Office of 
Inspector 
General 
Semiannual
 
Report
 
 to
Congress 
April 2013  September 2013 
 
   
  OIG Organization 
 
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) employs 
about 1,500 professional staff members who are deployed throughout the Nation in regional 
and field offices and in Washington, DC, headquarters.  We collaborate with HHS and its 
operating and staff divisions, the Department of Justice (DOJ) and other executive branch 
agencies, Congress, and States to bring about systemic changes, successful prosecutions, 
negotiated settlements, and recovery of funds.  Following are descriptions of our mission-based 
components.  The components are supported by the Immediate Office of the Inspector General 
and the Office of Management and Policy. 
THE OFFICE OF AUDIT SERVICES (OAS) provides auditing services for HHS, either by 
  conducting audits with its own audit resources or by overseeing audit work 
S
done by others.  Audits examine the performance of HHS programs and/or its 
A
grantees and contractors in carrying out their respective responsibilities and 
O are intended to provide independent assessments of HHS programs and 
operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
THE OFFICE OF EVALUATION AND INSPECTIONS (OEI) conducts national evaluations to 
 
provide HHS, Congress, and the public with timely, useful, and reliable 
I
E information on significant issues.  These evaluations focus on preventing fraud, 
O waste, and abuse and promoting economy, efficiency, and effectiveness in HHS 
programs.  OEI reports also present practical recommendations for improving 
program operations. 
THE OFFICE OF INVESTIGATIONS (OI) conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, operations, 
 
I and beneficiaries.  With investigators working in almost every State and the 
O
District of Columbia, OI actively coordinates with DOJ and other Federal, State, 
and local law enforcement authorities.  The investigative efforts of OI often 
lead to criminal convictions, administrative sanctions, or CMPs. 
THE OFFICE OF COUNSEL TO THE INSPECTOR GENERAL (OCIG) provides general legal 
services to OIG, rendering advice and opinions on HHS programs and 
  operations and providing all legal support for OIGs internal operations.  OCIG 
G
represents OIG in all civil and administrative fraud and abuse cases involving 
I HHS programs, including False Claims Act, program exclusion, and CMP cases.  
C
In connection with these cases, OCIG also negotiates and monitors corporate 
O integrity agreements.  OCIG renders advisory opinions, issues compliance 
program guidance, publishes fraud alerts, and provides other guidance to the 
health care industry concerning the antikickback statute and other OIG 
enforcement authorities. 
 
  HHS Office of Inspector General  Inspector General Message 
Semiannual Report to Congress  Fall 2013   
 
 
 
A Message From 
the Inspector General 
This Semiannual Report to Congress, submitted pursuant to the 
Inspector General Act of 1978, as amended, summarizes the 
activities of the Office of Inspector General (OIG), Department of 
 
Health and Human Services (HHS), for the 6-month period that 
Daniel R. Levinson 
ended September 30, 2013. 
Inspector General 
 
OIG is committed to driving p ositive change through work that is relevant, innovative, 
customer-focused, and high impact.  During this reporting period, we continued to 
advance our core mission of protecting HHS programs and the people they serve.   
Our partnership with other Federal, State, and local law enforcement entities as part of 
the Health Care Fraud Prevention and Action Team (HEAT) continues to yield impressive 
results.  During fiscal year 2013, HEAT Strike Force efforts resulted in the filing of charges 
against 274 individuals or entities, 251 criminal actions, and $333 million in investigative 
receivables.  HEATs strike force teams use sophisticated data analysis, combined with 
field intelligence and traditional law enforcement techniques to quickly identify fraud 
schemes and trends and hold wrongdoers accountable.   
We also identified opportunities to reduce waste in Medicare.  For example, Medicare 
could have saved close to a billion dollars in 1 year if it had reimbursed for laboratory 
tests at the lower rates paid by the Federal Employees Health Benefits Program plans or 
State Medicaid programs.  Also, Medicare could save up to hundreds of millions of 
dollars each year by implementing a payment policy for early discharges from hospitals 
to hospice care that is consistent with Medicare payment policies for such discharges 
from hospitals to other clinical settings, such as nursing facilities.  OIG continued its 
audits of acute care hospital claims for services at risk of improper billing and identified 
questioned costs. 
For this reporting period, OIG included significant contributions toward its oversight of 
public health and human services programs, including an examination of hospitals use 
and sourcing of compounded drugs and the steps they take to ensure the quality of such 
drugs.  This work was particularly important following the meningitis outbreak resulting 
from contaminated injections of compounded drugs.   
During the same period, our investigations also resulted in resolutions with drug 
manufacturers whose alleged violations put patients and HHS programs at risk.  The 
public health section of this report describes a manufacturer that resolved allegations 
that it had falsified records and data submitted to gain Food and Drug Administration 
(FDA) approval to sell drugs that were substandard.  The section also describes two  HHS Office of Inspector General  Inspector General Message 
Semiannual Report to Congress  Fall 2013   
 
 
manufacturers that resolved allegations of unlawful marketing of drugs for uses that 
were not approved by FDA. 
Going forward, HHS faces significant challenges as it works to implement the Affordable 
Care Act and its signature element, the Health Insurance Marketplaces.  OIG will be 
focusing on core risk areas associated with the Marketplaces, such as eligibility systems, 
payment accuracy, IT security, and contracting.    
Since its 1976 establishment, OIG has worked diligently with its partners to fight waste, 
fraud, and abuse in Medicare and more than 300 other HHS programs.  I would once 
again like to express my appreciation to Congress and HHS for their sustained 
commitment toward improving the efficiency and effectiveness of HHS programs. 
 
Daniel R. Levinson 
Inspector General 
 
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page i 
 
 
Highlights 
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) 
Semiannual Report to Congress (Semiannual Report) describes significant problems, abuses, 
deficiencies, and investigative outcomes relating to the administration of HHS programs and 
operations that were disclosed during the reporting period.  This edition addresses work 
completed during the second half of fiscal year (FY) 2013 (April - September) and summarizes 
key accomplishments during the period and for the year.      
Fiscal year 2013 accomplishments 
 
For FY 2013, we reported expected recoveries of over $5.8 billion consisting of nearly 
$850 million in audit receivables and about $5 billion in investigative receivables, which include 
about $1 billion in non-HHS investigative receivables resulting from our work in areas such as the 
States shares of Medicaid restitution.  We also identified about $19.4 billion in savings 
estimated for FY 2013 on the basis of prior-period legislative, regulatory, or administrative 
actions that were supported by OIG recommendations.  Such estimates generally reflect third-
party projections (such as those by the Congressional Budget Office or HHS actuaries) made at 
the time the action was taken.  Actual savings may be higher or lower.  
We reported FY 2013 exclusions of 3,214 individuals and entities from participation in Federal 
health care programs; 960 criminal actions against individuals or entities that engaged in crimes 
against HHS programs; and 472 civil actions, which include false claims and unjust-enrichment 
lawsuits filed in Federal district court, civil monetary penalties (CMP) settlements, and 
administrative recoveries related to provider self-disclosure matters.   
Medicare Fraud Strike Force accomplishments
 
 
The Health Care Fraud Prevention and Enforcement Action Team (HEAT) was started in 2009 by 
HHS and the Department of Justice (DOJ) to strengthen programs and invest in new resources 
and technologies to prevent and combat health care fraud, waste, and abuse.  HEAT has 
continued with increasing momentum to identify and hold accountable those who seek to 
defraud Medicare and Medicaid. 
Medicare Fraud Strike Force teams coordinate law enforcement operations conducted jointly by 
Federal, State, and local law enforcement entities.  The teams, now a key component of HEAT, 
have a record of successfully analyzing data to quickly identify and prosecute fraud.  The Strike 
Force began in March 2007 and is operating in nine major cities.   
Strike Force Accomplishments.  During FY 2013, Strike Force efforts resulted in the filing of 
charges against 274 individuals or entities, 251 criminal actions, and $333 million in investigative 
receivables.  The effectiveness of the Strike Force model is enhanced by interagency 
collaboration.  For example, we refer credible allegations of fraud to the Centers for Medicare 
& Medicaid Services (CMS) so that it can suspend payments to the suspected perpetrators, 
thereby immediately preventing losses from claims submitted by Strike Force targets.   
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page ii 
 
 
Nationwide Takedown.  In May 2013, a nationwide takedown by Medicare Fraud Strike Force 
operations in eight cities resulted in charges against 89 individuals, including doctors, nurses, 
and other licensed medical professionals, for their alleged participation in Medicare fraud 
schemes involving approximately $223 million in false billings.  The defendants charged were 
accused of various health-care-fraud-related crimes, including conspiracy to commit health care 
fraud, violations of the anti-kickback statutes, and money laundering.  The charges were based 
on a multitude of alleged fraud schemes involving various medical treatments and services, 
primarily home health care, but also mental health services, psychotherapy, physical and 
occupational therapy, medical equipment and supplies, and ambulance services.  This 
coordinated operation was the sixth national Medicare fraud takedown in Strike Force history.     
Strike Force Case ExampleHome Health Services.  Manuel Sanz was sentenced to 14 years of 
imprisonment and ordered to pay $30 million in restitution after pleading guilty to charges of 
conspiracy to commit health care fraud and conspiracy to pay health care kickbacks.  As co-
owner of Ideal Home Health, Inc., a company that purportedly provided skilled nursing services 
and home health aides to Medicare beneficiaries, Sanz offered and paid kickbacks and bribes to 
recruiters and employees in exchange for recruiting Medicare beneficiaries to Ideal Home 
Health.  Sanz then instructed nurses at Ideal Home Health to falsify patient medical records to 
make it appear that Medicare beneficiaries qualified for and received home health services 
when, in fact, the services were not medically necessary and were not provided.   
Prescription drug issues 
 
Medicare and Medicaid are major payers for prescription drugs.  Our investigations and reviews 
find vulnerabilities at many levels, including pharmaceutical manufacturer noncompliance, retail 
pharmacy and prescriber schemes, and flawed reimbursement methodologies. 
Prescription Drug Fraud SchemeMichigan.  Babubhai Patel and 6 other defendants were 
sentenced and 19 others have been convicted for their roles in a widespread scheme.  Patel was 
a licensed pharmacist who owned or controlled 26 pharmacies in Michigan.  Patel offered and 
paid kickbacks, bribes, and other inducements to providers in exchange for their writing 
fraudulent prescriptions for patients with Medicare, Medicaid, and private insurance and 
directing the patients to fill their prescriptions at one of Patels pharmacies.  Patels pharmacies 
falsely billed Medicare and Medicaid approximately $57.8 million for medications purportedly 
provided to beneficiaries over the course of the scheme.      
High-Prescribing Physicians.  Some Part D high-prescribing physicians have questionable billing 
patterns.  We identified over 700 general-care physicians with questionable prescribing patterns, 
including many who prescribed extremely high numbers of drugs per beneficiary, which may 
indicate that some of the prescriptions were not medically unnecessary.  More than half of the 
providers we identified with questionable prescribing patterns prescribed extremely high 
percentages of Schedule II or III drugs, which have potential for addiction and abuse.   
(OEI-02-09-00603.)    
Anemia Management Drugs.  Medicare payment adjustments could yield savings.  Almost all 
people with end-stage renal disease (ESRD) have anemia.  We estimated that Medicare and its 
beneficiaries could have saved $510 million during CY 2011 if the ESRD base rate had been 
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page iii 
 
 
adjusted to reflect the current utilization of Epogen and Aranesp and $19 million if the base rate 
had been adjusted to reflect current utilization of Venofer and Ferrlecit.  (A-01-12-00522.)   
Manufacturer Rebates.  Medicare could collect billions if pharmaceutical manufacturers were 
required to pay rebates for Part B drugs.  Medicaid recouped a substantial percentage of the 
$28 billion it spent on prescription drugs in 2011 because of statutorily mandated rebates from 
manufacturers; however, no similar rebate authority exists for Part B to reduce its costs of drugs.  
Medicare Part B expenditures for prescription drugs exceeded $16 billion in 2011.   
(OEI-12-12-00260.) 
Medicaid Pricing of Generic Drugs.  Using more aggressive State pricing formulas and inclusion 
criteria could help States control Medicaids generic drug costs.  We identified the State with the 
most aggressive pricing model (Wyoming) and calculated the potential national savings had all 
States used that program.  We found that 39 of 45 States could have achieved $483 million in 
savings during the first half of calendar year 2011 had they used the Wyoming model.  
(OEI-03-11-00640.)   
Other Medicare and Medicaid reviews 
 
Medicare Part A helps cover certain inpatient services, such as those provided in hospitals and 
skilled nursing facilities and some home health services.  Part B helps cover certain other 
medical services, equipment, supplies, and drugs that Part A does not cover.  Health care 
providers and suppliers bill Medicare.  The claims are processed by Medicare contractors. 
For the Medicaid program, States have considerable flexibility in designing and operating their 
programs; however, to receive a Federal share of Medicaid costs, applicable State and Federal 
requirements must be met.  Health care providers and suppliers are paid by the States.  The 
States then report the amounts to CMS to receive the Federal share.   
Physical Therapy FraudTexas.  An OIG Most Wanted Fugitive, Godwin Nzeocha, was 
captured and sentenced to 9 years and 1 month of incarceration and ordered to pay more than 
$26 million in restitution, joint and several, after pleading guilty to charges of conspiracy to 
commit health care fraud and money laundering.  Nzeocha was not licensed, trained, or 
otherwise qualified to provide physical therapy to patients.  According to court documents, 
Nzeocha signed his name on patient files as the provider of physical therapy services and signed 
blank treatment data forms, progress notes, and daily physical therapy records.  He also signed 
documents that were prefilled with units of physical therapy treatment that he knew had not 
been provided and that he was not qualified to provide.   
Management of Provider Data.  Medicare provider enumeration and enrollment data are often 
inaccurate, are occasionally incomplete, and are generally inconsistent between Medicares two 
primary provider databases, hindering oversight and placing health care programs at risk of 
fraud and abuse.  We reported that provider data were inconsistent between the two primary 
databases for 97 percent of records.  (OEI-07-09-00440.)   
Laboratory TestsInefficient Methodology.  We estimated that Medicare could have saved 
$910 million in 2011 (38 percent) on selected high-volume and/or high-expenditure lab tests if it 
had paid providers at the lowest established rate under  Medicaid or the Federal Employees 
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page iv 
 
 
Health Benefits (FEHB) Program  in each geographic area.  Medicare is the largest payer of 
clinical laboratory services in the Nation.  However, most State Medicaid programs and FEHB 
plans pay less than Medicare pays for many lab tests.  (OEI-07-11-00010.) 
HospitalsEarly Discharges to Hospice Care.  If Medicare Part A had implemented a hospital 
transfer payment policy for early discharges from hospitals to hospice care in 2009 and 2010, it 
could have saved over $600 million.  Generally, Medicares transfer payment policies assume 
that hospitals should not receive full payments for beneficiaries discharged early and then 
admitted for additional care in certain other clinical settings.  Instead of making full payments, 
Medicare pays the discharging hospitals a per diem rate for early discharges.  However, there is 
no similar policy for transfers to hospice care.  (A-01-12-00507.)   
Critical Access Hospitals (CAHs).  If CMS had decertified CAHs that were 15 or fewer miles from 
the nearest hospitals in 2011 and paid them at the applicable non-CAH rates, Medicare and 
beneficiaries would have saved $449 million.  Hospitals can be certified as CAHs if, for example, 
they are located at least a certain driving distance from other hospitals (including other CAHs) 
and are located in rural areas.  Medicare pays more for care in CAH-certified hospitals but most 
CAHs would not meet the location requirements if required to re-enroll in Medicare.   
(OEI-05-12-00080.)    
Hospital Inpatient and Outpatient Claims in Risk Areas.  Hospitals that appear to be at risk of 
submitting significant noncompliant claims to Medicare are subject to OIG review; risk areas are 
identified through data mining and analysis.  Audits of seven hospitals with questioned costs are 
described in the "Medicare" section of this Semiannual Report.  (A-04-12-07033, A-01-12-00523, 
A-04-12-00083, A-01-12-00527, A-09-12-02071, A-09-12-02048, and A-04-12-03071.) 
Medicare Hospital Outpatient Stays.  Hospital practices with regard to care in outpatient 
observation stays instead of inpatient stays may limit some beneficiaries ability to access skilled 
nursing facility care (SNF) upon discharge.  Only inpatient stays can be used to qualify for 
Medicare payment of SNF care.  SNF care can cost tens of thousands of dollars.  Hospital 
physicians decide whether to admit beneficiaries as inpatients or to extend outpatient stays.  
The potential financial burden of not meeting the inpatient stay requirement could discourage 
some beneficiaries from accessing the SNF care they need.  (OEI-02-12-00040.) 
Recovery Audit Contractors (RAC)Output and Effectiveness.  The RACs mission is to protect 
Medicare by identifying improper payments and referring potential fraud to CMS.  Prior OIG and 
Government Accountability Office work has identified problems with CMSs interactions and 
oversight of RAC contractors.  RACs identified improper payments totaling $1.3 billion in 2010 
and 2011.  Although CMS took actions to correct the majority of vulnerabilities identified, it lacks 
metrics to evaluate the effectiveness of these corrections. Additionally, CMS did not take action 
to address the six referrals of potential fraud it received from RACs.  (OEI-04-11-00680.) 
MedicaidDiabetes Test Strips.  The following reports estimated that selected States could 
reduce their Medicaid costs for blood glucose test strips:  New Yorksavings of about 
$5.9 million (A-02-11-01042); New Jerseyfee-for-service savings up to $2.7 million and 
managed care savings up to $4.5 million (A-02-12-01010); and Illinoissavings of about 
$8.5 million (A-05-12-00009).   
MedicaidTraumatic Brain Injury (TBI) Waiver.  We estimated that New York improperly 
claimed at least $54 million in Federal Medicaid reimbursement for TBI waiver program services 
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page v 
 
 
that were unallowable.  Beneficiary eligibility assessments were not conducted according to 
requirements. and providers did not ensure that they claimed reimbursement only for allowable, 
supported services.  (A-02-10-01043.)  
MedicaidHome Health Services.  For a 2-year audit period, New York State improperly 
claimed almost $31.5 million in Federal Medicaid reimbursement.  Physicians did not review 
plans of care as required; other deficiencies were found.  (A-02-11-01008.)   
MedicaidTransformed Medicaid Statistical Information System (T-MSIS).  Evidence from our 
early review of T-MSIS implementation indicated continued problems with completeness, 
accuracy, and other issues, and raised concerns about States abilities to submit complete and 
accurate data.  The T-MSIS is Medicaids only nationwide Medicaid eligibility and claims 
database.  Medicaids national MSIS eligibility and claims database is used in analytical research, 
program integrity, planning, budgeting, and policy analyses associated with Medicaid.  The 
T-MSIS initiative is intended to correct longstanding data deficiencies in MSIS.   
(OEI-05-12-00610.) 
Public health and other HHS-related reviews 
 
Public health activities and programs represent the countrys primary defense against acute and 
chronic diseases and disabilities and generally promote and enhance health.  Other HHS-related 
reviews include human services programs and administrative functions.   
President's Emergency Plan for AIDS Relief (PEPFAR).  The Centers for Disease Control and 
Prevention (CDC) implemented PEPFAR through the Global HIV/AIDS program, working with 
ministries of health and other in-country partners to combat HIV/AIDS by strengthening health 
systems and building sustainable HIV/AIDS programs in more than 75 countries.  CDCs offices in 
host countries are responsible for PEPFAR funds awarded to government agencies and for-profit 
and nonprofit organizations (recipients).  During this semiannual period we reported the results 
of several reviews of CDC and host country performance with regard to PEPFAR funds.  We 
variously questioned certain operating procedures, potentially unallowable value-added taxes, 
interest income, unallowable expenses, and reporting deficiencies.  (A-04-12-04023,  
A-05-12-00021, A-05-12-00022, A-05-12-00023, A-05-12-00024, A-06-11-00056, and  
A-06-11-00057.)   
Generic Drug Manufacturer Settled Quality, Other IssuesMaryland.  Ranbaxy Laboratories 
Limited (Ranbaxy) agreed to pay $350 million plus interest to resolve allegations that it falsified 
records and other data to obtain Food and Drug Administration (FDA) approval to sell generic 
drugs in the United States and submitted false data to gain approval for substandard generic 
antiretroviral drugs that were purchased through the PEPFAR program.  Ranbaxy entered into a 
consent decree with FDA that includes extensive auditing, monitoring, and review of Ranbaxys 
current practices and data integrity program.   
Unlawful Marketing of Drug for Unapproved UsesOklahoma.  Wyeth Pharmaceuticals Inc., a 
subsidiary of Pfizer, Inc., agreed to pay $490 million to resolves criminal and civil liability arising 
from its unlawful marketing of Rapamune, an immunosuppressive drug that prevents the bodys 
immune system from rejecting a transplanted organ.  Wyeth received FDA approval in 1999 for 
Rapamune for use in treating renal (kidney) transplant patients.  However, Wyeth also allegedly 
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page vi 
 
 
trained its sales force to promote Rapamune use in treating nonrenal patients.  Wyeth allegedly 
offered financial incentives to its sales staff to target all transplant patient populations in an 
effort to increase sales of Rapamune. 
Use of High-Risk Compounded Sterile Preparations (CSPs).  Pharmaceutical compounding is the 
creation of a prescription drug tailored to meet the needs of an individual patient.  This work 
was particularly important following the meningitis outbreak resulting from contaminated 
injections of compounded drugs.  Our survey revealed that the use of CSPs is widespread in 
hospitals, although the use of the highest risk products is limited to about one-quarter of 
hospitals, most commonly larger facilities.  Hospitals took limited steps to ensure the quality of 
outsourced CSPs, but had few identified problems with the quality of CSPs from outside 
pharmacies.  (OEI-01-13-00150.)   
License-Exempt Child Care Providers in the Child Care and Development Fund Program (CCDF).  
Gaps in health and safety requirements and gaps in monitoring represent vulnerabilities that 
could lead to harm for children in care.  Some child care providers, such as family home 
providers, are legally exempt from regulation (license exempt).  Not all States require license-
exempt child care providers to meet Federal health and safety requirements, and States with 
health and safety requirements for license-exempt providers commonly allow providers to self-
report compliance.  States do not always monitor license-exempt providers.  (OEI-07-10-00231.)   
CCDF Program in Connecticut.  CCDF-funded providers did not always comply with applicable 
State licensing requirements to ensure the health and safety of children.  Connecticuts onsite 
monitoring did not ensure that providers that received CCDF funds complied with State licensing 
requirements related to the health and safety of children.  We determined that all 20 of the 
providers that we reviewed failed to comply with 1 or more State licensing requirements to 
ensure the health and safety of children.  Two of the providers voluntarily surrendered their 
licenses after our review.  (A-01-12-02504.)   
Child Support EnforcementNew York.  An OIG Most Wanted Deadbeat Parent, Robert Sand, 
was sentenced to 2 years and 7 months of incarceration and ordered to pay $903,789 in 
restitution after pleading guilty to charges of failure to pay child support for his two children.  
Sand was arrested after accruing more than $1 million in unpaid child support obligations, 
penalties, and interest.  According to court documents, Sand admitted that he initially relocated 
from New York to Florida and then fled the United States in order to evade his child support 
obligations following the issuance of arrest warrants in both State and Federal court in 2000 and 
2002.  While overseas, Sand operated a business in Thailand, but was arrested upon entering the 
Philippines without proper identification documents.  In December 2012, he was returned to the 
United States, where he was taken into custody and arraigned.   
 
 
 
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page vii 
 
 
OIG participation in congressional hearings 
 
 
9-11-2013  Kay Daly, Assistant Inspector General for 
Audit Services, testified before the House 
Committee on Homeland Security, 
Subcommittee on Cybersecurity, about 
infrastructure protection and security 
technologies, threats to Americans' personal 
information, and the security and reliability of   
Kay Daly, Assistant Inspector General 
the Health Exchange Data Hub.  Testimony.   
for Audit Services 
 
6-24-2013  Stuart Wright, Deputy Inspector General for 
Evaluation and Inspections, and Gary Cantrell, 
Deputy Inspector General for Investigations, 
testified before the Senate Committee on 
Homeland Security and Governmental Affairs 
on curbing prescription drug abuse in   
Medicare.  Testimony. 
Stuart Wright, Deputy Inspector 
General for Evaluation and 
Inspections and  
Gary Cantrell, Deputy Inspector 
General for Investigations 
 
   
  HHS Office of Inspector General  Highlights 
Semiannual Report to Congress  Fall 2013  Page viii 
 
 
 
 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
 
  HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page ix 
 
 
Semiannual Report 
to Congress 
Fall 2013 
 
Medicare Part A and Part B Reviews ---------------------------------------1
 
Address wasteful policies and practices -------------------------------------- 1 
Significant problems, abuses, and deficiencies: --------------------------------- 2 
01 HospitalsEarly Discharges to Hospice Care.  Medicare pays hospitals more for early 
discharges to hospice care than it pays for early discharges to certain other care settings; a 
hospice-specific hospital transfer payment policy is needed. ------------------------------------------- 2 
02 Critical Access Hospitals (CAHs).  Medicare and its beneficiaries pay more for care in CAH-
certified hospitals, but most CAHs would not meet the location requirements if required to re-
enroll in Medicare. ------------------------------------------------------------------------------------------------- 2 
03 Laboratory Tests.  Medicare paid more for lab tests than did the State Medicaid programs and 
Federal Employee Health Benefit (FEHB) plans we reviewed; better aligning payments with 
Medicaid and FEHB could yield substantial savings. ------------------------------------------------------- 3 
04 Medical Equipment/SuppliesContinuous Positive Airway Pressure (CPAP) Therapy.  
Medicares replacement schedule for CPAP supplies has remained largely the same for the 
past 20 years and may not align with current payers and professional recommendations. ----- 4 
05 Part B Prescription Drugs.  Medicare could recoup billions on Part B drug costs if 
pharmaceutical manufacturers were required to pay rebates as they do for Medicaid drugs. - 4 
06 DialysisAnemia Management Drugs.  Utilization of anemia management drugs in dialysis 
treatments in 2011 was generally significantly less than the utilization reflected in the base 
rate calculation; adjustments could yield savings for Medicare. --------------------------------------- 5 
07 Claims ProcessingG Modifiers.  Medicare contractors fail to consider billing codes that flag 
claims as being unallowable for payment; practice and procedure adjustments are needed. -- 6 
Prevent, deter, and address abusive billing ---------------------------------- 6 
Significant problems, abuses, and deficiencies: --------------------------------- 7 
01 Hospital Postacute Discharges and Transfers.  Medicare overpaid millions to hospitals for 
claims subject to the postacute care transfer policy reduced rate. ------------------------------------ 7 
02 Hospital Claims for Mechanical Ventilation.  Medicare overpaid millions to hospitals that 
used the incorrect procedure code for mechanical ventilation. ---------------------------------------- 8 
03 Hospital Claims for Canceled Elective Surgeries.  Medicare overpaid millions to hospitals for 
canceled elective surgeries. -------------------------------------------------------------------------------------- 8 
04 Hospital Inpatient and Outpatient Claims in Risk Areas.  Hospitals that appear to be at risk of 
submitting significant noncompliant claims to Medicare are subject to OIG review; risk areas 
are identified through data mining and analysis. ----------------------------------------------------------- 9 
05 Outpatient Therapy ServicesAn outpatient therapy supplier improperly billed most of its 
claims to Medicare; the supplier did not have a thorough understanding of Medicares  HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page x 
 
 
requirements and did not have adequate policies and procedures in place to ensure 
correct billing. ------------------------------------------------------------------------------------------------------ 10 
06 Medical Equipment/SuppliesDiabetes Test Strips.  Billing abuses continue in non-
competitive-bidding areas and for non-mail-order purchases. ---------------------------------------- 11 
07 Medical Equipment/SuppliesDiabetic Testing Supplies.  One providers CY 2011 claims 
billed at the higher non-mail-order rate illustrate the effect of prior payment policy, 
now revised. -------------------------------------------------------------------------------------------------------- 11 
08 Medical Equipment/SuppliesLower Limb Prosthetics.  Medicare overpaid lower limb 
prosthetics claims that did not meet local coverage determinations; the contractor lacked 
effective edits.------------------------------------------------------------------------------------------------------ 12 
09 Part B DrugsHerceptin.  Medicare overpays for the cancer drug Herceptin; incorrect units of 
service billed and supporting documentation are inadequate. ---------------------------------------- 13 
10 Part B Ambulance ServicesIncreased Utilization.  Increases in the utilization of ambulance 
transports are disproportionate in relation to increases in the population of Medicare fee-for-
service beneficiaries. --------------------------------------------------------------------------------------------- 13 
11 Management of Provider Data.  Medicare provider enumeration and enrollment data are 
often inaccurate, are occasionally incomplete, and are generally inconsistent between 
Medicares two primary provider databases, hindering oversight and placing health care 
programs at risk of fraud and abuse. ------------------------------------------------------------------------- 14 
Maximize recovery of public funds ------------------------------------------ 15 
Significant problems, abuses, and deficiencies: ------------------------------- 15 
01 Overpayment Recoveries.  Inaccurate provider types and contact information and other data 
gaps delay or prevent overpayment demand letters from reaching providers; not all 
overpayments are recovered. ---------------------------------------------------------------------------------- 15 
02 CMS Recovery Audit Contractors (RACs)Output and Effectiveness.  Despite active 
identification of improper payments, high amounts of such payments continue; evaluation 
methods are lacking. ---------------------------------------------------------------------------------------------- 16 
Promote quality, safety, and value ------------------------------------------- 17 
Significant problems, abuses, and deficiencies: ------------------------------- 17 
01 Hospital Outpatient Stays.  Hospital practices with regard to outpatient observation stays 
may limit beneficiaries ability to access skilled nursing facility (SNF) care upon discharge. --- 17 
02 Survey and Certification of Home Health Agencies (HHAs).  CMSs lack of surveys for 
oversight of State agencies HHA survey performance could present a vulnerability to program 
effectiveness and quality of care for Medicare beneficiaries. ------------------------------------------ 18 
03 Survey and Certification of Hospices.  State recertification surveys of hospices are not 
sufficiently frequent to ensure compliance and quality of care. --------------------------------------- 19 
04 HospicesUse of General Inpatient Care.  Medicare hospices inconsistent use of general 
inpatient care raises questions about whether the hospices provide appropriate levels of care 
to beneficiaries. ---------------------------------------------------------------------------------------------------- 20 
05 Part B DrugsVaccines.  Some Medicare beneficiaries are being given pneumococcal 
vaccinations more often than recommended by the Centers for Disease Control and 
Prevention (CDC).-------------------------------------------------------------------------------------------------- 20  HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page xi 
 
 
Medicare Part C and Part D Reviews ------------------------------------ 21
 
Prevent and deter waste, fraud, and abuse ------------------------------- 21 
Significant problems, abuses, and deficiencies: ------------------------------- 21 
01 Part C Overpayments.  Diagnoses submitted by two Medicare Advantage (MA) organizations 
resulted in risk score calculation errors and Medicare overpayments; causes include service 
provider errors, ineffective policies and procedures, and inadequate documentation. --------- 21 
02 Part D Investment Income.  Medicare loses potential cost savings because Federal 
requirements governing Medicare Part D do not limit the ability of Part D plans to retain 
investment income earned on Medicare funds. ----------------------------------------------------------- 22 
03 Part D Billing Patterns.  Some Part D high-prescribing physicians have questionable 
billing patterns. ---------------------------------------------------------------------------------------------------- 23 
04 Part D Unauthorized Prescribers.  Medicare and Part D sponsors fail to detect many drugs, 
including controlled substances, that are being ordered by individuals without the authority to 
prescribe. ------------------------------------------------------------------------------------------------------------ 23 
05 Part D Dual EligiblesMandatory Review.  Prescription drug plans generally cover most 
drugs commonly used by individuals who are fully eligible for both Medicare Part D and 
Medicaid. ------------------------------------------------------------------------------------------------------------ 24 
Medicaid Program Reviews ------------------------------------------------ 25
 
Address wasteful Medicaid policies and practices ----------------------- 25 
Significant problems, abuses, and deficiencies: ------------------------------- 26 
01 Medical Equipment/SuppliesComparison of Medicare and Medicaid Payments.  The Ohio, 
New York, New Jersey, Texas, and Illinois Medicaid fee-for-service programs paid significantly 
more for selected medical equipment/supplies items than Medicare paid for the same items 
in those States. ----------------------------------------------------------------------------------------------------- 26 
02 Prescription DrugsPricing Generics.  The use of more aggressive State Maximum Allowable 
Cost (MAC) pricing formulas and inclusion criteria could help States achieve additional cost-
savings for generic drugs. --------------------------------------------------------------------------------------- 28 
Prevent improper State claims for the Federal share of Medicaid --- 29 
Significant problems, abuses, and deficiencies: ------------------------------- 29 
01 Hospital Inpatient CareHigh-Dollar Payments.  Wisconsin and Indiana improperly claimed 
Federal reimbursement for unallowable high-dollar payments they made to hospitals for 
inpatient services; the hospitals had submitted incorrect charges, which they attributed to 
data entry errors. -------------------------------------------------------------------------------------------------- 29 
02 Hospital Inpatient CarePsychiatric Services and Disproportionate Share Hospital 
Payments.  Missouri and Indiana improperly claimed Federal reimbursement for certain 
payments to psychiatric hospitals that could not demonstrate compliance with Medicare 
Conditions of Participation (CoP). ----------------------------------------------------------------------------- 30 
03 Intermediate Care Facilities (ICFs)Services to Individuals With Intellectual and 
Developmental Disabilities.  Missouris internal controls and procedures were inadequate to 
prevent it from improperly claiming Federal reimbursement for duplicate or unsupported 
payments. ----------------------------------------------------------------------------------------------------------- 31  HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page xii 
 
 
04 Home and Community-Based Services (HCBS)Personal Care Services.  Maryland did not 
ensure that the States Department of Aging sufficiently monitored waiver program services 
and that only allowable claims were submitted for Federal reimbursement. ---------------------- 32 
05 Home and Community-Based ServicesTraumatic Brain Injuries (TBI).  New Yorks TBI 
waiver program services were unallowable or potentially unallowable; beneficiary eligibility 
assessments were not conducted according to requirements, and providers did not ensure 
that they claimed reimbursement only for allowable, supported services. ------------------------- 32 
06 Medicaid Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) program
Residential Care Services.  Wisconsin improperly claimed a Federal share of payments made 
under its EPSDT program using a noncompliant cost allocation methodology and estimates 
that it could not adequately support. ------------------------------------------------------------------------ 33 
07 Family Planning ServicesSterilization Services.  Missouri received excess Federal 
reimbursement for sterilization procedures; two types of errors made at the same time 
hindered differentiation of the effect of the errors. ------------------------------------------------------ 34 
08 Excluded ProvidersCalifornias lack of procedures caused it to improperly claim a Federal 
share of payments for items or services that were furnished, ordered, or prescribed by 
excluded providers. ----------------------------------------------------------------------------------------------- 35 
09 Home Health ServicesNew York improperly claimed Federal reimbursement for 
unallowable payments, physicians did not review plans of care as required, and other 
deficiencies were found. ----------------------------------------------------------------------------------------- 35 
10 Managed CareBeneficiary Identifiers.  New York improperly claimed a Federal share of 
unallowable payments to managed care organizations (MCOs); poor system interfaces 
contributed to the issuance of multiple Medicaid identification numbers to some Medicaid 
managed care enrollees. ----------------------------------------------------------------------------------------- 36 
Prevent and deter fraud and abuse------------------------------------------ 37 
Significant problems, abuses, and deficiencies: ------------------------------- 37 
01 Medicaid Fraud Control UnitsOIG performs periodic onsite reviews to assess Unit 
performance and compliance with grant requirements.. ----------------------------------------------- 37 
02 Transformed Medicaid Statistical Information System (T-MSIS).  Early evidence raised 
concerns about States abilities to submit complete and accurate data to T-MSISMedicaids 
only nationwide Medicaid eligibility and claims database. ---------------------------------------------- 39 
Promote quality, safety, and value ------------------------------------------- 40 
Significant problems, abuses, and deficiencies: ------------------------------- 40 
01 Medicaid Home HealthImproper Restrictions of Eligibility.   Eleven States have policies that 
improperly restrict eligibility for home health benefits; as a result, some beneficiaries access 
to the care they need may be hindered. --------------------------------------------------------------------- 40 
CMS-Related Legal and Investigative Activities ----------------------- 41
 
