U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

71–524—PDF 2011

S. HRG. 112–178 

PREVENTING HEALTH CARE FRAUD: NEW TOOLS 

AND APPROACHES TO COMBAT OLD CHALLENGES 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 2, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

WITNESSES 

Budetti, Dr. Peter, Deputy Administrator and Director of the Center for 

Program Integrity, Centers for Medicare and Medicaid Services, Department of Health and Human Services, Washington, DC ................................... 5 

Levinson, Hon. Daniel, Inspector General, Department of Health and Human 

Services, Washington, DC ................................................................................... 7 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 27 

Budetti, Dr. Peter: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 29 

Responses to questions from committee members ......................................... 49 

Grassley, Hon. Chuck: 

Prepared statement .......................................................................................... 80 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 83 

Levinson, Hon. Daniel: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 85 

Responses to questions from committee members ......................................... 94 

COMMUNICATIONS

Academy of Managed Care Pharmacy ................................................................... 111 

Apria Healthcare ..................................................................................................... 114 

Pharmaceutical Care Management Association .................................................... 118 

(III) 

(1) 

PREVENTING HEALTH CARE FRAUD: 

NEW TOOLS AND APPROACHES 

TO COMBAT OLD CHALLENGES 

WEDNESDAY, MARCH 2, 2011 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:10 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Wyden, Carper, Cardin, Hatch, Grassley, 

Snowe, Ensign, and Coburn. 

Also present: Democratic Staff: Russ Sullivan, Staff Director; 

John Angell, Senior Advisor; David Schwartz, Acting Chief Health 

Counsel; Chris Law, Investigator; and Berenise Nunez, Fellow. Republican Staff: Chris Campbell, Staff Director; Kim Brandt, Chief 

Health Care Investigative Counsel; and Jay Khosla, Chief Health 

Counsel. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. I apologize for 

the late delay; something came up. But we will proceed. 

Warren Buffett once said, ‘‘Rule number one: never lose money. 

Rule number two: never forget rule number one.’’ Unfortunately, 

the Federal Government loses an estimated $60 billion to fraud in 

Federal health care programs every year. We must do a better job 

of ensuring that these programs do a better job of following 

Buffett’s rules. 

Before health care reform, our system let criminals into our programs and paid fraudulent claims without enough review. The 

health reform law provides law enforcement with an unprecedented 

set of new tools. These tools prevent fraud from occurring in the 

first place. Specifically, health care reform creates new ways for 

Medicare to screen health care providers before they are accepted 

into the program. 

The new law also creates one singular database for Medicare billing information. With all this information in one place, HHS and 

the Department of Justice can compare notes and help each other 

identify criminals, fraudulent schemes, and other abuses. 

Before the new health care law, even suspicious claims were paid 

and only investigated later. The Affordable Care Act gives law enVerDate Nov 24 2008 20:12 Dec 21, 2011 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 R:\DOCS\71524.000 TIMD
2 

forcement officials the authority to suspend payments and investigate suspicious claims before that money goes out the door. 

The law increases civil and criminal penalties for those who commit fraud, penalties that will make criminals think twice before 

committing fraud in Medicare or Medicaid. And the new law expands the use of recovery audit contractors to Medicare Parts C, 

D, and Medicaid. Medicare uses these independent investigators to 

look closely to find out if over-payments are being committed. 

Recently, we have seen and read good news on efforts to prevent 

fraud. We can read the headlines here. I will try to myself. This 

one is, ‘‘Twenty-six Arrested in Three States in Medicare Fraud 

Schemes.’’ That is December 15, the New York Times. ‘‘Drug Mak- ers Pay $400 Million in Medicare and Medicaid Fraud Case,’’ December 7, Boston Herald. Here is an earlier one in 2010, July 16, 

New York Times, ‘‘Dozens Arrested Totaling $251 Million in 

Fraud.’’ L.A. Times, ‘‘Two U.S. Agencies Team Up To Crack Down 

on Health Care Fraud.’’ That is dated August 27, 2010. 

Over here, these are all 2011: ‘‘U.S. Charges 111 in Largest 

Medicare Fraud Crackdown.’’ That is Reuters. ‘‘U.S. Recovers 

$4 Billion From Health Care Fraud Cases.’’ That is a lot of money. 

That was January 24, the Washington Post. And then AP, ‘‘Feds 

Recover $2.5 Billion in Health Care Fraud.’’ New York Post, ‘‘Medicaid Crackdown Paying Off.’’ So there is a lot of progress. That is 

good news. 

These posters list some of the headlines we have seen regarding 

our success. In January, we learned that our fraud prevention and 

enforcement efforts recovered $4 billion in 2010. This is the highest 

number of taxpayer dollars ever recovered by efforts to fight health 

care fraud. 

Two weeks ago, the Departments of Justice and Health and 

Human Services announced the largest fraud bust in U.S. history: 

114 defendants arrested. Arrests were made in nine cities, including Los Angeles, Brooklyn, Detroit, and Miami. The defendants 

were allegedly involved in more than 40 schemes to defraud the 

government. This bust recovered more than $240 million. 

One of those arrested was a Brooklyn physical therapist named 

Aleksandr Kharkover. Aleksandr billed Medicare $11.5 million over 

41⁄2 years. He is accused of billing for physical therapy services 

that were either never performed, or not medically necessary. 

Now we are expanding the Medicare Fraud Strike Force through 

Dallas and Chicago. Today we want to hear from our witnesses 

about how these new tools are being implemented: are they up and 

running, are they effective, when do you expect to see results? We 

want to know if any additional tools are needed and if you have 

enough resources to do the right job. 

The Finance Committee also will continue to investigate fraud. 

We will look for new places where we can enact laws to strengthen 

our efforts. Last December, the committee released the findings of 

our investigation on the connection between a stent manufacturer, 

Abbott Labs, and a Maryland doctor who allegedly implanted 600 

medically unnecessary stents. 

Mr. Levinson, yesterday I sent you a letter raising concerns 

about Medicare contractors along with Senators Carper and 

McCaskill. Medicare hires contractors to cut the checks that reimVerDate Nov 24 2008 20:12 Dec 21, 2011 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 R:\DOCS\71524.000 TIMD
3 

burse many of the doctors, hospitals, and other providers. Medicare 

hires contractors to oversee that process to prevent fraud, waste, 

and abuse. But many of these entities are owned by the same parent company. One division of the company overseeing another 

raises a conflict of interest. Many of the anti-fraud provisions in 

the health care law were bipartisan ideas. I am confident that both 

Democrats and Republicans can work together to prevent fraud as 

we move forward. 

So we thank you both for your hard work and for coming to visit 

us today. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, thank you, Mr. Chairman. We welcome our 

witnesses here today. We appreciate you taking time to be up here 

with us. There is no doubt that this is a challenging time. We are 

in the midst of one of the greatest fiscal crises ever to confront our 

country. This week, Congress is making tough choices regarding 

spending to keep the Federal Government’s doors open. It is fitting 

that we are here today to talk about risk to our health care dollars. 

Specifically, as the number of Medicare and Medicaid beneficiaries escalates and funds to pay for those services become preciously stretched, it is imperative that we take a critical look at 

how tax dollars are being spent to reduce the amount of fraud, 

waste, and abuse. 

I am really pleased to welcome Inspector General Daniel Levinson and Dr. Peter Budetti today to speak on this important topic 

and share with us what efforts are being made to ensure that dollars entrusted to HHS are being spent wisely. 

Medicare and Medicaid make up the bulk of the Federal health 

care programs, with nearly 100 million participants and more than 

$800 billion in outlays in 2010, more money than the whole Defense Department spends. When the State’s Medicaid matching 

amounts are added in, these Federal programs spend over $1 trillion per year. 

Estimates of the amount of fraud, waste, and abuse in these programs vary greatly, but CMS has reported that improper payments 

for Medicare alone in 2010 may have been nearly $48 billion, and 

some estimates have said that the amount of fraud, waste, and 

abuse could be nearly 10 percent of the total Federal entitlement 

program outlays. 

While there is much to be explored today in how HHS, OIG, and 

CMS are spending the money entrusted to them to curb fraud, 

waste, and abuse, I also wish to point out that the path to recovering these monies is a path fraught with peril. If the methods 

used to ferret out fraud, waste, and abuse are not just respectful 

of due process and recognize distinctions between the truly ‘‘bad actors’’ and errors that are the result of confusing rules and ambiguous regulations, then the agencies will lose their credibility with 

the health care organizations they monitor and the taxpayers who 

expect vigorous, but fair, vigilance. 

