  SEP 2002,  $362,326
CIN: A-09-04-00058  REVIEW  OF  ALASKAS  CLAIM  FOR  FEDERAL  MATCHING  FUNDS  FOR 
REIMBURSABLE SERVICE EXPENDITURES CLAIMED AS OTHER FINANCIAL 
PARTICIPATION,  OCT 2004,  $346,217
CIN: A-02-04-01003  ORGAN ACQUISITION COST SURVEY - REGION II,  DEC 2004,  $343,272
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES,  MAY 
2002,  $319,355
CIN: A-09-03-00032  BLUE CROSS OF CALIFORNIA, MEDICARE, TERMINATION COSTS,  OCT 2003,  
$319,187
Fall 2005 Semiannual Report to Congress 2 | Appendix D 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN,  MAR 
2003,  $315,474
CIN: A-03-04-00204  SKILLED PROFESSIONAL MEDICAL PERSONNEL (SPMP) - WEST VIRGINIA,  
DEC 2004,  $299,360
CIN: A-09-03-01017  REVIEW OF RYAN WHITE TITLE I SF CONTRACTOR - BAKER PLACES,  AUG 
2004,  $297,237
CIN: A-09-03-00050  OREGON MEDICAID REIMBURSEMENT RATE FOR NURSING FACILITY 
ADMINISTRATIVE COSTS,  OCT 2003,  $290,769
CIN: A-01-04-00522  THE MID COAST HOSPITAL IN MANIE DSH PAYMENT,  SEP 2004,  $289,936
CIN: A-01-04-00003  APPLICATION CONTROLS AT NEW HAMPSHIRE MEDICAID STATE AGENCY,  
FEB 2005,  $274,370
CIN: A-09-94-30178  STATE OF ARIZONA,  JUN 1994,  $267,021
CIN: A-07-04-00175  REVIEW OF UNFUNDED PENSION COSTS AT VERITUS, INC.,  OCT 2004,  
$266,052
CIN: A-05-02-00047  UNITED GOVERNMENT SERVICES, MEDICARE PART A ADMIN. COSTS  
FY 1999-2001,  JUN 2003,  $260,831
CIN: A-07-03-02662  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION  NORDIAN,  
DEC 2002,  $258,112
CIN: A-02-03-04001  AUDIT OF RUTGERS CONTRACT NO. SPO 103-96-D-0016/0001,  AUG 2003,  
$249,381
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL BENEFICIARIES,  
OCT 2002,  $229,656
CIN: A-02-03-04006  GRANT REVIEW DAAG55-97-1-0281,  MAR 2004,  $221,365
CIN: A-05-01-00103  PAYMENTS FOR SERVICES TO DECEASED BENEFICIARIES - MICHIGAN,  OCT 
2003,  $211,894
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT,  OCT 2002,  $208,271
CIN: A-05-04-00058  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF ANTHEM HEALTH PLANS OF NEW HAMPSHIRE, INC.,  
JUL 2004,  $206,495
CIN: A-01-04-01501  NORTHEASTERN UNIVERSITY DHHS GRANT COSTS GRANT #S 9274, 4000 
AND 4111,  JAN 2005,  $194,890
CIN: A-09-02-00084  REVIEW OF MEDICAID PAYMENT FOR RESIDENTS UNDER 21/22 IN STATE 
IMDS,  NOV 2004,  $190,460
CIN: A-07-03-02656  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION  KANSAS,  DEC 
2002,  $190,106
CIN: A-04-04-78917  STATE OF FLORIDA,  AUG 2004,  $186,096
CIN: A-03-01-00555  PDPI INC.  HEAD START,  JUN 2001,  $185,577
CIN: A-07-01-02094  SURVEY OF OUTPATIENT OBSERVATION SERVICES,  OCT 2002,  $165,125
CIN: A-09-02-00083  REVIEW MEDICAID PAYMENTS FOR RESIDENT UNDER 21/22  IN PRIVATE 
IMDS, NOV 2004,  $155,133
CIN: A-07-04-03051  MEDICAID PROVIDER OVERPAYMENTS IN UTAH,  AUG 2004,  $132,749
CIN: A-05-03-00067  ADMINISTRATIVE COSTS - WI MEDICAID WAIVERS,  JUN 2004,  $129,663
Fall 2005 Semiannual Report to Congress Appendix D | 3
CIN: A-02-01-04000  INTERIM AUDIT OF RUTGERS CONTRACT NO.SP0103-96-D-,  JAN 2002,  