Advisory opinions and other industry guidance -------------------------- 43 
Health care fraud prevention and enforcement -------------------------- 43 
01 HEAT Provider Compliance Training ------------------------------------------------------------------------- 43 
02 Medicare Fraud Strike Force Activities ---------------------------------------------------------------------- 43  HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page xiii 
 
 
03 Nationwide Strike Force Takedown -------------------------------------------------------------------------- 44 
04 Additional Examples of Strike Force Efforts --------------------------------------------------------------- 44 
Other criminal and civil enforcement activities --------------------------- 45 
01 Special Assistant U.S. Attorney Program ------------------------------------------------------------------- 45 
02 Most Wanted Fugitives Listed on OIGs Web Site -------------------------------------------------------- 47 
Recently completed actions and settlements ----------------------------- 47 
01 Prescription Drugs ------------------------------------------------------------------------------------------------ 47 
02 Durable Medical Equipment ----------------------------------------------------------------------------------- 48 
03 Physicians ----------------------------------------------------------------------------------------------------------- 49 
04 Kickbacks ------------------------------------------------------------------------------------------------------------ 50 
05 Physical Therapy -------------------------------------------------------------------------------------------------- 50 
06 Personal Care Services ------------------------------------------------------------------------------------------- 50 
07 Hospitals ------------------------------------------------------------------------------------------------------------- 51 
08 Home Health Care ------------------------------------------------------------------------------------------------ 51 
09 Transportation Fraud -------------------------------------------------------------------------------------------- 52 
10 Medicaid and Other Government Program Fraud ------------------------------------------------------- 52 
Medicaid Fraud Control Units ------------------------------------------------- 53 
01 Funding and Accomplishments -------------------------------------------------------------------------------- 53 
02 Joint investigations with MFCUs ------------------------------------------------------------------------------ 53 
Sanction authorities and other administrative actions ----------------- 54 
01 Program Exclusions ----------------------------------------------------------------------------------------------- 54 
02 Corporate Integrity Agreements ------------------------------------------------------------------------------ 55 
03 Civil Monetary Penalties Law ---------------------------------------------------------------------------------- 56 
04 Patient Dumping -------------------------------------------------------------------------------------------------- 56 
Provider Self-Disclosure Protocol -------------------------------------------- 57 
Public Health, Human Services, and Other HHS Issues -------------- 59
 
Public health reviews ----------------------------------------------------------- 60 
Significant problems, abuses, and deficiencies: ------------------------------- 60 
01 CDCPresident's Emergency Plan for AIDS Relief (PEPFAR).  In seven reports, OIGs 
recommendations included that improved oversight, guidance, controls, and procedures are 
needed to ensure that PEPFAR funds are used as intended by law. ---------------------------------- 60 
02 FDADrug Manufacturers Settled Allegations.  The United States alleged that companies 
submitted false data to FDA and failed to meet various FDA requirements. ----------------------- 62  HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page xiv 
 
 
03 FDAUse of High-Risk Compounded Sterile Preparations (CSPs) and Outsourcing by 
Hospitals That Use Them.  The use of CSPs is widespread in hospitals, although the use of the 
highest risk products is limited to about one-quarter of hospitals, most commonly 
larger facilities. ----------------------------------------------------------------------------------------------------- 63 
04 FDAClearance of Medical Devices.  FDA should complete the classification process 
for all types of Class III preamendment medical devices; classification of such devices is 
in progress. ---------------------------------------------------------------------------------------------------------- 64 
05 HRSAHealth Center Program Funds.  At two grantee organizations in Wisconsin and New 
York, Federal funds were found at risk of not being properly accounted for or not being used 
in accordance with requirements.----------------------------------------------------------------------------- 65 
06 HRSAHealth Education Assistance Loan Program.  OIG excludes individuals who have 
defaulted on HEAL loans from participation in Federal health care programs. -------------------- 66 
07 NIHClinical Trials Data and Safety Monitoring Boards (DSMBs).  Although DSMBs meet 
guidance, issues concerning independence, access to certain data, and recruitment and 
training of experts challenge DSMB effectiveness. -------------------------------------------------------- 67 
08 NIHUniversity Management of Grant Funds.  Not all of the selected costs that were 
charged to HHS awards by a university grantee were allowable.-------------------------------------- 67 
09 SAMHSAGrants Management.  A Massachusetts grantee failed to meet requirements or 
fully support its claimed costs. --------------------------------------------------------------------------------- 68 
Human services reviews -------------------------------------------------------- 69 
Significant problems, abuses, and deficiencies: ------------------------------- 69 
01 ACFLicense-Exempt Child Care Providers in the Child Care and Development Fund (CCDF) 
Program.  Gaps in health and safety requirements and gaps in monitoring represent 
vulnerabilities that could lead to harm for children in care. -------------------------------------------- 69 
02 ACFChild Care and Development Funds in Connecticut.  Providers did not always comply 
with applicable State licensing requirements to ensure the health and safety of children. ---- 70 
03 ACFChild Care and Development Funds in Nebraska.  Nebraskas policies and procedures 
were inadequate to correctly identify allowable expenditures. --------------------------------------- 70 
04 ACFChild Support Enforcement. --------------------------------------------------------------------------- 71 
05 ACFIdentity Theft.  A recipient of Temporary Assistance to Needy Families concealed 
earnings by using his sons social security number. ------------------------------------------------------- 72 
06 ACLSenior Medicare Patrol (SMP).  OIGs annual report of performance data indicates that 
despite fewer volunteers, the ACL-funded SMP program increased its public contacts to 
combat Medicare waste, fraud, and abuse. ---------------------------------------------------------------- 72 
Other HHS issues ----------------------------------------------------------------- 73 
Significant problems, abuses, and deficiencies: ------------------------------- 73 
01 Affordable Care ActConsumer Operated and Oriented Plan Program Loans (CO-OPs).  CMS 
awarded loans in accordance with Federal requirements, but startup funding is at risk of being 
exhausted before CO-Ops become operational; we found little evidence of private support to 
loan applicants. ---------------------------------------------------------------------------------------------------- 73 
02 Affordable Care ActCO-OP Implementation.  As new entities, CO-OP entities had made 
progress, meeting 90 percent of milestones; however, they may face financial and operational 
challenges in a competitive insurance market; unpredictable factors create risk. ---------------- 74  HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page xv 
 
 
03 Affordable Care ActHealth Insurance Exchange Data Services Hub.  During the 
development of the Data Services Hub, CMS was addressing and testing security controls; 
several critical information security tasks were in progress at the time of review. --------------- 74 
04 Oversight of Insurers Submissions to Plan Finder in 2011-2012.  Though most data displayed 
on the Plan Finder matched the information provided by insurers representatives, vigilant 
oversight will be needed. ---------------------------------------------------------------------------------------- 75 
05 Non-Federal Audits.  OIG reviews audits conducted by non-Federal auditors of entities 
receiving Federal awards. --------------------------------------------------------------------------------------- 76 
06 HHS Grant FundsMisuse.  The director of a nonprofit organization based in Maine conspired 
to divert HHS grant funds to personal use. ------------------------------------------------------------------ 77 
07 HHS Contract Audits.  Reporting requirement. ------------------------------------------------------------ 77 
08 Recovery Act Retaliation Complaint Investigations.  Reporting requirement. -------------------- 77 
09 Legislative and Regulatory Reviews.  Reporting requirement. ---------------------------------------- 78 
10 Employee MisconductAbuse of Retention Bonuses. ------------------------------------------------- 78 
Appendixes ------------------------------------------------------------------------ 81 
 
List of Appendixes: 
A  Savings Decisions Supported by OIG Recommendations 
B  Questioned Costs and Funds To Be Put to Better Use 
C  Peer Review Results 
D  Summary of Sanction Authorities 
E  Reporting Requirements in the Inspector General Act of 1978 
F  Anti-kickback StatuteSafe Harbors 
 
    HHS Office of Inspector General  Table of Contents 
Semiannual Report to Congress  Fall 2013  Page xvi 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
 
  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 1 
 
 
Medicare Part A and Part B Reviews 
This segment of the Department of Health and Human Services (HHS) Office of Inspector 
Generals (OIG) Semiannual Report to Congress (Semiannual Report) pertains to Medicare Part A 
and Medicare Part B.  Medicare Part A and Part B together are generally referred to as 
traditional Medicare or original Medicare, respectively.  Medicare Part C (Medicare 
Advantage) and Part D (Medicare Prescription Drug Benefit) are further additions to the 
program. 
Medicare Part A helps cover certain inpatient services in hospitals and skilled nursing facilities 
(SNFs) and some home health services.  Medicare Part B helps cover designated practitioners 
services; outpatient care; and certain other medical services, equipment, supplies, and drugs 
that Part A does not cover.   
As required by the Inspector General Act of 1978, as amended, the Semiannual Report identifies 
and describes significant problems, abuses, deficiencies (i.e., issues), and recommendations for 
corrective action.  For Medicare Part A and Part B, the issues fall into the following broad 
operational categories: 
  addressing wasteful policies and practices. 
  preventing, deterring, and addressing abusive billing. 
  maximizing recovery of public funds. 
  promoting quality, safety, and value. 
The Table of Contents lists the issues reported for each category.  The body of the document 
provides corresponding background information and savings potential and identifies 
recommendations that would address each issue.       
Address wasteful policies and practices  
 
The recommendations in this subsection address the wasteful spending that arises from 
shortcomings in current Medicare policies or practices.  Waste is a broad term that applies to 
situations in which Medicare pays more than it should.  Policies or practices sometimes result in 
waste when unintended loopholes or other inherent problems invite exploitation or hinder 
consistent payment determinations.  Medicares supporting systems and practices sometimes 
result in waste by hindering timely and appropriate payment adjustments.  Later subsections 
address abusive billing and failure to recover public funds, which are related forms and sources 
of wasteful spending.   
OIGs audit and evaluation reports do not routinely project the annual program-level cost savings 
that could be realized from implementing the recommendations.  Instead, the reports indicate 
within the scope of each review the extent to which policies or practices may be ineffective and 
describe the corrective actions that OIG recommends.  We describe the monetary findings of 
each report (which may result in receivables or funds made available better use) under the 
subheading Savings Potential.  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 2 
 
 
Significant problems, abuses, and deficiencies:   
01  HospitalsEarly Discharges to Hospice Care.  Medicare pays hospitals 
more for early discharges to hospice care than it pays for early 
discharges to certain other care settings; a hospice-specific hospital 
transfer payment policy is needed.  
Generally, Medicares transfer payment policies assume that hospitals should not receive full 
payments when beneficiaries are discharged early and then admitted for additional care in 
certain other clinical settings.  Instead of making full payments, Medicare pays the discharging 
hospitals a reduced rate for early discharges.  There is no similar policy for transfers to hospice 
care.  
We found that about 30 percent of all hospital discharges to hospice care were early discharges 
that, under a transfer payment policy, would have resulted in payment to the hospitals of a 
reduced rate instead of full payments.  Medicare beneficiaries discharges from acute-care 
hospitals to hospice care increased about 66 percent from calendar year (CY) 2007 to CY 2010, 
and Part A payments increased about 80 percent (i.e., payments increased from $1.5 billion to 
$2.7 billion).  
Savings PotentialIf Medicare Part A had implemented a hospital transfer payment policy for 
early discharges from hospitals to hospice care in 2009 and 2010, it could have saved over 
$600 million. 
We recommend that the Centers for Medicare & Medicaid Services (CMS)  
  change its regulations or pursue a legislative change if necessary to establish a hospital 
transfer payment policy for early discharges to hospice care. 
2013 MAY  Medicare Could Save Millions by Implementing a Hospital Transfer Payment 
Policy for Early Discharges to Hospice Care.  A-01-12-00507.   
 
02  Critical Access Hospitals (CAHs).  Medicare and its beneficiaries pay 
more for care in CAH-certified hospitals, but most CAHs would not meet 
the location requirements if required to re-enroll in Medicare. 
Our August 2013 report revealed that nearly two-thirds of CAHs would not meet the location 
requirements if required to re-enroll and the vast majority would not meet the distance 
requirement.  Also, CMS does not have the authority to decertify most of these CAHs because 
they are designated as necessary providers that are permanently exempt from meeting the 
distance requirement. 
CMS pays CAHs under a system different from that for paying most other hospitals.  Medicare 
reimburses CAHs at 101 percent of their reasonable costs, rather than at the rates set by 
prospective payment systems or fee schedules.  Currently, hospitals can be certified as CAHs if  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 3 
 
 
they meet a variety of regulatory requirements, including being located at least a certain driving 
distance from other hospitals (including other CAHs) and being located in rural areas. 
Savings PotentialIf CMS had decertified CAHs that were 15 or fewer miles from their nearest 
hospitals in 2011 and had paid them at the applicable non-CAH rates, Medicare and beneficiaries 
would have saved $449 million. 
We recommend that CMS  
  seek legislative authority to remove the permanent exemption from the distance 
requirement for necessary provider CAHs, thus allowing CMS to reassess the CAHs 
eligibility; seek legislative authority to revise the CAH Conditions of Participation to include 
alternative location-related requirements; ensure that it periodically reassesses CAHs for 
compliance with all location-related requirements; and ensure that it applies its uniform 
definition of mountainous terrain to all CAHs.  
2013 AUG  Most Critical Access Hospitals Would Not Meet the Location Requirements if 
Required To Re-enroll in Medicare.  OEI-05-12-00080.   
 
03  Laboratory Tests.  Medicare paid more for lab tests than did the State 
Medicaid programs and Federal Employee Health Benefit (FEHB) plans 
we reviewed; better aligning payments with Medicaid and FEHB could 
yield substantial savings.  
Medicare is the largest payer of clinical laboratory (lab) services in the Nation.  It paid 
approximately $8.2 billion for lab tests in 2010, which accounted for 3 percent of all Medicare 
Part B payments.  Our June 2013 report revealed that in 2011, Medicare paid between 18 and 
30 percent more than other insurers for 20 high-volume and/or high-expenditure lab tests.  
State Medicaid programs and 83 percent of FEHB plans use the Medicare Clinical Laboratory Fee 
Schedule as a basis for establishing their own fee schedules and payment rates, although most 
pay less.  Some State Medicaid programs and FEHB plans required copayments for lab tests, 
which, in effect, lowered the costs of lab tests for the insurer.  Unlike Medicare, FEHB programs 
incorporate factors such as competitor information, changes in technology used in performing 
lab tests, and provider requests in their payment rates.   
Savings PotentialMedicare could have saved $910 million in 2011 (38 percent) on selected 
high-volume and/or high-expenditure lab tests if it had paid providers at the lowest established 
Medicaid or FEHB rate in each geographic area.    
We recommend that CMS  
  seek legislation that would allow it to establish lower payment rates for lab tests and to 
institute copayments and deductibles for lab tests. 
2013 JUN  Comparing Laboratory Test Payment Rates:  Medicare Could Achieve Substantial 
Savings.  OEI-07-11-00010.   
    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 4 
 
 
 
04  Medical Equipment/SuppliesContinuous Positive Airway Pressure 
(CPAP) Therapy.  Medicares replacement schedule for CPAP supplies 
has remained largely the same for the past 20 years and may not align 
with current payers and professional recommendations. 
Positive airway pressure, commonly administered by a CPAP machine, is the most widely used 
method for treating obstructive sleep apnea (OSA).  Individuals diagnosed with OSA experience 
physical blockages or obstructions in the airway during sleep.  Suppliessuch as masks, tubing, 
chinstraps, and filtersmust occasionally be replaced, thus resulting in recurring expenses. 
We found that for most State Medicaid programs, frequency schedules for replacing CPAP 
supplies equaled or were less frequent than Medicares.  CPAP supplies are included in one 
product category of CMSs competitive-bidding process.  However, competitive bidding does not 
address replacement schedules. 
Savings PotentialProviding supplies more frequently than necessary leads to wasteful 
spending.  For example, we estimated that if Medicare reduced the frequency of mask 
replacement from one per 3 months to one per 6 months, expenditures would decrease by more 
than $14 million (about 14 percent).   
We recommend that CMS  
  review the CPAP supply replacement schedule and revise the national coverage 
determination for CPAP therapy for obstructive sleep apnea or request that the Durable 
Medical Equipment Medicare Administrative Contractors (MACs) revise their local coverage 
determinations as appropriate.     
2013 JUN  Replacement Schedules for Medicare Continuous Positive Airway Pressure 
Supplies.  OEI-07-12-00250.   
 
05  Part B Prescription Drugs.  Medicare could recoup billions on Part B 
drug costs if pharmaceutical manufacturers were required to pay 
rebates as they do for Medicaid drugs. 
Medicaid recouped a substantial percentage of the $28 billion it spent on prescription drugs in 
2011 because of statutorily mandated rebates from manufacturers.  That same year, Medicare 
Part B expenditures exceeded $16 billion on prescription drugs; however, no similar rebate 
authority exists for Part B to reduce the costs of drugs to the program.   
In response to a congressional request, OIG estimated in 2011 that if pharmaceutical 
manufacturers had been required to pay rebates similar to those under Medicaid for 20 high-
expenditure Part B brand-name drugs, Medicare could have collected up to $2.4 billion in 
rebates, representing as much as 26 percent of expenditures for those drugs in 2010.    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 5 
 
 
Whereas our original analysis was limited to 20 brand-name drugs, this current study provides a 
more thorough examination of the potential collections associated with Part B rebates, as well as 
implementation issues.  However, several implementation issues related to claims and data 
would need to be addressed if such a rebate program were implemented.  
Savings PotentialWe estimated that Medicare could have collected $3.1 billion if 
pharmaceutical manufacturers had been required in 2011 to pay rebates based on average 
manufacturer price for 60 high-expenditure Part B drugs, representing 22 percent of spending 
for those drugs.  Requiring manufacturers to pay rebates based on average sales price for the 
same 60 drugs could have garnered Medicare $2.7 billion in rebate payments, representing 
20 percent of spending.   
We recommend that CMS 
  examine the additional potential impacts of establishing a prescription drug rebate program 
under Medicare Part B and, if appropriate, seek legislative change.  As part of its 
consideration, CMS should address administrative issues that may hinder rebate collections.  
2013 SEP  Medicare Could Collect Billions If Pharmaceutical Manufacturers Were Required 
To Pay Rebates for Part B Drugs.  OEI-12-12-00260. 
 
06  DialysisAnemia Management Drugs.  Utilization of anemia 
management drugs in dialysis treatments in 2011 was generally 
significantly less than the utilization reflected in the base rate 
calculation; adjustments could yield savings for Medicare. 
Medicare payment adjustments could yield savings.  Almost all people with end-stage renal 
disease (ESRD) have anemia.  We estimated that Medicare and its beneficiaries could have saved 
$510 million during CY 2011 if the ESRD base rate had been adjusted to reflect the current 
utilization of erythropoiesis-stimulating agents (ESAs) Epogen and Aranesp and $19 million if the 
ESRD base rate had been adjusted to reflect current utilization of iron supplements Venofer and 
Ferrlecit.  Also, we identified limitations that CMS should consider when it relies on ESRD claims 
data for program oversight.  These limitations include inaccuracies in the quantities of drugs 
claimed and the inability to determine the extent of drug waste or overfill usage. 
To comply with statutory requirements, CMS used CY 2007 utilization and payment data for ESAs 
and iron supplements to calculate the base rate for the ESRD prospective payment system (PPS) 
payment bundle.  In CY 2011, Medicare and beneficiaries paid approximately $10 billion for 
dialysis services under a bundled ESRD prospective payment system (PPS) that went into effect 
on January 1, 2011. The anemia management drugs Epogen, Aranesp, Venofer, and Ferrlecit 
represent approximately 25 percent of the base rate payment made to dialysis facilities for each 
dialysis treatment furnished to a beneficiary. 
Savings PotentialWe estimated that Medicare and its beneficiaries could have saved 
$510 million during CY 2011 if the ESRD base rate had been adjusted to reflect current utilization 
of Epogen and Aranesp and $19 million if the ESRD base rate had been adjusted to reflect 
current utilization of Venofer and Ferrlecit.     HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 6 
 
 
We recommend that CMS  
  adjust the bundled base rate to realize program savings associated with decreased utilization 
of ESAs and iron supplements; develop new policies, procedures, or other guidance for 
recording drug waste and overfill; and remind dialysis facilities of the importance of claims 
accuracy. 
2013 MAY  Medicare and Beneficiaries Could Save Millions If Dialysis Payments Were 
Adjusted for Anemia Management Drug Utilization.  A-01-12-00522.  
 
07  Claims ProcessingG Modifiers.  Medicare contractors fail to consider 
billing codes that flag claims as being unallowable for payment; practice 
and procedure adjustments are needed.  
When processing claims, Medicares contractors often do not consider the G service code 
modifiers that providers and suppliers use to indicate that they expect services or items to be 
denied as not reasonable and necessary.  Contractors also do not always consider the 
G modifiers that providers and suppliers use to indicate that services or items are not covered by 
Medicare.  Although contractors have checks that affect some of these claims, such as 
determining whether the services and items met Medicare frequency limitations, they do not 
specifically check for claims for which providers expect not to be paid. 
Savings PotentialIn 2011, Medicare paid nearly $744 million for Part B claims with G modifiers.       
OIG did not make formal recommendations to CMS but provided a number of options that 
would help address the problems we found.  For example, CMS could 
  ensure that all contractors are following instructions to automatically deny claims with 
GZ modifiers; instruct contractors to automatically deny claims with GY modifiers and ensure 
that contractors follow the instructions; decide whether to implement the GX modifier for 
Part B claims, since providers are already using it; and ensure that contractors do not pay for 
claims with inappropriate combinations of G modifiers. 
2013 MAY  Medicare Payments for Part B Claims with G Modifiers.  OEI-02-10-00160.   
Prevent, deter, and address abusive billing 
 
Medicare makes improper payments (a form of wasteful spending) when it does not effectively 
prevent, deter, identify or address inappropriate and abusive billing by providers and suppliers.  
Some, but not all, abusive billing is fraudulent. 
Improper payments include both overpayments and underpayments.  This section of the 
Semiannual Report focuses primarily on significant overpayment issues, although the suggested 
remedies may also prevent underpayments.  Ultimately, the goal is for all payments to be correct 
and to comply with rules and requirements.         HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 7 
 
 
Abusive billing occurs when the items or services billed to Medicare are not supported by the 
documentation in the providers or suppliers medical files as required, are not medically 
necessary, are not covered by Medicare, or other requirements and conditions for payment are 
not met.  Also, administrative errors on claims may be associated with the improper payments. 
In addition to recovering improperly paid amounts, OIGs recommendations associated with 
erroneous or abusive billing may include that CMS and/or its contractors educate providers on 
proper claims submission, conduct prepayment and postpayment reviews of medical records 
(including third-party records, such as records of the providers who ordered the items or 
performed the services) as appropriate; conduct unannounced site visits of providers; 
implement system edits to detect and reject questionable entries on claims; develop data sets 
and other tools to assist in proper billing; track billing histories for capped items and services; 
establish risk-based levels for screening and reviewing providers; monitor provisions historically 
vulnerable to error, procedures, providers, benefit categories, and system codes; ensure 
effective guidance and communications among CMS, its payment contractors, and the public; 
collect overpayments; and impose sanctions, such as penalties, suspensions, and revocations on 
providers with serious deficiencies.  Some of OIGs recommendations are made directly to the 
billing provider or supplier. 
Significant problems, abuses, and deficiencies:   
01  Hospital Postacute Discharges and Transfers.  Medicare overpaid 
millions to hospitals for claims subject to the postacute care transfer 
policy reduced rate.  
Medicare makes full Medicare Severity Diagnosis-Related Group (MS-DRG) payments to 
hospitals that discharge inpatients to their homes.  In contrast, for specified MS-DRGs, Medicare 
pays hospitals that transfer inpatients to certain postacute care settings, such as home health 
care and skilled nursing facilities, a reduced rate for each day of the stay, not to exceed the full 
MS-DRG payment for a discharge.  Whether Medicare pays for a discharge or a transfer depends 
on the patient discharge status code indicated on the inpatient claim. 
The hospitals we reviewed were overpaid by Medicares contractor, Palmetto GBA, LLC, 
(Palmetto).  The audited hospitals used incorrect patient discharge status codes on their claims, 
indicating that the patients were discharged to home rather than transferred to postacute care.  
Of the selected claims on which hospitals said patients were discharged to home, 97 percent 
were followed by claims for home health services.  The hospitals should have been paid at 
reduced rates pursuant to postacute care transfer policy instead of at the full rates. 
Savings PotentialPalmetto overpaid about $10.8 million for 1,656 selected hospital claims 
subject to the postacute care transfer policy during CYs 2008 through 2011. 
We recommend that Palmetto  
  educate hospitals in its jurisdiction on the importance of reporting the correct patient 
discharge status codes on transfer claims, especially when home health services have been 
ordered; continue working with the pertinent data system maintenance contractor to ensure 
that it receives the system edits and alerts and associated information; and recover the 
overpayments we identified.   HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 8 
 
 
2013 MAY  Palmetto GBA, LLC, Inappropriately Paid Hospitals' Medicare Claims Subject to 
the Postacute Care Transfer Policy in Jurisdiction 1.  A-09-12-02038.   
 
02  Hospital Claims for Mechanical Ventilation.  Medicare overpaid millions 
to hospitals that used the incorrect procedure code for mechanical 
ventilation.   
With certain MS-DRGs, Medicare requires beneficiaries to receive 96 or more hours of 
mechanical ventilationthe use of a ventilator or respirator to take over active breathing for a 
patient.  Hospitals indicate that beneficiaries meet this requirement by using procedure code 
96.72 on claims. 
If a beneficiary received fewer than 96 hours of mechanical ventilation, the claim is coded with a 
different procedure code and is assigned to an MS-DRG with a lower severity level, resulting in a 
lower payment.  The hospitals incorrectly used procedure code 96.72 when the beneficiaries had 
not received 96 or more hours of mechanical ventilation, resulting in overpayments.   
Savings PotentialOf the 377 selected claims, 363 were coded with the incorrect procedure 
code, resulting in overpayments of about $7.7 million. 
We recommend that CMS  
  direct the Medicare contractors to review any claims for which procedure code 96.72 was 
used with a length of stay of 4 days or fewer, recover any overpayments after our audit 
period and before implementation of the length-of-stay edit, and ensure that the Medicare 
contractors recover the overpayments we identified.      
2013 SEP  Medicare Incorrectly Paid Hospitals for Beneficiaries Who Had Not Received 96 
or More Hours of Mechanical Ventilation.  A-09-12-02066.   
 
03  Hospital Claims for Canceled Elective Surgeries.  Medicare overpaid 
millions to hospitals for canceled elective surgeries.  
The Medicare Part A Trust Fund made payments that were not reasonable and necessary for 
short-stay inpatient hospital claims involving canceled elective surgeries.  The payments 
occurred because the hospitals were unclear about the Medicare requirements for billing for 
canceled inpatient surgeries, particularly with regard to changing a beneficiarys status from 
inpatient to outpatient after discharge, and hospitals did not always have adequate utilization 
review controls to confirm whether admissions were reasonable and necessary after elective 
surgeries had been canceled. 
Savings PotentialMedicare overpaid about $38 million over a 2-year period.  Hospitals may bill 
Medicare Part B for services related to the incorrectly billed Medicare Part A admissions.  The 
estimated overpayments could be reduced if hospitals correctly rebill Part B and Part B pays for 
the services.  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 9 
 
 
We recommend that CMS  
  strengthen guidance to better explain the Medicare rule that a clinical condition requiring 
inpatient care must exist for hospitals to bill for Part A payments for elective surgeries that 
were canceled, instruct MACs to emphasize to hospitals the need for stronger utilization 
review controls for claims that include admissions for elective surgeries that did not occur, 
adjust the sampled claims representing overpayments of over $345,000 to the extent 
allowed under the law, and work with OIG to resolve the remaining nonsampled claims and 
recover overpayments to the extent feasible and allowed under the law.   
2013 AUG  Medicare Could Save Millions by Strengthening Billing Requirements for 
Canceled Elective Surgeries.  A-01-12-00509.    
 
04  Hospital Inpatient and Outpatient Claims in Risk Areas.  Hospitals that 
appear to be at risk of submitting significant noncompliant claims to 
Medicare are subject to OIG review; risk areas are identified through 
data mining and analysis. 
The reports listed below (examples for this semiannual period) are part of an ongoing series of 
reviews of selected inpatient and outpatient services claims submitted by acute care hospitals.   
Prior audits, investigations, and inspections identified certain types of payments to hospitals that 
are at risk for noncompliance with Medicare billing requirements.  These types of payments 
(referred to here as risk areas) were identified by using computer matching, data mining, and 
data analysis techniques.    
Because the reviews focus on selected risk areas, the findings do not represent overall 
assessments of all claims submitted by the hospitals.  The objective is to determine whether 
hospitals complied with Medicare requirements when billing for services in the selected risk 
areas.  The goals are to improve the hospitals internal controls, increase provider awareness and 
compliance with Medicare rules, and recommend recovery of overpayments.  Acute care 
hospitals submit claims to Medicare under the Inpatient Prospective Payment System (IPPS) and 
the Outpatient Prospective Payment System .    
Savings PotentialOn the basis of CMS's Standard Analytical Files, we calculated about 
$151 billion of actual IPPS payments made to hospitals for CY 2011.  We did not determine the 
portion that would fall into our risk areas.  Below are amounts questioned in individual reports 
for the risk areas selected.    
2013 SEP  Medicare Compliance Review of University of Miami Hospital.  A-04-12-07033.  
($3,717,557 questioned in selected inpatient risk areas.)   
2013 AUG  Medicare Compliance Review of Southcoast Hospitals Group for Calendar Years 
2010 and 2011.  A-01-12-00523.  ($1,106,581 questioned in selected inpatient 
and outpatient risk areas.) 
2013 JUN  Baptist Medical Center South Complied With Most Medicare Requirements for 
Billing Inpatient and Outpatient Services for Calendar Years 2009 and 2010.    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 10 
 
 
A-04-12-00083. ($1,784,982 questioned in selected inpatient and outpatient risk 
areas.)  
2013 JUN  Medicare Compliance Followup Review of Tufts Medical Center.   
A-01-12-00527.  ($1,086,047 questioned in selected inpatient risk areas.) 
2013 JUN  Medicare Compliance Review of Community Regional Medical Center.   
A-09-12-02071.  ($1,075,310 questioned in selected inpatient and outpatient risk 
areas.) 
2013 MAY  Medicare Compliance Review of Cedars-Sinai Medical Center for the Period 
January 1, 2008, Through June 30, 2011.  A-09-12-02048.  ($2,244,649 
questioned in selected inpatient and outpatient risk areas.) 
2013 MAY  Medicare Compliance Review of Saint Thomas Hospital for Calendar Years 2009 
and 2010.  A-04-12-03071.  ($1,092,248 in estimated overpayments in the risk 
areas for the audit period.) 
 
05  Outpatient Therapy ServicesAn outpatient therapy supplier 
improperly billed most of its claims to Medicare; the supplier did not 
have a thorough understanding of Medicares requirements and did not 
have adequate policies and procedures in place to ensure correct billing.   
Spectrum Rehabilitation, LLC, improperly claimed Medicare reimbursement for 83 of 100 claims 
in a random sample.  Issues centered on physician certification, treatment notes, medical 
necessity, and deficient plans of care.  Also, the billing therapists did not supervise or perform 
the services claimed.   
Savings PotentialAn overpayment of about $3 million was estimated from a random sample of 
100 claims.  Corrective actions could result in Medicare savings at this supplier by recovering 
improperly paid amounts and by reducing future billing errors.    
We recommend that the outpatient therapy supplier  
  obtain a better understanding of the Medicare reimbursement requirements related to 
outpatient therapy services through such means as attending provider outreach and 
education seminars, strengthen its policies and procedures to ensure that outpatient 
therapy services are provided and documented in accordance with Medicare requirements, 
and refund the overpayments we identified to the Federal Government.  
2013 JUN  Spectrum Rehabilitation, LLC, Claimed Unallowable Medicare Part B 
Reimbursement for Outpatient Therapy Services.  A-02-11-01044.   
    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 11 
 
 
 
06  Medical Equipment/SuppliesDiabetes Test Strips.  Billing abuses 
continue in non-competitive-bidding areas and for non-mail-order 
purchases.  
Recent investigations and prior Office of Inspector General studies have found that diabetes test 
strips is an area vulnerable to fraud, waste, and abuse.  Our August 2013 report revealed that 
the Competitive Bidding Program for medical equipment and supplies appears to have reduced 
questionable billing for mail order test strips in Competitive Bidding Areas (CBAs).  Similar 
reductions in questionable billing did not occur in non-CBA areas or for non-mail-order test 
strips. 
Our findings included that suppliers in 10 geographic areas nationwide were responsible for 
77 percent of questionable billing.  
Savings PotentialIn 2011, Medicare inappropriately allowed an estimated $6 million for 
diabetic test strip claims with three types of errors. 
We recommend that CMS  
  enforce existing edits (system processes) to prevent inappropriate diabetes test strip claims, 
increase monitoring of suppliers Medicare billing, provide more education to suppliers and 
beneficiaries about appropriate billing practices, and take appropriate action regarding 
inappropriate Medicare claims and suppliers with questionable diabetic test strip billing.  
2013 AUG  Inappropriate and Questionable Medicare Billing for Diabetes Test Strips.   
OEI-04-11-00330.   
 
07  Medical Equipment/SuppliesDiabetic Testing Supplies.  One 
providers CY 2011 claims billed at the higher non-mail-order rate 
illustrate the effect of prior payment policy, now revised.  
For calendar year 2011, a medical equipment supplier properly submitted claims for diabetic 
testing supplies at the non-mail-order rate in accordance with Medicare billing requirements.  
All 100 sampled line items were properly paid at the higher rate because the supplier used 
company-owned vehicles instead of common carriers to deliver the supplies to Medicare 
beneficiaries at their homes, therefore qualifying for the higher non-mail-order rate.       
CMS redefined mail order to include any item (for example, diabetic testing supplies) shipped 
or delivered to the beneficiarys home, regardless of the method of delivery.  Thus, supplies 
delivered to beneficiaries homes by supplier-owned vehicles will now be paid at the lower mail-
order rate.    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 12 
 
 
We issued this report without recommendations because CMS has redefined the term mail 
order for payment purposes.  Delivery of diabetic testing supplies to the beneficiaries' homes 
using company-owned vehicles will no longer qualify for the higher non-mail-order rate. 
2013 APR  MedEnvios Healthcare, Inc., Submitted Claims for Diabetic Testing Supplies 
Without the KL Modifier in Accordance With Medicare Billing Requirements.   
A-09-12-02053.   
 