4 

Figuring out how much fraud exists is the first step to better 

being able to determine how to address it. Determining how to effectively fight it is the next step. In the past year, Congress has 

given additional tools and appropriated significant new resources to 

the agencies testifying here today, but it remains to be seen how 

effective those tools and resources ultimately will be in curbing improper payments. 

Recent reports seem to indicate that there are reasons to be optimistic about successes such as the over $4 billion in recoveries 

cited by HHS and the DOJ in their 2010 Health Care Fraud and 

Abuse Control Fund, the HCFAC, report. Moreover, the recovery 

reports and figures do not address what portion is the result of intentional fraud or is attributable to mistakes due to regulations 

that are tripping up health care organizations by the sheer size 

and complexity of those regulations. 

I am sincerely concerned about the helter-skelter approach being 

taken to implement the new health care law’s tools to address improper payments. For example, the recent stop and start and then 

reverse guidance by CMS to States and health care organizations 

on Medicaid RACs is mind-boggling. The Patient Protection and Affordable Care Act required CMS to establish a Medicaid Recovery 

Audit Contractor (RAC) program by December 31, 2010. Last 

month, CMS sent a letter to States which effectively says, ‘‘Don’t 

worry about it,’’ and promised to take up Medicaid RACs at an unspecified time ‘‘later this year.’’ 

Now, the examples abound in which CMS has issued guidances 

only to retract, amend, or postpone them indefinitely. Is it a wonder that health care organizations think that trying to comply with 

agency rules can seem like stacking papers in the middle of a tornado? 

Lastly, I must address the way the President’s budget for fiscal 

year 2012 uses health care fraud recoveries to suppress the real 

cost of health care reform and seeks a substantial increase in 

‘‘fraud-fighting funds,’’ when this administration has not yet shown 

sustained progress in reducing improper payments. 

I see that there is a request for a nearly $581-million increase 

in discretionary spending for health care fraud efforts. This is a 

significant increase over the $311 million contained in the fiscal 

year 2011 continuing resolution, and more than double the $259 

million spent in fiscal year 2010. 

Now, this is a sizeable increase at a time when there are scant 

extra dollars to be spared in the Federal budget. Just 2 weeks ago, 

at the Senate Appropriations Committee, Labor and HHS Subcommittee, Dr. Budetti stated that any spending reduction would 

be a ‘‘major impediment’’ for CMS’s program integrity efforts. And 

while I appreciate the need for more resources, I wonder why that 

money cannot come from the $1 billion implementation fund set up 

under health care reform rather than from additional appropriations. 

I think it is essential we look at the real return on investment 

of dollars specifically targeted towards implementation of the 

fraud-fighting provisions of PPACA and determine their effectiveness before committing to additional spending. 

5 

Ensuring the integrity and fiscal longevity of our Federal health 

care programs is an essential priority for all of us, and I look forward to working with both of you, and others as well, to find ways 

to achieve that goal. You both have very difficult jobs, I acknowledge that, and I appreciate the efforts that you make. I want to 

thank you both for all the work you and your staffs do on behalf 

of our taxpayers. This is a tough set of jobs you have, but we have 

to find some way to be even more successful than we are now. 

Thank you so much, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Hatch. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. I am very pleased to welcome our witnesses. 

Today we hear from Deputy Administrator and Director for the 

Center of Program Integrity, Peter Budetti; and Inspector General 

for the Department of Health and Human Services, Daniel 

Levinson. 

You probably know the custom here. That is, your statements 

will automatically be included in the record, and you can summarize within 5, 6, 7 minutes, whatever seems to make most sense. 

All right? 

We will start with you, Dr. Budetti. 

STATEMENT OF DR. PETER BUDETTI, DEPUTY ADMINISTRATOR AND DIRECTOR OF THE CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND MEDICAID SERVICES, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC 

Dr. BUDETTI. Chairman Baucus, Ranking Member Hatch, other 

members of the committee, thank you very much for this invitation 

to discuss the efforts of the Centers for Medicare and Medicaid 

Services to reduce fraud, waste, and abuse in the Medicare, Medicaid, and CHIP programs, and the new tools and authorities provided in the Affordable Care Act and other recent legislation. 

I am particularly pleased to be sharing the table with my distinguished colleague and tireless fraud fighter, the Inspector General 

of HHS, Dan Levinson, who is a close colleague in this fight. 

From the first day that I had the privilege to take this job on 

a little over a year ago, I have repeatedly been asked two key questions: why do we let crooks into the Medicare and Medicaid programs, and why do we pay fraudulent claims? 

I am pleased to tell you that, with the new authorities provided 

in the recent laws and the continued commitment of this administration to fighting fraud in our programs, we are making progress 

on both fronts. We will be keeping the people out of our programs 

who do not belong there, and we will be screening out fraudulent 

claims before they are paid. We now have the flexibility to tailor 

our resources to the most serious problems and to quickly initiate 

activities in a transformative way. 

Under the leadership of Secretary Sebelius, CMS has taken several administrative steps to better meet the emerging needs and 

challenges of fighting fraud and abuse. CMS consolidated the Medicare and Medicaid program integrity groups under the unified Center for Program Integrity, which I have the privilege of directing. 

6 

This allows us to pursue a more coordinated and strategic set of 

program integrity policies and activities across both programs. This 

change in structure has served our purposes well and has also facilitated our collaboration with our law enforcement partners. 

The Affordable Care Act enhances this organizational change by 

providing us an opportunity to jointly develop Medicare and Medicaid and CHIP policy on these new authorities. For example, the 

enhanced screening requirements under the Affordable Care Act 

apply equally to providers and suppliers across both programs. 

This provides a basis for assuring better consistency in our approach to fraud prevention across our programs. 

Now, you might question whether reorganization within an administrative structure is of real value, but I can tell you that creating a center within CMS that is on a par with the other centers 

has sent a powerful message about the commitment that we have 

made to fighting fraud and also put the bad actors on notice as to 

the seriousness of that commitment. 

To explain how we have been transforming our fraud detection 

and prevention work, I would like to draw your attention now to 

the new approach shown on this poster. I believe you all have copies of it as well, if it is difficult to read at a distance. 

First of all, central to our goal is a shift towards identifying 

fraud before it happens, preventing it from taking shape, and moving away from pay-and-chase, the approach that we have relied on 

in the past. 

Second, we are committed not to take a monolithic approach to 

dealing with fraud. Instead, we are focusing on the bad actors who 

pose elevated risks of fraud. 

Third, we are taking advantage of sophisticated new technology 

and other innovations as we move quickly to take action, to lead 

to prevention of fraud when possible. 

Fourth, consistent with this administration’s commitment to 

being transparent and accountable, we are developing performance 

measures that will specify our targets for improvement. 

Fifth, we are actively engaging our public and private partners 

from across the spectrum because we know there is much to learn 

from others who are engaged in the same activity of fighting fraud. 

We know the private sector is victim of many of the same schemes 

that we see in our public programs, and collaboration and communication with them will further enhance our fraud fighting. 

Finally, we are committed to coordinating and integrating all of 

the CMS fraud-fighting programs and initiatives when possible. As 

we move from the old ways to more modern and sophisticated approaches, we are concentrating our actions so that we do a better 

job of preventing bad actors from enrolling in the first place, while 

assuring that the good actors are, if anything, less bothered by our 

activities; second, acting quickly to prevent fraudulent or otherwise 

improper payments from being made, in collaboration with our colleagues in the Office of Inspector General; third, taking steps to 

achieve the President’s goal of reducing the claims payment error 

rate by 50 percent; and fourth, using new and different kinds of 

tools to identify bad actors against whom we need to take action. 

One point bears stressing: as we crack down on those who would 

commit fraud, we are mindful of the necessity to be fair to health 

7 

care providers and suppliers who are our partners in caring for 

beneficiaries and to protect beneficiary access to necessary health 

care services. This requires striking the right balance between preventing fraud and other improper payments without impeding the 

delivery of critical health care services to beneficiaries. 

We will always respect the fact that the vast majority of health 

care providers are honest people who provide critical health care 

services to millions of CMS beneficiaries every day. With the powerful new anti-fraud tools provided to CMS and our law enforcement partners, which I have detailed in my written testimony, we 

are putting into place these measures that will shift from our previous approach of pay-and-chase to the new approach of preventing 

fraud, and we are confident that this will be successful as we move 

forward. 

