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44–122 PDF 2008

S. Hrg. 110–721 

MEDICARE VULNERABILITIES: PAYMENTS FOR 

CLAIMS TIED TO DECEASED DOCTORS 

HEARING 

BEFORE THE

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JULY 9, 2008 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

(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 PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS 

CARL LEVIN, Michigan, Chairman 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

BARACK OBAMA, Illinois 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

ELISE J. BEAN, Staff Director and Chief Counsel 

KRISTINA KO, Legislative Assistant to Senator Levin 

MARK L. GREENBLATT, Staff Director and Chief Counsel to the Minority 

CLIFFORD C. STODDARD, JR., Counsel to the Minority 

MARY D. ROBERTSON, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Levin .................................................................................................... 1 

Senator Coleman .............................................................................................. 3 

Senator Carper ................................................................................................. 6 

Senator Collins ................................................................................................. 9 

Senator McCaskill ............................................................................................ 10 

Senator Coburn ................................................................................................. 11 

WITNESSES 

WEDNESDAY, JULY 9, 2008 

Herb B. Kuhn, Deputy Administrator, Centers for Medicare & Medicaid Services, U.S. Department of Health and Human Services ..................................... 12 

Robert Vito, Regional Inspector General for Evaluation and Inspections, Office of Inspector General, U.S. Department of Health and Human Services .. 14 

William E. Gray, Deputy Commissioner of Systems, Social Security Administration ................................................................................................................... 16 

ALPHABETICAL LIST OF WITNESSES

Gray, William E.: 

Testimony .......................................................................................................... 16 

Prepared statement .......................................................................................... 63 

Kuhn, Herb B.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 41 

Vito, Robert: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 49 

EXHIBITS 

1. Followup responses received from the Centers for Medicare & Medicaid 

Services (CMS) .................................................................................................... 69 

2. Permanent Subcommittee on Investigations Staff Report: Medicare 

Vulnerabilities: Payments For Claims Tied to Deceased Doctors .................... 80 

3. Permanent Subcommittee on Investigations Minority Staff Report: Medicare Vulnerabilities: The Use of Diagnosis Codes in DME Claims ................. 111 

(1) 

MEDICARE VULNERABILITIES: PAYMENTS 

FOR CLAIMS TIED TO DECEASED DOCTORS 

WEDNESDAY, JULY 9, 2008 

U.S. SENATE, PERMANENT SUBCOMMITTEE ON INVESTIGATIONS, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:02 a.m., in 

Room SD–342, Dirksen Senate Office Building, Hon. Carl Levin, 

Chairman of the Subcommittee, presiding. 

Present: Senators Levin, Carper, McCaskill, Coleman, Collins, 

and Coburn. 

Staff Present: Kristina Ko, Legislative Assistant to Senator 

Levin; Mark L. Greenblatt, Staff Director and Chief Counsel to the 

Minority; Clifford C. Stoddard, Jr., Counsel to the Minority; Timothy R. Terry, Counsel to the Minority; Mary D. Robertson, Chief 

Clerk; Gina Reinhardt, Congressional Fellow; Nicholas Standiford, 

Intern; Donell Ries, GAO Detailee; Jonathan Ende, Intern; and 

John Kim, Law Clerk; Peggy Gustafson (Senator McCaskill); John 

Collins (Senator Carper); Priscilla Hanley (Senator Collins); and 

Evan Feinberg (Senator Coburn). 

OPENING STATEMENT OF SENATOR LEVIN 

Senator LEVIN. Good morning, everybody. 

Medicare is a critically important program that provides essential health care to folks across the country. But Medicare has a reputation for weak controls that waste hundreds of millions of taxpayer dollars each year. Today’s hearing provides one example of 

those weak controls. From 2000 to 2007, we estimate that nearly 

half a million payments, totaling about $76 million, went to medical equipment suppliers that had submitted claims using the identification numbers of 17,000 deceased doctors, and that represents 

about half of the deceased doctor population. 

At the request of Senator Coleman, the Subcommittee undertook 

this investigation to examine Medicare claim prescriptions for durable medical equipment presumably authorized by deceased doctors. This program is operated by the Centers for Medicare & Medicaid Services (CMS). 

We found that doctors who had died 1, 5, even 10 years earlier, 

were listed on Medicare claims prescribing equipment supposedly 

ordered by them years after their death. Here is how the Subcommittee estimates the dollar amounts of these claims. The Subcommittee received, from the American Medical Association, a list 

2 

of physicians whose dates of death were between 1992 and 2002. 

We identified more than 33,000 deceased physicians who had what 

are called Unique Physician Identification Numbers (UPINs), and 

we created a random sample of 1,500 of those physicians. We then 

requested data from CMS about claims that had been filed from 

2000 to 2007 using those physician identifiers on a prescription 

dated more than a year after the physician’s death. 

Within our sample of 1,500 doctors, we found that 734 UPINs, 

or about half of the sample, were used by durable medical equipment suppliers on 21,000 claims totaling over $3.4 million during 

that 7-year period. That is an average of almost 30 false claims 

filed per deceased doctor, or about $4,600 paid out per deceased 

doctor. Then we used those numbers to generate statistically valid 

estimates of the total population of erroneous payments for medical 

equipment using the UPINs of deceased physicians. We estimate 

that, from 2000 to 2007, the UPINs of more than 17,000 deceased 

physicians were used on close to a half a million erroneous claims 

for durable medical equipment that were paid over $76 million. 

The failure to reject these claims raises questions about who at 

Medicare is safeguarding taxpayer dollars, and why basic protections are not in place. 

One example is a physician in Florida who died in 1999. Six to 

7 years later, from November 2005 through November 2006, Medicare paid out over $544,000 worth of durable medical equipment 

claims supposedly ordered by this physician. 

How is that possible? It seems apparent that the CMS system 

has failed to adequately monitor and audit the contractors who are 

paid to update the UPIN numbers and process the durable claims, 

the medical equipment claims. When a durable medical equipment 

claim comes in, the CMS contractor who processes the claims— 

called a DME Regional Carrier, (DMERC)—is supposed to verify 

that the claim includes a valid and active UPIN for the prescribing 

physician. If the UPIN does not exist or if it is assigned to a physician that is deceased, the claim should not be paid. It is supposed 

to be that simple. 

When the $544,000 in Florida durable medical equipment claims 

were submitted to Medicare using the UPIN of a physician who 

had died up to 7 years earlier, the contractor should have determined that the claims were invalid. Instead, the contractor accepted the claims from these companies using the deceased doctor’s 

UPIN. While those claims happened to be in Florida, contractors 

have been approving claims filed with deceased doctors’ UPINs all 

over the country. We estimate that about 2,500 deceased physicians 

still had active UPINs as of May of this year. 

What makes matters worse is that CMS was alerted to UPIN 

failures back in 2001 and said they took steps to correct it, but 

then never re-evaluated the situation to ensure that the problem 

was fixed. It was in November 2001, when the Inspector General 

of the Department of Health and Human Services, released a report finding that over $90 million had been paid for medical equipment and supply claims with invalid or inactive UPINs in 1999 

alone. In 2002, CMS said that they implemented procedures to ensure that these medical equipment claims with inactive or invalid 

UPINs, including those belonging to deceased physicians, would be 

3 

rejected. CMS issued instructions to its contractors, including the 

National Heritage Insurance Company, the contractor that maintained the UPIN registry—and, by the way, these are all contractors that are for-profit. These are not nonprofit contractors. CMS 

instructed them to conduct a one-time cleanup to eliminate deceased physicians’ UPINs. They were then paid to update their 

UPIN registries every 15 months. Its contractors were also required, as of April 1, 2002, to reject all claims using the UPINs of 

deceased physicians. Looking internally, CMS also issued a directive to reprogram its own data system to guarantee the rejection 

of these types of claims. 

Apparently, neither CMS nor their contractors did what they 

were supposed to do. The UPIN registry was not kept up to date. 

The contractors’ systems did not reject deceased physician claims. 

Neither did the CMS data system. And no one—CMS or the contractors—checked to see if the procedures were working. So 7 years 

after the IG report, we are back where we started, with CMS paying claims containing UPINs assigned to deceased doctors. 

A few months ago, CMS terminated the use of the UPIN registry 

and replaced it with a new registry. But unless CMS and their contractors are held accountable for failures, and unless companies 

who wrongfully profited from improper use of deceased physicians’ 

identification numbers are held accountable, we will be back here 

7 years from now asking the same questions. 

The failure to stop payment of deceased physician claims is inexcusable since dates of deaths are so readily available. This type of 

abuse should have been stopped long ago. It is easy to obtain deceased physicians’ identification numbers and easy to use those 

numbers to obtain payouts through fraudulent claims. As long as 

millions of dollars in claims with deceased provider identification 

numbers are paid, fraudsters will continue to rip off the system. 

To examine these issues in greater detail, we are going to hear 

today from some of the agencies that deal with Medicare, the Centers for Medicare & Medicaid Services—CMS—the Inspector General of the Department of Health and Human Services, and the Social Security Administration. Each of these agencies has cooperated 

with the Subcommittee’s inquiry. We appreciate that cooperation, 

but we will, of course, press them as hard as we can to end the 

taxpayer rip-off that we have identified. 

Finally, I would like to again thank the Subcommittee’s Ranking 

Republican, Norm Coleman, who initiated this investigation, and 

his staff, who have worked hard to examine these issues. 

Now I will call on Senator Coleman. 

OPENING STATEMENT OF SENATOR COLEMAN 

Senator COLEMAN. Thank you. Thank you, Senator Levin, and let 

me return the thanks by saying that you and your staff have been 

extremely supportive. Like all our investigations, this has been a 

tremendous bipartisan effort, and I certainly appreciate that very 

much. 

This morning, we turn our attention to a familiar topic: Medicare 

fraud and abuse. And I do want to be very clear from the beginning 

that Medicare is an important program that provides health insurVerDate Aug 31 2005 09:37 Feb 17, 2009 Jkt 044122 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 P:\DOCS\44122.TXT SAFFAIRS PsN: PAT
4 

ance for the elderly and the disabled. It is a genuine blessing for 

many of America’s most vulnerable citizens. 

But the program has been plagued by persistent and pervasive 

fraud and abuse. For almost 20 years, the Government Accountability Office has consistently designated the Medicare program as 

‘‘high risk’’ because of its vulnerability to mismanagement and improper payments. According to its own reports, Medicare made improper payments in 2004 and 2005 amounting to roughly $34 billion. That is the size of the entire Minnesota State budget general 

fund—wasted on improper payments. 

One Harvard professor estimated that fraud and abuse could 

consume about 15 to 20 percent of the Medicare budget. That 

would be more than $70 billion in 2008 alone. Let’s remember that 

these billions and billions are tax dollars paid by hard-working 

Americans. 

In keeping with our long tradition of government oversight, the 

Subcommittee spent the past year examining the Medicare program. Our bipartisan inquiry ultimately zeroed in on abuses in 

payments for durable medical equipment (DME). 

In short, the Subcommittee’s investigation uncovered some appalling facts. The Subcommittee found that, between 2000 and 

2007, Medicare paid for hundreds of thousands of DME claims in 

which the prescribing doctor had died years earlier. It has been estimated, as the Chairman has noted, that these payments for those 

claims could total over $70 million, possibly $100 million. The evidence also establishes certain links to fraudulent activity, which we 

will examine shortly. Clearly, we have a problem. 

Although the jargon can get confusing, here is the big picture: 

Medicare regulations require that DME claims contain certain information in order to qualify for payment, including valid identification numbers for the patient, the DME supplier, and the prescribing doctor. As the Chairman has noted, the doctor’s ID number 

is a UPIN. 

The bottom line is that Medicare paid tens of millions of dollars 

on claims that contained the UPINs of doctors who died long before 

the claims were filed. For hundreds of thousands of claims, the doctors had passed away 5, 10, or even 15 years beforehand. 

To get a sense of the problem, I just want to review a few alarming cases: 

The Chairman has discussed the case of the Florida doctor who 

passed away in 1999 with claims to the tune of over $500,000 being 

processed. At least three different companies used this doctor’s ID 

number, filing claims using his ID number 6, 7, or 8 years after 

the doctor died. Two of the culprits have been convicted of health 

care fraud, and the other companies were cited by State health 

agencies for violations. Altogether, the Subcommittee identified at 

least $350,000 paid by Medicare to these fraudulent actors for 

claims containing the ID number of this one doctor alone. 

Another doctor passed away in 2001, and his UPIN was used in 

more than 3,800 claims submitted between 2002 and 2007. The 

total payments for these claims amounted to over $354,000. 

The UPIN of another physician who died before 1999 was listed 

in more than 2,000 claims submitted up to 8 years after he died. 

5 

These claims resulted in Medicare payments of more than 

$478,000. 

Now, what is alarming is that the problems are not new; that 

CMS had been notified of these issues several years ago; that the 

Inspector General of the Department of Health and Human Services reported that Medicare had paid tens of millions for claims 

with invalid and inactive UPINs. The IG urged CMS to make 

changes to ensure that the system was fixed. 

CMS then did that. They then stated that claims with UPINs of 

deceased doctors would not be paid starting April 1, 2002. CMS attempted to fix the problems in 2002. They instituted several procedures designed to ensure that the claims with UPINs of these deceased physicians would not be used. 