08  Medical Equipment/SuppliesLower Limb Prosthetics.  Medicare 
overpaid lower limb prosthetics claims that did not meet local coverage 
determinations; the contractor lacked effective edits. 
A Medicare contractor, CGS Administrators, LLC (CGS), made payments for lower limb prosthetic 
claims that did not meet local coverage determination requirements.  A lower limb prosthesis is 
an artificial replacement for any or all parts of a leg; it enables an individual who has an 
amputated limb to perform functional tasks, particularly walking, that may not be possible 
without the device.  Local coverage determinations specify under what clinical circumstances a 
service is considered to be reasonable and necessary.  They are administrative and educational 
tools to assist providers in submitting correct claims for payment.   
In 2012, the Centers for Medicare & Medicaid Services issued a technical direction letter that 
instructed Durable Medical Equipment Medicare Administrative Contractors to put in place claim 
edits for all requirements set forth in the local coverage determinations for lower limb 
prosthetics. 
At the time CGS inappropriately paid for the claims, it did not have edits in place to evaluate 
whether the claims met all the local coverage determination requirements.  CGS paid lines of 
service for lower limb prostheses in 2010 and 2011 that did not meet requirements consisting of 
missing or incorrect functional level modifiers, unallowable quantities of socket inserts, and 
unallowable combinations of components.  
Savings PotentialWe estimated that CGS overpaid about $6 million in 2010 and 2011. 
We recommend that CGS  
  monitor the system edits developed in response to CMSs March 2012 technical direction 
letter to ensure that the edits are functioning correctly and recover the identified 
overpayments for lines of service for lower limb prostheses that did not meet local coverage 
determination requirements in 2010 and 2011. 
2013 JUL  CGS Administrators, LLC, Paid Unallowable Lower Limb Prosthetics Claims.   
A-06-12-00055.   
    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 13 
 
 
 
09  Part B DrugsHerceptin.  Medicare overpays for the cancer drug 
Herceptin; incorrect units of service billed and supporting 
documentation are inadequate.  
Herceptin, also known as trastuzumab, is a Medicare-covered drug used to treat breast cancer 
that has spread to other parts of the body.  Herceptin comes in a multiuse vial of 440 milligrams. 
A multiuse vial contains more than one dose of medication and is labeled as such by the 
manufacturer.  A vial of Herceptin, when reconstituted and properly stored, can be used for up 
to 28 days.  For multiuse vials, Medicare pays only for the amount administered to a beneficiary 
and does not pay for any discarded drug.  Therefore, a payment for an entire multiuse vial is 
likely to be incorrect.  The audits in this Semiannual Report are part of a nationwide review of 
the drug Herceptin. 
Savings PotentialOverpayments totaled about $1.8 million in Medicares Jurisdiction 7 and 
about $1 million in Medicares Jurisdiction 13 for selected line items. 
We recommend that the payment contractors for Medicares Jurisdictions 7 and 13  
  implement or update system edits that identify for review multiuse-vial drugs that are billed 
with units of service equivalent to the dosage of an entire vial, use the results of the audit in 
its provider education activities, recover identified overpayments, and identify and recover 
additional overpayments from the samples.   
2013 APR  Medicare Contractors' Payments Made to Providers in Jurisdiction 7 for Full Vials 
of Herceptin Were Often Incorrect.  A-06-11-00068.  
2013 MAY  The Medicare Contractor's Payments to Providers in Jurisdiction 13 for Full Vials 
of Herceptin Were Often Incorrect.  A-02-12-01003.   
 
10  Part B Ambulance ServicesIncreased Utilization.  Increases in the 
utilization of ambulance transports are disproportionate in relation to 
increases in the population of Medicare fee-for-service beneficiaries. 
This report analyzed for informational purposes a number of ambulance utilization data factors.  
The review did not seek to determine whether the increase in transports during the period were 
medically necessary or met coding and documentation requirements for coverage.   For the 
period 2002 through 2011, we found the following increases. 
  The number of Medicare ambulance transports increased 69 percent.       
  Medicare fee-for-service beneficiaries increased just 7 percent, but the number of 
beneficiaries who received ambulance transports increased 34 percent.    
  The number of ambulance suppliers providing transports increased 26 percent.  In particular, 
the number of ambulance suppliers that primarily provided basic life support nonemergency 
transports nearly doubled from 2002 to 2011.    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 14 
 
 
  Though the percentage of beneficiaries with end-stage renal disease who received the 
transports varied little during the period, dialysis-related transports increased 269 percent, 
representing 22 percent of all transports.   Although dialysis facilities are a covered 
destination, transports to them do not usually meet coverage requirements under Medicare. 
  The number of transports to or from hospitals increased 55 percent, representing 79 percent 
of all transports.  Notably, transports to hospitals originating from the scene of an accident 
or acute event increased 112 percent.      
Savings PotentialIn 2011, Medicare Part B paid $4.5 billion for ambulance transports, an 
increase of 130 percent, compared to a 74-percent increase in overall Part B payments.    In 
addition to service utilization, other factors that may contribute to the increase in payments 
include inflation and the transition to the national fee schedule for Medicare ambulance 
transports.  Savings could be achieved by identifying and curbing inappropriate growth in 
utilization.  The report is primarily informational and did not contain formal recommendations to 
CMS.  A separate review will identify ambulance suppliers that exhibited characteristics of 
questionable billing and the geographic areas with high numbers of such suppliers. 
2013 SEP  Utilization of Medicare Ambulance Services.  OEI-09-12-00350.   
 
11  Management of Provider Data.  Medicare provider enumeration and 
enrollment data are often inaccurate, are occasionally incomplete, and 
are generally inconsistent between Medicares two primary provider 
databases, hindering oversight and placing health care programs at risk 
of fraud and abuse.  
OIG work has revealed ongoing problems with CMSs oversight of provider enumeration and 
enrollment data, which may foster improper Medicare payments to fraudulently enrolled 
providers.  
Our May 2013 report revealed that provider data were inconsistent between two primary 
databases1 for 97 percent of records.  Addresses, which are essential for contacting providers 
and identifying trends in fraud, waste, and abuse, were the source of most inaccuracies and 
inconsistencies.  Finally, CMS did not verify most provider information in its data systems. 
We recommend that CMS  
  require contractors to implement program integrity safeguards for Medicare provider 
enrollment as established in the Program Integrity Manual, require more verification of 
enumeration and enrollment data, and detect and correct inaccurate and incomplete 
provider enumeration and enrollment data for new and established records. 
                                                           
1 National Plan and Provider Enumeration System (NPPES) and Provider Enrollment, Chain and Ownership 
System (PECOS).  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 15 
 
 
2013 MAY  Improvements Needed To Ensure Provider Enumeration and Medicare 
Enrollment Data Are Accurate, Complete, and Consistent.  OEI-07-09-00440. 
Maximize recovery of public funds 
 
In conducting its Medicare work, OIG places priority on holding wrongdoers accountable and 
maximizing recovery of public funds.  To this end, OIG activities routinely include: 
  using statistical sampling and estimation planning to identify overpayments when possible, 
  reviewing the most recent claims and conduct possible, 
  focusing on the types of claims that are more likely to result in overpayment collection, 
  ensuring timely referral of overpayment matters, and 
  matching data across systems to maximize recovery efforts. 
We also direct our resources to monitoring the effectiveness of CMSs efforts to identify 
overpayments and fraud and to recover public funds. 
Significant problems, abuses, and deficiencies:   
01  Overpayment Recoveries.  Inaccurate provider types and contact 
information and other data gaps delay or prevent overpayment demand 
letters from reaching providers; not all overpayments are recovered.   
Medicare identifies billions of dollars in overpayments to health care providers each year.  
However, not all overpayments are recovered.  Overpayments for which the provider has not 
made a repayment for at least 6 months after the due date on the Medicare demand letter are 
classified as currently not collectible (CNC) and are not reported on CMSs annual financial 
statements.  These overpayments are not reported on the financial statements because they are 
not likely to be recovered.  
Our July 2013 report provides information about Medicares CNC overpayments.  CMS reported 
$543 million in new CNC overpayments across all Medicare payment contractors in FY 2010. 
However, CMS provided detailed information on only $69 million in CNC overpayments for 7 of 
its 39 contractors.  For the seven contractors, 97 percent of the overpayments were not 
recovered.  According to the contractors, inaccurate provider contact information delays or 
prevents some overpayment demand letters from reaching providers.  In addition, CMS and 
contractors reported that expanding the types of provider identifiers used to recover payments 
could improve debt collection efforts. 
Savings PotentialIn FY 2010, Medicare overpaid $9.6 billion, of which $543,000 were new CNC 
overpayments.      HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 16 
 
 
We recommend that CMS  
  ensure that the pertinent data variable for provider type is populated for all overpayments, 
ensure that demand letters are mailed to the contacts and addresses identified by the 
provider, and use tax identification numbers and provider transaction access numbers in 
addition to national provider numbers for the collection of overpayments. 
2013 JUL  Medicares Currently Not Collectible Overpayments.  OEI-03-11-00670.   
 
02  CMS Recovery Audit Contractors (RACs)Output and Effectiveness.  
Despite active identification of improper payments, high amounts of 
such payments continue; evaluation methods are lacking. 
Recovery Audit Contractors (RAC) are designed to protect Medicare by identifying improper 
payments and referring potential fraud to CMS.  Prior Government Accountability Office work 
has identified problems with CMSs actions to address improper payment vulnerabilities, and 
prior OIG work has identified problems with CMSs actions to address referrals of potential 
fraud.  Further, OIG has identified vulnerabilities in CMSs oversight of its contractors.  Given the 
critical role of identifying improper payments, effective oversight of RAC performance is 
important.   
In FYs 2010 and 2011, RACs identified half of all claims they reviewed as having resulted in 
improper payments.  CMS took corrective actions to address the majority of vulnerabilities it 
identified in FYs 2010 and 2011; however, it did not evaluate the effectiveness of these 
actions.  As a result, high amounts of improper payments may continue.  Additionally, CMS did 
not take action to address the six referrals of potential fraud that it received from RACs.  Finally, 
CMSs performance evaluations did not include metrics to evaluate RACs performance on all 
contract requirements. 
Savings Potential In FYs 2010 and 2011, RACs identified improper payments totaling 
$1.3 billion.  Recoveries, fraud referrals, and implementation of other corrective actions could be 
improved. 
CMS should  
  take action, as appropriate, on vulnerabilities that are pending corrective action and 
evaluate the effectiveness of implemented corrective actions; ensure that RACs refer all 
appropriate cases of potential fraud; review and take appropriate, timely action on RAC 
referrals of potential fraud; and develop additional performance evaluation metrics to 
improve RAC performance and ensure that RACs are evaluated on all contract requirements.   
2013 SEP  Medicare Recovery Audit Contractors and CMSs Actions To Address Improper 
Payments, Referrals of Potential Fraud, and Performance.   
OEI-04-11-00680.   
    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 17 
 
 
 Promote quality, safety, and value 
 
Medicare faces challenges in ensuring the safety and quality of care rendered to its beneficiaries.  
Despite increased attention to patient safety and quality, problems persist.  OIG efforts to 
monitor quality, safety, and value routinely include  
  ensuring that health care providers meet all Medicare conditions for coverage and 
participation; 
  ensuring that health care professionals meet qualification and licensure requirements; 
  strengthening provider accountability for quality of care; 
  imposing appropriate sanctions; 
  denying payments for services of such low quality that they are virtually worthless; 
  excluding providers that fail to meet basic quality standards; and 
  adopting electronic health records and electronic prescribing, which should improve quality 
of care, reduce medication errors, and otherwise promote patient safety.     
CMS develops Conditions of Participation (CoP) and Conditions for Coverage (CfC) that health 
care organizations must meet to participate in and receive payment from Medicare.  These 
health and safety standards are the foundation for improving quality and protecting the health 
and safety of beneficiaries.  CMS also ensures that the standards of accrediting organizations 
recognized by CMS meet or exceed the Medicare standards set forth in the CoPs and CfCs.  
Medicare contracts with State health agencies, referred to as State survey agencies, to perform 
survey and review functions on behalf of Medicare and certify that providers comply with 
Federal requirements.  The types of health care organizations subject to CoP and CfC are listed 
on CMSs Web site at http://www.cms.gov.   
Significant problems, abuses, and deficiencies: 
01  Hospital Outpatient Stays.  Hospital practices with regard to outpatient 
observation stays may limit beneficiaries ability to access skilled nursing 
facility (SNF) care upon discharge. 
Observation and other outpatient nights2 in hospitals do not count toward the 3 nights needed 
for Medicare to pay for subsequent SNF care.3   
                                                           
2 Medicare Part B pays hospitals for outpatient stays under the Outpatient Prospective Payment System. 
3 Medicare Part A pays SNFs for services under the SNF Prospective Payment System.  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 18 
 
 
Only inpatient nights4 may be used to qualify for Medicare payment of SNF care.  Hospital 
physicians decide whether to admit beneficiaries as inpatients or to continue observation or 
other outpatient services.  If beneficiaries do not have a 3-night inpatient stay, they still may 
choose to receive SNF care, but Medicare will not pay for it.  SNF care can cost tens of thousands 
of dollars.  The potential financial burden may discourage beneficiaries from accessing the SNF 
care they need.     
We identified over 600,000 hospital stays lasting 3 nights or more that did not qualify the 
beneficiaries for SNF care because some nights were spent receiving observation or other 
outpatient services.  Our July 2013 report revealed that some hospitals were more likely to 
admit beneficiaries, while other hospitals were likely to keep beneficiaries as outpatients.  We 
also found that SNFs sometimes billed Medicare for SNF care even though the 3-night rule was 
not met.  
Savings PotentialWe found that for 4 percent of unqualified stays, beneficiaries received SNF 
services that were inappropriately billed to Medicare, amounting to about $255 million in 
improper payments. 
Because we plan more work in this area, OIG did not make formal recommendations to CMS but 
provided options for consideration.  For example, CMS could 
  ensure that beneficiaries with similar post-hospital care needs have the same access to and 
cost-sharing for SNF services; seek statutory authority, if needed, to allow nights spent as an 
outpatient to count toward the 3 nights needed to qualify for SNF services; ensure that 
Medicare does not inappropriately pay when beneficiaries do not qualify for SNF services; 
and recover $255 million in payments for unallowable SNF care that we identified in our 
review. 
2013 JUL  Hospitals Use of Observation and Short Inpatient Stays for Medicare 
Beneficiaries.  OEI-02-12-00040.   
 
02  Survey and Certification of Home Health Agencies (HHAs).  CMSs lack 
of surveys for oversight of State agencies HHA survey performance 
could present a vulnerability to program effectiveness and quality of 
care for Medicare beneficiaries. 
CMS is responsible for ensuring that HHAs comply with Federal requirements and provide quality 
care, and CMS relies on State agencies and accreditation organizations to verify HHAs 
compliance through onsite surveys and complaint investigations. 
To assess accreditation organizations survey performance, CMS contracts with State agencies to 
conduct surveys of HHAs surveyed by accreditation organizations.  However, Federal law does 
                                                           
4 Medicare Part A pays hospitals for inpatient stays under the Inpatient Prospective Payment System.  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 19 
 
 
not require CMS to conduct, and CMS rarely conducts, similar surveys to assess State agency 
survey performance.  CMS may conduct such surveys if it wishes.  In such cases, CMS itself 
conducts the survey of an HHA, rather than contracting with another entity to do it.  CMS then 
compares its results for an individual HHA with the State agencys results for the same HHA.    
We recommend that CMS  
  analyze survey data to determine whether it should routinely conduct surveys for oversight 
of State agencies, which conduct most HHA recertification surveys.  
2013 MAY  Home Health Agencies Received Timely Surveys and Corrected Deficiencies As 
Required.  OEI-06-11-00400.   
 
03  Survey and Certification of Hospices.  State recertification surveys of 
hospices are not sufficiently frequent to ensure compliance and quality 
of care.  
The goals of hospice care are to help terminally ill patients live comfortably with minimal 
disruption and to support patients families and other caregivers throughout the dying process. 
State survey (review)agencies, contracted by CMS and following CMSs survey protocol and 
guidelines, conduct surveys of hospices at the time of initial certification, for recertification, and 
in response to complaints.  Our August 2013 report revealed that the frequency of hospice 
recertification surveys has not improved since 2005; 17 percent of State-surveyed hospices had 
not been recertified within the last 6 years.  We concluded that CMSs use of fluctuating annual 
targets does not ensure timely recertification surveys of all hospices and raises concerns about 
whether CMS and contracted State survey agencies can adequately oversee hospice compliance 
with Medicare CoPs and the quality-of-care requirements for hospices.  
Our past and current research indicates that hospices are often out of compliance; a 2007 report 
found that almost half of hospices were cited with deficiencies when surveyed.  More recent OIG 
reports identified quality-of-care concerns regarding hospice care provided in nursing homes. 
This report did not make new recommendations to CMS but reiterated an earlier 
recommendation that CMS 
  seek legislation or promulgate regulations to set specific timeframes for the frequency of 
hospice recertification surveys and consider setting the survey frequency standard at 
3 years.   
2013 AUG  Frequency of Medicare Recertification Surveys for Hospices Is Unimproved.  
OEI-06-13-00130.   
    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 20 
 
 
 
04  HospicesUse of General Inpatient Care.  Medicare hospices 
inconsistent use of general inpatient care raises questions about 
whether the hospices provide appropriate levels of care to 
beneficiaries. 
Medicare paid more than $1 billion for hospice general inpatient care in 2011.  Our May 2013 
report revealed that about 58 percent of general inpatient care stays for hospice beneficiaries 
were in hospices own inpatient units, compared to 33 percent in hospitals and 8 percent in 
SNFs.  Of all Medicare hospices, 23 percent used their own inpatient units.  Hospices with 
inpatient units provided general inpatient care to more of their beneficiaries and for longer 
periods of time than hospices that used other settings.  By contrast, 27 percent of all Medicare 
hospices did not provide any general inpatient care to their beneficiaries.  
Long lengths of stay and the use of general inpatient care in inpatient units need further review 
to ensure that hospices are using general inpatient care as intended and are providing the 
appropriate level of care.  OIG is committed to looking into these issues and will conduct a 
medical record review that will assess the appropriateness of general inpatient care provided in 
different settings.     
Because OIG will be conducting related work in this area, we did not issue formal 
recommendations to CMS.  However, we suggested options.  For example, CMS could  
  focus on hospices that do not provide general inpatient care and ensure that these hospices 
are providing beneficiaries access to needed levels of care at the end of their lives and adopt 
a quality measure regarding hospices ability to provide all hospice services.   
2013 MAY  Medicare Hospice:  Use of General Inpatient Care.  OEI-02-10-00490.     
 
05  Part B DrugsVaccines.  Some Medicare beneficiaries are being given 
pneumococcal vaccinations more often than recommended by the 
Centers for Disease Control and Prevention (CDC). 
For individuals other than those with certain immunocompromising medical conditions, one 
pneumococcal vaccination should be sufficient to confer immunity for a lifetime.  However, CDC 
says that if more than one vaccination is given, they should be at least 5 years apart.  We found 
122,498 beneficiaries who received more than 1 pneumococcal vaccination of the same type 
within the 5-year period 20072011.  Vaccines are not without risk.  National vaccine 
surveillance program data show a number of adverse events in older beneficiaries associated 
with pneumococcal vaccinations.  The data suggest a need to educate certain providers about 
repeat vaccinations.  
We did not make formal recommendations to CMS but suggested that unnecessary vaccination 
could be reduced through providers' review of the medical histories of established patients.  
Tools such as electronic medical records may assist in this effort.   HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 21 
 
 
2013 JUN  Potentially Improper Frequency of Pneumococcal Vaccinations for Medicare 
Beneficiaries.  OEI-07-13-00310.    
 
Medicare Part C and Part D Reviews 
This segment of the Department of Health and Human Services Office of Inspector Generals 
Semiannual Report to Congress pertains to Medicare Part C and Medicare Part D.  Part C is the 
Medicare Advantage program that provides care delivery and coordination options and Part D is 
Medicares optional prescription drug program.  Part D plans are administered by private 
companies, known as plan sponsors, that contract with CMS to offer prescription drug coverage 
to Medicare beneficiaries who enroll in a prescription drug plan.       
Prevent and deter waste, fraud, and abuse  
Significant problems, abuses, and deficiencies:   
01  Part C Overpayments.  Diagnoses submitted by two Medicare 
Advantage (MA) organizations resulted in risk score calculation errors 
and Medicare overpayments; causes include service provider errors, 
ineffective policies and procedures, and inadequate documentation. 
MA Organization 1.  CIGNA Healthcare of Arizona, Inc. (CIGNA), is an MA organization under 
contract with CMS to administer health care plans for approximately 31,677 beneficiaries.  
CMS makes monthly capitated payments (prepayments) to MA organizations for beneficiaries 
enrolled in an organization's health care plans (beneficiaries). 
The diagnoses that CIGNA submitted to CMS for use in CMSs calculations did not always comply 
with Federal requirements, e.g., the documentation did not support the associated diagnoses 
and/or the diagnoses were unconfirmed.  CIGNAs policies and procedures were not effective for 
ensuring that the diagnoses it submitted to CMS were compliant.  CIGNAs health care providers 
often reported incorrect diagnoses to CIGNA as a result of data entry errors and reported 
diagnoses for conditions that did not exist at the time of beneficiaries encounters. 
Savings PotentialFrom our sample, we identified over $150,000 in overpayments to CIGNA and 
projected $28 million more to be reviewed for adjustments.  Corrective actions could result in 
savings at this MA organization from refunds, adjustments, and reductions in future 
overpayments.   
We recommend that MA Organization 1 
  improve its current policies and procedures to ensure compliance with Federal 
requirements, refund to the Federal Government the overpayments identified for the 
sampled beneficiaries, and work with CMS to determine the correct contract-level 
adjustment for additional projected overpayments.    HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 22 
 
 
2013 MAY  CIGNA Healthcare of Arizona, Inc. (Contract H0354), Submitted Many Diagnoses 
to the Centers for Medicare & Medicaid Services That Did Not Comply With 
Federal Requirements for Calendar Year 2007.  A-07-10-01082. 
MA Organization 2.  Bravo Health Pennsylvania, Inc. (Bravo), was an MA organization, later 
acquired by other companies.  Under one contract with CMS, Bravo administered health care 
plans for approximately 13,755 beneficiaries.  The diagnoses that Bravo submitted to CMS for 
use in CMSs risk score calculations did not always comply with Federal requirements, i.e., the 
documentation did not support the diagnoses.  Bravo did not provide the provider's signatures 
or credentials, or Bravo did not provide any supporting documentation.  Bravo did not review 
the diagnosis codes received from providers before submitting the codes to CMS and therefore 
could not ensure that the diagnoses submitted to CMS complied with Federal requirements. 
Savings PotentialOn the basis of our sample, we identified over $422,000 that was overpaid to 
Bravo and projected $22 million more to be reviewed for adjustments.  Corrective actions could 
result in savings at this MA organization from refunds, adjustments, and reductions in future 
overpayments.    
We recommend that MA Organization 2 
  work with CMS to make contract-level adjustments, modify its policies and procedures, 
improve its practices to ensure compliance with Federal requirements, and refund the 
overpayments we identified.  
2013 SEP  Bravo Health Pennsylvania, Inc. (Contract H3949), Submitted Many Diagnoses to 
the Centers for Medicare & Medicaid Services That Did Not Comply With Federal 
Requirements for Calendar Year 2007.  A-03-09-00003.   
 
02  Part D Investment Income.  Medicare loses potential cost savings 
because Federal requirements governing Medicare Part D do not limit 
the ability of Part D plans to retain investment income earned on 
Medicare funds. 
CMS makes advance capitated payments (prepayments) to Part D plans for each enrollee at the 
beginning of each month.  Part D plans may invest these Medicare funds in interest-bearing 
instruments until the funds are needed to pay for drug costs and administrative services.  
Federal law does not currently limit the ability of Part D plans to retain as additional revenue the 
investment income earned on Federal funds.  Part D plans must submit, annually, bid proposals 
containing their anticipated revenue requirements for providing drug coverage under each of 
their plans for the upcoming year. 
Because Federal requirements governing Medicare Part D do not limit the ability of Part D plans 
to retain investment income earned on Medicare funds, Medicare loses potential cost savings.  
In contrast to the Federal requirements that govern Part D, the Federal Employees Health 
Benefits (FEHB) program limits the ability of companies to retain as additional revenue the 
investment income earned from Federal funds.  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 23 
 
 
Savings PotentialUnder one calculation, delaying prepayments could have saved about 
$111 million in 2009.  Reducing plans' revenue could have saved about $5 million. 
We recommend that CMS evaluate these results and in the context of its joint effort with the 
U.S. Department of the Treasury 
  pursue legislation to adjust the timing of Medicares prepayments to Part D plans to account 
for the time that these plans invest Medicare funds before paying pharmacy claims or 
develop and implement regulations that require Part D plans to reduce their revenue 
requirements in their bid proposals to account for anticipated investment income. 
2013 APR.  Impact on Medicare Program for Investment Income That Medicare Part D Plans 
Earned and Retained From Medicare Funds in 2009.  A-07-11-05017.    
 
03  Part D Billing Patterns.  Some Part D high-prescribing physicians have 
questionable billing patterns. 
With the rise in prescription drug abuse, concerns about Medicare fraud, particularly prescriber 
fraud, have increased.  We identified over 700 general-care physicians who had questionable 
prescribing patterns.  Each of these physicians prescribed extremely high amounts for at least 
one of the five measures we developed.  For example, many of these physicians prescribed 
extremely high numbers of prescriptions per beneficiary, which may indicate that these 
prescriptions are medically unnecessary.  Moreover, more than half of the 736 general-care 
physicians with questionable prescribing patterns ordered extremely high percentages of 
Schedule II or III drugs, which have potential for addiction and abuse.  Although some of this 
prescribing may be appropriate, such questionable patterns warrant further scrutiny. 
We recommend that CMS  
  instruct the Medicare Drug Integrity Contractor to expand its analysis of prescribers, provide 
sponsors with additional guidance on monitoring prescribing patterns, provide education 
and training for prescribers, and follow up on prescribers with questionable prescribing 
patterns. 
2013 JUN  Prescribers With Questionable Patterns in Medicare Part D.  OEI-02-09-00603.   
 
04  Part D Unauthorized Prescribers.  Medicare and Part D sponsors fail to 
detect many drugs, including controlled substances, that are being 
ordered by individuals without the authority to prescribe. 
Nationwide, Part D inappropriately paid for drugs ordered by individuals who clearly did not 
have the authority to prescribe, such as massage therapists, athletic trainers, home contractors, 
interpreters, and transportation companies.  This raises concerns about the appropriateness of 
Part D payments and about patient safety.  We found that in 10 States, Part D inappropriately 
paid for drugs ordered by individuals without the authority to prescribe, such as counselors, 
social workers, and chiropractors.  Tens of thousands of these drugs were controlled substances,  HHS Office of Inspector General  Medicare Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 24 
 
 
which are of particular concern because they have potential for abuse.  Medicare should never 
pay for drugs ordered by individuals who do not have the authority to prescribe.   
Savings PotentialMedicare paid about $5.4 million for prescriptions ordered by the 14 types of 
unauthorized prescribers we reviewed.    
We recommend that CMS  
  require sponsors to verify that prescribers have the authority to prescribe drugs, increase 
the Medicare Drug Integrity Contractors monitoring of prescribers, ensure that Medicare 
does not pay for prescriptions from individuals without prescribing authority, and follow up 
on the individuals we identified without prescribing authority who ordered prescriptions. 
2013 JUN  Medicare Inappropriately Paid for Drugs Ordered by Individuals Without 
Prescribing Authority.  OEI-02-09-00608.   
 
05  Part D Dual EligiblesMandatory Review.  Prescription drug plans 
generally cover most drugs commonly used by individuals who are fully 
eligible for both Medicare Part D and Medicaid. 
The Patient Protection and Affordable Care Act of 2010 requires OIG to annually review and 
report on the extent to which Medicare Part D prescription drug plans include drugs commonly 
used by full-benefit dual eligible individuals.  Overall, we found that the rate at which Part D plan 
formularies include the drugs commonly used by dual eligibles is high, with some variation.  On 
average, Part D plan formularies include 96 percent of the commonly used drugs.  In addition, 
64 percent of the commonly used drugs are included by all Part D plan formularies. 
Full-benefit dual eligibles receive full Medicaid benefits and assistance with Medicare 
premiums and cost-sharing.  Dual eligibles are a particularly vulnerable population tending to 
have low incomes and poor health.  In January 2006, Medicare began covering outpatient 
prescription drugs for dual eligibles through Part D plans.  
We did not make formal recommendations to CMS as a result of this report. 
2103 JUN  Part D Plans Generally Include Drugs Commonly Used by Dual Eligibles:  2013.  
OEI-05-13-00090.   
  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 25 
 
 
Medicaid Program Reviews 
This segment of the Department of Health and Human Services (HHS) Office of Inspector 
Generals (OIGs) Semiannual Report to Congress (Semiannual Report) pertains to reviews of the 
Medicaid program.  States have considerable flexibility in designing and operating their Medicaid 
programs; however, to receive a Federal share of Medicaid costs, they must meet applicable 
State and Federal requirements.  The Federal Government generally pays its share of a States 
medical assistance expenditures under Medicaid on the basis of the Federal medical assistance 
percentage, which varies depending on various factors such as a States relative per capita 
income. 
As required by the Inspector General Act of 1978, as amended, the Semiannual Report identifies 
and describes significant problems, abuses, deficiencies (i.e., issues), and related 
recommendations for corrective action.  For Medicaid, the issues fall into the following broad 
operational categories: 
  addressing wasteful policies and practices; 
  preventing and addressing improper State claims for the Federal share of Medicaid; 
  preventing and deterring fraud and abuse; and 
  promoting quality, safety, and value. 
The Table of Contents lists the issues reported for each category.  The body of the document 
provides corresponding background information and savings potential and identifies 
recommendations that would address each issue. 
Address wasteful Medicaid policies and practices  
 
The recommendations in this subsection address the wasteful spending that arises from 
shortcomings in current Medicaid-related policies or practices.  Waste is a broad term that 
applies to situations in which Medicaid pays more than it should.  Policies or practices 
sometimes result in waste when unintended loopholes or other inherent problems invite 
exploitation or hinder consistent payment determinations.  Medicaids supporting systems and 
practices sometimes result in waste by hindering timely and appropriate payment adjustments.  
Later subsections address improper State claims for the Federal share of Medicaid and address 
fraud and abuse, which are related forms and sources of wasteful spending.   
Actions to reduce Medicaid costs generally provide mutual benefit to States and the Federal 
Government.  OIGs audit and evaluation reports do not routinely project the annual 
program-level cost savings that could be realized from implementing the reports 
recommendations.  Instead, the reports indicate within the scope of each review the extent to 
which policies or practices may be ineffective and describe the corrective actions that OIG 
recommends.  We describe the monetary findings of each report (which may result in 
receivables or funds made available better use) under the subheading Savings Potential. 
    HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 26 
 
 
Significant problems, abuses, and deficiencies:   
01  Medical Equipment/SuppliesComparison of Medicare and Medicaid 
Payments.  The Ohio, New York, New Jersey, Texas, and Illinois Medicaid 
fee-for-service programs paid significantly more for selected medical 
equipment/supplies items than Medicare paid for the same items in 
those States.   
OIG issued four reports that compared States maximum payment rates to pricing Medicare 
obtained through competitive bidding.  A fifth review compared one States Medicaid payment 
rates to Medicares rate and to Medicaid reimbursements in a neighboring State.  All the reports 
indicate that the States we reviewed could reduce their Medicaid costs for medical equipment 
and supplies.  Reducing State costs for Medicaid provides mutual benefit to States and the 
Federal Government.   
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 mandated the 
Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Competitive Bidding 
Program (the Competitive Bidding Program).  The Competitive Bidding Program sets lower 
payment rates than conventional Medicare payment rates for selected durable medical 
equipment and supplies (items) while ensuring access to quality items and services. 
New York Audit Report.  The State of New York implemented a preferred diabetic supply 
program that was structured to obtain enhanced rebates from preferred test strip manufacturers 
and reduce Medicaid program expenditures.  The rebates achieved savings of about 51 percent.   
We determined that the Medicare reimbursement rates for mail-order test strips obtained 
through competitive bids in nine competitive bidding areas were lower than New Yorks average 
Medicaid reimbursement rate after manufacturer rebates.  Establishing a competitive bidding 
mail-order program similar to that in the Medicare program could result in additional savings of 
36 percent in the price of test strips paid under New Yorks methodology. 
Savings PotentialFor a 1-year audit period, we estimated that the New York Medicaid program 
could have saved an additional $5.9 million on test strips.  We compared the amount that the 
State reimbursed providers less the amount of rebates received with the highest Medicare 
Competitive Bidding Area (CBA) test strip payment rate.  
We recommend that New York  
  establish a competitive bidding program similar to that in the Medicare program for the 
purchase of test strips. 
2013 JUL  The New York State Manufacturer Rebate Program Significantly Reduced 
Medicaid Costs for Home Blood-Glucose Test Strips But Could Achieve Additional 
Reductions.  A-02-11-01042.   
New Jersey Audit Report.  In 2011, New Jersey made Medicaid fee-for-service payments totaling 
almost $4 million for blood glucose test strips. During this same period, the four Medicaid MCOs 
in New Jersey paid providers $6.4 million for test strips.  Decreasing the Medicaid fee-for-service 
reimbursement rate to average retail price levels or establishing a competitive bidding mail- HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 27 
 
 
order program similar to that in the Medicare program could result in a 46- to 68-percent 
reduction in the price of test strips paid under the New Jersey Medicaid fee-for-service program 
and a 49- to 70-percent reduction in the price of test strips paid by the four New Jersey Medicaid 
managed care organizations and related savings to the New Jersey Medicaid program. 
Savings PotentialFor a 1-year audit period, we estimated fee-for-service savings of $1.8 million 
to $2.7 million and managed care savings of $3.1 million to $4.5 million during the same period.  
New Jersey indicated that it could use the information to work with the MCOs to lower MCO test 
strip payment rates, which would lead to the State making lower monthly Medicaid capitated 
payments.   
We recommend that New Jersey  
  establish a competitive bidding program similar to that in the Medicare program for the 
purchase of test strips, reduce the Medicaid fee-for-service reimbursement rate for test 
strips to be comparable to the average retail price, or work with Medicaid managed care 
organizations (MCOs) to adjust payment rates for test strips to the average retail price or to 
Medicare competitive payment rates.    
2013 SEP  New Jersey Medicaid Program Could Achieve Savings by Reducing Home Blood-
Glucose Test Strip Prices.  A-02-12-01010.   
Illinois Audit Report.  This audit compared Illinois Medicaids reimbursement rates for test strips 
to Medicares rates in Illinois.  We found that on average, Medicares rates were about 
40 percent less than Illinois Medicaid rates.  The audit also compared Illinois Medicaids net 
costs to Indiana Medicaids net costs; Indianas net costs were significantly lower. 
Through its manufacturer rebate program, the Illinois Medicaid program significantly reduced 
the net cost of test strips purchased during State fiscal year (SFY) 2011, providing mutual benefit 
to the State and Federal Governments while maintaining access to test strips for Illinois Medicaid 
beneficiaries.  However, Illinois manufacturer rebates offset only a portion of its comparatively 
high provider reimbursement rates.  We concluded that by changing its provider reimbursement 
rates, Illinois could further lower its net costs for test strips.   
Savings PotentialFor one SFY, we estimated that Illinois could have saved an additional 
$8.5 million.  
We recommend that Illinois  
  lower the net cost of test strips through changes to its provider reimbursement rates.  
2013 MAY  Illinois Significantly Reduced Medicaid Costs for Home Blood-Glucose Test Strips 
But Could Achieve Additional Reductions.  A-05-12-00009.   
Ohio Audit Report.  In a separate audit, we identified an estimated $8 million that the Ohio 
Medicaid program could have saved on diabetic test strips if it had obtained pricing similar to the 
pricing that Medicare obtained through the Competitive Bidding Program or if it had established 
a manufacturer rebate program.  Because of the savings that we identified for diabetic test 
strips, we conducted this review of 43 other competitively bid items.   HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 28 
 
 
We determined that Medicare payment rates obtained through competitive bids in 2 Ohio 
competitive bidding areas for the 43 selected items were significantly lower than the Ohio 
Medicaid maximum payment rate. 
Savings PotentialFor a 1-year audit period, the Ohio Medicaid program could have saved an 
estimated $3 million on selected durable medical equipment items by obtaining pricing similar 
to that in Medicares Competitive Bidding Program.  We estimated that the State agencys cost 
could have been reduced to $7.4 million (from $10.5 million) for the selected DME items. 
We recommend that Ohio  
  establish competitive bidding that functions similarly to Medicares Competitive Bidding 
Program for the purchase of selected durable medical equipment and supply items.    
2013 APR  The Ohio Medicaid Program Could Significantly Lower Payment Rates for 
Selected Durable Medical Equipment and Supplies.  A-05-12-00038.   
Texas Program Evaluation Report.  This report, which does not contain recommendations, 
compares Texas Medicaid fee-for-service payment amounts for selected medical 
equipment/supplies to Medicare payment amounts for the same items in Medicares Dallas/Fort 
Worth CBA.  We found that the Texas Medicaid fee-schedule amounts exceeded the Medicare 
Competitive Bidding Program payment amounts in the CBA on almost all items we reviewed.  
The findings provide a tangible example of potential State and Federal savings for Medicaid 
programs if the programs were to use the Medicare Competitive Bidding payment amounts for 
durable medical equipment, prosthetics, and supplies items.  Access to more timely Medicaid 
claims data would allow further analysis to better understand the full potential of limiting 
Federal reimbursement for State Medicaid spending on such items to Medicare payment rates. 
Savings PotentialIf Texas had used Medicares competitive bidding payment amounts for the 
Dallas/Fort Worth CBA during the 1-year review period, it could have saved approximately 
$2 million (State and Federal shares combined) on 30 selected items.     
2013 SEP  Medicaid DMEPOS Costs May Be Exceeding Medicare Costs in Competitive 
Bidding Areas.  OEI-06-13-00470. 
 
