Office of Inspector General Components 
Office of Audit Services provides all auditing services for HHS, either through its own 

S
resources or by overseeing audit work of others. Audits examine the performance of HHS 
A programs and/or its grantees and contractors in carrying out their respective responsibilities 
and are intended to provide independent assessments of HHS programs and operations in order 
O
to reduce waste, abuse, and mismanagement and to promote economy and efficiency throughout 
the Department. 
Office of Investigations conducts criminal, civil, and administrative investigations of 
allegations of wrongdoing in HHS programs or to HHS beneficiaries.  Investigative efforts lead 
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to criminal convictions, civil judgements and settlements, administrative sanctions, and/or civil 
O
monetary penalties.  OI serves as liaison to the Department of Justice on all matters relating to 
investigations of HHS programs and personnel. 
Office of Evaluation & Inspections conducts short-term management and program 
I evaluations that focus on issues of concern to the Department, the Congress, and the public. 
E
OEI generally focuses on programs with significant expenditures of funds and services to 
O program beneficiaries or in which important management issues have surfaced. The findings and 
recommendations contained in the reports generate rapid, accurate, and up-to-date information 
on the efficiency, vulnerability, and effectiveness of departmental programs. 
G Office of Counsel to the Inspector General provides legal services to OIG, rendering 
advice and opinions on HHS programs and operations, imposes program exclusions and civil 
I
monetary penalties on health care providers, and litigates those actions within the Department. 
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OCIG also represents OIG in the global settlement of cases arising under the civil False Claims 
O Act, develops and monitors corporate integrity agreements, develops compliance program 
guidances, and renders advisory opinions on sanctions to the health care community. 
Office of Management and Policy provides mission support services to the IG and 
 
other components.  OMP formulates and executes the budget, develops policy, disseminates 
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OIG information to the news media and public, liaises with the Department, Congress, and 
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external organizations, and manages information technology resources. OMP also conducts and 
coordinates reviews of existing and proposed legislation and regulations to assess implications 
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and economic consequences for HHS programs and operations.  In addition, OMP oversees 
State Medicaid Fraud Control Units that investigate and prosecute fraud and patient abuse in the 
Medicaid program.  This semiannual report and other OIG materials 
may be accessed on the Internet 
at http://oig.hhs.gov   Message from the Inspector General 
Over the past 6 months, the Office of Inspector General (OIG) has continued its mission 
to evaluate, audit and investigate fraud, waste and abuse in Federal health care programs.  OIG 
anticipated and has already assumed many of the additional responsibilities that we now have 
under the newly enacted Medicare Prescription Drug, Improvement and Modernization Act of 
2003 (the Act). In addition, OIG studies mandated by the Act will present an additional avenue 
for us to support the Department by providing the factual information and assistance necessary 
for them to meet their own responsibilities under the Act. 
Perennial oversight by OIG is critical because our studies continue to show that the 
Government significantly overpays for certain drugs, and our investigations continue to reveal 
fraudulent activity by various drug manufacturers.  In fact, our reports in the past 6 months have 
shown the tremendous savings, $650 million for FY 2002, that could be achieved by using 
alternative methodologies for pricing certain drugs.  
Our prosecutions are wide-ranging and include the resolution of allegations against many 
and varied entities, most prominent among them the hospital chain HCA, Inc., formerly known 
as Columbia/HCA Healthcare Corporation.  HCA paid $631 million plus interest to resolve their 
outstanding civil cost reporting issues with the Government.  Combined with the $841 million 
already paid by HCA, this prosecution represents the largest total health care fraud recovery to 
date from a single provider. 
In our audits and evaluations, we continue to find large program overpayments.  For 
example, we have uncovered significant Medicaid overpayments in the area of school-based 
health services and administrative claims.  The failure to provide services by appropriate 
professionals and/or to have documentation supporting many of the claims resulted in an 
overpayment of approximately $172.6 million in one State alone.  OIG will continue to audit 
Medicaid expenditures into the future. 
Not only do we suggest ways to prevent fraud, waste and abuse, we also seek to identify 
vulnerabilities in need of correction.  One of our more important evaluations looked at the 
Medicare-Approved Heart Transplant Centers.  Since no continuing standards for heart trans 
plant centers existed at the time of our study, we ascertained whether the centers currently met 
the initial criteria for becoming Medicare-Approved.  This study allowed us to provide data that 
will help the Department in drafting regulations to ensure the continuing quality of Medicare-
Approved Heart Transplant Centers. 
The successes of the past 6 months are truly a tribute to the dedicated individuals who 
work at OIG. It is our job to be vigilant and zealous in the pursuit of fraud, waste and abuse.  It 
is also our job to make sure that our work is useful and results in recoveries of money, closure of 
loopholes in law, or changes in program operations to minimize any abuse.  We take the job and 
the mission very seriously and will continue our efforts into the future.  
Dara Corrigan 
Acting Principal Deputy Inspector General    Highlights

Summary of Accomplishments 
For the first half of fiscal year 2004, the Office of Inspector General 
(OIG) reported savings of over $16.8 billion, comprised of $15.4 billion 
in implemented recommendations and other actions to put funds to better 
use, $214 million in audit receivables, $8.3 million in additional audit 
recoveries, and $1.2 billion in investigative receivables. 
(Details pp. 50, 54, and 57.) 
In addition, for this reporting period, OIG reported exclusions of 
1,544 individuals and entities for fraud or abuse of Federal health care 
programs and/or their beneficiaries; 234 convictions of individuals or 
entities that engaged in crimes against departmental programs; and 107 
civil actions, which include all False Claims Act and unjust enrichment 
suits filed in district court, all Civil Monetary Penalties Law settlements, 
and all administrative recoveries related to provider self-disclosure 
matters.  (Details pp. 16 and 54.) 
Medicare Prescription Drug, Improvement and 
Modernization Act of 2003 
In early December, the President signed the Medicare Prescription 
Drug, Improvement and Modernization Act of 2003 (the Act), a measure 
that will bring fundamental changes to Medicare reimbursement and 
coverage. Among its many provisions, the Act creates a voluntary out 
patient prescription drug benefit and offers additional prescription drug 
benefits to low-income beneficiaries.  It authorizes health savings accounts 
and amends some of the Departments regulatory processes.  In addition, 
the Act makes broad changes to Medicares fee-for-service payment 
practices. Most of these changes will be phased in over coming years. 
It is noteworthy that throughout the law, the Congress relied on 
prior OIG work in identifying immediate reductions in reimbursement for 
various items or services for which Medicare has overpaid.  OIG will 
identify cost savings such as these in this and future semiannual reports. 
Also, importantly, the Act specifically enlists OIG to perform a variety  of studies that will provide independent factual information to assist the 
Department in revising aspects of the Medicare program to comply with 
the new law. For example, OIG is directed immediately to study the costs   
of drugs used to treat end stage renal disease and to monitor widely 
available market prices for drugs on an ongoing basis. 
Prescription Drugs 
In updating two previous studies on the prescription inhalation 
drugs albuterol and ipratropium bromide, OIG found that Medicare 
continued to pay far more for both drugs than other payers.  If Medicare 
had been able to purchase these drugs at the Medicaid Federal Upper 
Payment Limit amount, savings would have reached nearly $650 million 
for FY 2002. And since the release of reports on this subject several years 
ago, the prices available to the supplier community have decreased, while 
the Medicare reimbursement prices have remained the same. 
In the Medicare Prescription Drug, Improvement and Modernization 
Act of 2003, Congress lowered payments for inhalation drugs to between 
80 and 85 percent of the average wholesale price.  The Congressional 
Budget Office estimates that this will save Medicare $4.2 billion over 10 
years. (Details p. 5.) 
Hospitals 
HCA, Inc., formerly known as Columbia/HCA Healthcare 
Corporation, agreed to pay $631 million plus interest to resolve the 
Governments remaining civil claims against the hospital chain.  When 
combined with an earlier settlement totaling approximately $840 million, 
these resolutions represent the largest total health care fraud recovery ever 
obtained from a single provider.  (Details p. 22.) 
In South Carolina, St. Francis Hospital, Inc., entered into the largest 
settlement ever reached solely under OIGs administrative authorities and 
one of the largest settled under OIGs Provider Self-Disclosure Protocol. 
The hospital-based home health agency, hospice, and durable medical 
equipment supplier agreed to pay $9.5 million after self-reporting 
Medicare billing improprieties to OIG.  (Details p. 15.) 
II
 School-Based Health Services 
In reviews of four States, OIG found large Medicaid overpayments 
for school-based health services and administrative activities.  Most sig-
nificantly, OIG estimated that New York improperly claimed $172.6 million 
in Federal Medicaid funds for speech services that did not meet Federal 
and State requirements.  Many of the services claimed lacked a referral by 
an appropriate medical professional or were not provided by or under the 
direction of a qualified speech-language pathologist.  In the three other 
States, Federal overpayments totaled an estimated $7.9 million.  These 
unallowable claims generally occurred because States did not provide 
sufficient guidance to and oversight of local education agencies.  OIG 
recommended that the States refund the overpayments to the Federal 
Government.  (Details p. 11.) 
Noncustodial Parents Contributions to Medicaid Costs 
Because medical support orders are not enforceable when 
noncustodial parents cannot obtain or afford employer-sponsored medical 
insurance, some children who receive child support are enrolled in 
Medicaid if they meet the income criteria.  The objective of this eight-
State initiative was to determine the number of such children and the 
potential savings to Medicaid if noncustodial parents were required to 
contribute toward the Federal and State Medicaid costs incurred on behalf 
of their children. OIG estimated that some noncustodial parents were 
financially able to contribute a total of $99 million, or 50 percent, of their 
childrens Medicaid costs during a 1-year period. (Details p. 36.) 
Departmental Financial Statement Audit 
For the fifth year, OIGs audit found that the Departments 
financial statements fairly presented its financial position in all material 
respects. In addition, OIGs audit approach allowed the Department to 
successfully meet its accelerated November 15, 2003 target date for 
submitting the financial statements and audit results to the Office of 
Management and Budget.  However, OIG noted two continuing material 
weaknesses: serious deficiencies in the Departments financial systems 
and processes for producing financial statements and inadequate internal 
controls over Medicare information systems.  Material weaknesses are 
defined as systemic problems cutting across a number of operating 
divisions or significant dollar issues affecting an individual division. 
(Details p. 46.) 
III
 Durable Medical Equipment Suppliers 
Abbott Laboratories and Abbotts Ross Products Division agreed to 
pay a total of $615 million as part of a global criminal, civil, and adminis 
trative settlement with the Government.  The settlement resolved allega 
tions that Ross paid kickbacks to purchasers of enteral nutrition items and 
services.  In addition, CG Nutritionals, Inc., an Abbott subsidiary, pled 
guilty and was sentenced for obstructing a health care fraud investigation. 
(Details p. 20.) 
OIG continued to focus on the investigation of fraudulent providers 
of power wheelchairs and other power mobility products to Medicare 
beneficiaries. The matters at issue involved inflated billings to Medicare, 
charges for equipment and supplies not delivered, the payment of kick 
backs for wheelchair referrals, and the falsification of documents needed 
to qualify beneficiaries for wheelchairs and other equipment they often did 
not need. (Details p. 20.) 
IV
 Table  of  Contents

Centers for Medicare & Medicaid Services  .................................. 1

CMS Financial Statement Audit ........................................... 2

Comprehensive Error Rate Testing Program .................................. 2

Hospital Payment Monitoring Program ...................................... 3

Medicares National Correct Coding Initiative  ................................ 3

CMS Oversight of Cost-Avoidance Waivers .................................. 4

Terminated Medicare Contractors .......................................... 4

Update: Excessive Medicare Reimbursements for Drugs ........................ 5

Medicare Reimbursement for Lupron ....................................... 6

Omission of Drugs From the Federal Upper Limit List  .........................  6
Payments for Enteral Nutrition  ............................................ 7

State Strategies to Contain Medicaid Drug Costs .............................. 7

Resource Utilization Groups  .............................................. 8

Medicare-Approved Heart Transplant Centers ................................ 9

Managed Care Payments for Institutionalized Beneficiaries ..................... 10

Institutions for Mental Diseases ........................................... 10

Clinical Diagnostic Laboratory Service Claims ............................... 10

Home Health Services Preceded by a Hospital Stay  ........................... 11

School-Based Health Services ............................................ 11

Disproportionate Share Hospital Payments .................................. 13

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

Advisory Opinions .............................................. 13

Compliance Guidelines ........................................... 14

Provider Self-Disclosure Protocol .................................. 14

Federal and State Partnership:  Joint Audits of Medicaid ....................... 16

OIG Administrative Sanctions ............................................ 16

Program Exclusions ............................................. 16

Civil Monetary Penalties.......................................... 18

Kickbacks ..................................................... 18

Patient Dumping ................................................ 18

Criminal and Civil Enforcement .......................................... 19

Durable Medical Equipment(DME) Suppliers......................... 20

Hospitals ...................................................... 22

Nursing Homes ................................................. 24

V
 Home Health ................................................... 25

Prescription Drugs  .............................................. 25

Practitioners  ................................................... 26

Medicaid Fraud Control Units ............................................ 27

Public Health Agencies. ................................................ 29

State Bioterrorism Preparedness Funds ..................................... 30

Ryan White CARE Act Grantee .......................................... 30

HIV Prevention Grantees ................................................ 30

CDC Indirect Costs .................................................... 31

Construction Costs for NIHs Clinical Research Center  ........................ 31

Health Education Assistance Loan Defaults ................................. 32

National Institute of Environmental Heath Sciences Superfund  .................. 33

Financial Statement Audit ............................................... 33

Administrations for Children and Families and on Aging ..................... 35

Increased Qualifications for Head Start Teachers  ............................. 36

Noncustodial Parents Contributions to Medicaid Costs ........................ 36

Aid to Families With Dependent Children Overpayment Collections .............. 38

Cost Claimed by Protection and Advocacy Organization........................ 38

Recipient Capability Audits .............................................. 39

Health Care Services for Children in Foster Care  ............................. 39

Child Support Enforcement .............................................. 40

Task Forces .................................................... 41

Task Force Table ................................................ 41

Investigations .................................................. 42

Misuse of ACF Grant Funds  ............................................. 43

Fraud Training Initiative  ................................................ 44

General Oversight ..................................................... 45

Departmental Financial Statement Audit .................................... 46

Federal Information Security Management Act ............................... 46

Departmental Service Organizations ....................................... 47

VI
 Non-Federal Audits .................................................... 48

Resolving Recommendations ............................................. 49

Table 1:  Reports With Questioned Costs ............................. 50

Table 2: Funds Recommended to Be Put to Better Use .................. 51

Legislative and Regulatory Review and Development ......................... 52

Review Functions ............................................... 52

Development Functions .......................................... 52

Employee Fraud and Misconduct  ......................................... 53

Additional Audit Recoveries ............................................. 54

Investigative Prosecutions ............................................... 54

Appendices ........................................................... 55

Appendix A:	 Savings Achieved Through Policy and Procedural Changes 

Resulting From Audits, Investigations, and Inspections ........... 57

Appendix B:	 Unimplemented Office of Inspector General Recommendations 

to Put Funds to Better Use .................................. 61

Appendix C:	 Unimplemented Office of Inspector General Program and 

Management Improvement Recommendations .................. 67

Appendix D:	 Notes to Tables 1 and 2 .................................... 73

Appendix E:	 Reporting Requirements of the Inspector General Act of 1978, 
as Amended ............................................. 85

