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67–652 2011

IMPROVED EFFORTS TO COMBAT 

HEALTH CARE FRAUD 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 2, 2011

Serial No. 112–OS1 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HEALTH 

CHARLES W. BOUSTANY, JR., Louisiana, Chairman 

DIANE BLACK, Tennessee 

JIM GERLACH, Pennsylvania 

VERN BUCHANAN, Florida 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

JOHN LEWIS, Georgia 

XAVIER BECERRA, California 

RON KIND, Wisconsin 

JIM MCDERMOTT, Washington 

JON TRAUB, Staff Director 

JANICE MAYS, Minority Staff Director 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of March 2, 2011 announcing the hearing ............................................. 2 

WITNESSES 

PANEL 1: 

Peter Budetti, Deputy Administrator and Director, Center for Program 

Integrity, Centers for Medicare and Medicaid Services ................................ 6 

Lewis Morris, Chief Counsel, Office of Inspector General ................................ 26 

PANEL 2: 

Karen Ignagni, President and CEO, America’s Health Insurance Plans ........ 51 

Louis Saccoccio, Executive Director, National Health Care Anti-Fraud Association ................................................................................................................ 63 

Aghaegbuna ‘‘Ike’’ Odelugo, Plead guilty to state and federal charges related to Medicare fraud. According to the Department of Justice, the 

total amount paid by Medicare as a result of Odelugo’s scheme was 

approximately $9,933,354.27*. He has been assisting law enforcement 

while awaiting sentencing in May .................................................................. 79 

*http://www.justice.gov/usao/txs/releases/August%202010/ 

082310%20Odelugo.htm 

SUBMISSIONS FOR THE RECORD 

Hon. Peter Roskam .................................................................................................. 95 

Academy of Managed Care Pharmacy ................................................................... 98 

Apria Healthcare ..................................................................................................... 101 

Dream Software ....................................................................................................... 106 

Pharmaceutical Care Management Association .................................................... 113 

MATERIAL SUBMITTED FOR THE RECORD 

Questions and Responses for the Record: 

Hon. Chairman Charles W. Boustany, Jr. .................................................. 116 

Hon. Jim Gerlach .......................................................................................... 120 

Hon. Lynn Jenkins ........................................................................................ 121 


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IMPROVED EFFORTS TO COMBAT 

HEALTH CARE FRAUD 

WEDNESDAY, MARCH 2, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:09 p.m., in Room 

1100, Longworth House Office Building, Hon. Charles Boustany 

[Chairman of the Subcommittee] presiding. 

[The advisory of the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Wednesday, February 23, 2011 

Boustany Announces Hearing on Improving 

Efforts to Combat Health Care Fraud 

Congressman Charles W. Boustany, Jr., MD, (R–LA), Chairman of the Subcommittee on Oversight of the Committee on Ways and Means, today announced 

that the Subcommittee will hold a hearing on improving efforts to combat health 

care fraud. The hearing will take place on Wednesday, March 2, 2011, in 

Room 1100 of the Longworth House Office Building, immediately after a 

brief Subcommittee organizational meeting beginning at 2:00 p.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. Witnesses will include experts on health 

care fraud from both the public and private sectors. Any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

Health care fraud costs the American taxpayer tens of billions of dollars every 

year, significantly increasing Medicare spending. As a GAO-designated ‘‘high-risk’’ 

program since 1990, Medicare continues to attract those who defraud the government through kickbacks, identity theft, and billing for services and equipment beneficiaries never receive or do not need. The Medicare program covered 47 million 

beneficiaries who are senior citizens or have disabilities in 2010 with estimated outlays of $509 billion, according to GAO. With the Medicare Board of Trustees predicting that Medicare expenditures will reach nearly $1 trillion per year by 2019, 

a rapidly increasing amount of taxpayer dollars will be vulnerable to fraud unless 

greater steps are taken to stem the tide. 

The Federal Bureau of Investigation estimates that between 3 and 10 percent of 

health care spending is fraudulent. With the Centers for Medicare and Medicaid 

Services estimating current health care spending to be over $2.5 trillion, anywhere 

from $75 to $250 billion is lost annually to fraud. As much as $80 billion of this 

fraud is in the federal health care programs, including up to $50 billion in Medicare 

alone. Though it is difficult to accurately quantify the total costs of health care 

fraud, experts at the National Health Care Anti-Fraud Association predict that with 

rising health care spending, total health care fraud, waste, and abuse could rise to 

as high as $330 billion per year by 2013. 

In announcing the hearing, Chairman Boustany said, ‘‘The Federal Government borrows 41 cents for every dollar it spends, and a growing portion of 

this is within the Medicare program. At a time when the Federal Government is hemorrhaging money, we have to make every effort to stop fraud 

within the health care system. It is important that Congress oversee what 

is happening to this money. This hearing will explore recent efforts to combat Medicare fraud and what the government can be doing better. It will 

also explore what the private sector is doing to stop fraud and how public 

and private actors might better work together in this effort.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on current policies and programs designed to prevent and 

punish Medicare fraud, as well as new and innovative practices aimed at preventing 

health care fraud in the private sector. The hearing will also explore how the public 

sector and private sector can learn from each other about new tools to combat Medicare fraud, waste, and abuse. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to submit, and click on the link entitled, ‘‘Click here 

to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close 

of business on Wednesday, March 16, 2011. Finally, please note that due to the 

change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical 

problems, please call (202) 225–3625 or (202) 225–2610. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

Chairman BOUSTANY. Now we will turn to today’s hearing on 

health care fraud. 

I want to begin this hearing by welcoming our guests, who are 

here to join a very important discussion about health care fraud. 

And, gentlemen, I know you have been very busy today, and we appreciate you being here today. 

For our first panel, we welcome Dr. Peter Budetti, who serves as 

deputy administrator of the Centers for Medicare and Medicaid 

Services and is director of its Center for Program Integrity. Welcome. 

We also welcome Mr. Lewis Morris. Mr. Morris serves as the 

chief counsel to the Department of Health and Human Services’ Office of Inspector General, an organization that is on the front lines 

of the fight against health care fraud. Welcome. 


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On our second panel, we will hear from Karen Ignagni from 

America’s Health Insurance Plans, and Lou Saccoccio from the National Health Care Antifraud Association. Both of these witnesses 

will provide insight into how the public and private sectors work 

together to fight health care fraud and where we might be able to 

improve anti-fraud efforts, and I thank them for coming as well. 

We also have a very rare chance to hear from Mr. Ike Odelugo. 

Through a variety of schemes involving durable medical equipment, Mr. Odelugo defrauded the Medicare program of an estimated $9 million. Since his days of committing health care fraud, 

he has assisted law enforcement efforts to track down those engaged in similar activities. Today, he will describe both how he 

went about defrauding the Medicare system and, in his experience, 

just how easy it was. 

This promises to be an eye-opening hearing on a very critical 

topic. This is not simply about those committing fraud; it is about 

the patients and health care providers that are hurt by it. I come 

from a family line of physicians, and, as a cardiothoracic surgeon, 

I certainly understand that every dollar lost to health care fraud 

is a dollar not spent on patient care. 

And we are not talking about small sums of money. Health care 

spending accounts for one-sixth of our Nation’s economy, and within this spending is an incredible amount of money lost to 

fraudsters. Professor Malcolm Sparrow of the Harvard Kennedy 

School said before the Senate Judiciary Committee in 2009, ‘‘The 

units of measure for losses due to health care fraud and abuse in 

this country are hundreds of billions of dollars per year. We just 

don’t know the first digit.’’ 

The FBI estimates that between 3 and 10 percent of all health care spending is fraudulent, as much as $250 billion each and 

every year. As much as $50 billion of this yearly fraud is in the 

Medicare program, and to put it another way, that is over $135 

million per day in the Medicare system alone. 

Medicare crooks are robbing the American taxpayer each and 

every year of the same amount it took Bernie Madoff decades to 

rob from his private investors. Medicare fraud has become such an 

attractive target for criminals that the FBI and OIG have seen an 

increasing number of foreign criminal groups coming to America to 

exploit the program because it is less risky and a lot more lucrative 

than other illegal ventures. 

Without action, the problem is only going to get worse. The Medicare program had estimated outlays of $509 billion in the year 

2010, and that number is expected to grow at a rapid pace as 7,000 

baby boomers become eligible for Medicare every single day in the 

year 2011. CMS expects annual Medicare spending to approach 

$900 billion by 2019, and, as this spending goes up, so will the 

amount of taxpayer money potentially lost to fraud. 

While the Affordable Care Act included some new anti-fraud provisions, it left a lot of suggestions by the Office of Inspector General, Government Accountability Office, and Members of Congress 

from both parties on the cutting-room floor. 

At the same time, the law created a host of new health care 

spending programs. The Congressional Budget Office estimates 

these new programs will cost $940 billion over the next 10 years 


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and much more after that. CBO has estimated the act’s anti-fraud 

provisions would save about $5.8 billion over the next 10 years. 

That is less than 1 percent of the expected fraud against Federal 

health care programs during the same period. 

There is also good news on the subject. Just last month a joint 

effort by the Departments of Justice and Health and Human Services resulted in charges against 111 defendants for allegedly defrauding the Medicare program of over $225 million. This was the 

largest crackdown we have seen yet, and we look forward to hearing about these and other efforts from our witnesses. 

There was also a lot to explore regarding potential private-public 

collaborations. As private health insurers develop new methods in 

technology to prevent fraud, it is important that the public and private sector work together in what should be a mutually beneficial 

collaboration. 

With important reforms, new technology, better use of data, and 

increased cooperation between the public and private sector, it is 

my hope we can put a substantial dent in the problem of health 

care fraud. This hearing seeks to begin that process. 

Before I yield to our ranking member, Mr. Lewis, I ask unanimous consent that all members’ written statements be included in 

the record, and without objection, so ordered. 

Chairman BOUSTANY. Mr. Lewis, we will now turn to you for 

your opening statement. 

Mr. LEWIS. Thank you very much, Chairman Boustany, for 

holding this important hearing on ways to fight health care fraud. 

This is an important topic that touches the lives of millions of 

Americans. Our health care dollars are too precious, and we must 

ensure that those dollars are spent on health care. 

Last year, this subcommittee held a hearing on fraud in the 

Medicare program. We learned about new tools and new approaches that were being used to protect Medicare patients and return billions of dollars to the program and the taxpayers. We also 

explored the new provisions of the Affordable Care Act that gave 

government agents new tools to fight fraud. 

Today, I look forward to learning how these tools are being used 

to protect the Medicare program. I am interested in the new initiatives of the Department of Health and Human Services in this 

area. I am also interested in learning how people become involved 

in Medicare fraud and how health plans, government agencies, and 

organizations can work together to detect and stop this abuse. 

In closing, Mr. Chairman, I would like to thank the witnesses for 

being here today. I thank you for your testimony and your willingness to share your experiences and ideas. I remain committed to 

protecting the Medicare program and finding new ways to work together with you and my colleagues to fight fraud in this important 

program. Together we can ensure that the Medicare program remains strong for the next generation of Americans. 

With that, Mr. Chairman, I yield back my time. 

Chairman BOUSTANY. Thank you, Mr. Lewis. 

We have a vote called. I think what we will do is take the witnesses’ testimony now and then probably recess at that point for 

three votes, and then we will return and resume the hearing. 


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So now we would like to turn to our first panel of witnesses. I 

want to welcome Dr. Peter Budetti, deputy administrator and director of the Center for Program Integrity with CMS. Mr. Budetti, 

you may proceed. 

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

WASHINGTON, D.C. 

