Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE’S PROGRAM 


SAFEGUARD CONTRACTORS:
 

ACTIVITIES TO DETECT AND 


DETER FRAUD AND ABUSE 


Daniel R. Levinson
 

Inspector General 


July 2007
 

OEI-03-06-00010
 
Office of Inspector General 
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations. These assessments help reduce waste, 

abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
Δ EXECUTIVE SUMMARY 

OBJECTIVE 

To assess three selected activities that program safeguard contractors 

(PSC) performed in 2005 to detect and deter fraud and abuse in 

Medicare Parts A and B. 

BACKGROUND 

The Medicare Integrity Program was established in 1996 to strengthen 

the Centers for Medicare & Medicaid Services’ (CMS) ability to reduce 

fraud and abuse in the Medicare program. In 1999, CMS began 

transferring the responsibility for detecting and deterring fraud and 

abuse in Medicare Parts A and B from carrier and fiscal intermediary 

fraud units to PSCs. CMS completed this transfer of responsibilities in 

2006. CMS now awards benefit integrity task orders to PSCs to perform 

the work of detecting and deterring fraud and abuse. CMS has the 

option of renewing or terminating task orders at the end of a 

performance period. A typical performance period lasts 1 year. In 2005, 

the year of our evaluation, seven PSCs performed the work under 

17 task orders (not including a 2-month task order that was excluded 

from our analysis). In this report, the term “PSC” represents a PSC 

benefit integrity task order. 

As part of their duties, PSCs conduct investigations to determine the 

facts and magnitude of alleged fraud and abuse. Upon completing 

investigations, PSCs determine whether to refer the investigations as 

cases to law enforcement. CMS expects PSCs to be innovative and 

effective in data analysis, moving beyond the capabilities of carrier and 

fiscal intermediary fraud units. This was one of the reasons for 

awarding contracts to PSCs. CMS expects a significant part of PSC 

data analysis to be proactive, i.e., self-initiated exploratory analysis that 

seeks previously unidentified patterns or instances of fraud and abuse. 

The Office of Inspector General conducted this study to gain an 

understanding of PSC accomplishments in the primary activities of 

investigations, case referrals to law enforcement, and proactive data 

analysis as reflected in PSC workload statistics. 

We collected PSC workload statistics as well as all PSC monthly status 

reports for calendar year 2005 from CMS. The monthly status reports 

contain PSCs’ narrative and numerical information about their 

activities and issues. We also collected budget allocation and level of 

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EXECUTIVE SUMMARY

PSC oversight responsibility (i.e., dollar amount of paid claims) from 

CMS for each task order. 

FINDINGS 

Program safeguard contractors differed substantially in the number 

of new investigations and case referrals to law enforcement 

produced in 2005; some had minimal activity in these primary 

workload categories. PSCs produced between 5 and 479 new Part A 

investigations, with a median of 60. The four lowest PSCs had between 

5 and 19 new Part A investigations for the year. PSCs produced 

between 0 and 10 new Part A case referrals to law enforcement, with a 

median of 3. Three PSCs had only one new Part A case referral, and 

two PSCs had none. 

PSCs produced between 18 and 3,707 new Part B investigations, with a 

median of 196. Three of these PSCs had 80 or fewer new Part B 

investigations. PSCs referred between 2 and 39 Part B cases to law 

enforcement, with a median of 13. Three PSCs had two, three, and four 

new Part B case referrals, respectively. 

Although PSCs might be expected to differ from one another in 

workload activity levels, neither the size of a PSC’s budget nor its 

oversight responsibility was strongly correlated with the number of new 

investigations or the number of new case referrals to law enforcement 

produced in 2005. 

Most program safeguard contractors had minimal results from 

proactive data analysis. Thirteen of seventeen PSCs (77 percent) 

reported 18 percent or less of new investigations from proactive data 

analysis. Of these 13 PSCs, 7 had 8 percent or less. Two of the seven 

PSCs produced no new investigations from proactive data analysis, and 

one PSC had only one new investigation from this source. Almost half 

the PSCs (7 of 17) had only one case referral to law enforcement that 

originated from proactive data analysis. One PSC had none. 

In addition to conducting our review of workload statistics, we reviewed 

PSC monthly status reports for any descriptions of proactive data 

analysis. Although CMS does not specifically require that descriptions 

of proactive data analysis or its results be included in monthly status 

reports, we found that all PSCs mentioned proactive data analysis in at 

least one month’s report during the year. We do not know if the absence 

of information about proactive data analysis in the remaining months 

indicates that the activity did not take place. In the reports that 

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EXECUTIVE SUMMARY 

mentioned proactive data analysis, some PSCs repeated the exact 

language about the same project in numerous monthly reports. 

