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21–375 2016

THE USE OF DATA TO STOP MEDICARE FRAUD 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MARCH 24, 2015 

Serial No. 114–OS02 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

PAUL RYAN, Wisconsin, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

SANDER M. LEVIN, Michigan, 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JOYCE MYER, Staff Director 

JANICE MAYS, Minority Chief Counsel and Staff Director 

SUBCOMMITTEE ON OVERSIGHT 

PETER J. ROSKAM, Illinois, Chairman 

KENNY MARCHANT, Texas 

MIKE KELLY, Pennsylvania 

PAT MEEHAN, Pennsylvania 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

KRISTI NOEM, South Dakota 

JOHN LEWIS, Georgia, 

JOSEPH CROWLEY, New York 

CHARLES B. RANGEL, New York 

LLOYD DOGGETT, Texas 


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C O N T E N T S 

Page 

Advisory of March 24, 2015 announcing the hearing ........................................... 2 

WITNESSES 

PANEL ONE 

Shantanu Agrawal, Deputy Administrator and Director, Center for Program 

Integrity, Centers for Medicare & Medicaid Services ....................................... 5 

Gary Cantrell, Deputy Inspector General for Investigations, Office of Inspector General, U.S. Department of Health and Human Services ........................ 20 

PANEL TWO 

Charlene Frizzera, President and CEO, CF Health Advisors .............................. 59 

Mark Nelsen, Senior VP for Risk Products and Business Intelligence, Visa 

Incorporated .......................................................................................................... 88 

Kirk Ogrosky, Partner, Arnold & Porter LLP ....................................................... 67 

Louis Saccoccio, Executive Director, National Health Care Anti-Fraud Association .................................................................................................................... 72 

MEMBER SUBMISSION FOR THE RECORD 

George Holding, statement ..................................................................................... 110 

SUBMISSION FOR THE RECORD 

Federation of State Medical Boards, letter ............................................................ 111 


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(1) 

THE USE OF DATA TO STOP 

MEDICARE FRAUD 

TUESDAY, MARCH 24, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:00 a.m., in 

Room B–319, Rayburn House Office Building, the Honorable Peter 

J. Roskam, [Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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Chairman ROSKAM. Good morning. The hearing will come to 

order. 

And welcome to the Oversight Subcommittee hearing on the use 

of data to stop Medicare fraud 

I think that there is an incredible opportunity, particularly this 

week, to think about the challenges that the health care system is 

feeling, and as we are working on a bipartisan basis here on Capitol Hill to think about how it is that we pay for the SGR, also 

known as the ‘‘doc fix,’’ to begin to think about the amount of 

money that is being contemplated there, and it is really significant. 

And yet the amount of fraud and waste and squandering resources on the other end suggests that if we fix the fraud side, we 

will have a lot more resources to figure out how it is that we can 

pay for these things to make these systems work better. 

And so the reason that we are here today is to strengthen one 

of the most important Federal programs, that is, Medicare, that obviously provides necessary health care services to millions of our 

Nation’s seniors. Every year Medicare loses billions of dollars 

through fraud and improper payments, and today we are going to 

find out what the Administration is doing to stop that. 

When we first constituted this Subcommittee at the beginning of 

the Congress, the Ranking Member and I talked about our shared 

goal of working together, establishing facts and making government work better for all Americans, and today I have the unique 

privilege of chairing a hearing on this topic that I know my friend, 

Mr. Lewis, has worked on for many years, including holding hearings and producing legislation as the chairman of this very same 

subcommittee. 


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He is detailed. I think the Democratic Caucus is meeting right 

now, and I would ask for unanimous consent for him to have leave 

to give his opening statement upon his arrival. 

I know I am speaking for every Member on this Committee when 

I say that we are extremely concerned about Medicare fraud. It remains a serious and evolving threat, and there are billions of dollars at stake, and there continues to be a lot more work to be done 

to get ahead of the criminals and to get it under control. So today’s 

hearing is a continuation of the significant work that these Members in Congress have done in the past, and we are going to be taking a look at what the Administration’s current effort is and ways 

that we can improve Medicare payment integrity. 

To begin with, I just want to pause and emphasize just how big of a problem this is. Last year the Federal Government lost $124.7 

billion in improper payments across 124 programs. Of that $124 

billion, one program accounted for $60 billion or so, and that was 

Medicare. 

Because the program is so large and susceptible to abuse, the 

Government Accountability Office has singled it out as a high risk 

for fraud every year since they started keeping track in 1990. Historically, CMS has used a method of payment called ‘‘pay and 

chase’’ in processing Medicare payments, first paying a charge, 

then later looking back to check on the validity and potentially trying to claw back the money if the payment was made improperly. 

As you can imagine, that strategy is not very effective. 

Time and again we have seen fraudsters hustle the system for 

a few million dollars, shut down, pop up under a new name, and 

run their scam somewhere else. The Medicare program is getting 

outsmarted by these methods, and the proof is the unacceptably 

high rate of improper payments each year. 

In 2010, I proposed a new approach to help CMS work smarter. 

Instead of ‘‘pay and chase,’’ CMS should use the same kind of cutting edge, predictive analytics technology that private companies 

use successfully to look at transaction data in real time and identify potentially fraudulent charges, stopping the payment before 

the money goes out the door. 

Credit card companies use a similar system to identify a potentially fraudulent charge and stop payment while they further investigate the claim, and the framework for that idea was later enacted 

as part of the Small Business Jobs Act of 2010. 

The system created by CMS to incorporate data analytics to protect Medicare is called the Fraud Prevention System, or FPS. In its 

first year, FPS got off to a rocky start. Health and Human Services 

Inspector General could not even certify any of the system’s results. 

In the second year, ending in July 2013, the IG certified that the 

system had returned $1.34 for each dollar invested that year, totaling $54.2 million in savings. 

The $54.2 million is significant money, but it is literally a drop 

in the bucket when compared to the $60 billion lost that I referenced earlier, and as it currently operates, FPS is catching less 

than one percent of improper payments, and I should add, CMS is 

still primarily relying on the ‘‘pay and chase’’ model to back after 

money that has already been paid out improperly rather than stopping improper payments on the front end. 


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I continue to think that the idea behind FPS is sound, but taxpayers are entitled to see the idea implemented with excellence. 

Each dollar we fail to secure from fraud and improper payments 

is a dollar that is not going into needed health care services for our 

seniors, and when we look around at what private companies are 

doing to protect the integrity of their transactions, it is clear that 

so far FPS is leaving a lot on the table. 

For the first panel, this Subcommittee wants to hear directly 

from CMS and the Office of the Inspector General about how they 

are using FPS and other data sources to identify emerging trends 

in Medicare fraud. We want to know how CMS and OIG are coordinating their efforts with the Department of Justice to share data 

and to prosecute Medicare fraudsters. 

And I will note here that regrettably we invited the Department 

of Justice to testify about these issues today, but they were unable 

to provide a witness. 

On the second panel, we will hear from two witnesses who previously served in the Administration at DOJ and CMS, respectively, and we will get their insights about how the government is 

performing on these issues. 

Another witness will tell us about how CMS and DOJ are collaborating with the private sector to address fraud issues affecting 

both Medicare and private insurers. 

And finally, we will hear about how Visa, a private sector company, has used predictive analysis to stop fraud. Visa’s global rate 

of fraud is six basis points, meaning 99.4 percent of the $10 trillion 

in payments it processes are fraud free. That is an impressive track 

record, and we hope to learn a thing or two from Visa. 

We look forward to hearing from all of our witnesses and thank 

them for their time and their willingness to come today. 

Now, as I said, Mr. Lewis is detained. He will be here shortly, 

and when he comes I will invite him to make his opening statement. And in the interim, why do we not start out? We will hear 

from our two government witnesses on the first panel, Dr. 

Shantanu Agrawal—I am sorry—from Centers for Medicare & 

Medicaid Services, and Gary Cantrell from the Office of the Inspector General for Health and Human Services. 

Gentlemen, thank you for your time today. We have already received your written testimony, and you have five minutes. Doctor, 

if you would like to go ahead, you are welcome. 

STATEMENT OF DR. SHANTANU AGRAWAL, DEPUTY ADMINISTRATOR AND DIRECTOR, CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE & MEDICAID SERVICES 

Dr. AGRAWAL. Thank you. 

Chairman Roskam, Mr. Doggett, other Members of the Committee, thank you for the invitation to discuss the Centers for 

Medicare & Medicaid Services’ use of data in its program integrity 

efforts. 

Mr. Chairman, we appreciate your leadership on these issues 

and your ongoing interest in making sure CMS has the tools and 

resources necessary to best use data to fight fraud in Medicare. Enhancing program integrity is a top priority for this Administration 

and an agency-wide effort at CMS. 


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Since passage of the Affordable Care Act and other critical legislation, CMS’ Center for Program Integrity has become increasingly 

data oriented, using data in a variety of ways to inform our efforts 

to identify waste, abuse and fraud. CMS is using a number of tools, 

including innovative data analytics to keep bad actors out of our 

programs and to uncover vulnerabilities, schemes, and trends 

quickly before they drain valuable resources from our trust funds. 

We have seen important successes from these efforts, and today 

I would like to highlight two critical ways we use data to identify 

and prevent waste, fraud and abuse: the Fraud Prevention System 

and our provider screening processes. Through both of these efforts, 

CMS is using data to stop issues on the front end and make important strides towards prevention. 

Since 2011, CMS has been using its Fraud Prevention System to 

apply advanced analytics on all Medicare fee for service claims on 

a streaming national basis by using predictive algorithms and 

other sophisticated analytics to analyze every Medicare fee for 

service claim against billing patterns. 

The system also incorporates other data sources, importantly, including information on compromised Medicare cards and complaints made through 1–800–Medicare. When FPS models identify 

egregious, suspect or aberrant activity, the system automatically 

generates and prioritizes leads for review and investigation by 

CMS’ Zone Program Integrity Contractors, or ZPICs. CMS can use 

this information to swiftly take actions and stop problematic behaviors. 

The FPS has demonstrated an impressive return on investment 

of five-to-one. In its second year of operation, the Department of 

Health and Human Services’ Office of Inspector General certified 

CMS’ identified savings of more than $210 million in improper 

Medicare fee for service payments, double the previous year. 

These savings are the outcomes of activities, such as revocations 

of provider billing privileges; the implementation of payment edits; 

the suspension of payments; and changes in behavior that result 

from CMS actions. 

In addition to saving taxpayer dollars through FPS, CMS has 

significantly strengthened provider enrollment. CMS now uses a 

risk-based approach to verify the legitimacy of new or existing 

Medicare providers by screening those that pose the highest risk to 

the program, including newly enrolling home health agencies and 

durable medical equipment companies. 

A combination of routine data checks of licensure and criminal 

records, scheduled and unscheduled site visits—and if anybody is 

wondering, the unscheduled visits work better—and fingerprinting 

is used to confirm the validity of providers and suppliers. CMS routinely revokes billing privileges from enrolled providers and suppliers based on the Social Security Administration’s complete death 

master file and CMS’ repository of information contained in the 

OIG’s exclusion list, and the Medicare exclusion database. 

As a result, we have removed nearly 500,000 Medicare enrollments, which stops these providers from billing the program, and 

denied thousands of enrollment applications, which means these 

providers never gained the ability to bill the Medicare program. 


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In the coming months we will continue our work to transition as 

many of these data checks into a largely automated process, which 

improves the efficiency of provider screening while lowering burden 

on legitimate actors. 

While data is a critical part of our work, Medicare fraud, waste 

and abuse will not be stopped with data alone. The true power of 

data analytics comes from using results to guide human interventions. Data helps CMS generate leads and take appropriate administrative actions. 

Medicare fraud, waste and abuse affects every American by 

draining critical resources from taxpayers and our health care system. Our health care system should offer the highest quality and 

most appropriate care possible to ensure the well-being of individuals and populations. CMS is committed to protecting taxpayer dollars by preventing or recovering payments for wasteful, abusing or 

fraudulent services. 

But the importance of program integrity extends far beyond dollars and health care costs alone. It is fundamentally about protecting our beneficiaries and ensuring we have the resources to 

provide for their care. Although we have made significant progress 

in stopping fraud and improper payments, more work remains to 

be done. 

I look forward to working with you and the Congress to fully utilize our data analytic systems to protect the integrity of our health 

care programs and safeguard taxpayer resources. 

Thank you. 

Chairman ROSKAM. Thank you, Doctor. 

[The prepared statement of Dr. Agrawal follows:] 


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Chairman ROSKAM. Mr. Cantrell. 

STATEMENT OF GARY CANTRELL, DEPUTY INSPECTOR GENERAL FOR INVESTIGATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Mr. CANTRELL. Good morning, Mr. Chairman and other distinguished Members of the Committee. I am Gary Cantrell, Deputy IG 

for Investigations at OIG. Thank you for the opportunity to testify 

about OIG’s efforts to fight fraud, waste and abuse in Medicare. 

OIG utilizes a range of tools in this fight, including audits, evaluations, investigations, enforcement authorities, and educational 

outreach. Combining data analytics with field intelligence, we identify areas most vulnerable to fraud and deploy our resources to ensure the greatest impact from our work. 

OIG works closely with the Department of Justice, CMS, and 

other Federal and State law enforcement partners to bring those 

who commit fraud against our programs to justice. Our Medicare 

Fraud Strike Force Team is located in nine cities throughout the 

country to exemplify this approach. 

The OIG and our partners are committed to fighting and preventing fraud, waste and abuse. Our efforts have produced some 

impressive results. In 2014, our work resulted in record numbers 

of criminal convictions, civil actions, and program exclusions, and 

since 1997, we have recovered more than $276 billion for the trust 

fund. Our return on investment is $7.70 for every dollar spent. 

Perhaps even more important, we are seeing strong indicators of 

a deterrent effect. When we work together to shed light on a program vulnerability, put criminals behind bars, and take appropriate administrative actions, we have the greatest impact, and our 

analysis reveals significant declines in Medicare payments across 

several program areas in Strike Force cities where we have focused 

our efforts. 

For example, following Federal enforcement and oversight activities, there have been sustained declines in Medicare payments for 

durable medical equipment, home health, ambulance, and community mental health centers, or CMHCs. Nationwide, Medicare payments for CMHCs have decreased approximately $250 million annually, and total Medicare payments for ambulance services in 

Houston are down approximately 40 percent. 

In the Miami area, DME payments have decreased by approximately $100 million annually since the launch of the Strike Force, 

and since 2010, home health payments have decreased nationally 

more than $1 billion annually. 

Despite these successes, more needs to be done. Fraud schemes 

are constantly evolving and migrating, and some of OIG’s top oversight priorities include the rise in prescription drug fraud and 

schemes involving home-base care. 

It is also critical that we protect beneficiaries from harm related 

to these health care fraud schemes. Rarely are these schemes perpetrated by one provider operating independently. There is often a 

network of individuals, including business owners, patient recruiters, health care practitioners and sometimes even the patient. 

Kickbacks in the form of cash or drugs often bind these networks 

together. 


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Identity theft is a national problem, and the theft of patient and 

provider data underpins many of our cases. Removing Social Security numbers from the Medicare card could also protect patient 

data and disrupt fraud schemes. Annual Medicare spending is approaching $600 billion. An estimated 10,000 individuals become newly eligible for Medicare every 

day, and Medicare prescription drug spending alone is projected to 

rise by $100 billion over the next ten years. As the program continues to grow and evolve, the need to protect the Medicare program and the beneficiaries it serves from fraud has never been 

more important. 

OIG working with our partners will continue using data analytics to target our resources for maximum results, and full funding 

of the 2016 budget for OIG will enable us to continue our vigorous 

oversight efforts and further protect programs, beneficiaries, and 

taxpayers. 

And we would like to express our appreciation for Congress’ sustained commitment and support for our mission and appreciate the 

Committee’s interest in this vital issue of protecting the Medicare 

program from fraud. 

Thank you for the opportunity to speak today, and I would be 

happy to answer any questions. 

Chairman ROSKAM. Thank you, Mr. Cantrell. 

[The prepared statement of Mr. Cantrell follows:] 


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Chairman ROSKAM. Mr. Marchant is recognized. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Gentlemen, thanks for being here today. 

If I could take you to a town hall meeting in my district, there 

is always going to be someone that stands up usually in their 

upper 60s or 70s and their question is, ‘‘When are you going to stop 

waste, fraud and abuse?’’ and then they tell a story about someone 

they know or some doctor that they know or some story that they 

saw on the front page of the newspaper or the lead-in for last 

night’s news story. So it is pretty confusing for the folks back 

home. They do not quite understand why their trust fund is being 

drained. They do not understand why the government, as big as it 

is and as many billions of dollars are being spent, that there does 

not seem to be any more progress made. 

