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80–160 2013

FOSTERING INNOVATION TO FIGHT WASTE, 

FRAUD, AND ABUSE IN HEALTH CARE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 27, 2013 

Serial No. 113–10 

( 

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 

EDWARD J. MARKEY, Massachusetts 

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 

ANTHONY D. WEINER, New York 

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 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

RALPH M. HALL, Texas 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

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

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

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 4 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 5 

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

California, opening statement ............................................................................. 6 

WITNESSES

Peter Budetti, Deputy Administrator and Director, Center for Program Integrity, Centers for Medicare and Medicaid Services ............................................ 8 

Prepared statement .......................................................................................... 11 

Answers to submitted questions ...................................................................... 85 

Kathleen M. King, Director, Health Care, Government Accountability Office .. 22 

Prepared statement .......................................................................................... 24 

Carolyn L. Yocom, Director, Health Care, Government Accountability Office ... 41 

Prepared statement .......................................................................................... 24 

Darrell Langlois, Vice President, Compliance, Privacy and Fraud, Blue Cross 

and Blue Shield of Louisiana .............................................................................. 62 

Prepared statement .......................................................................................... 65 

Thomas M. Greene, Managing Partner, Greene LLP ........................................... 70 

Prepared statement .......................................................................................... 72 

(1) 

FOSTERING INNOVATION TO FIGHT WASTE, 

FRAUD, AND ABUSE IN HEALTH CARE 

WEDNESDAY, FEBRUARY 27, 2013 

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

The subcommittee met, pursuant to call, at 10:15 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Joe Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Hall, Shimkus, 

Murphy, Lance, Cassidy, Guthrie, Griffith, Bilirakis, Ellmers, 

McKinley, Pallone, Capps, Schakowsky, Matheson, Green, 

Butterfield, Barrow, Christensen, Castor, Sarbanes and Waxman 

(ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Matt Bravo, 

Professional Staff Member; Paul Edattel, Professional Staff Member, Health; Steve Ferrara, Health Fellow; Sydne Harwick, Staff 

Assistant; Robert Horne, Professional Staff Member, Health; Carly 

McWilliams, Legislative Clerk; John O’Shea, Professional Staff 

Member, Health; Monica Popp, Professional Staff Member, Health; 

Andrew Powaleny, Deputy Press Secretary; Chris Sarley, Policy 

Coordinator, Environment and Economy; Alli Corr, Democratic Policy Analyst; Amy Hall, Democratic Senior Professional Staff Member; Elizabeth Letter, Democratic Assistant Press Secretary; and 

Karen Nelson, Democratic Deputy Committee Staff Director for 

Health. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. The subcommittee will come to order. The Chair will 

recognize himself for an opening statement. 

According to data from the Centers for Medicare and Medicaid 

Services, in 2011, Medicare spending accounted for 21 percent of 

total national health expenditures. Medicaid makes up another 15 

percent of total NHE. 

Medicare has been on the Government Accountability Office’s 

high-risk list continuously since GAO began designating programs 

as high risk in 1990, and it remains there in GAO’s February 2013 

report entitled ‘‘High Risk Series: An Update.’’ In 2012, Medicare spent approximately $555 billion caring for 

more than 49 million beneficiaries. CMS estimates that out of that 

$555 billion, $44 billion—nearly 8 percent—were improper payVerDate Nov 24 2008 12:32 May 15, 2013 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-10 CHRIS
2 

ments. The report noted that while Medicare has made progress toward addressing some of GAO’s previous concerns and the program’s known deficiencies, not enough had been done to warrant 

its removal from the list. 

Medicaid entered the high-risk list in 2003 and has also re- mained there. With total expenditures of $436 billion in 2011 for 

its approximately 70 million low-income beneficiaries, the Department of Health and Human Services estimates that Medicaid’s national improper payment rate is 7.1 percent. These improper payment figures represent only those payments that CMS knows were 

improper. Estimates of the real cost of waste, fraud and abuse in 

these programs are much higher. 

In an April 2012 study, former CMS Administrator Donald Berwick and RAND Corporation analyst Andrew Hackbarth estimated 

that fraud and abuse added as much as $98 billion to Medicare and 

Medicaid spending in 2011. And, without any significant program 

integrity changes, the Affordable Care Act will add an additional 

7 million people to the Medicaid rolls in 2014. By 2022, that number will grow to 11 million new enrollees. 

The ACA also contains perverse incentives for private insurance 

companies to ignore waste and fraud, which drives up premiums 

and copayments for consumers. The ACA’s Medical Loss Ratio provision requires health plans to spend 80 percent for plans in the 

individual and group market and 85 percent for large group plans 

of premium revenue on medical care. Supporters of the MLR claim 

it was designed to protect consumers from unscrupulous insurance 

companies. However, under the regulation, investments in fraud 

detection, and even quality improvement and care coordination, fall 

under administrative expenses, which can only make up 20 percent 

of a plan’s spending. Plans struggling to make the 80 or 85 percent 

threshold for medical costs often can’t risk these activities, which 

could save consumers money and provide them with a higher quality of care, for fear of being penalized and having to pay rebates. 

Even worse, if a plan does identify fraud, cutting those fraudulent 

payments and activities actually reduces their amount of spending 

on medical costs, making it even harder for them to reach the 80 

or 85 percent threshold. We are actually exporting the inefficiencies 

of federal health programs into the private sector. 

While some here today may champion MLR, it is apparent to me 

that MLR will not reduce the tens of billions of taxpayer dollars 

lost each year to improper payments, but rather add to it, and that 

is a problem. Simply eliminating waste, fraud, and abuse is not 

going to put Medicare and Medicaid on solid financial ground, but 

the threat it poses to sick Americans cannot be ignored any longer. 

We have an obligation to use taxpayer funds in the most responsible and efficient ways possible, an obligation we are not currently 

meeting. 

I thank all of our witnesses for being here today. I look forward 

to hearing from our GAO witnesses what areas in the Medicare 

and Medicaid programs are most vulnerable to fraud and their recommendations to combat improper payments. I also look forward to 

hearing from our private sector witnesses about the tools and innovations they use to fight waste, fraud and abuse on a daily basis. 

Thank you, and I yield back. 

3 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

According to data from the Centers for Medicare and Medicaid Services (CMS), 

in 2011, Medicare spending accounted for 21% of total national health expenditures 

(NHEs). Medicaid makes up another 15% of total NHE. 

Medicare has been on the Government Accountability Office’s (GAO) ‘‘high risk 

list’’ continuously since GAO began designating programs as ‘‘high risk’’ in 1990. 

And it remains there in GAO’s February 2013 report, ‘‘High Risk Series: An Update.’’ 

In 2012, Medicare spent approximately $555 billion caring for more than 49 million beneficiaries. CMS estimates that out of that $555 billion, $44 billion—nearly 

8%—were improper payments. 

The report noted that while Medicare had made progress toward addressing some 

of GAO’s previous concerns and the program’s known deficiencies, not enough had 

been done to warrant its removal from the list. 

Medicaid entered the ‘‘high risk list’’ in 2003 and has also remained there. 

With total expenditures of $436 billion in 2011 for its approximately 70 million 

low-income beneficiaries, the Department of Health and Human Services (HHS) estimates that Medicaid’s national improper payment rate is 7.1%. 

These improper payment figures represent only those payments that CMS knows 

were improper. Estimates of the real cost of waste, fraud, and abuse in these programs are much higher. 

In an April 2012 study, former CMS Administrator Donald M. Berwick and RAND 

Corporation analyst Andrew D. Hackbarth estimated that fraud and abuse added 

as much as $98 billion to Medicare and Medicaid spending in 2011. 

And, without any significant program integrity changes, the Affordable Care Act 

(ACA) will add an additional 7 million people to the Medicaid rolls in 2014. By 2022, 

that number will grow to 11 million new enrollees. 

The ACA also contains perverse incentives for private insurance companies to ignore waste and fraud, which drives up premiums and copayments for consumers. 

The ACA’s Medical Loss Ratio (MLR) provision requires health plans to spend 80 

percent (for plans in the individual and group market) and 85 percent (for large 

group plans) of premium revenue on medical care. 

Supporters of the MLR claim it was designed to protect consumers from unscrupulous insurance companies. 

However, under the regulation, investments in fraud detection, and even quality 

improvement and care coordination, fall under ‘‘administrative expenses,’’ which can 

only make up 20 percent of a plan’s spending. 

Plans struggling to make the 80 or 85 percent threshold for medical costs often 

can’t risk these activities—which could save consumers money and provide them 

with a higher quality of care—for fear of being penalized and having to pay rebates. 

Even worse, if a plan does identify fraud, cutting those fraudulent payments and 

activities actually reduces their amount of spending on medical costs, making it 

even harder for them to reach the 80 or 85 percent threshold. 

We are actually exporting the inefficiencies of federal health programs into the 

private sector. 

While some here today may champion MLR, it is apparent to me that MLR will 

not reduce the tens of billions of taxpayer dollars lost each year to improper payments, but rather add to it. 

And that is a problem. 

Simply eliminating waste, fraud, and abuse is not going to put Medicare and Medicaid on solid financial ground, but ignoring the threat it poses to sick Americans 

cannot be ignored any longer. 

We have an obligation to use taxpayer funds in the most responsible and efficient 

ways possible—an obligation we are not currently meeting. 

I thank all of our witnesses for being here today. 

I look forward to hearing from our GAO witnesses what areas in the Medicare 

and Medicaid programs are most vulnerable to fraud and their recommendations to 

combat improper payments. 

I also look forward to hearing from our private sector witnesses about the tools 

and innovations they use to fight waste, fraud, and abuse on a daily basis. 

Thank you. 

4 

Mr. PITTS. The Chair now recognizes the ranking member of the 

Subcommittee on Health, Mr. Pallone, for 5 minutes for an opening 

statement. 

OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Pitts, and good morning to 

everyone. 

Fighting fraud across all health care settings is critical. I think 

we can all agree on that. In fact, this committee has an important 

role in ensuring that the government is aggressive in addressing 

long-term solutions to an ongoing threat, and I am committed to 

working with my colleagues now and in the future to help support 

the constant work that must be done to cut waste, fraud and abuse. 

But I am not entirely sure that another hearing on this topic, 

since one was held less than 3 months ago, is necessary so soon. 

Instead, I think we should be examining the impact of the looming 

sequestration, which is just 2 days away. Mr. Waxman and I along 

with other senior members of this committee requested that we 

look at how sequestration will affect the programs and agencies we 

oversee. For example, in New Jersey, nearly 4,000 fewer children 

will receive vaccines for disease such as measles, mumps, rubella, 

tetanus, whooping cough, influenza and hepatitis B due to reduced 

funding for vaccinations, and the New Jersey State Department of 

Public Health will lose about $752,000, resulting in around 18,800 

fewer HIV tests. These spending cuts not only threaten our economy but also a range of vital services that I think our time today 

would be better spent examining. 

Fraud schemes come in all shapes and sizes and affect all kinds 

of insurance, public and private alike. Whether it is a sham storefront posing as a legitimate provider or legitimate businesses billing for services that were never provided, it all has the same result: undermining the integrity of our public health system and 

driving up health care costs. So for every dollar put into the pockets of criminals or program abusers, a dollar is taken out of the 

system to provide much-needed care to millions of people including 

Medicare seniors. 

I think we can all agree that a strong commitment to combat 

health care fraud and abuse was included within the Affordable 

Care Act. The law contains over 30 antifraud provisions to assist 

CMS, the OIG and the Justice Department in identifying abusive 

suppliers and fraudulent billing practices. The most important provisions change the way we fight fraud by heading off the bad actors 

before they strike and thwarting their enrollment into their federal 

programs in the first place. In this way, we aren’t left chasing a 

payment once the money is already out the door. And we also made 

important improvements in the ACA to the False Claims Act, 

which is another useful tool that can help address fraud and abuse. 

Today we will hear from CMS about the great work already 

being done. Over the past 4 years, enforcement efforts have recovered $14.9 billion, and I think that is considerable progress. In fact, 

return on investment for each dollar spent on health care-related 

fraud and abuse investigations in the last 3 years has been $7.90. 

5 

So we will also hear from the GAO about their high-risk report released this month. That report notes that while making positive 

steps, there is still a lot of areas or a number of areas that continue 

to need improvement. 

So I know we are going to hear from the panel. I think we must 

continue to innovate. Bad actors are always going to find loopholes, 

and it is our job to keep one step ahead of them. 

Thank you again, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the vice chairman of the subcommittee, Dr. Burgess, for 5 minutes 

for an opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman, and I will acknowledge 

that members on both sides of the dais have a fundamental sense 

of fairness about this and they want to preserve, protect and defend the program that is there to serve the most vulnerable seniors 

in our population. 

I agree with the ranking member that it does seem like we have 

a lot of hearings about this. I will agree that it doesn’t seem that 

there has been a lot of movement in the right direction. I would 

disagree that this hearing is not important and we should be focusing on something else because, after all, the sequester would not 

even be necessary if Congress was doing its job in oversight, if the 

Administration was doing its job and the agencies were doing their 

job and didn’t allow these dollars to be delivered hand over fist to 

felons and organized crime in the first place. 

I do feel that the Federal Government has not done enough to 

address this issue. Sure, we had a hearing right at the end of the 

last Congress, the Oversight and Investigations Subcommittee. In 

fact, we have some of the same witnesses here today. But I got to 

tell you, it bothers me that we keep having to have these hearings 

and we don’t seem to ever move the needle. 

I took the liberty of doing a little Google search last night, and 

Googled the name Janet Reno and Medicare fraud, and it turns out 

in February of 1998, 15 years ago this month, Janet Reno stood in 

front of the American Hospital Association and said fraud in the 

Medicare and Medicaid system is the number one priority for her 

Justice Department, and it was going to end with her. Well, here 

we are 15 years later and we are having the same discussion. 

The analysts, the law enforcement officials estimate that 10 percent of total health care expenditures are lost to fraud on an annual basis, and guess what? That 10 percent is not equally distributed between the public and private parts of our health care system. No, the loss falls disproportionately on the part that is under 

the jurisdiction and control of the Federal Government. The Government Accountability Office, who we have here with us this 

morning, and others have said these characteristics are 

unsustainable. Eliminating waste, fraud and abuse that hemorrhages billions of dollars from our country’s government-run health 

care program should be the foremost priority of this committee. 

And again, I will say it one more time: How can we protect the 

6 

most vulnerable in our society if we don’t protect the integrity of 

the system that was intended to serve them? 

If we are serious about bringing down the cost of health care, if 

we are serious about protecting the patient, if we are serious about 

avoiding another sequester, if we are serious about fixing the inequities in the payment system for physicians in Medicare, we 

ought to be all about eliminating this problem and eliminating it 

in this Congress, not waiting for another Congress, not waiting for 

another President. The time is now. 

The private sector has developed ways to combat fraud that really doesn’t burden providers or patients. They are able to catch far 

more incidents of fraudulent activity. The Centers for Medicare and 

Medicaid Services has attempted to develop new efforts to recover 

funds but the current system to prevent improper payments is just 

simply not working, and I know we have some of the same witnesses we had here in December. I will use the Visa example 

again. I gave my credit card to my staff to go out and by lunch for 

our staff at Chick-fil-A last December. I am calling on my cell 

phone on the House Floor, hey, somebody is trying to charge $100 

worth of Chick-fil-A on your credit card, is that oK, and I affirmed 

that it was. Why do we not have the same system of safeguards 

when we spend so many billions of dollars in our health care system? 

Now, in fairness, one of our witnesses, Dr. Budetti, thank you 

very much for being here this morning and thank you for coming 

in to brief my staff and myself earlier in the last Congress. I appreciate the efforts that you have underway. The Government Accountability Office has made recommendations, some dating back 

years and years, and they failed to be implemented. Well, it begs 

the question: Why is this acceptable? 

So if we are going to be developing new and innovative approaches to fight fraud, and it is becoming increasingly important 

that we do so, I do look forward to hearing the testimony from the 

witnesses today but let us hear that testimony with in mind the 

fact that we are going to solve this problem. 

Thank you, Mr. Chairman, for the indulgence and I will yield 

back the balance of my time. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the ranking member of the full committee, Mr. Waxman, for 5 minutes for an opening statement. 

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

Mr. WAXMAN. Thank you, Mr. Chairman. I appreciate your holding this hearing today and for focusing on the important topic of 

health care waste, fraud and abuse. Improving our health care system, both private and public, requires pursuing dollars that are 

wasted or diverted, dollars that add to our costs, but don’t improve 

health. 

I have dedicated much of my career in Congress to improving the 

quality and efficiency of both the Medicare and Medicaid programs. 

Fighting fraud is critical to both of these and critical to being reVerDate Nov 24 2008 12:32 May 15, 2013 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-10 CHRIS
7 

sponsible stewards of taxpayers’ dollars, an issue where we should 

be able to achieve bipartisan consensus. 

I am very pleased by the recent reports that have highlighted our 

progress fighting fraud and abuse. According to the Administration’s most recent report on the Health Care Fraud and Abuse Control Program, health care fraud prevention and enforcement efforts 

recovered a record $4.2 billion in fiscal year 2012. For each dollar 

spent on health care-related fraud and abuse investigations in the 

last three years, we recovered $7.90, the highest return on investment in the 16-year history of the program. 

We are now seeing the impact of provisions in the Affordable 

Care Act that help us move away from the traditional ‘‘pay and 

chase’’ approach to a more proactive approach designed to prevent 

fraud before it occurs. Other Administration initiatives, such as implementing the Command Center, which brings together the Centers for Medicare and Medicaid Services, the Office of the Inspector 

General and the Federal Bureau of Investigation, and the Health 

Care Fraud Prevention and Enforcement Action Team, which is 

taking action against Medicare fraud in fraud hot spots across the 

country, are bringing more tools and resources in the fight against 

fraud. 

We also need to ensure that the public and private sectors are 

collaborating, because we know that schemes that affect programs 

like Medicare and Medicaid often are also perpetrated against private payers as well. The Administration has initiated the Health 

Care Fraud Prevention Partnership that is bringing together federal and state officials with private insurers and health care antifraud groups to do just that. The value of these new preventionoriented approaches is that they target fraud and abuse before it 

occurs and leverage partnerships across government and the private sector to support this important work. 

Another tool in the health care fraud-fighting arsenal, which also 

is a form of public-private partnership, is the False Claims Act. 

This law incentivizes private parties to bring suit on behalf of the 

government to recover fraudulent payments and has been effective 

in helping get the federal and State governments reimbursed for a 

number of high-profile fraud schemes. 

We cannot rest on our laurels and be satisfied with the current 

successes in fraud fighting. The data clearly shows that we are 

moving in the right direction. But just as the fraudsters are constantly looking for the next new scheme, we too must continue our 

work, and I look forward to hearing from our panels of experts 

about the opportunities and challenges moving forward, and I want 

to yield the balance of my time to Ms. Schakowsky. 

Ms. SCHAKOWSKY. I thank the gentleman so much, and I appreciate his decades of work to make Medicare, Medicaid, the programs our citizens rely on, more efficient. 

But I have to say, the passion that I heard from Dr. Burgess, it 

is as if we don’t share that, and I want to set the record straight, 

that we want to and have been cutting the waste, fraud and abuse 

and we need to build on our successes, the $4.2 billion in fiscal 

year 2012. I think we can start with that and go further. 

