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91–806 2015

MEDICARE PROGRAM INTEGRITY: SCREENING OUT 

ERRORS, FRAUD, AND ABUSE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JUNE 25, 2014 

Serial No. 113–156 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

TIM MURPHY, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

GREGG HARPER, Mississippi 

PETE OLSON, Texas 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

BRUCE L. BRALEY, Iowa 

BEN RAY LUJAN, New Mexico 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

PETER WELCH, Vermont 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

GENE GREEN, Texas 

HENRY A. WAXMAN, California (ex officio) 

(III) 

C O N T E N T S 

Page 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Diana DeGette, a Representative in Congress from the state of Colorado, 

opening statement ................................................................................................ 4 

Hon. Fred Upton, a Representative in Congress from the state of Michigan, 

opening statement ................................................................................................

Prepared statement .......................................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the state of 

California, opening statement ............................................................................. 8 

WITNESSES

Shantanu Agrawal, M.D., Deputy Administrator and Director, Center for 

Program Integrity, Centers for Medicare and Medicaid Services .................... 10 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 105 

Gary Cantrell, Deputy Inspector General, Investigations, Office of Inspector 

General, Department of Health and Human Services ...................................... 24 

Prepared statement .......................................................................................... 26 

Answers to submitted questions ...................................................................... 138 

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

Office ..................................................................................................................... 39 

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

Answers to submitted questions ...................................................................... 154 

SUBMITTED MATERIAL

Subcommittee memorandum .................................................................................. 96 

Department of Health and Human Services memorandum, submitted by Mrs. 

Ellmers .................................................................................................................. 103 

(1) 

MEDICARE PROGRAM INTEGRITY: SCREENING OUT ERRORS, FRAUD, AND ABUSE 

WEDNESDAY, JUNE 25, 2014 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:03 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Tim Murphy 

(chairman of the subcommittee) presiding. 

Members present: Murphy, Burgess, Blackburn, Olson, Griffith, 

Johnson, Long, Ellmers, Upton (ex officio), DeGette, Braley, 

Schakowsky, Tonko, Green, and Waxman (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Gary Andres, 

Staff Director; Matt Bravo, Professional Staff Member; Leighton 

Brown, Press Assistant; Karen Christian, Chief Counsel, Oversight; 

Noelle Clemente, Press Secretary; Brad Grantz, Policy Coordinator, 

O&I; Brittany Havens, Legislative Clerk; Sean Hayes, Deputy 

Chief Counsel, O&I; Robert Horne, Professional Staff Member, 

Health; Emily Newman, Counsel, O&I; Macey Sevcik, Press Assistant; Alan Slobodin, Deputy Chief Counsel, Oversight; Josh Trent, 

Professional Staff Member, Health; Tom Wilbur, Digital Media Advisor; Peter Bodner, Democratic Counsel; Brian Cohen, Democratic 

Staff Director, Oversight and Investigations, Senior Policy Advisor; 

Lisa Goldman, Democratic Counsel; Elizabeth Letter, Democratic 

Press Secretary; and Stephen Salsbury, Democratic Investigator. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Good morning. I convene this hearing of the Subcommittee on Oversight and Investigations. Today we will be revisiting a subject that every member of this committee believes has 

gone on for far too long: the fraud, waste, and abuse rampant in 

our Medicare program. 

Last year the Medicare program helped finance the medical services of approximately 51 million individuals and in doing so spent 

approximately $604 billion. Sadly, a budget that large makes the 

program a high target for fraud and abuse. Last year the Centers 

for Medicare and Medicaid Services estimated that improper payments were almost $50 billion. Outside news reports have also 

pegged the amount lost to fraud as high as $60 billion. This is a 

shocking amount of taxpayer money to lose every year, especially 

considering that some experts tell us that we do not even know the 

2 

full extent of the problem. These financial losses are simply unacceptable. 

To someone unfamiliar with the topic, some of the ways the government improperly pays out Medicare funding may seem completely unbelievable. For example, according to the Department of 

Health and Human Services Office of Inspector General, just a few 

years ago the Federal Government managed to pay out $23 million 

in Medicare funding to dead people. One news story involved an 

Ohio doctor learning that he was the CEO of a medical practice 

only when a reporter called him to ask about it, and the practice 

he was allegedly running. Just a mailbox. Earlier this month news 

broke about an accusation that one doctor in California was able 

to help facilitate approximately $22 million in inappropriate Medicare payments for wheelchairs. The economics of this also 

incentivize abusing the Medicare program as well. Last year the 

Department of Justice issued a release noting that an individual 

was able to bill Medicare $6,000 for a wheelchair that cost $900 

wholesale. 

These are but a few of the more darkly humorous examples. But 

this is no laughing matter. Quite frankly, it is a national outrage. 

It is not only the stories or amounts of money that should shock 

us all but also the length of time the government has allowed this 

to continue. Since 1990, 24 years ago, the Government Accountability Office has designated the Medicare program as a high risk 

for fraud and abuse, a quarter century of wasted taxpayer dollars. 

When does it all stop? Think for a moment about a single company 

in the private sector that could lose this much money, year after 

year. How could they still be in business today? 

We recognize that the administration is attempting to solve this 

problem. In the past few years CMS has implemented new programs to provide enhanced screening for certain categories of providers. If a provider is servicing an area that typically is more susceptible to fraud, they may undergo additional scrutiny. I hope 

today to hear about how this is working and the number of fraudulent providers that have been stopped before they even entered the 

Medicare system. 

Meanwhile, the administration testified before the Committee on 

Ways and Means earlier this year on new collaborations with state 

governments on ways to combat fraudsters from moving their 

Medicare or Medicaid schemes from one state to another. I hope to 

also hear an update on this today. 

One of the main problems in the past with Medicare fraud was 

that those combatting it often relied on a pay-and-chase model, 

that is, pay out claims for Medicare, learn of potential fraudulent 

activity, and then try to stop the fraud. Our government simply 

must do better. Today I hope to hear about ways the administration is using new methods to use analytics to stop fraud before it 

happens. With the technological advances that the Medicare program has seen in its lifetime it simply should be much more difficult for individuals to defraud the program. 

And one of the easiest ways to prevent fraud on the system and 

protect Medicare patients is by excluding the bad actors who have 

committed crimes in the past, that is, make sure there’s a pre-approved list of providers. Yet, news reports indicate that doctors who 

3 

should not be billing Medicare continue to do so. Earlier this year 

one news outlet reported that several doctors who had a lost a 

medical license were still able to bill the Medicare program for millions of dollars. 

Committee staff has identified more problems as well. At least 14 

individuals convicted of FDA-related crimes—health providers that 

have been debarred by the FDA—do not appear to be excluded 

from the Medicare program. Worse, 6 doctors debarred by the FDA 

actually were paid over $1 million in Medicare payments in 2012. 

Finally, today I hope we hear about the steps that can be taken 

to further combat fraud. GAO has recommended some common 

sense steps that would reduce fraud, such as removing social security numbers from Medicare cards, but CMS has yet to implement 

this recommendation. 

I want to thank the witnesses for joining us. And by the way, I 

also want to note that last night HHS and CMS finally released 

their report to Congress on the second implementation of the fraud 

prevention system. We are pleased we finally got this. We hope 

that these new technologies can yield even greater returns in the 

future. And I believe this is a committee that pushed for this, and 

we are pleased we finally got that. Unfortunately, it was last night, 

so we haven’t had a chance to review it fully. It is 9 months late, 

and if we are truly serious about combatting Medicare fraud, we 

can’t have these delays. 

[The prepared statement of Mr. Murphy follows:] 

PREPARED STATEMENT OF HON. TIM MURPHY

I convene this hearing of the Subcommittee on Oversight and Investigations. 

Today we will be revisiting a subject that I and every Member of this Committee 

believe has gone on for far too long: the fraud, waste, and abuse rampant in our 

Medicare program. 

Last year the Medicare program helped finance the medical services of approximately 51 million individuals and in doing so spent approximately $604 billion. 

Sadly, a budget that large makes the program a high target for fraud and abuse. 

Last year the Centers for Medicare and Medicaid Services estimated that improper 

payments were almost $50 billion. Outside news reports have also pegged the 

amount lost to fraud as high as $60 billion. This is a shocking amount of taxpayer 

money to lose every year, especially considering that some experts tell us that we 

do not even know the full extent of the problem. These financial losses are simply 

unacceptable. 

To someone unfamiliar with the topic, some of the ways the government improperly pays out Medicare funding may seem completely unbelievable. For example, according to the Department of Health and Human Services Office of Inspector General, just a few years ago the federal government managed to pay out $23 million 

in Medicare funding to dead people. One news story involved an Ohio doctor learning that he was the CEO of a medical practice only when a reporter called him to 

ask about it; and the ‘‘practice’’ that he was allegedly running? Just a mailbox. Earlier this month news broke about an accusation that one doctor in California was 

able to help facilitate approximately $22 million in inappropriate Medicare payments for wheelchairs. The economics of this also incentivize abusing the Medicare 

program as well-last year the Department of Justice issued a release noting that 

an individual was able to bill Medicare $6,000 for a wheelchair that cost $900 

wholesale. These are but a few of the more humorous examples. But this is no 

laughing matter: it should be a national outrage. 

It is not only the stories or amounts of money that should shock you, but also 

the length of time the government has allowed this to continue. Since 1990—24 

years ago-the Government Accountability Office has designated the Medicare program as a high risk for fraud and abuse. A quarter century of wasted taxpayer dollars—when does it stop? Think for a moment about a single company in the private 

4 

sector that could lose this much money, year after year, and still be in business 

today. 

We recognize that the administration is attempting to solve this problem. In the 

past few years CMS has implemented new programs to provide enhanced screening 

for certain categories of providers. If a provider is servicing an area that typically 

is more susceptible to fraud, they may undergo additional scrutiny. I hope today to 

hear about how this is working and the number of fraudulent providers that have 

been stopped before they even entered the Medicare system. Meanwhile, the administration testified before the Committee on Ways and Means earlier this year on 

new collaborations with state governments on ways to combat fraudsters from moving their Medicare or Medicaid schemes from one state to another. I hope to also 

hear an update on this today. 

One of the main problems in the past with Medicare fraud was that those combatting it often relied on a ‘‘pay and chase’’ model. That is: pay out claims for Medicare, 

learn of potentially fraudulent activity, then try to stop the fraud. Our government 

simply must do better. Today I hope to hear about ways the administration is using 

new methods to use analytics to stop fraud before it happens—with the technological advances that the Medicare program has seen in its lifetime it simply should 

be much more difficult for individuals to defraud the program. 

And one of the easiest ways to prevent fraud on the system and protect Medicare 

patients is by excluding the bad actors who have committed crimes in the past. Yet, 

news reports indicate that doctors who should not be billing Medicare continue to 

do so: Earlier this year one news outlet reported that several doctors who had lost 

a medical license were still able to bill the Medicare program for millions of dollars. 

Committee staff has identified more problems as well: at least 14 individuals convicted of FDA-related crimes—health providers that have been debarred by the 

FDA—do not appear to be excluded from the Medicare program. Worse, 6 doctors 

debarred by the FDA actually were paid over $1 million in Medicare payments in 

2012. 

Finally, today I hope we will hear about the steps that can be taken to further 

combat fraud. GAO has recommended some common sense steps that would reduce 

fraud, such as removing social security numbers from Medicare cards, but CMS has 

yet to implement this recommendation. I would like to thank the witnesses joining 

us today-you all have the ability to save the American taxpayer a massive amount 

of money, and we hope to hear from you today on how you plan to do that. 

Mr. MURPHY. But now I would like to recognize the ranking 

member of this committee, Ms. DeGette, for 5 minutes. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you very much, Mr. Chairman. This is the 

third hearing that the committee has had on Medicare fraud in the 

last 3 years, and I think it is perfectly appropriate to do that. 

Medicare fraud wastes money and endangers the care of seniors 

and the disabled. That is why I think we can work in a bipartisan 

way, and I am pleased. 

We have witnesses today from CMS, the HHS Inspector General, 

and the GAO with us. I appreciate all of you joining us and look 

forward to hearing your perspective on where we stand and what 

we need to do to further reduce Medicare fraud, waste, and abuse. 

The administration has also made some important strides in this 

area. The Healthcare Fraud Prevention and Enforcement Action, or 

HEAT Teams, a joint effort between HHS and DOJ, have played 

a critical role in these efforts. Medicare strike forces are a key component of HEAT, interagency teams of analysts, investigators, and 

prosecutors who can target emerging or migrating fraud schemes, 

including fraud by criminals masking as healthcare providers or 

suppliers. These efforts have produced immediate returns. In fiscal 

year 2012, the government recovered $4.2 billion in fraud, and from 

5 

2009 through 2012, it has returned a record-breaking $14.9 billion 

to taxpayers, more than doubling returns compared to the previous 

4 years. CMS has also implemented many of the new tools provided 

to the agency under the Affordable Care Act. These new provisions 

of law have marked a dramatic shift in the way CMS fights fraud, 

moving from the old pay-and-chase model to the newer and much 

more effective approach of keeping fraudulent providers out of the 

Medicare system entirely. 

New Medicare providers are screened before they are allowed 

into the program. Providers in risky programs face additional scrutiny. CMS has embarked on an ambitious project to revalidate the 

enrollments of all existing 1.5 million Medicare providers and suppliers by 2015. This revalidation effort has deactivated or revoked 

almost 200,000 providers so far. 

The Affordable Care Act also limits the ability of fraudulent providers and suppliers to move from state to state or program to program by requiring all states to terminate providers whose billing 

privileges have been revoked by Medicare or have been terminated 

by another state Medicaid program for costs. And the administration has invested in predictive analytic tools that use algorithms 

and other sophisticated information technology to identify potentially fraudulent behavior. This technology has resulted in leads for 

more than 500 new fraud investigations and has provided new information for more than 500 existing investigations. 

Mr. Chairman, this is good news, but we also have some unfinished work for CMS that we are going to hear from the IG and 

GAO about. I am particularly concerned about reports that Medicare Part C and D plans may not be doing enough to identify and 

report fraud. The private Part C and D providers are popular with 

many beneficiaries and have become a key and growing part of 

Medicare, and that is why we need to make sure that they are 

doing as much as traditional Medicare to fight fraud. 

