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S. Hrg. 111–1059 

PREVENTING AND RECOVERING MEDICARE 

PAYMENT ERRORS 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JULY 15, 2010 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

EDWARD E. KAUFMAN, Delaware 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

ROLAND W. BURRIS, Illinois 

JOHN MCCAIN, Arizona 

TOM COBURN, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

JOHN KILVINGTON, Staff Director 

BRYAN PARKER, Staff Director and General Counsel to the Minority 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Senator Coburn ................................................................................................. 5 

Prepared statements: 

Senator Carper ................................................................................................. 41 

Senator McCain ................................................................................................ 44 

Senator Coburn ................................................................................................. 46 

WITNESSES 

THURSDAY, JULY 15, 2010 

Kathleen M. King, Director, Health Care, U.S. Government Accountability 

Office ..................................................................................................................... 5 

Deborah Taylor, Chief Financial Office and Director, Office of Financial Management, Centers for Medicare and Medicaid Services, U.S. Department 

Health and Human Services ............................................................................... 7 

Robert Vito, Acting Assistant Inspector General, Centers for Medicare and 

Medicaid Audits, Office of Inspector General, Department of Health and 

Human Services ................................................................................................... 9 

Libby Alexander, Chief Executive Officer, Connolly Healthcare, Connolly, 

Inc. ......................................................................................................................... 25 

Lisa Im, Chief Executive Officer, Performant Financial Corporation ................. 27 

Andrea Benko, President and Chief Executive Officer, HealthDataInsights, 

Inc. ......................................................................................................................... 29 

Robert Rolf, Vice President for Healthcare BPO, CGI Federal, Inc. ................... 31 

Romil Bahl, President and Chief Executive Officer, PRGX Global, Inc. ............. 32 

ALPHABETICAL LIST OF WITNESSES

Alexander, Libby 

Testimony .......................................................................................................... 25 

Prepared statement .......................................................................................... 77 

Bahl, Romil 

Testimony .......................................................................................................... 32 

Prepared statement .......................................................................................... 93 

Benko, Andrea 

Testimony .......................................................................................................... 29 

Prepared statement .......................................................................................... 84 

Im, Lisa 

Testimony .......................................................................................................... 27 

Prepared statement .......................................................................................... 81 

King, Kathleen 

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

Prepared statement .......................................................................................... 48 

Rolf, Robert 

Testimony .......................................................................................................... 31 

Prepared statement .......................................................................................... 90 

Taylor, Deborah 

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

Prepared statement .......................................................................................... 58 

Vito, Robert 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 69 

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IV 

APPENDIX 

Recovery Audit Contractor Demonstration Vulnerabilities Progress Report, 

submitted for the Record by Senator Carper ..................................................... 107 

Questions and responses for the Record from: 

Ms. Taylor ......................................................................................................... 114 

Mr. Vito ............................................................................................................. 131 

Ms. Alexander ................................................................................................... 134 

Ms. Im ............................................................................................................... 141 

Ms. Benko .......................................................................................................... 145 

Mr. Rolf ............................................................................................................. 154 

Mr. Bahl ............................................................................................................ 159 

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(1) 

PREVENTING AND RECOVERING MEDICARE 

PAYMENT ERRORS 

THURSDAY, JULY 15, 2010 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:06 a.m., in 

room SD–342, Dirksen Senate Office Building, Hon. Thomas R. 

Carper, Chairman of the Subcommittee, presiding. 

Present: Senators Carper and Coburn. 

Also Present: Senator Klobuchar. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The hearing will come to order. 

I am going to say something as we lead off here today that I do 

not think I have ever said at the beginning of a hearing, and that 

is, this is going to be a great hearing. [Laughter.] 

I really think so. We have some terrific witnesses. The subject 

material is very important, and we have some good news to talk 

about, and we have some lessons learned and some ideas that we 

need to drill down on, and we can do some real good for our taxpayers. 

I was on the phone earlier today with a long-time friend, a fellow 

who used to be Chief of Staff to former President Bill Clinton, Erskine Bowles. Erskine, along with Alan Simpson, former Senator 

from Wyoming, are heading up the Deficit Reduction Commission 

(DRC), which has begun working in recent months, and I think 

working effectively and with a lot of good thought, a lot of energy. 

So my mind is on deficit reduction today, and it is on the minds, 

it turns out, of a lot of people in our country. So I swapped with 

Erskine some ideas that the Commission is working on and some 

ideas that we are working on literally in this Subcommittee, talking about here today. 

But our focus today is to figure out what we are doing to prevent 

fraud and waste with respect to Medicare, and we have some witnesses that are going to tell us about what we are doing and maybe 

what we could do even better. 

The witnesses who are joining us today will tell an important 

story. Medicare, as we all know, is a critical component of health 

care in our Nation. I think there are some 45 million seniors that 

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2 

are participating. I am a baby boomer, and while I am too young 

to participate in Medicare, someday I hope to. And there are a lot 

of my colleagues, people born, as I was, after World War II, who 

have the same expectation. 

As a recovering Governor, I understand the unique challenges 

that come along with running major programs. Unfortunately, 

Medicare has seen its share of problems, and while it has done a 

lot of good for people, we are mindful that it certainly has its share 

of problems. 

We know that no program is perfect, and I like to say if it is not 

perfect, make it better. In fact, I just did a press interview with 

a reporter, and we were talking about my four core values: Figure 

out the right thing to do, just do it; treat other people the way I 

want to be treated; if it is not perfect, make it better; and if you 

know you are right, do not give up. So those are my core values, 

and number three applies here. If it is not perfect, make it better. 

But we in Congress need to ensure that the more than $460 billion that we are spending, I think, this year in Medicare to address 

health care needs of our Nation’s senior citizens is spent effectively 

and that we spend it in a cost-effective way. 

Medicare, as we know, is on the Government Accountability Office’s (GAO) list of government programs at high risk for waste, 

fraud, and abuse. There are several differing estimates of waste 

and fraud within the Medicare program. The Office of Management 

and Budget (OMB), for example, has reported $36 billion in improper payments by the Medicare program, according to data gathered from—I think that was fiscal year (FY) 2009, $36 billion in 

2009. And I ought to point out that figure does not include information about payments for the Medicare prescription drug program, 

affectionately known as Part D, as the administration is still struggling to determine the amounts of wasteful spending in that part 

of Medicare. Again, that is a part of Medicare that does a lot of 

good. But we are certain that there is a fair amount of waste or 

fraud involved there, and we want to try to identify that and go 

out and get it. 

I am told that U.S. Attorney General Holder estimates that 

Medicare fraud in total is probably more like $60 billion a year 

rather than $36 billion a year. 

So what has Congress and the Executive Branch done to address 

these very real problems with waste and fraud? Well, again, I want 

to start with some good news. In 2003, Congress mandated a Recovery Audit Contractor (RAC) demonstration program to examine 

Medicare fee-for-service (FFS) payments. And through recovery auditing, internal auditors or outside contractors are employed to go 

through an agency’s books, essentially line by line, to identify and 

recover payments that are made erroneously, such as duplicate 

payments or payments for medical procedures that never happened. 

This innovative tool is widely used in the private sector. We used 

it in State government in Delaware for the Division of Revenue to 

go out and recover tax monies that were owed but not being collected. And now we have seen successful use by the Federal Government with Medicare. 

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3 

The Recovery Audit Contractor program for Medicare began as a 

demonstration program I think in March 2005. We started in three 

States, California, Florida, I believe New York, and a couple years 

later added Massachusetts and South Carolina. And the program 

I think has been successful by almost anybody’s measure. 

Looking back at 2006, we were starting with three, I think later 

adding South Carolina and Massachusetts, but in 2006, $54 million 

was recovered. In 2007, we had about, we will say, a quarter of a 

billion dollars recovered. In 2008, almost $400 million, in the five 

States was recovered. The program was essentially down in 2009 

or so for a little more than a year, but that year we still collected 

almost $300 million while we were standing down and doing kind 

of lessons learned, looking back at the demonstration. But if you 

add up the money for those 3 or 4 years, it was about $1 billion, 

which is real money by our standards in Delaware, maybe even in 

Oklahoma. 

Somewhere along the line, we said, ‘‘Well, why don’t we step it 

up to 19 States? ’’ And then we said, ‘‘Well, if this works in three 

States, if this works in five States, if this works in 19 States, 

maybe it would work in all of them.’’ And there is a provision in 

the newly enacted health care law that the President signed earlier 

this year to expand the program not just for Medicare Part A and 

B, doctor and hospital stuff, but also Part C, which is Medicare Advantage, and Medicare Part D, which is the prescription drug program. And also, in a hearing we had here—I do not know if Dr. 

Coburn remembers this, but we had a guy here who I think ran 

the Medicaid program in New York State, and he said, ‘‘You are 

not collecting any money much at all on fraud in Medicaid.’’ And 

he told us why. He said we ought to make some changes. And we 

have made those changes in the legislation that was—again, the 

health care law. And our expectation is not only are we going to 

collect a lot more money, recover a lot more money from Medicare, 

but also to help the States recover Medicaid waste money, and we 

will split that with them on roughly a 50/50 basis. So that will help 

both the States and we hope help the Federal situation as well. 

There is an added benefit to expanding the Recovery Audit program in Medicare. The Recovery Audit Contracting pilot program 

has identified dozens of vulnerabilities in the Medicare payment 

system that can lead—can lead—to waste and fraud. According to 

the Centers for Medicare and Medicaid Services, (CMS) contractors 

hired to recoup overpayments identified ongoing vulnerabilities 

that could lead to future overpayments totaling more than $300 

million. That is like $300 million a year, not just one time, but 

$300 million each year, if we do not do something about it. So not 

only did the contractors recover about $1 billion for us in overpayments in the 3-year pilot program; they also identified problems in 

the system that, if addressed, will avoid literally billions of dollars 

in future errors and more fraud. 

Our witnesses from the Government Accountability Office will 

describe for us today how the Center for Medicare and Medicaid 

Services, the agency which oversees Medicare, could do even more 

to use the work of recovery audit contractors to address overpayments. 

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1The information submitted from Senator Carper appears in the Appendix on page 107. 

We have a chart based on GAO’s work.1 As I recall, GAO noted 

about 58 vulnerabilities. They said these are things that, if you do 

not fix these, you are going to continue to waste more money. They 

identified about 58 vulnerabilities through the demonstration programs. They represent, as I said earlier, about $300 million in 

overpayments on an annual basis. That is obviously useful information. However, according to GAO, CMS has actually only addressed, I think, maybe 23 of the 58 vulnerabilities. That leaves 

about 35 to go. And while we are glad they have addressed 23, we 

do not want to lose sight of the other 35. They represent cumulatively about almost a quarter of a billion dollars in annual overpayments, and they are awaiting action, and we want to make sure we 

do not forget them. 

GAO has also stated that CMS has not established steps to assess the effectiveness of any action taken to date to reduce the 

vulnerabilities by the auditors. So, one, the auditors identified the 

vulnerabilities; two, we say we are going to do something about it; 

three, we are going to figure out are we being effective in addressing those vulnerabilities. So it is a sort of three-step process. I look 

forward to hearing more about this issue from our witnesses. 

The last thing I want to mention before I turn it over to Dr. 

Coburn is prescription identifiers—this is interesting. I was in a 

Walgreens pharmacy in southern Delaware, in Seaford, the little 

town of Seaford, where the first nylon plant was built in this country 60 years ago. But Walgreens used to be Happy Harry’s. Happy 

Harry’s was a large regional chain in our State, taken over by 

Walgreens. But I spent about an hour there just to see how they 

are doing their work, how they are filling prescriptions and some 

of the safeguards that they have to protect consumers and make 

sure people who are taking more than one prescription are not having prescriptions that are just incompatible with one another, all 

kinds of stuff. They use a lot of technologies. It was very impressive. 

But the second issue for today’s hearing will focus on the Medicare prescription drug program. An audit by the Inspector General 

at the Department of Health and Human Services (HHS) discovered that Medicare does not have a strong process to ensure valid 

identification numbers on reimbursed prescriptions under the drug 

program. 

Now, what does that mean? When a beneficiary brings in a prescription for medication he or she has been prescribed, the pharmacy is required to enter a provider identifier showing that an actual doctor or some other authorized provider correctly OKed the 

prescription. It sounds like common sense to me. Probably to you, 

too. But, apparently, some 18 million prescription drug claims contained invalid prescriber identifiers in 2007. That represents about 

$1.2 billion in Medicare spending. 

The Inspector General (IG), concluded and this is a quote. He 

said, ‘‘It appears that CMS and Part D plans do not have adequate 

procedures in place to ensure valid prescription identification.’’ This 

is a lot of money, and we want to make sure that this is one that 

we address here today. 

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5 

1 The prepared statement of Ms. King appears in the Appendix on page 48. 

Our witnesses are going to report for us not only the current 

challenges of waste and fraud that we have outlined in the Medicare program but identify solutions, too, and we look forward to 

your presentations. Again, thank you for joining us. 

Dr. Coburn, welcome, you are on. 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. Mr. Chairman, thank you for holding this hearing. I have a statement for the record that I would ask to be submitted for the record—and then we will go forward with the witnesses. Thank you. 

Senator CARPER. Without objection, your statement will be inserted as part of the record. 

Let me just introduce our three witnesses on panel one. Our first 

witness today will be Kathleen King, Director of Health Care at the 

Government Accountability Office, where she is responsible for 

leading various studies of the health care system, specializing in 

Medicare management and prescription drug coverage. Ms. King 

has over 25 years of experience in health policy and administration. We thank you for being here today. Thank you. 

Deborah Taylor, Chief Financial Officer for the Centers for Medicare and Medicaid Services and the Director of the Office of Financial Management. Ms. Taylor is accountable and responsible for 

planning, directing, analyzing, and coordinating the agency’s comprehensive financial management functions, including the release 

of the Centers for Medicare and Medicaid Services annual financial 

report. 

And our third witness is Robert Vito—again, welcome back. Several of you have been with us before. It is good to see you all again. 

But Mr. Vito is a Regional Inspector General for Evaluations and 

Inspections at the Department of Health and Human Services. Mr. 