Dr. BUDETTI. Thank you very much, Chairman—Dr. Boustany 

and Ranking Member Lewis and Members of the Subcommittee for 

the invitation to discuss the Centers for Medicare & Medicaid Services’ efforts to reduce fraud, waste, and abuse in the Medicare, 

Medicaid, and CHIP programs. I am also very pleased to be sharing the table with my distinguished colleague in fighting fraud, the 

chief counsel for the Office of the Inspector General, Lewis Morris. 

Mr. Chairman, from the first day that I had the privilege of accepting this job about a year ago, I have been asked two questions 

over and over again: Why do you let crooks into the Medicare and 

Medicaid programs, and why do you pay their claims when they 

are fraudulent? And I am very pleased to be able to report to you 

today that we are making a great deal of progress on both fronts. 

We will be keeping the bad guys out of the programs, the people 

who don’t belong there, while working to make sure that the good 

providers and suppliers who are our partners have, if anything, 

less difficulties with our processes, and we will be moving to deny 

claims and screen them out when they are fraudulent and should 

not be paid. And we actually will be doing that in collaboration 

with our colleagues at the Office of the Inspector General. 

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

challenges in fighting fraud and abuse. The Secretary consolidated 

within CMS, program activities into four centers, one of which is 

the new Center for Program Integrity, and that is the one that I 

have the privilege of leading. This has served our purposes well. It 

has also helped foster our collaboration with our law enforcement 

partners. 

The Affordable Care Act also enhances this organizational 

change by providing us with an opportunity to jointly develop 

Medicare and Medicaid policies together, because the new center 

combines the Medicaid Program Integrity Group and the Medicare 

Program Integrity Group under the same roof for the first time; 

and because the Affordable Care Act, for example, the screening 

provisions in the Affordable Care Act apply equally to Medicare 

and Medicaid, this gives us a new opportunity to consolidate and 

to coordinate the programs and activities and policies across both 

programs to assure better consistency in what we are about. 

You might wonder whether administrative changes at an organization really mean anything. I can tell you that in our case, creating a Center for Program Integrity that is on a par with the 

other major components within the Centers for Medicare & Medicaid Services, elevates the issue substantially for both internally 

and also sends a message to the would-be fraudsters that we are 

taking this seriously. 


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To explain how we have been transforming our fraud detection 

and prevention work, I now draw your attention to our chart which 

I believe we have also given you some hard copies of—but this is 

a poster that depicts how we are moving from our historical state 

which was based on ‘‘pay and chase’’—pay claims first and then try 

to find problems afterwards—to preventing fraud. That is our number one goal. 

Number two, we are committed not to pursuing a monolithic approach but, rather, to use our resources to apply to bad actors and 

to identify those who pose the most serious risks to our programs. 

Third, we are taking advantage of advances in technology and 

other innovations to modernize our approaches to doing this. 

Four, consistent with this administration’s commitment to being 

transparent and accountable, we are developing performance measures that will specify what our targets are for improvement. 

Five, we are actively engaging our public and private partners 

from across the spectrum because there is much to learn from others who are engaged in fighting fraud, and we know that the private sector is oftentimes victim to the same schemes and to the 

same fraudsters as the public sector is. 

Finally, we are committed to coordination and integration among 

all the CMS fraud fighting programs wherever possible. 

I would like to particularly stress one point, Mr. Chairman, 

which is that as we crack down on those who would commit fraud, 

we are mindful of the necessity to be fair to health care providers 

and suppliers who are our partners in caring for beneficiaries, and 

to protect beneficiary access to necessary health services. This requires striking the right balance between preventing fraud and 

other improper payments without impeding the delivery of critical 

health care services to beneficiaries. 

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

care providers and suppliers are honest people who provide critical 

health care services to millions of Americans every day, and we are 

committed to providing health care services to our beneficiaries 

while reducing the burden on legitimate providers, targeting 

fraudsters, and saving taxpayer dollars. 

I appreciate the opportunity to meet with you today, and I will 

be happy to answer any of your questions later on. Thank you very 

much. 

Chairman BOUSTANY. Thank you, Dr. Budetti, and I should 

say also that your full written statements will be made part of the 

record, as is customary. 

[The prepared statement of Dr. Budetti follows:] 


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Chairman BOUSTANY. Now, Mr. Morris, you may present your 

testimony. 

STATEMENT OF LEWIS MORRIS, CHIEF COUNSEL, OFFICE OF 

INSPECTOR GENERAL, WASHINGTON, D.C. 

Mr. MORRIS. Good afternoon, and thank you for the opportunity 

to testify about the efforts of the Office of Inspector General and 

our partners to combat health care waste, fraud, and abuse. 

The OIG has been fighting the fight against health care waste, 

fraud, and abuse for over 30 years. Most of our health care integrity efforts are funded by the Health Care Fraud and Control program account, or HCFAC, and this anti-fraud program is a prudent 

investment of taxpayer dollars. Last fiscal year, HCFAC activities 

returned an unprecedented $4 billion in fraudulent and misspent 

funds. Over the last 3 years, for every dollar spent on the program 

integrity and enforcement efforts, the government has returned an 

average of $6.80. But despite our successes, there is much more to 

be done. 

Those intent on breaking the law are becoming more sophisticated, and the schemes more difficult to detect. Some fraud 

schemes are viral. They replicate easily and they migrate. As law 

enforcement cracks down on a particular scheme, the criminals 

may redesign it or relocate to another city. When their schemes are 

detected, some perpetrators have fled with stolen Medicare funds 

and become fugitives. 

To fight health care fraud, our response must be swift, agile, and 

well-organized. My written testimony describes in more detail our 

collaborative efforts and fraud-fighting initiatives, and this afternoon I would like to highlight three of the government’s ongoing 

initiatives. 


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First, our Medicare Strike Forces are cracking down on criminals 

in fraud hot spots across the country. Since their inception in 2007, 

Strike Force operations have charged almost 1,000 defendants 

whose fraud schemes have involved more than $2.3 billion in Medicare claims. Just last month, as you referenced, sir, Strike Forces 

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

including doctors, nurses, and health care company owners. The alleged fraud schemes involved more than $225 million in Medicare 

billings. 

Second, the OIG is using its exclusion authorities to bar from the 

Federal health care program those individuals who lack integrity 

and pose a threat to our beneficiaries. In particular, we are holding 

responsible the corporate executives who are accountable for their 

company’s criminal behavior. Health care is not limited to career 

criminals and sham providers. Unfortunately, major corporations 

also commit fraud, sometimes on a grand scale. We are concerned 

that some executives of these health care companies may believe 

that as long as the ill-gotten profits outweigh civil penalties and 

criminal fines, health care fraud is worth the risk. The long and 

short of it is that we aim to change that cross-benefit calculus by 

excluding the executives who are responsible for the fraud either 

directly or because of their position of responsibility in the company. We are mindful of our obligation to exercise this authority 

judiciously, but if an executive knew or should have known of the 

criminal misconduct of his organization, we will operate on the presumption in favor of excluding in order to protect our program and 

its beneficiaries. 

Our third initiative enlists the public and the vast majority of 

honest health care providers to help prevent fraud. For example, 

we are conducting free compliance seminars in six cities. One of 

those is taking place in Tampa, Florida, today. These seminars 

educate providers on fraud risks and share compliance best practices. We also recently published a fraud and abuse booklet for new 

physicians. It provides guidance on how physicians can comply 

with the fraud and abuse laws in their relationship with papers, 

vendors, and fellow providers. We have had over 27,000 hits on our 

Web site for this booklet alone. 

We are also reaching out to the public to play a very special role 

in helping us track down Medicare fraud fugitives. We have posted 

online on our Web site OIG’s most wanted health care fraud fugitives, and I have included a snapshot of that Internet posting for 

your consideration. Our current most wanted list includes 10 individuals who allegedly defrauded taxpayers of more than $136 million. 

In conclusion, the OIG is building on our successes and employing all the oversight and enforcement tools available to us to protect our health care programs, the people served by them, and the 

American taxpayer. 

Thank you for your support of our mission, and I would be 

pleased to answer any questions. 

[The prepared statement of Mr. Morris follows:] 


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Chairman BOUSTANY. Thank you, Mr. Morris and Dr. Budetti. 

What we are going to do now, since we have this pending vote, 

we are going to recess and we will return promptly—we have three 

votes—and resume with questioning. And I appreciate your indulgence. The committee stands in recess. 

[Recess.] 

Chairman BOUSTANY. The committee will resume its proceedings, and we will start off with questions, now that you all 

have both given your testimony. 

Mr. Morris, I think you were before our committee last year, and 

we spoke about fostering better cooperation between health care 


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providers and anti-fraud efforts, and both of you alluded to this in 

your oral testimony. 

I am interested in further exploring the role of physicians in preventing health care fraud; identifying it, helping you on the front 

end to identify it. Certainly physicians, nurses, other medical professionals, are in a unique position to pick up on fraudulent activity on the ground, as sort of direct intelligence on the ground as 

to what is happening. And I know you and I spoke about the case 

in Lafayette, in my hometown, and how it involved a whistle-blower who was actually a partner of a physician who brought something to light that maybe for years had been ongoing and really— 

was really not detectable until that whistle-blower activity. 

So what barriers are there now that you are seeing that would 

inhibit physicians and other providers from coming forward and 

helping you in your efforts to identify potentially fraudulent activity? 

Mr. MORRIS. I think there are a number of opportunities. We 

have to do a better job of reaching out to physicians and other professionals. Part of it is through education. I made reference in my 

written testimony to the Road Map for new physicians, and the 

idea behind that actually came from medical residents who told us 

they didn’t understand what the fraud and abuse laws were. OIG 

put together a booklet that will help them not only protect themselves but also be able to recognize when a practice is doing something that they might not want to get involved in. Education is 

part of our outreach. 

Every time we go out and demonstrate our commitment to compliance, demonstrate that we recognize that this is a complex program and that there are lots of opportunities to make mistakes, 

and that it is incumbent on physicians to embrace compliance, that 

that is the way to go. We are not a hammer looking at everything 

as a nail. Building that trust goes a long way. 

Next week we are meeting with the American Medical Association to get their ideas on how we can work together better and 

ways we can spot opportunities for collaboration. I think a big part 

of it is education. A large part of our efforts is also sending a message of compliance, that physicians and nurses and other professionals can be our partners in ensuring that waste, fraud, and 

abuse don’t harm our program. 

Chairman BOUSTANY. Thank you. Dr. Budetti. 

Dr. BUDETTI. Yes. Thank you, Mr. Chairman. 

We have had a series of regional fraud prevention summits, and 

at each one of the summits, the Attorney General and the Secretary have chaired them, and then we have had panels with law 

enforcement and providers and beneficiaries. And then I have put 

together breakout sessions with providers at each one of the regional fraud prevention summits, and I have to say, I am extremely 

encouraged by the response of physicians and providers that I have 

been meeting with in these groups; that they are now very interested in working with us on this, to the point where I have been 

so impressed that I actually have created a position within the 

Center for Program Integrity of a medical officer. 

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gram integrity issues, both to get the message to them but also to 

listen and to figure out what it is that we can work on together 

and what we could do different inside of CMS that would be more 

responsive. Because the message we have gotten from the providers 

was very straightforward, but it went in two directions. It was, on 

the one hand, they really want to work on this. On the other hand, 

they want us to do what Mr. Morris just said, which is not treat 

everybody the same; recognize the big difference between 

fraudsters and honest physicians, and we are committed to doing 

that. So I think there is a real opportunity here to work very closely with the medical community and other providers because the enthusiasm seems very strong on their side. 