$125,415
CIN: A-01-03-00010  MEDICAID SCHOOL-BASED HEALTH SERVICES ADMINISTRATIVE CLAIMING 
REVIEW - RHODE ISLAND,  JUN 2004,  $123,010
CIN: A-05-01-00069  MERITER - MC/MA CREDIT BALANCES,  JUL 2002,  $122,713
CIN: A-05-01-00091  PAYMENTS TO UNITED HC OF FLA FOR INSTITUTIONAL BENEFICIARIES,  SEP 
2002,  $121,023
CIN: A-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM,  JAN 1998,  
$114,631
CIN: A-09-02-71247  WATTSHEALTH FOUNDATION INC.,  APR 2002,  $113,000
CIN: A-01-02-00527  REVIEW OF ANTHEM BLUE CROSS/BLUE SHIELD MEDICARE CONTRACT 
TERMINATION AND SEVERANCE COSTS,  SEP 2003,  $104,468
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL BENEFICIARIES,  
JUN 2002,  $100,692
CIN: A-04-03-06007  NURSING HOME QUALITY OF CARE SANCTIONS - FLORIDA,  FEB 2004,  
$99,957
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS & COST REPORTS @ 
WELBORN,  JUN 2003,  $97,623
CIN: A-10-05-80407  FIRST A.M.E. CHILD & FAMILY CENTER,  MAR 2005,  $96,803
CIN: A-09-97-00066  WALTER MCDONALD - INDIRECT COST RATE AUDIT,  MAR 1998,  $95,733
CIN: A-05-02-00074  IL PARTNERSHIP PLAN - TRANSPORTATION DURING AN INPATIENT STAY,  
APR 2003,  $89,147
CIN: A-05-01-00090  PAYMENTS TO AETNA OF FOR INSTITUTIONAL BENEFICIARIES,  JUL 2002,  
$87,516
CIN: A-01-04-77722  STATE OF RHODE ISLAND & PROVIDENCE PLANTATIONS,  JAN 2004,  
$86,792
CIN: A-05-04-00061  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF BLUE CROSS BLUE SHIELD OF NEBRASKA,  DEC 2004,  
$78,352
CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW ON MANAGED CARE ORGANIZATION,  OCT 
2002,  $77,000
CIN: A-05-03-00085  NURSING HOME QUALITY OF CARE SANCTIONS - ILLINOIS,  MAY 2004,  
$69,892
CIN: A-03-05-79945  BOARD OF EDUCATION OF PRINCE GEORGES COUNTY MARYL,  DEC 2004,  
$67,937
CIN: A-01-03-75448  STATE OF NEW HAMPSHIRE,  APR 2003,  $65,917
CIN: A-08-03-74429  PORCUPINE CLINIC,  JUL 2003,  $65,027
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PA FOR INSTITUTIONAL BENEFICIARIES,  MAY 
2002,  $62,432
CIN: A-01-04-02501  REVIEW OF COMMUNITY RENEWAL TEAM, INC. COMPENSATION PRACTICES 
FOR EXECUTIVES AND TEACHERS,  MAR 2005,  $57,483
CIN: A-04-02-68936  STATE OF TENNESSEE,  JUN 2002,  $50,717
Fall 2005 Semiannual Report to Congress 4 | Appendix D 
CIN: A-05-02-00054  UNITED GOVERNMENT SERVICES, Y2K COSTS FY 1998 & 1999,  APR 2003,  
$49,923
CIN: A-02-99-58263  PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD,  JUL 1999,  
$49,684
CIN: A-03-93-03306  SURVEY RESEARCH ASSOC. CACS NO1-ES-45067,  DEC 1993,  $48,779
CIN: A-08-05-79580  PORCUPINE CLINIC,  OCT 2004,  $45,688
CIN: A-03-02-00373  REVIEW OF US HELPING US,  DEC 2003,  $45,558
CIN: A-09-03-01018  REVIEW OF RYAN WHITE TITLE I SF CONTRACTOR - CONTINUUM,  FEB 2005,  
$42,625
CIN: A-01-03-01500  REVIEW OF CDC HIV PROGRAMS AT GREATER BRIDGEPORT ADOLESCENT 
PREGNANCY PROGRAM,  JUL 2003,  $41,088
CIN: A-10-03-00003  REVIEW  OF  DUPLICATE  MEDICARE  FEE-FOR-SERVICE  PAYMENTS  AT 
REGENCE BLUESHIELD OF IDAHO,  OCT 2003,  $39,660