FPS, ZPIC, HC, FAC, RAC, CDAC, CPI, all these are terms that 

we can throw out, but they really are basically meaningless to the 

people that we represent. 

So my question is: in plain English, what could I say back to 

them directly? Both of you have given excellent testimony today at 

a technical level of what is happening, but when you read the statistics, the amount of fraud is actually going up, and I think last 

year it went from $60 billion in improper payments, up about $16 

billion. That is an eight and a half percent to 13 percent increase. 

So what can I say to them about what is really happening and 

why can I tell them that we are making very concrete progress? 

Mr. Agrawal. 

Dr. AGRAWAL. Sir, thank you for the question, and I can tell 

you, I am an emergency medicine physician, and having taken care 

of literally thousands of Medicare beneficiaries myself, I know how 

involved they are in the program and how much they care about 

its longevity. 

I would answer this way. You know, I would like to come back 

a little bit later if it is possible and really talk about the differences 

between improper payments and fraud, but to answer your question about how you discuss this with beneficiaries, I think there are 

a few important messages. 

One, we have got a lot of tools at our disposal in order to go after 

all manner of waste, abuse and fraud. I highlighted a couple of 

tools in my opening statement, between advanced analytic systems 

like the FPS; very importantly, our provider enrollment systems 

which make sure that providers and suppliers meet all the requirements to interact with those beneficiaries, from licensure to having 

legitimate sites of operation. These two things are incredibly important operating together. 

But we have additional resources and approaches to rooting out 

these issues. We conduct prior authorization and other prepayment 

reviews. Just last year we stopped the payment of over $5 billion 

from prepayment medical review. That stops the dollars from going 

out the door in the first place. 

We have competitive bidding. So there are a lot of tools that we 

utilize that should be emphasized, and we need to continue to build 

them. You know, it is not a process that is done. 

I think secondly I would say get involved. As I mentioned earlier, 

Medicare beneficiaries love the program. They want it to last and 


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be well funded, and what we see is that when beneficiaries are involved, they can be very helpful and important sources of information and leads. We get 40,000 complaints, on average, from Medicare beneficiaries every year related to program integrity, and we 

integrate those complaints into our existing analytics systems and 

models. Those complaints inform our investigations and, quite a 

few of them lead to real results. 

So their involvement is critical, and I would ask for them to continue to remain involved. 

Mr. MARCHANT. Thank you. 

Mr. CANTRELL. I will echo what he was just saying about the 

beneficiaries, the Medicare patients, being involved in this. We 

know that they care about the program. We want to get tips from 

them. If they suspect fraud, we want them to call us, 1–800–HHS– 

TIPS. There is a great deal of information they can provide to us 

to know what is happening on the ground. 

We work very closely with the Senior Medicare Patrols throughout the country, giving presentations to seniors in order to identify 

and report suspected fraud. So that, first, I think is critical that 

they get involved. 

Second, you know, part of my job is getting bad actors out of the 

program, and so we have excluded over 4,000 individuals and entities from participation in the Medicare program just this last year, 

and every year around 3,000 people are removed from the program, 

ineligible to participate after our exclusion authority. 

So we continue to focus our efforts on getting bad actors out of 

the program. I am very much encouraged by the developments at 

CMS to have a provider screening process that keeps bad actors 

out of the program in the beginning. That is one of the most effective ways we can avoid some of these problems. Keep the bad people out of the program to start with. Do not let them bill us. 

So we support all of the preventive efforts that are taking place 

at CMS. We want to work with them to improve those efforts. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Chairman ROSKAM. Mr. Meehan is recognized. 

Mr. MEEHAN. Thank you, Mr. Chairman, and thank you for 

this very, very important hearing, and thank you for the work that 

you do. The focus, saving these dollars, is so critically important so 

that we can direct them to the actual care. 

Dr. Agrawal, you identified and you used the work to make the 

difference between improper payments and fraud. What is the difference there? 

Dr. AGRAWAL. Yes, thank you for that. I think it is a very important question. 

Every year we are required in the Medicare and Medicaid programs to measure an improper payment rate. We do that based on 

a series of audits, and every year we publish that rate so that it 

is transparent to the public. 

I think what is important to realize is that the drivers of the improper payment rate are not the same as the drivers of fraud. Sixty 

percent of the improper payment rate is due to documentation 

issues. That means that there is insufficient documentation in the 

medical record to justify the service that was delivered. 


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Now, fraud is not something that every provider or physician 

commits. In fact, just a small minority do. But I can tell you, being 

a physician, that documentation issues are something that even the 

most legitimate, well-meaning provider can commit. 

Mr. MEEHAN. By its very nature you are going to see patterns 

develop with fraud where the improper documentation should not 

be developing patterns. 

Dr. AGRAWAL. You know, our experience is a little bit to the 

contrary, which is that when you are a fraudster and legitimate 

payment patient care is not your priority; you are not spending the 

majority of your day at the bedside trying to take care of Medicare 

beneficiaries; you have plenty of time to document very effectively. 

Mr. MEEHAN. So actually they are doing a better job. 

Dr. AGRAWAL. They can do quite well, and we see standardized 

notes, other template driven notes that actually would pass a number of different checks looking at the medical record. 

It is the legitimate providers, the ones that are spending the majority of the time—— 

Mr. MEEHAN. Well, that opens up the door, and, Mr. Cantrell, 

please jump into this as well, which is the investigations and the 

use of predictive analysis is really moving the ball forward. 

I had the good fortune of serving as a United States Attorney 

with one of the health care task forces that were set up, and it was 

a great step forward, but one of the other things that I really appreciated was it is one thing to take somebody out of qualification 

for a system. It is another thing to send them to Federal prison, 

and that is the kind of thing that really gets people’s attention. 

What is being done to find the right balance with the OIG and 

with the resources that you have and in collaboration with other 

particularly law enforcement resources to take some of these 

40,000 leads that you get and direct them to places where there 

can be criminal investigations and people can be held accountable 

not so they just reap themselves and come back again in a different 

format, but they do a little time in Leavenworth. 

Mr. CANTRELL. Yes, I will say we are working very closely with 

law enforcement partners across Federal and State and local law 

enforcement. We have the Medicaid Fraud Control Units that exist 

in every State. We work very closely with them. We are working 

more than ever with the DEA because of the prescription drug 

abuse problem and the fraud problem that exists there. 

So there are opportunities for us to share this information between the FBI, the DEA, the OIG and other law enforcement partners so that we are focusing our resources in the right areas. 

Mr. MEEHAN. How is that being done so that there is a regular 

collaboration and coordination? Because my experience is oftentimes it is not a bad thing, but a lot of these things are housed in 

the Civil Division, and so you are getting a lot of work that is done. 

Oftentimes people are proud of the work that they have done, and 

even within the institution people are proprietary. They want to 

protect the investigation. They do not want the criminal guys getting involved in my work. 

What are you doing to assure that there is real effort to look at 

the most effective way? 


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And let me ask the extent to which either of you are engaging 

in grand jury investigations, using the potential resources to break 

those schemes that you identified? 

Oftentimes they are larger parts of roles, while we have people 

that are susceptible to grand jury subpoenas that are part of those 

networks, drug dealer or whomever. 

How much effort is being put into really getting away from predictive analysis and really tying it effectively with law enforcement 

resources? 

Mr. CANTRELL. The key is turning data into action. So we have 

lots of identification of suspect providers. It is turning that information into an investigation, gathering the evidence necessary for 

prosecution. We absolutely utilize grand juries. We work with our 

partners, and information sharing on any particular investigation 

happens daily throughout the country. There are—— 

Mr. MEEHAN. What do you do to make sure that it is happening 

to make it actually do a good job? 

Actually, Dr. Agrawal, just the numbers indicate you are just 

starting on your efforts, not the same history or longevity. So there 

is a recognition, but at the same time, the numbers are more compelling in the form of impact in terms of, you know, predictive 

analysis turning into recoveries. 

What are you doing to make more timely referrals so that from 

the outset you are working with law enforcement on your side? 

Dr. AGRAWAL. I think that is a great question. So you are absolutely right that the authorities that CMS has now are unique in 

its history. The administrative authorities to stop payments on the 

front end, suspend anywhere from, you know, a claim at a time to 

100 percent of all the payments that a provider gets, and we have 

been working diligently to build those authorities, utilize them efficiently and effectively because I think what we see or what we 

have been focusing on is let us stop the flow of dollars for bad actors and then absolutely work with law enforcement to take other 

steps in the criminal justice system and if possible, put them in 

jail. 

We rely obviously very strongly on law enforcement to pick the 

ball up at that transition point where we cannot go past administrative action. I think that partnership is definitely critical as long 

as we are also stopping the flow of dollars on the front end so that 

they are not taking advantage of the trust funds. 

And while I agree that figures of folks entering jail are really important, I would highlight the importance of 500,000 enrollments 

that are no longer able to build a program, and literally hundreds 

if not thousands of enrollment applications that are denied. These 

folks will never get a chance to send a claim. That is as preventive 

as it gets. 

Mr. MEEHAN. Thank you, Mr. Chairman. I yield back. 

Chairman ROSKAM. Mrs. Noem is recognized. 

Mrs. NOEM. Doctor, FPS does not work very well, does it? 

Dr. AGRAWAL. I agree. I think there are lots of tools that we 

should use, balancing both prevention and recovery. 

Mrs. NOEM. My understanding is that using FPS, that that is 

supposed to help CMS identify claims before they are paid out, 

fraudulent claims; is that correct? 


ralbany on LAP520R082 with HEARINGS
40 

Dr. AGRAWAL. Yes. The system has lots of different capabilities. 

So, on the one hand, it can actually deny claims that simply do not 

meet payment requirements. 

Mrs. NOEM. And under the Affordable Care Act, there was more 

authorities given as well? 

Dr. AGRAWAL. Correct. 

Mrs. NOEM. And so how many fraudulent claims have been 

stopped using FPS going out the door? 

Dr. AGRAWAL. I do not know that I can give you that. We can 

get the number for you later, of actual claims denials. But, again, 

the FPS has capabilities that allow us in some cases if a payment 

policy is simply not met to deny the claim. No payment goes out 

the door. 

In other circumstances it makes our investigation more efficient 

and effective so that we can stop perhaps the payment of all 

claims. A hundred percent payment suspension can be put in place. 

We can work with law enforcement. We can work with our own 

boots on the ground staff, conduct the investigation that then allows us to take a more stringent administrative—— 

Mrs. NOEM. Are claims being flagged today and not being paid 

using FPS? 

Dr. AGRAWAL. Yes. 

Mrs. NOEM. They are being, and you can give us those numbers 

if we need them? 

Dr. AGRAWAL. Sure, yes. 

Mrs. NOEM. That would be wonderful. 

So my only question then is why the improper payment rate is 

going up. 

Dr. AGRAWAL. Again, I think we have to separate improper 

payments from fraud. Fraud is a legal determination made by the 

criminal justice system. 

Mrs. NOEM. But FPS is still utilized to help stop improper payments as well, not just fraud, correct? 

Dr. AGRAWAL. You know, initially because of the focus on fraud 

and abuse, obviously the legitimate and necessary focus, we designed a lot of our models in the FPS to directly address issues of 

extreme outlier behavior that we could then take significant administrative actions against and work with law enforcement about, and 

our referral rate has actually been steadily increasing to law enforcement. 

What we see now as the system has matured is we can move it 

upstream and try to address other types of improper payments. So, 

for example, we have worked with our Medicare administrative 

contractors who conduct medical review on a daily basis, and in a 

pilot we are actually utilizing the FPS to better focus their medical 

review efforts. 

That is not the same community of providers as we have been 

very focused on in our work because they are extreme outliers. This 

community is not so much an outlier. They are probably legitimate 

providers that are just not billing the program ideally. 

Mrs. NOEM. So necessarily at the beginning you were not looking at certain providers, only some that you identified could be potentially participating in fraudulent behavior? 


ralbany on LAP520R082 with HEARINGS
41 

Dr. AGRAWAL. Well, I think we want to be very careful with our 

administrative authorities because they can be extremely disruptive. A hundred percent payment suspension can put some providers out of business, and so—— 

Mrs. NOEM. How many Medicare providers are there? 

Dr. AGRAWAL. There are between 1.5 and 1.6 million enrolled 

providers. 

Mrs. NOEM. And FPS allows you to look at their behaviors and 

identify traits that may be fraudulent? 

Dr. AGRAWAL. We see four and a half million claims per day 

in FPS that address all of those provider types. We identify extremely aberrant outlier claims, and the system actually helps us 

prioritize not only the claims, but the providers for further investigation. 

Mrs. NOEM. So not just fraudulent but also improper? 

Dr. AGRAWAL. Well, again, we are well in front of the criminal 

justice process. We do not determine that something is fraudulent. 

We determine that it is an outlier and either should be paid or 

should not be paid. 

Mrs. NOEM. So can you tell me why CMS has not used crowd 

source fraud prevention in the past? 

Dr. AGRAWAL. Well, I think the small business—— 

Mrs. NOEM. It uses more of the analytics and that has not been 

utilized by CMS, correct, through FPS? 

Dr. AGRAWAL. The FPS is an advanced analytic system. So 

what it does is it takes existing models, and you asked about crowd 

sourcing. 

Mrs. NOEM. Yes. 

Dr. AGRAWAL. We take input from a wide variety of sources. I 

guess that is the definition of crowd sourcing. 

Mrs. NOEM. Okay. So that is being used. 

Dr. AGRAWAL. In order to develop these models, we get that 

input from our Zone Program Integrity Contractors. We get it from 

law enforcement. We even incorporate information from our beneficiary complaints, which is, I guess, another form of crowd 

sourcing. All of those things can feed and create, allow the development for these models that then look at the claims themselves. 

Mrs. NOEM. Okay. Do you have any regulatory or statutory or 

anything that is in statute that would prevent you from being able 

to use more crowd sourcing? Is there anything that would tie your 

hands from being able to rely even more on those analytics? 

Dr. AGRAWAL. You know, I think we have a variety of ways of 

getting input. I am not sure specifically, but we can perhaps take 

that question back. 

One source that I did not highlight yet is we actually are in a 

public-private partnership with a number of private plans. I guess 

that is another form of crowd sourcing where we exchange best 

practices and data with them, and that has also been a really useful source of leads and information for us. 

Mrs. NOEM. And is that useful when you are dealing with fraud 

prevention or improper payments? 

Dr. AGRAWAL. You know, in our world, these things really run 

together. I mean, there is not a sharp line when you say, well, this 


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42 

claim has now moved from sort of waste to abuse or fraud. Again, 

we do not make that fraud determination. 

Mrs. NOEM. But you did say earlier in your statement, did you 

not, though that you were focused mainly on fraud prevention to 

begin with and were not as concerned with improper payments. 

Dr. AGRAWAL. We have not—— 

Mrs. NOEM. But that is how you developed your FPS system. 

Dr. AGRAWAL. We started the FPS focus has been on some of 

the highest outlier because those outliers really do merit the administrative actions and other activities that law enforcement can 

generate against them. You know, they stand far and above other 

providers, even compared to their specialty or compared to their geographic peers. 

As the fraud prevention system has matured, we are trying to 

pilot and think of ways of moving it even further upstream to address legitimate providers that are not trying to push the envelope 

into abuse and fraud, but are ally, you know, just not meeting certain payment requirements or misusing modifiers, misusing certain 

codes, to see if we can get the system to help focus our efforts on 

the right set of providers that—— 

Mrs. NOEM. Well, considering the amount of improper payments 

and the fact that those numbers go up, I think that is a great place 

to focus. 

Thank you. Appreciate it. 

Chairman ROSKAM. Mr. Kelly is recognized. 

Mr. KELLY. Thank you, Chairman, and thank you for both being 

here. 

I come from the private sector, and what I compare a lot of what 

you do is to what I have done. I am an automobile dealer, and I 

have got to tell you that I had a discussion with one of our General 

Motors service people today, and what I am having trouble understanding is with the data that we collect, I mean, the IRS has absolutely no problem finding out who deposits what where and actually can freeze your accounts when they see something being done 

improperly, even if it is not proved yet. 

I think the confusion is when I look at the amounts of dollars 

that we are talking about, and if it is really as high as it is, if we 

have this data, if you go to an automobile, you have its birthdate. 