Appendix F:	 Summary of Sanction Authorities  ............................ 87

Appendix G:	 Performance Measures ..................................... 89

Please Note: Figures throughout the text have been 
rounded for reporting purposes. 
VII
 VIII
 Centers for Medicare
 & Medicaid Services 
The Centers for Medicare & Medicaid Services (CMS) administers 
the Medicare and Medicaid programs.  Financed by the Federal Hospital 
Insurance Trust Fund, Medicare Part A provides hospital and other insti 
tutional insurance for persons aged 65 or older and for certain disabled 
persons. Medicare Part B (Supplementary Medical Insurance) is an optional 
program which covers most of the costs of medically necessary physician 
and other services and is financed by participants and general revenues. 
The Medicaid program provides funding to States for medical care 
and other support and services for low-income children, senior citizens, and 
people with disabilities.  State expenditures for medical assistance are 
matched by the Federal Government using a formula that measures per 
capita income in each State relative to the national average.  The State 
Childrens Health Insurance Program (SCHIP) expands health coverage to 
uninsured children whose families earn too much for Medicaid, but too 
little to afford private coverage. 
The Office of Inspector General (OIG) devotes significant resources 
to investigating and monitoring the Medicare and Medicaid programs. 
These activities have helped ensure the cost-effective delivery of health 
care; improved its quality; and reduced the potential for fraud, waste, and 
abuse. In addition, these efforts have often led to criminal, civil, and/or 
administrative actions against perpetrators of fraud and abuse. 
OIG also reports on the audits of CMS financial statementswhich 
presently account for almost 82 percent of Department of Health and 
Human Services (HHS) net costs.  In addition to issuing an opinion on the 
statements, auditors assess compliance with Medicare laws and regulations 
and the adequacy of internal controls.  CENTERS FOR MEDICARE & MEDICAID SERVICES 
CMS Financial Statement Audit   
CMS again received an unqualified opinion on its FY 2003 financial 
statements.  However, this report noted continuing material weaknesses in 
financial systems and regional and central office oversight of the Medicare 
contractors and in Medicare electronic data processing (EDP) controls. Because 
the Medicare contractors lacked an integrated accounting system to accumulate 
and report financial information, they used ad hoc, labor-intensive reports, which 
increased the risk of human error, material misstatement, or omission.  Also, 
numerous weaknesses in EDP processing controls at the Medicare contractors, as 
well as application control weaknesses at a contractor shared system, increased the 
risk of unauthorized access to and disclosure of sensitive information, malicious 
changes that could interrupt data processing or destroy files, improper Medicare 
payments, and disruption of critical operations. 
CMS officials concurred with the recommendations and are taking 
corrective action. Most importantly, they are continuing efforts to implement the 
Healthcare Integrated General Ledger Accounting System, which is expected to be 
fully operational in 2007. (A-17-03-03003) 
Comprehensive Error Rate Testing Program 
CMS established a Comprehensive Error Rate Testing (CERT) program to 
review the appropriateness of Medicare payments made by and the reliability of 
claims review processes used by Medicare intermediaries.  The objective of this 
review was to determine whether the contractor responsible for performing the 
CERT reviews followed established protocols.  OIGs review of 105 claims found 
that the contractor generally followed established error rate review policies and 
procedures for 99 claims.  However, the medical records for six claims were never 
received, and letters requesting medical records were often sent late.  In addition, 
quality assurance reviews were not performed for 22 of 45 claims sampled, and 
the results of those reviews that were performed were not shared with medical 
review specialists. 
   Indicates performance measure.  Details can be found in Appendix G. 
2 CENTERS FOR MEDICARE & MEDICAID SERVICES 
CMS agreed with OIGs recommendation to follow established schedules 
in requesting medical records and to make better use of quality assurance reviews. 
(A-03-03-00014) 
Hospital Payment Monitoring Program
The objective of this audit was to determine whether the Clinical Data 
Abstraction Centers that are responsible for carrying out CMSs Hospital Payment 
Monitoring Program (HPMP) followed the established error rate review policies 
and procedures. OIGs review of 90 inpatient acute care hospital claims found 
that the centers generally followed established error rate review policies and 
procedures. In addition, a review of 45 claims subject to the HPMP internal quality 
control process showed that controls were generally operating effectively. How 
ever, OIG did note procedural problems.  For 2 of the 90 sampled claims, one 
center did not send followup letters requesting medical records, and for 1 of the 
45 claims subject to quality control reviews, a quality control procedure was not 
followed. 
OIG made recommendations concerning followup requests and clarification 
of final determinations on opposing medical screening decisions.  CMS concurred 
with the recommendations.  (A-03-03-00015) 
Medicares National Correct Coding Initiative 
In January 1996, CMS implemented the National Correct Coding Initiative 
(CCI) designed to promote correct coding by Medicare providers and to prevent 
payment for improperly coded services.  Under this program, payment processing 
edits are established to identify pairs of procedure codes that should not be billed 
together, either because one of the services is a component of a more comprehen 
sive procedure, or because the two services cannot reasonably be performed 
together. Medicare carriers are required to apply the edits to the Part B claims 
they process for payment when a provider bills for more than one service for the 
same beneficiary on the same date of service. 
OIG found that 98 percent of services targeted by CCI edits were paid 
appropriately by Medicare in 2001. Of the small percentage of services that met 
the criteria for denial based on CCI edits, 70 percent may have been paid correctly 
3
 CENTERS FOR MEDICARE & MEDICAID SERVICES 
due to adjustments made when two services in a CCI edit code pair were billed on 
different days. The OIG concluded that CCI edits appear to prevent Medicare 
payments for nearly all targeted services.  (OEI-03-02-00770) 
CMS Oversight of Cost-Avoidance Waivers
Generally, Medicaid State agencies decline to pay claims for beneficiaries 
who have other insurance, but CMS may authorize cost-avoidance waivers to 
States that demonstrate that the alternate pay and chase method (i.e., paying the 
providers claim and then seeking recovery from the liable third party) is cost 
effective. In this inspection of CMSs oversight of cost-avoidance waivers, OIG 
found that CMS and States differed on whether States were operating under 
approved waivers.  In addition, CMS approved waiver requests that did not meet 
the criteria set forth in Federal regulations.  CMS does not require States to report 
the data necessary to determine the cost-effectiveness of waivers.  Of the 34 States 
that had cost-avoidance waivers, 17 did not report attempted recoveries or validly 
denied figures to OIG. Without this data, OIG believes it would be difficult for 
CMS to make informed decisions concerning the cost-effectiveness of waivers. 
Another 17 States, however, did provide the requested data. Figures reported by 
14 of those 17 States showed $307 million in outstanding payments potentially 
owed by liable third parties in FY 2000.  This money has been paid out by 
Medicaid, yet the dollars associated with these claims have not been returned to 
the Federal Government and the States. 
OIG recommended that CMS improve its oversight of the cost-avoidance 
waiver process and also require more extensive and accurate data on States efforts 
at pay-and-chase and cost avoidance (i.e., returning the claim to the provider so 
that the provider can bill the liable third party). In its response to the report, CMS 
concurred with OIGs recommendations, but felt that the amount potentially owed 
to the States was significantly less than the amount stated in the report. 
(OEI-03-00-00031) 
Terminated Medicare Contractors 
OIG reviewed two insurance companies in Connecticut that processed and 
paid Medicare fee-for-service claims until their contractual relationships with 
CMS were terminated. 
4 CENTERS FOR MEDICARE & MEDICAID SERVICES 
One company claimed nearly $2.9 million in unallowable costs:  $2.5 million 
in termination costs and $366,000 in severance costs.  Contrary to the Medicare 
contracts provisions, the company continued to claim subcontract lease costs for 
periods after the contract termination date, and certain termination costs were not 
allowable for reimbursement under the Federal Acquisition Regulation.  The 
company agreed in part with OIGs recommendations for financial adjustments. 
(A-01-02-00508) 
At the second company, OIG identified almost $1.4 million in excess 
pension assets that should be remitted to Medicare.  Under Federal regulations 
and the Medicare contract, any gains in pension assets should be credited to the 
Medicare program when the Medicare segment of an employee pension plan 
closes. The company agreed to remit the excess assets.  (A-07-02-03021) 
Update:  Excessive Medicare 
Reimbursements for Drugs 
If Medicare had been able to reimburse for 
Medicare has been paying more for  albuterol and ipratropium bromide at the 
both albuterol and ipratropium bromide,  Medicaid Federal Upper Limit amount, in 
(inhalation drugs used to treat respiratory  calendar year 2002 the program would have 
saved nearly $650 million. 
conditions) than other payers, costing the 
program and its beneficiaries millions of 
dollars a year. If Medicare had been able 
to reimburse for these drugs at the Medicaid Federal Upper Limit amount, in 
calendar year 2002 the program would have saved nearly $650 million ($263 
million for albuterol and $386 million for ipratropium bromide).  Furthermore, 
data collected from a drug wholesaler and a group purchasing organization showed 
that pharmacies were able to purchase the drugs for substantially less than the 
Medicare reimbursement amounts.  Based on the results of an earlier OIG report, 
the price at which both drugs are available to the supplier community decreased, 
while the Medicare reimbursement amount remained the same. 
The Congressional Budget Office estimates savings on inhalation drugs to 
be more than $4 billion over the next 10 years.  Based in part on OIG studies of 
these daily costs, the Medicare Prescription Drug, Improvement and Modernization 
Act of 2003 provides for numerous changes in Medicares reimbursement 
methodology for drugs covered under Part B, including reductions in the amount 
Medicare pays for albuterol and ipratropium bromide. 
(OEI-03-03-00510; OEI-03-03-00520) 
5
 CENTERS FOR MEDICARE & MEDICAID SERVICES 
Medicare Reimbursement for Lupron 
OIG determined the amount Medicare would save if all carriers established 
a least costly alternative policy for Lupron, a prostate cancer drug. Under such 
a policy, where treatments are medically equivalent, Medicare would reimburse at 
the rate of the least costly drug, since there would be no medical necessity for the 
more expensive product.  This OIG study found that if carriers in 10 jurisdictions 
were to implement a least costly alternative policy for the drug, Medicare and its 
beneficiaries would save $40 million per year.  In 2003, Medicare carriers in 47 
of 57 jurisdictions applied a least costly alternative policy to Lupron, reimbursing 
$446 for 7.5 mg of the drug.  In comparison, carriers in the 10 jurisdictions with 
out a least costly alternative policy reimbursed $612 for the same amount of sub 
stance. 
OIG recommended that CMS encourage all Medicare carriers to apply a 
least costly alternative policy to Lupron. CMS partially concurred with OIGs 
recommendation.  (OEI-03-03-00250) 
Omission of Drugs From the Federal Upper Limit List 
Medicaid limits the amount of reimbursement for drugs with available 
generic equivalents. Federal Upper Limits were established to ensure that the 
Federal Government acts as a prudent payer by taking advantage of current market 
prices for multiple-source drugs.  Ninety drug products were not included on the 
Federal Upper Limit List in 2001, despite meeting the criteria established by 
Federal law and regulation. This inspection found that Medicaid could have saved 
$123 million in 2001 by adding 55 of the 90 drug products to the Federal Upper 
Limit list.  This represents 30 percent of the $411 million Medicaid reimbursed 
for these 55 products that year. The remaining 35 drug products met the criteria 
for inclusion on the Federal Upper Limit list, but did not have any associated 
savings. 
This report recommended that CMS take steps to ensure that all drugs 
meeting the criteria set forth in Federal law and regulation are included on the 
Federal Upper Limit list.  In their response to the report, CMS disagreed with 
OIGs savings estimates.  (OEI-03-02-00670) 
6
 CENTERS FOR MEDICARE & MEDICAID SERVICES 
Payments for Enteral Nutrition 
Medicare groups enteral nutrition formula products into seven categories, 
based on their composition; a wide variety of formulas, including the products 
Boost, Ensure, Isosource and 
Nutren, are grouped under 
Category I. This inspection 
P Medicare groups enteral nutrition formula products  compared the amount Medicare 
into seven codes based on their composition.  reimburses for Category I 
enteral nutrition formulas to 
P Category I formulas represented by code B4150 
prices available to the supplier 
accounted for $201 million of the $311 million in 
Medicare Part B payments for all enteral nutrition. community.  The Category I 
formulas that were represented 
by code B4150 accounted for 
$201 million of the $311 million 
in Medicare Part B payments for all enteral nutrition formulas in 2001.  OIG 
obtained 177 individual contract prices for these formulas through one national 
wholesaler, one group purchasing organization, and one supplier who negotiated 
contracts directly with two enteral nutrition formula manufacturers.  Medicares 
reimbursement amount for Category I formulas ($0.61 in 2001) exceeded median 
contract prices available to suppliers from the three sources reviewed by 70 to 115 
percent. Median contract prices ranged from $0.28 per unit to $0.36 per unit. 
Individual contract prices varied from a low of $0.18 per unit to a high of $0.86 
per unit, yet the majority (75 percent) of individual contract prices were lower 
than $0.42 per unit. 
OIG recommended that CMS consider using its inherent reasonableness 
authority to reduce the Medicare reimbursement amount for Category I formulas. 
CMS agreed with OIGs recommendation.  (OEI-03-02-00700) 
State Strategies to Contain Medicaid Drug Costs 
Escalating Medicaid drug expenditures, combined with strained State 
budgets, have precipitated the development of State strategies to contain Medicaid 
drug costs. Federal Medicaid constraints prevent States from benefitting from 
some cost containment tools widely used by private purchasers.  However, States 
7  CENTERS FOR MEDICARE & MEDICAID SERVICES 
exercise their flexibility within Federal  Medicaid parameters to employ three 
main drug cost containment strategies:  (1) limiting Medicaid reimbursement for 
drugs (32 States); (2) shifting use from 
Actual Maximum Allowable Cost Savings 
higher to lower cost drugs (39 States); 
and (3) limiting drug quantities (25 
Actual  Savings as 
State  Annual  Percent of States  States). 
Savings  FY 01 Drug  Maximizing States ability to 
(millions)  Expenditures  contain drug costs can provide a signif 
icant fiscal benefit to State and Federal 
NE  $22  15.7 
Medicaid budgets. However, States 
MO  $45.8  8.5  face significant challenges to 
maximizing drug cost savings, including 
VT  $4  4.9 
lack of accurate drug price information 
WA  $15.3  4.2
and stakeholder opposition to cost con 
tainment efforts.  (OEI-05-02-00680) 
Resource Utilization Groups    
When a beneficiary meets certain conditions, 
Medicare Part A helps pay for skilled nursing facility 
care. Beginning with the first cost reporting period after 
SEVEN MAJOR 
July 1, 1998, Medicare began paying skilled nursing  RESOURCE 
facilities through a case-mixed adjusted per diem pros  UTILIZATION GROUP 
pective payment.  To determine the case-mix, skilled  CATEGORIES 
nursing facilities classify residents into 1 of 44 resource  R Special Rehabilitation 
utilization groups that are divided into seven major  R Extensive Services 
R Special Care 
categories. 
R Clinically Complex 
This report followed up on an earlier study 
R Impaired Cognition 
mandated by the Medicare, Medicaid and SCHIP Benefits 
R Behavior Problems 
Improvement and Protection Act of 2000 and examined  R Reduced Physical Function 
changes in the proportion of Medicare beneficiaries 
assigned to each resource utilization group in skilled 
nursing facilities between January 1999 and December 2002, given legislative 
changes in reimbursement levels.  OIG found that minimal shifts occurred. 
Overall, the rehabilitation category, the largest of the resource utilization group 
   Indicates performance measure.  Details can be found in Appendix G. 
8  CENTERS FOR MEDICARE & MEDICAID SERVICES 
categories, remained stable.  Assignment to the rehabilitation sub-categories 
shifted in correlation with the reimbursement changes of the Medicare, Medicaid 
and SCHIP Balanced Budget Refinement Act of 1999 and the Medicare, Medicaid, 
and SCHIP Benefits Improvement and Protection Act of 2000.  In addition, small 
changes were seen in other categories, including extensive care, special care, and 
clinically complex services.  (OEI-01-03-00180) 
Medicare-Approved Heart Transplant Centers    
OIG found that many Medicare-approved heart transplant centers have 
performed at volume and survival rates below the minimum levels required for 
their initial Medicare approval, sometimes for several consecutive years.  Further 
more, CMS receives incomplete information from centers regarding their volume 
and survival rate performance and does not regularly obtain volume and survival 
rate data from the Scientific Registry of Transplant Recipients. 
OIG recommended that CMS expedite the development of standards for 
continuing performance and for the reapproval of approved centers as well as 
guidelines for what levels of performance trigger specific responses from CMS 
and, in the short term, improve its oversight of centers by entering into an arrange 
ment with HRSA for the regular exchange of volume and survival rate data. 
(OEI-01-02-00520) 
   Indicates performance measure.  Details can be found in Appendix G. 
9  CENTERS FOR MEDICARE & MEDICAID SERVICES 
Managed Care Payments for Institutionalized Beneficiaries 
Medicare pays a higher monthly rate to managed care organizations for 
beneficiaries who are institutionalized.  This report consolidated the results of a 
national sample of eight managed care organizations and individual audits of five 
others. Based on these results, OIG estimated that the organizations received 
$12.8 million in unallowable payments for beneficiaries incorrectly claimed as 
institutionalized during a 3-year period. 
OIG recommended that CMS improve oversight procedures to better 
identify managed care organizations that inappropriately claim beneficiaries as 
institutionalized and instruct the organizations to repay the overpayments.  CMS 
stated that it was considering implementing the recommendations. 
(A-05-02-00078) 
Institutions for Mental Diseases 
Federal regulations preclude Federal Medicaid funding of medical services, 
except inpatient psychiatric services, provided to under-21-year-old residents of 
institutions for mental diseases.  OIG estimated that during a 4-year period, New 
York State improperly claimed $7.6 million in Federal funds for services provided 
to such residents. The State either lacked controls or did not apply existing controls 
to prevent Federal funds from being claimed for these residents. 
In addition to recommending procedural changes, OIG recommended that 
the State refund the $7.6 million and identify and refund any improper Federal 
funds claimed after the audit period.  State officials generally disagreed with 
OIGs findings and recommendations.  (A-02-02-01024) 
Clinical Diagnostic Laboratory Service Claims 
Federal law limits Medicaid payments for clinical laboratory tests to the 
amounts payable for the same tests under the Medicare fee schedule.  However, in 
this followup audit on the Massachusetts Medicaid laboratory billing system, OIG 
found that of the $29 million in hospital outpatient laboratory claims submitted by 
the State for the period July 1999 through March 2002, $8.2 million ($4.1 million 
10
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Federal share) exceeded the Medicare fee schedule amounts.  The States pro 
cedures were not adequate to ensure that amounts claimed for Medicaid laboratory 
services and submitted for Federal reimbursement complied with the Medicare fee 
schedule. 
In addition to recommending financial adjustment, OIG recommended 
that the State ensure that amounts claimed for hospital laboratory services and 
submitted for Federal reimbursement do not exceed the Medicare fee schedule 
amounts.  The State disagreed with the findings. (A-01-02-00015) 
Home Health Services Preceded by a Hospital Stay
The objective of these reviews was to determine whether home health 
agencies properly claimed Medicare reimbursement for services to certain bene 
ficiaries who were previously discharged from inpatient hospitals.  These claims 
should have been reimbursed at a lower rate but were not because the home health 
agencies did not accurately identify prior hospital stays on patient assessment 
forms.  Overpayments totaled nearly $21 million. 
OIG recommended that regional home health intermediaries recover the 
overpayments, identify and collect overpayments made following the audit period, 
and educate home health agencies to ensure that they accurately enter beneficiary 
discharge data on patient assessment forms.  The three regional home health inter 
mediaries reviewed were Palmetto Government Benefits Administrators (approx 
imately $10 million in overpayments), Cahaba Government Benefits Administrators 
($5.6 million in overpayments), and United Government Services (approximately 
$5.3 million in overpayments).  
(A-04-03-00018, A-07-03-04021, A-09-03-00042) 
School-Based Health Services 
In a series of reviews, OIG determined whether Medicaid payments for 
school-based health services and related administrative activities complied with 
Federal and State requirements.  Section 1903(c) of the Social Security Act was 
amended in 1988 to allow Medicaid coverage of health-related services for 
children under the Individuals with Disabilities Education Act. The Individuals 
with Disabilities Education Act requires States to provide appropriate special 
education and related services to children with disabilities or special needs. 
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Based on a statistical sample, OIG estimated that the State 
Illinois	 claimed about $6.1 million in unallowable Federal reim 
bursement.  Local education agencies improperly included 
claims for, among other things, services not included in the 
childs or familys plan and services on dates when school was closed or 
students were absent. In addition, the State had not fully implemented 
computer edits to limit payments to local agencies to the lower of billed 
costs or the statewide ceiling. Illinois generally agreed with OIGs findings 
but did not agree to refund the overpayment.  (A-05-02-00049) 
Due to inadequate monitoring of Medicaid school-based 
Iowa	 administrative costs, the State improperly claimed almost 
$640,000 in Federal funds. Most of the improper claims 
concerned expenditures without the required State match- 
ing funds.  The State did not agree with the recommended financial 
adjustment.  (A-07-02-02099) 
Of a statistical sample of 100 speech claims, 56 did 
New York	 not meet Federal and/or State requirements.  Many of 
the services claimed lacked a referral by an appropriate 
medical professional or were not provided by or under 
the direction of a qualified speech-language pathologist. Other services 
were not properly documented, did not meet the minimum number of 
services per month, or lacked individualized education or family plans. 
OIG estimated that the State improperly claimed $172.6 million of Federal 
Medicaid funds from September 1, 1993 through June 30, 2001 and re 
commended that the State refund this amount to the Federal Government. 
The State disagreed with OIGs findings and recommendations.  
(A-02-02-01030) 
As a result of inadequate oversight and monitoring 
Rhode Island	 of school-based services, the State reimbursed 
ineligible claims and disseminated private infor 
mation.  In addition, the State did not always 
disseminate or adequately explain Medicaid program guidance to the local 
education agencies. Based on a statistical sample covering 2 years, OIG 
estimated that the State claimed about $1.2 million in unallowable Federal 
reimbursement.  Some unallowable claims were for services rendered by 
health care providers who did not have the qualifications required by 
Medicaid regulations. The State generally agreed with OIGs procedural 
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recommendations but disagreed with the recommended financial 
adjustments.  (A-01-02-00014) 
Disproportionate Share Hospital Payments 
Medicaid provides that States may make additional payments, called 
disproportionate share hospital (DSH) payments, to hospitals for the uncom 
pensated costs of serving disproportionate numbers of low-income patients with 
special needs. CMS guidance specifically prohibits Federal DSH funding for 
health care services provided to prison inmates.  In a review of DSH funding 
in New Jersey, however, OIG found that even though the State plan prohibited 
funding of health care services for prison inmates, the State claimed an estimated 
$22.2 million ($11.1 million Federal share) for such costs.  In addition to making 
procedural recommendations, OIG recommended financial adjustment; the State 
generally disagreed. (A-02-02-01028) 
Outreach 
OIG has continued to issue advisory opinions, special fraud alerts, special 
advisory bulletins, and other guidance as part of its ongoing effort to promote the 
highest level of ethical and lawful conduct by the health care industry. 
Advisory Opinions 
In accordance with section 205 of the Health Insurance Portability and 
Accountability Act of 1996, OIG, in consultation with the Department of Justice, 
may issue advisory opinions to outside parties regarding the interpretation and 
applicability of certain statutes relating to the Medicare and State health care pro 
grams.  This authority allows OIG to provide additional and case-specific formal 
guidance regarding the application of the anti-kickback statute and safe harbor 
provisions, as well as other OIG health care fraud and abuse sanctions. For the 
period from October 1, 2003 through March 31, 2004, OIG received 33 advisory 
opinion requests and issued 3 advisory opinions. 
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In addition, OIG issued guidance entitled, Hospital Discounts Offered to 
Patients Who Cannot Afford to Pay Their Hospital Bills.  With this guidance, 
OIG offered its assurance that under the fraud and abuse laws, hospitals have the 
ability to provide discounts to uninsured and underinsured patients who cannot 
afford their hospital bills and to Medicare beneficiaries who cannot afford their 
Medicare cost-sharing obligations. Nothing in OIGs rules or regulations prohibits 
such discounts, and OIG fully supports the hospital industrys efforts to lower 
health care costs for those unable to afford care. The full text of the guidance, and 
related fraud alerts and special advisory bulletins, may be found on the OIG 
website. 
Compliance Guidelines 
Because the great majority of providers are honest and wish to avoid fraud 
and abuse, OIG is actively working with the private sector to develop methods to 
prevent the submission of improper claims and inappropriate conduct.  OIG has 
already initiated significant outreach efforts with the private sector to encourage 
these compliance endeavors.  OIGs compliance program guidelines are available 
on the Internet at http://oig.hhs.gov in the Fraud Prevention & Detection 
section. 
OIG has developed and released 11 compliance program guidances for: 
clinical laboratories, hospitals, home health agencies, third-party billing companies, 
durable medical equipment, prosthetics, orthotics and supply industry, hospices, 
Medicare+Choice organizations that offer coordinated care plans, nursing homes, 
individual and small group physician practices, ambulance service providers, and 
pharmaceutical manufacturers.  OIG is currently working on a supplemental 
guidance for the hospital industry and is developing a guidance for recipients of 
NIH research grants. 
Provider Self-Disclosure Protocol 
In keeping with a longstanding commitment to assist providers and suppliers 
in detecting and preventing fraudulent and abusive practices, OIG established a set 
of comprehensive guidelines for voluntary self-disclosures, titled Provider Self-
Disclosure Protocol, available on the Internet at http://oig.hhs.gov in the Fraud 
Prevention & Detection section.  In addition, it can be found in 63 Federal 
Register 58,399 (October 30, 1998). 
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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 innocent 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 the Federal health care programs).  OIG 
evaluates the reported results of each internal investigation to determine the 
appropriate course of action. 
To date, OIG has received 212 submissions.  Self-disclosure cases have 
resulted in 42 recoveries and 30 settlements, totaling over $74 million collec 
tively. Examples include the following: 