And I also want to say that it is as if the election didn’t happen. As I recall, the $716 billion that Democrats were able to save 

8 

through Obamacare that reduced the cost of Medicare without cutting benefits was used as a sledgehammer accusing Democrats of 

cutting Medicare and in fact we did reduce the cost. Rather than 

being applauded for that at the time, it was used to say that we 

are the ones that are really taking away something from Medicare 

beneficiaries when of course we weren’t. 

So let us get on the same page here. We agree, we all agree that 

waste, fraud and abuse is a problem. We have begun and let us 

continue to do something serious about it. 

Thank you. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

We have two panels for today’s hearing. On our first panel, we 

have Dr. Peter Budetti, Deputy Administrator and Director at the 

Center for Program Integrity at CMS, and Ms. Kathleen King and 

Ms. Carolyn Yocom, who are both Directors of Health Care at the 

Government Accountability Office. Thank you for coming this 

morning. Your written testimony will be entered into the record. I 

will recognize each of you for 5 minutes to summarize your testimony. 

Dr. Budetti, you are recognized for 5 minutes for your opening 

statement. 

STATEMENTS OF PETER BUDETTI, DEPUTY ADMINISTRATOR 

AND DIRECTOR, CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND MEDICAID SERVICES; KATHLEEN 

M. KING, DIRECTOR, HEALTH CARE, GOVERNMENT ACCOUNTABILITY OFFICE; AND CAROLYN L. YOCOM, DIRECTOR, HEALTH CARE, GOVERNMENT ACCOUNTABILITY OFFICE 

STATEMENT OF PETER BUDETTI 

Dr. BUDETTI. Good morning, and thank you, Chairman Pitts and 

Ranking Member Pallone and members of the subcommittee for 

this invitation to appear before you today. 

As the Deputy Administrator of the Centers for Medicare and 

Medicaid Services for Program Integrity and Director of the Center 

for Program Integrity, I am now into my third year of having the 

privilege of overseeing program integrity efforts for the Medicare 

and Medicaid programs, which is a top priority for this Administration and for CMS, and it is an area where I am very pleased to 

say that new tools and a collaborative approach are indeed helping 

us move beyond pay and chase to preventing fraud before it happens. 

A key component of our fraud-fighting approach is what we call 

the Fraud Prevention System, or FPS. This system, this high-tech 

system, highly sophisticated system that we put into place in the 

middle of 2011, analyzes all Medicare fee-for-service claims using 

risk-based algorithms and generates alerts. CMS and our program 

integrity contractors can then stop, prevent and identify improper 

payments using a variety of administrative tools and actions including prepayment review, claims denials, payment suspensions, 

revocation of Medicare billing privileges, and referrals to law enforcement. 

9 

We have a poster for you here today that demonstrates the initial results from the first year of implementation of the Fraud Prevention System. Our numbers show that we did achieve a positive 

return on investment, saving an estimated $3 for every $1 we 

spent in the first year and that we have prevented or identified an 

estimated $115.4 million in improper payments. In addition, and 

very importantly, this system generated leads for over 500 new 

fraud investigations and provided new information for over 500 existing fraud investigations. 

To further enhance our program integrity efforts, we have implemented a risk-based screening process for newly enrolling and revalidating Medicare providers and suppliers. This system is designed to both make it easier for the legitimate providers and suppliers, some 20,000 of whom applied to be able to bill in the Medicare program every month, to make it easier on the enrollment side 

for them to get into the program while making it much harder for 

the bad guys to get in and makes it easier for us to find the bad 

guys if they do get in and kick them out. 

We have implemented the terms of the Affordable Care Act that 

required us to put into place risk-based screening so that people in 

the higher-risk categories are subject to greater scrutiny prior to 

their enrollment or revalidation in Medicare. Since March of 2011, 

our processes have validated or revalidated enrollment for nearly 

410,000 Medicare providers, and because of this, we have deactivated some 136,000 enrollments and revoked over 12,000 enrollments that were not appropriate or not timely in the program. 

We have also made major progress in engaging other federal 

partners to improve the collaboration in fighting fraud. Thanks to 

a variety of efforts, federal, State and local law enforcement health 

care fraud activities are being coordinated more and more and, as 

you have heard, and as I will talk about in a second, we are also 

engaging with our fraud-fighting partners in the private sector to 

improve the integrity of Medicare and Medicaid. 

We are working with our State partners to improve and enhance 

our program integrity activities in the Medicaid program and we 

have taken steps to ensure that someone who is caught defrauding 

the program in one State cannot simply move to another State. We 

have implemented the Recovery Auditor program in Medicaid, and 

the States are already reporting some $95 million in recovered payments in the first phase of implementation of that program. 

We have been working more closely with law enforcement, both 

through our new command center, which provides a collaborative 

environment so that we can work together and not just talk to each 

other one after the other, and we have had a string of successes 

in terms of building new models and engaging in new approaches 

to fighting fraud coming out of our collaboration in the command 

center. 

Medicare and Medicaid and health care fraud anywhere affects 

every American by draining critical resources from our health care 

system. The Administration has made stopping fraud and improper 

payments a top priority, and today new tools and a collaborative 

approach are moving us beyond pay and chase to preventing fraud 

before it happens. I look forward to continuing to work with you 

to make Medicare and Medicaid stronger, more effective programs 

10 

by protecting their integrity and safeguarding taxpayer resources, 

and I thank you for this opportunity to appear before you, and I 

will be happy to answer questions later. Thank you, Mr. Chairman. 

[The prepared statement of Dr. Budetti follows:] 

11 


80160.001

STATEMENT OF 

PETER BUDETTI, MD., J.D. 

DEPUTY ADMINISTRATOR AND DIREC:rQR, 

CENTER FOR PROGRAM INTEGRITY 

CENTERS FOR MEDICARE & MEDICAID SERVICES 

ON 

"FOSTERING INNOVATION TO FIGHT 

WASTE, FRAUl),AND ABUSE IN.HEALTH CARE" 

BEFO~THE 

UNITED STATES HOUSE OF REPRESENTATIVES 

COMMITTEE ON ENERGY AND COMMERCE 

SUBCOMMITTEE ON HEALTH 

FEBRUARY 27,2013 
12 


80160.002

U.S. House of Representatives 

Committee on Energy and Commerce, Subcommittee on Health 

Hearing on "Fostering Innovation to Fight Waste, Fraud, and Abuse in Health Care" 

February 27, 2013 

Chairman Pitts, Ranking Member Pallone, and members of the subcommittee; thank you for the 

invitation to discuss the Centers for Medicare & Medicaid Services (CMS) program integrity 

efforts for the Medicare and Medicaid programs, and as part of those efforts, our collaborations 

with our law enforcement partners and the private sector. Enhancing program integrity is a top 

priority for the administration and CMS, and the administration has made important strides in 

reducing fraud, waste, and abuse across the government. 

Thanks to new authorities and resources provided by the Affordable Care Act and the Small 

Business Jobs Act of 20 I 0, CMS has new powerful anti-fraud tools to shift the agency beyond a 

"pay and chase" approach to preventing fraud before it happens. CMS is also collaborating in an 

unprecedented way with the private sector, law enforcement, and our State partners to develop 

best practices in our fight against health care fraud. These efforts are paying off. Earlier this 

month, the government announced that in fiscal year (FY) 2012 its fraud prevention and 

enforcement efforts in the Health Care Fraud and Abuse Control (HCFAC) program resulted in 

the record-breaking recovery of $4.2 billion in taxpayer dollars from individuals trying to 

defraud Federal health care programs serving seniors and taxpayers. Over the last three years, 

the average return on investment of the HCFAC program is $7.90 for every dollar spent. Since 

2009, the HCFAC program has collected $14.9 billion. 

Preventing Fraud in the Medicare and Medicaid Programs 

Preventing fraud in Medicare and Medicaid involves striking an important balance: protecting 

beneficiary access to necess!!!y health care services and reducing the administrative burden on 

legitimate providers, while ensuring that taxpayer dollars are not lost to fraud, waste, and abuse. 

Every workday, the fee-for-service Medicare program pays out more than $1 billion from some 

4.64 million claims, and is statutorily required to pay claims quickly, usually within 14 to 

30 days. States administer the Medicaid program within the bounds of Federal law, and CMS 
13 


80160.003

partners with each State Medicaid program to support program integrity efforts. The 56 separate 

State-run Medicaid programs process 4.4 million claims per day. In order to protect taxpayer 

dollars in the Medicare and Medicaid programs, eMS has a comprehensive program integrity 

approach centered on prevention and detection, innovative anti-fraud technologies, provider riskbased strategy, and greater collaboration with our fraud fighting partners in the private sector and 

law enforcement. 

Fraud Prevention System 

A key component of this effort is the Fraud Prevention System (FPS), which was launched on 

June 30, 2011 pursuant to the Small Business Jobs Act of2010. The FPS analyzes all Medicare 

fee-for-service claims using risk-based algorithms developed by eMS and the private sector, 

prior to payment, allowing eMS to take prompt action where appropriate. eMS uses the FPS to 

target investigative resources to suspect claims and providers, and swiftly impose administrative 

action when warranted. The system generates alerts in priority order, allowing program integrity 

analysts to quickly investigate the most egregious, suspect, or aberrant activity. eMS and our 

program integrity contractors use the FPS information to stop, prevent, and identifY improper 

payments using a variety of administrative tools and actions, including pre-payment review, 

claim denials, payment suspensions, revocation of Medicare billing privileges, and referrals to 

law enforcement. 

Early results from the Fraud Prevention System show significant promise and eMS expects 

results to improve as the system matures over time. As reported in our first year Report to 

Congress, 1 in its first year of implementation, the Fraud Prevention System: 

• Stopped, prevented or identified an estimated $115.4 million in improper payments; 

• Achieved a positive return on investment, saving an estimated $3 for every $1 spent in 

the first year; 

Generated leads for 536 new fraud investigations; 

Provided new information for 511 existing investigations; and 

1 Report to Congress: Fraud Prevention System First Implementation Year 2012 

http://www.stopmedicarefraud.gov/fraud-rtcI2142012,pdf 

2 
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80160.004

Triggered 617 provider interviews and 1,642 beneficiary interviews regarding suspect 

claims or provider activity. 

Integrated Data Repository and One Program Integrity 

To complement this work, eMS continues to enhance the Integrated Data Repository (IDR) to 

provide a comprehensive view of Medicare and Medicaid data including claims, beneficiary 

data, and prescription drug event (PDE). eMS is using the IDR to provide broader and easier 

access to data for our partners while strengthening and supporting eMS's analytical 

capabilities. The IDR contains Medicare provider, supplier, beneficiary and claims data for 

Medicare Parts A, B, and D back to January 2006. In FY 2012, eMS expanded the IDR to 

include shared systems data, providing access to Part B physician, supplier, and durable medical 

equipment (DME) claims data from both before and after final payment has been made. This 

permits testing of prepayment analytics on historical data that can be used to develop analytic 

models that can be used in the FPS. eMS is working to integrate new data sources into the 

IDR. eMS is now requiring Medicare Advantage organizations to submit encounter data for 

dates of service January 3, 2012 and later. eMS is also working to incorporate State Medicaid 

data into the IDR, while working with States to improve the quality and consistency of the data 

from each State. 

Users may access the IDR through One Program Integrity ("One PI"), eMS's centralized portal 

that provides eMS contractors and law enforcement with a single access point to Medicare data 

as well as analytic tools to review the data. In FY 2012, eMS trained 275 contractors and 44 law 

enforcement staff to effectively use One PI, and since October of2010, a total of886 program 

integrity contractors and eMS staff, including 108 law enforcement personnel, have been 

trained. Additionally in FY 2012, eMS offered mobile, on-site training on One PI for our 

program integrity contractors, training large groups of contractor staff while reducing travel costs 

related to this training. 

Enhanced Provider Screening 

As part of our enhanced program integrity efforts, eMS has implemented a risk-based screening 

process for newly enrolling and revalidating Medicare providers and suppliers. This screening 

3 
15 


80160.005

process requires certain categories of providers and suppliers that have historically posed a 

higher risk of fraud to undergo greater scrutiny prior to their enrollment or revalidation in 

Medicare. Tn 2012, CMS began the implementation of the Automated Provider Screening 

System (APS). The APS is designed to verify the data submitted on enrollment applications 

against independent commercial and health care data to establish eligibility for enrollment or 

revalidation in the Medicare program. CMS has embarked on an ambitious project to revalidate 

the enrollments of all existing I.S million Medicare suppliers and providers under the new 

Affordable Care Act screening requirements. Since March 2011, CMS validated or revalidated 

enrollment information for nearly 410,000 Medicare providers and suppliers under the enhanced 

screening requirements of the Affordable Care Act. Because of revalidation and other proactive 

initiatives, CMS has deactivated 136,682 enrollments and revoked 12,447 enrollments.2 These 

efforts will ensure that only qualified and legitimate providers and suppliers can provide health 

care items and services to Medicare beneficiaries. These initiatives complement the traditional 

program integrity work and additional provider enrollment enhancements that CMS performs. 

CMS is collaborating with our State partners to ensure that those caught defrauding Medicare 

will not be able to defraud Medicaid, and those identified as fraudsters in one State will not be 

able to replicate their scams in another State's Medicaid program. Specifically, the Affordable 

Care Act and CMS's implementing regulations require States to terminate from Medicaid and 

the State Children's Health Insurance Program (CHIP) those providers whose Medicare billing 

privileges have been revoked for cause, those providers whose Medicare billing privileges have 

been revoked for cause, or that another State's Medicaid or CHIP agency has terminated for 

cause. Similarly, under current authority, the Medicare program may also revoke the billing 

privileges of its providers or suppliers that were terminated by State Medicaid or CHIP agencies. 

To support State efforts to share such information, CMS implemented a web-based application, 

which allows States to share information regarding providers who have been terminated for 

cause and view information on Medicare providers and suppliers who have had their billing 

privileges revoked for cause. This tool for States is the beginning of a smarter, more efficient 

2 "Deactivate" means that the provider or supplier's billing privileges were stopped, but can 

be restored upon the submission of updated information. Revoke means that the provider or supplier's billing 

privileges are terminated and cannot be reinstated. 

4 
16 


80160.006

Federal-State partnership, integrating technology solutions to routinely share relevant program 

information in a collaborative effort. 

CMS Collaboration with States on Medicaid Program Integrity 

To address Medicaid's structure as a Federal-State partnership, CMS has developed initiatives 

specifically designed to assist States in strengthening their own efforts to combat fraud, waste, 

and abuse. The Medicaid Integrity Institute (MIl) is one of CMS's most significant achievements 

in Medicaid program integrity. The MIl provides for the continuing education of State program 

integrity employees, including specific coursework in specialized skills in Medicaid fraud 

detection, investigative data collaboration, and on predictive analytics, as examples. At the MIl, 

CMS has a unique opportunity to offer substantive training, technical assistance, and support to 

States in a structured learning environment. From its inception in 2008 through the end ofFY 

2012, CMS has continually offered MIl courses and trained more than 3,383 State employees 

from all 50 States, D.C., and Puerto Rico through 82 courses at no cost to the States. These State 

employees are able to learn and share information with program integrity staff from other States 

on a variety of program integrity topics. In FY 2012, CMS trained 919 State staff in 19 courses 

at the MIL 

As in Medicare, CMS's ultimate goals are to use predictive modeling and analytics to enhance 

our capabilities, and to increase information-sharing and collaboration among State Medicaid 

agencies. CMS is actively pursuing ways to apply advanced analytics technology, including 

predictive analytics, to the Medicaid program. CMS is currently exploring ways to identify 

specific FPS algorithms applicable to Medicaid and is performing an analysis of one State's 

Medicaid claims data using the identified algorithms. The FPS pilot with State Medicaid data 

will also provide more collaboration between Medicare and Medicaid. CMS is also supporting 

States' use of predictive analytics through technical assistance and education. In an effort to 

foster information sharing and collaboration, eMS assessed States' current capabilities and 

facilitated joint presentations at various venues to share progress in their development. These 

presentations also shared information on how States can secure enhanced Federal financial 

participation (FFP) for a major information technology (IT) planning and implementation effort 

related to predictive analytics support software and systems related to the Medicaid Management 
17 


80160.007

Infonnation System (MMIS). CMS brought State program integrity staff together for a Data 

Experts Symposium at the MIl in July 2012, which included presentations about predictive 

analytics from speakers representing CMS, States that have developed their own systems, and 

States that have contracted with vendors. CMS also sponsored 10 sessions that covered 

predictive modeling and analytics during six different Mil courses held in FY 2012. 

CMS also provides States assistance with "boots on the ground" for targeted special investigative 

activities. Since October 2007, CMS has participated in 12 projects in three States, with the 

majority occurring in Florida. CMS assisted States in the review of 654 physicians and other 

prescribers, 60 home health agencies and DME suppliers, 52 group homes, and 231 assisted 

living facilities. During those reviews, CMS and States interviewed 1,145 beneficiaries, and 

States took nearly 900 actions against non-compliant providers (including, but not limited to 

fines, suspensions;licensing referrals, and State MFCU referrals). Florida reported that five 

home health agency investigations undertaken with CMS between 2008 and 2010 have resulted 

in nearly $40 million in savings to the Medicaid program through cost avoidance. 

Medicaid RAe Programs 

The Affordable Care Act expanded the Recovery Audit Contractors (RACs) to Medicaid. State 

Medicaid agencies are required to contract with RACs to identify and recover overpayments and 

identify underpayments made to Medicaid providers. As of February 15, 2013, 42 States and the 

District of Columbia have implemented Medicaid RAC programs. CMS developed the Medicaid 

RACs-At-A-Glance website3 to facilitate transparency and monitoring. In 2012, CMS enhanced 

RACs-At-A-Glance by including State-reported infonnation on each State's Medicaid RAC 

program, including contact infonnation for the State Program Integrity Director; the name of 

each RAC vendor and Medical Director; contingency fee rates for the identification and recovery 

of overpayments; fee structure for the identification of underpayments; user-friendly charts and 

data; and State profile pages. The website will include perfonnance metrics later this year. For 

FY 2012, the States have recovered a total Federal and State share combined amount of $95.64 

million and returned a total of$57.57 million to the Department of Health and Human 

Services (HHS), through the State Medicaid RAC programs. 

3 http://w2.dehpg.netiRACSS/Map.aspx 

6 
18 


80160.008

The Medicare-Medicaid Data Match Program 

The Medicare-Medicaid Data Match Program (Medi-Medi) is another CMS initiative to improve 

the use and availability of better quality Medicaid data. The Medi-Medi program began as a 

pilot project with the State of Cali fomi a in 2001; nine other States joined the Medi-Medi 

program between 2003 and 2005, followed by further expansions. The Medi-Medi program 

enables participating State and Federal Government agencies to collaboratively analyze billing 

trends across the Medicare and Medicaid programs to identifY potential fraud, waste, and 

abuse. Currently, CMS is partnering with the 19 States that account for most of the expenditures 

in Medicaid. We are also exploring additional opportunities to collaborate with States as well as 

working directly with States to match Medicare and Medicaid data for specific collaborative 

projects. In addition, we will be providing more opportunities for sharing lessons learned from 

States that have made successful referrals to law enforcement and recouped improper Medicaid 

expenditures. 

Collaboration to Detect and Prevent Fraud and Waste in Medicare and Medicaid 

CMS's approach to program integrity once involved stand-alone programs with siloed 

communications that did not engage other Federal partners or allow for shared best practices. 

Now, however, thanks to a variety of efforts, Federal, State, and local law enforcement health 

care fraud activities are being coordinated to a greater extent than ever before. 