Unfortunately, the Subcommittee’s investigation establishes that 

those changes did not work. For instance, even though CMS’ new 

procedures were supposed to reject claims with UPINs of dead doctors starting on April 1, 2002, the evidence obtained by the Subcommittee reveals that an estimated 63 percent of the improper 

payments occurred after that date. 

Similarly, CMS required that the UPIN database must be updated every 15 months and the UPINs of dead doctors must be deactivated. Yet the evidence indicates that the UPINs of thousands 

of physicians remained active, even though they passed away long 

ago. For instance, the Subcommittee estimates that the UPINs of 

thousands of doctors who passed away in the 1990s were still active as of this past May. 

It is clear that the claims review process has not worked properly. Medicare has not made sure that dead doctors are removed 

from the system and that claims linked to those doctors are rejected. This is simply unacceptable. Making sure that the prescribing doctor is alive before paying a claim should be a nobrainer. These errors leave Medicare—and, therefore, American 

taxpayers—vulnerable to fraud. The problem must be fixed and it 

must be fixed now. 

How do we clean up the system? The good news is that we have 

a unique opportunity right now to address the problem. Medicare 

has recently replaced the old UPINs with a new numbering system 

called the National Provider Identifier (NPI). So there is a golden 

opportunity to make sure that the problems are fixed at an early 

stage and make sure that the improper payments that plagued the 

UPINs will not recur with the NPIs. 

I just have to state this. We live in a high-tech world. FedEx and 

UPS can track every movement of a flow of goods. Surely we 

should have the capacity to figure out if doctors are dead and not 

making payments. Information is reported. Social Security has it. 

The AMA has it. And to me it is somewhat incomprehensible that 

we do not have in government the computer capability—I should 

not say in government as the Chairman indicated, we have outside 

providers here that they do not have the computer capability to 

match a dead doctor’s ID number with a claim that is being processed after they died. 

We cannot afford $100 million loopholes, especially not now. 

There are too many challenges that this country is facing—energy, 

education, homeland security, and housing. And what is required 

6 

now is an unprecedented level of fiscal discipline and political leadership to overcome these challenges. 

I will close by saying that, almost every day, my staff and I learn 

of a deserving Minnesota senior that is having a problem with 

Medicare coverage. If we want to look them in the eye and say we 

are trying to fix their problem, Job Number One must be attacking 

Medicare fraud, waste, and abuse so that precious tax dollars go 

to the noble use for which they were intended. 

We have a special responsibility to preserve the integrity of a 

vital service to the Nation’s elderly and disabled, and I am confident that CMS will be a productive and willing partner in that 

effort. I look forward to discussing with each of today’s witnesses 

how we can work together to ensure that Medicare accomplishes its 

noble goals while protecting American tax dollars from fraud, 

waste, and abuse. 

Thank you, Mr. Chairman. 

Senator LEVIN. Thank you, Senator Coleman. 

Let me now welcome our panel of witnesses for today’s hearing: 

Herb Kuhn, the Deputy Administrator for the Centers for Medicare 

and Medicaid Services of the Department of Health and Human 

Services here in Washington; Robert Vito, the Regional Inspector 

General for the Office of Evaluations and Inspections of the Department of Health and Human Services in Philadelphia; and William Gray, the Deputy Commissioner for the Office of Systems of 

the Social Security Administration in Baltimore. 

Gentlemen, I want to thank each of you for being here today. I 

want to thank you for the cooperation of your agencies. We look 

forward to your testimony. 

Before we call on you, I understand there are other Members 

who may want to give brief opening statements, and we would be 

happy to accommodate that. So let me first call on Senator Carper. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thank you, Mr. Chairman. I have a statement 

I would like to enter for the record. Let me just briefly say, however, when you look in the dictionary and you look up a word and 

sometimes they have a picture beside the word? I don’t know if 

there is any place in the dictionary where we look up ‘‘low-hanging 

fruit.’’ But I think if there were, we would find this issue of making 

Medicare payments to doctors who have been dead in some cases 

for many years. If we cannot go out and make sure that we are not 

making those kinds of improper payments, heaven help us. 

Yesterday, a reporter grabbed me. I was on my way into the LBJ 

Room for our weekly caucus luncheon, and they said, ‘‘I understand 

that the Medicare trust fund is in enormous difficulty, and it is 

going to go broke, and you guys are going to raise taxes.’’ And I 

said, well, before we raise taxes, I think there are a couple things 

we need to do. One of those is to make sure that we are collecting 

the taxes that are owed, and there are a lot of taxes that are owed 

that are not being collected, including some of these for our payroll 

taxes. 

The second thing we need to do is to stop making payments to 

deceased physicians who are no longer providing Medicare services. 

7 

The third thing we may want to do is to look at the monies that 

we spend on equipment, whether it is wheelchairs or oxygen and 

that sort of thing, to make sure that we are getting our value, our 

dollar’s worth from the money that we are spending. 

And another thing we might want to do, this is something that 

Dr. Coburn and I have been working on. We have a strong interest 

in addressing not just overpayments or improper payments in 

Medicare, but across the Federal Government. And one of the 

things that we have learned is there is about $55 to $60 billion in 

improper payments that we are aware of, and that does not cover 

all the agencies. But we have got a ton of it that is in Medicare. 

Actually, in the last 2 or 3 years, there has been a post-audit recovery operation going on with Medicare. They focused on three 

States: California, Florida, and New York. Last year, they recovered about $1 billion. That is real money. And I think we are just 

scratching the surface there. 

So before we raise taxes, those are a couple things we need to 

do. And for God’s sake, for something that would seem to be as 

easy to fix as this, if we cannot do this, heaven help us when it 

comes to going after the tough stuff. 

I am delighted we are having this hearing. This is oversight at 

its best, putting a spotlight on something that we ought to know 

better than to let happen. I think by virtue of having this hearing, 

we are going to make sure that this does not continue to be a problem, and hopefully we will remind some other folks who have lowhanging fruit that can be snatched up in their own operations in 

the Federal Government, whether it is CMS or elsewhere, that 

they need to be more diligent in the work they do. And to the extent that there is stuff that we can do here in the Congress, in this 

Subcommittee or otherwise, that can help give you the tools that 

you need to ensure that this kind of stuff does not happen, we need 

to hear that as well. 

We thank you for being here and look forward to your testimony. 

[The prepared opening statement of Senator Carper follows:] 

PREPARED OPENING STATEMENT OF SENATOR CARPER 

Thank you Mr. Chairman. 

I’m pleased that you and Senator Coleman have taken on this issue and are holding this hearing today. 

Senator Coburn and I held a hearing at in our Financial Management subcommittee just before the 4th of July recess about the dire long-term financial crisis 

our nation faces. We heard testimony from the administration, from GAO, and from 

experts like former Comptroller General David Walker about what we need to do 

and what the next administration will need to do to turn things around. 

The conclusions that are witnesses came to shouldn’t be a surprise to any of us. 

We need to reform entitlement programs like Medicare and Social Security because, 

as the Baby Boom generation retires, these programs will eat up a bigger and bigger 

portion of our budget. We need to redefine our spending priorities and start focusing 

again on balancing our budget. We need to redefine our priorities on the revenue 

side as well and, along with that, do as much as we can to collect those taxes that 

are owed to the Treasury each year, but never paid. Finally, we need to do all we 

can to stop agencies from making avoidable improper payments. 

Senator Coburn and I have been working on this improper payments issue for 

years now. According to the latest figures released by OMB—and these are based 

on numbers from fiscal year 2007—agencies are making an estimated $55 billion in 

improper payments each year. Nearly $11 billion of that total can be attributed to 

the Medicare fee-for-service program. Nearly $13 billion can be attributed to Medicaid. So nearly half of the improper payments—and keep in mind that these are 

8 

avoidable errors—are attributable to the programs for which Mr. Kuhn and his 

team at CMS are responsible. 

We are wasting a tremendous amount of money year-in and year-out. But the $55 

billion estimate that OMB has reported does not yet even include improper payments made in a number of large programs, including the Medicare Advantage and 

Medicare Prescription Drug Program. 

We have our work cut out for us. I was troubled, then, to read over the materials 

for this hearing and learn that, as challenging as the improper payments problem 

is at CMS, we are not doing all we can to go after the low-hanging fruit. As I understand it, CMS knew about the payments to deceased doctors that we’ll be discussing 

today but just didn’t follow through. That is unacceptable. So I look forward to hearing from our witnesses to learn more about the path forward on this issue in particular, but also on the larger improper payments issue that has been plaguing the 

Medicare and Medicaid programs for a number of years now. 

There may come a time in the not-so-distant future when Congress will be called 

upon to make some painful decisions about the future of these programs, especially 

Medicare. The least that we can do between now and then is eliminate the silly mistakes that have already contributed to billions in waste. 

Thank you again, Mr. Chairman. 

Senator CARPER. Thank you, Mr. Chairman. 

I’m pleased that you and Senator Coleman have taken on this 

issue and are holding this hearing today. 

Senator Coburn and I held a hearing at in our Financial Management subcommittee just before the 4th of July recess about the 

dire long-term financial crisis our nation faces. We heard testimony 

from the administration, from GAO, and from experts like former 

Comptroller General David Walker about what we need to do and 

what the next administration will need to do to turn things around. 

The conclusions that are witnesses came to shouldn’t be a surprise to any of us. We need to reform entitlement programs like 

Medicare and Social Security because, as the Baby Boom generation retires, these programs will eat up a bigger and bigger portion 

of our budget. We need to redefine our spending priorities and start 

focusing again on balancing our budget. We need to redefine our 

priorities on the revenue side as well and, along with that, do as 

much as we can to collect those taxes that are owed to the Treasury each year, but never paid. Finally, we need to do all we can 

to stop agencies from making avoidable improper payments. 

Senator Coburn and I have been working on this improper payments issue for years now. According to the latest figures released 

by OMB—and these are based on numbers from fiscal year 2007— 

agencies are making an estimated $55 billion in improper payments each year. Nearly $11 billion of that total can be attributed 

to the Medicare fee-for-service program. Nearly $13 billion can be 

attributed to Medicaid. So nearly half of the improper payments— 

and keep in mind that these are avoidable errors—are attributable 

to the programs for which Mr. Kuhn and his team at CMS are responsible. 

We are wasting a tremendous amount of money year-in and yearout. But the $55 billion estimate that OMB has reported does not 

yet even include improper payments made in a number of large 

programs, including the Medicare Advantage and Medicare Prescription Drug Program. 

We have our work cut out for us. I was troubled, then, to read 

over the materials for this hearing and learn that, as challenging 

as the improper payments problem is at CMS, we are not doing all 

we can to go after the low-hanging fruit. As I understand it, CMS 

9 

knew about the payments to deceased doctors that we’ll be discussing today but just didn’t follow through. That is unacceptable. 

So I look forward to hearing from our witnesses to learn more 

about the path forward on this issue in particular, but also on the 

larger improper payments issue that has been plaguing the Medicare and Medicaid programs for a number of years now. 

There may come a time in the not-so-distant future when Congress will be called upon to make some painful decisions about the 

future of these programs, especially Medicare. The least that we 

can do between now and then is eliminate the silly mistakes that 

have already contributed to billions in waste. 

Thank you again, Mr. Chairman. 

Senator LEVIN. Thank you, Senator Carper. Senator Collins. 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman. 

Let me thank both the Chairman and the Ranking Member for 

holding this hearing and conducting this investigation. I am going 

to put my full statement into the record and just make a few comments with the Chairman’s permission. 

First of all, I come to this hearing with a disturbing sense of 

deja-vu because the very first hearing that I chaired of this Subcommittee back in 1997 focused on fraud and abuse in the Medicare program. And during our investigation 11 years ago, we 

learned that the Medicare program loses more than $20 billion a 

year to waste, fraud, and abuse. Moreover, our investigation revealed far too many instances where Medicare and its contractors 

regularly wrote checks first and asked questions later. 

For example, we discovered back in 1997 that Medicare had paid more than $6 million to durable medical equipment companies that 

had provided no goods or services whatsoever, and one of those 

companies listed an absurd fictitious address that, had it existed, 

would have been in the middle of the runway of the Miami International Airport. 

I mention that particular case because just as sending checks 

based on claims from deceased doctors seems absurd and impossible to have occurred, sending checks to fictitious addresses also 

was occurring. 

It is disturbing that the Subcommittee’s current investigation reveals that so little has changed. Unscrupulous actors continue to 

take advantage of the system, wasting billions of taxpayer dollars 

and undermining the credibility of what, as Senator Coleman has 

pointed out, is an absolutely vital program to our seniors and disabled citizens. 

So I am very concerned that for a decade the Medicare program 

has been on the GAO’s high-risk list. For more than a decade, congressional investigations have time and time again shined a spotlight on egregious fraud. And yet so little seems to have changed, 

and that to me is very disturbing and completely unacceptable. 

So it is my hope that PSI’s investigation and report, the excellent 

bipartisan work that has been done by this Subcommittee’s leaders, 

will finally lay the groundwork for legislative and administrative 

reforms to address this problem once and for all. There are many 

issues the Federal Government faces that are complex and difficult 

10 

to resolve, but paying fictitious claims submitted by people using 

the identification numbers of deceased doctors does not seem to be 

one of them. Our Nation’s taxpayers and seniors and disabled 

Americans who depend on the Medicare program deserve no less. 

