Testimony before the U.S. House of Representatives 
Committee on Oversight & Government Reform, 
Subcommittee on Health Care, District of Columbia, Census and the National Archives 
 
 
 
 
 
 
 
 
A Perspective on Fraud, Waste, and Abuse 
Within The Medicare and Medicaid Programs 
 
Testimony of 
 
Gerald T. Roy 
 
Deputy Inspector General for Investigations 
 
Office of Inspector General, U.S. Department of Health & Human Services  
 
 
 
 
April 5, 2011 
 
1:30 PM 
 
 
 
 
 
 
2154 Rayburn House Office Building 
   
  1  Testimony of:  
Gerald T. Roy  
Deputy Inspector General for Investigations  
Office of Inspector General, U.S. Department of Health & Human Services  
 
A PERSPECTIVE ON FRAUD, WASTE, AND ABUSE 
WITHIN THE MEDICARE AND MEDICAID PROGRAMS 
 
Good afternoon Chairman Gowdy, Ranking Member Davis, and distinguished Members 
of the Subcommittee.  I am Gerald Roy, Deputy Inspector General for Investigations at 
the U.S. Department of Health & Human Services (HHS) Office of Inspector General 
(OIG).  I thank you for the opportunity to discuss fraud, waste, and abuse within the 
Medicare and Medicaid programs.  Today, I will discuss this issue from the perspective 
of a law enforcement officer with over 20 years of law enforcement experience, including 
16 years of working health care fraud violations. 
 
OIGs Role and Partners in Protecting the Integrity of Medicare and Medicaid   
 
OIGs mission is to protect the integrity of the more than 300 programs administered by 
HHS.  Approximately 80 percent of OIGs resources are dedicated to promoting the 
efficiency and effectiveness of federally funded health care programs and protecting 
these programs and our beneficiaries from fraud, waste, and abuse.  
 
OIG employs more than 1,700 dedicated professionals, including a cadre of over 450 
highly skilled criminal investigators trained to conduct criminal, civil, and administrative 
investigations of fraud and abuse related to HHS programs and operations.  Our special 
agents have full law enforcement authority to effectuate the broad range of available law 
enforcement actions, including the execution of search and arrest warrants.  We use state-
of-the-art technologies and a wide range of law enforcement tools in carrying out these 
important responsibilities. We are the Nations premiere health care fraud law 
enforcement agency. 
 
Our constituents are the American taxpayers, and we work hard to ensure that their 
money is not stolen or misspent.  Thanks to the work of our dedicated professionals, over 
the past fiscal year, OIG opened over 1,700 health care investigations and obtained over 
900 criminal convictions and civil actions.  OIG investigations also have resulted in over 
$3.7 billion in expected criminal and civil recoveries during that time period.   
Background 
 
On May 3, 1995, President Clinton announced Operation Restore Trust, a 2-year 
partnership of Federal and State agencies tasked with protecting the Medicare and 
Medicaid programs through shared intelligence, coordinated law enforcement, and 
enhanced quality of care for our program beneficiaries.  Under this program, I joined OIG 
in October of 1995 in the San Diego Field Office after serving for nearly 5 years as a 
Special Agent with the U.S. Treasury Department.  As an OIG Special Agent, I 
successfully investigated a wide variety of health care fraud matters, including cases 
  2  involving durable medical equipment (DME) schemes, ambulance transportation fraud, 
and corporate fraud. 
 
Once promoted to the position of Assistant Special Agent in Charge (ASAC) in the Los 
Angeles Region, I began to see organized criminal enterprises entering into the lucrative 
field of Medicare fraud.  The sophisticated nature of organized criminal enterprises in the 
Los Angeles area facilitated unprecedented levels of fraud, and in a span of 3 to 4 years, 
their concentrated efforts would have a nationwide adverse impact on Medicare. 
 
