Department of Health and Human Services 

OFFICE OF 

  
INSPECTOR GENERAL 

 
 
 
 
 
 
 
C F
ONFLICTS AND  INANCIAL 

 
 
R A
ELATIONSHIPS  MONG 

 
P   Z P
OTENTIAL  ONE  ROGRAM 

 
I C  
NTEGRITY  ONTRACTORS
 
 
Daniel R. Levinson 
  
Inspector General
  
 
July 2012 

OEI-03-10-00300 
  
   
EXECUTIVE SUMMARY:  CONFLICTS AND FINANCIAL RELATIONSHIPS 
AMONG POTENTIAL ZONE PROGRAM INTEGRITY CONTRACTORS  
OEI-03-10-00300 
 
WHY WE DID THIS STUDY 
 
The Centers for Medicare & Medicaid Services (CMS) uses Zone Program Integrity Contractors 
(ZPIC) to perform program integrity activities designed to fight fraud, waste, and abuse in the 
Medicare program.  Conflicts of interest among ZPICs could compromise CMSs efforts to 
protect the program.  CMS requires companies that submit proposals for ZPIC contracts 
(offerors) and their subcontractors to (1) disclose information about any business or contractual 
relationships that may present conflicts and (2) provide a strategy to mitigate all conflicts of  
interest that may compromise the ZPICs impartiality in conducting their work.    
 
HOW WE DID THIS STUDY 
 
We reviewed conflict-of-interest information for 18 offerors and 85 subcontractors.  We also 
conducted a structured interview with CMS staff to determine how CMS addresses conflicts of 
interest among offerors.  We determined whether offerors and subcontractors provided CMS all 
the information required for their reported conflicts and financial interests.  
 
WHAT WE FOUND 
 
Offerors and their subcontractors often had business and contractual relationships with CMS and 
with other offerors, but rarely considered them to be actual conflicts.  They reported having 
relationships with CMS or contractors of CMS that provide Medicare Parts C and D plans, 
claims processing, program integrity, and/or quality improvement services.  Offerors, 
subcontractors, and CMS identified 1,919 business and contractual relationships as possible 
conflicts and 16 as actual conflicts.  CMS does not have a written policy for reviewing conflict 
and financial interest information submitted by offerors, and submitted information was not 
always consistent or complete. Specifically, some offerors and subcontractors failed to provide 
all the requisite information regarding financial interests in other entities.   
    
WHAT WE RECOMMEND 
 
To encourage an environment of transparency and accountability among contractors, we 
recommend that CMS:  (1) provide clearer guidance in the Request for Proposals to offerors and 
subcontractors regarding which business and contractual relationships should be identified as 
actual conflicts and which should be identified as possible conflicts; (2) require offerors and 
subcontractors to distinguish those business and contractual relationships that they deem to be 
actual conflicts from those they deem to be possible conflicts; (3) state whether offerors and 
subcontractors need to report income amounts, periods of performance, and types of work 
performed for their contracts with CMS and income amounts generated from key personnels 
other employment; (4) create a standardized format for reporting information in the 
Organizational Conflict of Interest Certificate and require its use by offerors and subcontractors; 
and (5) develop a formal, written policy outlining how conflict-of-interest information provided 
by offerors should be reviewed by CMS staff. CMS partially concurred with our first and second 
recommendations and fully concurred with the remaining recommendations. 
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................7 

Findings......................................................................................................10 

Offerors and their subcontractors often had business and  

contractual relationships with CMS and with other offerors, but 

rarely considered them  to be actual conflicts .................................10 

Offerors, subcontractors, and CMS identified 1,919 business and 

contractual relationships as possible conflicts and 16 as actual 

conflicts..........................................................................................12
  
The most common strategy proposed to mitigate conflicts was      

to impose restrictions on information and resource sharing     

within the offerors or subcontractors company ...........................14 

CMS does not have a written policy for reviewing conflict and 

financial interest information submitted by offerors, and      

submitted information was not always consistent or complete .....16 

Conclusion and Recommendations ............................................................19 

Agency Comments and Office of Inspector General Response .....21 

Appendixes ................................................................................................23 

A: 	Conflict of Interest Requirements Established in the Zone 

Program Integrity Contractor Request for Proposals...............23 

B: 	Number and Type of Conflicts by Individual Offerors ............30 

C: Agency Comments  ...................................................................31 

Acknowledgments......................................................................................36 

 
   
   
OBJECTIVES 
1. 	  To determine the extent to which offerors reported business and 
contractual relationships with other offerors and the Centers for 
Medicare & Medicaid Services (CMS). 
2. 	  To determine the number of conflicts of interest identified by offerors 
or CMS during the Zone Program  Integrity Contractor (ZPIC) 
contracting process. 
3. 	  To determine what strategies offerors proposed to mitigate conflicts of 
interest.   
4. 	  To determine whether offerors provided consistent and complete 
information on their conflicts and financial interests to CMS and 
whether CMS reviewed this information.  
BACKGROUND 
A conflict of interest exists if a Federal contractor is unable or potentially 
unable to provide impartial assistance or advice to the Government.1   
Conflicts of interest among Federal contractors can compromise the 
integrity of the contracting process. Federal regulations provide guidance 
for resolving conflicts among contractors.   
CMS employs program integrity contractors to identify fraud, waste, and 
abuse in the Medicare program.  ZPICs are of particular importance 
because they perform the majority of program integrity work for CMS.  
Therefore, conflicts of interest that affect the impartiality of ZPICs could 
weaken CMSs efforts to protect Medicare from fraud, waste, and abuse.  
For example, a program integrity contractor owned by a health insurance 
company offering a Medicare prescription drug plan might have a 
disincentive to investigate suspected fraud involving those particular 
prescription drug plans. 
Conflicts of interest that go undetected or are not appropriately addressed 
could cost the Medicare program money and weaken public trust in its 
services.  If ZPICs with conflicts of interest become less vigilant in 
combating fraud, then taxpayer dollars may be wasted on payments to 
unscrupulous providers. Situations in which conflicted contractors are 
unable to conduct their responsibilities impartially could undermine public 
trust that Medicare is protected from fraud.  As a result, it is important that 
systems be in place to ensure the independence and integrity of program  
integrity contractors.    
 
1  Federal Acquisition Regulation (FAR), 48 CFR pt.2, subpart 2.1. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     1 
   
   
In a letter to the Office of Inspector  General (OIG), Senators Max Baucus, 
Thomas R. Carper, and Claire McCaskill raised concerns about potential 
conflicts of interest among contractors that perform Medicare 
administrative and program integrity functions.  This report was prepared 
in response to their letter.   
The Role of Private Contractors in Administering Medicare 
As the agency responsible for administering Medicare, CMS employs 
contractors to conduct the day-to-day operations of the program, such as 
claims processing, as well as to conduct program integrity activities 
designed to fight fraud, waste, and abuse.  Among other responsibilities, 
program integrity contractors develop and refer suspected cases of fraud to 
OIG for further investigation. 
The Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 substantially changed CMSs Medicare contracting process.  The law 
requires CMS to award contracts under the FAR, which requires an open, 
competitive award process.2  CMS has estimated that the Medicare 
contracting reform provisions in the law would result in cost savings from  
increased competition, consolidation of claims processing functions, and 
reductions in claims error rates.3     
The Transition to ZPICs 
CMS created ZPICs to consolidate all Medicare program integrity 
functions under one type of contractor in a geographic zone.  As of 
October 2011, ZPICs are replacing Program Safeguard Contractors (PSC) 
that perform program integrity work in Medicare Parts A and B.  At the 
time ZPICs were established, CMS stated that ZPICs may also assume  
some of the work of the Medicare Drug Integrity Contractors (MEDIC) 
that currently perform program integrity activities for Medicare Parts C 
and D. The new contracting arrangement requires that one ZPIC be 
assigned to each of seven geographic zones.  CMS began to transfer 
program integrity workloads from the PSCs to ZPICs in 2008.  ZPIC 
contracts for all seven zones have been awarded.   
ZPICs identify improper billing patterns that indicate potential fraud, 
waste, and abuse; investigate cases of suspected fraud; and refer cases to 
OIG for further investigation. The ZPIC Statement of Work details the 
range of activities that may be required of ZPICs. 
 