I look forward to working with you as we implement our responsibilities and to answering any questions that you might have. 

Thank you very much. 

The CHAIRMAN. Thank you, Dr. Budetti, very much. 

[The prepared statement of Dr. Budetti appears in the appendix.] 

The CHAIRMAN. Mr. Levinson, you are next. 

STATEMENT OF HON. DANIEL LEVINSON, INSPECTOR GENERAL, DEPARTMENT OF HEALTH AND HUMAN SERVICES, 

WASHINGTON, DC 

Mr. LEVINSON. Thank you, and good morning, Chairman Baucus, 

Ranking Member Hatch, and members of the committee. Thank 

you for the opportunity to testify about the efforts of OIG and our 

partners to combat health care fraud, waste, and abuse. I appreciate your support for OIG’s mission to protect the integrity of HHS 

programs and their beneficiaries. 

OIG has been leading the fight against health care fraud for 

more than 30 years in collaboration with the Justice Department 

and CMS. Thanks in part to the Health Care Fraud Prevention 

and Enforcement Action Team or HEAT initiative, we are making 

strides in preventing fraud, catching and prosecuting criminals 

more quickly, and assisting well-intentioned providers in complying 

with the law. Our efforts will be bolstered by the additional funding providing through the Affordable Care Act for the Health Care 

Fraud and Abuse Control, or HCFAC, program. 

The HCFAC program is a prudent investment of taxpayer dollars. In fiscal year 2010, this program’s activities returned an unprecedented $4 billion in fraudulent and misspent funds. Over the 

past 3 years, for every dollar spent on the HCFAC program, the 

government has returned an average of $6.80. The Affordable Care 

Act further enhances our program integrity efforts by addressing 

vulnerabilities, strengthening enforcement, and encouraging greater coordination among Federal agencies. 

Despite our successes, there is more to be done. Those intent on 

breaking the law are becoming more sophisticated, and their 

schemes are more difficult to detect. Some fraud schemes go viral, 

they replicate quickly, and they migrate. As law enforcement 

cracks down on a particular scheme, the criminals may redesign it 

or relocate to a new city. When detected, some perpetrators have 

become fugitives, fleeing with stolen Medicare funds. To combat 

8 

this fraud, the government’s response must be swift, agile, and 

well-organized. 

My written statement describes in more detail our collaboration 

with CMS and DOJ, enhanced program integrity tools in the Affordable Care Act, and OIG fraud-fighting initiatives, but this 

morning I would like to highlight a few of those initiatives. 

Our Medicare Fraud Strike Forces are cracking down on criminals in fraud hot spots around the country. Since 2007, Strike 

Force operations have charged nearly 1,000 individuals, involving 

more than $2.3 billion in Medicare billing. Just last month, Strike 

Force teams engaged in the largest Federal health care fraud takedown in history. The teams charged more than 100 defendants in 

9 cities, including doctors, nurses, and health care company owners 

and executives for fraud schemes involving more than $225 million 

in Medicare billing. 

OIG has referred credible evidence of fraud to CMS to implement 

payment suspensions, helping to turn off the spigot to prevent dollars from being paid for fraudulent claims. OIG excludes fraudulent 

or abusive providers from Federal health care programs, cutting 

them off from Federal funds. We are now focusing on holding responsible those individuals who are accountable for corporate misconduct. This exclusion authority is a powerful deterrent to corporate fraud. 

However, enforcement alone is not enough. We are also engaging 

health care providers to help prevent fraud and abuse. For example, we are conducting free training seminars in six cities, including one today in Tampa, FL, to educate providers on fraud risks 

and share compliance best practices. We recently published a road 

map for physicians. It provides guidance on how doctors should 

comply with fraud and abuse laws in their relationship with payers, vendors, and fellow providers. 

We are also asking the public to help us track down Medicare 

fraud fugitives. We have posted online our 10 Most Wanted Health 

Care Fraud Fugitives, including photographs and details on their 

fraud schemes. You can see our current Most Wanted list on display right here. 

We hope the public will help us bring these individuals to justice 

by reporting any information about their whereabouts to our 

website or fugitive hotline, and that is also posted right there on 

our enlarged poster. 

In conclusion, OIG is committed to building on our successes, employing all oversight and enforcement tools available to us, and 

maximizing our impact to protect our health care programs, the 

people served by them, and American taxpayers. We very much appreciate your support of our mission, and I am happy to take your 

questions. Thank you. 

The CHAIRMAN. Well, thank you all very much. 

[The prepared statement of Mr. Levinson appears in the appendix.] 

The CHAIRMAN. I have a sense, and I think the American public 

has a sense, that there is a lot of fraud in Medicare and Medicaid, 

and maybe even in CHIP. There is a lot. I think the American people believe that our government is not doing a very good job in 

rooting it out and preventing it in the first place. I appreciate the 

9 

recent developments, especially the most recent one, where a lot of 

bad actors were rounded up. But still, I think there is a sense that 

we are only at the tip of the iceberg. I do not know if that is accurate. I know it is accurate that the American people think that, but 

I do not know if it is accurate that you are not doing what you 

could be doing. 

I would like to ask, of all the health care dollars spent today, 

your best judgment as to what percent is fraudulent. Either one of 

you. 

Mr. LEVINSON. Mr. Chairman, I have always gone almost out of 

my way never to provide a specific figure. And it is not because I 

am trying to elude the question. It is regularly posed. 

The CHAIRMAN. Why do you go out of your way? 

Mr. LEVINSON. This is such a clandestine type of activity, and in 

order to try to provide some exact figure about what might be going 

on with any particular line within the health care industry, or any 

individual or collection of providers, is almost a distraction from 

our looking at exactly what the patterns we see are and acting aggressively. 

The CHAIRMAN. Let me ask a different question: do you internally have an idea what the answer to that question is, without 

disclosing it? Do you, in your own mind, have a sense of how much? 

Mr. LEVINSON. Well, we certainly know from our own practice, 

and we are 1,700 strong, and of course we are overseeing the largest department financially in the Federal Government. I have 1,700 

people, if I include everybody, looking over $900 billion. 

The CHAIRMAN. That is a different question, sir. I am asking you 

a different question. I am asking you, Mr. Levinson: do you have 

an idea of how much of the health care dollar spent today is fraudulent or wasted? Do you personally have an idea, irrespective of 

whether you have one person working for you or you have 2 million 

people working for you? 

Mr. LEVINSON. I believe it is a significant dollar figure. 

The CHAIRMAN. You think it is significant? 

Mr. LEVINSON. It is a significant dollar figure. I am hard-pressed 

to give you a percentage. It is a significant dollar figure. 

The CHAIRMAN. Now, what I would like you to do is give us quarterly reports on your progress. How do you internally measure your 

progress and whether you are doing a good job or not? Do you have 

benchmarks? Do you have dates by which you want to accomplish 

certain objectives? 

Mr. LEVINSON. Well, we certainly do valuable risk assessments. 

We have enormous expertise, both on the investigative and on the 

audit end of our work. Where we see suspicious billing patterns, 

where we look at those kinds of dollars, we know that that is an 

area that deserves concentrated attention. 

But I would hasten to add that it is not always a matter of looking at exact dollars and cents. It is also a matter of examining 

quality of care issues as they develop, because many of our investigators uncover patterns of work that indicate that there are significant patient safety issues that are being raised that do not necessarily accompany large dollar figures. That makes the equation 

more complicated. You are looking certainly at dollars, because 

these are taxpayer dollars, these are the dollars used for beneVerDate Nov 24 2008 20:12 Dec 21, 2011 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 R:\DOCS\71524.000 TIMD
10 

ficiaries. You are also looking at what the dollars are supposed to 

mean, and that is high quality of care. 

The CHAIRMAN. That was not the case in this latest round, 

though. That was just a pure rip-off. Not many people were being 

cared for in that one. 

Mr. LEVINSON. That is exactly right. I think it is helpful to address this area in the sense of two separate pillars. One is, who is 

entitled to get into the program? What kind of provider should be 

allowed to participate? Historically, entry into the program was too 

relaxed. There are some serious enrollment issues, people masquerading as health care providers who do not belong in the program 

in the first instance. 

The CHAIRMAN. Right. Right. 

Mr. LEVINSON. That is really where the Strike Force work has 

been so important. 