Moreover, we found no consistency across PSCs regarding the level of 

detail about proactive data analysis included in the monthly status 

reports. 

RECOMMENDATIONS 

To determine why certain PSCs have minimal or no activity in new 

investigations or new case referrals to law enforcement, especially as a 

result of proactive data analysis, CMS should: 

Review program safeguard contractors with especially low volumes 

of activity in investigations and case referrals for Medicare Parts A 

and B. For PSCs with no activity or low levels of activity, CMS should 

determine whether these PSCs have taken all the necessary steps to 

identify potential fraud and abuse. If CMS finds that not all necessary 

steps were taken, CMS could provide additional guidance to PSCs about 

their fraud and abuse detection and deterrence activity levels. CMS 

could also consider its remedies under the PSC contracts, up to and 

including contract termination. 

Require program safeguard contractors to provide more detailed 

explanations of their investigations, case referrals, and proactive 

data analysis activities in their monthly reports. CMS should use this 

information to review PSCs for which activity levels appear low. If 

workload activity levels are high, CMS can determine the techniques 

those PSCs are using and share the techniques with other PSCs. 

CMS should also require PSCs to provide more detailed information 

about their proactive data analysis efforts. PSCs should identify 

current proactive data analysis projects and identify the projects’ 

innovative and/or effective aspects. 

AGENCY COMMENTS 

CMS concurred in part with our first recommendation. CMS stated that 

currently it is difficult to compare PSCs. However, CMS has begun 

implementing a new strategy of aligning PSC jurisdictions with 

jurisdictions of claims–processing contractors and believes this will make 

it easier to compare PSCs in the future. CMS also noted that it has 

begun allocating funds to PSCs based on PSC performance, workload, 

and Medicare program vulnerabilities. 

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EXECUTIVE SUMMARY 

CMS stated that acceptable performance of PSCs is not based solely on 

their development of cases for referral to law enforcement. CMS reports 

that law enforcement often indicates its preference that PSCs pursue 

administrative actions rather than referrals. 

CMS concurred with our second recommendation. CMS stated that it has 

revised the monthly reporting system to collect more information and to 

improve reporting consistency across PSCs. Regarding proactive data 

analysis, CMS stated that this activity has other goals besides referring 

cases to law enforcement, such as identifying targets for edits, assessing 

the effectiveness of administrative actions, and assisting law enforcement 

with their open cases. 

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Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................... i 
 

INTRODUCTION ........................................... 1 
 

FINDINGS ................................................. 7 
 

PSCs differered substantially in workload activities............ 7 
 

PSCs had minimal results from proactive data analysis ........ 9 
 

RECOMMENDATIONS ..................................... 11 
 

Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 

APPENDIXES ............................................. 13 
 

A: 2005 Program Safeguard Contractors With Benefit 

 Integrity Task Orders ................................ 13 
 

B: Correlation Coefficients .............................. 14 
 

C: Agency Comments .................................. 15 
 

ACKNOWLEDGMENTS .................................... 18 
 
Δ INTRODUCTION 

OBJECTIVE 

To assess three selected activities that program safeguard contractors 

(PSC) performed in 2005 to detect and deter fraud and abuse in 

Medicare Parts A and B. 

BACKGROUND 

In our March 2006 study, “Medicare’s Program Safeguard Contractors: 

Performance Evaluation Reports” (OEI-03-04-00050), the Office of 

Inspector General (OIG) reviewed annual PSC performance evaluation 

reports issued by the Centers for Medicare & Medicaid Services (CMS). 

OIG found that these reports provided minimal information and limited 

quantitative data about PSC achievements related to detecting and 

deterring fraud and abuse. The OIG report was preceded by a 2001 

Government Accountability Office report (GAO-01-616) on PSCs, which 

found that CMS had “not established clear, measurable performance 

criteria to assess the PSCs’ performance on individual task orders.” 

In 2004, CMS began collecting from PSCs a variety of monthly 

summary statistics for each benefit integrity task order. Because these 

statistics reflect the volume of PSC workload activities to detect and 

deter fraud and abuse in Medicare Parts A and B, OIG conducted this 

current study to gain an understanding of PSC accomplishments in 

primary workload activities (investigations, case referrals to law 

enforcement, and proactive data analysis) as reflected in the statistics. 