I was promoted to Special Agent in Charge in the Los Angeles Region in October 2006.  
I cultivated a law enforcement environment and worked to increase public awareness of 
OIG agents as law enforcement officers.  During this time, for example, I recognized that 
OIG was ill equipped to unilaterally deal with the burgeoning organized crime issue.  We 
lacked the historical knowledge of these criminal elements and experience in fighting the 
street-level tactics they incorporated into health care fraud.  For the first time in OIG 
history, I assigned agents to organized crime task forces, and we combined our expertise 
to tackle the problem head on.  In addition to taking such innovative approaches to 
investigations, I laid the foundation to establish the Medicare Fraud Strike Force teams in 
Los Angeles before my departure to OIG Headquarters. 
Since December of 2007, I have held executive-level positions in the Office of 
Investigations (OI), OIG Headquarters in Washington, DC.  I have spearheaded OIGs 
collaboration and coalition building with HHS, Congress, the Department of Justice 
(DOJ), and Medicaid Fraud Control Units, among other stakeholders, and solidified OIG 
agents role as the Federal health care fraud law enforcement experts.   
Today, I hold the position of Deputy Inspector General of Investigations.  I am the senior 
official responsible for supervising the functions of OI.  I manage, direct, and coordinate 
the operations and resources of OI, which includes a workforce of over 630 employees 
composed of criminal investigators, analysts and administrative staff.  I have 
investigative oversight of nearly $900 billion in departmental expenditures.  
Over the past 16 years, I have served in every capacity available to a criminal investigator 
in OIG, and it is from this perspective that I will share with you my observations and 
experiences related to the prevalence of fraud, waste, and abuse within the Medicare and 
Medicaid programs. 
Has Fraud Changed Within the Programs? 
Some of the health care fraud schemes of 16 years ago are still used by todays criminals.  
These schemes include billing for services that were not provided or were not medically 
necessary, purposely billing for a higher level of service than what was provided, 
misreporting costs or other data to increase payments, paying illegal kickbacks, and/or 
stealing providers or beneficiaries identities.  While many of todays health care fraud 
schemes continue to exploit vulnerabilities in the health care system, we are uncovering 
more and more fraud. 
  3   
In early 1996, HHS Secretary Donna Shalala observed that many sectors of the Federal 
Government were experiencing a frustrating time...amid the constraints imposed by the 
budget impasse and two consequent furloughs.... (Shalala, Semi-Annual Report to 
Congress, 1996).  It was during this time that I opened an investigation into a San Diego-
based company that was engaged in DME fraud.  The case took me from Southern 
California to Miami, Florida, as I gathered evidence on a father-daughter team that was 
perpetrating fraud on both coasts.  The father-daughter team worked for several years to 
steal almost $1 million before the case was ultimately referred to OIG.  Combined, the 
investigative and prosecution processes took in excess of 3 years.  The father, a former 
drug dealer, told us he found stealing from Medicare far safer and more lucrative than his 
former occupation.  Their scheme was simple:  they used beneficiary lists that were 
photocopied or faxed among nursing homes and other fraud perpetrators to submit paper 
claims for DME they never provided.  Both pled guilty to health care fraud and 
conspiracy charges.  The father was sentenced to 5 months in prison and 2 years of 
probation.  His daughter was sentenced to 3 years of probation.  
 
Today, we see the same general scheme on a grander, more sophisticated scale.  For 
example, when I moved to the Los Angeles Regional Office in 2003, the shared 
beneficiary list used in DME fraud circulating around Los Angeles was composed of 
approximately 2,500 Medicare beneficiary numbers.  The numbers were often 
handwritten and traded on the streets of Los Angeles.  When I departed Los Angeles in 
2007 for Washington, DC, that list contained the names and numbers of well over 
100,000 beneficiaries, and it was shared electronically among countless fraud 
perpetrators.  With that list, Medicare fraud perpetrators can steal well over a million 
dollars in 90 days without ever filing a single sheet of paper.  Today, we estimate that 
270,000 Medicare beneficiary numbers have been compromised and may be employed by 
criminals as part of national fraud schemes. 
 
Although there is no precise measure of health care fraud, we know that it is a serious 
problem that demands an aggressive and sustained response.  Although the majority of 
health care providers are honest and well intentioned, a minority of providers who are 
intent on abusing the system can cost taxpayers billions of dollars.  The perpetrators of 
these schemes range from street criminals, who believe it is safer and more profitable to 
steal from Medicare than trafficking in illegal drugs, to Fortune 500 companies that pay 
illegal kickbacks to physicians in return for Medicare referrals.  
 