2  48 CFR pt.1, subpart 1.102-2(c).  
3  Department of Health and Human Services (HHS), Medicare Contracting Reform: A 
Blueprint for a Better Medicare, p. IV-2, February 7, 2005.    
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     2 
   
   
The Contract Award Process for ZPICs 
CMS begins the contract award process with the release of a Request for 
Proposal (RFP).4   The RFP outlines CMSs requirements, the nature of the 
work required, and the contracts period of performance and deliverables.   
Prospective ZPICs (offerors) compete for contracts by submitting a 
business proposal, including information about the companys financial 
status; a technical proposal describing the companys ability to perform  
the required work; a list of any actual, apparent, or potential conflicts of  
interest; and a conflict-of-interest and compliance plan that stipulates how  
the company would resolve any conflicts.    
A  Technical Evaluation Panel evaluates and scores each technical proposal 
by applying criteria in the RFP.5  Using the panels rating of each proposal, 
the CMS contracting officer may establish a competitive range that  
includes the most highly rated proposals.   These offerors then have an 
opportunity to discuss improvements to their proposals with CMS before 
submitting final revised proposals.  Finally, the contracting officer selects 
a proposal that is determined to provide the best value to the 
Government.  
Conflicts of Interest Among Offerors in the ZPIC Award 
Process 
Requirements for identifying and mitigating of conflicts of interest are 
provided in both the FAR and the RFP for ZPIC contracts.6  For example, 
a conflict of interest exists if a ZPIC is unable or potentially unable to 
provide impartial assistance or advice to the Government.  The 
Government  Accountability Office (GAO) has further clarified the FAR to 
establish three types of conflicts of interest: 
 	  An offeror has an unequal access to information conflict when, 
through its work as part of a Government contract, it has access to 
nonpublic information that may provide the offeror a competitive 
advantage in a later solicitation for a Government contract.   
 	  An offeror has a biased ground rules conflict when, as part of its 
performance of a Government contract, it has set the ground rules 
for another Government contract by, for example, writing a 
Statement of Work.  
 
4  The contract award process is established in FAR pt. 15 and supplemented in HHS 
Acquisition Regulation   pt. 315. 
   
5  Criteria include the companys expertise in carrying out fraud investigations and conducting 

data analysis. 
 
6 
 Requirements regarding conflicts of interest among Federal contractors are established in 

FAR subpart 9.5. 
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     3 
   
   
 	  An offeror has an impaired objectivity conflict when its work 
under a Government contract could involve evaluating itself. 7    
The FAR does not require that all contractors be free of conflicts.  
Contracting officers may award a contract even if an offeror has a conflict 
of interest that cannot be avoided or mitigated, as long as they establish 
that an award is in the Governments  best interest.  In such a case, a 
waiver must be requested.  However, the RFP explicitly states that 
contractors should be free of conflicts of interest to the greatest extent 
possible. 
Requirements in the ZPIC RFP. The ZPIC RFP includes a number of 
disclosure requirements designed to identify any conflicts and address 
them before a contract is awarded.  Offerors and their subcontractors must 
establish a conflict-of-interest program to identify, evaluate, and mitigate 
all conflicts of interest that prevent, or would appear to prevent, the ZPIC  
from conducting work in an impartial manner.8 
The contracting officer assesses the offerors conflict-of-interest and 
compliance plan independently of the Technical Evaluation Panels formal 
scoring of the offerors proposal.  The plan assessment is not part of the 
formal scoring process.    
The RFP requires that offerors and their subcontractors disclose any 
actual, apparent, and potential conflicts of interest by means of an 
Organizational Conflict of Interest Certificate.  However, the RFP does not 
provide definitions or examples that differentiate between actual, apparent, 
and potential conflicts. The certificate must identify all actual, apparent, 
and potential conflicts of interest that preclude, or would appear to 
preclude, impartiality.  The document must include the following items (a 
complete list is provided in Appendix A): 
 	  a description of all business or contractual relationships or 
activities that could be viewed as conflicts of interest by a prudent 
businessperson; 
 	  a description of the methods to be used to mitigate any conflict; 
 	  a description of the offerors program to monitor its own and its 
subcontractors compliance with conflict-of-interest requirements; 
 
7  GAO Bid Protest Decision, Aetna Government Health Plans, Inc.; Foundation Health 
Federal Services, Inc., File B-254397.15, B-254397.16, B-254397.17, B-254397.18, and     
B-254397.19, July 27, 1995.  
8  Subcontractors are used by offerors to perform  services such as medical review of claims, 
statistical analysis, data management, and database administration.  
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     4 
   
   
 	  a written affirmation attesting to the accuracy of the information in 
the certificate; 
 	  a description of the offerors corporate and organizational 

structure; 

 	  an accounting of the offerors financial interests (percentage of 
ownership in any other entity, income generated from other 
sources, contracts or arrangements with any insurance organization 
or its subcontractors, or provider of Medicare- or              
Medicaid-reimbursed services);9  
 	  a list of all of the officers, directors, and managers involved or 
potentially involved in the contract with a description of their 
potential conflicts of interest and financial interests (officers,  
directors, and mangers are hereafter referred to as key 
personnel);  and 
 	  a list of all subcontractors to be used in the contract.  
Offerors that are awarded ZPIC contracts are required under the RFP to 
submit an Organizational Conflict of Interest Certificate to the CMS 
contracting officer annually on October 31.   
Although not required by the FAR, CMS performs annual              
conflict-of-interest compliance audits for each ZPIC contract.  These 
compliance audits are for the period November 1 through October 31 each 
year.  If any new conflicts are found, CMS will notify the ZPIC and 
require the contractor to submit updated information, which may include 
an updated Organizational Conflict of Interest Certificate and/or a revised 
mitigation strategy, depending on the specific issue.  
CMS Review Process 
CMS staff reported that they review all the certificates they receive from  
offerors and subcontractors to determine whether the requirements in the 
RFP are met.  While the RFP requires that offerors and subcontractors 
provide certain information about their business and contractual 
relationships, it does not require that offerors and subcontractors use a 
standardized organizational format to do this.  Therefore, the information 
CMS receives varies in length and format across all offerors and 
subcontractors. In addition, the number and complexity of the offerors  
 
9  Offerors and subcontractors are also required to report the dollar amount, type of work 
performed, and period of performance for contracts or arrangements with insurance 
organizations, subcontractors of insurance organizations, and providers of Medicare- or 
Medicaid- reimbursed services.  
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     5 
   
   
business and contractual relationships also affect the volume of the 
information received.   
CMS staff also determine whether any conflicts of interest exist for 
offerors or subcontractors.  They base these determinations on a review of 
the specific circumstances of disclosed business or contractual 
relationships.  Each certificate that CMS receives from offerors and 
subcontractors can include hundreds of pages.  During the entire ZPIC 
conflict-of-interest review process, CMS reviewed approximately 10,000 
pages. 
Once offerors are selected for the competitive range, their certificates and 
those of their subcontractors are more closely reviewed.  CMS staff has 
discussions with these offerors regarding the information in the 
certificates.  After the discussions, the offerors in competitive range are 
asked to submit revised certificates that address CMSs concerns. 
After CMS determines which offeror will be awarded the ZPIC contract, it 
performs a more detailed review of the offerors revised Organizational 
Conflict of Interest Certificate and those of its subcontractors.  If any 
unresolved conflict-of-interest issues remain, CMS conducts an exchange   
with the offeror until a resolution is reached and the contract can be 
awarded. Any information that CMS needs to complete its assessment and 
review of the certificate is requested at this time. 
Conflict-of-Interest Protests During the ZPIC Award Process 
Offerors may file formal protests with GAO if they object to CMSs 
contracting decisions.10  Since the ZPIC award process began, protests 
have been filed covering various issues, including conflicts of interest.11    
In two of the sustained protests, the issue was the level of detail CMS 
accepted in the offerors plan to mitigate a conflict of interest.12   
According to GAO, CMS awarded contracts for Zones 2 and 5 to 
AdvanceMed, Inc., without reasonably considering the plan proposed by 
AdvanceMed to mitigate its conflicts of interest.      
AdvanceMeds parent company has contracts with Medicare Part D plan 
sponsors, e.g., information technology services contracts.13   According to 
CMS, AdvanceMed might have evaluated its parent companys work if it 
 