Thank you, Mr. Chairman, and thank you, Senator Coleman, for 

your excellent work. 

[The prepared opening statement of Senator Collins follows:] 

PREPARED STATEMENT OF SENATOR SUSAN M. COLLINS 

Mr. Chairman, I commend the Chair and Ranking Member for calling this morning’s hearing which is based on the Subcommittee’s investigation into waste, fraud 

and abuse in the Medicare program, with a particular focus on durable medical 

equipment claims. 

When I first came to the Senate in 1997, I had the honor and privilege of serving 

as Chairman of this Subcommittee. The very first hearing that I chaired was focused on the Subcommittee’s ongoing efforts to investigate and expose fraud and 

abuse in the Medicare program, with the twin goals of protecting the taxpayer from 

unscrupulous individuals who were stealing literally billions of dollars from Medicare and of protecting elderly and disabled Americans who rely upon this critically 

important program for their health care needs. 

During the course of our investigation, we learned that the Medicare program 

loses more than $20 billion a year to waste, fraud and abuse. Moreover, our investigation revealed far too many instances where the then-HCFA and its contractors 

regularly wrote checks first and asked questions later. For example, we discovered 

that Medicare had paid over $6 million to durable medical equipment companies 

that provided no goods or services whatsoever. One of these companies even listed 

an absurd fictitious address, that, had it existed, would have been in the middle of 

the runway of the Miami International Airport. 

Sadly, as the Subcommittee’s current investigation reveals, little has changed. 

Unscrupulous actors continue to take advantage of the system, wasting billions of 

taxpayer dollars and undermining the credibility of the Medicare program in the 

process. 

The Subcommittee’s current investigation has found that Medicare has paid as 

much as $92 million over the past seven years for durable medical equipment claims 

containing the identification numbers of deceased prescribing physicians, many of 

whom had died ten years or more before the service date on the claims. 

Moreover, these problems are not new. In 2001, the HHS Inspector General reported that Medicare paid $91 million in 1999 for medical equipment and supply 

claims with invalid or inactive numbers. In response to this report, CMS did take 

steps to reject claims containing the provider identification numbers of deceased 

physicians. These efforts, however, have evidently not been successful, since the 

claims are still being paid. 

Mr. Chairman, it is my hope that PSI’s investigation and report will help lay the 

groundwork for legislative and administrative reforms to address this problem once 

and for all. Our nation’s taxpayers and the seniors and disabled Americans who depend on the Medicare program deserve no less. 

Senator LEVIN. Thank you, Senator Collins. Senator McCaskill. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Thank you, Mr. Chairman. In preparing for 

this hearing today, I think as Senator Collins just said, the part 

that was most depressing is that I assumed that this was a problem that had just come to light, because this is the kind of problem 

when it comes to light, I think most average people think this is 

not a hard fix. 

CMS has full access to the Social Security Administration database relating to deaths, and it is deemed to be 99.5 percent accurate. We are talking about a data match. We are talking about 

something that people do all the time in terms of data matches. 

And the idea that this was exposed as long ago as it was exposed 

and as of May of this year we still have 2,900 deceased physicians 

11 

still active in this database—that is enough to make you want to 

tear your hair out. 

The sense of urgency appears to be missing, and I know that all 

of you have important jobs, and I know that this is a massive program. But somebody has to explain to me today why this is so 

hard. Why a problem that has been identified as creating an excessive amount of fraud and waste in a program that is going broke, 

that is so dramatically needed by the American people, is incompetence, frankly. And I do not understand it. 

Now, the other thing that I am concerned about that I hope we 

cover today is that in June, CMS temporarily allowed the suppliers 

to use their own NPIs rather than the NPIs of order physicians. 

In auditing, there is a very important concept called ‘‘segregation 

of duties.’’ Segregation of duties is, in fact, as the Inspector General—I see him nodding his head. It is the best tool we have to 

make sure that there is not fraud, waste, and abuse. And when you 

allow on a temporary basis them to use their own numbers instead 

of the doctor’s number, you are taking away a segregation of duties. We are going the opposite direction that we should be going 

in terms of ensuring that we root out this important amount of 

fraud and waste. 

So I really appreciate all those who have come to this Subcommittee before me, that have worked on this. Thank you, Mr. 

Chairman and the Ranking Member. And, obviously, I thank the 

others that exposed this problem over a decade ago. But there is 

somebody over there that is not mad enough, and they need to be 

getting mad. Thank you, Mr. Chairman. 

Senator LEVIN. Thank you, Senator McCaskill. Senator Coburn. 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. Mr. Chairman and Ranking Member Coleman, 

thank you for having the hearing. I have to say that I am somewhat perplexed. We are looking at $100 million worth of fraud. If 

you combine the CRS studies, the IG studies, and the GAO, we 

have $80 billion a year in waste, fraud, and abuse in the Medicare 

and Medicaid programs. I am not belittling the $100 million. 

The Congress this week is going to pass a bill probably that 

eliminates $1 billion worth of savings per year in terms of DME. 

That is $200 million of premiums that are going to be paid by seniors that they should not be paying because we felt a little heat 

from competitive bidding. We already pay 30 to 40 percent too 

much for the DME equipment that Medicare buys. 

So I am discouraged because I do not think—we are going to 

have a hearing here today, and the Chairman and Ranking Member are rightly so bringing this forward, and we are going to do a 

lot of talk, and we are going to get after CMS. But when it comes 

to acting responsibly, the Congress is not going to do anything except delay the competitive bidding on DME, which will get rid of 

a lot of the fraudulent DME companies, which is part of the problem. 

We passed a farm bill that has $8 billion worth of fraud to dead 

farmers. We could not even get rid of that in the farm bill. We 

passed a farm bill that did not fix that even though we amended 

it in the Senate. When the compromise bill came back, we did not 

12 

1The prepared statement of Mr. Kuhn appears in the Appendix on page 41. 

fix it. So there is $8 billion worth of farm fraud that is going out 

to dead farmers and $100 million being paid on DME only—that 

is DME only that we are talking about. We are not talking about 

the fraudulent claims of dead doctors for other things. And yet we 

will not do the hard work as a Senate or as a Congress to come 

alongside behind you. 

So my hope is, Mr. Chairman and Senator Coleman, that you 

start the rolling ball for us to start acting responsibly in the Congress, first by having this hearing, which I am thankful for, but, 

more importantly, doing the bigger things that need to be done to 

get rid of some of this $80 billion worth of fraud. Eighty billion 

means $200 billion of American taxpayer Medicare money that is 

being paid out, their share in Part B, $200 billion false claims to 

Medicare patients that they are paying for that we have not fixed. 

Thank you. 

Senator LEVIN. Thank you, Senator Coburn. 

Now, pursuant to Rule VI, all witnesses who testify before the 

Subcommittee are required to be sworn, and at this time I would 

ask each of you to please stand and raise your right hand. Do you 

swear that the testimony you are about to give before this Subcommittee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. KUHN. I do. 

Mr. VITO. I do. 

Mr. GRAY. I do. 

Senator LEVIN. Thank you. We will be using a timing system 

today, and about a minute before the red light comes on, you will 

see the lights change from green to yellow, giving you an opportunity to conclude your remarks. Your written testimony will be 

printed in the record in its entirety. We would ask that you limit 

your oral testimony to no more than 5 minutes. 

Mr. Kuhn, we will have you go forward, followed by Mr. Vito, 

and finish up with Mr. Gray. And then after we have heard all of 

the testimony, we will turn to questions. 

Mr. Kuhn, again, thank you for being here. 

TESTIMONY OF HERB B. KUHN,1 DEPUTY ADMINISTRATOR, 

CENTERS FOR MEDICARE & MEDICAID SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Mr. KUHN. Chairman Levin, Mr. Coleman, Members of the Subcommittee, thank you for the opportunity to testify today regarding 

the Subcommittee’s findings on Medicare payments for claims containing invalid and inactive provider identification numbers of deceased physicians. CMS appreciates the time and resources that 

the Subcommittee has invested in this study and is grateful for the 

Subcommittee’s shared interest and goal in reducing waste, fraud, 

and abuse in the Medicare program. We are currently reviewing 

the findings of your report. We consider these findings very valuable for identifying areas of vulnerability in the program and accelerated our efforts to fix them. 

CMS has taken several steps to implement policy changes and 

new procedures to ensure that invalid or inactive provider identiVerDate Aug 31 2005 09:37 Feb 17, 2009 Jkt 044122 PO 00000 Frm 00016 Fmt 6633 Sfmt 6601 P:\DOCS\44122.TXT SAFFAIRS PsN: PAT
13 

fication numbers, or PINs, are not used by unscrupulous suppliers 

of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 

(DMEPOS). Internally, and with our claims-processing contractors, 

we are making changes to substantially curb and, ideally, eliminate 

this practice altogether. 

Specifically, our conversion to the new National Provider Identifier (NPI), along with further documentation and data exchange 

improvements, have significantly strengthened CMS’ ability to 

combat fraud and abuse that rely on invalid provider identifiers. 

All providers and suppliers intending to bill Medicare are required 

to apply for and secure a new NPI, and to use the NPI exclusively 

on all forms when billing Medicare. Before a NPI is used, CMS 

verifies the Social Security number with the Social Security Administration (SSA), thereby verifying the information as accurate at 

the time of issuance. Given this change, CMS believes the vulnerability for further fraud and abuse relying on provider identifiers 

and deceased physicians is substantially smaller today than before 

full NPI implementation. 

However, as you noted in your report, we will need to guard the 

new NPI system, and in order to do that, CMS finalized a new information exchange agreement with the Social Security Administration, which will provide CMS with monthly updates of SSA’s 

Death Master File and unrestricted State death data beginning in 

August. CMS will match this information with data contained in 

the National Plan and Provider Enumeration System—the central 

system that maintains information about the NPI—and, of course, 

also our provider enrollment database as well. After confirming an 

individual practitioner is deceased, CMS will deactivate both the 

NPI and the practitioner’s enrollment in the Medicare program. 

But we do not stop there. While our claims-processing system allows any NPI to be used for ordering and referring services to 

Medicare beneficiaries, we anticipate implementing changes in 

2009 that will limit ordering and referring to only those individual 

practitioners enrolled in the Medicare program. 

In addition to assuring the accuracy of the NPI, we also need to 

work on the other side of the ledger to make sure that we have 

qualified DMEPOS suppliers out there, and in this regard, we are 

taking the following steps to make sure that we work both sides 

of the ledger so that we come to the middle to have a good, secure 

program. 

First, on July 1—and this is something Dr. Coburn referenced— 

we implemented DME competitive bidding in 10 metropolitan areas 

in the country and plan to expand to 70 more next year. This program, which ushers in new accreditation, financial and quality 

standards for DME suppliers, will substantially increase the quality of this program and those who are enrolled as suppliers. Furthermore, it will bring about market pricing to DME supplies. One 

of the vulnerabilities of the program is when you mis-price something, you bring the fraudsters into the program. This will help 

eliminate that. 

Second, we are in the process of completing the final regulation 

that for the first time will require surety bonds for DMEPOS suppliers. 

14 

1The prepared statement of Mr. Vito appears in the Appendix on page 49. 

Third, we recently published a proposed rule requiring DMEPOS 

suppliers to maintain ordering and referring documentation received from a physician or other non-physician practitioner for 7 

years. This change, if adopted, will strengthen our ability to identify fraudulent billing during documentation reviews. 

And then, finally, through our enrollment demonstration projects 

initiated last summer in South Florida and Los Angeles metropolitan areas, we were able to revoke the billing privileges of nearly 

1,000 DMEPOS suppliers. 

Protecting Medicare’s integrity, ensuring its efficient operation, 

and assuring safe and quality health care for all beneficiaries is 

our goal in all that we do. In this regard, we appreciate the Subcommittee’s work on this issue and your ongoing efforts to support 

the Medicare program’s integrity. 

I look forward to answering any questions that you may have. 

Senator LEVIN. Thank you, Mr. Kuhn. Mr. Vito. 

TESTIMONY OF ROBERT VITO,1 REGIONAL INSPECTOR GENERAL FOR EVALUATION AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

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

Subcommittee. I am Robert Vito, Regional Inspector General for 

Evaluation and Inspections at the U.S. Department of Health and 

Human Services’ Office of Inspector General. 

Because the Medicare DME benefit has proven to be particularly 

vulnerable to fraud, waste, and abuse, OIG has devoted substantial 

resources to conducting work in this area. We have performed studies on a wide array of DME-related issues; made recommendations 

to help CMS correct vulnerabilities; and performed targeted followup work to ensure that corrective action has been taken. One such 

issue—the use of ordering UPINs on DME claims—is the subject 

of my testimony today. 

DME and related supplies are only covered by Medicare when ordered by a physician or a health care practitioner. To help ensure 

this condition is met, CMS requires DME suppliers to list the 

UPIN and, as of May 2008, the NPI of physicians who order the 

equipment on the claim form. However, as part of our DME work, 

we learned that Medicare’s claims-processing system only verified 

that the UPIN met a certain format; edits were not being performed to ensure that the UPIN had been assigned or was active. 

