Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

CONFLICTS AND FINANCIAL 

RELATIONSHIPS AMONG 

POTENTIAL ZONE PROGRAM 

INTEGRITY CONTRACTORS
 

Daniel R. Levinson
 

Inspector General
 

July 2012 

OEI-03-10-00300 
 

 

EXECUTIVE SUMMARY: CONFLICTS AND FINANCIAL RELATIONSHIPS 

AMONG POTENTIAL ZONE PROGRAM INTEGRITY CONTRACTORS 

OEI-03-10-00300 

WHY WE DID THIS STUDY 

The Centers for Medicare & Medicaid Services (CMS) uses Zone Program Integrity Contractors 

(ZPIC) to perform program integrity activities designed to fight fraud, waste, and abuse in the 

Medicare program. Conflicts of interest among ZPICs could compromise CMS’s efforts to 

protect the program. CMS requires companies that submit proposals for ZPIC contracts 

(offerors) and their subcontractors to (1) disclose information about any business or contractual 

relationships that may present conflicts and (2) provide a strategy to mitigate all conflicts of 

interest that may compromise the ZPICs’ impartiality in conducting their work. 

HOW WE DID THIS STUDY 

We reviewed conflict-of-interest information for 18 offerors and 85 subcontractors. We also 

conducted a structured interview with CMS staff to determine how CMS addresses conflicts of 

interest among offerors. We determined whether offerors and subcontractors provided CMS all 

the information required for their reported conflicts and financial interests. 

WHAT WE FOUND 

Offerors and their subcontractors often had business and contractual relationships with CMS and 

with other offerors, but rarely considered them to be actual conflicts. They reported having 

relationships with CMS or contractors of CMS that provide Medicare Parts C and D plans, 

claims processing, program integrity, and/or quality improvement services. Offerors, 

subcontractors, and CMS identified 1,919 business and contractual relationships as possible 

conflicts and 16 as actual conflicts. CMS does not have a written policy for reviewing conflict 

and financial interest information submitted by offerors, and submitted information was not 

always consistent or complete. Specifically, some offerors and subcontractors failed to provide 

all the requisite information regarding financial interests in other entities. 

WHAT WE RECOMMEND 

To encourage an environment of transparency and accountability among contractors, we 

recommend that CMS: (1) provide clearer guidance in the Request for Proposals to offerors and 

subcontractors regarding which business and contractual relationships should be identified as 

actual conflicts and which should be identified as possible conflicts; (2) require offerors and 

subcontractors to distinguish those business and contractual relationships that they deem to be 

actual conflicts from those they deem to be possible conflicts; (3) state whether offerors and 

subcontractors need to report income amounts, periods of performance, and types of work 

performed for their contracts with CMS and income amounts generated from key personnel’s 

other employment; (4) create a standardized format for reporting information in the 

Organizational Conflict of Interest Certificate and require its use by offerors and subcontractors; 

and (5) develop a formal, written policy outlining how conflict-of-interest information provided 

by offerors should be reviewed by CMS staff. CMS partially concurred with our first and second 

recommendations and fully concurred with the remaining recommendations. 
TABLE OF CONTENTS 

Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................7 

Findings......................................................................................................10 

Offerors and their subcontractors often had business and 

contractual relationships with CMS and with other offerors, but 

rarely considered them to be actual conflicts .................................10 

Offerors, subcontractors, and CMS identified 1,919 business and 

contractual relationships as possible conflicts and 16 as actual 

conflicts..........................................................................................12
 

The most common strategy proposed to mitigate conflicts was 

to impose restrictions on information and resource sharing 

within the offeror’s or subcontractor’s company ...........................14 

CMS does not have a written policy for reviewing conflict and 

financial interest information submitted by offerors, and 

submitted information was not always consistent or complete .....16 

Conclusion and Recommendations ............................................................19 

Agency Comments and Office of Inspector General Response .....21 

Appendixes ................................................................................................23 

A: Conflict of Interest Requirements Established in the Zone 

Program Integrity Contractor Request for Proposals...............23 

B: Number and Type of Conflicts by Individual Offerors ............30 

C: Agency Comments ...................................................................31 

Acknowledgments......................................................................................36 
 

 

OBJECTIVES 

1.	 To determine the extent to which offerors reported business and 

contractual relationships with other offerors and the Centers for 

Medicare & Medicaid Services (CMS). 

2.	 To determine the number of conflicts of interest identified by offerors 

or CMS during the Zone Program Integrity Contractor (ZPIC) 

contracting process. 

3.	 To determine what strategies offerors proposed to mitigate conflicts of 

interest. 

4.	 To determine whether offerors provided consistent and complete 

information on their conflicts and financial interests to CMS and 

whether CMS reviewed this information. 

BACKGROUND 

A conflict of interest exists if a Federal contractor is unable or potentially 

unable to provide impartial assistance or advice to the Government.1 

Conflicts of interest among Federal contractors can compromise the 

integrity of the contracting process. Federal regulations provide guidance 

for resolving conflicts among contractors. 

CMS employs program integrity contractors to identify fraud, waste, and 

abuse in the Medicare program. ZPICs are of particular importance 

because they perform the majority of program integrity work for CMS. 

Therefore, conflicts of interest that affect the impartiality of ZPICs could 

weaken CMS’s efforts to protect Medicare from fraud, waste, and abuse. 

For example, a program integrity contractor owned by a health insurance 

company offering a Medicare prescription drug plan might have a 

disincentive to investigate suspected fraud involving those particular 

prescription drug plans. 

Conflicts of interest that go undetected or are not appropriately addressed 

could cost the Medicare program money and weaken public trust in its 

services. If ZPICs with conflicts of interest become less vigilant in 

combating fraud, then taxpayer dollars may be wasted on payments to 

unscrupulous providers. Situations in which conflicted contractors are 

unable to conduct their responsibilities impartially could undermine public 

trust that Medicare is protected from fraud. As a result, it is important that 

systems be in place to ensure the independence and integrity of program 

integrity contractors. 

1 Federal Acquisition Regulation (FAR), 48 CFR pt.2, subpart 2.1. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 1 
 

 

 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 2 

 

In a letter to the Office of Inspector General (OIG), Senators Max Baucus, 

Thomas R. Carper, and Claire McCaskill raised concerns about potential 

conflicts of interest among contractors that perform Medicare 

administrative and program integrity functions. This report was prepared 

in response to their letter. 

The Role of Private Contractors in Administering Medicare 

As the agency responsible for administering Medicare, CMS employs 

contractors to conduct the day-to-day operations of the program, such as 

claims processing, as well as to conduct program integrity activities 

designed to fight fraud, waste, and abuse. Among other responsibilities, 

program integrity contractors develop and refer suspected cases of fraud to 

OIG for further investigation. 

The Medicare Prescription Drug, Improvement, and Modernization Act of 

2003 substantially changed CMS’s Medicare contracting process. The law 

requires CMS to award contracts under the FAR, which requires an open, 

competitive award process.2 CMS has estimated that the Medicare 

contracting reform provisions in the law would result in cost savings from 

increased competition, consolidation of claims processing functions, and 

reductions in claims error rates.3 

The Transition to ZPICs 

CMS created ZPICs to consolidate all Medicare program integrity 

functions under one type of contractor in a geographic zone. As of 

October 2011, ZPICs are replacing Program Safeguard Contractors (PSC) 

that perform program integrity work in Medicare Parts A and B. At the 

time ZPICs were established, CMS stated that ZPICs may also assume 

some of the work of the Medicare Drug Integrity Contractors (MEDIC) 

that currently perform program integrity activities for Medicare Parts C 

and D. The new contracting arrangement requires that one ZPIC be 

assigned to each of seven geographic zones. CMS began to transfer 

program integrity workloads from the PSCs to ZPICs in 2008. ZPIC 

contracts for all seven zones have been awarded. 

ZPICs identify improper billing patterns that indicate potential fraud, 

waste, and abuse; investigate cases of suspected fraud; and refer cases to 

OIG for further investigation. The ZPIC Statement of Work details the 

range of activities that may be required of ZPICs. 

2 48 CFR pt.1, subpart 1.102-2(c). 

3 Department of Health and Human Services (HHS), Medicare Contracting Reform: A 

Blueprint for a Better Medicare, p. IV-2, February 7, 2005. 
 

 

 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 3 

The Contract Award Process for ZPICs 

CMS begins the contract award process with the release of a Request for 

Proposal (RFP).4 The RFP outlines CMS’s requirements, the nature of the 

work required, and the contract’s period of performance and deliverables. 