Command Center 

CMS is using new and innovative ways to collaborate to improve health care fraud detection and 

investigation. CMS has established collaboration between program officials and law 

enforcement as a critical cornerstone in improving health care fraud detection and 

investigation. The Command Center provides the advanced technologies and collaborative 

environment for a multi-disciplinary team of experts and decision makers to more efficiently 

coordinate policies and case actions, reduce duplication of efforts, and streamline fraud 

investigations for more immediate administrative action. From the opening of the Command 

Center on July 31, 2012, the Command Center conducted 61 missions that included over 450 

unique participants from eMS and its partners, including the HHS Office of Inspector 

7 
19 


80160.009

General (OIG) and the Federal Bureau ofInvestigations (FBI). The Command Center's 

collaborative activities will strengthen CMS's ability to take administrative actions, such as 

revocations of Medicare billing privileges and payment suspensions, more quickly and 

efficiently. 

Health Care Fraud Prevention & Enforcement Action Team (HEAT) 

The sustained success of HEAT demonstrates the effectiveness of the Cabinet-level commitment 

between HHS and Department of Justice (OOJ) to prevent and prosecute health care fraud. 

Since its creation in May 2009, HEAT, has played a critical role in identifYing new enforcement 

initiatives and expanding data sharing to a cross-government health care fraud data intelligence 

sharing workgroup. A key component of HEAT is the presence of Medicare Strike Force 

Teams, interagency teams of analysts, investigators, and prosecutors, who target emerging or 

migrating fraud schemes such as criminals masquerading as healthcare providers or suppliers. 

Medicare Strike Force Teams coordinated three major takedowns in 2012, and CMS took 

administrative action against 160 providers and suppliers associated with those law enforcement 

activities. Under the Affordable Care Act and implementing regulations, HHS is able to suspend 

payments for up to eighteen months and for longer periods under certain circumstances. The 

largest action was in May 2012, when the Medicare Strike Force teams charged 107 individuals, 

including doctors, nurses and other licensed medical professionals, in seven cities for their 

alleged participation in Medicare fraud schemes involving more than $452 million in alleged 

false billing. 

Since its inception: 

• Strike Force prosecutors filed more than 724 cases charging more than 1,476 defendants 

who collectively billed the Medicare program more than $4.6 billion; 

• 918 defendants pleaded guilty and 105 others were convicted in jury trials; and 

• 745 defendants were sentenced to imprisonment for an average term of more than 45 

months. 

8 
20 


80160.010

Healthcare Fraud Prevention Partnership 

In addition to collaborating with other agencies, CMS is partnering with the private sector in 

anti-fraud efforts. Last year, HHS and DO] launched a voluntary, collaborative partnership 

between the Federal government, State officials, several leading private health insurance 

organizations, and other health care anti-fraud groupS.4 The goal of the partnership is to improve 

fraud detection and prevent payment of fraudulent health care billings by finding and stopping 

schemes that cut across public and private payers. The partnership will enable those on the front 

lines of industry anti-fraud efforts to share information more easily with investigators, 

prosecutors, policymakers and other stakeholders. It will help law enforcement officials to more 

effectively identifY and prevent suspicious activities and use the full range of tools and 

authorities provided by the Affordable Care Act and other essential statutes to combat and 

prosecute illegal actions. 

CMS is also committed to engaging our beneficiaries because alert and vigilant beneficiaries are 

able to detect and prevent fraud as it occurs. Information from beneficiaries and other parties 

helps us to quickly identifY potentially fraudulent practices, stop payment to suspect providers 

and suppliers for inappropriate services or items, and prevent further abuses in the program. 

CMS is making it easier for seniors to help us fight fraud. In March 2012, CMS redesigned the 

Medicare Summary Notices, the explanation of benefits for people with Medicare fee-forservice, to make it easier to spot fraud or errors. The redesigned notices are available online,5 

and will be mailed quarterly later in 2013. 

Moving Forward 

Medicare and Medicaid fraud affects every American by draining critical resources from our 

health care system. The Administration has made stopping fraud and improper payments a top 

"The following organizations and government agencies are among the first to join this partnership: America's Health 

Insurance Plans, Amerigroup Corporation, Blue Cross and Blue Shield Association, Blue Cross and Blue Shield of 

Louisiana, Centers for Medicare & Medicaid Services, Coalition Against Insurance Fraud, Federal Bureau of 

Investigations, Health and Human Services Office of Inspector General, Humana Inc., Independence Blue Cross, 

National Association ofInsurance Commissioners, National Association of Medicaid Fraud Control Units, National 

Health Care Anti·Fraud Association, National Insurance Crime Bureau, New York Office of Medicaid Inspector 

General, Travelers, Tufts Health Plan, UnitedHealth Group, U.S. Department of Health and Human Services, U.S. 

Department of Justice, and WellPoint, Inc. 

5 http://www.medicare.govlhelp-and-resources/mail-about-medicare/medicare-summary-notice.html 

9 
21 


80160.011

priority. Today, we have more tools than ever before to move beyond "pay and chase" and 

implement strategic changes in pursuing and detecting fraud and abuse. We are focused on 

preventing fraud before it happens by stopping fraudsters from enrolling or maintaining 

enrollment in Medicare or Medicaid, using sophisticated analytics to identifY improper billing 

before claims are paid, and by rapid pursuit and implementation of administrative actions that are 

appropriate to the behavior. Our comprehensive program integrity strategy implements 

innovative data technologies and draws on expertise from across the country. As we integrate 

strategies and engage our Federal, State, and private sector partners, Medicare and Medicaid will 

become stronger, more effective programs. I look forward to continuing to work with you as we 

make improvements in protecting the integrity of our health care programs and safeguarding 

taxpayer resources. 

10 
22 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

Ms. King for 5 minutes for opening statement. 

STATEMENT OF KATHLEEN M. KING 

Ms. KING. Chairman Pitts, Ranking Member Pallone and members of the subcommittee, I am pleased to be here today to discuss 

our recent high-risk report on Medicare and Medicaid. I am joined 

by my colleagues, Carolyn Yocom and James Cosgrove. 

For many years, we have designated these programs as high risk 

because of their size, complexity and susceptibility to improper payments. Together, these two programs finance vital health care services for nearly 120 million Americans. Ensuring that they function 

effectively and efficiently should be a high priority. 

CMS has taken a number of important steps in Medicare to improve payment systems in traditional fee-for-service and Medicare 

Advantage. For example, CMS has implemented a competitive bidding program for durable medical equipment that pays selected 

providers at competitively determined prices. To date, it has produced savings while beneficiary access and satisfaction appeared 

stable in early assessments. 

However, we have also identified a number of opportunities for 

CMS to improve and refine payments to encourage appropriate use 

of services such as improving the accuracy of payments for Medicare Advantage. 

With respect to program integrity, CMS has made reducing improper payments one of their key priorities and has made progress 

in error rate measurement. CMS has also implemented provisions 

of the Patient Protection and Affordable Care Act to enhance its 

ability to screen providers before allowing them to enroll in Medicare. This should have prevented providers intent on defrauding 

the program from gaining entry. It has also implemented a fraud 

prevention system which uses analytic methods to screen provider 

billing and beneficiary utilization data before claims are paid to 

identify those that are potentially fraudulent. While these are important steps, we have made recommendations to CMS to enhance 

program integrity such as identifying measurable performance 

metrics and goals for the Fraud Prevention System. 

With respect to Medicaid, both Congress and the Administration 

have demonstrated commitment and leadership to making Medicaid fiscal and program integrity a priority. I would like to highlight two areas where there has been some progress but concerns 

remain. First, with regard to improper payments to providers, some 

positive steps toward improving transparency and reducing improper payments have been taken in recent years such as increased 

guidance to States regarding oversight of providers. However, key 

challenges remain including eliminating duplication between CMS 

and State program integrity efforts and refocusing national audits 

on cost-effective approaches. Also, our work has identified areas 

where CMS could streamline and improve its oversight of States’ 

improper payments. 

Second, supplemental payments, that is, payments above and beyond regular Medicaid payments for services, continue to be a large 

and growing problem. In fiscal year 2011, States reported spending 

at least $43 billion on supplemental payments up from $32 billion 

23 

in fiscal year 2010. While a variety of actions have helped curb 

supplemental payment arrangements, gaps in oversight remain. In 

2010, CMS implemented new transparency and accountability requirements for certain Medicaid supplemental payments known as 

disproportionate share, or DSH payments. However, similar standards for calculating, reporting and auditing non-DSH supplemental 

payments have not been established. Although Medicaid payments 

are not always limited to the cost of providing Medicaid services, 

when payments greatly exceed Medicaid costs, it raises questions 

about their purpose, relation to Medicaid service and whether such 

payments contribute to beneficiaries’ access to quality care. 

Congress, HHS and CMS have taken steps to improve the fiscal 

integrity of Medicaid. However, more federal oversight is needed, 

particularly in the areas of addressing improper payments and 

oversight of supplemental payments. In both cases, CMS oversight 

has been hampered by data systems that do not provide complete 

and timely data. 

Mr. Chairman, this concludes my prepared remarks. I would be 

happy to answer questions. 

[The prepared statement of Ms. King follows:] 

24 


80160.012

GAO 

For Release on Delivery 

Expected at 10:15 a,m. EST Wednesday, February 27, 2013 

GAO·13-433T 

United States Government Accountability Office 

Testimony 

Before the Subcommittee on Health, 

Committee on Energy and Commerce, 

House of Representatives 

GAO'S 2013 HIGH-RISK 

UPDATE 

Medicare and Medicaid 

Statement of Kathleen M. King 

Director, Health Care 

Carolyn L. Yocom 

Director, Health Care 

GAO 

Accountability * Integrity * Reliability 
25 


80160.013

United States Government Accountability Office 

Washington, DC 20548 

Medicare Program 

Chairman Pitts, Ranking Member Pallone, and Members of the 

Subcommittee: 

Thank you for the opportunity to discuss our recent work on Medicare and 

Medicaid. Since 1990, GAO has regularly reported on programs as part of 

our high-risk series, which focuses on government operations that we 

have identified as high risk due to their greater vulnerability to fraud, 

waste, abuse, and mismanagement or their need to address economy, 

efficiency, or effectiveness challenges. Our high·risk series has brought 

much-needed focus to problems impeding effective government and 

costing billions of dollars each year. My remarks today on Medicare and 

Medicaid are drawn from GAO's 2013 high-risk update.' (See Relevant 

GAO Products for a list of reports that form the basis of this statement.) 

BackgrOlmd In 2012, the Medicare program covered more than 49 million elderly and 

disabled beneficiaries at an estimated cost of $555 billion, and reported 

improper payments estimated to be more than $44 billion. The Centers 

for Medicare & Medicaid Services (CMS), which administers Medicare for 

the Department of Health and Human Services (HHS), is responsible for 

implementing payment methods that encourage efficient service delivery, 

managing Medicare to provide efficient and cost-effective services to 

beneficiaries, safeguarding the program from loss, and overseeing patient 

safety and care. Like health care spending in general, Medicare spending 

has grown faster than growth in the economy for many years. In the 

coming years, continued growth in the number of Medicare beneficiaries 

and program spending will create increasing challenges for the federal 

government. 

Why Medicare is High Risk GAO designated Medicare as a high-risk area in 1990 because of its 

complexity and susceptibility to improper payments, which, added to its 

size, have led to serious management challenges. Medicare spending 

must be held much more firmly in check to sustain the program over the 

High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: February 2013). 

Page 1 GAO-13433T 
26 


80160.014

long term, while continuing to ensure that beneficiaries have access to 

appropriate health care, To help do so, GAO has identified opportunities 

to make Medicare payment methods more efficient and cost-effective, In 

addition, the size of the program makes it important for eMS to manage 

program functions more effectively and better oversee the program's 

integrity and quality of patient care, The following areas delineate where 

GAO has identified opportunities for improvements, 

Reforming and refining payments, eMS has implemented broadbased reforms to payment systems in the traditional Medicare fee-forservice (FFS) program as well as Medicare Advantage (MA) plans, 

where about a quarter of Medicare beneficiaries receive their care, 

Many reforms introduce financial incentives into payment structures to 

explicitly reward quality and efficiency, Important initiatives include 

steps toward transitioning Medicare's FFS physician payment system 

from one that rewards volume of services to one in which value-as 

measured by quality and cost of care-is used to determine payment. 

As eMS progresses to full implementation of its value-based payment 

system, it will be important for the agency to use reliable quality and 

cost measures and methodological approaches that maximize the 

number of physicians for whom value can be determined, 

GAO's work identified opportunities for eMS to introduce additional 

payment method refinements and controls in Medicare FFS to 

encourage appropriate use of services, For example, self-referral, 

where a provider refers patients to entities in which the provider or the 

provider's family has a financial interest, continues to be a concern for 

advanced imaging services, GAO's analysis showed that providers' 

referrals of advanced imaging services substantially increased once 

they start to self-refer, GAO estimated that such additional referrals 

cost more than $100 million in 1 year, Further, although Medicare's 

payment system gives hospitals an incentive to seek the best price for 

implantable medical devices (IMO), GAO determined that hospitals 

may vary in their ability to do so, The lack of price transparency and 

variation in amounts hospitals pay for some IMOs-and may pass on 

to the Medicare program-raise questions about whether hospitals 

are achieving the best prices possible, 

For the MA program, eMS has made progress implementing required 

adjustments to plan payments to align them more closely with the cost 

of care in the traditional Medicare program, However, in a January 

2012 report, GAO indicated that eMS could still improve the accuracy 

of payments to MA plans, The payment adjustment eMS makes to 

MA plans to account for differences in diagnostic coding between MA 

Page 2 GAO,'3-433T 
27 


80160.015

plans and Medicare FFS was $2.7 billion in 2010 while GAO's 

estimate was that a more accurate adjustment would have been 

between $3.9 billion and $5.8 billion. In another report on MA plans. 

GAO reviewed a demonstration CMS established to test an alternative 

bonus payment structure. This demonstration is estimated to cost 

more than $8.3 billion over 10 years and offsets a significant portion of 

the MA payment reductions made by the Patient Protection and 

Affordable Care Act (PPACA). as amended. during its 3-year time 

frame. GAO identified significant shortcomings in the demonstration's 

design that preclude a credible evaluation of the effect of incentives 

on plans' quality improvement. For this reason, GAO recommended 

that the Secretary of Health and Human Services cancel the 

demonstration and implement the quality bonus payments provided 

for under the PPACA. HHS has continued the demonstration. 

Improving program management. CMS has overcome some 

challenges in managing Medicare as it implemented some recent 

program improvements. For example. GAO had previously reported 

that Medicare sometimes overpaid for durable medical equipment 

(DME) items relative to other payers. To achieve Medicare savings, in 

2009 CMS began implementing a DME competitive bidding program. 

In this program. CMS contracts with select suppliers to provide DME 

to beneficiaries and pays them at competitively determined prices 

based on the bids. GAO found that beneficiary access and 

satisfaction appeared stable in early assessments. and the 

competitive bidding program has led to savings. Similarly. in the past, 

CMS was sometimes hampered in identifying situations when 

Medicare should be the secondary payer. and the Medicare. 

Medicaid. and State Children's Health Insurance Program Extension 

Act of 2007 mandated reporting of such situations. Since CMS's 

implementation of the mandatory reporting for non-group health plans, 

program savings increased by $124 million from 2008 through 2011. 

CMS has improved its overall guidance and oversight of contracts, an 

area where GAO found pervasive internal control weaknesses in 2009 

that put billions of taxpayers' dollars at risk. Improvements include 

adding internal controls and testing the agency's review of contract 

payments. adding new checklists and policies to document 

compliance with federal acquisition requirements. and enhancing its 

policies and procedures for tracking, investigating. and resolving 

contract audit and evaluation findings. 

Page 3 GAO·13-433T 
28 


80160.016

Enhancing program integrity. The Administration and CMS have made 

reducing improper payments one of their priority initiatives. CMS has 

made progress in error rate measurement and in 2011 was able to 

report the error rate for·all Medicare components for the first time, 

including the prescription drug benefit (Part D). CMS's performance 

plan has set targets for percentages of improper payments, with the 

targets slightly lower in each year. However, as reported in 2012, the 

rate of improper payments in FFS and Part C exceeded CMS's target 

rates. Thus, additional efforts will be needed to further reduce 

improper payments in FFS and Part C. 

CMS has also taken steps to try to strengthen Medicare program 

integrity and reduce vulnerabilities to improper payment, but some 

problems have yet to be fully addressed. For example, GAO's 

previous work found persistent weaknesses in Medicare's enrollment 

standards and procedures that increased the risk of providing billing 

privileges to entities intent on defrauding the program. CMS has 

implemented provisions in PPACA designed to strengthen provider 

enrollment procedures in several ways, such as designating risk 

levels for categories of providers and applying different screening 

procedures for providers at each level. In addition, CMS contracted 

with two new entities at the end of 2011 to assume centralized 

responsibility for automated screening of provider and supplier 

enrollment and for conducting site visits of providers. However, CMS 

has not completed other actions required by this legislation, including 

(1) determining which providers will be required to post surety bonds 

to help ensure the recovery of payments made for fraudulent billing, 

(2) contracting for fingerprint screening services for high-risk 

providers, (3) issuing a final regulation to require providers to disclose 

additional information, and (4) establishing core elements for provider 

compliance programs. 

CMS also has implemented the Fraud Prevention System (FPS), 

which uses analytic methods to examine claims before payment to 

help identify and prioritize investigations of potential fraud. 

Specifically, FPS analyzes Medicare claims data using models of 

potentially fraudulent behavior, which results in automatic alerts on 

specific claims and providers. These alerts are then prioritized for 

program integrity analysts to review and investigate as appropriate. 

According to program integrity officials, FPS is intended to help 

facilitate the agency's shift from focusing on recovering fraudulent 

payments after they have been made, to taking actions more quickly 

when aberrant billing patterns are identified. However, the system is 

Page 4 GAO-13-433T 
29 


80160.017

not fully integrated with CMS's existing information-technology 

systems, and CMS has not defined and measured quantifiable 

benefits and performance goals for it. In addition, GAO reported in 

2011 that CMS had not incorporated all the data into its Integrated 

Data Repository, as planned, which limited the repository's use for 

identifying potentially fraudulent claims. 

Overseeing patient care and safety. For some of the most vulnerable 

beneficiaries-those in nursing homes-weaknesses remain in 

oversight of the quality of care, although CMS has taken steps to 

improve the oversight. For example, CMS contracts with state survey 

agencies to investigate complaints about nursing homes and helps 

ensure the adequacy of complaint processes by issuing guidance, 

monitoring data that state survey agencies enter into CMS's 

database, and annually assessing state agencies' performance 

against specific standards. However, CMS has found that states had 

difficulties meeting some of its standards for their complaint 

processes. CMS has taken steps to address GAO's recommendations 

to improve nursing home oversight, such as strengthening 

enforcement against nursing homes that have provided poor quality 

care and by increasing the number of facilities that will be subject to 

more intensive oversight and sanctions. 

To provide information to consumers and improve provider quality, in 

2008, CMS implemented the Five-Star Quality Rating System, which 

assigns each nursing home an overall rating and three component 

ratings-health inspections, staffing, and quality measures-based on 

the extent to which the nursing home meets CMS's quality standards 

and other measures. However, CMS lacks GAO-identified leading 

strategic planning practices-the use of milestones and timelines to 

guide and gauge progress toward desired results and the alignment of 

activities, resources, and goals-that could help it more efficiently and 

effectively improve the Five-Star System. 