The day it is produced has a serial number. From that time to the 

time it is scrapped we know who owns that car, where that car is, 

and everything about it. 

What I have trouble understanding is whether it is improper 

payments or whatever, fraud, you are still using taxpayer money 

that is being used in a wrong way. I mean, we are arguing now 

over a budget and worried about how we are going to defend a sequester and defense is about $100 billion. We are talking about 

Medicare and Medicaid paid out $77.4 billion in improper payments. That is money that probably could be used better elsewhere. 

So my question comes down really if we have all of this analytical data, and I go back to my years in the car business. A couple 

of years ago General Motors had a problem with ignitions. They 

said if you have too much weight on your key chain, it turns the 

car off. Well, I am still in the automobile business. You know, we 

had to go back to owners of 2005 and 2006 cars. We have cars that 


ralbany on LAP520R082 with HEARINGS
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ran off the road and gone into a river, retrieved and rebuilt. General Motors is still responsible for the safety recalls. 

If you were to drive your car into our service department today, 

Doctor, and it is a General Motors car, I can use through the VIS 

program, the vehicle identification system, I can find every single 

repair done to that car, the day it was done, the mileage that was 

on the car, the technician that did the work on the car, which 

would be the doctor working on somebody; the parts that were 

used, and if it was truly done that way. 

So I am constantly sitting down with General Motors. They go 

across all this data and say, ‘‘You know what? You guys seem to 

have a higher repair rate when it comes to brakes that does not 

match up with what happens in your area.’’ 

So all of this data that we collect, we collect the data, but we are 

not getting any closer to getting this fixed, and what I really worry 

about is we are talking about $125 billion of taxpayer money that 

has been wasted, and $77 billion of it is through Medicare and 

Medicaid programs. And there has to be some way with the collection of this data. 

Who is analyzing the data and who is looking at it? It cannot be 

that we do not know where the improper payments are being 

made, and whether it is fraud or improper payments, to me it is 

the same thing. It is wasted taxpayer dollars. 

Mr. Cantrell, you all have access into data that is incredibly deep 

into everything, and as I said, the IRS, I mean, listen. They know 

every day who deposits money across the country in different 

banks. We can ferret out those people, but we cannot find where 

77 and a half billion dollars of improper payments are going? 

That to me is inconceivable in a government that has data and 

has the ability to track every phone call we make, every movement 

we make, but we cannot find out where this money is going and 

say, ‘‘My God, this is taxpayer money that is being wasted in a 

country that is looking to put money where the best return is on 

it for the people who put it in, the taxpayers.’’ 

We are still playing in the dirt with this stuff and still trying to 

figure it out. 

So all the data that you are doing as Mr. Meehan talked about, 

who are we going after and why are we going after? 

I have got to tell you something. If you are an automobile dealer 

and you have these kind of numbers, one of two things is going to 

happen to you. First of all, you are going to lose your franchise, 

and secondly, you are going to get tried in a court for improper 

payments and for fraud. 

So tell me: where are we going with this? Where do you see this 

going? 

Because the numbers have gone up, and listen. I have a collection agency that collects money for me. After it goes beyond 180 

days, I am not going to go chasing somebody. I do not have time 

to do it, but we turn it over to a collection agency. Do you know 

what we pay them? We pay them 35 cents on the dollar that they 

retrieve. 

So please tell me where we are going with these program and 

how are we protecting taxpayers’ money? 


ralbany on LAP520R082 with HEARINGS
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Dr. AGRAWAL. I think the protection of taxpayer dollars is absolutely important. So I think what is important also is not to view 

any specific tool or process as a stand-alone. We use these things 

together to try to be as preventing and effective in our actions as 

possible. 

The FPS, the automated provider screening system, these are examples of tools that we have at our disposal. We have other tools, 

prior authorization stops payments from being made that do not 

meet our requirements. Prepay reviews, post pay reviews; we have 

a moratorium that has been implemented in different parts of the 

country that stops the enrollment of providers because, again, we 

know that that gateway to Medicare is so important that if we stop 

bad actors at the door, it is highly preventive and stops the flow 

of dollars. 

All of these things have to work in concert to really drive down 

all manners of waste, as you identify. 

One thing I would also add is outreach and education to the provider community is central in this. I am not purporting to educate 

the really, really bad actors that just want to steal from the program, but again, 60 percent of the improper payment rate that is 

driven by documentation challenges, we absolutely need to be 

working with providers to educate them on our documentation requirements and get that documentation to improve. 

I think what you will see is that the improper payment rate can 

come down because of issues like documentation, but the dollars 

going out will not necessarily change because the providers will be 

better educated to meet our requirements that they are documenting appropriately. 

The contention is not that the services were not provided or that 

they were not necessary. It is just that the documentation did not 

match. We can do a much better job outreaching to these physicians and get that level of awareness improved. 

Chairman ROSKAM. Mr. Crowley is recognized. 

Mr. CROWLEY. Thank you, Mr. Chairman. Thank you for holding this hearing today as well. I think it is important to remember 

that the Congress has a responsibility to enact laws but also for 

oversight purposes. So I appreciate you doing this in a responsible 

way. 

Doctor, welcome. Mr. Cantrell, welcome as well. 

On the next panel we will have a witness from Visa, and while 

CMS and Visa both use predictive modeling, I can only assume 

that health care is not the same as consumer purchases. You cannot return a repaired knee, for instance, after you have used it. 

How is CMS different from a credit card company? And how do 

these differences affect how CMS does their forward fighting job? 

Dr. AGRAWAL. Yes, thank you for that question. 

I think we are very different from a credit card company, even 

though some of our technology and the way we utilize it can look 

similar on the surface. 

There are three big differences I would highlight. One is medical 

claims are highly complex, I think more complex than the typical 

financial transaction on a credit card. 

Second, the medical claim is really just a shadow of what actually happened in the clinical setting. For anyone to know what acVerDate Sep 11 2014 00:13 Oct 14, 2016 Jkt 021375 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\21375.XXX 21375

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tually occurred in that clinical action you have to look at the underlying medical record, which typically does not come to CMS or 

any payer alongside the claim. 

And third, we have major access to care issues that we want to 

keep from occurring just because of payment denial. 

So let me talk a little bit more about these. First, on the complexity, medical claims are not unidimensional financial transactions. They have information about the provider, which we have 

1.5 to 1.6 million of in our program. They contain information 

about the beneficiary, which we have over 50 million of in our program. And they utilize a language of codes and modifiers. We have 

more than 11,000 of those codes that can be billed on a Medicare 

claim. 

Those things can all be combined in various combinations that 

make analyzing a claim far more sophisticated and involved a process than looking at dollar amounts coming from a particular vendor, you know, attached to a particular credit card. 

Looking at aberrancies connecting these claims over time can be 

very challenging and far more involved, I think, than the typical 

financial transaction. 

Second, medical review or medical record. So the claim is a bill, 

but it was generated after there was a clinical interaction that is 

really documented in the medical record. The medical record does 

not come to CMS with the claim, nor does it go to any payer typically. 

We only see medical records when we audit claims, and we audit 

far less than one percent of claims, given that we get over a billion 

claims per year. So oftentimes in order to corroborate that a claim 

is actually aberrant, we have to look at the underlying medical 

record and see what was aberrant about that clinical interaction, 

again, requiring more documentation than you typically need in a 

financial transaction. 

And third, access to care. When we deny a claim, whether it is 

one claim or a series of claims, we are denying payment to a physician or provider and denying a claim about a service that a beneficiary may really need. We want to be very careful when doing 

that because we do not want to cause access problems in our program because of an admittedly very vigilant and very productive 

program integrity approach. These things always have to hang in 

the balance with each other. 

We know that we are not denying payment for a TV. We are denying payment for what could be a legitimate medical service, and 

we want to make sure we do that very carefully. 

Mr. CROWLEY. Mr. Cantrell, before you respond if I could just 

for the sake of time and get another question in and you can also 

elaborate on this first question as well, but we all know that health 

care fraud goes beyond Medicare and Medicaid. How is CMS and 

other agencies within the Federal Government working to involve 

the private sector anti-fraud efforts? 

Mr. CANTRELL. Sure. I will start. The Health Care Fraud Prevention Partnership is something that CMS is leading and we are 

participating in since the very beginning with conversations about 

developing this partnership that includes private payers. There is 

a lot we can learn from each other. 


ralbany on LAP520R082 with HEARINGS
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Fraud, as you said, does not just affect government programs. It 

affects private insurance as well. So we often see and we do see the 

same schemes perpetrated against both public and private, and we 

work very closely in certain investigations to ensure that those private funds are recouped when someone is filling from both programs. 

So that partnership is meant to increase and build upon that relationship, begin sharing data, and I think that is going to be important for us going down in the future. 

Dr. AGRAWAL. I agree with everything that Mr. Cantrell has 

said. The only thing I would add is we are also working, you know, 

beyond the partnership context, which I certainly agree with. We 

are working to extend our reach into other private plans. 

So Medicare Part C plans, Part D plans. We have been working 

very hard in the agency to get and counter data, other sources of 

data from these plans so that we can better assess the kind of utilization that is occurring. 

We recently at the end of last year extended our enrollment requirements into Part D so that we could have direct line of sight 

on prescribers in Part D, and you know, they currently relate 

mainly to Part D plan sponsors, but you know, we are extending 

our authority there so that we can roll out many of the same enrollment and screening approaches that we have in A and B to Part 

D. 

We are also doing the same on the Medicaid side and looking to 

work much more closely with Medicaid managed care plans in the 

private sector. 

Mr. CROWLEY. Thank you. 

Thank you, Mr. Chairman. 

Chairman ROSKAM. Mr. Holding is recognized. 

Mr. HOLDING. Thank you, Mr. Chairman. 

I want to jump right into the questioning and pick up again on 

a theme that Mr. Meehan touched on regarding interagency coordination between CMS, HHS and DOJ. 

So to the both of you, do you think this interagency coordination 

is as good as it can be? Dr. Agrawal, you can start. 

Dr. AGRAWAL. Thank you. 

I think it can always be improved. So we have done a lot in 

terms of data sharing. Basically every system that I have access to 

law enforcement has access to as well. That includes our fraud investigations database, our FPS that we have been discussing, the 

integrated data repository at CMS. That is a large cache of a huge 

number of Medicare claims and other analytical tools. 

So we have certainly done a lot to try to make sure that law enforcement entities have access to all the data that CMS can provide, and I am sure we can do more than—— 

Mr. HOLDING. When FPS is generating leads, you know, you 

see the anomalies and you find the leads and you prioritize them; 

so do you turn around and share those directly with OIG? 

Dr. AGRAWAL. We give OIG real time direct access to the system itself so they can see leads as they are being generated. In addition, we—— 

Mr. HOLDING. Does OIG take advantage of that? I mean, do 

you see the leads there and do you proceed—— 


ralbany on LAP520R082 with HEARINGS
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Mr. CANTRELL. We use other systems they have made available 

to us more directly than the actual Fraud Prevention System. We 

have tools like the IDR, the Integrated Data Repository, 1PI. These 

are tools that we did not have five years ago. 

So I will say the access to data has been an area of great improvement over the last five years or so, and the partnership has 

led directly to that. We have over 200 individuals from our office 

who have direct access to this Medicare claims data that we did not 

have before. Now we have access to prescription drug data that we 

did not have before through these systems. 

I think there are definitely areas that Dr. Agrawal mentioned before, Medicare managed care, Medicaid data, and prescription drug 

data, where we can improve upon that access to data and monitor—— 

Mr. HOLDING. So you do not have access. Is that an obstacle 

then, not having access to that specific data there? 

Mr. CANTRELL. We have access to parts of that data, but it is 

not the same level of access, kind of real time access that we have 

for fee for service data. So there are definitely some opportunities 

there to build upon what we have done in fee for service so that 

we can have that level of near real time access to managed care 

data. 

We know there is fraud out there, but we just do not have visibility right now into Part C really. 

Mr. HOLDING. So do you have any way of evaluating or measuring the quality of your coordination? Is there a standard by 

which you can measure it? 

Mr. CANTRELL. I think it is very subjective in terms of that. We 

have so many leads that come from so many sources, and CMS, the 

referrals we get from the contractors are just one small part of 

that. In fact, I think it is about 10 to 15 percent of the leads we 

get, cases that we open are coming from CMS referrals. 

We work with our law enforcement partners. That is the bulk of 

the information we get. Whistleblowers have always been the 

greatest lead. 

Mr. HOLDING. It seems like you get a lot of leads and a lot of 

information coming in, but they are not being prioritized. They just 

kind of come into a basket and you try to figure out. 

Mr. CANTRELL. They are absolutely—— 

Mr. HOLDING [continuing]. Gets leads and you prioritize them. 

The OIG is getting a bunch of information from a lot of different 

sources, and do you have a method for prioritizing them? 

Mr. CANTRELL. We absolutely do. So we have a process. You 

know, every lead that comes in the office goes through an analysis 

by our Special Agents in Charge, our Assistant Agents in Charge, 

the investigators. They balance it against existing workloads and 

determine based on whether there is potential harm to patients, 

the financial impact on the case, what level of evidence has been 

provided up front. Is it a whistleblower or is it an anonymous lead 

with nothing really to corroborate that information? 

Mr. HOLDING. Right. 

Mr. CANTRELL. So we prioritize continuously. 

Mr. HOLDING. So in the next panel we are going to have some 

witnesses. I have read their written testimony, and they point out 


ralbany on LAP520R082 with HEARINGS
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if you could share all of this information across the entire spectrum, it would be a much more effective way to combat waste, 

fraud and abuse. Now, I understand there are privacy concerns, 

but do you all see a way forward to share this data uniformly 

across the spectrum of stakeholders in here who want to combat 

waste, fraud and abuse? 

Dr. Agrawal, do you want to hit that? 

Dr. AGRAWAL. Sure, absolutely. 

Mr. HOLDING. We are running out of time, so make it quick. 

Dr. AGRAWAL. I will do my best. 

Mr. HOLDING. All right. 

Dr. AGRAWAL. I have not been known for making it quick, but 

I will try. 

So I think that is absolutely right. You know, one of the principles behind the Health Care Fraud Prevention Partnership that 

Mr. Cantrell mentioned is exactly data sharing. I think for it to be 

effective it has to be purposeful, purpose driven, right? So it is not 

just a huge mass of data without any guidelines for what that data 

means or why we are sharing it. 

In the partnership we have taken a very steady, objective driven 

approach to sharing that data. What is it that we are trying to accomplish? What is the minimum amount of data that we need to 

exchange in order to meet that objective? 

So that we are not just exchanging a bunch of data that then 

overwhelms systems, overwhelms staff time to sift through it. We 

are doing it in a very purposeful driven way. I think that is the 

key to all of this so that, you know, we are really achieving impact 

with all of this data work. 

Mr. HOLDING. Mr. Cantrell, I will allow you to follow up in 

writing. Thank you. 

Thank you for your indulgence, Mr. Chairman. 

Chairman ROSKAM. Mr. Smith is recognized. 

Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman. 

My understanding is that the FPS generates leads for investigations by showing anomalies in claims data. I want to know if there 

is a risk that the FPS system would flag legitimate claims and 

send them for investigations to a contract. Could this potentially 

tie up resources on legitimate claims instead of going after actually 

fraudulent ones? 

Doctor, what does CMS do to mitigate this concern? 

And does CMS have any standard procedures in place to screen 

leads from the FPS before sending them on to the ZPICs? 

Dr. AGRAWAL. Yes. Thank you for the question. 

So our screening and prioritization process starts up front when 

the model is being developed. So we develop these models working 

with our contractors that know what is happening on the ground. 

We develop them working with law enforcement and get their 

input on not just what is outlier behavior because anybody can find 

that in a data set, but really the outlier behavior that we ought to 

be most concerned about, that we can take administrative action 

against, that might be threatening to the health and safety of our 

beneficiaries. 

And that is, I think, very specific, experience driven knowledge, 

that we can in viewing the models right at the front end so that 


ralbany on LAP520R082 with HEARINGS
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we are sifting out, you know, outlier behavior that is otherwise 

pretty innocent. 

Secondly, even when, you know, once claims start streaming 

through the system against the model, there is an internal 

prioritization based on just how many times you are hitting that 

model or a variety of models. So the more models you hit, the 

worse you look as a billing provider or supplier. 

And I think the system does a great job of both helping us further prioritize things just on a very technology, data-driven manner. 

And finally and extremely importantly, we do not take administrative actions without human beings getting involved, except 

where it is very clear that a single claim does not meet payment 

requirements, right? We can deny that kind of claim, but when you 

are trying to build a case, you need to do other on the ground work. 