In the November 2001 report, we found that Medicare and its 

beneficiaries paid $32 million for DME claims with invalid UPINs 

in 1999. In addition, $59 million was paid for DME claims listing 

UPINs that were inactive on the date of service. Almost $8 million 

of this involved UPINs for deceased physicians. We recommended 

that CMS revise claims-processing edits to ensure UPINs listed on 

DME claims were valid and active. In response, on two occasions 

CMS issued instructions to its carriers to deny DME claims listing 

deceased physician UPINs. However, other than provider education, we know of no further action taken by CMS to address the 

issue of invalid and inactive UPINs. We annually highlighted this 

15 

vulnerability in various publications, including our semiannual reports to Congress and our ‘‘Compendium of Unimplemented Office 

of Inspector General Recommendations.’’ 

To ensure effective edits for invalid and inactive UPINs, CMS 

needed to maintain accurate information in the UPIN Registry. 

However, in each of the three OIG reports issued between 1999 

and 2003, we found the UPIN Registry contained inaccurate data. 

For example, in the 2003 report, the OIG found that 52 percent of 

the providers listed in the active UPIN database had inaccurate information in at least one of their practice settings. Seventeen percent of the providers no longer billed Medicare from any practice 

setting listed in the active UPIN file, and of that number, 14 percent were deceased, and 26 percent were retired. 

Because CMS was planning to discontinue the use of UPINs once 

the NPI system was fully implemented, we did not perform additional studies on the UPIN for several years. In the interim, we focused on other DME issues, including payments for and coverage 

of power wheelchairs, pricing and utilization of inhalation drugs 

covered under the DME benefit, and excessive payments for home 

oxygen equipment. 

We also significantly expanded our efforts into the area of provider enrollment. For example, in 2006 and 2007, the OIG conducted in-person site visits of more than 2,500 DME suppliers in 

South Florida and Los Angeles to assess compliance with Medicare 

supplier standards. 

Now that the NPI is fully implemented, OIG is revisiting the use 

of physician identifiers on DME claims. Based on our preliminary 

analysis and discussion with CMS staff, we have concerns that 

valid and inactive physician numbers may be a continuing problem 

with the NPI. While it appears that edits will be established to 

verify the NPI is in the correct format, it is unclear whether there 

will be controls that identify NPIs that have not been assigned or 

correspond to inactive physicians. 

In addition, according to CMS, DME suppliers are temporarily 

allowed to use their own NPI in place of the NPI of the ordering 

physician. CMS has not indicated when this policy will be discontinued. However, as long as DME suppliers are allowed to enter 

their own NPI rather than the physician’s, a major control for preventing fraud, waste, and abuse will not be operational. 

In summary, the OIG will continue to devote considerable resources to fighting fraud, waste, and abuse in the Medicare program while maintaining a particular focus on vulnerabilities related to the DME benefit. As CMS moved away from the UPINs 

and began requiring the use of the NPIs in their place, there was 

an opportunity to address vulnerabilities highlighted in our earlier 

findings and recommendations. However, we remain concerned 

that old vulnerabilities as well as new challenges may affect the integrity of the NPI system. To address these concerns, OIG expects 

to conduct studies related to the NPI during the 2009 fiscal year. 

This concludes my statement. Thank you for the opportunity to 

testify today. I would be pleased to answer your questions. 

Senator LEVIN. Thank you, Mr. Vito. Mr. Gray. 

16 

1The prepared statement of Mr. Gray appears in the Appendix on page 63. 

TESTIMONY OF WILLIAM E. GRAY,1 DEPUTY COMMISSIONER 

OF SYSTEMS, SOCIAL SECURITY ADMINISTRATION 

Mr. GRAY. Chairman Levin, Members of the Subcommittee, 

thank you for inviting me to appear before you today. You have 

asked us to address two questions: How can we provide death 

record information regarding medical providers on a timely and 

regular basis to the CMS? And what, if anything, do we need to 

facilitate the sharing of death record information with CMS? Before 

I explain how and when we provide death information to CMS, I 

would like to briefly describe who we are and what we do. 

Social Security touches the lives of virtually every American. 

Through the Old-Age, Survivors, and Disability Insurance program, 

we provide benefits at critical junctures in people’s lives: When 

they retire, when they become disabled, and when the family’s 

wage earner dies. We also administer the Supplemental Security 

Income program, which provides a cash assistance safety net for 

aged, blind, and disabled individuals with little or no income or assets. Each year, we send benefits totaling about $650 billion to almost 60 million individuals. 

In addition, we have other responsibilities that are vitally important to the Nation, but are not directly connected to our core mission, including many workloads for other programs, such as Medicare, Medicaid, E-Verify, and Food Stamps. 

We collect and maintain death records which we use to determine continuing eligibility for benefits and for other program purposes. We receive approximately 2.5 million death reports each 

year. They come from a variety of sources, but 90 percent come 

from family members and from funeral homes. My written testimony describes in some detail how we gather death information 

and the circumstances under which it is made available to other 

Federal agencies and to the public. For purposes of our discussion 

today, I would like to summarize a few points. 

Currently, there are about 85.6 million records on our Death 

Master File, which is commonly known as the DMF. About 4 percent of these are from State reports. The publicly available Death 

Master File includes all verified death information, but it does not 

include any State death data. However, since 2001, we have given 

CMS access to all of our death records, both public and State. 

We provide the death information to CMS in three ways: 

In 2001, we began providing the public Death Master File to 

CMS via direct electronic connection, and we update it weekly in 

the same way. 

SSA also provides CMS with access to death information via the 

State Verification Exchange System (SVES). SVES is an overnight 

batch query process that matches against our records. In addition 

to the public data, this also gives CMS access to the State data. 

SSA responds each year to approximately 2 million CMS queries to 

SVES. 

SSA also provides CMS with access to the State On-Line Query 

system (SOLQ). SOLQ includes the same death information as 

SVES, but it provides real-time online access to this information. 

17 

SSA responds to approximately 1.1 million CMS requests per year 

through SOLQ. 

Studies show that, overall, our death data is over 99.5 percent 

accurate, and almost 90 percent of all deaths are posted within 30 

days of the date of death. Over the last 6 years, SSA and HHS 

have been working with the States to implement an electronic 

death notification process. Death information received through this 

Electronic Death Record (EDR) system gets to us within 5 days of 

an individual’s death and is virtually error free. Currently, 22 

States participate in EDR, and in those States, EDR replaces the 

more cumbersome and labor-intensive manual process of reporting 

death information to us. We continue to work with States who 

want and are able to begin using EDR. 

In closing, let me say that timely and accurate death information 

is vital to maintaining and assuring the integrity of Federal programs and protecting taxpayer funds. However, we can do only so 

much. We are unable to take on any additional work without adequate resources. That said, we will keep working with CMS to 

make sure that it continues to be provided accurate and timely 

death information. 

We are happy to provide the Subcommittee any additional information it would need on this issue, and I will be glad to answer 

any questions. Thank you. 

Senator LEVIN. Thank you, Mr. Gray. Let’s try an 8-minute 

round of questions for the first round. 

As I stated in my opening statement, Mr. Kuhn, our staff found 

that from 1992 to 2002, there were 33,000 deceased physicians listed by the AMA, and I am sure this is similar to what we have just 

heard about in terms of Social Security. Our staff then took a random sample of 1,500 of those physicians. They looked at the claims 

that were paid by CMS as to how many of those 1,500 physicians’ 

numbers, identification numbers, received payments. They obviously did not. They were deceased. But the numbers of these physicians were used. About half, 734 of those 1,500 deceased physicians’ identification numbers were used to pay claims. Now, that is 

an incredible number. 

Who is responsible for failure to remove those physicians’ names 

from the approved list? Do you hire a contractor to do that? 

Mr. KUHN. Yes. We use contractors to pay claims. Under the 

Medicare program, contractors run our enrollment systems as well. 

So we have contractors, but ultimately we hold the contractors responsible. So the responsibility comes to CMS, Senator. 

Senator LEVIN. Ultimately you hold them accountable or you 

don’t hold them accountable? 

Mr. KUHN. We do hold them accountable, yes. 

Senator LEVIN. How much money was paid to those contractors 

during this period of time? 

Mr. KUHN. I do not have that information with me, but I would 

be happy to get that for the Subcommittee. 

Senator LEVIN. Well, now, we identified 33—let me see if I can 

get you the exact number here. There were about 500,000 erroneous claims for durable medical equipment that were paid during 

that period by our analysis. How many of those erroneous claims 

paid out based on erroneous identification numbers were recovered 

18 

from our contractors who were paid to make sure that did not happen? 

Mr. KUHN. I am not sure if I completely understand that question. 

Senator LEVIN. Well, we pay contractors to make sure what happened did not happen. 

Mr. KUHN. Correct. 

Senator LEVIN. When it happens, do we recover from the contractor? 

Mr. KUHN. Oh, I see your question there. We have performance 

metrics with the contractors, and some of those performance 

metrics are enhanced by bonus payments or other things that are 

available to the contractors. So if they were not hitting their performance metrics, then it would impact the remuneration that they 

receive. 

Senator LEVIN. Well, I am sure there are performance metrics. 

There are hundreds of thousands of claims based on numbers that 

should not have been paid. How much recovery did we get from 

those contractors, for money we paid contractors to avoid that? 

How do we hold them accountable? 

Mr. KUHN. I don’t know if I have that specific information on 

there—— 

Senator LEVIN. Well, about how much have we paid to contractors for not doing their job? Give me an idea. 

Mr. KUHN. I guess, the amount that we pay contractors across 

the board exceeds $1 billion for the Medicare program that is out 

there. But part of the issue—— 

Senator LEVIN. How much have we recovered from contractors 

for paying claims they should not have paid? 

Mr. KUHN. Yes. And I don’t have that information, but would be 

happy to get it for the Subcommittee. 

Senator LEVIN. Well, about how much? 

Mr. KUHN. I wouldn’t even hazard a guess. 

Senator LEVIN. Is it a common practice that we say to contractors, ‘‘You have authorized claims that should not have been authorized under your contract. We want you to pay us back for that 

money’’? Is that a common practice? 

Mr. KUHN. Yes, that would be part of the performance metrics, 

whether we pay them or not. In terms of whether the performance 

metrics of the contract require us or allow us to go back and reclaim money for erroneous claims, I would have to go back and look 

at the specificity of the contracts. 

Senator LEVIN. Well, shouldn’t they do that? 

Mr. KUHN. That could be something that we could do in performance in the contracts that are out there. But, really, a lot of what 

the contractors—— 

Senator LEVIN. It could be something that we—why isn’t that an 

automatic thing? If they are given a job to do and they do not do 

it, why is there not a penalty paid by our contractors? 

Mr. KUHN. Part of the reason for the penalty to the contractor 

is really our ability to provide appropriate oversight in this area. 

Senator LEVIN. It is not oversight. It is just the dates of death, 

which are provided easily to them. 

19 

Mr. KUHN. Well, in this issue, and I think it begs really the issue 

in terms of some of the questions that you and others asked in the 

Subcommittee. What are the resources or the tools that we as an 

agency need in order to fulfill our responsibility to manage this 

program in an effective way? And one of the areas is really the 

Medicare Integrity Program. It is annual appropriations that we 

receive from Congress. This has been capped since 2003. We have 

asked over the last 3 years for about $300 million more infunding 

for that program in order to allow us to deal with vulnerabilities 

like this. And so when we face situations like this—and if you look 

at inflation adjusted, we are probably $90 million less than we 

were in 2003—we have to make decisions as a program: Where are 

the worst vulnerabilities that we need to take on? And I will be 

real candid with this Subcommittee. This is an area that was not 

a high vulnerability compared to others in the program as we were 

going forward. 

So one of the things—and I really appreciate the report that the 

Subcommittee has done and want to make sure it is clear with the 

Subcommittee—is that as you ask what do we need, funding for the 

Medicare Integrity Program would be extraordinarily helpful for us 

to fulfill some of these obligations. 

Senator LEVIN. Some of that funding ought to come from contractors who were not doing their jobs. 

Mr. KUHN. And the contractors do the jobs that we give them the 

information to—— 

Senator LEVIN. They have this information. 

Mr. KUHN. Right. 

Senator LEVIN. You have told them to do it. According to the Inspector General over here, his testimony, in responding to the recommendations that were made back in 2001 or 2002, ‘‘CMS indicated it had developed instructions, system changes, and edits that 

would reject claims listing a deceased physician’s UPIN. CMS stated it planned to expand the edits to include all invalid and inactive 

UPINs. In November 2001 and April 2002, CMS issued instructions 

to its carriers stating that DME claims listing a deceased physician’s UPIN would be denied.’’ 

Now, you do not even know if the contract with these carriers 

has a clause that penalizes the contractor for failing to do their job? 

Mr. KUHN. And what we do with the contractors—and I would 

go back and look at the contracts and get that information for you. 

I don’t have that information readily available to me now. But we 

send out, as you indicated, I think during this period from 2002 

through 2006, at least five instructions in this area to deal with not 

only the PINs, but the UPINs in this area. And we have the change 

requests. We gave the instructions to the contractors to execute. 

Some probably were executed better than others, I think as your 

report shows, versus Florida, versus other areas where we show 

some great variation there. But we have the information in their 

hands. Presumably they are executing. 

Where we have the difficulty—— 

Senator LEVIN. Presumably they are not executing. 