And finally, Mr. Chairman, Congress needs to do our part, especially when it comes to financial support for the fraud fighters. Sequestration meant that the CMS program integrity funding declined in the last 2 years, and the majority staff’s official hearing 

memo describes how funding cuts for the OIG will limit the agency’s ability to carry out its mission, forcing staff reductions of over 

200 people and forcing the IG to close over 2,000 investigative complaints and cut Medicare and Medicaid oversight by 20 percent. So 

at the same time we are trying to increase a robust program of 

oversight, we are cutting the funding for investigations. Now, I 

think we can all agree, this is penny-wise and pound-foolish. There 

is bipartisan agreement that we need to do more to wipe out Medicare fraud, and there is bipartisan agreement that every dollar 

spent to reduce fraud brings back more than a dollar in return. 

So we should fix this problem. I know a number of members on 

this and other committees have discussed bipartisan fraud prevention legislation. We should work diligently on that to give the CMS 

the tools they need to fight fraud, and we need to make sure that 

all of the fraud fighters have the funding they need to do this important work. And I yield back, Mr. Chairman. 

Mr. MURPHY. The gentlewoman yields back. I now recognize the 

Chairman of the Full Committee, Mr. Upton, for 5 minutes. 

6 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Well, thank you, Mr. Chairman. I do share my colleagues’ frustration on this issue for sure. It was 24 years ago 

when the GAO first announced the Medicare program was a big 

high risk for fraud and abuse. The program’s financial sustainability has also been under threat for years. This committee has 

routinely, on a bipartisan basis, conducted oversight of the Medicare program in an effort to eliminate waste, fraud and abuse. Our 

goal is to save taxpayer dollars and strengthen the program. While 

rooting out waste, fraud, and abuse cannot alone keep the promise 

of Medicare, it is an important step that has the potential to benefit both seniors as well as taxpayers. 

To our witnesses here today, we have got a simple question. How 

can the government continue losing tens of billions of taxpayer dollars every year? 

For years, HHS has relied on a pay-and-chase model to recover 

Medicare losses, learning far too late that fraudsters routinely 

tricked the Federal Government into paying them. But today there 

are some predictive methods that can help the government detect 

the fraud before the payments go out the door. 

I hope that today’s witnesses will do more to make these tools 

work. 

We should not pay potential fraudsters a dime, let alone the billions we actually do. All taxpayers, and those relying on Medicare, 

deserve better. 

Thank you for being here. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

I share my colleagues’ frustration on this issue. It was 24 years ago when the 

Government Accountability Office first announced the Medicare program was a high 

risk for fraud and abuse. The program’s financial sustainability has also been under 

threat for years. This committee has routinely conducted oversight of the Medicare 

program in an effort to eliminate waste, fraud, and abuse. Our goal is to save taxpayer dollars and strengthen the program. While rooting out waste, fraud, and 

abuse cannot alone keep the promise of Medicare, it is an important step that has 

the potential to benefit both seniors and taxpayers. 

To our witnesses here today, we have a simple question: How can the government 

continue losing tens of billions of taxpayer dollars every year? 

For years, the Department of Health and Human Services has relied on a payand-chase model to recover Medicare losses, learning far too late that fraudsters 

routinely tricked the federal government into paying them. But today there are 

some predictive methods that can help the government detect the fraud before the 

payments go out the door. I hope that today’s witnesses will do more to make these 

tools work. We should not pay potential fraudsters a dime, let alone the billions we 

actually do. All taxpayers, and those relying on the Medicare program, deserve better. 

To our witnesses here today: thank you for being here. I realize that bad actors 

will always be present. But we need to do better. I hope that today we can have 

a productive discussion about how we can finally move to a fraud-free Medicare system. 

Mr. UPTON. I yield now to Dr. Burgess. 

Mr. BURGESS. I thank the chairman for yielding and, too, want 

to welcome our witnesses. I appreciate your being here. 

Earlier this year, the CEO of a Texas hospital chain was indicted 

for defrauding the government of $18 million. The money continued 

7 

to flow from the Center for Medicare and Medicaid Services despite 

the hospital’s long record of patient safety violations and billing 

fraud. Conditions at these facilities were bad. Patients died. In 

2012, regulators moved to cut off funds, but a few months later, 

other officials at the Center for Medicare and Medicaid Services 

provided well over $1 million to these hospitals. 

This case in Texas raises broader questions about CMS’s ability 

to prevent improper payments to fraudulent or even dangerous providers. Providers that are excluded from one federal program because of improper or illegal conduct can often continue to be paid 

by other programs. It is my belief that providers that have been 

banned from federal programs for wrongdoing should be excluded 

from all federal programs. Period. The incident in Texas prompted 

me to work with Chairman Upton and Mr. Barton. We sent a letter 

to CMS and the Office of Inspector General. We asked about the 

screening of providers receiving Medicare payments and other 

types of federal funds. Dr. Agrawal was kind enough to come into 

my office to brief me in response to these letters. They have been 

very helpful and informative, but you still can’t help but be disappointed to learn that little progress has been made in this area 

over several decades. 

Numerous audits have been performed. Recommendations have 

been made in ways to improve the system. Through the miracle of 

Google you can find these recommendations going back well over 

20 years. But 2 decades later, these recommendations continue to 

be ignored, and taxpayers continue to lose money. The fact is that 

the Center for Medicare and Medicaid Services is not doing all they 

can to prevent this type of fraud and abuse of the system. You have 

the authority to implement tools to prevent abuse. Yet, you have 

not done so. We are here today to find out why. 

I look forward to hearing from our witnesses today and yield the 

balance of the time to the vice chair of the Full Committee, Ms. 

Blackburn. 

Mrs. BLACKBURN. Thank you, Dr. Burgess, and I want to welcome all of you. You have heard us talk about Medicare fraud, and 

we know that it is tens of billions of dollars. And it seems like it 

continues despite RAC audits and ZPICS and CERTS and the additional authorities that you all at CMS have been given, and we still 

have a permissive approach that allows providers with questionable backgrounds to continue to bill taxpayers. We have heard 

about doctors enrolled in Medicare who have been convicted of 

crimes. We have heard about companies that have been found 

guilty of fraud that are continuing to benefit. They rename themselves. They stay in the process. 

People are sick of this. And what we want to hear from you today 

is what are you going to do about it? If you can’t clean it up, let 

me tell you what. We are going to clean it up. But this is something that just absolutely has to stop. It is not your money. It is 

not the Federal Government’s money. It is the money of the taxpayer and they are fed up with the inept attitudes and approaches 

that are coming out of some of these agencies. 

So we thank you for being here. We are concerned about the persistence of this issue, and we look forward to solving it. I yield 

back. 

8 

Mr. MURPHY. The gentlelady yields back, and now I will recognize the ranking member of the Full Committee, Mr. Waxman, for 

5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Mr. Chairman, I appreciate your holding this hearing today. I care passionately about the Medicare program, and I 

want to make sure that we are doing everything we can to wipe 

out fraud. When I was chairman of this committee, we held hearings and passed legislation as part of the Affordable Care Act that 

gave CMS new authorities, new resources and a whole new approach to reducing fraud. 

We are going to hear today about some of the successes of that 

new approach. We are also going to hear from Members of the Congress’ outrage if there is any fraud. Well, it is outrageous to have 

any fraud, but it is also outrageous for Members of Congress to say 

this is outrageous, we are going to solve the problem, and then not 

hear a solution. 

We are seeing some progress. We have seen increases in enforcement, recovery for the taxpayers of that money that has been taken 

by fraud, and questionable providers have been kicked out of the 

program. CMS is using new, predictive analytics to sniff out and 

take action against fraud. And I know the IG and GAO will tell us 

about the work that CMS still has left to do, and I expect the agency to take additional action to fully implement the Affordable Care 

Act’s anti-fraud provisions and to address other concerns raised by 

the experts of these two agencies. 

I suppose one of the things the Republicans want to do to solve 

this problem is repeal the Affordable Care Act anti-fraud provisions 

which they would have done in over 50 times they have tried to 

get the Congress to repeal the whole law, everything. 

We should be working in a bipartisan way in Congress to address 

anti-fraud funding shortfalls caused by the sequester and close 

gaps in Medicare law identified by the administration and by GAO 

and by the IG. There is no reason we can’t work together on these 

issues, unless we just want to use them for talking points in an 

election year or the year before the next election. 

But Mr. Chairman, we need to address Medicare waste, fraud, 

and abuse. We need to look at all three of these areas, and probably the biggest source of waste of taxpayer funds in Medicare are 

the high prices that Medicare Part D plans pay for prescription 

drugs. 

Mr. Chairman, last week I wrote a letter to you and Chairman 

Upton requesting that the committee hold a hearing on the implications of the high cost on the Medicare Part D program of Sovaldi, 

the new Hepatitis C drug manufactured by Gilead Pharmaceuticals, and I hope we hold this hearing. Sovaldi has been hailed 

as a breakthrough treatment for individuals suffering from Hepatitis C, but it is costly: $1,000 per pill, or $84,000 for the entire 12- 

week course of treatment. And there are an estimated 350,000 

Medicare Part D beneficiaries with Hepatitis C. 

9 

As a result, a recent analysis was done by researchers from 

Georgetown University and Kaiser Family Foundation that said 

Medicare Part D will be spending $6.5 billion or 8 percent in 2015 

for this one drug. 

Mr. Chairman, this problem is exacerbated by the fact that Medicare Part D plans are not able to effectively negotiate for lower 

prices for Sovaldi or any other drug. While Gilead provides substantial discounts on the drug in other countries, and for the VA 

and the Medicaid program, these discounts are not available to 

Medicare Part D plans. 

The result of this inability of Medicare Part D plans to negotiate 

for lower drug prices is the waste of hundreds of billions of taxpayers’ dollars. This is a problem we should solve, at least examine. I hope this committee will hold a hearing, but I have written 

a lot of letters asking for hearings and if it affects the fossil fuel 

industry, forget about it. If it affects the pharmaceutical industry, 

well, they are big campaign contributors. But we ought to look into 

this issue. 

We could save money, and we could be doing the Medicare program a great service and we could be doing people who need this 

drug a great service. At least we ought to look at the problem. 

But today’s hearing on reducing Medicare fraud is useful. Let us 

approach it in a constructive manner. I thank the witnesses for 

being here today, and I yield back the balance of my time. 

Mr. MURPHY. The gentleman yields back. And I would like to introduce the witnesses on the panel for today’s hearing. Dr. 

Shantanu Agrawal. Did I say that correctly? 

Dr. AGRAWAL. That is correct. 

Mr. MURPHY. Thank you. The Deputy Administrator and Director of the Center for Program Integrity of the Centers for Medicare 

and Medicaid Services. Mr. Gary Cantrell is a Deputy Inspector 

General for Investigations, the Office of Inspector General at the 

Department of Health and Human Services. Today Mr. Cantrell is 

accompanied by Ms. Gloria Jarmon. She is the Deputy Inspector 

General for Audit Services in the Office of Inspector General at the 

Department of Health and Human Services. Ms. Kathleen King is 

the Director of Health Care at the U.S. Government Accountability 

Office. 

I will now swear in the witnesses. You are aware that the committee is holding and investigative hearing and when doing so has 

the practice of taking testimony under oath. Do any of you have 

any objections to testifying under oath? 

None of the witnesses have indicated that. So the chair then advises you that under the rules of the House and the rules of the 

committee, you are entitled to be advised by counsel. Do any of you 

desire to be advised by counsel during your testimony today? 

All the witnesses decline that. So in that case, would you all 

please rise and raise your right hand and I will swear you in? 

[Witnesses sworn.] 

Mr. MURPHY. Thank you. All of the witnesses said yes, so you are 

now under oath and subject to the penalties set forth in Title 18, 

Section 1001 of United States Code. 

I will ask all of you to give a 5-minute opening statement summary. Dr. Agrawal, we will begin with you. 

10 

STATEMENT OF SHANTANU AGRAWAL, M.D., DEPUTY ADMINISTRATOR AND DIRECTOR, CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND MEDICAID SERVICES; 

GARY CANTRELL, DEPUTY INSPECTOR GENERAL, INVESTIGATIONS, OFFICE OF INSPECTOR GENERAL, DEPARTMENT 

OF HEALTH AND HUMAN SERVICES; AND KATHLEEN M. 

KING, DIRECTOR, HEALTH CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

STATEMENT OF SHANTANU AGRAWAL 

Dr. AGRAWAL. Thank you. Chairman Murphy, Ranking Member 

DeGette, and members of the committee and subcommittee, thank 

you for the invitation to discuss the Centers for Medicare & Medicaid Services’ program integrity efforts. Enhancing program integrity is a top priority for the administration and an agency-wide effort at CMS. We share a commitment to protecting beneficiaries 

and ensuring taxpayer dollars are spent on legitimate items and 

services. I would like to make three major points in my oral remarks this morning. First, our work in implementing new provider 

enrollment and screening standards at CMS has had significant, 

tangible program integrity impacts and moved us firmly towards 

prevention on these issues. 

Second, we recognize that further work remains to improve our 

safeguards, and we are taking specific, proactive steps toward 

those improvements. And finally, one of our many tools is our advanced predictive analytic system, the fraud-prevention system, 

which has continued to develop and deliver a positive return on investment in just the second year of operation. That ROI has been 

certified by the Office of Inspector General. 

Thanks in part to the authorities and resources provided by the 

Affordable Care Act and the Small Business Jobs Act of 2010, CMS 

is changing the program integrity paradigm toward a focus on prevention to identify and combat waste, abuse, and fraud in our system. Our enhanced screening requires certain categories of providers and suppliers that have historically posed the higher risk of 

fraud to undergo greater scrutiny prior to their enrollment in Medicare. 

The Affordable Care Act also required CMS to revalidate all existing 1.5 million Medicare suppliers and providers under the new 

screening requirements. We have real, tangible results from these 

efforts to share. Since March 25, 2011, more than 930,000 providers and suppliers have been subject to these new screening and 

validation requirements. Over 350,000 providers and suppliers 

have had their billing privileges deactivated as a result of revalidation and other screening efforts, and over 20,000 providers and 

suppliers have had their billing privileges entirely revoked. Just 

since the start of this year, CMS has revoked over 800 providers 

for lack of appropriate licensure. These deactivations and revocations mean these providers can no longer bill or be paid by Medicare. 