You need to talk to the provider. You need to get medical records. 

You need to interview beneficiaries. 

That human interaction makes sure that we are not implementing an administrative action against an otherwise legitimate 

provider. 

Mr. SMITH OF MISSOURI. What is the rate of false positives 

in the leads generated by the system? 

Dr. AGRAWAL. I am not sure that it makes sense actually to 

speak in terms of a false positive rate because, again, there are so 

many filters that stand between a claim coming in and being labeled aberrant or flagged in some way and an administrative action being taken. Those filters are both technology driven as well 

as human driven as I described. 

Our focus has been let us not take an administrative action 

against a provider-supplier that is legitimate or has a billing problem that we can correct through education and outreach. We want 

to reserve the administrative actions for those providers and suppliers that are really egregious. The only manner of correcting their 

behavior is the administrative action or they have demonstrated a 

consistent unwillingness to follow our policies. 

So in that sense, you know, because there is not just an automated trigger leading to an action, it does not really make sense 

to speak in terms of a false positive rate. 

Mr. SMITH OF MISSOURI. So there is no like data to say that 

there is any kind of false positives? 

Dr. AGRAWAL. I do not think that there is. It is a question that 

I can take back to our analysts and see if they track anything like 

that. You know, I think what we actually spend more of our time 

on is rolling out models and then, you know, getting input from our 

contractors, from other sources to help us decide is the model working or not. 

And where the model is not working, we can make refinements 

to get it to improve. 

Mr. SMITH OF MISSOURI. Okay. That leads to my next question. According to GAO, in 2012, only five percent of all fraud contractor leads came from the FPS. Do you have updated numbers on 

that? 

Dr. AGRAWAL. Not that I am aware of, but again, I can take 

that back and see if there are updated numbers. 


ralbany on LAP520R082 with HEARINGS
50 

You know, that GAO report was quite early, as you know, in the 

development of the FPS. As we were building the technology, we 

had outstanding questions about how to integrate that with our existing work and what portion of the work it should drive. 

I think what the GAO found was something like ten percent of 

all of our work was initially driven by the FPS. As the FPS matures, takes on more models and its adoption rate has increased, 

I expect that number has gone up, but again, we can take that as 

a request back to determine. 

Mr. SMITH OF MISSOURI. That would be great. 

Once the contractor gets the lead, what happens? 

Dr. AGRAWAL. So a variety of actions can be taken. One thing 

that we have tried to do to make the FPS system more user friendly is by trying to present information in a way that makes it more 

actionable immediately for the contractor. So they do not get just 

a bunch of data and numbers. They actually get this data organized in a way that helps them do their investigative work. 

So what they will do often is they will take the data from the 

FPS. They can utilize other systems like 1PI to do any additional 

analysis that needs to be done. They can conduct very manual processes, like interviewing providers, interviewing beneficiaries, conducting site visits, conducting medical review of the underlying 

medical record, and then ultimately building that case for an administrative action or law enforcement referral. 

Chairman ROSKAM. Thank you. 

Dr. Agrawal, I have got a few questions for you. As I was reading 

your testimony and then listening to you this morning, I felt like 

I was the sales manager listening to a salesman who had been out 

working hard making a bunch of sales calls and was coming in and 

saying, ‘‘Look. I called on this customer and I have done this and 

I took this person to lunch, and I feel kind of like the sales manager that is saying, ‘Hey, where are the orders? Where is the final 

product?’ ’’ 

And I recognize that you are in a complicated milieu, and I am 

not here for a second saying that the responsibility that you have 

is easy or that I have got the Peter Roskam five-point easy solution 

for solving things. Yes, I have got that on a laminated bookmark 

for you, my friend. 

[Laughter.] 

Chairman ROSKAM. So I accept at face value that this is terribly complicated. But when I opened, I opened with this idea and 

that is, look, we are really struggling on Capitol Hill right now to 

fund a super important program as it relates to Medicare. These 

choices that are before us are all revenue seeking choices basically, 

and this SGR deal that is being negotiated, the ‘‘doc fix,’’ is really, 

really hard. It is hard on providers, and it is hard on seniors, and 

it is hard on everybody. 

And then I look across the table at you, figuratively, based on 

your responsibility, and I think you have got the answer. You have 

got the money, and you have this incredible responsibility. 

And I listen today and I read, and I feel underwhelmed by the 

direction that things are going. I just want to put something up on 

the board, which is sort of my frame of reference. 


ralbany on LAP520R082 with HEARINGS
51 

And you exchanged with Mr. Crowley and you made the argument, look, this is different than a Visa bill, and I accept that it 

is kind of different than a Visa bill, but I do not think it is this 

different. So Visa is doing $10 trillion. I mean that is thousands 

of billions of dollars on an annual basis and their numbers are 

practically de minimis compared to 12 billion or a 12 percent rate. 

There was something that you said in your testimony. You had 

it in your written testimony. It jumped out at me, and you reiterated it today. I just want to read a sentence to you and tell you 

how it struck me. So this is what you said, and it is not a bad 

thing, but just sort of the way in which it was presented, I perceived it differently than what you were trying to communicate. 

So this is what you said. ‘‘When FPS models identify an egregious suspect or aberrant activity, the system automatically generates and prioritizes leads for review and investigation by CMS’ 

Zone Program Integrity Contractors.’’ 

Now, you would say that and you would say, hey, that is a good 

thing. I read that and I say you have got to be kidding me. This 

process is so slow and so ridiculous and so hamstrung that it is this 

identifying leads and all of this sort of process? 

We are going to hear later on, I think, from Ms. Frizzera, who 

is going to give us an example in Miami. You may have seen her 

testimony, but an example in Miami where they identify this stuff 

and say this is a real problem. She goes to the IG, and it is slow, 

slow, slow. Meanwhile money is going out the door. 

So I think what you are hearing from many folks on this Committee is the level of activity is significant. Nobody is arguing that 

you are not working hard. But what we are saying is this has to 

improve, and this is not like a hope and a dream sort of improvement. This has to improve because this amount of money going on, 

and you know these numbers better than I do; you are marinating 

in this stuff; these numbers have to improve because it is simply 

unsustainable and the public is losing confidence and so forth. 

So here are a couple of questions. You started to address this 

when Mrs. Noem was asking, but I do not think you got to it. Why 

is the improper payment rate going up? 

Dr. AGRAWAL. I think as I mentioned earlier one of the biggest 

drivers of the improper payment rate is documentation. So here 

again I think we see the balance of the more vigilant on program 

integrity and then at the same time potentially driving up the rate. 

One of the biggest drivers of the improper payment rate is the 

home health face to face requirement now which is part of the Affordable Care Act. I think we can all agree that a clinician seeing 

a beneficiary who needs home health services and having that 

interaction be face to face, documenting the need for home health 

is a strong solution. It helps address one of the areas that we know 

has been endemic with aberrancies and problems, home health 

services. 

While I think the concept makes a lot of sense, the idea is very 

clear. Providers have a hard time documenting that face to face encounter, and so the home health improper payment rate has now 

jumped to over 50 percent, in large part driven by this, I think, 

well meaning, well intentioned, well thought out face to face requirement. 


ralbany on LAP520R082 with HEARINGS
52 

So one could argue let us eliminate the requirement, but I think 

that is not the right answer clinically, right? The right answer for 

us is educate these otherwise legitimate providers and get them to 

raise their level of documentation so that it meets our standard. 

That would bring down the improper payment rate. 

You can see this in a wide variety of clinical circumstances, and 

again, you know, so you can see—— 

Chairman ROSKAM. You think that there has been a new factor 

that has been introduced. The new factor is a new requirement, 

and that is influencing the payment rate or the improper payment 

rate. 

Dr. AGRAWAL. There is a variety of new factors, correct. 

Chairman ROSKAM. Okay. I have got it. 

Do you have confidence that that is the intervening cause, and 

that that is it alone? 

Dr. AGRAWAL. Yes. We do not just measure a high level of improper payment rate. We drill that down to the specific provider 

categories, the types of services that are leading that rate. 

Home health is consistently elevated, and it has gotten higher. 

DME supplies are consistently elevated. Skilled nursing facilities, 

consistently elevated. So a lot of our activities around lowering the 

rate focus on the areas of the highest errors. 

Chairman ROSKAM. But why does FPS only have an impact on 

one percent of Medicare claims? 

Dr. AGRAWAL. I think FPS is a new system. In part that is the 

answer, right? So the initiating legislation, as obviously you well 

know, came out in 2010. This is our third year of operations. Our 

maturity in building the system has improved dramatically every 

single year. 

If your point is we need to do more, we are totally aligned on 

that. We want to do more. I have a staff that works—— 

Chairman ROSKAM. Well, what is holding you back? I mean, 

one percent just seems incredibly underwhelming. 

Dr. AGRAWAL. You know, we have made a lot of investments 

in data analytics to identify leads for our work. Those investments 

are paying off. I think what we need to focus on is getting much 

more efficient from lead to final action. 

Certainly I spend a lot of my time focused on making our contractors more efficient, measuring their performance, making sure 

that we are paying them to do the work that we want, and getting 

the kind of end results that we are looking for. 

So, again, it is a continuum of activities. It is not just get a lead 

and take an action. We do have to meet a bar for taking an action. 

We do need to be fair to providers, even the bad actors, to make 

sure we are doing this the right way, and we want to do it in a 

way that does not victimize the innocent, legitimate providers that 

are just doing their work. 

Chairman ROSKAM. How can you not know the number of 

claims that have been stopped by FPS? 

Dr. AGRAWAL. We do. I will get you that number. I can give you 

a dollar amount as well as the number of claims. 

Chairman ROSKAM. Okay. I know that you use all of these tools 

in conjunction with one another, but how do you identify whether 

one program, especially FPS, is working in particular? 


ralbany on LAP520R082 with HEARINGS
53 

So what is the metric to say, if you are only hitting up against 

one percent, what is the metric to say it is working at all? 

Dr. AGRAWAL. The FPS, you mean? 

Chairman ROSKAM. Yes. 

Dr. AGRAWAL. Well, we have a very viable metric. We are 

working with the Office of Inspector General. As you know, the 

statute required certification of our savings numbers. We have engaged in an audit every single year since the FPS has been implemented, including this year, and the OIG certified both our identified savings numbers as well as the adjusted number. So I think 

that is an extremely viable metric of the financial impact of FPS. 

In addition, what we published in our report last year are all the 

actions that FPS has led to beyond the financial impact, right? We 

have taken administrative action against more than 900 providers 

and suppliers because of the FPS, not all the other processes that 

we have, which are numerous, but specifically because of the FPS. 

We have initiated new cases and investigations because of the 

FPS. We have made existing cases get more efficiently to outcome 

because of the FPS. Again, that is a focused piece of work and 

audit on the FPS, but my point, I think, continues to be the FPS 

is one tool at our disposal. Look at the broader picture and you will 

see a picture where we really have moved from a ‘‘pay and chase’’ 

model to a recovery—I am sorry—a prevention based model. 

Chairman ROSKAM. So the funding for FPS is coming to a close. 

Where are we on that? 

And if so, how are you paying for it? 

Dr. AGRAWAL. So at the end of this fiscal year we will have exhausted the initial funds given to us through the Small Business 

Jobs Act, and what we are doing is transitioning the FPS to utilizing other existing program integrity funds. 

Chairman ROSKAM. Getting back to your point that this is a 

more complicated system than Visa, does that not create more opportunities for you though? Does that not actually create more data 

points and more opportunities to say, ‘‘Now that is looking weird 

and that is looking off and that is inconsistent,’’ and so forth, rather than just trying to figure out if Joe Crowley is buying, you know, 

$10,000 worth of stereo equipment on—— 

Mr. CROWLEY. Mr. Chairman, keep me out of it if you do not 

mind. 

[Laughter.] 

Chairman ROSKAM. Do you follow me? I mean, you have got a 

lot of data. You have got a lot of stuff, and to your own point, look, 

this is highly complicated and integrated, but does that not create 

more opportunity, sort of more facets to look at? 

And if they are off, you can see the hues and the angles are off, 

and it just does not make sense. So do not pay it. 

Dr. AGRAWAL. Yes, that is very interesting. So I think we are 

trying to utilize every available opportunity to take administrative 

action. So, again, we have lots of tools. We can conduct the site visits that I mentioned. We have the enrollment screening requirements. We have analytic systems like the FPS. We can conduct social network analysis that looks at how one provider relates to another providers, especially as—— 


ralbany on LAP520R082 with HEARINGS
54 

Chairman ROSKAM. You see, if all of that is happening well, 

then the number gets closer to the Visa number. 

Dr. AGRAWAL. But again, this number is the improper payment 

rate, right? So these providers do not necessarily need to be kicked 

out of the program. They have a problem which is documentation 

or providing the right service in the wrong location, but those are 

not the same types of problems that we want to address by kicking 

folks out of the program. Those are the problems that everyday clinicians have. 

Chairman ROSKAM. Yes, but you are arguing how many angels 

can dance on the head of a pin here. We are still talking about 12.7 

percent of money, dollars, that are going out the door, dollars that 

cannot be used for the ‘‘doc fix,’’ for example. 

So I understand that there is a distinction that in some cases is 

an important distinction with a difference, but in this case it is sort 

of a distinction without a difference. The money is still the money. 

You are still at 12.7 percent. 

I mean Visa is not just lapping you. Do you know what I mean? 

You are not even in the same order of magnitude with them. 

And I guess it comes down to this, and let me just close by this. 

I think both sides of the aisle have a very high expectation of what 

you are doing, and you are viewed as the trustee of literally billions 

of dollars. Yes, it has gotten more complicated over the years. The 

fraudsters and the hustlers are totally on top of their game, and 

they are super aggressive and super bright, but we have to have 

an improvement all the way around. 

And, yes, it is a more complicated system than buying a stereo 

and so forth, but out of that complication comes a real opportunity 

in terms of more exposure. And so I think the sense that you are 

getting from this Subcommittee today is that we look with an urgency about what you are doing, and we are rooting for you, but 

we are disappointed. Actually I am, and I know, listen, nobody 

wants to disappoint people, but that is all said. We have got to improve this whole scene. 

So I appreciate your coming in, and I appreciate very much your 

disposition. 

Oh, and we have been joined by the gentlelady from Tennessee. 

So let me yield to her for a question as well. 

Mrs. BLACK. And thank you, Mr. Chairman. I apologize for 

being tardy. It is, as you know, a very busy day, but a very interesting subject, and I appreciate being able to ask a question. 

So Mr. Agrawal, I want to ask you: your FPS system, I understand it is working better this year; is that correct? 

Dr. AGRAWAL. Yes. 

Mrs. BLACK. Okay. So you mentioned the public-private partnership. Are they also working better this year? 

Dr. AGRAWAL. I think that partner has continued to grow and 

expand, yes. 

Mrs. BLACK. Okay. So, Mr. Cantrell, are CMS and law enforcement partnerships also working better this year than last year? 

Mr. CANTRELL. We are constantly in a state of improvement I 

would say. 

Mrs. BLACK. Do you think that it is working better this year 

than it was? 


ralbany on LAP520R082 with HEARINGS
55 

Mr. CANTRELL. Our access to data is better than it ever has 

been. I think we are working very closely to identify that point in 

time where we turn from administrative action to investigation and 

prosecution. 

Mrs. BLACK. So you both say that it is working better, and yet 

what we see is an increase rather than a decrease in the fraud. So 

can you address that, why that might be the case? 

Mr. Cantrell, do you want to go first? 

Mr. CANTRELL. Sure. I think, one, we have greater visibility. 

We are seeing more in the data. So we are able to identify more 

suspect providers. That is potentially part of it, just the fact that 

we can now see more than we used to be able to see through the 

data and identify potentially fraudulent providers. That is part of 

it. 

We have seen an increase in our criminal convictions. Once people get past, you know, the front lines of defense of prevention, 

there are more of them committing fraud against the program than 

we are actually identifying and convicting. I think that is a product 

of our deploying our resources based on the data to the areas where 

the fraud is greatest. 

So our Strike Force teams have increased criminal convictions 

because we are putting our resources in areas where there is the 

most fraud and the greatest amount of risk. So I think that in part 

is due to just our being more effective and putting our resources 

where they can have the greatest impact. 

Mrs. BLACK. Would you like to also answer, Mr. Agrawal? 

Dr. AGRAWAL. I actually think that was a very complete answer. I agree with it. 