Mr. MORRIS. If I could add one more thing, we share the view 

that physicians should be part of our team, and we also have a 

chief medical officer who provides valuable counsel to us as we do 

our work, planning and ensuring that we best understand what is 

going on from the physician’s perspective. 

Chairman BOUSTANY. I know in the private sector, the private 

insurers often go through credentialing processes. Can you talk a 

little bit about what you are doing now at CMS in that regard? 

Dr. BUDETTI. One of the major provisions in the recent legislation that will take effect, our final regulation will take effect on 

March 25, speaks to screening of applicants to be able to bill Medicare and Medicaid. We all know that that has been kind of a soft 

spot in the programs, people getting in too easily. But under the 

new authorities, we are doing risk-based screenings so that categories of providers and suppliers are assigned to different levels 

of risk with different levels of screening. Then they also have to revalidate periodically, every 3 or 5 years depending upon the categories. So this is a new approach. It is going to mean a much 

greater degree of scrutiny for the high-risk providers, and about 

the same scrutiny, but maybe done more efficiently for other providers. 

We get something on the average of 19,000 applications every 

month to become a provider in Medicare. So it is a large number 

of people that we have to screen through because most of them are 

going to be honest, of course, but with our new screening systems, 

we are very pleased to have that authority and we are putting it 

into place with a great deal of energy. 

Chairman BOUSTANY. Thank you. Mr. Lewis, you may inquire. 

Mr. LEWIS. Thank you very much, Mr. Chairman. Welcome. 

Dr. Budetti, in your testimony, you talk about the new fraud 

fighting tools because of the Affordable Care Act. If the Affordable 

Care Act is repealed, what would that do to your ability to fight 

fraud in Federal health programs? 

Dr. BUDETTI. Thank you, Mr. Lewis. 

Yes, the Affordable Care Act did provide us with very powerful 

new tools, as well as resources. Both of those are extremely important to us. I mentioned the screening provisions. The Secretary also 

has authority to declare a moratorium on enrollment of new providers or suppliers, where necessary, to fight fraud. We have a different test for when we can suspend payments when there is a 

credible allegation of fraud. We have coordination of a number of 

activities such as termination of Medicare and Medicaid, linking 


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those two together. There is a variety of other provisions related 

to enhancing the requirements for durable medical equipment and 

home health that are areas of high risk. There are additional penalties for violation of the statutes that are involved. There is a wide 

range of very important authorities in the Affordable Care Act, and 

we are very pleased to have them and look forward to implementing all of them. 

Mr. LEWIS. Could you explain to Members of the Committee 

why the Medicare Strike Forces have been so successful, and do 

you plan to expand them? 

Dr. BUDETTI. Mr. Lewis, I am very pleased with the success of 

the Strike Forces. I think I will turn to my colleague, Mr. Morris, 

who is more directly involved in those. 

Mr. MORRIS. The Medicare Fraud Strike Forces represent a collaborative effort that includes the Inspector General’s Office, CMS, 

the Department of Justice, and U.S. Attorneys’ Offices. Part of the 

reason they are successful is we are working better together. We 

are using data to spot fraud hot spots and get to the problem 

quicker. Instead of waiting 6 months or a year to identify an abusive provider, we know within weeks if someone is engaged in 

Medicare fraud. 

By putting resources into these fraud spots and focusing prosecutors and dedicated investigative resources, we are able to more effectively deploy them in strategic fashion. We are getting remarkable results as a result of those efforts. 

Mr. LEWIS. Thank you very much. 

Mr. Morris, in your testimony you discuss the agency’s ability to 

exclude providers from Medicare. On average, how many providers 

do you bar from Medicare each year, and how has your focus on 

corporate executives helped you fight fraud? 

Mr. MORRIS. On average, we exclude around 3,300 individuals 

and entities each year from the Federal health care programs. The 

basis of those exclusions include convictions related to Medicare 

fraud and patient abuse, as well as a number of discretionary authorities; loss of licensure in a State, for example. 

One of the things that we would like to close a loophole on is our 

ability to go after corporate executives who are responsible for corporate crime but evade our exclusion tool by simply quitting the 

company. The current statute only allows us to exclude if the person continues to be employed by that sanctioned entity. We think 

we need to close that loophole. 

We also need the ability to focus on related entities. If we identify one nursing home that has committed criminal abuse of its 

residents, ofttimes that is because the corporate heads have denied 

needed resources to that facility. It has been very difficult for us 

to get up to the corporate heads and hold them responsible for the 

abuse of residents in an individual facility, and the amendment of 

our discretionary exclusion authority would give us the ability to 

do that and be able to say to that corporate executive, you are out 

of our program because you are not treating our residents the way 

we expect you to. 

Mr. LEWIS. Again, I want to thank the two of you for being here 

and thank you for your service. I yield back, Mr. Chairman. 


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Chairman BOUSTANY. I thank the ranking member for his 

questions. 

The chair now recognizes Ms. Black, if you are ready, or I can 

now move on. 

Ms. BLACK. Is there someone else ready? 

Chairman BOUSTANY. We will give you some time. Ms. Jenkins, you may inquire. 

Ms. JENKINS. Thank you, Mr. Chairman. Thank you for joining 

us. 

Mr. Budetti, one of the new tools put in place by the new health 

care law was the requirement for face-to-face meetings for certain 

Medicare services. In Section 6407 of the bill, it requires that a 

provider conduct face-to-face meetings before certifying that patient 

is eligible for their home health services. And while I understand 

the intent of this regulation to fight abuse of the system, I wonder 

if your agency has taken regional concerns into consideration. 

In a rural State like Kansas, we already have a shortage of physicians, and this requirement is simply not feasible for direct supervision for outpatient therapeutic services for critical access in rural 

hospitals. If the regulations are followed as written, many of my 

hospitals would have to eliminate a lot of outpatient services, and 

that is creating access and cost issues for the beneficiaries. 

So I was just wondering if you could speak to any discussions 

that you have had or any ideas for how to make this new requirement work in our rural communities. 

Dr. BUDETTI. Well, thank you, Ms. Jenkins. I think that, of 

course, we are in the position of enforcing the statute as written, 

but we are also very much interested in not cutting off beneficiary 

access, and we are very sensitive to the kinds of issues that you 

are raising. 

This area of home health and also the area of durable medical 

equipment have been high-risk areas for us, and so it is quite important for us to move forward with implementing some of the different approaches. But that is an area that we did listen to some 

of the comments that we received about the timetable, and we are 

responding to that, and we are very interested in working on this. 

And I would be delighted to listen to any specific incident that 

you would like to relate from your home State of Kansas. I would 

be pleased to meet with you and listen to that and try to understand exactly what the kinds of issues are and how we might address those. 

Ms. JENKINS. Okay. Thank you. We will look forward to taking 

you up on that offer. 

On another note, CMS is expanding their use of recovery audit 

contractors, the RACs, and authority given to them by this new 

law. And I have some concerns that these contracts are for profit 

and aggressively going after claims with cash-strapped hospitals, 

especially in rural States like Kansas. While I agree that waste 

and fraud needs to be found and addressed, this seems to me to 

be a duplication of audit services. Search and probe audits were already occurring before this RAC process was authorized. The rate 

of denied claims by the RAC which are then being overturned is 

over 70 percent. During this time, if a hospital does not pay the 

recoupment requested and allows it to follow the automatic process, 


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interest is then charged on the claim amount to the hospital at 

over 13 percent; and even if the claims are reversed, they don’t get 

their interest back. 

So questions for you: What is the net cash to CMS on the RAC 

program, and can you speak to whether this is actually saving 

money in the health care system and increasing quality patient 

care, or is it simply shifting more of the cost to these small hospitals by requesting payment after the fact and adding to their administrative costs? 

Dr. BUDETTI. The recovery audit contractor program is, as you 

mentioned, one that is based on contingency fees, and so they are 

paid for out of their recoveries, and so that is the structure of the 

RAC program, as you mentioned. 

And the RAC program was implemented, first, in a small number 

of States, and it did experience a number of issues. And so the 

feedback that we got during the initial implementation phase has 

been taken into very strong consideration in shaping the way the 

program is being implemented going forward. We phased in the full 

national implementation for just that reason, and we are also taking that experience into account as we also follow the new provisions that require the expansion of RACs to Medicaid and to Part 

C and D of Medicare. 

So the way that the RACs work is, as you mentioned, in terms 

of a portion of the recoveries is how they are funded, but we are 

working very, very hard to make sure that the kinds of things that 

the RACs learn both provide a basis for education to other providers so that they can deal with those kinds of issues and also so 

that we understand how to improve the RAC program. 

I would have to get back to you on the exact recoveries. I do 

know that the rate of being overturned on appeal was much higher. 

I don’t offhand remember the exact numbers but it was much higher during the initial phase, the pilot phase, and that many of the 

issues that came up in that setting are now being taken into consideration on implementation of the full program. But I will be 

happy to get you those numbers. 

Ms. JENKINS. Okay. I would appreciate it. Thank you. I yield 

back. 

[The information follows, The Honorable Ms. Jenkins:] 


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Chairman BOUSTANY. The gentlelady, Ms. Black, is recognized. 

Ms. BLACK. Thank you, Mr. Chairman. 

My question is for you, Mr. Morris, and I am going to borrow on 

my experiences at my State level. Tennessee was the pilot project 

for initiating universal care, and that program was called 

TennCare. It was unsuccessful. It failed and we had to disassemble 

it because of its high costs. 

And one of the problems in that program that caused it to fail 

is the sheer amount of waste and fraud. And we do have an Office 

of Inspector General, and one of the things that we saw that was 

so effective is to have a hotline for people to actually call and report abuses, and it was very successful. 

I didn’t notice in your testimony—and of course, you have the 

most-wanted fugitives up here and the hotline for that—but do you 

have something in place that if just an individual knew of someone 

that was abusing the program, that they would be able to make a 

call so that you could investigate? 

Mr. MORRIS. Yes, we do. The number is 1–800–HHSTIPS, T– 

I–P–S. We have operators standing by. They are trained to process 

complaints and concerns, many of which actually don’t pertain to 

our program. 

As an example, we get calls about Social Security checks. The operators are trained to send those over to Social Security. Operators 

also vet the continuing complaints and refer many of them to our 

Office of Investigations or our Office of Audit Services. We get 

thousands of hotline calls every month, and one of the jobs of these 

operators is to go through them, and those that have potential to 

start a criminal investigation or a civil investigation are sent to our 

investigative teams. 

Ms. BLACK. And to follow up on that, can you give me some 

kind of an idea about how effective those calls are? Are you finding 


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that you are able to pick up fraud, waste, and abuse on those 

calls—or from those calls? 

Mr. MORRIS. I would need to get back to you with the specific 

percentages within the universe of what actually turn into viable 

criminal investigations. As I mentioned, a number of the calls come 

from citizens who just need to talk to someone about a problem 

with the government. When we are not able to be directly responsive because it is an issue outside of our agency, we do make sure 

they get to the right place. But I will be glad to get back to you 

on the specifics of what percentage of those calls translate into a 

viable investigative lead. 

Ms. BLACK. And how is it that you let the public know that this 

line is accessible and available to them? 

Mr. MORRIS. Well, it is on our Web site, which gets thousands 

of hits every week. We make a point of bringing it to the attention 

of communities that we speak to. 

I mentioned in my oral remarks that OIG staff are in Tampa, 

Florida, today, talking about compliance training to the provider 

communities down there, and the hotline is one of the features that 

we talk to them about. That way, if they see a problem, they know 

there are avenues to bring it to our attention. 

Ms. BLACK. I would really like to get further feedback from you 

on how effective those calls are and whether you really are seeing 

some actual useful information. 