Our experiences with provider screening tell us that there is 

more work to be done to continue to enhance the screening process. 

We already rely on over 200 databases in our current screening 

processes, but challenges remain. For example, CMS has historiVerDate Nov 24 2008 15:27 Jun 08, 2015 Jkt 037690 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-156 CHRIS
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cally relied on Medicare exclusion and GSA debarment data to 

identify relevant felony convictions because there is not a centralized or automated means of obtaining felony conviction data. Using 

these databases on an automated basis, CMS ensures that individuals convicted of healthcare fraud, related crimes or other conduct 

that bars them from contracting with the Federal Government are 

denied enrollment to Medicare or swiftly removed from the program as part of our routine screening and validation. 

However, to address the lack of an off-the-shelf solution for all 

criminal data, CMS is developing a process to match enrollment 

data against numerous public and private data sources to ensure 

receipt of timely conviction data. Additionally, in April 2014, CMS 

announced that high-risk providers will now be subject to fingerprint-based background checks to gain or maintain billing privileges for Medicare. 

We are also applying our enrollment and screening processes 

more broadly. Just a few weeks ago, CMS issued a final rule to extend enrollment requirements to Part D which prevents revoked or 

excluded providers from prescribing to Medicare beneficiaries. The 

same rule also allows us to use data from the Drug Enforcement 

Agency to ensure prescribers are appropriately licensed to prescribe 

certain drugs and enable CMS to remove them from Medicare 

when the DEA has taken an action against an individual’s license. 

In addition to enhanced provider screening procedures, CMS is 

using private-sector tools and best practices to stop improper payments of all types. Since June 2012, the fraud prevention system 

has applied advanced analytics on all Medicare fee-for-service 

claims on a streaming national basis. In its second year of operations and through over 70 active models in the system, FPS identified or prevented more than $210 million in improper Medicare 

payments, double the previous year, and resulted in CMS taking 

action against 938 providers and suppliers. The tool is part of CMS 

comprehensive program integrity strategy. For example, the FPS is 

used as part of an agency focus on home health services in South 

Florida which includes our screening processes, implementation of 

an enrollment moratorium, on-the-ground investigations and collaboration with law enforcement. 

CMS is expanding the use of FPS beyond the initial focus on 

identifying potential fraud into the areas of waste and abuse which 

we expect to increase future savings. While we have made significant progress to address areas of vulnerability, we also know that 

more work remains to further refine our efforts and prevent improper payments and fraud in the first place. 

I look forward to answering the subcommittee’s questions on how 

we can improve our commitment to protecting taxpayer and trust 

fund dollars while also protecting, I think very importantly, beneficiaries’ access to safe, high-quality care. Thank you. 

[The prepared statement of Dr. Agrawal follows:] 

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Mr. MURPHY. Thank you. Mr. Cantrell, you have 5 minutes. 

STATEMENT OF GARY CANTRELL 

Mr. CANTRELL. Good morning, Mr. Chairman, and other distinguished members of the committee. I am Gary Cantrell, Deputy IG 

for Investigations, and I am joined today by my colleague, Gloria 

Jarmon, who is Deputy IG for Audit Services. 

Thank you for the opportunity to testify about OIG’s efforts to 

fight fraud, waste and abuse in Medicare and Medicaid. OIG utilizes a range of tools in this fight including audits, evaluations, investigations, enforcement authorities and educational outreach. We 

focus our resources on areas most vulnerable to fraud so we obtain 

the greatest impact from our work. 

OIG works closely with the Department of Justice, CMS, and 

other federal and state law enforcement partners to bring those 

who commit fraud against our programs to justice. Our Medicare 

fraud strike force teams, located in nine cities throughout the country, exemplify this approach. The OIG and our partners are committed to fighting and preventing fraud, waste, and abuse. 

Our efforts have produced impressive results. In 2013, our work 

resulted in record numbers of criminal convictions and civil actions, 

and over the last 5 years, we have recovered more than $19 billion 

from those defrauding federal healthcare programs, and our return 

on investment is over $8 for every dollar spent. Perhaps even more 

important, we are seeing strong indicators of a deterrent effect. 

When we work together to shed light on program vulnerabilities, 

put criminals behind bars and CMS takes appropriate administrative actions, our efforts are most successful. We have seen significant declines in Medicare payments across several program areas 

in strike force cities where we focused our efforts. 

For example, following federal enforcement and oversight activities, there have been sustained declines in Medicare payments for 

DME, home health, ambulance, and community mental health centers, or CMHCs. Nationwide, Medicare payments for CMHCs have 

decreased by approximately $250 million annually. 

Total Medicare payments for ambulance services in Houston are 

down approximately 50 percent. Miami area DME payments have 

decreased by approximately $100 million annually since the launch 

of the strike force. And since 2010, home health payments have decreased nationally more than $1 billion annually. 

Despite these successes, more needs to be done. Fraud schemes 

are constantly evolving and migrating, and some of the IG’s top 

oversight priorities include the rise in prescription drug fraud and 

schemes involving home base services. 

Rarely are these schemes perpetrated by one provider operating 

independently. There is often a network of individuals including 

business owners, patient recruiters, healthcare practitioners, and 

sometimes even the patients. Kickbacks in the form of cash or 

drugs bind these networks together. 

The federal forfeitures are a valuable tool to help defund and disrupt illegal activities and can serve as a powerful deterrent. Empowering OIG to execute forfeiture warrants would help curb the 

profitability of healthcare fraud and exert a deterrent effect. Removing Social Security numbers from Medicare cards could also 

25 

protect patient data and disrupt fraud schemes. The theft of patient and provider data underpins many of our cases. In a recent 

case, criminals perpetrated a $100 million fraud scheme by stealing 

the identities of doctors and thousands of patients. 

In conclusion, I must note that OIG’s mission is challenged by 

declining resources at a time when our oversight responsibilities 

are growing. OIG is responsible for oversight of about 25 cents of 

every federal dollar. However, since 2012, we have lost 200 employees and expect to reduce our Medicare and Medicaid oversight by 

20 percent by the end of the fiscal year. Now is not the time to reduce oversight in the face of a growing and changing program, and 

OIG is a proven investment. We would appreciate the committee’s 

support in securing full funding of OIG’s 2015 budget request. And 

thank you for the interest and opportunity to testify. We would be 

happy to answer any questions. 

[The prepared statement of Mr. Cantrell follows:] 

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Mr. MURPHY. Thank you. Ms. Jarmon, I don’t think you have a 

statement, do you? 

Ms. JARMON. No. 

Mr. MURPHY. Ms. King, do you have a statement? Thank you. 

You are recognized for 5 minutes. 

STATEMENT OF KATHLEEN M. KING 

Ms. KING. I do. Chairman Murphy, Ranking Member DeGett,e 

and members of the subcommittee, thank you for inviting me to 

talk about our work regarding Medicare fraud, waste, and abuse. 

CMS has made progress in implementing several recommendations 

we identified through our work to help protect Medicare from fraud 

and improper payments. But there are additional actions they 

should take. 

I want to focus my remarks today on three areas: provider enrollment, pre- and post-payment claims review and addressing 

vulnerabilities to fraud. 

With respect to provider enrollment, CMS has implemented provisions of the Patient Protection and Affordable Care Act to 

strengthen the enrollment process so that potentially fraudulent 

providers are prevented from enrolling in Medicare and higher risk 

providers undergo more scrutiny before being permitted to enroll. 

CMS has recently imposed moratoria on the enrollment of certain types of providers in fraud hotspots and has contracted for fingerprint-based background checks for high-risk providers. These 

are positive steps. 

However, CMS has not completed certain actions authorized in 

PPACA which would also be helpful in fighting fraud. It has not 

yet published regulations to require additional disclosures of information regarding actions taken against providers such as payment 

suspensions, and it has not published regulations establishing the 

core elements of compliance programs or requirements for surety 

bonds for certain types of at-risk providers, including home health 

agencies. 

With respect to review of claims for payment, Medicare uses prepayment review to deny payment for claims that should not be paid 

and post-payment review to recover improperly paid claims. Prepayment reviews are typically automated edits in claims processing 

systems that can prevent payment of improper claims. Post-payment reviews are those that are made after the fact and recover 

payments. We have found some weaknesses in the use of pre-payment edits and have made a number of recommendations to CMS 

to promote the implementation of effective edits regarding national 

policies and to encourage more widespread use of local pre-payment 

edits by Medicare administrative contractors. 

With respect to post-payment claims review, we recently completed work that recommended greater consistency in the requirements under which four post-payment review contractors operate 

when it can be done without reducing the efforts to reduce improper payments. CMS agreed with our recommendations and is 

taking steps to implement them. 

We also recommended to CMS that they collect and evaluate how 

quickly one type of post-payment review contractor, the Zone ProVerDate Nov 24 2008 15:27 Jun 08, 2015 Jkt 037690 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-156 CHRIS
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gram Integrity Contractors, or ZPICS, takes action against suspect 

providers. CMS did not comment on this recommendation. 

We also have further work underway on the post-payment review 

contractors to examine whether CMS has strategies to coordinate 

their work and whether these contractors comply with CMS’s requirements regarding communications with providers. 

With respect to vulnerabilities to fraud, we have made recommendations to CMS over the last several years, and CMS has 

implemented several of them, including establishing a single vulnerability tracking process and requiring the MACs to report on 

how they have addressed vulnerabilities. However, CMS has not 

taken action to address our recommendations to remove Social Security numbers from Medicare cards because display of these numbers increases beneficiaries’ vulnerability to identity theft. We continue to believe that CMS should act on our recommendations, and 

we are currently studying the use of electronic card technologies, 

such as smart cards, for Medicare cards, including potential benefits and limitations and barriers to implementation. 

Because Medicare is such a large and complex program, it is vulnerable to fraud and abuse. Constant vigilance is required to prevent, detect and deter fraud so that Medicare can continue to meet 

the needs of its beneficiaries. 

I would be happy to answer questions. Thank you. 

[The prepared statement of Ms. King follows:] 

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Mr. MURPHY. Thank you. I thank all the witnesses. I will now 

begin some questions for 5 minutes. Dr. Agrawal, you need to know 

whether the agency’s actions have been successful in reducing 

fraud and abuse, and one way that the agencies examine the effect 

on this is by measuring performance as required by the Government Performance and Results Act of 1993 as amended by the 

GPRA Modernization Act. One of CMS’s goals is to fight fraud and 

work when they’ve made improper payment. Isn’t that right? 

Dr. AGRAWAL. We are absolutely focused on the improper payment rate and working to reduce that rate. 

Mr. MURPHY. And isn’t it correct that CMS’s target improper 

payment rate for Medicare fee for service for fiscal year 2013 was 

8.3 percent? Is that about what the target was? 

Dr. AGRAWAL. Yes. 

Mr. MURPHY. Now, that translates to about $36 billion in losses. 

So what I don’t understand is why is it acceptable to have about 

a $36 billion loss rate that is acceptable? 

Dr. AGRAWAL. I don’t think it is about acceptability, sir. We are 

focused on the improper payment rate and reducing that rate as 

much as feasible. 

I will say just two points on the improper payment rate. One is 

it is not equivalent to the fraud rate. Improper payments do not 

measure the amount of criminal behavior that is in the Medicare 

program. That is often an area of confusion I find among stakeholders. Second, what it really does I think show, demonstrate, is 

the ability of providers to follow our strict payment guidelines and 

requirements, namely and most particularly, documentation requirements. So we see for example areas where the improper payment rate continues to rise, like certain institutional providers, 

DME suppliers, home health services, and we do think—— 

Mr. MURPHY. It went up for 2013 for you to 10.7 percent, I think. 

Dr. AGRAWAL. Well, I think what we have done is institute a lot 

more specific requirements in those areas in order to reduce fraud, 

waste and abuse. Those requirements can take time for providers 

to catch up with, and what we see is documentation lags and the 

improper payment rate goes up. 

Mr. MURPHY. I guess I am concerned about that you went from 

8.5 percent to 10.7 percent which says it is getting worse. 

Dr. AGRAWAL. Again, I think it is an outcome of our more stringent requirements. I think this shows the balancing act between 

trying to be very strong on program integrity which is really enforced by strong rules and regulations and then those rules and 

regulations being difficult for providers to follow. 

Mr. MURPHY. The bottom line up front, though, is you didn’t 

meet your goals and it is getting worse. 

Dr. AGRAWAL. Correct. Well, we did not meet our goal, and we 

have taken proactive steps to help reverse that trend. One is we 

work very closely with providers to help educate them on our rules 

to make sure that they are able to follow our rules, follow our documentation requirements. We have instituted point audits that 

allow us to look at specific—— 

Mr. MURPHY. I get all that. I am just saying bottom line for taxpayers is the amount of money that has been done in improper 

68 

payments is greater than the entire budget of the State of Pennsylvania. So I hope you will improve that. 

Let me ask this. I am trying to find ways that can facilitate you 

on this because you are probably familiar with that old quote from 

the bank robber Willie Sutton why he robbed banks, and he says 

because that is where the money is. So with $600 billion in Medicare spending, that looks like a ripe target for a lot of people. But 

the fact that he was convicted as a bank robber, I believe the way 

the laws and regulations are written right now, those types of 

criminal convictions wouldn’t prevent you from giving someone 

Medicare payments, am I correct? They could still slip through the 

system? 

Dr. AGRAWAL. Certain convictions we can revoke from the Medicare program for—— 

Mr. MURPHY. Would bank robbery be one of them? 

Dr. AGRAWAL. Felony convictions? So I am no lawyer. I assume 

bank robbery is a felony conviction. 

Mr. MURPHY. A felony conviction. 

Dr. AGRAWAL. If it is a felony conviction, then yes, we can kick 

people out of the Medicare program. 

Mr. MURPHY. I just want to be sure. Mr. Cantrell, would you 

know if someone with some felony conviction—we are trying to improve this. So if it is not there, I would like to know. Insurance 

fraud, auto insurance fraud, tax fraud. I believe tax fraud is still 

acceptable, that they wouldn’t be kicked out of the program. Do either of you know that? 

Mr. CANTRELL. As it relates to our exclusion authority? 

Mr. MURPHY. Yes. 