Mrs. BLACK. Well, as the chairman has already said, you know, 

we applaud you for continuing work, but when we see that the 

numbers are increasing rather than decreasing, and I certainly understand that now that you have a better system where you can 

identify them that you are going to see more of that. 

But we have got to be able to tell our constituents that we are 

doing everything we can with their tax dollars to make sure we are 

protecting them. So I will be very interested to hear as you move 

forward about the successes rather than what we are seeing, the 

increases. 

Thank you. 

Thank you, Mr. Chairman. 

Chairman ROSKAM. Dr. Agrawal, one other question. Can you 

divide out how much is fraud versus improper payments? 

Dr. AGRAWAL. No, that is a very challenging question. So there 

is not a ready answer for that kind of question. There is no methodology currently that determines that a claim is fraudulent versus 

something else. 

The center has actually been working on devising such a methodology. We have an initial pilot that we will be launching looking 

at home health claims. 

As you can imagine, in order to figure out that a claim is fraudulent you have actually got to do all of the work in terms of figuring 

out what is underneath that claim. Was the beneficiary seen? Is 

there a face to face encounter? Is the order legitimate? Were servVerDate Sep 11 2014 00:13 Oct 14, 2016 Jkt 021375 PO 00000 Frm 00059 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\21375.XXX 21375

ralbany on LAP520R082 with HEARINGS
56 

ices given? All of that stuff and put it together in a picture of that 

claim to tell you, yes, this claim is potentially fraudulent or not. 

So we have devised such a methodology. We will be rolling it out 

and trying to arrive at the first real fraud rate in a particular benefit category, but there is currently no such rate that we are aware 

of. 

Chairman ROSKAM. It seems amazing to me. I mean really 

foundational that you do not have that capacity to be able to discern one from the other. I mean, I am really surprised by that because how do you know how to direct resources then? 

Dr. AGRAWAL. Yes. That is a really important question. So the 

reason it is challenging is because fraud is a legal determination. 

Chairman ROSKAM. I understand that it is challenging. 

Dr. AGRAWAL. Well, it is more. So, yes, it is hard, but if it takes 

a legal determination to say that a claim is fraudulent, then that 

quickly leaves the sphere of control that we have. Right? I mean, 

that is a criminal justice determination. 

What we can do is establish that services were not granted, 

which is often very indicative of fraud. 

Chairman ROSKAM. Look. There is a difference though. So let 

us not parse the legal stuff. The prosecutors may not be able to 

prove in a court of law intent and all that sort of stuff, but you 

know when something is not just a physician who did not check the 

right box off or write the right sort of question. That is poor documentation. 

But if there is a malicious intent to get at this, that is not bad 

documentation, and it seems like it is a super important point, particularly as it relates to the third point you made in talking to Mr. 

Crowley, and that was kind of your inherent defensiveness about, 

hey, this is an access to care issue and if we pull the plug on this, 

then it is going to adversely impact patients and so forth. 

So I find it amazing that you cannot discern between these two, 

and there is probably nothing that you are going to say right now 

that is going to take away that sense of wonder. 

And we were just joined by the Ranking Member, and with your 

welcome, Mr. Lewis. I understand that you have been detained. 

You are now recognized if you would like to be for your opening 

statement, which can kind of be a closing statement, but it is a 

good statement nevertheless. 

Mr. LEWIS. Well, thank you very much, Mr. Chairman. I must 

apologize to you and other Members for being late. I had to be over 

in the other side of the Capitol, another body, to introduce a candidate that the President has nominated to become the Deputy Attorney General. So that kept me. 

I understand that we are going through the question phase? 

Chairman ROSKAM. We just finished with the first panel. 

Mr. LEWIS. Okay. Could I yield to Mr. Crowley to raise a question? 

Chairman ROSKAM. Yes. 

Mr. CROWLEY. Thank you. Thank you, Mr. Lewis, and thank 

you, Mr. Chairman. 

I think, Doctor and Mr. Cantrell, the image that the chairman 

has placed is interesting when you look at the difference between 


ralbany on LAP520R082 with HEARINGS
57 

what is then the private sector in terms of Visa and banking fraud, 

and the number 12.7 percent is an incredible number to look at. 

I was wondering though that under the Affordable Care Act you 

have been given new tools to help go after fraudulent works. Could 

you describe for us, Mr. Cantrell, some of those new tools in terms 

of criminal prosecutions and, I believe, denying a real moment by 

doctors who have conducted willful acts of fraud? 

And could you also tell us what would happen to those new tools 

if the Affordable Care Act were to be undone? 

Mr. CANTRELL. Well, I think most of the tools that we were 

given in the Affordable Care Act are administrative tools that CMS 

deploys. We were given an initial amount of funding which allowed 

us to increase our boots on the ground, our agents out in our Strike 

Force cities, which has been very helpful. 

Some of the administrative tools that CMS does have, we worked 

with them to deploy those tools to stop payments as early as we 

can in our investigations to support the stoppage of payments in 

fraud cases. 

Dr. AGRAWAL. So you are absolutely right. The Affordable Care 

Act gave the agency a number of new tools. They provide enrollment standard that you discussed. 

We are on a five-year cycle now. We are validating every single 

provider and supplier in Medicare. We will do that every five years. 

We are actually at the end of our first five-year cycle. 

After nearly being complete with that revalidation process, over 

500,000 enrollments have been removed from the program so they 

can no longer bill. 

Mr. CROWLEY. So have doctors actually been disenrolled? 

Dr. AGRAWAL. Doctors, DME suppliers, home health agencies, 

absolutely. 

Mr. CROWLEY. For fraudulent acts? 

Dr. AGRAWAL. Well, for not meeting enrollment requirements. 

Mr. CROWLEY. Under the Affordable Care Act. 

Dr. AGRAWAL. Yes. 

Mr. CROWLEY. The new tools you were given. 

Dr. AGRAWAL. Absolutely. 

Mr. CROWLEY. So would that be a tool that would be taken 

away from CMS if the Affordable Care Act is unmined? 

Dr. AGRAWAL. Yes. Our approach to screening and enrollment 

and revalidation is almost entirely dependent on the Affordable 

Care Act. 

Mr. CROWLEY. So is it fair to say that some of the tools that 

you have and that you are now employing are starting to make 

their way through the system and people are beginning to understand just the serious nature of what ought to have been obvious 

in the first place in terms of the fraud that had been taking place 

both by physicians and patients? Is that something that you think 

is happening now? 

We should expect to see this number go down? 

Dr. AGRAWAL. I think there is a strong sentinel effect of our activities that is beginning to take hold. So, you know, revocation allows us to kick a provider out of Medicare, essentially stopping all 

Medicare reimbursement. That is very disruptive for the majority 

of providers. 


ralbany on LAP520R082 with HEARINGS
58 

OIG can actually take a more disruptive action, obviously a very 

positive one, which is exclusion, and that does not allow them to 

participate in any Federal program, and I think being able to take 

on data from the OIG about who has been excluded, being able to 

take our own revocation actions, they have significant sentinel effects. People see that and say, ‘‘I think I need to fly straight,’’ or, 

‘‘I want to fly straight because I do not want to run afoul of this.’’ 

Mr. CROWLEY. Right. So folks who are watching us on C–SPAN 

or pay attention to this hearing today, this is an opportunity to 

send a message loud and clear that the sheriffs in town now have 

new tools. 

Dr. AGRAWAL. Yes, sir, all people watching C–SPAN. 

Mr. CROWLEY. Under the Affordable Care Act that were not in 

place before that, and that if they go astray of the rules and of the 

law, that they will fully be prosecuted under the Affordable Care 

Act; is that correct? 

Dr. AGRAWAL. Yes, sir. 

Mr. CROWLEY. I appreciate it. 

Mr. Chairman, I do appreciate your hearing today, and I do 

think this number is a serious number that needs to be addressed. 

I also believe under the Affordable Care Act and the tools that 

have been given to CMS and to the Administration as well as over 

on Justice, that we are going to see that number come down. 

And with that, I yield back to the gentleman from Georgia. 

Mr. LEWIS. I yield back, Mr. Chairman. 

Chairman ROSKAM. I would like to thank our panel for being 

with us this morning. I appreciate your time and your courtesy and 

your willingness to invest it with us, and you are dismissed, and 

we will welcome our second panel to join us. 

Well, as we have previously announced, I now recognize Mr. 

Lewis for his opening statement. 

Mr. LEWIS. Mr. Chairman, thank you for holding this hearing 

and for your work on this important issue. 

I also would like to thank all of the witnesses for being here 

today. Thank you for giving of your time. 

On July 30th, 1965, President Lyndon B. Johnson signed a bipartisan law to establish Medicare and Medicaid. It was a great step 

in realizing a long overdue promise to America’s seniors. The Federal Government would never forget the lesson of the Great Depression, where the sick, the poor, and the downtrodden felt hopeless and forgotten. 

The success of Medicare did not just happen overnight. It took 

decades of work, study and negotiation to develop this sacred pact 

with seniors. For years our predecessors on this very committee 

worked tirelessly to get the package just right. 

We have a responsibility to do everything in our power to ensure 

that this program continues for generations yet unborn. Today 

there are about 54 million senior citizens and persons with disabilities who depend on Medicare. These people are our parents, our 

neighbors and our friends. Every American, especially those who 

work their entire lives, deserves a Federal safety net. They are entitled to a program that works. 

I want to thank the Administration for working with us to fight 

fraud in the Medicare program. Nearly 50 years ago this Congress 


ralbany on LAP520R082 with HEARINGS
59 

made historic progress in ensuring that every American has a 

chance to live a healthy, long life. The Affordable Care Act continues that dream. This landmark health care law provided the 

government with better tools to prevent fraud. 

Just last year, the government and Anti-fraud Program recov- ered more than $3 billion from individuals and companies who 

tried to defraud the program. In the last three years, this Administration has recovered seven dollars for every dollar spent on antiFraud investigations. 

These savings have real benefits for Americans who rely on 

Medicare every single day. We must do all we can to protect Medicare. It is not a Democratic issue or a Republican issue. It is an 

American responsibility. 

Today I look forward to learning what more is needed to fight 

Medicare fraud and protect this important national treasure. 

Again I would like to thank the witnesses for their hard work. 

Thank you for your testimony. 

And thank you, again, Mr. Chairman, for allowing me to read my 

opening statement, which is later than opening. 

I yield back. 

Chairman ROSKAM. Always welcome. 

Mr. LEWIS. Thank you. 

Chairman ROSKAM. Thank you. 

Well, we would like to welcome Charlene Frizzera, former Acting 

CMS Administrator; Kirk Ogrosky, former Deputy Chief of Department of Justice Criminal Fraud and now at Arnold & Porter; Mark 

Nelsen, Senior Vice President for Risk Products at Visa; as well as 

Lou Saccoccio, CEO of National Health Care Anti-Fraud Association. 

Thank you all for your time today. You heard the previous panel 

I am sure, and so feel free to interact with things that you heard 

before either that you agreed with or other points of view or you 

disagreed with. That I think would be helpful for us today. 

We have got your written testimony. It is part of the record, and 

now you are each recognized for five minutes and then we will follow on with the questions. 

So, Ms. Frizzera, welcome. 

STATEMENT OF CHARLENE FRIZZERA, PRESIDENT AND CEO, 

CF HEALTH ADVISORS 

Ms. FRIZZERA. I want to thank Congressman Roskam and the 

Committee Members for inviting me today to talk a little bit about 

Medicaid fraud. 

During my time at CMS, I worked there for over 30 years, and 

I served as the Regional Administrator in the Philadelphia Regional Office. I was the Director of the Medicaid and CHIP Program under Tom Scully. I was the Chief Operating Officer under 

Mark McClellan, and I was eventually the Acting Administrator 

from January of 2009 until Don Berwick and Marilyn Tavenner 

came. 

The reason I think that is important is over a 30-year career 

span at CMS, I can tell you every Administration wanted to fight 

fraud, but you know, as I think you will see from my testimony 

today, based on my visit in Miami, you know, a lot really has not 


ralbany on LAP520R082 with HEARINGS
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happened, and I think that there are many ways that particularly 

the Fraud Prevention System can be used to really do a much better job of detecting and preventing fraud. 

I do want to just start out by saying the people at CMS work incredibly hard every day. You know, they have very difficult jobs, 

and it is easy for me on the outside now to come and tell you what 

they should do, but as you heard today, there are so many different 

pressures on them from the beneficiaries to providers to, you know, 

folks on the Hill to their own internal demands that it is very difficult to really do this job. 

However, I do think in the Fraud Prevention System there are 

some pretty significant changes that can be made fairly easily to 

make a big improvement in detecting fraud. 

As fraud evolves, we must realize that our systems to detect 

fraud and prevent fraud must change as well. Re-evaluating some 

of the rules and processes that govern what the agency can do to 

protect and prevent fraud and the technologies available today that 

could aid us in better detection and prevention may provide better 

solutions. 

The goal of the Fraud Prevention System is to identify and prevent fraud, waste and abuse in the Medicare fee for service program. The system identifies questionable billing patterns and aberrancies and provides information through an alert system report to 

the ZPIC contractors. The ZPICs are then tasked to follow up the 

investigations on particular providers. 

To evaluate the effectiveness of the FPS system, there should be 

clear accountability of the savings attributable to the FPS. The 

usage of the adjusted savings metric by CMS makes it very difficult 

to separate the results of FPS from the results that you would get 

from the many varied systems that were mentioned earlier today. 

It is difficult to assess the real returns of FPS when you do not 

have a control group or any other method to compare it against. 

Under the current system, the ZPICs get information from many 

sources, one of which is the FPS. In some cases some of those leads’ 

generations are more reliable than the FPS, and of course, the 

ZPICs do and should follow the most reliable leads. 

But the overlap of effort and lack of accountability attributable 

to the savings make the evaluation of the effectiveness of FPS difficult and makes it hard to measure FPS against what the ZPICs 

could have accomplished on their own without FPS. 

The impact of FPS to date has been to get more data more quickly to contractors, but the problem is it still uses today the silo-driven fee for service data system that is not multivariate and is limited in its design. We currently have access to greater amounts of 

data and technology to share that data in a much greater capacity 

than is used by the FPS. 

First, the current system is set up to detect fraud based on historical patterns. We are only able to predict fraud that copies a familiar pattern and are not able to identify new patterns of fraudulent behavior. By limiting our data sets to these variables, we miss 

associations that could be identified with broader data sets integrated into the system. 

By limiting our data sources and only using historical patterns, 

we may very well be allowing more effective fraud schemes over 


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time since we are effectively handing over our play book to those 

looking to commit fraud. 

Second, our ability to create informational association should be 

interagency, as you heard this morning, and should use a more dynamic and open network rather than a closed, fully proprietary system. Under the current contracting rules, the government owns the 

data and owns the intellectual property. Both of these discourage 

innovation. 

I appreciate the concerns about providing data more broadly and 

the concern about not owning the intellectual property. However, 

there exists a faulty underlying assumption in the approach that 

CMS has the best data and the best fraud tools available in their 

use. 

A reasonable solution would be to allow the use of information 

from authorized sources, those sources that CMS already entrusts 

with other pieces of intellectual property, States, commercial plans, 

contractors and other areas of program integrity outside of the 

Medicare fee for service program to create a more robust database 

that will allow for connections that are potentially being overlooked 

due to the lack of a unified database of information. 

The technology available today in the private sector has the ability to rapidly integrate a greater number of data sets and make 

more efficient associations between this data than is currently 

being used. The ability to use these more advanced systems and 

processes is limited by the rules and processes under which CMS 

is required to operate. 

When I was Acting Administrator, actually Mr. Ogrosky and I 

were in Miami together, and you know, I saw the inability of CMS 

to be able to stop billings from providers that had aberrant billings 

on the spot. I saw the lack of the ability to close down a physical 

site that was simply a storage unit because decisions had to be 

made and those cases had to be referred to others to decide what 

to do and whether to continue to pay or not. 

You know, watching that is pretty difficult when you see just 

Medicaid dollars flowing out the door, and there is absolutely nothing you can do to stop that. 

Doing something the same way, expending a different answer 

does not work. Keeping the rules and the process the same will not 

allow for new ideas and innovation to take place. To truly stay one 

step ahead of fraud, we need to design a system of processes and 

procedures that integrate the wealth of information and data available to use today to analyze and detect fraud. 

This should include not just better technology, but a systemic 

and holistic, overall, and redesign of the people and processes that 

we use in our program integrity efforts. We should give those tasks 

with identifying and preventing these schemes the best information, procedural architecture and flexibility to ensure the continued 

integrity of government health care programs and payments. 