Prospective ZPICs (offerors) compete for contracts by submitting a 

business proposal, including information about the company’s financial 

status; a technical proposal describing the company’s ability to perform 

the required work; a list of any actual, apparent, or potential conflicts of 

interest; and a conflict-of-interest and compliance plan that stipulates how 

the company would resolve any conflicts. 

A Technical Evaluation Panel evaluates and scores each technical proposal 

by applying criteria in the RFP.5 Using the panel’s rating of each proposal, 

the CMS contracting officer may establish a “competitive range” that 

includes the most highly rated proposals. These offerors then have an 

opportunity to discuss improvements to their proposals with CMS before 

submitting final revised proposals. Finally, the contracting officer selects 

a proposal that is determined to provide the “best value” to the 

Government. 

Conflicts of Interest Among Offerors in the ZPIC Award 

Process 

Requirements for identifying and mitigating of conflicts of interest are 

provided in both the FAR and the RFP for ZPIC contracts.6 For example, 

a conflict of interest exists if a ZPIC is unable or potentially unable to 

provide impartial assistance or advice to the Government. The 

Government Accountability Office (GAO) has further clarified the FAR to 

establish three types of conflicts of interest: 

	 An offeror has an “unequal access to information” conflict when, 

through its work as part of a Government contract, it has access to 

nonpublic information that may provide the offeror a competitive 

advantage in a later solicitation for a Government contract. 

	 An offeror has a “biased ground rules” conflict when, as part of its 

performance of a Government contract, it has set the ground rules 

for another Government contract by, for example, writing a 

Statement of Work. 

4 The contract award process is established in FAR pt. 15 and supplemented in HHS 

Acquisition Regulation pt. 315. 
 

5 Criteria include the company’s expertise in carrying out fraud investigations and conducting 

data analysis.
 

6 Requirements regarding conflicts of interest among Federal contractors are established in 

FAR subpart 9.5.
 
 

 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 4 

 

 

	 An offeror has an “impaired objectivity” conflict when its work 

under a Government contract could involve evaluating itself. 7 

The FAR does not require that all contractors be free of conflicts. 

Contracting officers may award a contract even if an offeror has a conflict 

of interest that cannot be avoided or mitigated, as long as they establish 

that an award is in the Government’s “best interest.” In such a case, a 

waiver must be requested. However, the RFP explicitly states that 

contractors should be free of conflicts of interest “to the greatest extent 

possible.” 

Requirements in the ZPIC RFP. The ZPIC RFP includes a number of 

disclosure requirements designed to identify any conflicts and address 

them before a contract is awarded. Offerors and their subcontractors must 

establish a conflict-of-interest program to identify, evaluate, and mitigate 

all conflicts of interest that prevent, or would appear to prevent, the ZPIC 

from conducting work in an impartial manner.8 

The contracting officer assesses the offeror’s conflict-of-interest and 

compliance plan independently of the Technical Evaluation Panel’s formal 

scoring of the offeror’s proposal. The plan assessment is not part of the 

formal scoring process. 

The RFP requires that offerors and their subcontractors disclose any 

actual, apparent, and potential conflicts of interest by means of an 

Organizational Conflict of Interest Certificate. However, the RFP does not 

provide definitions or examples that differentiate between actual, apparent, 

and potential conflicts. The certificate must identify all actual, apparent, 

and potential conflicts of interest that preclude, or would appear to 

preclude, impartiality. The document must include the following items (a 

complete list is provided in Appendix A): 

	 a description of all business or contractual relationships or 

activities that could be viewed as conflicts of interest by a prudent 

businessperson; 

	 a description of the methods to be used to mitigate any conflict; 

	 a description of the offeror’s program to monitor its own and its 

subcontractors’ compliance with conflict-of-interest requirements; 

7 GAO Bid Protest Decision, Aetna Government Health Plans, Inc.; Foundation Health 

Federal Services, Inc., File B-254397.15, B-254397.16, B-254397.17, B-254397.18, and 

B-254397.19, July 27, 1995. 

8 Subcontractors are used by offerors to perform services such as medical review of claims, 

statistical analysis, data management, and database administration. 
 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 5 

	 a written affirmation attesting to the accuracy of the information in 

the certificate; 

	 a description of the offeror’s corporate and organizational 

structure; 

	 an accounting of the offeror’s financial interests (percentage of 

ownership in any other entity, income generated from other 

sources, contracts or arrangements with any insurance organization 

or its subcontractors, or provider of Medicare- or 

Medicaid-reimbursed services);9 

	 a list of all of the officers, directors, and managers involved or 

potentially involved in the contract with a description of their 

potential conflicts of interest and financial interests (officers, 

directors, and mangers are hereafter referred to as “key 

personnel”); and 

	 a list of all subcontractors to be used in the contract. 

Offerors that are awarded ZPIC contracts are required under the RFP to 

submit an Organizational Conflict of Interest Certificate to the CMS 

contracting officer annually on October 31. 

Although not required by the FAR, CMS performs annual 

conflict-of-interest compliance audits for each ZPIC contract. These 

compliance audits are for the period November 1 through October 31 each 

year. If any new conflicts are found, CMS will notify the ZPIC and 

require the contractor to submit updated information, which may include 

an updated Organizational Conflict of Interest Certificate and/or a revised 

mitigation strategy, depending on the specific issue. 

CMS Review Process 

CMS staff reported that they review all the certificates they receive from 

offerors and subcontractors to determine whether the requirements in the 

RFP are met. While the RFP requires that offerors and subcontractors 

provide certain information about their business and contractual 

relationships, it does not require that offerors and subcontractors use a 

standardized organizational format to do this. Therefore, the information 

CMS receives varies in length and format across all offerors and 

subcontractors. In addition, the number and complexity of the offerors’ 

9 Offerors and subcontractors are also required to report the dollar amount, type of work 

performed, and period of performance for contracts or arrangements with insurance 

organizations, subcontractors of insurance organizations, and providers of Medicare- or 

Medicaid- reimbursed services. 
 

 

 

 

 

 

business and contractual relationships also affect the volume of the 

information received. 

CMS staff also determine whether any conflicts of interest exist for 

offerors or subcontractors. They base these determinations on a review of 

the specific circumstances of disclosed business or contractual 

relationships. Each certificate that CMS receives from offerors and 

subcontractors can include hundreds of pages. During the entire ZPIC 

conflict-of-interest review process, CMS reviewed approximately 10,000 

pages. 

Once offerors are selected for the competitive range, their certificates and 

those of their subcontractors are more closely reviewed. CMS staff has 

discussions with these offerors regarding the information in the 

certificates. After the discussions, the offerors in competitive range are 

asked to submit revised certificates that address CMS’s concerns. 

After CMS determines which offeror will be awarded the ZPIC contract, it 

performs a more detailed review of the offeror’s revised Organizational 

Conflict of Interest Certificate and those of its subcontractors. If any 

unresolved conflict-of-interest issues remain, CMS conducts an exchange 

with the offeror until a resolution is reached and the contract can be 

awarded. Any information that CMS needs to complete its assessment and 

review of the certificate is requested at this time. 

Conflict-of-Interest Protests During the ZPIC Award Process 

Offerors may file formal protests with GAO if they object to CMS’s 

contracting decisions.10 Since the ZPIC award process began, protests 

have been filed covering various issues, including conflicts of interest.11 

In two of the sustained protests, the issue was the level of detail CMS 

accepted in the offerors’ plan to mitigate a conflict of interest.12 

According to GAO, CMS awarded contracts for Zones 2 and 5 to 

AdvanceMed, Inc., without reasonably considering the plan proposed by 

AdvanceMed to mitigate its conflicts of interest. 

AdvanceMed’s parent company has contracts with Medicare Part D plan 

sponsors, e.g., information technology services contracts.13 According to 

CMS, AdvanceMed might have evaluated its parent company’s work if it 

10 GAO bid protest regulations are established in 4 CFR pt. 21. 

11 GAO bid protest determinations are not binding and can be overridden by an agency. 

12 GAO Bid Protest Decision, C2C Solutions, Inc., File B-401106.5, January 25, 2010; GAO 

Bid Protest Decision, Cahaba Safeguard Administrators, LLC, File B-401842.2, January 25, 

2010. 

13 Medicare Part D prescription drug coverage is provided through private sponsors that offer 

a choice of plans with different costs and coverage. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 6 
 

 

 

had been tasked with conducting program integrity work for Medicare 

Part D. There was a possibility that Part D program integrity work would 

never be awarded because it was an option under the ZPIC contract. 