02  Prescription DrugsPricing Generics.  The use of more aggressive State 
Maximum Allowable Cost (MAC) pricing formulas and inclusion criteria 
could help States achieve additional cost-savings for generic drugs. 
To take advantage of lower market prices for certain multiple-source drugs, States may use the 
Federal upper limit (FUL) and/or State MAC programs.  The Affordable Care Act required the 
Centers for Medicare & Medicaid Services (CMS) to begin calculating FULs using average 
manufacturer prices (AMPs).  On that basis, post-implementation FUL amounts would have been 
lower, on average, than MAC prices in the aggregate.  CMS said that it expects to implement the 
Affordable Care Act changes to the FULs in the near future.   
MAC programs operate similarly to the FUL program in that States establish maximum 
reimbursement amounts for certain multiple-source drugs.  However, unlike the FUL program,  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 29 
 
 
State MAC programs give States flexibility in determining which drugs to include in the program 
and in setting reimbursement rates.  We identified the State with the most aggressive MAC 
program (Wyoming) and calculated the potential national savings had all States used that MAC 
program.  We found that 39 of 45 States could have achieved savings had they used Wyomings 
MAC program. 
Savings PotentialWe estimated that using the Wyoming model, 39 of 45 States could have 
saved $483 million on their Medicaid generic drug costs in the first half of 2011.    
We recommend that CMS  
  complete the implementation of the post-ACA FUL amounts and encourage States to 
reevaluate their MAC programs for additional cost-saving opportunities.   
2013 AUG  Medicaid Drug Pricing in State Maximum Allowable Cost Programs.   
OEI-03-11-00640.   
Prevent improper State claims 
for the Federal share of Medicaid 
 
Improper payments are those that should not have been made or that were made in incorrect 
amounts, i.e., overpayments or underpayments.  This segment focuses on instances in which the 
Federal Government overpaid its share of Medicaid as a result of improper State claims for 
Federal reimbursement.  For example, States do not always effectively identify and reduce their 
erroneous and inappropriate payments for provider and supplier billings before submitting the 
amounts for reimbursement of the Federal share.  Provider billings may be inappropriate for 
several reasons:  the items or services billed are not supported by the documentation in the 
providers medical files or are not medically necessary for the patients conditions, the billings 
have administrative or policy errors, or other Federal and State requirements are not met.   
A States own administrative errors or misinterpretations may also result in unallowable claims 
for the Federal share of Medicaid. 
Significant problems, abuses, and deficiencies:   
01  Hospital Inpatient CareHigh-Dollar Payments.  Wisconsin and Indiana 
improperly claimed Federal reimbursement for unallowable high-dollar 
payments they made to hospitals for inpatient services; the hospitals 
had submitted incorrect charges, which they attributed to data entry 
errors.  
Wisconsin and Indiana pay hospitals for inpatient services using a prospective payment system 
that includes an outlier payment for high-dollar claims.  Under prospective payment systems, 
States pay hospital costs at predetermined rates for patient discharges.  When hospitals charges 
exceed thresholds, the States make what is known as outlier payments.  Outlier payments are 
intended to protect hospitals against large financial losses associated with high-cost cases and  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 30 
 
 
generally result in unusually high-dollar Medicaid payments.  Prior OIG reviews found improper 
payments.  In Wisconsin, 22 percent of the high-dollar payments we reviewed were unallowable; 
in Indiana, 92 percent were unallowable. 
Savings PotentialFor the separate audit periods, Wisconsin improperly claimed about 
$1.1 million in Federal reimbursement for unallowable high-dollar payments that it made to 
hospitals for inpatient services.  Indiana improperly claimed almost $1 million. 
We recommend that Wisconsin and Indiana  
  use the results of this audit in their provider education activities related to data entry 
procedures and refund the Federal share of payments we estimated to be unallowable. 
2013 JUN  Wisconsin Claimed Medicaid Reimbursement for High-Dollar Inpatient Services 
That Were Unallowable.  A-05-11-00037.   
2013 SEP  Indiana Claimed Medicaid Reimbursement for High-Dollar Inpatient Services 
That Were Unallowable.  A-05-11-00040.   
 
02  Hospital Inpatient CarePsychiatric Services and Disproportionate 
Share Hospital Payments.  Missouri and Indiana improperly claimed 
Federal reimbursement for certain payments to psychiatric hospitals 
that could not demonstrate compliance with Medicare Conditions of 
Participation (CoP).   
For States to claim Federal reimbursement for their Medicaid inpatient psychiatric service and 
disproportionate share hospital (DSH) payments to psychiatric hospitals, the hospitals must 
comply with the Medicare basic CoP applicable to all hospitals and with special CoP that apply to 
psychiatric hospitals.  DSH payments are made to hospitals that provide a disproportionate share 
of uncompensated care, e.g., to patients who cannot afford to pay.   
To demonstrate compliance with the Medicare CoP, psychiatric hospitals must undergo review by 
qualified health care professionals.  The Missouri hospital we reviewed generally demonstrated  
compliance with the basic Medicare CoP.  However, it was never surveyed to demonstrate 
compliance with the special Medicare CoP for psychiatric hospitals.  The Indiana hospital we 
reviewed could not demonstrate compliance because it had last been surveyed in October 1993, 
more than 14 years before the start of the audit period. 
For periods in which compliance cannot be demonstrated, claims by the State for the Federal 
share would be inappropriate. 
Savings PotentialNo payments should be made to hospitals for periods in which compliance 
with CoP cannot be demonstrated.  With regard to the reviews listed below, we questioned over 
$22.7 million in Federal reimbursement for Medicaid inpatient psychiatric service and DSH 
payments made to the Missouri provider; in the first Indiana report, we questioned about 
$7.9 million.  In the second Indiana report, we questioned about $7.1 million.        HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 31 
 
 
We recommend that Missouri and Indiana 
  ensure that Federal reimbursement for the subject payments to psychiatric hospitals is 
claimed only if the hospitals can demonstrate compliance with the basic and special 
Medicare CoP, refund the Federal share of payments we estimated to be unallowable, and 
work with CMS to resolve other claims for which payment may have been unallowable.  
2013 JUN  Missouri Improperly Claimed Federal Reimbursement for Most Reviewed 
Medicaid Inpatient Psychiatric Hospital Service and Disproportionate Share 
Hospital Payments to Hawthorn Children's Psychiatric Hospital.   
A-05-12-00050.   
 2013 MAY  Indiana Improperly Claimed Federal Reimbursement for Most Medicaid Inpatient 
Psychiatric Hospital Service and Disproportionate Share Hospital Payments to 
Evansville Psychiatric Children's Center.  A-05-12-00040.   
2013 JUN  Indiana Improperly Claimed Federal Reimbursement for All Reviewed Medicaid 
Inpatient Psychiatric Hospital Service Payments to Evansville State Hospital.  
A-05-12-00041.    
 
03  Intermediate Care Facilities (ICFs)Services to Individuals With 
Intellectual and Developmental Disabilities.  Missouris internal 
controls and procedures were inadequate to prevent it from improperly 
claiming Federal reimbursement for duplicate or unsupported 
payments.       
State and privately operated ICFs provide housing and supportive services to individuals with 
intellectual and developmental disabilities.  State Medicaid programs reimburse the facilities for 
services and report (i.e., claim) the amounts to the Federal Government to receive the Federal 
share of Medicaid.  The amounts the States claim must be for actual expenditures with 
supporting documentation.    
Missouri did not always claim Federal reimbursement for its payments to State-operated ICFs in 
accordance with Federal requirements.  The States controls did not specify that the State agency 
must reconcile payments to claimed costs to ensure that it did not claim duplicate or 
unsupported Medicaid payments. 
Savings PotentialDuring  SFY 2011, Missouri claimed $7.2 million in Federal reimbursement for 
unallowable duplicate and unsupported payments.   
We recommend that Missouri  
  develop and implement sufficient internal controls and procedures, including those 
pertaining to reconciliations of payments to claimed costs, and refund the Federal share of 
payments we estimated to be unallowable.   HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 32 
 
 
2013 JUN  Missouri Claimed Unallowable Medicaid Payments for Individuals With 
Intellectual and Developmental Disabilities in Intermediate Care Facilities.   
A-07-12-03180.  
 
04  Home and Community-Based Services (HCBS)Personal Care Services.  
Maryland did not ensure that the States Department of Aging 
sufficiently monitored waiver program services and that only allowable 
claims were submitted for Federal reimbursement. 
States may obtain waivers that allow them to furnish an array of services to Medicaid 
beneficiaries so that they can live in the community and avoid institutionalization.  Marylands 
waiver for older adults, which is administered by the Maryland Department of Aging, authorizes 
services for individuals with low incomes who are aged 50 or older and who need the level of 
care provided by a nursing facility.  The Department of Aging contracts with local area agencies 
to manage waiver program activities, including case management.   
Twenty of 100 waiver program claims we reviewed were noncompliant with Federal and State 
requirements.  For a majority of the errors, personal care aides did not meet at least one of the 
qualification requirements, including a background check.  We also found that plans of care were 
unapproved or were missing and found that services were unathorized.  Though the Department 
of Aging says it cites providers for unallowable claims, it does not recoup the improper payments 
or determine whether the providers have taken corrective action. 
Savings PotentialFor a 2-year audit period, we estimated that Maryland improperly claimed at 
least $10.9 million in Federal reimbursement for unallowable costs. 
We recommend that Maryland  
  work with Marylands Department of Aging to improve its controls over personal care 
services waiver claims to ensure compliance and refund the Federal share of payments we 
estimated to be unallowable. 
2013 APR  Maryland Improperly Claimed Personal Care Services Provided Under Its 
Medicaid Home and Community-Based Services Waiver for Older Adults.   
A-03-11-00201.  
 
05  Home and Community-Based ServicesTraumatic Brain Injuries (TBI).  
New Yorks TBI waiver program services were unallowable or potentially 
unallowable; beneficiary eligibility assessments were not conducted 
according to requirements, and providers did not ensure that they 
claimed reimbursement only for allowable, supported services.  
New Yorks TBI waiver program allows the State to claim a Federal share of its Medicaid 
payments for HCBS provided to individuals with TBIs who would otherwise require  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 33 
 
 
institutionalization in a nursing home.  In New York, the Department of Health, Office of Long-
Term Care, administers the TBI waiver program through nine contracted regional resource 
development centers that serve specific counties throughout New York State (collectively 
referred to as the centers).   
The recommendations below would help address the causes underlying the unallowable or 
potentially unallowable payments we found in our review. 
Savings PotentialFor a 3-year audit period, we estimated that New York improperly claimed at 
least $54 million in Federal Medicaid reimbursement for TBI waiver program services that were 
unallowable. 
We recommend that New York  
  require its contracted development centers to ensure and document that all beneficiaries 
approved for TBI waiver program services have been assessed by certified individuals and 
are eligible for the services, require adequate training for assessors on the Federal and State 
requirements,; require providers to ensure that they document the services billed and claim 
reimbursement only for allowable ones, refund the Federal share of payments we estimated 
to be unallowable, and work with CMS to resolve other claims for which payment may have 
been unallowable.  
2013 MAY  New York's Claims for Medicaid Services Provided Under Its Traumatic Brain 
Injury Waiver Program Did Not Comply With Certain Federal and State 
Requirements.  A-02-10-01043.   
 
06  Medicaid Early and Periodic Screening, Diagnostic, and Treatment 
(EPSDT) programResidential Care Services.  Wisconsin improperly 
claimed a Federal share of payments made under its EPSDT program 
using a noncompliant cost allocation methodology and estimates that it 
could not adequately support. 
The Federal EPSDT law requires each State Medicaid program to provide periodic physical and 
mental examinations for all Medicaid enrollees under 21 years of age.  Wisconsins EPSDT 
program is known as HealthCheck.  HealthCheck purchases services from Residential Care 
Centers (RCC) throughout the State.  RCCs are private, nongovernmental entities that provide 
custodial care and treatment for children, youth, and young adults.       
Wisconsins Medicaid State Plan provides only that the State will establish maximum allowable 
fees for EPSDT services furnished by RCCs.  However, we did not find a policy or method that 
the State used to calculate maximum fees for EPSDT services furnished by RCCs. 
When Wisconsin began using an RCC allocation methodology, in the first year alone, the RCC 
payments claimed for Federal reimbursement increased by $18.3 million ($10.7 million Federal 
share).  We found that during our audit period, most of Wisconsins RCC claims did not comply 
with Federal requirements.  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 34 
 
 
Savings PotentialFor a 2-year audit period, we estimated that about $39.4 million 
($22.8 million Federal share) that the State claimed under HealthCheck was unallowable.    
We recommend that Wisconsin  
  work with CMS to identify payment and allocation methodologies for claiming allowable 
Medicaid RCC costs under HealthCheck and refund the Federal share of payments we 
estimated to be unallowable. 
2013 SEP  Wisconsin Improperly Claimed Federal Medicaid Reimbursement for Most 
Residential Care Center Payments.  A-05-07-00036.   
 
07  Family Planning ServicesSterilization Services.  Missouri received 
excess Federal reimbursement for sterilization procedures; two types of 
errors made at the same time hindered differentiation of the effect of 
the errors. 
Federal reimbursement for family planning services is made at an enhanced 90-percent rate.   
Such services include those that prevent or delay pregnancy or otherwise control family size and 
may also include sterilization procedures.  The amounts States report to CMS for reimbursement 
must represent actual expenditures and be supported by documentation.   
Missouris reporting errors involved the difference between Federal reimbursement at the 
enhanced 90-percent rate and Federal reimbursement at the lower Federal medical assistance 
percentage rates.  The incorrect claims occurred when Missouri moved sterilization costs from 
each of the report lines for inpatient hospital services, outpatient hospital services, and clinic 
services (initially used to record the costs) to the designated line. The State agency moved one-
third of the total sterilization costs from each line instead of using the correct actual costs.   
The ineffective adjustment process created incorrect costs for each line with amounts that were 
either more or less than the actual costs for each line.  Because Missouris errors simultaneously 
occurred on each report, the monetary effects of the errors were not differentiated. 
Savings PotentialMissouri overstated the amount of Federal reimbursement reported on eight 
quarterly reports to CMS by almost $1.5 million.  
We recommend that Missouri  
  ensure that future expenditures for family planning sterilization procedures are correctly 
claimed to CMS, refund the Federal share of payments we estimated to be unallowable, 
review family planning sterilization procedures for quarterly reporting periods after our 
audit period, and refund the Federal share of any unallowable payments.  
2013 JUN  Missouri Did Not Always Correctly Claim Costs for Medicaid Family Planning 
Sterilization Procedures for Calendar Years 2009 and 2010.   
A-07-12-01117.   
  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 35 
 
 
 
08  Excluded ProvidersCalifornias lack of procedures caused it to 
improperly claim a Federal share of payments for items or services that 
were furnished, ordered, or prescribed by excluded providers.   
OIG may exclude certain individuals and entities from participation in federally funded health 
care programs.  Such programs should not pay for items or services to the excluded provider, to 
anyone who employs or contracts with the excluded provider, or to any hospital or other 
provider where the excluded provider furnished items or services during the period of exclusion. 
The payment prohibition applies regardless of who submits the claims and applies to all 
administrative and management services furnished by the excluded provider.  There is a limited 
exception permitting Federal payment to excluded physicians for the provision of certain 
emergency items or services not provided in a hospital emergency room.  The exclusion period 
ends when OIG reinstates the provider. 
Medicaid, as a federally funded health care program, does not pay for items and services 
furnished, ordered, or prescribed by excluded providers.  To prevent improper Medicaid 
payments, CMS instructs States to conduct monthly searches of either of two Federal databases 
(one maintained by CMS and one maintained by OIG) to identify provider exclusions and 
reinstatements that have occurred since the last search.  
We found that California made unallowable Medicaid payments because it did not implement 
policies and procedures to determine whether excluded providers were listed on the claims. 
Savings PotentialFor a 1-year audit period, California made unallowable Medicaid payments of 
$1.9 million ($1.2 million Federal share). 
We recommend that California  
  comply with CMS guidance to conduct monthly reviews to determine whether any 
furnishing, ordering, or prescribing providers listed on claims are excluded and deny the 
claims.  California should refund the Federal share of payments we estimated to be 
unallowable and work with CMS to resolve other claims for which payment may have been 
unallowable. 
2013 APR  California Made Unallowable Medicaid Payments for Items and Services 
Furnished, Ordered, or Prescribed by Excluded Providers.  
A-09-11-02016.   
 
09  Home Health ServicesNew York improperly claimed Federal 
reimbursement for unallowable payments, physicians did not review 
plans of care as required, and other deficiencies were found. 
Home health services are provided to beneficiaries at their places of residence pursuant to their 
physicians' orders and written plans of care that the physicians are to review every 60 days.  
Under New Yorks home health program, Certified Home Health Agencies (CHHAs) provide  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 36 
 
 
preventive, therapeutic, and/or rehabilitative services to Medicaid beneficiaries.  Most CHHAs 
provide nursing care directly to beneficiaries and contract with one or more Licensed Home Care 
Services Agencies (LHCSAs) to provide other home health services, such as physical therapy and 
occupational therapy. 
All of the CHHAs in our sample used the same form to document the certification periods on the 
basis of physicians reviews and the plan of care for each Medicaid beneficiary.  The certification 
periods represent the 60-day periods during which the plans of care are valid.  Physician review 
is required at the end of each certification period.    
Of 100 claims in our random sample, 15 claims (15 percent) did not comply with Federal and 
State requirements.  Ten of the claims did not comply because the beneficiaries physicians did 
not review the plans of care within the 60-day certification period.  On average, the physicians 
reviewed the plans of care 118 days after the certification period ended.  Without physician 
review, the services are not allowable.  CHHS officials said it is difficult to coordinate plan-of-care 
reviews by physicians within the required 60-day period.  The remaining five deficient claims 
were unallowable for other causes, such as the fact that no plan of care existed or the service 
was not documented.   
Savings PotentialFor a 2-year audit period, New York improperly claimed at least $31.5 million 
in Federal Medicaid reimbursement. 
We recommend that New York  
  issue guidance to CHHAs in the State on Federal and State requirements for physicians 
orders and plans of care and refund the Federal share of payments we estimated to be 
unallowable. 
2013 SEP  New York State Improperly Claimed Medicaid Reimbursement for Some Home 
Health Services Claims Submitted by Certified Home Health Agencies.   
A-02-11-01008.   
 
10  Managed CareBeneficiary Identifiers.  New York improperly claimed 
a Federal share of unallowable payments to managed care organizations 
(MCOs); poor system interfaces contributed to the issuance of multiple 
Medicaid identification numbers to some Medicaid managed care 
enrollees.    
New York pays MCOs a monthly fee to ensure that an enrolled beneficiary has access to a 
comprehensive range of medical services.  For those beneficiaries not enrolled in the Medicaid 
managed care program, New York pays Medicaid providers on a fee-for-service basis for every 
Medicaid-eligible service provided to a beneficiary. We reviewed certain Medicaid managed care 
payments New York made to different MCOs for the same beneficiaries.  Federal law authorizes 
payments to States for eligible Medicaid beneficiaries enrolled in MCOs and prohibits payments 
to MCOs for beneficiaries whose Medicaid eligibility has not been properly determined.    HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 37 
 
 
Of the 150 beneficiary records in our random sample, 107 had deficiencies.  Most (98) had more 
than 1 Medicaid number, resulting in managed care payments to different MCOs for the same 
beneficiary under different Medicaid identification numbers for the same date of service.  For 
16 records, Medicaid numbers were issued to individuals who did not have valid Social Security 
numbers (SSNs), and for 7, there was no case record for at least 1 of the Medicaid numbers.   
These deficiencies occurred because New Yorks two eligibility systems did not identify potential 
beneficiary matches between the systems.  The recommendations below address the 
vulnerabilities we found. 
Savings PotentialOver a period of about 5 years, New York claimed at least $7.3 million in 
Federal Medicaid reimbursement for managed care payments that were unallowable. 
We recommend that New York  
  ensure that no beneficiary is issued multiple Medicaid identification numbers or develop 
one eligibility system that could be used to determine whether applicants are enrolled in any 
medical or public assistance program throughout New York State and require local 
departments of social services to ensure that applicants provide valid SSNs when required 
and maintain documentation to support eligibility determinations.  New York should refund 
the Federal share of payments we estimated to be unallowable.  
2013 APR  New York State Made Unallowable Medicaid Managed Care Payments for 
Beneficiaries Assigned Multiple Medicaid Identification Numbers.   
A-02-11-01006.   
Prevent and deter fraud and abuse 
 
Significant problems, abuses, and deficiencies: 
01  Medicaid Fraud Control UnitsOIG performs periodic onsite reviews to 
assess Unit performance and compliance with grant requirements..  
Medicaid Fraud Control Units (MFCUs or Units) are key partners in the fight against fraud, waste, 
and abuse in State Medicaid programs.  OIG is responsible for overseeing the Units activities.  
As part of this oversight, OIG conducts periodic reviews of all Units and prepares public reports 
on the basis of the reviews.  The reviews describe the Units caseloads, assess performance in 
accordance with 12 MFCU standards; identify opportunities for improvement; and identify 
instances of noncompliance with laws, regulations, or policy transmittals. 
Idaho Review.  From FY 2009 through 2011, the Idaho Unit reported recoveries of $5 million, 
convictions and civil judgments and settlements increased, and the Unit opened 326 cases.  
Idaho Unit case files consistently contained documentation of supervisory approval to open and 
close cases,; documentation of at least one supervisory review; and documentation of 
additional, periodic supervisory reviews.  The Idaho Unit could improve its safeguards to secure 
case files and should fully update its manuals to reflect current operations, laws, and practices.  
We identified an inappropriate stipulation in the Unit's memorandum of understanding with the 
State Medicaid agency that the Idaho Unit may be charged for data requests.  Otherwise, we  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 38 
 
 
found no evidence of noncompliance with applicable laws, regulations, policy transmittals, or 
standards. 
2013 APR  Idaho State Medicaid Fraud Control Unit:  2012 Onsite Review.   
OEI-09-12-00220.   
Tennessee Review.  For FYs 2009 through 2011, the Tennessee Unit obtained 96 criminal 
convictions and 22 civil settlements and reported recoveries of over $181 million.  We identified 
one instance in which the Unit investigated a case that was not eligible for Federal funding under 
Federal regulations.  With regard to standards, we noted that the Unit referred all convicted 
health care providers to OIG for program exclusion but did not refer nonprovider convictions.   
Although the Unit had a training plan, it did not establish training hour requirements for each 
professional discipline.  Otherwise, our review of compliance issues found no evidence of 
significant noncompliance with applicable laws, regulations, policy transmittals, or standards.  
2013 APR  Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review.   
OEI-06-12-00370.   
New Jersey Review.  From FY 2010 through FY 2012, the New Jersey Units recoveries increased 
but felony charges and convictions decreased.  The Unit also investigated fewer cases of patient 
abuse and neglect in FY 2012 than in FY 2010.  Though most case files included opening and 
closing documents, half lacked documentation of supervisory review. Further, the Unit did not 
refer 94 percent of convictions to OIG appropriately and did not meet the requirements of its 
training plan in FY 2012.  The Unit identified as beneficial a case management tool that tracks 
tasks and deadlines and includes descriptions of investigative and legal issues that arise. 
2013 SEP  New Jersey State Medicaid Fraud Control Unit:  2013 Onsite Review.   
OEI-02-13-00020. 
Arkansas Review.  For FY 2010 through 2012, the Arkansas Unit obtained 27 criminal convictions 
and 43 civil settlements; and reported recoveries of nearly $42 million.  Our review of 
compliance issues found no evidence of significant noncompliance with applicable laws, 
regulations, or policy transmittals.  However, we identified instances in which the Unit did not 
fully adhere to performance standards.  Opportunities for improvement in the Units adherence 
to the performance standards include establishing policies and procedures specific to the Units 
operations; updating the Units memorandum of understanding with the State Medicaid agency 
to reflect current law; working with the State Medicaid agency to ensure an adequate number of 
referrals from the State Medicaid agency, including supervisory review and approval 
documentation in case files; ensuring that indirect costs are correctly reported; and establishing 
and maintaining an annual training plan. 
2013 SEP  Arkansas Medicaid Fraud Control Unit:  2013 Onsite Review. 
OEI-06-12-00720. 
Illinois Review.  The Illinois Unit reported total combined criminal and civil recoveries of nearly 
$141 million for fiscal years (FY) 2009 through 2011.  Settlements for global (i.e., multi-State) 
cases accounted for $124 million of the total recoveries.   While the number of referrals received 
by the Unit decreased during the review period, it obtained 97 criminal convictions.  We 
identified instances of noncompliance with Federal regulations and instances when the Unit 
could have better adhered to performance standards.  Specifically, the Units organizational  HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 39 
 
 
structure for its attorneys conflicted with the MFCU certification standards, and Unit attorneys 
were not eligible for Federal reimbursement.  Further, the Unit did not report to OIG the 
identities of 56 convicted providers for the purpose of program exclusion.  As a promising 
practice, the Unit identified its initiative to provide nursing home staff with drug diversion 
awareness training to reduce instances when caregivers divert residents prescription drugs for 
personal use or sale. 
2013 JUN  Illinois Medicaid Fraud Control Unit:  2012 Onsite Review. 
OEI-07-12-00510 
 
02  Transformed Medicaid Statistical Information System (T-MSIS).  Early 
evidence raised concerns about States abilities to submit complete and 
accurate data to T-MSISMedicaids only nationwide Medicaid 
eligibility and claims database.  
Medicaids national MSIS eligibility and claims database is intended for use in analytical research, 
program integrity, planning, budgeting, and policy analyses associated with Medicaid.  The 
T-MSIS initiative is intended to correct longstanding data deficiencies and transform the MSIS 
into an effective system.  Evidence from our early review of T-MSIS implementation indicates 
continued problems with completeness, accuracy, and other issues.  
Complete, accurate, and timely national Medicaid data are essential to help protect the integrity 
of Medicaid.  In previous reports, OIG identified problems with missing or outdated MSIS data 
that make it an inadequate tool for national Medicaid program integrity data analysis strategies.   
CMS has multiple program integrity projects underway that require T-MSIS data to be fully 
functional.  Also, OIG and other external stakeholders could more effectively protect Medicaid 
from problems, deficiencies, and abuse with complete, accurate, and timely national Medicaid 
data.  The early outcomes of volunteer States efforts to implement T-MSIS may also provide 
insight into the remaining 39 States abilities to implement T-MSIS.  
We recommended that CMS  
  establish a deadline for when national T-MSIS data will be available; ensure that States 
submit required T-MSIS data; and ensure that T-MSIS data are complete, accurate, and 
timely upon implementation.     
2013 SEP  Early Outcomes Show Limited Progress for the Transformed Medicaid Statistical 
Information System.  OEI-05-12-00610. 
   
    HHS Office of Inspector General  Medicaid Program Reviews 
Semiannual Report to Congress  Fall 2013  Page 40 
 
 
Promote quality, safety, and value 
 
Significant problems, abuses, and deficiencies:   
01  Medicaid Home HealthImproper Restrictions of Eligibility.   Eleven 
States have policies that improperly restrict eligibility for home health 
benefits; as a result, some beneficiaries access to the care they need 
may be hindered. 
Federal regulations require that Medicaid services made available to any categorically or 
medically needy individual shall not be less in amount, duration, or scope than the medical 
assistance made available to any other such individual.  Furthermore, Federal regulations 
prohibit the arbitrary denial or reduction of the amount, duration, and scope of a required 
Medicaid service on the basis of a beneficiarys diagnosis, type of illness, or condition.  
In July 2000, CMS released a State Medicaid Director letter stating that although Medicare 
requires beneficiaries to be homebound to qualify for home health services, imposing a 
homebound requirement on Medicaid home health benefits violates CMSs interpretation of 
Medicaid regulations related to amount, duration, and scope of services and comparability of 
services.  In July 2011, CMS published a Notice of Proposed Rulemaking to codify its 
interpretation, but it remains to be implemented.  (76 Fed. Reg. 41032, 41033, and 41038 
(July 12, 2011).)   
We identified 11 States with policies in their Medicaid State Plans or other written policy 
documents that restrict eligibility for the mandatory home health benefit to homebound 
individuals:  Alabama, Arkansas, Indiana, Montana, Nebraska, New Mexico, North Dakota, 
Pennsylvania, South Dakota, Utah, and West Virginia. 
This report did not include formal recommendations to CMS.  However, the report encourages 
CMS to finalize its proposed rule, after which it could consider issuing guidance specific to home 
health services and homebound eligibility restrictions, explaining why such restrictions are 
improper. 
2013 JUL  Some States Improperly Restrict Eligibility for Medicaid Mandatory Home Health 
Services.  OEI-07-13-00060.   
  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 41 
 
CMS-Related Legal and 
Investigative Activities 
For this semiannual period, we reported 413 criminal and 226 civil actions against individuals or 
entities that engaged in health-care-related offenses.  We also reported $1.35 billion in 
investigative receivables due to the U.S. Department of Health and Human Services (HHS) and 
$379.8 million in non-HHS investigative receivables, including civil and administrative 
settlements or civil judgments related to Medicare; Medicaid; and other Federal, State, and 
private health care programs. 
HHS OIGs investigations often involve the combined efforts and resources of our office and 
other Federal and State law enforcement agencies.  One of the most common types of fraud 
perpetrated against Medicare, Medicaid, and other Federal health care programs involves filing 
false claims for reimbursement.  False claims may be pursued under Federal and State criminal 
statutes and, in appropriate cases, under the False Claims Act Amendments of 1986 (FCA), as 
further amended in 2009.   
Depending on the types of fraud or other violations involved, OIG investigations may culminate 
in criminal or civil court judgments and decisions, administrative sanctions and decisions, and/or 
negotiated settlement agreements.  Investigative outcomes take many forms, including 
incarceration, restitution, fines, penalties, forfeitures, assessments, and exclusion of individuals 
or entities from participation in all Federal health care programs.  Frequently used exclusion and 
penalty authorities are described in Appendix D of this Semiannual Report to Congress 
(Semiannual Report) and on our Web site at:   
https://www.oig.hhs.gov/fraud/enforcement/cmp/index.asp.  
 
    HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 42 
 
Chart 1- Actions:  All HHS Programs 
 
 
Chart 2  Receivables:  All HHS Programs 
 
(Includes non-HHS receivables, e.g., States share of Medicaid restitution.) 
    HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 43 
 
Advisory opinions and other industry guidance 
 
As part of OIGs continuing efforts to promote the highest level of ethical and lawful conduct by 
the health care industry, we issue advisory opinions and other guidance to educate industry and 
other stakeholders on how to avoid fraud, waste, and abuse.  Advisory opinions, which are 
developed in consultation with the Department of Justice (DOJ), are issued to requesting parties 
regarding the interpretation and applicability of certain statutes relating to Federal health care 
programs.  The Health Insurance Portability and Accountability Act of 1996,  205, allows OIG to 
provide case-specific formal guidance on the application of the anti-kickback statute and safe 
harbor provisions and other OIG health care fraud and abuse sanctions.  From April 1, 2013, to 
September 30, 2013, OIG received 24 requests for advisory opinions and issued 11 opinions.    
Health care fraud prevention and enforcement  
 
On May 20, 2009, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder announced 
the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), an 
interagency effort focused specifically on combating health care fraud.  HEAT includes senior 
officials from DOJ and HHS who are strengthening programs, as well as investing in new 
resources and technologies, to prevent and combat fraud, waste, and abuse. 
01  HEAT Provider Compliance Training  
OIG provides free training on our Web site for health care providers, compliance professionals, 
and attorneys.  OIGs Provider Compliance Training was an initiative developed as part of HEAT in 
2011 that continues to reach the health care community with OIGs message of compliance and 
prevention via free, downloadable, comprehensive training materials and podcasts.  The 
following are links to OIGs provider compliance training resources:  
  http://oig.hhs.gov/newsroom/video/2011/heat_modules.asp  
  http://oig.hhs.gov/newsroom/video/2011/heat_modules.asp#modules  
  http://oig.hhs.gov/compliance/provider-compliance-training/index.asp#materials 
02  Medicare Fraud Strike Force Activities  
The Medicare Fraud Strike Force (Strike Force) is a key component of HEAT.  Strike Force was 
established in March 2007 and is operating in nine citiesMiami, Florida; Los Angeles, 
California; Detroit, Michigan; Houston, Texas; Brooklyn, New York; Baton Rouge, Louisiana; 
Tampa, Florida; Chicago, Illinois; and Dallas, Texas.  Strike Force teams coordinate joint law 
enforcement operations conducted by Federal, State, and local law enforcement entities.  These 
teams have a proven record of success in analyzing data and investigative intelligence to quickly 
identify fraud and bring prosecutions.  During this reporting period, Strike Force efforts resulted 
in the filing of charges against 126 individuals or entities, 112 criminal actions, and 
$139.3 million in investigative receivables.  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 44 
 
03  Nationwide Strike Force Takedown  
The Medicare Fraud Strike Force charged 89 individuals for approximately $223 million in false 
billing.  In May 2013, a nationwide takedown by Medicare Fraud Strike Force operations in eight 
cities resulted in charges against 89 individuals, including doctors, nurses, and other licensed 
medical professionals, for their alleged participation in Medicare fraud schemes involving 
approximately $223 million in false billings.  The defendants charged were accused of various 
health-care-fraud-related crimes, including conspiracy to commit health care fraud, violations of 
the anti-kickback statutes, and money laundering.  The charges were based on a multitude of 
alleged fraud schemes involving various medical treatments and services, primarily home health 
care, but also mental health services, psychotherapy, physical and occupational therapy, durable 
medical equipment (DME), and ambulance services.  This coordinated operation was the sixth 
national Medicare fraud takedown in Strike Force history.   
04  Additional Examples of Strike Force Efforts 
Florida  Twelve defendants have been sentenced for their roles in a $56 million health care 
fraud scheme.  Health Care Solutions Network, Inc. (HCSN), operated community mental health 
centers in Florida (HCSN-FL) and North Carolina (HCSN-NC).  These facilities allegedly provided 
partial hospitalization program (PHP) services to individuals suffering from mental illness.  
According to court documents, the clinical director of the PHP at HCSN-FL submitted claims to 
Medicare under her personal Medicare provider number for individual therapy she purportedly 
provided, while knowing that HCSN-FL was simultaneously billing for PHP services for the same 
patients.  HCSN-FL personnel fabricated patient medical records to support false and fraudulent 
billing to Medicare and Florida Medicaid.  A majority of the fabricated notes were created at the 
HCSN-FL facility for patients admitted to the PHP HCSN-NC facility.  The defendants either 
submitted, or caused the submission of, approximately $56 million in false and fraudulent claims 
to the Medicare and Florida Medicaid programs.  To date, Wondera Eason, Paul Layman, Dana 
Gonzalez, Gema Pampin, Alexandra Haynes, Armando Gonzalez, John Theon, Daniel Martinez, 
Serena Joslin, Ivon Perez, Raymond Rivero, and Sarah Keller have been sentenced to a combined 
70 years of incarceration and ordered to pay $186 million in joint and several restitution.  
Florida  Three executives of Hollywood Pavilion LLC, an inpatient psychiatric hospital in 
Broward County, Florida, were sentenced for their roles in a $67 million Medicare fraud scheme.  
Evidence at trial showed that the defendants and their co-conspirators paid illegal bribes and 
kickbacks to patient brokers to recruit Medicare beneficiaries as patients at Hollywood Pavilion, 
though these patients did not qualify for psychiatric treatment.  Hospital executive Daisy Miller 
facilitated the payment of bribes to patient recruiters and oversaw the fraudulent admissions 
and treatment of unqualified patients.  Executive Karen Kallen-Zury created false documents to 
make it appear as if legitimate services were being rendered.  Executive Christian Coloma also 
facilitated the payment of bribes and kickbacks and, he supervised the creation of false 
documents to conceal the bribery scheme.  Between 2003 and 2012, Hollywood Pavilion 
submitted approximately $67 million in false claims to Medicare based on these fraudulent acts.  
Miller, Kallen-Zury, and Coloma were sentenced to 15, 25, and 12 years of incarceration, 
respectively.  Kallen-Zury and Miller were also ordered to pay more than $39 million in 
restitution, joint and several, while Coloma was ordered to pay more than $20 million in 
restitution, joint and several.  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 45 
 
Florida  Manuel Sanz was sentenced to 14 years of imprisonment and ordered to pay 
$30 million in restitution after pleading guilty to charges of conspiracy to commit health care 
fraud and conspiracy to pay health care kickbacks.  Sanz was co-owner of Ideal Home Health, 
Inc., a company that purportedly provided skilled nursing services and home health aides to 
Medicare beneficiaries.  According to the indictment, Sanz offered and paid kickbacks and bribes 
to recruiters and employees of Ideal Home Health for recruiting Medicare beneficiaries to be 
placed at Ideal Home Health in order for the company to bill Medicare for home health services 
that were not medically necessary and were not provided.  Sanz then instructed nurses at Ideal 
Home Health to falsify patient medical records to make it appear that Medicare beneficiaries 
qualified for and received home health services when, in fact, the services were not medically 
necessary and were not provided.   
New York  Aleksandr Kharkover was sentenced to 2 years of incarceration and ordered to pay 
$4.6 million in restitution after pleading guilty to charges of health care fraud.  Kharkover was a 
physical therapist who operated a private practice in at least two locations in Brooklyn, New 
York.  From around January 2005 through July 2010, Kharkover billed Medicare for 
approximately $11.9 million for purportedly providing medically necessary physical therapy 
services to Medicare beneficiaries.  However, according to court documents, Kharkover allegedly 
hired individuals who were not certified as physical therapy assistants to provide the physical 
therapy.  Kharkover also allegedly submitted claims to Medicare for services that were not 
actually provided.  
Michigan  Husband and wife Raymond and Emelitza Arias were both sentenced after pleading 
guilty to charges of conspiracy to commit health care fraud.  Raymond Arias was the owner of 
Elite Wellness, LLC, and Carefirst Occupational & Rehab Center, Inc.  Elite Wellness was a 
purported HIV infusion therapy clinic, while Carefirst was a purported physical therapy and 
infusion therapy center.  Emelitza Arias was part owner of Carefirst and assisted in the 
operations of Elite Wellness.  According to the indictment, Emelitza offered and paid kickbacks 
and bribes to Medicare beneficiaries to undergo purported injection or infusion therapy.  Elite 
Wellness and Carefirst then submit claims to Medicare seeking reimbursement for the cost of 
injection and infusion therapy purportedly furnished to the beneficiaries under the care of a 
physician.  Raymond Arias caused the submission of over $13 million in false claims by Carefirst 
and Elite Wellness for infusion and injection therapy and other services that were not medically 
necessary and/or were not actually provided.  Medicare reimbursed the companies over 
$3.8 million, of which the couple transferred $2.6 million to accounts in Mexico and Panama.  
Raymond Arias was sentenced to 8 years and 4 months of incarceration and ordered to pay 
$5.4 million in restitution, joint and several.  Emelitza was sentenced to 1 year and 1 day of 
incarceration and ordered to pay $531,883 in restitution, joint and several.   
Other criminal and civil enforcement activities 
 
01  Special Assistant U.S. Attorney Program  
During this reporting period, DOJ and OIG continued their participation in a program in which 
OIG attorneys, some of whom are Special Agents, serve as Special Assistant U.S. Attorneys.  OIG 
attorneys are detailed full time to DOJs Criminal Division, Fraud Section, for temporary  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 46 
 
assignments, including assignments to the Medicare Fraud Strike Force.  Other attorneys 
prosecute matters on a case-by-case basis.  Both arrangements offer excellent litigation training 
for OIG attorneys and enhance collaboration between the Departments in their efforts to fight 
fraud.  Under this program, OIG attorneys have successfully litigated important criminal cases 
relating to the fraudulent billing of medical equipment and supplies, infusion therapy, and 
physical therapy, as well as other types of Medicare and Medicaid fraud.  Case examples include: 
Texas  Julian Kimble was sentenced to 6 years of incarceration and ordered to pay $3.6 million 
in restitution after pleading guilty to charges of conspiracy to commit health care fraud, 
conspiracy to commit money laundering, and tax evasion.  According to published reports, from 
March 2008 through December 2010, Kimble owned and operated four ambulance companies 
and used these companies to routinely bill Medicare for basic life support (BLS) ambulance 
transports that were not provided, not needed, or not ordered by the treating physicians.  
Investigators determined that none of the four ambulance companies operated by Kimble 
owned licensed ambulance vehicles necessary to provide the BLS transports for which he billed 
Medicare.  Instead, Kimble and his co-conspirators transported multiple beneficiaries at the 
same time in vans or sedans, fraudulently billing Medicare for allegedly providing individual 
transports in ambulances under the attention of qualified emergency medical personnel.  In 
addition, Kimble received kickbacks from the owners of various community mental health 
centers in exchange for supplying patients to their facilities.  
Texas  Robert Baker was sentenced to 1 year and 6 months of incarceration and ordered to pay 
$173,653 in restitution, joint and several, after pleading guilty to conspiracy to violate the anti-
kickback statute.  According to court documents, Baker was a Medicare beneficiary who, from 
March 2007 through April 2012, visited Adom Rehabilitation Services, Inc., and Healthcare and 
Wellness Medical Clinic, Inc.  These clinics purportedly provided medical services, such as 
physical therapy, diagnostic testing, and mental health services.  However, Baker did not have a 
medical need for the services; rather he would allow his Medicare benefits to be billed in 
exchange for cash.  Baker also was paid cash to recruit Medicare and Medicaid beneficiaries to 
the clinics.  The owners and operators of the medical clinics then submitted claims to Medicare 
for payment using Medicare information from Baker and his co-conspirators.  The owner and 
operator of the clinics, along with two clinic employees were previously sentenced for their roles 
in the scheme.  
Connecticut  Alan Bradley was sentenced to 2 years in prison and ordered to pay $151,898 in 
restitution after pleading guilty to charges of health care fraud.  According to published reports, 
Bradley was a certified alcohol and drug abuse counselor who obtained the Medicaid 
identification numbers of various Medicaid clients and used the identification numbers to 
submit hundreds of claims to Connecticuts Department of Social Services.  The claims alleged 
that Bradley provided 75- to 80-minute individual psychotherapy sessions to these Medicaid 
clients at his office in Norwalk, Connecticut.  However, hundreds of the counseling sessions 
never occurred, and during the time for which he billed Medicare for many of them, Bradley was 
actually living and attending school in Florida.  In addition to receiving his sentencing, Bradley 
was suspended from participating in the Medicaid program.   HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 47 
 
02  Most Wanted Fugitives Listed on OIGs Web Site 
The OIG Most Wanted Fugitives Web site continues to garner national and international 
attention and greatly assists in helping to capture fugitives charged with defrauding Federal 
health care programs and stealing millions of taxpayer dollars.  The Most Wanted Fugitives Web 
site is continuously updated and features a profile and statistics for each fugitive, as well as an 
online tip form and a hotline number for individuals to report fugitive-related information to 
OIG, in English or Spanish, 24 hours a day, 365 days a year.  The Most Wanted Fugitives list can 
be accessed at https://oig.hhs.gov/fraud/fugitives.  During this reporting period, three fugitives 
were captured.  
California  Captured fugitives included Won Suk Lee, who was arrested in June 2013 after he 
arrived at Los Angeles International Airport.  In July 2012, Lee was indicted on charges of health 
care fraud, aiding and abetting, and causing an act to be done.  According to the indictment, Lee 
owned and operated Won Suk Lee Acupuncture and Herb, Inc. (aka Huntington Park 
Acupuncture Clinic and Variety Choice, Inc.), two clinics in Huntington Park, a suburb of Los 
Angeles.  Lee, an acupuncturist, and his staff allegedly billed Medicare for purportedly providing 
services that were not covered by Medicare.  According to court documents, Lee also received 
kickbacks for providing Medicare beneficiaries' health identification cards and other personal 
and medical information to a clinic enrolled as a Medicare provider for physical therapy services 
that then allegedly submitted false claims to Medicare for Medicare-covered services, such as 
physical therapy, though the beneficiaries did not receive any services from the clinic. Lee's co-
conspirators allegedly created patient files for the beneficiaries that included false 
documentation for covered services and received approximately $1.2 million from Medicare for 
the fraudulent claims.      
Because of the success of OIGs Most Wanted Fugitives Web site, OIG launched its Most Wanted 
Deadbeat Parents Web site at:  https://oig.hhs.gov/fraud/child-support-enforcement/index.asp.  
The site highlights parents who fail to pay court-ordered child support for their children, thus 
causing an unnecessary strain on the custodial parents and the children, as well as on agencies 
that enforce these matters.  Examples are provided in the "Human Services Reviews" section of 
this Semiannual Report. 
Recently completed actions and settlements 
 
01  Prescription Drugs 
Michigan  Twenty-six defendants have been convicted for their roles in a widespread scheme to 
defraud Medicare and Medicaid of nearly $58 million.  According to the indictment, Babubhai 
Patel was a licensed pharmacist who either owned or controlled 26 pharmacies in 
Michigan.  Patel concealed his ownership and control over many of his pharmacies through the 
use of straw owners.  Patel offered and paid kickbacks, bribes, and other inducements to 
prescribers in exchange for their writing fraudulent prescriptions for patients with Medicare, 
Medicaid, and private insurance and directing the patients to fill their prescriptions at one of 
Patels pharmacies.  Patel and his pharmacists billed Medicare and other insurers for dispensing 
the medications, despite the fact that the medications were medically unnecessary and/or were  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 48 
 
never provided.  Since January 2009, Patels pharmacies dispensed approximately 250,000 doses 
of Oxycontin, 4.6 million doses of Vicodin, 1.5 million doses of Xanax, and 6,100 pint bottles of 
codeine cough syrup.  Patels pharmacies falsely billed Medicare and Medicaid approximately 
$57.8 million for medications purportedly provided to beneficiaries over the course of the 
scheme.   
Patel was sentenced to 17 years in prison and ordered to pay $18.9 million in restitution, joint 
and several.  Mustak Vaid (physician), Komal Acharya (associate of Patel), Lokesh Tayal 
(pharmacist), Viral Thaker (pharmacist), Brijesh Rawal (pharmacist), and Ashwini Sharma 
(pharmacist) were sentenced to a combined 19 years in prison and ordered to pay more than 
$8.4 million in restitution, joint and several.  Nineteen additional defendants are awaiting 
sentencing. 
Florida  Captured OIG Most Wanted Fugitives Carlos Rodriguez and Keilan Fife were sentenced 
during this reporting period after pleading guilty to charges related to health care fraud.  The 
husband and wife team were fugitives from justice until they were arrested in November 2012 
after arriving at Miami International Airport.  Rodriguez was the owner and operator of Universal 
Scripts, Inc., while Fife was the owner and operator of Millennium Rx, Inc.  Both pharmacies 
were based in Miami.  According to court records, Fife, Rodriguez, and their co-conspirators were 
involved in a Medicare scheme in which kickbacks and bribes were paid to patient recruiters and 
beneficiaries for prescriptions that were then used to submit fraudulent claims to Medicare.  
Universal was paid approximately $7 million from Medicare for medical items and services 
allegedly provided, while Millennium was paid approximately $1.3 million from Medicare.    
Rodriguez was sentenced to 4 years and 9 months of incarceration and ordered to pay 
$4.4 million in restitution, joint and several, while Fife was sentenced to 2 years and 6 months of 
incarceration and ordered to pay $845,000 in restitution.  Lazaro Betancourt, an employee at 
Universal who also participated in the scheme, was sentenced to 3 years and 10 months of 
incarceration and ordered to pay $4.4 million in restitution, joint and several.   
02  Durable Medical Equipment 
Nevada  Alegria Phankonsy was sentenced to 4 years and 3 months of incarceration and 
ordered to pay over $12 million in restitution after pleading guilty to charges of health care 
fraud and tax evasion.  According to the indictment, Phankonsy simultaneously operated several 
medical equipment and supplies companies in Las Vegas using several alias names.  The 
companies, Proforma Medical Source, Divine Health, and Freemotion Plus Medical Supply, 
received more than $11 million from Medicare for equipment that was allegedly provided to 
Medicare beneficiaries.  Phankonsy allegedly paid marketers in southern California to obtain 
patients for her various companies.  The marketers provided patients with money in exchange 
for their Medicare information, which was used to bill Medicare for items not provided.  
Phankonsy also forged or caused to be forged prescriptions and falsified or caused to be falsified 
certificates of medical necessity to make it appear as if a physician had ordered a product for her 
customers.  She then submitted and caused to be submitted false claims to Medicare for medical 
equipment that was not medically necessary, was not provided to her customers, and was not 
prescribed by a physician.  
New York  Helene Michel was sentenced to 12 years of imprisonment and ordered to pay 
$4.4 million in restitution for her role in a scheme to defraud Medicare by billing for durable  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 49 
 
medical equipment that she did not provide.  Michel, along with her husband, Etienne Allonce, 
owned and operated Medical Solutions Management, Inc. (MSM), a medical equipment and 
supplies company purportedly specializing in high-end wound care supplies, braces, and orthotic 
shoes.  Through MSM, Michel and Allonce fraudulently billed the accounts of nursing home 
residents from over 15 New York area nursing homes for equipment that was never ordered or 
provided.  According to court documents, Michel entered these nursing homes falsely presenting 
herself in many roles, including physician, nurse practitioner, and wound care expert.  She then 
stole original medical records, as well as altered and manufactured records, in an effort to justify 
MSM's medical billing.  Evidence at trial showed that Michel and MSM had no relationship with 
the nursing homes and never provided medical equipment to any of their residents.  The 
Government contends that between 2003 and 2007, MSM improperly received over $6.5 million 
from Medicare for equipment that was never ordered or supplied.   
Texas  Kenny Msiakii was sentenced to 8 years and 1 month of incarceration and ordered to pay 
$2.5 million in restitution after being convicted on charges of health care fraud.  Msiakii owned 
Joy Supply and General Services, a Louisiana-based entity that billed Medicare for orthotics, heat 
pads, power wheelchairs, and other medical equipment.  According to the indictment, Msiakii 
submitted approximately $467,000 in claims to Medicare for equipment purportedly prescribed 
by a doctor in Houston, Texas.  However, the doctor never prescribed any of the equipment for 
which Msiakii billed Medicare.  Msiakii also submitted more than $6.7 million in claims to 
Medicare for equipment that was not medically necessary and, in some cases, was never 
provided.  
03  Physicians 
Washington  Sound Inpatient Physicians, Inc. (Sound), agreed to pay $14.5 million to resolve 
allegations that it violated the FCA.  Sound is a provider of hospitalists and other physicians to 
hospitals and other medical facilities.  It employs more than 700 hospitalists and post-acute 
physicians who provide services at 70 hospitals and post-acute facilities in 22 States.  Between 
January 2004 and December 2012, Sound allegedly submitted claims to Federal health care 
programs using codes for specific physician Evaluation and Management and related services 
furnished by Sounds hospitalists to beneficiaries when, in fact, the services performed did not 
meet the level billed and/or the available documentation did not support the level billed.  In 
addition to entering into the monetary agreement, Sound entered into a 5-year corporate 
integrity agreement (CIA) with OIG.   
Washington  Alfred Chan agreed to pay $3.1 million to resolve allegations under the FCA.  
Chan was a medical doctor who specialized in hematology and oncology.  He and his wife Judy 
operated the "Alfred H. Chan, M.D., P.C., Clinic" in Lakewood, Washington, until the clinic closed 
in February 2011.  According to court documents, the Chans allegedly defrauded Medicare, 
Medicaid, and other Federal health care programs by intentionally submitting false and 
inaccurate claims for medications and services.  Specifically, the Chans allegedly billed for 
quantities of drugs greater than those actually administered to patients, overstated 
chemotherapy drug infusion times, and double-billed for medications.  They also falsified the 
patient charts to support the fraudulent billing.  As a result of this conduct, Chan agreed to be 
excluded for a period of 15 years.  In January 2012, Chans license to practice as a physician and 
surgeon in the State of Washington was indefinitely suspended.   HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 50 
 
California  Licensed physician Joel I. Bernstein, M.D., agreed to pay approximately $2.28 million 
to resolve allegations under the FCA.  In addition, Joel I. Bernstein, M.D., Inc., Bernsteins 
professional corporation, pleaded guilty in a related criminal action to charges of health care 
fraud and aiding and abetting.  The company was sentenced to probation and ordered to pay a 
$500,000 fine and $1.7 million in restitution.  Bernsteins practice specialized in the treatment of 
patients suffering from various forms of cancer.  According to court records, Bernstein allegedly 
purchased non-FDA-approved prescription oncology drugs from a variety of sources that 
purported to contain the same active ingredient as oncology drugs sold in the United 
States.  Bernstein administered these drugs to patients, including Medicare beneficiaries, and 
submitted and caused to be submitted false claims for payment to Medicare related to the 
administration of the drugs.  
04  Kickbacks 
Georgia  C.R. Bard, Inc., and its wholly owned subsidiary, ProSeed, Inc., agreed to pay 
$48.26 million to resolve allegations that it provided illegal remuneration to certain customers 
and physicians to induce them to purchase their products.  C.R. Bard is a multinational company 
that develops, manufactures, and markets medical devices, including brachytherapy seeds, 
which are used in the treatment of prostate cancer.  C.R. Bard allegedly paid kickbacks to 
customers and physicians who performed prostate cancer treatment procedures using its 
brachytherapy seeds.  The kickbacks included grants, guaranteed minimum rebates, conference 
fees, marketing assistance, or free medical equipment in an effort to secure and maintain sales 
of brachytherapy seeds. 
05  Physical Therapy 
Texas  A captured OIG Most Wanted Fugitive, Godwin Nzeocha, was sentenced to 9 years and 
1 month of incarceration and ordered to pay more than $26 million in restitution, joint and 
several, after pleading guilty to charges of conspiracy to commit health care fraud and money 
laundering.  According to court documents, Nzeocha worked for City Nursing Services of Texas, 
Inc., where he signed his name as the provider of physical therapy services on City Nursing 
patient files, including blank treatment data forms, progress notes, and daily physical therapy 
records.  However, Nzeocha was not licensed, trained, or otherwise qualified to provide physical 
therapy to patients.  Nzeocha also signed documents that were prefilled with 4 units of 
physical therapy treatment that he knew had not been provided and that he was not qualified to 
provide.  Nzeocha said he knew that City Nursing was not providing any of the physical therapy 
services that were billed to Medicare and that all the money City Nursing received from 
Medicare as payment for physical therapy services was criminally derived.  During the time 
Nzeocha worked at City Nursing, the company billed Medicare and Medicaid approximately 
$3  million for physical therapy services that were not provided.  Nzeocha was arrested by 
Nigerian authorities in 2011 and extradited to the United States in June 2012 to face health care 
fraud charges.  
06  Personal Care Services 
Illinois  Daniel Geary and Cynthia Harmon were each sentenced to time served (4 months and 
25 days for Harmon, 4 months and 11 days for Geary) and ordered to pay $421 after pleading 
guilty to false statements relating to health care matters.  According to the indictment, Harmon  HHS Office of Inspector General  CMS-Related Legal 
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  Page 51 
 
and Geary defrauded the State of Illinois Medicaid program by falsely claiming and taking 
payments for personal assistant services that were not actually performed.  Between February 
and March 2012, Geary purportedly provided personal care services to Harmon, a Medicaid 
recipient, at her home.  However, Harmon was incarcerated during the time that the services 
were supposed to be provided.  Geary completed home services time sheets falsely stating that 
he performed 44.5 hours of personal assistant services for Harmon; he then billed Medicaid for 
the hours and received $821 in reimbursement.  
07  Hospitals 
Utah  Intermountain Health Care, Inc., agreed to pay $25.5 million plus interest to resolve 
allegations under the Physician Self-Referral Law (Stark Law) and FCA.  Intermountain is a 
nonprofit entity that operates the largest health system in the State of Utah.  Intermountain self-
disclosed to the Government that it engaged in improper financial relationships with referring 
physicians, in violation of the Stark Law.  The Government contended that Intermountain, 
through its subsidiary, Intermountain Medical Group, compensated certain employed physicians 
using a bonus formula that may have improperly taken into account the volume and value of the 
physicians patient referrals to Intermountain, that it rented office space to certain physicians 
without written and executed leases that were in effect for the entire term and/or that may have 
had fair market value issues, and that it had compensation or other financial arrangements with 
certain physicians who provided services to Intermountain under which the parties 
arrangements were not memorialized in a written and executed contract.  
Montana  St. Vincent Healthcare and Holy Rosary Healthcare (collectively, the Hospitals) agreed 
to pay $3.9 million to resolve allegations under the Stark Law.  The Hospitals self-disclosed that 
between July 2003 and December 2010, they paid certain employed physicians incentive 
compensation that was based, in part, on the volume or value of referrals made to the Hospitals.  
More specifically, the physician formula for compensation included inappropriate revenue 
related to such designated health services as EKG and EMG services at the Hospitals.  In addition, 
the Hospitals identified numerous arrangements or contracts it held with independent 
physicians or physician groups that the Government contended violated the Stark Law.  These 
arrangements or contracts included violations relative to expired or unsigned contracts, 
unwritten agreements, untimely payment of rent under lease terms, and potential deviations 
from fair market value rental charges. 
08  Home Health Care 
Florida  Nine defendants were sentenced for their roles in a home health care fraud scheme.  
According to the indictment, the president and an employee of Safe Home Health Care Agency, 
Inc., a Miami-based business that purported to provide home health services, along with a 
Miami resident co-conspirator and others, allegedly offered and paid kickbacks and bribes to 
patient recruiters in return for referring beneficiaries to Safe Home to serve as patients.  
Beneficiaries also received kickbacks for agreeing to serve as patients of Safe Home.   
According to court records, Maria Rueda was the president of Safe Home.  Jorge Sell was 
employed at Safe Home as an office administrator.  The Government contended that Rueda and 
Sell used the beneficiary information to submit false claims from Safe Home to Medicare for 
home health services and prescriptions that either were never provided or were medically  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 52 
 
unnecessary.  Safe Home received $9.5 million in reimbursements from these false claims.  
Miami resident Arminda Reyes was a co-conspirator.  Manuela Rodriguez, Rene Suarez-Basanta, 
Cristobal Garcia, and Marta Gonzalez were Medicare beneficiaries who, along with Maria Valdez, 
Francisco Rizo, and others, solicited and accepted thousands of dollars in kickbacks and bribes 
for referring Medicare beneficiaries to Safe Home to serve as patients.  During this reporting 
period, the nine defendants were sentenced to a combined 16 years and 2 months in prison and 
ordered to pay more than $5.8 million in restitution, joint and several.   
09  Transportation Fraud 
Pennsylvania  William Hlushmanuk, aka Bill Le, was sentenced to 7 years and 8 months in 
prison and ordered to pay $5.4 million in restitution after pleading guilty to health care fraud 
charges.  Hlushmanuk operated Starcare Ambulance, Inc., a private ambulance company that 
transported patients almost exclusively on nonemergency calls.  According to the indictment, 
from approximately 2006 until 2011, Hlushmanuk allegedly directed Starcare employees to 
transport by ambulance or private vehicle Medicare patients who were ineligible for Medicare-
paid nonemergency transport because they either could walk or be transported by other means.  
Most of these patients were on dialysis and attended dialysis treatments several times a week.  
Starcare patients were directed to get onto a stretcher or were placed by Starcare employees on 
a stretcher, even though the patients were able to walk or be moved via wheelchair.  Starcare 
then submitted fraudulent claims to Medicare for these medically unnecessary ambulance 
services and received more than $5.4 million in reimbursement for these false claims. 
10  Medicaid and Other Government Program Fraud 
Minnesota  James and Cynthia Hood fraudulently applied for several types of government 
benefits, including Medicaid and Social Security.  According to court records, James and Cynthia 
Hood, along with their three children, moved to Minnesota from Louisiana in 2005 after 
Hurricane Katrina.  The Hoods claimed they were displaced by the storm and had difficulty 
finding adequate services for their children in New Orleans.  During the application process for 
these benefits, Cynthia Hood stated that she was the sole legal guardian/custodian of the 
children, that she did not have any assets, that she lived separately from her husband, and that 
she was not employed.  However, investigators determined that Cynthia Hood lived with her 
husband; had at least eight different bank accounts that either were in her name or were held 
jointly with James Hood, totaling approximately $680,000; owned two vehicles; paid over 
$860,000 in cash for a home in Minnesota co-owned with her husband; and owned another 
house in Louisiana valued in excess of $270,000.   
Investigators also determined that James Hood was a retired college professor who had 
retirement accounts, stocks, and other investments worth over $11 million.  He also owned a 
farm in Iowa.  Investigators believe that James Hood assisted in the fraud by preparing false 
federal income tax returns.  From January 2006 to April 2011, the couple stole approximately 
$480,000 in State and Federal Medicaid benefits and Social Security benefits.  James Hood was 
sentenced to 3 years and 6 months of imprisonment after pleading guilty to charges of theft of 
public money, health care fraud, and mail fraud.  Cynthia Hood was sentenced to 3 years of 
probation after pleading guilty to false statements for use in determining rights to a Social 
Security benefit and mail fraud.  Both were ordered to pay $483,312 in restitution, joint and 
several, and were fined $500,000.    HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 53 
 
Iowa  Dennis Schuller agreed to pay $100,000 to settle allegations that he submitted, or caused 
to be submitted, false claims for payment to Medicaid.  Schuller practiced dentistry in Cedar 
Rapids, Iowa.  According to court records, Schuller allegedly billed Medicaid from August 2008 
through June 2010 for exams performed by a hygienist as though a dentist had performed the 
exams, medically unnecessary procedures, individual x-rays when whole mouth x-rays had been 
performed, occlusal guards (mouth guards) that were not medically necessary, and the use of 
desensitizing medication on patients when this medication was not medically necessary.  
Medicaid Fraud Control Units 
 
01  Funding and Accomplishments 
Medicaid Fraud Control Units (MFCUs) are key partners with OIG in the fight against fraud, 
waste, and abuse in State Medicaid programs.  In FY 2012, HHS awarded $162.9 million in 
Federal grant funds to 50 MFCUs (including 1 in Washington, DC), which employed 1,901 
individuals.  Collectively, in FY 2012, MFCUs reported 15,531 investigations, of which 11,660 
were related to Medicaid fraud and 3,871 were related to patient abuse and neglect, including 
misappropriation of patients private funds.  The cases resulted in criminal charges against or 
indictments of 1,359 individuals, including 995 for fraud and 364 for patient abuse and neglect, 
including patient funds cases.  In total, 1,337 criminal actions were reported in FY 2012, of which 
982 were related to Medicaid fraud and 355 were related to patient abuse and neglect, including 
patient funds cases.  Civil judgments and settlements for FY 2012 totaled 823.  MFCU 
accomplishment data for FY 2013 will be reported in OIGs spring 2014 Semiannual Report. 
02  Joint investigations with MFCUs 
Maine  John Perry was sentenced to 8 years of imprisonment and ordered to pay $7,580 in 
restitution and a $900 fine after pleading guilty to charges of conspiracy to possess with intent 
to distribute oxycodone; health care fraud, aiding and abetting; and unlawful distribution of 
oxycodone.  Perry was a licensed podiatrist who owned and operated Atlantic Foot & Ankle, P.A., 
in Portland, Maine.  According to court records, Perry prescribed controlled substances, 
including oxycodone, knowing that these substances were being further distributed by his co-
conspirators.  Perry would charge up to $500 or more for each oxycodone prescription.  Perry 
wrote prescriptions without any medical purpose; in the names of people to whom he never 
provided medical care; and in exchange for money and other controlled and illegal substances, 
including cocaine, for his personal use.  Perry also wrote prescriptions with no legitimate medical 
purpose outside his medical office, including at bars and a strip club.  Perry fabricated patient 
charts in his office to cover his improper prescriptions and then submitted false claims for these 
prescriptions to MaineCare.  This was a joint investigation with the Drug Enforcement 
Administration, the Federal Bureau of Investigation (FBI), and the Maine MFCU. 
California  Vincent Rubio was sentenced to 8 months of home confinement and ordered to pay 
$10.6 million in restitution after pleading guilty to charges of conspiracy to pay kickbacks for 
patient referrals, causing an act to be done, and subscription to false tax return.  Rubio was Chief 
Financial Officer of a hospital in Tustin, California.  According to court documents, Rubio oversaw 
the issuance of checks to companies owned by co-conspirators for the referral of recruited  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 54 
 
beneficiaries admitted to the hospital.  The hospital executed sham consultant contracts with 
these companies to conceal the fact that the hospital was making kickback payments to them for 
the referrals.  The hospital then billed Medicare and Medi-Cal for hospital stays and related 
services provided to the recruited beneficiaries, including admissions that were medically 
unnecessary.  Medicare and Medi-Cal paid the hospital more than $10.5 million in 
reimbursement for these false claims.  This was a joint investigation with the Internal Revenue 
Service, the FBI, and the California MFCU. 
Sanction authorities and other administrative actions 
 
Various Federal laws provide authorities to impose administrative sanctions for fraud and abuse, 
as well as other activities that pose a risk to Federal health care programs and their 
beneficiaries.  Sanctions include the exclusion of individuals and entities from Federal health 
care programs and the imposition of civil monetary penalties (CMPs) for submitting false and 
fraudulent claims to a Federal health care program or for violating the anti-kickback statute; the 
Stark Law; or the Emergency Medical Treatment and Labor Act of 1986 (EMTALA), also known as 
the anti-patient-dumping law.  
During this semiannual reporting period, OIG imposed 1,605 administrative sanctions in the 
form of program exclusions or administrative actions for alleged fraud or abuse or other 
activities that posed a risk to Federal health care programs and their beneficiaries.  Exclusion and 
penalty authorities are described in Appendix D and on our Web site at:  
http://oig.hhs.gov/fraud/enforcement/cmp/index.asp. 
01  Program Exclusions  
During this semiannual reporting period, OIG excluded 1,553 individuals and entities from 
Medicare, Medicaid, and other Federal health care programs.  Most of the exclusions resulted 
from convictions for crimes relating to Medicare or Medicaid, for patient abuse or neglect, or as 
a result of license revocation.  OIG is also responsible for reinstating providers who apply and 
have met the requirements of their exclusions.  For a list of excluded individuals and entities, 
see:  
https://exclusions.oig.hhs.gov/. 
Florida  Joseph Burrell Wagner, Jr., a chiropractor, was excluded for a minimum period of 40 
years on the basis of his convictions for health care fraud; conspiracy to illegally distribute and 
dispense, and cause to be distributed and dispensed, schedule III and IV controlled substances; 
and aiding and abetting transactional money laundering.  Wagner billed, and caused bills to be 
sent to, Medicare, Medicaid, and private insurers for services that were rendered by him or his 
staff as though they were medical doctors.  In actuality, Wagner used the name of a medical 
doctor to fraudulently bill for services that had never been performed or provided by the 
medical doctor.  In addition, he conspired with others to distribute and dispense schedule III and 
IV controlled substances.  As a licensed chiropractor, Wagner is not permitted to prescribe, 
distribute, or dispense controlled substances.   As part of the scheme, Wagner used the name 
and DEA numbers of medical doctors to illegally prescribe controlled substances to patients with  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 55 
 
no legitimate doctor-patient relationship.  As a result of these crimes, Wagner was sentenced to 
15 years and 8 months of incarceration and ordered to pay more than $2 million in restitution.  
The Florida Board of Chiropractic Medicine ordered the voluntary relinquishment of Wagners 
license to practice as a chiropractor. 
Louisiana  Vadim Mysak, owner, manager, and technician of several medical clinics, was 
excluded for a minimum period of 25 years on the basis of his conviction.  Mysak and his co-
conspirators were involved in a scheme to defraud Medicare and Medicaid through fraudulent 
billing for diagnostic tests that were not medically necessary or were not performed.  On the 
basis of this scheme, Mysak was convicted on charges of conspiracy to commit health care fraud 
and conspiracy to commit money laundering.  He was sentenced to 4 years and 1 month of 
incarceration and ordered to pay more than $6 million in restitution, joint and several.  Mysak 
was also excluded from participation in Medicaid by the Louisiana Department of Health and 
Hospitals. 
Kentucky  Deloris Williams, a registered nurse, was excluded for a minimum period of 20 years 
on the basis of her reckless homicide conviction.  While employed as a registered nurse, Williams 
entered the room of a patient with a cigarette lighter.  The cigarette lighter started a fire on the 
bedding of a patient who was in a complete vegetative state that left him unable to escape the 
fire.  Williams made no attempt to contact anyone regarding the fire.  The patient died at the 
hospital as a result of the fire.  The court sentenced Williams to 5 years of incarceration.  In 
addition, the Kentucky State Board of Nursing revoked her license to practice as a registered 
nurse. 
Florida  Joseph Pastorek, a medical doctor, was excluded for a minimum period of 10 years on 
the basis of his conviction for conspiracy to knowingly and willfully dispense, and cause to be 
dispensed, schedule IV controlled substances.  Pastorek purported to provide pain management 
treatment for chronic pain patients in various clinics in Louisiana and Florida.  However, in 
actuality, Pastorek engaged in a conspiracy to unlawfully dispense controlled substances outside 
the course of legitimate medical practice.  From about January 2004 to about February 2008, 
Pastorek conspired with others to dispense controlled substances that involved a mixture and 
substance containing methadone.  Pastorek was sentenced to 12 months of incarceration 
followed by 12 months of home detention.  
Massachusetts  Brian Awbrey, a medical doctor, was excluded for an indefinite period on the 
basis of the loss of his license to practice medicine in Massachusetts.  Awbrey allegedly entered 
into a sexual relationship with a patient whom he treated from about 1989 to about 2007.  In 
addition, Awbrey also allegedly failed to comply with the standard of care in relation to a 
number of patients regarding his prescribing of medications.  As a result, the Massachusetts 
Board of Registration in Medicine revoked his license to practice medicine. 
02  Corporate Integrity Agreements 
Many health care providers elect to settle their cases before litigation.  As part of the 
settlements, providers often agree to enter into CIAs with OIG to avoid exclusions from 
Medicare, Medicaid, and other Federal health care programs.  Under a CIA, a provider commits 
to establishing a program and taking other specified steps to ensure future compliance with 
Medicare and Medicaid rules.  The compliance programs are designed, in part, to prevent future  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
  Page 56 
 
fraud.  OIG monitors providers compliance with these agreements.  OIG may impose penalties 
on entities that fail to comply with the requirements of their CIAs.   
03  Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose administrative penalties on 
and assessments against a person who, among other things, submits, or causes to be submitted, 
claims to a Federal health care program that the person knows or should know are false or 
fraudulent.  During this semiannual reporting period, OIG concluded cases involving more than 
$8 million in CMPs and assessments.   
Massachusetts  Trustees of Tufts College and Tufts University School of Dental Medicine 
(TUSDM) agreed to pay $841,120 for allegedly violating the CMPL.  TUSDM submitted claims to 
Medicare for various services from four of its clinics.  However, OIG alleged that these claims 
were improper because the services had been provided by dentists who were not credentialed 
by Medicare or the services were not supported by sufficient medical record documentation.  
Georgia  Dr. Matthew James Britton and C.F. Health Management, Inc., d/b/a Gainesville Pain 
Management (GPM), agreed to pay $1.5 million for allegedly violating the CMPL.  OIG alleged 
that GPM submitted false or fraudulent claims by inappropriately using certain service code 
modifiers to submit claims for payment for multiple units when only a single unit may be billed 
per patient encounter and by inappropriately billing for higher paying service codes when less 
expensive services were actually provided.  
Pennsylvania  Bravo Health Pennsylvania, Inc. (Bravo), agreed to pay $225,000 to resolve its 
liability under the CMP provisions applicable to Medicare Advantage (MA) organizations.  OIG 
alleged that Bravo provided patient medical records to OIG's Office of Audit Services as part of 
an audit.  However, the medical records were intentionally altered prior to their submission or 
resubmission.  Specifically, Bravo added apparent diagnoses notations or signatures to the 
patient medical records. 
New York  Sergey Lugina and Executive Medical Care, P.C. (EMC), agreed to pay $74,000 for 
allegedly violating the CMPL.  OIG alleged that EMC submitted, or caused to be submitted, 
claims for medical services that had not been provided as claimed and/or were false or 
fraudulent.  OIG alleged that these services had not been provided as claimed because Lugina 
was on travel outside the United States during the periods when he claimed to have rendered 
services to beneficiaries. 
Missouri  Paul Lux, M.D., agreed to pay $63,900 for allegedly violating the CMPL provisions 
applicable to physician self-referrals and kickbacks.  OIG alleged that Lux received remuneration 
from a medical device manufacturer in return for recommending the purchase of the 
manufacturers medical devices. 
04  Patient Dumping  
Some of the CMPL cases that OIG resolved between April 1 and September 30, 2013, were 
pursued under EMTALA, a statute designed to prevent hospitals from denying emergency care to 
patients and to ensure patient access to appropriate emergency medical services.  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
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Georgia  Donalsonville Hospital, Inc. (Donalsonville), agreed to pay $25,000 to resolve its 
liability under the patient dumping statute.  OIG alleged that Donalsonville failed to provide an 
adequate medical screening examination to a patient who arrived at its emergency department 
complaining of shortness of breath and chest pain.  The patient did not receive any medical 
examination from a physician and was told that he was required to pay a minimum fee of $100 
to continue further treatment.  The patient chose not to pay the fee and was discharged without 
receiving an appropriate medical screening examination.   
Georgia  Emory University Hospital (Emory) agreed to pay $50,000 to resolve its liability under 
the patient dumping statute.  OIG alleged that Emory refused to accept the appropriate transfer 
of a patient who required Emory's specialized capabilities.  
Iowa  Mercy Hospital of Franciscan Sisters (MHFS) entered into a $20,000 settlement 
agreement to resolve its liability under the CMPL for a violation of EMTALA.  MHFSs liability 
arose from its failure to provide a medical screening examination, stabilizing treatment, or an 
appropriate transfer to a patient who arrived at the emergency department after ingesting 
window deicer, a product containing the toxin methanol. 
Provider Self-Disclosure Protocol  
 