What Remains to Be Done CMS has not met GAO's criteria to have the Medicare program removed 

from the High-Risk List. For example, although CMS has made progress 

in measuring and reducing improper payment rates in different parts of 

the program, it has yet to demonstrate sustained progress in lowering the 

rates. Because the size of Medicare relative to other programs leads to 

aggregate improper payments that are extremely large, continuing to 

reduce improper payments in this program should remain a priority for 

CMS. Further, CMS should complete some actions required by PPACA 

that were designed to improve the integrity of the program, such as 

Page 5 GAO-13-433T 
30 


80160.018

determining which providers must post surety bonds to help in recovering 

payments for fraudulent billing, using fingerprint screening for high-risk 

providers, issuing a final regulation that requires providers to disclose 

additional information, and establishing core elements for provider 

compliance programs. 

To refine Medicare payment methods to encourage efficient provision of 

services, CMS should 

ensure the implementation of an effective physician profiling system, 

to help support use of value-based modifiers; 

develop and implement approaches to identify self-referred claims, 

reduce payments to recognize efficiencies achieved when the same 

provider refers and provides the service, and take steps to ensure the 

appropriateness of service provision; 

cancel the current MA Quality Bonus Demonstration and implement 

the quality bonus payment provisions in PPACA, as amended; and 

improve the accuracy of the adjustment of payments to MA plans for 

diagnostic coding differences, such as by using more current data in 

determining the amount of the adjustment. 

To enhance program integrity, CMS should 

improve the structure and processes related to use of prepayment 

controls and assess the feasibility of increasing contractors' incentives 

for their use; and 

develop or finalize schedules and plans for its information technology 

efforts related to improper payments and fraud, including the FPS; 

define quantifiable benefits, measurable performance targets, and 

goals for these efforts; and use the targets and goals to determine 

their effectiveness. 

To improve oversight of patient care and safety, CMS should 

strengthen oversight of nursing home complaint investigations by 

improving the reliability of its complaints database and clarifying 

guidance for its state performance standards, and 

Page 6 GAO-13-133T 
31 


80160.019

Medicaid Program 

use strategic planning to guide and gauge the progress of its planned 

efforts to meet the goals of the Five-Star Quality Rating System for 

nursing homes. 

Background The Medicaid program is a federal and state program that covered acute 

health care, long-term care, and other services for about 70 million lowincome people in fiscal year 2011; it is one of the largest sources of 

funding for medical and health-related services for America's most 

vulnerable populations. Medicaid consists of more than 50 distinct statebased programs. The federal government matches state expenditures for 

most Medicaid services using the Federal Medical Assistance 

Percentage, a statutory formula based in part on each state's per capita 

income. Medicaid is a significant expenditure for the federal government 

and the states, with total expenditures of $436 billion in 2011. CMS is 

responsible for overseeing the program at the federal level, while states 

administer their respective programs' day-to-day operations. 

Why Medicaid is High Risk GAO designated Medicaid as a high-risk program because of its size, 

growth, diversity of programs, and concerns about the adequacy of fiscal 

oversight, which is necessary to prevent inappropriate program spending. 

Both Congress and the administration have demonstrated commitment 

and leadership to making Medicaid fiscal and program integrity a priority. 

In 2012, committees in Congress held hearings on reducing Medicaid 

improper payments and on improving oversight of the program. HHS 

continues to review and report on the rate of Medicaid improper 

payments, and continues to train and provide technical assistance to 

states on approaches to prevent improper payments. Among other 

actions, CMS issued guidance to states on removing providers from their 

Medicaid programs who have been terminated for committing fraud in 

other states' Medicaid programs or in Medicare, and required improved 

reporting and independent audits of states' Medicaid supplemental 

payments made to certain providers known as disproportionate share 

hospitals. However, stronger federal oversight of Medicaid is warranted 

as the program continues to grow in size and spending. For example, 

potential Medicaid expansions under PPACA are estimated to result in 

the enrollment of about 7 million add~ional individuals in 2014, growing to 

11 million in 2022. The federal government is responsible for paying more 

than gO percent of the increased costs associated with this expansion. 

Page 7 GAO·13-433T 
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80160.020

CMS will need new tools and resources as the law is implemented, 

including more reliable data for assessing expenditures, measuring 

performance, and preventing improper payments. Areas where program 

oversight has been insufficient include the following: 

Improper payments to Medicaid providers serving program 

beneficiaries. Improper payments to providers who submit 

inappropriate claims can result in substantial financial losses to states 

and the federal government. In its 2012 financial report, HHS 

estimated-on the basis of individual state error rates from a sample 

of 17 states reviewed on an annual rotating basis-a national 

improper payment rate for Medicaid of 7.1 percent (with the federal 

share estimated at $19.2 billion). 

Positive steps toward improving transparency and reducing improper 

payments have been taken in recent years. In May 2011, CMS issued 

guidance to states on processes to remove providers from their 

program when the providers have been terminated from another 

state's Medicaid program or terminated from Medicare as required by 

PPACA. In addition, CMS has committed to (1) redesigning its 

national Medicaid audit program, which relied on data that were 

incomplete, unreliable, and untimely, and, as a result cost significantly 

more than the potential overpayments it identified; and (2) using its 

comprehensive reviews of state integrity program activities to better 

target audits toward states with significant weaknesses in their ability 

to detect overpayments. Separate from this initiative, CMS is also 

testing the cost-effectiveness and feasibility of establishing a fraud 

prevention system for Medicaid by April 1 , 2015; however key 

challenges remain, including improving key data systems so that they 

provide reliable and complete data needed to implement effective 

pr09rams to identify and prevent improper payments; eliminating 

duplication between CMS and state program integrity efforts; and 

refocusing national audit efforts on approaches that are cost-effective. 

Financing methods that are inappropriate, and large supplemental 

payments that are not always transparent. Some states have 

established varied finanCing arrangements involving Medicaid 

supplemental payments that inappropriately increase federal Medicaid 

matching payments. The total amount of supplemental payments has 

increased in recent years. In fiscal year 2011, states reported 

spending at least $43 billion, up from $32 billion in fiscal year 2010 

and $23 billion in fiscal year 2006. GAO and others have reported 

concerns with states' Medicaid supplemental payments over the last 

decade, including the use of supplemental payment arrangements to 

Page 8 GAO·13-433T 
33 


80160.021

increase federal funding without a commensurate increase in state 

funding, and concerns that the payments were not used for Medicaid 

purposes. Large increases in reported supplemental payments have 

been identified as a major factor that contributed to increased 

Medicaid spending on hospital services in 2010. 

A variety of federal legislative, regulatory, and eMS actions have 

helped curb inappropriate arrangements, but gaps remain. In 2003, 

eMS began an initiative to closely review state supplemental 

payments and required states to end those it found inappropriate; 

however, in 2008, GAO reported that eMS had not reviewed all 

supplemental payment arrangements to ensure payments were 

appropriate and were for Medicaid purposes. Starting in 2010, eMS 

implemented new transparency and accountability requirements for 

certain Medicaid supplemental payments, known as Disproportionate 

Share Hospital (DSH) payments, including new reporting and auditing 

requirements for these payments. In 2012, GAO found that the new 

requirements improve eMS's ability to oversee DSH payments by 

better assuring that states comply with federal requirements, including 

accurate calculation of payment amounts to ensure payments are not 

excessive. However, similar standards for calculating, reporting, and 

auditing of other types of Medicaid supplemental payments-referred 

to here as non-DSH supplemental payments-have not been 

established even though these payments have increased Significantly 

in recent years and exceeded DSH supplemental payments in total 

amounts. Although Medicaid payments are not limited to the costs of 

delivering Medicaid services, Medicaid payments that greatly exceed 

Medicaid costs raise questions about the purpose of the payments, 

how payments relate to Medicaid services, whether payments are 

consistent with economy and efficiency, and whether payments 

contribute to beneficiaries' access to quality care. 

Managed care rate setting and quality of data used to set such rates 

has net been consistently reviewed by eMS. Requirements for 

Medicaid managed care rates to be actuarially sound are key 

safeguards in efforts to ensure that federal spending is appropriate. In 

2010, GAO reported that eMS had been inconsistent in ensuring that 

states are complying with the actuarial soundness requirements. 

Further, GAO found that eMS efforts were not sufficient to ensure the 

quality of the data used by states to set managed care rates. With 

limited information on data quality, eMS cannot ensure that states' 

managed care rates are appropriate, which places billions of dollars at 

risk for misspending. 

Page 9 GAO-13-433T 
34 


80160.022

Demonstrations that inappropriately increase federal costs. HHS has 

the authority to waive certain statutory provisions to allow states to 

implement demonstrations that test ideas for achieving program 

objectives. By policy, demonstrations should not increase federal 

costs. However, GAO reported in 2008 that HHS had approved two 

state demonstrations that could substantially increase the federal 

financial liability. At the time of GAO's work in 2007, HHS disagreed 

with GAO's recommendation to improve the demonstration review 

process through steps such as clarifying the criteria for reviewing and 

approving states' proposed spending limits, and ensuring that valid 

methods were used to demonstrate budget neutrality. 

Consequentially, GAO elevated this recommendation to Congress for 

consideration. HHS subsequently reported taking steps, such as 

monitoring the spending under ongoing approved demonstrations, to 

improve its oversight; however, as of December 2012, HHS had not 

planned on any changes in the criteria and methods used to 

determine budget neutrality of demonstrations prior to approving 

them. 

What Remains to Be Done Congress, HHS, and CMS have taken steps to improve the fiscal integrity 

of Medicaid, and CMS has implemented certain GAO recommendations, 

such as improving the information collected on certain supplemental 

payments and issuing guidance to states to better prevent payment of 

improper claims. However, more federal oversight of Medicaid's fiscal and 

program integrity is needed. For example, CMS oversight of program 

integrity has been challenged by data systems that do not provide 

reliable, complete, and timely data. States also have key roles in reducing 

improper payments to providers in developing, implementing, and 

evaluating the effectiveness of corrective plans to reduce improper 

payments. 

CMS should also continue taking steps to improve oversight of Medicaid 

managed care payment rate-setting and Medicaid supplemental 

payments. In November 2012, GAO suggested that Congress require 

eMS to take certain steps to improve the transparency of and 

accountability for Medicaid non-DSH supplemental payments, including 

requiring improved reporting and independent audits of these payments. 

In addition, GAO's suggestion that Congress require HHS to improve the 

criteria and methods used to ensure the budget neutrality of Medicaid 

demonstrations remains valid. 

Page 10 GAO·13-433T 
35 


80160.023

Thank you, Chairman Pitts, Ranking Member Pallone, and Members of 

the Committee. This concludes our testimony. We would be pleased to 

answer any questions. 

If you or your staff have any questions about this testimony, please 

contact Kathleen King at 202-512-7114 or kingk@gao.govor 

Carolyn Yocom at 202-512-7114 or yocomc@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this statement. Martin T. Gahart, Assistant 

Director; Kristin Ekelund; and Krister Friday were key contributors to this 

statement. 

Page 11 GAO-13-433T 
36 


80160.024

Relevant GAO Products: Medicare 

Medicare Physician Payment: Private-Sector Initiatives Can Help Inform 

CMS Quality and Efficiency Incentive Efforts. GAO-13-160. Washington, 

D.C.: December 26,2012. 

End-Stage Renal Disease: Reduction in Drug Utilization Suggests 

Bundled Payment Is Too High. GAO-13-190R. Washington, D.C.: 

December 7,2012. 

Medicare Program Integrity: Greater Prepayment Control Efforts Could 

Increase Savings and Better Ensure Proper Payment. GAO-13-102. 

Washington, D.C.: November 13, 2012. 

Medicare Fraud Prevention: CMS Has Implemented a Predictive 

Analytics System, but Needs to Define Measures to Determine Its 

Effectiveness. GAO-13-104. Washington, D.C.: October 15, 2012. 

Medicare: Higher Use of Advanced Imaging Services by Providers Who 

Self-Refer Costing Medicare Millions. GAO-12-966. Washington, D.C.: 

September 28,2012. 

Medicare Advantage: Quality Bonus Payment Demonstration Has Design 

Flaws and Raises Legal Concems. GAO-12-964T. Washington, D.C.: 

July 25, 2012. 

Medicare: Progress Made to Deter Fraud, but More Could Be Done. 

GAO-12-801T. Washington, D.C.: June 8, 2012. 

Nursing Homes: CMS Needs Milestones and Timelines to Ensure Goals 

for the Five-Star Quality Rating System Are Met. GAO-12-390. 

Washington, D.C.: March 23, 2012. 

Medicare Secondary Payer: Additional Steps Are Needed to Improve 

Program Effectiveness for Non-Group Health Plans. GAO-12-333. 

Washington, D.C.: March 9, 2012. 

Medicare: Lack of Price Transparency May Hamper Hospitals' Ability to 

Be Prudent Purchasers of Implantable Medical DeVices. GAO-12-126. 

Washington, D.C.: January 13, 2012. 

Medicare Physician Feedback Program: CMS Faces Challenges with 

Methodology and Distribution of Physician Reports. GAO-11-720. 

Washington, D.C.: August 12, 2011. 

Page 12 GAO-13-433T 
37 


80160.025

Relevant GAO Products: Medicare 

Fraud Detection Systems: Centers for Medicare and Medicaid SelVices 

Needs to Ensure More Widespread Use. GAO-11-475. Washington, D.C.: 

June 30, 2011. 

Nursing Homes: More Reliable Data and Consistent Guidance Would 

Improve CMS Oversight of State Complaint Investigation. GAO-11-280. 

April 7, 2011. 

Page 13 GAO-13-433T 
38 


80160.026

Relevant GAO Products: Medicaid 

(291131) 

Medicaid: More Transparency of and Accountability for Supplemental 

Payments Are Needed. GAO-13-48. Washington, D.C.: November 26, 

2012. 

Medicaid: States Made Multiple Program Changes, and Beneficiaries 

Generally Reported Access Comparable to Private Insurance. 

GAO-13-SS. Washington, D.C.: November 1S, 2012 

Medicaid Integrity Program: CMS Should Take Steps to Eliminate 

Duplication and Improve Efficiency. GAO-13-S0. WaShington, D.C.: 

November 13, 2012. 

Medicaid: Data Sets Provide Inconsistent Picture of Expenditures. 

GAO-13-47. Washington, D.C.: October 29,2012. 

Health Care Fraud: Types of Providers Involved in Medicare, Medicaid, 

and the Children's Health Insurance Program Cases. GAO-12-820. 

Washington, D.C.: September 7,2012. 

Medicaid: States Reported Billions More in Supplemental Payments in 

Recent Years. GAO-12-694. Washington, D.C.: July 20,2012. 

National Medicaid Audit Program: CMS Should Improve Reporting and 

Focus on Audit Collaboration with States. GAO-12-627. Washington, 

D.C.: June 14, 2012. 

Medicaid: Federal Oversight of Payments and Program Integrity Needs 

Improvement. GAO-12-674T. Washington, D.C.: April2S, 2012. 

Medicaid Program Integrity: Expanded Federal Role Presents Challenges 

to and Opportunities for Assisting States. GAO-12-288T. Washington, 

D.C.: December 7, 2011. 

Fraud Detection Systems: Centers for Medicare and Medicaid Services 

Needs to Expand Efforts to Support Program Integrity Initiatives. 

GAO-12-292T. Washington, D.C.: Dec 7,2011. 

Page 14 GAO-,3-43,T 
39 


80160.027

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80160.028

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41 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

Ms. Yocom for 5 minutes for an opening statement. 

Ms. YOCOM. Chairman Pitts and Ranking Member Pallone and 

members of the subcommittee, Ms. King and I combined our statements so I am available to answer any questions regarding Medicaid. 

Mr. PITTS. Thank you. I will now begin questioning and recognize 

myself for 5 minutes for that purpose. 

Dr. Budetti, it is often said that CMS uses a pay-and-chase 

model to fight fraud in our Nation’s entitlement programs. That is, 

CMS will unknowingly process a fraudulent payment and then try 

to recover payment down the road. My understanding is that CMS 

still largely operates reactively. Are you aware of any single claim 

using the Fraud Prevention System that stopped a claim before it 

was paid? 

Dr. BUDETTI. Mr. Pitts, the history certainly has been of a predominantly pay-and-chase approach, and that is what the Fraud 

Prevention System is changing, and I would like to point out something that is really quite different with the Fraud Prevention System than the way we have done things in the past because in the 

past, most of our screening was done on a single claim-by-claim 

basis, and what the Fraud Prevention System allows us to do, it 

is triggered by claims that into the system, but then what happens 

is, we are able to combine not just one claim but the pattern of 

claims that we are seeing and the pattern of beneficiaries being 

served and the pattern of services being billed as well as lots of 

other forms of information to produce, if you will, a picture of an 

entire book of business, and that book of business then is given a 

risk score, and based upon that risk score, we then are able to take 

action, and that is the basis of the $115 million in savings, which 

includes many ways of stopping the payments. 

Mr. PITTS. So the answer is no? 

Dr. BUDETTI. No, the answer is yes. We have definitely been implementing systems that are stopping payments from going out the 

door triggered by incoming claims but looking at a broader perspective. For example, one of the ways we like to stop payments is to 

kick somebody out of the program once we have identified the fact 

that they don’t belong in the program. 

Mr. PITTS. Thank you. 

Ms. King, Dr. Budetti testified before the Health Oversight and 

Government Reform Committee on April 5, 2011, that most of the 

$60 billion in improper payments accounted for in 2010 were not 

‘‘usually fraudulent nor necessarily payments for inappropriate 

claims’’ but rather, indications that errors were made by the Provider in filing a claim or inappropriately billing or a service. In 

that same year, his former boss, Donald Berwick, put the number 

at $98 billion. Frankly, I haven’t seen one indication that CMS 

truly knows how much it loses each year much less whether a majority of these payments are not usually fraudulent. Do you agree 

with Dr. Budetti’s assertion that most of the payments are not 

fraudulent but merely billing errors by providers? 

Ms. KING. Mr. Chairman, I would like to distinguish between improper payments and potentially fraudulent payments. Improper 

payments are those payments that should not have been made for 

42 

any reason, and they include both overpayments and underpayments, and each year HHS measures the rate of improper payments. It is true that most of the problems related to improper payments are related to inadequate or missing documentation, so a 

large part of that is they have not supplied the proper documentation or the documentation is inadequate. 

But i would like to point out the difference between improper 

payments and fraud. There is no measure of fraud in the Medicare 

program, in part because you can’t determine everything that is 

fraudulent because a lot of fraud is committed and it doesn’t hit 

the improper payment screens. For example, if I sell my beneficiary 

number to someone and they use it to obtain services, and if those 

services are billed correctly, they are not going to show up as an 

improper payment. And fraud is actually only determined by a 

court of law because it involves a deliberate attempt to deceive and 

to cheat. 

Mr. PITTS. Thank you. 

Ms. Yocom, in GAO’s most recent report, you note that States 

have increasingly used supplemental payments through sophisticated financing arrangements such as provider taxes. Increased 

scrutiny of such payments has raised significant concerns from the 

States who believe they have limited resources to fund their already strained Medicaid programs. Given the drastic expansion of 

the Medicaid program in 2014, do you not see a further increase 

in the use of such State funding arrangements? 

Ms. YOCOM. Mr. Chairman, our work has shown that there has 

been an increase in the use of supplemental payments rising from 

about $23 billion in 2006 up to about $43 billion in 2011. We do 

have some outstanding recommendations for CMS involving in particular the use of non-DSH supplemental payments, which currently there is not enough reporting and transparency regarding 

their oversight, approval and use. 