Organized Crime 
 
Perhaps the most challenging and disturbing trend I have witnessed in my tenure at OIG 
is the rise of criminal enterprises in health care fraud.  Medicare has been increasingly 
infiltrated by sophisticated, organized criminal networks and violent criminals. 
 
For example, in Southern California, OIG special agents investigated an individual who 
set out to defraud the Medicare program by establishing multiple fraudulent DME 
companies.  The owner used members of a street gang as nominee owners of his DME 
  4  companies, consistent with the organized crime model in which the crime boss uses foot 
soldiers as a front for his operations.  He paid the gang members approximately $5,000 
each to establish bank accounts and fill out Medicare enrollment paperwork.  The 
nominee owners submitted claims for reimbursement to Medicare for power wheelchairs 
and orthotic devices that were not medically necessary or legitimately prescribed by a 
physician.  The criminal records for the gang members involved in this fraud ranged from 
assault on a peace officer to drug trafficking.  Nine of the gang members and associates 
were indicted for charges including health care fraud and providing false statements to 
government agents.  Of the nine defendants, eight have pled guilty and are currently 
serving or have completed serving jail time for their crimes.  Not only is this 
investigation an example of one of the more prevalent fraud schemes that we are seeing, 
but also it highlights multitiered schemes and sophisticated criminals entering the health 
care fraud arena.  
 
Health care fraud criminals are acutely aware of the time it has historically taken 
Medicare program integrity contractors to discover something is amiss and inform OIG 
of their findings.  They know they have 90 days to establish a provider number, open a 
bank account, and bill as much money as they can using the shared beneficiary lists.  
When 90 days are up, after billing Medicare for millions of dollars, they drop the 
provider number and empty the bank account to the best of their ability.  Simultaneously, 
they work on establishing the next provider number and bank account.  To assist in their 
efforts, many gang members have had insiders working at the banks to ensure that 
identification of account holders was difficult if not impossible.  One of my agents and 
the Department of Justice also successfully investigated and prosecuted several 
individuals who worked at the Medicare provider enrollment unit in Los Angeles, who 
were paid to facilitate provider numbers for organized criminals.  So well executed were 
their schemes that it was difficult identifying who these criminals actually were.  
 
The emergence of organized crime has brought new investigative challenges and raised 
the level of violence.  In Los Angeles, we found that Eurasian organized crime family 
members have little to no fear of law enforcement or our judiciary system.  To them, a 
prison sentence is a badge of honor that is expected from each gang member at some 
point during a life of criminal activity.  We have learned that once inside prison, Eurasian 
gang members can pay for personal safety using their ill-gotten gains from Medicare and 
recruit prisoners to act as nominee clinic and DME store owners upon their release. 
 
The new criminal is also violent.  As an ASAC in Southern California, I was once asked 
to assist an agent in a meeting with a criminal informant to whom we had given $10,000 
to lure an elusive subject out in the open.  We met at midnight at a predetermined 
location and waited for hours as the informant never showed.  Three days later, I traveled 
with my agent to a community hospital 90 miles outside Los Angeles, where we had 
located our informant.  He had been severely beaten and was so scared that he refused to 
cooperate further, citing not only his own safety, but that of his family.  He chose to 
return to jail over cooperating with law enforcement. 
 
  5  If and when a fraud perpetrator goes outside the realm of the shared beneficiary list, we 
have increasingly witnessed the targeting of vulnerable beneficiaries within ethnic 
communities to facilitate the fraudulent actions.  Our investigations have shown that 
fraud perpetrators are paying individuals within specific ethnic communities nominal 
amounts of money to secure the use of their Medicare or Medicaid identification 
numbers.  Even worse, beneficiaries are being loaded into vans, taken to facilities and put 
through invasive procedures that are medically unnecessary; all for the purpose of 
fraudulently billing Federal health care programs.  Often, language and cultural barriers 
impede fraud-fighting efforts in these communities. 
 