Ms. BLACK. My second question along that same line is, you actually have in your written testimony how critical it is for the Office of Inspector General to obtain real-time data on Medicare 

claims from CMS. Are you able to get that data in a timely fashion? 

Mr. MORRIS. We are make important strides, thanks to our 

partnership with Dr. Budetti and his team. The challenge right 

now, frankly, is one of technology. Dr. Budetti can speak better to 

this, but I believe that many of the claims processing systems that 

CMS has are somewhat antiquated, and there are about 20 different systems in play. CMS is making great efforts to move those 

systems into the 21st century so that we will be able to get data 

more quickly. 

The other challenge, of course, we face is being able to do something with the data once it arrives at our door; and we are committing significant resources to be able to analyze the data so we can 

spot fraud trends and get to the site of a crime as quickly as possible. 

Ms. BLACK. Well, thank you. And I do absolutely agree with 

you, because that is one thing we found in our State is that the 

data was there, and being able to mine that data was very, very 

helpful. So I certainly will encourage that we continue to do that. 

Thank you. I yield back my time. 

Chairman BOUSTANY. Thank you. The chair now recognizes 

Mr. Becerra to inquire. 

Mr. BECERRA. Thank you, Mr. Chairman, and again, thank you 

very much for having this be the very first hearing that the Oversight Subcommittee does. 


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Gentlemen, thank you very much actually for your patience, the 

interruption with votes. We appreciate you being here and the 

work you are doing. 

Quick question. How much are you able to do with the health 

community in the private sector? We are talking about Medicare 

for the most part, Medicaid, but we know that there is a lot going 

on that overlaps between the private sector health care system and 

the public sector health care system. Any quick examples—and I 

want to get to some other questions—but any quick examples of 

how CMS is able to work with the private sector in health care to 

try to deal with fraud that hits both public and private sector 

health care? 

Dr. BUDETTI. Sure. We are doing two things that I can speak 

to right off the top of my head. One is that we are now in the process of moving into, as Mr. Morris said, the 21st century, with the 

technology and the sophisticated analytics that are currently being 

applied in the private sector both in the health care industry and 

in other industries. So we are reaching out to get the best ideas 

and the best approaches from the private sector and use them in 

the public programs. That is one thing that we are doing. 

We also have been engaged for some time in a dialogue with the 

private sector about building a public-private partnership to work 

together to fight fraud, and that is something that my colleague 

from the Inspector General could also speak to. 

Mr. MORRIS. I did a quick check last night of the number of 

cases that our Office of Investigations is working with its private 

sector counterparts. We have 50 ongoing cases where we are sharing intelligence and resources, to tackle a problem which is both in 

the private and the public side. The NHCAA—you will be hearing 

from its representative in the next panel—I think will tell you that 

we are working very effectively together in finding new ways to improve. We are working on a best practices document, for example, 

so that we can find additional ways to multiply our efforts. 

Mr. BECERRA. Excellent. I hope you continue to give us reports 

on how you are working together because we know that the costs 

of health care outside of Medicare and Medicaid are helping drive 

the costs of Medicare and Medicaid higher. And so to the degree 

that we help them tamp down costs on the private side, it helps 

us control them on the public side. 

A question—and I had ask asked my staff what the acronym 

stood for, because last year my father ended up having a difficult 

time, and he survived an episode with a heart condition, but he got 

a CPAP machine, and it stands for continuous positive airway pressure. I just got to the point of calling it the CPAP, the air machine. 

It helps him breathe. 

We know that there has been an issue with fraud in the area of 

DME, durable medical equipment, the CPAP machine, the oxygen 

equipment, the wheelchairs, the hospital beds that are often provided to beneficiaries under Medicare. And in the next panel, we 

are going to hear from an individual who was convicted of Medicare 

fraud involving durable medical equipment. 

I wonder if you could tell me what was done in the historic 

health care reform of the Affordable Care Act which is going to 


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help us address what we know is pretty aggressive fraud in the 

area of durable medical equipment. 

Dr. BUDETTI. The area of durable medical equipment, as you 

mentioned, also is in fact one of the high-priority areas. And I mentioned before that we had structured, as the act requires, our 

screening processes by categories, and the highest level of risk includes new durable medical equipment suppliers, and so they will 

be subject to the highest level of screening for new entrants. 

There are also provisions in the Affordable Care Act that provide 

for increased surety bonds and other kinds of oversight of new 

DME providers and initial claims. We are also very much involved 

in a completely different approach which has to do with the implementation of competitive bidding for durable medical equipment, 

because when you have a limited number of bidders who undergo 

scrutiny to get into that program, we believe that will also be helpful in terms of having controls on it. And we have had a series of 

durable medical equipment specific initiatives in the past in south 

Florida and elsewhere. 

So it is something that we are attacking from multiple points because that is an area that we have to do a better job of preventing 

fraud. 

Mr. BECERRA. Mr. Morris, instead of answering to that question—I know I am going to run out of time—can I ask one last 

question? You are obviously using personnel. They are obviously 

having success in helping us detect and track down some of this 

fraud. What happens if you have to furlough or reduce your personnel because of budget constraints? 

Mr. MORRIS. Because the significant part of our funding is off 

of the general appropriations—it is through the HCFAC account— 

we are going to be able to keep a law enforcement presence. It will 

be reduced, unfortunately. 

I think the other challenge we will face will be just the general 

disruption when the government goes through a shutdown process. 

We will spend a lot of time on that instead of catching bad guys, 

but to the extent possible, with the funds available, we will continue to fight against fraud. 

Mr. BECERRA. Thank you. Thank you, Mr. Chairman. 

Chairman BOUSTANY. Mr. Gerlach, you may inquire. 

Mr. GERLACH. Thank you, Mr. Chairman, and thank you, gentlemen. 

Really quickly, want to give you a constituent matter that I just 

uncovered 2 months ago, and I would like to get your reaction to 

it based upon your testimony that you have presented to the subcommittee. 

About 2 months ago, a constituent of mine, someone who is on 

Medicare, sought medical advice from his orthopedic surgeon regarding an MCL problem he was having with his knee. The orthopedic surgeon then prescribed a knee brace for him to help him 

with his recovery of that situation. 

When Medicare was billed for that knee brace, it was billed for 

about $690. That really struck this gentleman as being very odd, 

based upon the knee brace that he got. So he went online to the 

manufacturer’s Web site and saw online that the manufacturer is 

only retailing this knee brace for about $190, about 21⁄2 to 3 times 


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more being reimbursed by Medicare for what the manufacturer is 

retailing this knee brace for. 

So with that as a background, Mr. Budetti, for example, in your 

testimony you indicate that the Affordable Care Act has offered 

more opportunities and more provisions to combat fraud, as well as 

new tools for deterring wasteful and fiscally abusive practices to 

ensure the integrity of the program. So what would your specific 

recommendation be today to immediately halt this practice of Medicare paying 21⁄2 to 3 times for this kind of medical product? And 

I am sure there are thousands of kinds of medical products that 

the system or the program reimburses for that are probably out of 

whack for what you could pick it up retail for. What are you doing 

specifically to halt that practice immediately? 

Dr. BUDETTI. Thank you for that question, Mr. Gerlach. 

What I mentioned just a minute ago, the competitive bidding for 

durable medical equipment projects a very substantial reduction in 

the prices that will be paid by Medicare. I believe it is on the order 

of 32 percent are based upon competitive bidding, and we believe 

that introducing this level of competition into the provision of durable medical equipment supplies is an important step towards combating exactly what you just mentioned. 

I would also add in follow-up to Ms. Black’s question from a 

minute ago—— 

Mr. GERLACH. May I interrupt just so I understand exactly 

what you are saying? 

So you are going to have folks competitively bid to have the ability to be the entity that provides the product for that particular 

medical condition. Are you going to relate at all whatever those 

bids are to the real-world retail price for those products, or are you 

just going to allow bidding among certain entities but they still, 

even though you picked the lowest bid, may not be tied to what the 

reality is in terms of what that product retails for in the real 

world? 

Dr. BUDETTI. You know, I would be very—I can’t—I can’t speak 

to the exact market dynamics that governed our initial implementation of the competitive bidding, Mr. Gerlach. I would be happy 

to look at exactly that issue for you and get back to you on how 

well the bids that we took compared to the market prices that we 

otherwise would have seen, because that is the core of what we are 

trying to do is to get to a point where we are paying either market 

price or whatever the market should be charging for things. 

Mr. GERLACH. When was the last time, if you know, this competitive bidding process was used for a knee brace product in the 

program so that that would have been the basis to set this new 

brace price at $690? 

Dr. BUDETTI. We are just implementing the competitive bidding 

this year, and it was in nine areas, but the projection is for it to 

be phased in across the country. I will be happy to get you all the 

details. 

[The information follows, The Honorable Mr. Gerlach:] 


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Mr. GERLACH. Thank you, sir. 

And real quickly, Mr. Morris, your office is obviously responsible 

for auditing, evaluating these programs. Have you at any time in 

the past looked at the overcharging, overpayment for products of 

this nature? And if so, what have your recommendations been, and 

how has CMS handled those recommendations; or has this been an 

issue you have not looked at before? 

Mr. MORRIS. This is an issue we have looked at a great deal 

over the last 10 years or more. The OIG, of course, does not set 

prices. It merely does the audits. But we have looked at everything 

from wheelchairs to oxygen concentrators to orthotics and, in each 


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case, reported back to CMS that we believed that the program is 

paying way too much. 

Mr. GERLACH. What has been the response by CMS to those 

recommendations? 

Mr. MORRIS. It has varied a great deal on the particular product, but CMS has generally been receptive to our recommendations. 

In some instances, they put it out they felt they had legal barriers 

to actually reducing the prices. The competitive bidding process—— 

Mr. GERLACH. Have you had a systematic recommendation to 

cover all of the products that are utilized through the program, or 

have your recommendations been product specific, a wheelchair or 

a knee brace or an oxygen tank? 

Mr. MORRIS. They have been product specific, but with broader 

programmatic recommendations that would go to the principle of 

we ought to pay at market rate and not above it. 

Mr. GERLACH. It seems to me there ought to be some systematic recommendations, not individual equipment specific recommendations. There are probably problems across the entire spectrum of product reimbursement in the program. So, appreciate your 

additional thoughts on that. 

Thank you, Mr. Chairman. 

Chairman BOUSTANY. Mr. Kind, you may inquire. 

Mr. KIND. Thank you, Mr. Chairman. Thank you for holding 

what I think is a very important hearing, and hopefully we will 

have an opportunity in the course of this session of Congress to get 

into this as well. I think it is very helpful. 

Nothing drives people crazier than the thought of wasteful payments going out to fraudulent claims being made against the Medicare system. So I appreciate the work both of you gentlemen and 

your agencies are doing to combat this. 

Mr. Morris, let me start with this. Have you had a chance to 

quantify the type of return we get on the dollar that we spend on 

anti-fraud measures, what type of return that we are recovering 

from that? 

Mr. MORRIS. Yes, we have. We are very mindful of how valuable 

the taxpayers’ dollars are, and we want to make sure we are a good 

investment. If you look at the money spent on our health care antifraud efforts in the last 3 years, we brought back to the government $6.80. That is a great ROI. So the short answer is yes, and 

it is a great number. 

Mr. KIND. So, under the Affordable Care Act, if I got my numbers right, roughly $350 million was authorized over a 10-year period for the feet-on-the-street effort, and I think the President’s 

2012 effort was asking for about $270 million for HCFAC. You 

think that is going to be a wise use of the money as far as the potential for return? 