Vito works in the Inspector General’s office in Philadelphia, a suburb of Wilmington, Delaware, and—— [Laughter.] 

Under his leadership has been credited with identifying billions 

of dollars in savings for the Medicare program. 

Again, welcome one and all. Your full statements will be made 

part of the record, and you can proceed. I will ask you to try to 

keep your statement to about 5 minutes. If you run a little over 

that, that is OK. If you run a lot over that, that is not OK. 

Please proceed, Ms. King. 

TESTIMONY OF KATHLEEN M. KING,1 DIRECTOR, HEALTH 

CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. KING. Mr. Chairman and Senator Coburn, thank you so 

much for inviting me here today to talk about the use of recovery 

audit programs in Medicare. 

For almost 20 years, as you pointed out, we have designated 

Medicare as high risk due to its size, complexity, and susceptibility 

to improper payments. The purpose of the RAC demonstration was 

to test the feasibility of using recovery auditing as a means of identifying improper payments. Congress directed CMS to test the use 

of RACs in a 3-year demonstration program from March 2005 to 

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6 

2008. And in 2006, Congress enacted legislation that made the 

RAC program a permanent part of Medicare, and CMS launched 

the national program in March 2009. 

In its first year, the demonstration was estimated to have recouped more than $300 million. It was the first time the agency 

paid contractors on a contingency basis through a share of improper payments identified. The demonstration provided a unique 

opportunity for CMS to identify issues at risk of improper payments. CMS could then use the information to take corrective action to address the root causes and to help reduce improper payments in the future. 

The demonstration required coordination, particularly between 

RACs and Medicare’s claims contractors. The demonstration RACs 

reviewed claims that had already been paid by those other contractors to identify payment errors. RACs then shared those errors and 

their amounts with providers and the claims contractors, which collected any overpayments due, repaid underpayments, and handled 

the first level of provider appeals. 

Many providers expressed concerns about the operation of the 

demonstration. In particular, they were concerned about the use of 

contingency fees because they thought it created an incentive for 

RACs to be too aggressive in determining improper payments. They 

also indicated that RACs made many inappropriate determinations 

that resulted in thousands of provider appeals. The appeals created 

additional workload and coordination challenges for the claims contractors. 

In 2008, CMS said it would make a number of changes to the 

RAC program to address these problems. In our March 2010 report, 

we said that CMS had learned valuable lessons from the RAC demonstration, particularly in regard to coordination between contractors and program oversight of RAC accuracy. However, we identified improvements still to be made. In particular, as of March 2010, 

and as your chart shows, CMS had not yet implemented corrective 

actions for 60 percent of the most significant RAC-identified 

vulnerabilities, which are those representing more than $1 million. 

In our report, we identified steps that CMS should take to improve 

the national program. 

First, we said that they should establish an adequate process to 

address RAC-identified vulnerabilities that lead to improper payments. For the national program, CMS did develop a process to 

identify the vulnerabilities and take corrective actions. It is better 

than the process they used during the demonstration, but it still 

lacks essential procedures. We recommended, and CMS concurred, 

that they improve their process. CMS said that they would promptly evaluate findings of the RAC audits, decide on appropriate responses, and act to correct the vulnerabilities identified. 

Second, we said CMS should take steps to address coordination 

issues among the contractors. Based on lessons learned during this 

demonstration, CMS has improved ways for RACs and the other 

contractors to communicate. CMS also improved its data warehouse that helps providers avoid duplicate reviews, and it is working to improve its storage and transfer of medical records, which 

was a significant issue during the demonstration. 

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7 

1The prepared statement of Ms. Taylor appears in the appendix on page 58. 

Third, we said that CMS should oversee the accuracy of RAC 

claims reviews and the quality of their service to providers. CMS 

did take steps to address concerns about inaccurate RAC decisions. 

The agency hired a validation contractor to independently review 

RAC decisions. They created performance metrics to monitor RAC 

accuracy and service. And they also changed the contingency fee 

payment structure so that RACs will have to refund contingency 

fees for any determinations overturned at any level of appeal. 

CMS’ experience with the RACs provides useful lessons in identifying the root causes of vulnerabilities and effectively coordinating 

and overseeing accuracy and customer service of contracts. 

Mr. Chairman, this concludes my prepared remarks. I would be 

happy to answer questions. 

Senator CARPER. Thanks, Ms. King. Ms. Taylor. 

TESTIMONY OF DEBORAH TAYLOR,1 CHIEF FINANCIAL OFFICE 

AND DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT, CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT HEALTH AND HUMAN SERVICES 

Ms. TAYLOR. Thank you, Chairman Carper and Senator Coburn, 

for the opportunity to appear before you today to discuss the Centers for Medicare and Medicaid Services’ efforts to prevent and recover Medicare improper payment errors. 

As you know, the Medicare Modernization Act of 2003 required 

the Centers for Medicare and Medicaid Services to establish a recovery audit demonstration to pilot the potential usefulness of recovery auditing in the Medicare fee-for-service program. During the 

demonstration program, three demonstration States were selected: 

Florida, California, and New York. Within the first 18 months of 

the recovery audit pilots, we saw much potential and promise for 

results. Thus, in the summer of 2007, we expanded the demonstration to three additional States: South Carolina, Massachusetts, and 

Arizona. By the time the recovery audit demonstration concluded 

in May 2008, the six pilots in the demonstration project had collectively identified over $1 billion of improper payments and returned 

over a net $690 million to the Medicare Trust Fund. 

At the conclusion of the demonstration program, the Government 

Accountability Office evaluated our results and progress. Generally, 

they had some positive comments about the demonstration; however, they did note, as Kathy said, 58 vulnerabilities were identified, and we had addressed or done corrective actions for 23, leaving 35 vulnerabilities with no corrective actions. At this time I am 

pleased to report that CMS has taken or begun corrective actions 

in all 35 of the remaining vulnerabilities. We appreciate GAO’s recommendations, and going forward, we are committed to developing 

and implementing corrective actions to prevent these 

vulnerabilities from occurring in the future. 

The ultimate goal and measure of success of the recovery audit 

program is to prevent these errors from occurring after they are 

identified. The success of the RAC demonstration provided us with 

valuable information about vulnerabilities where improvements in 

the Medicare program were needed as well as some lessons learned 

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8 

for improving the recovery audit program. In general, we were able 

to gain valuable feedback from providers about ways to improve 

the recovery audit program with respect to interactions between 

the provider community. We took these lessons learned very seriously when designing the national recovery audit program and incorporated them into the national program. 

For example, we required all recovery audit contractors to hire 

a physician medical director to be responsible for ensuring that the 

medical records were properly reviewed in accordance with our 

payment policies. We also established a new Issue Review Board 

(IRB) within the agency to review and approve all claim review 

areas before the recovery auditors can begin widespread medical 

review. 

Another important step we took before the national recovery 

auditors could begin requesting and reviewing claims was to set up 

meetings with State representatives and provider associations in 

every single State to discuss the recovery audit program and answer their questions. These outreach meetings coupled with the incorporation of lessons learned with critical improvements to the national recovery audit program. 

While the national recovery audit program is now operational, it 

did take time to establish these improvements and build the infrastructure that Kathleen talked about for the national program. We 

currently have four national recovery auditors. They are divided 

into four regions across the country. And as of June, the national 

recovery audit program has returned over $32 million to the Medicare Trust Funds. 

Although the national program just began, it has also identified 

some significant program vulnerabilities. To date, the program has 

focused mostly on durable medical equipment (DME), an area 

where we know we have had high improper payments in the past. 

We are currently working on corrective actions to address these 

vulnerabilities. 

CMS also takes seriously the use of invalid prescriber identifiers 

in the Part D claims, as described by the OIG’s recent report and 

as shown on the chart. Although not an automated indicator of 

fraud or invalid claim, the use of invalid prescriber identifiers does 

hamper the oversight of the Medicare Part D benefit. Since the 

OIG’s review of Part D claims from 2007, there has been a substantial shift away from the use of DEA numbers toward the use of a 

national provider identifier. CMS plans to thoroughly evaluate 

these more recent claims to determine whether there are similar 

incidents of invalid NPIs and to understand what pharmacies and 

prescriber practices are resulting in the use of invalid identifiers. 

As the Chief Financial Officer (CFO) for CMS, it is my responsibility to ensure that we do everything possible to ensure the accuracy of all payments in the Medicare and Medicaid programs. I 

take this responsibility very seriously. I thank you for your continued support and interest in this program, and I look forward to answering any questions you may have. 

Senator CARPER. Thanks so much. Mr. Vito, welcome back. Nice 

to see you. Please proceed. 

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9 

1The prepared statement of Mr. Vito appears in the appendix on page 69. 

TESTIMONY OF ROBERT VITO,1 ACTING ASSISTANT INSPECTOR GENERAL, CENTERS FOR MEDICARE AND MEDICAID 

AUDITS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT HEALTH AND HUMAN SERVICES 

Mr. VITO. Good morning, Mr. Chairman and Members of the 

Subcommittee. I am Robert Vito, Acting Assistant Inspector General for the Centers for Medicare and Medicaid Audits at the U.S. 

Department of Health and Human Services Office of Inspector General. I would like to thank you, Mr. Chairman, for holding a hearing on this important topic. 

A little more than 4 months ago, I sat before you and testified 

about the OIG’s body of work related to program integrity efforts 

and payment safeguards in the Medicare Part D prescription drug 

program. At that time I stated the oversight of this area by the 

Centers for Medicare and Medicaid Services and its contractors had 

been limited, and as a result, the Part D program was vulnerable 

to fraud, waste, and abuse. Unfortunately, our current work further illustrates the potential impact of these vulnerabilities as the 

lack of program safeguards has actually resulted in Medicare paying for a substantial number of questionable claims for prescription 

drugs. 

One of the most basic safeguards in paying for medical care, 

whether we are talking about Medicare, Medicaid, or private payers, is ensuring that an item or service was performed, provided, 

and prescribed by an appropriate medical professional. To that end, 

CMS requires that pharmacies list an identifier for the drug prescriber on most Part D claims. Without a valid identifier, we cannot even be sure that an actual practicing physician prescribed the 

drug, much less determine the physician’s name, verify the physician was appropriately licensed, or identify questionable prescribing patterns associated with a particular physician. 

In other words, even though invalid prescriber identifiers do not 

automatically indicate fraud, they severely inhibit our ability to detect it. In our report, ‘‘Invalid Prescriber Identifiers on Medicare 

Part D Drug Claims,’’ we found that more than 18 million prescription drug claims contained invalid prescriber identifiers in 2007, 

representing 2 percent of the nearly 1 billion claims submitted by 

the plan sponsors that year. These identifiers were either not listed 

in the appropriate provider identifier directories or had been deactivated or retired more than a year earlier. Part D sponsors and 

enrollees paid pharmacies $1.2 billion in 2007 for these questionable claims. 

Furthermore, CMS and the sponsors did not successfully verify 

that the prescriber identifiers were even in the proper format. In 

almost 20 percent of the cases, the invalid identifiers did not have 

the correct number of characters and/or contained inappropriate 

letters, numbers, punctuation marks, or keyboard symbols. Just to 

give an example, one invalid prescriber that did not meet the format specifications was a string of nine zeros. Despite this obvious 

issue, Medicare paid $3.7 million for almost 40,000 claims listed 

with this identifier in 2007. 

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10 

In other cases, identifiers met format requirements, but still appeared to be highly questionable on their face. Prescriber identifier 

AA with seven zeros after it was listed on almost 1.8 million prescription drug event (PDE) records in 2007, representing more than 

$100 million in paid claims for 150,000-plus beneficiaries who were 

enrolled in almost 250 different Part D sponsors. In other words, 

10 percent of all PDE records with invalid prescribers contained 

this one invalid identifier. 

So what can be done to fix the problem with invalid Part D prescription identifiers? To start with, we have provided invalid identifier data from our report to the Centers for Medicare and Medicaid 

Services. We are also conducting additional analysis and have identified specific geographical areas with an unusually large number 

of questionable claims. In addition, the OIG will soon issue another 

report that looks specifically at prescriber identifiers on claims for 

Schedule II drugs, like OxyContin, which are highly susceptible to 

fraud and abuse activity. 

In terms of the systemic changes, OIG recognizes the difficult 

balancing act CMS faces in trying to ensure beneficiary access to 

needed drugs while also preventing improper payments. Therefore, 

rather than implementing prepayment edits, we recommended that 

CMS conduct periodic reviews to ensure the validity of the prescriber identifiers used on the PDE records. CMS could also require 

sponsors to institute procedures that would identify and flag for review any Part D claims with invalid identifiers in the prescriber 

identifier field. The success of these intermediate steps relies on 

the appropriate action being taken by CMS, the sponsors, and the 

program integrity contractors when problematic claims are identified. 

I would also like to note that this is not the first time the OIG 

has identified vulnerabilities related to invalid identifiers. In July 

2008, I testified that invalid identifiers were also an issue on 

claims for durable medical equipment, such as wheelchairs and diabetic supplies, covered under Part B. Specifically, Medicare paid 

millions of dollars for claims that did not accurately identify the 

physician that supposedly ordered the item, including many that 

listed a deceased doctor as the prescriber. 

In conclusion, prescriber identifiers are the only data on the Part 

D drug claim to indicate that a legitimate practitioner has prescribed medication for Medicare beneficiaries and, as such, serves 

as an invaluable program safeguard. With CMS’ agreement to take 

steps to address the findings in our report, we are hopeful that the 

issues with prescriber identifiers are being resolved. However, you 

can be assured that the OIG will continue to monitor the agency’s 

progress in this area. 

I would be happy to answer any questions that you might have 

at this time. 

Senator CARPER. Good. Mr. Vito, thanks very much. 

I have asked Dr. Coburn if he will just lead off the questioning, 

and he has agreed to do that. 

Senator COBURN. Thank you. I appreciate the privilege. I do not 

know why I have it, but I appreciate it. Thank you. 