CIN: A-05-03-00105  AUDIT OF MEDICAID NURSING FACILITY ADMINISTRATIVE COSTS,  OCT 
2004,  $39,104
CIN: A-03-03-00211  MEDICAID DENIAL OF PAYMENT REMEDY FOR SANCTIONED NURSING 
HOMES - PA,  JUN 2004,  $39,074
CIN: A-02-00-65502  ABYSSINIAN DEVELOPMENT CORP.,  AUG 2000,  $34,737
CIN: A-06-03-74833  AMIGOS VOLUNTEERS IN EDUCATION & SERVICES INC. (AV,  APR 2003,  
$31,180
CIN: A-05-02-69155  STATE OF WISCONSIN,  DEC 2001,  $30,900
CIN: A-01-02-71527  STATE OF MASSACHUSETTS,  APR 2002,  $29,260
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE,  JAN 2003,  $28,573
CIN: A-03-98-03301  AAUAP  INCURRED COST REVIEW  HHS 105-95-7011,  APR 1998,  $28,289
CIN: A-05-03-00097  MEDICARE OUTPATIENT CARDIAC REHAB - NORTHFIELD HOSPITAL,  NOV 
2003,  $27,013
CIN: A-09-03-01013  REVIEW OF UNIVERSITY MEDICAL CENTER RYAN WHITE TITLE I FUNDING,  
FEB 2005,  $26,760
CIN: A-04-03-01004  OUTPATIENT CARDIAC REHAB SERVICES - HEALTHSOUTH SEA PINES REHAB 
HOSPITAL,  DEC 2003,  $26,279
CIN: A-07-02-00150  PAYMENTS TO COVENTRY--PITTSBURG FOR INSTITUTIONAL BENEFICIARIES,  
JUN 2003,  $26,000
CIN: A-09-05-80636  SOUTH COUNTY ECONOMIC DEVELOPMENT COUNCIL,  FEB 2005,  $25,000
CIN: A-01-04-78952  STATE OF CONNECTICUT,  AUG 2004,  $24,457
CIN: A-09-03-01019  REVIEW OF AID FOR AIDS OF NEVADA RYAN WHITE TITLE I FUNDING,  MAR 
2005,  $24,355
CIN: A-06-02-70732  UNITED STATES-MEXICO BORDER HEALTH ASSOCIATION,  JAN 2002,  
$23,483
CIN: A-05-01-00078  PAYMENTS  TO  HEALTH  NET-TUCSON,  AZ.-  FOR  INSTITUTIONAL 
BENEFICIARIES,  APR 2002,  $21,233
CIN: A-02-03-04004  CONTRACT CLOSING - NAS 9-19441,  JUL 2003,  $20,595
CIN: A-05-02-72480  HANSEL NEIGHBORHOOD SERVICE CENTER INC.,  SEP 2002,  $20,266
Fall 2005 Semiannual Report to Congress Appendix D | 5
CIN: A-05-02-00079  MEDICAID FFS PAYMENTS FOR MEDICAID MANAGED CARE ENROLLEES,  SEP 
2003,  $20,165
CIN: A-05-02-70624  STATE OF OHIO,  JAN 2002,  $19,970
CIN: A-04-01-67441  CATAWBA INDIAN NATION,  APR 2001,  $19,204
CIN: A-08-04-76779  COLORADO FOUNDATION FOR MEDICAL CARE,  DEC 2003,  $18,925
CIN: A-05-01-00100  PAYMENTS TO FALLON HEALTH FOR INSTITUTIONALIZED BENEFICIARIES,  
MAY 2002,  $18,842
CIN: A-05-01-00095  PAYMENTS TO HUMANA OF ARIZONA FOR INSTITUTIONAL BENEFICIARIES,  
JUN 2002,  $18,645
CIN: A-07-03-00151  REVIEW OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH INSTITUTIONAL 
STATUS,  JUN 2003,  $18,400
CIN: A-10-04-76879  STATE OF ALASKA,  DEC 2003,  $18,226
CIN: A-01-02-01504  REVIEW OF CDCS HIV PROGRAMS AT FENWAY COMMUNITY HEALTH 
CENTER,  JUN 2003,  $18,028
CIN: A-05-03-00037  NURSING HOME QUALITY OF CARE SANCTIONS - OHIO,  MAY 2004,  
$17,796
CIN: A-05-03-00052  NURSING HOME QUALITY OF CARE SANCTIONS - MICHIGAN,  APR 2004,  
$17,564
CIN: A-06-04-77400  UNIV. OF ARKANSAS FOR MEDICAL SCIENCES,  JAN 2004,  $14,989
CIN: A-05-01-00044  MINNESOTA MEDICAID PERSONAL CARE SERVICES REVIEW,  APR 2002,  
$14,844
CIN: A-09-04-00056  REVIEW OF CARE PLAN OVERSIGHT SERVICES PAID MORE THAN $150,  JAN 