Mr. CANTRELL. There are requirements that link it to in connection with the delivery of a healthcare item or service. 

Mr. MURPHY. But if it is not healthcare. So if someone was involved with auto insurance fraud or assault or convicted of clinical 

research fraud, if it is not health, right, they can still be a Medicare provider, am I correct—— 

Dr. AGRAWAL. We have—— 

Mr. MURPHY [continuing]. The way the law is currently written? 

Dr. AGRAWAL. We have very proscribed guidelines for what we 

can revoke for. They are four types of felony convictions. 

Mr. MURPHY. I am trying to help you so—— 

Dr. AGRAWAL. These are not—— 

Mr. MURPHY. If you would like it stricter, we need to know this. 

So if someone has a history of criminal fraud, criminal felony behavior, and you can’t exclude them, I think one of the best predictors of future problems is past. And if someone has a pattern of 

this, can they still slip through and be a provider for Medicare? 

Dr. AGRAWAL. Yes, I think the agency agrees with you, sir. In 

fact, we have taken steps in the last year to put out a proposed 

rule that would actually expand our use of this felony conviction. 

Mr. MURPHY. Well, we would like to work with you on that. Let 

me ask one other thing. Can someone with a foreign address or just 

a box number also be a Medicare provider? Do you go through and 

check those records? 

69 

Dr. AGRAWAL. We do check records. We have automated checks 

for addresses as well as the ability to conduct on-site visits to make 

sure that these are legitimate places of business. 

Mr. MURPHY. Can someone with a foreign address be a Medicare 

provider? 

Dr. AGRAWAL. I would have to check specifically on that, but I 

believe the answer is no. 

Mr. MURPHY. OK. We will find out. Ms. DeGette, you are recognized for 5 minutes. 

Ms. DEGETTE. Dr. Agrawal, in your testimony you discussed how 

taxpayers get a significant return on investments to reduce Medicare fraud, is that right? 

Dr. AGRAWAL. Yes. 

Ms. DEGETTE. And I have been told for each dollar we spend, we 

save more than a dollar. Is that right? 

Dr. AGRAWAL. Yes. 

Ms. DEGETTE. Why is that true? 

Dr. AGRAWAL. Our activities are having impact. I think we have 

clearly—— 

Ms. DEGETTE. But why for each dollar that we spend do we save 

more than a dollar? 

Dr. AGRAWAL. I think our activities have a cumulative effect, so 

they can actually prevent dollars from going out the door in the 

first place. They have sentinel effects where we see impact beyond 

just the specific providers and suppliers that we are looking at. I 

think all those things cumulatively lead to that higher ROI. 

Ms. DEGETTE. It is a systemic issue? 

Dr. AGRAWAL. Correct. 

Ms. DEGETTE. OK. And what are the sources of funds for CMS 

program integrity efforts? 

Dr. AGRAWAL. We have a variety of funds. We have both Medicare and Medicaid funds. We have Small Business Jobs Act funds 

that are connected, for example, to the FPS, HCFAC funds. 

Ms. DEGETTE. How much will CMS spend this year on Medicare 

and Medicaid program integrity efforts? 

Dr. AGRAWAL. I would have to come back to you with a specific 

number. I am not sure about—— 

Ms. DEGETTE. I would appreciate it—— 

Dr. AGRAWAL [continuing]. The total application—— 

Ms. DEGETTE [continuing]. If you would supplement your response. 

Dr. AGRAWAL. Absolutely. 

Ms. DEGETTE. Do you remember how much you spent in 2012? 

Dr. AGRAWAL. No, ma’am. 

Ms. DEGETTE. OK. Do you know if there has been an increase 

or a reduction in funding for fighting fraud over the last 2 years? 

Dr. AGRAWAL. Well, we have experienced between the sequester 

and then sort of flat-funding is a general flattening out of our funding and that has forced us to make certain budgetary decisions 

about what programs and tools to focus on. 

Ms. DEGETTE. Now, you mentioned the layoffs, and I talked 

about that in my opening statement. What other programmatic adjustments have you made? 

70 

Dr. AGRAWAL. Well, I might just point out that the layoffs most 

significantly impacted the Office of Inspector General—— 

Ms. DEGETTE. OK. 

Dr. AGRAWAL [continuing]. Which we take seriously obviously as 

well. 

Ms. DEGETTE. So Mr. Cantrell, maybe you can answer that. 

Mr. CANTRELL. Sure. Our budget is primarily funded—our 

healthcare oversight is primarily funded by the Healthcare Fraud 

and Abuse Control Act, and that fund is—we get about $300 million a year. But with sequestration, it takes about $14 million out 

of that healthcare oversight fund. We have another funding stream 

that we call our discretionary fund that funds all of our other activity related to the Department of Health and Human Services but 

not the Medicare and Medicaid programs. 

Ms. DEGETTE. Have you made programmatic adjustments to account for the budget cuts or have you just laid people off? 

Mr. CANTRELL. We haven’t laid people off. We have lost people 

through attrition. 

Ms. DEGETTE. OK. 

Mr. CANTRELL. We have reduced investments in things like 

training, equipment—— 

Ms. DEGETTE. Now you have fewer people doing the job. 

Mr. CANTRELL. That is correct. 

Ms. DEGETTE. Right? 

Mr. CANTRELL. That is correct. 

Ms. DEGETTE. So are you trying to make them figure out how 

to do the job more efficiently? 

Mr. CANTRELL. We do. We are trying to focus our work on the 

areas where we can have the greatest impact. So the biggest thing 

we are doing is picking our work. There is much more work in this 

program than we have the ability to do. So we are being very strategic about the work that we select, and placing our resources in 

areas where they can have the greatest impact is our strategy here. 

Ms. DEGETTE. So this is really a situation. If we adequately 

funded you, then you could actually do more investigations and 

pick more cases, correct? 

Mr. CANTRELL. Absolutely. 

Ms. DEGETTE. Now, for either one of you who knows the answer 

to this, while we have been having a slight reduction in the funding, at the same time, the Medicare population has increased and 

Medicare expenditures have increased. Is that correct, Dr. 

Agrawal? 

Dr. AGRAWAL. That is correct. 

Ms. DEGETTE. You know, Mr. Chairman, I think that there are 

some things you can do by efficiencies and by being smart and so 

on. But when you cut $30 million from CMS’s integrity efforts, I 

am not sure how much you can make up for that. 

Dr. Agrawal, the administration has asked for significant increase in program integrity funding for fiscal year 2015, over $400 

million. Is that correct? 

Dr. AGRAWAL. Yes. 

Ms. DEGETTE. And what would you do with that funding? 

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ization demo could be expanded nationally into program areas that 

it doesn’t currently cover. We know that that could have impact. 

Ms. DEGETTE. Do you think that would assist you? 

Dr. AGRAWAL. Absolutely. 

Ms. DEGETTE. Perhaps you can also add to your supplement, to 

your testimony, some of the things, some of your plans for this 

money if Congress appropriates the money. 

Dr. AGRAWAL. I will do that. 

Ms. DEGETTE. OK. Thanks. Mr. Cantrell, let us see, what would 

you be able to do with the funding if we adequately funded your 

agency? 

Mr. CANTRELL. Well, first we would hire more investigators, 

auditors, evaluators, attorneys to support the work that we are 

doing and actually have more boots on the grounds performing this 

type of oversight work. We also need investments in technology. As 

we deploy electronic health record systems throughout the country 

and that becomes a greater adoption of EHR, that creates digital 

evidence that we have to collect, store, maintain and sort through. 

So we need investments in technology to maintain, to kind of stay 

above water here in this area that continues to evolve. 

Ms. DEGETTE. Thank you. Thank you, Mr. Chairman. I yield 

back. 

Mr. MURPHY. Thank you. Now I recognize Mr. Burgess, or Dr. 

Burgess, for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. So again, I appreciate 

everyone being here this morning. If I understood your testimony 

correct, we are doing a great job. If you just give us a little bit more 

money, we will do a better job, and yet the problem continues. Year 

after year after year we are here having these same hearings. 

Let me just ask—I have got questions that I must ask, but at the 

same time, I feel obligated to make the statement that, yes, I supported the sequester. It was a policy that I supported, but it was 

the President who signed it into law. Now, we all knew after the 

President signed it into law that it was going to affect the Department of Health and Human Services significantly at a time when 

the President’s healthcare law was being implemented. So I had 

asked repeatedly for someone, the Secretary of HHS, to come to 

this committee and talk about how you were going to deal with an 

8- to 10-percent reduction in across-the-board funding, how were 

you going to prioritize. I would think, Mr. Cantrell, you would 

prioritize your department. I don’t know why you would prioritize 

money going to build an exchange that you then had to reinvest 

when they didn’t build the exchange the right way. But I am not 

the head of HHS, so I don’t make those decisions. So please forgive 

me if I am a little bit circumspect about people coming in here and 

saying more money for my agency, more money for my agency, 

when my God, you have wasted so much money in that agency in 

the last 4 years that it is just absolutely astounding. 

Now, let us get to the reason why we are here. Mr. Cantrell, do 

you have recommendations, your office, the Office of Inspector General, have recommendations and have you made recommendations 

to the Centers for Medicare and Medicaid Services relating to improvements in the screening of providers that have not been adopted? 

72 

Ms. JARMON. I can answer that question. We have several recommendations. In fact, we posted in March 2014 a compendium of 

priority recommendations that are unimplemented, and that has 

over 100 recommendations to CMS, many related to Medicare and 

Medicaid payment and process issues and some related to quality 

of care. So we do have several recommendations that we have been 

working with CMS, and they have been unimplemented but—— 

Mr. BURGESS. Let me just ask—— 

Ms. JARMON [continuing]. We are still working with them. 

Mr. BURGESS [continuing]. The question, Dr. Agrawal or Mr. 

Cantrell. What is the status of the implementations of those recommendations from the Office of Inspector General? 

Dr. AGRAWAL. You know, we have appreciated the recommendations that are provided to us, both by the OIG as well as GAO. We 

work diligently to implement those recommendations based on our 

ability to do so, and budgetary and other resource constraints. 

Since January 2013, we have completed or closed out over 60 recommendations provided to us by GAO and OIG. We continue to 

work through the remaining recommendations in order of priority 

based on their potential impact on our program. But we do appreciate those recommendations. 

Mr. BURGESS. Will you provide to the committee a list of those 

recommendations that have been made which have not yet been 

implemented? Are you able to do that? 

Dr. AGRAWAL. I can do that. 

Mr. BURGESS. And the committee would appreciate that information. 

There was an article in Bloomberg not too terribly long ago talking about doctors who have lost their licenses and continued to get 

paid by Medicare. I mean, I always lived in fear—as a practicing 

physician, I always lived in fear of getting a bad mark at the National Practitioner Data Bank. I would assume that all of these 

doctors have recorded activity in the National Practitioner Data 

Banks. Dr. Agrawal, do you query the National Practitioner Data 

Bank when you authorize or when you permit someone to bill the 

Medicare system? 

Dr. AGRAWAL. Yes. And I share your feelings about my medical 

license as well, Dr. Burgess. It is something that I guard very carefully and want to make sure is untarnished. 

We access a lot of different data sources including the NPDB and 

over 200 other data sources to check things like licensure. As I said 

in my opening remarks, we revoked over 800 providers just since 

the beginning of this year for licensure issues. This was an area 

of vulnerability for us, even a couple of years ago, that we have 

really worked hard to close by getting access to all the right data 

at the state level so that we can do automated checks on licenses 

literally every week and revoke any providers that don’t have appropriate licensure. 

Mr. BURGESS. You know, a lot of the substance of this hearing 

came about because of the local article in the newspaper back home 

where you had a doctor, a CEO of a hospital chain, who had received $17 million from the stimulus to improve medical records in 

his system. And then it was found that the medical records were 

boxed up and sitting in the basement being eaten by rodents. So 

73 

I guess you would classify that as meaningless use of health information technology. But yet, at the same time, with this bad and 

egregious an offense, he continues to get paid by CMS. Is this just 

a one-off or are there other such stories out there in the country? 

Dr. AGRAWAL. I think it is a notable case. It is one that I know 

well personally. I can tell you that we have a lot of checks in place 

to ensure that that kind of thing does not happen both before payments are made and after. 

Mr. BURGESS. But it did happen. 

Dr. AGRAWAL. I agree that it did. I think in part this person was 

providing misleading information to the agency, and we were also 

made aware about law enforcement concerns well into their process. And I think OIG would agree here that early collaboration between our agencies is very helpful. That allows us to take the actions that we can take very quickly, and we can work with law enforcement to facilitate their actions as well. 

Mr. BURGESS. Then do it. 

Mr. MURPHY. Thank you. 

Mr. BURGESS. Early collaboration is the key. I yield back, Mr. 

Chairman. 

Mr. MURPHY. Just a quick question. When you are getting that 

clarifying data for the committee with regard to recommendations 

you have made that have not been implemented, if they have not 

been implemented, could you let us, with each one, explain some 

reason of why that is, if it is some federal action, if there is any 

state action, if states are not sending you data. That is extremely 

important. We want to help you, but we need to have that thorough 

report. 

I now recognize the gentleman from Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and ranking member. Dr. 

Agrawal, can you tell me more about how the Affordable Care Act 

helps CMS in fighting Medicare fraud? Specifically, can you expand 

a little on CMS’s provider enrollment and screening process? 

Dr. AGRAWAL. Absolutely, and thank you for the question. The 

Affordable Care Act has had significant impact on our ability to 

safeguard the program and particularly in the area of provider enrollment and screening. The ACA really required us to, for the first 

time, categorize providers based on the risk of fraud and subject 

higher risk providers to greater levels of scrutiny. That includes 

automated checks, site visits, fingerprinting. All of that was made 

possible by the Affordable Care Act. 

In addition, our moratorium authority, our requirement to revalidate all providers on a cyclic basis, again, comes out of the ACA. 

Mr. GREEN. OK. I appreciate it because some of the savings from 

the ACA was actually giving CMS the tools to go after the fraud. 

We would prefer not to read it on the front page of the papers before we can get to you. 

The health reform bill includes the authority for CMS enact moratorium on enrolling new providers. Has CMS used this new tool 

yet? 

Dr. AGRAWAL. We have. So we implemented the first moratoria 

last summer in July. We have moratoria in two different provider 

categories, ambulance services, and home health services in seven 

74 

different metropolitan areas and are closely monitoring the impact 

of that moratorium. 