'	 South CarolinaSt. Francis Hospital, Inc., agreed to pay $9.5 million 
to resolve Medicare billing improprieties from 1997 through 1999 in its 
home health, hospice, and durable medical equipment programs.  After 
conducting an internal investigation and audit, St. Francis discovered 
significant error rates and systematic documentation lapses in its claims 
submitted to Medicare.  The hospital subsequently disclosed these findings 
to OIG under the Protocol. The settlement is the largest OIG has reached 
to date under the Civil Monetary Penalties Law and one of the largest 
reached to date under the Protocol. 
Also in South Carolina, Lexington Medical Center agreed to pay 
$99,000 in order to settle two separate submissions concerning claims for 
services rendered by two excluded individuals employed by the hospital. 
'	 North CarolinaCumberland County Hospital System, Inc., doing 
business as Cape Fear Valley Home Health and Hospice, agreed to pay 
the Government $1 million to resolve its liability for identified misconduct. 
In July 1998, Cape Fear self-disclosed to OIG suspected documentation 
and billing irregularities with respect to Medicare and Medicaid claims for 
home health services that were provided to patients who were not home 
bound and for services that were not properly certified or properly ordered 
by a physician. 
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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.  The Partnership Plan was 
developed to foster these joint reviews and provide broader coverage of the 
Medicaid program.  The partnership approach has been an overwhelming success 
in ensuring more effective use of scarce audit resources by both the Federal and 
the State audit sectors. To date, partnerships have been developed in 25 States. 
Reports issued to date have resulted in identifying over $262 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 1,651 sanctions in the form 
of program exclusions or civil actions for alleged fraud or abuse or other activities 
that posed a risk to Federal health care programs and their beneficiaries.  A brief 
explanation of these sanction authorities can be found in Appendix F. 
Program Exclusions 
During this reporting period, OIG excluded 1,544 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 licensure revocation. Examples include the following: 
'	 Unproven Opiate Detoxification ProcedureA physician was excluded 
for an indefinite period of time based on the loss of his license to practice 
medicine in the State of New Jersey.  The physician and his partner provided 
an opiate detoxification procedure to patients addicted to opiates.  The 
addiction procedure is neither medically established nor recognized.  Six 
patients died and numerous other patients were hospitalized after under 
going this procedure in the physicians office.
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'	 Multiple ConvictionsA licensed practical nurse in Arkansas was excluded 
permanently from participation in all Federal health care programs because 
she was convicted on three separate occasions for crimes related to fraud, 
theft, embezzlement, breach of fiduciary responsibility or other financial 
misconduct in connection with the delivery of a health care item or service, 
and crimes related to the unlawful manufacture, distribution, prescription, 
or dispensing of a controlled substance. While working at a nursing and 
rehabilitation center, she stole controlled substances by signing out the 
drugs on the narcotics log. Sometimes she indicated the drugs were given 
to a specific patient, when they were not; and sometimes she only gave the 
patient a portion of the medication.  At other times, she did not chart the 
drugs to any patient. Additionally, she was convicted for forging pre 
scriptions in two separate jurisdictions. 
'	 Child MolestationIn California, a marriage, family, and child counselor 
was excluded for 30 years based on his conviction for performing lewd 
and lascivious acts upon several of his male patients under the age of 14. 
He was also sentenced to 22 years of incarceration, and the State Board of 
Behavior Sciences revoked his license 
'	 Kickbacks and False Blood TestsAlso in California, a physician and 
co-operator of a medical clinic was excluded for 20 years after being found 
guilty of health care fraud and aiding and abetting. The physician sub 
mitted fraudulent claims to Medi-Cal as a result of a financial kickback 
arrangement with several laboratories to which he made referrals.  His 
scheme involved using blood drawn from his employees to pair with false 
Medi-Cal beneficiary information and recruiting individuals to provide 
blood in exchange for payment.  He was sentenced to 18 months of im 
prisonment and ordered to pay $1.1 million in restitution.  
'	 Illegal Prescription of Controlled SubstancesA doctor of osteopathy 
was excluded for 30 years after being convicted on multiple counts of 
insurance fraud, delivery of a controlled substance, prescribing a controlled 
substance contrary to legal requirements, and practicing osteopathic 
medicine and surgery without a license.  The court sentenced him to 30 to 
120 years of imprisonment for insurance fraud and 14 to 28 years for the 
drug convictions. Despite operating on both an expired and suspended 
medical license, the osteopath continued to engage in the practice of 
medicine in Pennsylvania. 
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Civil Monetary Penalties 
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose 
administrative penalties and assessments against a person who submits claims to 
a Federal health care program that the person knows or should know are false or 
fraudulent. During this reporting period, OIG collected over $9 million in civil 
monetary penalties and assessments.  For example: 
'	 Contracting With an Excluded IndividualCommunity Residences, Inc., 
a nonprofit provider of community-based physical disability, mental health, 
and mental retardation services in Virginia, agreed to pay the Government 
$25,000. The settlement resolved allegations of contracting with an indi 
vidual who had been excluded from participation in Federal health care 
programs.  Based on a credentialing audit and subsequent investigation, 
the provider self-disclosed to OIG that it had engaged an excluded indi 
vidual as the medical director for two of its facilities.  
Kickbacks 
Individuals or entities that engage in unlawful referral or kickback schemes 
may be subject to criminal penalties under the Federal criminal anti-kickback 
statute, civil monetary penalties under OIGs CMPL authority, and/or program 
exclusion under OIGs permissive exclusion authority.  A description of these 
enforcement authorities can be found in Appendix F.  The following is an example 
of a kickback enforcement action during this reporting period: 
'	 Cardiologist and HospitalGood Samaritan Hospital in Nebraska agreed 
to pay the Government $1.2 million and entered a 5-year corporate integrity 
agreement to settle alleged violations of the statutory prohibition on 
physician self-referrals (the Stark law) and the Federal anti-kickback 
statute. The hospital allegedly provided a cardiologist with inducements, 
including underwriting a loan, paying practice consultants, and providing 
free or reduced price drugs and medical equipment, in exchange for patient 
referrals. The cardiologist had been previously sentenced to 1 year and 1 
day in prison for health care fraud. 
Patient Dumping 
Between October 1, 2003 and March 31, 2004, OIG collected civil 
monetary penalties of approximately $297,000 from 9 hospitals and physicians 
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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: 
'  Burn PatientJackson Memorial Hospital in Florida agreed to pay 
$50,000 to resolve allegations that it failed to accept the appropriate 
transfer of a burn patient who needed its specialized capabilities to treat 
burn victims. 
'  Patient Unable to PayAlso in Florida, St. Marys Medical Center agreed 
to pay $40,000 to resolve allegations that it did not provide an appropriate 
medical screening examination to an individual who presented to its emer 
gency department for evaluation.  He was allegedly refused such treatment 
based on his inability to pay. 
'  Multiple PatientsSouthPointe Hospital in Missouri agreed to pay 
$100,000 to resolve allegations that it failed to provide medical screening 
examinations and/or stabilizing treatment to four individuals who presented 
to its emergency department.  One individual presented with a blood 
alcohol level of .43, another with lacerations on both her wrists, another 
with high blood pressure and dizziness, and the last complained of de 
pression, stating she had been raped. 
'  Patient Sent to Another HospitalIn California, Mercy San Juan Medical 
Center agreed to pay $25,000 to resolve allegations that it failed to provide 
an appropriate medical screening examination, stabilizing treatment, or an 
appropriate transfer to a woman who presented to its emergency depart 
ment by order of her physician.  Instead, for insurance-related reasons, she 
was directed to seek treatment at another 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.  Such false claims may be pursued under the civil False 
Claims Act and, in appropriate cases, may also be prosecuted under Federal and 
State criminal statutes.  A description of these enforcement authorities can be 
found in Appendix F. The successful resolution of these matters often reflects 
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the combined investigative efforts and resources of OIG, the FBI, and other law 
enforcement agencies. 
One of OIGs responsibilities is to assist the Department of Justice in 
bringing and settling cases under the civil False Claims Act.  Many providers elect 
to settle their cases prior to litigation. As part of their settlements, providers often 
agree to enter integrity agreements with OIG to avoid exclusions and be permitted 
to continue to participate in Medicare, Medicaid, and other programs.  These agree 
ments are monitored by OIG and require the providers to establish compliance pro 
grams.  The compliance programs are designed to prevent a re- currence of the 
underlying fraudulent activities. 
In the 6 months ending March 31, 2004, the Government negotiated more 
than $995 million in False Claims Act civil settlements related to the Medicare 
and Medicaid programs.  Some of these successful settlements, as well as notable 
criminal enforcement actions, are described below.  Summaries are organized by 
the sector of the health care industry involved or by the nature of the offense. 
Durable Medical Equipment (DME) Suppliers 
'	 Enteral NutritionIn Illinois, Abbott Laboratories and Abbotts Ross 
Products Division entered a global criminal, civil, and administrative 
settlement totaling $615 million with the Government.  The settlement 
resolved allegations that Ross paid kickbacks to purchasers of enteral 
nutrition items and services by:  conditioning the sale of enteral nutrition 
sets on the purchase of enteral nutrition feeding pumps; failing to collect 
rental payments for the sets and pumps; and paying conversion bonuses 
that bore no relation to the actual cost of converting from one manufacturer 
to another.  As part of the settlement, CG Nutritionals, Inc., an Abbott 
subsidiary, was sentenced based on its guilty plea to obstructing a health 
care fraud investigation and agreed to be permanently excluded.  Abbott 
also agreed to enter into a company-wide, comprehensive 5-year corporate 
integrity agreement. 
'	 Power WheelchairsIn Florida, four individuals were sentenced for their 
involvement in a DME fraud scheme.  Along with three others previously 
sentenced for their roles in the scheme, the four were charged with con 
spiring to defraud Medicare in connection with fraudulent claims for the 
20
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cost of power wheelchairs and accessories purportedly supplied by two 
DME companies.  All seven defendants pled guilty prior to trial.  The two 
organizers of the conspiracy were sentenced to prison terms of 87 months 
and 53 months, respectively.  The other five defendants were sentenced to 
prison terms ranging from 1 year and 1 day to 78 months.  The organizers 
and their top patient recruiter were ordered to pay $1.7 million in joint and 
several restitution. The four other defendants were held responsible for 
paying restitution in amounts ranging from $406,000 to $867,000, as a 
portion of the joint restitution figure. 
Also in Florida, a man was sentenced to 37 months in prison and 
ordered to pay $1 million in restitution for health care fraud.  From 1999 
to 2002, he operated and controlled four different DME companies using 
straw nominee owners to conceal his true identity.  He submitted claims 
to Medicare for power wheelchairs that were either not provided, were 
used or refurbished but billed as new, or were exchanged for less expensive 
scooters. He also billed for unnecessary repairs of the equipment and paid 
kickbacks for wheelchair referrals.  In 1997, he was convicted in State 
court of Medicaid provider fraud in connection with using the same DME 
scheme. 
'	 Medically Unnecessary EquipmentUnity Health Services, LLC, in 
Missouri agreed to pay $877,000 for allegedly submitting claims for DME 
that lacked the required medical necessity documentation.  OIGs investi 
gation into the improper billings stemmed from Unitys initial disclosure 
to the Department of Justice.  The DME included wheelchairs, hospital 
beds, oxygen, enterals, and continuous positive airway pressure devices. 
'	 Orthotics and Incontinence SuppliesTwo former owners of a DME 
company were ordered to pay $195,000 in joint restitution for fraudulently 
billing Medicare and Medicaid for expensive orthotics and incontinence 
supplies.  One was also sentenced to 46 months in prison and ordered to 
pay a special assessment of $4,600 for health care fraud, conspiracy to 
launder money, money laundering, and procuring U.S. citizenship contrary 
to law. The other was sentenced to 1 year and 1 day in prison for health 
care fraud and conspiracy to commit health care fraud.  She transported 
patients to doctors offices and offered them gifts to obtain prescriptions 
for DME. 
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Hospitals 
'	 HCAFollowing an OIG audit and investigation, HCA, Inc., formerly 
known as Columbia/HCA Healthcare Corporation, agreed to enter a settle 
ment and pay $631 million, plus interest.  The settlement resolved alle 
gations that HCA knowingly submitted false costs reports to Medicare; 
entered into improper referral arrangements with physicians that violated 
the anti-kickback statute and the Stark law; and submitted false claims for 
wound care services provided at 56 HCA hospitals. HCA also agreed to 
pay the Government $5 million to resolve its civil and administrative 
liability relative to allegations concerning claims for patients transferred 
to other facilities. 
In a separate administrative settlement, HCA agreed to pay CMS 
$250 million to resolve administrative overpayments in connection with its 
cost reports. In December 2000, HCA paid approximately $840 million in 
criminal fines, civil restitution, and penalties to resolve a separate set of 
allegations and entered into a comprehensive 8-year corporate integrity 
agreement.  In combination with the earlier settlement, this criminal, civil, 
and administrative resolution represents the largest health care fraud 
recovery ever obtained by the Government. 
'	 MetropolitanIn Michigan, Metropolitan Hospital, an acute care facility, 
and several related entities, agreed to pay $6.2 million to settle allegations 
of submitting false claims to Medicare.  Metropolitan allegedly engaged in 
prohibited financial relationships with various physicians through whom 
the hospital received Medicare reimbursement for services to patients re 
ferred by those physicians. Metropolitan also allegedly submitted claims 
for services rendered in its detoxification unit for which medical necessity 
was not documented and allegedly billed for wound care claims at a higher 
level of evaluation and management service than was documented. 
'	 Coast PlazaCoast Plaza Doctors Hospital, a 123-bed acute care facility 
in California, agreed to pay the Government $4.1 million to settle allega 
tions that it falsified its Medicare cost reports for the years 1994 through 
1999. A qui tam lawsuit alleged that the hospital included charges on its 
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cost reports not related to patient care. Signed by the hospitals late chief 
executive officer (CEO), the cost reports included charges for golf clubs, 
jewelry, crystal, clothing, and entertainment.  The CEO had misappro 
priated funds from the hospital in order to maintain an extravagant lifestyle. 
During the time under consideration, the hospital also saved substantial 
funds through the CEOs business practice of failing to pay hospital 
vendors the full amount they were owed.  Despite the savings, Coast Plaza 
did not adjust its Medicare cost reports to reflect the fact that it had not 
paid these vendor charges. As part of the settlement, Coast Plaza entered 
into a com- prehensive 5-year integrity agreement with OIG.  An 
additional $757,000 is also being recovered administratively by the fiscal 
intermediarys audit function. 
'	 University of IllinoisThe University of Illinois agreed to pay $2.3 million 
to settle its liability under the False Claims Act.  The settlement stemmed 
from a whistleblower complaint concerning the hospitals liver transplan 
tation programs, as well as those at both the University of Chicago and 
Northwestern Memorial Hospital.  The allegations related to care provided 
to liver transplant patients who did not need hospitalization prior to surgery. 
Specifically, from 1995 through 1998, the university hospital allegedly 
admitted liver transplant-eligible patients to the hospital and/or the inten 
sive care unit when such care was not medically necessary; billed for the 
medically unnecessary hospitalizations and service; falsely diagnosed 
patients to justify their placement on the transplant eligibility list; and 
falsely identified their status to make them eligible for liver transplants 
before other patients. Separate settlements were reached earlier with the 
other two hospitals. 
'	 Charleston Area Medical Center, Inc.A multi-facility, non-profit 
hospital group in West Virginia, agreed to pay $1.3 million and to enter 
a 5-year corporate integrity agreement for allegedly submitting false claims 
to Medicare and Medicaid from 1999 through 2001.  The Government 
alleged that the group submitted claims for individual physical therapy 
when group physical therapy was actually provided.  The group also 
allegedly submitted claims for more units of therapy than actually provided, 
therapy without sufficient documentation of treatment, and therapy pro 
vided by unqualified Medicare and Medicaid providers. 
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Nursing Homes 
'	 Corporate FraudIntegrated Health Services, Inc., a nationwide chain 
of nursing homes, long-term care hospitals, and providers of ancillary 
services to nursing homes, entered into a global settlement to resolve False 
Claims Act liability and administrative claims.  Because the firm is 
currently in bankruptcy and unable to pay more, the chain agreed to pay 
$19.1 million.  The settlement covered five whistleblower lawsuits and 
two other fraud cases involving a variety of allegations. The primary fraud 
allegations included such improper billing and cost reporting practices as 
overcharging Medicare by billing for unnecessary and nonrendered services 
and wrongfully depreciating various equipment on its cost report.  The 
company also agreed to enter two 5-year corporate integrity agreements, 
one for its long-term care division and one for its mobile diagnostic di 
vision, both of which are being sold to other companies as part of its 
bankruptcy reorganization. 
'	 Money LaunderingAn Oklahoma nursing home owner/operator was 
sentenced to 63 months in prison for money laundering.  The former Deputy 
Commissioner of Health conspired with the owner/operator to provide 
preferential treatment by the Oklahoma State Department of Health to the 
owner/operators nursing homes.  The former Deputy Commissioner also 
used Department employees in the illegal transfer of nursing home residents 
to homes belonging to the owner/operator.  In return, the owner/operator 
paid the former Deputy Commissioner through an investment account 
specifically set up to make the payments.  In August 2003, the former 
Deputy Commissioner was sentenced to serve an additional 2 years in 
prison for conspiracy. 
'	 Overstating ServicesA Michigan physician agreed to pay the Government 
$233,000 and a private insurer $9,000 to settle his liability for allegedly 
submitting improper claims to Medicare.  The physician routinely billed in 
excess of 100 nursing home patient visits a day and also routinely upcoded 
the visits without appropriate documentation.  As part of the settlement, he 
also entered an integrity agreement with OIG. 
'	 False StatementsTwo respiratory therapists in Georgia were ordered to 
pay restitution of $8,000 and $3,000, respectively, for false statements 
relating to health care. The therapists caused the nursing home where they 
24
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worked to submit Medicare claims for services that were not rendered or 
were not medically necessary.  While records indicated they were working 
at the nursing home, the therapists were also clocked in as working at area 
hospitals. 
Home Health 
'	 Patients Not HomeboundVisiting Nurse Association of Central 
Pennsylvania agreed to pay $685,000 and to enter a comprehensive 5-year 
corporate integrity agreement.  The settlement resolved allegations of sub 
mitting false claims to Medicare between January 1995 and December 1999. 
The agency allegedly billed for home care nursing services provided to 
patients without properly assessing and/or reporting the homebound status 
of the patients as required by Medicare. 
'	 Personal ExpensesThe owner/administrator of a home health agency in 
Minnesota was sentenced to 1 year of incarceration and ordered to pay 
$256,000 in restitution for health care fraud and income tax evasion.  The 
owner/administrator put personal expenses, including charges for clothing, 
jewelry, flowers, and travel abroad, on his Medicare cost reports. 
'	 Unlicensed Nursing ServicesIn Idaho, a former home health agency 
owner/operator was ordered to pay $20,000 in restitution for executing a 
scheme to defraud the Medicare and Medicaid programs.  The woman 
submitted claims for services performed by a nurse who had lost her license 
and for services by a nursing assistant who failed the State background 
check.  The owner/operator attempted to hide the identity of the nurse 
performing the services by having a licensed nurse sign the progress notes. 
The owner/operator also made false statements regarding the results of the 
nursing assistants background check. 
Prescription Drugs 
'	 OxyContinA Pennsylvania physician was sentenced to 16 months of 
incarceration and ordered to pay $54,000 in restitution and fines for charges 
related to prescription drug fraud. The physician wrote prescriptions for 
OxyContin (a powerful painkiller) knowing the prescriptions were not 
25
 CENTERS FOR MEDICARE & MEDICAID SERVICES 
medically necessary and the patients would not take the pills.  He instructed 
patients to present the prescriptions to local pharmacies, obtain the drug, 
pay for the pills using their Medicaid benefits, and deliver the Oxycontin 
back to him for dispensing to others. 
'	 Unlicensed PharmacistA man who purported to be a licensed pharmacist 
in Massachusetts was sentenced for furnishing false information in records 
required to be made, kept, and filed under the Controlled Substances Act. 
From 1982 through 2001, he worked in a hospitals pharmacy department, 
though he was never a licensed pharmacist during that time.  He was 
ordered to pay restitution of $40,000 to the hospital and a $5,000 fine. 
Practitioners 
'	 False Tax Returns and Other DocumentsA Florida physician was 
sentenced to 54 months imprisonment and ordered to pay $1.7 million in 
restitution for conspiracy to defraud the United States. He was involved 
with a business associate in filing false tax returns with the IRS, causing 
the filing of a materially false statementa Medicare provider/supplier 
enrollment applicationand providing false and fraudulent documents to 
assist another individual in receiving authorization to remain and work in 
the United States under a certain visa waiver process. The physician, who 
had been excluded for 10 years, held a majority ownership interest in a 
medical clinic that received reimbursement from Medicare; but, the 
Medicare provider enrollment application fraudulently omitted his 
association with the clinic. 
'	 Misrepresentation of Services ProvidedIn Georgia, The Physicians 
Pain & Rehabilitation Specialists of Georgia, P.C., and certain of its 
member physicians agreed to pay $900,000 and to enter a 3-year corporate 
integrity agreement for allegedly submitting false claims to Medicare 
between 1996 and 1999. The firm and the physicians submitted claims to 
Medicare for different procedures than were actually performed and 
improperly billed for the technical component of certain procedures. 
'	 Services Not RenderedA licensed clinical social worker in Georgia was 
sentenced to 1 year and 1 day of incarceration and ordered to pay $74,000 
in restitution for submitting false claims to Medicare.  The social worker 
submitted claims for psychotherapy services not rendered, billed for services 
26
 CENTERS FOR MEDICARE & MEDICAID SERVICES 
totaling more than 24 hours in a day, and submitted over 300 claims for 
dates of service when he was actually out of town. He also solicited bus 
iness by going to door-to-door and telling beneficiaries he could provide 
them with free social services, such as transportation to doctors 
appointments and meal deliveries. 
'	 Dental ServicesA Michigan dentist was sentenced to 1 year and 1 day of 
incarceration, ordered to pay restitution of $740,000, and fined $3,000 for 
mail fraud.  He billed insurance programs for nonrendered and upcoded 
dental services. 
'	 Substandard Renal CareIn South Dakota, a renal facility charge nurse 
was sentenced for false statements relating to health care matters.  Her 
indictment stemmed from an OIG investigation into allegations that the 
facility provided substandard care to Medicare and Medicaid patients.  The 
nurse altered patient records and shredded or ordered the shredding of 
patient care records to conceal life-threatening treatment errors; she also 
documented patient files for medications not given. 
Medicaid Fraud Control Units 
At present, 47 States and the District of Columbia have established 
Medicaid Fraud Control Units (MFCUs) that investigate and prosecute providers 
charged with defrauding the Medicaid program or abusing or neglecting patients. 
Three StatesIdaho, Nebraska, and North Dakotahave sought and received 
waivers from the requirement that all States operate MFCUs.  OIG annually 
certifies each MFCU as eligible to receive Federal grant funds. 
During fiscal year 2004, OIG is providing oversight for and administration of 
approximately $128.2 million in funds to the units.  Examples of cases worked 
jointly by OIG with MFCUs include the following: 
'	 IndianaThe owner/operator of a DME and pharmaceutical supplier was 
sentenced to 51 months imprisonment and ordered to pay $1.9 million in 
restitution for health care fraud, kickbacks, and mail fraud.  The woman 
must forfeit her assets, including an exclusive home, mink coats, diamonds, 
investment accounts, and assets of two related businesses.  The supplier 
billed Medicare, Medicaid, and TRICARE for injectible solutions, intra 
27
 CENTERS FOR MEDICARE & MEDICAID SERVICES 
venous therapies, and other selected services and supplies in highly exces 
sive quantities, often billing more per week than patients could use in a 
year.  In addition to the owner/operators sentencing, her husband pled 
guilty to obstruction of justice for conduct related to this matter, and a 
sales representative was ordered to pay $20,000 in restitution for mail 
fraud in connection with the scheme.  This investigation also involved the 
FBI, and the Defense Criminal Investigative Service.  
'	 New YorkA physician was ordered to pay $652,000 in restitution. The 
physician upcoded evaluation and management codes and billed for vital 
capacity tests that were not performed. 
In another New York joint investigation, a man was sentenced to 
4.5 years of incarceration for criminal possession of a controlled substance. 
He participated in a scheme that involved recruiting, paying, and trans 
porting Medicaid beneficiaries to a physician, and then to a pharmacy, in 
order to acquire medications for the purpose of illegal distribution. 
'	 IllinoisA man was sentenced to 9 years in prison and ordered to pay 
$201,000 in restitution, including $63,000 to the Medicaid program. 
Upon completion of his sentence, the court also recommended he be denied 
citizenship and deported. The man submitted fraudulent claims to the 
Illinois Department of Human Services, Home Services Program, using 
falsified social security cards, drivers licenses, and records of rehabilitation 
services rendered. He also engaged in other fraudulent activity including 
the use of arson and false claims to defraud a number of private insurance 
companies.  This investigation also involved the Illinois State Police and 
the Bureau of Alcohol, Tobacco, Firearms and Explosives. 
'	 MarylandA former employee of a clinic serving the developmentally 
challenged was found guilty on 9 counts of a 41-count indictment for her 
involvement in a Medicaid fraud and drug distribution scheme.  On one 
count alone, she was ordered as part of her sentence to be incarcerated for 
10 years without the possibility of parole; she was also ordered to pay 
$100,000 in restitution to the Medicaid program.  The employee used her 
position to gain access to prescription pads and a document stamp used to 
authenticate the prescriptions. She was the last of three defendants to be 
sentenced in this scheme. 
28
 Public Health Agencies