The CHAIRMAN. There is some talk in the Congress on how far 

it has gotten over at HHS or CMS. A credit card company, let us 

take, for example, American Express. If it sees an outlier, a charge 

that is out of your usual pattern of purchases, it calls you up and 

asks, ‘‘Did you charge this or not?’’ They call you up, and you respond, ‘‘Yes, I made that purchase.’’ 

Someone suggested—in fact, a couple of Senators here suggested—that the government adopt a similar procedure. That is, 

look at the billing practices of companies like American Express, 

and incorporate similar procedures to root out fraud. Are you doing 

that? 

Mr. LEVINSON. Well, I would defer to CMS about how the program actually is being operated here. But it is unquestionably true 

that our investigators would benefit enormously from being able to 

obtain real-time data so that we can act far more aggressively as 

the fraud actually unfolds, and we are seeing improvements in 

being able to get data in real time. But I would defer to CMS. 

The CHAIRMAN. But is the program I just outlined being pursued 

or not? 

Dr. BUDETTI. My two words would be my poster. 

The CHAIRMAN. And it says what? 

Dr. BUDETTI. Yes, Senator. The short answer is that we are developing, within the Center for Program Integrity, a new approach 

that takes into account not only claims patterns, but many other 

sources of information, so that we can identify patterns and problems prospectively and put administrative actions and referrals to 

law enforcement into place before the claims are paid. That is 

where we are going, using the latest technology and sophisticated 

tools. 

The CHAIRMAN. All right. 

Dr. BUDETTI. I would be happy to discuss that in more detail if 

you would like. 

The CHAIRMAN. I would like for you, Mr. Levinson, and your 

whole team, and I guess that includes the Justice Department, 

CMS, and others, to send this committee a quarterly report on your 

progress, with data, with numbers. I asked the SIGTARP to do 

that, the Special Inspector General for the TARP program. It 

worked wonderfully. He did a very good job. A very good job. So, 

I am asking you to do the same, to do a quarterly report with data, 

11 

numbers, dates, benchmarks, so you can show what your progress 

is or is not on a quarterly basis. See, we want to help you. If you 

give us the information, then we can help you, help each other 

here, to get these bad guys, the bad people. 

Mr. LEVINSON. Mr. Chairman, we welcome the opportunity to 

work with you and your staff to provide exactly the information 

that you are looking for. 

The CHAIRMAN. And you will do this? 

Mr. LEVINSON. In whatever form that is appropriate. 

The CHAIRMAN. A quarterly report. You will send a quarterly report to this committee? 

Mr. LEVINSON. Yes. 

The CHAIRMAN. And with numbers, and benchmarks, etc. 

Mr. LEVINSON. We will provide the information that you are looking for. 

The CHAIRMAN. All right. Thank you very much. I appreciate 

that. 

Senator Hatch? 

Senator HATCH. Well, thank you, Mr. Chairman. 

I agree with the chairman that we have to have more information. We need to know what is going on, and we need to have you 

really keep us informed at all times. We also need your suggestions 

on what we can do to help you to do a better job—or the best job, 

I will put it that way. We are serious about it, because it is just 

pathetic that we have so many crooks who are in these industries. 

Now, Dr. Budetti, we have discussed the anti-fraud provisions 

that were included in the Patient Protection and Affordable Care 

Act. As I noted in my opening statement, it seems that the implementation of the anti-fraud provisions has run into a number of 

delays. For instance, the provisions implementing the order and referring requirement for providers have been delayed multiple 

times, and most recently there have been additional delays in the 

implementation of the Medicaid RAC provisions. 

Now, in both instances the reasons cited for the delays are operational issues by either CMS or the States. Now, can you explain 

to me why CMS did not assess or anticipate these operational 

delays before issuing guidance and beginning down the pathway toward implementation? How can providers be expected to be compliant if CMS itself is not able to effectively implement these provisions? 

And one last question on this: what is being done to ensure that 

these types of start-stop implementation issues will not occur with 

other provisions as they are rolled out? 

Dr. BUDETTI. Thank you for the question, Senator Hatch. We 

have certainly been engaged in meeting the statutory deadlines 

that were provided in the Affordable Care Act with great diligence. 

We just recently published a major regulation on provider screening and enrollment, on suspension of payments, on moratoria, and 

on termination of providers from both Medicare and Medicaid that 

will take effect on March 25 of this year. 

The final rule will take effect March 25. That is a significant step 

towards implementing some of the key provisions of the Affordable 

Care Act, and we look forward to that being implemented aggressively and quickly over the coming year. 

12 

On some of the other items that you mentioned, as far as the 

State Recovery Audit Contractor program under the Medicare program, the requirement, we believe, was met by publishing a Notice 

of Proposed Rulemaking before the end of last year to the States. 

We have had a lot of interaction back and forth with the States. 

We have provided guidance to the States. 

We are in the process of preparing the final rule for implementing that. We want to be responsive to our partners in the 

States in fighting fraud and get it right, so we have had some 

interaction—extensive interaction—on this, and we believe that we 

are moving forward with full implementation of that provision, as 

well as all of the other provisions. So this is a big job. We are on 

it with a great deal of effort and diligence. I believe that so far we 

have, in fact, met our statutory deadlines. I would be happy to discuss any particular issues with you, Senator. 

Senator HATCH. We will send you a list of questions that you can 

answer. 

Dr. BUDETTI. Sure. 

[The questions appear in the appendix.] 

Senator HATCH. Mr. Levinson, in the OIG’s top management 

challenges, the first challenge discussed is health care reform implementation and the challenge HHS faces with respect to successfully implementing health care reform. 

Now, can you please elaborate on some of the challenges and how 

well-prepared you think HHS is to meet these challenges? 

Mr. LEVINSON. Well, Senator Hatch, I think that we have a rather robust collection of important assignments to do just in terms 

of the ACA itself, which mandates certain studies for us to do. But 

as the program unfolds, we are going to want to do a list of items 

that include how the expedited time frames will actually be addressed in terms of the roll-out. 

Of course, we can draw upon our experience from the Medicare 

prescription drug benefit law and the American Recovery and Reinvestment Act, programs involving data collection, to ensure accuracy and completeness of the data. That will be a major challenge. 

The grant programs. We are already the largest grant-making 

department in the government, but we have new significant grant 

program responsibilities that we will endeavor to oversee as quickly as possible, ensuring the accuracy of payments involving risk 

corridors, reconciliation payments, or similar payment structures, 

changes to Part D and other Medicare and Medicaid payments, 

and, of course, the potential for scams, such as insurance scams 

that target beneficiaries. So, we have a very robust collection of 

issues that we need to address. 

Senator HATCH. Well, thank you. 

My time is up, Mr. Chairman. 

The CHAIRMAN. Senator Ensign? Thank you. 

Senator ENSIGN. Thank you, Mr. Chairman. 

Just a couple of questions. I have several questions I can submit 

for the record as well. 

[The questions appear in the appendix.] 

Senator ENSIGN. When you were talking with the chairman, and 

he was asking for a specific figure, have we looked back over time? 

Do we have estimates? Are there studies that you have looked at, 

13 

either one of you have looked at, what the estimates are, or have 

been at least in the past several years on the percentage of Medicare dollars or Medicaid dollars that we think are in fraud? 

Dr. BUDETTI. Senator Ensign, yes. In fact, there have been two 

different sets of numbers that have circulated. One is the one that 

we are required to report under the Improper Payments Act, and 

those are improper payments. That is the figure of what was cited 

earlier. Improper payments are improper, and they should not 

occur the way that they have occurred, but they are not necessarily 

equated to fraud. 

Senator ENSIGN. Right. Some of those are just, somebody did not 

fill out the form right, or whatever. 

Dr. BUDETTI. Right. Anywhere from honest billing mistakes, to 

apparent lack of documentation, to delivering the right care but in 

the wrong setting. There are a number of different ways that there 

can be improper payments, and those can be corrected, and should 

be corrected. 

On the other hand, as far as real fraud is concerned, I would say 

that the estimates that have been circulated most widely are 3 percent and 10 percent; 3 percent is principally a figure that was developed by the National Health Care Anti-Fraud Association by 

interviews with the investigative units of private health plans, and 

it is an estimate—that is all it is—that cuts across both private 

and public sector potential fraud. The 10-percent figure is one that 

the General Accounting Office, when it was the General Accounting 

Office, the Government Accountability Office now, produced, maybe 

20 years ago, also by interviews with executives in the health care 

industry, so it is also an educated guess at best. 