Thank you. 

Chairman ROSKAM. Thank you. 

[The prepared statement of Ms. Frizzera follows:] 


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Chairman ROSKAM. Mr. Ogrosky. 

STATEMENT OF KIRK OGROSKY, PARTNER, ARNOLD & 

PORTER LLP 

Mr. OGROSKY. Chairman, Ranking Member, Members of the 

Subcommittee, thank you very much for asking me to come and 

testify today. 

The first thing I want to say is that fraud by very definition is 

a non-self-revealing offense. What that means is that criminals 

who intend to steal from Medicare fraud are trying to stay away 

from the system. They are not trying to be detected. They are trying to stay a step ahead of law enforcement. 

And like all enforcement endeavors, what I want to tell you is 

law enforcement depends on the victim of a crime to report a crime. 

So it is up to CMS to come in and say, ‘‘We have been defrauded,’’ 

and CMS is truly the victim here, but they are the victim representing taxpayers all across the United States. 

So I unfortunately have spent almost 20 years working in health 

care fraud, first as an Assistant United States Attorney in Miami, 

and I am going to tell you a story about Ms. Frizzera and me in 

just a moment. I have also been on the board of Lou’s organization, 

and I have been in this business for 20 years, and I hope this Subcommittee and other Members of Congress can put me out of business because I am done. Fraud just keeps getting worse and worse 

and worse, and I would prefer not to be dealing with it. 

So what is critical here? Timely information, timely information 

from CMS going to law enforcement; information not about what 

is paid, you know, after several weeks of claims processing, but 

what is billed; what is billed by criminals. That is what is helpful 

to law enforcement. 

And no matter how many agents and prosecutors and people are 

assigned, having access to what is billed is really critical, and it is 

that timely information that makes it possible for prosecutors and 

agents and others in enforcement to move forward. 

And let me just talk about the timeliness for a second. Without 

timely information, that means that law enforcement is working on 

stale cases, old cases. Witnesses are gone. You cannot use proactive 

techniques like a wiretap or a search warrant because the criminals are gone. Money is transferred out of bank accounts today in 

seconds. It is not written by checks in weeks. 

So effective law enforcement lives and breathes on immediate access to information. 

Criminals can make decisions in seconds. Government needs to 

be able to make decisions in seconds. If a code does not pay, a 

criminal bills something else. It is that simple. 

If an audit is coming, a known audit is coming, they prepare for 

it, and like the representative from CMS said, he is exactly right. 

You will never see better medical records than those prepared by 

criminals waiting for an audit. 

The medical records where we talk about things that are missing 

in the record, those are busy practitioners who are treating patients. The medical records that I have seen that look perfect have 

been in the most egregious criminal cases where people have stolen 

ten, $20, $100 million for providing no care; cases where people 


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have been billed for prosthetic limbs who had their limbs; cases 

where medicine was whipped up in the back rooms of fly-by-night 

pharmacies where patients did not need it and did not get it. 

The case that Ms. Frizzera and I worked on was fascinating because it involved the home health care services that CMS provides 

that should be saving taxpayer money because it should keep people out of the hospital, but what we saw in Miami was people were 

diagnosed falsely with conditions that they claimed to be homebound. 

I will tell you personally I worked on cases where we went to 

interview witnesses that were supposed to be homebound, and we 

could not find them because they were at work, and then when we 

did find them, they were cutting their grass. And what we found 

was that they not only were not homebound, they did not have the 

diseases or conditions with which they had been diagnosed. 

And when you take those people to trial and they have providers 

that are trying these cases, they say, ‘‘Well, everyone in our business had the same diagnosis. Every one of the claims we submitted 

got the same treatment, and we got paid.’’ So that is a real problem 

that needs to be solved. 

So how do we solve that? And back in 2006, we had an idea in 

the Department of Justice. Rather than wait for the victim of the 

crime to respond, we were going to look at known fraud schemes 

in high crime areas. We were then going to take medical professionals who look at the claims and say, ‘‘You know what? We do 

not need to pay for a prosthetic limb for someone who has their 

limb. We do not need to pay for home care for people who are not 

homebound.’’ 

Those are the types of things that we sought to target, and then 

accessing that data coupled with the medical personnel and the law 

enforcement all working together, classic community policing was 

very effective. 

Predictive analytics and modeling and today’s technology is even 

better than it was back in 2006 and 2007. The claims data points 

should be used by the government to stop the payment of these 

criminal claims. That is the only way to get this done. 

One of the Members of the Subcommittee asked an excellent 

question. It relies on the coordination and cohesiveness of all of the 

constituent government agencies that work on this. CMS and their 

contractors, OIG, DOJ, everyone at the State level at the MFCU, 

they have to be on the same play book, and they have to be working off the same material. 

Thank you. 

Chairman ROSKAM. Thank you. 

[The prepared statement of Mr. Ogrosky follows:] 


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Chairman ROSKAM. Mr. Saccoccio. 

STATEMENT OF LOUIS SACCOCCIO, EXECUTIVE DIRECTOR, 

NATIONAL HEALTH CARE ANTI-FRAUD ASSOCIATION 

Mr. SACCOCCIO. Thank you. Good morning. Chairman Roskam, 

Ranking Member Lewis, and other distinguished Members of the 

Subcommittee, I appreciate the opportunity to testify today on behalf of the National Health Care Anti-Fraud Association, or 

NHCAA, on the topic of how the use of data analytics can help protect seniors and taxpayers from Medicare fraud. 

The United States is projected to spend $3.2 trillion on health 

care in 2015 and generate billions of claims from health care service providers and product providers. Medicare alone accounts for 

$633 billion in annual spending, representing more than 54 million 

beneficiaries. 

Additionally, our Nation’s health care system hinges upon a staggering amount of data spread across the health care claims adjudication systems of numerous payers. Medicare Parts A and B 

alone process 4.5 million claims a day. 

Given the complexity of the health care system as well as the 

sheer volume of activity, the challenge of preventing fraud is 

daunting. There are two strategies which NHCAA believes can be 

successful in this complex environment. The first is the application 

of data analytics, including predictive modeling of health care data 

to identify potential fraud and abuse. 

The second is anti-fraud information sharing among all payers of 

health care, including the sharing of information between private 

insurers and public programs. 

The ‘‘pay and chase’’ model of combatting health care fraud, 

while necessary in certain cases, is no longer tenable as the primary method of fighting this crime. Clearly, the best way to detect 

emerging fraud patterns and schemes in a timely manner is to aggregate claims data as much as practicable and then to apply cutting edge technology to the data to detect risks and emerging fraud 

trends. 

One example of the use of analytics at CMS’ Fraud Prevention 

System that Dr. Agrawal already testified with respect to that system and how it operates. It is quite understandable that many are 

anxious to see immediate, positive results from the investments already made in adopting predictive modeling analysis to Medicare 

data. 

NHCAA would encourage continued patience regarding the use of 

predictive modeling and data analysis for combatting fraud. It will 

take time to effectively refine and adjust models for such a large 

and complex system as Medicare in order to realize the full potential that these power tools offer. 

It is also important to note, however, that while the use of data 

analytics is a key tool in the detection of fraud, it is not a panacea. 

Anti-fraud units responsible for ensuring the integrity of our Federal health care programs must be staffed sufficiently to meet the 

challenge that fraud and abuse present. 

As we focus on the promise of technology, we must not overlook 

the vital need for adequate staffing of smart, analytical, insightful 


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and committed fraud fighting professionals both in the prevention 

area and also in the law enforcement area. 

The second key element in the fight against health care fraud is 

information sharing. Health care fraud does not discriminate between types of medical coverage. Health care providers who commit 

fraud build multiple payers, both private and public. The same 

schemes used to defraud Medicare and Medicaid migrate to private 

insurance, and schemes perpetrated against private insurers make 

their way into government programs. 

It is precisely this reason why the share of preventive and investigative information among payers is crucial for the effective identification and prevention of health care fraud. Payers, whether private or public, who limit the scope of their anti-fraud information 

to data from their own organization or agency are taking an uncoordinated and a piecemeal approach to this problem. 

Our experience at NHCAA as champion and facilitator and 

champion of anti-fraud information exchange has taught us that it 

is very effective in combatting health care fraud. NHCAA’s coordinated private-public anti-fraud sharing routinely helps our private 

side members and our government partners to safeguard and recover funds that would otherwise be lost to fraud. 

Another major initiative focused on data analytics and the sharing of anti-fraud information is the Health Care Fraud Prevention 

Partnership which was launched in 2012. The partnership is a 

point initiative of the U.S. Department of Health and Human Services and the Department of Justice. It is a voluntary public-private 

partnership between the Federal Government, States, health insurance plans, and health insurance associations which aims to foster 

a proactive approach to detect and prevent health care fraud across 

public and private payers. 

NHCAA believes the Health Care Fraud Prevention Partnership 

is a necessary next step of information sharing. It uses the exchange of payer data, including Medicare data, to conduct targeted 

studies in particular fraud risk areas. 

In summary, harnessing the enormous quantities of data on 

Medicare in order to identify and predict fraud holds great promise. 

We support continued investment of resources to enhance and expand CMS’ Fraud Prevention System in Medicare. 

Additionally, anti-fraud information data sharing among private 

and public payers of health care is critically important and should 

be encouraged and strengthened. Health care payers cannot work 

in isolation and expect to be successful in detecting and preventing 

health care fraud. 

Thank you for allowing me to speak today, and I will certainly 

answer any questions that may have. 

Chairman ROSKAM. Thank you. 

[The prepared statement of Mr. Saccoccio follows:] 


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Chairman ROSKAM. Mr. Nelsen. 

STATEMENT OF MARK NELSEN, SENIOR VICE PRESIDENT FOR 

RISK PRODUCTS AND BUSINESS INTELLIGENCE, VISA INC. 

Mr. NELSEN. Chairman Roskam, Ranking Member Lewis, and 

Members of the Subcommittee, my name is Mark Nelsen. I am a 

Senior Vice President of Risk Products and Business Intelligence 

with Visa. Thank you for the invitation to appear before the subcommittee to discuss some of the ways Visa uses predictive analytics and data insights to help prevent fraud. 

While I am not an expert in health care or here to speak to the 

specifics of Medicare fraud, I do want to share what Visa does in 

the payments industry to combat fraud as our experience and perspective may be of useful insights to the subcommittee. 

For more than 50 years Visa has enabled consumers, businesses 

and governments to make and receive payments across the globe. 

Visa works behind the scenes to enable hundreds of millions of 

transactions each day powered by our core processing network, 

VisaNet. We invest heavily in advanced fraud fighting technologies 

to help make digital commerce more convenient, reliable and secure. 

As a leader in security, we recognize that there is no silver bullet 

to protect against fraud. A layered approach that includes a combination of technology, processes, and people is required to prevent 

fraud, and the use of data analytics is a critical component in making this effective. 

Last year alone Visa processed more than 66 billion transactions 

in global commerce across more than 200 countries. Since the 

1990s, Visa payment volume has increased more than 1,000 percent, while the rates of fraud actually declined by two-thirds over 

the same time period. 

Predictive analytics are one of the core tools Visa uses to help 

limit fraud and make commerce more secure by identifying suspicious transactions before fraud can happen. 

Our use of modeling and analytics helps us keep our fraud rates 

low and stable at less than 6/100 of a percent, that is, six cents for 

every $100 spent. Visa’s analytics are among the most advanced in 

the payments industry. We evaluate up to 500 unique data elements to spot suspicious transactions as they occur. 

Visa uses a continuous feedback loop which enables our stakeholders to inform us in the event that fraud does occur. This allows 

us to identify patterns across the industry to help predict fraudulent behavior before a transaction is completed. 

Visa’s advanced authorization is a foundation of our analytics capabilities and provides an instantaneous rating of a transaction’s 

potential for fraud. We examine such factors as account history, 

geo location, transaction velocity, recent fraud, and other relevant 

information. This rating occurs as part of the transaction authorization process and enables financial institutions to make a more 

informed decision about whether to accept or decline the transaction. 

All of this happens today in the background for every single 

transaction that Visa processes in less than one millisecond. Visa 


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is also beginning to provide this same type of intelligence to merchants. 

A recent pilot with Chevron resulted in a 23 percent reduction 

in the rate of fraudulent transactions at automated fuel pumps. 

This service is now live at more than 25 gas stations nationwide. 

This new initiative highlights the value that analytics can bring to 

address an area where we have seen higher propensity for fraudulent activity. 

Another key element of security and fraud prevention that we 

apply is a method called the common points of purchase. We search 

millions of transactions to identify unique locations that show a 

pattern of suspicious activity. We look at historical data to build a 

picture of what is normal, including typical daily spend amounts, 

the approved-declined rates, average ticket size, average cross-border spend, and other data elements. 

We then compare that picture to what is happening now, and we 

look for deviations. The deviations become signals that lead to the 

source for a potential data compromise and allows us to further improve our analytics and prevent fraud. 

Criminals know we are searching for patterns, and so we are 

constantly working to improve our analytics. We incorporate new 

sources of data as they become available, such as device information, geo location, and we are constantly working to enhance our 

modeling techniques to yield the best possible results. 

As criminal attack vectors evolve, we, too, follow suit and continue to improve, refine and advance our fraud fighting solutions 

through significant investment, innovation and constant vigilance. 

So in closing, the reality is criminals, whether they are cyber, 

health care, or other types of fraudsters, will always exist, and 

their tactics will continue to evolve and try to game the system. 

But the good news is there are sophisticated tools available to help 

manage these threats. Criminals are a common foe, and each sector 

must work together to protect against their respective challenges. 

Thank you again for the opportunity to testify today. I would be 

happy to answer any questions. 

Chairman ROSKAM. Thank you all for your insight. 

[The prepared statement of Mr. Nelsen follows:] 


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Chairman ROSKAM. I will turn now to Mr. Marchant on the majority side. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

In listening to the first panel it became very obvious that there 

was a lot of theory, a lot of concept, a lot of analytics, and probably 

more information that they had the ability to act on. I found that 

to be very discouraging. 

In listening to your testimony, it sounds like there is a very large 

gap between this panel and that in that you are saying that with 

that kind of information, if it is used properly, this problem is solvable and we can actually make some progress on this. 

Is that a correct analysis? 

Ms. FRIZZERA. Well, I will start. I will say I totally agree with 

you, and you heard the first panel. They have more data than they 

know what to do with. 

What I in my testimony, oral and written, what I really talked 

about is that is true, but there is technology today that can take 

that data and put it together and make it more useful. 

The problem is, as I also mentioned, you know, the government 

does not want contractors to keep the intellectual property of the 

product, and I appreciate that because then the government gets 

stuck with one contractor and, you know, you are sort of beholden 

to them. 

But you know, you have to figure out a way: how do I get new 

technology? How do I let people keep their intellectual property but 

do a better job at analyzing that data? 

You know, there are folks today that have technology that can 

identify fraud, waste and abuse before it happens. The problem we 

have today is we have the claims which are after the fact. So you 

need to have somebody who can actually engineer that data. 

So it is more, you know, the people that we talk to who can do 

this are more engineers versus statisticians and researcher. You 

get an engineer and let them reengineer something, that is a very 

different concept than taking what we have today and appreciate 

for CMS under all the rules and restrictions they have on them, 

they do not really have the ability to do that, but that really is, in 

my opinion, the answer to really trying to make this work much 

better in the future. 

Mr. OGROSKY. Yes, sir. I think there is more data in the system 

than most people could possibly know what to do with. The question is: how do you design models that are effective at rooting out 

fraud? 

My experience is that the more data points that you have, the 

easier it is to look for aberrations, and an aberration does not mean 

fraud. An aberration just means you need to look further. 

So what I mean by that is we know in the United States that 

you do not need a prosthetic limb if you have your legs. So you can 

look for a diagnosis code, and then look for the product that treats 

it. You can match disease states with treatments. We know what 

the standards of care are. 

If you see a provider that is treating outside of the standard of 

care on everything, you will know that that is a real problem. That 

is why years ago at DOJ we really used nurses to look at those 


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claims to say these treatments do not match the diagnosis. That is 

a very simple way. 

When all of the patients from one provider do that, it tells you 

you should not be paying those claims, but it is hard to take action 

on that in a law enforcement context if you are not learning about 

it for several years. 

So steps have been made to the point now where the question is 

can law enforcement learn of that at the time the claims start to 

roll in and can they make those changes, and the more data, it is 

a question of how to harness that data and create those models to 

narrow and focus on real criminal fraud. 