However, GAO still held that CMS should have obtained a more detailed 

mitigation plan. 

GAO recommended that CMS reconsider its determination of 

AdvanceMed’s eligibility for awards. In both cases, CMS gave 

AdvanceMed an opportunity to draft a more detailed mitigation plan. The 

contracting officer reviewed the revised plans and approved them. 

METHODOLOGY 

Scope 

Our study is limited to the five zones where ZPIC contracts were awarded 

at the time our study began in October 2010: Zones 1, 2, 4, 5, and 7. At 

the time of our data collection, ZPIC contracts for Zones 3 and 6 had not 

yet been awarded. 

Data Collection 

Documentation From CMS. We obtained the following from CMS: 

	 copies of the portions of the proposal that dealt specifically with 

conflicts of interest submitted by each offeror for the five ZPIC 

zones, including the Organizational Conflict of Interest Certificates 

submitted by each offeror and each of their subcontractors; and 

	 copies of statements, files, analyses, notes, records of 

conversations and meetings, and correspondence CMS used to 

review offerors’ conflicts of interest. 

Interview With CMS staff. We interviewed relevant CMS staff to 

determine what procedures CMS uses for identifying and reviewing 

conflicts of interest among ZPIC offerors. 

Data Analysis 

A total of 19 offerors submitted proposals for ZPIC contracts in Zones 1, 

2, 4, 5, and 7. CMS provided Organizational Conflict of Interest 

Certificates for 18 of the 19 offerors. CMS was unable to locate and 

provide documentation for one offeror in one zone.14 We reviewed 

original and, if submitted, revised Organizational Conflict of Interest 

Certificates for 18 offerors and 85 subcontractors. Because some 

companies submitted proposals for ZPIC contracts in more than 1 zone, 

there were only 12 unique ZPIC offerors. The first finding of this report is 

14 This offeror was not awarded a ZPIC contract. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 7 
 

 

 

 

 

based on these 12 unique offerors. All of the remaining findings are based 

on the total of 18 offerors. 

We reviewed the original and revised Organizational Conflict of Interest 

Certificates submitted by offerors and their subcontractors to determine 

whether they met conflict-of-interest disclosure requirements outlined in 

the RFP. We also reviewed the certificates to determine the number of 

conflicts of interest disclosed by the offerors and their subcontractors. 

To determine the business and contractual relationships that offerors and 

subcontractors had with each other and with CMS, we analyzed the 

conflict and financial interest information provided in Organizational 

Conflict of Interest Certificates. 

We reviewed documentation generated by offerors, subcontractors, and 

CMS to quantify and categorize conflicts of interest. We categorized 

those conflicts into two groups: (1) actual conflicts and (2) possible 

conflicts. 

Actual Conflicts. Actual conflicts are situations in which an offeror, a 

subcontractor, or CMS described a business or contractual relationship as 

an actual conflict. To be included in this category, a conflict must not 

have been described using other terms, such as “apparent,” “potential,” or 

“perceived.” 

Possible Conflicts. Possible conflicts are situations in which an offeror, a 

subcontractor, or CMS described a business or contractual relationship as 

an apparent, potential, or perceived conflict. No additional information 

was provided that would designate the business or contractual relationship 

as an actual conflict. There was also no indication that the business or 

contractual relationship was not an actual conflict. This category also 

includes situations in which an offeror identified business or contractual 

relationships of various types without specifying which were actual or 

possible conflicts. 

If documentation showed that CMS’s description of a conflict differed 

from the offeror’s or subcontractor’s description, we based our 

categorization of the conflict on CMS’s decision. For example, CMS 

determined some conflicts to be actual even though offerors did not 

specify the type of conflict. 

We also reviewed mitigation information provided by offerors and 

subcontractors to quantify and categorize their mitigation strategies. 

Some offerors submitted more than one version of their Organizational 

Conflict of Interest Certificates—an original certificate and a revised 

certificate(s) that incorporated changes based on concerns raised by CMS. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 8 
 

 

In categorizing conflicts and mitigation strategies, we used the most recent 

certificate submitted by each offeror during the award process. 

We also determined whether offerors and subcontractors submitted 

complete information regarding their financial interests as well as those of 

their key personnel. According to the RFP, this includes: (1) percentage 

of ownership in any other entity, (2) income generated from other sources, 

and (3) contracts or arrangements with any insurance organization or its 

subcontractors or provider of Medicare- or Medicaid-reimbursed services. 

To assess how CMS reviewed offerors’ and subcontractors’ conflicts of 

interest, we reviewed documentation submitted by CMS. This included 

copies of statements, files, analyses, notes, records of conversations and 

meetings, and correspondence. We reviewed the documentation to 

determine whether CMS identified any concerns with offerors’ and 

subcontractors’ Organizational Conflict of Interest Certificates. 

Limitations 

All of the information in the “Findings” section of this report was 

provided to us by CMS, including offerors’ and subcontractors’ 

information. We did not verify the information provided. 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 9 
 

 

FINDINGS 

Offerors and their subcontractors often had business 

and contractual relationships with CMS and with other 

offerors, but rarely considered them to be actual 

conflicts 

Ten of the twelve unique offerors described having business or contractual 

relationships with CMS and/or another offeror at the time proposals were 

submitted. These 10 offerors reported a total of 31 relationships with 

CMS or contractors of CMS that provide Medicare Parts C and D plans, 

claims processing, program integrity, and/or quality improvement services. 

The three unique offerors that won ZPIC contracts reported having six 

such relationships. Some of the 10 offerors considered these business and 

contractual relationships to be actual or possible conflicts, while others 

characterized them as financial relationships but not conflicts. 

Seven offerors were subsidiaries of health insurance 

companies that offered Medicare plans 

Seven offerors were owned by five health insurance companies, which 

had contracts to provide Medicare Part C and/or D plans. The seven 

offerors either did not report their relationships to Medicare Parts C and D 

plan sponsors as actual conflicts hindering their ability to provide 

impartial assistance to the Government or did not specify that these 

relationships were actual conflicts. 

Some offerors stated that their ZPIC program integrity work would occur 

in a geographic area different from the one where their parent companies 

offered Medicare Part C and/or D plans. Other offerors contended that 

separate corporate and governance structures prevented any influence by 

their parent companies on their objectivity in performing program 

integrity work under the ZPIC contract. CMS determined that one of 

these relationships was an actual conflict because the offeror could be 

called upon to review the services of its parent company. 

Two-thirds of offerors either were Medicare claims processors 

or had financial ties to claims processors 

Two offerors were Medicare claims processors and six offerors had parent 

or sister companies that were claims processors. One of these six offerors 

had two parent companies that processed Medicare claims. The other five 

offerors were owned by parent companies that also owned subsidiaries 

that processed Medicare claims (i.e., the offeror and subsidiary were sister 

companies). 

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Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 11 

Neither the offerors nor CMS considered these eight relationships as 

actual conflicts. Some offerors determined that these relationships did not 

create actual conflicts because the offerors would be performing program 

integrity functions outside the zone where they or their parent and sister 

companies processed Medicare claims. Therefore, the offerors would not 

be performing program integrity functions on Medicare claims processed 

by related companies. CMS staff also reported that they do not consider 

an affiliation with a Medicare claims processor to be an actual conflict 

because the ZPIC is not investigating the claims processor, but instead is 

investigating the providers that submit claims. 

Half of the offerors had existing Medicare program integrity 

contracts with CMS 

Six of the twelve offerors stated they had existing program integrity 

contracts with CMS. Four of these six had PSC contracts with CMS, one 

had a MEDIC contract with CMS, and one had both a PSC and a MEDIC 

contract. None of these relationships were considered to be actual 

conflicts by either the offerors or CMS. 

One offeror had a qualified independent contract (QIC) with CMS.15 This 

offeror did not consider this relationship to be an actual conflict because 

the scope of the QIC work was outside the ZPIC geographic zone. Four 

offerors had sister companies with CMS contracts to operate as quality 

improvement organizations (QIO) or QICs.16 Two of these offerors did 

not consider these relationships to be actual conflicts. Another offeror 

considered this relationship as a possible conflict. However, CMS 

determined it to be an actual conflict because the QIC (sister company) 

could be called upon to review the work of the offeror. The remaining 

offeror listed this relationship as a financial interest but did not address 

whether it was any type of conflict. 

Offerors subcontracted with each other as well as with entities 

that had a contractual relationship with CMS 

All 12 offerors stated they would use subcontractors to support their work. 