10  GAO bid protest regulations are established in 4 CFR pt. 21.  
11  GAO bid protest determinations are not binding and can be overridden by an agency.    
12  GAO Bid Protest Decision, C2C Solutions, Inc., File B-401106.5, January  25, 2010;  GAO 
Bid Protest Decision, Cahaba Safeguard Administrators, LLC, File B-401842.2, January 25, 
2010.  
13  Medicare Part D prescription drug coverage is provided through private sponsors that offer 
a choice of plans with different costs and coverage.   
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     6 
   
   
had been tasked with conducting program integrity work for Medicare  
Part D. There was a possibility that Part D program integrity work would 
never be awarded because it was an option under the ZPIC contract.  
However, GAO still held that CMS should have obtained a more detailed 
mitigation plan.  
GAO recommended that CMS reconsider its determination of 
AdvanceMeds eligibility for awards.  In both cases, CMS gave 
AdvanceMed an opportunity to draft a more detailed mitigation plan.  The 
contracting officer reviewed the revised plans and approved them. 
METHODOLOGY 
Scope 
Our study is limited to the five zones where ZPIC contracts were awarded 
at the time our study began in October 2010:  Zones 1, 2, 4, 5, and 7. At 
the time of our data collection, ZPIC contracts for Zones 3 and 6 had not 
yet been awarded.  
Data Collection  
Documentation From CMS. We obtained the following from CMS: 
 	  copies of the portions of the proposal that dealt specifically with 
conflicts of interest submitted by each offeror for the five ZPIC 
zones, including the Organizational Conflict of Interest Certificates 
submitted by each offeror and each of their subcontractors; and 
	   copies of statements, files, analyses, notes, records of 
conversations and meetings, and correspondence CMS used to 
review offerors conflicts of interest. 
Interview With CMS staff. We interviewed relevant CMS staff to 
determine what procedures CMS uses for identifying and reviewing 
conflicts of interest among ZPIC offerors.   
Data Analysis 
A total of 19 offerors submitted proposals for ZPIC contracts in Zones 1, 
2, 4, 5, and 7. CMS provided Organizational Conflict of Interest 
Certificates for 18 of the 19 offerors.  CMS was unable to locate and 
provide documentation for one offeror in one zone.14   We reviewed 
original and, if submitted, revised Organizational Conflict of Interest 
Certificates for 18 offerors and 85 subcontractors.  Because some  
companies submitted proposals for ZPIC contracts in more than 1 zone, 
there were only 12 unique ZPIC offerors.  The first finding of this report is 
 
14  This offeror was not awarded a ZPIC contract.   
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     7 
   
   
based on these 12 unique offerors.  All of the remaining findings are based 
on the total of 18 offerors.       
We reviewed the original and revised Organizational Conflict of Interest 
Certificates submitted by offerors and their subcontractors to determine 
whether they met conflict-of-interest disclosure requirements outlined in  
the RFP.   We also reviewed the certificates to determine the number of 
conflicts of interest disclosed by the offerors and their subcontractors.   
To determine the business and contractual relationships that offerors and 
subcontractors had with each other and with CMS, we analyzed the 
conflict and financial interest information provided in Organizational 
Conflict of Interest Certificates. 
We reviewed documentation generated by offerors, subcontractors, and 
CMS to quantify and categorize conflicts of interest.  We categorized 
those conflicts into two groups: (1) actual conflicts and (2) possible 
conflicts. 
Actual Conflicts.   Actual conflicts are situations in which an offeror, a 
subcontractor, or CMS described a business or contractual relationship as 
an actual conflict.  To  be included in this category, a conflict must not 
have been described using other terms, such as apparent, potential, or 
perceived. 
Possible Conflicts.   Possible conflicts are situations in which an offeror, a 
subcontractor, or CMS described a business or contractual relationship as 
an apparent, potential, or perceived conflict.  No additional information 
was provided that would designate the business or contractual relationship 
as an actual conflict. There was also no indication that the business or  
contractual relationship was not an actual conflict.  This category also 
includes situations in which an offeror identified business or contractual 
relationships of various types without specifying which were actual or 
possible conflicts. 
If documentation showed that CMSs description of a conflict differed 
from the offerors or subcontractors description, we based our 
categorization of the conflict on CMSs decision.  For example, CMS 
determined some conflicts to be actual even though offerors did not 
specify the type of conflict. 
We also reviewed mitigation information provided by offerors and 
subcontractors to quantify and categorize their mitigation strategies.  
Some offerors submitted more than one version of their Organizational 
Conflict of Interest Certificatesan original certificate and a revised 
certificate(s) that incorporated changes based on concerns raised by CMS.  
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     8 
   
   
In categorizing conflicts and mitigation strategies, we used the most recent 
certificate  submitted by each offeror during the award process. 
We also determined whether offerors and subcontractors submitted 
complete information regarding their financial interests as well as those of  
their key personnel. According to the RFP, this includes:  (1) percentage 
of ownership in any other entity, (2) income generated from other sources, 
and (3) contracts or arrangements with any insurance organization or its 
subcontractors or provider of Medicare- or Medicaid-reimbursed services.   
To assess how CMS reviewed offerors and subcontractors conflicts of 
interest, we reviewed documentation submitted by CMS.  This included 
copies of statements, files, analyses, notes, records of conversations and 
meetings, and correspondence.  We reviewed the documentation to 
determine whether CMS identified any concerns with offerors and 
subcontractors Organizational Conflict of Interest Certificates.    
Limitations 
All of the information in the Findings section of this report was 
provided to us by CMS, including offerors and subcontractors  
information.  We did not verify the information provided. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     9 
   
   
FINDINGS 
Offerors and their subcontractors often had business 
and contractual relationships with CMS and with other 
offerors, but rarely considered them to be actual 
conflicts  
Ten of the twelve unique offerors described having business or contractual 
relationships with CMS and/or another offeror at the time proposals were 
submitted.  These 10 offerors reported a total of 31 relationships with 
CMS or contractors of CMS that provide Medicare Parts C and D plans, 
claims processing, program integrity, and/or quality improvement services.  
The three unique offerors that won ZPIC contracts reported having six 
such relationships. Some of the 10 offerors considered these business and 
contractual relationships to be actual or possible conflicts, while others 
characterized them as financial relationships but not conflicts.   
Seven offerors were subsidiaries of health insurance 
companies that offered Medicare plans 
Seven offerors were owned by five health insurance companies, which  
had contracts to provide Medicare Part C and/or D plans.  The seven 
offerors either did not report their relationships to Medicare Parts C and D  
plan sponsors as actual conflicts hindering their ability to provide 
impartial assistance to the Government or did not specify that these 
relationships were actual conflicts. 
Some offerors stated that their ZPIC program integrity work would occur 
in a geographic area different from the one where their parent companies 
offered Medicare Part C and/or D plans.  Other offerors contended that 
separate corporate and governance structures prevented any influence by 
their parent companies on their objectivity in performing program  
integrity work under the ZPIC contract.  CMS determined that one of 
these relationships was an actual conflict because the offeror could be 
called upon to review the services of its parent company.  
Two-thirds of offerors either were Medicare claims processors 
or had financial ties to claims processors   
Two offerors were Medicare claims processors and six offerors had parent 
or sister companies that were claims  processors.  One of these six offerors 
had two parent companies that processed Medicare claims.  The other five 
offerors were owned by parent companies that also owned subsidiaries 
that processed Medicare claims (i.e., the offeror and subsidiary were sister 
companies).   
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     10 
   
   
Neither the offerors nor CMS considered these eight relationships as 
actual conflicts. Some offerors determined that these relationships did not 
create actual conflicts because the offerors would be performing program  
integrity functions outside the zone where they or their parent and sister 
companies processed Medicare claims.  Therefore, the offerors would not 
be performing program integrity functions on Medicare claims processed 
by related companies.  CMS staff also reported that they do not consider 
an affiliation with a Medicare claims processor to be an actual conflict 
because the ZPIC is not investigating the claims processor, but instead is 
investigating the providers that submit claims.  
Half of the offerors had existing Medicare program integrity 
contracts with CMS  
Six of the twelve offerors stated they had existing program integrity 
contracts with CMS. Four of these six had PSC contracts with CMS, one 
had a MEDIC contract with CMS, and one had both a PSC and a MEDIC 
contract. None of these relationships were considered to be actual 
conflicts by either the offerors or CMS.   
One offeror had a qualified independent contract (QIC) with CMS.15   This 
offeror did not consider this relationship to be an actual conflict because 
the scope of the QIC work was outside the ZPIC geographic zone.  Four 
offerors had sister companies with CMS contracts to operate as quality 
improvement organizations (QIO) or QICs.16   Two of these offerors did 
not consider these relationships to be actual conflicts.  Another offeror 
considered this relationship as a possible conflict.  However, CMS 
determined it to be an actual conflict because the QIC (sister company) 
could be called upon to review the work of the offeror.  The remaining 
offeror listed this relationship as a financial interest but did not address 
whether it was any type of conflict. 
Offerors subcontracted with each other as well as with entities 
that had a contractual relationship with CMS  
All 12 offerors stated they would use subcontractors to support their work.  
Eight offerors had subcontracting agreements with other offerors.  Ten 
offerors had subcontracting agreements with entities that had existing 
relationships with CMS. These subcontractors included Medicare claims  
processors, PSCs, QIOs, and information technology providers.  
 