Mr. PITTS. Thank you. My time has expired. The Chair recognizes the ranking member, Mr. Pallone, 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

Dr. Budetti, if Congress fails to act in the next couple days, sequestration will result in a 2 percent cut in the Medicare funding, 

and I know that funding for fraud and abuse work is not exempt 

from this cut. Can you tell me yes or no, though, is the funding for 

your program integrity work at CMS exempt from the sequester? 

Just yes or no. 

Dr. BUDETTI. No, sir. My understanding is it is not exempt. 

Mr. PALLONE. All right. Then can you tell me if your budget 

takes a 2 percent cut as required in the sequester, is it logical to 

assume that this cut will have a negative effect on the staff and 

activities that are currently being used to fight fraud? 

Dr. BUDETTI. All of our activities, Mr. Pallone, to fight fraud and 

to reduce improper payments depend upon our resources, and anything that reduces our resources is going to mean that we will have 

lowered ability to carry out our mission. 

Mr. PALLONE. According to your own HCFAC report, fraud and 

abuse activities have had an eight to one return on investment over 

the past 3 years. Is it true a cut to program integrity as a result 

43 

of the sequester could negatively affect the ability to return fraudulently obtained monies to the Medicare trust fund? 

Dr. BUDETTI. That is a serious consideration because what we 

have learned over the years of the Health Care Fraud and Abuse 

Control program is that the more we do spend looking for fraud, 

the more we find, and so the return on investment has actually 

gone up the more we spend. So cutting back would be expected to 

have just the opposite effect. 

Mr. PALLONE. Thank you. Now, I wanted to ask you, waste, fraud 

and abuse are not unique to public programs. It is fair to say that 

many, if not all, the fraudulent practices that we are addressing in 

public programs at the federal and State level are also issues for 

private health payers and sharing information and collaboration 

between the public and private sector are critical to these efforts. 

So could you tell us about the work CMS is doing to increase collaboration and coordination both internally between Medicare and 

Medicaid and externally with private payers? 

Dr. BUDETTI. We have joined with the Attorney General and the 

Secretary joined together to establish the Public-Private Partnership for Health Care Fraud Prevention. We have a number of 

health plans and antifraud associations and other private sector 

partners that we are working together with as well as State agencies and other law enforcement agencies to work together on a 

problem. This is in recognition of the fact that actually health care 

fraud knows no boundaries and it attacks everybody, and we have 

already had the first serious interactions between the parties in the 

public-private partnerships, health care fraud prevention partnership, and we are building on that, and the intention is that we will 

be sharing best practices, data, analytic tools across the public and 

private sector. This is a very exciting and very important step forward for us to marshal resources throughout the health care system to fight fraud. 

Mr. PALLONE. Thanks. 

Let me go to Ms. Yocom and ask her about CMS. CMS through 

its Medicaid Integrity Institute and other programs is working to 

partner with States and help to build State-level antifraud capacity. Can you give us a sense of how they are doing and are their 

program oversight activities that CMS has taken that appear to be 

effective, in your opinion? 

Ms. YOCOM. Sir, there has been some improvements in the improper payment rate in Medicaid. It has decreased by about a percent, and in terms of dollar value, from about 21.9 to about 19.2 

billion. 

There is more to be done. Our recommendations and our outstanding work is focusing on having CMS collaborate more with 

States to both augment their program activities and to support 

their program activities. Our work has found that those collaborative audits have actually been the most successful of the efforts 

that have happened to date. 

Mr. PALLONE. Did you want to comment on what I mentioned before in terms of, you know, dealing with the private sector as well 

and what they are doing? 

Ms. YOCOM. I don’t think we have work that I can respond to you 

on that. 

44 

Mr. PALLONE. All right. Thanks so much. I yield back. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the vice chairman of the committee, Dr. Burgess, 5 minutes for 

questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Ms. King, let me ask you a quick question that deals with thirdparty liability payment. Congress intended that Medicaid be the 

payer of last resort. My staff has been in contact with you about 

improving Medicaid third-party liability. To what extent do you feel 

that it is necessary to address this? 

Ms. KING. Sir, Medicare or Medicaid? 

Mr. BURGESS. Medicaid. 

Ms. KING. GAO’s work on third-party is pretty dated at this 

point. We have some studies—— 

Mr. BURGESS. So the answer would be, you think it would be 

worthwhile to look into this? 

Ms. KING. Yes. 

Mr. BURGESS. As I understand, the last report was in 2006. 

Ms. KING. Correct. 

Mr. BURGESS. It demonstrated a significant problem. Will you be 

willing to work with my staff to see if we can’t move the needle 

on this one a little bit? 

Ms. KING. We certainly would. 

Mr. BURGESS. Thank you. 

Dr. Budetti, at this committee’s last hearing on fraud, we asked 

the Government Accountability Office to provide a list of recommendations to combat waste, fraud and abuse in Medicare and 

Medicaid that had yet to be implemented. So in a sense of fairness, 

maybe you can give us an update on some of these things. I am 

going to ask for really brief answers like yes or no answers to these 

questions. Have you implemented the GAO recommendation from 

February 2009 that CMS should expand the types of improper billing practices that are grounds for revoking a home health provider’s billing privileges? 

Dr. BUDETTI. Dr. Burgess, I don’t have the specifics on the individual programs right in front of me. I can tell you that the vast 

majority of the GAO recommendations are in some kind of process 

of our responding to them, but I would be delighted to give you a 

specific answer—— 

Mr. BURGESS. I wish you would. 

Dr. BUDETTI. —for the record afterwards. 

Mr. BURGESS. It is a possible no but may be an incomplete. Yes 

or no, have you implemented the GAO recommendation from 

March of 2010 to require the agency to evaluate RAC audits to correct the vulnerabilities identified in the agency? Those are the recovery audits. 

Dr. BUDETTI. Well, again, I can’t speak to the individual one 

right offhand but we do have lists, we do track these and I will be 

delighted to get that to you. 

Mr. BURGESS. I have a list myself, happily, and I am anxious to 

track this with you because it is important. The GAO makes recommendations. We are here fighting the same problem we fight 

year after year after year. It is important that we make some 

progress: I will tell you what. In the interest of time, we will leave 

45 

the GAO reports and maybe you can work with my office to get us 

answers. 

Now, it is referenced several times under the President’s Affordable Care Act under subtitle (e), Medicare and Medicaid, CHIP program integrity provisions, several provisions that were signed into 

law by the President. Maybe we can just briefly run through those 

and you can tell me if those have been implemented. The face-toface encounter with the patient that is required before a physician 

may certify eligibility for durable medical equipment. 

Dr. BUDETTI. I believe that one has been implemented. 

Mr. BURGESS. So that is a yes? Ding, ding, ding. Good for you. 

Implement criminal background checks for fingerprinting for providers and suppliers considered at risk. 

Dr. BUDETTI. We have not finished the implementation of that 

for a number of reasons, in part related to the FBI’s own internal 

rewarding of its contracts, but we are in the process, very much in 

the process of putting that into place, sir. 

Mr. BURGESS. It has been almost 3 years since this was signed 

into law. It is important stuff. I would get the FBI, the Justice Department engaged because it was felt to be important by the President. He signed it into law. Let us see that it is implemented. How 

about implementing limitations on how much high-risk providers 

and suppliers can bill the Medicare program within the first year? 

Dr. BUDETTI. We are in the process of developing—— 

Mr. BURGESS. So that is an incomplete. How about implementing 

a temporary moratorium for new Medicare providers from enrolling 

and billing the Medicare program even though there are more than 

enough suppliers to furnish health care services in certain areas of 

the country? 

Dr. BUDETTI. That is a very important tool. We have been looking very carefully at the places to implement it, and we have—we 

are in the process of moving forward with that where we think it 

is appropriate as an adjunct to all of the other tools. 

Mr. BURGESS. Well, an important tool but it is—— 

Dr. BUDETTI. We have not implemented a moratorium yet. 

Mr. BURGESS. It is languishing, and we are coming up on 3 

years, establish a compliance program for fee-for-service providers 

and suppliers. 

Dr. BUDETTI. We are still in the process of working on that, in 

part because the Inspector General has long since had very sound 

guidance for providers for voluntary compliance programs. 

Mr. BURGESS. OK. I am running out of time. That is also an incomplete. Implement a surety bond on home health agencies and 

certain other providers of services and supplies? 

Dr. BUDETTI. The surety bond program is in place for DME but 

we are still in the process of implementing it beyond that. 

Mr. BURGESS. For home health specifically, that is a no, and 

what about implementing checks to make sure that a physician actually referred a Medicare beneficiary for medical service before 

paying the claim? 

Dr. BUDETTI. We do have processes in place for doing that. 

Mr. BURGESS. Incomplete, so one out of those seven things that 

were signed into law by the President that are always referenced 

as hey, these are important things that we want the Affordable 

46 

Care Act to do to combat fraud, we are still waiting to see if they 

in fact will be effective. 

Thank you, Mr. Chairman. You have been generous. I will yield 

back. 

Mr. PITTS. The chair thanks the gentleman and now recognize 

the gentleman from Texas, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman, for the time, and I appreciate our panel has taken the time to be here today. 

The rising cost of health care threatens our Nation’s economy 

and puts more and more families at financial risk, although I have 

to say that I just read an interesting article in Time magazine last 

week that said Medicare is the ultimate cost saver in health care, 

but that is not part of my questions. I believe the key part of saving money is keeping people healthier longer. To achieve this, people must have the health care coverage necessary that they can be 

seen when they first get sick and not have to wait until it is so bad 

they need urgent care. 

My question is to GAO and CMS. Can the Government Accountability Office or CMS estimate the government or private sector 

costs from the administrative waste associated with the phenomenon in Medicaid known as ‘‘the churn’’ where people who are 

eligible for Medicaid are discharged from the rolls for bureaucratic 

or paperwork reasons or for some temporary changes in income 

that do not impact their long-term eligibility for Medicaid? Is there 

any studies that you all have been able to do on that? 

Ms. YOCOM. We have not done any studies in that area. We have 

taken a brief look at express-lane eligibility and the extent to 

which that is a potential benefit. There are a few States that have 

reported some cost savings. From our perspective, those savings always have to be offset by ensuring that eligibility is correctly calculated. 

Mr. GREEN. Well, and I agree, and I know a lot of States have 

a 6-month eligibility, and if you have a senior citizen who forgets 

to return the letter, you know, instead of being treated for diabetes 

they will end with an episode and end up even costing more. Again, 

to GAO and CMS: Can GAO and CMS describe the costs to the 

State and federal budget associated with the ongoing determinations of whether people are eligible for Medicaid? For example, my 

State requires people on Medicaid to be determined eligible every 

6 months, and despite the fact that most people who are on Medicaid are eligible for the program for much longer period of time 

and it requires adult Texans on Medicaid to show up in person for 

their redetermination, and I know we can cut our Medicaid rolls by 

making that happen. The problem is that that increases our costs 

by making someone who may be so ill or a senior citizen drop off 

and then get back on. Is there any quantification of that? 

Ms. YOCOM. We have not done any quantification of the costs and 

benefits associated with that. 

Mr. GREEN. Because I know on a State level, oftentimes they can 

quantify that if they do this, this will cut our rolls X amount, but 

in the long run, those folks who are typically so ill, they will be 

back on and much more costly. I would sure appreciate it if there 

was an option on that. 

47 

My last question to the GAO. Where should we assign the government expenditures for the following hypothetical? A Medicaid 

beneficiary with diabetes eligible for and enrolled in Medicaid is removed from the rolls because he or she failed to respond to a letter 

sent by the State to confirm their residency at a particular address. 

Two months later, that person has a diabetic event because the diabetes went unmanaged and is reenrolled in Medicaid at the time 

and now the costs are more expensive of inpatient and emergency 

care is billed to Medicaid. If that person were just covered by Medicaid for those two months, it would be more likely we wouldn’t 

have seen those episodic costs. In your opinion, should these added 

costs be categorized as waste, fraud and abuse, and if not, where 

should we categorize that excessive waste and avoid unnecessary 

spending? 

Ms. YOCOM. Sir, certainly getting care earlier is always beneficial 

to the patient. Our work on preventive services and taking a look 

at trying to balance costs and benefits, it is difficult to come up 

with an exact measure of cost and/or savings, and I don’t believe 

that GAO has done that. 

Mr. GREEN. Well, I understand, and I have a couple of seconds 

left. The private sector in some of the studies we have seen, both 

from businesses who provide the health care can show that they 

can save money for that continuing care, for that continuing much 

more reasonable maintenance of an illness instead of waiting for 

that episode. 

So Mr. Chairman, I would hope we would look at that not only 

from the private sector but also for Medicaid and Medicare, and I 

appreciate the time. I will yield back. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentleman from Louisiana, Dr. Cassidy, 5 minutes for questions. 

Mr. CASSIDY. Thank you, sir. 

Tagging off of what Mr. Pallone, now, in your testimony, you say that for every $1 spent, the program saves $7.90, and it begs the 

question, that if you have to take a 2 percent across-the-board cut, 

why are they going to cut the programs that would save you $7.90 

per dollar spent? Is the management so inconsiderate of return on 

investment that they are going to cut something that saves $7.90 

per dollar spent? That is the testimony you suggested. 

Dr. BUDETTI. Dr. Cassidy, thank you for that question. As you 

know, the specific cuts related to the sequester have not occurred 

yet. There has been a lot of internal planning and preparation for 

the way to do any cuts if they should take effect. 

Mr. CASSIDY. I have limited time. So if the taxpayer is listening 

and the taxpayer is wondering what kind of management would cut 

a program which has an ROI of $7.90 per dollar spent, and that 

is your testimony, what was management thinking that this would 

even be on the table? 

Dr. BUDETTI. Well, what I would say, sir, is that the thinking is 

that our number one priority is making sure that beneficiaries get 

the medical care that they need, and if we have—— 

Mr. CASSIDY. But clearly, if Mr. Pallone is right, that the money 

you save goes back into the trust fund in order to support that 

medical care, I think the taxpayer has every right to wonder what 

48 

in the heck he is spending money for. If we are cutting something 

with an ROI of $7.90 per dollar spent, do you see my concern? 

Dr. BUDETTI. I do see your concern. I also know that in the immediate short term, we have to worry about our principal mission, 

which is making sure that beneficiaries—— 

Mr. CASSIDY. So there is nothing else that can be cut between actually paying for medical services and something which gives you 

an ROI of $7.90 per dollar spent? 

Dr. BUDETTI. There are very few things that have been exempted 

under the terms of the sequester. 

Mr. CASSIDY. I will tell you, it calls into question the wisdom of 

your management. 

Secondly, you create the impression that if we cut under the sequester all these valuable things, but then what Dr. Burgess just 

brought up, which I am sure is because of his staff’s good homework, not his own, that only one out of seven of these things demanded by the Affordable Care Act, which passed in 2010, has 

been fully implemented. It doesn’t seem like a sequester cut now 

is going to be that which is fatal to their implementation. It actually seems as if there is kind of a casual timeline anyway. 

Dr. BUDETTI. Sir, I would point out that there are a few more 

pages of provisions that actually have been implemented that—— 

Mr. CASSIDY. But I am speaking specifically about waste, fraud 

and abuse. 

Dr. BUDETTI. That is exactly what I am talking about. We have 

implemented many provisions in the Affordable Care Act that have 

greatly strengthened our ability to fight waste, fraud and abuse, 

and in doing so, we always have to establish our priorities and allocate our resources appropriately. 

Mr. CASSIDY. Well, if we are going to establish priorities, then I 

would suggest that the taxpayer would like that you continue to 

spend money which gives you a $7.90 return on investment per dollar spent. 

Now, let me move on, and I don’t mean to grill but this is obviously a process. We are all familiar with the New Yorker article 

about McAllen, Texas, under Medicare, the hospital in McAllen 

spent 180 percent of a cohort, of the amount spent on a cohort in 

El Paso. There is a follow-up article on that in Health Affairs in 

which Blue Cross Blue Shield patients, Texas Blue Cross Blue 

Shield, 7 percent less was spent for the cohort in McAllen than in 

El Paso. Under CMS, it is 180 percent more. On Blue Cross Blue 

Shield, it is 7 percent less. It seems like the problem may not be 

the docs, the patients or the hospital but it may be CMS’s systems, 

just looking at the contrast between the two payers and the results 

they get. What comment would you have on that? 

Dr. BUDETTI. I would say that one of the advantages of our having established the strike forces under the joint Department of Justice and Health and Human Service aegis has been to look at the 

highest fraud areas very carefully. 

Mr. CASSIDY. But why did Blue Cross Blue Shield figure this out 

prospectively and we are having to do strike forces to get it retrospectively? 

Dr. BUDETTI. The populations that are being served, sir, are very 

different. The situations are very different. 

49 

Mr. CASSIDY. Sixty-four years old and 65 years old, these are the 

same patients in the same hospital with the same doctors. Again, 

this seems somewhat of an indictment upon the system because 

there is not that much difference—I am a doc—between something 

who is 64 and 65. 

Dr. BUDETTI. I don’t have a specific answer for you on that, in 

that area. I would be happy to look for, you know, anything more 

specific, but I will say that we are focusing on the high-fraud areas 

and we are making major progress in identifying discrepancies like 

that and working together with law enforcement and with the private sector to do something about it. 

Mr. CASSIDY. Thank you for your testimony. I yield back. 

Dr. BUDETTI. Thank you, sir. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentlelady from California, Ms. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman. I again thank the panelists for being here today. 

Dr. Budetti, Dr. Burgess asked about several projects CMS is implementing from the Affordable Care Act, and you didn’t really 

have time to address them. Would you like to take a minute now 

to tell us what CMS has been implementing from the ACA? 

Dr. BUDETTI. There are many provisions of the Affordable Care 

Act that we have implemented. Some of the biggest ones involve 

the risk-based screening of providers and suppliers, which is a new 

way of identifying the suppliers and providers that are in the limited-risk group and are subjected to very detailed background 

checks but not to the same level of scrutiny as others. That is a 

very extensive program. We have established a program to alert 

States when someone is suspended or is terminated by one Medicaid program or by Medicare for cause so that other States can 

keep them from entering their program. That is an important step 

forward. We have implemented a number of aspects of our collaboration with law enforcement that have really moved things forward 

on that front. There are many provisions of the Affordable Care Act 

that have strengthened our ability to fight fraud, waste and abuse 

and we have implemented a great number of them. 

Mrs. CAPPS. Thank you. You know, the hearing is about fraud, 

waste and abuse. We know these are significant problems for both 

public and private health care payers. The scope and complexity of 

health care itself as well as the diverse payers and the systems we 

have to pay for it certainly adds to the challenge. Both CMS and 

GAO acknowledge that we don’t really know the true scope and 

cost of waste, fraud and abuse to the Federal Government. 

My question has to do with how we can begin to get our hands 

around measuring the scope and the extent of the problem. Unless 

we do, we won’t really know how to tackle it or how much to spend 

doing that. In that context, how do we measure the effectiveness 

of the efforts being undertaken now, just some of the problems that 

you just described? 

Dr. BUDETTI. Sure. We have taken steps towards developing the 

methodology for measuring probable fraud. We intend to implement that in one particular arena, which is home health, and to 

apply that methodology. It involves a very sophisticated approach 

because as Ms. King pointed out, people don’t often volunteer that 

50 

they have committed fraud so we can’t do a simple survey, but we 

have made substantial progress toward having a methodology in 

place to estimate probable fraud. We intend to do that first in home 

health, and then once we have learned how well that works to 

apply it to other areas. We have done a very thorough job in the 

government of measuring improper payments, and improper payments encompass a wide range of reasons why a certain payment 

should not have been made, and we would very much like to move 

forward with a reliable measure of probable fraud. 