Eight offerors had subcontracting agreements with other offerors. Ten 

offerors had subcontracting agreements with entities that had existing 

relationships with CMS. These subcontractors included Medicare claims 

processors, PSCs, QIOs, and information technology providers. 

15 A QIC conducts the second level of appeal when a beneficiary or provider appeals certain 

decisions related to a Medicare claim.
 

16 A QIO monitors the appropriateness, effectiveness, and quality of care provided to 

Medicare beneficiaries.
 
 

 

 

 

 

 

 

 

 

 

Offerors, subcontractors, and CMS identified 1,919 

business and contractual relationships as possible 

conflicts and 16 as actual conflicts 

Actual Conflicts. Offerors, subcontractors, and CMS identified 16 actual 

conflicts out of 1,935 reported conflicts. CMS considered all 16 as 

mitigated. Ten of the 16 actual conflicts belonged to offerors and their 

subcontractors that were awarded ZPIC contracts. All 16 actual conflicts 

were “impaired objectivity” conflicts, meaning that the offeror or 

subcontractor could be in the position of evaluating work performed or 

associated with its own company. Table 1 provides the number and types 

of conflicts for offerors and their subcontractors. Appendix B shows the 

number and type of conflicts for individual offerors. 

Table 1: Number and Types of Conflicts Among Offerors and Subcontractors 

Offerors and Subcontractors Number of Actual 

Conflicts 

Number of 

Possible Conflicts 

Total Number of 

Conflicts 

Offerors Awarded 

ZPIC Contracts 

(5 offerors with 

38 subcontractors) 

Offerors 8 22 30 

Subcontractors 2 1,419 1,421 

Subtotal 10 1,441 1,451 

Offerors Not 

Awarded ZPIC 

Contracts 

(13 offerors with 

47 subcontractors) 

Offerors 5 211 216 

Subcontractors 1 267 268 

Subtotal 6 478 484 

All Offerors 

(18 offerors with 

85 subcontractors) 

Offerors 13 233 246 

Subcontractors 3 1,686 1,689 

Total 16 1,919 1,935 

Source: OIG analysis of ZPIC offerors’ Organizational Conflict of Interest Certificates and CMS documentation for Zones 1, 2, 4, 5, 

and 7, 2011. 

Fourteen of the sixteen actual conflicts involved offerors and 

subcontractors with business or contractual relationships with Parts C and 

D plan sponsors. For instance, one offeror’s parent company had a 

contract to offer technology-related implementation and operations work 

to a company that was a Part D plan sponsor. In another case, an offeror’s 

parent company owned Parts C and D plans operating in all 50 States. 

Another subcontractor’s parent company operated as both Parts C and D 

plan sponsors in the zone where the offeror submitted its proposal. 

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One conflict involved an offeror whose parent company also owned a 

company acting as a QIC for CMS. According to CMS, this created an 

actual conflict because the QIC could be called upon to review the work of 

the offeror. Another actual conflict involved an individual whose spouse 

worked for a provider in the zone where the ZPIC was to perform work. 

In a few cases, CMS disagreed with offerors’ and subcontractors’ own 

assessments of their conflicts. For example, CMS required that an offeror 

characterize its ties to a Parts C and D plan sponsor as actual conflicts. In 

this case, the offeror provided information about the relationships but did 

not consider them to be actual or possible conflicts. 

Possible Conflicts. Of the 1,935 total conflicts reported, 1,919 were 

possible conflicts. For example, one offeror’s parent company also owned 

a Medicare Administrative Contractor (MAC) that was processing 

Medicare claims in the same zone where the offeror would be evaluating 

claims. The offeror stated that the situation only presented the appearance 

of a conflict for two reasons: (1) although ZPICs analyze provider claims 

that may have been processed by a MAC, they do not evaluate how MACs 

process those claims; and (2) the company’s corporate structure 

guaranteed its independence. 

In another case, an offeror disclosed a possible conflict regarding an 

individual who sat on its board of directors. This individual’s spouse was 

a vice president at a provider in the same zone where the contractor would 

be evaluating claims. This could present a possible conflict if the offeror 

evaluated this provider’s claims. 

A single subcontractor associated with 3 offerors that were awarded ZPIC 

contracts accounted for 1,231 of the 1,919 possible conflicts in this 

category. The subcontractor’s contractual relationships were characterized 

differently across the three zones. In two zones, the subcontractor listed 

its contracts with providers and health care plans as possible conflicts 

because the providers and health care plans may come under the scrutiny 

of the ZPIC. Most of these conflicts stemmed from the company’s 

contracts with providers or health insurance plans. Both types of 

relationships create a possible conflict because ZPICs could review the 

providers’ and health plans’ services. However, in a third zone, the 

subcontractor provided a list of its contracts with providers that could also 

come under the scrutiny of the ZPIC, but did not characterize them as any 

type of conflict. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 13 
 

 

 

 

The most common strategy proposed to mitigate 

conflicts was to impose restrictions on information 

and resource sharing within the offeror’s or 

subcontractor’s company 

The RFP requires that offerors and subcontractors mitigate all conflicts of 

interest. For some of the conflicts, offerors proposed more than one 

mitigation strategy. Table 2 shows the mitigation strategies proposed by 

offerors and subcontractors and, in a very few instances, strategies 

suggested by CMS for offerors’ consideration. According to CMS, CMS 

made a complete assessment of conflicts and mitigation strategies for all 

offerors that were awarded ZPIC contracts and the contracting officer 

made a determination in each case that all conflicts were adequately 

mitigated prior to the ZPIC contract award. 

The mitigation strategy most frequently proposed involved various 

methods for restricting access to certain company information and/or 

resources. For example, offerors and subcontractors implemented 

measures designed to ensure that only employees performing ZPIC-related 

work could access these data. The goal was to make sure other divisions 

of the company did not have access to sensitive data or proprietary 

information. This type of mitigation strategy was also the most common 

among offerors (and their subcontractors) that won ZPIC contracts. 

Table 2: Frequency of Mitigation Strategies for Conflicts Among Offerors, Subcontractors, 

and CMS in Zones 1, 2, 4, 5 and 7 

Mitigation Strategy Number of Times Mitigation 

Strategy Was Proposed 

Restrictions on sharing information and resources within the company 1,567 

Separation of corporate, organizational, or management structure 501 

Limitations or restrictions on scope of work (including recusal) 378 

Elimination of conflicting relationship 26 

Use of subcontractor or another ZPIC 25 

Divestiture 11 

Audits 3 

Total1 2,511 

Source: OIG analysis of ZPIC offerors’ Organizational Conflict of Interest Certificates and CMS documentation for Zones 1, 2, 4, 5, 

and 7, 2011. 

1 Total number of mitigation strategies is greater than the total number of conflicts because offerors and subcontractors proposed more than 

one mitigation strategy for some conflicts. 

The level of specificity in the mitigation strategies varied. For example, 

one subcontractor asserted that “there is no sharing of Medicare 

beneficiary or claim data” between the subcontractor and its affiliate. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 14 
 

 

 

Another subcontractor offered a more detailed mitigation strategy, which 

included methods to prevent clients from accessing other clients’ data. 

That subcontractor proposed creating secure electronic platforms to house 

data in a way that allowed only the subcontractor’s clients and the 

personnel working for those clients to have access. 

Another offeror’s detailed information security plan included methods to 

ensure that information gathered by the offeror would be inaccessible to its 

affiliated company. The mitigation strategy called for the offeror and its 

affiliated company to maintain separate information technology networks, 

separate human resources and payroll systems, password protection for 

information technology systems, and a security system to make work 

spaces accessible only to employees with proper badges. 

Offerors and subcontractors often cited the separation of 

corporate, organizational, and management structures as 

mitigation strategies 

In some cases, offerors stated that their current or future corporate, 

organization, and management structures mitigated any conflicts. For 

example, one offeror had a subcontractor that was already working as a 

QIC. To mitigate the conflict, the subcontractor created a separate 

business unit within its organization to isolate the QIC work from the 

ZPIC work. In another case, a subcontractor had individuals on its board 

of directors who also sat on the board of directors of sister companies that 

offered Medicare Parts C and/or D plans and also functioned as claims 

processors. The subcontractor ensured that its board of directors’ 

day-to-day decisionmaking did not involve the ZPIC functions. 