15  A QIC conducts the second level of appeal when a beneficiary or provider appeals certain 
decisions related to a Medicare claim. 
 
16 
 A QIO monitors the appropriateness, effectiveness, and quality of care provided to 

Medicare beneficiaries. 
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     11 
   
   
Offerors, subcontractors, and CMS identified 1,919 
business and contractual relationships as possible 
conflicts and 16 as actual conflicts  
Actual Conflicts. Offerors, subcontractors, and CMS identified 16 actual 
conflicts out of 1,935 reported conflicts.  CMS considered all 16 as 
mitigated.  Ten of the 16 actual conflicts belonged to offerors and their 
subcontractors that were awarded ZPIC contracts.  All 16 actual conflicts 
were impaired objectivity conflicts, meaning that the offeror or 
subcontractor could be in the position of evaluating work performed or 
associated with its own company.   Table 1 provides the number and types 
of conflicts for offerors and their subcontractors.  Appendix B shows the 
number and type of conflicts for individual offerors.   
 
Table 1: Number and Types of Conflicts Among Offerors and Subcontractors  
   
Number of  Actual  Number of   Total Number of  
Offerors and Subcontractors  
Conflicts   Possible Conflicts   Conflicts  
Offerors  8  22  30 
Offerors Awarded 
ZPIC Contracts              
Subcontractors  2  1,419   1,421  
(5 offerors with         
38 subcontractors)  
Subtotal  10  1,441   1,451  
Offerors  5  211  216 
Offerors Not 
Awarded ZPIC 
Contracts    Subcontractors  1  267  268 
(13 offerors with       
47 subcontractors)  
Subtotal  6  478  484 
Offerors  13  233  246 
All Offerors  
(18 offerors with        Subcontractors  3  1,686   1,689  
85 subcontractors)  
     Total  16  1,919   1,935  
 
Source:  OIG analysis of ZPIC offerors Organizational Conflict of Interest Certificates and CMS documentation for Zones 1, 2,  4, 5,   
and 7, 2011. 
 
Fourteen of the sixteen actual conflicts involved offerors and 
subcontractors with business or contractual relationships with Parts C and 
D plan sponsors. For instance, one offerors parent company had a 
contract to offer technology-related implementation and operations work 
to a company that was a Part D plan sponsor.  In another case, an offerors 
parent company owned Parts C and D plans operating in all 50 States.  
Another subcontractors parent company operated as both Parts C and D 
plan sponsors in the zone where the offeror submitted its proposal.  
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     12 
   
   
One conflict involved an offeror whose parent company also owned a 
company acting as a QIC for CMS.  According to CMS, this created an 
actual conflict because the QIC could be called upon to review the work of 
the offeror.   Another actual conflict involved an individual whose spouse 
worked for a provider in the zone where the ZPIC was to perform work.   
In a few cases, CMS disagreed with offerors and subcontractors own 
assessments of their conflicts.  For example, CMS required that an offeror 
characterize its ties to a Parts C and D  plan sponsor as actual conflicts.  In 
this case, the offeror provided information about the relationships but did 
not consider them to be actual or possible conflicts.   
Possible Conflicts. Of the 1,935 total conflicts reported, 1,919 were 
possible conflicts. For example, one offerors parent company also owned 
a Medicare Administrative Contractor (MAC) that was processing 
Medicare claims in the same zone where the offeror would be evaluating 
claims.  The offeror stated that the situation only presented the appearance 
of a conflict for two reasons:  (1) although ZPICs analyze provider claims  
that may have been processed by a MAC, they do not evaluate how MACs 
process those claims; and (2) the companys corporate structure 
guaranteed its independence. 
In another case, an offeror disclosed a possible conflict regarding an 
individual who sat on its board of directors.  This individuals spouse was 
a vice president at a provider in the same zone where the contractor would 
be evaluating claims.  This could present a possible conflict if the offeror 
evaluated this providers claims.    
A single subcontractor associated with 3 offerors that were awarded ZPIC 
contracts accounted for 1,231 of the 1,919 possible conflicts in this 
category.   The subcontractors contractual relationships were characterized 
differently across the three zones.  In two zones, the subcontractor listed 
its contracts with providers and health care plans as possible conflicts 
because the providers and health care plans may come under the scrutiny 
of the ZPIC. Most of these conflicts stemmed from the companys 
contracts with providers or health insurance plans.  Both types of 
relationships create a possible conflict because ZPICs could review the 
providers and health plans services.  However, in a third zone, the 
subcontractor provided a list of its contracts with providers that could also 
come under the scrutiny of the ZPIC, but did not characterize them as any 
type of conflict. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     13 
   
   
The most common strategy proposed to mitigate 
conflicts was to impose restrictions on information 
and resource sharing within the offerors or 
subcontractors company   
The RFP requires that offerors and subcontractors mitigate all conflicts of  
interest.  For some of the conflicts, offerors proposed more than one 
mitigation strategy.  Table 2 shows the mitigation strategies proposed by 
offerors and subcontractors and, in a very few instances, strategies 
suggested by CMS for offerors consideration.  According to CMS, CMS 
made a complete assessment of conflicts and mitigation strategies for all 
offerors that were awarded ZPIC contracts and the contracting officer 
made a determination in each case that all conflicts were adequately 
mitigated prior to the ZPIC contract award. 
The mitigation strategy most frequently proposed involved various 
methods for restricting access to certain company information and/or 
resources. For example, offerors and subcontractors implemented 
measures designed to ensure that only employees performing ZPIC-related 
work could access these data. The goal was to make sure other divisions 
of the company did not have access to sensitive data or proprietary 
information.  This type of mitigation strategy was also the most common 
among offerors (and their subcontractors) that won ZPIC contracts.   
 
Table 2: Frequency of Mitigation Strategies for Conflicts Among Offerors, Subcontractors, 
 
and CMS in Zones 1, 2, 4, 5 and 7 
Number of Times Mitigation  
Mitigation Strategy  
Strategy Was Proposed 
Restrictions on sharing information and resources within the company   1,567  
Separation of corporate, organizational, or management structure   501 
Limitations or restrictions on scope of work (including recusal)   378 
Elimination of conflicting relationship  26 
Use of subcontractor or another ZPIC  25 
Divestiture  11 
Audits  3 
Total1   2,511  
Source:  OIG analysis of Z PIC offerors Organizational Conflict of Interest Certificates and CMS documentation for Zones 1, 2,  4, 5,   
and 7, 2011. 
1 T otal number of mitigation strategies is greater  than the total number of conflicts because offerors and subcontractors proposed  more than   
one mitigation strategy  for some conflicts. 
The level of specificity in the mitigation strategies varied.  For example, 
one subcontractor asserted that there is no sharing of Medicare 
beneficiary or claim data between the subcontractor and its affiliate. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     14 
   
   
Another subcontractor offered a more detailed mitigation strategy, which 
included methods to prevent clients from accessing other clients data.  
That subcontractor proposed creating secure electronic platforms to house 
data in a way that allowed only the subcontractors  clients and the 
personnel working for those clients to have access. 
Another offerors detailed information security plan included methods to 
ensure that information gathered by the offeror would be inaccessible to its 
affiliated company.   The mitigation strategy called for the offeror and its 
affiliated company to maintain separate information technology networks, 
separate human resources and payroll systems, password protection for 
information technology systems, and a security system to make work 
spaces accessible only to employees with proper badges.   
Offerors and subcontractors often cited the separation of 
corporate, organizational, and management structures as 
mitigation strategies 
In some cases, offerors stated that their current or future corporate, 
organization, and management structures mitigated any conflicts.  For 
example, one offeror had a subcontractor that was already working as a 
QIC. To mitigate the conflict, the subcontractor created a separate 
business unit within its organization to isolate the QIC work from the 
ZPIC work. In another case, a subcontractor had individuals on its board 
of directors who also sat on the board of directors of sister companies that 
offered Medicare Parts C and/or D plans and also functioned as claims  
processors. The subcontractor ensured that its board of directors          
day-to-day decisionmaking did not involve the ZPIC functions. 
Offerors and subcontractors sometimes cited limitations or 
restrictions on the scope of their work to mitigate conflicts  
In some cases, offerors reported that their business and contractual 
relationships with companies that have Medicare claims processing or 
Parts C and/or D contracts could create possible conflicts.  To address one 
such possible conflict, an offeror stated that the ZPIC work it would be 
performing was outside the geographic area (zone) in which the parent 
companys Part C and Part D plans were offered.  Another offeror stated 
that the company with a claims processing contract only provided it with 
technology support services. 
Offerors and subcontractors sometimes took more proactive measures to 
address conflicts among key personnel.  For example, in a number of 
cases, key personnel had personal relationships with individuals who 
worked for providers in the zone where the ZPIC work was to be 
performed.  Offerors and subcontractors required that those individuals be 
prohibited from working on or taking actions that involved those 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     15 
   