Mr. MORRIS. I confess that I have a somewhat self-interested 

answer here. Yes, of course. More seriously, I can tell you that 

there are cases that we want to get to that our current resources 

do not allow us to. By way of example, we have put a lot of resources into the Medicare Strike Forces and realized a tremendous 

return both in taking bad guys off the street and saving Medicare 

money, but it has meant that some of our civil cases, civil cases inVerDate Mar 15 2010 22:58 Nov 14, 2011 Jkt 067652 PO 00000 Frm 00051 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\67652.XXX GPO1 PsN: 67652

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volving pharmaceutical fraud and others, have had to wait. The 

ability to bring more feet to the job and focus on those cases I think 

will return very positive benefits. 

Mr. KIND. So you don’t have to answer this, but it just seems 

intuitively, then, that this is an area where further budget cuts 

may end up costing us more in the long run if we are taking away 

that enforcement capability or investigative capability. 

To follow up on what I think Ms. Black was referring to earlier, 

are we getting better at being able to distinguish innocent errors 

that are submitted versus outright fraudulent practices? Mr. 

Budetti. 

Dr. BUDETTI. This is a very high priority for us to do exactly 

that, and that is why I mentioned the risk-based approach that we 

are taking. We are implementing a variety of different private sector approaches analyzing data and not just claims data, but moving 

into a much wider range of data. We have set a goal of having essentially zero false positives. We want to be very sure that we have 

reached the right conclusions in analyzing the data. So, yes, so I 

believe that we are making great progress in that direction. 

Mr. KIND. Let me ask both of you if you have an opinion on this. 

But I think ultimately the key to whether health care reform is 

successful or not is our ability to change the way we pay for health 

care in this country, starting with Medicare and moving from the 

fee-for-service system we currently have under Medicare to a feefor-value or a quality- or outcome-based reimbursement system. If 

we are successful in making that transition to a new reimbursement, rewarding value over volume, what impact is that going to 

have on fraudulent practices throughout the country? 

Mr. MORRIS. I think it is going to have the potential of reducing 

conventional fraud, in for example the paying of a kickback to get 

a service ordered. The challenge we will face is that in any system 

of reimbursement, there are opportunities to exploit it. As we move 

into an integrated delivery system where we are rewarding quality, 

we are going to also need to make sure that some of the other reverse incentives don’t result in skimping on care or steering of patients. We are mindful of those risks, but I think it is critical that 

we move to an integrated system and that we are going to have to 

give the system an opportunity to sort of try itself out. Every system has opportunities for exploitation and we are going to need to 

be vigilant. 

Mr. KIND. Sure. Dr. Budetti. 

Dr. BUDETTI. Yes. I think that, as you are well aware, we are 

moving towards implementing a number of new ways of organizing 

and paying for care with accountable care organizations and medical or health homes, value-based purchasing, a variety of different 

initiatives. In each case, we are raising exactly what Mr. Morris 

raised which is, if we are going to approach this from a new direction, let’s look at what the vulnerabilities are. Let’s do that prospectively so that we don’t set ourselves up for a different kind of 

problem going forward. 

So, yes, we might very well escape some of the past problems 

that we have had. We want to also be on the lookout for what kind 

of new situations we might encounter as we change the system. 

Mr. KIND. All right. Thank you both. Thank you, Mr. Chairman. 


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Chairman BOUSTANY. Mr. Buchanan, you may inquire. 

Mr. BUCHANAN. Thank you, Mr. Chairman for holding this important hearing. Gentlemen, I was curious because I hear so many 

numbers and I am a Member from Florida. But when you look at 

just the fraud or abuse or whatever for Medicare and Medicaid, 

what is the best number? What is the range that you use? Because 

there are so many numbers out there. I hear $100 billion, $60 billion. What is the estimate as it relates to basically Medicare and 

Medicaid? 

Mr. MORRIS. We share your frustration that there is not one 

number and that there seem to be estimates all over the place— 

you hear everything from 3 to 10 percent, 3 percent being what the 

NHCAA estimates, 10 percent being what the GAO estimated 

about 10 years ago. To be honest with you, I don’t think we know 

with precision how much fraud there is out there. That is in part 

because fraud is, by the nature of the crime, concealment. Good 

frauds go undetected. 

Mr. BUCHANAN. But what is your best estimate? As someone 

who deals in this every day, what would you say is a range from 

a high to a low or whatever? 

Mr. MORRIS. My best estimate, not based on any empirical proof 

but just everything we see, is that the fraud ranges anywhere from 

about $60 to $100 billion a year across all systems, public and private. 

Mr. BUCHANAN. And how much is the public system, Medicare 

and Medicaid; just your estimate? And I am not holding you to it. 

I am just trying to get a sense of what that might be. 

Mr. MORRIS. Well, if we assume that both public and private 

systems are preyed on by the same set of criminals, I think we can 

presume that we would share our proportion of the total health 

care expenditures. So it is going to be in the tens of billions of dollars. It is way too high. 

Mr. BUCHANAN. Doctor, what is your thought on it? 

Dr. BUDETTI. Yes, sir. I think that whatever it is, it is too high. 

I think that whether we have a number or not, that one thing that 

we do see is that the more we look for it, the more we find. 

Mr. Morris mentioned the return on investment. The return on 

investment has been going up consistently over time as we have 

spent more money to fight fraud. I view that as both good news 

and bad news. It means that it is a wise investment of public 

funds. It also means that we are not on the flat of the curve, so 

to speak; that there is still quite a bit of fraud out there for us to 

find and to deal with. So I think that whatever the number is, it 

is very substantial, and it needs our attention. 

Mr. BUCHANAN. Let me mention, you always hear—you 

brought it up here a few minutes ago about south Florida, Miami/ 

Dade/Broward Counties. And being the only member on Ways and 

Means in Florida, I hear a lot of that even in my own district. 

But let me state something that I read. It was reported by the 

University of Miami. There was a recent report out that said it is 

their understanding that six of the Nation’s top most-wanted Medicare fraud fugitives have been given refuge in Cuba. Could this be 

the case? Is it ongoing? Is there any organized crime component 


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that you are aware of as it relates to fraud? And can it be any kind 

of a tie-in with the Cuban Government? 

Mr. MORRIS. I am not aware of any tie-in to foreign governments as it relates to the health care fraud perpetrators that we 

either have listed here or elsewhere. 

Mr. BUCHANAN. Have you heard about the six of the Nation’s 

most-wanted Medicare fraud victims are in Florida—or, I mean, 

are in Cuba? 

Mr. MORRIS. I have not. I have heard rumors that three of them 

are in Cuba in a Cuban jail. 

Mr. BUCHANAN. Okay. Well, we hear different information. 

Doctor, do you have anything to add to that? 

Dr. BUDETTI. No, I don’t. 

Mr. BUCHANAN. The other thought is, and you touched on this 

a little bit earlier, that you are working with the private sector together to combat fraud. In terms of the various agencies—you 

know, and I heard you touch on it a little bit—could you expand 

on that a little bit more, what you are doing? I know you can’t be 

everywhere at all times. But in terms of working with the private 

sector to deal with fraud, what are you actually doing? 

Mr. MORRIS. Well, let me give you a great example. The Investigation of the Year, awarded by the NHCAA last year, was for a 

collaborative effort in Kansas, focusing on a pill mill, two defendants who were pushing painkillers. They were associated with potentially 60 deaths from drug overdoses. The DEA, FBI, OIG teams 

and a number of private insurers came together, pooled their information on the prescription patterns and practices, identified the 

trends and were able to focus and build a case that would have otherwise taken far longer and taken far more resources. 

The result is we got the convictions and we were able to close 

down a pill mill that was threatening citizens’ lives. That is a great 

example of how we can work with the private sector to pool our resources and our intel to get to a just result. 

Mr. BUCHANAN. We have 1,300 pill mills. We are dealing with 

that right now. I will yield back. 

Chairman BOUSTANY. Yes. Gentlemen, thank you for your testimony and your answers to these questions. Please be advised that 

members may have written questions they would like to submit, 

and I would ask you to oblige. Thank you for the work you are 

doing, and we look forward to hearing from you again on this ongoing problem that we are having to deal with on Medicare health 

care fraud. 

Mr. MORRIS. Thank you very much, Mr. Chairman. Members. 

Chairman BOUSTANY. I would now ask the second panel to 

take their seats. 

I want to thank and welcome Karen Ignagni, President and CEO 

of America’s Health Insurance Plans; Mr. Louis Saccoccio, Executive Director of the National Health Care Anti-Fraud Association; 

and Mr. Ike Odelugo who has pled guilty to State and Federal 

charges related to Medicare fraud. And I want to thank all of you 

for being here as we try to delve into this important subject and 

try to understand what more might need to be done. 


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You will each have 5 minutes to present your oral testimony. 

Your full written statements will be made a part of the record. And 

Ms. Ignagni, we will begin with you. Thank you. 

STATEMENT OF KAREN IGNAGNI, PRESIDENT AND CEO, 

AMERICA’S HEALTH INSURANCE PLANS, WASHINGTON, D.C. 

Ms. IGNAGNI. Thank you, Mr. Chairman, Dr. Boustany, Ranking Member Lewis, and Members of the Subcommittee. We are 

pleased to have the opportunity today to discuss how health plans 

are playing a leadership role in fighting and preventing health care 

fraud; how we are working with the Department of Health and 

Human Services—a number of you inquired about that; how we are 

working with law enforcement and where there are opportunities 

to do even more. 

Our members have developed cutting-edge techniques, as you 

have heard this afternoon, to identify fraud and halt practices that 

lead to substandard care. We are involved in flagging the delivery 

of inappropriate or unnecessary services that may harm patients, 

inappropriate charges or charges for phantom services; detecting 

unlicensed or unqualified personnel, and identifying substance 

abuse and increasingly identity theft. Our members’ anti-fraud initiatives have prioritized preventing fraud before it takes place rather than paying and chasing after the fact. 

We are proud that these initiatives were models for the important new efforts being made in the public sector and believe now 

even more progress can be made. Health plans fight fraud by operating special investigations units that are staffed with personnel 

with clinical, statistical, and law enforcement expertise. They do 

four things: They perform intensive license and qualification review. That is the credentialing function. They work to identify potential fraud before a claim is paid by employing sophisticated software techniques to detect anomalies in billing. They investigate the 

clinical basis for the claim that has been flagged and tagged by relying on physicians, pharmacists, and other trained personnel. 

Quite a number of these matters, as you heard this afternoon, involve medical equipment, infusion, and narcotics prescribing. We 

take action by suspending payments when fraud is detected, jettisoning providers from networks, and providing information to law 

enforcement. 

Increasingly, efforts are focused on preventing identity theft. 

When a patient borrows a friend’s identity to obtain insurance coverage, harm can result to the real beneficiary of that insurance policy who may be inappropriately or incorrectly tagged with the 

wrong blood type or identified inappropriately as having a condition they do not have. We detect substance abuse as a very, very 

high-priority activity, a current fraud and abuse initiative that literally has life-and-death significance. 

Looking ahead we have offered the committee this afternoon four 

recommendations: 

First, we are urging a reconsideration of how fraud prevention 

and credentialing programs are treated under the interim final regulation for the new medical loss ratio requirement. The Department of Health and Human Services’ interim final rule adopts the 

recommendations that were made by the National Association of 


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Insurance Commissioners which, in those recommendations, only 

allowed fraud recoveries to be considered as quality improvement, 

not the cost of programs that have been the focus of discussion this 

afternoon, the prevention and early intervention. This is at odds 

with the promising efforts now being incorporated into the public 

sector programs which are based on the very programs that our 

members have pioneered. Similarly, the MLR interim final regulation excludes provider credentialing from the definition of activities 

that improve health care quality which is now recognized as a critical function, and we applaud the Department for doing that in the 

efforts that are underway. We urge the committee to ask for reconsideration of how these programs are handled. 