I will tell you that our experience is that there are plenty of indicators that there is a lot of fraud and that we need to do something 

about it, indirect indicators, even if we do not, as the Inspector 

General said, have the number. The biggest indicator to me is that 

the more we look for, the more we find. The return on investment 

of fighting fraud goes up the more we spend to fight fraud. That 

is both, as far as I am concerned, good news and bad news. It 

means that we are getting a good recovery for the investments that 

we are making in fighting fraud, but it also means there is still a 

lot there to find. 

Senator ENSIGN. In that study that went across public and private, how much was public, how much was private? 

Dr. BUDETTI. I do not recall that they made any effort to separate those, Senator. 

Mr. LEVINSON. My best recollection is that the figures of 3 to 10 

percent were actually sought by Congress during the deliberations 

on the Kennedy-Kassebaum HIPAA law in 1996, and that played, 

actually, a very crucial part in establishing this whole HCFAC program because the 104th Congress was so concerned about the fraud 

risk. My best recollection is that it was done by the private sector, 

in effect saying there is bound to be fraud risk. No matter what 

you do with big dollars, there is going to be fraud risk. 

Senator ENSIGN. I was on the Ways and Means Committee at the 

time on the Health Subcommittee, and I was part of those hearings. As I recall, the 10-percent number, though, included fraud, 

waste, and abuse, so lot of the improper payments, a lot of that 

14 

stuff. So the bottom line is, we do not really have good numbers. 

Obviously we have to go after it. 

You mentioned, Dr. Budetti, the system, the credit system that 

you all are developing. I did not hear a time table when you 

thought that that would be completed and functional. Completed 

and functional. 

Dr. BUDETTI. So what we are running right now, Senator, is a 

pilot to test the use of swipe card technology, as in credit cards, in 

a limited area with Durable Medical Equipment (DME) suppliers 

in order to get experience with this new technology and to confirm 

that it is going to work. That is going on through the course of this 

year and will be completed this year as a pilot, and it is going to 

help us direct where we are going to go in the future with similar 

approaches to identifying securely who is ordering and who is providing the supplies on the DME side, and it also will give us a good 

basis for expanding such efforts in the future. 

We are doing other kinds of technology that are under way right 

now besides the credit card approach. We are using the same kind 

of analytic that many of the industries are using—banking and 

telephone and so forth are using—to identify problems across a 

wide range of data. 

Senator ENSIGN. But the chairman asked you a question on that 

type of a system. Do you have a plan put in with goals, benchmarks of when it would be fully functional? In other words, the old 

saying is, if you do not shoot for a target, you will never hit it. 

Dr. BUDETTI. We are doing two things. One is, we are doing this 

pilot so that we get our experience with this kind of technology so 

we can see how promising it is, going forward. I think that is a 

very important first step for us to take. 

The second thing is that we are using the same kinds of technologies, not the swipe card, per se, but we are using those, and 

that is on a time table. We put out bids. We solicited bids for those 

kinds of technologies late last year. We are in the process right 

now of reviewing the applications that came in. That system will 

be in place later this year and will be fully integrated into our systems next year. So it is very much on a specific timetable, and I 

would be happy to share that with you in more detail. 

Senator ENSIGN. Yes. If you could get that to us so we can at 

least see what your goals are, and so we can at least, when you 

come back before the committee, we can say—— 

Dr. BUDETTI. See whether we got there or not. 

Senator ENSIGN [continuing]. See whether you got there, what 

are the problems, and things like that, because it seems to me that 

this is an important part of eliminating—credit cards, they live off 

wiping out fraud and things like that, and that is why they have 

such robust systems, because it is their money. It is out of their 

profits. The government does not have nearly as much motivation, 

but we should be as vigilant because this is the taxpayers’ money, 

and especially the types that we are dealing with today, the huge 

deficits that we are dealing with today, every dollar is precious and 

we have to go after those dollars in every way we possibly can. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

15 

Senator Carper? First, I want to say what a great job Senator 

Carper has been doing in this area. He has been working hard to 

root out a lot of fraud here, and that is probably because in his earlier life he was Governor of his State. 

Senator CARPER. Thanks very much, Mr. Chairman. I want to be 

your partner in all this. To my other partners across the aisle here, 

Tom Coburn and John Ensign, we have worked on this stuff together. People, particularly those behind me, Peter, Tyler, and 

Heather, have been just great in providing staff support. 

The CHAIRMAN. Thank you all for your work, all of you. 

Senator CARPER. We appreciate very much the ability to work 

with your staff and the Republican staff, too. 

It is very nice to see you both, and thank you for appearing. I 

just want to say, as John Ensign was speaking I was thinking that 

I could not have agreed more with what he said. 

I would like to say, and I have said this to you before, everything 

I do, I know I can do better. I think that is probably true for all 

of us. One of the things that we have sought to do is introduce 

what I call a culture of thrift in the Federal Government. A lot of 

people think we operate under a culture of spendthrift. We need to 

look in every nook and cranny of the Federal Government, all of 

our operations, whether they are domestic spending, defense spending, entitlements, even work we do at the IRS, look at everything 

we do and see if there is a way to get a better result for less 

money, or a better result for not a lot more money. 

One of the things you suggested in your testimony today to us 

is that we get a really good bang for the buck in terms of fraud 

recovery for the monies that we invest, so we want to make sure 

that you have the resources, the access to resources to get that 

bang for the buck. 

The other thing we want to make sure of is that you are using 

good ideas, good ideas of what works around the country. In Delaware, we have a lot of financial services industries there. We have 

a lot of credit card banks and those that do debit card operations. 

I remember in the early 1990s, talking to a fellow who was then 

the CEO of MBNA Bank. They had been hiring a lot of folks in 

fairly senior positions who are former FBI, former law enforcement 

people. I would say, well, what do they know about credit cards? 

He said they do not know a lot about credit cards, but they know 

about fraud. They have focused 24/7 on fraud. They have very 

smart people who do this, and they are pretty good at it. 

Some of the debate we are hearing on the issue of interchange 

that sort of cropped up again, you buy stuff with a debit card and 

there is a fee that is paid by the merchants, if you will, to the 

issuer of the debit card. But one of the issues that comes out of 

that is, in recovery, one of the reasons why there is an interchange 

fee is because fraud costs are so large. 

But I just want to make sure that we are having a good dialogue 

between CMS and the folks who literally do this for a living, because they have been working on it for years and years, and they 

have the technology, the ideas, and they can be a great resource. 

They have a dog in this fight, because they are all taxpayers, too. 

The question I would like to ask is, we have had the opportunity, 

Dr. Budetti, to talk about, I call it post-audit cost recovery. It is 

16 

something that Senator Coburn and I have worked a whole lot on, 

in improper payments, the idea of how we harness market forces 

to be able to recover some of this money. We use these private contractors: they collect a dollar, they keep a dime, and that incentivizes them and keeps people off your payroll, and we get 

money. 

There was, as you know, a ramp-up for a number of years, for 

about 4 years, where we actually did this in like 5 States, and I 

think eventually maybe all 50 States. As we are prepared to go to 

all 50 States, I think we are expecting to collect, frankly, maybe 

less money in all 50 States, or certainly not a lot more money in 

all 50 States, as we extend the scope of what had been a demonstration. I think we clocked about $1 billion over maybe 3, 4 

years in 5 States, and we are expecting not to do much more than 

that in 50. 

I would really appreciate the opportunity for you again to visit with us and say, why can we not do a whole lot better than $300 

million a year, $400 million a year? I realize we are going from, 

what do you call it, pay-and-chase? We are going to kind of move 

away from pay-and-chase to be able to stop the problem up front, 

but it would still seem to me that we could do better than that. 

Could you just talk about that for me? 

Dr. BUDETTI. Sure, Senator. Thank you. Yes, the Recovery Audit 

Contractor program in Medicare fee-for-service was implemented 

as you described in a step-wise fashion, first as a series of initial 

States, and now nationwide. There has been some adjustment, because there were lessons learned in the original implementation 

that we wanted to be sure were taken into account in the final 

version that was put into place. 

So the initial year of recoveries may appear to be lower because 

of the phasing in of the program nationwide, but we believe that 

the recoveries will continue to grow over the next few years substantially back into the order of magnitude that I think we all expected from the pilot program. So we see that very much as an 

area that will in fact have those kinds of returns. 