   
providers. For two conflicts involving an offerors and subcontractors 
key personnel, CMS recommended recusal to mitigate conflicts.    
CMS does not have a written policy for reviewing 
conflict and financial interest information submitted by 
offerors, and the submitted information was not 
always consistent or complete  
CMSs process for reviewing conflict and financial interest information is 
neither outlined in a written policy nor standardized through the use of 
checklists or other methods.  According to CMS staff, CMS performs a 
preliminary review of all the offerors certificates upon initial receipt to 
determine whether the requirements in the RFP are met.  More detailed 
reviews of certificates and exchanges are performed on offerors in the 
competitive range.  A final review and exchange are performed before the 
ZPIC contract is awarded. 
However, offerors and their subcontractors often failed to provide all the 
information required by the RFP, even after CMS reviewed the initial 
submission of certificates.  Fifteen subcontractors (related to four offerors) 
never submitted the required Organizational Conflict of Interest 
Certificates.   These four offerors were not awarded ZPIC contracts.   
Our examination of CMSs documentation associated with its review of 
certificates did not reveal documentation showing that CMS conducted a 
preliminary review of three offerors and four of their subcontractors  
certificates. In addition, there was no consistent documentation detailing 
whether CMS reviewed every business and contractual relationship and 
financial interest that offerors and subcontractors reported.  CMS also 
lacked consistent documentation showing whether its determination 
agreed or disagreed with offerors  and subcontractors classification of 
business and contractual relationships as possible conflicts. 
It is crucial that not only conflict but financial interest information (e.g., 
percentage of ownership in any other entity, income generated from other 
sources) be complete because CMS can use this information to identity 
conflicts of offerors and subcontractors.  For instance, an offeror or a 
subcontractor may submit financial interest information that it does not 
report as an actual conflict, but CMSs review of the details of this 
information may reveal the relationship to be an actual conflict.         
Some offerors and their subcontractors did not distinguish 
between actual and possible conflicts  
Offerors and subcontractors reported 173 conflicts without specifying 
whether they were actual or possible conflicts. After reviewing the 
information provided by offerors and subcontractors, we could not 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     16 
   
   
determine which of these were actual conflicts.  For example, some  
offerors listed several conflicts under a single heading, such as actual or 
apparent conflicts or actual, apparent, or potential, without clarifying 
which were actual conflicts and which were apparent.  In contrast, other 
offerors and subcontractors provided a list of relationships and clearly 
indicated which were actual conflicts.    
Offerors and their subcontractors did not always provide all 
the required information regarding their financial interests in 
other entities 
Many offerors and their subcontractors did not provide all the information 
required by the RFP in their original Organizational Conflict of Interest  
Certificates.   Two offerors and thirty-two subcontractors did not report any 
information regarding their financial interests in other entities.   They also 
did not state, as others did, that they had no any financial interests in other 
entities. 
Another 7 offerors and 32 subcontractors did not provide all the required 
information regarding their financial interests.  Some offerors and 
subcontractors simply stated whether they received income from other 
sources without including the amounts.  Others provided only partial 
information regarding their contracts  with health insurance organizations 
and providers of Medicare- or Medicaid-reimbursed services.  For those 
contracts, the RFP requires disclosure of income amount, period of 
performance, and type of work performed.  For a number of these offerors 
and subcontractors, information was still missing or incomplete even after  
CMS requested revised Organizational Conflict of Interest Certificates.   
In some cases, offerors and subcontractors did not seem to interpret the 
RFP requirements in the same way.  For example, offerors and 
subcontractors provided varying levels of detail on their existing contracts 
with CMS. Some disclosed all three items that the RFP required for 
contracts with health insurers and providers (income amount, period of 
performance, and type of work performed).  Other offerors and 
subcontractors did not provide all of these details.    
Offerors and their subcontractors did not always provide all 
the required information regarding key personnels financial 
interests in other entities 
The RFP requires that offerors disclose not only the financial interests of 
the company, but also the financial interests of key personnel.  Two 
offerors and twenty-seven subcontractors did not report any information 
regarding their key personnels financial interests in other entities even 
after CMS requested revised Organizational Conflict of Interest 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     17 
   
   
Certificates. This does not include those offerors and subcontractors that 
stated their key personnel had no financial interests in other entities.   
Another 14 offerors and 17 subcontractors did not provide all of the 
required information regarding key personnels financial interests.  For 
example, some offerors and subcontractors stated that key personnel were 
employed elsewhere, but did not provide their income amounts.  Some  
stated that key personnel held investments, but did not provide the 
amounts held.   
Some offerors seemed to have different interpretations of the scope of 
these disclosure requirements.  For their key personnel, some offerors and 
subcontractors addressed only financial interests that they believed 
presented conflicts. Others addressed all financial interests, regardless of  
whether they considered them conflicts.    
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     18 
   
   
CONCLUSION AND RECOMMENDATIONS 
Because ZPICs perform program integrity functions for CMS, it is crucial 
that they be free from conflicts of interest that could affect their work.  
Conflicts of interest could introduce bias, which in turn could influence 
ZPICs efforts to reduce fraud, waste, and abuse in the Medicare program.   
Contractors and CMS have the responsibility to ensure that conflicts are 
identified and mitigated.   
According to the ZPIC RFP, offerors and their subcontractors are required 
to identify their conflicts and their financial interests in other entities.  
However, some offerors and subcontractors failed to provide all the 
requisite information regarding financial interests in other entities.   
Additionally, descriptions of their conflicts of interest the offerors and 
subcontractors presented were often unclear.  Some offerors and 
subcontractors did not distinguish actual conflicts from possible conflicts.   
Currently, CMS does not use a written policy or standard checklist to 
facilitate its review of  Organizational Conflict of Interest Certificates.  In 
addition, we found no documentation showing that CMS conducted a 
review of some offerors and subcontractors certificates.  In some cases, 
even after CMS had requested revised certificates, required conflict and 
financial interest information was still missing.   
The initial submission of certificates should contain clear, consistent, and 
complete information across offerors and subcontractors so that CMS has 
accurate information when addressing conflicts.  The requirements in the 
RFP should be more clearly and thoroughly delineated. 
The existence of conflicts of interest does not necessarily indicate that 
improper activity is taking place among CMS contractors.  However, the 
public trust in CMS and its contractors could come into question if 
conflicts are not explicitly and openly disclosed as well as properly 
mitigated.  Therefore, to encourage an environment of transparency and 
accountability among contractors, we recommend that CMS: 
Provide Clearer Guidance in the RFP to Offerors and 
Subcontractors Regarding Which Business and Contractual 
Relationships Should Be Identified as Actual Conflicts and 
Which Should Be Identified as Possible Conflicts (i.e., 
Apparent or Potential Conflicts) 
Require Offerors and Subcontractors To Distinguish Those 
Business and Contractual Relationships That They Deem To  
Be Actual Conflicts From Those That Are Possible Conflicts  
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     19 
   
   
(i.e., Apparent or Potential Conflicts) in Their Organizational 
Conflict of Interest Certificates 
State Whether Offerors and Subcontractors Need To Report 
Income Amounts, Periods of Performance, and Types of Work 
Performed for Their Contracts With CMS and Income Amounts 
Generated From Key Personnels Other Employment 
Create a Standardized Format for Reporting Information in the 
Organizational Conflict of Interest Certificate and Require Its 
Use by Offerors and Subcontractors 
Develop a Formal, Written Policy  Outlining How Organizational 
Conflicts of Interest Certificates  Are To Be Reviewed by CMS 
 