Mr. KUHN [continuing]. Is for us to follow up to make a determination on the execution. And, again, that is where we made a 

choice back in 2004 in terms of program vulnerabilities. We did not 

20 

have the resources to do the follow-up here that we needed to, Senator. 

Senator LEVIN. Presumably they are not executing. Look, we 

have a small staff. Our small staff identifies, going through these 

materials, huge amounts of mistakes or payments that never 

should have been made. Do you assume, by the way, that most of 

those are fraudulent or most of those are non-fraudulent? 

Mr. KUHN. I would like to think some are mistakes, but I suspect, knowing what goes on in the DMEPOS area, probably a lot 

of those are true fraud. 

Senator LEVIN. All right. So our staff, our limited staff, is able 

to do this in a very short amount of time, I mean, this is a huge 

issue here, to identify the use of the UPINs numbers of 17,000 deceased physicians. Now contractors were supposed to catch that. 

They did not catch it. We have got to go after our contractors. Will 

you? 

Mr. KUHN. We are working with them on—— 

Senator LEVIN. Not working with them. Will you go after them 

to recover money that was paid that should not have been paid? 

Mr. KUHN. We will go back and have conversations with them, 

but the other thing about the contractors—— 

Senator LEVIN. I don’t want conversations. I want a commitment 

from you that you are going to seek recovery from them. 

Mr. KUHN. We will go back and exercise everything we have in 

our contracts with them. 

Senator LEVIN. If the contracts do not provide rights to get recovery from contractors who did not do their job because they paid 

claims that should not have been paid, will you insist that those 

contracts in the future have that provision? 

Mr. KUHN. We will review our contracting strategy and make 

sure that is something we will work on. 

Senator LEVIN. Well, I have to tell you, that is too wishy-washy 

for me. Will you let this Subcommittee know what you have done 

or will do? 

Mr. KUHN. Absolutely. 

Senator LEVIN. And will you let us know how much you have 

paid contractors during this period 2000 to 2007? 

Mr. KUHN. Those are appropriate follow-ups, and we will get 

those for you. 

Senator LEVIN. Thank you. Senator Coleman. 

Senator COLEMAN. Thank you, Mr. Chairman. 

Just if I can, one follow-up on that. Do you know whether CMS 

withheld any bonuses from contractors from 2000 to 2007? 

Mr. KUHN. I am not sure during that period, Senator, and that 

is information we could get for the Subcommittee. 

Senator COLEMAN. That would be another—Mr. Chairman, I 

would like to know whether we withheld any bonuses during that 

period. 

And let me just say I appreciate the cooperative relationship that 

CMS has had with the Subcommittee on acknowledging the nature 

of the problem and the new system that is being put in place. But 

the IG, even with that new system, has raised some concerns. Let 

me see if I could focus on that a little bit. 

21 

First, I am not sure whether Mr. Gray or Mr. Kuhn should deal 

with this, but Social Security has the data, they have the information. They know who is dead. It is not that complicated. You pass 

it over to CMS and their contractors. 

First, is there any question about the computer capability to 

process the Social Security data? Do we have the capacity to do 

that so that we have systems that are compatible today? 

Mr. KUHN. We believe we do. We have actually a new interagency agreement with Social Security that was recently executed 

to be able to get this data feed in a format that will fit our enrollment system. So we think that is going to work out real well for 

us on this new system. 

Senator COLEMAN. And when you say agreement, I have some information that the agreement was signed last week. 

Mr. KUHN. Yes. That was wrapped up last week. 

Senator COLEMAN. And somehow could I get perhaps a little 

more of understanding why in 2008 that we are having issues 

about whether CMS can use data from Social Security that—I 

mean, thank goodness last week we got an agreement, but why did 

it take so long? 

Mr. GRAY. We have been sending that information to CMS since 

2001 in exactly the same format that this new agreement will call 

for. 

Senator COLEMAN. So 2001 until last week, you are sending information, but they cannot process it—— 

Mr. GRAY. It is the exact same format. It is not changing. So, yes, 

they—— 

Senator COLEMAN. Mr. Kuhn, I just want to make sure as we 

move forward that, in fact, we have a unique opportunity. You 

have said with the new NPI system, we are going to first—again— 

we are going to clean out the system—if you are dead, you cannot 

apply. So at least we start with that. We know we have a base. 

But, on the other hand, we did this in 2002, we found out that it 

really did not clean up the system. 

First of all, I want to find out technically what we are capable 

of doing and see if there are shortcomings there. So all this data 

was coming over. What was the issue in terms of them being able 

to use the data that was given? 

Mr. KUHN. It is interesting. We are using two different sources 

of data. When we were looking at the deceased physicians’ files, we 

were collecting that data initially from the American Medical Association. We thought that was a good source document. But I think 

as we are all finding out, that was probably not as robust a system 

that we needed, and, therefore, we think the Social Security file 

will provide a much better data source for us. 

The data feeds we have been getting from the Social Security Administration, as Mr. Gray indicates, we have been using more on 

the beneficiary side in terms of looking at eligibility, issues like 

that. This will be the first time we have begun using this in terms 

of enrollment as well as for the NPI. And our technical staff are 

working on this interagency agreement to make sure that it comes 

in a format that is functional for us. 

I know Mr. Gray has indicated that it will be coming in the same 

exact format. Our technical folks just want to make sure this will 

22 

work for our systems that we have because this is a different system than on the beneficiary side. And we want to make sure we 

do those data matches appropriately. 

The nice thing about the NPI system is that it is a new system, 

and it is almost like the term in golf. We got a ‘‘mulligan’’ here. 

And what have we learned from the past in order to make sure 

that we safeguard the system as best we can? We think using the 

Social Security data will really help us do that. 

Senator COLEMAN. This is a $100 million mulligan. That is a 

pretty expensive one. 

Mr. KUHN. It is big, and we are as outraged as you are about it, 

Senator. 

Senator COLEMAN. In terms of the new system, one of the issues, 

Mr. Vito, you talked about concerns continuing problems with NPI. 

One, you talked about controls. Can you give me a little more information? What type of controls do you want to see in place that you 

do not see right now? 

Mr. VITO. When we did the work in 2001, what we looked for 

were edits that would prevent claims that came in that had inactive and invalid UPINs on them. Part of that would have stopped 

the problem for deceased physician UPINs as well. What we expect 

to look at in the future is to see if the NPI system will be able to 

have edits that would prevent that from occurring again in that 

they would have claims that would come in and they wouldn’t be 

checked to see if it was a valid NPI and if it was an active NPI. 

In addition to that, another important part is that the system 

has integrity, that the data in the system is accurate. We have 

found in the past that the UPIN Registry contained inaccurate 

data. So this is an opportunity for CMS to take the new system, 

rectify some of the persistent problems and make sure they have 

good data. When they do the edits, the data has to be good in the 

program for them to run properly and for it to be effective. 

Senator COLEMAN. One of the issues that you raised, Mr. Vito, 

that has been of certain concern to the Subcommittee—and perhaps, Mr. Kuhn, you can help me understand—apparently CMS 

has for some period of time allowed providers to use their own NPI, 

their own identification number. I take it we all agree that you 

have three entities here: You have a patient, you have a physician, 

and you have a provider. And you have some measure of cross-control when we have the physician. There is a reason for the physician to sign that. They get reimbursed. We want to have an identification number. 

Can you help me understand you would allow claims to be processed without the NPI from a physician? 

Mr. KUHN. Yes, Senator. Because we have the new NPI system 

that was brought about on May 23, on June 2 we did allow and 

will allow for a very short period of time for the supplier of the 

DMEPOS products to use their own NPI if they are unable to obtain the NPI from the ordering or referring physician. Some of 

those physicians do not have their NPIs yet. It is a new system. 

And what we wanted to make sure is that there was no interruption in terms of services to Medicare beneficiaries. Had we had a 

hard and fast rule, we think we would have created some access 

issues for Medicare beneficiaries out there. 

23 

Having done that, we knew that we were creating a program 

with vulnerability, but when we made this decision, we told all 

those suppliers that are going to use their own NPI, ‘‘Do it at your 

own risk, because if you do, be sure that you are on our list for 

post-payment review.’’ And I hope people hear this loud and clear, 

that we will be going to those suppliers that use their own NPI to 

make sure that they are candidates for post-payment review. That 

is the other side of the ledger to make sure that we have integrity 

for this short-term fix in order to assure access to beneficiaries. 

And that is why we did it. 

Senator COLEMAN. And I understand the value of getting access 

to beneficiaries. In terms of being unable to obtain, other than a 

physician not having the new NPIs, is there any other reason why 

a provider would not be able to get a NPI number from a physician? 

Mr. KUHN. It might be that they might not be communicating 

well between one another. There could be other kinds of process 

reasons. But we hope that this is truly the exception to the rule. 

But we think the fact that those that do use it will be subject to 

post-payment review, we think we can—— 

Senator COLEMAN. But here is the problem you have with that. 

What we have seen with DME, what we have seen with this program is that this has been a cash cow, an ATM machine for flyby-night players. In our discussion with some of the folks who have 

been convicted, they talk about passing around UPIN numbers. 

Why do drug deals when you can get long sentences and go to a 

tough place, when you can simply create a DME operation, submit 

claims? And in this case, if you have fly-by-night suppliers, folks 

who are not going to worry about any post-payment review, aren’t 

we setting ourselves up for a period of time in which folks simply 

want to cash in knowing that all you have to have is your own 

number? How do you protect against that? 

Mr. KUHN. Senator, your point is well taken. It is a vulnerability 

to the program. But it is a balance between making sure beneficiaries have access and making sure that through the post-payment review we think that is the best check we could put in place 

here. We could have sided on the other side of the ledger, but then 

I think our goal here is to serve the beneficiaries, and we thought 

we were serving them well by doing that. 

Senator COLEMAN. And I appreciate that. My concern is that, 

again, other than a physician not having the number in which you 

could then put in an old number, which other than that, the idea 

that ‘‘there is any difficulty’’—I mean, part of this system requires 

that you can get reimbursed by the Federal Government for either 

something to do with durable medical equipment—and you talked 

about prosthetics and others, by the broader phrase there—that a 

physician has to say this is going to be reimbursable. And so for 

a provider to say they are having difficulty, it is their responsibility 

if they want to get paid. Why wouldn’t we put the burden on them 

to do that? 

Mr. KUHN. Well, the other part of this is that while in that particular field there would be the NPI for the referring or prescribing 

physician or the particular entity’s NPI, it still does not—it still 

needs to have all the documentation there and for some that they 

24 

are going to get what is called a Certificate of Medical Necessity 

(CMN). There needs to be a prescription. The other documentation 

needs to be there as well. 

So, again, that gives us the opportunity to deal with the postpayment reviews. 

Senator COLEMAN. Thank you, Mr. Chairman. 

Senator LEVIN. Thank you very much, Senator Coleman. Senator 

Carper. 

Senator CARPER. Thank you. 

Dr. Coburn and I held a hearing about 2 weeks ago. We invited 

a number of folks to come in and testify, including David Walker, 

who until very recently was the Comptroller General of our country. And we asked them to look way down the road at the kind of 

fiscal challenges, budgetary challenges that we are going to face. 

I think one of our witnesses mentioned that within maybe 25 

years or so, we are going to be spending about 18 percent of GDP 

in this country just for three programs: Social Security, Medicare, 

and Medicaid—18 percent of GDP. The reason why that is alarming is because historically in the last decade or two, we spent about 

18 percent of GDP to run the whole Federal Government. And we 

are looking in our lifetime at a time when we will be spending 

about that much just to run those three programs—nothing for the 

environment, nothing for transportation, nothing for space, nothing 

for food programs. I mean, it is not just alarming. It is scary. 

One of the reasons why we are all over this issue and other 

issues—and Dr. Coburn and I are going to drive people crazy before 

we leave here on improper payments. But we are going to make 

sure that improper payments come down, most of which are overpayments. And we are going to make sure to the extent that improper payments are made that we go out there and recover the 

money that has been mis-paid or overpaid. 

One of the things that we are looking at in the legislation that 

he and I have co-authored to change the improper payments law 

is how might we penalize agencies that are not making progress in 

addressing their improper payments problems And I might add, 

Senator McCaskill has been all over this with us. She has been just 

a great partner in this issue. But in addition to having sticks, we 

want to have a couple carrots in this as well. 

And you started to say, Mr. Kuhn, in response to what the Congress can do to better make sure that you all are doing your job— 

let’s return to that for a second. What can we do? And I think you 

were saying something about funding for the Medicare Integrity 

Program. Just go back to that. What can we do to help make sure 

that you are doing your job so that a year from now when we have 

you back, and we say, well, what is different now, you have a much 

better story to tell us? If you do not, I would not want to be in your 

shoes. 

Mr. KUHN. I thank you for that question. Two or three observations I would make for you on that point. 

One is the Medicare Integrity Program, it has been capped since 

2003. If you look at inflation growth, we are probably $90 million 

less than we were in 2003, and our requests have been for about 

$300 million over the last 3 years, which we have not seen that 

funding. And so when you really think about our ability to manage 

25 

these programs and deal with the integrity and the fraud and 

abuse, full funding in that area, I think, would be extraordinarily 

helpful for the agency in order to fulfill our work in this area. 