2005,  $14,800
CIN: A-09-04-00041  WEDGE:  AUDIT OF MEDICAID VACCINES FOR CHILDREN - ARIZONA,  NOV 
2004,  $14,162
CIN: A-05-05-80308  INDIANHEAD COMMUNITY ACTION AGENCY INC.,  MAR 2005,  $13,655
CIN: A-07-04-01011  PAYMENTS FOR UNITED HEALTHCARE FOR INSTITUTIONAL BENEFICIARIES,  
MAR 2005,  $13,128
CIN: A-03-03-72847  DISTRICT OF COLUMBIA DEPT. OF HEALTH,  OCT 2002,  $12,850
CIN: A-08-03-74361  PORCUPINE CLINIC,  JUL 2003,  $12,611
CIN: A-04-04-79536  STATE OF SOUTH CAROLINA,  AUG 2004,  $12,154
CIN: A-05-03-00012  FROEDTERT MEDICAID CREDIT BALANCES,  FEB 2003,  $12,066
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL BENEFICIARIES,  
JAN 2002,  $11,089
CIN: A-03-03-00004  MEDICARE AUDIT CARDIAC REHABILITATION CENTERS-SHADY GROVE,  
OCT 2003,  $9,127
CIN: A-03-02-72715  DISTRICT OF COLUMBIA DEPT. OF HEALTH,  JUL 2002,  $7,851
CIN: A-06-03-00040  LONG-TERM CARE TEXAS MEDICAID PAYMENTS FOR DUAL ELIGIBLES,  MAR 
2004,  $7,801
CIN: A-05-01-68270  LAKE COUNTY COMMUNITY ACTION PROJECT,  MAY 2001,  $7,614
CIN: A-06-97-48062  SER-JOBS FOR PROGRESS NATIONAL INC.,  MAY 1997,  $5,924
Fall 2005 Semiannual Report to Congress  | Appendix D 
CIN: A-15-02-20006  REVIEW OF CDC COOPERATIVE AGREEMENT AND HRSA RYAN WHITE 
ACTIVITIES AT HEALTH EDUCATION RESOURCE ORGANIZATION (HERO), 
INC. (BALTIMORE EMA/BALTIMORE CITY HEALTH DEPT),  MAR 2003,  
$5,010
CIN: A-05-04-00030  PAYMENTS FOR SERVICES TO DECEASED MEDICAID BENEFICIARIES - 
MASSACHUSETTS,  FEB 2005,  $4,696
CIN: A-04-03-01006  OUTPATIENT CARDIAC REHAB SERVICES AT MORTON PLANT HOSPITAL,  
JAN 2004,  $4,426
CIN: A-05-04-78989  STATE OF WISCONSIN,  JUL 2004,  $4,009
CIN: A-02-02-01035  EVALUATION OF BID PROPOSAL - MEDICARE HELP LINE,  AUG 2002,  $3,760
CIN: A-05-03-00084  MEDICARE  OUTPATIENT  CARDIAC  REHAB  -  NORTHERN  MICHIGAN 
HOSPITAL,  OCT 2003,  $3,738
CIN: A-02-04-04001  GRANT REVIEW N00014-93-1-1380,  MAY 2004,  $3,376
CIN: A-03-01-03303  JOHNS HOPKINS UNIVERSITY/KPMG/NIDA/N01DA-3-7301,  FEB 2001,  $3,347
CIN: A-03-95-03318  TRANS-MANAGEMENT SYSTEMS 105-92-1527 (CCO),  MAY 1996,  $3,016
CIN: A-02-03-04002  GRANT REVIEW DAAH04-93-G-0234,  SEP 2003,  $2,576
CIN: A-04-03-01002  OUTPATIENT  HOSPITAL  CARDIAC  REHAB  -  MEMORIAL  HOSPITAL 
JACKSONVILLE,  NOV 2003,  $2,123
CIN: A-04-03-01005  OUTPATIENT CARDIAC REHAB SERVICES CENTRAL FL REGIONAL HOSPITAL,  
NOV 2003,  $2,003
CIN: A-02-03-01026  MEADOWLANDS HOSPITAL MEDICAL CENTER CARDIAC REHAB SERVICES,  
JAN 2004,  $1,703
CIN: A-04-04-02002  MEDICAID PAYMENTS TO SNFS FOR MEDICARE COVERED SERVICES,  AUG 
2004,  $1,554
CIN: A-06-02-00032  CMS FY 01 MEDICARE ERROR RATE - ARK BC/BS REPORT,  NOV 2002,  $1,311
CIN: A-05-03-00070  MEDICARE OUTPATIENT CARDIAC REHAB - ST.CHARLES MERCY HOSP,  OCT 
2003,  $1,158
CIN: A-03-03-00393  AUDIT OF CDC HIV/AIDS GRANT TO SEXUAL MINORITY YOUTH ASSISTANCE 
LEAGUE,  OCT 2003,  $1,155
CIN: A-07-00-02082  REVIEW OF A COST HMO - IOWA,  FEB 2002,  $1,006
Notes to Table 2
1The opening balance was adjusted downward by $69 million.