As far as the expansion of the contingency fee Recovery Audit 

Contractor program, fondly known as the RAC, in the Affordable 

Care Act to both Medicaid and to Medicare Parts C and D, we are 

in the process of implementing all of that. That raises very different implementation issues because Medicare Parts A and B, of 

course, being fee-for-service, C and D being structured differently 

with payments to plans, and with Medicaid largely being under 

managed care in most States, we are looking very carefully at exactly how that should be implemented. But this is a priority for us. 

It is something that we are implementing very actively, and we believe that it will be extremely useful on the recovery side of things. 

Does that address your question, sir? 

Senator CARPER. Yes. That is helpful. 

My time is expired. Mr. Chairman, as you know, you said you 

tried to get our witnesses to provide an actual range or cost estimate. This is huge. I think one of the things that Senator Coburn 

and I learned on the Improper Payments Act is just that, improper 

payments for CMS for fraud, for last year, I think were about $47 

billion. We are not sure how much is fraud or just mistakes, that 

17 

kind of thing, but it is huge. I really compliment you for taking this 

time today to put this before the full committee. 

I would ask that we maybe have a chance to talk later on in a 

roundtable. I mentioned this to Russ Sullivan, the idea of a roundtable, where members of our committee, our staffs, could have the 

opportunity to really drill down on this stuff in a more informal 

way in the weeks to come. There is just so much that could be 

done. Thank you. 

The CHAIRMAN. That is a good idea. You bet. 

I think, Senator Coburn, you are next. 

Senator COBURN. Thank you. 

The CHAIRMAN. Thank you for your efforts, too, Senator. 

Senator COBURN. Yes, sir. 

Thank you both for being here. Just to give you a little background, AARP’s CEO, Barry Rand, and Newt Gingrich estimate 

that Medicare and Medicaid may lose $100 billion every year. That 

is their estimate. Thomson Reuters, who actually did a thorough 

study, said $120 billion. We had a hearing in the Federal Financial 

Management Subcommittee where we could document $100 billion. 

GAO participated in that hearing, as well as CMS, and we pulled 

that data together. So we know it is a big problem. 

Just a small question. When you do provider exclusions, do you 

notify Indian Health Service and VA of those provider exclusions 

as well? 

Mr. LEVINSON. As far as how that information is—— 

Senator COBURN. No, no. Do you or do you not? 

Mr. LEVINSON. I do not know exactly who gets that—— 

Senator COBURN. Would you not think that would be a wise 

thing for us to do, so somebody who is defrauding Medicare or Medicaid does not go over and turn around and start defrauding IHS 

and VA? 

Mr. LEVINSON. I think all of government should be aware of it. 

Absolutely. 

Senator COBURN. So do you all need a piece of legislation to do 

that, or can you not just do that internally? 

Mr. LEVINSON. I would hope that that would not require any additional legislation. 

Senator COBURN. Would you get back to me on that? 

Mr. LEVINSON. Yes. 

Senator COBURN. All right. 

The second thing is, on physicians and licensed personnel, do you 

notify the State boards of your exclusions? 

Mr. LEVINSON. I know that has been a challenge, because there 

are so many different authorities at the State and local level. 

Senator COBURN. No, no. In all 50 States there are State licensing boards. There is a licensing board for MDs, for DOs, for chiropractors—— 

Mr. LEVINSON. Right. 

Senator COBURN [continuing]. And for nurse practitioners and 

physician assistants. The question is, if we are not, will you, and 

will you get back to me on that? 

Mr. LEVINSON. Senator Coburn, I think the problem has been 

historically about the information getting to us as opposed to us 

sharing results. 

18 

Senator COBURN. No, no. I am talking about, when you all exclude a provider, you make that determination. Do you give that 

information to the State licensing boards? 

Mr. LEVINSON. I would think we would, yes. 

Senator COBURN. That is every State, on every provider that 

you—— 

Mr. LEVINSON. Yes. Yes, we do. 

Senator COBURN. Great. Thank you. 

Predictive modeling did not come through the Affordable Care 

Act. It came through the Small Business Act by Senator LeMieux, 

one of the last things he accomplished before he left here. The private insurance industry has been doing predictive modeling for 20 

years. You are new, Dr. Budetti, to this, so we cannot hold you accountable. 

But is it not a question that the American people ought to ask, 

that here is something that the insurance industry is doing that 

has a 1-percent fraud rate—which we also documented in the Federal Financial Management Subcommittee—why has it taken us so 

long to get to predictive modeling? 

Dr. BUDETTI. Senator, as you said, thank you for letting me off 

the hook, but I must say this is something that we do feel is going 

to be extremely valuable. We appreciate what was in the Small 

Business and Jobs Act, very much support what was in that legislation. We had, in fact, already embarked on the road towards developing predictive modeling and viewed the support that came 

from the Small Business and Jobs Act as very timely and useful 

to moving us forward, and also to setting certain time tables for us 

which we are happy to meet. 

Senator COBURN. Can I ask you a question about that? Are you 

all recreating the wheel here or are you taking something that is 

already proven in industry and applying it to Medicare? 

Dr. BUDETTI. We are doing the latter, sir. We had a solicitation 

that went out to get the best ideas from the private sector, and we 

are incorporating those. We are reviewing them right now. We 

have two different sets of requests for information and for bids that 

went out. We are putting into place the ideas from the private sector. 

I think it is also fair to say, we need to know what we are doing 

on our end as well. We need to oversee this, and we need to make 

sure that we know how to use the private sector tools appropriately, because we are responsible for these programs. So we are 

doing both at the same time, but we are not recreating wheels. We 

are using the best ideas in the private sector, we are putting them 

all together in the way that we think serves the interests of the 

Medicare and Medicaid programs, so it is a mixture of getting the 

best ideas and putting them into place. 

Senator COBURN. Do you have any concern about the new list of 

diagnostic procedures that is going to be this expansive new volume that you are mandated to now cover? Senator Wyden and I 

are working on trying to pass some restrictions on that, because 

what is going to be required in the provider level, what is going to 

be required for you, is exponentially larger with very little benefit 

and gain in terms of diagnosis. Most of that is done because the 

19 

public health people would like to see that, but not because it 

makes sense in Medicare or Medicaid to go to that large number. 

Would you look favorably on Senator Wyden and I trying to limit 

utilization of that so it limits your frame of areas? It is a multiplier 

of about 10 times in terms of diagnostic codes that are going to be 

required, which is going to cost a ton on the provider side and also 

cost you a ton in terms of the range of things you have to check. 

Would you have any interest or recommendation on that? 

Dr. BUDETTI. Are you talking about the shift to ICD–10, is that 

what it is? 

Senator COBURN. Yes. 

Dr. BUDETTI. That is not really directly under my purview, so I 

am not really able to comment on that. 

Senator COBURN. But you have to carry it out. 

Dr. BUDETTI. We at CMS will have to carry it out. 

Senator COBURN. Yes. 

Dr. BUDETTI. But within the Center for Program Integrity, that 

is not something that I am directly responsible for. 

Senator COBURN. But in the Center for Program Integrity—— 

Dr. BUDETTI. Yes, sir. 

Senator COBURN [continuing]. If we increased the diagnostic 

codes by 10-fold for you, what that does is magnify tremendously 

the difficulty in terms of accuracy and your job. It makes it more 

difficult. It also makes it much more difficult and creates a potential for error—not direct fraud but error—on the providers who are 

billing you who are innocent. 

In other words, what you are going to do is, you are going to get 

all these flags because they are not perfect. Quite frankly, a coder 

in an office, they are going to get as close as they can but they are 

not going to be right, not when you have that number. 

So I would love for you to look into that and see what that effect 

is going to be, the ICD–10, on your efforts, because I am really worried about that, especially in terms of computer storage—just computer storage. You are going to have that with every claim that you 

get. You are going to have to look through that whole thing and 

make sure that it is accurate. 

So I will not spend any more time on that. I plan on sending you 

each lots of questions, because I have a limited amount of time, 

and I am already out of it. I am sorry, Mr. Chairman. I yield back. 

[The questions appear in the appendix.] 

The CHAIRMAN. Senator Grassley? 

Senator GRASSLEY. Inspector General Levinson, your office has 

posted on the agency website a list of the 10 Most Wanted Health 

Care Fraud Fugitives. In addition, a research associate at the Institute of Cuban and Cuban American Studies at the University of 

Miami recently reported that officials from the Cuban government 

may be facilitating Medicare fraud in South Florida. I intend to follow up on this matter with the Department of Justice, but I would 

like to ask you, has this come up in any of your investigations, and 

if so, how did your office handle it? 