This policy should include: 
 	  guidance on what additional information CMS staff should collect 
regarding offerors and when they should collect it,   
 	  the use of a standardized checklist to ensure that all required 
information has been submitted by each offeror in its 
Organizational Conflict of Interest Certificates, and 
 	  documentation requirements showing that a complete review of 
each offerors Organizational Conflict of Interest Certificates was 
conducted and the outcome and resolution of those reviews.  
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     20 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
In its comments, CMS stated that it has had considerable experience 
addressing conflict-of-interest matters.  CMS believes that receiving the 
magnitude of potential conflict-of-interest issues outlined in OIGs report 
is a direct result of CMSs consistent efforts of raising awareness of 
conflict-of-interest issues and working with the contractor community to 
identify possible conflicts. 
CMS concurred in part with our first two recommendations.  Regarding 
our first recommendation, CMS stated that it believes it is more 
appropriate to limit terms (actual or  potential conflicts of interest) to 
those exclusively identified in the FAR.  CMS also stated that its draft 
conflict-of-interest review policy contains standard RFP language to be 
used in all procurements.  Regarding the second recommendation, that 
offerors should identify their relationships as potential or actual 
conflicts, CMS agreed to consider language to request that the offeror 
classify its conflicts as potential and/or actual.  OIG continues to 
recommend that CMS offer guidance in the RFP regarding which business 
and contractual relationships should be identified as actual conflicts and 
which should be identified as other types of conflicts. OIG recommends 
that CMS request that offerors distinguish between their actual and 
potential conflicts. This guidance would allow for clearer and more 
consistent submissions regarding conflicts across offerors and their 
subcontractors. 
CMS concurred with our last three recommendations. CMS shared an 
excerpt from its draft conflict-of-interest policy, which, it stated, addresses 
our third recommendation regarding the reporting of certain types of financial 
information in certificates. OIG requests that CMS, in its final 
management decision, clearly indicate how its new policy and the ZPIC 
RFP will address our fourth and fifth recommendations.  In addition, we 
ask that CMS provide information on the new standardized format that 
offers and subcontractors will be required to use when reporting 
information in certificates. 
CMS suggested that the report state that all substantive actual or potential 
conflicts were mitigated for ZPIC awardees to the satisfaction of the 
Contracting Officer and that these conflicts were addressed and mitigated  
prior to the award.   While CMS states that all conflicts were mitigated to 
the satisfaction of the Contracting Officer, GAO found in favor of two bid 
protestors that questioned the level of detail CMS accepted in an offerors 
plans to mitigate a conflict of interest.   With regard to the mitigation plan 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     21 
   
   
CMS originally accepted, GAO found there [were] no details explaining 
how any of the plans would work or when they would, or could, be 
implemented.  This lack of detail is significant given the inherently 
complex nature of the proposed strategies ....  
CMS also clarified that a preliminary or cursory review for three offerors 
and four of their subcontractors'  certificates was conducted even though 
OIG found no documentation of this.  CMS stated that no documentation 
was included in the file because it is not required for offerors excluded 
from the competitive range for award.  However, during the review, OIG 
found documentation regarding the review of certificates for offerors that 
were not in the competitive range for award.  OIG recommends that 
although not required, consistent documentation of any and all reviews 
should be maintained. 
The full text of CMSs comments is provided in Appendix C. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     22 
   
   
APPENDIX A 
Conflict-of-Interest Requirements Established in the Zone Program 
Integrity  Contractor Request for Proposals  
Section H.2 
a. General: It is essential that the Contractor and the services provided to 
Medicare beneficiaries under this contract be free, to the greatest extent  
possible, of all conflicts of interest.  Except as provided below, the 
Contracting Officer shall not enter into a contract with an Offeror or 
maintain a contract with a Contractor that the Contracting Officer 
determines has, or has the potential for, an unresolved organizational 
conflict of interest. 
b. Definitions: As used in this subpart, the following definitions apply: 
  1.  Financial relationship means-- 
  (a) A direct or indirect ownership or investment interest 
(including an option or nonvested interest) in any entity 
that exists through equity, debt, or other means and 
includes any indirect ownership or investment interest no 
matter how many levels removed from a direct interest; or  
    (b) A compensation arrangement with an entity. 
  2. Organizational conflict of interest -- has the meaning given at 
FAR 9.501, as follows: 
Organizational conflict of interest means that because of other 
activities or relationships with other persons, a person is unable or 
potentially unable to render impartial assistance or advice to the 
Government, or the person's objectivity in performing the contract 
work is or might be otherwise impaired, or a person has an unfair 
competitive advantage.  
For purposes of the Medicare Integrity Program, the activities and 
relationships described include those of the Offeror or Contractor 
itself and other business related to it and those of officers, directors 
(including medical directors), managers, and subcontractors. 
c.  Conflict of interest identification: 
  1. An organizational conflict of interest exists, or the potential for 
a conflict exists, if - 
    (a) The Offeror or Contractor is an entity that- 
   
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     23 
   
   
(1) Provides, insures, or pays for health benefits, 
with the exception of health plans provided as the 
entitys employee fringe benefit; or  
(2) Conducts audits of health benefit payments or 
cost reports; or 
(3) Conducts statistical analysis of health benefit 
utilization; or  
(4) Would review or does review, under the 
contract, Medicare services furnished by a provider 
or supplier that is a direct competitor of the Offeror 
or Contractor; or 
(5) Prepared work or is under contract to prepare 
work that would be reviewed under the Medicare 
program integrity contract; or 
(6) Is affiliated, as that term is explained in FAR 
19.101, with a provider or supplier to be reviewed 
under the contract. 
  (b) The Offeror or Contractor has a present, or known 
future, direct or indirect financial relationship with an 
entity described in paragraph H.2.c.1.(a) above. 
    A financial relationship may exist either-- 
(1) Through an Offeror's or Contractor's parent 
companies, subsidiaries, affiliates, subcontractors, 
or current clients; or 
(2) From the activities and relationships of the 
officers, directors (including medical directors), or 
managers of the Offeror or Contractor and may be 
either direct or indirect.  An Officer, director, or 
manager has an indirect financial relationship if an 
ownership or investment interest is held in the name  
of another but provides benefits to the Officer, 
director, or manager.    
Examples of indirect financial relationships are, but 
are not limited to, holdings in the name of a spouse 
or dependent child of the Officer, director, or 
manager and holdings of other relatives who reside 
with the Officer, director, or manager.  
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     24 
   
   
  2. The Contracting Officer may determine that an Offeror or 
Contractor has an organizational conflict of interest, or the 
potential for a conflict exists, based on the following: 
(a) Apparent organizational conflicts of interest.  An 
apparent organizational conflict of interest exists if a 
prudent business person has cause to believe that the 
Offeror or Contractor would have a conflict of interest in 
performing the requirements of a contract under this 
subpart. No inappropriate action by the Offeror or 
Contractor is necessary for an apparent organizational 
conflict of interest to exist.  
  (b) Other contracts and grants with the Federal 
Government.  
  3. Post-award conflicts of interest. 
  (a) In addition to the conflicts identified in paragraph 
H.2.c.1. of this section, the Contracting Officer considers 
that a conflict of interest has occurred if during the term of 
the contract--
(1) The Contractor receives any fee, compensation, 
gift, payment of expenses, or any other thing of 
value from any entity that is reviewed, audited, 
investigated, or contacted during the normal course 
of performing activities under the Medicare 
integrity program contract; or  
(2) The Contracting Officer determines that the 
Contractor's activities are creating a conflict of  
interest.  
  (b) In the event the Contracting Officer determines that a 
conflict of interest exists during the term of the contract, 
the Contracting Officer may take action including, but not 
limited to,  
(1) Not renewing the contract for an additional 
term; 
      (2) Modifying the contract; or 
(3) Terminating the contract.  
  4. Exception. The Contracting Officer may contract with an 
Offeror or Contractor that has an unresolved conflict of interest if 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     25 
   
   
the Contracting Officer determines that it is in the best interest of  
the Government to do so. 
  5.  Offeror's or Contractor's  responsibility with regard to 
subcontractors. An Offeror or Contractor is responsible for 
determining whether an organizational conflict of interest exists in 
any of its proposed or actual subcontractors at any tier and is 
responsible for ensuring that the subcontractors have mitigated any 
conflict of interest or potential conflict of interest.  
A Contractor shall maintain documentation necessary to support its 
determination that its subcontractors have mitigated any conflict or  
potential conflict. A Contractor may require its subcontractors to 
follow the procedures for identifying, evaluating and disclosing 
conflicts of interest and potential conflicts of interest as contained 
herein. 
d.  Disclosure: Contractors must disclose all actual, apparent and potential 
conflicts of interest to the Contracting Officer during the term of the 
contract in accordance with paragraph H.2.d.1. below.   The Contractor 
shall have programs in place to identify, evaluate and mitigate all actual, 
apparent and potential conflicts of interest that preclude, or would appear 
to preclude, the Contractor from rendering impartial assistance or advise 
on work performed for this contract. CMS protects disclosed proprietary 
information as allowed under the Freedom of Information Act (5 U.S.C. 
552). The Contracting Officer requires signed statements from CMS 
personnel with access to proprietary information that prohibits personal 
use during the procurement process and term of the contract.  The 
Contractors Organizational Conflict of Interest Certificate, that includes 
the Contractors plan to mitigate all actual, apparent and potential conflicts 
of interest (d.1.(c)) identified during the term of the contract and 
certification that all work to be performed under this contract is free of 
unresolved conflicts of interest, is incorporated by reference at Attachment 
J.11.  
  1.  Certificate Requirements. Offerors that wish to be eligible for 
the award of a Program Integrity contract under this subpart and 
Program Integrity Contractors, must submit, at times specified in 
paragraph H.2.d.2. of this section, an Organizational Conflicts of 
Interest Certificate.  The Certificate must contain the information 
specified in paragraphs H.2.d.1.(a) through (h) of this section as 
follows: 
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     26 
   