The activities conducted and supported by HHS public health 
agencies represent this countrys primary defense against acute and 
chronic diseases and disabilities. These programs provide the foundation 
for the Nations efforts in promoting and enhancing the continued good 
health of the American people.  Agencies within the Department include 
the following: 
National Institutes of Health (NIH)

Food and Drug Administration (FDA)

Centers for Disease Control and Prevention (CDC)

Health Resources and Services Administration (HRSA)

Indian Health Service (IHS)

Agency for Toxic Substances and Disease Registry (ATSDR)

Agency for Healthcare Research and Quality (AHRQ)

Substance Abuse and Mental Health Services Administration (SAMHSA) 

OIG continues to examine policies and procedures throughout 
these agencies to determine whether proper controls are in place to guard 
against fraud, waste, and abuse and are cost effective. 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. 
29
 PUBLIC HEALTH AGENCIES 
State Bioterrorism Preparedness Funds 
Under the Public Health Preparedness and Response for Bioterrorism 
Program, State and major local health departments received funding from CDC 
and HRSA to improve their bioterrorism preparedness.  Reviews of 18 grantees 
(14 States and 4 local governments) generally found that they had accounted for 
the funds in accordance with CDC and HRSA cooperative agreements.  However, 
OIG noted significant unobligated (unspent and uncommitted) grant fund balances 
in several States. Grantees stated that these unobligated balances resulted from 
delays or difficulties in recruiting and hiring personnel, coordinating the startup 
of new activities, executing contracts, issuing requests for proposals and bids for 
procurement, and purchasing equipment and supplies.  (Various reports) 
Ryan White Care Act Grantee 
At the request of the Senate Committee on Finance, OIG continued its 
audit activities at grantees and subrecipients of HRSAs Ryan White Comprehensive 
AIDS Resources Emergency (CARE) Act funds.  In this review of funds claimed 
by a nonprofit hospital under contract with HRSAs grantee in San Juan, Puerto 
Rico, OIG found that the hospital was reimbursed $352,000 for services that were 
not reasonable, allocable, or allowable. Contrary to Federal cost requirements, the 
hospital billedand the grantee reimbursed forunreasonable costs and fees on 
medications, unallocable surcharges for laboratory services, medications dispensed 
without valid prescriptions, and client services for which the CARE Act was not 
the payer of last resort. OIG recommended a refund to the Federal Government of 
the $352,000 and procedural improvements.  The grantee concurred with OIGs 
findings and recommendations.  (A-02-02-05001) 
HIV Prevention Grantees 
In a series of reviews at CDC grantees that provide HIV prevention 
education and outreach, OIG found that these community-based organizations 
needed to improve their methods for managing and accounting for Federal funds 
in accordance with Office of Management and Budget Circular A-122, Cost 
30
 PUBLIC HEALTH AGENCIES 
Principles for Nonprofit Organizations. In several cases, the grantees could not 
demonstrate that personnel costs were charged to Federal grants based on em 
ployees actual level of effort because the grantees had not established after-the-
fact time and effort reporting systems.  In other instances, grantees charged 
unallowable costs, such as costs of items not benefiting the federally funded 
prevention program, to the CDC grants.  In these cases, OIG recommended 
refunds to the Federal Government.  The grantees generally agreed with the 
findings and are working with CDC to resolve the recommendations. 
(Various reports) 
CDC Indirect Costs 
In this report, OIG found that, until FY 2003, CDC had not implemented a 
system to allocate its organization-wide indirect costs on a reasonable and consis 
tent basis as required by Federal accounting standards. The agency had made a 
commitment in 1997 to implement such a system for use in FY 2000.  Instead, 
CDC relied on traditional allocation methodologies that resulted in overcharges 
and undercharges affecting almost all programs and activities.  Due to allocation 
modifications made in 1998, CDC was able to reduce some of the erroneous 
charges. Agency projections showed, however, that the HIV/AIDS program, the 
focus of this audit, was charged about $11.9 million for excessive indirect costs 
during FYs 2000 and 2001resulting in reduced funds available to meet program 
objectives. 
In FY 2003, CDC fully implemented a more simplified indirect costing 
system.  OIG believes that the new system represents a significant improvement in 
CDCs allocation of indirect costs and provision of accurate information on the 
full costs of programs and activities.  (A-04-02-08001) 
Construction Costs for NIHs Clinical Research Center 
In 1995, NIH initially estimated that construction of its clinical research 
center would cost $380 million, but this estimate has increased about 33 percent 
to a current total estimate of $504.5 million.  To facilitate the project, NIH em 
ployed a fast-track construction delivery method.  Under this delivery method, 
intended to save time by overlapping design and construction activities, construction 
began before a firm project price had been established.  NIHs February 2002 
31
 PUBLIC HEALTH AGENCIES 
request for an additional $144.5 million appears to be sufficient to complete the 
project. OIG noted that the project had yielded several lessons to help strengthen 
controls and improve accountability on future construction projects:  use an inde 
pendent cost estimator, limit the use of the fast-track construction delivery method, 
and prepare routine status reports for key decisionmakers.  (A-03-02-00371) 
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 all efforts to secure repayment of a debt, it declares 
the individual in default. Thereafter, the Social Security Act permits, and in some 
instances mandates, exclusion from Medicare, Medicaid, and all Federal health 
care programs for nonpayment of these loans.  Exclusion means that the individual 
may not receive reimbursement under these programs for professional services 
rendered.  During the 6-month period from October 1, 2003 to March 31, 2004, 
39 individuals and related entities were excluded as a result of PSC referral of 
their cases to OIG. 
Individuals who have been excluded as a result of their default may enter 
into settlement agreements, whereby the exclusion is stayed while they pay 
specified amounts each month to satisfy the debt.  If they default on these settle 
ment agreements, they can then be excluded until the entire debt is repaid, and 
they cannot appeal these exclusions. Some health professionals, upon being 
notified of their exclusion, immediately repay their HEAL debts. 
After being excluded for nonpayment of their HEAL debts, a total of 1,812 
individuals have taken advantage of the opportunity to enter into settlement agree 
ments or completely repay their debts.  This figure includes the 53 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 settle- 
32
 PUBLIC HEALTH AGENCIES 
ment agreements or through complete repayment totals almost $129 million.  Of 
that amount, $3.5 million is attributable to this reporting period.  In the following 
examples, each individual entered into a settlement agreement to repay the 
amount indicated: 
'  California Medical Doctor$139,000 
'  New York Optometrist$119,000 
'  Pennsylvania Chiropractor$94,000 
'  Idaho Optometrist$85,000 
National Institute of Environmental Health Sciences Superfund 
Through an agreement with the Environmental Protection Health Protection 
Agency, the National Institute of Environmental Health Sciences receives Super 
fund money to carry out health-related and other activities.  As required by statute, 
OIG audited the Institutes Superfund obligations and disbursements for FY 2002. 
The audit determined that these funds were administered in accordance with 
applicable laws and regulations. (A-04-03-08009) 
Financial Statement Audit    
To support its audit of the Departments FY 2003 financial statements, 
OIG contracted with independent certified public accounting firms to audit the 
financial statements of the major public health operating divisions.  During this 
reporting period, an accounting firm issued an unqualified opinion on FDAs 
FY 2003 financial statements, which means that they were reliable and fairly 
presented. No material weaknesses were noted in the system of internal controls. 
(A-17-03-00003) 
   Indicates performance measure.  Details can be found in Appendix G. 
33  34
 Administrations for
 Children and Families 
and on Aging 
The Administration for Children and Families (ACF) provides 
direction and funding for programs designed to promote stability, economic 
security, responsibility, and self-support for the Nations families.  Some 
of the major programs include Temporary Assistance for Needy Families 
(TANF), Child Support Enforcement, Foster Care, Family Preservation 
and Support, Head Start, and the Child Care and Development Block Grant. 
OIG reviews of these programs focus on ways to increase the 
efficient use of program dollars; to more effectively implement programs; 
to better coordinate programs among the Federal, State, and local govern 
ments; and to strengthen States financial management practices. 
The Administration on Aging (AoA) awards grants to States for 
establishing comprehensive community-based systems that assist the elderly 
in maintaining their independence and in remaining in their homes as long 
as possible. Socially and economically disadvantaged elderly and low-
income minority elderly are targeted for assistance, including supportive 
and nutrition services, education and training, low-cost transportation, 
and health promotion.  OIG has reported opportunities for program im 
provements to target the neediest for services, expand available financial 
resources, upgrade data collection and reporting, and enhance program 
oversight. 
35
 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
Increased Qualifications for Head Start Teachers     
This report found that Head Start programs increased the proportion of 
teachers with appropriate degrees, as mandated by the Community Opportunities, 
Accountability, and Training and Educational Services (COATS) Act of 1998. 
According to ACF, 51 percent of Head Start teachers held appropriate degrees in 
enrollment year 2002, effectively meeting the COATS Act mandate.  However, 
disparities exist in individual programs progress in 
meeting ACFs self-imposed goal that each program 
strive to achieve 50 percent degreed teaching staff.
States With Over 90 Percent 
To meet the COATS Act mandate, programs hired 
of Programs at or Above 50% 
more degreed teachers, helped non-degreed teaching 
Degreed Teachers 
staff earn degrees, and used Quality Improvement 
g Hawaii  funds to increase salaries and benefits and further 
g New Hampshire  support teaching staff. The lack of attainment of 
g Rhode Island 
ACFs self-imposed goal was particularly acute in 15 
g Vermont 
States. Also, OIG noted 72 counties with multiple 
g New York 
Head Start programs, where at least one program met 
ACFs self-imposed goal and at least one did not. 
OIG recommended that ACF provide targeted 
assistance to those programs where the level of degreed teaching staff is below 50 
percent. The first priority should be to assist programs that are having the most 
difficulty. Special attention also must be focused on American Indian and Alaska 
Native, migrant, and Early Head Start programs that experience  special 
challenges. (OEI-07-01-00560) 
Noncustodial Parents Contributions to Medicaid Costs    
This eight-State initiative was designed to determine the number of 
children under the Child Support Enforcement Program whose noncustodial 
parents could contribute toward the childrens Medicaid costs and the amount 
their parents could contribute. (Reports on three States were issued in the previous 
semiannual reporting period.)  The reviews focused on noncustodial parents for 
   Indicates performance measure.  Details can be found in Appendix G. 
36 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
whom private medical insurance was unavailable or unaffordable.  States have an 
opportunity to increase the number of noncustodial parents providing medical 
support for their children and reduce Medicaid costs to States and the Federal 
Government.  Based on statistical samples in the eight States, OIG estimated that 
certain noncustodial parents were financially able to contribute $99 million, or 
50 percent of the combined Federal and State Medicaid costs incurred in a 1-year 
period. 
OIG estimated that the noncustodial parents of 4,808 
Indiana	
children could have contributed about $3 million toward 
the costs paid by Medicaid.  OIG recommended that 
Indiana consider the results of the study and pursue 
collecting the Medicaid costs incurred by the children of noncustodial 
parents who have medical support orders and the ability to pay.  The State 
is pursuing innovative ways to recover the costs. (A-05-02-00075) 
Noncustodial parents of an estimated 35,000 children 
Michigan	 could have contributed an aggregate of $10.5 million 
toward total Medicaid costs of $26.8 million for their 
childrens medical expenses.  OIG made recom 
mendations similar to those for Indiana.  The State said it would implement 
enhancements to its child support enforcement system before evaluating 
the cost effectiveness of the recommendations.  (A-05-02-00077) 
OIG estimated that almost 6,000 children had 
New Jersey	
noncustodial parents who could have contributed an 
aggregate of $2.5 million toward total Medicaid costs 
of $11.8 million.  OIG recommended that the State 
determine whether existing child support guidelines should be modified to 
require noncustodial parents to contribute toward the Medicaid costs of 
their dependent children. State officials did not respond to this specific 
recommendation.  (A-02-02-02004) 
The noncustodial parents of an estimated 41,000 
New York	 children could have contributed $32.8 million toward 
total Medicaid costs of $56.1 million.  OIG suggested 
that the State continue working with local social services 
districts to implement new legislation and use the results of OIGs review 
to assess additional actions that may be taken to recover fee-for-service 
37
 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
costs. State officials indicated that they would consider the suggestion. 
(A-02-02-02003) 
OIG estimated that more than 15,000 children had 
Virginia	 noncustodial parents who could have contributed an 
aggregate of $6.8 million toward total Medicaid costs 
of $11.3 million.  OIG recommended that the State 
determine whether existing child support guidelines should be modified to 
require noncustodial parents to contribute toward the Medicaid costs of 
their dependent children. The State supported the objective of this review. 
(A-03-02-00204) 
Aid to Families With Dependent Children Overpayment Collections 
OIGs objective was to determine whether California had refunded the 
Federal share of Aid to Families with Dependent Children (AFDC) overpayments 
collected by San Diego County from October 1, 1996, when the AFDC program 
was repealed and replaced by the Temporary Assistance for Needy Families pro 
gram, through June 30, 2002.  The State refunded the Federal share of AFDC 
overpayments collected during October and November 1996, but not an estimated 
$5.3 million collected between December 1, 1996 and June 30, 2002. 
OIG recommended that the State refund the $5.3 million to the Federal 
Government and establish procedures to identify and refund the Federal share of 
the countys AFDC overpayments collected after the audit period.  The State 
concurred. (A-09-02-00094) 
Costs Claimed by Protection and Advocacy Organization 
OIG reviewed the costs claimed by a nonprofit organization in Kansas 
whose purpose is to protect and advocate for the rights of persons with disabilities. 
The objective was to determine whether unallowable consultant and legal fees and 
selected health insurance costs were paid to, or on behalf of, the organizations 
board of directors and charged to Federal grants. OIG found that during a 7-year 
period, the organization paid $492,000 in such unallowable fees and costs. 
OIG recommended that this amount be refunded to the applicable Federal 
programs.  The law firm that commented on the draft report on the organizations 
38
 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
behalf indicated that it could not respond to the validity of the facts and reason 
ableness of the recommendations because of the lack of records.  The law firm 
also indicated that the organization would cooperate fully with the Federal agencies 
involved to resolve this matter.  (A-07-03-02008) 
Recipient Capability Audits 
OIGs objective was to determine the adequacy of three grantees accounting 
and administrative systems and their financial capabilities to satisfactorily manage 
and account for Federal funds. Two grantees were not in compliance with Federal 
regulations on maintaining written accounting policies and procedures and estab 
lishing after-the-fact time and effort reporting systems to support the distribution 
of salaries and wages. Internal controls at the third grantee were inadequate with 
regard to segregation of duties, and its written policies and procedures did not 
adequately document Federal requirements for competitive bidding in the hiring 
of consultants. 
OIG recommended that ACF designate two of the organizations as high-
risk grantees and require all three grantees to prepare quality improvement plans, 
including the dates for correction of deficiencies. 
(A-02-03-02015; A-02-03-02017; A-02-03-02016) 
Health Care Services for Children in Foster Care    
Federal Early and Periodic Screening, Diagnosis, and Treatment guidelines 
require each State to provide coverage of preventive health care services to 
Medicaid-eligible individuals under the age of 21, at intervals which meet 
reasonable standards of medical and dental practice as established by statute.  This 
multi-State initiative was designed to assess the extent to which children in foster 
care were receiving Medicaid health services in accordance with regulations. 
All 50 sampled children in the program received Medicaid 
Texas	 services, and the majority received their most recent 
required Early and Periodic Screening, Diagnosis, and 
Treatment medical examinations.  However, the study 
found a low percentage of children received the required initial medical 
   Indicates performance measure.  Details can be found in Appendix G. 
39  ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
and dental screenings. In addition, compliance with guidelines for vision 
and hearing screenings was undocumented.  Furthermore, case plans were 
not completed within required timeframes for over half of the children 
sampled, and foster care providers for almost half of the children never 
received a written medical history for the children in their care.  OIG 
recommended that ACF work with the State to increase the number of 
(1) initial medical and dental screenings that are received within required 
timeframes, (2) initial case plans that are completed within required time-
frames, and (3) foster care providers who are supplied available medical 
information for the children in their care, as required by Federal regulations. 
OIG also recommended that CMS work with the State to evaluate the need 
for documentation to ensure compliance with routine vision and hearing 
screening guidelines.  ACF noted that it is working with the State to 
accomplish goals established in a program improvement plan. CMS 
concurred with the recommendations and indicated that they are available 
to provide technical assistance to the State to promote provider education 
regarding the frequency of schedule requirements and appropriate docu 
mentation of vision and hearing screenings.  (OEI-07-00-00641) 
All 50 of the children sampled received Medicaid 
Illinois  services, and nearly all received their most recent 
required medical and dental examinations and initial 
health examination upon entry into foster care.  How-
ever, less than half received a comprehensive health care evaluation and 
mental health screening.  Less than half of the case files contained the re 
quired medical history, and several children received duplicate services. 
Excluding the recommendation regarding vision and hearing tests, OIG 
recommendations were similar to those made for Texas, above.  OIG also 
recommended that CMS work with the State to prevent duplicate services 
resulting in unnecessary costs to the Medicaid program.  CMS agreed, in 
part, with the recommendations.  ACF is working with the State to achieve 
program improvement plan goals.  (OEI-07-00-00642) 
Child Support Enforcement 
OIG has made the detection, investigation, and prosecution of absent parents 
who fail to pay court-ordered child support a priority. OIG continues to work 
with the Office of Child Support Enforcement (OCSE), the Department of Justice, 
U.S. Attorneys Offices, U.S. Marshals Service, and other Federal,
40  ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
State, and local partners to develop procedures to expedite the collection of child 
support and to bring to justice those who willfully disregard their obligations. 
Since 1995, OIG has opened 2,580 investigations of child support cases nation 
wide, which have resulted in 895 convictions and court-ordered criminal 
restitution and settlements of over $46.7 million. 
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a criminal 
child support initiative made up of multiagency, multijurisdictional investigative 
task forces. The task forces are designed to identify, investigate, and prosecute 
egregious criminal nonsupport cases both on the Federal and State levels through 
the coordination of law enforcement, criminal justice, and child support office 
resources. 
Task Force Table 
Task Force  Task Force  Task Force 
Regions  Headquarters  States
 Mid-Atlantic  Baltimore, Maryland  Delaware, District of Columbia, 
Maryland, Pennsylvania, Virginia, 
West Virginia
 Midwest  Columbus, Ohio  Illinois, Indiana, Michigan, 
Minnesota, Ohio, Wisconsin
 Northeast  New York, New York  New Jersey, New York, Puerto Rico
 Southeast  Atlanta, Georgia  Alabama, Florida, Georgia, 
Kentucky, North Carolina, South 
Carolina, Tennessee 
Southwest  Dallas, Texas  Arkansas, Louisiana, Mississippi, 
New Mexico, Oklahoma, Texas
 West Coast  Sacramento, California  Arizona, California, Hawaii, Nevada 
New England  Boston, Massachusetts  Connecticut, Maine, Massachusetts, 
New Hampshire, Rhode Island, 
Vermont
 Great Plains  Topeka, Kansas  Iowa, Kansas, Missouri, Nebraska, 
North Dakota, South Dakota
 Rocky Mountains  Denver, Colorado  Colorado, Montana, Utah, Wyoming 
Pacific North  Olympia, Washington  Alaska, Idaho, Oregon, Washington 
41
 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
Central to the task forces are the screening units located in each task force 
region and staffed by Investigative Analysts from OIG and OCSE.  The units re 
ceive child support cases from the States, conduct preinvestigative analyses of 
these cases through the use of databases, and then forward the cases to the investi 
gative task force units where they are assigned and investigated. The task force 
approach streamlines the process by which the cases best suited for criminal 
prosecution are identified, investigated, and resolved. 
At this point, the task force units have received over 8,000 cases from the 
States. As a result of the work of the task forces, 435 Federal arrests have been 
executed and 363 individuals sentenced. The total ordered amount of restitution 
related to Federal investigations is over $21.7 million.  There have been 348 
arrests at the State level and 309 convictions or civil adjudications to date, 
resulting in over $14.3 million in restitution being ordered. 
Investigations 
OIG investigations of child support cases, nationwide, resulted in 83 
convictions and court-ordered criminal restitution of over $4.4 million during this 
period. Examples of the Federal arrests, convictions, and sentences for failure to 
pay child support include the following: 
'  PennsylvaniaA former professional football player was sentenced to 
6 months in a Federal work release facility for failure to pay child support. 
He is to begin paying support from his prison wages and continue during 
1 year of supervised release. He was also ordered to pay $142,000 in sup 
port to his former wife and $110,000 in a separate case to a woman with 
whom he had another child.  His last football contract was a 1-year deal 
worth $1.1 million. 
'  GeorgiaA man was sentenced to 15 months of incarceration, 1 year 
supervised probation and ordered to pay $137,000 in restitution. From 
December 1990 through March 2003, he made only two voluntary pay- 
ments totaling $300, plus $700 received through garnishment of his income 
tax refund, toward the support of his two children. 
'  OregonA man was sentenced to 5 years probation and ordered to pay 
not less than $1,230 a month until his restitution of $129,000 is paid in 
full. In accordance with his plea agreement, he also paid $5,000 toward 
his arrearage at sentencing.  Since his arrest, he has obtained steady 
42
 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
employment and has started making regular monthly child support 
payments. 
'	 NevadaA man pled guilty and was fined $5,000 for failure to pay child 
support. He also paid $63,000 to satisfy his arrearage in full. Since 1990, 
he concealed his assets through his business partner and other associates. 
Over a 2-year period, he wired over $450,000 from business to personal 
accounts in an effort to avoid his child support obligation. 
'	 North CarolinaA man was sentenced to 3 years probation and ordered 
to pay $17,000 in restitution. Despite earning income of over $100,000 
yearly, he failed to pay support for his two children who suffer from health 
issues. 
Misuse of ACF Grant Funds 
One of OIGs responsibilities is investigating the misuse of ACF grant 
funds. 	 Resolution of charges involving the improper use of these funds occurred 
in the following examples during this reporting period: 
'	 TexasThe former executive director of an HHS grantee receiving Head 
Start funds was sentenced to 63 months in prison and ordered to pay 
$805,000 in restitution and a $20,000 fine for his role as the mastermind of 
an embezzlement scheme.  He and four others devised a variety of schemes 
to defraud the grantee and HHS. Each scheme entailed a plan to submit 
invoices to the grantee for supplies and services never provided. One 
scheme included submitting invoices to the grantee for equipment, supplies, 
and services purportedly provided to Head Start centers when they were 
actually provided to the executive directors restaurant. Another scheme 
involved instructing a contractor to make and submit fraudulent invoices 
for repairs and/or renovations to Head Start centers that were never done. 
For their involvement in the embezzlement scheme, the four co-defendants 
were sentenced to an average prison time of 12.5 months and ordered to 
pay a total of $381,000 in restitution 
'	 Puerto RicoThe executive director of two Head Start programs run by 
a concessionary agency funded directly through Head Start was sentenced 
to 30 days imprisonment and ordered to pay $141,000 in restitution to ACF 
43
 ADMINISTRATIONS FOR CHILDREN AND FAMILIES AND ON AGING 
for bank fraud. The executive director and the agencys council president 
had signature authority for all program disbursements.  The executive 
director forged the council presidents signature on approximately 24 
checks. When the bank did not cash two of the checks, the executive 
director instructed the fiscal manager to wire transfer the funds to his 
personal account. 
Fraud Training Initiative 
In addition to its investigations, OIG has been working with Departmental 
grant officials to increase fraud awareness within the grant programs.  For example, 
in FY 2003, in a combined effort with respect to Head Start, over 300 program 
officials throughout the country received fraud awareness training.  Additionally, 
in cooperation with State officials, the Child Care Bureau, and the Foster Care 
program officials, OIG identified areas vulnerable to fraud and developed training 
for State and Federal officials to heighten fraud awareness to prevent and detect 
fraud in the child care program. 
44
 General Oversight 

The Office of the Assistant Secretary for Budget, Technology 
and Finance (ASBTF) is responsible for developing and executing the 
Department of Health and Human Servicess (HHS) budget; ensuring that 
HHS performance measurement and reporting are in compliance with the 
Government Performance and Results Act; establishing and monitoring 
departmental policy for financial management (including debt collection, 
audit resolution, cost policy, and financial reporting); and developing and 
monitoring HHS information technology policy (including IT security). 
The Assistant Secretary is the Departments Chief Financial Officer and 
oversees the Departments Chief Information Officer.  The Department 
also has the responsibility, by virtue of the magnitude of its funding, to 
negotiate the payment rates and methods that many outside entities, such 
as State and local governments, charge for administering HHS and other 
Federal programs. 
The Office of the Assistant Secretary for Administration and 
Management (ASAM) is responsible for HHS policies regarding human 
resources, grants, and acquisition management.  This office also oversees 
the Program Support Center, which provides a range of administrative 
services, such as human resources, financial management, and adminis 
trative operations. 
OIG has oversight responsibility for these activities at the 
departmental level.  A related major responsibility flows from Office 
of Management and Budget Circular A-133, under which HHS is the 
cognizant agency to audit the majority of Federal funds awarded to major 
research schools, State and local government cost allocation plans, and 
separate indirect cost plans of State agencies and local governments.  OIG 
also oversees the work of non-Federal auditors of Federal money at some 
6,700 entities, such as community health centers and Head Start grantees, 
as well as at State and local governments, colleges and universities, and 
other nonprofit organizations. In addition, OIG is responsible for auditing 
the Departments financial statements. 
OIG also reviews audits, inspections, and studies performed by 
others, such as the Office of Management and Budgets Program Assessment 
and Rating Tool and reports of the General Accounting Office. It takes 
these studies into account when planning its own work and examines 
management actions designed to correct the deficiencies cited in these 
prior studies. 
45
 GENERAL OVERSIGHT 
Departmental Financial Statement Audit   
As required by the Government Management Reform Act of 1994, OIG 
audited the Departments consolidated/combined financial statements for FY 2003 
and issued an audit opinion, a report on internal controls, and a report on com 
pliance with laws and regulations. OIGs audit approach allowed the Department 
to successfully meet its accelerated November 15, 2003 target date for submitting 
the financial statements and audit results to the Office of Management and Budget. 
The audit report, which appears in the Departments FY 2003 Performance 
and Accountability Report, included a clean, or unqualified, opinion on the 
financial statements.  This means that, for the fifth consecutive year, the state 
ments were reliable and fairly presented.  However, the report noted two continuing 
material internal control weaknessesthat is, problems that are systemic across a 
number of operating divisions, as well as significant dollar issues affecting only 
one division. First, serious weaknesses persisted in the Departments financial 
systems and processes for producing financial statements.  These weaknesses 
related to financial statement preparation, financial management systems, and 
financial analyses and reporting. Second, Medicare information systems lacked 
adequate controls to ensure the security and integrity of data processing operations 
and data files. As discussed in OIGs report on compliance with laws and regu 
lations, weaknesses in the Departments financial management and Medicare 
information systems also represented departures from certain Federal requirements. 
(A-17-03-00001) 
Federal Information Security Management Act 
As required by the Federal Information Security Management Act, OIG 
conducted independent evaluations of information systems security programs at 
six HHS operating and staff divisions.  These divisions accounted for more than 
95 percent of HHSs critical infrastructure as defined by Presidential Decision 
Directive 63 and the Critical Infrastructure Assurance Office Project Matrix Report. 
The results of the reviews were reported to management and summarized in a 
report to the Office of Management and Budget. 
   Indicates performance measure.  Details can be found in Appendix G.
46  GENERAL OVERSIGHT 
While progress had been made in securing critical systems, OIG identified 
fundamental security program weaknesses that inhibited the Departments ability 
to create a more mature security environment.  In total, OIG identified 71 defi 
ciencies (34 significant), of which 26 had been noted in prior years. The cause of 
most weaknesses was that the Department did not have an effective information 
security management program structure to ensure that sensitive data and critical 
operations received adequate attention and that appropriate security controls were 
implemented to protect them.  (Various reports) 
Departmental Service Organizations    
To support its audit of the Departments FY 2003 financial statements, 
OIG contracted for examinations of four service organizations that provide com 
mon administrative, data processing, and accounting services to the operating 
divisions. In accordance with Statement on Auditing Standards No. 70, indepen 
dent certified public accounting firms examined the organizations controls and 
tested their operating effectiveness. The results are as follow: 
'	 Human Resources Service, Program Support Center:  Controls were 
suitably designed and operating with sufficient effectiveness except 
for certain weaknesses in segregation of duties. (A-17-03-00012) 
'	 Division of Financial Operations, Program Support Center:  Controls 
were suitably designed and operating with sufficient effectiveness but 
demonstrated exceptions in access and system software controls.  
(A-17-03-00011) 
'	 Division of Payment Management, Program Support Center:  Controls 
were suitably designed and operating with sufficient effectiveness. No 
significant exceptions were noted. (A-17-03-00009) 
'	 Center for Information Technology, National Institutes of Health: 
Controls were suitably designed and operating with sufficient effec 
tiveness. No significant exceptions were noted. (A-17-03-00010) 
   Indicates performance measure.  Details can be found in Appendix G.
47  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 which includes all Federal money they receive. 
These annual audits are conducted by non-Federal auditors, such as public account-
ing firms and State auditors.  As cognizant auditor, OIG reviews the quality of 
these audits and assesses the adequacy of the entitys management of Federal funds. 
In the first half of FY 2004, OIGs National External Audit Review Center reviewed 
1,218 reports that covered $819.7 billion in audited costs. Federal dollars covered 
by these audits totaled $285.4 billion, about $131.1 billion of which was HHS 
money. 
OIGs oversight of non-Federal audit activity not only provides Department 
managers with assurances about the management of Federal programs but also 
identifies any significant areas of internal control weakness, noncompliance, and 
questioned costs that require formal resolution by Federal officials.  By taking a 
proactive stance, OIG identifies entities for high-risk monitoring and alerts pro 
gram officials to any trends that could indicate problems in HHS programs.  In 
addition, OIG profiles non-Federal audit findings of a particular program or 
activity over time to identify systemic problems.  As a further enhancement of 
audit quality, OIG provides training and technical assistance to grantees and the 
auditing profession. 
To rely on the work of non-Federal auditors, OIG maintains a quality 
control review process which assesses the non-Federal reports received and the 
audit work that supports selected reports. The non-Federal audit reports reviewed 
and issued during this reporting period are categorized in the box below. 
Reports issued:
 Without changes or with minor changes  1,098
 With major changes  94
 With significant inadequacies  26 
Total  1,218 
48
 GENERAL OVERSIGHT 
The 1,218 reports included recommendations for HHS program officials 
to take action on cost recoveries totaling $3.6 million, as well as 4,617 recom 
mendations for improving management operations.  In addition, these audit reports 
provided information for 83 special memoranda which identified concerns for 
increased monitoring by departmental management. 
Resolving Recommendations 
The tables that appear on the following pages are provided in accordance 
with section 5 of the Inspector General Act and indicate the dollar value of actions 
taken on OIG recommendations. 
49
 GENERAL OVERSIGHT 
Table 1:  Reports With Questioned Costs* 
Reports  Number of  Dollar Value Dollar Value
Reports   Questioned   Unsupported 
Section 1 
For which no management decision 
had been made by the beginning of 
the reporting period1  560  $1,979,110,000  $320,541.000 
Issued during the reporting period  102  $292,073,000  $74,000 
Total Section 1  662  $2,271,183,000  $320,615,000 
Section 2 
For which management decision was 
made during the reporting period2,3,4
 Disallowed costs  $214,545,000  $60,212,000
 Costs not disallowed  $102,992,000  $246,000 
Total Section 2  194  $317,537,000  $60,458.000 
Section 3 
For which no management decision 
had been made by the end of the 
reporting period
 Total Section 1 minus
          Total Section 2  468  $1,953,646,000  $260,157,000 
Section 4 
For which no management decision 
was made within 6 months of  issuance5  375  $1,667,189,000  $166,718,000 
*Details concerning footnotes can be found in Appendix D. 
50  GENERAL OVERSIGHT 
Table 2:  Funds Recommended to Be Put to Better Use* 
Reports  Number of   Dollar Value 
Reports
Section 1 
For which no management decision had been made 
by the beginning of reporting period1  61  $8,929,373,000 
Issued during the reporting period  12  $78,386,000 
Total Section 1  73  $9,007,759,000 
Section 2 
For which management decision was 
made during the reporting period 
Value of recommendations that 
were agreed to by management 
Based on proposed 
management action  5  $267,227,000 
Based on proposed 
legislative action  0  0 
Value of recommendations that 
were not agreed to by management  1  $306,000
            Total Section 2  6  $267,533,000 
Section 3 
For which no management decision had been made by 
the end of the reporting period2
            Total Section 1 minus
            Total Section 2  67  $8,740,226,000 
*Details concerning footnotes can be found in Appendix D. 
51  GENERAL OVERSIGHT 
Legislative and Regulatory
 Review and Development 
Review Functions 
Section 4(a) of the Inspector General Act of 1978 requires that the Inspector 
General review existing and proposed legislation and regulations and make recom 
mendations in this report concerning the impact on the economy and efficiency of 
the administration of the Departments programs and on the prevention of fraud 
and abuse.  In reviewing regulations and legislative proposals, OIG uses as the 
primary basis for its comments the audits, inspections, investigations, and other 
activities highlighted in this and previous semiannual reports. 
Development Functions 
OIG is responsible for the development and public announcement of a 
variety of sanction regulations addressing civil money penalty and program 
exclusion authorities administered by the Inspector General, as well as advisory 
opinions and safe harbor regulations related to the anti-kickback statute.  During 
this reporting period, OIG: 
!	 Developed, in accordance with section 1860D-31 of the Social Security 
Act, interim final rulemaking setting forth OIGs new authority for im 
posing civil money penalties against endorsed sponsors under the Medicare 
prescription drug discount card program that knowingly (1) engage in false 
or misleading marketing practices; (2) overcharge program enrollees in 
violation of the terms of an endorsement contract; or (3) misuse transitional 
assistance funds. In each instance, OIG may impose CMPs of no more 
than $10,000 for each violation. 
In addition, during this period, OIG continued to develop and publish 
Federal Register notices that serve to reflect OIG policy and procedures with 
regard to compliance program guidance, Special Fraud Alerts, Special Advisory 
Bulletins and continued OIG regulations development.  Specifically, during this 
period, OIG: 
52
 GENERAL OVERSIGHT 
!	 Published a Federal Register notice soliciting recommendations and 
proposals for developing new and modifying existing safe harbor pro 
visions under the Federal and State health care programs anti-kickback 
statute, as well as developing new OIG Special Fraud Alerts. 
(68 FR 69366; December 12, 2003) 
!	 In compliance with the requirements of section 3506(c)(2)(A) of the 
Paperwork Reduction Act of 1995, published a final Federal Register 
notice setting forth OIGs summary of information collection activities 
with regard to State Medicaid Fraud Control Units recertification and 
application and annual reports, as required by 42 CFR 1007.15 and 
1007.17 of OIG regulations. (69 FR 2147; January 14, 2004) 
!	 Continued development of an OIG Federal Register notice setting forth 
revised standards for assessing the performance of State Medicaid Fraud 
Control Units. These revised standards will be used in the certification 
and recertification of each unit and to determine if a unit is effectively and 
efficiently carrying out its duties and responsibilities. 
Employee Fraud and Misconduct 
Most of the persons employed by HHS are dedicated, honest civil servants. 
Occasionally, however, individuals violate their fiduciary responsibilities. OIG 
conducts or oversees investigations of serious allegations of wrongdoing by 
Department employees, as in the following examples: 
'	 MarylandTwo NIH employees were ordered to pay close to $9,000 
in restitution and fines for theft of Government property.  Procurement 
agents, the employees used their Government issued Visa IMPAC cards 
to make purchases for themselves and others. 
Also in Maryland, a former NIH employee was sentenced to 18 
months of incarceration for knowingly receiving child pornography.  As 
conditions of his supervised probation upon his release, he must also 
participate in a mental health treatment program, register as a sex offender, 
and not access a computer or the Internet without prior approval from the 
Division of Probation. 
53
 GENERAL OVERSIGHT 
Additional Audit Recoveries 
Based on an OIG recommendation, the Department realized $8.3 million 
in additional recoveries, beyond the disallowances reported in Table 1, during this 
semiannual period.  OIG recommended that Clarion Health Partners, Inc., deter 
mine whether errors identified in a review of medical education payments occurred 
in prior Medicare cost reports and coordinate with the fiscal intermediary to make 
the necessary financial adjustments.  As a result of this recommendation, the fiscal 
intermediary adjusted the providers cost reports for the 2 years preceding the year 
audited. (A-05-02-00026) 
Investigative Prosecutions 
During this semiannual reporting period, OIG investigations resulted in 
234 successful criminal actions.  Also during this period, 701 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 288 individuals and entities. 
In addition to terms of imprisonment and probation imposed in the judicial 
processes, over $1.2 billion was ordered or returned as a result of OIG investi 
gations during this reporting period. Civil settlements from investigations resulting 
from audit findings are included in this figure. 
54
 Appendices