Medicare Vulnerabilities 

Medicare Parts A and B are vulnerable to fraud and abuse because of 

their size and complexity. In 2005, PSCs were responsible for fraud and 

abuse oversight of $303 billion in paid claims for Medicare Parts A 

and B. In addition to services provided by hospitals and physicians, 

Medicare Parts A and B cover services by home health agencies, 

laboratories, end stage renal disease facilities, physical therapy 

facilities, ambulatory surgical centers, rural health clinics, 

comprehensive outpatient rehabilitation facilities, hospices, ambulance 

suppliers, and medical equipment suppliers. 

Fraud and Abuse Contractors 

The Health Insurance Portability and Accountability Act of 1996 

(HIPAA), section 202, established the Medicare Integrity Program to 

strengthen CMS’s ability to deter potential fraud and abuse in the 

Medicare program. It also gave CMS the authority to transfer the work 

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INTRODUCTION 

of detecting and deterring fraud and abuse from carrier and fiscal 

intermediary fraud units to new entities under competitive contracts.1 

As part of the “Medicare Integrity Program,” CMS replaced all carrier 

and fiscal intermediary fraud units with PSCs through the award of 

contracts called “benefit integrity task orders.” In 2006, CMS completed 

the transfer of fraud and abuse work from the fraud units to the PSCs. 

A typical PSC performance period lasts 1 year, after which CMS has the 

option of renewing or terminating the task order. In 2005, the year of 

our evaluation, seven PSCs performed fraud and abuse work under 

17 benefit integrity task orders. This does not include a task order that 

lasted only 2 months and was not renewed by CMS. In this report, the 

term “PSC” represents a PSC benefit integrity task order. 

Of the 17 PSCs, 14 have responsibility for both Medicare Parts A and B, 

1 has Part A only, and 2 have Part B only. 

Primary Activities of Program Safeguard Contractors 

Pursuant to HIPAA, section 202, PSCs are expected to have capabilities 

surpassing those of carrier and fiscal intermediary fraud units to detect 

and deter fraud and abuse and are expected to cooperate with OIG and 

other law enforcement agencies in the detection and deterrence of fraud 

and abuse. 

In CMS’s comments on OIG’s previous report on PSCs (OEI-03-04-

00050), CMS stated that PSCs are tasked with identifying potentially 

fraudulent providers and supporting the efforts of law enforcement and 

CMS in pursuing civil, criminal, and administrative remedies for fraud. 

CMS also stated that PSCs focus primarily on investigating allegations 

of fraud, referring potential fraud cases to law enforcement, and 

conducting data analysis. 

Investigations. CMS’s “Program Integrity Manual” (Rev. 71, 04-09-04) 

states that the purpose of a PSC investigation is to determine the facts 

and magnitude of alleged fraud and abuse. This includes research and 

analysis conducted in followup to leads identified proactively or in 

response to complaints screened by the claims-processing contractor 

(formerly carriers and fiscal intermediaries and now transitioning to 

1 The 1998 and 2005 publications of CMS’s proposed rules in the Federal Register 

(63 Federal Register 13590 and 70 Federal Register 35204, respectively) establish the 

“Medicare Integrity Program” permitting CMS to contract with eligible entities prior to the 

publication of a final rule. 

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INTRODUCTION 

Medicare administrative contractors). PSCs identify the actual or 

estimated overpayments associated with their investigations and notify 

the claims-processing contractor to collect the overpayments. PSCs 

reported to CMS that in 2005 they identified overpayments of 

$54,673,571 in connection with their investigations.2 

Case Referrals to Law Enforcement. Upon completing its investigation, 

the PSC determines whether to refer the investigation to law 

enforcement, namely to OIG’s Office of Investigations. Once the referral 

is made, it is counted as a case in the PSC statistics reported to CMS. 

Not all investigations become cases. In this report, we use the term 

“case referral” when discussing cases that have been referred to law 

enforcement. 

PSCs identify the actual or estimated overpayments associated with 

case referrals and notify the claims-processing contractor to collect the 

overpayments. PSCs reported to CMS that in 2005 they identified 

overpayments of $119,053,255 in connection with case referrals to law 

enforcement.3 

Data Analysis. PSCs are expected to conduct “innovative and effective 

data analysis for early detection, prevention, intervention, and 

investigation of potential fraud.”4 CMS expects a significant part of 

PSC data analysis to be proactive, i.e., self-initiated exploratory 

analysis that seeks previously unidentified patterns or instances of 

fraud and abuse.5 PSCs are also expected to use equipment and 

software technologies that surpass the capability of the equipment and 

technologies used by their predecessors and to move beyond carrier and 

fiscal intermediary data analysis methods and choices in data-mining 

software.6 Unlike the carrier and fiscal intermediary fraud units that 

had access only to either Part A or Part B data, most PSCs have access 

to both. This gives PSCs the ability to perform more comprehensive and 

proactive data analysis of Medicare Parts A and B. 