I should also say while the moratorium is in place, we have really stepped up our activities to make sure that we are taking action 

on the providers that are already in the moratoria area. 

Mr. GREEN. OK. Good. Because I represent the Houston area, 

and it seems like we are ground zero for some of the fraud, and 

I appreciate that. How does the moratorium help fight the fraud? 

Dr. AGRAWAL. Well, what the moratoria really allows us to do is 

essentially close the door for enrollment, in this case, for new ambulance services as in Houston or home health agencies in other 

parts of the country. That gives us an opportunity to clean up the 

providers or suppliers that are already there and work very closely 

with law enforcement. We actually work very closely with them in 

identifying these areas for the moratoria and then in the steppedup activities to make sure that we are cleaning up those areas before eliminating the moratoria. 

Mr. GREEN. OK. The Affordable Care Act required Medicare providers to report and return overpayments once they are identified. 

Failing to do so would constitute a federal crime under the False 

Claims Act. Was this requirement necessary and have you seen evidence of providers complying with this requirement and is it being 

enforced? 

Dr. AGRAWAL. I am sorry, Mr. Congressman. I missed the beginning part of your question. 

Mr. GREEN. The Affordable Care Act required Medicare providers 

to report and return overpayments once they are identified, and 

failing to return those payments would constitute a federal crime 

under the False Claims Act. I was wondering if this is being enforced and how it is working. 

Dr. AGRAWAL. Yes, we published a proposed rule on this, and we 

are looking to finalize that. We do see providers actually taking 

just the statutory authority seriously itself and actually returning 

overpayments voluntarily. We have also promulgated another proposed rule that would actually have overpayments follow providers 

if they try to close down one location and open up another one. 

They will have to pay the overpayment before they can get into the 

program again. 

Mr. GREEN. OK. Ms. King, do you have a view on how CMS is 

doing at implementing the broad range of new Affordable Care Act 

anti-fraud positions? And after you, I would like to give Dr. 

Agrawal a chance to respond. 

Ms. KING. Yes, we view the new provisions in the Affordable 

Care Act as a positive step because we are in favor of keeping people out of the program who shouldn’t be in the program, and right 

now our investigative team has work under way to determine 

whether people are being kept out of the program as they should 

be and whether people who have committed bad acts and should 

be thrown out of the program are being thrown out. And we should 

be able to report on that by the end of the year. 

Mr. GREEN. OK. Thank you. Dr. Agrawal, do you have a comment on that, how CMS is doing with the GAO? 

Dr. AGRAWAL. Sure. And again, I appreciate Ms. King’s comments and agree that their recommendations are very important. 

75 

We have done a lot based on their recommendations to strengthen 

our program in Part D, in basic provider enrollment and screening. 

There are other recommendations that we continue to work 

through, but they are very helpful to us. 

Mr. GREEN. OK. Thank you, Mr. Chairman. I yield back. 

Mr. MURPHY. Thank you. Now I recognize Ms. Blackburn for 5 

minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. Dr. Agrawal, I 

want to come to you. You mentioned in your testimony that since 

2011, 20,000 providers and suppliers had their participation in 

Medicare revoked and some from felony convictions and some from 

administrative actions. And also, you mentioned that CMS has 

issued a proposed rule that would clarify the list of felony convictions that may result in a denial of participation. And yet, I have 

heard from constituents that some of these bad actors that are out 

there continue to do business because they change their names and 

they start a new business. But it is the same bad group of people. 

And we have seen this time and again, and I know the chairman, 

a couple of years ago, had a piece of legislation that went through 

judiciary, didn’t get very far at the time. We need to bring it back. 

It would say if you have ever been convicted, you can in no way 

participate and benefit. 

GAO has recommended that CMS could potentially thwart this 

type of behavior by strengthening enrollment procedures as is currently authorized, and CMS could require additional disclosure information on the front end. And yet, according to GAO, it hasn’t 

been done. My question to you is this. After 20 years after being 

on a fraud high-risk list, when can the taxpayers expect to see results from some common-sense activity in this arena? 

Dr. AGRAWAL. Well, I think we clearly are seeing results, and I 

think you saw that in the testimony that I provided to the committee this morning that there are clear results of our activities. 

Now, I, too, am frustrated by the kind of case that you are identifying. If there are cases like that specific ones that we can work 

on with your office, I would be happy to do that. 

Let me just say that we are working toward strengthening disclosure requirements. We actually have a proposed rule that would require far more disclosure to resolve issues just like that so that we 

can actually prevent people from entering the program that are 

just changing names and switching from company to company. I 

think that kind of approach is indeed very frustrating, and we are 

working to expand our authorities to get greater clarity. 

Mrs. BLACKBURN. Well, you are not giving me the granular level 

that I am seeking. Tell me specifically what you are going to do because when I talk to my constituents, they say we want to know 

specifically what is going to be done about this. It is our money, 

and you are wasting it. 

Dr. AGRAWAL. Well, beyond the overall approach that I have described, there are two things that I think will affect the situation. 

One is we are expanding our ability to actually revoke or deny enrollment for a broader list of felony convictions than we currently 

are authorized to do, and second, we are requiring greater transparency at the time of attempted enrollment so that if there are 

overpayments from other enrollments that that provider had, we 

76 

can actually deny enrollment until those overpayments are recovered. Those are two very specific things that I think will go directly 

at the cases that you are talking about. 

Mrs. BLACKBURN. But why did we let them in the program in the 

first place? 

Dr. AGRAWAL. Well, again, historically, I think Medicare has had 

a more open enrollment process than it has had since the passage 

of the Affordable Care Act. So we are working very diligently every 

day to clean up those records and hence, the numbers that you 

have seen of over 300,000 deactivations and over 20,000 revocations —— 

Mrs. BLACKBURN. OK. Does CMS give bonuses? 

Dr. AGRAWAL. Pardon me? 

Mrs. BLACKBURN. Does CMS give performance bonuses to employees? 

Dr. AGRAWAL. I am not sure. I don’t really manage our HR function. I don’t know what kind of bonuses—— 

Mrs. BLACKBURN. Do you get a performance bonus? 

Dr. AGRAWAL [continuing]. That we do. I joined the agency in 

this role 3 1⁄2 months ago. 

Mrs. BLACKBURN. OK. 

Dr. AGRAWAL. I haven’t qualified for bonuses. 

Mrs. BLACKBURN. Mr. Cantrell, did you get a performance bonus? 

Mr. CANTRELL. We do pay performance bonuses in OIG based on 

our ranking of record. 

Mrs. BLACKBURN. OK. Ms. Jarmon, HHS, do they do performance 

bonuses? 

Ms. JARMON. I am in the same office with Mr. Cantrell. There 

are performance bonuses based on performance. 

Mrs. BLACKBURN. OK. All right. Let me come back, Mr. Cantrell 

and then also—let me talk to you about this issue. I have got a 

prop back here. 

[Chart shown.] 

Mrs. BLACKBURN. Identity theft and privacy is a huge issue, and 

this is something we have tried repeatedly to get cleaned up. This 

is a copy of a Medicare card. Now, what we have that is a problem 

with identity theft, you have got the program, the health insurance 

program it is in, Medicare. You have got the name. And this Medicare claim number is the Social Security number. When are you 

going to delink these and make certain that a Social Security and 

a name do not appear on this card? When are you going to change 

that? 

Dr. AGRAWAL. I think you are probably asking me, not Mr. 

Cantrell. So we have—— 

Mrs. BLACKBURN. I am sorry. I thought I called for you and then 

I would like to know from Ms. King, has GAO recommended doing 

this? 

Ms. KING. We have. 

Mrs. BLACKBURN. OK. Back to you, Doctor. 

Dr. AGRAWAL. So this is an area—— 

Mrs. BLACKBURN. Why not? 

Dr. AGRAWAL [continuing]. We have looked at. We have appreciated the recommendations. We are not, as an agency, opposed to 

77 

the idea. It is, however, a challenging idea that requires a lot of 

sort of rigor to implement—— 

Mrs. BLACKBURN. Do something. Take an action. Be brave. 

Dr. AGRAWAL. I think we need to be adequately resourced—— 

Mrs. BLACKBURN. I yield back. 

Dr. AGRAWAL [continuing]. By the Congress to be able to do that. 

But yes, we appreciate the ability. 

Mr. MURPHY. Dr. Agrawal, do you have the authority to make 

that decision to eliminate the Social Security number from the 

cards? 

Dr. AGRAWAL. I think we as an agency could do that. Again, however, as we have discussed this with the GAO, making this change 

would require changes to over 70 systems that CMS has. It would 

also require changes to state Medicaid agency systems, private insurers that deal with us in Part C and D as well as even potentially on the provider side. So there is quite a bit of burden across 

the healthcare community to make this change. Again, we are not 

opposed to it. I think as an agency we just need to be adequately 

resourced to be able to take on that challenge. 

Mr. MURPHY. Just don’t hire the same company that did the 

Obamacare rollout. You can do better. Ms. Schakowsky first. 

Ms. SCHAKOWSKY. I would like to talk a little bit about fraud and 

the Medicare Part D program. Dr. Agrawal, CNS released a Medicare Part D proposed rule in January of 2005. What steps did that 

rule take to reduce fraud in Medicare Part D? 

Dr. AGRAWAL. So just to clarify, this is the rule that we finalized 

now 3 weeks ago, or roughly 3 weeks ago, is that correct? 

Ms. SCHAKOWSKY. Yes. 

Dr. AGRAWAL. Yes. I think that rule is going to have really important impact for us in Part D. One thing is it extends our controls and safeguards in Parts A and B to Part D. It will actually 

require an enrollment of providers in the Medicare program to— 

even if all they do is prescribe in the Part D program. So we will 

have much more transparency into who those providers are, and I 

think importantly, we can keep revoked and excluded providers out 

of the Part D program so they can no longer prescribe. 

A second big impact is that it will allow us for the first time to 

go after abusive prescribing. So this will be not just those prescribers that have actually committed fraud but will allow us to go 

upstream of the problem and actually be much more preventive to 

make sure that prescribers that are endangering the safety and 

health of our beneficiaries, for example, can be taken action against 

and we can actually kick them out of the program. 

Ms. SCHAKOWSKY. So it is a financial issue, but also a health 

issue for a patient? 

Dr. AGRAWAL. Absolutely. 

Ms. SCHAKOWSKY. OK. So I appreciate these steps. Fraud in Part 

D appears to be a problem that is increasing, and it is important 

that CMS act quickly to nip this fraud in the bud. 

Mr. Chairman, fraud is not the only problem with Medicare Part 

D. Waste and abuse is also a problem. In particular, taxpayers and 

beneficiaries are forced to pay too much for prescription drugs because Medicare Part D plans are not able to negotiate for lower 

prices. The poster child for high Medicare Part D prices will soon 

78 

be Sovaldi, which Mr. Waxman was talking about, the Hepatitis C 

drug manufactured by Gilead. The company charges $84,000 for a 

course of treatment. A recent analysis by researchers from Georgetown University and the Kaiser Family Foundation found that 

Medicare Part D coverage for Sovaldi alone would increase Medicare drug spending by $6.5 billion, or 8 percent, in 2015 which is 

an astounding amount of money for one drug. While Gilead provides substantial discounts on this same drug in other countries 

and for the VA and the Medicaid program, these discounts are not 

available to Medicare Part D plans. According to the studies’ authors, ‘‘It is likely to be hard for Part D plans to have an impact 

on the price in the case of Sovaldi. Part D sponsors have little negotiating power.’’ 

Mr. Chairman, Sovaldi is not unique. Part D plans are not able 

to obtain significant discounts on many expensive drugs. So Mr. 

Cantrell, the Inspector General has conducted analyses of Part D 

drug prices and compared prices charged for the same drugs on 

Medicaid. Can you tell us what those investigations have found? 

Mr. CANTRELL. I can tell you that Part D drug prices are higher. 

We are paying more in Medicare than we are in Medicaid, and our 

work has come out of the Office of Evaluation and Inspections and 

somewhat from the Office of Audit Services. So I will pass on to 

Ms. Jarmon. 

Ms. SCHAKOWSKY. OK. 

Ms. JARMON. One of the things we have looked at are rebates— 

the Part D drug prices were higher than Medicaid prices because 

Medicaid received higher rebates. Average rebates for Medicaid 

drugs were 45 percent of the cost while average rebates from Part 

D drugs were only 19 percent of cost. And in the Compendium of 

Unimplemented Recommendations, we actually have several recommendations related to payment policies, looking at lab costs, and 

the differences between Medicare and Medicaid prices for these 

same services. 

Ms. SCHAKOWSKY. And how much would the—so you are saying 

that there is an administration proposal that would end the waste 

and require higher rebates for Part D drugs, is that right? 

Ms. JARMON. I am not sure if there is a proposal. 

Ms. SCHAKOWSKY. Dr. Agrawal? 

Dr. AGRAWAL. There is. There is an item in the President’s budget that would put Medicare payments on par with the Medicaid rebates. 

Ms. SCHAKOWSKY. And how much would that proposal save taxpayers? 

Dr. AGRAWAL. I would have to look back at the O Act estimation. 

I can get back to you about that. 

Ms. SCHAKOWSKY. OK. The number I have heard, and you can 

confirm it, is about $150 billion would be saved by that one change. 

Dr. AGRAWAL. Right. 

Ms. SCHAKOWSKY. And I would certainly support that change. 

Thank you, and I yield back. 

Mr. MURPHY. Thank you. Now I recognize Mr. Olson for 5 minutes. 

Mr. OLSON. I thank the chair for having this hearing that is required by our rules. Welcome to all the witnesses. Before I get to 

79 

my questions, I want to tell you about what Medicare fraud looks 

like back home in Texas 22, in Houston in particular. These are 

some stories that have been in local papers. January 24, 2014, 

‘‘Houston medical device supplier charged with $3.4 million in 

Medicare fraud.’’ February 2, 2 weeks later, Houston psychiatrist 

indicted for $158 million in Medicare fraud. February 29, Houston 

physician arrested in healthcare fraud conspiracy. In that case, 

CMS missed the fact that one person had been tested 1,000 times 

and billed those tests over a 3-year period. April 3 of 2014: ‘‘Houston businesswoman convicted of $1.5 million in Medicare fraud.’’ 