2A management decision has not been made within 6 months on the following reports. Discussions with management 
are on going. 
CIN: A-10-00-00011  MEDICAID INTERGOVERNMENTAL TRANSFERS - WA STATE,  MAR 2001,  
$427,500,000
CIN: A-06-01-00041  AUDIT OF THE TX DISPROPORTIONATE SHARE HOSP PROG PAYMENT 
METHODLOGY,  FEB 2003,  $319,200,000
CIN: A-09-03-00055  AUDIT OF OREGONS MEDICAID UPPER PAYMENT LIMITS FOR NON-STATE 
Fall 2005 Semiannual Report to Congress Appendix D | 
GOVERNMENT NURSING FACILITIES FOR STATE FISCAL YEARS 2002 AND 
2003,  FEB 2005,  $45,917,548
CIN: A-01-02-00503  FURTHER  EXPANSION  OF  THE  DRG  PAYMENT  WINDOW,    AUG  2003,  
$37,000,000
CIN: A-05-02-00078  ROLLUP OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH INSTITUTIONAL 
STATUS,  FEB 2004,  $12,764,202
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM  NATIONAL,  MAR 1993,  $10,161,742
CIN: A-05-03-00019  PAYMENTS FOR SERVICES TO DECEASED RECIPIENTS - NEW YORK,  OCT 
2004,  $6,707,623
CIN: A-05-02-00077  MICHIGAN MEDICAID/SCHIP REVIEW,  NOV 2003,  $5,908,350
CIN: A-01-97-02506  REVIEW OF THE AVAIL OF MEDICAL COVERAGE/CSE SUPORT,  JUN 1998,  
$5,704,585
CIN: A-03-02-00203  VIRGINIA - SCHIP/TITLE IV - D  SURVEY,  JUL 2004,  $5,402,491
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR,  MAR 2002,  
$4,000,000
CIN: A-05-02-00066  REVIEW OF RFP CMS-02-001/ELH1,  MAY 2002,  $1,885,793
CIN: A-05-02-00075  INDIANA MEDICAID/SCHIP REVIEW,  NOV 2003,  $1,885,708
CIN: A-05-04-00025  REVIEW  OF  MEDICARE  PHYSICIAN  PLACE  OF  SERVICE  CODING  FOR 
AMBULATORY  SURGICAL  AND  RELATED  PROCEDURES,    OCT  2004,  
$742,510
CIN: A-05-02-00082  BID PROPOSAL FOR 1-800 MEDICARE HOTLINE ADMINISTRATION,  AUG 2002,  
$609,950
CIN: A-05-02-00080  SINAI - MC/MA CREDIT BALANCES,  JAN 2003,  $515,942
CIN: A-05-03-00021  CIMRO PRO PRE-AWARD AUDIT FOR NEBRASKA,  NOV 2002,  $504,650
CIN: A-05-04-00030  PAYMENTS FOR SERVICES TO DECEASED MEDICAID BENEFICIARIES - 
MASSACHUSETTS,  FEB 2005,  $503,715
CIN: A-05-03-00052  NURSING HOME QUALITY OF CARE SANCTIONS - MICHIGAN,  APR 2004,  
$280,879
CIN: A-07-04-01008  FAMILY PLANNING - FEE-FOR-SERVICE - COLORADO,  JAN 2005,  $269,024
CIN: A-05-04-00023  HEAD START COMPENSATION REVIEW - CEOGC,  JAN 2005,  $178,000
CIN: A-01-02-73084  STATE OF MAINE,  SEP 2002,  $149,082
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN,  MAR 
2003,  $144,909
CIN: A-05-03-00059  ESRD #9 PRE-AWARD AUDIT (RFP-CMS-03-001/JAC),  MAY 2003,  $139,816
CIN: A-04-03-08013  ESRD NETWORK COST PROPOSAL,  MAY 2003,  $116,085
CIN: A-05-03-00060  ESRD #10 PREAWARD AUDIT (RFP-CMS-03-001/JAC),  MAY 2003,  $114,289
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL BENEFICIARIES,  
JAN 2002,  $98,698
CIN: A-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM,  JAN 1998,  
$90,528
CIN: A-05-02-00089  REVIEW OF RFP CMS-500-97-0408/0008,  NOV 2002,  $84,457
Fall 2005 Semiannual Report to Congress  | Appendix D 
CIN: A-05-02-00084  MEDICARE OUTPATIENT CARDIAC REHAB - ST.LUKES MEDICAL CENTER,  
JUL 2003,  $47,247
CIN: A-09-04-00047  WEDGE: REVIEW OF ALASKAS ACCOUNTS RECEIVABLE SYSTEM FOR 
MEDICAID PROVIDER OVERPAYMENTS,  OCT 2004,  $10,085
CIN: A-05-04-00051  ALLOWABILITY OF CDC BIOTERRORISM COSTS - OHIO DEPARTMENT OF 
HEALTH,  FEB 2005,  $4,154
Fall 2005 Semiannual Report to Congress Appendix E
Reporting  Requirements  of  the  Inspector  General  Act  of  1978,  as 
Amended
The reporting requirements of the Inspector General Act of 1978, as amended, are listed below with reference to the page 
in the semiannual report on which each is addressed. Where there are no data to report under a particular requirement, 
the word none appears in the column. A complete listing of audit and inspection reports is being furnished to Congress 
under separate cover. Copies are available upon request.