Corporate Fraud 
 
OIG established itself as the lead in corporate health care fraud investigations with the 
successful conclusion of the National Health Laboratory (NHL) investigation in 1992.  
The corporate entity settled civil false claims allegations for a then record-breaking $110 
million.  The companys chief executive also pled guilty to health care fraud.  NHL billed 
Medicare for additional blood tests that were marketed to customers as part of a basic 
blood series.  The deterrent effect associated with this case resonated throughout the 
corporate world.  The message was sent and received:  engage in corporate fraud activity 
and OIG will hold you accountable, both financially and criminally.  Unfortunately, this 
message did not resonate for long, even in the wake of Operation LabScam, the 
Governments concentrated effort to address clinical laboratory fraud nationwide.  More 
than $800 million in recoveries later, corporate fraud continued. 
 
How these cases are investigated has remained consistent over the years.  Investigations 
of large corporations are often initiated after a whistleblower files a lawsuit on behalf 
of the Government, known as a qui tam, alleging wrongdoing by the company.  The 
allegations include information that the companies engaged in illegal activities that 
violated the False Claims Act.  In doing so, the companies cause false claims to be 
submitted to Federal health care programs for payment.  The investigations involve 
coordination among many Federal Government departments and agencies whose 
programs are alleged to have been harmed. 
OIG often negotiates compliance obligations, known as corporate integrity agreements or 
CIAs, with health care providers and other corporate entities as part of the settlement of 
Federal health care program investigations arising under a variety of civil and 
administrative false claims statutes.  Like the evolution of health care fraud, CIAs have 
also evolved to address specific aspects of corporate conduct.  Current CIAs are much 
more tailored to address the deficiencies of the particular organization.  For instance, 
there are CIA increased requirements that pertain to transparency; internal audits; and, in 
the case of quality of care violations, very specific compliance measures that the entity 
must undertake. 
The typical term of a comprehensive CIA is 5 years. These compliance measures seek to 
ensure the integrity of corporate activities and the Federal health care program claims 
  6  submitted by providers.  Although many CIAs have common elements, each agreement 
addresses, in part, the specific facts of the conduct at issue. 
 
To address large-scale corporate fraud, OIG has the authority to use one of the most 
powerful tools in our arsenal:  exclusion from participating in Federal health care 
programs.  Once we determine that an individual or entity is engaged in fraud or the 
provision of substandard care, program exclusion can be implemented.  This tool bolsters 
our fraud-fighting efforts by removing from the Federal health care programs those who 
pose the greatest risk to programs and beneficiaries.  I will discuss the impact of the 
exclusion process later in my testimony. 
 
Today, what is most troubling to OIG is the possibility that some unethical health care 
corporations build the cost of paying civil fines and penalties and implementing CIAs 
into their cost of doing business.  Some hospital systems, pharmaceutical manufacturers, 
and other providers play such a critical role in the care delivery system that they may 
believe that they are too big to fire and thus OIG would never exclude them and 
thereby risk compromising the welfare of our beneficiaries.  As long as the profit from 
fraud outweighs those costs, abusive corporate behavior is likely to continue.   
  
Why Significant Health Care Fraud, Waste, and Abuse Continue 
 
While our efforts have made a major impact on health care fraud, there is indeed a 
significant amount of fraud in our Federal health care programs.  There are many reasons 
for this trend, including the pitfalls associated with a trust-based Federal health care 
system, low barriers to entry, lucrative targets, and the perception of low risk of detection 
and penalty. 
 