55
 56
 Appendix A 
Savings Achieved Through Policy and Procedural Changes Resulting From Audits, 
Investigations, and Inspections 
October 1, 2003 Through March 31, 2004 
The following schedule highlights savings resulting from the Office of Inspector General (OIG) 
efforts to prevent unnecessary obligations for expenditures of agency funds or to improve agency systems 
and operations. These achievements depend greatly on the contributions of and actions by others, such as 
departmental officials and the Congress.  The amounts shown represent funds or resources that will be 
available to be used more efficiently as a result of documented measures taken in response to OIG audits, 
investigations, and inspections. Those include actual reductions in unnecessary budget outlays; deobli 
gations of funds; reductions in costs incurred or pre-award reductions in grants or contracts; and reduction 
and/or withdrawal of the Federal portion of interest subsidies on loans or loan guarantees, or insurance or 
bonds. 
Legislative savings are annualized amounts based on Congressional Budget Office (CBO) estimates 
consistent with CBO savings. Savings from the Medicare provisions of the Balanced Budget Act (BBA) 
of 1997 were adjusted downward to reflect related provisions of the Balanced Budget Refinement Act 
(BBRA) of 1999. Administrative savings are calculated based on departmental estimates, where available, 
for the year in which the change is effected and for subsequent years, if applicable. 
Total savings from these sources amount to $15,427 million for this period.
 Savings 
OIG Recommendation  Implementing Action  (millions) 
Centers for Medicare & Medicare Services 
Medicare Part A Payments for Skilled Nursing  $4,140 
Facilities:  Section 4432 of the BBA of 1997 (as 
Services should be bundled into Medicare and Medicaids  amended by the BBRA of 1999) 
payments to nursing homes; Part B payments for services  established a prospective payment 
normally included in the extended care benefit should  for SNF care. Covered services 
continue to be examined for appropriateness; and  include Part A SNF benefits and all 
legislation should prohibit entities other than the skilled  services for which payment may be 
nursing facility (SNF) from seeking payment on behalf of  made under Part B (except physician 
persons in part A covered SNF stays for enteral nutrition,  and certain other professional 
incontinence care, and surgical dressings, and limit  services) during the period when the 
Medicare coverage of these services to Part A. In 1997  beneficiary is provided covered SNF 
congressional testimony, OIG supported establishing a  care. 
prospective payment system and consolidated billing. 
(OEI-03-94-00790; OEI-06-92-00863; OEI-06-92-00864; 
A-17-95-00096; A-14-98-00350) 
State Enhanced Payments Under Medicaid Upper  $3,800 
Payment Limit Requirements:  On January 12, 2001, CMS issued 
States are allowed to make enhanced payments to local  revisions to the upper payment limit 
government providers as long as aggregate State payments  regulations which, among other 
for each class of service do not exceed the amount that  things, created new payment limits 
would have been paid under Medicare payment principles.  for local government-owned pro-
OIG found that States use of intergovernmental transfers  viders. This final rule will signifi 
maximized Federal Medicaid reimbursements.  OIG also  cantly affect a States ability to reap 
found that enhanced payments were not based on the cost  windfall revenues by reducing the 
continued 
57  APPENDIX A 
State Enhanced Payments Under Medicaid Upper 
Payment Limit Requirements (continued):  available funding pool from which to 
of providing services, nor did OIG find a direct  make enhanced payments to local 
relationship in the use of these funds to increase the  government-owned providers. 
quality of care. (A-03-00-00216) 
Medicare Secondary Payer Extensions:   $2,220 
CMS should establish a centralized database of  The database capacity was achieved 
information about private insurance coverage of Medicare  through the authorization of data 
beneficiaries and extend the Medicare secondary payer  exchanges between CMS, the Social 
(MSP) provision to include end stage renal disease  Security Administration, and the 
(ESRD) beneficiaries as long as the individual has  Internal Revenue Service. Section 
employer based coverage available.  4631 of the BBA of 1997 permanently 
(OEI-07-90-00760; OEI-03-90-00763; A-10-86-62016;  extended current MSP policies for 
A-09-89-00100; A-09-91-00103; A-14-94-00391;  beneficiaries who are disabled and 
A-14-94-00392)  have ESRD. For ESRD benefi 
ciaries, the statute also increased the 
time period Medicare is secondary 
payer from 18 to 30 months.
Medicare Outlier Payments:  $1,800 
To prevent future inappropriate outlier payments, CMS  CMS issued new regulations on 
should focus its attention on (i) determining how to limit,  June 9, 2003. As a result of the new 
if not eliminate, the policy which allows for the use of  regulations, the Medicare program is 
the statewide rate in place of a hospital-specific rate,  estimated to save at least $9 billion 
(ii) dramatically reducing the time lag between the  over the next 5 years. 
payment of outliers and the actual closing of a specific 
hospitals cost report, particularly for the hospitals that the 
fiscal intermediary identify as having significantly 
increased their charges, and (iii) eliminating the hospitals 
ability to construct and manipulate charges in order 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) 
Capital-Related Costs of Hospital Services:  $1,190 
CMS should seek legislative authority to continue  Section 4402 of the BBA of 1997 
mandated reductions in capital payments since excess  provided for rebasing of capital 
capacity was not considered in the capital cost policy.  payment rates for an additional 
(A-09-91-00070; A-07-95-01127)  reduction in the rate of 2.1 percent. 
Medicare Payments for Oxygen:   $800 
CMS should reduce Medicare payments for oxygen  Section 4552(a) of the BBA of 1997 
concentrators and ensure that beneficiaries receive  reduced Medicare reimbursement for 
necessary care and support in connection with their  oxygen 25 percent until 1999 and by 
oxygen therapy.  30 percent for each subsequent year; 
(OEI-03-91-00711; OEI-03-91-001710)  section 4552(c) mandated that the 
Secretary develop service standards 
for oxygen provided in the home.
58  APPENDIX A 
Medicare Laboratory Reimbursements:   $800 
In July 1989, OIG recommended that CMS take advantage  Section 4553 of the BBA of 1997 
of economies of scale present in the laboratory industry by  provided for reducing fee schedule 
considering competitive bidding or making reductions to  payments by lowering the cap to 74 
the fee schedule amounts.  In January 1990, OIG recom  percent of the median for payment 
mended that CMS seek legislation to allow across the  amounts, with no inflation update for 
board adjustments in Medicare laboratory fee schedules,  1998 through 2002.
bringing them in line with the prices which laboratories 
charge physicians in a competitive marketplace.  In a 
January 1996 followup, OIG found that Medicare 
continued to pay more to clinical laboratories than 
physicians for the same tests.  Although the Omnibus 
Budget Reconciliation Act of 1993 reduced the fee 
schedule to 76 percent of the average in 1996, OIG 
recommended that CMS periodically evaluate the national 
fee schedule to ensure that it is in line with the prices 
physicians pay for the same clinical laboratory services. 
(OEI-02-89-01910; A-09-89-00031; A-09-93-00056) 
Payments for Durable Medical Equipment:  $400 
Excessive Medicare Part B payments for enteral and  Section 4316 of the BBA of 1997 
parenteral nutrition, equipment and supplies should be  froze Medicare payments for enteral 
reduced, or competitive acquisition strategies should be  and parenteral nutrition and supplies 
employed.  for 1998 through 2002. 
(OEI-03-94-00021; OEI-06-92-00866; OEI-03-96-00230; 
OEI-06-92-00861) 
Medicare Payments to Hospitals for Bad Debt:   $150 
CMS should seek legislative authority to modify the bad  Section 4451 of the BBA of 1997 
debt payment policy by eliminating the Medicare payment  reduced bad debt payment to 
for bad debts, offsetting Medicare bad debts against  providers by 25 percent in FY 1998, 
beneficiary Social Security payments, limiting bad debt  40 percent in FY 1999, and 45 per-
payments to profitable prospective payment hospitals, or  cent in later years. The Benefits 
including a bed debt factor in the diagnosis-related group  Improvement and Protection Act of 
rates.  2000 subsequently decreased the 
(A-14-90-00039)  reduction to 30 percent.
Medicaid Drug Rebates-Sales to Repackagers   $80.7 
Excluded from Best Price Determinations:  CMS issued Medicaid Drug Rebate 
Medicaid rebates were lost because sales to HMOs were  Program Release #47 in July 2000 to 
improperly excluded from some drug manufacturers best  make it clear to manufacturers to not 
price determinations in FYs 1998 and 1999.  CMS should  inappropriately exclude HMO and 
require drug manufacturers who excluded sales to HMOs  other prices from their calculation of 
from their best price calculations to repay the rebates and  best prices, as required by section 
evaluate the policy guidance relating to exclusion of sales  1927 of the OBRA of 1990.
to other (non-HMO) repackagers from best price 
determinations.  
(A-06-00-00056) 
59  APPENDIX A 
Medicare Payments for Prescription Drugs:   $40 
CMS should reexamine its Medicare drug reimbursement  Section 4556 of the BBA of 1997 
methodologies, with a goal of reducing payments as  reduced Medicare payments for 
appropriate.  drugs, which are paid based on the 
(OEI-03-95-00420; OEI-03-94-00390; OEI-03-97-00290)  average wholesale price, by 5 percent.
Various Operating Divisions 
Results of Investigations:   $6.4 
In addition to any restitution, fines, settlements or  The operating division takes action 
judgments, or other monetary amounts resulting from  based on the results of OIG investi 
successful investigations, additional monetary losses are  gation to suspend or terminate pay 
avoided through timely communication of the  ments to the offending individual or 
investigative results to the operating division.  entity.
60  Appendix B 
Unimplemented Office of Inspector General Recommendations 
to Put Funds to Better Use 
This schedule represents potential annual savings or one-time recoveries which could be realized 
if OIG recommendations were enacted by the Congress or the Department through legislation, regulation, 
or management action.  In some cases, these recommendations are beyond the direct authority of the 
departmental operating division.  The Congress develops savings over a 5- or 10-year budget cycle which 
results in far greater dollar impact than the annual estimates shown in the table below.  The same can be 
said for regulations issued and management actions taken by the Department.  Savings are based on pre 
liminary OIG estimates and reflect economic assumptions which are subject to change.  The magnitude of 
the savings may increase or decrease due to interactive effects if enacted together. 
More detailed information may be found in OIGs Red Book which can be accessed on the 
Internet at http://oig.hhs.gov.
 Savings 
OIG Recommendation  Status  (millions) 
Centers for Medicare & Medicaid Services 
Clinical Laboratory Tests:  $1,130* 
CMS should develop a methodology and legislative  CMS initially agreed with the first 
proposal to pay for tests ordered as custom panels  recommendation but not the second.  The 
at substantially less than the full price for individual  BBA required the Secretary to request that 
tests, and study reinstating the beneficiary  the Institute of Medicine study Part B 
coinsurance and deductible provisions for  laboratory test payments.  As a result of the 
laboratory services as a means of controlling  Institute of Medicines recommendations, 
utilization. (A-09-89-00031; A-09-93-00056)  the Medicare Prescription Drug, 
Improvement and Modernization Act of 
2003 mandates that CMS conduct a 
demonstration that applies competitive 
bidding for clinical laboratory services. 
The initial report to Congress is due by 
December 31, 2005.
Outpatient Surgery Rates:  CMS has agreed to consider seeking  $1,100 
CMS should seek authority to set rates that are  authority to set rates that are consistent 
consistent across sites and reflect only the costs  across sites as it develops its legislative 
necessary for the efficient delivery of health services  program.  The agency has also issued a 
and remove the procedure codes that meet its  notice of proposed rulemaking which would 
criteria for removal from the ASC list of covered  remove certain procedure codes from the 
procedures. (A-14-89-00221; A-14-98-00400;  ASC list of covered procedures. This rule 
OEI-09-88-01003; OEI-05-00-00340)  has not yet been finalized.
Hospital Capital Costs:  $820 
CMS should determine the extent that capital  CMS did not agree with the 
reductions are needed to fully account for hospitals  recommendation.  Although the BBA of 
excess bed capacity and report the percentage to the  1997 reduced capital payments, it did not 
Congress.  include the effect of excess bed capacity 
(A-09-91-00070; A-14-93-00380)  and other elements included in the base-
year historical costs. 
*This savings estimate would result from the copayment; the savings estimate for panels has yet to be determined. 
61  APPENDIX B 
Medicare Payments for Mental Health Services:   $676 
CMS should ensure mental health services are  CMS concurred and has initiated some 
medically necessary, reasonable, accurately billed,  efforts, particularly regarding community 
and ordered by an authorized practitioner by using a  mental health centers.  However, these 
comprehensive program of targeted medical reviews,  efforts were affected by industry court 
provider education, improved documentation  actions. These claims may receive 
requirements, and increased surveillance of mental  additional attention as targeted Medical 
health services.  reviews are increased as part of payment 
(OEI-02-99-00140; OEI-03-99-00130;  safeguard contractor operations.
A-04-98-02145; A-01-99-00507; A-01-99-00530) 
Payment Policy for Medicare Bad Debts:   $340 
OIG presented four options for CMS to consider,  The BBA of 1997 provided for some 
including the elimination of a separate payment for  reduction of bad debt payments to providers. 
bad debts, the offset of Medicare bad debts against  The Benefits Improvement and Protection 
beneficiary Social Security payments, the limitation  Act of 2000 subsequently increased bad 
of bad debt payments to prospective payment  debt reimbursement.  However, additional 
system hospitals that are profitable, and the  legislative changes are needed to implement 
inclusion of a bad debt factor in the diagnosis- the modifications that OIG recommended.
related group (DRG) rates. CMS should seek 
legislative authority to further modify bad debt 
policies. (A-14-90-00339) 
Cost Effectiveness of Pay and Chase Methods   $185 
for Medicaid Pharmacy Third-Party Liability  CMS agreed that States cost-avoidance 
Recoveries:  waivers should be reexamined and has 
CMS should determine whether States cost- made a concerted effort to track States pay-
avoidance waivers for pharmacy claims are meeting  and-chase activities. CMS central office 
the cost-effectiveness criterion. CMS can ascertain  asked the regional offices to identify any 
cost effectiveness by requiring States to track  waivers that have been granted, any 
dollars that they pay and chase and the amounts that  pending waiver requests, and situations 
they recover. CMS should also review States  where a State is using pay-and-chase 
policies to determine if they are paying and chasing  without an approved waiver. CMS has also 
pharmacy claims without waivers.  conducted conference calls with third party 
(OEI-03-00-00030)  liability coordinates in an effort to develop 
potential guidelines and criteria for the 
review of waiver requests.
Graduate Medical Education:  $157.3 
CMS should revise the regulations to remove from  CMS did not concur with the 
a hospitals allowable graduate medical education  recommendations.  Although the BBA of 
(GME) base-year costs any cost center with little or  1997 and the BBRA of 1999 contained 
no Medicare utilization and submit a legislative  provisions to slow the growth in Medicare 
proposal to compute Medicares percentage of  spending on GME, OIG believes that its 
participation under the former, more comprehensive  recommendations should be implemented 
system.  (A-06-92-00020)  and that further savings can be achieved. 
62  APPENDIX B 
Medicaid Drug Rebate Program:   $123 
The best price calculation in the Medicaid drug  Disagreeing with the recommendation, 
rebate program should be indexed to the consumer  CMS believes that savings will be achieved 
price index-urban. (A-06-94-00039)  through the Presidents budget proposal to 
enact a legislative change that would base 
the drug rebate on the difference between 
the AWP and the best price for a drug.
Inappropriate Payments for Nail Debridement:   $96.8 
CMS should require Medicare carriers to recoup the  CMS concurred; the agency planned to 
overpayments found in OIGs sample and to  continue to maximize the effectiveness of 
carefully scrutinize payments for nail debridement  its medical review strategy, collect the 
services through medical reviews, require  overpayments identified in OIGs sample, 
podiatrists to adequately document the medical  and educate podiatrists on Medicare policy 
necessity of all nail debridement services, and  for paying nail debridement claims.
require CMS regional offices and carriers to 
educate podiatrists on Medicare payment policies 
for nail debridement claims.  (OEI-04-99-00460) 
Medical Equipment/Supply Claims Lacking   $91 
Valid, Active UPINs:  CMS concurred. The agency implemented 
CMS should create edits to identify medical  an edit to reject claims listing a deceased 
equipment and supply claims that do not have a  physicians UPIN beginning in April 2002. 
valid and active unique physician identification  They plan to expand this to include all 
number (UPIN) listed for the ordering physician.  inactive and invalid UPINs.
(OEI-03-01-00110) 
Inpatient Psychiatric Care Limits:   $47.6 
CMS should develop new limits to deal with the  CMS agreed with OIGs findings but stated 
high cost and changing utilization patterns of  that further analysis would be required 
inpatient psychiatric services and apply a 60-day  before any legislative changes could be 
annual and a 190-day lifetime limit to all  supported.
psychiatric care regardless of the place of service. 
(A-06-86-62045) 
Medicare Orthotics:   $43 
CMS should take action to improve Medicare  CMS generally concurred with OIGs 
billing for orthotic devices. CMS should also  original recommendations.  The agency is 
require standards for suppliers of custom-molded  working on a proposed rule regarding 
and custom-fabricated orthotic devices.  orthotics and intends to put in place 
(OEI-02-95-00380; OEI-02-99-00120;  standards for custom orthotics.
OEI-02-99-00121) 
Expansion of the DRG Payment Window:   $37 
CMS should consider proposing legislation to  CMS agreed but cautioned that such action 
expand the DRG payment window to include  could increase beneficiaries health risks. 
admission-related services rendered up to 14 days  OIG acknowledges the need to assess such 
before an inpatient admission.  (A-01-02-00503)  risks before proposing a legislative change.
63  APPENDIX B 
End Stage Renal Disease Payment Rates:   $22** 
CMS should reduce the payment rates for outpatient  CMS agreed, and the BIPA of 2000 
dialysis treatments to reflect current efficiencies  required the Secretary to develop a 
and economies in the marketplace.  composite rate that includes, to the extent 
(A-14-90-00215)  composite rate that includes, to the extent 
feasible, payment for laboratory tests and 
drugs that are routinely used in dialysis 
treatments but are now separately billable. 
The Medicare Prescription Drug, 
Improvement and Modernization Act of 
2003 requires the Secretary to establish a 
case-mix adjusted composite rate for 2005 
and to conduct a demonstration of a 
bundled case-mix adjusted prospective 
payment system.  The Act also directs CMS 
to use the results of an OIG study on 
separately billable ESRD drug payments 
and costs to set the 2005 composite 
payment rate.
Respiratory Assist Devices With a Back-Up   $11.5 
Rate:  CMS concurred and published a proposed 
CMS should reclassify bi-level respiratory assist  rule in August 2003 clarifying that bi-level 
devices with a back-up rate from the frequent and  respiratory assist devices with back-up rate 
substantial servicing category to the capped  be paid as capped rental items.
rental category under the durable medical device 
benefit. (OEI-07-99-00440) 
Indirect Medical Education:     TBD*** 
CMS should reduce the indirect medical education  CMS agreed with the recommendation, and 
(IME) adjustment factor to the level supported by  the BBA of 1997, as amended by the BBRA 
CMSs empirical data and initiate further studies to  of 1999, reduced the IME adjustment to 
determine whether different adjustment factors are  5.5 percent in 2002 and thereafter. OIG 
warranted for different types of teaching hospitals.  believes the factor should be further 
(A-07-88-00111)  reduced to eliminate any overlap with the 
disproportionate share adjustment.
Medicare Secondary PayerEnd Stage Renal      TBD 
Disease Time Limit:  CMS was concerned that an indefinite MSP 
CMS should extend the Medicare secondary payer  provision might encourage insurers to drop 
(MSP) provisions to include end stage renal disease  uneconomical services, namely facility 
(ESRD) beneficiaries without a time limitation.  dialysis and transplantation. OIG continues 
(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.
**This estimate represents annual program savings of $22 million for each dollar reduction in the composite 
rate, given the population of ESRD beneficiaries at the time of OIGs review. 
***To be determined. 
64  APPENDIX B 
Home Health Agencies:      TBD 
CMS should revise Medicare regulations to require
 Although the BBA of 1997 included 
the physician to examine the patient before ordering
 provisions to restructure home health 
home health services.
 benefits, CMS still needs to revise 
(OEI-04-93-00262; OEI-04-93-0026;
 Medicare regulations to require that 
OEI-12-94-00180; OEI-02-94-00170;
 physicians examine Medicare patients 
A-04-95-01103; A-04-95-01104; A-04-94-02087;
 before ordering home health services. 
A-04-94-02078; A-04-96-02121; A-04-97-01169;
 Subsequent to the BBA, OIGs four-State 
A-04-97-01166; A-04-97-01170; A-04-99-01195)
 review found that unallowable services 
continued to be provided because of 
inadequate physician involvement.  While 
agreeing in principle, CMS said it would 
continue to examine both coverage rules 
and conditions of participation to develop 
the discipline necessary for ensuring proper 
certification. Also, CMS provided 
additional payments for physician care plan 
oversight and education for physicians and 
beneficiaries. 
Connection Between the Calculation of Medicaid      TBD 
Drug Rebates and Drug Reimbursement: 
CMS should seek legislation that would require  CMS agreed to pursue a change in the 
participating manufacturers to pay Medicaid drug  rebate program similar to that recom 
rebates based on average wholesale price (AWP) or  mended.  The Presidents FY 2003 budget 
study other viable alternatives to the current  proposed a legislative change that would 
program of using average manufacturer price) to  base the drug rebate on the difference 
calculate the rebates. This legislation would have  between the AWP and the best price for a 
resulted in about $1.15 billion in additional rebates  drug. That legislative change was 
for 100 brand-name drugs with the highest total  ultimately dropped, and none of the 
Medicaid reimbursements in calendar years  subsequent Presidential budgets included a 
1994-96. (A-06-97-00052)  similar proposal. 
Various Operating Divisions 
Recharge Center Costs:  $1 
The Assistant Secretary for Administration and  The Department concurred and has worked 
Management should propose changes to OMB  with OMB on a revision to A-21. The 
Circular A-21 to improve guidance on the financial  proposed revision, which was published in 
management of recharge centers.  The revision  the Federal Register in August 2002, would 
should include criteria for establishing, monitoring,  require that adjustments to a recharge 
and adjusting billing rates to eliminate accumulated  centers billing rate take into account 
surpluses and deficits; preventing the use of recharge  overrecoveries and/or underrecoveries from 
funds for unrelated purposes and excluding unal  previous periods. Rate adjustments would 
lowable costs from the calculation of recharge rates;  be required at least every 2 years. The final 
ensuring that Federal projects are billed equitably; and  rule is expected to be issued in FY 2004. 
excluding recharge costs from the recalculation of 
facilities and administrative cost rates. 
(A-09-96-04003) 
65
 66
 Appendix C 
Unimplemented Office of Inspector General Program 
and Management Improvement Recommendations 
This schedule represents Office of Inspector General (OIG) findings and recommendations which, 
if implemented, would result in substantial benefits.  The benefits relate primarily to effectiveness rather 
than cost-efficiency. 
More detailed information may be found in OIGs Orange Book which can be accessed on the 
Internet at http://oig.hhs.gov. 
OIG Recommendation  Status 
Centers for Medicare & Medicaid Services 
Accountability Over Billing and Collection of 
Medicaid Drug Rebates:  CMS concurred with the recommendation and set up a 
CMS should ensure that States implement accounting  reporting mechanism to capture rebate information. 
and internal control systems in accordance with  The agency still needs to ensure that States establish 
Federal regulations for the Medicaid drug rebate  adequate accounting and internal control systems to 
program.  Such systems must provide for accurate,  obtain reliable information.  Current audit results have 
current, and complete disclosure of drug rebate  shown that this remains a problem in most States. 
transactions and provide CMS with the financial 
information it needs to effectively monitor and manage 
the Medicaid drug rebate program.  (A-06-92-00029) 
Fairly Presenting the Medicare Accounts 
Receivable Balance:  CMS hired consultants to assist in validating accounts 
CMS should require Medicare contractors to  receivable reported by Medicare contractors and 
implement or improve internal controls and systems to  provided comprehensive instructions to contractors. 
ensure that reported accounts receivable are valid and  For the long term, CMS is developing an integrated 
documented.  general ledger system as the cornerstone of its financial 
(A-17-95-00096; A-17-97-00097; A-17-98-00098;  management controls. 
A-17-00-00500; A-17-00-02001; A-17-01-02001; 
A-17-02-02002) 
Guidance to Drug Manufacturers to Better 
Implement the Medicaid Drug Rebate Program:  CMS did not concur, stating that the drug law 
CMS should survey manufacturers to identify the  and the rebate agreements already established a 
various calculation methods used to determine average  methodology for computing AMP.  OIG disagrees 
manufacturer price (AMP).  CMS should also develop  because the rebate law and agreements defined AMP 
a more specific policy for calculating this price which  but did not provide specific written methodology for 
would protect the interests of the Government and  computing it. 
which would be equitable to the manufacturers. 
(A-06-91-00092) 
Accuracy of Carrier Payment Data: 
CMS should conduct a review of carriers claims  CMS stated that a review is under way to compare data 
processing data to examine the scheduled date of  contained in the National Claims History File with data 
payment entered on claims sent to the Common  at the carrier level. In addition, CMS has approved 
Working File (CWF).  If there is no correlation  two new edits which will enforce the payment floor 
between the claims payment date variable and the  standards on claims sent to the CWF. 
actual date of payment, CMS should define what data 
continued 
67  APPENDIX C 
Accuracy of Carrier Payment Data (continued): 
should be entered into this field and how it should be 
calculated, and/or revise the current variable definition 
to clarify for National Claims History data users that 
the scheduled date of payment is not an accurate 
reflection of the actual claim payment date.  CMS 
should also review the carriers claims processing data 
to determine the accuracy of the information contained 
in the CROWD system.  (OEI-03-00-00350) 
Duplicate Payments for the Same Service by 
Multiple Carriers:  CMS concurred with OIGs recommendations and will 
CMS should revise CWF edits to detect and deny  re-examine existing criteria regarding duplicate editing 
duplicate billings to individual carriers or to more than  in the CWF system to determine the cost effectiveness 
one carrier, or increase post-payment reviews if such  of including the carrier number in the match criteria. 
edits are determined not to be cost effective.  CMS entered a contract to study duplicate billing. 
(OEI-03-00-00090; OEI-03-00-00091) 
Inappropriate Payments for Blood Glucose Test 
Strips:  CMS concurred with the recommendations and noted a 
CMS should alert suppliers of the importance of  number of initiatives that have reduced the incidence 
properly completed documentation to support their  of improper payments in recent years. 
claims for test strips; require suppliers to indicate 
actual and accurate start and end dates on claim 
forms; promote supplier concurrence and cooperation 
with OIGs recently issued compliance guidelines; and 
advise beneficiaries to report any instances of 
fraudulent or abusive practices involving their home 
blood glucose monitors, test strips, or related supplies 
to their DMERCs. (OEI-03-98-00230) 
Educating Beneficiaries on Reducing Financial 
Liability for Durable Medical Equipment:  CMS concurred with OIGs recommendations and has 
CMS should educate beneficiaries on ways to reduce  undertaken a number of efforts to increase beneficiary 
financial liability for medical equipment and supplies  education and awareness about the consequences of 
and re-evaluate Medicare fee schedules for ostomy  assigned and nonassigned claims. 
supplies. (OEI-07-99-00510) 
Resident Assessment Instruments: 
CMS should more clearly define minimum data set  CMS generally concurred with OIGs recommendations 
(MDS) elements and work with States to train nursing  for improved data definitions and training, but did not 
home staff.  OIG also recommended that CMS  concur with the recommendation to establish an audit 
establish an audit trail to validate the 108 MDS  trail. 
elements that affect facility reimbursement by 
Medicare. (OEI-02-99-00040; OEI-02-99-0041) 
Assessments of Mental Illness: 
CMS should work with States to improve the  CMS concurred with most of OIGs recommendations 
assessment of persons with serious mental illness and  and has made revisions to its training curriculum for 
use survey and certification to monitor compliance.  nursing home surveyors. 
OIG also recommended that CMS define specialized 
services that are to be provided by the State to nursing 
home residents with mental illness. 
(OEI-05-99-00700) 
68  APPENDIX C 
Nursing Home Residents With Serious Mental 
Illness:  Except for reporting MDS records by primary, 
CMS should improve the quality and usefulness of its  secondary, and tertiary diagnoses, CMS concurred with 
data sources by requiring the use of a unique provider  most of OIGs recommendations.  CMS does not feel 
number across systems, requiring reporting of resident  that adding space to the MDS to record diagnoses 
data by age and diagnosis, and encouraging States to  would solve the problem. 
use these data in demonstrating their progress in 
placing disabled persons in the most integrated 
settings. OIG also recommended training to improve 
data collection and accurate coding. 
(OEI-05-99-00701) 
Payments for Mental Health Services: 
CMS should promote provider awareness of  CMS generally concurred with the recommendations, 
documentation and medical necessity requirements,  plans to explore a variety of educational efforts, and 
develop a comprehensive list of psychological testing  will refer the reports to the carrier clinical workgroup 
tools that can be correctly billed, target problematic  on psychiatric services. Carriers will conduct data 
services for pre-payment edits or post-payment medical  analysis of psychological testing and psychotherapy 
review, and encourage carriers to take advantage of the  claims and will conduct medical review, if indicated. 
MDS, especially for its assessment of patient cognitive 
level. (OEI-03-99-00130; OEI-02-99-00140) 
Organ Donation: 
CMS should revise the Medicare conditions for  CMS concurred with the recommendations and 
coverage for Organ Procurement Organizations  indicated it will explore ways in which additional data 
(OPOs) to make them more accountable for imple  can be used to assess OPO effectiveness and hospital 
menting the new donation rule and require OPOs to  compliance with the donation rule.  CMS has prepared 
provide hospital-specific data on referrals and on organ  a draft regulation that would address many of  OIGs 
recovery. HRSA should require that OPOs submit  concerns; the regulation is currently passing through 
hospital-specific data on referrals and on organ  HHS clearance. HRSA also concurred with the 
recovery and support demonstration projects on how to  recommendations. 
effectively train and make use of designated 
requestors. (OEI-01-99-00020) 
Various Public Health Agencies 
Oversight of Tissue Banking: 
FDA should expedite publication of its regulatory  The Deputy Secretary concurred that FDA should 
agenda requiring registration of tissue banks, enhanced  expedite its planned rulemaking activities related to 
donor suitability screening and testing the use of good  tissues, specifically the final rule to require registration 
tissue practices. FDA should set a realistic, yet  of tissue banks. The Department also found consid 
aggressive date by which it would complete an initial  erable merit in OIGs recommendation for an intensi 
inspection of all tissue banks. FDA should determine  fied inspection program directed towards entities that 
the appropriate minimum cycle for tissue bank  procure, process, and store human tissues.  In 
inspections, and work with States and professional  congressional testimony, FDA said that all three of the 
associations to determine in what areas oversight  proposed rules have been published, and one rule 
activities could be coordinated. (OEI-01-00-00441)  (Establishment Registering and Listing) was finalized. 
FDA also worked to inspect all 36 identified, 
uninspected tissue banks. As of March 2004, FDA has 
not issued the final regulation on good manufacturing 
practices. 
69
 APPENDIX C 
Effectiveness of FDAs Adverse Event Reporting 
System for Dietary Supplements:  FDA agreed with the majority of OIGs 
FDA should (1) facilitate greater detection of adverse  recommendations and has taken several important 
events by requiring dietary supplement manufacturers  steps to implement them.  In March 2003, FDA 
to report serious events to FDA for some products,  published proposed good manufacturing practices for 
(2) obtain more information on adverse event reports  dietary supplements.  In June 2003, FDA implemented 
by requiring manufacturers to register themselves and  a new adverse event reporting system called the Center 
their products with FDA, (3) notify manufacturers  for Food Safety and Applied Nutrition Adverse Events 
when FDA receives a serious adverse event report and  Reporting System.  This replaces the old system, and 
develop a new computer database to track and analyze  FDA will use it to identify potential public health 
adverse event reports, (4) expedite the development  issues associated with the use of a particular product. 
and implementation of good manufacturing practices  FDA now notifies manufacturers of a receipt an 
for dietary supplement manufacturers, and (5) disclose  adverse event alleged to be caused by their product. 
more useful information to the public about dietary 
supplement adverse events.  (OEI-01-00-00180) 
Protection for Research Subjects in Foreign Clinical 
Trials:  FDA supported OIGs recommendations, but noted 
FDA should examine ways to obtain more information  that in most cases it did not have the resources to 
about the performance of non-U.S. Institutional  implement the recommendations.  OHRP concurs with 
Review Boards (IRBs) and help those inexperienced  the recommendations and emphasized that its new 
IRBs build their capacities; encourage all non-U.S.  Office of International Activities will serve as a focal 
investi- gators participating in research to sign  point and coordinating center for the Departments 
attestations upholding human subject protections; and  efforts to improve human subject protection.  FDA has 
develop a database to track the growth and location of  also contributed to international guidance, standards-
foreign research. OHRP should exert leadership in  development, and training through World Health 
developing strategies to ensure adequate human subject  Organization, Pan American Health Organization, and 
protections for non-U.S. clinical trials funded by the  several foreign regulatory authorities. 
Federal Government and those that contribute data to 
new drug applications. (OEI-01-00-00190) 
Managed Care Organizations Reporting to the  Under contract to HRSA, PricewaterhouseCoopers 
National Practitioner Data Bank:  recently completed a  study on hospital and managed 
The Agency for Healthcare Research and Quality  care reporting to the NPDB. The study recommended 
should devote attention to the kind of educational and  that HRSA should try to facilitate reporting by: 
remedial efforts that could be directed to practitioners  seeking legislative authority and funding for 
who have been experiencing performance problems.  conducting compliance reviews of clinical privileges 
HRSA should conduct an outreach program to inform  reporting including authority to access peer review 
managed care organizations of their reporting  records; developing a strategy for communicating key 
responsibilities, and CMS should examine its  stakeholders including trade associations and accrediting 
practitioner monitoring systems.   organizations (AMA, AHA, etc.); linking communica 
(OEI-01-99-00690)  tion strategies to quality of care and patient safety 
initiatives; consider focus groups as a vehicle for 
garnering support for the NPDB. HRSA did not agree 
with the recommendation to do compliance reviews; 
however, HRSA has taken steps to implement the other 
recommendations.  HRSA and AHRQ plan to address 
outreach issues at a conference in the Fall of 2004. 
70  APPENDIX C 
Administration for Children and Families 
Child Support Orders for Low-Income 
Noncustodial Parents:  ACF is helping 9 States test approaches to serving 
ACFs Office of Child Support Enforcement should  young, never-married fathers who may have obstacles 
work with States to emphasize parental responsibility  to employment and who do not have a child support 
and improve the ability of low-income noncustodial  order. ACF has granted a contract to determine how 
parents to meet their obligations.  ACF should facilitate  computerized income data can be used by local child 
and support State experiments to test the payment  support offices to independently verify the income of 
effects of using various periods of retroactivity in  noncustodial parents and be used in the establishment 
determining the amount of support owed; facilitate and  or modification of child support orders where income 
support State experiences to test negotiating child  documentation or verification is lacking or incomplete. 
support debt owed to the States in exchange for 
improved payment compliance.  (OEI-05-99-00391) 
General Oversight 
Cost Principles for Federally Sponsored Research 
Activities:  The Department circulated several draft iterations 
The Department should modernize and strengthen cost  of the hospital cost principles to internal users for 
principles applicable to hospitals by either revising  comment.  Many of the policies in the outdated 
existing guidelines to conform with Office of  document have been updated in the draft regulation. 
Management and Budget (OMB) Circular A-21 or  The target date for issuing the draft regulation as a 
working with OMB to extend Circular A-21 coverage  notice of proposed rulemaking is December 31, 2004. 
to all hospitals. (A-01-92-01528)  Once the formal notice and rulemaking process is 
complete, the updated cost principles will be issued. 
71
 72
 Appendix D 
Notes to Tables 1 and 2 
Notes to Table 1 
1 The opening balance was adjusted downward $9.8 million.