Section of the Act  Requirement Page
Section 4(a)(2) Review of legislation and regulations 41
Section 5
(a)(1) Significant problems, abuses, and deficiencies Throughout
(a)(2) Recommendations with respect to significant  Throughout
problems, abuses, and deficiencies
(a)(3) Prior significant recommendations on which  Appendixes B & C
corrective action has not been completed 
(a)(4) Matters referred to prosecutive authorities 42
(a)(5) Summary of instances where information was  None
refused 
(a)(6) List of audit reports Under separate cover
(a)(7) Summary of significant reports Throughout
(a)(8) Statistical Table 1Reports With Questioned Costs 39
(a)(9) Statistical Table 2Funds Recommended To Be Put  40
to Better Use
Summary of previous audit reports without 
(a)(10) Appendix D
management decisions
Description and explanation of revised management 
  (a)(11) Appendix D
decisions
Management decisions with which the Inspector 
  (a)(12) None
General is in disagreement
 9 Fall 2005 Semiannual Report to Congress 0 |
Fall 2005 Semiannual Report to Congress Appendix F
Status of Public Proposals for New and Modified Safe Harbors to the 
Anti-Kickback Statute Pursuant to Section 205 of the Health Insurance 
Portability and Accountability Act of 1996
Pursuant to section 205 of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public 
Law 104-191, the Inspector General is required annually to solicit proposals via Federal Register notice for 
developing new and modifying existing safe harbors to the anti-kickback statute and for developing special 
fraud alerts. The Inspector General is also required annually to report to Congress on the status of the 
proposals received.
In crafting safe harbors for a criminal statute, it is incumbent upon the Office of Inspector General (OIG) 
to engage in a complete and careful review of the range of factual circumstances that may fall within 
the proposed safe harbor subject area, so as to uncover all potential opportunities for fraud and abuse by 
unscrupulous providers. Having done so, OIG must then determine, in consultation with the Department 
of Justice, whether it can develop effective regulatory limitations and controls that will permit beneficial 
or innocuous arrangements, but also protect the Federal health care programs and their beneficiaries from 
abusive practices.
In response to the 2004 annual solicitation, OIG received the following proposals related to safe harbors:
Proposal OIG Response
New safe harbor for physician-owners of ambulatory  OIG is not adopting this suggestion. The arrangements 
surgical centers permitting such owners to divide profits  described are subject to abuse and should be evaluated on 
from facility fees based on physician productivity as long  a case-by-case basis, such as under the advisory opinion 
as physician-owners do not cross-refer patients. process.
New safe harbor for implementing electronic health  Rulemaking on this topic is forthcoming.
record  systems  among  hospitals,  health  systems, 
and multispecialty group practices and to provide 
standardized software and hardware to physicians 
without charge.
New safe harbor for implementation of a community  A solicitation of comments on this topic is forthcoming.
wide health information network.
Modification of existing safe harbor for obstetrical  This suggestion requires further study.
malpractice insurance subsidies to include additional 
types  of  physicians  and  subsidies  where  there  is 
documented need and the subsidy amount is limited in 
scope and duration.
 1 Fall 2005 Semiannual Report to Congress 2 | Appendix F 
Proposal OIG Response
New safe harbor for retention payments by hospitals to  OIG  is  not  adopting  this  suggestion.  Retention 
practitioners. arrangements  are  subject  to  abuse  and  should  be 
evaluated on a case-by-case basis, such as under the 
advisory opinion process.