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11 

Senator CARPER. It is because of your good work on the improper 

payments legislation which the House passed yesterday and is 

going to the President and something that we can celebrate for—— 

Senator COBURN. We have been working on it for 6 years. 

Senator CARPER. A long time. Good work. 

Senator COBURN. Several reports outside of the government’s re- ports estimated Medicare and Medicaid fraud at $80 to $100 billion. It is really interesting to me that the government estimates 

it at far less. So the question I have is: Given that the private insurance industry has about a 1-percent fraud rate, why do we have 

a pay-and-chase system? Ms. Taylor. 

Ms. TAYLOR. Well, I believe part of the reason is—and we do a 

lot up front to ensure that providers coming into the system are legitimate as they do the enrollment. But we are a system that is 

any willing provider, so if a provider has a legitimate State license, 

we must allow that person to participate in Medicare—— 

Senator COBURN. I am not talking about participation. I am talking about payment of a claim. Why do we pay it and then chase 

it if it is erroneous? Why don’t we certify it beforehand? In other 

words, there are statistical models out there and programs that 

look for abnormalities in claims. Are these models being used by 

HHS? 

Ms. TAYLOR. We have a system that does utilize edits up front. 

We have medically unbelievable edits. We have unlikely edits. We 

do have, correct coding initiatives that look for diagnosis with an 

incorrect code. So we do have those up-front sort of identifiers that 

are in the system. We currently are looking at commercial software 

out there that could be added to our systems where maybe there 

are commercial edits that would apply to Medicare. 

Senator COBURN. Have you ever gone and sat down with one of 

the large insurance companies and said, ‘‘Show me how you all do 

your proactive fraud’’? 

Ms. TAYLOR. We have talked to. 

Senator COBURN. No. I am talking about you. Have you ever sat 

down and gone through one of the large insurance companies’ 

proactive fraud detection programs? 

Ms. TAYLOR. I have talked to a plan sponsor—— 

Senator COBURN. OK. I am going to ask the question again, and 

I am not trying to be combative. 

Ms. TAYLOR. Right. 

Senator COBURN. Have you personally sat down and gone 

through a proactive fraud detection program by one of the large 

health insurers? Gone through it so that you see how it works. 

Ms. TAYLOR. No, I have not. 

Senator COBURN. Would you think that would be a good idea 

since their fraud rate is markedly less than yours? 

Ms. TAYLOR. I would agree and I do think, we should be doing 

more of that, and I can take that and do that. I do want to explain, 

though, that in Medicare we have different rules than some of the 

commercial. They do a lot of prior authorization of claims. We do 

not do that—prior authorization of services prior to services being 

rendered and claims paid. So we do have a different type of system 

where they do an up-front validation before the service and claim 

is ever even provided or submitted. 

H605-41331-79W7 with DISTILLER

12 

Senator COBURN. Well, on large items they do. 

Ms. TAYLOR. Right. 

Senator COBURN. But on small items, on the vast majority of 

Medicare Part B, which are small items, other than the DME product, they do not. I do not have to have permission from Blue Cross/ 

Blue Shield to see a patient in my office if they have a valid card. 

And that is a large portion—I know it is not the hospital-based, I 

am really just talking interaction. 

You said that all 35 you have taken action on or have begun. 

Which ones—how many have you begun action on but not completed of the recommendations? 

Ms. TAYLOR. I do not know that number exactly. 

Senator COBURN. That is a real important number for us to 

know. Would you supply to the Subcommittee the ones that you 

have actually taken and finished the action on the others that you 

are taking actions and what steps you are taking? It does not have 

to be in detail, but so we see where you are. 

Ms. TAYLOR. I can absolutely do that. I do want to stress, though, 

that much of the errors we are identifying are the harder ones to 

fix, meaning on the face of the claim the service and the payment 

looks absolutely valid and necessary. It is not until you get into the 

underlying medical records that you find that possibly progress 

notes are missing, a physician did not, in fact, order the service, 

there is no signed order from the physician. So it becomes very 

much human error within the medical record that is creating much 

of these errors, and that is very, very difficult to stop and to identify a real solid corrective action. It is really doing education and 

outreach with providers on what is necessary to be inside the medical record to support—— 

INFORMATION SUPPLIED FOR THE RECORD FROM MS. TAYLOR 

From the demonstration project 58 ‘‘vulnerabilities’’ were identified. The GAO reported in March 2010 that CMS took action on 23 of the 58. CMS has initiated several corrective actions for the 35 vulnerabilities identified by the GAO that had not 

been addressed when the GAO conducted their review; since that time, three of the 

outstanding vulnerabilities have been addressed, 22 are on track for completion 

within 6 months, eight are likely to take up to a year to correct, and two are on 

hold pending law enforcement investigations. In response to the identified 

vulnerabilities, corrective actions CMS has taken to date include: 

• Education to providers at various nationwide outreach events. Provider outreach occurred in all 50 States to discuss what documentation providers need 

to submit to support their claims; 

• Education to our claims processing contractors during RAC Vulnerability 

Calls; 

• Approval of continued review in the National RAC program for those vulnerable areas that cannot be addressed and corrected through proactive automated system edits (CMS gave RACs the approval to review on August 6, 

2010); 

• Publication of a Medicare Learning Network educational article on July 12, 

2010 emphasizing the importance of medical record documentation and submission of documents timely; 

• Publication of a Medicare Learning Network educational article published on 

September 23, 2010 on hospital billing codes and the importance of submitting documentation and quantifying the correct principal and secondary diagnoses and the correct procedure codes for billing purposes; and 

• Publication of a Medicare Learning Network educational article published on 

September 23, 2010 concerning medical necessity review. 

H605-41331-79W7 with DISTILLER

13 

Senator COBURN. You know the best way to educate me as a physician to do it right? Not pay me. I guarantee you the next time 

I will get it right. 

Do you have sufficient sanction authority that you need with 

which to make corrective actions when people are not compliant 

with the record? 

Ms. TAYLOR. We do not have sanction authority. 

Senator COBURN. In other words, you cannot limit somebody’s 

ability to participate in Medicare if they are not complying? 

Ms. TAYLOR. All we can do is flag their claims for pre-payment 

review. That I believe was with the OIG, any exclusion or sanction. 

Senator COBURN. Well, do you think it would be important that 

you could have sanction on individual providers who, in fact, do not 

comply with the rules under which you say they have to operate? 

Ms. TAYLOR. That would maybe be helpful, yes. 

Senator COBURN. I guarantee you, when I send a claim to Blue 

Cross/Blue Shield, if it is not backed up, I do not get paid. And 

then I ask why I am not getting paid, and they say, ‘‘You did not 

comply.’’ So either I comply and they pay me, or I do not comply. 

If I do that multiple times, guess what? They sanction me. They 

will not let me provide benefits to their insurer. 

Do any of our panelists have any thoughts on what they think 

we ought to do to limit the improper payments, just general 

thoughts, improper payments that are occurring in Medicare and 

Medicaid outside of the recommendations of the GAO report on 

what you saw on recovery audits? 

Ms. KING. Senator, there is a new program that is beginning for 

competitive bidding for durable medical equipment that gives the 

agency the ability to screen providers ahead of time to make sure 

that they are legitimate businesses, and that gives CMS the ability 

not to take any willing provider but to make sure that they are legitimate and that they have the financial ability to provide services. That is something that we think is helpful. 

Senator COBURN. Would the GAO think it would be helpful to 

give Medicare the ability to provide sanctions on providers if, in 

fact, they were not in compliance with the rules of Medicare? I am 

not talking fraud. I am just saying lack of compliance, not having 

the data there. In other words, do I have a responsibility as a provider if I am going to contract with Medicare to make sure the 

available information to justify my charge to Medicare is there? 

Ms. KING. That is not an issue that we have examined, but I can 

say that CMS does have the ability, as has been said, to not pay 

providers for services that are not provided legitimately or that are 

provided in error, or in the case of the RACs, to take payments 

back. So that is one thing they can do. 

When I think of sanctions, I think of that having more to do with 

illegal or fraudulent behavior, and that enters more into an enforcement realm. So in terms of official sanctions, you would want 

to think about whether it crosses over into something that is abusive or fraudulent. 

Senator COBURN. So your position would be—I am out of time? 

Senator CARPER. You have had 9 minutes, and we start voting 

at 11 o’clock. 

Senator COBURN. All right. I will yield back. 

H605-41331-79W7 with DISTILLER

14 

Senator CARPER. If you would. 

One thing I want to just follow up on Dr. Coburn’s questions is 

this issue of pay and chase, which is not something I have thought 

a lot about until actually this hearing today. But I am told Peter 

Tyler, who is sitting over my left shoulder, says that the new 

health care law gives CMS some new authority to stop pay and 

chase, and it requires CMS to stop payments if there is credible 

evidence of fraud. And as I understand, this is a significant change. 

Would you just respond on the record, Ms. Taylor, as to what you 

are all going to do with that authority? 

Ms. TAYLOR. I believe we are still drafting regulation on that authority, so I really cannot speak to it right now. 

Senator CARPER. I am asking you to respond on the record what 

you are going to do with that new authority. All right. Thank you. 

Senator Coburn, it sounds like they may have some new authority here. We will find out how they are going to use it. 

INFORMATION PROVIDED FOR THE RECORD FROM MS. TAYLOR 

The Affordable Care Act (ACA) provides CMS with many new authorities to combat waste, fraud, and abuse in Federal health care programs. These new authorities 

offer more front-end screening and enrollment protections to keep those who are intent on committing fraud out of the programs in the first place, and new tools for 

deterring wasteful and fiscally abusive practices, identifying and addressing fraudulent payment issues promptly, and ensuring the integrity of the Medicare and Medicaid programs. CMS is pursuing an aggressive program integrity strategy that better incorporates fraud-protection activities into our claims payment and provider 

processes where appropriate, with the goal of preventing fraudulent transactions 

from ever occurring, rather than simply tracking down fraudulent providers and 

chasing fake claims. CMS also now has the flexibility needed to tailor resources and 

activities in previously unavailable ways, which we believe will greatly support the 

effectiveness of our work. 

On September 17, CMS put on display proposed rule CMS–6028–P that details 

the initial steps the Agency is taking to implement certain provisions in the Affordable Care Act, including new provider enrollment screening measures and requirements, new authority to issue a temporary moratorium on enrollment for areas at 

high risk of fraud in our programs, and authority to suspend Medicare and Medicaid 

payments for providers or suppliers subject to credible allegations of fraud. This proposed rule builds on existing authorities and on earlier rulemaking that implemented the Affordable Care Act requirement for physicians and other professionals 

who order or refer Medicare-covered items or services to be enrolled in the Medicare 

program. 

Senator CARPER. OK. From Minnesota, welcome, Senator 

Klobuchar. Thanks for joining us. 

Senator KLOBUCHAR. Well, thank you very much, Senator Carper. Thank you for inviting me to be part of this Subcommittee for 

the purpose of this hearing. I am not actually on this Subcommittee, but I have a great interest in this issue due to my work 

on Judiciary, where Senator Coburn also serves, as well as my 

former job as a prosecutor where we prosecuted a number of cases 

in this area. I am glad that you are back to report on some of the 

work that has been done since our last hearing a few months ago. 

When I say the numbers myself, I always think I get the million 

wrong over the billion, but $60 billion a year in fraud to taxpayers 

for Medicare, as we know, is just simply unacceptable. And every 

time I say that, I think it is million, and I am wrong. It is billion. 

The recently released OIG report confirmed just that, one of the 

most basic oversights ensuring that a drug was prescribed by a 

doctor is not operating effectively. Medicare drug plans and beneH605-41331-79W7 with DISTILLER

15 

ficiaries paid pharmacies $1.2 billion in 2007 for more than 18 million prescriptions that contained over 500,000 invalid prescriber 

numbers. What is almost even most shocking is that the invalid 

prescriber identified, which is AA0000000, accounted for $105 million in paid claims. That is a lot of money for AA0000000. So I 

think that just gives us the example of the enormity of what we 

are dealing with here. 

I guess I would start with you, Ms. King. Your report noted 58 

vulnerabilities identified through the pilot program representing 

$303 million in overpayments. However, the CMS only addressed 

23 of these vulnerabilities, leaving the 35 vulnerabilities, which I 

think accounted for $231 million in overpayments, still awaiting action. Was there a reason to address only some of the identified 

overpayments? 

Ms. KING. I do not think there was a specific reason. I think 

there were some issues in which there were problems with categorization. There were some issues where it was hard to tell what 

the problem was. But there was not always a reason why they were 

not addressed. 

Senator KLOBUCHAR. Do you think you will go back and look at 

them or see if they—— 

Ms. KING. We do not have any ongoing work looking at the 

RACs, but, I think CMS has testified that they are working on 

them. 

Senator KLOBUCHAR. OK. Mr. Vito, in your testimony, you made 

recommendations to CMS for subjecting invalid identifiers to further review. It is alarming that just 10 invalid prescriber identifiers account for 17 percent of all the invalid prescriber identifiers. 

And when I saw this, I thought, Shouldn’t there be some kind of 

flagging system in place? And if so, can you describe how your recommendations would add to what is already in place? 

Mr. VITO. Well, I think the first thing is that CMS has determined that they want the beneficiaries to be able to get the prescriptions that they were given. So with that in mind, we understand the balancing act that they have to do. But we are suggesting that CMS start looking and doing work in this area to ensure that the claims that come in have valid IDs on them. 

In addition to that, we are saying that CMS should remind the 

sponsors or make the sponsors first identify all these invalid prescriber IDs and then review them to ensure that they do not keep 

coming up. When you see $100 million, $100 million as a regular 

doctor would cause people to be very concerned. It is just the volume of the claims. And the issue really is that you do not know 

if the claim is a good one or a bad one until you do more work. 

It could be that, they just put a number in and they are using that. 

But you will not know that until you actually go into doing all the 

work, going back into it and getting the information. 

So for us, it is so much more valuable to prevent it up front and 

to stop it right at that time and make sure that the information 

is correct. 

Senator KLOBUCHAR. That it is correct. 

And, Ms. Taylor, what do you think about his recommendations? 