2 During the period, revisions to previously reported management decisions included:

CIN: A-04-01-01009  Assistance at USF: Grantee withdrew its appeal and the recommended dollar 
amount of $2,104,603 was sustained. 
CIN: A-05-03-00015  Review of Ineligible SNF Payments Processed at BCBS of Tennessee: CMS 
determined that it is not appropriate to recover overpayments since the ineligible 
payments totaling $11.6 million were not the fault of the skilled nursing facility. 
CIN: A-05-02-00088  Review of Ineligible SNF Payments Processed at Palmetto GBA: 
CMS determined that it is not appropriate to recover overpayments since the 
ineligible payments totaling $14.1 million were not the fault of the skilled 
nursing facility. 
Not detailed are revisions to previously disallowed management decisions totaling $11.1 million. 
3Included are management decisions to disallow $7.5 million that was identified in non-Federal audit 
reports. 
4During this reporting period, DCAA did not issue reports with monetary recommendations. 
5A. 
Due to administrative delays, many of which are beyond management control, resolution of the 
following 375 audits was not completed within 6 months of issuance; however, based upon 
discussions with management, resolution is expected before the end of the next semiannual 
reporting period: 
CIN: A-04-00-02171  REV. AL MEDICAID INTERGOVERMENTAL TRANSFERS-HOSP. ENHANC, MAY 2001,  
$236,983,528 
CIN: A-06-00-00041  INCORRECTLY REPORTED PPS TRANSFERS-CMS/OIG PROJECT, NOVEMBER 2001,  
$163,900,000 
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DSH PROGRAM FOR FY 1998, MAY 2003,  
$128,269,448 
CIN: A-06-00-00056  MEDICAID DRUGS-REVIEW OF REPACKAGED DRUGS EX FROM, MARCH 2001,  
$108,000,000 
CIN: A-04-99-05561  AUDIT ADMIN COST PROPOSALS FY95-98, BCBSFL, JAX, JULY 2002,  $101,671,328 
CIN: A-09-02-00071  AUDIT OF CA DSH PROGRAM FOR FY 1998 - LA COUNTY, MAY 2003, $98,190,042 
CIN: A-04-00-01220  IMPLE. MEDICARES POSTACUTE CARE TRANSFER POLICY, OCTOBER 2001, 
$52,311,082 
CIN: A-01-00-00538  NATIONAL IDENTIFICATION OF SNF CONSOLIDATED BILLNG, JUNE 2001,  $47,633,686 
CIN: A-05-02-00083  REVIEW OF INELIGIBLE SNF PAYMENTS PROCESSED AT MUTUAL OF OMAHA, 
MARCH 2003, $41,500,000 
73  APPENDIX D 
CIN: A-07-01-02093  MISSOURI DSH - UNALLOWABLE COSTS, AUGUST 2002, $36,200,000 
CIN: A-01-00-00509  M/C PART B PMTS FOR DME PROVIDED TO SNF PATIENTS, JULY 2001,  $35,000,000 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID SCHOOL BASED 
HEALTH SERVICES - CT, MAY 2003, $32,780,146 
CIN: A-02-01-01037  REVIEW OF DUPLICATE DHS PAYMENTS TO NEW JERSEY ACUTE CARE HOSPITALS, 
FEBRUARY 2003, $30,420,823 
CIN: A-05-02-00086  REVIEW OF INELIGIBLE SNF PAYMENTS PROCESSED AT ADMINASTAR FEDERAL, 
MARCH 2003, $25,300,000 
CIN: A-05-02-00087  REVIEW OF INELIGIBLE SNF PAYMENTS PROCESSED AT UNITED GOVERNMENT 
SERVICES, MARCH 2003, $23,300,000 
CIN: A-10-01-00001  REVIEW OF WA COMPLIANCE W/MEDICAID HOSP DSH PYMT, OCTOBER 2002,  
$23,291,531 
CIN: A-07-01-00125  TRANSAMERICA (TOLIC) - PENSION SEGMENT CLOSING AUDIT, MAY 2002, 
$20,227,001 
CIN: A-03-01-00224  MEDICAID SCHOOL-BASED SERVICES/MARYLAND, MARCH 2003,  $19,954,944 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE HOSPITAL 
PAYMENTS FOR FY 1998, SEPTEMBER 2002,  $19,446,435 
CIN: A-06-00-00051  AUDIT OF MEDICARE REHAB AGENCY COSTS IN TX, RHS, I, JUNE 2001,  $18,394,465 
CIN: A-05-01-00052  DME REVIEW IN INDIANA, OCTOBER 2001, $16,377,560 
CIN: A-05-94-00064  MI BLUE CROSS/BLUE SHIELD, AUDIT OF ADMIN COSTS, JUNE 1996,  $15,609,718 
CIN: A-06-01-00035  COLLECTION OF AFDC OVERPAYMENTS, JANUARY 2002, $13,800,000 
CIN: A-01-01-02502  REVIEW OF UNCOLLECTED AFDC OVERPAYMENTS, AUGUST 2001,  $12,400,000 
CIN: A-07-96-01176  MEDICARE EXCESS PENSION ASSETS - BC MICH, NOVEMBER 1996,  $11,904,263 
CIN: A-05-02-00031  AFDC OVERPAYMENTS - WISCONSIN, AUGUST 2002, $10,711,338 
CIN: A-01-01-00513  MEDICARE PT B PMT FOR DME I/P PRTL MNTH STAYS SNF, OCTOBER 2001, 
$10,500,000 
CIN: A-05-03-00022  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTARTIVE 
RESPONSIBILITY OF EMPIRE BLUE CROSS, MAY 2003,  $9,700,000 
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PYMTS @ SCOTT & WHITE, 
MAY 2003, $8,229,574 
CIN: A-05-03-00026  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF CARE FIRST (MARYLAND), MARCH 2003,  $8,100,000 
CIN: A-09-01-00085  AUDIT OF UCSDMC DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FOR SFYE 
1998, SEPTEMBER 2002, $7,999,212 
CIN: A-09-97-44262  STATE OF CALIFORNIA, APRIL 1997, $7,300,000 
CIN: A-07-02-03033  CAREFIRST SEGMENTATION AUDIT, MAY 2003, $6,788,644 
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM - NATIONAL, MARCH 1993,  $6,529,545 
CIN: A-03-01-00222  MEDICAL COLLEGE OF VIRGINIA/DSH/MEDICAID, APRIL 2003,  $6,324,796 
CIN: A-05-03-00035  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF VERITUS MEDICARE SERVICES, JULY 2003,  $6,300,000 
CIN: A-03-99-00052  ALLEGHENY/CHESAPEAKE ORF, SEPTEMBER 2001,  $5,540,344 
CIN: A-04-00-02161  MEDICAID SCHOOL-BASED SERVICES IN NORTH CAROLINA, NOVEMBER 2001, 
$5,344,160 
CIN: A-07-99-02537  BLUE CROSS & BLUE SHIELD OF MASSACHUSETTS, NOVEMBER 1999,  $5,270,461 
CIN: A-05-96-00058  CLOSE-OUT AUDIT OF MEDICARE CONTRACT-BCBS-MI, DECEMBER 1997,  $5,226,443 
CIN: A-01-00-00506  DIAGNOSIS-RELATED GROUP PAYMENT WINDOW, JULY 2001,  $5,042,207 
CIN: A-01-97-00516  ADMIN. COSTS-PART A&B, RAILROAD RETIRE BOARD, JUNE 1999,  $4,939,184 
CIN: A-03-01-00226  UVA MEDICAL CENTER/DSH/MEDICAID/VIRGINIA, MAY 2003,  $4,760,385 
CIN: A-05-01-00023  ADMINISTRATIVE COSTS REVIEW - ADMINASTAR FEDERAL, JANUARY 2002, 
$4,694,863 
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL, MARCH 2002, $4,505,051 
CIN: A-07-98-01263  DENVER CMHC, MAY 2000, $4,447,607 
CIN: A-07-02-00144  IV-E FOSTER CARE ADMINISTRATIVE COSTS CLAIMED, AUGUST 2003,  $4,335,542 
CIN: A-07-00-00108  RURAL HEALTH CENTER REVIEW, OCTOBER 2001,  $4,088,929 
CIN: A-05-01-00068  PARTNERSHIP PLAN - ILLINOIS PHYSICIAN BILLING-FAMILY DYNAMICS, JULY 2002, 
$3,790,846 
CIN: A-02-02-01014  UNLICENSED PROVIDERS IN PUERTO RICO, SEPTEMBER 2003,  $3,607,820 
74
 APPENDIX D 
CIN: A-04-01-05002  AUDIT MEDICAID PAYMENTS FOR CLINICAL LABORATORIES, JANUARY 2002, 
$3,522,639 
CIN: A-02-95-01019  STAFF BUILDERS HOME OFFICE MEDICARE COST REV. ORT, AUGUST 1998, 
$3,434,274 
CIN: A-07-99-01283  HMO - AFTER DEATH PAYMENTS, FEBRUARY 2000, $3,250,000 
CIN: A-07-99-01298  DATE OF DEATH - 2, MAY 2001, $3,200,000 
CIN: A-05-98-00042  ADMINISTAR INS. CO. - ADMIN. COSTS AUDIT, SEPTEMBER 1999,  $3,111,728 
CIN: A-06-99-00057  AUDIT OF MEDICARE REHAB AGENCY SERVICES IN TX, RHS, IN, JANUARY 2001, 
$3,097,201 
CIN: A-09-02-00061  REVIEW OF MEDICAL CLAIMS FOR PRIVATE IMD PATIENTS, DECEMBER 2002, 
$3,083,389 
CIN: A-07-02-03007  COSTS CLAIMED FOR POST RETIREMENT BENEFITS BY TOLIC, MAY 2002,  $3,060,873 
CIN: A-05-93-00013  MI-BLUE CROSS/BLUE SHIELD-CONTRACT MEDICARE AUDIT, APRIL 1993,  $3,010,916 
CIN: A-09-98-50183  STATE OF CALIFORNIA, MARCH 1998,  $3,000,000 
CIN: A-01-02-00009  MEDICAID PAMYENTS FOR SCHOOL-BASED HEALTH SERVICES - MASSACHUSETTS 
DEPARTMENT OF MEDICAL ASSISTANCE - JUL 1999 - JUNE 2001, JULY 2003, 
$2,997,268 
CIN: A-01-96-00508  MEDICARE ADMIN COSTS PARTS A&B AND RRB - TRAVELERS, MARCH 1996, 
$2,803,260 
CIN: A-07-03-03039  CAREFIRST OF MARYLAND UNFUNDED PENSION COSTS, MAY 2003,  $2,611,100 
CIN: A-06-02-00038  CAPITATION PYMTS MADE UNDER NM MEDICAID PROGRAM, MARCH 2003, 
$2,600,000 
CIN: A-05-97-00005  ADMINISTRATIVE COSTS CLAIMED UNDER MEDICARE A & B, FEBRUARY 1998, 
$2,569,067 
CIN: A-07-92-00579  BC/BS OF MICHIGAN INC - UNFUNDED PENSION COSTS, OCTOBER 1992,  $2,535,698 
CIN: A-05-92-00026  ASSOCIATED INSURANCE CO. - MEDICARE ADMIN, FEBRUARY 1992,  $2,530,409 
CIN: A-09-02-72300  STATE OF CALIFORNIA , JULY 2002,  $2,400,000 
CIN: A-05-03-00062  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE ADMINISTRATIVE 
RESPONSIBILITY OF NORIDIAN MUTUAL INSURANCE COMPANY, JUNE 2003, 
$2,400,000 
CIN: A-02-91-01006  BLUE SHIELD OF WESTERN NY MEDICARE ADM CTS PORTER, SEPTEMBER 1991, 
$2,379,239 
CIN: A-04-00-01209  OUTPATIENT PSYCHIATRIC SERVICES AT HOLLYWOOD PAV. HOSP, APRIL 2001, 
$2,366,287 
CIN: A-02-03-70760  PUERTO RICO DEPT. OF THE FAMILY, MAY 2003,  $2,350,100 
CIN: A-03-99-00038  EDGEWATER PSYC HOSPITAL, MARCH 2001, $2,348,604 
CIN: A-06-01-00083  AUDIT OF MEDICAID SCHOOL-BASED SERVICES IN OKLAHOMA, APRIL 2003, 
$2,332,774 
CIN: A-04-97-01166  REV. HOME Health SERVICES BY STAFF BUILDERS HOME HEALTH, APRIL 1999, 
$2,300,000 
CIN: A-07-97-01247  DUPLICATE PAYMENTS - HMO/FFS, OCTOBER 1999,  $2,300,000 
CIN: A-10-02-00008  REVIEW OF WASHINGTON STATE'S MEDICAL ASSISTANCE COSTS CLAIMED FOR 
SCHOOL-BASED HEALTH SERVICES, JULY 2003,  $2,279,752 
CIN: A-04-02-07007  MEDICAID FEE FOR SERVICE PAYMENTS FOR DUALLY ELIGIBLE MEDICARE 
MANAGED CARE ENROLLEES, FEBRUARY 2003, $2,231,100 
CIN: A-04-97-01170  REVIEW HOME HEALTH SERVICES BY MEDICARE HOME HEALTH SERVICES, APRIL 
1999, $2,200,000 
CIN: A-02-03-74060  PUERTO RICO DEPT. OF THE FAMILY, JULY 2003,  $2,180,261 
CIN: A-09-01-00056  PACIFICARE-CALIFORNIA JAN 1998 INSTITUTIONAL PMTS, SEPTEMBER 2001, 
$2,158,577 
CIN: A-04-00-02162  REVIEW TREATMENT OF QUALIFIED DISCHRGS @ FCSO, FEBRUARY 2001,  $2,042,060 
CIN: A-07-01-03001  BCBS OF MN PENSION SEGMENT CLOSING, JANUARY 2003,  $2,003,341 
CIN: A-05-00-00034  PROVENA ST. JOSEPH HOSPITAL-O/P PSYCH SERVICES, NOVEMBER 2000,  $1,978,583 
CIN: A-05-02-00048  REVIEW OF MEDICAID DME CLAIMS - TEXAS, SEPTEMBER 2002,  $1,969,704 
CIN: A-04-97-01169  REVIEW HOME HEALTH SERVICES BY MEDTECH HOME HEALTH SERVICES, APRIL 
1999, $1,900,000 
75
 APPENDIX D 
CIN: A-01-03-00500  HOME HEALTH PPS SYSTEM CONTROLS 14 DAY PAYMENT - WHEN PRECEDED BY A 
HOSPITAL DISCHARGE, JULY 2003, $1,861,857 
CIN: A-01-02-72211  STATE OF CONNECTICUT , JUNE 2002, $1,860,148 
CIN: A-02-02-01005  HORIZON BLUE CROSS BLUE SHIELD - REVIEW OF TERMINATION COST, JANUARY 
2003, $1,832,896 
CIN: A-05-97-00014  GROUP HEALTH PLAN INC.(HEALTHPARTNERS) INST. BENES, JUNE 1998,  $1,808,308 
CIN: A-06-02-00012  CONSOLIDATION OF UNIV HOSP & MEDICAL CNTR OF LA @ NEW ORLEANS, JUNE 
2003, $1,800,000 
CIN: A-05-95-00059  AUDIT OF ADMINISTRATIVE COSTS - BCBS MICHIGAN, JANUARY 1997,  $1,787,345 
CIN: A-01-02-00516  REVIEW OF POTENTIALLY EXCESSIVE MEDICARE PAYMENTS FOR OUTPATIENT 
SERVICES UNITED GOVERNMENT SERVICES, MARCH 2003,  $1,768,783 
CIN: A-09-00-00127  BLUE CROSS OF CALIF - MEDICARE ADMIN COSTS, DECEMBER 2002,  $1,677,822 
CIN: A-03-00-00007  REVIEW OF 1-DAY DISCHARGES- PA., APRIL 2001,  $1,649,411 
CIN: A-04-99-01196  OIG - HCFA JOINT REVIEW OF JMV MEDICAL CORP., DECEMBER 2000,  $1,600,417 
CIN: A-03-00-00215  ANNABURG MANOR NURSING HOME COST REPORT, MARCH 2002, $1,582,079 
CIN: A-03-96-00012  BCBSM PT-B NON-RENEWAL COSTS, AUGUST 1998,  $1,557,459 
CIN: A-04-01-05011  REVIEW OF FLORIDA MEDICAID PAYMENTS FOR SERVICES PROVIDED TO INMATES, 
OCTOBER 2002, $1,450,077 
CIN: A-05-93-00057  MI-BLUE CROSS & BLUE SHIELD OF MI-CONTRACT AUDIT, JULY 1993,  $1,409,954 
CIN: A-07-02-03022  WELLMARK PENSION SEGMENT CLOSING, MARCH 2003,  $1,353,036 
CIN: A-05-95-00042  BCBSA ADMINISTRATIVE COSTS - CONTRACTED AUDIT, DECEMBER 1995,  $1,333,598 
CIN: A-04-03-02024  REVIEW OF BCBSFL RESPONSE TO SET-ASIDE COSTS IN PRIOR FACP AUDIT, APRIL 
2003, $1,277,247 
CIN: A-05-01-00064  REVIEW OF OUTPATIENT REHABILITATION CLAIMS REIMBURSED BY MEDICARE 
DURING CALENDAR YEAR 1999, FEBRUARY 2002,  $1,235,892 
CIN: A-02-02-01022  REVIEW OF TRANSPORTATION CLAIMS MADE BY SPECIAL SERVICE SCHOOL 
DISTRICTS, APRIL 2003, $1,223,426 
CIN: A-03-01-00251  AFDC OVERPAYMENTS - VIRGINIA, MARCH 2003,  $1,221,494 
CIN: A-04-02-72903  STATE OF TENNESSEE , SEPTEMBER 2002,  $1,213,353 
CIN: A-05-00-00004  NEW CENTER COMMUNITY MENTAL HEALTH CENTER, JUNE 2000,  $1,181,000 
CIN: A-05-00-00049  PARTNERSHIP PLAN - IL HOSPITAL TRANSFERS, JUNE 2001,  $1,150,113 
CIN: A-02-97-01026  EDDY VNA (#337152) HHA ELIGIBILITY REVIEW, SEPTEMBER 1999, $1,131,593 
CIN: A-05-98-00050  FOLLOW-UP MEDICAID CLINICAL LABORATORIES, JULY 1999,  $1,097,036 
CIN: A-02-94-01029  HOSPICE ELIGIBILITY RVW IN PR - SAN GERMAN - ORT, JUNE 1995,  $1,070,814 
CIN: A-09-98-00052  CALIFORNIA MEDICAL REVIEW INC. (CA. PRO), JANUARY 1999,  $1,067,991 
CIN: A-05-94-00047  NATIONWIDE INS., MEDICARE PART B ADMIN. COSTS, SEPTEMBER 1995,  $1,049,309 
CIN: A-05-01-00037  BC/BS OF MN. ADMIN COSTS - LEON SNEAD & CO., JUNE 2001,  $1,037,090 
CIN: A-01-98-00500  PAYMENT EDITS FOR PSYCHIATRIC AT MA PART B CARRIER, SEPTEMBER 1998, 
$1,000,000 
CIN: A-09-94-01010  CLOSEOUT AUDIT - CONT NO. N01-ES-75196 (STRATAGENE), MARCH 1994,  $983,208 
CIN: A-06-02-00027  TEXAS MEDICARE BAD DEBT COLLECTIONS, OCTOBER 2002, $919,331 
CIN: A-05-92-00060  CONTRACTOR AUDIT - BCBS - ADMIN, FEBRUARY 1993, $879,609 
CIN: A-02-97-01034  DR. PILA FOUNDATION HOME CARE PRORAM (PONCE), SEPTEMBER 1999,  $857,208 
CIN: A-07-98-02533  TRAVELERS FACP, DECEMBER 1998, $854,214 
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES, MARCH 2002,  $836,711 
CIN: A-02-98-01040  NIAGARA CTY DEPT. OF HEALTH-#337001-HHS ELIG REVIEW, DECEMBER 1999, 
$807,679 
CIN: A-09-01-00094  PACIFICARE CORPORATE JANUARY 1998 MEDICARE INSTITUTIONAL STATUS, 
FEBRUARY 2002, $786,003 
CIN: A-07-99-00981  ASSIST REVIEW OF MEDICARE A/R HCFA RO DENVER, JANUARY 2000,  $754,926 
CIN: A-06-01-00027  REVIEW PALMETTOS HH-PPS RAP POLICIES & PROCEDURES, SEPTEMBER 2001, 
$743,917 
CIN: A-05-02-00041  INDIANA MEDICAID HOSPITAL PATIENT TRANSFERS, JANUARY 2003, $730,061 
CIN: A-09-00-00103  PACIFICARE HMO - MEDICARE DUAL ELIGIBLES, MAY 2001, $720,858 
CIN: A-07-02-03035  COSTS CLAIMED FOR PRBS BY WELLMARK, FEBRUARY 2003,  $717,106 
CIN: A-09-97-00078  PHYSICIAN BILLINGS DR. SPENCER, JANUARY 1999, $683,264 
CIN: A-06-01-00090  PREAWARD-APASS MAINTAINER DATA PROCESSING SERVICES - ABCBS, 
SEPTEMBER 2001, $678,651 
76
 APPENDIX D 
CIN: A-05-00-64226  NA-ILLINOIS DEPT. OF PUBLIC AID, MAY 2000, $654,017 
CIN: A-01-98-00503  PSYCHIATRIC OUTPT SERVICES AT THE FRANKLIN MED CENTER, NOVEMBER 1998, 
$646,517 
CIN: A-01-99-00535  AUDIT OF M/C PART A ADMIN COSTS - ANTHEM BC/BS CT, AUGUST 2000,  $621,256 
CIN: A-07-03-02660  REVIEW OF MULTIPLE PROCEDURES IN THE SAME SESSION NHIC - CAL, JANUARY 
2003, $618,273 
CIN: A-04-00-00138  MEDICAID ESCHEATED WARRANTS - FLORIDA, JANUARY 2002,  $613,891 
CIN: A-02-02-01025  NEW YORK NURSING HOME DUPLICATE PAYMENTS, SEPTEMBER 2003,  $606,403 
CIN: A-06-98-00066  ORT REVIEW OF ULTIMATE HOME HEALTH CARE INC., OCTOBER 1999,  $602,982 
CIN: A-04-94-01078  MONITORING ADMIN COST - AUDIT MEDICARE P.B BCBSSC, JULY 1994, $594,092 
CIN: A-09-01-00083  MEDICARE PART B SERVICES BILLED BY DR FARB, MAY 2003,  $593,177 
CIN: A-04-93-01069  MONITORG ADMIN COST AUDIT MCARE PART A BCBSSC, JULY 1994,  $590,844 
CIN: A-04-01-01007  GABCBS MEDICARE PART A ADMINISTRATIVE COST AUDIT, NOVEMBER 2001, 
$575,471 
CIN: A-09-01-00055  REVIEW OF IMD CLAIMS - STATE OF CALIFORNIA, MARCH 2002,  $551,394 
CIN: A-07-02-03015  BCBS OF MN PENSION COSTS CLAIMED FOR MEDICARE REIMBURSEMENT, 
FEBRUARY 2003, $550,083 
CIN: A-05-02-72811  COMMUNITY ACTION OF GREATER INDIANAPOLIS INC. , AUGUST 2002,  $547,899 
CIN: A-07-02-03029  WELLMARK - PENSION COSTS CLAIMED FOR MEDICARE REIMBURSEMENT, 
FEBRUARY 2003, $547,053 
CIN: A-05-00-00011  LIBERTYVILLE MANOR SNF - THERAPY SERVICES, SEPTEMBER 2001,  $506,937 
CIN: A-05-99-00062  AMERICARE PHYSICAL THERAPY SERVICES, DECEMBER 2000,  $503,619 
CIN: A-09-99-56858  HAWAII DEPT. OF HUMAN SERVICES, FEBRUARY 1999, $502,000 
CIN: A-03-92-16229  STATE OF PENNSYLVANIA, MARCH 1992, $496,876 
CIN: A-02-02-01004  MEDICAID PPS TRANSFERS, MAY 2003, $493,158 
CIN: A-05-02-72298  STATE OF WISCONSIN, AUGUST 2002, $491,120 
CIN: A-01-02-73084  STATE OF MAINE, SEPTEMBER 2002, $489,321 
CIN: A-05-01-67384  MICHIGAN DEPT. OF COMMUNITY HEALTH , FEBRUARY 2001, $481,693 
CIN: A-07-03-03037  SERP COSTS CLAIMED BY BCBS OF MA, APRIL 2003, $444,413 
CIN: A-05-03-74102  STATE OF OHIO, MARCH 2003, $439,556 
CIN: A-07-01-00120  REVIEW OF UNFUNDED PENSION COSTS AT BCBS OF OK, JULY 2001,  $413,800 
CIN: A-04-03-74904  EAST COAST MIGRANT HEAD START PROJECT, FEBRUARY 2003,  $394,443 
CIN: A-02-01-67912  STATE OF NEW YORK, MARCH 2001, $389,536 
CIN: A-05-00-00030  CONTRACTED AUDIT - NATIONWIDE INS .- MEDICARE ADMIN., OCTOBER 2000, 