Modification  of  existing  safe  harbor  for  hospital  OIG is not adopting this suggestion. The recruitment 
recruitment  payments  to  practitioners  to  protect  arrangements described are subject to abuse and should 
arrangements outside of Health Professional Shortage  be evaluated on a case-by-case basis, such as under the 
Areas and to permit payments to an existing practice for  advisory opinion process.
recruiting a practitioner to join the practice.
Modification of existing safe harbor for group purchasing  OIG is not adopting this suggestion. The GPO safe 
organizations (GPO) to limit product bundling, to limit  harbor is statutory, and OIG has no authority to modify 
sole-source contracts, and to limit administrative fees. the substantive elements of the statutory exception.
Rescission of the safe harbor for GPOs. OIG is not adopting this suggestion. The GPO safe 
harbor is statutory.
In addition to the proposals in the preceding table (some of which duplicate proposals from past years), OIG 
has had under consideration a number of suggestions reported in prior years. The following table updates 
the status of those suggestions:
Proposal OIG Response
New safe harbor for manufacturer donations to charitable  OIG is considering this suggestion.
organizations that provide items or services to financially 
needy patients, including copayment assistance.
Modification of the discount safe harbor to clarify  This suggestion requires further study.
its application to the additional entities with which 
pharmaceutical manufacturers may contract under 
Medicare  Prescription  Drug,  Improvement,  and 
Modernization  Act  of  2003  (e.g.,  discount  drug 
card sponsors, pharmacy benefits managers, retail 
pharmacies, and Part D drug plan sponsors).
New  safe  harbor  for  certain  practices  related  to  This  issue  was  addressed  in  OIG  Supplemental 
economic credentialing of physicians by hospitals. Compliance Program Guidance for Hospitals, issued on 
January 31, 2005. Public comments previously received 
variously suggest issuance of different types of guidance; 
some comments suggest that OIG take no action. OIG is 
reviewing the comments and studying the issue.
Fall 2005 Semiannual Report to Congress Appendix F | 3
Proposal OIG Response
Modification of the Medicare SELECT safe harbor  These suggestions require further study. In September 
to cover coinsurance waivers for inpatient services  2002, OIG issued a notice of proposed rulemaking to 
negotiated  between  a  hospital  and  an  Employee  make certain modifications to the safe harbor. The public 
Retirement Income Security Act employee welfare  comments to that rulemaking are under review.
benefit plan that covers retirees and Part B waivers for 
employer group plans.
New safe harbor for inducements offered to beneficiaries  OIG is considering this suggestion.
that fit in an exception to the beneficiary inducements 
statute at section 42 U.S.C.  1320a-7a(a)(5).
Modification of the existing shared risk exception to  OIG is considering these suggestions.
cover second tier contractors of federally qualified 
health centers (FQHC) and the TRICARE program.
New safe harbor for certain fee-for-service arrangements  OIG  published  a  proposed  rule  regarding  FQHC 
between FQHCs and other providers, practitioners, and  arrangements. See 70 FR 38081 (July 1, 2005).
suppliers.
Modification of the discount safe harbor to include a  OIG is considering this suggestion.
discount obtained by a commercial health plan that does 
not file claims with the Federal health care programs, 
where the discount otherwise meets the safe harbor 
conditions.
Modification of the discount safe harbor to clarify its  This suggestion requires further study.
application to discounts applied to a manufacturers full 
product line.
Modification of the discount safe harbors reporting  This suggestion requires further study.
requirements. 
Modification of the existing safe harbors to make them  OIG is considering making some conforming changes 
conform to the final regulations under the physician self- with respect to the group practice safe harbor. With 
referral statute published by the Centers for Medicare  respect to other safe harbors, the statutes generally 
and Medicaid Services (CMS), and creation of new safe  serve somewhat different purposes and conforming the 
harbors analogous to the new self-referral exceptions  safe harbors to the self-referral exceptions may not be 
created by the CMS regulations. appropriate.
Modification of the ambulatory surgery center (ASC) safe  OIG is considering this suggestion.
harbor to address protection of startup multispecialty 
ASCs that otherwise comply with the current safe 
harbor conditions.
Modification of the safe harbor for ASCs jointly owned  OIG is considering this suggestion.
by hospitals and physicians to add conditions under 
which a hospital would not be in a position to make or 
influence referrals.
Fall 2005 Semiannual Report to Congress 4 | Appendix F 
Proposal OIG Response
Modification of the ASC safe harbor to indicate whether  OIG is considering this suggestion.
an ASC can require investors to comply with safe harbor 
conditions.
Modification of the ASC safe harbor to clarify the use  OIG is considering this suggestion.
of pass-through entities to hold ownership interests 
and the treatment of physician investors who invest at 
different times.
New safe harbor for rural health networks operating  OIG is considering this suggestion.
pursuant to the Medicare Rural Hospital Flexibility 
Program.