Ms. TAYLOR. We actually agree with all the OIG recommendations. We actually have looked at what is going on in 2009. We 

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16 

were troubled by seeing some entities with a preponderance of invalid numbers. We did have discussions with them. What we are 

seeing now is a trend that the pharmacies and the sponsors are 

using the National Provider Identifiers (NPIs). I think in the early 

days of the program there was confusion as to whether or not those 

numbers should be protected. And so, I think we have clarified 

that, but because they were DEA numbers, people thought they 

needed some privacy or protection to them. Some sponsors told us 

they just put in fictitious numbers rather than putting in the actual number. We told them they need to use the NPI. And we are 

starting to see about 75 percent of the claims now in the PDE database coming in with NPI numbers rather than, these DEA numbers. 

Senator KLOBUCHAR. So do you think some of this is not really 

fraud, it is just them putting in any number? Is that what you are 

saying? 

Ms. TAYLOR. We believe that may be part of the reason. They 

just put in a number rather than trying to look up for a valid number. 

Senator KLOBUCHAR. Because they know they are going to get 

paid. 

Ms. TAYLOR. Correct. 

Senator KLOBUCHAR. Of course, that also leads to a lot of fraud, 

I would think. 

Ms. TAYLOR. Right. I mean, so we have several efforts underway 

now. We are looking at what is going on in 2009. We are going to 

validate those NPI numbers. We do want to understand if there is 

a systemic reason for why they cannot get to a valid number. If 

there is a problem with systems or look-up tables, we need to work 

on that. But we also want to and have started dialogue with those 

who seem to be not following our guidance, and we will be discussing that and telling them to cease and desist, that they need 

to do actual look-ups for valid numbers on the PDE claims. 

Senator KLOBUCHAR. So what do you think has been the greatest—we just passed this bill. There are major fraud components in 

there, and I know it was just a few months ago, but, —since we 

had our hearing 4 months ago, or since Senator Carper did. What 

would you say have been the greatest improvements? And do you 

think you see a difference in the money that is being saved already? 

Ms. TAYLOR. I think it is probably too early for me to give you 

an answer on that. We are still looking into it. But I do think that 

the plans understand we are looking and that the oversight is 

going to be much harder, and we will be scrutinizing the information they are giving us. 

Senator KLOBUCHAR. When is the first time you will know if 

there has actually been savings? 

Ms. TAYLOR. Maybe by the end of the year. I am not really sure. 

Senator KLOBUCHAR. OK. Anyone else have any other examples 

of changes that you think have been significant? Nothing? So those 

have to be made soon. That is what we are going to do, right? 

OK. Very good. Well, we will be looking forward to—we are continuing to work on legislation and pushing things. I think what 

H605-41331-79W7 with DISTILLER

17 

really counts here is the numbers and those cost savings, which are 

going to be very important to taxpayers. So thank you. 

Senator CARPER. Thanks a lot for joining us today. The welcome 

mat is always out for you. 

Senator KLOBUCHAR. Thank you. 

Senator CARPER. A first question for Ms. Taylor, if I could. I 

think three points are especially clear from your testimony. 

First, you and CMS have recognized the importance of curbing 

waste. We are talking about a program where we are spending 

about $460 billion this year, and the amount of waste that has 

been identified ranges anywhere from $36 billion to, I think, $60 

billion. Senator Coburn suggests it is higher than that. But we are 

talking about something in excess of 10 percent of the amount of 

money that we are spending is going in what many would describe 

as waste or fraudulent spending. And as pleased as I am that we 

are focused on that and beginning to drill down and address it 

more comprehensively, that is still a huge amount of money. But 

there is a huge upside there in reducing fraud. So we are pleased 

that you are focusing on this. 

Second, we learned a lot from the Recovery Audit Contracting 

demonstration program that can apply toward the current program 

as well as the next expansions that are taking place right now. 

That is good. 

Third, the Recovery Audit Contractor program has proven itself 

capable of not only recovering payments, but almost as important 

in identifying vulnerabilities that can lead to those overpayments. 

I think your testimony used the word ‘‘success,’’ and overall I think 

the Medicare program deserves credit for increasing the level of 

priority for recovery auditing in order to ensure that the current 

program is successful. And with the signing by the President in a 

week or two of the improper payments bill, we are going to take 

what you are doing here in recovery for Medicare Parts A and B 

and extend to other parts of our government. So that is good. 

Of course, under the recently enacted health care reform bill, the 

Recovery Audit Contractor program will expand, as I suggested, to 

Medicare Advantage, Part C, Medicare prescription drug, Part D, 

and to Medicaid. I think the deadline for completing this expansion 

is this December 31st. I believe it is very important, considering 

the success of the Medicare Recovery Audit Contracting demonstration and current program, that the expansion stays on track, including meeting the expansion deadline of December 31st. 

Will we see the expansion by the end of this year of the Medicare 

Recovery Audit Contracting program to all of Medicare and to Medicaid as is required by this new law? 

Ms. TAYLOR. Yes, so we are in, still planning and early stages of 

how we would expand it into the Medicare Advantage arena as well 

as the Part D program. We have some ideas specifically in the drug 

area where we think recovery auditing would be very valuable, 

such as validating the drug rebate and price concessions data. We 

think that would be very valuable to us. So we do have, some ideas 

there. 

Part C, a little tougher. We know that risk adjustments are 

something we have had problems with. We currently are already 

doing some audits in that area, but we want to explore a little 

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18 

more about some opportunities for expansion of recovery audit in 

Part C. 

For Medicaid, a little bit tougher, meaning there are 56 different 

programs in Medicaid. We know that it is not free to bring up a 

recovery audit even if it is with—pays for itself eventually. It does 

require contracts. It does require resources. And some State legislature may not be in positions to give States money to seed that recovery auditing. 

So we are looking a little harder at Medicaid. I can say that we 

will do everything possible to be ready to bring it up, expand it in 

all three of those programs. I think Medicaid is a little bit tougher 

for us, just given the States’ timing and the 56 very unique programs. 

Senator CARPER. I understand that what we have asked you to 

do is not easy, and what we have asked you to do is hard, and especially with Medicaid. But I would just urge you and your colleagues to give this everything you have. There is a lot of money 

at stake here, and we just need your very, very best efforts. And 

we also need—if there are things that we need to be doing here on 

the legislative side, you need to tell us that, and we would do our 

best to try to be supportive. 

A question, if I could, Ms. King, for you. The GAO testimony that 

you have offered describes, I think, a great opportunity provided by 

the Recovery Audit Contracting program. Not only has the program 

recouped about $1 billion over a 3-year period, but it identified 

vulnerabilities that can lead to future overpayments, and we talked 

about some of this today. However, the GAO audit in today’s testimony points out that not all the recovery audit contractor overpayment vulnerabilities have been addressed by CMS. And, again, we 

have a chart, I think, that shows how much progress has been 

made right over here. Blue is good, corrective action taken on 23 

out of the 58 areas. It is about 40 percent of the areas identified. 

Sixty percent, 35 items. And let me just say—and Ms. Taylor mentioned, she said, ‘‘We have already started working on the other 

35,’’ which is good. ‘‘We have completed some of them,’’ which is 

good. But I would just ask of you, Ms. King, has there been 

progress in your view since the audit was completed? When was 

the audit completed? 

Ms. KING. We finished our work in March of this year. 

Senator CARPER. OK, so it was about 3 months ago. Has there 

been progress since the audit was completed that you are aware of? 

And how many of the 35 items that had not been addressed as of 

March have been addressed today? 

Ms. KING. Senator, I am afraid I cannot answer that because we 

have not done any work on the issue since then. 

Senator CARPER. OK. I am going to ask you to answer that for 

the record. 

Ms. KING. OK. 

Senator CARPER. Just answer that one for the record if you could. 

Let me go back to you, Ms. Taylor. I understand from my staff 

that some of your folks from your office prepared some documents 

describing some of the progress in addressing the vulnerabilities 

identified by the recovery audit contractors, and I appreciate your 

providing those statements. My staff also tells me that the docuH605-41331-79W7 with DISTILLER

19 

ments show—I should not say ‘‘my staff.’’ It is Subcommittee staff. 

Subcommittee staff tells me that documents show that CMS has a 

system in place, I think a database, to track the reported 

vulnerabilities, and I think that is one of the recommendations that 

GAO made. Is that correct? 

Ms. TAYLOR. Yes, sir. 

Senator CARPER. Thank you. Let me just ask, Ms. Taylor, if you 

could, could you describe further for us the process that has been 

in place for the current program to address all the identified 

vulnerabilities. Just talk to us about how you are doing that. And 

do you have a timeline for when you think all the vulnerabilities 

of the identified thus far will have been addressed? 

Ms. TAYLOR. Sure. The way we track vulnerabilities is there is 

a data warehouse where vulnerabilities are—or denied claims are 

run through. What it does is it cumulates those so that we can see 

by provider and by provider type what are some repeated 

vulnerabilities, and it allows us to lump them together. We put as 

major vulnerabilities anything where overpayments are identified 

in the cumulative total of over $500,000. So that is how we are 

tracking and identifying the major vulnerabilities. 

Right now my office is directly responsible for the day-to-day 

monitoring and reporting out of that data warehouse. To the extent 

I have to reach out to colleagues across CMS to develop corrective 

actions, that is what I do. But if we need to elevate things, meaning there are vulnerabilities that require policy and systems 

changes as well as possibly national coverage decision changes, 

that may involve someone at the Office of the Chief Operating Officer to get involved. But at this point, most of it is managed in my 

office on a day-to-day basis. I cannot give you an exact date of 

when I think we will resolve all the vulnerabilities. I think the fair 

answer there is some are easy to fix, meaning it is a systems edit 

that we can put into place. 

For example, we had an issue with a drug where we were paying 

for a claim even though the dosage was too high and likely not to 

be reasonable. So we were able to put an edit in place to stop that 

drug from being paid at too high of a dosage. 

Other things require policy changes which may require us to do 

legislative changes. It also can require us to do lots of education 

and outreach with our providers to understand what the documentation requirements are for the medical record. 

Senator CARPER. I see. So if I understand it—in my question, do 

you have a timeline for when all the identified vulnerabilities of 

the current program will be addressed? And the answer is, ‘‘Really 

we do not.’’ 

Ms. TAYLOR. I do not have a timeline, mostly because many of 

the underlying issues require us to continue to do education and 

outreach. The only way to find problems is to look at medical 

records. It is not evident on the face of the claim. It is very difficult 

to find. And it is constant repeated reviewing of medical records 

and having education and outreach with physicians. 

I will say that as an outgrowth of the recovery audit program, 

a lot more providers are doing compliance programs themselves 

where they are actually having compliance auditors and programs 

in-house looking through their own medical records to ensure that 

H605-41331-79W7 with DISTILLER

20 

they are following our policies. So that is something where, we are 

seeing some positive impacts there. 

Senator CARPER. My father used to say that the work expands 

to fill the amount of time we allocate to do a particular job. And 

I find it helpful for myself and for my own staff in other roles that 

I have held to set timelines. And I think a timeline could be helpful 

here as well. You all have addressed 40 percent of the 

vulnerabilities. That is good. We have 60 percent to go, and maybe 

some of those have already been addressed. And I am going to ask 

you to respond for the record what is a reasonable timeline, and 

I would like for it to be aggressive. 

Ms. TAYLOR. OK. 

Senator CARPER. I do not want, 5 years from now or 4 years from 

now or 3 years. I want it to be aggressive. 

Let me just ask Ms. King, in terms of a timeline, is it important? 

What is a reasonable timeline for getting most of this stuff done? 

Ms. KING. I do not know that we have an exact date that we 

think that it should be accomplished, but we do think it is important to set timely goals for achieving it. 

Senator CARPER. All right. 

Ms. KING. And, as Ms. Taylor pointed out, some things are more 

complicated than others, and some things are under appeal. So you 

have to take different factors into consideration, but we think it is 

important to press forward and to establish a timeline. 

Senator CARPER. And as I said earlier, if there are some of these 

vulnerabilities that need some legislative action, you just need to 

come back and lay that out for us, and we will see what we can 

do and work together. 

Mr. Vito, we are going to have a vote here in just a minute. I 

do not want to let you get away without being asked some questions. In fact, this is probably the vote starting right now. We very 

much appreciate your being here today and the good work that you 

and your folks do. 

Mr. VITO. Thank you. 

Senator CARPER. I think your audit has pointed out an area that 

Medicare needs to pay a lot more attention to, and you have described to some extent the importance of prescriber identifiers and 

ensuring that prescriptions are valid and also—but I am going to 

ask you to drill down on it a little bit more. Do you believe that 

the same validation process has impacts on other parts of Medicare, such as with fee-for-service? 

Mr. VITO. OK. We have identified the invalid prescriber problem 

in both the Part B area and the durable medical equipment and 

in the Part D area for prescription drugs. We believe that it is very 

important that this information be there. I could give you an analogy. This would be similar to placing a combination lock on the 

gate to protect what is inside, but then allowing any combination 

to open the lock. This leaves whatever is behind the gate vulnerable, just like accepting invalid prescriber IDs on Part D claims 

leaves the program vulnerable to fraud, waste, and abuse. And 

when you do not have this information, there are many things 

you—when you look at it, there are three main controls: First, that 

the beneficiary is eligible for the Medicare program and is enrolled; 

second, that a supplier has enrolled with the program and meets 

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21 

the Medicare standards; and third is that the physician actually 

wrote the prescription. 

So that is one of the main controls. If you cannot tell that a prescription actually—that a physician—you cannot tell who it is that 

actually wrote that prescription, it makes it very difficult for you 

to do a lot of program integrity work. 

Senator CARPER. When you say ‘‘you,’’ who is ‘‘you’’ ? 

Mr. VITO. Anyone who is doing program integrity work. It makes 

the Medicare Drug Integrity Contractors (MEDICs), it makes CMS, 

it makes the OIG. Without knowing that, you cannot—normally 

what is done is you do aberrancy analysis. You lay out all the 

claims, and then you see who the prescribers are that are hitting 

the higher levels. In this case, when you have an invalid number 

you really do not know who that prescriber is, and you have to go 

back and look at it. You do not know if that prescriber, is licensed. 