   
(a) A description of all business or contractual relationships 
or activities that may be viewed by a prudent business 
person as a conflict of interest. 
(b) A description of the methods the Offeror or Contractor 
will apply to mitigate any situations listed in the Certificate 
that could be identified as a conflict of interest.  
(c) A description of the Offeror's or Contractor's program to 
monitor its compliance and the compliance of its proposed 
and actual subcontractors with the conflict of interest 
requirements as identified in the relevant solicitation. 
(d) An affirmation, using language provided below, signed 
and dated by an official authorized to bind the Contractor: 
I, (Name and Title), certify that to the best of my  
knowledge and belief: 1) I am an official authorized 
to bind the entity; 2) the information contained in  
the Organizational Conflict of Interest Certificate is 
true and accurate as of (Date); and 3) I understand 
that the Contracting Officer may consider any 
deception or omission in this Certificate to be  
grounds for non-consideration for contract award, 
modification or non-renewal or termination of the 
current contract, and/or other contract or legal 
action. 
An Offeror or Contractor shall submit an affirmation 
certifying the information to be true and accurate as of the 
date the proposal is submitted.  Upon award, the Contractor  
shall submit an updated affirmation, if necessary, certifying 
the information to be accurate as of the date of contract 
award. 
    (e) Corporate and organizational structure. 
(f) Financial interests in other entities, including the 
following: 
(1) Percentage of ownership in any other entity. 
      (2) Income generated from other sources. 
  (3) A list of current or known future contracts or 
arrangements, regardless of size, with any-- 
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     27 
   
   
  (i) Insurance organization or subcontractor 
of an insurance organization; or 
  (ii) Providers or suppliers furnishing health 
services for which payment may be made 
under the Medicare or Medicaid program.  
  (4) In the case of contracts or arrangements 
identified in accordance with paragraph H.2.d.1. 
(f)(3) of this section, the dollar amount of the 
contracts or arrangements, the type of work 
performed, and the period of performance. 
(g) The following information for all of the Offeror's or 
Contractors officers, directors (including medical 
directors), and managers who would be, or are involved 
with, the performance of this Medicare Integrity Program  
contract: 
  (1) The information required under paragraph 
H.2.d.1. (a) of this section. 
  (2) The information specified in paragraphs 
H.2.d.1.(f) of this section. 
(h) A list of all subcontractors used, at any tier, in the 
performance of the contract. 
  2. When disclosure is made. The Organizational Conflict of 
Interest Certificate is submitted 
(a) With the contractors  task order proposal, unless 
otherwise identified in the task order solicitation;  
  (b) When the Contracting Officer requests a revision in the 
Certificate;  
  (c) With the submission of the ZPIC proposal and annually 
on October 31st thereafter; and 
(d) 45 days or less (as the information becomes known) 
before any change in the information submitted in 
accordance with paragraph H.2.d.1.  Only changed 
information shall be submitted. 
 
 
 
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     28 
   
   
    Section L.18.A  
In order to be eligible for award of a contract the Government must ensure  
that an Offeror and its proposed subcontractors are free, to the greatest 
extent possible, of all conflicts of interest.  Therefore, the Offeror and its 
subcontractors are required to submit the disclosure of information 
contained in contract section H.2 Conflict of Interest, in order to be 
considered for award. Failure to submit the required information may 
deem an Offerors proposal to be non-responsive to the solicitation. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     29
   
   
APPENDIX B 
Number and Type of Conflicts by Individual Offerors  
Actual  Possible  Total 
Offerors and Subcontractors 
Conflicts  Conflicts    Conflicts 
Offeror 1  0  0  0 
   Subcontractors  0  7  7 
Offeror 2  4  13  17 
   Subcontractors  0  486   486  
Offeror 3  0  0  0 
   Subcontractors  0  11   11  
Offerors Awarded  Offeror 4  4  9  13 
ZPIC Contracts      Subcontractors  2  915   917  
Offeror 5  0  0  0 
   Subcontractors  0  0  0 
Offerors subtotal  8  22   30  
Subcontractors  
2  1,419   1,421 
subtotal  
   Subtotal  10   1,441   1,451  
Offeror 6  1  26  27 
   Subcontractors  0  39   39  
Offeror 7  0  25  25 
   Subcontractors  0  5  5 
Offeror 8  0  18  18 
   Subcontractors  0  6  6 
Offeror 9  0  28  28 
   Subcontractors  0  49   49  
Offeror 10  0  4  4 
   Subcontractors  0  5  5 
Offeror 11  0  7  7 
   Subcontractors  1  29   30  
Offeror 12  0  5  5 
   Subcontractors  0  0  0 
Offerors Not  Offeror 13  0  18  18 
Awarded ZPIC 
   Subcontractors  0  34   34  
Contracts 
Offeror 14  0  34  34 
   Subcontractors  0  53   53  
Offeror 15  0  0  0 
   Subcontractors  0  0  0 
Offeror 16  4  21  25 
   Subcontractors  0  2  2 
Offeror 17  0  2  2 
   Subcontractors  0  41   41  
Offeror 18  0  23  23 
   Subcontractors  0  4  4 
Offerors subtotal  5  211   216  
Subcontractors  
1  267   268 
subtotal  
   Subtotal  6  478   484  
All Offerors       Total  16   1,919   1,935  
S ource:  Office of  Inspector General analysis of Zone Program Integrity Contractor offerors Organizational Conflict 
of Interest Certificates and Centers for  Medicare & Medicaid Services documentation for Zones 1, 2, 4, 5, and 7,  
2011. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     30 
  APPENDIXC 
Agency Comments 
(:!I-	
~~..r'.VlC.t./r.;,
DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
Administrator 
Washington, DC 20201 
DATE: 	 MAY  0 3 2012 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 MaJ\btn TlWMncr 

Acting Admin\strator 

SUBJECT:  Office of Inspector General (OIG) Draft Report: "Conflicts and Financial 

Relationships among Potential ZPIC Contractors" (OEI-03-1 0-00300) 

Thank you for the opportunity to review and comment on the Office of Inspector General 

(OIG) draft report titled, "Conflicts and Financial Relationships Among Potential ZPIC 

Contractors." The purpose of this report was to determine conflicts of interest identified 

by offerors during the Zone Program Integrity Contractor (ZPIC) contracting process, 

strategies otTerors proposed to mitigate conflicts of interest, whether offerors provided 

complete information on conflicts, and whether the Centers for Medicare & Medicaid 

Services (CMS) reviewed this information. 