$385,081 
CIN: A-04-00-01208  OUTPATIENT CLINIC COSTS, CORAL GABLES HOSPITAL, FL, FEBRUARY 2001, 
$384,295 
CIN: A-06-03-75545  STATE OF LOUISIANA, MAY 2003, $374,003 
CIN: A-04-02-02014  MEDICAID CLAIMS FOR IMD RESIDENTS UNDER AGE 21, FEBRUARY 2003,  $362,931 
CIN: A-06-01-00087  AUDIT OF OBSERVATION SERVICE BILLING BY PRESBYTERIAN HOSPITAL OF 
DALLAS, JUNE 2002, $361,832 
CIN: A-05-02-70413  SOKAOGON CHIPPEWA COMMUNITY MOLE LAKE BAND, JUNE 2002,  $345,125 
CIN: A-07-03-02653  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION BC/BS ARKANSAS, 
JANUARY 2003, $344,883 
CIN: A-01-03-76134  UNIV. OF MASSACHUSETTS, AUGUST 2003, $338,877 
CIN: A-10-01-00005  AUDIT OF ADMIN COSTS AT MEDICARE NORTHWEST, SEPTEMBER 2001,  $332,274 
CIN: A-07-01-02630  REVIEW OF MUTUALS SETTLEMENT OF HHA COST REPORTS, JANUARY 2002, 
$319,949 
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES, MAY 2002, 
$319,355 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN, MARCH 2003, 
$315,474 
CIN: A-03-03-72652  NATIONAL ASSOCIATION FOR EQUAL OPPORTUNITY IN HIGH, OCTOBER 2002, 
$313,256 
CIN: A-02-02-01026  NEW JERSEY PARTNERSHIP - NURSING HOME DAY CARE SERVICES, MARCH 2003, 
$309,500 
CIN: A-06-01-00028  AUDIT OF OBSERVATION SERVICE BILLINGS BY PPS HOSPITALS, FEBRUARY 2002, 
$298,549 
77
 APPENDIX D 
CIN: A-05-96-00069  CPA AUDIT OF HOOPER HOLMES HHA G&A - OI CASE OPEN, FEBRUARY 1998, 
$280,515 
CIN: A-06-97-00015  NEW MEXICO PRO CLOSE OUT AUDIT, SEPTEMBER 1999,  $268,844 
CIN: A-09-94-30178  STATE OF ARIZONA, JUNE 1994, $267,021 
CIN: A-09-00-00089  COMMUNITY URGENT CARE MEDICAL GROUP, NOVEMBER 2001, $266,236 
CIN: A-05-02-00047  UNITED GOVERNMENT SERVICES, MEDICARE PART A ADMIN. COSTS FY 1999-2001, 
JUNE 2003, $260,831 
CIN: A-07-03-02662  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION NORDIAN, 
DECEMBER 2002, $258,112 
CIN: A-02-03-04001  AUDIT OF RUTGERS CONTRACT NO. SPO 103-96-D-0016/0001, AUGUST 2003,  $249,381 
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL BENEFICIARIES, 
OCTOBER 2002, $229,656 
CIN: A-04-00-01222  CAPITAL HEALTH PLAN, COST-BASED MANAGED CARE PLAN, SEPTEMBER 2001, 
$221,952 
CIN: A-01-00-00549  BETH ISRAEL AUDIT OF OUTPATIENT PHARMACY SVC, MARCH 2001,  $221,905 
CIN: A-05-99-00067  WPS PART B ADMINISTRATIVE COSTS, NOVEMBER 2000,  $221,644 
CIN: A-01-01-00523  REVIEW OF OUTPATIENT PHARMACY SERVICES AT NOBLE HOSPITAL, NOVEMBER 
2001, $216,797 
CIN: A-02-01-65217  PUERTO RICO DEPT. OF THE FAMILY, DECEMBER 2000,  $213,264 
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT, OCTOBER 2002, $208,271 
CIN: A-06-96-00064  ORT SNF RESEARCH AT METHODIST HOSPITAL, JANUARY 1997,  $200,000 
CIN: A-07-01-02631  REVIEW OF HOSPITAL OBSERVATION BEDS, MAY 2002, $197,773 
CIN: A-07-03-02656  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION KANSAS, DECEMBER 
2002, $190,106 
CIN: A-03-01-00555  PDPI INC. - HEAD START, JUNE 2001, $185,577 
CIN: A-07-02-03016  TRANSAMERICA SUPPLEMENTAL PENSION PLAN COSTS, MARCH 2002,  $180,244 
CIN: A-05-02-73374  STATE OF OHIO, SEPTEMBER 2002, $179,797 
CIN: A-02-03-75530  COMMUNITY ACTION PLANNING COUNCIL OF JEFFERSON COU, AUGUST 2003, 
$166,959 
CIN: A-10-01-00006  REVIEW OF OREGON MEDICAID SCHOOL BASED HEALTH SERVICES  
REIMBURSEMENT OF DIRECT SERVICES, AUGUST 2002,  $166,671 
CIN: A-07-01-02094  SURVEY OF OUTPATIENT OBSERVATION SERVICES, OCTOBER 2002,  $165,125 
CIN: A-07-03-74746  GRACE HILL SETTLEMENT HOUSE, APRIL 2003, $159,617 
CIN: A-03-98-00034  FREESTATE HP/INSTITUTIONAL STATUS/MEDICARE, MARCH 1999,  $156,987 
CIN: A-06-03-75523  UNITED STATES-MEXICO BORDER HEALTH ASSOCIATION, JUNE 2003,  $152,465 
CIN: A-01-02-01504  REVIEW OF CDCS HIV PROGRAMS AT FENWAY COMMUNITY HEALTH CENTER, 
JUNE 2003, $151,912 
CIN: A-01-02-00515  REVIEW OF MEDICARE BAD DEBTS AT THE BAYSTATE MEDICAL CENTER, 
JANUARY 2003, $151,787 
CIN: A-09-01-00084  VISTA DEL MAR NEPHROLOGY GROUP, NOVEMBER 2001, $151,566 
CIN: A-01-02-00524  REVIEW OF OUTPATIENT HOSPITAL/INDEPENDENT AMBULATORY SURGICAL 
CENTER AND PHYSICIAN CODING FOR AMBULATORY SURGERIES, JULY 2003, 
$146,000 
CIN: A-07-03-02664  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION TRAILBLAZERS, 
DECEMBER 2002, $140,202 
CIN: A-08-03-74616  OGLALA SIOUX TRIBAL DEPT. OF PUBLIC SAFETY, MARCH 2003,  $136,764 
CIN: A-09-99-52846  INTER-TRIBAL COUNCIL OF CALIFORNIA INC., FEBRUARY 1999,  $136,360 
CIN: A-02-98-01002  IPRO CLOSEOUT AUDIT - CPA CONTRACT MONITORING, DECEMBER 1998,  $135,492 
CIN: A-05-00-00060  MEDICA FOLLOW-UP, REIMB. RATES FOR INSTITUTIONAL BENEFICIARIES, JUNE 
2001, $133,795 
CIN: A-06-00-00014  REV OF INFUSION THERAPY CLAIMS @ DOCTORS HEALTHCAR, JUNE 2000,  $132,238 
CIN: A-07-02-00148  PAYMENTS FOR COVENTRY - K.C. FOR INSTITUTIONAL BENEFICIARIES, APRIL 2003, 
$132,000 
CIN: A-07-03-02661  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION NHIC, JANUARY 2003, 
$129,748 
CIN: A-02-01-04000  INTERIM AUDIT OF RUTGERS CONTRACT NO.SP0103-96-D-, JANUARY 2002,  $125,415 
CIN: A-05-01-00069  MERITER - MC/MA CREDIT BALANCES, JULY 2002, $122,713 
CIN: A-05-01-00091  PAYMENTS TO UNITED HC OF FLA FOR INSTITUTIONAL BENEFICIARIES, 
SEPTEMBER 2002, $121,023 
78
 APPENDIX D 
CIN: A-02-02-71384  STATE OF NEW YORK, MARCH 2002, $118,773 
CIN: A-05-97-00023  KAISER FOUNDATION - HMO INSTITUTIONAL STATUS PROJECT, APRIL 1998, 
$116,096 
CIN: A-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM, JANUARY 1998, 
$114,631 
CIN: A-09-02-71247  WATTSHEALTH FOUNDATION INC., APRIL 2002, $113,000 
CIN: A-03-01-00001  EASTERN SHORE AMBULANCE CO., AUGUST 2001, $110,417 
CIN: A-01-02-00527  REVIEW OF ANTHEM BLUE CROSS/BLUE SHIELD MEDICARE CONTRACT 
TERMINATION AND SEVERANCE COSTS, SEPTEMBER 2003,  $104,468 
CIN: A-01-02-01502  NORTHEASTERN UNIVERSITY DHHS CONTRACT COSTS, JUNE 2003,  $102,378 
CIN: A-02-99-58263  PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD, JULY 1999,  $101,199 
CIN: A-09-01-00080  NEPHROLOGY ASSOCIATES MEDICAL GROUP - RIVERSIDE, NOVEMBER 2001, 
$100,788 
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL BENEFICIARIES, JUNE 2002, 
$100,692 
CIN: A-07-03-02658  REVIEW OF MULTIPLE ASC PROCEDURES IN SAME SESSION EMPIRE, JANUARY 
2003, $100,600 
CIN: A-05-00-65775  STATE OF WISCONSIN, SEPTEMBER 2000, $98,586 
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS & COST REPORTS @ 
WELBORN, JUNE 2003, $97,623 
CIN: A-09-97-00066  WALTER MCDONALD - INDIRECT COST RATE AUDIT, MARCH 1998, $95,733 
CIN: A-01-99-00507  NAT-WIDE REF - OUTPATIENT PSYCH SVC AT ACUTE CARE HOSPITALS, MARCH 
2000, $94,716 
CIN: A-10-97-00003  BCWAAK-ADM COSTS REMOTE NETWORK ACTIVITIES FY93&94, FEBRUARY 1998, 
$94,643 
CIN: A-06-03-00021  CMS FY 02 MEDICARE ERROR RATE - TRAILBLAZER REPORT QTR 1 (NOV-DEC), JULY 
2003, $93,863 
CIN: A-04-02-02009  MEDICAID IMDS - PRIVATE FACILITIES IN FLORIDA, SEPTEMBER 2002,  $92,726 
CIN: A-07-95-01164  MEDICARE ADMIN COSTS - GENERAL AMERICAN, DECEMBER 1995,  $89,929 
CIN: A-06-00-00013  REVIEW OF INFUSION THERAPY CLAIMS @ SPRING CREEK N, JUNE 2000,  $89,288 
CIN: A-05-02-00074  IL PARTNERSHIP PLAN - TRANSPORTATION DURING AN INPATIENT STAY, APRIL 
2003, $89,147 
CIN: A-05-01-00090  PAYMENTS TO AETNA OF FOR INSTITUTIONAL BENEFICIARIES, JULY 2002,  $87,516 
CIN: A-07-00-00118  REVIEW OF KANSAS RURAL HEALTH CENTER, MAY 2001,  $87,493 
CIN: A-08-99-56914  RURAL AMERICA INITIATIVES, JULY 1999, $87,468 
CIN: A-04-01-01006  MBCBS MEDICARE PART A ADMINISTRATIVE COST AUDIT, NOVEMBER 2001, 
$87,042 
CIN: A-05-01-00071  PAYMENTS TO HUMANA - K.C. FOR INSTITUTIONAL BENEFICIARIES, DECEMBER 
2001, $84,808 
CIN: A-02-03-74061  PUERTO RICO DEPT. OF THE FAMILY, AUGUST 2003,  $80,001 
CIN: A-10-01-67562  KENAITZE INDIAN TRIBE, MARCH 2001,  $79,533 
CIN: A-04-01-02003  REVIEW FLORIDA MEDICAID CLAIMS - IMDS, MARCH 2002,  $78,880 
CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW ON MANAGED CARE ORGANIZATION, OCTOBER 
2002, $77,000 
CIN: A-01-99-00530  NATIONWIDE REV OF OUTPATIENT PSYCH SERVICES @ PSYCHIATRIC HOSPITALS, 
DECEMBER 2000, $75,413 
CIN: A-04-01-02008  ANCILLARY CLAIMS PAID FOR MEDICAID BENEFICIARIES WHILE IN IMDS, JULY 
2002, $71,406 
CIN: A-01-03-75448  STATE OF NEW HAMPSHIRE, APRIL 2003, $65,917 
CIN: A-08-03-74429  PORCUPINE CLINIC, JULY 2003, $65,027 
CIN: A-04-03-73667  MANATEE OPPORTUNITY COUNCIL INC., OCTOBER 2002, $63,321 
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PA FOR INSTITUTIONAL BENEFICIARIES, MAY 2002, 
$62,432 
CIN: A-05-99-00045  KAISER HEALTH PLAN OF OHIO - INSTITUTIONAL STATUS, MAY 2000,  $61,177 
CIN: A-05-02-72716  SOKAOGON CHIPPEWA COMMUNITY MOLE LAKE BAND, SEPTEMBER 2002,  $60,378 
CIN: A-05-96-00072  MI DEPT. OF COMMUNITY HEALTH/MEDICAID LAB SERVICES, AUGUST 1997,  $59,956 
CIN: A-06-01-68876  STATE OF LOUISIANA, JUNE 2001, $59,914 
CIN: A-01-96-00505  CFO AUDIT OF HCFAS FINANCIAL STATEMENTS, JULY 1997,  $59,327 
CIN: A-09-97-00059  HEALTH SERVICES ADVISORY GROUP, INC PRO-AZ, MAY 1997,  $57,925 
79
 APPENDIX D 
CIN: A-04-02-72118  STATE OF NORTH CAROLINA, MAY 2002, $52,912 
CIN: A-06-00-00053  OIG HCFA NEBULIZER PROJECT - NATIONAL ERROR RATE, OCTOBER 2001,  $52,550 
CIN: A-08-00-60687  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, NOVEMBER 1999,  $52,536 
CIN: A-04-02-68936  STATE OF TENNESSEE, JUNE 2002, $50,717 
CIN: A-01-02-00518  REVIEW OF OUTLIER PAYMENTS MADE TO MERCY HOSPITAL OF PORTLAND MAINE 
UNDER THE OUTPATIENT PPS, APRIL 2003, $50,280 
CIN: A-05-00-00059  TITLE XIX - MEDICAID ESCHEATED WARRANTS, MARCH 2001,  $50,162 
CIN: A-05-02-00054  UNITED GOVERNMENT SERVICES, Y2K COSTS FY 1998 & 1999, APRIL 2003,  $49,923 
CIN: A-09-95-00095  HEALTH SERVICES ADVISORY GROUP, INC (HSAG), DECEMBER 1995,  $49,585 
CIN: A-03-93-03306  SURVEY RESEARCH ASSOC. CACS NO1-ES-45067, DECEMBER 1993,  $48,779 
CIN: A-07-00-00106  PENSION SEGMENTATION AUDIT AT BCBS OF OKLAHOMA, JULY 2001,  $45,508 
CIN: A-09-99-52845  INTER-TRIBAL COUNCIL OF CALIFORNIA INC., FEBRUARY 1999,  $43,315 
CIN: A-09-99-57306  PICAYUNE RANCHERIA OF THE CHUKCHANSI INDIAN TRIBE, SEPTEMBER 1999, 
$43,159 
CIN: A-07-01-00121  REV. OF PEN. COSTS FOR MED. REIMB. FOR BCBS OF OK, JULY 2001,  $42,463 
CIN: A-01-02-71892  STATE OF VERMONT, APRIL 2002, $42,037 
CIN: A-03-99-00017  PSU-HERSHEY/PHY CREDIT BALANCES/MEDICARE, DECEMBER 1999,  $41,712 
CIN: A-01-03-01500  REVIEW OF CDC HIV PROGRAMS AT GREATER BRIDGEPORT ADOLESCENT 
PREGNANCY PROGRAM, JULY 2003, $41,088 
CIN: A-10-02-72331  IDAHO MIGRANT COUNCIL INC., JULY 2002, $40,541 
CIN: A-05-00-00017  INDIANA MEDICAID TRANSPORTATION SERVICES, MARCH 2001,  $39,735 
CIN: A-08-00-65136  STATE OF SOUTH DAKOTA, JUNE 2000, $36,380 
CIN: A-06-03-00020  CMS FY 02 MEDICARE ERROR RATE - TRAILBLAZER REPORT QTR 3 (APR-JUN), JULY 
2003, $35,474 
CIN: A-10-03-74366  FIRST A.M.E. CHILD & FAMILY CENTER, JANUARY 2003, $35,162 
CIN: A-02-00-65502  ABYSSINIAN DEVELOPMENT CORP., AUGUST 2000, $34,737 
CIN: A-09-01-00050  BALBOA NEPHROLOGY MEDICAL GROUP, APRIL 2001, $32,568 
CIN: A-06-03-74833  AMIGOS VOLUNTEERS IN EDUCATION & SERVICES INC. AV, APRIL 2003,  $31,180 
CIN: A-05-02-69155  STATE OF WISCONSIN, DECEMBER 2001, $30,900 
CIN: A-04-01-01005  REVIEW DUPLICATE MEDICARE FEE-FOR-SERVICE PAYMENTS AT CAPITAL HEALTH 
PLAN, NOVEMBER 2001, $30,293 
CIN: A-06-02-00018  GRADUATE MEDICAL EDUCATION COST AT METHODIST HOSPITAL IN HOUSTON, 
JUNE 2002, $30,230 
CIN: A-03-00-00209  STATE SURVEY AND CERTIFICATION COSTS - VA, AUGUST 2001,  $29,298 
CIN: A-01-02-71527  STATE OF MASSACHUSETTS, APRIL 2002, $29,260 
CIN: A-04-02-72213  STATE OF FLORIDA, JUNE 2002, $28,612 
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JANUARY 2003,  $28,573 
CIN: A-03-98-03301  AAUAP - INCURRED COST REVIEW - HHS 105-95-7011, APRIL 1998, $28,289 
CIN: A-10-02-69837  NATIVE VILLAGE OF TYONEK, DECEMBER 2001,  $26,848 
CIN: A-07-02-00150  PAYMENTS TO COVENTRY - PITTSBURG FOR INSTITUTIONAL BENEFICIARIES, JUNE 
2003, $26,000 
CIN: A-06-00-00020  REV OF INFUSION THERAPY CLAIMS @ VISTA CONTINUING, JUNE 2000,  $25,008 
CIN: A-06-02-70732  UNITED STATES-MEXICO BORDER HEALTH ASSOCIATION, JANUARY 2002,  $23,483 
CIN: A-04-03-03018  ASSIST AUDIT OF CMS FY 2002 FINANCIAL STMTS. AT PGBA, 4TH QTR. (JULY-SEPT. 
2001), APRIL 2003, $21,614 
CIN: A-06-02-71744  SENECA-CAYUGA TRIBE OF OKLAHOMA, MARCH 2002, $21,376 
CIN: A-04-00-01206  BCBSNC - MEDICARE PART A ADMIN COST AUDIT - CARMICHAEL, SEPTEMBER 
2000, $21,302 
CIN: A-05-01-00078  PAYMENTS TO HEALTH NET - TUCSON, AZ - FOR INSTITUTIONAL BENEFICIARIES, 
APRIL 2002, $21,233 
CIN: A-02-03-04004  CONTRACT CLOSING - NAS 9-19441, JULY 2003, $20,595 
CIN: A-05-02-72480  HANSEL NEIGHBORHOOD SERVICE CENTER INC., SEPTEMBER 2002, $20,266 
CIN: A-09-02-00092  CA MEDICARE SETTLEMENT OF CROSSOVER BAD DEBTS - MUTUAL OF OMAHA, 
JANUARY 2003, $20,248 
CIN: A-05-02-00079  MEDICAID FFS PAYMENTS FOR MEDICAID MANAGED CARE ENROLLEES, 
SEPTEMBER 2003, $20,165 
80
 APPENDIX D 
CIN: A-06-02-72610  STATE OF OKLAHOMA, AUGUST 2002, $19,992 
CIN: A-05-02-70624  STATE OF OHIO, JANUARY 2002, $19,970 
CIN: A-04-01-67441  CATAWBA INDIAN NATION, APRIL 2001, $19,204 
CIN: A-08-03-76453  WILLISTON PUBLIC SCHOOL DISTRICT NO. 1, SEPTEMBER 2003,  $18,929 
CIN: A-05-01-00100  PAYMENTS TO FALLON HEALTH FOR INSTITUTIONALIZED BENEFICIARIES, MAY 
2002, $18,842 
CIN: A-04-97-01163  VIMI MEDICARE PRO CONTRACT AUDIT, SEPTEMBER 1997,  $18,758 
CIN: A-05-01-00095  PAYMENTS TO HUMANA OF ARIZONA FOR INSTITUTIONAL BENEFICIARIES, JUNE 
2002, $18,645 
CIN: A-07-03-00151  REVIEW OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH INSTITUTIONAL 
STATUS, JUNE 2003, $18,400 
CIN: A-03-97-00007  NE HEALTH CARE QUALITY FOUNDATION/CCAS/N HAMPSHIRE, MARCH 1997, 
$17,045 
CIN: A-09-03-73329  CENTER FOR HEALTH TRAINING, APRIL 2003, $17,000 
CIN: A-07-00-00117  REV. OF PENSION COSTS FOR MED. REIMB. BC/BS OF ND, JANUARY 2001,  $16,863 
CIN: A-05-03-75408  MICHIGAN DEPT. OF COMMUNITY HEALTH, APRIL 2003, $16,645 
CIN: A-01-99-55594  STATE OF VERMONT, NOVEMBER 1998, $16,623 
CIN: A-01-97-44143  BRANDEIS UNIV., JANUARY 1997, $16,602 
CIN: A-06-01-68297  NATIVE AMERICAN CENTER OF RECOVERY INC., MAY 2001,  $16,314 
CIN: A-03-03-00006  CARDIAC REHABILITATION - WASHINGTON ADVENTISIT HOSPITAL, AUGUST 2003, 
$15,946 
CIN: A-10-00-59080  NORTON SOUND HEALTH CORP., DECEMBER 1999, $15,000 
CIN: A-05-01-00044  MINNESOTA MEDICAID PERSONAL CARE SERVICES REVIEW, APRIL 2002,  $14,844 
CIN: A-01-03-75589  STATE OF CONNECTICUT, JULY 2003, $14,605 
CIN: A-03-97-00008  NE HEALTH CARE QUALITY FOUNDATION/CCAS/VERMONT, MARCH 1997,  $14,596 
CIN: A-09-00-00104  PACIFICARE OF CALIFORNIA - INSTITUTIONAL STATUS, MARCH 2001,  $14,278 
CIN: A-05-03-73921  NATIONAL ASSOCIATION OF LOCAL BOARDS OF HEALTH, NOVEMBER 2002,  $13,317 
CIN: A-03-03-72847  DISTRICT OF COLUMBIA DEPT. OF HEALTH, OCTOBER 2002,  $12,850 
CIN: A-06-03-74511  SOUTHERN UNIV. SYSTEM, FEBRUARY 2003, $12,693 
CIN: A-08-03-74361  PORCUPINE CLINIC, JULY 2003, $12,611 
CIN: A-07-02-04002  FY 2002 CFO/CMS/MEDICARE ERROR RATE MUTUAL OF OMAHA, OCTOBER 2002, 
$12,070 
CIN: A-05-03-00012  FROEDTERT MEDICAID CREDIT BALANCES, FEBRUARY 2003, $12,066 
CIN: A-04-03-03020  ASSIST AUDIT OF CMS FY 2002 FINANCIAL STATEMENTS AT PGBA 2ND QTR. (JAN.  
MAR. 2002), APRIL 2003, $11,893 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL BENEFICIARIES, JANUARY 
2002, $11,089 
CIN: A-03-01-00513  IRSA - KOSOVO ASSISTANCE GRANT 90-ZK-0002/01, DECEMBER 2001,  $10,913 
CIN: A-02-01-01007  REVIEW OF ADMINISTRATIVE COST AT COOPERATIVA (CARMICHAEL & CO, CPA), 
MAY 2002, $10,778 
CIN: A-03-02-71608  SUPPORTIVE CHILD ADULT NETWORK INC., APRIL 2002,  $10,561 
CIN: A-09-02-71757  PYRAMID LAKE PAIUTE TRIBE, MAY 2002, $9,857 
CIN: A-10-97-00002  GROUP HEALTH INSTITUTIONALIZED, NOVEMBER 1997, $9,769 
CIN: A-06-02-00032  CMS FY 01 MEDICARE ERROR RATE - ARK BC/BS REPORT, NOVEMBER 2002,  $9,655 
CIN: A-02-01-02003  FORDHAM UNIVERSITY - DISCRETIONARY GRANT REVIEW, MAY 2002,  $9,451 
CIN: A-02-01-66887  PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES, FEBRUARY 2001,  $9,000 
CIN: A-05-01-67360  MICHIGAN FAMILY INDEPENDENCE AGENCY, FEBRUARY 2001,  $8,708 
CIN: A-02-02-70019  SENECA NATION OF INDIANS, DECEMBER 2001, $8,706 
CIN: A-03-03-74002  MINORITY ACCESS INC., NOVEMBER 2002, $8,113 
CIN: A-07-97-01231  PROWEST-DOSHI WASHINGTON, JUNE 1997, $8,027 
CIN: A-03-02-72715  DISTRICT OF COLUMBIA DEPT. OF HEALTH, JULY 2002,  $7,851 