You do not know if they had actions taken against them. You do 

not know if they saw the patient before they actually wrote the 

prescription. There are many, many things that you do not know. 

You do not know if they can write a prescription for controlled substances. 

So this is a very valuable key, and the only way you are going 

to find out if this information—if the claim is good, you have to do 

more work, and that takes a lot of effort. And that is why we are 

thinking that if you put this information up front, then you will be 

stopping the problem before you have to go on the back end to look 

at it and figure out what is going on. 

Senator CARPER. Do we have a chart that speaks to this? 

If your eyes are pretty good, you can read this, folks. But if they 

are not, I will help. We are looking at PDE—PDE stands for? 

Mr. VITO. Prescription drug event data. 

Senator CARPER. All right. Prescription drug event data. Records 

and payments for the top 10 prescriber identifiers in 2007. And on 

the left-hand column, we are looking at invalid prescriber identifiers. In the middle column, we are looking at the number of PDE 

records for invalid identifiers, the number of records for invalid 

identifiers. And then on the right-hand side, we are looking at the 

payments to invalid identifiers. I think you mentioned the first one 

in your testimony. And the invalid prescriber identifiers, AA, and 

then there is like about five or six zeros after that. 

Then you come on down, and some of them have a lot of 1’s in 

their identifier number, then a lot of 5’s, but it adds up to a lot 

of money. And this is just 1 year? This is the top 10? 

Mr. VITO. 2007. 

Senator CARPER. I suspect that this is not all fraudulent or improper payments, but my guess is some of it might be, and we really do not know. 

Mr. VITO. The only way you are going to know is when you do 

the work to find out what is really behind that, and that is the key, 

that if you are able to put edits up front, like you are trying to stop 

it at the very early stage, then you do not have to do all the work 

on the back end, because as Ms. Taylor said, some of this could be 

that the plans are putting in just certain numbers or dummy numbers. But you do not know if that is masking other problems that 

are underneath that until you actually do the work. 

H605-41331-79W7 with DISTILLER

22 

Senator CARPER. This might be an obvious question, but are 

there some simple things that we could do to really perform checks 

on the identifiers? 

Mr. VITO. Yes, I think there are, like in 17 percent of the cases, 

we knew that the actual format did not match. You know, if it was 

a DEA number, you had nine numbers in it. If you had an NPI, 

it was 10 numbers. If you do not have that exact number, right off 

the bat they could have stopped the problem for about $200 million 

because these were ones that did not meet the format requirements 

at all. 

So, I mean, at the very easiest stage, when you see that coming 

in, right off the bat there is something wrong there, and you should 

say, OK, there is something wrong here, we need to check into it 

and we need to address it, make sure it does not happen again. 

Senator CARPER. Do you know if CMS has data, say, for 2010 in 

terms of the number of PDE records that include the top 10 invalid 

identifiers? Do you know that? 

Mr. VITO. I do not know if CMS has that information. It would 

be better if you would ask them. We do know that medics have 

been doing some analysis, the Medicare drug—they have been actually looking at this and identifying some of these numbers. And I 

believe according to the information we have received from them, 

there is a movement away from the DEA number towards the NPI 

number. But the question also is: When we did our work in 2007, 

we found that there were NPI numbers that were invalid as well. 

Are there going to be invalid numbers in the NPI system? Just because they are moving to a system where it is one uniform identifier, that does not mean that there might not be these problems 

still. So I think they still need to be vigilant in that area. 

Senator CARPER. OK. We are well into our vote. I am going to 

just take about 2 more minutes, and then I am going to run and 

vote, and we will recess until I have voted, and I will come back 

as quickly as I can, probably within 15 minutes. 

I want to stay on this issue for a bit longer and, Ms. Taylor, just 

ask you to talk to us about this situation. And, again, what are we 

doing about it? How serious are you all taking this? 

Ms. TAYLOR. Sure. We obviously take this very seriously, and we 

are not happy that there were invalid numbers, certainly dummy 

numbers that on the face of the claim were not valid to begin with. 

I think Mr. Vito has alluded—we have asked our contractors for 

some of these top 10 to go back to the entity and find out why they 

were putting those numbers in there. We certainly are focused on 

the high-risk claims, meaning those where controlled substances 

were part of the claim. We will work closely with the IG if we find 

any real underlying issues. We believe that because it was in the 

beginning of the program, there may have just been a misunderstanding of whether or not they could put the DEA number on the 

face of the PDE claim. Some of the sponsors have told us they 

thought that was a protected number, that they would not be allowed to put it on the claim. So we certainly want to work and figure out what is going on there. 

Again, we have seen a substantial shift moving away from the 

DEA number to the NPI. We are going to be looking at the 2009— 

we do not have all of 2010 yet, but we will look at 2010 also to see 

H605-41331-79W7 with DISTILLER

23 

whether or not, we are just substituting invalid numbers from DEA 

to NPI. We want to understand that. We want to be able to give 

these plans and pharmacies information and guidance about how 

to get to a valid NPI number. We do not know if there is a systems 

issue. We do not know if all pharmacies and plan sponsors have 

the ability to get into the NPI database. We do not know if there 

are problems with slowness of the database, whatever. So we want 

to figure out what is causing some of the underlying reasons why 

they are just putting a number on there. 

I think Mr. Vito and certainly the CMS concern is we do not 

want beneficiaries standing in front of the drug counter not being 

able to get needed and necessary drugs. So we always weigh that 

balance of making sure we get the valid information on the claim, 

but not holding up beneficiaries from getting their needed drugs. 

So we do not want to stop that. I think the issue here is we need 

the pharmacies and the sponsors to then, even if they give the information out because the system is slow or whatever, the drugs 

out, they still go back and validate the number, they do not leave 

it as a fake number on the PDE. We absolutely do not want that. 

And we are absolutely going to be working directly with those 

who seem to not want to follow our guidance and figure out whether or not we can take some actions. We certainly will tell them 

cease and desist, we will be watching you. But what further actions 

we can take on their behalf, I mean, we will absolutely be looking 

at that. 

Senator CARPER. All right. Again, our thanks to each of you for 

being here today and for your testimony and for your responses. 

We are going to do a lot of oversight and follow-up on this. There 

is real money to be saved here. We have a Medicare Trust Fund 

that has somewhere between—I do not know—10, 15 years of life 

left in it, and we need every dollar—it needs every dollar that we 

can save. 

It appears to me that roughly one out of every seven or eight dollars that is being spent in Medicare is being spent wastefully or 

fraudulently. And we have a pretty good idea where some of that 

is coming from, and obviously work has begun to identify those and 

correct it and recover money where we can. But when you have a 

trust fund that is running out of money in the next 10, 15, or 20 

years and we know that one out of every seven or eight dollars is 

being misspent, fraudulently spent, there is a good way to stretch 

the life of the trust fund without raising anybody’s taxes. I appreciate the work that is being done here. Let us keep it up. As I said 

earlier on, one of my core values, if it is not perfect, make it better. 

And while we are doing better, we can still improve, and we need 

to. So thanks very much. 

We will stand in recess for about 15 minutes, and I will hustle 

back as quickly as I can for the second panel. Thanks very much. 

[Recess.] 

The Subcommittee will reconvene. Welcome. Thanks for hanging 

in here. We were voting. If you want to know what we were voting 

on, we were voting on what we call a cloture motion. That is to see 

whether or not we will proceed to a vote on the conference compromise that has been worked out on financial regulatory reform 

legislation. So we need 60 votes to proceed to the vote on the conH605-41331-79W7 with DISTILLER

24 

ference report, and we will find out probably by now whether we 

got the 60 votes. I think we did, but we will see. 

I want to introduce our panel of witnesses. Our first witness, I 

am told, is Libby Alexander. Is Libby short for Elizabeth? 

Ms. ALEXANDER. Yes. 

Senator CARPER. OK. Chief Executive Officer of Connolly 

Healthcare, Connolly, Incorporated. Where are you all located? 

Ms. ALEXANDER. Wilton, Connecticut. 

Senator CARPER. OK. And I understand you provide recovery 

audit contracting services under Medicare. OK. Thank you. 

Our next witness—this is kind of a nice—I am always after my 

staff, when we have names that are just names you do not hear 

every day, I ask them to spell it out phonetically, and they said 

that your name is Lisa Im, ‘‘rhymes with Kim.’’ Is that right? 

Ms. IM. That is correct. 

Senator CARPER. Pretty good. Chief Executive Officer of 

Performant Financial Corporation. I understand you are 

headquartered in—is it Livermore? 

Ms. IM. Yes. 

Senator CARPER. Livermore, California. I used to live in Palo 

Alto, in Menlo Park, right across the bay, when I was a naval flight 

officer. It is nice to have you here. And we understand that your 

company, Performant, also performs recovery audit contracting for 

Medicare. 

Ms. IM. Yes. Region A. 

Senator CARPER. What is that, Region A? 

Ms. IM. Region A is the Northeast. 

Senator CARPER. OK. Thank you. Does that include Wilton, Connecticut? 

Ms. IM. Yes. 

Senator CARPER. OK. Thank you. 

Our next witness is Andrea—it says ‘‘Bank-o.’’ But your name is 

spelled B-E-N, like my son’s name is Ben, and we call him Ben, but 

is your name pronounced ‘‘ban’’? 

Ms. BENKO. No. Benko, just like—— 

Senator CARPER. Benko, thank you. All right. President and 

Chief Executive Officer of HealthDataInsights, Incorporated. I am 

told that you are based in Las Vegas, Nevada. 

Ms. BENKO. Correct. 

Senator CARPER. OK. And that you also provide recovery audit 

contracting under Medicare. I just spoke with Harry Reid when I 

was over on the floor a few minutes ago. He said, ‘‘Be nice to the 

witnesses from Nevada.’’ [Laughter.] 

Our next witness is Robert Rolf, Vice president of CGI Federal. 

CGI is based in Montreal, Quebec, and provides recovery audit contracting services under Medicare throughout Canada. Is that right? 

[Laughter.] 

Mr. ROLF. Senator, our U.S. headquarters is in Fairfax, Virginia. 

Senator CARPER. All right. What part of the country do you all 

cover? 

Mr. ROLF. We cover Region B, which is seven States in the Midwest, and that work is performed out of Cleveland, Ohio. 

Senator CARPER. OK. And our fifth and final witness is Romil 

Bahl—is it ‘‘Ra-mill’’? 

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25 

1The prepared statement of Ms. Alexander appears in the appendix on page 77. 

Mr. BAHL. It is ‘‘Row-mill.’’ 

Senator CARPER. Is the emphasis on the first or second syllable? 

Mr. BAHL. If you actually do not emphasize either side of that, 

it works better. 

Senator CARPER. It works. Romil. And your last name is B-A-HL, but it is pronounced ‘‘ball’’ like in baseball. Is that right? 

Mr. BAHL. Close enough again. Thank you, Mr. Chairman. 

Senator CARPER. All right. President and Chief Executive Officer 

of PRGX Global, and I understand you are based in Atlanta, Georgia, and also do Medicare recovery audit contracting. What part of 

the country do you all cover? 

Mr. BAHL. Sir, we have an interesting arrangement with three 

of my colleagues here on this panel, Regions A, B, and D. So we 

are actually serving about 11 States, Senator, sort of holistically on 

our own, and then we have roughly 24 other States that we provide 

other services to, for example, in the DME area and home health. 

Senator CARPER. OK, good. We are happy that you are here, and 

you have had a chance to listen to the first panel of witnesses, and 

to my colleagues and I ask some questions. Now we look forward 

to hearing your testimony. We value the work that you and your 

colleagues do for our country, and we want to make sure that we 

get the full value out of the work that you are doing. As I said earlier, everything I do I know I can do better, and I suspect it might 

be the same is true for your folks as well. 

So, again, Ms. Alexander, I am going to ask you to lead us off, 

and we will make your full statement a part of the record, and you 

can summarize as you see fit. Try to stick to about 5 minutes, each 

of you, if you would. Thank you. 

TESTIMONY OF LIBBY ALEXANDER,1 CHIEF EXECUTIVE 

OFFICER, CONNOLLY HEALTHCARE, CONNOLLY, INC. 

Ms. ALEXANDER. Chairman Carper and distinguished Members of 

the Subcommittee, thank you for the opportunity to testify today 

on preventing and recovering government payment errors. We appreciate your interest in recovery auditing, a best practice that is 

increasingly recognized as an invaluable tool for returning improper payments to the government and for identifying ways to 

mitigate future payment errors. My name is Libby Connolly Alexander. I am the Vice Chairman of Connolly, Inc., and the CEO of 

Connolly Healthcare. 

Connolly currently serves as a recovery audit contractor, or RAC, 

for the Centers for Medicare and Medicaid Services, Region C, the 

Southeast, and we were one of the three RACs during the demonstration program serving in New York and Massachusetts. We 

have also performed recovery audit work for the Department of 

Health and Human Services, the Department of Education, and the 

Defense Logistics Agency. 

Since our founding in 1979, Connolly’s sole focus is the identification and recovery of improper payments. I personally have lived 

and breathed recovery auditing for the past 25 years. Our company 

serves some of the world’s largest—— 

H605-41331-79W7 with DISTILLER

26 

Senator CARPER. What is it like to live and breathe something 

like that for 25 years? 

Ms. ALEXANDER. We have something in common: Our passion for 

this subject. 

Our company serves some of the world’s largest and best-run organizations in the retail, non-retail, health care, and government 

arenas. We entered the health care market in 1998 and have since 

grown to where we now serve commercial insurers, Blue Cross/Blue 

Shield plans, Medicare Advantage plans, Medicaid managed care 

plans, and, of course, CMS. In all, we recover nearly $1 billion annually for our clients. Our growth has been dramatic, including tripling the number of employees over the course of the past 5 years 

to over 700 today, a reflection of the widespread adoption of recovery audit as a best practice. 

Most large organizations have created dedicated teams assigned 

to recovery auditing and plan recovery dollars into annual budgets. 