 OEI-03-06-00010 

2 CMS’s Benefit Integrity Workload Template database, calendar year 2005. 

3 Ibid. 

4 CMS’s 2004 “Record of Evaluation,” an internal rating tool used during the annual
 

performance evaluation of PSCs. 

5 CMS’s 2006 PSC Performance Evaluations Guidelines. 

6 HIPAA, section 202, and CMS’s 2006 PSC Performance Evaluations Guidelines. 

MEDICARE ’ S PSCS : ACTIVITIES TO DETECT AND DETER F RAUD AND ABUSE 3 
INTRODUCT INTROD ION UCT

Program Safeguard Contractor Workload Statistics 

As of July 2004, CMS began collecting monthly summary statistics 

about PSC workload activities in the Benefit Integrity Workload 

Template database. This database is part of CMS’s online CMS 

Analysis, Reporting, and Tracking System (CMS ARTS). The workload 

activities represented in the 2005 statistics include investigations, case 

referrals to law enforcement agencies, medical review in support of 

benefit integrity cases, payment suspensions, law enforcement data 

requests, fraud alerts, and training and conferences. The numbers of 

statistics for each activity vary. Below are examples of types of 

statistics available for investigations and case referrals for Medicare 

Parts A and B. 

•	 Number of new investigations opened during the reporting month, 

source (e.g., proactive data analysis, complaints), and dollar amount 

of potential overpayments identified. 

•	 Number of new case referrals to law enforcement during the 

reporting month, source (e.g., proactive data analysis, complaints), 

and dollar amount of potential overpayments identified. 

In this report, the term “workload statistics” refers to statistics included 

in the Benefit Integrity Workload Template. 

Program Safeguard Contractor Monthly Status Reports 

At the time of our review, PSCs provided CMS with required monthly 

status reports that contained narrative and numerical information 

describing PSC activities and issues under a specific task order. CMS 

required that these reports be uploaded monthly into CMS ARTS. CMS 

did not require a standard format for the reports but did have minimum 

general requirements for what should be included, such as “prior 

month’s activities by task and activity” and “any unresolved issues from 

the prior month.” 

Recent Changes to Benefit Integrity Workload Template 

CMS reported that several changes were made to the Benefit Integrity 

Workload Template beginning in 2007. CMS will now include PSC 

budget and cost allocations in the template. CMS also eliminated the 

separate monthly status report and instead PSCs will now add 

narrative information to the statistics collected in the template. 

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INTRODUCT INTROD ION UCT

METHODOLOGY 

Scope 

For calendar year 2005, we reviewed PSCs’ workload activity for 

Medicare Parts A and B in the areas of investigations, case referrals to 

law enforcement agencies, and proactive data analysis. We reviewed 

data for 17 benefit integrity task orders. Fifteen of these task orders 

were in effect for 12 months and 2 were in effect for 10 months during 

2005. Because one additional task order was in effect for only 2 months 

and it was not renewed by CMS, we did not include it in our review. 

We assigned an identification letter, from A–Q, to the 17 PSCs in our 

review. We use these identification letters in our report so that the 

reader can identify information related to the same PSC across the 

different tables while still maintaining the confidentiality of the PSC. 

Appendix A provides the following information about PSCs for 2005. 

•	 Medicare programs covered by the task order 

•	 Number of months the task order was active 

•	 Budget allocation 

•	 Number of paid Part A and Part B claims for which the PSC had 

oversight 

•	 Dollar amount of paid Part A and Part B claims for which the PSC 

had oversight 

Data Collection 

For each PSC task order, we collected monthly workload statistics from 

the Benefit Integrity Workload Template. We also collected the 2005 

and 2006 definitions of PSC workload categories in the Template. 

We collected monthly status reports for each PSC task order. Because 

15 task orders were in effect for 12 months and the remaining 2 task 

orders were in effect for 10 months, we collected a total of 200 reports. 

We also collected the budget allocation and the oversight responsibility 

data associated with each task order. We use the term “oversight 

responsibility” to mean dollar amount of Medicare paid claims. 

Analysis 

We summarized the workload statistics by workload activity, by 

Medicare Parts A and B, by month, and by the entire year, for each PSC 

task order and across all PSC task orders. We identified averages, 

medians, maximums, and minimums for each activity. 

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INTRODUCT INTROD ION UCT

We calculated the sum of new investigations and new case referrals 

from reactive and proactive sources in calendar year 2005. We also 

calculated the percentages of new investigations and new case referrals 

that originated from proactive data analysis. 