OIG is committed to assisting health care providers and suppliers in detecting and preventing 
fraud and abuse.  Since 1998, we have made available comprehensive guidelines describing the 
protocol for providers to voluntarily submit to OIG self-disclosures of fraud, waste, or abuse.  The 
provider self-disclosure protocol gives providers an opportunity to minimize the potential costs 
and disruption that a full-scale OIG audit or investigation might entail if fraud were uncovered.  
The self-disclosure also allows the provider to negotiate a fair monetary settlement and 
potentially avoid being excluded from participation in Federal health care programs.  
The protocol guides providers and suppliers through the process of structuring a disclosure to 
OIG about matters that constitute potential violations of Federal laws.  After making an initial 
disclosure, the provider or supplier is expected to thoroughly investigate the nature and cause of 
the matters uncovered and make a reliable assessment of their economic impact.  OIG evaluates 
the reported results of each internal investigation to determine the appropriate course of action.  
The self-disclosure guidelines are available on the OIG Web site at  
https://oig.hhs.gov/compliance/self-disclosure-info/index.asp. 
During this reporting period, self-disclosure cases resulted in $28.1 million in HHS receivables.  
Following are examples of provider self-disclosure settlements. 
California  Sonora Regional Medical Center agreed to pay $597,193 to resolve its liability under 
the Civil Monetary Penalty Law.  Sonora self-disclosed to OIG that a physician at its oncology 
outpatient center routinely submitted upcoded claims for evaluation and management services, 
resulting in his receipt of reimbursement at a higher level than that of the code that was 
applicable to the services he actually provided.  
Florida  SpecialtyCare Surgical Assist, LLC (SCSA), agreed to pay $247,024 for allegedly violating 
the CMPL.  SCSA self-disclosed to OIG that it had knowingly presented to Medicare, Medicaid,  HHS Office of Inspector General  CMS-Related Legal 
Semiannual Report to Congress  Fall 2013  and Investigative Activities 
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and TRICARE claims for items or services that it knew, or should have known, were not provided 
as claimed.  Specifically, OIG contended that SCSA billed Federal health care programs for 
assistant-at-surgery services provided by certified surgical assistants and registered nurse first 
assistants when these programs reimburse such services only if provided by physicians and/or 
physician assistants. 
California  Sutter Health Sacramento Sierra Region (SHSSR) agreed to pay $130,308 for 
allegedly violating the CMPL.  SHSSR self-disclosed to OIG that it employed an individual that it 
knew, or should have known, was excluded from participation in Federal health care programs.  
Oregon  Radiology Associates, P.C. (RA), and Oregon Imaging Centers, LLC (OIC), agreed to pay 
$189,045 for allegedly violating the CMPL.  OIC self-disclosed to OIG that it had inappropriately 
billed Medicare for certain diagnostic tests provided by radiology practitioner assistants 
employed by RA that required personal supervision by a physician but that instead had been 
provided under a lesser level of supervision.  
  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
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Public Health, Human Services, 
and Other HHS Issues 
This segment of the Department of Health and Human Services (HHS) Office of Inspector 
Generals (OIG) Semiannual Report to Congress pertains to public health, human services, and 
other selected HHS issues.   
Public health activities and programs represent the countrys primary defense against acute and 
chronic diseases and disabilities and provide the foundation for the Nations efforts to promote 
and enhance the health of the American people.  Our reviews of public health agencies within 
HHS generally include the following: 
  Agency for Healthcare Research and Quality (AHRQ).  AHRQ sponsors and conducts 
research that provides evidence-based information on health care outcomes, quality, costs, 
use, and access.     
  Centers for Disease Control and Prevention (CDC).  CDC operates a health surveillance 
system to monitor and prevent disease outbreaks, including bioterrorism; implements 
disease prevention strategies; and maintains national health statistics.  
  Food and Drug Administration (FDA).  FDA is responsible for ensuring the safety of the 
Nations food, drugs, medical devices, biologics, cosmetics, and animal food and drugs.   
  Health Resources and Services Administration (HRSA).  HRSA maintains a safety net of 
health services for people who have low incomes or are uninsured or who live in rural areas 
or urban neighborhoods where health care is scarce. 
  Indian Health Service (IHS).  IHS provides or funds health care services for American Indians 
and Alaska Natives. 
  National Institutes of Health (NIH).  NIH supports medical and scientific research examining 
the causes of and treatments for diseases, such as cancer, human immunodeficiency virus 
(HIV), and acquired immunodeficiency syndrome (AIDS).  
  Substance Abuse and Mental Health Services Administration (SAMHSA).  SAMHSA funds 
services to improve the lives of people who have, or are at risk for, mental and substance 
abuse disorders. 
The HHS agencies that administer human services programs are the Administration for 
Community Living (ACL), which includes the Administration on Aging, to provide services such as 
meals, transportation, and caregiver support to older Americans at home and in the community 
through a nationwide network, and the Administration for Children and Families (ACF), which 
promotes the economic and social well-being of children, families, and communities, including 
Temporary Assistance for Needy Families (TANF); the national child support enforcement (CSE) 
system; the Head Start program for preschool children; and assistance for child care, foster care, 
and adoption services.  Other HHS issues include those functions managed by the Office of the 
Secretary or new initiatives being implemented pursuant to the Patient Protection and 
Affordable Care Act of 2010 (Affordable Care Act).  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 60 
 
Public health reviews  
 
Significant problems, abuses, and deficiencies:   
01  CDCPresident's Emergency Plan for AIDS Relief (PEPFAR).  In seven 
reports, OIGs recommendations included that improved oversight, 
guidance, controls, and procedures are needed to ensure that PEPFAR 
funds are used as intended by law.      
HHS receives PEPFAR funds from the State Department through a memorandum of agreement.  
In addition, it also receives direct HHS funding for its Global HIV/AIDS Program.  HHSs Centers 
for Disease Control and Prevention works in more than 75 countries with ministries of health 
and other in-country partners to strengthen health systems and build sustainable HIV/AIDS 
programs.  CDCs offices in host countries are responsible for PEPFAR funds awarded to 
government agencies and for-profit and nonprofit organizations (recipients).     
In this semiannual period, we issued seven PEPFAR-related reports with recommendations for 
corrective action as follows.    
CDC Vietnam.  In general, CDC Vietnam monitored recipients use of PEPFAR funds in accordance 
with HHS and other Federal requirements.  We recommended that CDCs Vietnam office 
implement standard operating procedures specific to monitoring recipients use of PEPFAR 
funds, including, but not limited to, documenting CDCs review of progress reports.  Savings 
PotentialCDC awarded $28.2 million of PEPFAR funds to 19 recipients in Vietnam during 
FY 2009.  Risk of misuse of funds can be mitigated through improved monitoring procedures. 
2013 APR  CDC VietnamThe Centers for Disease Control and Prevention's Vietnam Office 
Generally Monitored Recipients' Use of the President's Emergency Plan for AIDS 
Relief Funds.  A-04-12-04023.        
Vietnam Ministry of Health.  The Ministry did not always manage PEPFAR funds or meet 
program goals in accordance with requirements for returning interest income and used PEPFAR 
funds to pay for potentially unallowable value-added taxes (VAT) on purchases.  We 
recommended that the Ministry strengthen controls to ensure accurate and timely reporting, 
return interest income to CDC, record adjustments to the general ledger account in a timely 
manner, ensure that all the provinces obtained the tax identification (tax ID) required to receive 
a VAT refund, and resolve whether the VAT payments we questioned were allowable 
expenditures.  Savings PotentialSavings could be realized through improved compliance and 
returns and recoveries of amounts questioned.  We questioned almost $18,000 in unreturned 
interest and about $30,000 in VAT payments.   
2013 JUN  The Vietnam Administration for HIV/AIDS Control Did Not Always Manage the 
President's Emergency Plan for AIDS Relief Funds or Meet Program Goals in 
Accordance With Award Requirements.  A-06-11-00057.   
Potentia Namibia Recruitment Consultancy (Potentia).  Potentia generally managed PEPFAR 
funds and met program goals in accordance with award requirements.  Potentia made small  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
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financial errors, used some funds for potentially unallowable VAT, and did not submit a required 
annual progress report.  We recommended that Potentia implement policy and procedures to 
prevent other errors, refund unallowable expenditures, and resolve whether the VAT 
expenditures were allowable.  Savings PotentialFindings included over $173,000 of potentially 
unallowable VAT and minor transaction errors.  (Transactions totaling about $185,000 were 
allowable.)   
2013 APR  Potentia Namibia Recruitment Consultancy Generally Managed the President's 
Emergency Plan for AIDS Relief Funds and Met Program Goals in Accordance 
With Award Requirements.  A-06-11-00056.   
South African National Department of Health (Ministry).  The Ministrys mission is to ensure 
the delivery of quality, affordable, and accessible health services in accordance with the national 
10-point plan for health.  The Ministry did not always accurately report PEPFAR expenditures, did 
not obtain an annual financial audit, and claimed some unallowable and potentially unallowable 
expenditures.  We recommended that the Ministry develop and implement policies and 
procedures to address our findings, use correct exchange rates, submit timely audits, resolve 
costs we questioned, and refund unallowable amounts to CDC.  Savings PotentialFindings 
included about $75,000 in potentially unallowable VAT and over $3,000 in unallowable 
expenditures that lacked supporting documentation.  (Transactions totaling about $1.9 million 
were allowable.)    
2013 AUG  The South African National Department of Health Did Not Always Manage 
President's Emergency Plan for AIDS Relief Funds or Meet Program Goals in 
Accordance With Award Requirements.  A-05-12-00022. 
Southern African Catholic Bishops' Conference AIDS Office (SACBC).  SACBC generally managed 
PEPFAR funds and met program goals in accordance with award requirements but did not submit 
a required financial audit.  We recommended that the SACBC AIDS Office implement policies and 
procedures to prevent performance, progress, and audit issues; refund unallowable expenses; 
and resolve whether VAT was allowable.  Savings PotentialWe questioned transactions totaling 
more than $18,000 and potentially unallowable VAT payments totaling more than $25,000.  
(Transactions totaling $442,083 were allowable.)     
2013 JUL  The Southern African Catholic Bishops' Conference AIDS Office Generally 
Managed President's Emergency Plan for AIDS Relief Funds and Met Program 
Goals in Accordance With Award Requirements.  A-05-12-00023.   
South AfricaNational Health Laboratory Service (NHLS).  NHLS provides cost-effective and 
professional laboratory medicine through state-of-the-art technology to all South Africans.  
Deficiencies included unallowable transactions, inaccurate reporting, and failure to submit an 
annual financial audit.  We recommended that NHLS develop and implement policies and 
procedures to address our findings, use correct exchange rates, submit timely audits, resolve 
costs we questioned, and refund unallowable amounts to CDC.  Savings PotentialWe 
questioned transactions totaling more than $185,000, of which more than $183,000 were for 
unallowable expenditures.  (Transactions totaling almost $600,000 were allowable.)  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
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2013 AUG  National Health Laboratory Service Did Not Always Manage President's 
Emergency Plan for AIDS Relief Funds or Meet Program Goals in Accordance 
With Award Requirements.  A-05-12-00024.   
South AfricaAurum Institute for Health Research (Aurum).  Aurum, a nonprofit organization 
incorporated under the laws of the Republic of South Africa, conducts health research and 
provides care and treatment for tuberculosis and HIV.  Aurum inappropriately requested, 
received, and maintained cash advances in excess of its immediate needs; did not accurately 
report expenditures; and did not fully report progress on its objectives.  We recommended that 
Aurum develop and implement policies and procedures to address our findings, use correct 
exchange rates, file an amended financial report, and refund unallowable amounts to CDC.  
Savings PotentialWe identified more than $1.6 million of unallowable expenditures.  
(Transactions totaling about $869,000 were allowable.)    
2013 AUG  Aurum Institute for Health Research Did Not Always Manage President's 
Emergency Plan for AIDS Relief Funds or Meet Program Goals in Accordance 
With Award Requirements.  A-05-12-00021.  
 
02  FDADrug Manufacturers Settled Allegations.  The United States 
alleged that companies submitted false data to FDA and failed to meet 
various FDA requirements. 
Maryland  Ranbaxy Laboratories Limited, which has headquarters in Gurgaon, India, agreed to 
pay $350 million plus interest to resolve allegations under the False Claims Act.  Ranbaxy 
admitted to violations of introducing adulterated drugs into interstate commerce, delivering 
unapproved new drugs into interstate commerce, failing to make required reports to the Food 
and Drug Administration, and causing drugs to be adulterated while the drugs were held for sale 
after being shipped in interstate commerce, in violation of the Federal Food, Drug and Cosmetic 
Act.  From April 2003 through September 2010, Ranbaxy allegedly falsified records and other 
data with FDA in order to obtain approval to sell generic drugs in the United States.  In addition, 
Ranbaxy allegedly submitted false data to the United States in order to gain approval for 
substandard generic antiretroviral drugs, which were purchased under the Presidents 
Emergency Plan for AIDS Relief.  As a result of this conduct, Ranbaxy entered into an extensive 
consent decree with FDA, which includes extensive auditing, monitoring, and review of 
Ranbaxys current Good Manufacturing Practices and data integrity program. 
Oklahoma  Wyeth Pharmaceuticals, Inc., a subsidiary of Pfizer, Inc., agreed to pay $490 million 
to resolves its criminal and civil liability arising from its unlawful marketing of the drug 
Rapamune.  Rapamune is an immunosuppressive drug that prevents the bodys immune system 
from rejecting a transplanted organ.  According to published reports, Wyeth received FDA 
approval in 1999 for Rapamune for use in renal (kidney) transplant patients.  However, Wyeth 
also allegedly trained its sales force to promote Rapamune in nonrenal patients, despite the fact 
that the drug was not approved by FDA for this use.  Wyeth allegedly provided its sales staff with 
training materials regarding nonrenal transplant use and trained them on how to use these 
materials in presentations to transplant physicians.  In addition, Wyeth allegedly offered financial  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 63 
 
incentives to its sales staff to target all transplant patient populations in an effort to increase 
sales of Rapamune.   
New York  As part of a global settlement, ISTA Pharmaceuticals, Inc., agreed to pay 
$33.5 million to resolve its criminal and civil liability involving the marketing, distribution, and 
sales of its drug Xibrom.  FDA approved the use of Xibrom, an ophthalmic, nonsteroidal, anti-
inflammatory drug, for treating inflammation of post-cataract surgery and for reducing ocular 
pain after cataract surgery.  However, some ISTA employees promoted Xibrom to physicians for 
uses that were not approved by FDA, such as post-Lasik surgery, post-Photorefractive 
Keratectomy surgery, post-glaucoma surgery, and other eye-related laser surgeries.  Some ISTA 
employees also provided physicians with post-operative instruction sheets and sponsored 
medical education programs for uses of Xibrom that were not approved by FDA as safe and 
effective.  ISTA also allegedly instructed employees not to memorialize in writing certain 
interactions with physicians regarding unapproved new uses and not to leave certain printed 
materials regarding unapproved uses in physicians offices in order to prevent their conduct 
relating to unapproved new uses from being detected.  In addition, ISTA allegedly offered and 
paid kickbacks to physicians in order to induce them to prescribe Xibrom. 
 
03  FDAUse of High-Risk Compounded Sterile Preparations (CSPs) and 
Outsourcing by Hospitals That Use Them.  The use of CSPs is 
widespread in hospitals, although the use of the highest risk products is 
limited to about one-quarter of hospitals, most commonly 
larger facilities.     
Pharmaceutical compounding is the creation of prescription drugs tailored to meet the needs of 
individual patients.  This work was particularly important following the meningitis outbreak 
resulting from contaminated injections of compounded drugs.   An OIG survey revealed that in 
2012, use of the highest risk CSPsthose involving preparation of sterile products from 
nonsterile componentsis limited to about one-quarter of hospitals, most commonly larger 
facilities. 
Although most hospital pharmacies prepared sterile-to-sterile products onsite, hospitals 
outsource the preparation of most nonsterile-to-sterile CSPs.  Hospitals tend to rely upon a 
limited number of external pharmacies for CSPs, especially for nonsterile-to-sterile products.  
Often these pharmacies are located in other States.  We found that hospitals took limited steps 
to ensure the quality of outsourced CSPs but had few identified problems with the quality of 
CSPs from outside pharmacies.  Also, 56 percent of hospitals made changes, or planned to make 
changes, to CSP sourcing practices in response to the fall 2012 meningitis outbreak.  
We did not make formal recommendations to FDA.  We plan additional work to further examine 
the safety and quality of pharmaceutical compounding in hospitals, including work examining 
Federal oversight mechanisms.   
2013 APR  High-Risk Compounded Sterile Preparations and Outsourcing by Hospitals That 
Use Them.  OEI-01-13-00150.    HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 64 
 
 
04  FDAClearance of Medical Devices.  FDA should complete the 
classification process for all types of Class III preamendment medical 
devices; classification of such devices is in progress.    
Medical devices are those used in diagnosis, cure, mitigation, treatment, or prevention of 
disease.  FDA is required to classify devices by the level of control needed to provide reasonable 
assurance of device safety and effectiveness (i.e., Class I, II, or III).  Class I devices include tongue 
depressors and stethoscopes and Class II devices include syringes and electrocardiographs.  Class 
III devices support or sustain human life, are of substantial importance in preventing impairment 
of human health, or present a potential unreasonable risk of illness or injury; implantable 
pacemakers and atrial defibrillators are examples of Class III devices.   
FDA's premarket notification process (the 510(k) process) is a faster and less stringent method to 
obtain clearance to market medical devices than its Premarket Approval process (the PMA 
process).  Class I and Class II devices are reviewed under the 510(k) process.  Pursuant to the 
510(k) process, sponsors do not have to submit scientific evidence demonstrating that the 
device is safe and effective for its intended use, as is required under the PMA process.  Instead, 
sponsors must submit information demonstrating a devices substantial equivalence to a device 
already being legally marketed (i.e., the predicate device).  Most Class III devices must be 
approved through the PMA process, although some continue to be cleared through the 510(k) 
process using regulatory categories of devices (Class III preamendment device types).  The Safe 
Medical Devices Act of 1990 requires FDA to either reclassify Class III preamendment device 
types as Class II or I or keep them as Class III and require a PMA review.   
Consistent with the Food and Drug Administration Safety and Innovation Act of 2012, FDA 
should finish classifying Class III preamendment device types no later than July 9, 2014.  We 
found that as of July 9, 2012, FDA had not finished classifying all types of Class III preamendment 
devices.  Also, FDA had not consistently documented the review of devices it had cleared 
through the 510(k) process in 2010 and had not provided complete administrative files during 
our data collection, thereby demonstrating deficiencies in its filing system.  An adequate process 
for maintaining administrative files requires transparency regarding the location of documents 
and the completeness of the files.  The lack of such a process could lead to confusion and human 
error.   
We recommended that FDA  
  finish classifying the remaining types of Class III preamendment devices that include devices 
still used as predicates in the 510(k) process, improve its maintenance of administrative files 
for devices, and continue to implement new policies on how to compile an administrative 
file. 
2013 SEP  FDAs Clearance of Medical Devices Through the 510(k) Process.   
OEI-04-10-00480.   
    HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
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05  HRSAHealth Center Program Funds.  At two grantee organizations in 
Wisconsin and New York, Federal funds were found at risk of not being 
properly accounted for or not being used in accordance with 
requirements.  
The Health Center Program, consolidated under section 330 of the Public Health Service Act, 
provides grants to nonprofit private or public entities that serve designated medically 
underserved populations and areas, as well as vulnerable populations of migrant and seasonal 
farmworkers, the homeless, and residents of public housing.  These grants are commonly 
referred to as section 330 grants.  The Health Resources and Services Administration 
administers the program.   
Also, the American Recovery and Reinvestment Act of 2009 (Recovery Act) provided funding to 
support the Health Center Program.  HRSA received $2.5 billion$2 billion of which was to 
expand the Health Center Program by serving more patients, stimulating new jobs, and meeting 
the expected increase in demand for primary health care services among the Nations uninsured 
and underserved populations.  HRSA awarded a number of grants using Recovery Act funding, 
including Increased Demand for Services (IDS) and Capital Improvement Program (CIP) grants.   
Wisconsin.  Our review of a grantee organization in Wisconsin found that the IDS and CIP costs 
were allowable, but we questioned certain section 330 costs.  The grantee organization did not 
maintain a financial management system that adequately identified the source and application 
of costs and did not adequately support, with personnel activity reports, the distribution of 
salaries and wages.  The grantee did not have policies and procedures to ensure that the use of 
grant funds complied with Federal requirements.  As a result, we could not determine the 
allowability of salary, wage, and fringe benefit costs.  We also found misappropriation of 
program income.    
With regard to the Wisconsin grantee, we recommended that HRSA impose special award 
conditions on the Wisconsin grantee so that it takes corrective actions to ensure that financial 
records adequately identify the source and application of Federal program funds, ensure that 
personnel activity reports for employees working on Federal awards are maintained, and ensure 
that segregation of duties is adequate to safeguard assets.  We also recommended that HRSA 
require the grantee to refund the improperly claimed costs we estimated or work with the 
grantee to determine whether any of the costs were allowable.  HRSA should ensure that any 
monetary recoveries related to misappropriated funds are applied to services and activities 
consistent with the scope of the health center program.  Savings PotentialWe questioned 
almost $6 million in claimed costs and $754,731 in misappropriated program income.  
2013 APR  Milwaukee Health Services, Inc., Claimed Unallowable Costs Under Health 
Resources and Services Administration Grants.  A-05-12-00015.   
New York.  Our review of a grantee organization in New York revealed that it misinterpreted the 
grant award terms and conditions and claimed unallocable and duplicate costs.  We could not 
determine the allowability of some other costs because it did not properly maintain personnel 
activity reports for employees charged to the IDS grant.  Although the grantee maintained  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
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personnel activity reports for employees who it stated worked on the IDS grant, the employees 
personnel activity reports reflected that the employees worked entirely on another HRSA grant 
(the section 330 grant).  In addition, the grantee drew down CIP grant funds for which it did not 
have an immediate cash need. 
With regard to the New York grantee, we recommended that HRSA educate grantee officials in 
New York on Federal requirements for the proper period to charge costs and supporting salaries 
and wages, ensure that the grantee maintains personnel activity reports for each employee who 
works on Federal awards, and ensure that the grantee adheres to its policies and procedures for 
drawing down Federal funds.  HRSA should also require the grantee to refund amounts we 
estimated related to the IDS and CIP grants or work with the grantee to determine whether any 
of the costs claimed against the grant were allowable.  Savings PotentialWe questioned over 
$1.6 million in costs.    
2013 APR  Mount Vernon Neighborhood Health Center, Inc., Claimed Unallowable Federal 
Grant Expenditures.  A-02-11-02013.   
 
06  HRSAHealth Education Assistance Loan Program.  OIG excludes 
individuals who have defaulted on HEAL loans from participation in 
Federal health care programs. 
Under the Health Education Assistance Loan (HEAL) program, the Health Resources and Services 
Administration guarantees commercial loans to students seeking education in health-related 
fields.  The students are allowed to defer repayment of the loans until after they graduate and 
begin to earn income.  Although HHSs Program Support Center (PSC) takes steps to ensure 
repayment, some loan recipients do not resolve their indebtedness.  After PSC has exhausted 
efforts to secure repayment of a debt, it declares an individual in default.  Thereafter, the Social 
Security Act permits exclusion of such individuals from Medicare, Medicaid, and all other Federal 
health care programs for nonpayment of the loans.  
Exclusion means that the individual may not receive reimbursement under these programs for 
professional services rendered, nor may any other provider receive reimbursement for services 
ordered or prescribed by the individual.  OIG is responsible for excluding individuals who have 
defaulted on HEAL loans from participation in Federal health care programs. 
HEAL Exclusions.  During this semiannual reporting period, 37 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 default may enter into settlement agreements, whereby the exclusions 
are stayed while they pay specified amounts each month to satisfy their debts.  If they default on 
these settlement agreements, they may be excluded until the entire debts are repaid and they 
may not appeal the exclusions. 
After being excluded for nonpayment of their HEAL debts, a cumulative 2,502 individuals 
chose to enter into settlement agreements or completely repay their debts.  That figure includes 
22 individuals who entered into such settlement agreements or completely repaid their debts 
during this semiannual reporting period.  The amount of money being repaid through settlement  HHS Office of Inspector General  Public Health, Human Services,  
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agreements or through complete repayment is $195 million.  Of that amount, $4.3 million is 
attributable to this semiannual reporting period. 
 
07  NIHClinical Trials Data and Safety Monitoring Boards (DSMBs).  
Although DSMBs meet guidance, issues concerning independence, 
access to certain data, and recruitment and training of experts 
challenge DSMB effectiveness. 
DSMBs are committees of experts responsible for reviewing clinical trial data on an ongoing 
basis to ensure the safety of study subjects and validity and integrity of the data.  Although 
DSMBs for National Institutes of Health (NIH) clinical trials are generally meeting operational 
guidelines, we found some issues concerning independence, access to certain data, and 
recruitment and training of experts. 
In particular, we found that NIH participation in closed DSMB meetings diminishes the 
appearance of independence; NIH faces challenges in recruiting and training DSMB members; 
and not all of NIH's Institutes and Centers' (IC) policies reference DSMB access to "unmasked 
data" (meaning DSMB members know which subjects are in which treatment groupsomething 
the researchers and subjects themselves do not generally know).   Unmasked data is essential to 
DSMBs' ability to review evidence of adverse events and interim treatment outcomes to 
recommend whether trials should be continued, altered, or terminated.  
We recommended that NIH 
  direct ICs  to articulate the circumstances in which IC staff should participate in DSMB 
meetings, direct ICs to explicitly reference DSMB access to certain data in their DSMB 
policies, and identify ways to recruit and train new DSMB members.  
2013 JUN  Data and Safety Monitoring Boards in NIH Clinical Trials:  Meeting Guidance But 
Facing Some Issues.  OEI-12-11-00070.   
 
08  NIHUniversity Management of Grant Funds.  Not all of the selected 
costs that were charged to HHS awards by a university grantee were 
allowable. 
This audit was limited to grants, contracts, and other agreements between the University of 
Colorado Denver and certain HHS agencies:  NIH, CDC, and HRSA.  We did not evaluate 
transactions charged to the universitys agreements with other Federal departments and 
agencies.  The majority of our sample transactions related to NIH awards.  
The universitys oversight did not ensure that all costs claimed were allowable.  Although its 
finance and accounting procedures often incorporated text from the applicable cost principles, 
the University left it largely to the discretion of its individual colleges, departments, and principal 
investigators to interpret the universitys policies and procedures for correctly charging costs to 
Federal awards and complying with Federal regulations and guidance.   HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 68 
 
Savings Potential Savings could be realized from improved oversight and from recoveries of 
questioned costs.  Of about $42.4 million in costs covered by our review, we estimated that the 
University improperly charged at least $1.2 million in unallowable salary and nonsalary costs to 
HHS awards during FY 2010.  We also estimated that it improperly charged other unallowable 
costs totaling about $185,000 for two awards.   
We recommended that the university 
  exercise more stringent oversight of charges to Federal awards to ensure compliance with 
Federal regulations and refund questioned amounts to the Federal Government. 
2013 JUN  The University of Colorado Denver Did Not Always Claim Selected Costs Charged 
Directly to Department of Health and Human Services Awards in Accordance 
With Federal Regulations.  A-07-11-06013.   
 
09  SAMHSAGrants Management.  A Massachusetts grantee failed to 
meet requirements or fully support its claimed costs. 
The Substance Abuse and Mental Health Services Administration is the principal Federal agency 
charged with increasing access to substance abuse and mental health services. The Childrens 
Health Act of 2000 created and reauthorized programs for such services. SAMHSA provides 
funding for the services to States, political subdivisions of States, Indian tribes and tribal 
organizations, and other public or nonprofit private entities. 
We found that a nonprofit organization in Massachusetts claimed costs that were unallowable 
under the terms of the grant and inadequately supported salary and related fringe benefit and 
overhead costs, e.g., it did not prepare personnel activity reports for employees whose time was 
charged to the grant.  Further, the grantee inappropriately allocated costs for facilities charges 
and related overhead costs on the basis of the grant award budgets instead of on the basis of 
the relative benefit of the grant awards received. 
Savings PotentialSavings could be realized from improved procedures and methodologies and 
from recoveries of questioned costs.  We questioned about $1.3 million on the basis of our 
sample. 
We recommended that SAMHSA 
  require the grantee to develop written procedures for reporting time-and-effort on the basis 
of actual effort expended on programs and develop a documented methodology for 
allocating facility costs on the basis of the relative benefits received to all of its locations.  
Also, SAMHSA should either require grantee to refund to the Federal Government the 
amounts we questioned or work with the grantee to determine whether any of the costs it 
claimed were allowable. 
2013 APR  Latin American Health Institute Did Not Always Claim Costs in Accordance With 
Federal Requirements.  A-01-12-01501.   
    HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
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Human services reviews  
 
Significant problems, abuses, and deficiencies:   
01  ACFLicense-Exempt Child Care Providers in the Child Care and 
Development Fund (CCDF) Program.  Gaps in health and safety 
requirements and gaps in monitoring represent vulnerabilities that 
could lead to harm for children in care. 
Pursuant to the Child Care and Development Block Grant Act of 1990 and the Social Security Act, 
 418, the CCDF program assists low-income families; families receiving temporary public 
assistance; and families transitioning from public assistance to obtain child care so that family 
members can work, attend training, or receive education.   
States are required to have health and safety standards in place for all providers.  The standards 
must cover three areas:  prevention and control of infectious disease, building and physical 
premises safety, and health and safety training.   
States may and do exempt many kinds of providers from licensing, for example, individuals who 
provide child care services in the childs own residence and providers caring for relatives.  Such 
providers, however, are still required to adhere to Federal health and safety requirements in 
order to be eligible for CCDF payments.  
We found that not all States required license-exempt child care providers to meet Federal health 
and safety requirements.  Further, we found insufficient procedures in effect to ensure that 
license-exempt child care providers comply with applicable State or local health and safety 
requirements.  Some States reported allowing providers to self-certify compliance and reported 
limited monitoring, limited use of background checks, and provider nonreporting of serious 
injuries.   
We believe that these gaps in health and safety requirements and gaps in monitoring represent 
vulnerabilities that could lead to harm for children in care, including care financed by the Federal 
Government. 
We did not issue formal recommendations.  ACF issued a proposed rule that included 
regulations to strengthen health and safety requirements for and oversight of CCDF providers.  
(78 Fed. Reg. 29441 (May 20, 2013).) 
2013 JUL  License-Exempt Child Care Providers in the Child Care and Development Fund 
Program.  OEI-07-10-00231.   
    HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 70 
 
 
02  ACFChild Care and Development Funds in Connecticut.  Providers did 
not always comply with applicable State licensing requirements to 
ensure the health and safety of children. 
We audited 20 licensed family day care homes (providers) that received CCDF funding in 
Connecticut to determine whether health and safety risks exist at those locations.     
Although Connecticut conducted the required inspections at all of the 20 providers that we 
reviewed, the States onsite monitoring did not ensure that providers that received CCDF funds 
complied with State licensing requirements related to the health and safety of children.  We 
determined that all 20 of the providers that we reviewed did not comply with 1 or more State 
licensing requirements to ensure the health and safety of children.  Specifically, we found that 
19 of the 20 providers did not always comply with 1 or more requirements related to the 
physical conditions of the family homes and that 8 of the providers did not comply with required 
criminal records and protective services checks.  Two of the providers voluntarily surrendered 
their licenses after our review. 
We recommended that Connecticut 
  ensure, through more frequent onsite monitoring, that providers comply with health and 
safety regulations; develop a mandatory training program to improve provider compliance 
with health and safety regulations; and further define household member for the 
purposes of criminal record and protective services check requirements by adding examples 
of situations when it would be necessary for a provider to contact the State licensing agency 
and obtain the required checks.  
2013 SEP  Connecticut Family Day Care Home Providers Did Not Always Comply With State 
Health and Safety Licensing Requirements.  (A-01-12-02504).   
 