Offerors and subcontractors sometimes cited limitations or 

restrictions on the scope of their work to mitigate conflicts 

In some cases, offerors reported that their business and contractual 

relationships with companies that have Medicare claims processing or 

Parts C and/or D contracts could create possible conflicts. To address one 

such possible conflict, an offeror stated that the ZPIC work it would be 

performing was outside the geographic area (zone) in which the parent 

company’s Part C and Part D plans were offered. Another offeror stated 

that the company with a claims processing contract only provided it with 

technology support services. 

Offerors and subcontractors sometimes took more proactive measures to 

address conflicts among key personnel. For example, in a number of 

cases, key personnel had personal relationships with individuals who 

worked for providers in the zone where the ZPIC work was to be 

performed. Offerors and subcontractors required that those individuals be 

prohibited from working on or taking actions that involved those 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 15 
 

 

providers. For two conflicts involving an offeror’s and subcontractor’s 

key personnel, CMS recommended recusal to mitigate conflicts. 

CMS does not have a written policy for reviewing

conflict and financial interest information submitted by

offerors, and the submitted information was not 

always consistent or complete 

CMS’s process for reviewing conflict and financial interest information is 

neither outlined in a written policy nor standardized through the use of 

checklists or other methods. According to CMS staff, CMS performs a 

preliminary review of all the offerors’ certificates upon initial receipt to 

determine whether the requirements in the RFP are met. More detailed 

reviews of certificates and exchanges are performed on offerors in the 

competitive range. A final review and exchange are performed before the 

ZPIC contract is awarded. 

However, offerors and their subcontractors often failed to provide all the 

information required by the RFP, even after CMS reviewed the initial 

submission of certificates. Fifteen subcontractors (related to four offerors) 

never submitted the required Organizational Conflict of Interest 

Certificates. These four offerors were not awarded ZPIC contracts. 

Our examination of CMS’s documentation associated with its review of 

certificates did not reveal documentation showing that CMS conducted a 

preliminary review of three offerors’ and four of their subcontractors’ 

certificates. In addition, there was no consistent documentation detailing 

whether CMS reviewed every business and contractual relationship and 

financial interest that offerors and subcontractors reported. CMS also 

lacked consistent documentation showing whether its determination 

agreed or disagreed with offerors’ and subcontractors’ classification of 

business and contractual relationships as possible conflicts. 

It is crucial that not only conflict but financial interest information (e.g., 

percentage of ownership in any other entity, income generated from other 

sources) be complete because CMS can use this information to identity 

conflicts of offerors and subcontractors. For instance, an offeror or a 

subcontractor may submit financial interest information that it does not 

report as an actual conflict, but CMS’s review of the details of this 

information may reveal the relationship to be an actual conflict. 

Some offerors and their subcontractors did not distinguish 

between actual and possible conflicts 

Offerors and subcontractors reported 173 conflicts without specifying 

whether they were actual or possible conflicts. After reviewing the 

information provided by offerors and subcontractors, we could not 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 16 
 

 

 

determine which of these were actual conflicts. For example, some 

offerors listed several conflicts under a single heading, such as “actual or 

apparent conflicts” or “actual, apparent, or potential,” without clarifying 

which were actual conflicts and which were apparent. In contrast, other 

offerors and subcontractors provided a list of relationships and clearly 

indicated which were actual conflicts. 

Offerors and their subcontractors did not always provide all 

the required information regarding their financial interests in 

other entities 

Many offerors and their subcontractors did not provide all the information 

required by the RFP in their original Organizational Conflict of Interest 

Certificates. Two offerors and thirty-two subcontractors did not report any 

information regarding their financial interests in other entities. They also 

did not state, as others did, that they had no any financial interests in other 

entities. 

Another 7 offerors and 32 subcontractors did not provide all the required 

information regarding their financial interests. Some offerors and 

subcontractors simply stated whether they received income from other 

sources without including the amounts. Others provided only partial 

information regarding their contracts with health insurance organizations 

and providers of Medicare- or Medicaid-reimbursed services. For those 

contracts, the RFP requires disclosure of income amount, period of 

performance, and type of work performed. For a number of these offerors 

and subcontractors, information was still missing or incomplete even after 

CMS requested revised Organizational Conflict of Interest Certificates. 

In some cases, offerors and subcontractors did not seem to interpret the 

RFP requirements in the same way. For example, offerors and 

subcontractors provided varying levels of detail on their existing contracts 

with CMS. Some disclosed all three items that the RFP required for 

contracts with health insurers and providers (income amount, period of 

performance, and type of work performed). Other offerors and 

subcontractors did not provide all of these details. 

Offerors and their subcontractors did not always provide all 

the required information regarding key personnel’s financial 

interests in other entities 

The RFP requires that offerors disclose not only the financial interests of 

the company, but also the financial interests of key personnel. Two 

offerors and twenty-seven subcontractors did not report any information 

regarding their key personnel’s financial interests in other entities even 

after CMS requested revised Organizational Conflict of Interest 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 17 
 

Certificates. This does not include those offerors and subcontractors that 

stated their key personnel had no financial interests in other entities. 

Another 14 offerors and 17 subcontractors did not provide all of the 

required information regarding key personnel’s financial interests. For 

example, some offerors and subcontractors stated that key personnel were 

employed elsewhere, but did not provide their income amounts. Some 

stated that key personnel held investments, but did not provide the 

amounts held. 

Some offerors seemed to have different interpretations of the scope of 

these disclosure requirements. For their key personnel, some offerors and 

subcontractors addressed only financial interests that they believed 

presented conflicts. Others addressed all financial interests, regardless of 

whether they considered them conflicts. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 18 
 

 

CONCLUSION AND RECOMMENDATIONS 

Because ZPICs perform program integrity functions for CMS, it is crucial 

that they be free from conflicts of interest that could affect their work. 

Conflicts of interest could introduce bias, which in turn could influence 

ZPICs’ efforts to reduce fraud, waste, and abuse in the Medicare program. 

Contractors and CMS have the responsibility to ensure that conflicts are 

identified and mitigated. 

According to the ZPIC RFP, offerors and their subcontractors are required 

to identify their conflicts and their financial interests in other entities. 

However, some offerors and subcontractors failed to provide all the 

requisite information regarding financial interests in other entities. 

Additionally, descriptions of their conflicts of interest the offerors and 

subcontractors presented were often unclear. Some offerors and 

subcontractors did not distinguish actual conflicts from possible conflicts. 

Currently, CMS does not use a written policy or standard checklist to 

facilitate its review of Organizational Conflict of Interest Certificates. In 

addition, we found no documentation showing that CMS conducted a 

review of some offerors’ and subcontractors’ certificates. In some cases, 

even after CMS had requested revised certificates, required conflict and 

financial interest information was still missing. 

The initial submission of certificates should contain clear, consistent, and 

complete information across offerors and subcontractors so that CMS has 

accurate information when addressing conflicts. The requirements in the 

RFP should be more clearly and thoroughly delineated. 

The existence of conflicts of interest does not necessarily indicate that 

improper activity is taking place among CMS contractors. However, the 

public trust in CMS and its contractors could come into question if 

conflicts are not explicitly and openly disclosed as well as properly 

mitigated. Therefore, to encourage an environment of transparency and 

accountability among contractors, we recommend that CMS: 

Provide Clearer Guidance in the RFP to Offerors and 

Subcontractors Regarding Which Business and Contractual 

Relationships Should Be Identified as Actual Conflicts and 

Which Should Be Identified as Possible Conflicts (i.e., 

Apparent or Potential Conflicts) 

Require Offerors and Subcontractors To Distinguish Those 

Business and Contractual Relationships That They Deem To 

Be Actual Conflicts From Those That Are Possible Conflicts 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 19 
 

(i.e., Apparent or Potential Conflicts) in Their Organizational 

Conflict of Interest Certificates 

State Whether Offerors and Subcontractors Need To Report 

Income Amounts, Periods of Performance, and Types of Work 

Performed for Their Contracts With CMS and Income Amounts 

Generated From Key Personnel’s Other Employment 

Create a Standardized Format for Reporting Information in the 

Organizational Conflict of Interest Certificate and Require Its 

Use by Offerors and Subcontractors 

Develop a Formal, Written Policy Outlining How Organizational 

Conflicts of Interest Certificates Are To Be Reviewed by CMS 

This policy should include: 

	 guidance on what additional information CMS staff should collect 

regarding offerors and when they should collect it, 

	 the use of a standardized checklist to ensure that all required 

information has been submitted by each offeror in its 

Organizational Conflict of Interest Certificates, and 

	 documentation requirements showing that a complete review of 

each offeror’s Organizational Conflict of Interest Certificates was 

conducted and the outcome and resolution of those reviews. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 20 
 

 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments, CMS stated that it has had considerable experience 

addressing conflict-of-interest matters. CMS believes that receiving the 

magnitude of potential conflict-of-interest issues outlined in OIG’s report 

is a direct result of CMS’s consistent efforts of raising awareness of 

conflict-of-interest issues and working with the contractor community to 

identify possible conflicts. 