We analyzed the correlation (strength of relationship) between the level 

of activity in new investigations and case referrals and the size of PSC 

budget and oversight responsibilities. 

We reviewed the monthly status reports to determine whether PSCs 

addressed proactive data analysis. 

Limitations 

We did not collect information from CMS, PSCs, or claims-processing 

contractors to verify the workload statistics or information in the 

monthly status reports. We did not determine the quality of either the 

PSCs’ investigations or their case referrals to law enforcement. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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Δ FINDINGS 

Program safeguard contractors differed 

substantially in the number of new 

investigations and case referrals to law 

enforcement produced in 2005; some had 

minimal activity in these primary workload 

categories 

The number of new investigations 

and case referrals varied greatly by 

PSC, and some PSCs produced few 

new investigations and case 

referrals in 2005. 

As shown in Table 1, the 15 PSCs 

that had responsibility for Medicare 

Part A produced between 5 and 479 new Part A investigations, with a 

median of 60. The four lowest PSCs had between 5 and 19 new Part A 

investigations for the year. In the area of new case referrals to law 

enforcement, these 15 PSCs produced between 0 and 10 new case 

referrals, with a median of 3 for the year. Three PSCs had only one new 

Part A case referral, and two PSCs had none. 

The 16 PSCs having responsibility for Medicare Part B produced 

between 18 and 3,707 new Part B investigations, with a median of 196. 

Three of these 16 PSCs had 80 or fewer new Part B investigations. In 

the area of new case referrals to law enforcement, these 16 PSCs 

referred between 2 and 39 Part B cases, with a median of 13 for the 

year. Three PSCs had only two, three, and four new Part B case 

referrals, respectively, for the entire year. 

Table 1. PSC Part A and Part B Activity in New Investigations and New Case Referrals to Law 

Enforcement Agencies (sorted by case referrals, n=17) 

PART A PART B 

PSC Task Order Investigations Case Referrals PSC Task Order Investigations Case Referrals 

A 125 0 F 679 2 

L 19 0 J 18 3 

B 31 1 L 80 4 

G 5 1 A 1,141 8 

N 12 1 H 142 8 

F 479 2 D 406 11 

P 28 2 P 139 11 

C 38 3 G 106 12 

D 14 3 M 996 13 

Q 84 3 B 153 14 

H 224 4 K 75 14 

K 79 4 Q 886 15 

I 60 5 O 223 25 

J 127 9 C 169 32 

M 196 10 E 3,707 33 

E n/a n/a I 1,054 39 

O n/a n/a N n/a n/a 

Total 1,521 48 Total 9,974 244 

Median 60 3 Median 196 13 

Source: OIG analysis of CMS's Benefit Integrity Workload Template 2005 data. 

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FINDINGS FINDINGS 

Neither the size of a program safeguard contractor’s budget nor its 

oversight responsibility was strongly correlated with the number of new 

investigations or case referrals to law enforcement 

Although PSCs might be expected to differ from one another in 

workload activity levels, neither the size of a PSC’s budget nor its 

oversight responsibility (dollar amount of Medicare paid claims) was 

strongly correlated with the number of new investigations or the 

number of new case referrals to law enforcement produced in 2005. 

Appendix B contains the correlation coefficients. 

For instance, as shown in Table 2 below, PSCs G and D are both 

responsible for Medicare Parts A and B. In 2005, PSC G had 111 new 

investigations and 13 new case referrals with the highest budget 

allocation and almost the highest oversight responsibility. In contrast, 

PSC D had 420 new investigations and 14 new case referrals but had 

less than half the budget and less than one-third of the oversight 

responsibility of PSC G. 

Although PSCs C and P had similar levels of oversight responsibility, 

PSC C produced more investigations and more than twice as many case 

referrals with a smaller budget allocation than PSC P. 

Table 2. Size of PSC Budget and Oversight Responsibility Compared to Workload Activity in New Investigations and 

New Case Referrals (sorted by budget allocation, n=17) 