Low Barriers to Entry Facilitate Fraud 
 
Throughout my tenure at OIG, those who wish to steal from our program have enjoyed 
unfettered access to Federal health care programs.  Since its inception, Medicare has been 
a program that allows any willing provider to provide services for beneficiaries.  In 
other words, we have treated participation in our programs as a right, instead of a 
privilege.  The Department has faced challenges in ensuring the integrity of the 
programs provider and supplier enrollment processes.  While the majority of providers 
are innocent and provide invaluable services to beneficiaries, a small percentage of 
providers and suppliers intent on defrauding these programs have continuously exploited 
weaknesses in the enrollment process.  Many of the criminals prosecuted in our Strike 
Force investigations have been able to defraud the program of millions of dollars because 
of these low barriers of entry.  Without enhanced enrollment standards, such as proper 
background checks, these fraudulent providers and suppliers drain resources that should 
be spent on providing care to beneficiaries.   
We have long advocated strengthening enrollment standards and making participation in 
Federal health care programs as a provider or supplier a privilege.  Recently, the 
  7  Department has made strides in strengthening enrollment standards; and we will continue 
to work with the Department as it makes improvements in this area.  It is more efficient 
and effective to protect the programs and beneficiaries from unqualified, fraudulent, or 
abusive providers and suppliers upfront than to try to recover payments or redress fraud 
or abuse after it occurs.  Ensuring adequate and appropriate provider and supplier 
enrollment standards and screening is an essential first step to strengthening the integrity 
of the Medicare and Medicaid programs.   
 
Low Risk of Detection and Lesser Penalties 
 
Among the criminals who steal from Medicare, there is the perception of a low risk of 
detection.  While organized crime figures use their 90-day window of opportunity to 
avoid being identified, other, more brazen criminals discuss Medicare fraud openly on the 
streets as a safe and easy way to get rich quick.  
 
We must make defrauding Federal health care programs less attractive by increasing the 
risk of swift detection and the certainty of punishment.  As part of this strategy, law 
enforcement must accelerate the Governments response to fraud schemes.  The Strike 
Force model has proved highly successful in this regard.  The Medicare Fraud Strike 
Force is a critical component of the Health Care Fraud Prevention and Enforcement 
Action Team (HEAT) initiative.  Strike Forces are collaborative efforts, combining 
OIGs law enforcement skills and resources with those of our partners in the Federal 
Bureau of Investigation, Medicaid Fraud Control Units, and other State and local law 
enforcement agencies. Strike Force cases focus on the development and implementation 
of a technologically sophisticated and collaborative approach to combat fraud.  Using this 
streamlined investigative approach, not only have Strike Force investigations enabled us 
to identify perpetrators of health care fraud earlier in their fraud schemes, but also we 
have significantly cut down the amount of time to fully adjudicate a case.   
 
Additionally, there is the perception among criminals that if the fraud scheme is 
uncovered, the penalties are far less severe than imposed for other crimes.  And while this 
may have been true in the recent past, this perception, however, is no longer reality.      
 
During my tenure at OIG, I have seen significant changes to the sentencing guidelines, 
and prison sentences for health care fraud have increased significantly.  And for these 
changes, I would like to thank the Committee and the Congress for being our strong ally 
in fighting health care fraud.  In just the last 15 years, the Congress has enacted a number 
of Federal offenses that specifically target health care, including fraud,[1,7] false 
statements,[2] theft or embezzlement,[3] money laundering,[4] and obstruction.[5]  These 
                                                           
[1] 18 U.S.C.  1347 
[2] 18 U.S.C.  1035 
[3] 18 U.S.C.  669 
[4] 18 U.S.C.  1956 
[5] 18 U.S.C.  1518 
  8  offenses are all important tools for law enforcement in prosecuting a Federal health care 
case.  Thanks to you and your colleagues, wrongdoers also can now be required to forfeit 
property derived from the commission of health care fraud.[6]  And just last year, the 
Affordable Care Act directed the U.S. Sentencing Commission to dramatically increase 
the Federal sentencing guidelines for health care fraud offenses, especially those that 
involve large losses.[7]  The Commission issued draft amendments for comment early this 
year.  In addition to enacting these strong criminal enhancements, the Congress 
strengthened the Governments civil remedies by amending the Federal False Claims Act 
in 2009 and 2010.  All of these changes improved the Governments ability to pursue 
fraud, waste, and abuse in the Federal health care programs.  These laws make clear that 
the Congress and the Federal executive branch are joined in an effort to identify and stop 
fraudulent practices, punish the wrongdoers, and recapture the funds lost to fraud.  
 
Through the Strike Force, we are seeing the positive effects of these more stringent 
guidelines with more and longer sentences mandating time in prison.  According to DOJ, 
in fiscal year 2010, more than 94 percent of Strike Force defendants were convicted, of 
whom 86 percent received prison terms.  The average prison term for Strike Force 
defendants was over 40 months.  This is more than double the 1995 average prison term 
for health care fraud violations investigated by OIG. 
 