03  ACFChild Care and Development Funds in Nebraska.  Nebraskas 
policies and procedures were inadequate to correctly identify allowable 
expenditures.   
CCDF provides discretionary funding for three targeted funds known as Infant and Toddler, 
Quality, and School Age Resource and Referral funds.  These targeted funds are used for 
activities that improve the availability, quality, and affordability of child care and for supporting 
the administration of these activities.  The funds are 100 percent federally funded. 
Nebraska improperly obligated targeted funds after the obligation period had ended, improperly 
claimed expenditures that were not for targeted funds activities, and did not refund to the 
Federal Government targeted funds that either were returned by the grantee after the 
obligation period had ended or remained unliquidated after the liquidation period ended.  The 
errors occurred because Nebraska did not have policies and procedures in place to direct 
adequate oversight of the obligation and liquidation of the targeted funds.  In the absence of  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 71 
 
necessary policies and procedures, it could not correctly identify which expenditures would be 
allowable for a particular fiscal year.  
Savings PotentialSavings could be realized from improved practices and recoveries of 
questioned costs.  During a 5-year audit period, Nebraska claimed Federal reimbursement for an 
estimated $2.9 million of unallowable CCDF.    
We recommended that Nebraska  
  develop policies and procedures to monitor the obligation and liquidation of CCDF targeted 
funds to ensure that expenditures are properly obligated and liquidated.  Nebraska should 
also refund to the Federal Government targeted funds that were not properly obligated, 
expenditures that were not for targeted funds activities, and targeted funds that were 
returned by the grantee after the obligation period had ended or were not properly 
liquidated.   
2013 APR  Nebraska Improperly Claimed Some Child Care and Development Targeted 
Funds.  A-07-12-03175   
 
04  ACFChild Support Enforcement. 
OIG investigates noncustodial parents who fail to pay court-ordered child support.  OIG works 
with the Office of Child Support Enforcement; the Department of Justice; U.S. Attorneys Offices; 
the U.S. Marshals Service; and Federal, State, and local partners to expedite the collection of 
child support in cases that meet prosecutorial guidelines.   
Because of the success of OIGs Most Wanted Fugitives Web site, OIG launched its Most Wanted 
Deadbeat Parents Web site at:  https://oig.hhs.gov/fraud/child-support-enforcement/index.asp.  
The site highlights parents who fail to pay court-ordered child support for their children and put 
an unnecessary strain on the custodial parents and the children, as well as on agencies that 
enforce these matters.  The Web site lists deadbeat parents and is updated frequently.  The site 
includes information on OIGs role in pursuing parents who fail to pay court-ordered child 
support and has a reporting button to turn in deadbeat parents. 
OIG investigations of child support cases nationwide resulted in 32 criminal actions and court-
ordered restitution and settlements of $2.1 million during this semiannual period.  Following are 
examples of child support enforcement cases. 
New York  Robert Sand was sentenced to 2 years and 7 months of incarceration and ordered to 
pay $903,789 in restitution after pleading guilty to charges of failure to pay child support for his 
two children.  Sand was arrested after accruing more than $1 million in unpaid child support 
obligations, penalties, and interest.  According to court documents, Sand admitted that he 
initially relocated from New York to Florida and then fled the United States in order to evade his 
child support obligations following the issuance of arrest warrants in both State and Federal 
courts in 2000 and 2002.  Sand was profiled on OIGs Web site of OIG Most Wanted Fugitives.  
While overseas, Sand operated a business in Thailand, but was arrested upon entering the 
Philippines without proper identification documents.  In December 2012, he was returned to the 
United States, where he was taken into custody and arraigned.    HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 72 
 
New York  George Ely was sentenced to 12 months and 1 day of incarceration and ordered to 
pay $8,934 in restitution after pleading guilty to charges of failure to pay lawful child support.  
From August 2006 through April 2010, Ely failed to make any child support payments for his 
child, despite the fact that he held several jobs during that time.  Ely pleaded guilty to the failure 
to pay child support charge in October 2011, but he then failed to appear for his sentencing on 
several occasions.  Ely was deemed a fugitive and posted on HHS OIGs child Support 
Enforcement Web site.  In February 2013, Ely was apprehended, was charged, and pleaded guilty 
to charges of failure to appear.  
Indiana  Theodore Cerneant, Jr., was sentenced to 4 years of probation and ordered to pay 
$66,614 in restitution after pleading guilty to charges of failure to pay child support.  In May 
2002, Cerneant was ordered by the Macomb County Circuit Court in Michigan to pay child 
support for his child.  According to court documents, Cerneants last child support payment was 
in February 2010 and his payments prior to that date were infrequent and insufficient, despite 
the fact that he was gainfully employed at that time.  After the child support court order, the 
mother and child moved to Indianapolis, Indiana, while Cerneant moved to Columbia, South 
Carolina.  
 
05  ACFIdentity Theft.  A recipient of Temporary Assistance to Needy 
Families concealed earnings by using his sons social security number.  
Maine  Mark Judd was sentenced to 4 years of imprisonment and ordered to pay $29,791 in 
restitution after pleading guilty to charges of theft of Federal funds, social security fraud, 
aggravated identity theft, and a false statement on a loan application.  According to court 
records, in 2003, Judd began receiving welfare assistance from the State of Maine.  Between 
August 2010 and April 2012 and during the time when he was still employed, Judd received 
Temporary Assistance to Needy Families, Supplemental Nutrition Assistance Program (SNAP) 
benefits, and MaineCare from the Maine Department of Health & Human Services because he 
concealed his earnings by using his sons social security number.  TANF is an HHS-funded 
program designed to help needy families achieve self-sufficiency.  SNAP is a nutrition assistance 
program administered by the Department of Agriculture.  Judd also received housing benefits 
and an automobile loan using his childs social security number.  In August 2010, Judd began 
working, but he continued to receive welfare assistance by using his sons social security number 
on his job and job-related tax forms.  Judd also used his sons social security number while 
employed at another job in 2011.   
 
06  ACLSenior Medicare Patrol (SMP).  OIGs annual report of 
performance data indicates that despite fewer volunteers, the ACL-
funded SMP program increased its public contacts to combat Medicare 
waste, fraud, and abuse. 
SMP projects receive grants from the Administration for Community Living  to recruit and train 
retired professionals and other senior citizens to recognize and report instances or patterns of  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 73 
 
health care fraud.  In 2012, the 54 SMP projects had 5,137 active volunteers, a 9-percent 
decrease from 2011.  Despite the decrease, the volunteers conducted 113,457 one-on-one 
counseling sessions and 14,748 group education sessions, a 71-percent and 33-percent increase 
from 2011, respectively.  
In 2012, for the first time the SMP performance measures included expected recoveries (i.e., 
investigative receivables) from criminal actions, settlements, civil judgments, or overpayments 
that resulted in part from SMP activities.  Expected recoveries represent the amount of money 
that was ordered or agreed upon to be returned or paid and better reflects the impact of SMPs 
work and the potential savings to Medicare, Medicaid, and beneficiaries.  The SMPs reported 
nearly $6 million in expected recoveries identified in 2012.     
However, there was a more than 50-percent decrease in cost avoidance on behalf of the 
Medicare, Medicaid, beneficiaries, and others.  Cost avoidance means the person, program, or 
entity was relieved of responsibility for payment as a result of the projectsfor example, when a 
beneficiary discovers charges for services he or she did not receive and, on behalf of the 
beneficiary, a project contacts the provider and a corrected billing statement is issued. 
We continue to emphasize that it is not always possible to track referrals to Medicare 
contractors or law enforcement from beneficiaries who have learned to detect fraud, waste, and 
abuse from the projects.  Therefore, the projects may not be receiving full credit for savings 
attributable to their work.  In addition, the projects are unable to track the substantial savings 
derived from a sentinel effect whereby fraud and errors are reduced by Medicare beneficiaries 
scrutiny of their bills. 
We did not make formal recommendations to ACL.  OIG annually reviews and reports SMP 
projects performance.  
2013 JUL  Performance Data for the Senior Medicare Patrol Projects:  July 2013 
Performance.  OEI-02-13-00170.   
Other HHS issues  
 
Significant problems, abuses, and deficiencies:   
01  Affordable Care ActConsumer Operated and Oriented Plan Program 
Loans (CO-OPs).  CMS awarded loans in accordance with Federal 
requirements, but startup funding is at risk of being exhausted before 
CO-Ops become operational; we found little evidence of private support 
to loan applicants. 
The Patient Protection and Affordable Care Act (Affordable Care Act),  1322, established the 
Consumer Operated and Oriented Plan (CO-OP) program to provide loans to help establish new 
consumer-governed, nonprofit health insurance issuers, referred to as CO-OPs.  We reviewed the 
CO-OP program because of the large amount of funding for this new program and the short 
timeframe in which the CO-OPs must be established and initiated.  Total appropriated funding 
for the CO-OP program is approximately $2 billion.  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 74 
 
CMS awarded loans in accordance with Federal requirements.  However, we identified several 
factors that could affect the CO-Ops.  Private support is one of the three selection factors that 
the Affordable Care Act specifies will have priority in the selection process.  We saw little 
evidence of private monetary support in any of the 16 applications we reviewed.  Additionally, 
11 of 16 CO-OPs reported estimated startup expenditures in their applications that exceeded the 
total startup funding ultimately provided by CMS.  If unforeseen circumstances (such as limited 
enrollment) or barriers (such as uncertainty about operations of State-based or federally 
facilitated marketplaces or a States denial of insurance licensure) impede CO-OPs from 
becoming operational, there is a risk that CO-OPs could exhaust all startup loan funding before 
they are fully operational or before they earn sufficient operating income to be self-supporting.  
This may affect the CO-OP program in the long term.  
We recommended that CMS  
  monitor CO-OPs to ensure that startup funds are not exhausted before the CO-OPs become 
fully operational and monitor CO-OPs solicitation of additional private monetary support.   
2013 JUL  The Centers for Medicare & Medicaid Services Awarded Consumer Operated and 
Oriented Plan Program Loans in Accordance With Federal Requirements, and 
Continued Oversight Is Needed.  A-05-12-00043.     
 
02  Affordable Care ActCO-OP Implementation.  As new entities, CO-OP 
entities had made progress, meeting 90 percent of milestones; however, 
they may face financial and operational challenges in a competitive 
insurance market; unpredictable factors create risk.   
We found that despite challenges, CO-OPs have made progress toward achieving licensure and 
met 90 percent of their milestones during the period of our review.  CMSs oversight strategy 
includes frequent monitoring and early intervention to ensure that CO-OPs adhere to program 
requirements and goals.  Although CO-OPs appear to be making progress, at the time of our 
review, they were still hiring staff, obtaining licensure, and building necessary infrastructure.  
The extent to which any particular CO-OP can achieve program goals depends on a number of 
unpredictable factors, such as each States Exchange operations, market competition, and 
enrollment.  As of January 2, 2013, the Centers for Medicare & Medicaid Services had awarded 
loans totaling $1.98 billion to 24 CO-OPs.   
This report, which is primarily informational, did not include formal recommendations to CMS.    
2013 JUL  Early Implementation of the Consumer Operated and Oriented Plan Loan 
Program.  OEI-01-12-00290.   
 
03  Affordable Care ActHealth Insurance Exchange Data Services Hub.  
During the development of the Data Services Hub, CMS was addressing  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 75 
 
and testing security controls; several critical information security tasks 
were in progress at the time of review.    
This review assessed the information technology (IT) security controls that CMS was 
implementing for the Hub, adequacy of the testing activities being performed during its 
development, and the coordination between CMS and Federal and State agencies during the 
development of the Hub. 
At the time of our review, CMS and its contractors were continuing to develop the Hub and work 
with its Federal and State partners in testing the Hub to ensure its readiness in time for the initial 
open enrollment, which was scheduled to begin on October 1, 2013.  
At the time of our review, several critical tasks remained to be completed in a short period of 
time, such as the final independent testing of the Hubs security controls, remediating security 
vulnerabilities identified during testing, and obtaining the security authorization decision for the 
Hub.   
This report, which is primarily informational, did not include formal recommendations to CMS.    
2013 AUG  Observations Noted During the OIG Review of CMSs Implementation of the 
Health Insurance ExchangeData Services Hub.  A-18-13-30070.      
 
04  Oversight of Insurers Submissions to Plan Finder in 2011-2012.  
Though most data displayed on the Plan Finder matched the 
information provided by insurers representatives, vigilant oversight will 
be needed. 
The Plan Finder was the first comprehensive, online portal that assists consumers in comparing 
their health insurance coverage options.  All private health insurers in the individual and small 
group markets were required to submit information to populate the Plan Finder.  The data 
collection to populate the Plan Finder represented the first national attempt to identify these 
insurers and the products and plans they offer.  
To realize the benefits of expanded consumer information, the data must be complete and 
accurate.   We found that when products and plans were available and recognized on the Plan 
Finder, 81 percent of the data displayed on the Plan Finder matched the information provided by 
insurers representatives.  Most private insurers reported data to the Plan Finder.  However, gaps 
existed in compliance with reporting requirements.  The data displayed on the Plan Finder for 
the sample of products and plans contained some inconsistencies that could confuse consumers.  
The products and plans displayed were not always available for sale or were not always 
recognized by insurers representatives. 
We recommended that CMS 
  establish and implement procedures to identify and pursue private insurers that do not 
submit required data, ensure that each private insurers Chief Executive Officer or Chief 
Financial Officer certifies to the completeness of data submitted, design and implement  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 76 
 
additional strategies to ensure data accuracy, and validate that products and plans 
submitted are available for sale. 
2013 APR  Oversight of Private Health Insurance Submissions to the HealthCare.gov Plan 
Finder.  OEI-03-11-00560. 
 
05  Non-Federal Audits.  OIG reviews audits conducted by non-Federal 
auditors of entities receiving Federal awards. 
In this semiannual period, OIGs National External Audit Review Center reviewed 1,472 reports 
covering $2.3 trillion in audited costs.  Federal dollars covered by these audits totaled 
$716.3 billion, of which about $289.8 billion were HHS funds. 
Office of Management and Budget 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 must conduct annual organization-wide single 
audits of all Federal money they receive.  These audits are conducted by non-Federal auditors, 
such as public accounting firms and State auditors.   
OIG reviews the quality of these audits and assesses the adequacy of the entities management 
of Federal funds.   
OIGs oversight of non-Federal audit activity informs Federal managers about the soundness of 
management of Federal programs and identifies any significant areas of internal control 
weakness, noncompliance, and questioned costs for resolution or followup.   
We identify entities for high-risk monitoring, alert program officials to any trends that could 
indicate problems in HHS programs, and profile non-Federal audit findings of a particular 
program or activity over time to identify systemic problems.  We also provide training and 
technical assistance to grantees and members of the auditing profession.  OIG maintains a 
process to assess the quality of the non-Federal reports received and the audit work that 
supports the selected reports.  OIGs reports on non-Federal audits reviewed during this 
reporting period are categorized in the following table. 
 
Non-Federal Audits, April 1, 2013, through September 30, 2013 
Number of Non-Federal Audits: 
  Not requiring changes or having minor changes    1,376 
  Requiring major changes  90 
  Having significant technical inadequacies  6 
Total  1,472 
  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 77 
 
The 1,472 reports included 3,184 recommendations for improving management operations.  In 
addition, these audit reports provided information for 44 OIG special memorandums that 
identified concerns for increased monitoring by management. 
 
06  HHS Grant FundsMisuse.  The director of a nonprofit organization 
based in Maine conspired to divert HHS grant funds to personal use. 
Maine  Thomas Nelson was sentenced to 2 years and 6 months of incarceration and ordered to 
pay more than $1.3 million in restitution after pleading guilty to charges of conspiracy to 
embezzle funds from a federally funded program and tax evasion.  Nelson was the executive 
director of the York County Community Action Corporation (YCCAC), a nonprofit organization 
based in Maine that purportedly provided social service, health, and educational programs to 
York County individuals and families living in poverty.  Between 2006 and 2011, YCCAC received 
more than $25 million in Federal funds from HHS, including funds awarded under the American 
Recovery and Reinvestment Act of 2009.  
According to court documents, between 2005 and 2009, Nelson conspired with a consulting firm 
to divert approximately $413,000 from YCCAC to the firm in a kickback scheme.  Specifically, 
Nelson directed payments to the consulting firm that overpaid the firm relative to the amount of 
work actually performed.  In addition, Nelson diverted and caused to be diverted more than 
$400,000 from YCCAC and York County Financing to a previously defunct nonprofit organization, 
New England Community Action Association (NECAA).  NECAA acted as a joint resource for 
community action programs in New England.  However, it had not conducted business in years 
until Nelson acted as treasurer and began diverting YCCAC funds through NECAA.  Nelson used 
these funds to pay personal expenses, including credit card payments, personal mortgage 
payments, and gambling debts.  Nelson admitted that he recorded fraudulent payments as 
donations, consulting, or other expenses on the YCCAC books.  He also admitted to forging the 
signature of a YCCAC employee on the checks payable to NECAA. 
 
07  HHS Contract Audits.  Reporting requirement. 
National Defense Authorization Act for Fiscal Year 2008,  845Inspectors General appointed 
under the Inspector General Act of 1978 are required to submit, as part of their Semiannual 
Reports to Congress pursuant to section 5 of such Act, information on final, completed contract 
audit reports issued during the period to the contracting activity containing significant audit 
findings.  OIG did not issue final reports meeting section 845 criteria during this semiannual 
period. 
 
08  Recovery Act Retaliation Complaint Investigations.  Reporting 
requirement. 
The Recovery Act,  1553, prohibits non-Federal employers that have received Recovery Act 
funding from retaliating against employees who disclose evidence of mismanagement of  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 78 
 
Recovery Act funds or any violation of law related to Recovery Act funds.  OIGs are required to 
include in their Semiannual Reports to Congress the retaliation complaint investigations that 
they decided not to conduct or continue during the reporting period.  During this reporting 
period, OIG closed an investigation into an HHS grantee after determining that the complaint did 
not involve Recovery Act funds.    
 
09  Legislative and Regulatory Reviews.  Reporting requirement. 
Inspector General Act, 4(a)(2)OIG is required to review existing and proposed legislation and 
regulations relating to HHSs programs and operations and make recommendations concerning 
their impact on economy and efficiency or the prevention and detection of fraud and 
abuse.  Most audits and other reviews that we conduct are designed to test compliance with 
and/or assess the administration and oversight of existing laws and regulations.  Our reports of 
such reviews describe findings, which include questioned costs, inefficiencies, vulnerabilities to 
fraud, inconsistencies, errors in application, or weaknesses in oversight or supporting 
systems.  Our corresponding recommendations tell HHS and its operating or staff divisions what 
administrative, regulatory, or legislative actions we believe are needed to effectively respond to 
the findings.  Our regularly published core publications reflect the relationship between our 
work and laws and regulations.    
  Our Semiannual Report to Congress describes findings and recommendations from recently 
completed reviews, many of which focus on existing laws and regulations.   
  Our Compendium of Unimplemented Recommendations, which is published annually, 
describes priority findings and recommendations from past periods that remain to be 
implemented, along with pertinent citations of existing laws and regulations.   
  Our annual Work Plan, which is published at the start of each fiscal year, provides citations 
to laws and regulations that are the subject of ongoing or future reviews.   
We also review proposed legislation and regulations related to HHS programs and operations.  
HHS routinely involves us and its operating and other staff divisions in the review and 
development of HHS regulations through a well-established HHS process.  Our audits, 
evaluations, and investigations are sometimes cited in regulatory preambles as influencing HHS 
regulations.  In addition, we provide independent, objective technical assistance on a bipartisan, 
bicameral basis to congressional committees and members who request it. 
 
10  Employee MisconductAbuse of Retention Bonuses. 
District of Columbia  Michael Balady was sentenced to 6 months of incarceration and ordered 
to pay $94,940 in restitution after pleading guilty to charges of wire fraud.  Balady worked in 
HHSs Office of the Assistant Secretary for Preparedness and Response (ASPR) as the director of 
Acquisition Management Systems in ASPRs Biological Advance Research and Development 
Authority.  HHS is authorized to give monetary incentives, or retention bonuses, to employees 
deemed essential to its mission who would likely leave in the absence of such a bonus.  
Requirements for receiving a retention bonus include producing a current offer of employment  HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 79 
 
for a position in the private sector or another government agency.  According to court 
documents, from October 2008 through around June 2012, Balady conspired with a colleague in 
the private sector to fabricate employment offers from the colleagues communications firm in 
order for Balady to receive fraudulent retention bonuses from HHS.  Specifically, Balady 
requested and received on several occasions for the colleague to provide him with a fake job 
offer.  Balady then submitted the fake offer to HHS human resources personnel, and 
consequently, received a $30,000 or more retention bonus.  In total, Balady received $94,940 in 
retention bonuses due to these fake job offers, and he submitted a fraudulent request for an 
additional $38,875 bonus that was prevented by the OIG investigation. 
    HHS Office of Inspector General  Public Health, Human Services,  
Semiannual Report to Congress  Fall 2013  and Other HHS Issues 
  Page 80 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
 
  HHS Office of Inspector General  Appendixes 
Semiannual Report to Congress  Fall 2013  Page 81 
 
 
Appendixes 
 
A  Savings Decisions Supported by OIG Recommendations 
B  Questioned Costs and Funds To Be Put to Better Use 
C  Peer Review Results 
D  Summary of Sanction Authorities 
E  Reporting Requirements in the Inspector General Act of 1978 
F  Anti-kickback StatuteSafe Harbors 
    HHS Office of Inspector General  Appendixes 
Semiannual Report to Congress  Fall 2013  Page 82 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 83 
 
Appendix A 
Savings Decisions Supported  
by OIG Recommendations 
 
The table below lists policy decisions reflected in legislation, regulations, or other directives from 
prior periods that are supported by Office of Inspector General (OIG) recommendations and for 
which cost savings were estimated, usually by third parties, such as the Congressional Budget 
Office (CBO) or actuaries of the Department of Health and Human Services (HHS).  Of the savings 
estimated for the decisions below, nearly $19.4 billion was attributed to fiscal year (FY) 2013.  
This figure reflects the most recent available savings estimates issued by the third party 
appraiser; actual savings may be higher or lower. 
After laws involving HHS programs are enacted, OIG analyzes them to identify the provisions that 
comport with our prior recommendations, i.e., our recommendations support the decisions that 
were made.  A similar process occurs with respect to administrative decisions in regulations or 
other directives or agreements (e.g., modifications to Medicaid State Plans).  Most of the 
decisions reported in this appendix reflect ways in which funds could be put to better use, such 
as reductions in Federal spending and/or avoidance of unnecessary or inappropriate 
expenditures.   
To quantify the value of administrative decisions, we use estimates developed by, or in 
consultation with, HHS operating or staff divisions.  To quantify the value of legislative decisions, 
we generally use estimates developed by CBO.  CBO projects the annual increases and/or 
reductions in Federal spending that it expects would result from enacting the legislation.  The 
decisions below mirror not only OIGs recommendations, but also the contributions of others, 
such as HHS staff and operating divisions, congressional committees, and the Government 
Accountability Office (GAO). 
 
Centers for Medicare & Medicaid Services (CMS) Programs  
Estimated 
Savings 
OIG Recommendations  Policy Decisions  (millions) 
Medicare Part C Prepayments.   Section 3201 of the Patient Protection  $9,400 
Modify monthly capitated payments  and Affordable Care Act (Affordable 
to a level fully supported by  Care Act) reduced the Medicare 
empirical data.   Advantage (MA) benchmark 
The recommendation reflected  percentages that are applied to 
findings in OIG report number  Medicare fee-for-service, resulting in 
A-14-00-00212.  cost savings for Part C as compared to 
prior law.  CBO estimated Part C savings 
through FY 2019, including $1.8 billion 
for FY 2011, $6 billion for FY 2012, and 
$9.4 billion for FY 2013.  CBO produced 
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 84 
 
Estimated 
Savings 
OIG Recommendations  Policy Decisions  (millions) 
its estimate in 2010, prior to two 
significant implementation decisions by 
HHS that affect the actual savings; 
however, neither CBO nor HHS has 
calculated a revised estimate.1  
Payment Reform for Part B Drugs  Sections 303 through 305 of the  $3,100 
and Biologicals.  Reexamine drug  Medicare Prescription Drug, 
reimbursement methodologies  Improvement, and Modernization Act 
based on average wholesale price  of 2003 (MMA) revised the current 
(AWP) with the goal of reducing  payment methodology for Part B-
payments in both Medicare and  covered drugs and biologicals that were 
Medicaid.  The recommendation  not paid on a cost or prospective 
reflected findings in the following  payment basis.  Since January 1, 2005, 
OIG reports:  most drug prices have been based on 
the average sales price or competitive 
OEI-03-96-00420  
acquisition instead of AWP.  CBO 
OEI-03-97-00290  
estimated savings of $3.1 billion for 
OEI-03-00-00310  
FY 2013. 
OEI-03-97-00293  
A-06-00-00023    
A-06-01-00053  
A-06-02-00041 
Medicare Secondary Payer.  Ensure  Section 301 of the MMA clarifies the  $1,300 
sufficient resources and contractor  Secretarys authority to make certain 
training for retroactively examining  reimbursable conditional payments and 
paid claims to identify other payer  to take recovery actions against all 
sources and initiating recovery  responsible entities, including collection 
action on all related overpayments.   of damages, under Medicare Secondary 
The recommendation reflected  Payer provisions.  This section builds on 
findings in the following OIG  other program improvements 
reports:  implemented by the Balanced Budget 
A-02-98-01036   Act of 1997 (BBA), the Omnibus Budget 
A-04-92-02057   Reconciliation Act (OBRA) 1993, OBRA 
A-09-89-00162   1990, and OBRA 1989.  CBO estimated 
                                                           
 
1  One implementation decision related to a nationwide quality bonus payment demonstration, which 
GAO found would reduce MA savings.  (See GAO-12-409R.)  The other was a change in policy about how 
HHS calculates the fee-for-service rate against which MA payments are benchmarked that would increase 
the savings associated with the reduced benchmark.  (See CMSs Medicare Advantage Rate 
Announcement from April 1, 2013.) 
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 85 
 
Estimated 
Savings 
OIG Recommendations  Policy Decisions  (millions) 
A-10-86-62005  savings of $1.3 billion for FY 2013.  
Clinical Diagnostic Laboratory Tests.   Section 628 of the MMA froze annual  $1,300 
Seek legislation to allow across-the- updates for FY 2004 through FY 2008.  
board adjustments in Medicare  This action builds on prior legislative 
laboratory fee schedules, bringing  actions in the BBA, OBRA 1993, OBRA 
them in line with the prices that  1990, and legislation in 1984 that were 
laboratories charge physicians in a  also responsive to OIGs 
competitive marketplace, and  recommendations to curb excessive 
periodically evaluate the national  clinical laboratory test reimbursements 
fee schedule levels.  The  by Medicare.  CBO estimated savings of 
recommendations reflected findings  $1.3 billion for FY 2013. 
in the following OIG reports:  
A-09-89-00031 and  
A-09-93-00056. 
Medicare Home Health Payments.   Section 701 of the MMA changed the  $1,100 
Reduce the Home Health Agency   updates of home health rates from 
update factor to account for the  fiscal year to calendar year beginning in 
high error rate found in OIGs  2004, with the update for the last three 
review.  The annual update was  quarters of 2004 equal to the market 
defined as the home health market  basket increase minus 0.8 percent.  CBO 
basket percentage increase.  The  estimated savings of $1.1 billion for 
recommendation reflected findings  FY 2013. 
in OIG report number   A-04-99-
01194. 
Payments for Durable Medical  Section 302 of the MMA froze payments  $1,000 
Equipment.  Take steps to reduce  for certain items, including prosthetics 
payments for a variety of durable  and orthotics, effective January 1, 2004.  
medical equipment and related  CBO estimated savings of $1 billion for 
supplies.  The recommendation  FY 2013.     
reflected findings in the following 
OIG reports: 
OEI-03-01-00680  
OEI-03-02-00700  
OEI-07-96-00221  
OEI-03-96-00230  
OEI-03-94-00021  
OEI-06-92-00861  
OEI-06-92-00866 
Payment for Services Furnished in  Section 626 of the MMA limited the ASC  $500 
Ambulatory Surgical Centers ASCs).   update starting April 1, 2004, then froze 
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 86 
 
Estimated 
Savings 
OIG Recommendations  Policy Decisions  (millions) 
Set rates that are consistent across  updates for a period beginning the last 
sites and that reflect only the costs  quarter of FY 2005, effectively reducing 
necessary for the efficient delivery  the payment advantage to ASCs for 
of health services, and establish  those procedure codes that are paid at 
parity among ambulatory surgical  a higher rate for the surgical center 
centers (ASC) and outpatient  compared to the rate for outpatient 
departments.  The recommendation  departments.  Section 626 also 
reflected findings in the following  mandated that CMS implement a new 
OIG reports:   payment system that takes into account 
disparities in the costs of procedures 
OEI-05-00-00340  
performed in ASCs and in hospital 
OEI-09-88-01003  
outpatient departments.  CBO 
A-14-98-00400  
estimated savings of $500 million for 
A-14-89-00221 
FY 2013.   
Excessive Medicaid Payments to  New Yorks Medicaid State Plan  $399 
New York Developmental Centers.   Amendment 12-03, effective April  1, 
Ensure that New Yorks Medicaid  2013, limits payment to costs with 
daily rate for State-operated  projected savings of nearly $1.2 billion 
developmental centers meets the  in FYs 2013 and 2014 ($399 million for 
Federal requirement that payment  FY 2013).  The State expects to issue 
for services be consistent with  another amendment for FYs 20152017 
efficiency and economy.  The  with additional savings for those years, 
recommendation reflected findings  projected at $799 million per year. 
in OIG report number A-02-11-
01029. 
Part B Drugs Average Sales Price.   Section 112 of the Medicare, Medicaid,  $300 
Adopt an alternate calculation of  and State Childrens Health Insurance 
volume-weighted average sales  Program (SCHIP) Extension Act of 2007 
price (ASP) that is consistent with  establishes a revised method for 
the results set forth in section  calculating volume-weighted ASPs for 
1847A(b)(3) of the Social Security  Medicare Part B drugs that comports 
Act.  The recommendation reflected  with OIGs recommendation.  CBO 
findings in OIG report number OEI- estimated savings of $300 million for 
03-05-00310.  FY 2013. 
Reductions in Medicare Bad Debt  Section 3201 of the Middle Class Tax  $240 
Reimbursement.  Seek legislative  Extension and Job Creation Act of 2012 
authority to eliminate (or reduce)  applied percentage reductions in bad 
Medicare payments to hospitals for  debt reimbursement to all providers 
bad debt associated with  eligible to receive bad debt 
beneficiaries failure to pay their  reimbursement.  CMS estimated savings 
deductibles and coinsurance.  The  to Medicare of $10.92 billion over 
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 87 
 
Estimated 
Savings 
OIG Recommendations  Policy Decisions  (millions) 
recommendations reflected findings  10 years with $240 million attributed to 
in OIG report number   FY 2013.  (77 Fed. Reg. 67523, 
A-14-90-00339 and subsequent  November 9, 2012.) 
reviews. 
Medicaid Third Party Liability.   Section 6035 of the Deficit Reduction  $220 
Determine whether legislation is  Act (DRA) made several changes to 
needed to explicitly include  strengthen Medicaids third-party 
pharmacy benefit management  liability provisions, including 
companies in the Medicaid  clarification regarding pharmacy benefit 
definition of "third party," require  managers.  The section also requires 
third parties to match their eligibility  States to ensure that health insurers 
files with Medicaids eligibility files,  provide requested coverage data; 
and allow Medicaid up to 3 years to  accept the States right of recovery; and 
recover payments from liable third  agree, conditionally, not to deny a claim 
parties.  The recommendations  solely on the basis of date of submission 
reflected findings in OIG report  of the claim when the claim is 
number OEI-03-00-00030.  submitted by the State within a 3-year 
period beginning on the date of service.  
CBO estimated savings of $220 million 
for FY 2013.   
Additional Rebates for Brand-Name  Section 2501(d) of the Affordable Care  $200 
Drugs With Multiple Versions.  OIG  Act Affordable Care Act, as amended by 
recommended that CMS continue to  section 1206(a) of the Health Care and 
seek legislative authority to modify  Education Reconciliation Act of 2010, 
the rebate formula calculation to  addresses this issue.  CBO estimated 
ensure that manufacturers cannot  savings of $200 million for FY 2013. 
circumvent additional rebates by 
bringing new versions of existing 
brand-name drugs to market.  The 
recommendation reflected findings 
in OIG report number A-06-09-
00033. 
Capped Rental Durable Medical  Section 5101 of the DRA revised the  $200 
Equipment.  Eliminate the  payment rules for capped rental 
semiannual maintenance payment  equipment to require that ownership of 
allowed for capped rental  the item transfer to the beneficiary 
equipment, pay only for repairs that  after the 13th month and that Medicare 
are needed, eliminate the 15-month  pay for maintenance services on a cost-
rental option, and convert rentals to  reimbursement basis.  CBO estimated 
purchases after the 13th month.   savings of $200 million for FY 2013. 
The recommendations reflected 
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 88 
 
Estimated 
Savings 
OIG Recommendations  Policy Decisions  (millions) 
findings in report number 
OEI-03-00-00410. 
Medicare Secondary Payer.   Section 111 of the Medicare, Medicaid,  $100 
Implement stronger followup  and SCHIP Extension Act of 2007 
procedures for employers who fail  amended the Medicare secondary payer 
to respond to data requests,  provisions of the Social Security Act, 
exercise civil monetary penalty   1862(b), to provide for mandatory 
authority, and seek necessary  reporting for various categories.  CBO 
legislative authority for mandatory  estimated savings of $100 million for 
data reporting.  The  FY 2013. 
recommendations reflected findings 
 
in the following OIG reports:  
A-02-98-01036  
A-02-02-01037  
A-02-02-01038  
A-04-01-07002  
A-09-89-00100 
Rebates for Physician-Administered  Section 6002 of the DRA requires States  $15 
Drugs.  Encourage States to take  to provide for the collection and 
action to collect rebates on  submission of utilization data needed to 
physician-administered drugs,  secure rebates for physician-
especially single-source drugs.   administered drugs and provides that 
States should either use National  the utilization data for single source and 
Drug Codes (NDC) instead of  specified multiple-source physician-
procedure codes or link procedure  administered drugs be submitted using 
codes to NDCs for single-source  NDC numbers (unless the Secretary 
drugs.  The recommendations  specifies an alternative coding system).  
reflected findings in OIG report  CBO estimated savings of $15 million for 
number OEI-03-02-00660.  FY 2013. 
 
Administration for Children and Families Programs 
Estimated 
Savings 
OIG Recommendations  Policy Decisions  (millions) 
Triennial Reviews of Child Support  Section 7302 of the DRA required States  $25 
Orders and Medical Support by  to adjust child support orders of families 
Parents.  Ensure that more periodic  enrolled in the Temporary Assistance for 
reviews are initiated and take action  Needy Families program every 3 years.  
to increase medical support by  Section 7307 requires States to assess 
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 89 
 
parents.  The recommendations  the ability of either or both parents to 
reflected findings in OIG report  provide medical support for their 
number OEI-05-98-00100.  children.  CBO estimated savings 
(combined) of $25 million.   
 
 
   
  HHS Office of Inspector General  Appendix A 
Semiannual Report to Congress  Fall 2013  Savings Decisions Supported by OIG Recommendations 
  Page 90 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
 
 
 
  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 91 
 
Appendix B 
Questioned Costs and  
Funds To Be Put to Better Use 
 
The following tables summarize the Office of Inspector Generals (OIG) monetary 
recommendations and the Department of Health and Human Services (HHS) responses to them.  
This information is provided in accordance with the Inspector General Act,  5(a)(8) and (a)(9), 
(5 U.S.C. App.  5(a)(8) and (a)(9) and the Supplemental Appropriations and Rescissions Act of 
1980.   
Audit Reports With Questioned Costs 
Questioned costs are those questioned by OIG audits because of an alleged violation of a 
provision of a law, regulation, contract, grant, or other agreement governing the expenditure of 
funds.  Costs are questioned because the expenditure was not supported by adequate 
documentation or because the expenditure was unnecessary or unreasonable. 
OIG includes those questioned costs that HHS program officials, in a management decision, have 
agreed should not be charged to the Federal Government, commonly referred to as disallowed 
costs, as part of the expected recoveries in the "Highlights" section at the beginning of OIGs 
Semiannual Reports to Congress.  Superscripts indicate end notes. 
 