PSC 

Task 

Order 

Budget 

Allocations 

Dollar Amount of 

Paid Claims 

Parts A and B 

Dollar Amount 

of Paid Claims 

Part A 

Dollar Amount 

of Paid Claims 

Part B 

Number of 

Investigations 

Parts A and B 

Number of 

Case Referrals 

Parts A and B 

G $9,316,750 $32,608,874,051 $30,122,833,543 $2,486,040,508 111 13 

I $9,234,176 $16,061,254,458 $9,879,110,033 $6,182,144,425 1,114 44 

H $9,159,828 $38,627,435,953 $32,804,312,314 $5,823,123,639 366 12 

K $8,191,839 $21,959,723,581 $17,961,026,386 $3,998,697,195 154 18 

Q $7,159,648 $16,828,770,952 $8,372,462,619 $8,456,308,333 970 18 

A $7,083,680 $26,044,518,589 $22,433,987,042 $3,610,531,547 1,266 8 

M $7,035,096 $33,461,032,180 $24,767,547,520 $8,693,484,660 1,192 23 

N $6,941,000 $4,840,800,571 $4,840,800,571 $0 12 1 

O $6,579,116 $1,370,257,300 $0 $1,370,257,300 223 25 

E $5,201,210 $6,938,670,223 $0 $6,938,670,223 3,707 33 

J $4,708,763 $14,266,760,684 $13,118,796,561 $1,147,964,123 145 12 

F $4,643,975 $34,001,129,627 $31,486,329,750 $2,514,799,877 1,158 4 

P $4,208,991 $11,887,536,412 $8,291,721,600 $3,595,814,812 167 13 

D $4,042,433 $9,360,881,234 $6,142,707,019 $3,218,174,215 420 14 

L $3,226,096 $11,139,110,800 $7,148,627,324 $3,990,483,476 99 4 

B $3,038,729 $13,444,256,435 $9,463,286,619 $3,980,969,816 184 15 

C $2,332,467 $10,162,135,021 $7,485,513,031 $2,676,621,990 207 35 

Totals $102,103,797 $303,003,148,071 $234,319,061,932 $68,684,086,139 11,495 292 

Source: CMS’s Program Integrity Group and OIG analysis of Benefit Integrity Workload Template 2005 data. 

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FINDINGS 

Most program safeguard contractors had There were minimal results from 

proactive data analysis in the 

areas of new investigations and 

case referrals to law enforcement in 2005. As shown in Table 3 below, 

three-quarters of PSCs (13 of 17) had 18 percent or less of their new 

investigations from proactive data analysis. Seven of these thirteen 

PSCs had 8 percent or less. Two of these PSCs produced no new 

investigations from proactive data analysis, and one PSC initiated one 

new investigation based on this source. 

minimal results from proactive data analysis 

Table 3. Proactive Data Analysis as 

Enforcement Agencies (n=17) 

Source of New Investigations and New Case Referrals to Law 

PSC 

Task 

Order 

Investigations 

PSC 

Task 

Order 

Case Referrals 

Number of 

Investigations 

Number of 

Investigations 

From Proactive 

Data Analysis 

Percentage of 

Investigations 

From Proactive 

Data Analysis 

Number of 

Case 

Referrals 

Number of 

Case Referrals 

From Proactive 

Data Analysis 

Percentage of 

Case Referrals 

From Proactive 

Data Analysis 

E 3,707 0 0% F 4 0 0% 

H 366 0 0% E 33 1 3% 

M 1,192 20 2% M 23 1 4% 

D 420 8 2% B 15 1 7% 

Q 970 55 6% H 12 1 8% 

C 207 12 6% K 18 2 11% 

N 12 1 8% A 8 1 13% 

B 184 24 13% P 13 2 15% 

L 99 13 13% Q 18 3 17% 

P 167 27 16% L 4 1 25% 

I 1,114 183 16% C 35 10 29% 

J 145 24 17% I 44 13 30% 

O 223 39 18% J 12 4 33% 

A 1,266 490 39% D 14 8 57% 

K 154 69 45% O 25 17 68% 

F 1,158 692 60% G 13 12 92% 

G 111 74 67% N 1 1 100% 

Totals 11,495 1,731 15% Totals 292 78 27% 

Source: OIG analysis of CMS's Benefit Integrity Workload Template 2005 data. 

In the area of new case referrals to law enforcement, almost half the 

PSCs (7 of 17) had only one case referral originating from proactive data 

analysis. For 9 PSCs, 17 percent or less of their new case referrals 

resulted from proactive data analysis. Of these PSCs, five had 8 percent 

or less, and one had no new case referrals from this source. 

In addition to conducting our review of workload statistics, we reviewed 

PSC monthly status reports for any descriptions of proactive data 

analysis. Although CMS does not specifically require that proactive 

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FINDINGS 

data analysis projects and their results be included in monthly status 

reports, it does ask that the PSCs’ prior month’s activities be included in 

the reports. 

We found that all PSCs mentioned proactive data analysis in at least 

four monthly status reports during the year. We do not know if the 

absence of information about proactive data analysis in the remaining 

months indicates that the activity did not take place. In the reports 

that mentioned proactive data analysis, some PSCs repeated the exact 

language about the same project in numerous monthly reports. After 

the initial mention of a proactive data analysis project, subsequent 

reports that referenced the same project provided no new or additional 

information about the project or its results. 