New safe harbor for arrangements that comply with  OIG is considering this suggestion.
section 513 of the IRS Code pertaining to the provision 
of certain supporting goods and services by tax-exempt 
hospitals to other tax-exempt hospitals. 
Fall 2005 Semiannual Report to Congress Appendix G
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 Congress. A selection of other authorities appears below:
Program Exclusions
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds for excluding individuals and 
entities from participation in Medicare, Medicaid, and other Federal health care programs. Exclusions are required 
for individuals and entities convicted of the following types of criminal offenses: (1) Medicare or Medicaid fraud;  
(2) patient abuse or neglect; (3) felonies for other health care fraud; and (4) felonies for illegal manufacture, distribution, 
prescription, or dispensing of controlled substances. OIG has the discretion to exclude individuals and entities on several 
other grounds, including misdemeanors for other health care fraud (other than Medicare or Medicaid) or for illegal 
manufacture, distribution, prescription, or dispensing of controlled substances; suspension or revocation of a license 
to provide health care for reasons bearing on professional competence, professional performance, or financial integrity; 
provision of unnecessary or substandard services; submission of false or fraudulent claims to a Federal health care program; 
or engaging in unlawful kickback arrangements.
Providers subject to exclusion are granted due process rights (such as including a hearing before an HHS administrative law 
judge and appeals to the HHS Departmental Appeals Board and Federal district and appellate courts) regarding whether 
the basis for the exclusion exists and the length of the exclusion is reasonable.
Patient Dumping
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an individual presents to the emergency 
room of a Medicare-participating hospital, the hospital must provide an appropriate medical screening examination to 
determine whether that individual has an emergency medical condition. If an individual has such a condition, the hospital 
must provide either treatment to stabilize the condition or an appropriate transfer to another medical facility.
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to minimize the risks of transfer and 
must ensure that the receiving hospital agrees to the transfer and has available space and qualified personnel to treat the 
individual. In addition, the transferring hospital must effect the transfer through qualified personnel and transportation 
equipment. Further, a participating hospital with specialized capabilities or facilities may not refuse to accept an appropriate 
transfer of an individual who needs services if the hospital has the capacity to treat the individual.
OIG is authorized to collect civil monetary penalties of up to $25,000 against small hospitals (less than 100 beds) and up to 
$50,000 against larger hospitals (100 beds or more) for each instance in which the hospital negligently violated any of the section 
1867 requirements. In addition, OIG may collect a penalty of up to $50,000 from a responsible physician for each negligent 
violation of any of the section 1867 requirements and, in some circumstances, may exclude a responsible physician.
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 
 5 Fall 2005 Semiannual Report to Congress  | Appendix G 
that the person knows or should know is false or fraudulent is subject to a penalty of up to $10,000 for each item or 
service falsely or fraudulently claimed, an assessment of up to three times the amount falsely or fraudulently claimed, 
and exclusion.
For the purposes of the CMPL, should know is defined to mean that the person acted in reckless disregard or deliberate 
ignorance of the truth or falsity of the claim. The CMPL also authorizes actions for a variety of other violations, including 
submission of claims for items or services furnished by an excluded person; requests for payment in violation of an 
assignment agreement; violations of rules regarding the possession, use, and transfer of biological agents and toxins; and 
payment or receipt of remuneration in violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)).
Summary of Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities
Anti-Kickback Statute
The anti-kickback statute authorizes penalties against anyone who knowingly and willfully solicits, receives, offers, or 
pays remuneration, in cash or in kind, to induce or in return for (1) referring an individual to a person or entity for the 
furnishing, or arranging for the furnishing, of any item or service payable under the Federal health care programs; or 
(2) purchasing, leasing or ordering, or arranging for or recommending the purchasing, leasing or ordering of any good, 
facility, service, or item payable under the Federal health care programs (Section 1128B(b) of the Social Security Act, 
42 U.S.C.  1320a-7b).
Individuals and entities that engage in unlawful referral or kickback schemes may be subject to criminal penalties under 
the general criminal anti-kickback statute, civil monetary penalties under OIGs CMPL authority (Section 1128A(a)(7) 
of the Social Security Act, 42 U.S.C.  1320a-7a), and/or program exclusion under OIGs permissive exclusion authority 
(Section 1128(b)(7) of the Social Security Act, 42 U.S.C.  1320a-7(b)(7)).
False Claims Act
Under the Federal civil False Claims Act (FCA), 31 U.S.C.  3729-3733, a person or entity is liable for up to treble 
damages and a penalty between $5,500 and $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 in which 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.
Fall 2005 Semiannual Report to Congress