 
Sustained Law Enforcement Efforts Are Critical to Success 
 
Operation Restore Trust, the Governments first national antifraud effort, is one of many 
examples of OIGs efforts to hold perpetrators of health care fraud accountable.  
Operation Restore Trust was responsible for $187 million in recoveries, 74 criminal 
convictions, 58 civil settlements, and 218 exclusions from Federal health care programs. 
The lessons learned during Operation Restore Trust, including the importance of 
collaboration, have been critical to our ongoing antifraud initiatives.  Its stated goals are 
similar to those of todays HEAT initiative.  The HEAT initiative, established by 
Secretary Kathleen Sebelius and Attorney General Eric Holder in May 2009, is an 
unprecedented partnership that brings together senior officials from both Departments 
with the stated goals of sharing information, spotting fraud trends, coordinating 
prevention and enforcement strategies, and developing new fraud prevention tools. 
 
Operation Restore Trust produced many important results.  In addition to resulting in 
enforcement actions and recoveries, the Operation built and strengthened relationships 
among law enforcement agencies and within HHS.  It also provided a foundation for the 
creation of the Health Care Fraud and Abuse Control (HCFAC) Program, which 
continues to be the main source of funding for OIGs fraud-fighting efforts.  
 
However, after Operation Restore Trust concluded, external attention to health care fraud 
waned and some of the same fraud problems reemerged.  This pilot program was never 
                                                           
[6] 18 U.S.C.  982 
[7] ACA,  10606 
  9  expanded beyond the original five States of California, Texas, Florida, Illinois, and New 
York.  Data from the Centers for Medicare & Medicaid Services reveal that Operation 
Restore Trust reduced expenditures in fraud hotspots on which it focused -- home health 
and DME.  However, as interest waned from those outside OIG, expenditures in those 
two arenas began a steady climb.  In the years that followed, the fraud problem was 
burgeoning, with modifications to old schemes going viral and organized criminals 
discovering new ways to exploit the programs.   
 
 
Making an Impact on Fraud 
 
While I consider the state of health care fraud to be at a critical level, reinvigorated 
partnerships and an emphasis on this issue by various stakeholders reinforce my belief 
that a concerted, sustained effort will make significant strides towards eradicating health 
care fraud, waste, and abuse.  Together, with our law enforcement partners, we are using 
new techniques to combat fraud.  For example, the Medicare Fraud Strike Forces under 
HEAT are concentrating antifraud efforts in geographic areas at high risk for Medicare 
fraud and implemented new processes regarding the identification of health care fraud 
cases and the manner in which they are investigated and prosecuted.  Coincidentally, we 
find ourselves running Strike Forces in the same five Operation Restore Trust States:  
California, Texas, Florida, Illinois, and New York.  We have also added Michigan and 
Louisiana to the list.  Strike Force cases focus on the development and implementation of 
a technologically sophisticated and collaborative approach.  By using Medicare data early 
in the investigative process, we can spot fraud as it is occurring and catch those criminals 
who, for years, operated in anonymity.  If my DME fraud case from 1996 were to be 
investigated using the Strike Force model, the combined investigative and prosecution 
processes associated with the father-daughter team would be less than a year.  Most 
likely, their prison sentences would have been significantly increased. 
 
From a law enforcement perspective, we are making a substantial impact on fraud.  In 
February, HEAT Strike Forces engaged in the largest Federal health care fraud takedown 
in history.  Teams across the country arrested over 100 defendants in 9 cities, including 
doctors, nurses, health care company owners and executives, and others, for their alleged 
participation in Medicare fraud schemes involving more than $225 million in false 
billing.  More than 300 special agents from OIG participated in partnership with other 
Federal and State agencies.  The defendants charged as a part of the operation are accused 
of various health-care-related crimes ranging from violating the anti-kickback statute to 
money laundering and to aggravated identity theft.   
 