We found no consistency across PSCs regarding the level of detail about 

proactive data analysis included in the monthly status reports. 

Therefore, based on information in the reports, we could not determine 

whether the low numbers of proactive investigations and case referrals 

to law enforcement reported in the workload statistics were the result of 

PSCs performing proactive data analysis that did not yield cases of 

potential fraud and abuse for further investigation or the result of PSCs 

not performing substantial proactive data analysis overall. 

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Δ RECOMMENDATIONS 

PSCs were established to strengthen CMS’s ability to detect and deter 

potential fraud and abuse in the Medicare program. OIG has not found 

strong evidence that this is occurring across all PSCs for the three 

workload activities we reviewed. Based on the 2005 Benefit Integrity 

Workload Template statistics and monthly status reports, OIG found 

that some PSCs had minimal or no activity in new investigations or case 

referrals to law enforcement. PSCs also had minimal results from 

proactive data analysis, which was expected to be a significant activity 

of PSCs and distinguish them from their predecessors. 

To determine why certain PSCs have minimal or no activity in new 

investigations or new case referrals to law enforcement, especially as a 

result of proactive data analysis, CMS should: 

Review program safeguard contractors with especially low volumes 

of activity in investigations and case referrals for Medicare Parts A 

and B 

For PSCs with no activity or low levels of activity, CMS should 

determine whether these PSCs have taken all the necessary steps to 

identify potential fraud and abuse. If CMS finds that not all necessary 

steps were taken, CMS could provide additional guidance to PSCs about 

their fraud and abuse detection and deterrence activity levels. CMS 

could also consider its remedies under the PSC contracts, up to and 

including contract termination. Under the umbrella contracts 

governing the various task orders, CMS may terminate a contract if the 

PSC defaults in performing its obligations. 

Require program safeguard contractors to provide more detailed 

explanations of their investigations, case referrals, and proactive 

data analysis activities in their monthly reports 

CMS should use this information to review PSCs for which activity levels 

appear low. If workload activity levels are high, CMS can determine the 

techniques those PSCs are using and possibly share the techniques with 

other PSCs. 

CMS should also require PSCs to provide more detailed information 

about their proactive data analysis efforts. PSCs should identify 

current proactive data analysis projects and identify the projects’ 

innovative and/or effective aspects. 

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RECOMMENDATIONS 

AGENCY COMMENTS 

CMS concurred in part with our first recommendation to review PSCs 

with especially low volumes of activity in investigations and case 

referrals. CMS stated that the variation in workloads and geographical 

jurisdictions between PSCs makes it difficult to directly compare PSCs’ 

efforts. However, CMS has begun implementing a new contracting 

strategy to align PSC jurisdictions with the jurisdictions of claims– 

processing contractors and believes this will make it easier to compare 

PSCs in the future. CMS also noted that it has begun allocating funds to 

PSCs based on PSC performance, workload, and Medicare program 

vulnerabilities. 

CMS stated that acceptable performance of PSCs is not based solely on 

their development of cases for referral to law enforcement. CMS reports 

that law enforcement often indicates its preference that PSCs pursue 

administrative actions rather than referrals. 

CMS concurred with our second recommendation to require PSCs to 

provide more detailed explanations of their investigations, case referrals, 

and proactive data analysis activities in their monthly reports. CMS 

stated that it has revised the monthly reporting system to collect more 

information and to improve reporting consistency across PSCs. 

With regard to proactive data analysis, CMS stated that this activity has 

other goals besides referring cases to law enforcement, such as identifying 

targets for edits, assessing the effectiveness of administrative actions, 

and assisting law enforcement with their open cases. The full text of 

CMS’s comments is provided in Appendix C. 

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Δ APPENDIX A 

2005 Program Safeguard Contractors (PSC) With Benefit Integrity Task Orders (n=17) 

PSC 

Task 

Order Medicare Programs 

Months 

Task Order 

Was Active 

Budget 

Allocation 

Number of 

Paid Claims 

Part A 

Number of 

Paid Claims 

Part B 

Dollar Amount 

of Paid Claims 

Part A 

Dollar Amount 

of Paid Claims 

Part B 

A 

Part A hospitals 

Part A home health 

Part B physicians 

12 $7,083,680 20,807,426 43,984,933 $22,433,987,042 $3,610,531,547 

B Part A hospitals 

Part B physicians 12 $3,038,729 10,467,606 49,807,501 $9,463,286,619 $3,980,969,816 

C Part A hospitals 

Part B physicians 12 $2,332,467 7,362,719 30,442,872 $7,485,513,031 $2,676,621,990 