April 24, 3 weeks later: ‘‘$70 million alleged healthcare scam busted in Texas.’’ And finally, June 4 of 2014: ‘‘Houston physician and 

four others indicted for $2.9 million in healthcare fraud in state 

and federal case.’’ That is 6 months and $200 million in fraud in 

Houston. And that is what we have known. That is what has been 

charged, what has been put in the press. We know that it is much, 

much worse in Houston and all across America. 

One area of abuse is billing Medicare for ambulance services that 

aren’t given or provided or needed. As was mentioned by some of 

our witnesses, Houston is one of seven cities in America that have 

a moratorium on new ambulance services under Medicare. And I 

believe, Mr. Cantrell, in your testimony you said that because of 

the moratorium, Houston’s costs have gone down 50 percent since 

2010. Is that correct? 

Mr. CANTRELL. I am not linking it directly to the moratorium, 

sir, but based on our collective efforts, yes, our enforcement efforts 

and administrative efforts. 

Mr. OLSON. You anticipate my question. So it is not due to moratorium. It may be due to putting people in jail as opposed to some 

sort of combination thereof? 

Mr. CANTRELL. Absolutely. We think putting people in jail who 

commit these crimes is paramount to success in this area. 

Mr. OLSON. Can you get us that data, separate the moratorium 

from actually putting people in jail? Is that possible? 

Mr. CANTRELL. We haven’t studied that, the impact of the moratoria. I don’t know if Dr. Agrawal—— 

Mr. OLSON. Dr. Agrawal, any possibility of having that information? 

Dr. AGRAWAL. Well, we are monitoring the certain measures like 

utilization and cost in the moratoria area. I think statistically it is 

very hard to desegregate all the work that we are doing from the 

moratorium alone. In fact, we bring a package of activities between 

us and the Office of Inspector General that allow us to attack these 

problems head on. The moratorium is one component. We also 

have, as you saw the report, the fraud prevention system enrollment requirements. So I think all of those things together clearly 

have impact. It is very hard to desegregate and say that this is the 

impact of one of those things. 

Mr. OLSON. Do you plan to expand the moratorium? 

Dr. AGRAWAL. Pardon me? 

Mr. OLSON. Do you—expand the moratorium with the seven cities, make it go longer? 

Dr. AGRAWAL. Well, what we are doing currently, since this is a 

new authority and the first time that CMS has really implemented 

80 

it, is that we are studying it to see what impact it does have, making sure that it plays a useful role in our toolbox and that it allows 

us to take action against providers that are already in those areas. 

So until we know the answers to those questions I think, given 

that it has a real impact on even potentially legitimate providers, 

we want to be careful about expanding that authority until we really have a sense of what it does for us. 

Mr. OLSON. Any idea of when that timeframe will come out and 

when you can tell us this is working, we will expand it in a year, 

2 years, 3 years, 4 years? 

Dr. AGRAWAL. Well, we are required by the statute to publish a 

federal register notice every 6 months in order to continue the moratorium or eliminate it or implement new ones. So we will be looking forward to publishing a notice within the next month with that 

decision. 

Mr. OLSON. So if you expand it to the seven cities currently involved in the moratorium that you will take more cities, 12, 14, 15, 

20, 25 to see if it is working? It seems to be working. Costs have 

gone down 50 percent since 2010. Let us go forward. 

Dr. AGRAWAL. Yes, again, I think we are very open to using this 

authority more. I think we just want to be able to know what its 

impact is and make sure that we are not negatively impacting legitimate providers or beneficiary access to care. I think that is really paramount for us as an agency. 

Mr. OLSON. Thank you, and I have 47 seconds left. Mr. Burgess, 

would you like my time or—— 

Mr. BURGESS. Yes, let me just ask a question on the predictive 

modeling issue. Prior to the passage of the Affordable Care Act, 

was there any prohibition on using predictive modeling? 

Dr. AGRAWAL. Well, sir, in fact the predictive modeling became 

a requirement from the Small Business Jobs Act which preceded 

the ACA. There was no prohibition. I think what the Small Business Jobs act really gave us was the necessary funding to be able 

to implement this kind of advanced technology. 

Mr. BURGESS. But predictive modeling has long been known, particularly among the credit card agencies. I mean, I don’t know how 

many years they have used this, but it has been some time. It is 

a reliable way to cut down on fraud. One of the things I have never 

understood is why CMS has been so slow to embrace it. I will yield 

back. 

Mr. MURPHY. Thank you. I now recognize Mr. Tonko for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair, and welcome to our panelists. 

Yesterday the Second Annual Fraud Prevention System Report to 

Congress was released which detailed some of the accomplishments 

of CMS in the fiscal year 2013 to identify bad actors and again protect Medicare. If we could just visit those report findings for a moment, for starters, Dr. Agrawal, can you just give us a basic description of what the fraud prevention system is and just how it 

works? 

Dr. AGRAWAL. Sure. So the fraud prevention system is an advanced piece of technology. It allows us to perform predictive analytics and other kinds of analytics on claims in Medicare as they 

are streaming through the system in real time. So the Medicare 

81 

program sees about 4.5 million claims per day. This allows us to 

more quickly and specifically identify those claims that need to be 

evaluated by our investigators, and further develop to see if they 

represent aberrancies or even fraud. 

Mr. TONKO. And beyond that, are there other things that enable 

your office to do that that was not previously available? Are there 

new opportunities here with that system? 

Dr. AGRAWAL. Yes. I think the system itself is a great piece of 

technology that allows us to, again it would be impossible for a 

human being to lay eyes on all 4.5 million claims per day. The fact 

that we have an automated system to pull out those claims and 

those providers that are really problematic is an amazing step forward for us. 

In addition to that, it allows us to do certain things as well, like 

simply deny claims that don’t meet payment requirements, which 

is an ability that the agency had before but the FPS allows us to 

do it more flexibly and quickly. 

Mr. TONKO. And what kind of investment has been made by 

CMS in the prevention system? 

Dr. AGRAWAL. The Small Business Jobs Act came with about 

$100 million of funding for the fraud prevention system that we 

have been utilizing in its implementation. You know, as I think we 

have pointed out earlier, we implemented the system on a very 

rapid timeframe and actually exceeded the expectations of the statute by going to a national view as opposed to a regional view which 

the statute required initially. We have also shown good progress in 

the implementation, going from a 3-to-1 ROI to now this year a 5- 

to-1 ROI that I would point out has actually been certified by the 

Office of Inspector General. 

Mr. TONKO. So any expanded opportunities there in terms of fiscal impact? You see it improving even beyond that? 

Dr. AGRAWAL. Yes. We have undertaken various measures to increase the value and return of the FPS. We are, for example, applying it against a wider spectrum of program integrity issues, actually using it to identify providers for medical review, as one example, being able to implement those automated edits as another example. We do look forward to the value of this program increasing. 

Mr. TONKO. OK. Thank you. And Mr. Cantrell, are you familiar 

with the FPS system and with the results that were released yesterday? 

Mr. CANTRELL. I think Ms. Jarmon is the person to answer that 

question, if you don’t mind. 

Mr. TONKO. Ms. Jarmon? 

Ms. JARMON. Yes. It is not a part of the Office of Investigations— 

the OIG office of Audit Services actually did that work looking at 

the fraud prevention system the second year. The first year we 

weren’t able to certify the information because of inconsistencies, 

and the second year we were able to certify both the unadjusted 

number, the number before adjustments, and the adjusted number 

to reflect what actually gets returned to the Medicare trust fund. 

We were able to certify both numbers in the report that went out 

late yesterday, the larger number being $210 million of unadjusted 

projected actual and projected savings, and the adjusted number of 

$54.2 million is a 1.34-to-1 return on investment. 

82 

Mr. TONKO. And basically what is the significance of the certification? 

Ms. JARMON. The significance is that the auditors actually looked 

at supporting documentation. They actually did work similar to financial audit work to determine the reasonableness of the numbers. So the numbers actually started out as the larger number, 

and we worked closely with CMS on any concerns we had if we 

couldn’t directly associate these savings to the fraud prevention 

system so we really got comfortable with the unadjusted number. 

Like I said, it started out as a larger number. So it was the audit 

work that was done to make us feel comfortable that we could certify the numbers this year. 

Mr. TONKO. Thank you. And earlier you were quizzed as a panel 

about the legislative recommendations for further improvements in 

anti-fraud. Could any of you highlight which of those recommendations would be your top priority? 

Mr. CANTRELL. From a law enforcement perspective, our ability 

to have asset seizure authority is important to OIG, but also removing the Social Security number from the Medicare beneficiary 

card is important from an identity theft perspective, preventing 

identity theft. 

Mr. TONKO. Do you all share that same priority? 

Ms. KING. Yes. I think from our perspective the removal of the 

Social Security number from the cards is a very high priority. 

Mr. TONKO. OK, and Dr. Agrawal? 

Dr. AGRAWAL. Well, being from the agency that I am, I don’t get 

to make the recommendations. I get to implement them. So, again, 

we look at all of them. There are others that I think have very high 

priority because of their impact on our enrollment and screening 

work. The SSN issue is one that we have looked at specifically. 

Again, we are open to that recommendation, but need to be 

resourced appropriately to meet its requirements. 

Mr. TONKO. Thank you very much. I yield back. 

Mr. MURPHY. Thank you, Mr. Tonko. I would like to get some 

clarification on something the gentleman asked you. On page II of 

the Executive Summary of this document you released last night, 

the Report to Congress, Fraud Prevention, you indeed say in this 

little blue box, ‘‘The results are a 5-to-1 return on investment almost double the value of the FPS in the first implementation year.’’ 

But then when we get into the meat of the text on—it also says 

in here, what we found, it says Medicare fee for service program 

and return on investment on—it is only $1.34 for every dollar spent 

on the FPS. Can you justify for us what that distinction is? 

Dr. AGRAWAL. Sure. So number one, let me just say, either number, both numbers, demonstrates that the fraud prevention system 

has had a positive ROI. The two numbers are something that Ms. 

Jarmon alluded to. There is an unadjusted savings number and 

then an adjusted savings number. We believe in the agency that 

the unadjusted savings number most directly measures the impact 

of the fraud prevention system. 

Mr. MURPHY. In which one of those, the $5 or the $1.34? 

Dr. AGRAWAL. The 5-to-1 ROI. And the reason for that is because 

the FPS is a piece of technology, again, as I have pointed out earlier that points to those claims and those providers that need furVerDate Nov 24 2008 15:27 Jun 08, 2015 Jkt 037690 PO 00000 Frm 00086 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-156 CHRIS
83 

ther investigation. What the adjusted number gives you is the 

downstream impact of all of a series of work. So not only the outcomes of the investigation, the outcomes of any administrative 

processes, any recovery processes and the work of law enforcement 

referrals. 

So it reflects dollars returned to the trust fund, but the FPS was 

not designed to impact the entire downstream process. 

Mr. MURPHY. Ms. Jarmon and Mr. Cantrell, then he is saying 

your numbers aren’t accurate. Is it $1.34 or is it 5-to-1? 

Ms. JARMON. Well, both numbers show again the positive effect 

of the fraud prevention system. 

Mr. MURPHY. Sure. 

Ms. JARMON. But in Office of Inspector General, we feel more 

comfortable with the adjusted number which shows the return on 

invest of 1.34-to-1 because that reflects the actual amount that is 

expected to be returned to the Medicare trust fund. The larger 

number is the number before adjustments. In some cases assets 

were not there to be collected. So the larger number—while it was 

identified by the Medicare contractors, what actually is going to 

come in is the adjusted number with the expected return of investment of 1.34-to-1. 

Mr. MURPHY. Thank you. I appreciate that. I now recognize Mr. 

Johnson of Ohio for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman, and I thank the panel 

for being with us today. You know, one of the ways that has been 

suggested to fight fraud is increase disclosure of prior actions 

against providers and suppliers that were enrolling or revalidating 

their Medicare enrollment. So Dr. Agrawal, has CMS issued a rule 

on increasing disclosure of prior actions? 

Dr. AGRAWAL. Yes, we have actually put out a proposed rule that 

will allow for more disclosure. But one thing I would point out is, 

again, disclosure is one aspect of a program integrity approach. If 

these are really criminals, then they probably won’t have much of 

a problem lying on an application. So we have a lot of other resources at our disposal that include data checks that go beyond 

anything that somebody puts on an application. And those I think 

data checks have had significant impact on our ability to keep people out of the program or remove them if necessary. 

Mr. JOHNSON. OK. Mr. Cantrell, Ms. Jarmon, would, in your 

opinion, would such disclosure help fight fraud, for instance? Would 

contractors that CMS currently works with, say Medicare Advantage and drug plan sponsors, be better able to identify fraudulent 

providers up front if they had access to such information? 

Mr. CANTRELL. Well, I think for one thing, if they lied on the application, it would be a means for us to charge them with that actual crime. So we like that attestation by the provider or whoever 

is attesting to the facts on the application so that we, or in this 

case, someone might withhold some information, to use against 

them as evidence if you will of intent to commit fraud. So I think 

it would help our efforts on the prosecution and enforcement side. 

Mr. JOHNSON. OK. Ms. Jarmon, any comment? 

Ms. JARMON. Yes, and it is in line with what we have also been 

recommending that the Part C and Part D contractors report fraud 

84 

also so that they can use that information to try to make sure the 

bad actors are not in the program. 

Mr. JOHNSON. OK. Ms. King, are Medicare contractors able to 

share such information with each other? For instance, if a patient 

or provider is suspected of fraud and they change plans during 

open enrollment, would a plan a beneficiary is leaving be able to 

communicate with a plan they are joining about the suspected 

fraud? 

Ms. KING. I am not sure of the answer on that. Let me get back 

to you. 

Mr. JOHNSON. Can you take that for the record and get back—— 

Ms. KING. I don’t believe they can, but I am not positive. 

Mr. JOHNSON. OK. All right. Well, certainly it would be good if 

they could, right? OK. Also for Ms. King, Medicare administrative 

contractors known as MACs, MACs were created about a decade 

ago. Today they serve as the primary bill payers for Medicare 

claims. Given that the bulk of Medicare reimbursements are processed by MACs, the bulk of improper payments are also made by 

MACs. I know GAO is currently wrapping up work examining the 

work of the MACs. Do you have any early observations on your 

work that you can share with our committee? 