Mr. SACCOCCIO. Well, you know, the law enforcement piece of 

it is important and getting timely information to law enforcement 

is certainly important. But I think the real problem is on the prevention side. 

Once the dollars are out the door, once you have law enforcement 

involvement, you have already in some way lost in the sense that 

those dollars are lost. So I think any solution really has to focus 

on prevention, and it has to focus in such a way that CMS could 

make timely, real time decisions that say, ‘‘Hey, wait a minute. We 

are not going to pay this claim.’’ 

You know, they do have suspension authority now. They do have 

certain things that they do from an administrative standpoint, but 

I think they have to be somewhat more aggressive, and there is 

going to be pushback from the provider community. There is no 

doubt about it, but you have to be more aggressive in saying, ‘‘Hey, 

there is something suspicious here. We are going to stop paying 

and we are going to stop paying until we figure out whether or not 

there is a problem.’’ 

If there is no problem then we send the check, but right now although there is a focus on prevention, I think to a certain degree 

there is still the tendency to pay that claim and then figure it out 

after the fact. 

So I think they could do a lot better job on the prevention side, 

and you know, they have to improve their Fraud Prevention System to be able to do that. 

Mr. MARCHANT. Mr. Nelsen. 

Mr. NELSEN. Trust in payments is critical to our business, and 

at Visa we spend more on security than any other part of our business, and so we have architected our solutions so that we can look 

at all of these data points in real time. 

I mentioned in the statement that we create the likelihood of 

fraud in less than one millisecond, and that comes with a lot of investment and a lot of hard work. It is very hard to pull that off, 

but it does just require constant investment in these technologies, 

constant evolution of the models as fraud migrates and as fraud 

evolves, but that has been the key to our success, is this constant 

innovation and use of technology as we can. 

Mr. MARCHANT. Thank you. 

Chairman ROSKAM. Mr. Lewis. 

Mr. LEWIS. Thank you very much, Mr. Chairman. 

Let me thank each one of you for being here, for taking the time 

to provide us with very important and valuable information. 

Mr. Saccoccio. 


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Mr. SACCOCCIO. Saccoccio. Yes, sir. 

Mr. LEWIS. Well, I do not want to mess up your name. So I will 

not try to pronounce it again. 

Mr. SACCOCCIO. Saccoccio. 

Mr. LEWIS. Saccoccio. Well, thank you very much. 

I am deeply troubled about the fraud cases that harm the recipients of Medicare. Are there other examples that you did not list in 

your prepared testimony? 

Mr. SACCOCCIO. As far as harm to patients, yes. I mean, you 

know, we often talk about the dollars when we talk about health 

care fraud, but oftentimes patients are actually harmed, physically 

harmed, by health care fraud. Unnecessary services are provided. 

Look what happens on the pharmacy side with the misuse of prescription drugs. Many deaths occur in that arena. 

Every year at our annual conference we give an award for Investigation of the Year, and several years ago we actually gave the 

award for an investigation involving a pain management physician 

that actually because of the treatments, the fraudulent treatments 

he was providing, he actually killed two or three patients, and he 

was sentenced to life in prison under the health care fraud law. 

But there are many examples where patients are physically 

harmed by health care fraud, and I think you have to look at fraud 

in the Medicare system and throughout the system, not just as a 

financial issue, as egregious as that is, but as a patient safety issue 

as well. 

Mr. LEWIS. Could you tell the Members of the Committee where 

there is greater fraud, with individual physicians, health providers, 

or with institutions like a hospital or clinic? 

Mr. SACCOCCIO. Well, that is difficult to point out. Certainly 

there are some hot areas in health care fraud, and again, not to 

denigrate any particular type of provider, but certainly home 

health care has been a hot area. DME has been a hot area. Community mental health I know has been a hot area recently, and 

they migrate from time to time. 

But I would say normally the vast majority of fraud I would say 

is not so much in the physician area, but in other types of health 

care providers. That is not to say there are not physicians that are 

involved in health care fraud, but you will often see that it is in 

the DME area or home health care or nursing homes, those kinds 

of facilities where there seems to be higher rates of fraud than, say, 

your typical physician. 

Mr. LEWIS. Are there certain areas of the country where there 

is a greater degree of fraud? 

Mr. SACCOCCIO. Oh, definitely. The Justice Department, their 

Strike Forces under the HEAT Program focus on certain geographic areas because they are hot areas as far as fraud. Certainly 

although a lot of work has been done down in Miami and Dade 

County, still Florida and Dade County are certainly a hot area. 

Certainly California; certain areas in New York, Houston, Detroit, 

those areas; there are certain areas where organized crime and enterprise type criminals who enter the system strictly to commit 

fraud seem to focus their attention. 

Mr. LEWIS. Thank you very much, Mr. Chairman. Thank you, 

sir. 


ralbany on LAP520R082 with HEARINGS
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Chairman ROSKAM. Mrs. Noem. 

Mrs. NOEM. Mr. Nelsen, can you give me a percentage approximately of what you spend on fraud prevention in relation to the 

amount of transactions that you conduct in a year’s time? 

I am just wondering about costs, how much that really is, and 

if it is feasible for a program such as CMS to utilize. 

Mr. NELSEN. You know, we do not disclose how much we spend 

on security, but like I mentioned it is the single biggest expense of 

our innovation. So when we look at our global technology spend, security is our highest amount. So I cannot give an exact number, 

but it is extremely important to us as a business. 

Mrs. NOEM. Did it become more feasible as you grew? I mean, 

I am wondering about volume as well having an impact on the ability to continuously invest in technology. 

Mr. NELSEN. Yes, it has. It is interesting. If you look over the 

past 30 years, our fraud rates used to be much higher, but we continuously invest in both technology, such as chip technology, 

encryption and data standards, and data analytics is also a core 

part of that investment. 

So it is a combination of both data analytics and technology, but 

over the time period, over the 30 years, the fraud rate continues 

to get lower, and we are at near historic lows now, but we still 

strive to get even lower fraud rates. Our goal is to get it down. We 

are at six basis points today, but our goal is to get it lower. 

So I think that is everyone’s goal. There is always opportunity 

to reduce fraud if you continue to invest in the technology. 

Mrs. NOEM. And smaller companies you believe are able to utilize the same technology that you do? 

Mr. NELSEN. They can. There is a lot of newer technology available today than there was ten years ago. So ten, 20 years ago when 

Visa was developing our solutions, it was all proprietary built, but 

today if you look, there are more software solutions in the marketplace that are using machine learning technologies to help implement and basically better analyze the data that you have. 

Mrs. NOEM. How many merchants did you say use Visa or process Visa? 

And then do you flag these merchants for certain activities that 

you would deem to be worthy of watching? 

Mr. NELSEN. So we have tens of millions of merchants that use 

and accept Visa around the world. What we do is we track both 

fraudulent transactions for our issuing banks. For the merchant 

tracking, what we typically try to do is look and see patterns of unusual behavior that helps us determine was this merchant 

breached. Did a data compromise occur at that merchant? 

And if we have enough analysis to help prove that there is, then 

we would initiate what we call a forensics investigation with that 

merchant to help determine did a breach really occur. 

Mrs. NOEM. Ms. Frizzera, you, in your experience because you 

are so closely tied and have been with CMS, do you think the same 

technology that Visa is utilizing could be utilized by CMS and be 

affordable as well to implement and continuously upgrade and invest in the technology? 

Ms. FRIZZERA. Yes. I will say the question has been asked 100 

times over the past 15 years that I have been involved in some of 


ralbany on LAP520R082 with HEARINGS
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these discussions, and I think the point earlier today was it is different. You know, buying a TV is very different than a medical 

service, and I think the problem that CMS has is the underlying 

documentation that goes with the claim makes it very hard just to 

use the claim. 

So how do you take that medical documentation and make that 

part of a record that everyone can use? And I think that Kirk’s 

point earlier, you know, then people just figure out a way to get 

around the system. 

So I think it is hard. They have tried a lot to really figure out 

how to use the system, but that underlying documentation that 

supports the claim has always been the problem in trying to really 

identify fraud outside of just numbers and volume of movement. 

Mrs. NOEM. So you do not think there is a way to really scam 

the claims and use that information in a quick process that would 

identify it as potentially fraudulent or improper? 

Ms. FRIZZERA. No. So you can scan a claim. You can put a 

claim in a system, and you can run claims against other claims. 

The claim itself is not really the fraudulent activity. The fraudulent 

activity is what happened under the claim. 

Mrs. NOEM. There should be indicators on that claim though, 

should there not? 

Ms. FRIZZERA. Well, there are some, but again, it is not a claim 

by claim. It is not like let me scan and look at this claim. It is taking that data together and saying how does that fit in the pattern 

of other providers and how does it fit into the pattern of that particular provider. 

And what we have not been able to do today that I think we can 

is other information about that provider. So as people talked earlier about commercial payers, you know, there is a lot of other information other than the Medicare fee for service claim which is 

what we hang all this on, and that is part of the issue with fraud 

detection. Using the Medicare fee for service claim has its own limitations. 

If you can broaden it past the claim to what other payers are 

saying, so for example, if there is a provider that is excluded from 

a commercial payer, why does not Medicare automatically exclude 

them? Right? 

So that sounds like an easy question, but Medicare has its own 

rules. Medicare cannot really say, ‘‘Well, I am going to forget my 

rules.’’ It is statutory. It is regulatory. They just cannot say, ‘‘I am 

going to forget my rules and I am just going to apply these rules.’’ 

It takes time. It takes process. So a lot of it is the process that 

is in place that will not let them move very nimbly to make some 

of those changes. 

Mrs. NOEM. I am out of time. Thank you very much. 

Chairman ROSKAM. Mr. Holding. 

Mr. HOLDING. Thank you, Mr. Chairman. 

I am going to continue on with my line of inquiry on coordination. So, Ms. Frizzera and Mr. Ogrosky, you have both been in the 

executive branch. Give me some of your thoughts about the barriers to interagency coordination in the executive branch, starting 

with ladies first. 


ralbany on LAP520R082 with HEARINGS
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Ms. FRIZZERA. Well, I will just start with our differences when 

we were doing this together. So there is a very big tension between 

a claim or behavior that you know is not acceptable and the time 

it takes for Justice to do something with the claim, right? 

So part of it is that gap between where do you draw the line between, okay, this is good. We are just going to stop paying the 

claims, and we are going to get overpayments versus saying, ‘‘I do 

not know. This is probably really fraud, and let us send it to the 

investigators.’’ 

And it is not easy. They cannot do that in a short period of time, 

but with no criteria in between, it is very difficult to figure out 

where do you draw the line. It may be fraud, but it is not worth 

it for us to wait time for the Department of Justice and OIG to do 

their investigations. 

So I think it is hard. I think the other honest answer to that is 

territory. Right? Everybody wants credit for what happens, and it 

is very difficult when you do not have a system where everybody 

gets credit for what has happened. Everybody wants their own 

credit. 

So I think, you know, there is a lot of that. The system does not 

encourage interagency cooperation. It encourages agencies to have 

their own metrics and their own, you know, rewards for doing a 

good job. 

Mr. HOLDING. But how do you change that? 

Ms. FRIZZERA. So, you know, I guess the way I was thinking 

about it, and I was just thinking about it this morning, think of 

an ACO for Fraud, right? So all of you guys are responsible for 

fraud. You all have to figure out how to meet X measure and you 

all get rewarded and you all get penalized if that does not happen. 

So that sounds pretty grand, but if you thought about that again, 

you know, just think about it that way, not CMS should do, DOJ 

should do, OIG should do, IRS should do, right? It is really that 

combination of how do we just make them all responsible? 

They have to share the responsibility, the risks and the rewards 

in doing that. 

Mr. HOLDING. So if there was some standard which you could 

hold it to and say, ‘‘All right. You have got to get your fraud rate 

down or your mis-payment rate down to under five percent, and 

you figure out how to do it,’’ do you think that would be the stimulating quest? 

Ms. FRIZZERA. Yes, and it would be multiple agencies responsible for that. So it is not just CMS all by itself or OIG by itself 

or DOJ by itself. 

Now, I would say that is easy for me to sit here and say, but you 

know, the times we tried it before, it is hard. 

Mr. HOLDING. We have to start somewhere. 

Ms. FRIZZERA. It is hard, but that would be one way to think 

of a new way of doing it in a more coordinated penalties and rewards. 

Mr. HOLDING. Right. Mr. Ogrosky. 

Mr. OGROSKY. Let me approach it this way and get into the alphabet soup just a little bit. You have MACs paying claims. You 

have ZPICs determining that the MAC payment is appropriate or 

not appropriate. 


ralbany on LAP520R082 with HEARINGS
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Then you have referrals from the ZPICs that go to the OIG. Then 

you have the OIG coordinating with the FBI. Then you have the 

FBI bringing a case to DOJ, and DOJ is then going back to CMS 

and saying, ‘‘Give me the baseline data so I can determine whether 

a crime has been committed or not.’’ 

Mr. HOLDING. Right. Do you happen to know the current placement of Medicare fraud in the priorities established by the Attorney General shipped out to the U.S. Attorneys? 

Mr. OGROSKY. I do not. I can tell you that what is interesting 

to me when I look at the DOJ reports is still almost a third of the 

entire criminal enforcement of health care fraud happens in MiamiDade County, two-thirds in the rest of the country, and in the rest 

of the country there are many districts that do not do much health 

care fraud at all. 

One of the things that Lou and I would disagree on is he said 

health care fraud does not discriminate among payers. I think, in 

fact, it does. It goes where the money is, and that is the trust basis 

system of Medicare. I think private payers have done a much better job of preventing fraud. 

Mr. HOLDING. Do we know the fraud rate or the mis-payment 

rate for providers, this 12.7 percent Medicare? Do we have a private provider that we can compare apples to apples with? 

Mr. SACCOCCIO. No. I mean as far as an error rate, I do not 

think. I have never heard them keep track of it that way again, the 

distinction between fraud and erroneous payments. 

And fraud itself, as Dr. Agrawal said, because of its nature, it is 

very hard to say what the percentage is. There are percentages 

that range from three to ten percent of all health care spending in 

the country that could range anywhere from $70 billion up over 

$200 billion a year that is lost to fraud, and then what do you consider fraud; what do you consider abuse, you know, depending on 

the definitions? 

On the private side, I have not seen any numbers with respect 

to erroneous payments as they are defined in Medicare. 

Mr. OGROSKY. So private payers have done some things that 

Medicare simply has not done, like preauthorization for in-patient 

hospital admissions. I cannot think of any instance in my almost 

20 years of doing this where a private payer has spent billions of 

dollars for a drug to treat HIV that was facially unneeded. 

I have not seen any instance where private payers pay for hundreds of millions of dollars of prosthetic limbs that are not needed. 

So they do a better job when claims come in. 

Now, of course, private payers spend a much higher percentage 

on admin., but you really asked about the coordination, and I think 

Ms. Frizzera really did a service in answering that by saying the 

incentives within all of these agencies, it needs to be collaborative 

and cooperative with a goal in mind of eradicating fraud and doing 

that means on the front end, the victim, the trustee that administers that fund has control of that process, and that is where it 

starts. 

And law enforcement should be an afterthought in terms of, I 

mean, it costs money to put people in jail. It costs money to bring 

cases. These claims should not have been paid to begin with. So 


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that coordination needs to work across government to bring all that 

together. 

Mr. HOLDING. Thank you. 

Thank you, Mr. Chairman. 

Chairman ROSKAM. Mr. Smith. 

Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman. 

I asked the first panel about the FPS and the Zone Program integrity contractors, the contractors hired to investigate fraud. I 

want to ask you about the relationship between the ZPICs and the 

Medicare administrative contractors known as MACs. 

My understanding is that ZPICs root out fraud and MACs review 

claims from providers and sign the checks. 

Ms. Frizzera, is there any incentive for the MACs to ensure that 

the claims they are paying are not fraudulent? 

Ms. FRIZZERA. Well, there is incentive because they want to 

pay good claims, but it is not their responsibility. 

And, you know, just a little bit of history. So MACs used to do 

all of this work at some point in time, and then we reengineered 

the MAC process. Legislation was passed that said we had to look 

at them differently, and we basically broke up the MAC so that 

they no longer do all of those services. 

So they used to do beneficiary services. They did a lot of the 

fraud detection. They did all of the claims processing. CMS broke 

that apart and divided that up so that they would specialize in 

fraud, waste and abuse detection and paying claims and beneficiary contact. 