Senator CARPER. Let me just interrupt for a second. I think in 

our legislation, we provide the opportunity for agencies to retain 

some of the monies that they recover and to be able to use those 

monies for better financial management. Would that be of help? 

Mr. KUHN. That would, in fact, and we have a pilot, which I 

think you referenced in your opening comment, the recovery audit 

contractors, which we did pilots in three States and then ultimately 

six States, and we hope to launch nationally here very soon, which 

really go back to providers and look at improper payments and the 

recoveries. They captured in that period of time about $1 billion in 

those three States. We think they were good, and there might be 

opportunities to retain some of that funding to fund some of the 

program integrity area. 

And then, finally, I think another important tool for us will be 

something that Dr. Coburn talked about earlier, DME competitive 

bidding. The real issue—there are two sides to this ledger, as we 

were talking about earlier. One is these invalid numbers, to make 

sure that we do things well on the front end. I think the folks in 

law enforcement will tell you it is kind of like health care. You 

want to prevent something, a disease from happening before it happens. The same thing with fraud and abuse, you want to prevent 

it before it occurs. So having these good quality numbers can hopefully prevent some of this stuff from happening. 

But on the back side, we have to have legitimate suppliers out 

there to make sure that they are valid, and DME competitive bidding gives us a new set of tools to deal with that in terms of accreditation, quality standards, financial standards, plus by holding 

an auction, we can get pricing where it needs to be. Under the 10 

demonstration areas that we are looking at right now, or the pilot 

areas, we brought prices down by about 26 percent across the 

board. That is real savings to the program, and it shows that when 

you mis-price something in this program, that brings the fraudsters 

in. 

So I think competitive bidding, the issue of the recovery audit 

contractors, and ultimately funding for the MIP program would be 

very helpful to the agency. 

Senator CARPER. All right. Thank you. 

One of my core values in our office—and a core value when I was 

governor and running State administration in Delaware—was to 

really focus on excellence in everything we do. I used to say, ‘‘If it 

is not perfect, make it better.’’ And I think we have a real opportunity to do just that with the recent switch over to the National 

Provider Identification for all of Medicare’s providers. You have got 

basically a clean slate right now, and my concern is that it stays 

that way. 

Let me just ask, what is your agency doing to take advantage of 

this fresh start? You spoke to this at least indirectly, but let me 

ask it again. What is your agency doing to take advantage of this 

fresh start to ensure that the registry does not face the same kind 

of problems that its predecessor did? How do you plan to incorporate some of the report’s recommendations? 

26 

Mr. KUHN. I think the point is well taken, and I think you are 

right. We have this unique opportunity here that you do not really 

see in government too often, where we have a fresh start for a program that began on May 23, and then the value of this report that 

the Subcommittee has put forward, because it really puts in place, 

as you talked about excellence, the basic engineering model—that 

is, let’s identify the gaps, let’s address those gaps, and let’s improve 

as part of the process. 

So a couple of the real improvement areas, of course, is going to 

be the new data match agreement we have with the Social Security 

Administration to make sure that we deal with that issue effectively. 

A second improvement that we are looking at, again, based on 

resources, is a periodic validation process in terms of all the providers that have come in with new NPIs that are out there. We estimate right now that about 25 percent of physicians have some 

kind of change in terms of their NPI or their enrollment process 

over a 5-year period, and we want to do periodic validations to keep 

that system as robust as we possibly can. 

Another new edit we want to put in place is to make sure that 

the referring or ordering physician actually is an enrolled provider 

in the Medicare program, and we will have a cross-check that will 

make that happen as we go forward. 

And then, finally, to make sure, at least on the DMEPOS side, 

we have an enrollment contractor that is doing the work there. 

That contract has now changed. It is a new contract that was let 

just a couple weeks ago, where before they mostly focused on enrollment, now they are going to be looking at enrollment and fraud. 

And their follow-up, their on-site inspections of these facilities out 

there to make sure they are legitimate businesses out there is 

stepped up dramatically, and I think that will help us as well. 

Senator CARPER. All right. GAO has told one of our subcommittees that Dr. Coburn and I serve on—that Medicare Advantage and 

the Medicare Prescription Drug Benefit Program are likely committing substantial improper payments. These programs did not report 

their improper payment estimates for fiscal year 2007. They did 

not report them for 2006 or 2005 either. Nor did they provide a target date for when they would be providing that information. In 

fact, they were the only two programs identified by GAO who did 

not give a time frame—the only two in the whole Federal Government that I am aware of. 

When does CMS plan on releasing this information? And does 

your agency have any set goals for reducing improper payments 

with respect to those programs? 

Mr. KUHN. Senator, I am not familiar with that particular report 

or the timetables there, so I would like to get back to you with that 

information and to kind of understand behind that a little bit in 

terms of the improper payments because under those particular 

programs they are paid to an entity, and then they have separate 

contracts with the providers. So if it is an improper payment that 

we are making to the MA plan or PDP, that is one issue. If it is 

their contractual relationship with the providers, that is something 

else. And I would like to understand a little bit more, and we could 

get back to you in writing on that one. 

27 

Senator CARPER. Thank you. The improper payments law has 

been around for less than a decade. Finally, I think most of the 

Federal agencies are actually complying, a couple of big ones—Department of Defense, Homeland Security. A couple programs I just 

mentioned do not. Not only are they not out there recovering improper payments, they are not even reporting what their improper 

payments might be. And before we can go out and recover, we need 

to know, the agencies need to know, some idea of what the magnitude of the improper payments is, and then we need to go to 

work and recover as much of that money as we can. I will look forward to your responses. 

Again, I just want to say to Senator Levin, to Senator Coleman, 

and to your staffs, thank you very much for your diligence and 

bringing us to this hearing. Thank you. 

Senator LEVIN. Thank you, Senator Carper. Dr. Coburn. 

Senator COBURN. Thank you, Senator Levin. 

Mr. Kuhn, I want to go back to something. You did not answer 

Senator Levin’s question, and before you leave here today, I think 

you—it is unbelievable that we would have contracts with Medicare 

service organizations that are not held responsible. And I have a 

very direct question for you. Will you make sure that in the future 

all contracts with all these service companies, these payers, have 

a section in there in which they are culpable and held responsible 

for overpayments which they should have avoided? 

Mr. KUHN. Senator, I thank you for asking that question again, 

and here is what I will follow up and do. One, I am going to go 

back and sit down with our General Counsel to look at existing 

contracts to see if they include those provisions and did we exercise 

those clauses appropriately in terms of collecting improper payments. And then on a go-forward basis, we will engage with our 

contracting process to make sure that the Federal Acquisition Regulations out there, FAR contracting and all that, to make sure that 

we are properly exercising contractual arrangements; that if there 

are improper claims made, that we are meeting all Federal standards to go forward. So I will make sure—— 

Senator COBURN. I am not sure that is a yes. The fact is that any 

American looking at this hearing today would say Medicare is contracting with service providers, and you have not told us, yes, we 

will hold them accountable. And what I want is an answer, yes, we 

will hold them accountable. 

Mr. KUHN. To the extent we can, we will. The reason I equivocate a little bit is I just do not know all the provisions of the FAR 

contracting rules. But if we can hold them accountable, yes, sir. 

Senator COBURN. You can hold them accountable. And if you cannot, we have to change those rules. It is ridiculous. If you cannot 

hold a contractor accountable for doing something because of some 

silly regulation that we have written in contracting rules, then we 

need to know that and change the rules. But the fact is that we 

know $80 billion in waste, fraud, and abuse is in Medicare, and 

that $16 billion—I misspoke earlier when I said $200 billion. It is 

$16 billion that is coming out of the pocket of Medicare payers. Individual Medicare recipients are paying $16 billion more than they 

should be. So what we need is a commitment. 

28 

The second thing I would like to ask that you supply the Subcommittee with is a list of all the service contractor providers and 

their 10–Ks to this Subcommittee. In other words, here is the list, 

here are the companies, and here are their 10–Ks, and you provide 

that, because we are going to be wild by the time you see the profitability of the people who are your service contractors, and then 

we compare that to this fraud, it is a drop in the bucket to hold 

them accountable in terms of their profitability. 

Senator LEVIN. Well, we ought to get an answer to that. 

Mr. KUHN. Yes, sir. We would be happy to supply that information to the Subcommittee. 

Senator COBURN. Thank you. 

Did I understand your testimony that you only cross-reference 

this list in the past as far as dead physicians every 15 months? 

Mr. KUHN. That is correct. That was the instructions. 

Senator COBURN. Is that changing? 

Mr. KUHN. That will change—depending on what we come up 

with with Social Security, whether it is now weekly, monthly, but 

it will—the periodic rate of that will be accelerated greatly under 

the new NPI system. 

Senator COBURN. It ought to be every week. I mean, that is 

punching a button on a computer cross-checking a list. 

Mr. KUHN. Right. 

Senator COBURN. So why is that not just common sense that we 

are going to do this every time we get a list? 

Mr. KUHN. That is right. Under the new interagency agreement, 

it is my hope it will be weekly. But weekly, monthly, biweekly, the 

periodic rate is going to be much quicker. 

Senator COBURN. Now, one other thing you said, Mr. Kuhn, in 

answering questions for Senator Carper was the problem of not 

cross-checking whether you had—even though you had a UPIN 

number or a new NPI number, not knowing whether they were enrolled providers? Have we not been checking against enrolled providers all this time? 

Mr. KUHN. No, we haven’t. In fact—— 

Senator COBURN. OK. That is—just think about that for a 

minute. People who are not enrolled to provide for Medicare, we 

are paying DME suppliers for prescriptions from people who are 

not qualified to give those prescriptions? The question I would have 

is why haven’t we. 

Mr. KUHN. There are rare exceptions in the program, changes in 

the future, where there may be a physician who has elected not to 

participate in the Medicare program. But they are licensed in the 

State. They can practice in the State. But they see a Medicare beneficiary who signs an Advanced Beneficiary Notice (ABN), and 

says, ‘‘I am going to self-pay because I want to come to this doctor. 

I have been seeing him for years,’’ and they write him a prescription. We have filled those prescriptions for that particular individual as a result of that relationship with that physician. 

Senator COBURN. Fine. That is the exception to the rule. 

What about the people who are off the Medicare list who have 

been sanctioned and still have a UPIN number and still have a 

NPI number? You are not cross-checking against those people for 

writing prescriptions for DME equipment? 

29 

Mr. KUHN. Not under the old system. Under the new one we will. 

Senator COBURN. OK. Mr. Vito, on page 9 of your testimony, 

when you looked at the UPIN database, you found 52 percent of 

the providers in that database had inaccurate information in at 

least one category, and 17 percent of those providers no longer 

billed Medicare from any of the practice settings listed in the UPIN 

file. 

Now, does that mean they were not practicing or they just were 

not at the location at which the UPIN file listed them? 

Mr. VITO. I don’t know that answer. We would have to go back 

and look. I think sometimes that they might not have been practicing at that location. 

Senator COBURN. And of that 17 percent, 14 percent were deceased? 

Mr. VITO. That is correct. 

Senator COBURN. And 26 percent were retired? 

Mr. VITO. That is correct. And we found that out because we 

asked the physicians about their info. We got the information from 

the UPIN directory. We asked the actual physician. We found that 

information because either when we asked at the practice they told 

us that the physician had died or a family member told us that 

they had died. 

Senator COBURN. So what that means is at least 6 percent of the 

total UPIN numbers are lousy numbers because they either represent retired physicians or physicians who no longer participate in 

Medicare or are no longer at the practice site which they supposedly are supposed to keep updated with Medicare. Correct? 

Mr. VITO. I believe there are problems with that database. There 

were problems with that database, and we pointed that out. But I 

think the point is that there was never any check at all for the 

UPIN other than it started with an alpha, then either had an 

alpha or a numeric in the next two digits, and the following three 

digits were just numeric. 

Senator COBURN. So there was no integrity to the list in terms 

of the quality of the UPIN? You didn’t know, even though you had 

a UPIN number, that may have not represented the—— 

Mr. VITO. What I am saying, when they processed the claims, 

when the claim came in, they didn’t match it up to see if it was 

an actual—— 

Senator COBURN. A good number. 

Mr. VITO. Yes. 

Senator COBURN. OK. Mr. Kuhn, do DME equipment providers 

who use dead physician numbers get sanctioned by CMS? 

Mr. KUHN. Yes. 

Senator COBURN. Explain the sanctioning process. 

Mr. KUHN. When we are aware of that, it can come about in a 

number of different ways. One, revocation of their ability to work 

with the Medicare program. They are out of the program. And then 

where we see cases like this, we refer them over to our law enforcement partners—IG, Department of Justice, others—for follow-up 

and case development if there is outright fraud there and for prosecution. 

Senator COBURN. Can you give me a situation where a dead physician’s prescription would not be outright fraud? 

30 

Mr. KUHN. I think there is a possibility. This is a credible hypothetical, but it is plausible, I guess, where someone wrote a prescription one day, the physician, the next day was in a car accident. 

Senator COBURN. OK, so within a month, let’s say. After a 

month, can you give me a situation in which a DME supplier could 

logically use a dead physician’s UPIN number without trying to 

commit fraud? 

Mr. KUHN. Without a month, 60 days, I think you are probably 

looking at fraud, or perhaps a mistake, but certainly more likely 

fraud. 