Mr. LEVINSON. Senator Grassley, I am sure that our investigators work very, very closely with the Justice Department, and 

when we deal with potentially international issues, I think that 

gets beyond both the strict portfolios of HHS and DOJ, so we probVerDate Nov 24 2008 20:12 Dec 21, 2011 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 R:\DOCS\71524.000 TIMD
20 

ably work with the State Department as well. But I would have to 

get back to you on the particulars of this particular instance. 

Senator GRASSLEY. And in getting back to me on the particulars 

of that, could you consult with the other two departments you just 

mentioned? 

Mr. LEVINSON. Yes. 

Senator GRASSLEY. That would avoid my having to do it. But if 

they do not want to do it for you, will you tell me and tell them 

that I am going to contact them? 

Mr. LEVINSON. Yes, sir. 

Senator GRASSLEY. Thank you. 

This is also for you. Last year, the House passed a bill, H.R. 

6130, by voice vote to expand the permissive authority the Inspector General has to exclude individuals or entities from participating 

in Medicare or Medicaid. Unfortunately, we ran out of time in the 

Senate and were not able to get it passed before session end. The 

bill has been reintroduced in the House this year as H.R. 675. I understand that you believe that this bill would provide valuable tools 

for combatting fraud and abuse. 

Can you discuss for us the types of fraud and abuse that you 

could address if this legislation were passed? 

Mr. LEVINSON. Yes. There have been a variety of problems that 

have come up in the course of our investigative work in which an 

individual or a family or a collection of people will—and I will take 

the South Florida example—open up a sham clinic on one block, 

and then go down the street and open up another. We wind up 

with, in effect, a crime ring in which our agents then have to play 

Whack-a-Mole to close down one, and then not be able to make the 

obvious connection that an individual or a group of people are actually principals in more than one operation. 

So being able to go after those who are affiliated with the entity 

that needs to be sanctioned would create a far more efficient law 

enforcement effort in that kind of case. Other examples would be 

if you had, for example, a national pediatric dental clinic. This 

comes very close to a real case in which dentists—not just in one 

clinic, but in many clinics around the country—are performing 

baby root canals unnecessarily. 

Scores of young children are being put on papoose boards and 

being subject to pulpotomies. The need to close down one clinic at 

a time seems to be a waste of law enforcement resources when 

there is plainly something going on at headquarters, up the chain, 

that a very effective or a more effective law enforcement scheme 

would be able to address more immediately. 

I would also refer to—— 

Senator GRASSLEY. I think you are telling me it would be a very 

useful tool. 

Mr. LEVINSON. It would be a very useful tool, because it would 

allow us to go up the chain, and now we can go down based on the 

principal and agent concept. But so often we find in these larger 

pattern or practice cases, we need to go up the chain. 

Senator GRASSLEY. I would like to ask one more question. This 

would be for both of you to listen. We had a Wall Street Journal 

article point out how a 3-decade-old court decision from 1979 protects physician privacy by limiting the release of physician MediVerDate Nov 24 2008 20:12 Dec 21, 2011 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 R:\DOCS\71524.000 TIMD
21 

care billing records. A former Department of Justice official is 

quoted in this article as supporting making physician billing 

records public. 

At least I think it is time to revisit this decision and make some 

transparency of payments physicians receive for Medicare payments, pretty much like you can see Chuck Grassley’s name in the 

newspaper sometimes that I have gotten a farm subsidy through 

the U.S. Department of Agriculture. That sort of transparency is 

good, to know where the taxpayers’ dollars go. 

Mr. Levinson and Dr. Budetti, do you agree that we should consider making data available from physician billing records in Federal health care programs, and why or why not? 

Dr. BUDETTI. Well, Senator, as you mentioned, this has been 

something that did come up years ago, and there were some issues 

that were dealt with, so we have not been in the position of doing 

that. We do need to respect the privacy of everybody involved and 

look carefully at what is released and what is not released. 

There are some provisions in the Affordable Care Act that allow 

certain qualified entities to have access to certain identifiable data 

for quality purposes. That is a different provision, but it is something that is in the Act. But as far as the release of the physician 

billing records, I think that is something we would have to look at 

very carefully. 

Senator GRASSLEY. Do you have an opinion, Mr. Levinson? 

Mr. LEVINSON. Senator Grassley, our default position always is, 

we like transparency. I think that is very important, to shine as 

much light on people and issues as possible. But of course, we cannot always do that within OIG itself, given our important investigative responsibilities and the need to protect innocent people. 

There are plainly conflicting policy issues that I think—— 

Senator GRASSLEY. I think I got a non-answer from both of you, 

so we will let it go at that. 

The CHAIRMAN. Thank you very much. 

We have about two minutes left on a vote. Senator Cardin? 

Senator CARDIN. I would take one minute. 

The CHAIRMAN. Do what you want to do. Senator Wyden is supposed to have voted and is on his way back so he can close us out. 

Senator CARDIN. I will take one. 

The CHAIRMAN. You go right ahead. 

Senator CARDIN. Thank you. 

First, let me point out that when we deal with the unnecessary 

treatments, such as stents, in Maryland, there are people who are 

directly impacted by it. It is not just the fraud of expenditures, it 

is people who have gone through unnecessary medical procedures 

and unnecessary medical risks. So I would hope that we would be 

also highlighting the fact about the fraud having a negative impact 

on people’s lives and people’s health outcomes. 

The second thing—and if necessary I will supplement this via 

questions for the record—is that, where you have third party responsibility for Medicare costs and settlements are reached, it is 

necessary to get forms from Medicare in order to pay off those 

forms. This can amount to significant funds to the Federal Treasury. I have been told over and over again that the bureaucracy to 

get that number straight takes a long time, hours on the phone. 

22 

I would just ask that you look into this issue, because I think it 

is denying the Federal Government the flow of money at a more 

efficient rate, which also can save us dollars. 

Dr. BUDETTI. Senator, I would particularly like to comment on 

your first point, which is of great importance to us. Our central 

mission at CMS is to provide services to beneficiaries to make sure 

that they receive the services that are appropriate and necessary, 

and we never forget that that is at the core of our mission. When 

even one dollar is stolen and it detracts from the ability to provide 

those services, we think that is a very serious problem. 

Senator CARDIN. But it is also those getting services they should 

not be getting that is putting them at risk. 

Dr. BUDETTI. And that as well. So we always remember that 

there is a human being at the other end of what we are doing, sir. 

Senator CARDIN. Thank you. And, if you could get back on the 

secondary payer issues, on where there is third-party responsibility, I would appreciate it. Thank you. 

I will now yield to Senator Wyden. 

Senator WYDEN. I thank my friend from Maryland. Good to see 

both of you. I remember fondly my days working with Dr. Budetti 

when he was at the Commerce Committee; I had a full head of hair 

and rugged good looks. I am just very glad to have both of you 

here. 

I want to pick up on two questions that I gather have just been 

touched on in the last couple of minutes while I was running to 

vote. I share Senator Grassley’s concern with respect to this lawsuit that has been brought by the Wall Street Journal and the Center for Public Integrity. 

I think it is very clear that that 1979 Federal court injunction 

that prevents public disclosure of what medical procedures a health 

care provider bills Medicare for and how much they are reimbursed 

for these procedures, this is something that has to be dealt with. 

I am going to be working on legislation. I am now in the process 

of drafting legislation that will ensure access and disclosure of this 

information. In fact, I intend to talk with Senator Grassley about 

seeing if we can team up, because the two of us have for some time. 

Dr. Budetti, would you be supportive of legislation like that? I 

think this is essential in terms of really having the disincentives 

that are needed to deal with those who commit fraud, and it seems 

to me that making this data available to a wider variety of individuals and groups is going to encourage accountability. So I have this 

legislation now in process of being drafted. You heard from my colleague that there is bipartisan concern. Dr. Budetti, would you be 

supportive of that? 

Dr. BUDETTI. Senator Wyden, just let me say it is also very good 

to see you again and to be working with you again on fighting 

fraud issues and related topics. This is something that, as you 

know, is a long-standing and complicated issue. It is something I 

would be delighted to work with you on and to explore what could 

be done here. It is not something that I am in a position to speak 

to directly at the moment, but it is something that we would be 

happy to discuss with you and your staff at any time, sir. 