CMS concurred in part with our first two recommendations. Regarding 

our first recommendation, CMS stated that it believes it is more 

appropriate to limit terms (“actual or potential conflicts of interest”) to 

those exclusively identified in the FAR. CMS also stated that its draft 

conflict-of-interest review policy contains standard RFP language to be 

used in all procurements. Regarding the second recommendation, that 

offerors should identify their relationships as “potential or actual” 

conflicts, CMS agreed to consider language to request that the offeror 

classify its conflicts as “potential” and/or “actual.” OIG continues to 

recommend that CMS offer guidance in the RFP regarding which business 

and contractual relationships should be identified as actual conflicts and 

which should be identified as other types of conflicts. OIG recommends 

that CMS request that offerors distinguish between their actual and 

potential conflicts. This guidance would allow for clearer and more 

consistent submissions regarding conflicts across offerors and their 

subcontractors. 

CMS concurred with our last three recommendations. CMS shared an 

excerpt from its draft conflict-of-interest policy, which, it stated, addresses 

our third recommendation regarding the reporting of certain types of financial 

information in certificates. OIG requests that CMS, in its final 

management decision, clearly indicate how its new policy and the ZPIC 

RFP will address our fourth and fifth recommendations. In addition, we 

ask that CMS provide information on the new standardized format that 

offers and subcontractors will be required to use when reporting 

information in certificates. 

CMS suggested that the report state that all substantive actual or potential 

conflicts were mitigated for ZPIC awardees to the satisfaction of the 

Contracting Officer and that these conflicts were addressed and mitigated 

prior to the award. While CMS states that all conflicts were mitigated to 

the satisfaction of the Contracting Officer, GAO found in favor of two bid 

protestors that questioned the level of detail CMS accepted in an offeror’s 

plans to mitigate a conflict of interest. With regard to the mitigation plan 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 21 
 

CMS originally accepted, GAO found “there [were] no details explaining 

how any of the plans would work or when they would, or could, be 

implemented. This lack of detail is significant given the inherently 

complex nature of the proposed strategies ....” 

CMS also clarified that a preliminary or cursory review for three offerors 

and four of their subcontractors' certificates was conducted even though 

OIG found no documentation of this. CMS stated that no documentation 

was included in the file because it is not required for offerors excluded 

from the competitive range for award. However, during the review, OIG 

found documentation regarding the review of certificates for offerors that 

were not in the competitive range for award. OIG recommends that 

although not required, consistent documentation of any and all reviews 

should be maintained. 

The full text of CMS’s comments is provided in Appendix C. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 22 
 

 

APPENDIX A 

Conflict-of-Interest Requirements Established in the Zone Program 

Integrity Contractor Request for Proposals 

Section H.2 

a. General: It is essential that the Contractor and the services provided to 

Medicare beneficiaries under this contract be free, to the greatest extent 

possible, of all conflicts of interest. Except as provided below, the 

Contracting Officer shall not enter into a contract with an Offeror or 

maintain a contract with a Contractor that the Contracting Officer 

determines has, or has the potential for, an unresolved organizational 

conflict of interest. 

b. Definitions: As used in this subpart, the following definitions apply: 

1. Financial relationship means-- 

(a) A direct or indirect ownership or investment interest 

(including an option or nonvested interest) in any entity 

that exists through equity, debt, or other means and 

includes any indirect ownership or investment interest no 

matter how many levels removed from a direct interest; or 

 (b) A compensation arrangement with an entity. 

2. Organizational conflict of interest -- has the meaning given at 

FAR 9.501, as follows: 

“Organizational conflict of interest” means that because of other 

activities or relationships with other persons, a person is unable or 

potentially unable to render impartial assistance or advice to the 

Government, or the person's objectivity in performing the contract 

work is or might be otherwise impaired, or a person has an unfair 

competitive advantage. 

For purposes of the Medicare Integrity Program, the activities and 

relationships described include those of the Offeror or Contractor 

itself and other business related to it and those of officers, directors 

(including medical directors), managers, and subcontractors. 

c. Conflict of interest identification: 

1. An organizational conflict of interest exists, or the potential for 

a conflict exists, if - 

 (a) The Offeror or Contractor is an entity thatConflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 23 
 

 

 

(1) Provides, insures, or pays for health benefits, 

with the exception of health plans provided as the 

entity’s employee fringe benefit; or 

(2) Conducts audits of health benefit payments or 

cost reports; or 

(3) Conducts statistical analysis of health benefit 

utilization; or 

(4) Would review or does review, under the 

contract, Medicare services furnished by a provider 

or supplier that is a direct competitor of the Offeror 

or Contractor; or 

(5) Prepared work or is under contract to prepare 

work that would be reviewed under the Medicare 

program integrity contract; or 

(6) Is affiliated, as that term is explained in FAR 

19.101, with a provider or supplier to be reviewed 

under the contract. 

(b) The Offeror or Contractor has a present, or known 

future, direct or indirect financial relationship with an 

entity described in paragraph H.2.c.1.(a) above. 

A financial relationship may exist either-- 

(1) Through an Offeror's or Contractor's parent 

companies, subsidiaries, affiliates, subcontractors, 

or current clients; or 

(2) From the activities and relationships of the 

officers, directors (including medical directors), or 

managers of the Offeror or Contractor and may be 

either direct or indirect. An Officer, director, or 

manager has an indirect financial relationship if an 

ownership or investment interest is held in the name 

of another but provides benefits to the Officer, 

director, or manager. 

Examples of indirect financial relationships are, but 

are not limited to, holdings in the name of a spouse 

or dependent child of the Officer, director, or 

manager and holdings of other relatives who reside 

with the Officer, director, or manager. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 24 
 

2. The Contracting Officer may determine that an Offeror or 

Contractor has an organizational conflict of interest, or the 

potential for a conflict exists, based on the following: 

(a) Apparent organizational conflicts of interest. An 

apparent organizational conflict of interest exists if a 

prudent business person has cause to believe that the 

Offeror or Contractor would have a conflict of interest in 

performing the requirements of a contract under this 

subpart. No inappropriate action by the Offeror or 

Contractor is necessary for an apparent organizational 

conflict of interest to exist. 

(b) Other contracts and grants with the Federal 

Government. 

3. Post-award conflicts of interest. 

(a) In addition to the conflicts identified in paragraph 

H.2.c.1. of this section, the Contracting Officer considers 

that a conflict of interest has occurred if during the term of 

the contract--

(1) The Contractor receives any fee, compensation, 

gift, payment of expenses, or any other thing of 

value from any entity that is reviewed, audited, 

investigated, or contacted during the normal course 

of performing activities under the Medicare 

integrity program contract; or 

(2) The Contracting Officer determines that the 

Contractor's activities are creating a conflict of 

interest. 

(b) In the event the Contracting Officer determines that a 

conflict of interest exists during the term of the contract, 

the Contracting Officer may take action including, but not 

limited to, 

(1) Not renewing the contract for an additional 

term; 

 (2) Modifying the contract; or 

(3) Terminating the contract. 

4. Exception. The Contracting Officer may contract with an 

Offeror or Contractor that has an unresolved conflict of interest if 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 25 
 

 

the Contracting Officer determines that it is in the best interest of 

the Government to do so. 

5. Offeror's or Contractor's responsibility with regard to 

subcontractors. An Offeror or Contractor is responsible for 

determining whether an organizational conflict of interest exists in 

any of its proposed or actual subcontractors at any tier and is 

responsible for ensuring that the subcontractors have mitigated any 

conflict of interest or potential conflict of interest. 

A Contractor shall maintain documentation necessary to support its 

determination that its subcontractors have mitigated any conflict or 

potential conflict. A Contractor may require its subcontractors to 

follow the procedures for identifying, evaluating and disclosing 

conflicts of interest and potential conflicts of interest as contained 

herein. 

d. Disclosure: Contractors must disclose all actual, apparent and potential 

conflicts of interest to the Contracting Officer during the term of the 

contract in accordance with paragraph H.2.d.1. below. The Contractor 

shall have programs in place to identify, evaluate and mitigate all actual, 

apparent and potential conflicts of interest that preclude, or would appear 

to preclude, the Contractor from rendering impartial assistance or advise 

on work performed for this contract. CMS protects disclosed proprietary 

information as allowed under the Freedom of Information Act (5 U.S.C. 