Senator COBURN. So why would not all of them be completely 

sanctioned and banned from Medicare for that? 

Mr. KUHN. They should be, and when we work up those cases, 

I think there should be absolutely revocation as part of that process. And what we are pleased about is that with our new contractor, our new contract in terms of those that do enrollment for 

DME suppliers, this is going to be one of their new charges, to 

make sure that we are even better policing that, because you are 

absolutely right, there is the one side in terms of making sure 

these numbers are good. But if we still have bad suppliers out 

there, they are going to try to find a way to commit fraud against 

us, and we have got to work both sides of that ledger. 

Senator COBURN. Would you kindly forward to the Subcommittee 

the number of fraud causes that you—or the number of sanctions 

that have been banned from the program in the last year of DME 

suppliers? 

Mr. KUHN. Sure, we would be happy to. 

Senator COBURN. And the number that also have had dead physician prescriptions that have not been banned from the program? 

Mr. KUHN. We would be happy to get that information for you. 

Senator COBURN. Thank you, Mr. Chairman. 

Senator LEVIN. Thank you, Dr. Coburn. Senator McCaskill. 

Senator MCCASKILL. Thank you, Mr. Chairman. 

I am curious with this new system, the NPI system. Obviously, 

I am beyond alarmed that you have allowed these folks to make 

claims without a NPI number from the doctors. Could somebody explain to me why you wouldn’t give the doctors NPIs before you give 

the providers NPIs? 

Mr. KUHN. We do, and I think it is the issue in terms of us allowing how they use their own NPI in that field in terms of referral 

and prescription. Is that your question? 

Senator MCCASKILL. Yes. I mean, as of June 2, you are allowing 

DME suppliers, durable medical equipment suppliers, to use their 

own NPIs rather than the prescribing doctor. And the issue, I was 

told, is that because there were some order physicians that did not 

have their NPIs yet. 

Mr. KUHN. Right. 

Senator MCCASKILL. Well, why would you give them to any providers before you give them to all the doctors? 

Mr. KUHN. Here is the way that scenario works. Everybody applies for a NPI. They get their NPI. The physician or his office 

manager, his or her office manager, might not readily have it. They 

might not have applied for it yet, but they still are practicing in 

31 

the community, been there for 20, 30 years, whatever the case may 

be. What we were concerned about here is we know this created 

a vulnerability in the program. But we were also trying to balance 

that against access for Medicare beneficiaries to make sure that 

they could get the supplies and services that they needed. This is 

a temporary patch, but the key here, as I mentioned earlier, is that 

anybody that uses their own NPI in that field, any supplier, they 

are a very good candidate for post-payment review as a result of 

this scenario. 

So, yes, they have the opportunity to use it if it is a true access 

issue. But if you do use it, beware, we are going to come and look 

over your shoulder. 

Senator MCCASKILL. Do you get the Social Security number of 

the prescribing doctor if there is not a NPI for the prescribing doctor? 

Mr. KUHN. We have that information in terms of the enrollment 

process. That is correct. 

Senator MCCASKILL. OK. So for every single claim that is coming 

in from a provider where there is not a NPI for the doctor, are you 

running it through the Social Security database to make sure that 

the doctor is alive? 

Mr. KUHN. Yes, on enrollment, yes, we do. 

Senator MCCASKILL. No. I am asking on these claims. You have 

stopped segregating duties. 

Mr. KUHN. Right. 

Senator MCCASKILL. We have a program that cannot figure out 

for 6 years how to match the Social Security numbers of the doctors with the information you have been getting from the Social Security Administration. You have been getting the Social Security 

information for 6 years. You cannot figure out how to do that. 

If someone is making a claim for durable medical equipment 

with a NPI without a doctor’s NPI, you have that doctor’s Social 

Security number; before you pay that claim, are you running it to 

make sure they are alive now, this minute? 

Mr. KUHN. We are not right now. 

Senator MCCASKILL. OK. So why not? 

Mr. KUHN. We are making those systems changes. Those will be 

system changes that we hope will be in place by the end of this 

year or early next year as part of the process. 

Senator MCCASKILL. OK. Clearly, the cart is before the horse 

here because this seems to me that at a minimum, if you are going 

to allow these people to use their own numbers, you have to have 

another safeguard in place in terms of prevention. With all due respect, Mr. Kuhn, you came to this hearing not even knowing if you 

have a mechanism to hold these contractors accountable. You don’t 

even know if it is in the contract or not. That has not even gotten 

on your radar screen until some very pointed questions from this 

Subcommittee. That does not give me comfort that the priorities 

are in terms of looking at how we prevent fraud, waste, and abuse. Let me ask you about this $300 million that you currently get 

for the Integrity Program. Who is in charge of it? 

Mr. KUHN. Our Office of Financial Management and our Program Integrity Group. 

Senator MCCASKILL. Who is the person in charge of the program? 

32 

Mr. KUHN. Program Integrity is run by Kimberly Brandt. 

Senator MCCASKILL. Kimberly Brandt is in charge of a $300 million budget to make sure that bad guys are not ripping us off? 

Mr. KUHN. No, let me correct the numbers here. Right now we get $720 million for Program Integrity. That number has been frozen since 2003. Over the last 3 years, we have requested additional 

funding to the tune of $300 million in that area. Overall, that program is run by our Office of Financial Management. That is run 

by a gentleman by the name of Tim Hill. And then a particular 

group within the Office of Financial Management is the Program 

Integrity Group. They run many of the program integrity issues, 

but those dollars are also used in terms of audit function, different 

organizations within the Office of Financial Management. 

Senator MCCASKILL. Well, so now what you are telling me is we 

are spending $720 million—and you want $1 billion—to make sure 

people are not stealing from us. 

Mr. KUHN. That is correct. 

Senator MCCASKILL. OK. That gives me a headache. That means that we are spending $1 billion on top of all the people who work 

there, on top of the IG and the GAO, we are spending $1 billion— 

you want us to spend $1 billion. We are spending $720 million. 

Mr. Chairman, I think it would be a really good idea to have a 

hearing and talk to these integrity people. I would love to know 

what they are doing. I would love to see an org. chart. Could you 

provide to the Subcommittee an org. chart of how the $720 million 

is being spent? 

Mr. KUHN. Happy to. 

Senator MCCASKILL. And I would like to know how many people 

it is paying for. I would love to know how many contractors we are 

buying with that money. And what are they doing? The idea that 

you would be spending $720 million a year and for 6 years nobody 

has checked the death database at Social Security for doctors? Talk 

about needing to fire some people. 

Mr. KUHN. I think that is a fair question. But I think as I tried 

to share with the Subcommittee earlier, we face on a regular basis 

a number of vulnerabilities in the program. In 2004, when we were 

going to do the follow-up checks in terms of this issue of the deceased physician files that were out there, here is what we were 

looking at in 2004: We had a major scandal going on in this country with the issue of powered mobility devices or powered wheelchairs in certain parts of the country, to the tune of about $1 billion being ripped off from the Medicare program. With law enforcement, we launched a major initiative called Operation Wheeler 

Dealer. We threw resources in that direction. 

We had the new enrollment program, the PECOS system that 

came up. We moved resources in that direction. We had, on the 

heels of the Medicare Modernization Act, the new Part D program, 

and we wanted to make sure that was secure and up and running 

before it got out of the gate. 

So we make tough choices in terms of areas of vulnerability. This 

is an important area, but at that time when we were making these 

decisions, there were things that were much higher for us to put 

resources on. These are tough choices, but these are the decisions 

we made. 

33 

Senator MCCASKILL. Well, all of the money that you are throwing 

to these various programs is addressing fraud that has occurred as 

opposed to investing that money, integrating this money into prevention. And this hearing today is a drop in the bucket. I realize 

that. But it is a symbolic drop in the bucket in terms of, we are 

chasing the cow after it gets out of the barn rather than doing 

some pretty simple checking on that lock on the barn. And, if there 

are $720 million worth of people at Medicare that are supposed to 

be fixing the lock on the barn, then the very basic would be some 

of the things that clearly have not been done. 

I am curious that the Integrity Section, how they felt about you 

guys using NPI numbers for people providing the equipment as opposed to the doctors that were prescribing it. Did anybody over 

there scream? They should have. That should be something they 

should be reviewing. Everything should be going on at the front 

end, not at the back end. 

Of all the dead doctors we have found who prescribed DME after 

they had been dead a month, how many of those have been referred for prosecution? How many of those providers have gone to 

jail? 

Mr. KUHN. We are hoping to get the information from the Subcommittee in terms of the report. In the report, I think they identify one DME supplier. I did not see that they identified any physicians by name, but we hope to follow up with the Subcommittee to 

get their files, their identification. And I have asked staff, once we 

get that, to pursue active investigations in these areas and recoveries where we can. 

Senator MCCASKILL. What I would certainly like to see is if you 

all can do this without us passing a law demanding you do it. Is 

there any reason that every time you find a prescription that has 

been filled for a doctor who has been dead for more than 30 days 

that you cannot send a letter to the Attorney General in that State 

saying, ‘‘We have evidence of fraud. Go for it?’’ 

Mr. KUHN. That might be a nice improvement to have as part of 

this process. I like that suggestion. I will take that back. 

Senator MCCASKILL. Yes, and the $720 million worth of staff 

over at the integrity place, I would be curious why they have not 

demanded that you be doing that. You have 50 Attorneys General 

out there that are staffed and ready to handle these cases, and I 

know that it is a big deal in my State, and local prosecutors, too. 

Everybody wants to go after people that are preying upon sick people and undermining the Medicare program. 

I know my time is up. Thank you, Mr. Chairman. 

Senator LEVIN. Thank you, Senator McCaskill. 

We have asked you for a number of reports. Can you assure us 

we will have those reports in 30 days? 

Mr. KUHN. We will do our level best to get it to you in 30 days. 

If we are unable to, we will inform you accordingly and give you 

a time certain when we think we can deliver the information. 

Senator LEVIN. Fine. Now, let’s just take maybe 3 minutes each 

because we have some roll call votes coming on the Senate floor. 

You indicated, Mr. Kuhn, that CMS had a problem in terms of 

the data that was coming in. You apparently suggested that the 

AMA data was faulty. Now, the data that our staff looked at were 

34 

your files. In your files, the prescription dates came after the dates 

of death. 

Mr. KUHN. I think the issue is not that it was faulty, but it was 

not as robust as—— 

Senator LEVIN. Forget robust. That is, 734 out of the 1,500 cases 

were in your files. 

Mr. KUHN. Right. 

Senator LEVIN. It does not take much. Look, I am not a high-tech 

guy, but it does not seem to me it is very complicated for software 

to be written that says if there is a date of death in your file, you 

do not pay claims. 

Mr. KUHN. Oh, I do not dispute—— 

Senator LEVIN. What is complicated about that? 

Mr. KUHN. I do not dispute that the matches weren’t made as 

good or—— 

Senator LEVIN. Not ‘‘as good.’’ The claims should not have been 

paid. 

Mr. KUHN. But, again, a lot of it is the thing that we have got 

to have good data sources. I know when we talked to the staff—— 

Senator LEVIN. No. I am sorry. I have to interrupt you. I have 

only 3 minutes. This is not good data. So this is your data. This 

investigation by our staff looked at your files. In your files, the date 

of death was present. For the 1,500 we looked at, that random 

sample, in half of those deceased physicians there were payments 

made. Those 1,500 cases had dates of death in CMS files. It is not 

a matter of getting information from Social Security or from AMA. 

Your files had the date of death. How complicated is it for someone 

to write a program that says in your files where there is a date of 

death, you hold off paying any claims? Why is that complicated? 

Mr. KUHN. I cannot imagine why that should be so complicated, 

and I do not understand why that one was not corrected. I will look 

into that one personally. 

Senator LEVIN. Why does that take $300 million to do? 

Mr. KUHN. It was an issue of priorities at the time, what we 

were—— 

Senator LEVIN. But there is no dollar priority. That is a software 

issue. That is just writing a simple software program that says do 

not pay a claim where there is a date of death in CMS’ files for 

a physician. 

Mr. KUHN. Senator, it is tough calls. If someone is stealing a billion dollars here, someone—— 

Senator LEVIN. Go after the billion dollars. 

Mr. KUHN. We are going to go after the billion dollars. 

Senator LEVIN. I am with you, but could you get $1,000 for someone to write a program? 

Mr. KUHN. We will see what we can do to chase the others. 

Senator LEVIN. No. It is not chase the others. It is to write a program in your own file which says if there is a date of death in your 

file, you do not pay claims. That is not a complicated, expensive 

deal. So I do not think it is good enough for you to say, well, you 

have asked for $300 million more above the $700 million that you 

have not gotten when that is a simple software cure. 

Mr. KUHN. The only thing I can answer, Senator, is that we have 

to make choices with limited resources. We made some choices on 

35 

vulnerabilities here. I understand that this sounds simple, but we 

made some choices in 2004, and this is the choices we made. 

Senator LEVIN. You mean you looked at this possibility and decided not to do it? 

Mr. KUHN. We looked at where we had program vulnerabilities, and as I said, $1 billion, chasing those that were stealing on power 

wheelchairs, the new PECOS system, the new Part D program is 

where we put our resources. 