Ms. KING. Not from the work that is ongoing, but we did release 

some work recently that looked at a lot of their requirements. 

There are different types of contractors that do post-payment review for fee-for-service claims, and we found a lot of variety among 

the requirements that they are subject to which is a source of confusion for providers. And we recommended that the CMS take 

steps to align those requirements where it wouldn’t hurt program 

integrity efforts. 

Mr. JOHNSON. OK. 

Ms. KING. So streamlining—not streamlining but making the requirements more consistent across contractors—we think would be 

helpful. 

Mr. JOHNSON. OK. And then a follow-up, Ms. King. GAO has conducted work looking at CMS’s management of all program integrity 

contractors. GAO made several interesting findings including the 

fact that CMS did not standardize its requirements for all contractors. One of the consistent findings from GAO’s work over the years 

is that CMS will often sign a contract for a program integrity function but either fail to measure the right functionality and activities 

from the contractor or failed to assess progress as the contractor 

conducts the work. 

So in what ways do you think the current contracting mechanism 

that CMS uses, which is subject to the federal acquisition rules or 

the FAR, might hinder CMS’s flexibility to manage the program 

well? 

Ms. KING. Are you referring to the MAC’s or the program integrity contractors’, if I might ask a clarifying question? 

Mr. JOHNSON. I think we are talking about management of all 

program integrity contractors. 

Ms. KING. OK. We did some work recently that evaluated the 

program integrity contractors that are called ZPICs, and we did 

find that they had a positive return on their investment. And they 

are FAR contracts subject to the FAR and they are cost plus award 

85 

fee contracts. We made some recommendations to CMS that they 

could further link the program integrity contracts with the agency’s 

higher goals in the GPRA Act so that the goals from the top of the 

agency flow down through the program integrity contractors. 

Mr. JOHNSON. OK. So do you think that the current contracting 

mechanism that CMS uses would hinder their flexibility to manage 

the program well? 

Ms. KING. I don’t have reason to believe that it does. 

Mr. JOHNSON. I yield back, Mr. Chairman. 

Mr. MURPHY. Thank you. I now recognize Mr. Long for 5 minutes. 

Mr. LONG. Thank you, Mr. Chairman, and thank you all for 

being here today. Ms. King, I want to direct my questioning toward 

you, and in my questioning I would like to focus on the issue of 

post-payment audits within the Medicare program and the effect 

they are having on hospitals and small businesses across the State 

of Missouri. 

In the Dallas airport last Friday I ran into a fellow that happened to be one of my constituents. We both happen to be flying 

back to Springfield, and he owns a prosthetics and orthotics company. If you go to Google and look that up, O&P, it is the evaluation, fabrication, and custom fitting of artificial limbs and orthopedic braces. I am sure you know that—but custom fitting. He sat 

and told me that Medicare is sitting on a quarter million dollars 

or better in these RAC audits. And so as I go through this little 

line of questioning that I have here, I want you to keep in mind 

that fellow. It is him and his wife and his son. They own a little 

O&P business in my district, and think about a small businessman 

that is sitting around waiting for a quarter million dollars and 

when he might see that money. 

But as you know, Medicare currently contracts with private vendors referred to as recovery audit contractors, RACs, to perform 

these payment audits. These contractors are paid on a contingency 

fee basis receiving a share of the improper payments they identify, 

and they are not penalized if the alleged improper payments are 

overturned on appeal. So they are going to hold this money and try 

and prove—because they are going to benefit if they are going to 

make money by proving that these were paid when they shouldn’t 

have been paid. But if they are wrong and they hold this guy’s 

money forever and put him out of business, if it is overturned on 

appeal, there is no penalty for those companies. As a result, the demands with the contractor for medical and billing records have 

nearly doubled since 2012. Ultimately this has resulted in administrative quagmire where the Office of Medicare Hearings and Appeals has suspended the ability for providers to appeal their decisions due to the backlog of almost 357,000 cases they are backlogged. So they have suspended it. 

I recognize that the post-payment audits are an appropriate tool 

for HHS to employ and have also successfully recovered millions 

from genuine bad actors in the system. But there are a lot of small 

business people just like my constituent that are out there waiting 

for this money. Now it has been suspended. The people that are 

doing the audits are getting paid for what they find, and even if 

it is overturned on appeal there is no penalty for those people. 

86 

So one question I have is do you believe that the current structure of the system is designed in such a way that it incentivizes 

quantity over quality of these audits? 

Ms. KING. Let me answer your question in several parts. You are 

correct that the RACs are paid on a contingency fee basis, and they 

are paid differently from all of the other post-payment review auditors who are paid on a cost basis. And initially, the RACs were not 

penalized if payments were overturned on appeal, but now they 

are. So if they lose on appeal, they have to—— 

Mr. LONG. OK. I—— 

Ms. KING. There is a penalty there. 

Mr. LONG. I had incorrect information on that, ma’am. 

Ms. KING. It was initially correct. The volume of audits done by 

the RACs has increased substantially over the last several years, 

and they do by far—— 

Mr. LONG. Have they doubled since 2012? 

Ms. KING. Oh, more than that. Well, not since 2012 but probably 

since 2010 or 2011. And for example—— 

Mr. LONG. My information says 2012, but OK. 

Ms. KING. They have gone up a lot and your—— 

Mr. LONG. Are there 357,000? 

Ms. KING. Yes, they are out of the—— 

Mr. LONG. Backlogged? 

Ms. KING. Of the $2.3 million of—2.3 million post-pay audits in 

2012, about 2.1—— 

Mr. LONG. Those are audits, not dollars, right? 

Ms. KING. Audits, yes. 

Mr. LONG. OK. 

Ms. KING. 2.1 million of them were done by the RACs. You are 

also correct that there is a huge backlog in appeals, and we 

have—— 

Mr. LONG. What do you do for a small business guy like mine? 

He and his wife and his son are trying to make a living in a custom-fit part that is not returnable. Nobody else can use that. If 

they say, oh, you shouldn’t have got that part, we should not reimburse you for that part, what do you do in that situation? I mean, 

what can we do? 

Ms. KING. Well, I think there are a few things. One is that I 

would be curious to know what the reason is for the payment being 

declared improper. If it is a documentation error—— 

Mr. LONG. But the company that is declaring it is going to get 

compensated if they can prove that it is, whether it is or not. 

Ms. KING. No. But there—— 

Mr. LONG. Maybe you can correct me on this, too. 

Ms. KING. There—— 

Mr. LONG. Excuse me, ma’am. 

Ms. KING. Oh, I am sorry. 

Mr. LONG. It is my understanding that like it is 93 and above, 

maybe 97—93, 97, somewhere in that range of these 357,000 cases 

are going to be adjudicated have been fine in the first place, and 

the small business guy should have been paid his money. Is that 

correct? Is it over 90-some percent that were—— 

Ms. KING. I don’t know the numbers on that. 

87 

Mr. LONG [continuing]. Proper in the first place and they were 

holding this money? 

Ms. KING. I don’t know. I don’t know the numbers on that 

but—— 

Mr. LONG. OK. Well, can you find out for me and see if that is 

accurate, if it is above 90-some percent that they say, oh, yes, we 

should have paid you months and months and months ago, maybe 

after he’s out of business? 

Ms. KING. Well, I have been asked to look at the appeals process 

and look at the backlog and determine what some of the underlying 

reasons are and to figure out whether we have any recommendations for solutions. 

Mr. LONG. Has the GAO ever made any recommendations and 

more efficiently reviewed claims after payments were made? 

Ms. KING. We have made some recommendations to improve the 

consistency of the requirements that the post-payment review audit 

contractors are subject to, and we have further work under way 

that is looking at the post-payment review process, and that should 

be out later this summer. 

Mr. LONG. OK. 

Mr. MURPHY. Gentleman’s time has expired. 

Mr. LONG. Thank you. I yield back. 

Mr. MURPHY. Now I recognize Ms. Ellmers for 5 minutes. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to our 

panel. I have a number of questions, so I would really like to get 

right into my questioning. And I just want to start by saying, just 

as my colleague, Mr. Long—I also, as we all do, have constituents 

who are very, very concerned about this issue. They are small business owners. They are medium-sized business owners. They are 

taking care of our patients. They are taking care of Medicare patients. 

Now, I just want to outline for you just how ridiculous this process is in relation to the MAC, both RAC and MAC, absolutely ridiculous. 

Oxygen, CPAP, hospital beds. They outline for me over a year’s 

time—we are talking about 2,600 of those filled. Of those, they 

have 1,228 audits. That is 46 percent. Why would any business 

have to be audited 46 percent? Dr. Agrawal? 

Dr. AGRAWAL. Thank you for the question. I think you highlight 

a really important and complex topic, so I think what this highlights is—and we try to achieve a balance every day between not 

being burdensome on providers, making sure that beneficiaries can 

get access to the services that they need, and yet being fiscal stewards of the trust fund as required by law. 

Mrs. ELLMERS. And—— 

Dr. AGRAWAL. And these are areas—just to complete the thought, 

if you don’t mind. DME supplies, orthotics and prosthetics are 

areas that the OIG has identified as being very high for improper 

payment rates. 

Mrs. ELLMERS. OK. I am going to stop you right there—— 

Dr. AGRAWAL. Seventy percent of DME alone. 

Mrs. ELLMERS [continuing]. And reclaim my time because the 

issue here is they are not getting paid. The product has gone out 

to the patients, to the family that is taking—the caregivers who are 

88 

taking care of this patient. This patient has oxygen, this patient 

has a hospital bed. But they have not been paid. And the timeline, 

the ridiculous timeline. You know, we are talking about the process 

of the audit, and then we have the redetermination period. Then 

we have the reconsideration period, and now the Administrative 

Law Judge, they are coming in and saying, you know what? We 

can’t even take anymore new appeals. You know, there is going to 

be a 2-year waiting list just to get a hearing. How can anyone run 

a business if they are not going to get paid for some of the most 

basic—I am a nurse. These are basic items that our seniors need 

and use every day. How can these gentlemen that run this business in my district continue to keep their doors open when they are 

not getting paid? Can you please just tell me how that can be possibly addressed? 

Let me back up also. One of the issues in talking about the 

fraud—and this is what I see here. There is fraud. We all know 

that there is fraud and abuse of the system. But you are going 

after the good guys to make up the dollar difference. You are not 

addressing the real fraud issues that are there. You are not taking 

recommendations and applying them. Your own recommendations—let me ask a question, Dr. Agrawal. As far as the audit system, if the provider is found to, you know, have a low denial rate, 

why are we not rewarding them? Why are we not saying, look, you 

are in this category, whether you want to score them, grade them. 

Why are we not rewarding them? 

Dr. AGRAWAL. I think that is a great point and idea. In fact, that 

is something that we got from the provider community and we are 

actually implementing in the next round of RAC contracts. 

Mrs. ELLMERS. And when will that round be? 

Dr. AGRAWAL. Well, we have been engaged in that procurement 

for a while now, but the procurement itself has come under protest. 

So we would have looked forward to actually having it completed 

by now. But it is currently in that protest process. 

Mrs. ELLMERS. And who is protesting it? 

Dr. AGRAWAL. Other contractors. 

Mrs. ELLMERS. So these folks, my constituents and every other 

provider is just left in limbo right now, not getting paid? 

Dr. AGRAWAL. Well, I would point out—— 

Mrs. ELLMERS. You know, being good actors, playing by the 

rules, doing everything they can. They are not getting paid, and we 

are waiting because someone is protesting? 

Dr. AGRAWAL. Let me just say that these audits are required by 

law. The contingency fee structure was set up in statute. This is 

not typically the way that—most of our other contractors are not 

paid that way, either. They also post-pay audit, so they did in fact 

get paid. These are—and just to differentiate sort of improper payments from fraud, these are tools that we actually utilize to lower 

the improper payment rate, which this committee has identified as 

a priority, I think we can agree. And you know, the areas that the 

RACs have gone after are areas where there is high cost and high 

improper payments. The DME supplies I just pointed out—— 

Mrs. ELLMERS. Well, how is it—— 

Dr. AGRAWAL [continuing]. Are those areas—— 

89 

Mrs. ELLMERS. How does the RAC auditor—how do they determine—what is it that makes them, that puts the red flag up that 

they need to go in and audit? What is it? 

Dr. AGRAWAL. I think one of the best early indicators is where 

the improper payments are based on our CERT audits that are also 

required by law. So the CERT audits pointed out for example that 

the improper payment rate in DME is about 70 percent so—— 

Mrs. ELLMERS. OK. But why—OK. So XYZ provider now has 

auditors, and what is it that they did that alerted the RAC auditor 

to come in? 

Dr. AGRAWAL. Oftentimes it is the area in which they operate. 

Again, the areas of high—— 

Mrs. ELLMERS. What do you mean the area? 

Dr. AGRAWAL. So if they are a DME supplier and 70 percent of 

DME payments are improper, then you are obviously going to 

go—— 

Mrs. ELLMERS. So DME provider is just subject to a random 

audit at any given time? 

Dr. AGRAWAL. It is not typically random. It is based on real analytical work to see where improper payments could reside among 

the specific suppliers. In addition, as I mentioned to you, we are 

very interested in rewarding those that have low denial rates so 

that they get audited less frequently and at less volume. 

Mrs. ELLMERS. But we don’t know when that will happen because we are in a protest. 

Dr. AGRAWAL. We want to get the RACs up and running as 

quickly as anybody else. 

Mrs. ELLMERS. OK. Thank you, Mr. Chairman, for indulging me. 

I am over my time, but I would like to submit for the record and 

ask unanimous consent, there is a memorandum to OMHA Medicare appellants on the time, the length of time for the Administrative Law Judge hearings on the claims and entitlement appeals. 

Mr. MURPHY. Thank you. Any objections? 

Ms. DEGETTE. Let me see that document. 

Mr. MURPHY. Could you send that document over here for a second. Thank you. While that is being looked over, let me just ask 

a question here that I think is important, too. When people get 

caught for Medicare fraud—is that acceptable? That is acceptable 

for the record. 

[The information appears at the conclusion of the hearing.] 