As of March 31, 2011, our Strike Force efforts nationwide have charged over 840 
defendants; obtained over 420 convictions; and secured over $380 million in court-
ordered restitutions, fines, and penalties. 
We are focusing on corporate fraud as well.  One way to address the too big to fire 
issue discussed above is to alter the cost-benefit calculus of the corporate executives who 
run these companies.  By excluding the individuals who are responsible for the fraud, 
either directly or because of their positions of responsibility in the company that engaged 
  10  in fraud, we can influence corporate behavior without putting patient access to care at 
risk.  For example, in 2008, we excluded three former executive officers of the 
pharmaceutical company Purdue Frederick based on their convictions for misbranding of 
the painkiller OxyContin.  Each of the executives was convicted based on his status as a 
responsible corporate officer.    
 
As I mentioned earlier, OIG also has the discretionary authority to exclude certain 
owners, officers, and managing employees of a sanctioned entity (i.e., an entity that has 
been convicted of certain offenses or excluded from participation in the Federal health 
care programs) even if the executive has not been convicted of a crime.  This authority, 
section 1128(b)(15) of the Social Security Act, allows OIG to hold responsible 
individuals accountable for corporate misconduct.  OIG has used this exclusion authority 
in over 30 cases since it was added to the statute in 1996.  But until recently, we had 
typically applied this exclusion authority to individuals who controlled smaller 
companies, such as pharmacies, billing services, and DME companies and not to 
executives of large complex organizations like a drug or device manufacturer. 
 
We intend to use this essential fraud-fighting tool in a broader range of circumstances.  
For example, in addition to excluding the Purdue Frederick executives, we recently 
excluded an owner (and former executive) of Ethex Corporation under our section (b)(15) 
exclusion authority.  Ethex operated manufacturing facilities in St. Louis.  In March of 
last year, Ethex pled guilty to felony criminal charges after it failed to inform the Food 
and Drug Administration about manufacturing problems that led to the production of 
oversized tablets of two prescription drugs.  The owner was excluded for 20 years. 
 
We are mindful of our obligation to exercise this authority judiciously, and we do not 
propose to exclude all officers and managing employees of a company that is convicted 
of a health-care-related offense.  However, when there is evidence that an executive knew 
or should have known of the underlying criminal misconduct of the organization, OIG 
will operate with a presumption in favor of exclusion of that executive.  We have 
published guidance on our Web site that sets out factors we will consider when 
determining whether a section (b)(15) exclusion should be imposed in a particular case.[8]  
This guidance alerts health care providers and executives to the standards of ethical 
conduct and responsibility to which they will be held accountable by OIG.  Even if we 
decide exclusion of a major health care entity is not in the best interests of Federal health 
care programs and their beneficiaries, we may decide that executives in positions of 
responsibility at the time of the fraud should no longer hold such positions with entities 
that do business with the programs. 
 
Conclusion 
From a law enforcement perspective, Medicare and Medicaid are under siege by fraud 
perpetrators from all walks of life.  And as some 70 million baby boomers near 
                                                           
[8] Available online at 
http://oig.hhs.gov/fraud/exclusions/files/permissive_excl_under_1128b15_10192010.pdf.   
  11  retirement, the Medicare rolls will grow and the workforce that supports the program 
with taxes will shrink.  In years to come, controlling fraud, waste, and abuse will play a 
considerable role in ensuring the solvency of our Federal health care programs that were 
put in place to ensure that our children, senior citizens, the disabled, and low income 
citizens have adequate health care. 
 
In my tenure at OIG, I have never seen a more focused spotlight on this important issue.  
The partnerships between OIG, DOJ, and the Centers for Medicare & Medicaid Services 
are strong.  The potential to make a lasting impact on fraud, waste, and abuse has never 
been better. 
 
Our motto in OI is simple and powerful:  Mission Focus.  We understand that we protect 
the Nations most vulnerable citizens and the Federal health care programs on which they 
depend.  OIG Special Agents diligently and effectively investigated health care fraud 
long before the issue hit the national spotlight.  We will be here for the American 
taxpayers if the spotlight is no longer focused on this important issue.  But I submit that it 
is not in this Nations best interest to let our attention wane.   
From my perspective, we cannot afford to let up on our efforts.  Sustained funding 
sources and continued interest from Congress and American taxpayers are of paramount 
importance to our future success. 
  12