Senator LEVIN. I would agree with that decision to put resources 

there. What I am telling you is this is not a complicated thing. This 

is writing software, a program, which is not complicated. This is 

not a matter of making sure the data that comes in from Social Security or AMA is accurate and up to date. This is where your file 

has that record in there that there is a physician that has died and 

where you have not automatically then said no payments based on 

that identification number. 

Mr. KUHN. And I appreciate that distinction. 

Senator LEVIN. I have to tell you, I just do not find your testimony credible in this regard. To talk about other needs that you 

have to go after—the wheelchair frauds—I agree with you, if it is 

a matter of either/or, you do it. But this is a very simple fix, and 

I do not get how you can defend not doing it and how you do not 

know whether or not the contract that you signed with contractors 

who are supposed to implement this program contains a provision 

that holds them accountable for failures to do their job. On all 

those items you mentioned, looking forward, you have to have accountability in there. And that is what has been missing, and it is 

still missing. There is no accountability for failure to do people’s 

jobs. That to me is a huge gap, and it is a gap in too many programs, too many government programs, where people, including 

our contractors, are not held accountable for not doing their job. 

I would add that to your program as the No. 1 item that you 

ought to have in any new program. 

Senator Coleman. 

Senator COLEMAN. Thank you, Mr. Chairman. 

First, just to go back to the issue of the DME providers providing 

a number and not the physicians. Again, I stress the concern with 

the fly-by-night folks, that a post-payment review is not going to 

be of help for those folks who are doing this to rip off the system. 

We know that they are out there. Then we have contractors that 

do the review. That costs money. 

My strong suggestion is that as you go back, you look at putting 

a guard at the front door. It goes back to the issue the Chairman 

raised and I raised in my opening statement. I talked about things 

that UPS does and FedEx does. It is the ability with computer capability today to be able to check things. You would think that 

there would be some kind of automated system at the front door. 

So I would urge you to go back because I do not want to be back 

here in another year looking at what happened in that period 

where we did not require the new NPI from physicians. 

Second, it would appear that if we have dead physicians, there 

was obviously no system in place to check against treatment visits. 

In other words, CMS has information from treatment visits. Physicians are being reimbursed for that. So, again, where we are today, 

36 

we have to look back and you see all these years of payments with 

this—it was then a UPIN, but I would presume that there would 

be a big blank for many years about any treatment visit because 

there is no physician. Why doesn’t CMS cross-check claims with 

DME for doctor visits? 

Mr. Vito, I would turn to you. Would that be another piece of the 

way in which we ensure greater integrity by doing—again, at the 

press of a button. I have to believe that you can press a button, 

and it may be more expensive than $1,000. It probably costs money 

to do this. But we are paying contractors to do it. This is not the 

government’s limitation. We have lots of money in the private sector. What am I missing in having a cross-check of treatment visits 

to physicians in looking at DME payments, claims? 

Mr. VITO. Well, there are two different systems at CMS. There 

is the DMERC, the DME system, and also the Part B system. And 

sometimes they are not housed together. But when we do reviews 

and when we look at billing patterns for aberrations involving 

UPINs, we look at the beneficiaries. Then we also look to see if 

there were any Part B bills indicating that they had an office visit 

at the time that they were supposed to have gotten an order for 

this equipment. 

Senator COLEMAN. But that is my point. I would presume that 

is what you do, and in this day and age, where we have such capability electronically, it shouldn’t matter where you are housed. It 

shouldn’t matter. That is of no relevance today. It is a question of 

whether we want to ensure that the right hand knows what the 

left hand is doing. And so it all goes to this issue of what kind of 

capability do we have today to be able to provide—not waiting for 

you to come in after the fact, Mr. Vito. And I appreciate it—I do 

not want to put you out of a job. But it would be nice if you would 

have less to look at because you are doing what I believe could be 

done up front. 

Mr. VITO. Right. The only issue here is that they are not even 

editing for the most basic format. CMS did not edit for the most 

basic edit of just seeing if the UPIN was active. You are talking 

about even doing more, which would be even more computer capabilities and requirements because you would then have to match it 

up onto the Part B system. What I am saying is we could start by 

taking first steps and build upon those first steps to make it so 

that we would have a system that certainly has more integrity and 

does more checks. We will be glad to work with CMS and you to 

make sure that happens. 

Senator COLEMAN. I appreciate that, Mr. Vito. Thank you, Mr. 

Chairman. 

Senator LEVIN. Thank you. Dr. Coburn. 

Senator COBURN. Thank you. I am starting to get a little worried 

that CMS’ computer systems are like the Pentagon’s, and it is scaring me to death. Am I hearing you right that there is no cross-reference capability between Medicare Part D, CME, Part B, and Part 

A to talk to one another? 

Mr. KUHN. Probably 5 years ago there was not, but there is now. 

Senator COBURN. All four of those, you can run cross-checks all 

the way across—eligibility, UPIN numbers, date of birth, certifiVerDate Aug 31 2005 09:37 Feb 17, 2009 Jkt 044122 PO 00000 Frm 00040 Fmt 6633 Sfmt 6601 P:\DOCS\44122.TXT SAFFAIRS PsN: PAT
37 

cation, enrolled doctors, certified suppliers—all that can be crossreferenced? 

Mr. KUHN. My understanding is that with the changes—let me 

even back up, a little more history here. Part of the Medicare Modernization Act gave us authority to do contractor payment reform, 

something that the agency has wanted to do for 20 years of this 

whole legacy system that we had out there. And so we got rid of 

the fiscal intermediaries; we got rid of the carriers; we got rid of 

the DMERCs. All those folks are gone now, and basically we are 

creating what we now call Medicare Administrative Contractors 

(MACs), which for the first time brings Medicare A and B together. 

Those systems now talk to one another. They work together. 

Senator COBURN. But do they talk to Medicare Part D? 

Mr. KUHN. And we are working on making sure that they can 

now talk to the DMACs. I don’t know if that system is actually put 

in place yet, but ultimately that is the goal so that the whole system is synched up across the way. And that is part of the reform 

effort to get at the very issues Mr. Coleman was raising. 

Senator COBURN. Mr. Chairman, I would just say Medicaid is designed to be defrauded. I mean, we have designed it. You look at 

DME. We set artificial prices. We inflated the prices based on inflation. It had nothing to do with the real cost of goods. We set it up, 

and we created the system and said here is a real lucrative area, 

let’s go take some of it. And what we really have to do is we have 

to go back and look at Medicare and change it. And I have proposed this to CMS before, if we are not going to do everything up 

front like we should be doing—which we should be holding contractors accountable. If you were in the private sector and you did not 

have this cross-referencing available and you did not think about 

doing it beforehand, not after the fact, I mean, why wasn’t this part 

of the program 10 years ago of talking? We had a very accurate 

computer. But the answer to this is undercover patients. The fact 

is people do not like going to jail. And all you have to do is throw 

about 50 doctors in jail and about 100 DME suppliers and 100 hospice suppliers, and you know what? This fraud would go from $80 

billion a year down to about $5 billion. But nobody wants to do the 

hard work of the true undercover to get rid of the fraud. And we 

will not do the hard work of changing the system where it is not 

fraud—it is not a pro-fraud environment. 

I would like to know from Mr. Kuhn and Mr. Vito, how would 

you have us change the Medicare program so that it is not so enticing for fraud? 

Mr. KUHN. Boy, that is a very good question. I think part of the 

issues you talked about in terms of are there better ways that we 

can do it in terms of active surveillance or areas that we are looking at. For example, one of the initiatives we launched with the 

Justice Department, the IG, and others was about 2 years ago 

called Operation Accidental Tourist, where we went through the 

Miami area looking at DME suppliers. And as a result, that resulted in a revocation of close to 500 suppliers out there that were 

nothing more than storefronts, folks that were clearly trying to defraud the program. 

There is a new Medicare task force operated by the Department 

of Justice that is having some real success, and my understanding, 

38 

within the last year to 18 months, is that has led to around 55 

prosecutions and convictions out there right now. 

So I think getting tougher on the fraud side of the ledger is going 

to make a big difference. But you are right at the outset. It really 

is how you pay and what you pay for. When you have mis-priced 

procedures, when you pay too much for something, as we do in 

DME and other areas, it does bring the fraudsters into the program. 

When you have systems that do not adequately work with one 

another and talk, as has been the subject of this hearing, it leaves 

opportunities for people to kind of encroach on the program that is 

out there. 

But I think at the end of the day, where it really makes a difference is that we have good, legitimate suppliers out there, people 

we can count on and trust and try to drive integrity in every step 

of the process that we have there, and to make sure that the payment systems are as fair and as honest as they can be. I think we 

have a fair payment and legitimate suppliers out there. Those are 

the areas that I think are going to give us the biggest bang for our 

buck. 

Senator COBURN. Mr. Vito. 

Mr. VITO. Well, it is very important that the controls that are established be utilized in the manner that is most effective. Largely, 

the program is relying on honest providers to file claims properly, 

and that is the way the system was designed. So it is a lot of trust 

that is involved in the provider billing process. But I think there 

needs to be more verification with the trust and more checks up 

front to ensure that things are done properly. 

We have worked with CMS, the Department of Justice, and others, for example, in South Florida, and we have really made a dent 

into the problem of the DME suppliers down there. I think it is a 

concerted effort of identifying vulnerabilities, correcting those 

vulnerabilities, making sure that they do not exist, and then engaging in collaborative activities that best utilize our investigators and 

the Department of Justice resources simultaneously. So largely 

what it is, is all of us working together to get the best results and 

by doing it with all the tools that are available to us, such as eliminating the vulnerabilities that we identify and then taking actions 

to prosecute the people who committed the crimes and make sure 

that is known by other people who would do likewise. We need to 

make sure that we continue to stay on the task until it is resolved. 

Senator COBURN. Mr. Chairman, I have one further request, and 

I don’t know if I asked you this. And I think I did, but I wanted 

to confirm it with Mr. Kuhn. The list of people who have been filing claims for DME equipment under the pretense of a deceased 

physician and the sanctions applied, you will give that to the Subcommittee? 

Mr. KUHN. You did ask for that, and we will supply that to the 

Subcommittee. 

Senator COBURN. Thank you, Mr. Chairman. 

Senator LEVIN. Thank you, Dr. Coburn. 

Just one thing that I want to pursue and then see if colleagues 

have any additional questions. There is supposed to be a vote any 

minute. 

39 

When we talked before about the deceased date information coming to the agency, what you said, Mr. Gray, is that the same information is going to be going under the new system as is going under 

the old system. That is not going to change. 

Mr. GRAY. Let me be clear, Senator. It is the same file format. 

Senator LEVIN. All right. And then the question was raised: How 

often would somebody press a button, I guess, at CMS to put a hold 

on any payment to somebody, a doctor, who is deceased, a payment 

to a provider based on that identification number? And I think Dr. 

Coburn asked the question about—well, you said every month, and 

Dr. Coburn I think said why not do it every week, and you said, 

well, we could do it every week. 

Why can’t that be done automatically? Why couldn’t it be done 

when the information comes over from Social Security that somebody is deceased, automatically there is a hold on that file? Why 

does someone have to press a button even? Why can’t we have software saying it is automatic? 

Mr. KUHN. I think there are two different issues here at play. 

One is trying to update the files to make sure that we have the 

batches that we get from Social Security in order to get the deceased physicians, and that is one issue, to make sure that our files 

are accurate. That presumably would be done on a weekly basis. 

I think the question you are asking is that when our claims system detects that there is a deceased—— 

Senator LEVIN. No. 

Mr. KUHN. OK. I am sorry. 

Senator LEVIN. I go to the first question. Why is that not done 

automatically? Why isn’t there a hold placed automatically when 

that information comes electronically to you? 

Mr. KUHN. Oh, well, it depends when we process the batches. 

Senator LEVIN. Is that electronic processing? 

Mr. KUHN. Yes, and presumably—and again, our data folks 

would be the ones that could speak to this better. But presumably 

they have to reserve data-processing time. These probably would be 

files that would be run at night, on weekends, things like that. 

Senator LEVIN. It would just be inputted by hand? 

Mr. KUHN. I do not think so. I am sure it is all electronic. 

Senator LEVIN. Well, then, why do we have to wait a week? Why 

isn’t it an automatic hold on that file electronically when that information comes in? 

Mr. KUHN. Well, I think, as you may know, Senator, there is real 

competition for computer time when you run large files like this, 

and I think it is just a matter of whenever they can schedule that. 

If we can do it even more rapidly than every week, I think that 

would be preferable. 

Senator LEVIN. Well, I am just wondering why it is not an automatic deal. If you could check—— 

Mr. KUHN. Sure, with the data folks. 

Senator LEVIN. Just find out whether that could be done automatically as the information comes in, bingo, it is done electronically as it comes in, just the way we get e-mail automatically, 

which triggers a bell in my wife’s head somewhere. 

Senator COLEMAN. I have nothing further now. We have a lot of 

information coming back to us, Mr. Chairman, that we will need 

40 

to take a look at and see whether we need to schedule another 

hearing. 

Senator LEVIN. We want to thank our witnesses. Again, thank 

you, Senator Coleman, and your staff for your initiative here, and 

we thank all of our staff. They work together very well, as you 

pointed out. We are grateful for that. 

We will stand adjourned. 

[Whereupon, at 11:54 a.m., the Subcommittee was adjourned.] 

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Æ 


44122.148