The Federal Government recognized the value of recovery audits 

nearly 10 years ago, and since that time strides have been made, 

with the RAC demonstration program perhaps being the best example of how a successful national recovery audit program can be. 

As we replicate and build upon the success of the national expansion of the RAC program and extend the RAC efforts to Medicare 

Parts C and D and Medicaid, as called for under Section 6411 of 

the Patient Protection and Affordable Care Act and now the Improper Payments Elimination and Recovery Act, the country should 

realize recoveries of billions of dollars annually. 

So what made the RAC demonstration program so successful? 

And what can we do to build upon it? In our testimony for the written record of this Subcommittee, Connolly submitted eight recommendations to help the government successfully expand its recovery audit efforts. In the interest of time, I will discuss only five 

of them here today. 

No. 1, establish goals. In our 30 years’ experience, a successful 

recovery audit program is achieved when there is a strong alignment on the metrics against which the success of the program can 

be measured. These goals can be determined by examining agency 

estimated error rates and the success of previous recovery audit 

programs in areas such as outreach, transparency, and quality. 

No. 2, executive sponsorship. Since our earliest years of conducting recovery audits, we have continually found that recovery 

audits are most successful when there is a champion at a high 

enough level to see that the program gets off the ground and continues to see success. 

No. 3, provide proper funding and resources to ensure the greatest financial benefit to the government. Agencies need a comprehensive program for preventing and recovering improper payments, and resources for the audit on the agency side should be established prior to the start of the audit. This would include resources to assemble audit data and personnel to approve audit 

issues for recovery, to manage the collection process, and to handle 

provider-vendor relations. Over time these costs can be funded 

through a portion of the recoveries that flow back to the agencies. 

But to recover the most improper payments possible, funds and 

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27 

1The prepared statement of Ms. Im appears in the appendix on page 81. 

personnel should be put in place and committed up front to get the 

program off the ground. 

No. 4, institutionalize recovery audit as a comprehensive program, not a stand-alone project. By itself, a recovery audit project 

can recover some money for the taxpayers which we all can feel 

good about. But the true value comes from being part of a comprehensive program where the agency supports the audit and uses 

its results to make continual improvements. Every agency’s mission should include a commitment to recapture improper payments, 

support valid overpayments through the appeals process, and look 

for ways to improve the recovery audit program going forward. 

No. 5, use the experts. Rely on recovery audit experts to conduct 

audits and provide guidance for rolling out future audits under 

6411 of the Patient Protection and Affordable Care Act. Recovery 

audit contractors have the people, the tools, the technology, the 

processes, the years of experience, and independence to achieve the 

goals of a program. Agencies should focus their resources on the activities necessary to support the execution of a comprehensive recovery audit program in a timely fashion and on improvements to 

prevent improper payments from occurring in the future. 

In conclusion, Mr. Chairman, recovery auditing for the government is a valuable tool in the war chest against fraud, waste, and 

abuse. If an effort is made to align resources and a commitment 

made to recover improper payments, then we will continue to see 

the kind of success that we saw or encountered with the RAC demonstration program. 

Mr. Chairman and other Members of the Subcommittee, thank 

you for the opportunity to provide my insights, and I am available 

for any questions. 

Senator CARPER. Thanks very much. 

Lisa Im. 

TESTIMONY OF LISA IM, CHIEF1 EXECUTIVE OFFICER, 

PERFORMANT FINANCIAL CORPORATION 

Ms. IM. Thank you, Chairman Carper, Members of the Subcommittee, for inviting me here to testify. As chief executive officer 

of Performant Financial Corporation, I am happy to say that for 

over 33 years we have actually worked for Federal and State agencies to help improve their fiscal and economic responsibility and accountability. Our first contract with CMS began in 2005. We were 

awarded the MSP demonstration project, and while we had California, which was one of the three States, we did recover 90 percent of the MSP dollars. We have had two other contracts with 

CMS, and we are currently a recovery audit contract for Region A. 

Since February of 2009, we have invested millions of dollars into 

our own organization to support the recovery audit contract. And 

what we have learned thus far is actually fairly consistent with 

what we know from our work with many Federal and State agencies, including Department of Education and the Department of the 

Treasury. 

One, seed money is critical to help an agency prepare for a 

smooth implementation. Budgeting is a critical issue we recognize 

H605-41331-79W7 with DISTILLER

28 

which is addressed in this contract by the self-funding allowance, 

but, frankly, more resources were needed up front to establish the 

program infrastructure and assure that CMS could dedicate organizational resources to the contract start. 

Two, contingency fee structures can be and are very effective for 

recovery audit contracts. Sometimes this concept is misunderstood. 

The parties being audited describe this as a bounty when, in fact, 

it is a widely accepted program commonly deployed by private companies, including providers of health care. It is one of the best ways 

to recoup dollars at a value proposition because in contingency fee 

contracting, the value actually equals recovered dollars minus the 

fees. Therefore, recovery becomes the lever to drive value. And successful recovery contracts in our experience at both the Federal and 

State level are not necessarily low-priced, but they are a fixed fee, 

and so technical competency becomes the decision factor in a vendor selection process. And the most successful recovery contracts 

require that vendor partners continue to invest in the process to 

drive greater results over time and to provide continuous improvement efforts and feedback to the client. 

Third, outreach and education of all constituents is a best practice that has been applied to this recovery audit contract. Many of 

these overpayment errors are inadvertently made, but still represent billions of Medicare dollars erroneously disbursed. To educate and help providers, CMS has urged us and we have committed 

to extend great efforts to create and maintain outreach programs 

to the provider community. There is a continuous feedback of learning and education with providers that we have committed to. 

Fourth, collaborative efforts between the parties is a best practice, and by this I mean due to the newness of this recovery audit 

contract, there should be a spirit of collaboration between CMS and 

the vendor partners, and among vendor partners, like us, who are 

encouraged to provide direct feedback to CMS. This process is a 

discussion loop to try for greater consistency and uniformity in 

processes and enables continuous improvement in the contract as 

it matures. 

Fifth, the recovery audit concept we believe can be successfully 

applied to many other areas of the Federal Government, including 

Medicare Parts C, D, and Medicaid. Clearly, there are very unique 

challenges to each of these areas of health care, including disparate 

technological platforms, budgetary constraints at the State levels 

and elsewhere, and differing current practices which should be understood and assessed. That said, it is our belief that Part D is a 

fairly intrinsic part of Part A and B claims and can be added to 

this RAC contract. Many government programs, including Medicare 

and Medicaid, employ various types of preventative programs. To 

be fair, CMS has a number of preventative programs in order to 

help guide and educate the provider groups. But as an added process, recovery audit contracts can capture dollars lost just due to errors. 

As an example, Senator, Medicare processes 1.2 billion transactions per year. Provider groups have turnover in people or expertise, and there is an inherent difficulty in implementing changing 

reimbursement rules into systems in a timely manner. It all causes 

error that may never be completely addressed in a preventative 

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29 

1The prepared statement of Ms. Benko appears in the appendix on page 84. 

way, irrespective of how strong the preventative program is. And 

that is why recovery audit contracts create value to the Federal 

agency. This kind of contracting is often deployed by providers in 

the health care community who also have very strong preventative 

programs, but they also will have a recovery audit kind of process 

on the back end to capture any lost dollars. 

This RAC contract implementation we believe is just beginning, 

but has great potential to succeed in returning dollars to CMS. 

Moreover, we think the application of recovery audit contracting 

across other Federal agencies has very strong potential and will be 

successful if best practices and key lessons from contemporaries are 

applied. 

Chairman Carper, thank you very much for the opportunity to 

testify today. 

Senator CARPER. Thank you, Lisa Im. 

And next, Andrea Benko. Welcome. Please proceed. 

TESTIMONY OF ANDREA BENKO,1 PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, HEALTHDATAINSIGHTS, INC. 

Ms. BENKO. Chairman Carper, thank you very much for inviting 

me to testify before this very important hearing and for your efforts 

to prevent and recover government payment errors. I am president 

and CEO of HealthDataInsights (HDI). HDI is a technology-drive 

health care services company that specializes in claims integrity. 

Our customers include both public and private payers of health 

care services. The company employs sophisticated proprietary software tools, database queries, and complex review strategies to retrospectively analyze 100 percent of a payer’s claims data. We have 

an experienced, robust, physician-led clinical team and quality 

management team who review more than $300 billion in annual 

claims paid data each year. We focus our efforts on the honest end 

of the spectrum of waste, fraud, and abuse; that is, overpayments 

and underpayments due to improper billing and other sources of 

error. 

HDI participated in the RAC demonstration program that corrected over $1 billion in improperly paid claims. During the demonstration we identified 41 percent of the total findings while working with only 31 percent of the data. HDI is the national RAC in 

Region D, which includes the 17 Western States and three U.S. 

Territories. We also serve as the payment error measurement review contractor, which establishes the error rate for the Federal 

Medicaid program. 

I would like to thank CMS for the progress made to date on the 

implementation of the national RAC program and acknowledge the 

challenges of implementing a program that requires cooperation 

among a vast number of contractors while managing the potential 

provider impact and the quality of the audit programs. 

While the national program performance to date has been encouraging, there are a number of ways to achieve greater success. 

Based on lessons learned, HDI has the following recommendations: 

First, we strongly urge Congress to establish target recovery 

goals of at least 50 percent of an agency’s identified payment error 

H605-41331-79W7 with DISTILLER

30 

as estimated in the annual reports. For example, based on the 2009 

Medicare fee-for-service error rate, the annual recovery goal would 

be $12 billion for this program, half of the projected error rate as 

established by the Comprehensive Error Rate Testing (CERT) program of $24 billion. 

Second, claims adjustment processes to recover the improper payments identified must be expedited and expanded to materially 

benefit the trust fund. Currently, automated mass adjustment 

processes to adjudicate incorrectly paid claims are in development, 

and until those are implemented, we need to increase the manual 

throughput to accelerate returns to the trust. 

Third, expansion of the quality and scope of reviews is necessary. 

To the extent that RACs are allowed to review inpatient claims and 

other new issues more quickly, we believe returns to the Medicare 

Trust Fund will rapidly increase. Another issue to consider is the 

current limitation on the ability to request medical records from 

providers within the RAC program. 

Fourth, CMS has conducted major finding discussions with contractors to determine strategies to reduce improper payment types, 

and this should be implemented as this recovery program is rolled 

out in all agencies. 

Fifth, Medicare’s provider network is a key component to the delivery of quality health care, and as such, our efforts are sensitive 

to providers. All constituents of health care delivery systems desire 

claim payment integrity and accuracy. Claims should be paid according to policies and fee schedules. No more, no less. This creates 

a sentinel effect of ensuring that providers continue to maintain 

solid billing and treatment practices. Medicare policies, coverage 

requirements, and guidelines, which have been so carefully developed over decades, are evidence-based, proven protocols for delivering patient care that ensure quality. 

Our final recommendation is to leverage the success of the Medicare RAC program by extending it to other government health care 

payers. While there is a mandate that a RAC-like project be implemented in Medicaid as well as Parts C and D, we believe that the 

benefit to the government, when data is aggregated. If data can be 

audited and analyzed for an entire region for Medicare fee-for-service, Medicaid, and Part D, we can identify more improper payments 

through better data quality, more significant statistical analysis, 

and the impact on the provider can be effectively managed via one 

coordinated program that maximizes the return to the trust fund 

and minimizes the impact on the provider networks. The government would also benefit by expanding the RAC to the Federal Employees Health Benefit (FEHB) Program , the VA, and TRICARE. 

In summary, we believe at HDI that there is a tremendous opportunity to ensure claim payment integrity and quality and to realize literally hundreds of billions of dollars over the next 10 years 

in recoveries for the government. 

Thank you. 

Senator CARPER. Good. Thanks. And thanks for mentioning the 

Federal Employees Health Benefit Plan, the potential there, and 

the VA as well. 

Mr. Rolf, welcome. Please proceed. 

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1The prepared statement of Mr. Rolf appears in the appendix on page 90. 

TESTIMONY OF ROBERT ROLF,1 VICE PRESIDENT FOR 

HEALTHCARE BPO, CGI FEDERAL, INC. 

Mr. ROLF. Thank you, Chairman Carper, Ranking Member 

McCain, and Members of the Subcommittee. My name is Robert 

Rolf. I am vice president for CGI Federal, an information technology and business process services company that has been 

partnering with government for nearly 35 years. 

In my role, I am responsible for CGI’s efforts to implement the 

Recovery Audit Contractor program in Region B, a seven-State region in the Midwest, as well as similar audit and recovery efforts 

that CGI performs for its State government and commercial clients. 

It is my pleasure to appear today before you at this hearing to examine the use of RACs in the Medicare program. 

Under CGI’s contract with CMS, we are tasked with the identification of improper payments made to hospitals, physicians, clinics, and other providers of services under Medicare Parts A and B. 

This work involves conducting audits of paid claims using both 

automated and manual review processes intended to identify provider overpayments and underpayments. Although most of this 

work involves catching improper payments on the back end, CGI 

fully supports all efforts to prevent such payments from happening 

in the first place. We currently assist CMS in the development of 

an improper payment prevention plan, a mission that CGI takes 

very seriously. 

As a result of CGI’s experience with the RAC program, I would 

like to share a few observations about this important CMS program 

and some lessons learned about recovery audit efforts with the 

Subcommittee. 

First, transparency and communication are critical to the success 

of the program. It is important that RACs provide transparent information to Medicare providers regarding the program, the issues 

under investigation, and the basis for an improper payment determination. 

Second, the RAC program promotes continuous process improvement for claims processing and payment. CGI participates along 

with the other RACs in major finding discussions with CMS. This 

process informs CMS of areas representing the greatest vulnerability to the program, along with recommendations for corrective 

action. 

Third, there is the potential for this contingency approach to expand to other areas across government. Several legislative provisions in the Affordable Care Act expand the RAC program to Medicaid as well as Medicare Parts C and D. And now, thanks to your 

leadership, Chairman Carper, along with Ranking Member McCain 

and Senators Lieberman, Collins, McCaskill, and Coburn, CGI believes that with the final passage of the Improper Payments Elimination and Recovery Act, combined with OMB fiscal year 2012 

budget guidance, we will focus agency attention on this topic in an 

unprecedented fashion across the entire Federal Government. 