CIN: A-05-01-68270  LAKE COUNTY COMMUNITY ACTION PROJECT, MAY 2001, $7,614 
CIN: A-03-98-00045  TEMPLE UNIV/PHYSICIAN CREDIT BALANCES/MEDICARE, JULY 1999,  $7,280 
CIN: A-10-03-74448  K-12 WASHINGTON EDUCATION SYSTEM, JULY 2003, $7,180 
CIN: A-01-97-49174  BRANDEIS UNIV., AUGUST 1997, $7,068 
CIN: A-01-03-75708  GENERAL HOSPITAL CORP., AUGUST 2003, $6,314 
81
 APPENDIX D 
CIN: A-07-95-01167  PENSION COSTS CLAIMED NEBRASKA BC/BS, JANUARY 1996,  $6,075 
CIN: A-06-97-48062  SER-JOBS FOR PROGRESS NATIONAL INC., MAY 1997, $5,924 
CIN: A-04-03-75509  STATE OF NORTH CAROLINA, MAY 2003, $5,880 
CIN: A-15-02-20006  REVIEW OF CDC COOPERATIVE AGREEMENT AND HRSA RYAN WHITE ACTIVITIES 
AT HEALTH EDUCATION RESOURCE ORGANIZATION (HERO), INC. (BALTIMORE 
EMA/BALTIMORE CITY HEALTH DEPT), MARCH 2003,  $5,010 
CIN: A-01-00-60299  INDIAN TOWNSHIP TRIBAL GOVERNMENT PASSAMAQUODDY TR, JANUARY 2000, 
$4,597 
CIN: A-02-03-74893  WOMENS COALITION OF ST. CROIX INC., MARCH 2003,  $4,113 
CIN: A-07-02-04001  FY-2002 CFO/CMS MEDICARE ERROR RATE NORIDIAN (ND B/C), OCTOBER 2002, 
$3,999 
CIN: A-04-97-01162  HMSA MEDICARE PRO CONTRACT AUDIT, SEPTEMBER 1997,  $3,871 
CIN: A-09-01-00067  EAST BAY NEPHROLOGY MEDICAL GROUP, AUGUST 2001, $3,418 
CIN: A-03-01-03303  JOHNS HOPKINS UNIVERSITY/KPMG/NIDA/N01DA-3-7301, FEBRUARY 2001,  $3,347 
CIN: A-05-02-69215  ONEIDA TRIBE OF INDIANS OF WISCONSIN, OCTOBER 2001, $3,109 
CIN: A-02-01-66889  PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES, FEBRUARY 2001,  $3,103 
CIN: A-03-95-03318  TRANS-MANAGEMENT SYSTEMS 105-92-1527 (CCO), MAY 1996,  $3,016 
CIN: A-02-01-66888  PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES, FEBRUARY 2001,  $2,883 
CIN: A-07-98-02502  CT. BC/BS PENSION COSTS CLAIMED, MARCH 1998,  $2,725 
CIN: A-03-98-51505  ALLIEDSIGNAL TECHNICAL SERVICES CORP., APRIL 1998,  $2,722 
CIN: A-01-97-45487  ABT ASSOCIATES INC., JANUARY 1997, $2,596 
CIN: A-02-03-04002  GRANT REVIEW DAAH04-93-G-0234, SEPTEMBER 2003, $2,576 
CIN: A-03-97-43996  ACTUARIAL RESEARCH CORP., OCTOBER 1996, $2,561 
CIN: A-05-97-00013  PACIFICARE OF CA-HMO INSTITUTIONAL STATUS PROJECT, APRIL 1998,  $2,000 
CIN: A-07-97-01232  PROWEST - DOSHI ALASKA, JUNE 1997, $1,473 
CIN: A-07-00-02082  REVIEW OF A COST HMO - IOWA, FEBRUARY 2002, $1,006 
5B. 
The following audits are open pending the resolution of the contractors termination audit, related 
termination agreements and pending lawsuits: 
CIN: A-07-96-01176  MEDICARE EXCESS PENSION ASSETS - BC MICH, NOVEMBER 1996,  $11,904,263 
CIN: A-07-92-00579  BC/BS OF MICHIGAN INC - UNFUNDED PENSION COSTS, OCTOBER 1992,  $2,535,698 
CIN: A-05-93-00057  MI-BLUE CROSS & BLUE SHIELD OF MI-CONTRACT AUDIT, JULY 1993,  $1,409,954 
Notes to Table 2 
1The opening balance was adjusted downward by $22.8 million. 
2Management decision has not been made within 6 months on 56 reports. 
Discussions with management are ongoing, and it is expected that the following audits will be 
resolved by the next semiannual reporting period: 
CIN: A-03-00-00203  PA/INTERGOVERNMENTALTRANSFERS/MEDICAID, FEBRUARY 2001,  $3,700,000,000 
CIN: A-05-00-00056  MEDICAID INTERGOVERNMENTAL TRANSFERS - IDPA, MARCH 2001,  $1,870,000,000 
CIN: A-06-00-00023  MEDICAID PHARMACY/PHYSICIAN ACTUAL ACQUISITION COS, AUGUST 2001, 
$1,080,000,000 
CIN: A-10-00-00011  MEDICAID INTERGOVERNMENTAL TRANSFERS - WA STATE, MARCH 2001, 
$475,000,000 
CIN: A-06-01-00069  EVALUATION OF LEGISLATION TO INCREASE MEDICAID HOSP-SPEC DSH PAYMENT 
LIMITS, DECEMBER 2001, $380,000,000 
82
 APPENDIX D 
CIN: A-06-01-00041  AUDIT OF THE TX DISPROPORTIONATE SHARE HOSPITAL PROGRAM PAYMENT 
METHODOLOGY, FEBRUARY 2003, $319,200,000 
CIN: A-01-99-00507  NAT-WIDE REF OUPATIENT PSYCHIATRIC SERVICES AT ACUTE CARE HOSPITALS, 
MARCH 2000, $224,466,692 
CIN: A-04-00-02165  REVIEW OF AL MEDICAID INTERGOVERNMENTAL TRANSFERS, MARCH 2001,  
$147,500,000 
CIN: A-06-00-00053  OIG HCFA NEBULIZER PROJECT - NATIONAL ERROR RATE, OCTOBER 2001, 
$133,960,552 
CIN: A-04-00-02169  REV. AL MEDICAID INTERGOVERNMENTAL TRANSFERS - HOSPITAL ENHANCE, 
MAY 2001, $63,000,000 
CIN: A-01-99-00530  NATIONWIDE REV OF OUTPATIENT PSYCHIATRIC SERVICES AT PSYCHIATRIC 
HOSPITALS, DECEMBER 2000, $56,936,287 
CIN: A-07-98-02534  EMPIRE BC/BS PENSION PLAN TERMINATION, MARCH 2000,  $38,626,351 
CIN: A-01-02-00503  FURTHER EXPANSION OF THE DRG PAYMENT WINDOW, AUGUST 2003,  $37,000,000 
CIN: A-02-03-73313  CITY OF NEW YORK ADMINISTRATION FOR CHILDRENS SERVICES, JANUARY 2003, 
$22,203,439 
CIN: A-02-01-67912  STATE OF NEW YORK, MARCH 2001, $19,000,000 
CIN: A-06-99-00060  REVIEW OF AN HMO UNDERPAYMENT CLAIM OF 21 MILLION, JUNE 2001,  $12,191,579 
CIN: A-01-00-00502  REV OF EXORBITANT MEDICARE PAYMENTS FOR OUTPATIENT SERVICES, MAY 
2001, $12,100,000 
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM - NATIONAL, MARCH 1993,  $10,161,742 
CIN: A-07-96-01177  MEDICARE POST RETIREMENT CLAIM BC MICHIGAN, NOVEMBER 1996,  $8,978,998 
CIN: A-06-99-00045  MEDICARE LEFT AGAINST MEDICAL ADVICE DISCHARGES, MARCH 2002,  $6,800,000 
CIN: A-03-00-00007  REVIEW OF 1-DAY DISCHARGES - PA., APRIL 2001, $6,300,000 
CIN: A-01-99-00506  FOLLWUP REVIEW OF SEPARATELY BILLABLE ESRD LAB TESTS, JANUARY 2001, 
$6,100,000 
CIN: A-01-97-02506  REVIEW OF THE AVAIL OF MEDICAL COVERAGE/CSE SUPPORT, JUNE 1998,  
$5,704,585 
CIN: A-05-01-00052  DME REVIEW IN INDIANA, OCTOBER 2001, $4,400,000 
CIN: A-06-00-00073  REV OF MGR CARE ADDITIONAL BENEFITS FOR CY 00 OF NYLCAR, MARCH 2002, 
$4,000,000 
CIN: A-02-02-01026  NEW JERSEY PARTNERSHIP - NURSING HOME DAY CARE SERVICES, MARCH 2003, 
$3,500,000 
CIN: A-04-98-01188  REVIEW ADMIN. COSTS AT MEDICARE MANAGED RISK PLAN, AUGUST 1999, 
$2,559,357 
CIN: A-05-00-00083  REVIEW OF MEDICAID DME CLAIMS - MICHIGAN, OCTOBER 2001,  $2,500,000 
CIN: A-05-02-00066  REVIEW OF RFP CMS-02-001/ELH1, MAY 2002, $1,885,793 
CIN: A-09-95-00095  HEALTH SERVICES ADVISORY GROUP, INC (HSAG), DECEMBER 1995,  $1,389,723 
CIN: A-05-01-00031  WI MEDICAID - DME, OCTOBER 2001, $1,250,000 
CIN: A-07-99-01298  DATE OF DEATH -2, MAY 2001, $700,000 
CIN: A-05-02-00082  BID PROPOSAL FOR 1-800 MEDICARE HOTLINE ADMINISTRATION, AUGUST 2002, 
$609,950 
CIN: A-05-02-00080  SINAI - MC/MA CREDIT BALANCES, JANUARY 2003, $515,942 
CIN: A-05-03-00021  CIMRO PRO PRE-AWARD AUDIT FOR NEBRASKA, NOVEMBER 2002, $504,650 
CIN: A-03-99-00052  ALLEGHENY/CHESAPEAKE ORF, SEPTEMBER 2001,  $467,646 
CIN: A-05-00-00057  REVIEW OF MEDICAID MUTUALLY EXCLUSIVE CODES - OH, NOVEMBER 2001, 
$450,000 
CIN: A-05-01-00074  REVIEW OF BID PROPOSAL RFP HCFA-01-0003, JUNE 2001,  $282,049 
CIN: A-03-99-00038  EDGEWATER PSYCHIATRIC HOSPITAL, MARCH 2001, $208,731 
CIN: A-07-97-01230  OFMQ - DOSHI OKLAHOMA, JUNE 1997, $203,510 
CIN: A-07-97-01231  PROWEST - DOSHI WASHINGTON, JUNE 1997, $163,552 
CIN: A-01-02-73084  STATE OF MAINE, SEPTEMBER 2002, $149,082 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN, MARCH 2003, 
$144,909 
CIN: A-05-03-00059  ESRD #9 PRE-AWARD AUDIT (RFP-CMS-03001/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 
83
 APPENDIX D 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL BENEFICIARIES, JANUARY 
2002, $98,698 
CIN: A-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM, JANUARY 1998, 
$90,528 
CIN: A-05-02-00089  REVIEW OF RFP CMS-500-97-0408/0008, NOVEMBER 2002, $84,457 
CIN: A-05-02-00084  MEDICARE OUTPATIENT CARDIAC REHAB - ST.LUKES MEDICAL CENTER, JULY 
2003, $47,247 
CIN: A-07-97-01232  PROWEST - DOSHI ALASKA, JUNE 1997, $21,218 
CIN: A-05-96-00069  CPA AUDIT OF HOOPER HOLMES HHA G&A -OI CASE OPEN, FEBRUARY 1998,  $17,555 
CIN: A-07-95-01164  MEDICARE ADMIN COSTS - GENERAL AMERICAN, DECEMBER1995,  $16,632 
CIN: A-01-97-00526  PSYCHIATRIC OUTPATIENT SERVICES, MARCH 1998,  $7,245 
CIN: A-06-03-00033  REVIEW OF GOOD SHEPHERD MEDICAL CENTER CARDIAC REHABILITATION 
SERVICE, JULY 2003, $3,737 
CIN: A-01-98-00506  PSYCHIATRIC OUTPATIENT AT NEWTON-WELLESLEY HOSPITAL, MARCH 1998,  
$1,120 
84
 Appendix E 
Reporting Requirements of the Inspector General Act of 1978, as Amended 
The specific reporting requirements of the Inspector General Act of 1978, as amended, are listed 
below with reference to the page in the semiannual report on which each is addressed.  Where there are no 
data to report under a particular requirement, the word none appears in the column.  A complete listing 
of audit and inspection reports is being furnished to the Congress under separate cover.  Copies are 
available upon request. 
Section of the Act  Requirement  Page 
Section 4(a)(2)  Review of legislation and regulations  52 
Section 5 
(a)(1)  Significant problems, abuses, and deficiencies  Throughout 
(a)(2)  Recommendations with respect to significant problems, 
abuses, and deficiencies  Throughout 
(a)(3)  Prior significant recommendations on which corrective 
action has not been completed  Appendices B & C 
(a)(4)  Matters referred to prosecutive authorities  54 
(a)(5)  Summary of instances where information was refused  None 
(a)(6)  List of audit reports  Under separate cover 
(a)(7)  Summary of significant reports  Throughout 
(a)(8)  Statistical Table 1Reports With Questioned Costs  50 
(a)(9)  Statistical Table 2Funds Recommended to Be Put to 
Better Use  51 
(a)(10)  Summary of previous audit reports without management 
decisions  Appendix D 
(a)(11)  Description and explanation of revised management 
decisions  Appendix D 
(a)(12)  Management decisions with which the Inspector 
General is in disagreement  None 
85  86
 Appendix F 
Summary of Sanction Authorities 
The Inspector General Act of 1978 (Public Law 95-452), as amended, sets forth specific 
requirements for semiannual reports to be made to the Secretary for transmittal to the Congress.  
A selection of other authorities appears below: 
Program Exclusions 
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds for 
excluding individuals and entities from participation in Medicare, Medicaid, and other Federal health 
care programs.  Exclusions are required for individuals and entities convicted of the following types 
of criminal offenses:  (1) Medicare or Medicaid fraud; (2) patient abuse or neglect; (3) felonies for other 
health care fraud; and (4) felonies for illegal manufacture, distribution, prescription or dispensing of 
controlled substances. OIG has the discretion to exclude individuals and entities on several other 
grounds, including: misdemeanors for other health care fraud (other than Medicare or Medicaid) or for 
illegal manufacture, distribution, prescription or dispensing of controlled substances; suspension or 
revocation of a license to provide health care for reasons bearing on professional competence, professional 
performance, or financial integrity; provision of unnecessary or substandard services; submission of false 
or fraudulent claims to a Federal health care program; and engaging in unlawful kickback arrangements. 
Providers who are subject to exclusion are granted due process rights, including a hearing before 
an HHS administrative law judge and appeals to the HHS Departmental Appeals Board and the Federal 
district and appellate courts, regarding whether the basis for the exclusion exists and the length of the 
exclusion is reasonable. 
Patient Dumping 
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an individual 
presents to the emergency room of a Medicare-participating hospital, the hospital must provide an appro 
priate medical screening examination to determine whether that individual has an emergency medical 
condition. If an individual has such a condition, the hospital must provide either 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 col 
lect a penalty of up to $50,000 from a responsible physician for each negligent violation of any of the 
section 1867 requirements and, in some circumstances, may exclude a responsible physician. 
87
 APPENDIX F 
Civil Monetary Penalties Law 
Under the Civil Monetary Penalties Law (CMPL), section 1128A of the Social Security Act, 
42 U.S.C.  1320a-7a, a person is subject to penalties, assessments, and exclusion from participation in 
Federal health care programs for engaging in certain activities.  For example, a person who submits to a 
Federal health care program a claim for items and services that the person knows or should know is false 
or fraudulent is subject to a penalty of up to $10,000 for each item or service falsely or fraudulently 
claimed, an assessment of up to three times the amount falsely or fraudulently claimed, and exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim. The CMPL also authorizes 
actions for a variety of other violations, including submission of claims for items or services furnished by 
an excluded person, requests for payment in violation of an assignment agreement, and payment or receipt 
of remuneration in violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)).  The authority to 
bring CMPL cases has been delegated to the Inspector General. 
Anti-Kickback Statute 
The anti-kickback statute authorizes penalties against anyone who knowingly and willfully 
solicits, receives, offers or pays remuneration, in cash or in kind, to induce or in return for (1) referring an 
individual to a person or entity for the furnishing, or arranging for the furnishing, of any item or service 
payable under the Federal health care programs; or (2) purchasing, leasing or ordering, or arranging for or 
recommending the purchasing, leasing or ordering of any good, facility, service or item payable under the 
Federal health care programs (Section 1128B(b) of the Social Security Act, 42 U.S.C.  1320a-7b). 
Individuals and entities that engage in unlawful referral or kickback schemes may be subject to 
criminal penalties under the general criminal anti-kickback statute, civil monetary penalties under OIGs 
CMPL authority (Section 1128A(a)(7) of the Social Security Act, 42 U.S.C.  1320a-7a) and/or program 
exclusion under OIGs permissive exclusion authority (Section 1128(b)(7) of the Social Security Act, 42 
U.S.C.  1320a-7(b)(7)).
False Claims Act 
Under the Federal civil False Claims Act (FCA), 31 U.S.C.  3729-3733, a person or entity is 
liable for up to treble damages and up to $11,000 for each false claim it knowingly submits or causes to 
be submitted to a Federal program.  Similarly, a person or entity is liable under the FCA if it knowingly 
makes or uses, or causes to be made or used, a false record or statement to have a false claim paid. 
The FCA defines knowing to include not only the traditional definition, but also instances 
when the person acted in deliberate ignorance of the truth or falsity of the information or in reckless 
disregard of the truth or falsity of the information.  Under the FCA, no specific intent to defraud is 
required. Further, the FCA contains a qui tam or whistleblower provision that allows private individuals 
to file suit on behalf of the United States and entitles that whistleblower to a percentage of any fraud 
recoveries. 
88
 Appendix G 
Performance Measures 
Performance measures are used to evaluate the achievement of a program goal, such as the 
efficiency of an immunization program measured by the number of inoculations provided per dollar of 
cost. OIG has identified some items throughout this report as performance measures by following the 
item with the symbol   . In OIGs opinion, the audits, inspections and investigations identified with the 
performance measure symbol offer management information about whether some aspect or all of the 
programs or activities reviewed are achieving their missions and goals.  These proposals are provided to 
management for their consideration as they develop their performance measures.  
The reports listed in each of the following sections warrant the performance measure symbol: 
Centers for Medicare & Medicaid Services: 
CMS Financial Statement Audit 
Resource Utilization Groups 
Medicare-Approved Heart Transplant Centers 
Public Health Agencies:

Financial Statement Audit

Administrations for Children and Families and on Aging: 
Increased Qualifications for Head Start Teachers 
Noncustodial Parents Contributions to Medicaid Costs 
Health Care Services for Children in Foster Care 
General Oversight: 
Departmental Financial Statement Audit 
Departmental Service Organizations 
89