Second, we have recommended that existing partnerships between the private and public sectors be strengthened. We have 

made a recommendation about how that can happen. We think a 

simple aspect of more clarity about the ability of law enforcement 

to share information is important in this endeavor. 

Third, we recommend that the health plans should be included 

in restitution agreements when the Department of Justice or other 

enforcement agencies enter into agreements and obtain restitution 

from people who commit health care fraud. This is done sometimes, 

not always; and we think there are opportunities here. 

Fourth, we recommend creating a safe harbor for health plans 

that supply information concerning suspected health care fraud to 

any public or private entity. 

Mr. Chairman, there has been a great deal of progress made in 

certain States. We are encouraged by that. We think there should 

be a more uniform approach, and we hope that the committee 

might consider that more attention could be paid to that matter. 

This concludes our testimony. We appreciate the opportunity to be 

here. 

And, Mr. Chairman, we are very happy to have the opportunity 

to sit next to Mr. Saccoccio who has done a fantastic job operating 

his group that has brought many in the public and private sectors 

together to share this kind of information. Thank you very much. 

Chairman BOUSTANY. I thank you. 

[The prepared statement of Ms. Ignagni follows:] 


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Chairman BOUSTANY. Mr. Saccoccio, you may proceed. 

STATEMENT OF LOUIS SACCOCCIO, EXECUTIVE DIRECTOR, 

NATIONAL HEALTH CARE ANTI-FRAUD ASSOCIATION, WASHINGTON, D.C. 

Mr. SACCOCCIO. Thank you. Good afternoon, Chairman 

Boustany, Ranking Member Lewis, and other distinguished Members of the Committee. I am Louis Saccoccio, Executive Director of 

the National Health Care Anti-Fraud Association, NHCAA. 

NHCAA was established in 1985 and it is the leading national 

organization focused exclusively on combating health care fraud. 


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We are uncommon amongst associations in that we are a privatepublic partnership. Our members comprise more than 85 of the Nation’s most prominent private health insurers, along with more 

than 80 Federal, State, and local government law enforcement and 

regulatory agencies that have jurisdiction over health care fraud 

who participate in NHCAA’s law enforcement liaisons. 

NHCAA’s mission is simple: to protect and serve the public interests by increasing awareness and improving the detection, investigation, civil and criminal prosecution, and prevention of health 

care fraud. The magnitude of this mission remains the same regardless of whether the patient has health care coverage as an individual or through an employer or through Medicare, Medicaid, 

TRICARE, or other Federal or State program. 

Health care fraud is a serious and costly problem that affects 

every patient and every taxpayer in America. Just as importantly, 

health care fraud is a crime that directly affects the quality of 

health care. Patients are physically and emotionally harmed by 

health care fraud. As a result, fighting health care fraud is not only 

a financial necessity, it is a patient safety imperative. Also, health 

care fraud does not discriminate between types of medical coverage. 

The same schemes used to defraud Medicare migrate over to private insurers, and schemes perpetrated against private insurers 

make their way into government programs. 

Additionally, many private insurers are Medicare Part C and D 

contractors or provide Medicaid coverage in the States, making 

clear the intrinsic connection between private and public interests. 

As a result, the main part I want to emphasize is the importance 

of anti-fraud information-sharing between private and public payers. NHCAA has stood as an example of the power of a privatepublic partnership against health care fraud since its founding, and 

we believe that health care fraud should be addressed with privatepublic solutions. 

One salient example that illustrates the power of cooperative efforts against health care fraud can be found in south Florida. In 

response to the challenge of health care fraud schemes in south 

Florida, including fraud schemes involving infusion therapy in 

home health care, NHCAA formed the South Florida Work Group. 

In meetings held in 2009 and 2010, this NHCAA work group 

brought together representatives of private insurers, FBI headquarters, and field divisions, CMS, HHS, OIG, DOJ, the Miami 

U.S. Attorney’s Office, and other Federal and State law enforcement agencies, to address the health care fraud schemes emanating in south Florida. The details of the emerging schemes, investigatory tactics and the results of recent prosecutions were discussed with the dual goals of preventing additional losses in south 

Florida and preventing the schemes from spreading and taking 

hold in other parts of the country. 

This type of anti-fraud information-sharing is critical to the success of anti-fraud efforts. HHS, OIG, CMS, and DOJ have demonstrated a strong commitment to information-sharing with private 

insurers and are working with NHCAA to identify the barriers, 

both actual and perceived, to effective anti-fraud information-sharing with the goal of increasing the effectiveness of this critical tool 

in the fight against health care fraud. 


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It would greatly enhance the fight against health care fraud if 

Federal and State agencies clearly communicate to their agents the 

guidelines for sharing information with private insurers, emphasizing that information-sharing for the purposes of preventing, detecting, and investigating health care fraud is authorized and encouraged, consistent with applicable legal principles. 

In addition to information-sharing, the other effective way to detect emerging fraud patterns and schemes in a timely manner is 

to apply cutting-edge technology to the data to detect risk and 

emerging fraud trends. The pay-and-chase model of combating 

health care fraud, while necessary in certain cases, is no longer 

tenable as the primary method of fighting this crime. In recognition 

of this fact, many private sector health insurers now devote additional resources to predictive modeling technology and real-time 

analytics, applying the fraud prevention methods on the front end, 

prior to medical claims being made. 

The Federal Government has also recognized the value of realtime data analysis as a key aspect of its interagency HEAT initiative. The Medicare Strike Force model, as you have heard, employed by the HEAT program combines Medicare paid claims into 

a single searchable database, identifying potential fraud more 

quickly and effectively. Additionally, CMS is working to implement 

risk-scoring technology to apply effective predictive models to Medicare. 

NHCAA is encouraged by the renewed Federal emphasis given to 

fighting health care fraud, and NHCAA knows continued investment and innovation are critical. And as greater attention is given 

to eradicated fraud from government health care programs, we 

urge decisionmakers to also recognize and encourage the important 

role that private insurers play in keeping our health care system 

healthy and free from fraud. 

Thank you for allowing me to testify today. I would be happy to 

answer any questions. Thank you. 

Chairman BOUSTANY. Thank you Mr. Saccoccio. 

[The prepared statement of Mr. Saccoccio follows:] 


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Chairman BOUSTANY. And, Mr. Odelugo, thank you for being 

here. You may proceed, sir. 

STATEMENT OF AGHAEGBUNA ‘‘IKE’’ ODELUGO, PLED GUILTY 

TO STATE AND FEDERAL CHARGES RELATED TO MEDICARE 

FRAUD; HAS BEEN ASSISTING LAW ENFORCEMENT WHILE 

AWAITING SENTENCING IN MAY; HOUSTON, TEXAS 

Mr. ODELUGO. Thank you, Mr. Chairman and Members of the 

Committee. It is with profound humility and deep gratitude for this 

opportunity that I come before the Members of the Committee 

today to provide testimony on the pressing issue of Medicare fraud 


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in the durable medical equipment (DME) sector of the health care 

services industry. 

My name is Aghaegbuna ‘‘Ike’’ Odelugo. I am from Nigeria and 

came to the United States in 1998 with the sincerest of intentions 

to eventually acquire my master’s degree. Instead, beginning in 

2005 and extending to 2008, I engaged in a business that presents 

unique opportunities for fraud and abuse. I am speaking of the 

DME sector of the health care services industry. I engaged in fraud 

and abuse in this industry. I participated with others in 14 different companies, reaching 11 different States. 

DME fraud is incredibly easy to commit. The primary skill required to do it successfully is knowledge of basic data entry on a 

computer. Additionally required is the presence of so-called ‘‘marketers’’ who recruit patients and often falsify patient data and prescription data. With these two essential ingredients, one possesses 

a recipe for fraud and abuse. The oven in which this recipe is prepared is the Medicare system. This system has a number of weaknesses which are easily exploitable. This is a nonviolent crime and 

is often committed by very educated people, including business people, hospitals, doctors and administrators. It reaches across all ethnic and racial lines. It relies on an often unsuspecting victim base 

of Medicare recipients, elderly citizens who long for attention and 

care, who simply want someone to talk to. It also at times involves 

patients who willingly participate in the fraud. 

DME providers who engage in this type of fraud either do their 

own billing or outsource the billing to persons such as myself. In 

my own experience, I dealt with 14 DME companies and did their 

billing. I often dealt directly with marketers who provided patient 

referrals, most of them fraudulent. I also dealt with physicians who 

knowingly participated in this fraud by knowingly writing prescriptions when they knew they were not medically necessary, or at 

times writing prescriptions for patients they never saw. 

I am not here today to appear proud of what I have done, yet 

I want the Members of the Committee to understand that I have 

done everything humanly possible to correct my past wrongs. The 

opportunity to testify today before this subcommittee is something 

I am very grateful to be able to do. 

Mr. Chairman and Members of the Committee, I want to thank 

you for allowing me the opportunity to address the Subcommittee 

on Oversight. I sincerely regret my actions over the past years and 

today’s testimony, I hope, will be understood as part of a continuing effort on my part to help in any way I can to correct my 

wrongs and prevent future wrongs. 

I also wish to take this opportunity to publicly thank Assistant 

United States Attorney Al Balboni and Special Agent Joseph Martin of Health and Human Services for the confidence they have 

placed in me during the course of my continued cooperation. 

Finally, I wish to publicly apologize to this body and, most of all, 

to the American taxpayers. I am now prepared to answer any questions the Members of the Committee may have. Thank you. 

Chairman BOUSTANY. Thank you, Mr. Odelugo. We appreciate 

your testimony. 

[The prepared statement of Mr. Odelugo follows:] 


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Chairman BOUSTANY. Ms. Ignagni, in your testimony you mentioned the possible negative impact of the medical loss ratio rules 


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on a private insurer’s anti-fraud efforts. Could you elaborate more 

on that? What will happen if this rule is fully implemented, and 

what the impact will be on your efforts or your private insurer 

companies, their efforts to conduct anti-fraud activities? 

Ms. IGNAGNI. Thank you, Mr. Chairman. We appreciate the opportunity to speak more about this. Essentially what the MLR requirements involve in a very direct way is that it allows plans to 

categorize expenditures for health care quality activities. What is 

not included in the quality activities are two buckets, basically. 

Number one, credentialing of providers. Dr. Budetti talked, I think 

very effectively, about the importance of that being added to government programs. We agree with that. We have pioneered those 

techniques. We are not allowed to account for those under quality 

in the present recommendation that was submitted by the NAIC to 

the Department of Health and Human Services, number one. 

Number two, also the preventive aspects that I talked about and 

Mr. Saccoccio talked about; the data mining, the predictive modeling, the early detection prevention that now the Department is 

working very hard also to incorporate into their public programs, 

again, important activities underway at HHS. We have had those 

activities underway for very, very many years and have been very 

successfully undergoing and engaging in programs and efforts. So 

we flagged that both for the NAIC, we flagged it for the Department, and we wanted to flag it today as the committee is focusing 

on the progress that is being made now in public programs, particularly incorporating these very techniques. It is penny-wise and 

pound-foolish, essentially. 

Chairman BOUSTANY. So in addition to that, both you and the 

panel before you talked about the importance of public-private 

partnerships. 

Ms. IGNAGNI. Yes, sir. 

Chairman BOUSTANY. And if this rule goes forward, it really 

hurts your ability to conduct anti-fraud activity at a time when we 

are trying to enhance and move forward on these collaborations between the private sector and the public sector. Is that correct? 