When expanding into new areas for recovery audit, it is important to note that while there are many similarities, there will be 

some differences in approach from the existing RAC program. One 

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1The prepared statement of Mr. Bahl appears in the appendix on page 93. 

common lesson learned from any recovery audit program, whether 

in health care claims or other payment areas, is the need for a robust process to recover funds identified by a RAC as improper. 

Companies such as those before you today are adept at analyzing 

and identifying improper payments out of the millions of transactions that occur in programs each year. However, without the 

necessary infrastructure to recover the funds, the government will 

be slow to realize the benefit a RAC program can bring. 

CGI prides itself on combining cutting-edge technology with 

years of domain experience in creating valuable solutions for our 

clients. We are especially proud of our ability to deliver successfully 

on the RAC program by featuring our health care expertise and 

broad experience in audit recovery programs. More than that, CGI 

remains passionate about the opportunity to partner with CMS and 

hopefully other Federal agencies in one of the most critical goodgovernment efforts underway today. 

I appreciate the chance to appear before you today, and I would 

be pleased to answer any questions you have. 

Senator CARPER. Thanks, Mr. Rolf. Mr. Bahl. 

TESTIMONY OF ROMIL BAHL,1 PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, PRGX GLOBAL, INC. 

Mr. BAHL. Thank you, Mr. Chairman. 

Mr. Chairman, Senator McCain, distinguished Members of the 

Subcommittee, PRGX very much appreciates the opportunity to 

testify before this Subcommittee, and it is my privilege to represent 

our team here today. We are gratified by the Subcommittee’s efforts to tackle the problem of improper payments, most recently, of 

course, the passage of the Improper Payments Elimination and Recovery Act of 2010. 

The act removes major impediments to successful recovery audits 

and, most importantly, incents agencies by allowing them to keep 

a portion of the funds recovered. This act, coupled with the expansion of recovery audits included in the recent health care legislation, more than doubles the levels of auditable Federal spending. 

We are excited about this expansion and look forward to competing 

for the opportunity to recover more taxpayer dollars. 

While the rules for the expansion to Medicare Parts C and D and 

Medicaid across the 50 States will not be known until CMS and the 

States issue their solicitations and launch formal procurement 

processes, we are convinced that the application of proven recovery 

audit capabilities to these other areas of Medicare and Medicaid 

will yield great returns. Recovery audit potential has also been advanced by the administration’s emphasis, including the President’s 

personal endorsement, of the recovery audit process. 

PRGX is the global leader in recovery audit and the pioneer of 

a new category of services we term ‘‘profit discovery.’’ Our services: 

Audit, analytics and advice, are key elements of successful financial management in large private enterprises and in government 

agencies. We also have one of the longest track records in recovery 

auditing for the Federal Government. 

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Based on our 40-plus years of experience since pioneering the recovery audit industry, we believe there are four key success factors 

for a government agency to run an effective audit: One, an effective 

program champion; two, a broad scope audit; three, strong motivation, certainly with no disincentives; and, four, a capable recovery 

audit services partner. 

In doing our work, we abide by a number of key principles: Integrity, confidentiality, security, and always value for our clients. Also, 

we are sensitive to the providers and other vendors we work with 

and, in fact, one of our key metrics is provider abrasion or vendor 

abrasion. 

It is part of our commitment to our clients, including CMS, that 

we are fair in all our dealings with the hospitals, the physician 

groups, and all other providers as we audit on behalf of the taxpayer. 

It may also be worthwhile to mention that there are three key 

pillars to how we approach recovery audit. As we have said for long 

at our company, first, we make sure that the juice is worth the 

squeeze. Our very heavy, front-loaded investments demand a high 

confidence that we can deliver results. 

Second, we turn over big rocks before the pebbles. We do not 

spend dollars to chase dimes, nor should the American taxpayer. 

And, finally, we focus a lot of effort on getting it right the first 

time. Our focus on accuracy is paramount and is demonstrated by 

PRGX having the lowest percentage of findings overturned on appeal during the Medicare RAC demonstration program. 

We bring this expertise and commitment to our work with CMS 

and the provider community to optimize recoveries as a core part 

of their overall program integrity efforts. As an auditor in three of 

the four recovery audit regions, we have a broad and unique perspective on the processes and the errors that take place. 

The same methodical, careful implementation that CMS is using 

with its national Medicare RAC program should also be emulated 

in other Federal agencies, and now it can be, given the means provided in your recent legislation. 

PRGX’s Medicaid recovery audit experience incorporates many of 

the lessons we have learned from the Medicare RAC program. Our 

estimates suggest that recoveries in Medicaid alone could be more 

than $1.35 billion annually. 

Our recommendations for the national Medicaid expansion include the following: Create a set of guidelines for process automation and streamlining of appeals to get each State’s Medicaid recovery audit program up and running quickly; and, further, the audit 

concepts that have already been approved for the national Medicare RAC program could be carried over to fast-track State Medicaid recovery audit programs, thereby reducing duplication of effort, reducing provider confusion. 

Error rates for Medicare Parts C and D also suggest great potential for recoveries, and we are eager to begin helping CMS identify 

and recover these funds. We suggest focusing the recovery audit effort on the transactions between the Medicare Advantage and prescription drug plans and the provider. This is where the complexity 

lies. This is where the errors occur. 

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Because Medicare Part C and Part D plans are administered by 

private enterprises that bear the actuarial risk, the recovered funds 

in any fiscal year could accrue back to the plans, thereby providing 

them the appropriate incentive to implement effective recovery 

audit programs. But CMS should then use the adjusted costs to revise future annual premiums, thereby effectively bending the 

health care cost curve going forward. 

The lessons learned from the Medicare RAC program, the new 

authorities and incentives provided in legislation, and a renewed 

emphasis by the Executive Branch have set the stage for great 

strides in tackling improper payments. We are proud, sir, to be 

part of these efforts. 

I would now be happy to answer any questions you may have. 

Thank you again. 

Senator CARPER. Thank you all. 

How many of you have testified before, before the House or Senate? Raise your hand. So this is the first time. That is good. Well, 

you did a very nice job. Very nice job. 

You have the benefit of being the second panel, and you have had 

a chance to listen to the first panel. And I do not want to spend 

a lot of time on this, but I would like to ask each of you to maybe 

take 30 seconds or so, anything you want to reflect on that you 

heard from the first panel that you think should be underlined, emphasized, maybe should question, but just go back to what you 

heard in that first panel and let me hear from you. Ms. Alexander, 

I do not want to pick on you, but if there is anything you would 

like to just reflect on and react to the first panel’s comments. 

Ms. ALEXANDER. Some final remarks, actually, that Deb Taylor 

was making with regard to the correction of some of the identified 

improper payments. I do support what she was saying, that some 

of them are much more easily addressed than others. Some of these 

errors can be fixed with, adjustments to computer edits and things 

like that, very easy and very efficient to address. But, other the 

root cause of some of these errors is much more complicated. And, 

we have been in the recovery audit business for a very long time, 

and most of our business is repeat business. I would assume it is 

the same for my colleagues here at this table. 

I think that the notion that you can completely fix and make errors go away is something that needs to be considered. 

Senator CARPER. All right. Thank you. 

Ms. Im, a reflection on anything that you heard that you want 

to just emphasize. 

Ms. IM. Sure. Again, I think I just want to speak to the error correction and the prevention piece of it, sir. A good recovery audit 

program will continually find areas for opportunity for improvement, and I think that is what makes us good partners, is if we 

continue to find room for improvement. So, again, to the extent 

that 100 percent prevention is in a perfect world, we as partners 

to CMS can help continue to improve that process over time. 

Senator CARPER. OK, thank. Ms. Benko. 

Ms. BENKO. I have to add to that, because we have been doing 

health care auditing for 25 years, and we do not find the same 

things today that we found 5 years ago. When something gets fixed 

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something else pops up because there are new treatments, there 

are new ways of billing, there are all kinds of new things. 

The other issue is that, a lot of emphasis this morning was put 

on correcting vulnerabilities, and in the new program, the more 

dollars that we can recover, the more opportunity to identify 

vulnerabilities. The program is slowly ramping up. So as it ramps 

up, there will be more opportunity, and I think if we can accelerate 

the ramp-up, that would be to all of our benefit. 

Senator CARPER. Good. Thank you. Mr. Rolf. 

Mr. ROLF. I was intrigued by the discussion concerning the Part 

D error rates, and the issue that I see is you can attack both 

these—what we are doing now in the Part A and B program, separate from the errors that were discussed earlier today on the Part 

D side. But the real synergies that you are going to achieve is 

when you can compare across both of those programs, analyze the 

data across both of those programs, and identify a third set of errors that are independent from each other. 

So while it was significant, the discussion that was had this 

morning, I think there is an untapped opportunity there to be able 

to discover additional improper payments by integrating the reviews between the Parts A and B and the D. 

Senator CARPER. All right. Thanks. Mr. Bahl. 

Mr. BAHL. Mr. Chairman, if I could first, sort of two reactions to 

this morning. As a taxpayer, as a good corporate citizen, I know my 

PRGX team would join me in saying that I was gratified. The obvious interest and passion to fix overpayments, whether they are, erroneously done or whether there is actual fraudulent misconduct 

conducted, was absolutely terrific. 

Without saying anything different from what the other panelists 

have said, I do think focusing on fixing the gaps as you go along 

is crucial, sir. I will tell you that after 40 years of recovery auditing 

in this industry, we believe entirely so—and this is true right 

across the private sector for all our clients—that they do not only 

want us to fix recoveries. They want us to give them simplified, improved operating environments, to be strategic partners with them, 

to close those gaps that are causing those errors all the time. It is 

increasingly not a differentiator. It is increasingly table stakes for 

a recovery auditor to audit a client, to be able to fix those errors 

as we go. And so we look forward to being involved in that. 

Senator CARPER. OK. I pressed our witness from CMS on a 

timeline. I said, ‘‘Give me a timeline for’’—we do not have the chart 

up, but for the vulnerabilities that have been addressed—I think 

40 percent of them have been, about 60 percent have not been. And 

as you suggest, Ms. Alexander, some of them are easy, some of 

them are not. And maybe a couple of them require legislation. 

But I said before, if we do not have a timeline, if we do not have 

a date that we are trying to get something done or something close 

to that, then these kinds of things just stretch out forever. 

Also, I questioned our witnesses about how realistic is it to expect to expand cost recovery in Parts C and D by the end of this 

year, how realistic is it to expect for us to have it done in 50 States. 

And let me just come back to that second part, the expansion of 

C and D by the end of this year, December 31st, and the expansion 

of this capability in all 50 States. How realistic is that? And I am 

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concerned—I was encouraged by what I heard on Parts C and D, 

not so encouraged on what I heard about the States. As an old Governor, a former Governor, a recovering Governor, I can appreciate 

a little bit why that might be. 

Anybody have any thoughts on the expansion, how realistic are 

we in our expectations? Please, Mr. Rolf. 

Mr. ROLF. Chairman Carper, regarding the expansion and the 

time frames, I agree with you that work tends to expand the time 

allotted, and it is a statement within my company that what gets 

measured gets done. And so I would agree with you the time 

frames need to be set, and they need to be aggressive time frames 

to move forward. 

Regarding the specific areas of expansion to C and D and into 

Medicaid, many of us up here today have experience in those areas 

now working with Medicare Advantage plans, working in the Medicaid arena, have the experience to be able to quickly move into 

those types of programs. I think it would be difficult given the current state of Federal procurement time frames, I think that the 

chance for the agency to be able to meet those time frames is to 

leverage existing contract vehicles they have in place today. 

Senator CARPER. All right. Thank you. Mr. Bahl. 

Mr. BAHL. Thank you, Mr. Chairman. You know, if I could be so 

bold as to quote what you quoted, I think, just a few months ago, 

you quoted Willie Sutton, did you not, sir? There is money there, 

right? There is over $600 billion just of auditable spend, and we 

must get after it. 

I think one of the potential issues that is in front of the CMS 

is while Medicaid expansion should be relatively easy because it is 

very sort of RAC-style, right, fee-for-service, and the question is 

only will there be 50 independent procurements with the States or 

not. I mean, that I think can roll out quickly. 

There is some complexity with respect to Parts C and D, sir. 

Those are obviously run by private enterprises that bear the actuarial risk, and so, our suggestions specifically in that—just like 

what you did in S. 1508, you provided for some incentives for the 

government agencies. That sort of incentive, therefore, has to be 

provided to the plans, the plan administrators themselves. 

And so while we must audit where the money is in the transactions set between those plans and the providers, we believe that 

we give back, right, the recoveries in any given year back to those 

private players so that they are incented. But then the CMS is 

incented, as I said before, to bend the cost curve, to use that adjusted amount each year to apply their SGI and other cost increases. 

Senator CARPER. All right. Thank you. 

Ms. Benko, Ms. Im, Ms. Alexander, any other comment on this 

point? 

Ms. BENKO. We are be ready to take on additional work with the 

Medicaid and the Part D plans absolutely quickly. We know where 

the errors are. We could incorporate that into the work we are already doing with the Medicare Part A and B, and it could happen 

this year. It is more CMS has to set out a goal of what they want 

to accomplish and make it happen. 

Senator CARPER. OK. Thank you. Ms. Im. 

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Ms. IM. Chairman Carper, I would agree with what Andrea has 

said, and, moreover, the type of infrastructure and alignment that 

CMS has to do in order to engage a vendor because of all of the 

multiple partners requires that they leverage what work has already been done. So our experience has been that these are no 

small tasks for any agency to face, and for CMS to expand current 

contracts feels a lot more effective and efficient than to actually go 

out and have to do another whole stream of procurements and 

technological matching. So it certainly sounds a bit self-serving, 

but we are prepared also to take on additional work based on this 

being a recovery audit contract, very prepared to help CMS make 

continuous improvements in Part D, and C as well. 

Senator CARPER. Good. Thanks. Ms. Alexander, a comment? 