So they have an incentive in the sense that they obviously want 

to pay good claims, and some of them do have some programs 

where they actually do some claim review. They will look at the 

claims and then also notice that there is some aberrant behavior. 

But the ZPICs are ultimately responsible for taking that data 

and putting it into some tiering process and sending that to the 

ZPICs for processing. 

Mr. SMITH OF MISSOURI. Is there a way for the system to 

work better? 

Ms. FRIZZERA. So I would offer a suggestion really to be to look 

at all of the Medicare contractors and what do they do and how 

much money do they spend on what they do, and I would go back 

to Mr. Marchant’s earlier comment. RACs, ZPICs, MACs, there are 

a lot of acronyms and a lot of people trying to do fraud, waste and 

abuse. 

We have sort of bifurcated it from, you know, fraud, waste and 

abuse, and it really is all one. It is all one system. You heard today 

the difficulty of defining the differences between the two. I mean, 

they have different results. Fraud results in people going to jail, 

but all of those other activities result in abuse and waste of the 

system. 

And I think that is where there should be much more coordination in that arena in the waste and abuse and among and between 

the contractors, and maybe even, you know, some redirection of 

how that contracting process works and who even does it. 

Mr. SMITH OF MISSOURI. Do the MACs use FPS’ prepayment 

edits to stop payments before they go out? 

Ms. FRIZZERA. I do not know that. Do you? 


ralbany on LAP520R082 with HEARINGS
104 

I do not think it does, but I do not know that for sure. 

Mr. SMITH OF MISSOURI. Okay. Mr. Nelsen, I asked the first 

panel about how they evaluated the outcome of leads generated by 

their predictive analytic system. Does Visa have metrics to determine performance? 

Mr. NELSEN. Yes. We create different models for different segments. So we have models for e-commerce fraud, for credit, for 

debit, and so for each model that we create we have a performance 

metric that we share with our issuing banks, and they can then 

use that performance metric to determine what degree of false positive do they want to accept from the approve or decline perspective. 

So every time we create a model, we have those performance projections that we publish. 

Mr. SMITH OF MISSOURI. So you all do have track of false 

positives? 

Mr. NELSEN. Yes, absolutely. 

Mr. SMITH OF MISSOURI. All right. Thank you, Mr. Chairman. 

Chairman ROSKAM. Mrs. Black. 

Mrs. BLACK. Thank you, Mr. Chairman. 

Very interesting subject matter, and I am just trying to put it all 

together. I actually tried to diagram all of this, and I have got the 

FBI, the OIG, the CMS, the DOJ, the ZPICs, the MACs, the RACs. 

When you start looking at what the cost of operating all of these 

various divisions, I know that the security piece that folks like Visa 

use has got to be expensive. I know Mr. Nelsen talked about how 

it is a great percentage of their budget. 

But it seems to me that that would certainly be a savings in the 

long run when you look at the cost of all of these because it is a 

‘‘pay and chase,’’ and getting any of that money back is very difficult to do. 

So, Mr. Ogrosky, I think one of the things that you said that you 

thought when you looked at the private sector insurance companies 

was the preauthorization piece. Do you, Ms. Frizzera and Mr. 

Ogrosky, believe that that is something that we possibly should be 

looking at on the Medicare side, is the preauthorizations as opposed to the ‘‘pay and chase’’? 

Ms. Frizzera, how about you first and then Mr. Ogrosky? 

Ms. FRIZZERA. So I will say every time we try to do that physicians go crazy, or hospitals, whoever the provider is. So you definitely delay the payment when you put a process in like that, and 

the complaint is you are hurting the good guys for the bad guys 

so that the majority of us are doing the right thing, but we have 

a delayed payment because, you know, we have to allow you to prevent the bad guys. 

So you know, I think there are policy issues that come out of 

these claimed processings. So a lot of times you will see, well, this 

is not right, but when you really look at what is happening, it is 

a bad policy, and the policy needs to be changed and adjusted to 

stop the waste and abuse project. 

I do not know that I would say that the preauthorization for hospital admission is workable in a system like CMS when you have 

so many beneficiaries, and quite honestly so much pressure on 

CMS to pay timely claims, and when providers do not get paid, 


ralbany on LAP520R082 with HEARINGS
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that is a pretty big problem and it becomes everybody’s problem 

here. It becomes everybody’s problem at CMS. 

So anything that delays that payment probably will cause a lot 

of problems. However, I do think there is an additional piece that 

CMS could do which is really revising policies when they see things 

happening that are creating waste and abuse. 

Mrs. BLACK. Because it is working in the private sector, and 

people do get paid timely in the private sector. So I would like to 

explore that a little bit more about why that does not work in the 

public sector. 

Ms. FRIZZERA. Yes. So I would just add one quick comment in 

defense of CMS. The private payers do not have the same pressures that CMS has in paying providers publicly. Right? It is a 

very public program. So anything that we do not do, anything that 

CMS would not do becomes a big public problem. 

Private payers really do not have that same responsibility to 

publicly announce that they are stopping payment. So I think the 

public perception is one of the issues around CMS that makes it 

a little bit harder for them to do some things that maybe commercial payers can. 

Mrs. BLACK. Mr. Ogrosky, you mentioned it. So let me turn to 

you. 

Mr. OGROSKY. So I am by no stretch of the imagination an expert in how to run an insurance company, which is what CMS is. 

Private insurance companies have put in checks and balances over 

the years that do things like preadmission, preauthorization. 

When you have 50 million people, the bulk of whom are over 65, 

the rates of hospital admission are very different. That is a different thing. 

The administrative cost that private insurance companies run 

compared to the administrative cost that CMS runs is a lot different also. So there are different factors here that go into it. 

My thinking is Medicare has been since the 1960s to today a 

trust based system, and that trust is earned by the majority of providers in the community. They file legitimate claims. They work 

hard. 

We are talking about finding ways to close those loopholes or 

minimize that margin, whether it is five percent or ten percent, to 

eliminate that, and some of the ways of thinking about it are if we 

cannot get rid of the outright criminal fraud, you know, then 

spending our time second guessing a doctor’s decision on whether 

someone needed to be in this status seems to me to be a real waste 

of resources. 

So I do not know the right way to design it. I do know that on 

the other question that was asked about the structure of the system, there are a lot of components that are expensive, but you 

know, everyone needs to figure out how to work together, and there 

are some government agencies that work great together. 

Mrs. BLACK. I cannot see how much time I have left, Mr. Chairman. Am I still—— 

Chairman ROSKAM. Seconds. 

Mrs. BLACK. Oh, seconds. Well, I was going to go to the historical patterns and try to figure out how do you get these historical 

patterns to be able to determine when there is a possibility of a 


ralbany on LAP520R082 with HEARINGS
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fraud or the improper use of a certain procedure or a device, so to 

speak. Someone has legs but they get a prosthetic. 

Mr. OGROSKY. So historical patterns, if you look at fraud cases 

over the last 20 years, they are replicating fraud patterns. You see 

most criminals are not highly sophisticated. They copy what they 

see in the community. 

So basic community policing knows that low barrier to entry 

companies, whether they are DME, home health care, some pharmacies, companies where you do not need a medical degree, you do 

not need a high school degree; you can go in and get a provider 

number; those low barrier entry companies are the ones that tend 

to have patterns of repeating fraud. 

And if you look at the data from each community and you do not 

compare it to the averages across the country but you compare it 

to the mean for Medicare beneficiaries, you can very quickly see 

DME, ambulance, home health. These things just pop off a page, 

and they are repetitive. 

And as much as we would try at DOJ to tackle and reduce those 

rates, and we were able to see it in the claims data, as soon as the 

DME would drop, the home health would go up. So the criminals 

are on the move. 

Mrs. BLACK. Thank you, Mr. Chairman. 

Chairman ROSKAM. Thank you. 

Let me just ask a few closing questions, and I will sort of gallop 

through these kind of quickly, but they are important, I think, for 

the record and to bring this discussion to fruition. 

Mr. Nelsen, there has been a lot of discussion about paying and 

the delay of payments and so forth. How does Visa mitigate? You 

know, you have got an unhappy merchant who is part of your system and you want to keep satisfied, but how do you all mitigate 

that relationship if the argument is, ‘‘Hey, look. You have got an 

unhappy provider here,’’ and so forth? 

Can you walk us through that parallel and just give us some insight? 

Mr. NELSEN. Yes, that is a good question. So it is a little bit 

different for Visa because our relationship is with the acquiring 

bank. So each merchant has an acquiring bank, and so we would 

go after the acquiring bank if there is a fraud case, for example. 

So it is up to the acquiring bank to actually go to each individual 

merchant to collect the funds. 

So for our perspective, it is a little bit easier in terms of how we 

manage and monitor the system. 

Chairman ROSKAM. How long does that process usually take? 

Mr. NELSEN. It depends. It depends kind of by geography. It 

can be fairly quick, a couple of days. It could be a couple of weeks 

as well. 

Chairman ROSKAM. Are you able to discern between a fraudulent claim, a false claim, and an error? 

Mr. NELSEN. That is a little bit more on the issuing side. Since 

we have zero liability, some consumers will take advantage of that 

and they will claim it is fraud, but it may actually be the genuine 

consumer. So the issuing banks deal with that to some degree. We 

call it first party fraud, and they will have to do some due diligence 


ralbany on LAP520R082 with HEARINGS
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to say did this person really do this or not, and that is going to be 

up to each individual bank to determine was it really fraud or not. 

But the banks will use our tools to help assess that. So if it is 

within a pattern and the risk scores are low, the bank can use that 

to help determine, hey, this is actually maybe the genuine consumer. 

Chairman ROSKAM. So a question for Mr. Nelsen and Mr. 

Ogrosky. 

Can you help us discern this concept that has been floating out 

there today? CMS asserted earlier, hey, there are all of these other 

data points and that makes our life more complicated. Is there not 

an argument that says: no, no, no. If you have more data points 

it is actually more helpful? 

Who is right? What is up with that? 

Mr. OGROSKY. So I will answer it from my perspective, looking 

at the data and analyzing claims data, and I like claims data. I do 

not need an electronic health record to be able to spot patterns and 

trends. 

Basic data points on a health care claim, you cannot look at just 

one claim standing alone. You look at the providers in a community 

and you look at all of their claims, and what I see in claims forms 

are really some basic things that are very helpful. 

Does the diagnosis match the service? 

Is the doctor alive? 

Is the zip—— 

Chairman ROSKAM. Crazy, that. Wow. 

Mr. OGROSKY. Is the zip code within the same region as the 

provider? Like is the patient’s home address near the provider? 

Chairman ROSKAM. Now, just for my benefit, is that billing information? So walk me through. You have got an underlying medical record, right? That is not what you are really talking about. 

Mr. OGROSKY. No, I am talking about—— 

Chairman ROSKAM. You are talking about claims. 

Mr. OGROSKY [continuing]. The 1500 form. It used to be the 

HCFA 1500 form. 

Chairman ROSKAM. And that is all you have got to look at? 

That is what you are saying? 

Mr. OGROSKY. That is what I have always used. You have the 

name of the beneficiary. You have their Medicare number, which 

is the Social Security number. You have their home address, where 

they live. You have the name of the provider. You have the doctor, 

the ordering physician, and you have the service or the item. 

So you have all of this information. Now, if I wanted to know, 

and I have seen cases where the provider is in, let us say, Miami 

and is servicing patients from all over the country. Well, how 

would that be possible? 

Well, it is theoretically possible. They could have all traveled to 

Miami, but then you look at the next thing. Does the diagnosis 

match the treatment? And then I would consult with a nurse and 

say, ‘‘Gee, you know, they have ordered all braces for people diagnosed with arthritis. Do you brace an arthritic joint?’’ 

And the nurse would say, ‘‘No, you do not brace an arthritic joint. 

You flex an arthritic joint.’’ 


ralbany on LAP520R082 with HEARINGS
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So there is enough information for me to be able to look at that 

claim form and flag it as an aberrational claim form. 

Now, once it is flagged as an aberrational claim form does not 

mean that the provider has committed fraud. There could be a specialist out there that has a unique treatment. But then what you 

do is you refer it and a ZPIC or someone goes out to see does this 

company actually exist. 

And what I would find when we would send people out from OIG 

or from some of these agencies, they would show up at the provider 

and it would not exist. 

Chairman ROSKAM. So can I put you in the Peter Roskam camp 

of more data is better? 

Mr. OGROSKY. I think so. 

Chairman ROSKAM. Okay. 

Mr. OGROSKY. I think there are many choices. 

Chairman ROSKAM. Stop talking. Perfect. 

[Laughter.] 

Chairman ROSKAM. That is right where I want you. 

Mr. Nelsen, what do you think? 

Mr. NELSEN. I would agree more data is generally better. I 

think one of the challenges though is organizationally a lot of times 

data is siloed within different databases. So in order to really use 

it—— 

Chairman ROSKAM. That is a serious point. 

Mr. NELSEN [continuing]. You have to develop and engineer the 

systems that can get access to the data in real time to either build 

the models or analyze the activity. 

Chairman ROSKAM. Yes. 

Mr. NELSEN. But if you can use the data, then it is valuable. 

Chairman ROSKAM. Okay. So just last little line of inquiry. Ms. 

Frizzera, should CMS be able to discern between improper payments and fraud? 

You heard me. I was surprised. 

Ms. FRIZZERA. Yes. Well, I will say they should. They should, 

and I think the distinction really is they can distinguish it, but people continue to put it in the same bucket. Right? So everybody calls 

it fraud. It really is not. I mean you can redefine fraud differently. 

Fraud is defined as people illegally using the system, and fraud 

in the way it has been interpreted and used are the really bad guys 

just really scamming the system. 

Improper payments, maybe not. Maybe they are just scamming 

the system a little bit. It is just improper. 

So I think it is the definition that makes that very hard, and 

when people talk about fraud, they include all of that, and it is not 

the same. Fraud is really, you know, when you have the Strike 

teams and you see the data about real fraud. They put people in 

jail. That is fraud. That is very different than the waste and abuse, 

and improper payments are in that bucket. 

So I think the difficulty is people tend to put it all into one bucket, but I think if you defined fraud as people who go to jail, they 

can give you those differences. I think the definition is just very 

unclear today when you ask the question. 

Chairman ROSKAM. So let me just wrap up. I know I speak on 

behalf of the Ranking Member and every Member here. It has been 


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really helpful for us to get your perspective. Your time is valuable, 

and you have been generous with your time today, and we really, 

really appreciate it. 

One point, and that is the general concern about slowing down 

of payments, and there is clearly a sensitivity to that. But if you 

look at the reality and kind of the broader picture, we have a sort 

of Damocles over our head, and the sort of Damocles is an SGR 

that will come to an end, which what does that mean? That means 

a 22 percent payment cut for providers which is unpleasant and 

miserable. That is not slow. That is never coming. 

Now, you know and I know it is going to get fixed, but I think 

we need to think more broadly in the totality of there is plenty of 

money for us to deal with this system. There is plenty of money 

to make sure that seniors are cared for and to Mr. Lewis’ point 

that nobody is left on the side here. 

But we absolutely need to be much, much smarter about how we 

do this, and I know that this Subcommittee and the Members who 

are on it on a bipartisan basis are passionate about this. 

I will make one other point. A lot of times we conflate, and this 

is a point that you made Ms. Frizzera. You conflate these concepts 

of waste, fraud and abuse, and they become almost a phrase that 

we chuck out. And the more I have thought about this responsibility that I have now, I begin to think of them in different ways. 

Abuse is what we heard last month at this Committee. The IRS 

had been abusing people with civil forfeiture. That is the misuse 

of government power, poorly place on someone that is used to a bad 

end. That is civil forfeiture that was abusive. 

Fraud is that hustler, that manipulator, somebody that comes 

and gains a personal gain, a pecuniary gain, but it’s ill-gotten. 

And waste is something different. Waste is, you know, ordering 

the pencils and paying too much for them or leaving the lights on 

or being stupid and gratuitous while it is easy to spend other people’s money. 

And that sort of construct has been helpful for me to think about 

the responsibility of this Subcommittee. But here is what I know. 

I know that we have got to do better. I know that on a bipartisan 

basis with the help of all of the Members of this Subcommittee we 

will do better, and your insight today, all four of you, is very, very 

helpful, and I know I speak for every Member in thanking you. 

Thank you. The hearing is adjourned. 

[Whereupon, at 12:34 p.m., the Subcommittee was adjourned.] 

[Member Submission for the Record follows:] 


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George Holding, letter 

f 


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[Public Submission for the Record follows:] 

Federation of State Medical Boards, letter 


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Æ 


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