Ms. IGNAGNI. The incentives are, as you have correctly stated, 

now under the recommendations that were made originally by the 

NAIC, and there was considerable discussion about that here. It is 

only for the pay-and-chase situation. And that is precisely what everyone wants to get away from and what our plans have worked 

very, very hard to actually not only think about executing programs but actually operating programs very effectively and very 

successfully. 

And as you heard from Mr. Morris who spoke very effectively 

about this as well, we are now turned to by law enforcement agencies for help in their activities, and are very effectively doing that. 

Chairman BOUSTANY. Mr. Saccoccio, do you want to comment 

on that as well? 

Mr. SACCOCCIO. Yes. You know, we feel that if you look at the 

Federal side, a lot of resources have been put into anti-fraud efforts. And the President’s budget I know asks for an increase of 

discretionary funding for the health care fraud and abuse control 

program. There are additional fundings in the Affordable Care Act. 

It doesn’t make sense to put all those investments on the Federal 


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side and then create a rule that is really a disincentive for private 

plans to invest in the type of preventive-type techniques that you 

want to use to go after fraud. 

Chairman BOUSTANY. It runs counter to the whole effort, it 

seems. 

Mr. SACCOCCIO. That is correct. 

Chairman BOUSTANY. Okay. Thank you. 

With regard to the interaction between private sector and public, 

when a private insurance company highly suspects fraud or actually detects fraud, you do contact CMS to notify them, right? Most 

of the time or all the time? 

Ms. IGNAGNI. The first place that normally this contact is made 

is law enforcement. Oftentimes there are criminal cases that our 

plans suggest and expect based on what they are seeing in their 

data. So oftentimes that is the first place. 

Increasingly, Mr. Chairman, there will be this exchange of information now with the new activities that are being built in the public sector. We have similar kinds of activities. So it is easier to go 

back and forth. And there has been a great deal of communication 

both in Mr. Saccoccio’s association as well as with law enforcement 

directly. We think there is an opportunity—more opportunity for 

information-sharing from law enforcement to the private sector, 

when there is a case that has been opened, to more routinely share 

information. And we think that there needs to be some clarification 

in that regard to make sure that agents are aware that that is permissible and that they can do that. 

Chairman BOUSTANY. So you still are encountering some barriers there whereby a Federal agent may not feel comfortable cooperating or collaborating with—— 

Ms. IGNAGNI. In some cases. We think there is just an opportunity for clarity here and there could be more consistency and 

more uniformity of practice. 

Chairman BOUSTANY. And if you have further suggestions specifically on how we might do that, you might bring it forward to 

the committee. 

Ms. IGNAGNI. Thank you, sir. 

Chairman BOUSTANY. Thank you. Mr. Kind, you may inquire. 

Mr. KIND. Thank you, Mr. Chairman. And I thank the panelists 

for their testimony here today. Karen, let me continue with you for 

a second. You said first referral goes to local law enforcement for 

follow-up and possible prosecution. Have you found that they have 

the level of competency or expertise in order to pursue these investigations? 

Ms. IGNAGNI. It is a very good question that you are posing. 

And it really depends on the issue at hand. This is a very important question. In some cases they are very active—we had a case 

recently where one of our special fraud investigative units found 

that they were being billed for phantom procedures by infusion 

clinics that weren’t providing services to anyone. They were just 

being billed. And they noticed that in the data because they noticed 

an uptick from what was going on usually in the community. So 

it caused them to ask questions and so on. 

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dures which are very clinical, very high tech, we have found now 

that there is a great deal of activity going on in law enforcement 

to make sure that they are getting the kind of medical expertise 

that Mr. Morris talked about, frankly, with the medical director 

being involved in the OIG activities. There is quite a lot of that 

going on. 

And I know Mr. Saccoccio has far more experience than I do. So 

I am happy to yield to him, Mr. Kind, for more explanation about 

this. 

But generally we are finding that in our units, we have staffed 

them with people who know about law enforcement, people who are 

clinicians, people who know about pharmacy, and people who are 

statisticians. And that served our plans very, very well, to have a 

full panel of techniques they can deploy. 

Mr. KIND. Mr. Saccoccio, do you have anything to add? 

Mr. SACCOCCIO. Mr. Kind, one of our goals and one of our missions at NHCAA is to educate investigators about fraud. So we 

probably educate between 150 to 200 FBI agents every year, about 

50 to 70 IG agents every year. So that that is an important part 

of what we do, too, and that was the concept behind this publicprivate partnership. And when this education takes place, it is both 

private and public investigators coming together, sharing their experiences, sharing what they know, their best practices. And that 

is really critical. 

So I think we are seeing that. For example, the FBI and the IG 

does have that expertise. As they bring in new agents, we take 

them into our programs, educate them about what they need to 

know, because you are dealing with coding and medical jargon and 

those kinds of things that you know, say, maybe a new FBI agent 

isn’t aware of. But I know the agency is very good about getting 

their agents trained, and we do a lot of that with them. 

Mr. KIND. Karen, if we eventually move from fee-for-service to 

fee-for-value reimbursement, is that going to have any impact on 

anti-fraud measures? 

Ms. IGNAGNI. This is also a thoughtful question. I heard you 

pose it to the last panel. I think, Yes, but. Let me just tell you the 

‘‘but’’ I was thinking when I was sitting back there listening. What 

we are seeing in some of our fraud units also is when you go to 

bundling of payments and you have more integration, there are 

new skills that are required to make sure that we are not seeing 

up coding in that situation. So, yes. But I want to provisionally say 

that there are new skills and tools that we are already deploying 

to make sure that we can spotlight problems. 

Also moving from the ICD–9 to ICD–10 coding system, you are 

going to be creating thousands of new codes. We are very concerned 

about upcoding there as well. So we will be deploying new skills 

to make sure we are spotlighting that early. 

Mr. KIND. And what about the build-on on the HIT systems and 

the integration of those systems? Is that going to enhance data collection? 

Ms. IGNAGNI. It has in our case. What we have seen is just the 

investment that we have made in infrastructure in HIT, has really 

allowed the statistical tools to be deployed. They are very sophisticated and you need the right kinds of personnel to operate them, 


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obviously. But this investment in IT allows that to move much faster. 

In the old days we used to be looking at clinical charts. Now we 

are looking at data and we can look at reports and we look at statistical profiles, frankly, of areas and different practitioners. 

Mr. KIND. Thank you. I have to go run and vote. 

Mr. GERLACH. [Presiding.] Let me follow up on some of the 

points you made in your testimony. And you see members moving 

off of the dais here because we had a vote series called about 15 

minutes ago, so that is why they are running over to the floor and 

voting and then some of them are coming back as well, given the 

space that we have between a couple of the votes. So we would like 

to try to conclude the hearing today, and hopefully we can do that 

with your continued testimony here over the next few minutes. 

Mr. Odelugo, if I may go to you, sir. Thank you for testifying 

today. And thank you for your insights. We heard from the other 

two presenters on the panel with you, some of their more systematic views of what is happening with health care fraud, their experiences out there in the system from a systematic standpoint. 

You were very much involved in fraudulent activity through your 

individual activity and those of those you partnered with. You said 

in your testimony that it was incredibly easy to commit fraud, and 

as a result you billed the system for over $1 million, if our information is correct. Is that accurate? 

How long did it take you to put in place the plan of action that 

you engaged in, getting other folks to participate with you to the 

point where you were able to make claims and ultimately collect 

over $1 million in Medicare reimbursement payments? 

Mr. ODELUGO. It didn’t take me that long. It was just a matter 

of understanding the system. 

Mr. GERLACH. I am sorry. Say that again? 

Mr. ODELUGO. I said it didn’t take that long. It was a matter 

of understanding the system and setting up the structures. Not 

more than a month. 

Mr. GERLACH. Okay. The people you worked with in this process, in this scheme, how did you approach them? And how willing 

were they to participate? Because, obviously, they were going to 

make money out of this scheme that they shouldn’t have been making. Was it pure greed? Or what was it that got you to entice them 

to participate in this fraudulent activity? 

Mr. ODELUGO. Basically I didn’t approach them. I found—well, 

like I found a loop in the system where I could bill for some things 

on a patient—maybe out of a patient bill up to $4,000, $5,000. And 

I kind of set up a billing system. Where most of them were interested in billing for wheelchairs, I was concentrating on billing for 

these ortho-kits. And they couldn’t figure it out on how to do it. So 

most of them had to come to me to bill for their provider services. 

Mr. GERLACH. Was there somebody that gave you this idea initially to participate in this activity? Or did somehow you decide, 

you have accessed physician identifier numbers on the computer 

and figured out how to move forward? 

Mr. ODELUGO. No. Just like I heard your last question you 

were asking about the knee brace. My understanding, the cost of 

the back brace which was about $960, against $80. And then, you 


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know, from there, I started getting into more of it. Then I got to 

know about the hinged knee braces. All of this is right in the computer. You go online, you can see them and how much they pay for 

it. And you just get the correct code and bill it. That is all it takes. 

Mr. GERLACH. Okay. Ms. Ignagni and Mr. Saccoccio, have you 

had an opportunity to read the Affordable Care Act’s anti-fraud 

provisions that were enacted in this law? And if so, what is your 

overall sense of how effective they might be? Or what other recommendations would you have that are not included in those provisions that we ought to be looking at making into law to try to really address the fraud and waste and abuse problems that we have? 

Mr. SACCOCCIO. The anti-fraud provisions in the Affordable 

Care Act I think are going to be effective, with respect to the 

screening, as Dr. Budetti and Mr. Morris spoke about earlier. 

Screening, the moratorium, bringing in certain classes of providers, 

given the circumstances, the Secretary’s ability to suspend payments when there is a credible allegation or credible evidence of 

fraud. All those things I think are good things. 

The additional resources as far as money that is there, I think 

also obviously is a good thing, especially given the return on investment that you get. It is unlike maybe some other Federal spending. 

This is money that you put in, that you get back a nice return on 

investment. 

As far as other things, I think there is—as CMS goes forward 

and develops their analytical tools, their data analytics, to the extent that they are able to share that information with private insurers, I think that would be very helpful. In other words, as they, 

say, get into the 21st century with respect to looking at Medicare 

data, as they begin to find trends and schemes, to be sure to share 

that with the private side. I mean, we do a lot of that now. But 

I think it is going to be important as they—because they have 

probably the largest group of data than any—the other private insurers obviously are divided up, you know, by company. Here with 

Medicare, to be able to get that information that they develop 

based on those analytics, I think would be very helpful and critical 

once they are able to do that. 

Mr. GERLACH. Ms. Ignagni, do you agree? 

Ms. IGNAGNI. I agree with Mr. Saccoccio. And I think further 

that one could provide more clarity about the sharing of information so that particularly law enforcement agents know that that is 

permissible. 

Second, I do believe that there should be more thought to this 

issue of having safe harbors for health plans that actually provide 

information to State insurance commissioners, provide information 

to law enforcement, to the agency, to make sure that it is very 

clear that that is permissible and there will not be countersuits 

from providers who are at the other end of that information. 

And then I do believe that in the area of restitution, it should 

be more routine that the private sector is included in those restitution agreements and efforts. And then finally the MLR, sir. 

Mr. GERLACH. I will yield back to the chairman. Thank you. 

Chairman BOUSTANY. [Presiding.] The chair recognizes the 

ranking member of the subcommittee, Mr. Lewis. 


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Mr. LEWIS. Thank you very much, Mr. Chairman. And welcome. 

Thank you for your testimony. I have had an opportunity to read 

over it. 