Mr. MURPHY. When people get caught for Medicare fraud, are 

they going to jail? Are you fining them? What kind of examples can 

they be made of, if I can end with a preposition there? So are there 

current penalties that are incurred upon folks who are involved 

with Medicare fraud? Mr. Cantrell? 

Mr. CANTRELL. They are going to jail more and more. The DOJ 

reported in strike force cases over 2013, the average length of sentence was 52 months. And that is a fairly substantial time for this 

kind of crime, and that is an average from 2013. Over the last several years the average has been since the implementation of the 

strike force, 47 months. So they are going to jail. There are criminal fines. There are criminal forfeitures that are applied, and that 

is the work that results in the recoveries that the government has 

received. 

90 

Mr. MURPHY. So can I ask then, of those who are—when you 

catch someone, the likelihood that they will serve time, they will 

pay a fine, any idea what those numbers are like? 

Mr. CANTRELL. I don’t have the percentage, sir. 

Mr. MURPHY. That would be important if we get those—— 

Ms. KING. I believe that we have some information on that, sir. 

Mr. MURPHY. Yes? You do, Ms. King? If you can get that to 

us—— 

Ms. KING. We do. 

Mr. MURPHY. Do you know anything offhand or can you get those 

to us? 

Ms. KING. I don’t remember off the top, but I can tell you that 

most of the people—we did some work on 2010 data that came out 

I think in 2012—most of the people who are investigated for fraud, 

both criminally and civilly, those actions do not go forward. On the 

criminal side, only about 15 percent of the investigations actually 

result in the action going forward. 

Mr. MURPHY. What is that percent? 

Ms. KING. 15 percent. 

Mr. MURPHY. 15 percent? Only 15 percent actually go forward to 

some criminal prosecution? 

Ms. KING. Yes. 

Mr. MURPHY. Are the rest somehow settled or does that mean 

you have an 85 percent chance of getting away with it? 

Ms. KING. No, that is the settlements. You know, some investigations just do not go forward for a host of reasons. 

Mr. MURPHY. OK. So for example, they are not really guilty of 

fraud or if there is no fraud charges there. Is that what that is— 

am I correct in that? 

Ms. KING. Well, there are no fraud charges finally brought or 

there is no settlement. 

Mr. MURPHY. I guess what we want to know, if someone is— 

there is a fraud charge, what is the likelihood they are going to see 

the inside of a prison cell or pay a fine? The rate of success? 

Ms. KING. I believe we have some high-level data on what the 

results are not bound to the length of the sentence but the types 

of penalties imposed. 

Mr. MURPHY. We would like to—Ms. DeGette, do you have a 

quick question? 

Ms. DEGETTE. I just have a follow-up. Mr. Cantrell, the IG identified problems with Medicare C and D plans not reporting data 

and recommended that the CMS make the reporting mandatory. Is 

that correct? 

Mr. CANTRELL. That is correct. 

Ms. DEGETTE. And Dr. Agrawal, has CMS done that? 

Dr. AGRAWAL. Well, we have taken a number of steps to better 

align Medicare C, D and you know, the fee-for-service programs. I 

talked earlier about the Part D rule that was going to allow us to 

require provider enrollment in Part D. 

We are also working on other activities like the healthcare fraud 

prevention partnership that actually allows us to exchange data 

and best practices directly with the private sector so that we can 

jointly, you know, work to detect and prevent fraud. 

91 

Ms. DEGETTE. Right. So I am going to take that answer as a no, 

you have not made it mandatory, is that right? 

Dr. AGRAWAL. We have currently not yet made it mandatory. 

Ms. DEGETTE. Yes. Thanks. I think frankly, Mr. Chairman, I 

think CMS needs to do that because we know there is a lot of fraud 

in those Part C and Part D programs. I appreciate the efforts that 

the agency has made on those other ends, but I think making it 

mandatory would really help. And I appreciate your indulgence, 

Mr. Chairman. 

Mr. MURPHY. Thank you. Mr. Long and Ms. Ellmers have each 

asked for 1 minute. 

Mr. LONG. Just a quick follow-up, Dr. Agrawal. When you were 

answering Congresswoman Ellmers’ questions, you said 70 percent. 

Are you talking about O&P or are talking about prosthetics? That 

business? 70 percent of them are not correct on their billing? 

Dr. AGRAWAL. No, what I was identifying was that there is a 

high improper payment rate for DME, but there is also a high improper payment rate in orthotics and prosthetics. 

Mr. LONG. OK. 

Dr. AGRAWAL. Those are reports that the OIG has also published. 

Mr. LONG. OK, because if what my constituent is telling me is 

accurate, isn’t it 93 or 97 percent they go ahead and pay eventually, some time, a couple years from now. The 70 percent didn’t 

match. So I just wanted a clarification on that. 

Dr. AGRAWAL. Well, if I could clarify on that point, sir, so of all 

of the RAC overpayment determinations, only 7 percent are actually overturned on appeal. That is 7. So of all the overpayments 

that the RACs actually get from providers, 7 percent go onto appeal 

and at any level of appeal—— 

Mr. LONG. Yes, but we are talking apples and oranges. We are 

talking about how many were not improper in the first place is 

what my question is, not how many were overturned on appeal. 

Dr. AGRAWAL. OK. Got you, sir. 

Mr. MURPHY. Thank you. Ms. Ellmers, 1 minute. 

Mrs. ELLMERS. Thank you, Mr. Chairman. Dr. Agrawal, I have 

a question, too, about what is the period of time—a provider has 

an audit and maybe they haven’t been educated. I know that you 

said that there is an effort to educate. Is there a grace period? Is 

there a time? What time limit from a change that is made to the 

time that the auditor goes in are we looking at? If something is 

flagged to, you know, for an audit? 

Dr. AGRAWAL. So if I am understanding the question, a change 

in payment policy that would then—— 

Mrs. ELLMERS. Right. 

Dr. AGRAWAL [continuing]. Downstream be enforced? 

Mrs. ELLMERS. Yes. So a change is made. The provider may or 

may not have had time to—what does CMS consider a reasonable 

time that that provider should know that a change has occurred? 

Dr. AGRAWAL. Sure. So I don’t think there is a set time period, 

the kind of set time period that you are identifying. I will point out 

that a lot of the audits—— 

Mrs. ELLMERS. So the change could be made and the next day 

the auditor can be in the office? 

92 

Dr. AGRAWAL. It is typically not like that. The majority of audits 

that we conduct are around rules and policies that are very well 

known by the provider community. So the high improper payment 

rates in DME for example are based on documentation requirements that have been around for a while. 

Mrs. ELLMERS. OK. So that is not what I am hearing from my 

constituents. My constituents are looking at the situation. They are 

saying, look, we weren’t even aware of that change. Ms. King, is 

that something GAO has recommended, that there be a grace period time or anything like that? 

Ms. KING. It is not an issue that we have looked at. 

Mrs. ELLMERS. OK. 

Ms. KING. But you raise an interesting question about education 

of providers about the documentation requirements and the rules. 

Mrs. ELLMERS. One last question, Dr. Agrawal. You did say that 

one of the things that you are suggesting in the change in the next 

RAC audit time period is the idea that those are rewarded. What 

would you say the percentage, if you have got a low denial rate? 

Throw out a number. 

Dr. AGRAWAL. I don’t have a specific number. You know, we can 

actually get that for you based on the—— 

Mrs. ELLMERS. Well, I would like to work with you—— 

Mr. MURPHY. Thank you. 

Mrs. ELLMERS [continuing]. On that. Thank you so much, and 

thank you, Mr. Chairman. 

Mr. MURPHY. Dr. Burgess, you have some concluding questions? 

Mr. BURGESS. Thank you, Mr. Chairman. OK. Well, I want to go 

back for a minute to the article, the Bloomberg article, that I referenced that was published on April 28th of this year. Doctors get 

millions from Medicare after losing their licenses. And this article 

goes through sometimes in rather painful detail of how a doctor 

would lose their license in one state and then be able to bill Medicare in another state. I realize that states have a responsibility 

here as well. But you as the payer for Center for Medicare and 

Medicaid Services, you ultimately have the responsibility about 

those dollars going out, and even though New Mexico may have 

erred in not checking a database for someone who lost their license 

in Ohio, which was the case of one of the doctors that was referenced here, Medicare paid that doctor an additional $660,000 for 

that doctor to treat patients in New Mexico. You know, the question is, why won’t CMS at least do the basics on checking with the 

National Practitioner Data Bank to see if there is a problem with 

this doctor’s license? 

Dr. AGRAWAL. Congressman, it is not a question of will, it is a 

question of authorities. So loss of licensure is one of the best triggers that we have for removing somebody from the Medicare program. If a provider loses their license in one state, however, and 

they have a license that is active in another state, we are bound 

by limits of authority about, you know, whether or not we can revoke that person across the entire Medicare program. We can certainly revoke or eliminate any enrollment in the state in which 

they lost their license. But loss of licensure in one state is not in 

and of itself a basis for losing enrollment nationally. 

Now, if there was something underlying the licensure loss—— 

93 

Mr. BURGESS. I have to stop you there. I find that absolutely incredulous. A guy loses his license, and some of these doctors were 

charged with fairly serious crimes. And because they had good lawyers, they were able to keep their license in another state. But I 

mean, does that at least not trigger some sort of basic curiosity on 

the part of CMS as to why the doctor lost their license in a given 

state, what was the crime of which they were accused and should 

we keep sending them checks for $660,000? 

Dr. AGRAWAL. Of course, and I, again, as a physician am very 

frustrated when loss of licensure in one state is not followed by loss 

of licensure in all states. We do look at those providers to investigate or understand what they have done. But again, this comes 

down to due process. If there is just not an authority that we can 

trigger to cause the revocation, then we simply can’t do it. These 

are the constraints that are placed on us rightfully by taxpayers to 

make sure we don’t go too far. 

Mr. BURGESS. I don’t want you to go too far, and we have certainly heard from other members about some of the problems when 

you go too far. But should this at the very least, should this not 

trigger some type of heightened scrutiny on the bills that are coming in from a doctor who has lost their license in another state because of the death of a patient or because they are charged with 

a serious crime? 

Dr. AGRAWAL. It can absolutely be a risk factor. I don’t think that 

that is what is under contention. I think the real issue is whether 

we can just revoke summarily across the country for loss of licensure in one state, and that is where there are significant restrictions or limitations in our authority. 

Mr. BURGESS. Do you not have the authority for heightened scru- tiny? I mean, you paid this guy $660,000. Apparently we weren’t 

scrutinizing very highly. 

Dr. AGRAWAL. That may or may not be true. I don’t know about 

the data on that particular case or what the report was. But we 

can subject providers to medical review based on a multitude of 

factors. We can certainly do that in these kinds of cases. But again, 

providers can—as you know as well as I do, providers can lose their 

licenses for a variety of reasons, some of them having nothing to 

do with healthcare fraud or the extent of our authorities and concern. 

Mr. BURGESS. Yes, but it just raises or begs the question, should 

the Medicare system be paying those doctors? I mean, should they 

even be taking care of Medicare patients? The fundamental question, is there a way that you have of debarring someone who has 

been accused of or been convicted of a fairly serious allegation and 

lost their license as a consequence? 

Dr. AGRAWAL. So we have a specific revocation authority that we 

utilize on a consistent basis. The OIG has an exclusion authority. 

GSA has a debarment authority. We utilize as triggers for our actions the GSA debarment list as well as the OIG exclusion list. 

Mr. BURGESS. Is that the exclusion list here? 

Dr. AGRAWAL. Yes. 

Mr. BURGESS. I mean, one of the permissive exclusions is license 

revocation or suspension. One of the mandatory is conviction on 

three or more occasions of mandatory exclusion offenses. I mean, 

94 

what have you got to do? What have you got to do to lose your ability to bill Medicare and have you guys pay? 

Dr. AGRAWAL. Well, I would have to defer exclusion questions to 

the OIG since we don’t put people on the exclusion list. 

Mr. MURPHY. The gentleman’s time is expired. 

Mr. BURGESS. Can we let Mr. Cantrell answer the question? 

Mr. MURPHY. Mr. Cantrell? 

Mr. CANTRELL. We also have a variety of limitations to our exclusions authority. There are situations—often it is the underlying 

crime or offense that resulted in the loss of license. But the real 

vulnerability that we face is we don’t have 100 percent of the data 

that we would need to implement exclusions in 100 percent of the 

cases where we would have the opportunity and the authority. We 

have a voluntary reporting system to the OIG from the state 

boards, from other federal agencies, and so that is an area where 

we know we have incomplete information. But we get—we currently have 57,000-plus entities and individuals who are excluded, 

and we exclude over 3,000 every year. So there is a lack of complete data that we have access to, but there is still a great number 

of exclusions that occur. 

Mr. BURGESS. I just have to ask you. Can you not query the National Practitioner Data Bank? Can you? 

Mr. CANTRELL. I believe that we can. There were some restrictions on law enforcement access to the National Practitioner Data 

Bank. I can’t speak to whether that is actually a continuing concern or not. 

Mr. MURPHY. Let me—— 

Mr. BURGESS. Can you find out and get me that information, 

please? 

Mr. CANTRELL. Certainly. 

Mr. MURPHY. Let me ask in general for that for this committee 

if Dr. Agrawal, Mr. Cantrell and Ms. King, to the extent you can, 

you have heard a number of things there. We recognize also that 

you are aware that there is more information that would be valuable to you to help prescreen out people who have some tendency 

towards crime. The example I gave before, if someone has robbed 

a bank or involved with some other fraud that is not Medicare 

fraud, they can still be involved in this I think raises all of our 

questions, and Mr. Cantrell, you just said you don’t have a lot of 

data. 

If you would please in a timely manner get that data back to the 

committee, as I was talking to Ms. DeGette, too, as I think this is 

something I think this committee would be interested in moving 

forward on some legislation to assist you in that rather than just 

pay and chase moving forward. 

I am going to ask unanimous consent that the members’ written 

opening statements be introduced in the record, and without objection, the documents will be there. Also, in conclusion, I thank all 

the witnesses and members who participated in today’s hearing. I 

remind members, I am sure many people have some other followup questions for you. They have 10 business days to get them to 

you, and I do ask that you do all agree to respond promptly to the 

questions. So with that, this committee is adjourned. Thank you. 

[Whereupon, at 12:00 p.m., the subcommittee was adjourned.] 

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