Mrs. CAPPS. One sort of parallel question that hasn’t been 

brought up. Measuring the impact of prevention—that is my background, public health—this is really hard to measure in any way. 

Can you share some of the metrics and benchmarks that you are 

using or working on in the area of preventive health? 

Dr. BUDETTI. Sure, and I appreciate the question very much. I 

think the best way to illustrate it is with an example. When we put 

into place one of our models in the Fraud Prevention System, we 

identified a pattern of behavior that raised very strong suspicions, 

and we ended up identifying a particular potential fraudster who 

fell into the same pattern that others had perpetrated, others had 

billed hundreds of thousands of dollars or even millions of dollars 

to the program, but this particular one, I believe, had only billed 

us for $4,000 but it was the same scam and it was clear that they 

were just starting up and getting going, and so we are faced with 

the question of how do we take credit for finding something that 

had only billed us for $4,000. Now, that is exactly where we want 

to be. I mean, I would rather it be at $2,000 but $4,000 is a lot 

better than $4 million, but yet if we just say that we stopped something that prevented that when somebody had already billed us for 

$4,000 doesn’t sound very impressive. So we have to figure out the 

best way to put, as the statute requires us, to put a dollar value 

on prevention, and that is a challenge but we are taking it on. 

Mrs. CAPPS. I appreciate that. Thank you very much, and I yield 

back. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

I am not sure if it was Ms. Yocom or Ms. King who made the 

statement of trying to define improper payments from fraudulent 

payments. 

Ms. KING. That would be me. 

Mr. SHIMKUS. And, you know, we are almost in like bizarro world 

a little bit because improper payments, fraudulent payments, theft, 

abuse—Dr. Budetti, when you mentioned this $4,000, following this 

scheme of abuse, that is what credit card companies do every day. 

Dr. Burgess is right. 

Now, I know, sir, you have done a pilot program on the magnetic 

strip card, identification card, I think it was in Indiana. Not a lot 

of fraud there. One, I would ask if we could get a release of the 

findings of that pilot program. Also, you know, I have also been involved in the magnetic chip issue. There was a bill last year by Mr. 

Gerlach. I would encourage all my colleagues to look at that bill 

from last year, 2925. It will probably get reintroduced this year. If 

major financial institutions can call someone and ask about an imVerDate Nov 24 2008 12:32 May 15, 2013 Jkt 037690 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-10 CHRIS
51 

proper payment that is outside their area within 12 hours of the 

payment being made, for the life of me, I don’t understand why 

that is not a good system to help us identify improper payments 

and fraudulent payments. The billing on both ends, a statement released. Well, that is why we have a bill because we don’t think you 

have effectively looked at it and we are slow, we are bureaucratic, 

we are not private sector and we just can’t seem to get it done, and 

that hurts the payments to other folks. So that is my statement, 

that there is another bill coming to try to get us to move to a current world technology of a payment system that will help identify 

improper and fraudulent payments. 

A real crisis in Medicaid is the funding. That is why these hear- ings are important, but in Illinois, we have $1,922,000,000 in backlog of unpaid bills that are sitting in our comptroller’s office. There 

is another $700 million worth of bills that are being held by the 

State government before they give them to the comptroller, when 

then you add those up, that is $2.6 billion in unpaid Medicaid reimbursements to our providers. The delay in payment is 3 to 8 

months, and of course, when they do pay, they are paying 70 percent of what the private sector is paying for the health care delivery. We are a disaster in Medicaid reimbursement to our health 

care providers, some smaller ones going broke or just saying we 

can’t provide Medicaid anymore. Having said that, I know that, Ms. 

Yocom, the biggest challenge to the Medicaid program, through federal initiatives is the lag in Medicaid data from the States, and you 

have reviewed the discrepancy in the data from States and reported that CMS will need more reliable data for assessing expenditures and measuring performance in the Medicaid program. I 

would encourage you to get current data on Illinois. 

Can you please outline the GAO work on aligning the States’ expenditure data which in your 2012 October report showed significant discrepancies and reported expenditures of more than $40 billion for fiscal year 2009? Even in Washington, $40 billion is a bad 

discrepancy of reporting on payments. 

Ms. YOCOM. Yes, sir. We did take a look at two expenditure systems that CMS operates. The first is an expenditure system that 

is the basis with which States claim their federal match. The second is a statistical system that takes the activities performed in 

the Medicaid program and looks at them from the perspective of 

the beneficiary. So it is beneficiary-specific payments. These two 

systems are not measuring the same thing, so there is some acceptance that they should be different, but we could not quantify the 

source of all the differences or the reasons why those differences 

occurred. At the end of the day, we ended up with about a 90 percent national match but on the State-by-State basis, there were significant variation across the different—in terms of the two systems. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for 

questions. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

There was an earlier discussion about McAllen, Texas, and 

CMS’s antifraud activities to root out fraud and unnecessary 

spending. Dr. Budetti, you mentioned the HEAT task force as 

52 

catching fraud on the back end, but isn’t it also true that many of 

the Affordable Care Act provisions you are implementing are catching fraud on the front end? For example, the Fraud Prevention System, the new provider screening requirements, the cross-checking 

between bad providers and Medicare and Medicaid. So is it not accurate to say that—so my sense is that it is not accurate to say 

that you are doing nothing in these high-fraud areas on the front 

end, and I wondered if you could talk about how the front-end prevention is paying off. 

Dr. BUDETTI. Thank you, Ms. Schakowsky. One of the things that 

I am extremely pleased with is our growing collaboration with law 

enforcement. Our law enforcement colleagues are very fond of saying that they don’t believe that they can prosecute their way out 

of the current fraud situation after the fact, and so they have been 

very active partnering with us on the prevention side and on the 

early detection side as well, and we have agents from both the Office of Inspector General and the FBI who are assigned to work directly with us and who have been very much involved in helping 

us build the Fraud Prevention System and the models in the Fraud 

Prevention System and how to follow up on it, and when we do 

that, we are taking an across-the-board approach which says we 

want to stop as much as we can before it ever happens, and that 

is what we are able to do with activities under the Fraud Prevention System. We want to catch it early and take administrative action because if somebody has only stolen, say, $4,000, that may 

very well not be a case of law enforcement could ever pursue because of resources. But then we also want to work together when 

in fact some people do squeeze through and we have to chase after 

them after the fact. So our approach is to shift to moving beyond 

pay and chase but we cannot pay and chase in that sense. 

Ms. SCHAKOWSKY. I wanted to ask you also about the—I feel like 

sometimes we overlook the importance that beneficiaries can play 

in fighting fraud, and I am wondering if you could discuss how 

Medicare beneficiaries can help CMS identify fraud and what steps 

CMS may have taken to make it easier for beneficiaries to spot 

fraud or errors. 

Dr. BUDETTI. So I don’t know if any of the members of the subcommittee have looked at their explanation of benefits recently, but 

when I got to CMS and we were reviewing the Medicare summary 

notices, we decided that we could do a better job of communicating 

both what the content was and the ability to highlight where there 

might be problems, and so over a period of time working with focus 

groups with Medicare beneficiaries and redesigning the Medicare 

summary notice, we have now produced a new statement that is 

going out for the first time this year. It has been available for people who would get their summary notices online previously but it 

is now going into the mail, and this will be much easier to read 

and much easier for individuals to look to see whether or not there 

is a problem with the billing that is attributed to their having gotten services and be able to raise questions. 

In responding to that, we have also vastly upgraded and made 

much more user friendly the 1-800-MEDICARE call system way of 

dealing with calls that come in that raise questions about possible 

fraud, and last year something like 50,000 of the calls that came 

53 

in led to some level of escalation of our investigation to look behind 

an incoming call. So on both the summary notices and on the 

changes to the 1-800-MEDICARE call system and, on top of that, 

to our outreach to Medicare beneficiaries to inform them about 

these changes, we are very much engaging because our feeling is 

that, you know, 45 million, 50 million beneficiaries out there fighting fraud with us is one of the—— 

Ms. SCHAKOWSKY. Let me just say, I would like to see an example or two of the savings from beneficiaries. 

Dr. BUDETTI. I would be happy to. 

Ms. SCHAKOWSKY. Thank you. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from Kentucky, Mr. Guthrie, 5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Chairman, and thank you for coming and I appreciate your having this hearing on waste, fraud and 

abuse within the Medicare system and hope we continue to explore 

this. 

But before I begin my questions, I would just like to bring to the 

committee’s attention a company in Kentucky that has a plan to 

bring savings to the Medicare program through the home health 

program integrity measures. The industry’s 2010 proposal to limit 

outlier payments has been successful in saving the program roughly $900 million per year in the first 2 years alone. Almost Family’s 

proposal will build on that, and that includes episode limits for a 

beneficiary to get at the bad actors who are billing for lengthy episodes of care in excess of three or four per beneficiary. Estimates 

predict this would save Medicare nearly $1 billion per year. We 

should look at this and other industry proposals for a way to save 

money within the system and get the bad actors that are fraudulently draining Medicare dollars. I found that a lot of industries 

with good actors who are trying to do service and do things correctly immediately want to point out the bad actors immediately 

want to point out the bad actors because that affects the whole 

Medicaid and Medicare program. 

I do have a question for Ms. Yocom and Dr. Budetti. I am interested in reviewing how the States use the funds in the health care 

law related to Medicaid IT payments. As you know, States are eligible to receive a 90 percent match from the Federal Government 

for the design and development of new systems through 2015. Has 

GAO initiated any integrity review of these funds and how they are 

expended to date? 

Ms. YOCOM. We have not instituted an integrity review of the 90/ 

10 matching States. There has been interest in that, and I believe 

we are planning to respond to that interest. 

Mr. GUTHRIE. What are you doing now with CMS to ensure—this 

is a significant funding stream—that funds are being used appropriately? How are you managing that? I know you don’t have a 

GAO study or initiative but how are you managing that to make 

sure it is being spent appropriately? 

Dr. BUDETTI. We are working very closely with the States and 

encouraging the States to implement their advances in data systems and technology because that is a major aspect of oversight of 

the Medicaid program. If you would like more details on that, I 

54 

would be happy to get you a substantial amount of information on 

just what our approach is. But yes we do believe that having adequate and sophisticated data systems at the State level that can 

both analyze data and supply data better to the Federal Government that we need for oversight is one of our top priorities. 

Mr. GUTHRIE. Thank you for that answer, and I do have 2–1/2 

minutes I can yield, or yield to Dr. Burgess. 

Mr. PITTS. Dr. Burgess. 

Mr. BURGESS. I appreciate the gentleman for yielding. 

Director Budetti, let me just ask you a couple of questions along 

the lines that Ms. Schakowsky was just asking. First off, do you 

have an app for that? 

Dr. BUDETTI. For—— 

Mr. BURGESS. When you talked about your new explanation of 

benefits and forms that you are providing people. 

Dr. BUDETTI. Well, that is a very interesting question, Dr. Burgess, because we have been looking into that possibility. 

Mr. BURGESS. Well, I did a little research sitting here at the dais, 

and I typed the word ‘‘Medicare’’ into the app store and you don’t 

have one but other people do, and it just seems, you know, knowing 

the way the world works, most people who get to the age where 

they are signing up for Medicare are going to be asking their 12- 

year-old grandson to help them navigate the smartphone. It may 

be something that is worth looking into. 

I thank the gentleman for yielding, and I will yield back. 

Dr. BUDETTI. In my case, I will rely on my 17-year-old grandson 

and my 5-year-old and my 4-year-old. 

Mr. BURGESS. Great. 

Dr. BUDETTI. The Chair thanks the gentleman and recognizes 

the gentlelady, Dr. Christensen, 5 minutes for questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and welcome to 

the panelists this morning. 

I want to follow up also on Congresswoman Schakowsky’s question, and I am glad to know that the notices to beneficiaries have 

improved. I am sure they have improved a lot over the 16 years 

that I have been having to explain them. And you pretty much answered how beneficiaries can help detect fraud, and I know that 

many seniors are just as concerned as we are with program integrity and are glad to help in fighting fraud. My constituents participate in the Senior Medicare Patrol program, and they seem to be 

very active. How widespread is this program across the States and 

territories and has it shown itself to be helpful in ensuring or reporting and helping program integrity? 

Dr. BUDETTI. Dr. Christensen, when I got to my job at CMS, I 

decided that one thing we should do was invent the Senior Medicare Patrol and then I found out it already existed, so we worked 

very closely to help expand the resources available to the Senior 

Medicare Patrol for the first couple of years that I was on the job. 

It does extend to all States. There are programs operating, and I 

believe through the territories as well. It does involve many Medicare beneficiaries, and they receive extensive training in how to 

help seniors protect their identities, how to identify problems with 

potential fraud or abuse, and what to do about it and how to report 

it. So we consider this a very strong adjunct program of ours and 

55 

we have taken a lot of initiative in helping to support that program. 

Mrs. CHRISTENSEN. Thank you. I have a provider question as a 

person who has practiced medicine for more than 20 years before 

coming here, and having heard from my colleagues back then but 

also more so since I have been here about sometimes overzealous 

investigations and sometimes unwarranted investigations. But I 

am very interested, like my colleagues are, that efforts to fraud are 

effective, but also that they are fair to providers, especially those 

providing care to our Nation’s most underserved communities who 

are sicker and where there are fewer resources, and I just want to 

say for the record, of course, and I am sure you will agree, that the 

vast majority of providers are honest actors who are not causing 

problems. 

I would like to find out what CMS is doing to ensure that providers are your partners and not necessarily adversaries, and how 

effectively are you able to distinguish between who the bad actors 

and the good guys are, so that some of my colleagues or former colleagues are not feeling that they are being treated fairly in some 

of these investigations. 

Dr. BUDETTI. First of all, this is a very high priority for us. I 

mentioned early on that we want to make the system easier and 

more efficient for the legitimate and vast majority of providers 

while making it much harder and more likely to spot the ones who 

don’t belong in the program, and along those lines, I will give you 

one example, that in developing improvements in our enrollment 

processes, we worked very closely with the provider community. 

There is a long list of changes that we made to the enrollment system that came specifically out of group meetings that we had with 

providers, working side by side with them to have demonstrate to 

us online what the problems were that they were having with our 

system so that we could implement a fix to that problem. So that 

has been a big part of it. We have gotten a lot of positive feedback 

from the provider community in doing that. 

And in terms of the audits and the potential for problems, one 

of the big advantages of moving the Medicare and Medicaid program integrity operations together into the Center for Program Integrity is, it is allowing us to pursue coordination and integration 

of a wide range of audits precisely for that reason, to make sure 

that we are doing the job but we are doing it as respectfully and 

appropriately as possible. 

Mrs. CHRISTENSEN. Thank you. And on the enrollment, I understand you are transitioning away from a paper-based system of provider enrollment. Do you feel that you are able to capture the rural 

providers and some of those providers that are in the poor, urban 

communities as well? 

Dr. BUDETTI. That is a very important consideration, and I will— 

I know that we have worked with large groups but I will be sure 

that we will check on what our outreach efforts have been. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you very much. I would like to pick up 

where Dr. Christensen left off because some of my providers don’t 

56 

feel like there is much of a partnership going on, and I would direct 

your attention specifically to the RAC program where I am advised 

that the American Hospital Association based on self-reported data 

indicates that nationally, 74 percent of the appeals are being overturned in favor of the hospitals when this comes up, and apparently in my region, it is 78 percent. And it would seem to me, I 

mean, one of the problems that they are having is, they feel like 

these independent contractors are taking the money and saying 

wait a minute, we are not going to release this unless you go 

through the process, push it to the end, and then if you win in the 

end, you will get your money. And so this is a real concern for them 

because while we all want to get the bad guys, the hospitals by and 

large in my district are not the bad guys, they are the good guys, 

and I may not know of some exception to that rule but I think they 

are all pretty good providers and they are trying to do the best they 

can. And 78 percent being overturned on appeal indicates there is 

a problem in the system. Wouldn’t you agree? 

Dr. BUDETTI. So Mr. Griffith, I will say that we want to get it 

right, and we want to get it right for the good guys and we want 

it to be as efficient as possible. The very high—we have heard some 

very high appeal successes, but it is only a small fraction of total 

RAC determinations. So when appealed, the overturn rates seems 

to be growing, but still only a very small fraction of total RAC determinations are being appealed in the first place. 

But having said that, we do want to get it right and so we have 

put into place a number of checks to look back at what the guidance is that is going to the recovery auditors, what the number of 

documents that they are able to request. There are a lot of things 

that we are doing to make sure that the system is working. 

Mr. GRIFFITH. Well, I would encourage you to do that. I would 

say, I don’t come from a medical background. I was a country lawyer, and most of the time when people lose, if it is close, they don’t 

appeal, and I understand that. When they appeal, it means that 

they really think they have been treated wrongly. That being said, 

in my profession, if you had a 78 percent turnover rate, you would 

have a judge being removed, and that is what I am looking at is, 

that, you know, in this case, if we can’t get it straightened out, we 

may have to look at a different system because that is not fair to 

the medical providers. And so I appreciate that. 

Also, one of the other complaints they had that ought to be simple to fix is that when they are denied, they get a letter, but when 

they win or they get it overturned, they don’t get a letter so all of 

a sudden a check comes in and then they have to track down, well, 

why did we get this check. It sure would be nice if there was a 

tracking number or a letter that came with that that said we have 

decided you were right and here is your check. Can you fix that? 

Dr. BUDETTI. I will make every effort to look into that, sir. I have 

initiated a number of actions to, shall we say, improve our communications, and I will put this on the list. 

Ms. KING. Sir, and if I might add? 

Mr. GRIFFITH. Yes, ma’am. 

Ms. KING. There has been a change in the design of the RAC program so that if the provider wins on appeal, the RAC doesn’t get 

to keep the contingency payment, and that is a change from earVerDate Nov 24 2008 12:32 May 15, 2013 Jkt 037690 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-10 CHRIS
57 

lier. And I would also add that we have been asked to look into— 

well, we have work underway now that looks at what is happening 

in postpayment review and the coordination of those contractors 

that are doing that and whether there is duplication, and also to 

look at the communications that they are issuing. So we will have 

something to say on that later this year. 

Mr. GRIFFITH. Well, I really appreciate that, and I hope that you 

all will continue to work to make this an easier process for the providers that are just trying to do what they do, and that is to help 

heal people. 

That being said, let me shift gears slightly and just ask if there 

isn’t more you can do in the private sector. In our area, I represent 

southwest Virginia, which includes a big chunk of Appalachia, and 

we have had a problem with abusive drug usage, and some of the 

private companies are doing things that actually work to stop that 

such as they have one they call the lock-in program where if somebody is abusing, they don’t stop giving them drugs if they need 

help but they don’t let them go from doctor to doctor; they are 

locked in. Can we do things like that to try to look and see what 

the private sector is doing like the lock-in program? And there are 

others that I have here but my time is running out. 

Dr. BUDETTI. We have been looking at what the options are because we agree that where there are problems such as the ones 

that you mentioned, we should look to do the most we can. I will 

say that the constraints that we have, certain rules that do or do 

not apply in the Medicare program, we may have different options 

in terms of what we can pursue. I don’t know if you have looked 

at this or not. 