As the report indicates, CMS ensures that its contractors are free from conflicts of interest 
or have taken the appropriate steps to mitigate any potential conflicts. CMS has had 
considerable experience addressing Organizational Conflict of Interest (OCI) matters. 
Since 1999, with the early implementation of the Medicare Integrity Program (MIP), 
CMS was forward-looking enough to consider OCI as a major concern. As a result, CMS 
requires its ofTerors and contractors to submit OCI infom1ation during the solicitation 
period and annually thereafter. As a result, and as reflected in the orG report, the ZPIC 
offerors identified almost 2,000 apparent. potential or actual OCls. We believe receiving 
this magnitude of potential OCI issues is a direct result ofCMS consistent efforts of 
raising awareness of OCI and working with the contractor community to identify possible 
OCls. Consistent with section 9.5 of the Federal Acquisition Regulations (FAR 9.5), 
CMS reviewed and resolved conflicts of interest for those organizations who were 
awarded a ZPIC contract. 
It is important to note that CMS has experienced a large number of Government 
Accountability Office (GAO) bid protests over the last several years.  In many of these, 
bidders have challenged CMS' OCI analysis. In almost all cases, when a GAO decision 
was rendered, eMS OCI evaluation and determination was found acceptable by GAO. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300)  31  Page 2 -Daniel R. I.cvinson 
The Contracting Officer is responsible for exercising common sense, good judgment and 
sound discretion when making OCI determinations. CMS addressed the ZPIC conflicts 
of interest through exchanges with the apparent awardees. If there was a substantive 
issue concerning an actual or potential conflict, CMS worked with the apparent awardee 
to either avoid, neutralize or mitigate any significant potential conflict(s). The 
Contracting Officer, in consultation with other appropriate CMS representatives, 
determined that mitigation strategies submitted by the awardees were sufficient prior to 
awarding any contracts. The mitigation strategies employed in the ZPIC procurements 
included, but were not limited to, divestitures, de-identification of information to 
subcontractors, exclusion of conflicted work for certain subcontractors, and 
separationlfirewalls for access to information conflicts. 
AlllPIC awardees have Compliance Officers on staff that oversee OCI matters and the 
implementation of mitigation strategies. After the contract is awarded, lPIC contractors 
are required to submit annual OCI certificates and are also required to submit updated 
information within 45 days before any change in the information is made.  CMS reviews 
the annual submissions and also contracts with an independent firm that performs an 
audit of the OCI submission. CMS uses this information to address any new or emerging 
OCI issues that might arise during performance of the contract. 
CMS receives OCI submissions for all ZPIC offerors. However, CMS prioritizes the 
review and mitigation of OCls for those organizations that are in the competitive range 
and thus have potential for winning the contract effort. Since not all offerors will be 
successful in being awarded a contract, CMS believes its resources are best utilized in 
this manner. 
CMS is in the process of finalizing an OCI review policy for procurement staff. CMS 
provided OIG with the draft of the policy during its review.  Following the final internal 
CMS committee review, the policy will be implemented. 
CMS' response to each OIG recommendation and general comments follows: 
OIG Recommendation 
CMS should provide clearer guidance in the Request for Proposal to offerors and subcontractors 
regarding which business and contractual relationships should be identified as actual conflicts 
and which should be identified as possible conflicts (I.e., apparent or potential conflicts). 
Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300)  32  Page 3 -Daniel R. Levinson 
eMS Response 
eMS concurs with this recommendation in part.  We believe it is more appropriate to 
limit the terms to those exclusively identified in the FAR. Section 9.S02(c) of FAR uses 
the term of "actual or potential conflict of interest." eMS' draft Oel review policy, soon 
to be implemented, contains standard RFP language to be used in all procurements. 
Regarding the recommendation that offerors should identify their business and 
contractual relationships as "potential or actual" conflicts, eMS will agree to consider 
language in our guidance to request that the offeror classify its conflicts as "potential" 
and/or "actual." 
OIG Recommendation 
eMS should require offerors and subcontractors to distinguish those business and 
contractual relationships that they deem to be actual conflicts from those that are possible 
conflicts (i.e., apparent or potential conflicts) in their organizational conflict of interest 
certificates. 
eMS Response 
eMS concurs with this recommendation in part. See previous response. 
O.G Recommendation 
eMS should state whether offerors and subcontractors need to report income amounts, 
periods of performance, and types of work performed for their contracts with eMS and 
income amounts generated from key personnel's other employment. 
eMS Response 
eMS concurs with the recommendation. The attached is an excerpt from eMS' draft 
oel review policy which outlines the proposal submission requirement(s) for prime and 
subcontractors. 
OIG Recommendation 
eMS should create a standardized format for reporting intormation in the organizational conflict 
of interest certificate and require its use by offerors and subcontractors. 
eMS Response 
eMS concurs with the recommendation. eMS' draft oel review policy contains RFP 
language that standardizes the format for reporting information in the organization 
conflict of interest certificate. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-1 0-00300)  33  Page 4 -Daniel R. Lev.inson 
OIG Recommendation 
CMS should dev.elop a formal, written policy outlining how organization contlicts of 
interest certificates are to be reviewed by CMS. 
CMS Response 
CMS concurs with the recommendation. The draft policy includes documentation 
templates for use by Contracting Officers.  In addition, CMS has recently performed 
extensive training in this area and will continue to educate its staff on how to properly 
assess, analyze and document OCI matters. 
General Comments 
In an effort to provide further clarity as to how eMS addressed ZPIC OCI issues, the 
following general comments are also provided: 
CMS suggests that the OIG report state that all substantive actual or potential OCls were 
mitigated for ZPIC awardees to the satisfaction of the Contracting Officer. These 
contlicts were addressed and mitigated prior to the award. 
In performing OCI analysis, it is important to understand the contract requirements and 
the roles of the contractor.  As background, CMS uses ZPICs to perform program 
integrity activities designed to fight fraud, waste, and abuse in the Medicare program.  In 
doing so, ZPICs review providers and suppliers (i.e. physician, hospitals, DME suppliers, 
etc) and their submitted fee-far-service Medicare claims in performing its activities.  In 
traditional fee-for-service, the fraud in which the ZPIC is required to review occurs at the 
provider level, not at the claims processing level. The ZPIC contract has the potential for 
ZPICs to also perform program integrity activities associated with Medicare Part C 
and/or D.  Unlike traditional fee-for-service Medicare, where fraud typically occurs at the 
provider level as indicated above, in Part CID, fraud can occur at the plan level. This 
distinction is important for OCI analysis because consideration must be given regarding 
who or what the ZPIC is reviewing. 
Page 10 states; "Offerors and their subcontractors often had business and 
contractual relationships with CMS and with other offerors, but rarely considered 
them to be actual conflicts." 
As stated in the beginning of this report, CMS has been addressing OCI issues 
since 1999. We required that ZPIC offerors disclose conflicts so we could make 
an independent analysis of the specific conflicts, regardless of how offcrors 
characterized such conflicts. In some cases we disagreed with the offerors 
assessment of the conflict, and in other cases we agreed with the 
offerors/contractor's assessment. 
Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-1 O"()0300)  34  Page 5 -Daniel R. I.evinson 
Page 12-13 stated "Offerors, subcontractors, and eMS identified 1,919 business and 
contractual relationsbips as possible conflicts and 16 as actual conflicts." 
Again, CMS considers it a success that the offerors disclosed as many OCI issues 
as they did.  As stated earlier, CMS addressed all significant OCl's of the 
successful ZPIC awardees. 
OIG also mentions on page 16 of the report that its review of certificates did not reveal 
documentation of CMS conducting a preliminary review ofthree offerors and four of 
their subcontractors' certificates. CMS would like to clarify that a preliminary or cursory 
review was conducted; however, no documentation was included in the file as this is not 
required for offerors not included in the competitive range for award. 
CMS thanks the OIG for evaluating this important issue and is confident our new OCI 

policy will enhance our already rigorous OCI evaluations and determination process. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300)  35   
   
 
 ACKNOWLEDGMENTS 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office; and Linda M. Ragone, Deputy Regional Inspector 
General. 
Tanaz Dutia served as the team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the Philadelphia regional 
office who contributed to the report include Russell Tisinger; central office 
staff who contributed include Scott Manley. 
 
Conflicts and Financial Relationships Among Potential Zone Program Integrity  Contractors (OEI-03-10-00300)     36
   
Office of Inspector General 

http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is  
to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the 
health and welfare of beneficiaries served by those programs.  This statutory mission is carried out through 
a nationwide network of audits, investigations, and inspections conducted by the following operating 
components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting audits with 
its own audit resources or by overseeing audit work done by others.  Audits examine the performance of  
HHS programs and/or its grantees and contractors in  carrying out their respective responsibilities and are  
intended to provide independent assessments of HHS programs and operations.  These assessments help 
reduce waste, abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections  
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress, 
and the public with timely, useful, and reliable information on significant issues.  These evaluations focus 
on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of  
departmental programs.  To promote impact, OEI reports also present practical recommendations for 
improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and 
misconduct related to HHS programs, operations, and beneficiaries.  With investigators working in all 
50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the  
Department of Justice and other Federal, State, and local law enforcement authorities.  The investigative 
efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering 
advice and opinions on HHS programs and operations and providing all legal support for OIGs internal  
operations.  OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS 
programs, including False Claims Act, program exclusion, and civil monetary penalty cases.  In  
connection with these cases, OCIG also negotiates and monitors corporate integrity agreements.  OCIG 
renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement 
authorities.