D Part A hospitals 

Part B physicians 12 $4,042,433 7,510,708 38,386,833 $6,142,707,019 $3,218,174,215 

E Part B physicians 12 $5,201,210 0 66,776,723 $0 $6,938,670,223 

F Part A hospitals 

Part B physicians 12 $4,643,975 21,875,279 31,118,549 $31,486,329,750 $2,514,799,877 

G Part A hospitals 

Part B physicians 12 $9,316,750 24,692,061 25,920,332 $30,122,833,543 $2,486,040,508 

H 

Part A hospitals 

Part A home health 

Part B physicians 

12 $9,159,828 33,559,768 70,175,227 $32,804,312,314 $5,823,123,639 

I Part A hospitals 

Part B physicians 12 $9,234,176 11,505,945 72,066,690 $9,879,110,033 $6,182,144,425 

J 

Part A hospitals 

Part A home health 

Part B physicians 

12 $4,708,763 6,563,509 13,460,733 $13,118,796,561 $1,147,964,123 

K 

Part A hospitals 

Part A home health 

Part B physicians 

12 $8,191,839 15,766,970 46,711,525 $17,961,026,386 $3,998,697,195 

L Part A hospitals 

Part B physicians 10 $3,226,096 7,415,334 48,470,878 $7,148,627,324 $3,990,483,476 

M Part A hospitals 

Part B physicians 12 $7,035,096 22,647,652 90,720,697 $24,767,547,520 $8,693,484,660 

N Part A hospitals 12 $6,941,000 4,539,310 0 $4,840,800,571 $0 

O Part B medical 

equipment 12 $6,579,116 0 10,850,302 $0 $1,370,257,300 

P Part A hospitals 

Part B physicians 12 $4,208,991 7,884,208 44,326,406 $8,291,721,600 $3,595,814,812 

Q Part A hospitals 

Part B physicians 10 $7,159,648 7,361,298 79,739,197 $8,372,462,619 $8,456,308,333 

Totals $102,103,797 209,959,793 762,959,398 $234,319,061,932 $68,684,086,139 

Source: CMS, Program Integrity Group, 2005. 

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Δ APPENDIX B 

Correlation Coefficients 

We performed Pearson’s correlations to determine the strength of the 

relationship between the variables in each of the following four pairs: 

• Budget allocations and new investigations 

• Budget allocations and new case referrals 

• Oversight responsibility and new investigations 

• Oversight responsibility and new case referrals 

As shown in the tables below, a correlation coefficent was calculated for 

each of the relationships listed above. The correlation coefficient is a 

number that ranges from -1 to +1. If a positive correlation exists 

between two variables, the value of one variable will increase as the 

value of the other variable increases. If a negative correlation exists 

between two variables, the value of one variable will decrease as the 

value of the other variable increases. 

Table 1. Correlation: Budget Allocations and New Investigations 

Budget Allocations 

Number of New 

Investigations 

Budget allocations 1.0 0.06 

Number of new investigations 0.06 1.0 

Source: OIG analysis of 2005 CMS data. 

Table 2. Correlation: Budget Allocations and New Case Referrals 

Budget Allocations 

Number of New 

Case Referrals to 

Law Enforcement 

Budget allocations 1.0 0.11 

Number of new case referrals to law enforcement 0.11 1.0 

Source: OIG analysis of 2005 CMS data. 

Table 3. Correlation: Oversight Responsibility and New Investigations 

Dollar Amount of 

Paid Claims 

Number of New 

Investigations 

Oversight responsibility (Dollar amount of paid 

claims) 1.0 0.02 

Number of new investigations 0.02 1.0 

Source: OIG analysis of 2005 CMS data. 

Table 4. Correlation: Oversight Responsibility and New Case Referrals 

Dollar Amount of 

Paid Claims 

Number of New 

Case Referrals to 

Law Enforcement 

Oversight responsibility (Dollar amount of paid 

claims) 1.0 -0.22 

Number of new case referrals to law enforcement -0.22 1.0 

Source: OIG analysis of 2005 CMS data. 

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Agency Comments 

Δ APPENDIX C 
 

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APPENDIX ~ C 
 

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APPENDIX ~ C 
Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Robert A. Vito, Regional 

Inspector General for Evaluation and Inspections in the Philadelphia 

regional office, and Linda M. Ragone, Deputy Regional Inspector 

General. 

Isabelle Buonocore served as the team leader for this study. Other 

principal Office of Evaluation and Inspections staff from the 

Philadelphia regional office who contributed to this report include 

Cynthia Hansford and Conswelia McCourt; central office staff who 

contributed include Scott Manley and Barbara Tedesco. 

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