Ms. KING. We have actually looked at it and we have made recommendations that CMS consider that, and I think their response 

back to us has been that they believe there are some legal restrictions. 

Mr. GRIFFITH. Well, let us just say you are at the right place to 

get those legal restrictions changed, and if you need something that 

helps catch the bad guys but makes it easier on the health care 

providers, we would be glad to oblige. 

Mr. PITTS. The Chair thanks the gentleman. The gentleman 

yields back. The Chair recognizes Ms. Ellmers, the gentlelady from 

North Carolina, 5 minutes for questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to the 

panel. 

I have a couple of questions for you, and I am probably going to 

run out of time, so I would ask that I be able to submit some of 

my questions to you and that you would be able to give me a written response within a reasonable amount of time. 

Dr. BUDETTI. Absolutely. We would be delighted to do that. 

Mrs. ELLMERS. Wonderful. Well, let me start off with one question, and Ms. Yocom, I think this question is best suited to you, but 

feel free for anyone to answer. 

Back in 2008, when Congress passed Section 1940 as amended 

to the Social Security Act, Section 1940 required that the Department of Health and Human Services, through CMS, to ensure that 

each of the 50 States implement an electronic verification system 

for their Medicaid programs to ensure current and future beneVerDate Nov 24 2008 12:32 May 15, 2013 Jkt 037690 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-10 CHRIS
58 

ficiaries meet the eligibility standards to qualify for assistance. My 

question for you is, since that time, being the 5 years that have 

passed now, how many States have fully implemented this program? 

Ms. YOCOM. I may have to provide that for the record. We did 

do work looking at that for long-term care eligibility, and I believe 

it wasn’t all States yet. 

Mrs. ELLMERS. OK. Well, my understanding based on the information that I have, is that there is one State out of 50 that has 

put this in place, and that is the State of Florida. That is an incredible amount of time for this process to not have been put in 

place, and for me in North Carolina, this is significant. Why is it 

important to us? For every day that the electronig asset verification 

system is not in place in my home state of North Carolina, our 

state loses $275,000. At this point, 5 years in the process, this 

should have been put in place. So I guess I would ask, what is 

standing in the way? What possible reason could there be that only 

one State has fully implemented this process? 

Ms. YOCOM. Again, we will provide additional for the record, but 

I do believe that a lot of it is around data systems and Medicaid 

and the need for them to be upgraded and improved. 

Mrs. ELLMERS. OK. Well, my next question, I am going to shift 

gears a little bit here, and Dr. Budetti, this might be a question 

best suited for you. In the durable medical equipment competitive 

bidding process, the number of audits has increased dramatically. 

I have a number of 140 in 2010, up to 4,199 in 2012. That is a significant number of audits. Now, the audits themselves are basically 

giving that facility 45 days to report all information to basically 

show medical necessity, and obviously their payment or actually 

taking back the payment would be based on that information. Having been a nurse for over 20 years, I know working in a physician’s 

office that you are dependent upon that particular physician’s office 

to provide that information and then the facility or the company 

that has provided the durable medical equipment is incumbent to 

report the information to you. In the current state of health care 

with fewer physicians, and physicians having to decrease their 

overhead, that is a big problem. What are you doing today to help 

decrease this administrative cost to these durable medical equipment companies and to physicians who are also facing this burden? 

Dr. BUDETTI. As you know, Congresswoman, durable medical 

equipment has been an area that has been subject to serious fraud 

in the past. It is one of the highest risk areas. 

Mrs. ELLMERS. But sir, if I could interject—— 

Dr. BUDETTI. But I will say—— 

Mrs. ELLMERS. One of the issues that we were delineating here 

is between improper payments and fraud. A clerical error involving 

a signature, a date or, an order, is simply not fraud. So having 

identified that already, how could a company be required to send 

back reimbursement, or a physician’s office be required to send 

back reimbursement, and then have to go into an appeal process 

that could take up to 14 to 24 months to recoup that payment? 

Isn’t that a little excessive? 

Dr. BUDETTI. So if there is a specific circumstance that you would 

like us to look into to get the details, I would be delighted to do 

59 

that. I can tell you that this is an area where we do need to be 

sure that the durable medical equipment has been appropriately 

ordered by someone who is qualified to order within the Medicare 

program and that there is documentation for that. That is the legal 

requirement. If there is an individual circumstance that appears to 

be somewhat of, you know, a problem, why don’t you contact us 

and we will be delighted to get that information from you and—— 

Mrs. ELLMERS. We will definitely do that. 

Dr. BUDETTI. —we will let you know where things stand. 

Mrs. ELLMERS. I am over my time, so thank you very much. 

Dr. BUDETTI. You are welcome. 

Mrs. ELLMERS. I thank the chairman for indulging me. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from Texas, Mr. Hall, 5 minutes for questions. 

Mr. HALL. Thank you, sir. 

Mr. Budetti, you mentioned the Recovery Audit Contractors, the 

RAC, how you are expanding that program into Medicaid, and I appreciate the fact that you and all the money you saved the government, all the fraud that they detect, and I see you as necessary 

with the abuse that is abound, and I have kind of a follow-up question to Dr. Christensen and Counsel McKinley. 

I have a company in my district that has been accused of owing 

multiple millions of dollars back to the government because RACs 

claimed that some of the services they provided were unnecessary, 

just some of the services. They are now working with CMS on a 

payment plan that they can afford if they ever get in front of a 

judge, and lawyers—and I also note that RACs are paid on commission. Is that correct? 

Dr. BUDETTI. The RACs are paid on a contingent-fee basis, yes, 

sir, so they only get to—— 

Mr. HALL. Well, you know, that is one of the things that kind of 

got lawyers in trouble and probably brought about the tort reform, 

that they would file cases with little merit but an insurance company would pay it to save money by paying it and not having to 

go to court. And it has brought a lot of criticism for lawyers. I am 

a lawyer but I remember a story, if I might tell it. You know, in 

Orlando, if you have gone there, you land in an airplane and then 

you get on a train and you go on it to where the tickets are made 

there, Orlando, and going there the doors will close on you if you 

are not careful, and just before they closed one time, a guy 

hollered, I want you to know that I am a lawyer and just got my 

degree last Monday night, and then the doors closed and they went 

on down the tracks. Somebody said, I hate lawyers, they are all 

geeks, and another guy in the crowd said, I resent that. He said 

well, I am sorry, I didn’t mean to offend you. He said I am not a 

lawyer, I am a geek. 

Something brought about bad things in the tort reform. Sometimes you know we do that. So I guess what I want to really ask 

you about, you acknowledge that part of your role is to strike an 

important balance to protect beneficiary access to necessary health 

care services and reduce the administrative burden on legitimate 

providers—I like that—while ensuring that the taxpayer dollars 

are not lost to fraud, waste and abuse, and I certainly support that. 

But what are some specific, concrete steps that CMS could take to 

60 

work with legitimate providers who may inadvertently find themselves ensnared by some of these antifraud initiatives? I think 

there is a huge distinction that should be made between a provider 

who is committing fraud, for example, billing for services that 

weren’t rendered, and just plain making a mistake, and that is the 

situation I have in East Texas where they have been called upon 

to make payments that they are unable to make now, and if they 

are not able to get to the legal service that can’t reach them for 

over a year, they have nothing to do but to shut their doors, and 

they provide very wonderful services to people and they might have 

made a mistake but they need a way to pay their out of it or prove 

that they didn’t make a mistake. And since you all are paid on 

commission, you are going to be filing those. I don’t say that you 

just file anything that comes in the door but if you don’t file, you 

are on a commission basis, you don’t make any money if you don’t 

file. Do you think this is the best way to pay these contractors? 

Dr. BUDETTI. Sir, the contingent-fee approach, of course, is a 

statutory requirement of the program. 

Mr. HALL. I know you didn’t devise it, we devised it, but what 

do you think about—— 

Dr. BUDETTI. But I will say that as I said before, about all of our 

programs, we want to get it right, and I think that one of the 

things that we are doing is greatly increasing our feedback to providers about exactly what the findings from the RAC program and 

what steps they can take to assure that they have the appropriate 

procedures in place in their billing and appropriate documentation 

and appropriate site of service so that we are giving them feedback. 

We are giving them comparative reports. We are giving them indications of what the RACs are finding and what the underlying data 

are behind what the RACs are allowed to look at by CMS. So we 

agree with you. We want the outreach to be even more successful 

in terms of educating the provider community, and we also want 

to be responsive to any specific problems like that and so again, sir, 

if there is something, a specific issue that you would like us to look 

into, we will be happy to do that, but we are building as much feedback as we can to try to make sure the program works as well as 

it can. 

Mr. HALL. But the alternative is to go to the courthouse, and 

these people can’t get to the courthouse for a long time because of 

the loads of a particular area, the courts. So maybe I would like 

to talk to you sometime about that. 

My time is over. I thank the chairman. 

Mr. PITTS. The Chair thanks the gentleman, and that concludes 

the first round of questioning. We will go to one follow-up per side. 

Dr. Burgess, you are recognized 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

I think anyone who has watched this hearing this morning gets 

a sense of the enormous amount of time involved in all of these 

things, and what people have a hard time understanding is why it 

does take so much time. It takes the Government Accountability 

Office a little over a year to do a study and to deliver that back 

either to the legislative branch, where then it takes us time to 

come up with a legislative fix, or to the agency, and we see 3 years 

into the signing of the Affordable Care Act into law one out of 

61 

seven of the antifraud provisions have actually been enacted, not 

to say that you are not working on the others but 3 years does 

seem like a long time frame, and I don’t know what can be done 

to accelerate the process. I know when GAO gets a request from 

us, they want to do a good job. It does take time but somehow we 

need to make this all work and work to the extent that we are not 

just delivering money to organized crime. 

Let me just ask one last question, Dr. Budetti. To what extent 

are HHS and CMS using commercial public record database services such as those used by banks and retailers to verify the identity 

of providers and beneficiaries before claims are paid? 

Dr. BUDETTI. So we have put into place and are building a system that will be even more extensive than it has been in the past 

in terms of getting access to a variety of databases such as the ones 

that you refer to in order to verify the provider and supplier information and to identify them. That is part of the Automated Provider Screening System capabilities that we are continuing to build 

out, and it will allow us to look not just at licensure and Social Security death files and other things but also at a wider range of 

databases that we will have access to and the system is being used 

in specific ways right now and it will be phased in as the core way 

of enrolling providers. So on the enrollment and on the revalidation 

side, we are very definitely moving in that direction and we have 

already made a great deal of progress. 

Mr. BURGESS. I assume at some point in the future it is going 

to be linked to payments and billing as well. 

Dr. BUDETTI. The Fraud Prevention System and the Automated 

Provider Screening System are specifically designed to be able to 

interact and talk to each other, if you will, so that the information 

we get from the one side can feed into the other side, and so yes, 

that is exactly the way that this is intended to operate. 

Mr. BURGESS. Again, credit card companies figured this out 25 

years ago, and it seems like we ought to be farther along than we 

are now. 

Thank you, Mr. Chairman, for calling the witnesses. I will yield 

back my time. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the Ranking Member, Mr. Pallone, for a follow-up. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I wanted to ask Ms. King, we have heard in the past recommendations that CMS pilot or adopt certain technologies like 

smart cards, and I think Mr. Shimkus actually mentioned this. 

Since much of GAO’s work centers around making sure that the 

government is prudently spending taxpayer dollars, I would like to 

ask you from the GAO perspective, what questions should CMS be 

asking before embarking on any activity that would give tens of 

millions and even billions perhaps of dollars to a handful of companies in one industry to create this technology? What would you recommend? 

Ms. KING. Mr. Pallone, we have actually been asked to look into 

smart cards, and we have a request in-house that we hope to start 

soon, and I think from that, we should be able to answer some of 

those questions like what are the costs and benefits, what are the 

risks, what are the downsides to this. Because, you know, right 

62 

now, as you know, Medicare has a paper card that displays the Social Security number, and we have recommended in the past that 

that be taken off of there, and CMS has estimated about $800 million to do that. We don’t think that that estimate was credible and 

we asked them to do another one, but certainly any smart card effort would cost much more than replacing a paper card. So you are 

raising very legitimate questions, and we will be looking into it and 

advising both CMS and the Congress, we hope later this year. 

Mr. PALLONE. Thank you. 

Can I ask Dr. Budetti, is there anything else that the committee 

or Congress should do to help you in your ongoing efforts or activities, if you just wanted to comment in general? 

Dr. BUDETTI. So Mr. Pallone, I appreciate the question and I 

have to say that we very much appreciate the support that the 

Congress has given us, and this is something that I think everybody agrees is important and so we will be delighted to continue 

to work with all the members on any ideas or any potential improvements that might come up. But we very much appreciate the 

support and the interest that is being shown in fighting fraud, 

waste and abuse because we all agree, this is a very important aspect of these programs, so thank you, Mr. Chairman, and thank 

you, Mr. Pallone. 

Mr. PALLONE. I thank you and the whole panel, and I yield back, 

Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. The Chair thanks 

the panel for you testimony, for answering questions. It has been 

very informative. And at this time we will dismiss panel one and 

call panel two to the witness table, and I would like to thank the 

second panel for agreeing to testify before the subcommittee today, 

and I would like to quickly introduce our second panel as they 

come to the table. 

First, Mr. Darrell Langlois, Vice President of Compliance, Privacy and Fraud at Blue Cross and Blue Shield of Louisiana, and 

Mr. Thomas Green, Managing Partner of Greene LLP. Again, 

thank you all for coming. We have your prepared statements and 

they will be made a part of the record. 

Mr. Langlois, we will begin with you. You are recognized for 5 

minutes to summarize your testimony. 

STATEMENTS OF DARRELL LANGLOIS, VICE PRESIDENT, COMPLIANCE, PRIVACY AND FRAUD, BLUE CROSS AND BLUE 

SHIELD OF LOUISIANA; AND THOMAS M. GREENE, MANAGING PARTNER, GREENE LLP 

STATEMENT OF DARRELL LANGLOIS 

Mr. LANGLOIS. Thank you, Mr. Chair, Ranking Member Pallone 

and subcommittee members. I am Darrell Langlois, Vice President 

of Compliance and Privacy and Antifraud Activities with Blue 

Cross and Blue Shield of Louisiana. It is my pleasure to be here 

today to talk about a very important issue, and as I listened to the 

testimony and the conversation leading to this point, I want to tell 

you that health care fraud has far more reaching implications than 

simply the money and the dollars that are taken out of our system, 

and I would like to emphasize my testimony today on the fact that 

63 

many times and at an alarming rate, we find that the health care 

fraud that takes place is beyond the dollar and it is impacting the 

patients, you know, your family, my family in ways that are unmentionable, and that I through the quality of care that is received 

that ultimately results in patient harm. 

In my 20-plus years of being in this field, working both nationally and locally, I can tell you I have been increasingly alarmed at 

what I have personally seen in my own State in cases that I have 

worked personally. These are not anecdotes. These are not stories 

read in the Wall Street Journal. These are stories and cases that 

I have worked personally, and it alarms me and concerns me, and 

I hope we talk a little bit about that today. 

My testimony is going to touch two broad topics: first, what my 

organization has done in this regard, and second, how the Affordable Care Act’s MLR provisions are serving to limit and hold back 

some of the investment that has taken place in the past in respect 

to health care fraud. 

First, as far as my organization, we have structured a threepoint strategy. It has evolved in the 20 years that I have been responsible for health care fraud at my organization, and is currently 

in this format. First, we believe that data is at the foremost and 

the forefront of what we must do. The implications, the indications 

and the analysis that must be done through data is apparent and 

foremost. The technology that is needed to ensure that we are successful in almost every turn in this regard is growing and evolving 

and some of it is there and available for us but we do need to see 

improvement in that area and we need to spend money in that 

area and we need to increase resources in that area to do some of 

the things that I think Representative Burgess and others have 

talked about in relation to other industries, how they have been 

more timely in that respect. 

The second is public and private partnerships. I have been fortunate to work very closely with the law enforcement entities in my 

State. I could name names and go on and on. But we have been 

one of two plans around this country that has been successful and 

be included in the government’s HEAT cases there in the State of 

Louisiana, and that is a direct result of our willingness to work 

hand and hand with our public partners in this health care fraud 

fight, and we think that needs to continue. 

Finally, prepay is an avenue in which we must continue to follow. The pay-and-chase model has long been gone, long deemed unsuccessful, and I am proud and appreciative of the comments I 

have been hearing today, that that is something that no one is considering to be a success and no one is considering to be a strategy 

on a go-forward basis. We must keep the dollars out of the hands 

of those who are willing to defraud our system, and the best way 

to do that is to never pay the dollar in the first place on a prepay 

basis. 

The second part of my testimony is to address the MLR provisions of the Affordable Care Act. Today, as we understand it, only 

the recovery portions of what a private payer is able to recover are 

provided to us as a benefit in that calculation. As we have just 

said, prepay is where the strategy needs to be and where the focus 

needs to be. So to have a calculation that focuses on an antiquated 

64 

or towards a strategy that no one wants to employ anymore seems 

to be something that we ought to consider changing. In that regard, 

we would offer that we broaden the perspective of what is allowed 

in this fight against health care fraud to something that is more 

than recoveries. 

Also, again, as I started my testimony, I mentioned to you that 

my alarming concern that I have seen in my 20-plus years of this 

has been around the quality-of-care issue. I can tell you about cases 

where patients have died. I can tell you about cases where I have 

spoken to family members who have had their family members irreparably harmed physically as a result of what physicians or other 

professionals have chosen to do in the name of seeking money. 

That is something that comes about through investigations and not 

solely in the quality improvement area, and I would encourage 

strongly that the committee and Congress consider that those are 

the things that improve our system and should be accounted for in 

our Medical Loss Ratio. 

That concludes my comments, and I will be prepared for any 

questions you may have. 

[The prepared statement of Mr. Langlois follows:] 

65 


80160.029

Fostering Innovation to Fight Waste, Fraud and Abuse in Health Care 

by 

Darrell Langlois 

Vice President of Compliance, Privacy, and Frand 

Blne Cross and Blue Shield of Lonisiana 

for the 

House Energy and Commerce Committee 

Subcommittee on Health 

February 27, 2013 
66 


80160.030

I. Introduction 

Chainnan Pitts, Ranking Member Pallone, and members of the subcommittee, I am Darrell 

Langlois, Vice President of Compliance, Privacy, and Fraud for Blue Cross and Blue Shield of 

Louisiana. I have over 20 years of experience in fighting health care fraud, both locally and 

nationally. I sit on the board of directors of the National Health Care Anti-fraud Association and 

the Blue Cross and Blue Shield Association National Anti-fraud Advisory Board. Additionally, I 

am a member of the Health Care Fraud Prevention Partnership that was created by Health and 

Human Services Secretary Kathleen Sebelius and Attorney General Eric Holder. Blue Cross and 

Blue Shield of Louisiana has long been a leader in the fight against health care fraud as 

evidenced by their support of the investigations office and investment in technology to identify 

such fraud. Further, we have worked closely with the State legislature to craft legislation that 

places Louisiana in the forefront of this fight. 

I appreciate this opportunity to testify on the strategies Blue Cross and Blue Shield of Louisiana 

has developed and implemented to prevent and detect health care fraud. Recognizing that fraud 

has far-reaching implications both for health care costs and quality, we are continually 

developing new and innovative strategies to identify fraud and halt practices that lead to 

substandard care - including the delivery of inappropriate or unnecessary services that may hann 

patients. These fraud prevention and detection programs are part of our broad-based strategy for 

improving health outcomes and achieving the optimal use of health care dollars on behalf of the 

enrollees we serve. 