Senator WYDEN. I appreciate that. Conceptually, would you have 

any problem with legislation like that? I understand that there is 

23 

a departmental review process, but one of the reasons that I want 

us to send a stronger message is that this issue has gone on for 

so long. I mean, some of these battles in health care seem like the 

longest-running battle since the Trojan War. They just go on and 

on and on. It seems to me, I think the lawsuit that is being brought 

is certainly a powerful message, but you sure get people’s attention 

by having it carry the force of law. 

So conceptually, recognizing that you cannot state an official departmental position, would you have a problem with this? 

Dr. BUDETTI. The concept itself, Senator Wyden, is something 

that really has a lot of ramifications, so I would want to really explore all of those, both in terms of what the effects might be on 

physicians, what the effects would be on the physician community, 

what the benefits would be in terms of the information that would 

be provided. 

So I think that we need to take a very careful look at all of the 

ramifications in order to decide. It is not a concept that I have yet 

explored. Even myself, I have been busy with other things. But I 

would be happy to begin that discussion with you, sir. 

Senator WYDEN. I will tell you, it strikes me that the benefits are 

pretty obvious. I mean, the benefits are the benefit of sunlight, and 

sunlight has always been the best disinfectant. I mean, this information is going to be out there to a broader array of people. I think 

that is why the Center for Public Integrity wants it; I think it is 

why the Wall Street Journal wants it. 

There would be a very strong message sent that, if you are going 

to try to rip off the government for millions of dollars—the press 

has been investigating these physicians who have allegedly perpetrated fraud that amounts to millions of dollars—you are going 

to face a new set of hurdles. There is going to be a very substantial 

disincentive for you doing that because this information is going to 

get out. 

So why do we not close this part of my questioning. Can you get 

back to me within, let us say, 2 weeks, because I would like to go 

forward with this legislation. Knowing of my colleagues’ interest, I 

want us to work in a bipartisan way. Senator Grassley and I have 

done this. Could you get back to me within, say, 2 weeks with respect to what you just mentioned? You are going to have to look 

at the ramifications. That way you do not have to take a position 

on a bill within 2 weeks, but I would like to know what you call 

the ramifications. Would that be acceptable, within 2 weeks? 

Dr. BUDETTI. I would be delighted to work on that, sir. 

Senator WYDEN. All right. 

Let me ask you one other question. I think my colleagues talk 

about it. That is this new coding system, ICD–10 system, which is 

estimated to cost something in the vicinity of $30 billion. Dr. 

Coburn and I have been working on this, and I gather he has 

talked about it. My big concern is that this is fighting the last war. 

This is propping up the fee-for-service system. 

One of the most troubling parts of the discussion about health reform is that, as we went forward and looked at the various issues, 

people did not really think through some of the ramifications for 

fee-for-service and just paying for each individual service. Is this 

not going to have to be part of the debate in terms of scrutinizing 

24 

wasteful kinds of payments and getting away from a system that 

just constantly rewards volume? 

I mean, Democrats and Republicans, through the course of 

health reform, had disagreement on lots of stuff. Lots and lots of 

stuff. But almost everybody, at least on this committee, said we 

really have to have payment reform. We need to start moving away 

from fee-for-service. Yet, the department is looking at fighting the 

last war and propping up the fee-for-service system. Would moving 

away from that not take away some of the incentives for overbilling and just continually putting the focus on the volume of services rather than quality? 

Dr. BUDETTI. Senator, I think, as you know, the department is 

in fact looking at some alternatives in terms of reorganization of 

both the delivery and financing of care, creating Accountable Care 

Organizations, health homes, and other approaches to organizing 

care to achieve many of the goals that you are talking about. 

So I think in that context there are some very important innovations that are moving forward. As far as ICD–10, I have to tell you, 

that is not something that I consider myself an expert in. But to 

the extent that you would also like to be discussing that with us, 

I would be happy to explore that with you. 

Senator WYDEN. I like the fact that the department is moving 

ahead with payment reform and Accountable Care Organizations. 

These were consensus features in terms of health reform, and the 

department, to its credit, is moving ahead. What is striking is, having moved ahead with payment reform, particularly under Secretary Sebelius, who constantly champions it, I do not understand 

why the department then would be talking about this kind of step 

backwards in propping up fee-for-service through ICD–10. 

I continue to believe that those kinds of billing arrangements invite the payment for each specific service and volume, and that as 

we continue to look at how inventive people—luckily a small minority—try to take advantage of these programs, they can use the feefor-service system in a volume-driven kind of system in order to do 

it. 

So I hope that you all will get involved in those discussions. Secretary Sebelius has talked with me about it. She has been very gracious in terms of her time. I think the department is clearly thinking through how it wants to handle it. But we are talking about 

coding for 150,000 procedures. I do think that this is propping up 

yesteryear. 

Given the fact that the department is moving thoughtfully in just 

the opposite direction on payment reform, we can do better here. 

I mean, if we are talking about trying to describe various services, 

that is an electronic medical records issue. That is an issue for a 

description of services, not the same as coding and getting us away 

from paying for value and bundling and a lot of the other things 

that you would like to do. 

I will give you the last word. Anything you want to add? 

Dr. BUDETTI. I do want to say that we are very appreciative of 

the support that this committee and the Congress has provided us 

with the new tools and authorities in the Affordable Care Act and 

with the resources as well that expanded it. I think that it is unfortunate that we have a problem of this magnitude, but we are up 

25 

to the task, and we are taking it on. I believe that you will continue to see a great return on your investment. Thank you, sir. 

Senator WYDEN. Mr. Levinson? 

And we will leave it for you, Dr. Budetti, 2 weeks in terms of getting your assessment on the pros and cons of the legislation on disclosure. That is very helpful. 

You have been spared here, Mr. Levinson. Anything you want to 

add? 

Mr. LEVINSON. No. I would certainly second what Dr. Budetti has 

said about the support of the committee for our work. It is extremely vital. No matter what figure you put on fraud, waste, and 

abuse, we know it is a significant challenge for the program. So 

much of both financial and public health is at stake. The fact that 

we get the kind of support we do from you and your colleagues is 

instrumental in being able to tackle that challenge. 

Senator WYDEN. A good point to close on. I do not think a session 

goes by when the chairman has committee members together when 

he does not talk about how we can come up with new ways to work 

together in this area. We will continue to do that. 

With that, the committee is adjourned. 

[Whereupon, at 11:29 a.m., the hearing was concluded.] 

(27) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


71524001.eps
28 


71524.002
29 


71524.003
30 


71524.004
31 


71524.005
32 


71524.006
33 


71524.007
34 


71524.008
35 


71524.009
36 


71524.010
37 


71524.011
38 


71524.012
39 


71524.013
40 


71524.014
41 


71524.015
42 


71524.016
43 


71524.017
44 


71524.018
45 


71524.019
46 


71524.020
47 


71524.021
48 


71524.022
49 


71524.023
50 


71524.024
51 


71524.025
52 


71524.026
53 


71524.027
54 


71524.028
55 


71524.029
56 


71524.030
57 


71524.031
58 


71524.032
59 


71524.033
60 


71524.034
61 


71524.035
62 


71524.036
63 


71524.037
64 


71524038.eps
65 


71524.039
66 


71524.040
67 


71524.041
68 


71524.042
69 


71524.043
70 


71524.044
71 


71524.045
72 


71524.046
73 


71524.047
74 


71524.048
75 


71524.049
76 


71524.050
77 


71524.051
78 


71524.052
79 


71524.053
80 


71524.054
81 


71524.055
82 


71524.056
83 


71524.057
84 


71524.058
85 


71524.059
86 


71524.060
87 


71524.061
88 


71524.062
89 


71524.063
90 


71524.064
91 


71524.065
92 


71524.066
93 


71524.067
94 


71524.068
95 


71524.069
96 


71524.070
97 


71524.071
98 


71524.072
99 


71524.073
100 


71524.074
101 


71524.075
102 


71524.076
103 


71524.077
104 


71524.078
105 


71524.079
106 


71524.080
107 


71524.081
108 


71524.082
109 


71524.083
110 


71524.084
(111) 

COMMUNICATIONS


71524085.eps
112 


71524.086
113 


71524.087
114 


71524.088
115 


71524.089
116 


71524.090
117 


71524.091
118 


71524.092
119 


71524.093
120 

Æ 


71524094.eps