Table 1 follows.    HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 92 
 
Table 1  Audit Reports With Questioned Costs 
  Number  Dollar Value  Dollar Value 
of  Questioned  Unsupported 
Reports 
Section 1       
Reports for which no management decisions  170  $632,411,000  $31,424,000 
had been made by the beginning of the 
reporting period1 
Reports issued during the reporting period  107    $483,552,000  $3,534,000 
  Total section 1  277  $1,115,963,000  $34,958,000 
 
Section 2       
Reports for which management decisions       
were made during the reporting period 2, 3  
  Disallowed costs  133  $328,382,000*     $813,000 
  Costs not disallowed  8  $ 27,397,000  $7,265,000 
  Total section 2  141  $355,779,000  $8,078,000 
       
Section 3       
Reports for which no management decisions  136  $760,184,000  $26,880,000 
had been made by the end of the reporting 
period (sec. 1 minus sec. 2) 
 
Section 4        
Reports for which no management decisions  50  $312,126,000  $23,762,000 
were made within 6 months of issuance4 
 
*  Audit receivables (expected recoveries).    HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 93 
 
Audit Reports With Funds  
Recommended To Be Put to Better Use  
Recommendations that funds be put to better use mean that funds could be used more 
efficiently if management took action to implement an OIG recommendation through reductions 
in outlays, deobligation of funds, and/or avoidance of unnecessary expenditures.  Table 2 reports 
HHS program officials decisions to take action on these audit recommendations.   
Table 2  Audit Reports With Funds To Be Put to Better Use 
  Number  Dollar Value 
of 
Reports 
Section 1     
Reports for which no management decisions had been made  20  $51,491,000 
by the beginning of the reporting period1 
Reports issued during the reporting period  13  $1,312,683,000 
  Total section 1  33  $1,364,174,000 
     
Section 2     
Reports for which management decisions were made during     
the reporting period: 
Value of recommendations agreed to      
by management 
  Based on proposed management action  17  $19,691,000 
  Based on proposed legislative action  0  0 
Value of recommendations not agreed to by management  1     $1,073,000 
  Total section 2  18  $20,764,000 
     
Section 3     
Reports for which no management decisions had been made  15  $1,343,410,000 
by the end of the reporting period2 (sec. 1 minus sec. 2)  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 94 
 
End Notes 
 
Table 1 End Notes 
1 The opening balance was adjusted downward by $145.6 million because of a reevaluation of 
previously issued recommendations.  
2 Revisions to previously reported management decisions included: 
  The Centers for Medicare & Medicaid Services (CMS) determined that it could not recoup 
disallowances totaling $11,538,177 associated with seven audits because Federal regulations 
at 42 CFR 405.980(b) prevented it from reopening claims beyond 4 years after its initial 
determination.   
  A-01-10-95476 State of Maine.  Subsequent documentation provided by the State identified 
$2,865,944 as Federal share refunded by the State during submission of the CMS 64 QE 
3/31/20013.  Disallowed cost was reduced by $1,802,249. 
  A-05-08-00051, Review of High-Dollar Payments for Inpatient Services Processed by 
Wisconsin Physicians Services for CYs 2004 Through 2006-Hospitals With Five or More High-
Dollar Payments.  Subsequent review of Wisconsin Physicians Services high-dollar claims 
resulted in an increase of disallowed cost by $1,202,954.     
  A-05-09-91337 State of Indiana.  Subsequent review by CMS determined that faculty 
physician payments were allowable and reduced disallowed cost by $26,087,500.  In 
addition, CMS determined that $10,843,643 was allowable because of an adjustment on the 
CMS 64 document.  Disallowed cost was reduced by total of $36,931,143.    
  A-07-08-03114 Review of Missouri ACF Training Costs.  As result of an appeal by the State 
and subsequent review of additional documentation provided, the disallowed cost was 
reduced by $2,063,088.   
  Not detailed are net reductions to previously reported disallowances totaling $2,795,462. 
3 Included are management decisions to disallow $42.1 million in questioned costs that were 
identified by non-Federal auditors in audits of State and local governments, colleges and 
universities, and nonprofit organizations receiving Federal awards conducted in accordance with 
Office of Management and Budget Circular A-133.  By law, OIG is responsible for ensuring that 
work performed by these non-Federal auditors complies with Federal audit standards; 
accordingly, OIG tracks, resolves, and reports on recommendations in these audits. 
4 Because of administrative delays, some of which were beyond management control, resolution 
of the following 50 audits was not completed within 6 months of issuance of the reports; 
however, agency management has informed us that the agency is working to resolve the 
outstanding recommendations before the end of the next semiannual reporting period:  
CIN: A-07-12-01116   REVIEW OF MEDICARE PAYMENTS FOR UNLAWFULLY PRESENT 
BENEFICIARIES, JAN 2013, $91,620,548  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 95 
 
CIN: A-09-06-00023  REVIEW OF LOS ANGELES COUNTY APPROVAL PROCESS OF RELATIVE 
FOSTER FAMILY HOMES, OCT 2009, $45,520,603 
CIN: A-07-12-01113  REVIEW OF MEDICARE PAYMENTS FOR INCARCERATED BENEFICIARIES, 
JAN 2013, $33,587,634 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID SCHOOL-
BASED HEALTH SERVICES - CT, MAY 2003, $32,780,146 
CIN: A-05-08-00098  REVIEW OF OHIO DEPARTMENT OF JOB AND FAMILY SERVICES CLAIMS 
FOR COSTS REPORTED BY THE HAMILTON COUNTY DEPARTMENT OF JOB 
AND FAMILY SERVICES, JAN 2011, $30,595,545 
CIN: A-07-10-06004  REVIEW OF PART D DRUGS PRESCRIBED BY EXCLUDED PROVIDERS, DEC 
2011, $15,079,608 
CIN: A-03-09-00019  REVIEW OF MEMBERHEALTH'S 2006 AND 2007 DIRECT AND INDIRECT 
REMUNERATION REPORTS, OCT 2010, $9,339,013 
CIN: A-01-11-00534  NATIONWIDE REVIEW OF INPATIENT REHABILITATION FACILITIES PATIENT 
ASSESSMENT INSTRUMENTS FOR CALENDAR YEARS 2009 AND 2010, SEP 
2012, $7,700,700 
CIN: A-01-10-00508  REVIEW OF PAYMENTS TO HOSPITALS FOR NONPHYSICIAN OUTPATIENT 
SERVICES UNDER THE I/P PROSPECTIVE PAYMENT SYSTEM, JUN 2012, 
$6,100,000 
CIN: A-04-08-03521  AUDIT OF UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS IN 
TENNESSEE FOR THE PERIOD OCTOBER 1, 1998, TO DECEMBER 31, 2007, 
FEB 2009, $5,768,243 
CIN: A-03-12-00004  REVIEW OF HORIZON'S 2009 AND 2010 BONA FIDE SERVICE FEES, MAR 
2013, $4,344,417 
CIN: A-01-11-02500  REVIEW OF MASSACHUSETTS' TITLE IV-E ADOPTION ASSISTANCE COSTS 
FOR FEDERAL FISCAL YEARS 2006 THROUGH 2008, AUG 2011, 
$4,242,540 
CIN: A-04-11-01095  ADMINISTRATIVE AND CLERICAL COSTS CHARGED TO FEDERAL GRANTS 
AND CONTRACTS, JUL 2012, $2,977,548 
CIN: A-03-11-00002  REVIEW OF NEW ENGLAND JOINT ENTERPRISE 2009 DIR REPORTS, APR 
2012, $2,710,732 
CIN: A-07-11-03163  REVIEW OF CCDF TARGETED FUNDS IN IOWA, MAR 2012, $2,654,238 
CIN: A-03-12-00006  REVIEW OF TAHMO'S 2009 AND 2010 BONA FIDE SERVICE FEES, MAR 
2013, $2,355,532 
CIN: A-03-12-00007  REVIEW OF ARCADIAN'S 2009 AND 2010 BONA FIDE SERVICE FEES, FEB 
2013, $2,048,967  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 96 
 
CIN: A-03-12-00005  REVIEW OF WINDSOR'S 2009 AND 2010 BONA FIDE SERVICE FEES, JAN 
2013, $1,948,737 
CIN: A-02-11-02007  LONG ISLAND CHILD AND FAMILY DEVELOPMENT SERVICES, INC.S 
FINANCIAL MANAGEMENT SYSTEM DID NOT ACCURATELY DISCLOSE 
HEAD START PROGRAM RESULTS, MAY 2012, $1,489,093 
CIN: A-03-12-00008  REVIEW OF XL HEALTH DIR, JAN 2013, $1,410,342 
CIN: A-01-12-02500  REVIEW OF CONNECTICUT'S TITLE IV-E ADMINISTRATIVE/TRAINING 
COSTS AND MAINTENANCE PAYMENTS, DEC 2012, $1,316,684 
CIN: A-04-12-04019  REVIEW OF NAMIBIA MOH FY 09 PEPFAR COOP AGREEMENT 
5UGPS001094-2, JAN 2013, $807,754 
CIN: A-03-11-00501  AUDIT OF SOUTHESTERN TIDEWATER OPPORTUNITY PROGRAM HEAD 
START PROGRAM, FEB 2013, $726,746 
CIN: A-02-11-02005  LIMITED HEAD START REVIEW OF INCLUDED EDUCATIONAL SERVICES, 
JUL 2012, $588,830 
CIN: A-07-11-04181  REVIEW OF THE MEDICARE PAYMENTS TO PROVIDERS FOR THE ORAL 
FORM OF THE DRUG EMEND FOR JULY 2007 THROUGH DECEMBER 
2010, DEC 2012, $530,769   
CIN: A-09-11-01007  REVIEW OF CSBG RECOVERY ACT COSTS CLAIMED BY HI FOR HCAP, FEB 
2013, $513,649 
CIN: A-01-11-02505  NEON - HEAD START LIMITED SCOPE REVIEW - ALLOCATING OF COSTS - 
ARRA, JAN 2012, $406,434 
CIN: A-02-11-01004  REVIEW OF THE QUARTERLY MEDICAID STATEMENT OF EXPENDITURES 
FOR THE MEDICAL ASSISTANCE PROGRAM IN THE U.S. VIRGIN ISLANDS 
FOR THE QUARTER ENDED SEPTEMBER 30, 2009, APR 2012, $393,316 
CIN: A-06-11-00034  RCA OF THE ECONOMIC OPP. DEV. CORP. OF ATASCOSA, KARNES, 
WILSON COUNTIES, SEP 2012, $372,081 
CIN: A-01-10-02505  RESULTS OF LIMITED SCOPE REVIEW OF CTE, INC., MAY 2011, $293,870 
CIN: A-05-05-00033  UNDISTRIBUTED CHILD SUPPORT COLLECTIONS - MI, AUG 2006, 
$257,859 
CIN: A-09-09-00045  RISK ADJUSTMENT DATA VALIDATION OF PAYMENTS MADE TO 
PACIFICARE OF CALIFORNIA FOR CALENDAR YEAR 2007 (CONTRACT 
H0543), NOV 2012, $224,388 
CIN: A-05-09-00044  RISK ADJUSTMENT DATA VALIDATION OF PAYMENTS MADE TO 
PARAMOUNT CARE, INC., FOR CALENDAR YEAR 2007 (CONTRACT 
NUMBER H3653), SEP 2012, $205,534  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 97 
 
CIN: A-06-09-00012  RISK ADJUSTMENT DATA VALIDATION - PACIFICARE H4590, MAY 2012, 
$183,247 
CIN: A-04-11-01004  NORTHEAST FLORIDA COMMUNITY ACTION AGENCY, INC.S CSBG FUNDS 
AWARDED UNDER THE AMERICAN RECOVERY AND REINVESTMENT ACT 
OF 2009, SEP 2012, $165,795 
CIN: A-02-09-01014  RISK ADJUSTMENT DATA VALIDATION OF PAYMENTS MADE TO EXCELLUS 
HEALTH PLAN, INC. FOR CALENDAR YEAR 2007 (CONTRACT H3351), OCT 
2012, $157,777 
CIN: A-04-11-03538  HEAD START HIGH RISK GRANTEE - MOBILE COMMUNITY ACTION 
AGENCY, INC., DEC 2011, $147,587 
CIN: A-09-09-01007  REVIEW OF IDAHO'S TITLE IV-E ADOPTION ASSISTANCE COSTS FOR 
FEDERAL FISCAL YEARS 2006  2008, JUL 2009, $124,046 
CIN: A-06-11-00058  REVIEW OF CSBG ARRA COSTS CLAIMED BY CROWLEY'S RIDGE 
DEVELOPMENT COUNCIL, AUG 2012, $115,420 
CIN: A-04-11-01010  FLORIDA'S ADMINISTRATION OF CSBG RECOVERY ACT PROGRAM AND 
COSTS CLAIMED BY THE AGRICULTURAL AND LABOR PROGRAM INC., 
FEB 2013, $58,437 
CIN: A-05-11-00051  MEDICARE MADE PAYMENTS TO UNITED HEALTHCARE OF WISCONSIN, 
INC. UNDER PART D FOR DRUGS THAT WERE ALREADY COVERED UNDER 
PART C, NOV 2012, $53,439 
CIN: A-05-11-00083  REVIEW OF IL CSBG RECOVERY ACT COSTS CLAIMED (CITY OF CHICAGO), 
MAR 2013, $40,247 
CIN: A-09-12-01000  REVIEW OF CSBG RECOVERY ACT ADMINISTRATIVE COSTS CLAIMED BY 
HI OFFICE OF COMMUNITY SERVICES, JUN 2012, $34,861 
CIN: A-03-10-03110  TIGER TEAM - CONTRACT HHSN267-2007-00014C, OCT 2011, $27,707 
CIN: A-02-11-02000  DIRECT COST REVIEW - SUNY ALBANY, OCT 2011, $27,384 
CIN: A-09-11-01014  REVIEW OF CSBG RECOVERY ACT COSTS CLAIMED BY HI FOR THE HAWAII 
COUNTY ECONOMIC OPPORTUNITY COUNCIL, JUL 2012, $22,602 
CIN: A-02-11-02008  DIRECT COST REVIEW - SUNY STONY BROOK, AUG 2012, $18,254 
CIN: A-05-11-00042  MEDICARE PART D MADE SOME INCORRECT PAYMENTS TO COMMUNITY 
INSURANCE INC FOR INSTITUTIONAL BENEFICIARIES IN 2008, AUG 2012, 
$13,346 
CIN: A-05-11-00053  THE COLUMBUS URBAN LEAGUE CLAIMED SOME UNALLOWABLE COSTS 
TO HEAD START, SEP 2012, $13,102  HHS Office of Inspector General  Appendix B 
Semiannual Report to Congress  Fall 2013  Questioned Costs and Funds Put to Better Use 
  Page 98 
 
CIN: A-01-12-02501  REVIEW OF CSBG RECOVERY ACT COSTS CLAIMED - CFC, FALL RIVER, MA, 
AUG 2012, $10,769 
TOTAL NUMBER OF REPORTS:  50 
TOTAL AMOUNT:  $312,126,000 
 
Table 2 End Notes 
1The opening balance was adjusted downward by $427.7 million because of reevaluation of 
previously issued recommendations.  
  A-04-1003059, Obstacles to Collections of Millions in Medicare Overpayments.  The 
uncollected disallowed cost totaling $416.3 million was reported in prior semiannual 
periods.  A downward adjustment was made to avoid double-counting. 
  Not detailed is $11.4 million in downward adjustments due to changes in previously issued 
recommendations. 
2 Because of administrative delays, some of which were beyond management control, resolution 
of the following five audits was not completed within 6 months of issuance of the report.  OIG is 
working with management to reach resolution on these recommendations before the end of the 
next semiannual reporting period: 
CIN: A-06-10-00059  REVIEW OF HOSPICE COVERED DRUGS NATIONWIDE, JUNE 2012, 
$33,638,137 
CIN: A-05-05-00033  UNDISTRIBUTED CHILD SUPPORT COLLECTIONS - MICHIGAN, AUGUST 
2006, $4,397,133 
CIN: A-05-06-00023  UNDISTRIBUTED CHILD SUPPORT COLLECTIONS - MINNESOTA, 
SEPTEMBER 2006, $28,240 
CIN: A-09-09-01007  REVIEW OF IDAHO'S TITLE IV-E ADOPTION ASSISTANCE COSTS FOR 
FEDERAL FISCAL YEARS 2006 THROUGH 2008, JULY 2009, $17,764 
TOTAL NUMBER OF REPORTS:  4 
TOTAL AMOUNT:   $38,081,274 
 
  HHS Office of Inspector General  Appendix C 
Semiannual Report to Congress  Fall 2013  Peer Review Results 
  Page 99 
 
Appendix C 
Peer Review Results 
 
The Inspector General Act of 1978, as amended, requires Offices of Inspector General (OIGs) to 
report the results of peer reviews of their operations conducted by other OIGs, the date of the 
last peer review, outstanding recommendations from peer reviews, and peer reviews conducted 
by the OIG of other OIGs in the semiannual period.  Peer reviews are conducted by member 
organizations of the Council of the Inspectors General on Integrity and Efficiency (CIGIE).  The 
required information follows. 
 
Office of Audit Services peer review results 
During this semiannual reporting period, no peer reviews involving the Office of Audit Services 
(OAS) were completed.   Listed below is information concerning OASs peer review activities 
during prior reporting periods.  
 
OAS  Date  Reviewing Office  Office Reviewed 
June 2012  Department of  HHS OIG, OAS 
Homeland Security 
The system of quality control for the audit organization of HHS OIG in effect for the year 
ending September 30, 2011, has been suitably designed and complied with to provide HHS 
OIG with reasonable assurance of performing and reporting in conformity with applicable 
professional standards in all material respects.  Federal audit organizations can receive a rating 
of pass, pass with deficiencies, or fail.  HHS OIG received a peer review rating of pass. 
 
OAS  Date  Reviewing Office  Office Reviewed 
May 2012  HHS OIG, OAS  U. S. Environmental 
Protection Agency (EPA) 
The system of quality control for the audit organization of EPA OIG in effect for the year ending  
September 30, 2011, has been suitably designed and complied with to provide EPA OIG with 
reasonable assurance of performing and reporting in conformity with applicable professional 
standards in all material respects.  Federal audit organizations can receive a rating of pass, pass 
with deficiencies, or fail.  EPA OIG received a peer review rating of pass. 
 
 
    HHS Office of Inspector General  Appendix C 
Semiannual Report to Congress  Fall 2013  Peer Review Results 
  Page 100 
 
Office of Investigations peer review results  
During this semiannual reporting period, the U.S. Postal Service (USPS) Office of Inspector 
General conducted a peer review of HHS OIGs Office of Investigations (OI).  OI did not conduct a 
peer review of another OIG during this reporting period.  Listed below is information concerning 
OIs peer review activities during this and prior reporting periods.  
OI  Date  Reviewing Office  Office Reviewed 
August 2012  USPS-OIG  HHS-OIG, OI 
The system of internal safeguards and management procedures for the investigative function 
of HHS-OIG in effect for the year ending September 30, 2012, were in full compliance with the 
quality standards established by CIGIE and the Attorney General's guidelines. 
 
OI  Date  Reviewing Office  Office Reviewed 
July 2011  HHS-OIG, OI  DoD-OIG 
The system of internal safeguards and management procedures for the investigative function 
of DoD-OIG in effect through July 2011 were in full compliance with the quality standards 
established by CIGIE and the Attorney General's guidelines. 
 
OI  Date  Reviewing Office  Office Reviewed 
January 2011  HHS-OIG, OI  Department of Housing and 
Urban Development (HUD) 
 
OIG 
The system of internal safeguards and management procedures for the investigative function 
of HUD-OIG in effect through February 2011 was in full compliance with the quality standards 
established by CIGIE and the Attorney Generals guidelines. 
 
  HHS Office of Inspector General  Appendix D 
Semiannual Report to Congress  Fall 2013  Summary of Sanction Authorities 
  Page 101 
 
Appendix D 
Summary of Sanction Authorities 
 
The Inspector General Act of 1978, as amended, specifies requirements for semiannual reports 
to be made to the Secretary for transmittal to Congress.  A selection of other authorities appears 
below. 
Program Exclusions 
The Social Security Act,  1128 (42 U.S.C.  1320a-7), provides several grounds for excluding 
individuals and entities from participation in Medicare, Medicaid, and other Federal health care 
programs.  Exclusions are required for individuals and entities convicted of the following types of 
criminal offenses:  (1) Medicare or Medicaid fraud; (2) patient abuse or neglect; (3) felonies for 
other health care fraud; and (4) felonies for illegal manufacture, distribution, prescription, or 
dispensing of controlled substances.   
The Office of Inspector General (OIG) is authorized to exclude individuals and entities on several 
other grounds, including misdemeanors for other health care fraud (other than Medicare or 
Medicaid) or for illegal manufacture, distribution, prescription, or dispensing of controlled 
substances; suspension or revocation of a license to provide health care for reasons bearing on 
professional competence, professional performance, or financial integrity; provision of 
unnecessary or substandard services; submission of false or fraudulent claims to a Federal health 
care program; or engaging in unlawful kickback arrangements. 
The Patient Protection and Affordable Care Act of 2010 (Affordable Care Act) added another 
basis for imposing a permissive exclusion, that is, knowingly making, or causing to be made, any 
false statements or omissions in any application, bid, or contract to participate as a provider in a 
Federal health care program, including managed care programs under Medicare and Medicaid, 
as well as Medicares prescription drug program. 
Providers subject to exclusion are granted due process rights.  These include a hearing before an 
administrative law judge and appeals to the Department of Health and Human Services (HHS) 
Departmental Appeals Board and Federal district and appellate courts regarding the basis for 
and the length of the exclusion. 
Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) of the Social Security Act, 1128A (42 U.S.C. 
 1320a-7a), imposes penalties, assessments, and exclusion from participation in Federal health 
care programs for engaging in certain activities.  For example, a person who submits, or causes 
to be submitted, 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 law and its 
implementing regulations also authorize actions for a variety of other violations, including  HHS Office of Inspector General  Appendix D 
Semiannual Report to Congress  Fall 2013  Summary of Sanction Authorities 
  Page 102 
 
submission of claims for items or services furnished by an excluded person; requests for 
payment in violation of an assignment agreement; violations of rules regarding the possession, 
use, and transfer of biological agents and toxins; and payment or receipt of remuneration in 
violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)). 
The Affordable Care Act added more grounds for imposing civil monetary penalties (CMPs).  
These include, among other conduct, knowingly making, or causing to be made, any false 
statements or omissions in any application, bid, or contract to participate as a provider in 
a Federal health care program (including Medicare and Medicaid managed care programs and 
Medicare Part D); the Affordable Care Act authorizes a penalty of up to $50,000 for each false 
statement, as well as activities relating to fraudulent marketing by managed care organizations, 
their employees, or their agents.  
Patient Dumping 
The Social Security Act,  1867 (42 U.S.C.  1395dd), provides that when an individual goes to 
the emergency room of a Medicare-participating hospital, the hospital must provide an 
appropriate medical screening examination to determine whether that individual has an 
emergency medical condition.  If an individual has such a condition, the hospital must provide 
either treatment to stabilize the condition or an appropriate transfer to another medical facility. 
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to minimize 
the risks of transfer and must ensure that the receiving hospital agrees to the transfer and has 
available space and qualified personnel to treat the individual.  In addition, the transferring 
hospital must effect the transfer through qualified personnel and transportation equipment.  
Further, a participating hospital with specialized capabilities or facilities may not refuse to accept 
an appropriate transfer of an individual who needs services if the hospital has the capacity to 
treat the individual. 
OIG is authorized to collect CMPs of up to $25,000 against small hospitals (fewer than 100 beds) 
and up to $50,000 against larger hospitals (100 beds or more) for each instance in which the 
hospital negligently violated any of the section 1867 requirements.  In addition, OIG may collect 
a penalty of up to $50,000 from a responsible physician for each negligent violation of any of the 
section 1867 requirements and, in some circumstances, may exclude a responsible physician. 
Anti-Kickback Statute and  
Civil False Claims Act Enforcement Authorities 
The 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 an 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 of the Social Security Act,  1128B(b) (42 U.S.C.  1320a-7b(b)). 
Individuals and entities that engage in unlawful referral or kickback schemes may be subject to 
criminal penalties under the general criminal anti-kickback statute; a CMP under OIGs authority 
pursuant to the Social Security Act,  1127(a)(7) (42 U.S.C.  1320a-7a); and/or program  HHS Office of Inspector General  Appendix D 
Semiannual Report to Congress  Fall 2013  Summary of Sanction Authorities 
  Page 103 
 
exclusion under OIGs permissive exclusion authority under the Social Security Act,  1128(b)(7) 
(42 U.S.C.  1320a-7(b)(7)). 
False Claims Amendments Act of 1986  Under the Federal False Claims Amendments Act of 
1986 (FCA) (31 U.S.C.  37293733), a person or an entity is liable for up to treble damages and 
a penalty between $5,500 and $11,000 for each false claim it knowingly submits, or causes to be 
submitted, to a Federal program.  Similarly, a person or an entity is liable under the FCA if it 
knowingly makes or uses, or causes to be made or used, a false record or statement to have a 
false claim paid. 
The FCA defines knowing to include not only the traditional definition but also instances in 
which the person acted in deliberate ignorance or 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 a private individual to file a lawsuit on behalf 
of the United States and entitles that whistleblower to a percentage of any fraud recoveries.  The 
FCA was again amended in 2009 in response to recent Federal court decisions that narrowed the 
laws applicability.  Among other things, these amendments clarify the reach of the FCA to false 
claims submitted to contractors or grantees of the Federal Government. 
    HHS Office of Inspector General  Appendix D 
Semiannual Report to Congress  Fall 2013  Summary of Sanction Authorities 
  Page 104 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
 
 
  HHS Office of Inspector General  Appendix E 
Semiannual Report to Congress  Fall 2013  Reporting Requirements 
  Page 105 
 
Appendix E  
Reporting Requirements in the 
Inspector General Act of 1978 
 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed in the 
following table along with the location of the required information.     
Section  Requirement  Location 
Section 4     
(a)(2)  Review of legislation and regulations  "Other HHS-Related Issues"  
section   
Section 5     
(a)(1)  Significant problems, abuses, and  Throughout this report 
deficiencies 
(a)(2)  Recommendations with respect to  Throughout this report 
significant problems, abuses, and 
deficiencies 
(a)(3)  Prior significant recommendations on  OIG Compendium of 
which corrective action has not been  Unimplemented 
completed  Recommendations 
(a)(4)  Matters referred to prosecutive  "Legal and Investigative Activities" 
authorities  section 
(a)(5)  Summary of instances in which  None 
information requested by OIG was 
refused 
(a)(6)  List of audit reports  Submitted to the Secretary under 
separate cover 
(a)(7)  Summary of significant reports  Throughout this report 
(a)(8)  Statistical Table 1  Reports With  Appendix B 
Questioned Costs 
(a)(9)  Statistical Table 2  Funds Recommended  Appendix B 
To Be Put to Better Use 
(a)(10)  Summary of previous audit reports  Appendix B 
without management decisions 
(a)(11)  Description and explanation of revised  Appendix B  HHS Office of Inspector General  Appendix E 
Semiannual Report to Congress  Fall 2013  Reporting Requirements 
  Page 106 
 
Section  Requirement  Location 
management decisions 
(a)(12)  Management decisions with which the  None 
Inspector General disagrees 
(a)(13)  Information required by the Federal  Reported annually in the spring 
Financial Management Improvement Act  Semiannual Report to Congress, 
of 1996  "Other HHS-Related Issues" 
section 
(a)(14)-(16)  Results of peer reviews of HHS-OIG  Appendix C 
conducted by other OIGs or the date of 
the last peer review, outstanding 
recommendations from peer reviews, and 
peer reviews conducted by HHS-OIG of 
other OIGs. 
 
Other Reporting Requirements 
Section  Requirement  Location 
845  Significant contract audits required to be  "Other HHS-Related Issues" 
reported pursuant to the National  section 
Defense Authorization Act for fiscal 
year 2008 (P.L. No. 110-181),  845. 
205  Pursuant to the Health Insurance  Reported annually in the fall 
Portability and Accountability Act (P.L. No.  Semiannual Report.   
104-191),  205, the Inspector General is  Appendix F 
required to solicit proposals annually via a 
 
Federal Register notice for developing 
new and modifying existing safe harbors 
to the anti-kickback statute of the Social 
Security Act,  1128(b), and for 
developing special fraud alerts.  The 
Inspector General is also required to 
report annually to Congress on the status 
of the proposals received related to new 
or modified safe harbors. 
1553  Pursuant to the American Recovery and  "Other HHS-Related Issues" 
Reinvestment Act of 2009,  1553, OIG  section 
reports to Congress the retaliation 
complaint investigations it decided not to 
conduct or continue during the period. 
  HHS Office of Inspector General  Appendix F   
Semiannual Report to Congress  Fall 2013  Anti-Kickback StatuteSafe Harbors 
  Page 107 
 
Appendix F 
Anti-Kickback StatuteSafe Harbors 
 
Pursuant to the Health Insurance Portability and Accountability Act (HIPAA),  205, the Inspector 
General is required to solicit proposals annually via a Federal Register notice for developing new 
and modifying existing safe harbors to the anti-kickback statute of the Social Security Act, 
 1128(b), and for developing special fraud alerts.  The Inspector General is also required to 
report annually to Congress on the status of the proposals received related to new or modified 
safe harbors. 
It is incumbent upon the Office of Inspector General (OIG), in crafting safe harbors for a criminal 
statute, to engage in a complete and careful review of the range of factual circumstances that 
may fall within the proposed safe harbor subject area to uncover all potential opportunities for 
fraud and abuse by unscrupulous providers.  Having done so, OIG must then determine, in 
consultation with the Department of Justice, whether it can develop effective regulatory 
limitations and controls not only to foster beneficial or innocuous arrangements but also to 
protect the Federal health care programs and their beneficiaries from abusive practices.   
Public Proposals for New and Modified Safe Harbors 
In response to the 2012 annual solicitation, OIG received the following proposals related to safe 
harbors: 
Proposal  OIG Response 
Modification of the electronic health  On April 10, 2013, OIG issued a Notice of 
records (EHR) safe harbor to (1) remove  Proposed Rulemaking (NPRM) (78 Fed. 
the sunset provisions and make it a  Reg. 21314), which proposed extending 
permanent safe harbor, (2) extend the  the date of the sunset provision and 
sunset date to 2016 to align it with the  making certain other modifications to this 
EHR incentive payments program  safe harbor.  The comment period for this 
timeline, or (3) extend the sunset date by  NPRM closed on June 10t, and we are 
4 or more years.  considering the comments received in 
preparation for issuing a final rule 
A new safe harbor protecting, in certain  OIG is not adopting this suggestion.  The 
circumstances, (1) free continuing  concept of free or reduced cost programs 
medical education (CME) programs  could vary greatly and should be 
offered by hospitals to physicians or (2)  addressed on a case-by-case basis, such 
free or reduced-cost CME programs  as under the advisory opinion process. 
provided by institutional Medicare Part A 
 
providers to their staff physicians. 
A new safe harbor protecting certain  OIG is considering the adoption of 
motivational incentives offered to  generally applicable safe harbors 
patients by Federally Qualified Health  regarding rewards for patient compliance 
Centers (FQHCs) or FQHC look-alikes to  HHS Office of Inspector General  Appendix F   
Semiannual Report to Congress  Fall 2013  Anti-Kickback StatuteSafe Harbors 
  Page 108 
 
Proposal  OIG Response 
either encourage patients to obtain  with prevention and treatment regimens. 
medically necessary treatment, reward 
 
compliance with a treatment plan, or 
reward achievement of treatment
related goals.  
A new safe harbor that would apply to  OIG is not adopting this suggestion.  The 
discounts on Medicare Part A-covered  arrangement described poses a risk of 
services offered by independent  abuse under the anti-kickback statute and 
providers (such as mobile x-ray service  should be evaluated on a case-by-case 
providers) to skilled nursing facilities that  basis, such as under the advisory opinion 
have the ability to refer to these  process. 
independent providers business covered 
by Medicare Part B. 
Modification of the safe harbor for  OIG is not adopting these suggestions at 
investments in group practices to  this time as they require further study. 
(1) either (a) provide that it does not 
apply to revenues from anesthesia 
services if any equity owner of the group 
practices in a medical specialty other 
than anesthesiology or pain management 
or (b)  limit application of the safe harbor 
to profits generated by the services 
provided by the equity owners of the 
group practice and from their employees 
who provide services in the same medical 
specialty as the equity owners of the 
group practice, and (2) to provide that 
anesthesia services are not in-office 
ancillary services for purposes of the 
safe harbor. 
Modification of the safe harbor for  OIG is not adopting this suggestion.  The 
investments in ambulatory surgical  existing safe harbor does not protect 
centers to explicitly exclude from its  profits from anesthesia services. 
protection profits from anesthesia 
services. 
Modification of the safe harbor for  OIG is not adopting these suggestions.  
employee compensation to (1) explicitly  The employee compensation safe harbor 
exclude from protection certain  is statutory, and OIG has no authority to 
employment arrangements in which  modify the substantive elements of the 
physicians employ physicians in other  statutory exception. 
specialties to whom the former group 
 
would otherwise refer or (2) to introduce 
to the safe harbor requirements of  HHS Office of Inspector General  Appendix F   
Semiannual Report to Congress  Fall 2013  Anti-Kickback StatuteSafe Harbors 
  Page 109 
 
Proposal  OIG Response 
commercial reasonableness and of 
compensation not varying with the 
volume or value of referrals from the 
employing/referring physicians. 
A new safe harbor that would permit  OIG is considering this suggestion.  
health care providers and suppliers in 
certain circumstances to compensate 
individuals in clinical trials and to provide 
services related to the clinical trials at no 
cost, including the waiver of cost-sharing 
obligations. 
A new safe harbor that would allow rural  OIG is not adopting this suggestion at this 
providers to offer annual retrospective  time but is considering the adoption of 
reimbursement for cost-sharing  generally applicable safe harbors 
obligations as a reward for patients  regarding rewards for patient compliance 
compliance with prevention and  with prevention and treatment regimens. 
treatment regimens. 
 
Create an exemption to the civil  OIG is considering the adoption of a safe 
monetary penalties provision relating to  harbor to the anti-kickback statute that 
beneficiary inducements at section  would apply to free or discounted local 
1128A(a)(5) of the Social Security Act for  transportation.  This safe harbor to the 
complimentary transportation which  anti-kickback statute, if adopted, would 
takes into account not just patient  be incorporated as an exception to the 
financial need, but also concerns such as  CMP, pursuant to section 1128A(i)(B). 
incapacitation and scarcity of local 
 
treatment options.   
Modification of the safe harbor for  OIG is not adopting this suggestion at this 
obstetrical malpractice insurance  time as it requires further study. 
subsidies to include additional types of 
physicians and subsidies when  there is 
documented need and the subsidy 
amount is limited in scope and duration. 
New safe harbor for retention payments  OIG is not adopting this suggestion. 
by hospitals to practitioners.  Retention arrangements are subject to 
abuse and should be evaluated on a case-
by-case basis, such as under the advisory 
opinion process. 
Modification of the safe harbor for  OIG is considering this suggestion. 
hospital recruitment payments to 
 
practitioners to protect arrangements 
outside Health Professional Shortage  HHS Office of Inspector General  Appendix F   
Semiannual Report to Congress  Fall 2013  Anti-Kickback StatuteSafe Harbors 
  Page 110 
 
Proposal  OIG Response 
Areas and to permit payments to an 
existing practice for recruiting a 
practitioner to join the practice. 
Modification of the safe harbor for space  OIG is considering this suggestion. 
rental to expand the definition of fair 
 
market value to take into account costs 
incurred in leasehold maintenance and 
improvements.