Ms. ALEXANDER. I agree that a coordinated approach would be 

the most efficient under the time frame that has been established. 

I also think that they should move forward and segment the eligibility and the other payer liability type recovery work separately 

from the type of recovery audit contracting overpayment work that 

we are doing currently. 

Senator CARPER. OK. Thank you. 

I am going to ask each of you to take a shot at this question. I 

am supposed to be someplace else right about now, and so I am 

going to be mercifully brief with you. But this is a good panel. I 

hate to let you go too soon. But I have a question, again, for each 

of you. 

Some of you included in your testimony specific recommendations, I think at least the first three witnesses, maybe others, but 

specific recommendations—I do not know if we asked for them. Did 

we ask for our witnesses to give us specific recommendations for 

improving the program? But you did, and we appreciate that. 

Do you all believe that CMS should establish a goal for the collection of improper payments? I think I know the answer to that 

question, but do you agree that they ought to set a goal for collection of improper payments? Sort of describe that goal for us, if you 

would. Like if you were in their shoes and you were setting a goal, 

what might that goal be? How might you set it? What would you 

keep in mind in setting the goal? And I think that sort of thing is 

maybe done more often in the private sector than the public sector. 

But we need to set some goals here, and I think we need to set 

some timelines. But just respond to that, if you all would. I do not 

care in what order you respond. 

Ms. BENKO. I will start. 

Senator CARPER. Please. 

Ms. BENKO. If I was running CMS, I would look at the CERTidentified error rate because that is the error rate that can be recovered. It is on the honest end of fraud, waste, and abuse. 

Senator CARPER. You say the ‘‘honest end.’’ 

Ms. BENKO. It is mistakes. It is not a criminal intent where you 

are never going to get the money back because the person has 

taken the money and left the country. The money is still here. The 

providers are still participating in Medicare. So I would look at 

that CERT error rate, which is, I believe, in 2009 $24 billion of errors. And then I would look at how am I going to be impacting the 

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providers and the beneficiaries and the quality of care, and I would 

balance it. 

So I would set at least half of that as a goal, that I should be— 

and ultimately I would want to recover all of it, but I would say 

at least half of that should be able to be recovered. I mean, you saw 

$1 billion recovered from three States. It is definitely doable on a 

national program. 

Senator CARPER. OK. Thanks. 

Anyone else? Please, Mr. Rolf. 

Mr. ROLF. Chairman Carper, I would agree with Andrea. I would also say that, as she pointed out, since $1 billion was recovered in 

States representing approximately 25 percent of the program, a 

minimum threshold should be, in rolling it out to the rest of the 

country, should be to achieve what was achieved during that program. So a floor should be at least $4 billion. 

Senator CARPER. OK. Thank you. Mr. Bahl. 

Mr. BAHL. Mr. Chairman, there is not a whole lot to add to that. 

The only thing I would say, because you specifically asked what 

else should one keep in mind, and I do think that what we are asking the agency to do—in this particular case, it is the CMS—in 

terms of managing those provider abrasion levels and so forth that 

I was so key on earlier, have to be kept in mind. And so I think, 

somewhat of a slow and steady approach to ramps is OK, but then 

absolutely, I could not agree more with Rob. Our number is closer 

to five on that chart than it is four. 

Senator CARPER. All right. Thanks. Ladies, anything you want to 

add before we—— 

Ms. ALEXANDER. The only thing I would add is there are two 

pieces to goals, right? There is the quantitative goals, the financial 

goals, which are very, very important in creating alignment and 

the resources and the objectives of reaching those financial goals. 

But equally as important are the qualitative goals around things 

that are important to making the program a success beyond just 

the numbers. So, goals have to really reflect both qualitative and 

quantitative pieces. 

But the projects that, have strong alignment between a client 

and a contractor are where those goals are clearly understood so 

that everybody is marching along toward the same goal line. 

Senator CARPER. OK. Thanks. Ms. Im, anything else you want to 

add? 

Ms. IM. Mr. Chairman, the only thing I would add is in a collaborative effort, which we believe this should be, those numbers will 

not be absolute over time, but will continue to change with feedback and learning from the RAC contract. 

Senator CARPER. OK. All right. 

If 2 weeks goes by and you do not hear any questions, you are 

free and clear, at least from my colleagues and me. My guess is 

that you will probably hear some questions from us, and I appreciate your willingness to respond to some of my questions today. 

I said earlier I am a boomer. I was born in 1947. A lot of people 

were born that year and the years that followed that as well. There 

are a lot of us, and it is amazing how—I try to work out just about 

every day of my life, and one of the places I work out is the YMCA. 

We have great YMCAs in Delaware. I usually work out at one of 

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them before I get on the train and come on down here. But you 

would be surprised how many people say to me, ‘‘Do you think Social Security will still be there when I am ready for it? Do you still 

think we will have a Medicare program when I am eligible for it?’’ 

And I say, ‘‘You bet we will. And we are determined to make sure 

that you do.’’ 

I was on the phone this morning with Erskine Bowles, as I said 

earlier, just talking through some of the entitlement programs and 

what we might do and sharing with him a little bit of the work 

that you are doing and the promise that I think it holds for our 

broader Federal Government. But I come back to—Dr. Coburn said 

that he thought maybe 1 percent of the claims paid by a private 

health insurance company there is fraud involved. It sounds pretty 

low, especially if you are looking at Medicare and these fraud numbers look to be anywhere from about 8 percent to maybe 15 percent. I cannot believe that they are that good and that we are that 

bad. 

But whether it is 8 percent or 10 percent or 12 percent, we can 

do a lot better than that, and we really need to. So when those people who are at the YMCA or on the train or down in southern Delaware at the beaches, when they say, ‘‘Well, is Medicare going to be 

there for me?’’ I will say, ‘‘You bet it is.’’ And one of the ways we 

are going to make that happen is what you are doing. 

I think it is really—and Peter Tyler, who has helped me with 

putting this hearing together, one of the points that he keeps coming back to is a really good one—is it is not just important that you 

figure out how to go out and recover some of this money. It is important that you figure out how to provide less—what do you call 

it? ‘‘Provider abrasion,’’ I think that is the term that you used—and 

we actually have learned from the first several years of the program how we can interact better with hospitals and doctors and 

nurses and other providers. But a big part of this is actually having 

identified the other vulnerabilities and for CMS to take that seriously and aggressively and go out and address those rather than 

must keep making those same mistakes. Three hundred million 

dollars year after year after year, that adds up pretty quick. 

I am a recovering State treasurer, too. When I was elected State 

treasurer, I was 29, and in the State of Delaware, nobody wanted 

to run as a Democrat, so I got to run because nobody wanted to. 

And at the time we had the worst credit rating in the country. We 

were tied for dead last with Puerto Rico. They were embarrassed 

to be in our company. Delaware was very good at the time at overestimating revenues and underestimating spending, and that is 

how we got the worst credit rating in the country. We had all the 

money in the State-owned bank that was about to go under, and 

we had $40,000 of FDIC insurance on it. We had no cash management system, and nobody would lend us any money. And I got to 

be State treasurer. And from an early age, I have been interested 

in trying to figure out how to spend our taxpayers’ money wisely. 

And with respect to Medicare, we actually do spend taxpayers’ 

money from the employers and the employees who pay into the 

fund, for the most part. There are some general fund monies as 

well. But a lot of the spending that we do in our government today 

is not taxpayer money. It is money that we just borrow from the 

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Chinese or from the Japanese, from the Brits, and from anybody 

else, the folks that have all that oil who turn around and lend us 

money. 

We have to be smarter than that, and with your help we are 

going to be. In fact, I think we already are. 

Thank you very much, and with that, this hearing is adjourned. 

[Whereupon, at 12:31 p.m., the Subcommittee was adjourned.] 

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H605-41331-79W7 with DISTILLER


58400.029
70 

H605-41331-79W7 with DISTILLER


58400.030
71 

H605-41331-79W7 with DISTILLER


58400.031
72 

H605-41331-79W7 with DISTILLER


58400.032
73 

H605-41331-79W7 with DISTILLER


58400.033
74 

H605-41331-79W7 with DISTILLER


58400.034
75 

H605-41331-79W7 with DISTILLER


58400.035
76 

H605-41331-79W7 with DISTILLER


58400.036
77 

H605-41331-79W7 with DISTILLER


58400.037
78 

H605-41331-79W7 with DISTILLER


58400.038
79 

H605-41331-79W7 with DISTILLER


58400.039
80 

H605-41331-79W7 with DISTILLER


58400.040
81 

H605-41331-79W7 with DISTILLER


58400.041
82 

H605-41331-79W7 with DISTILLER


58400.042
83 

H605-41331-79W7 with DISTILLER


58400.043
84 

H605-41331-79W7 with DISTILLER


58400.044
85 

H605-41331-79W7 with DISTILLER


58400.045
86 

H605-41331-79W7 with DISTILLER


58400.046
87 

H605-41331-79W7 with DISTILLER


58400.047
88 

H605-41331-79W7 with DISTILLER


58400.048
89 

H605-41331-79W7 with DISTILLER


58400.049
90 

H605-41331-79W7 with DISTILLER


58400.050
91 

H605-41331-79W7 with DISTILLER


58400.051
92 

H605-41331-79W7 with DISTILLER


58400.052
93 

H605-41331-79W7 with DISTILLER


58400.053
94 

H605-41331-79W7 with DISTILLER


58400.054
95 

H605-41331-79W7 with DISTILLER


58400.055
96 

H605-41331-79W7 with DISTILLER


58400.056
97 

H605-41331-79W7 with DISTILLER


58400.057
98 

H605-41331-79W7 with DISTILLER


58400.058
99 

H605-41331-79W7 with DISTILLER


58400.059
100 

H605-41331-79W7 with DISTILLER


58400.060
101 

H605-41331-79W7 with DISTILLER


58400.061
102 

H605-41331-79W7 with DISTILLER


58400.062
103 

H605-41331-79W7 with DISTILLER


58400.063
104 

H605-41331-79W7 with DISTILLER


58400.064
105 

H605-41331-79W7 with DISTILLER


58400.065
106 

H605-41331-79W7 with DISTILLER


58400.066
107 

H605-41331-79W7 with DISTILLER


58400.067
108 

H605-41331-79W7 with DISTILLER


58400.068
109 

H605-41331-79W7 with DISTILLER


58400.069
110 

H605-41331-79W7 with DISTILLER


58400.070
111 

H605-41331-79W7 with DISTILLER


58400.071
112 

H605-41331-79W7 with DISTILLER


58400.072
113 

H605-41331-79W7 with DISTILLER


58400.073
114 

H605-41331-79W7 with DISTILLER


58400.074
115 

H605-41331-79W7 with DISTILLER


58400.075
116 

H605-41331-79W7 with DISTILLER


58400.076
117 

H605-41331-79W7 with DISTILLER


58400.077
118 

H605-41331-79W7 with DISTILLER


58400.078
119 

H605-41331-79W7 with DISTILLER


58400.079
120 

H605-41331-79W7 with DISTILLER


58400.080
121 

H605-41331-79W7 with DISTILLER


58400.081
122 

H605-41331-79W7 with DISTILLER


58400.082
123 

H605-41331-79W7 with DISTILLER


58400.083
124 

H605-41331-79W7 with DISTILLER


58400.084
125 

H605-41331-79W7 with DISTILLER


58400.085
126 

H605-41331-79W7 with DISTILLER


58400.086
127 

H605-41331-79W7 with DISTILLER


58400.087
128 

H605-41331-79W7 with DISTILLER


58400.088
129 

H605-41331-79W7 with DISTILLER


58400.089
130 

H605-41331-79W7 with DISTILLER


58400.090
131 

H605-41331-79W7 with DISTILLER


58400.091
132 

H605-41331-79W7 with DISTILLER


58400.092
133 

H605-41331-79W7 with DISTILLER


58400.093
134 

H605-41331-79W7 with DISTILLER


58400.094
135 

H605-41331-79W7 with DISTILLER


58400.095
136 

H605-41331-79W7 with DISTILLER


58400.096
137 

H605-41331-79W7 with DISTILLER


58400.097
138 

H605-41331-79W7 with DISTILLER


58400.098
139 

H605-41331-79W7 with DISTILLER


58400.099
140 

H605-41331-79W7 with DISTILLER


58400.100
141 

H605-41331-79W7 with DISTILLER


58400.101
142 

H605-41331-79W7 with DISTILLER


58400.102
143 

H605-41331-79W7 with DISTILLER


58400.103
144 

H605-41331-79W7 with DISTILLER


58400.104
145 

H605-41331-79W7 with DISTILLER


58400.105
146 

H605-41331-79W7 with DISTILLER


58400.106
147 

H605-41331-79W7 with DISTILLER


58400.107
148 

H605-41331-79W7 with DISTILLER


58400.108
149 

H605-41331-79W7 with DISTILLER


58400.109
150 

H605-41331-79W7 with DISTILLER


58400.110
151 

H605-41331-79W7 with DISTILLER


58400.111
152 

H605-41331-79W7 with DISTILLER


58400.112
153 

H605-41331-79W7 with DISTILLER


58400.113
154 

H605-41331-79W7 with DISTILLER


58400.114
155 

H605-41331-79W7 with DISTILLER


58400.115
156 

H605-41331-79W7 with DISTILLER


58400.116
157 

H605-41331-79W7 with DISTILLER


58400.117
158 

H605-41331-79W7 with DISTILLER


58400.118
159 

H605-41331-79W7 with DISTILLER


58400.119
160 

H605-41331-79W7 with DISTILLER


58400.120
161 

H605-41331-79W7 with DISTILLER


58400.121
162 

H605-41331-79W7 with DISTILLER


58400.122
163 

H605-41331-79W7 with DISTILLER


58400.123
164 

H605-41331-79W7 with DISTILLER


58400.124
165 

H605-41331-79W7 with DISTILLER


58400.125
166 

H605-41331-79W7 with DISTILLER


58400.126
167 

H605-41331-79W7 with DISTILLER


58400.127
168 

Æ 

H605-41331-79W7 with DISTILLER


58400.128