Mr. Odelugo, we understand that you have been cooperating with 

law enforcement for over 2 years. Why did you initially get involved with Medicare fraud? And why have you chosen to come forward? What moves you? What suggested to you to cooperate, to 

come forward? 

Mr. ODELUGO. Before I came forward, I really stopped doing it. 

I stopped doing that in December of 2007 when I knew there was 

an ongoing investigation on me. So I approached my attorney right 

here, and he advised me that the best thing for me to do was to 

come forward and get them to know me and talk to me. And that 

is how I got to turn myself in. And from then on, I started cooperating with them, based on their suggestion. 

Mr. LEWIS. Do you have any regrets? Would you tell others that 

may have the desire, the urge to participate in defrauding Medicare or some other Federal health program, suggest to them that 

this is not the way to go? 

Mr. ODELUGO. I have been doing that already. 

Mr. LEWIS. All right. I appreciate that. 

Mr. Saccoccio, on your Web site, you warn consumers about a 

new scam involving health care. What are the types of scams you 

have seen to date? What tips do you give consumers? 

Mr. SACCOCCIO. I think probably if I had to pick the one top 

scam, it would be identity theft. And that is not just identity theft 

where person A steals person B’s identity in order to get health 

care, but large-scale identity theft that occurs in Medicare and 

Medicaid, regrettably on a regular basis, where folks on the inside 

that is somebody, say, working at a clinical laboratory or a hospital, decides that they are going to take this information and sell 

it on the outside. So folks could still make false claims. Sometimes 

the information is obtained through misrepresentations, phone 

calls where seniors are fooled into giving their information over the 

phone. 

So I think the biggest one right now is medical identity theft. 

And the biggest recommendation we give to consumers is to protect 

your health insurance information, whether it be Medicare, private 

insurance, whatever it happens to be. Make sure you protect that 

just like you would a credit card, your Social Security number. Just 

do not give that information out to anyone on the phone unless you 

particularly know who you are speaking to. So I think identity 

theft is really the biggest one. 

And the other hot areas that we have seen I think are similar 

to Medicare. It has been DME. It has been home health care. It has 

been infusion therapy. And the other one, community mental 

health centers, are now I think becoming a challenge as well. But 

you know, from a patient and a consumer perspective, I think identity theft is the number one thing they need to look out for. 

Mr. LEWIS. Thank you. Ms. Ignagni, I understand your members have experience in analyzing claims and they are using this 

to predict fraud. Based on their experience, what recommendation 

or best practice will you share with us and CMS? 


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Ms. IGNAGNI. I think, sir, that CMS now is in the process of 

adopting exactly the kinds of tools and techniques that we use. It 

is called in statistical terms ‘‘predictive modeling,’’ software packages that actually detect anomalies in data. In other words, in a 

particular area, there are patterns of practice. When you see in the 

data that a particular physician, a particular pharmacy, a particular area, is up significantly or we have seen situations where 

physicians are billing over 50-some patients in a day, that would 

be an anomaly that this software would flag. 

We have been very pleased that CMS now, and the Department, 

is adopting the same kind of tools and techniques, and they work 

very, very well to really give you that early intervention and that 

kind of emphasis on prevention so you want to detect fraud before 

any claim is paid. 

It is much harder when you are paying and chasing, and it is 

much better when you can do this earlier on. And that is where we 

have really focused a great deal of our activities. And, frankly, that 

was the model on which there was a lot of discussion last year, and 

now the Department is actually operating those same skills. 

Mr. LEWIS. I just want to thank you for being here and for your 

testimony. Mr. Chairman, thank you for holding this hearing. 

Chairman BOUSTANY. Thank you. Ms. Jenkins, you may inquire. 

Ms. JENKINS. Thank you, Mr. Chairman. And I, too, want to 

thank you for this hearing and thank you all for your testimony. 

Ms. Ignagni, as you are aware, the Medicaid program was designated as high risk by the Government Accountability Office in 

2003 and Medicare has been designated that way since 1990. In 

the last update on these high-risk programs back in February of 

this year, GAO states that CMS has not met their criteria for having the Medicare program removed from this list. And while they 

have implemented certain recommendations for Medicaid, more 

Federal oversight of the fiscal and program integrity is needed. The 

new health reform law expands eligibility to both of these programs. 

So, could you just please address how this will affect your Association’s ability to reduce fraud over an even larger population and 

pool of taxpayer dollars? 

Ms. IGNAGNI. What our plans have done is actually pioneer a 

number of different practices which are very, very important. First, 

credentialing. We have put a lot of resources into making sure that 

physicians have the qualification that patients expect, that they 

are licensed, that they don’t have malpractice efforts, that they 

have not been convicted of fraud, et cetera. They just go down the 

line. Those are very robust activities that we have worked very, 

very hard to make sure as we are putting together panels of practitioners, clinicians, that we can guarantee to our beneficiaries that 

we have executed those processes, number one. 

Number two, the whole area that the chairman was inquiring 

about a few minutes ago in terms of how do you step back and prevent fraud, getting the statistical packages operating with—they 

are called SIUs, special investigative units, with clinicians, with 

statisticians, with pharmacy experts, with law enforcement experts, 

so that you can look at what we are seeing in the data; where are 


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their hot spots, if you will; where is there trouble? What needs to 

be done? We flag claims and then we do further investigations. So 

that is on the front end. 

Also, when payments are made, there are similar processes that 

are executed to make sure you are following those; if we have 

missed anything, to make sure that we are catching it also on the 

back end. Similarly for pharmacy, in the area of pharmacy, we 

have found clinics that are prescribing pain medications. There 

have been a number of efforts to shut those clinics down, detect 

them, et cetera. There has been a great deal of work between our 

health plans and law enforcement and public officials to do exactly 

that. And you will see that expanding. 

Infusion, as Mr. Saccoccio said, we have seen a very, very significant uptick in problems related to infusion; clinics springing up, 

billing, and no patients behind those bills. So we have worked very 

hard to put in place practices that will detect that. 

Unnecessary procedures that can be life-threatening for patients. 

We have seen situations where physicians have operated on patients who didn’t need those operations. Or in some cases people 

weren’t qualified to actually practice the services they were providing. So unnecessary services, a very, very big area. I must say, 

of course, that the majority of physicians, of course, are upstanding, ethical individuals. But there are some bad apples. So our tools 

and techniques are designed to detect those. 

We worked very closely with Mr. Saccoccio’s Association that has 

brought together health plans, law enforcement, and public officials 

to share this kind of information. Mr. Saccoccio does a great deal 

of training, as he indicated, which is very, very important to make 

sure that all sides have access to the best practices that work and 

that work effectively. 

And now that the public agencies have adopted the practices of 

private sector plans, then I think there is reason to be very, very 

hopeful about the ability to do even more to share information 

under the auspices of Mr. Saccoccio’s Association and the activities 

that are underway at the Department that we heard about earlier. 

Ms. JENKINS. Okay. Thank you. 

Ms. IGNAGNI. Sure. 

Ms. JENKINS. Ten years ago, back in Kansas City, we had one 

of the most horrendous cases of health care fraud that I ever heard 

of. A local pharmacist was convicted of diluting nearly 100,000 prescriptions for 4,000 patients. His profits came from diluting expensive chemotherapy medications. A local pharmaceutical sales rep 

was the first one to suspect foul play. He discovered that pharmacist was selling more of a specific drug than he was purchasing 

from him. He worked with a doctor who used this pharmacy and 

the local authorities to bring charges against the pharmacist. 

Mr. Ignagni and Mr. Saccoccio, you both mentioned the need for 

more public-private cooperation to help combat health care fraud. 

The case I just mentioned was greatly assisted by private companies. Can either one of you elaborate on what else those of us in 

Congress can do to allow and encourage private companies to work 

with CMS and our law enforcement to reduce fraud in the system? 

Mr. SACCOCCIO. Well, I think, as I mentioned, data analysis is 

going to become critical going forward. CMS is in the process of 


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looking for and putting in place the right type of system as far as 

predictive modeling for Medicare. I think it is going to be critically 

important as they develop these systems on the set of data that 

they have, which is an enormous set of data, that that data be 

shared, that what comes out of that data be shared with the private side. 

It is critically important not just for the commercial side, but remember again the private insurers have Medicare Part C, Part D. 

They are doing Medicaid in the State. So there is a lot of tie-in 

both on the private side and public side in the public program. So 

I think that sharing of data is going to be critically important. 

And then I think the other thing is, there is a commitment I believe on the part of the IG and HHS, CMS, and DOJ to share information with the private side. I think a lot of that information has 

to filter down to the agents in the field; that they need very specific 

guidance about what they can and can’t do. And we have been 

working with Mr. Morris, with Dr. Budetti, and others to try to address that particular issue. And hopefully in the near future we are 

going to see some progress along those lines, too. Where agents are 

in the field though, okay, this is not only okay for me to do, it is 

something that I should be doing. 

Ms. JENKINS. Thank you. We will look forward to working with 

you. I yield back. 

Chairman BOUSTANY. One final question for you. Mr. Odelugo, 

how easy is it to get physician provider numbers in your experience 

and to file additional claims? You know, if you get denied, getting 

a different number and filing additional claims. Could you talk a 

little bit more about your experience with that? 

Mr. ODELUGO. Thank you, Mr. Chairman. Basically to get a 

physician’s UPIN number, you just have to go online and pick it 

out. It is public information. 

Chairman BOUSTANY. So just go online and you can find these 

numbers? 

Mr. ODELUGO. Yes. You just get it from there. You can even 

get the one that has the closest ZIP Code to wherever the patient 

lives, and you can input it on the system and transmit. 

Chairman BOUSTANY. Is there a method to what provider numbers you would pinpoint? Do you look for those who perhaps may 

be licensed in multiple States versus just in a single location? 

Mr. ODELUGO. Well most providers will want to get licensed in 

every four regions of Medicare. That way they can bill for any patient, depending on where they are. That is why if you look at my 

statement or my recommendations, I was trying to suggest that 

any claim that doesn’t cross-reference with the doctor’s billing for 

the services should not be paid. That way, providers cannot just 

turn in a claim without the doctor billing for the services of, you 

know, doing the prescription. 

So try to implement it that way because most of businesses are 

done by the billers. Most billers know whatever is going on between the doctors and the providers. But they transmit the claims. 

If they can have it where they can get the billers to be held responsible for a little bit of whatever that is going on, that can help assist them. 


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Chairman BOUSTANY. Thank you. Mr. Lewis, do you have any 

further questions? 

Mr. LEWIS. Mr. Chairman, I don’t have any further questions. 

Chairman BOUSTANY. Thank you. Well, that will conclude our 

questioning of the witnesses. I want to thank all of you for being 

here today and providing your testimony and answering questions 

of the members. I want to remind you that members may have 

some written questions they would like to submit later to you, and 

I would ask you if you would oblige and make those answers a part 

of the record. 

One final thing, Mr. Ranking Member, Mr. Roskam, a member 

of the full committee, has a statement that he would like to submit 

for the record. 

Mr. LEWIS. Without objection. 

Chairman BOUSTANY. Without objection, so ordered. 

[The information follows, The Honorable Mr. Roskam:] 


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Chairman BOUSTANY. With that, we will conclude this hearing, 

and the hearing is adjourned. 

[Whereupon, at 4:22 p.m., the subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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Academy of Managed Care Pharmacy, Letter 


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Prepared Statement of Apria Healthcare 


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Prepared Statement of Dream Software 


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Prepared Statement of Pharmaceutical Care Management Association 


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MATERIAL SUBMITTED FOR THE RECORD 

Questions from the Honorable Chairman Boustany 


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Questions from Mr. Gerlach 

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Questions from Ms. Jenkins 

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