552). The Contracting Officer requires signed statements from CMS 

personnel with access to proprietary information that prohibits personal 

use during the procurement process and term of the contract. The 

Contractor’s Organizational Conflict of Interest Certificate, that includes 

the Contractor’s plan to mitigate all actual, apparent and potential conflicts 

of interest (d.1.(c)) identified during the term of the contract and 

certification that all work to be performed under this contract is free of 

unresolved conflicts of interest, is incorporated by reference at Attachment 

J.11. 

1. Certificate Requirements. Offerors that wish to be eligible for 

the award of a Program Integrity contract under this subpart and 

Program Integrity Contractors, must submit, at times specified in 

paragraph H.2.d.2. of this section, an Organizational Conflicts of 

Interest Certificate. The Certificate must contain the information 

specified in paragraphs H.2.d.1.(a) through (h) of this section as 

follows: 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 26 
 

 

 

(a) A description of all business or contractual relationships 

or activities that may be viewed by a prudent business 

person as a conflict of interest. 

(b) A description of the methods the Offeror or Contractor 

will apply to mitigate any situations listed in the Certificate 

that could be identified as a conflict of interest. 

(c) A description of the Offeror's or Contractor's program to 

monitor its compliance and the compliance of its proposed 

and actual subcontractors with the conflict of interest 

requirements as identified in the relevant solicitation. 

(d) An affirmation, using language provided below, signed 

and dated by an official authorized to bind the Contractor: 

I, (Name and Title), certify that to the best of my 

knowledge and belief: 1) I am an official authorized 

to bind the entity; 2) the information contained in 

the Organizational Conflict of Interest Certificate is 

true and accurate as of (Date); and 3) I understand 

that the Contracting Officer may consider any 

deception or omission in this Certificate to be 

grounds for non-consideration for contract award, 

modification or non-renewal or termination of the 

current contract, and/or other contract or legal 

action. 

An Offeror or Contractor shall submit an affirmation 

certifying the information to be true and accurate as of the 

date the proposal is submitted. Upon award, the Contractor 

shall submit an updated affirmation, if necessary, certifying 

the information to be accurate as of the date of contract 

award. 

(e) Corporate and organizational structure. 

(f) Financial interests in other entities, including the 

following: 

(1) Percentage of ownership in any other entity. 

(2) Income generated from other sources. 

(3) A list of current or known future contracts or 

arrangements, regardless of size, with any-- 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 27 
 

(i) Insurance organization or subcontractor 

of an insurance organization; or 

(ii) Providers or suppliers furnishing health 

services for which payment may be made 

under the Medicare or Medicaid program. 

(4) In the case of contracts or arrangements 

identified in accordance with paragraph H.2.d.1. 

(f)(3) of this section, the dollar amount of the 

contracts or arrangements, the type of work 

performed, and the period of performance. 

(g) The following information for all of the Offeror's or 

Contractor’s officers, directors (including medical 

directors), and managers who would be, or are involved 

with, the performance of this Medicare Integrity Program 

contract: 

(1) The information required under paragraph 

H.2.d.1. (a) of this section. 

(2) The information specified in paragraphs 

H.2.d.1.(f) of this section. 

(h) A list of all subcontractors used, at any tier, in the 

performance of the contract. 

2. When disclosure is made. The Organizational Conflict of 

Interest Certificate is submitted— 

(a) With the contractor’s task order proposal, unless 

otherwise identified in the task order solicitation; 

(b) When the Contracting Officer requests a revision in the 

Certificate; 

(c) With the submission of the ZPIC proposal and annually 

on October 31st thereafter; and 

(d) 45 days or less (as the information becomes known) 

before any change in the information submitted in 

accordance with paragraph H.2.d.1. Only changed 

information shall be submitted. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 28 
 

 Section L.18.A 

In order to be eligible for award of a contract the Government must ensure 

that an Offeror and its proposed subcontractors are free, to the greatest 

extent possible, of all conflicts of interest. Therefore, the Offeror and its 

subcontractors are required to submit the disclosure of information 

contained in contract section H.2 Conflict of Interest, in order to be 

considered for award. Failure to submit the required information may 

deem an Offeror’s proposal to be non-responsive to the solicitation. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 29
 

 

 

 

 

APPENDIX B 

Number and Type of Conflicts by Individual Offerors 

Offerors and Subcontractors Actual 

Conflicts 

Possible 

Conflicts 

Total 

Conflicts 

Offerors Awarded 

ZPIC Contracts 

Offeror 1 0 0 0 

 Subcontractors 0 7 7 

Offeror 2 4 13 17 

 Subcontractors 0 486 486 

Offeror 3 0 0 0 

 Subcontractors 0 11 11 

Offeror 4 4 9 13 

 Subcontractors 2 915 917 

Offeror 5 0 0 0 

 Subcontractors 0 0 0 

Offerors subtotal 8 22 30 

Subcontractors 

subtotal 2 1,419 1,421

 Subtotal 10 1,441 1,451 

Offerors Not 

Awarded ZPIC 

Contracts 

Offeror 6 1 26 27 

 Subcontractors 0 39 39 

Offeror 7 0 25 25 

 Subcontractors 0 5 5 

Offeror 8 0 18 18 

 Subcontractors 0 6 6 

Offeror 9 0 28 28 

 Subcontractors 0 49 49 

Offeror 10 0 4 4 

 Subcontractors 0 5 5 

Offeror 11 0 7 7 

 Subcontractors 1 29 30 

Offeror 12 0 5 5 

 Subcontractors 0 0 0 

Offeror 13 0 18 18 

 Subcontractors 0 34 34 

Offeror 14 0 34 34 

 Subcontractors 0 53 53 

Offeror 15 0 0 0 

 Subcontractors 0 0 0 

Offeror 16 4 21 25 

 Subcontractors 0 2 2 

Offeror 17 0 2 2 

 Subcontractors 0 41 41 

Offeror 18 0 23 23 

 Subcontractors 0 4 4 

Offerors subtotal 5 211 216 

Subcontractors 

subtotal 1 267 268

 Subtotal 6 478 484 

All Offerors Total 16 1,919 1,935 

Source: Office of Inspector General analysis of Zone Program Integrity Contractor offerors’ Organizational Conflict 

of Interest Certificates and Centers for Medicare & Medicaid Services’ documentation for Zones 1, 2, 4, 5, and 7, 

2011. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 30 
APPENDIXC 

Agency Comments 

..r VlC«.t./r.;, (:!I-	 DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 

Administrator 

Washington, DC 20201 

DATE: 	 MAY 0 3 2012 

TO: 	 Daniel R. Levinson 


Inspector General 


FROM: 	 MaJ\btn TlWMncr 


Acting Admin\strator 


SUBJECT: Office of Inspector General (OIG) Draft Report: "Conflicts and Financial 


Relationships among Potential ZPIC Contractors" (OEI-03-1 0-00300) 


Thank you for the opportunity to review and comment on the Office of Inspector General 


(OIG) draft report titled, "Conflicts and Financial Relationships Among Potential ZPIC 


Contractors." The purpose of this report was to determine conflicts of interest identified 


by offerors during the Zone Program Integrity Contractor (ZPIC) contracting process, 


strategies otTerors proposed to mitigate conflicts of interest, whether offerors provided 


complete information on conflicts, and whether the Centers for Medicare & Medicaid 


Services (CMS) reviewed this information. 


As the report indicates, CMS ensures that its contractors are free from conflicts of interest 

or have taken the appropriate steps to mitigate any potential conflicts. CMS has had 

considerable experience addressing Organi zational Conflict of Interest (OCI) matters. 

Since 1999, with the early implementation of the Medicare Integrity Program (MIP), 

CMS was forward-looking enough to consider OCI as a major concern. As a result, CMS 

requires its ofTerors and contractors to submit OCI infom1ation during the solicitation 

period and annually thereafter. As a result, and as reflected in the orG report, the ZPIC 

offerors identified almost 2,000 apparent. potential or actual OCls. We believe receiving 

this magnitude of potential OCI issues is a direct result ofCMS consistent efforts of 

raising awareness of OCI and working with the contractor community to identify possible 

OCls. Consistent with section 9.5 of the Federal Acquisition Regulations (FAR 9.5), 

CMS reviewed and resolved conflicts of interest for those organizations who were 

awarded a ZPIC contract. 

It is important to note that CMS has experienced a large number of Government 

Accountability Office (GAO) bid protests over the last several years. In many of these, 

bidders have challenged CMS' OCI analysis. In almost all cases, when a GAO decision 

was rendered, eMS OCI evaluation and determination was found acceptable by GAO. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 31 
Page 2 - Daniel R. I.cvinson 

The Contracting Officer is responsible for exercising common sense, good judgment and 

sound discretion when making OCI determinations. CMS addressed the ZPIC conflicts 

of interest through exchanges with the apparent awardees. If there was a substantive 

issue concerning an actual or potential conflict, CMS worked with the apparent awardee 

to either avoid, neutralize or mitigate any significant potential conflict(s). The 

Contracting Officer, in consultation with other appropriate CMS representatives, 

determined that mitigation strategies submitted by the awardees were sufficient prior to 

awarding any contracts. The mitigation strategies employed in the ZPIC procurements 

included, but were not limited to, divestitures, de-identification of information to 

subcontractors, exclusion of conflicted work for certain subcontractors, and 

separationlfirewalls for access to information conflicts. 

AlllPIC awardees have Compliance Officers on staff that oversee OCI matters and the 

implementation of mitigation strategies. After the contract is awarded, lPIC contractors 

are required to submit annual OCI certificates and are also required to submit updated 

information within 45 days before any change in the information is made. CMS reviews 

the annual submissions and also contracts with an independent firm that performs an 

audit of the OCI submission. CMS uses this information to address any new or emerging 

OCI issues that might arise during performance of the contract. 

CMS receives OCI submissions for all ZPIC offerors. However, CMS prioritizes the 

review and mitigation of OCls for those organizations that are in the competitive range 

and thus have potential for winning the contract effort. Since not all offerors will be 

successful in being awarded a contract, CMS believes its resources are best utilized in 

this manner. 

CMS is in the process of finalizing an OCI review policy for procurement staff. CMS 

provided OIG with the draft of the policy during its review. Following the final internal 

CMS committee review, the policy will be implemented. 

CMS' response to each OIG recommendation and general comments follows: 

OIG Recommendation 

CMS should provide clearer guidance in the Request for Proposal to offerors and subcontractors 

regarding which business and contractual relationships should be identified as actual conflicts 

and which should be identified as possible conflicts (I.e., apparent or potential conflicts). 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 32 
Page 3 - Daniel R. Levinson 

eMS Response 

eMS concurs with this recommendation in part. We believe it is more appropriate to 

limit the terms to those exclusively identified in the FAR. Section 9.S02(c) of FAR uses 

the term of "actual or potential conflict of interest." eMS' draft Oel review policy, soon 

to be implemented, contains standard RFP language to be used in all procurements. 

Regarding the recommendation that offerors should identify their business and 

contractual relationships as "potential or actual" conflicts, eMS will agree to consider 

language in our guidance to request that the offeror classify its conflicts as "potential" 

and/or "actual." 

OIG Recommendation 

eMS should require offerors and subcontractors to distinguish those business and 

contractual relationships that they deem to be actual conflicts from those that are possible 

conflicts (i.e., apparent or potential conflicts) in their organizational conflict of interest 

certificates. 

eMS Response 

eMS concurs with this recommendation in part. See previous response. 

O.G Recommendation 

eMS should state whether offerors and subcontractors need to report income amounts, 

periods of performance, and types of work performed for their contracts with eMS and 

income amounts generated from key personnel's other employment. 

eMS Response 

eMS concurs with the recommendation. The attached is an excerpt from eMS' draft 

oel review policy which outlines the proposal submission requirement(s) for prime and 

subcontractors. 

OIG Recommendation 

eMS should create a standardized format for reporting intormation in the organizational conflict 

of interest certificate and require its use by offerors and subcontractors. 

eMS Response 

eMS concurs with the recommendation. eMS' draft oel review policy contains RFP 

language that standardizes the format for reporting information in the organization 

conflict of interest certificate. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-1 0-00300) 33 
Page 4 - Daniel R. Lev.inson 

OIG Recommendation 

CMS should dev.elop a formal, written policy outlining how organization contlicts of 

interest certificates are to be reviewed by CMS. 

CMS Response 

CMS concurs with the recommendation. The draft policy includes documentation 

templates for use by Contracting Officers. In addition, CMS has recently performed 

extensive training in this area and will continue to educate its staff on how to properly 

assess, analyze and document OCI matters. 

General Comments 

In an effort to provide further clarity as to how eMS addressed ZPIC OCI issues, the 

following general comments are also provided: 

CMS suggests that the OIG report state that all substantive actual or potential OCls were 

mitigated for ZPIC awardees to the satisfaction of the Contracting Officer. These 

contlicts were addressed and mitigated prior to the award. 

In performing OCI analysis, it is important to understand the contract requirements and 

the roles of the contractor. As background, CMS uses ZPICs to perform program 

integrity activities designed to fight fraud, waste, and abuse in the Medicare program. In 

doing so, ZPICs review providers and suppliers (i.e. physician, hospitals, DME suppliers, 

etc) and their submitted fee-far-service Medicare claims in performing its activities. In 

traditional fee-for-service, the fraud in which the ZPIC is required to review occurs at the 

provider level, not at the claims processing level. The ZPIC contract has the potential for 

ZPICs to also perform program integrity activities associated with Medicare Part C 

and/or D. Unlike traditional fee-for-service Medicare, where fraud typically occurs at the 

provider level as indicated above, in Part CID, fraud can occur at the plan level. This 

distinction is important for OCI analysis because consideration must be given regarding 

who or what the ZPIC is reviewing. 

Page 10 states; "Offerors and their subcontractors often had business and 

contractual relationships with CMS and with other offerors, but rarely considered 

them to be actual conflicts." 

As stated in the beginning of this report, CMS has been addressing OCI issues 

since 1999. We required that ZPIC offerors disclose conflicts so we could make 

an independent analysis of the specific conflicts, regardless of how offcrors 

characterized such conflicts. In some cases we disagreed with the offerors 

assessment of the conflict, and in other cases we agreed with the 

offerors/contractor's assessment. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-1 O"()0300) 34 
Page 5 - Daniel R. I.evinson 

Page 12-13 stated "Offerors, subcontractors, and eMS identified 1,919 business and 

contractual relationsbips as possible conflicts and 16 as actual conflicts." 

Again, CMS considers it a success that the offerors disclosed as many OCI issues 

as they did. As stated earlier, CMS addressed all significant OCl's of the 

successful ZPIC awardees. 

OIG also mentions on page 16 of the report that its review of certificates did not reveal 

documentation of CMS conducting a preliminary review ofthree offerors and four of 

their subcontractors' certificates. CMS would like to clarify that a preliminary or cursory 

review was conducted; however, no documentation was included in the file as this is not 

required for offerors not included in the competitive range for award. 

CMS thanks the OIG for evaluating this important issue and is confident our new OCI 


policy will enhance our already rigorous OCI evaluations and determination process. 


Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 35 
 

 ACKNOWLEDGMENTS 

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

Inspector General for Evaluation and Inspections in the Philadelphia 

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

General. 

Tanaz Dutia served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the Philadelphia regional 

office who contributed to the report include Russell Tisinger; central office 

staff who contributed include Scott Manley. 

Conflicts and Financial Relationships Among Potential Zone Program Integrity Contractors (OEI-03-10-00300) 36
Office of Inspector General 

http://oig.hhs.gov 

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

to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the 

health and welfare of beneficiaries served by those programs. This statutory mission is carried out through 

a nationwide network of audits, investigations, and inspections conducted by the following operating 

components: 

Office of Audit Services 

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

its own audit resources or by overseeing audit work done by others. Audits examine the performance of 

HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are 

intended to provide independent assessments of HHS programs and operations. These assessments help 

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

Office of Evaluation and Inspections 

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

and the public with timely, useful, and reliable information on significant issues. These evaluations focus 

on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of 

departmental programs. To promote impact, OEI reports also present practical recommendations for 

improving program operations. 

Office of Investigations 

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

misconduct related to HHS programs, operations, and beneficiaries. With investigators working in all 

50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the 

Department of Justice and other Federal, State, and local law enforcement authorities. The investigative 

efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

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

advice and opinions on HHS programs and operations and providing all legal support for OIG’s internal 

operations. OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS 

programs, including False Claims Act, program exclusion, and civil monetary penalty cases. In 

connection with these cases, OCIG also negotiates and monitors corporate integrity agreements. OCIG 

renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement 

authorities.