Our testimony focuses on two broad topics: 

• The specific initiatives we have developed and implemented to fight health care fraud to 

improve quality and to prevent health care dollars from being wasted. 

• The importance of recognizing, under the regulations for the new medical loss ratio (MLR) 

requirements, that fraud prevention programs playa key role in advancing quality 

improvement. 

II. Our Programs to Prevent and Detect Health Care Fraud 
67 


80160.031

Blue Cross and Blue Shield of Louisiana recognized the need to fight health care fraud in 1990 

and dedicated an office for this purpose at that time. Since, we have continuously worked to 

improve our strategies based on national and local trends and data. Our number one strategy is 

the use of data to filter out those who defraud and abuse the system. We have utilized a peer 

comparison fraud management system by IBM since 1995 and have built numerous cases with 

evidence from this system. Claims are run through this system and can be measured against any 

number of over 3000 algorithms that are built specifically to identify possible fraud and abuse. 

Our second strategy is to partner with federal and local law enforcement as we believe strongly 

that a collaborative effort is far more productive than an isolated approach. We have been one of 

only two health care plans in the country to be included in the government's HEAT (Health Care 

Fraud Prevention Enforcement and Action Team) cases. We believe that those who defraud the 

system should be held accountable and not simply slapped on the wrist. This is why we work so 

closely with law enforcement. Finally, we hold to a strategy that we identify as many fraudulent 

claims as possible before they are paid. Recovering funds lost to fraud on a post-payment basis 

is largely unsuccessful. This approach requires sophisticated technological approaches that have 

not been widely used to date. 

With these successful strategies, we have consistently outperformed national averages and 

gained national respect among our peers and government counterparts. However, the greatest 

achievement is when these strategies serve to identify and stop patient harm cases. We have 

identified, built and assisted in the successful prosecution of numerous cases that have stopped 

those who were physically harming patients in the name of money. 

Many of the most egregious professionals who are willing to harm patients in the pursuit of more 

money are not halted in the traditional quality improvement programs. There are many reasons 

for this and often those who run such quality improvement programs reach out to the 

investigations office for assistance when they identify issues not already identified by fraud data 

research. Quality programs view claim data as largely accurate and truthful, thus patient harm is 

not easily identified with these assumptions. Anti-fraud techniques first work with the 

assumption that not all data is accurate and truthful and should be challenged for veracity and 

appropriateness. This is often where patient harm cases come to light as the investigations office 

has the ability to look deeper into the reality of what the data tells us. Quality improvement 

programs are not designed to challenge and further investigate what otherwise appears to be 

accurate and appropriate. 

2 
68 


80160.032

Our office has recently helped identity and stop patient hann cases involving cardiologists, 

internal medicine practices, and neurosurgeons. In these cases, patient harm ranged from death 

to irreparable hann to critical physiologic functions. Two of these cases resulted in professionals 

serving significant criminal sentences and a third resulted in the suspension of his license to 

perfonn surgery pending a review of his peers. 

III. Recognizing the Role of Fraud Prevention in Quality Improvement 

Under the Affordable Care Act (ACA), health plans are required to meet annual medical loss 

ratio (MLR) requirements of80 percent in the individual and small group markets and 85 percent 

in the large group market. This means that health plans must spend a specified percentage of 

premium revenue on either reimbursement for clinical services provided to enrollees or 

"activities that improve health care quality." Health plans are required to pay rebates to enrollees 

if they fail to meet the MLR requirements. In addition to having broad concerns about the 

unintended consequences of these MLR requirements, we have specific concerns about the fact 

that the regulations for implementing this ACA provision do not properly recognize the 

important role that fraud prevention programs play in advancing quality improvement. 

At Blue Cross and Blue Shield of Louisiana, our anti-fraud initiatives are strongly focused on 

preventing fraud before it takes place, rather than "paying and chasing" after the fact. This 

approach serves as a powerful deterrent in preventing not only inappropriate billings, but more 

importantly, preventing inappropriate delivery of unnecessary or inappropriate services from 

occurring in the first place. The success of these fraud prevention initiatives is evidenced by the 

fact that government programs now are incorporating these innovative private sector practices. 

Given the role that health plan fraud prevention and detection programs have played in 

establishing effective models for public programs, improved data for law enforcement, and 

successful prevention efforts, we believe policymakers should reevaluate the treatment of such 

programs by the regulation for implementing the MLR requirements. Our specific concern is 

that the MLR regulation only provides a credit for fraud "recoveries" (i.e., funds that were paid 

out to providers and then recovered under "pay and chase" initiatives). It does not include the 

cost of developing and administering anti-fraud programs that detect fraud before claims are paid 

and in the process protect consumers, purchasers, and patients. As a result, the regulation 

3 
69 


80160.033

penalizes health plans for committing resources to innovative programs that prevent and detect 

fraudulent conduct or prevent the delivery of unnecessary services or care. 

By taking this approach, the MLR regulation's treatment of fraud prevention expenses works at 

cross purposes with efforts by the federal government to emulate successful private sector 

programs. Instead of encouraging fraud prevention, the regulation threatens to stifle the next 

generation of private sector innovations that will be helpful to the federal government in the 

future. This approach also is at odds with the broad recognition by leaders in the private and 

public sectors that there is a direct link between fraud prevention activities and improved health 

care quality and outcomes. 

We urge Congress and the Administration to reconsider the treatment of fraud prevention 

programs under the current MLR regulations. Excluding these expenses, which help to improve 

quality, is contrary to the health reform goals of developing a system that delivers consistently 

high quality care, optimizes the use of health care resources, and enhances anti-fraud cooperation 

between private and public entities. 

IV. Conclusion 

Thank you again for the opportunity to testify on these important issues. We appreciate the 

committee's interest in strengthening efforts to prevent and detect health care fraud, and we 

stand ready to provide further information to assist in this effort. 

4 
70 

Mr. PITTS. The chair thanks the gentleman, and Mr. Greene, you 

are recognized 5 minutes for opening statement. 

STATEMENT OF THOMAS M. GREENE 

Mr. GREENE. Thank you, Chairman Pitts, Ranking Member 

Pallone and members of this committee for inviting me to testify 

on innovations to fight fraud, waste and abuse. My name is Tom 

Greene, and my testimony today relates to my experience representing whistleblowers under the False Claims Act for more than 

20 years. The vast majority of my False Claims Act cases have 

been in the health care industry. With respect to pharmaceutical 

marketing fraud litigation, I have also represented private payers 

including health insurance plans, Taft-Hartley funds and self-insured employers. 

I am pleased to be here today to speak about the False Claims 

Act, which is an excellent model of how the United States can foster innovation in fighting health care fraud, waste and abuse. 

The False Claims Act is a dynamic fraud-fighting machine which 

encourages the participation of insiders with knowledge of fraud 

and the management. That is really good for everyone. And because whistleblowers can pursue cases, even when the United 

States does not intervene, the False Claims Act can foster new 

ways of fighting health care fraud. 

When I first filed what was the first off-label promotion False 

Claims Act case in 1996, the government attorneys were not convinced of the viability of that theory and declined to intervene. But 

once that case was settled in 2004, it set a precedent that kicked 

off $14 billion in other recoveries. All told, since 1986, more than 

$24 billion has been recovered by the government for health care 

fraud cases under the False Claims Act, thanks largely to courageous whistleblowers who often risk their own financial security. 

Today I make three recommendations to improve the effectiveness of the False Claims Act. One is to clarify the pleading standard for such cases because many courts have applied the standard 

for common-law fraud. A second would be to do more to encourage 

States to enact false claims acts. And there is one more thing that 

Congress could do by addressing one impediment to investigation 

and pursuit of False Claims Act cases that attorneys in my position 

find particularly troubling. Although we are working on behalf of 

the United States when we pursue these cases, it is often very difficult to gain access to data from CMS. Such data can be critical 

to proving a False Claims Act case because many whistleblowers 

are in marketing, sales or servicing, and it is unusual for them to 

already have the data in hand when they come to the attorney. 

Some of these cases fail not because the fraud is uncertain but because we can’t get CMS data. Frankly, it is ridiculous not to facilitate our access to CMS data when billions of taxpayer dollars hang 

in the balance. 

Marketing fraud by pharmaceutical companies accounts for more 

than half of the health care money recovered under the False 

Claims Act, especially through off-label promotion of drugs. False 

or fraudulent off-label promotion is a serious problem which costs 

taxpayers billions of dollars through the payment of increased 

health insurance premiums, and this serious problem needs to be 

71 

addressed by Congress, in part because private payers don’t have 

a fraud-fighting tool as potent as the False Claims Act. 

Now, I believe that fraudulent pharmaceutical marketing can be 

stopped before it starts in five ways. First, fraudulent pharmaceutical marketing could be deterred by giving private payers a 

right of action because currently they are left to use ill-fitting options like RICO or patchworks of State laws. Second, marketing 

fraud can be deterred by giving teeth to the FDA Amendments Act 

clinical trial registration requirement. Third, it could be deterred 

by threatening the forfeiture of Hatch-Waxman Act patent extensions for particular drugs. As you know, these extensions are granted in part for cooperation with the FDA approval process. When 

drug companies do end runs around the FDA through off-label promotion, drug companies should forfeit these extensions. Fourth, 

pharmaceutical marketing fraud could also be deterred by making 

sure that pharmaceutical executives have some skin in the game 

personally. And lastly, I would like to recommend that Congress 

eliminate the incentives for medical device manufacturers to play 

games with the 510(k) approval process, which could be done by 

amending the Social Security Act to forbid reimbursement of offlabel medical devices except in certain circumstances. 

I would be happy to expand on any of these issues that I have 

commented on this morning, and there is additional detail in my 

written testimony. 

I would like to thank you, Chairman Pitts and Ranking Member 

Pallone, for this opportunity to testify, and I am glad to respond 

to any questions that you might have. 

[The prepared statement of Mr. Greene follows:] 

72 


80160.034

Amendment to the Testimony of Thomas M. Greene, Managing Partner, Greene LLP 

Before the House Energy & Commerce Subcommittee on Health 

Hearing on Fostering Innovation to Fight Waste, Fraud, and Abuse in Health Care 

February 27, 2013 

Before the submission of this amendment, my testimony did not directly address 

the 2007 FDA Amendments Act, which strengthened and clarified the language in the 

1997 FDAMA which created a national clinical trials registry. However, FDAAA only 

requires some, but not all, clinical trials to be registered, certain designs are not 

included, and the legislation focuses on approved drugs, biologics and devices. Of 

course, if properly enforced, this legislation would address some of the concerns I have 

discussed (Part II Recommendation 1, pages 27-30). It is clear, however, that the spirit 

as well as the letter of the registry provisions in FDAAA have been subverted, and 

stronger measures are necessary to accomplish the goals of that legislation.1 

The reporting of results for registered clinical trials lags far behind the target 

100% compliance rate, subjecting the medical literature to "selective outcome bias" and 

other reporting biases. A 2012 study in the British Medical Journal concluded that only 

22 % of clinical trials registered on clinicaltrials.gov report the results of the clinical trial 

within one year, despite the FDAAA requirement to do SO.2 With regard to Phase IV 

post-marketing studies, which are the studies most relevant for health care fraud with 

1 Many of the issues I discuss in this amendment are also addressed in an editorial published in the 

Journal of the American Medical Association by Kay Dickersin and Drummond Rennie. lAMA. 

2012;307(17): 1861-M. 

2 Prayle, AP, Hurley MN, Smyth AR. Compliance with mandatory reporting of clinical trial results on 

ClinicaITrials.gov: cross sectional study. 8M]. 2012;344: d7373. 

{OOO09544 1 1 
73 


80160.035

regard to FDA approved drugs, only 31 % of registered studies reported results.3 Only 

last week, the former president of Pfizer Global Research and Development admitted 

these statistics are accurate.4 

FDAAA includes a $10,000 a day fine for failure to report results to the 

clinicaltrials.gov registry,S but it is clear that few fines, if any, have actually been levied. 

The fines themselves may not be a sufficient incentive to comply with the letter of 

FDAAA, considering that the fine is a pittance compared to the possible profits a 

company might enjoy by flouting the regulations.6 If the law specified that failure to 

make a timely filing of negative results would be deemed to constitute scienter in any 

subsequent fraud litigation by a private party, it is likely that pharmaceutical companies 

and their researchers would comply with FDAAA much more frequently. 

Moreover, many clini.cal trials are still not registered with clinicaltrials.gov at all. 

In many cases, this is because the registry requirement only requires filing of results of 

clinical trials with at least one site in the United States. But most of the major 

pharmaceutical companies are multi-national and even those that have no overseas 

3Id. 

4 Last week, on Forbes Magazine's website, Jo1m LaMattina, the former president of Pfizer Global 

Research and Development, admitted that BM]' s statistics were correct and that the reporting of results of 

clinical trials "is lagging." http://www.forbes.com/sitesfiohnlamattina/2013(02(14/bad-pharmamaybe-but-goldacres-selective-use-of-data-is-wrong/ (page 2 of comments, last accessed February 26, 

2013). 

521 V.S.c. § 333(£)(3)(B). 

6 "[T]he fine for noncompliance is $10,000 a day, which sounds spectacular, until you realise that it's only 

$3.5 million a year, which is chickenfeed for a drug bringing in $4 billion a year. And what's more, no 

such fine has ever been levied, through the entire history of the legislation." Goldacre, Ben. (2013). 

Bad Pharma. New York, NY: Faber and Faber, Inc. pp. 53-54 

(00009544 ) 2 
74 


80160.036

presence still license and sponsor drugs developed in foreign countries. If a drug is to 

be marketed in the United States, then all clinical trials studying its safety and efficacy, 

not just those conducted in the United States, should be registered and results 

reported. Pharmaceutical research performed overseas is, in most cases, just as relevant 

to safety and efficacy issues as tests conducted in this country. 

In addition, there is a significant difference between the simple registration of 

a trial, with or without the posting of summary results, and making the underlying 

patient-level data available so that the results can be verified and practitioners, 

decision-makers and researchers can draw their own conclusions from the full data 

set. I have dealt with this issue first hand; in the Neurontin litigation, we received full 

data sets from Pfizer's clinical trials through discovery. Because of this, we were able to 

get to the truth about Neurontin's efficacy for off-label indications. As an example, we 

were able to show that a clinical trial highly touted by Pfizer was irremediably 

compromised by the unblinding of patients. Without access to the underlying data, this 

sort of analysiS would not have been possible. It should not require litigation for 

physicians to be able to analyze a study's purported results. Underlying data from 

clinical trials is also helpful to meta-analyses run by organizations like the Cochrane 

Collaboration, and withholding some data while releasing others can affect their 

conclusions immeasurably. Again, I saw this in Neurontin, where Pfizer's withholding 

of data from the Cochrane Collaboration obfuscated several of their reviews. As a 

result, the medical community and the patients they treat suffered. 

[00009544 } 3 
75 


80160.037

For all of these reasons, I renew my recommendation that a stronger push be 

made to require the registration of all clinical trials at their early stages, so that the 

"selective outcome reporting" variety of publication bias no longer plagues the medical 

literature. Greater transparency is needed, so that physicians and medical researchers 

can accurately gauge the accuracy of the conclusions drawn by studies' authors. A bill 

proposed in the 112th Congress, the TEST Act proposed by Congressman Markey, 

would require that any trial that could be used to support an application for FDA 

approval be registered in Clinicaltrials.gov and that the results be reported in a timely 

fashion. 7 I urge this subcommittee to reconsider the proposals within that bill, and to 

otherwise revisit the issues raised by the inconsistent registration and reporting of 

clinical trials. 

7 Drazen, Jeffrey M. Transparency for Oinical Trials - the TEST ACT. N Engl J Med 2012; 367:863-64. 

"The TEST Act expands reporting requirements under existing federal law by broadening the scope to 

include all interventional studies of drugs or devices, regardless of phase (Le., including phase 1) design 

(Le., including single-group trials), or approval status (Le., making no distinction between trials of 

approved vs. unapproved products); requiring all foreign trials that are used to support marketing in the 

United states to be registered; mandating results reporting for all trials within 2 years after study 

completion (including trials of unapproved drugs or devices); and extending results reporting to include 

the deposition of consent and protocol documents approved by institutional review boards." 

{OOO09544 } 4 
76 

Mr. PITTS. The chair thanks the gentleman. I will now begin 

questioning and recognize myself 5 minutes for that purpose. 

Mr. Langlois, your testimony describes many of the important investment plans to prevent fraudulent payments and improve quality so you can attract customers. I would like to ask you to expound 

on this some more. If a plan expands its provider network based 

on their customers’ desire to receive care from a particular doctor 

or physician practice, does the MLR classify the associated cost as 

an administrative expense and doesn’t this penalize a plan for expanding consumer choice in doctors and providers? 

Mr. LANGLOIS. It is my understanding that that is an administrative expense, and as such would have to factor into the overall 

cost of our products and the overall cost of health care, which 

would serve as the—as the costs go higher would serve to limit 

choices for our customers and those who participate in the program. 

Mr. PITTS. Now, plans often work to ensure that health care 

practitioners are properly credentialed to provide care. Are these 

quality-enhancing activities punished by the MLR rule? 

Mr. LANGLOIS. Again, it is my understanding that those are considered administrative costs, which do not benefit that calculation 

and would serve to discourage to the extent it doesn’t make reasonable sense to the organization, would discourage them from participating in that activity at some reasonable level. 

Mr. PITTS. So it would penalize a plan for ensuring credential 

providers are serving their customers? 

Mr. LANGLOIS. Yes, sir. 

Mr. PITTS. Now, these are necessary and non-negotiable costs 

that we all want to encourage health plans to incur, and clearly are 

not the kinds of costs that Congress wants to curtail. Network expansion and credentialing providers are critically important and 

beneficial to customers, to consumers, and clearly enhances value 

for their premium dollars. I am not sure, by why is HHS classifying 

these expenses as administrative when they are expended specifically to improve the quality of a network that a patient can access? 

Mr. LANGLOIS. I am afraid I don’t have the answer to that question as I did not participate in the process. 

Mr. PITTS. Now, in your testimony, you write that ‘‘The MLR regulations’ treatment of fraud prevention expenses works at cross 

purposes with efforts by the Federal Government to emulate successful private sector programs.’’ Could you expound on these comments? 

Mr. LANGLOIS. Sure. As an organization under the current MLR 

calculation chooses to spend money or no spend money as it works 

today, if they choose to spend money and invest in this critical 

function, every dollar they spend works against them in the calculation of the MLR. Therefore, a choice has to be made according 

to many factors by those who have the opportunity to spend that 

money and they have to make it in spite of the fact that it is going 

to work against them in the MLR calculation knowing that it could 

be better for the organization and its members to go ahead in the 

money. My recommendation, of course, would be to take away that 

cross-purpose and make it a dual win-win. Let us not only spend 

the money in a manner that is beneficial to the system and for our 

77 

customers but let us also let it work for us during the MLR calculation, which serves to better our system overall. 

Mr. PITTS. Now, there remains significant interest in Congress 

about antifraud efforts in Medicare and Medicaid. We just heard 

from the Administration that fighting fraud in Medicare was a key 

goal of the Administration. Yet the MLR regulation excludes health 

plan investments and initiatives to prevent fraud from those activities that improve health care quality. Does this create a perverse 

incentive in the commercial insurance market to tackle fraud on 

the pay-and-chase side rather than the prevention side just at a 

time when CMS is stepping away from the pay-and-chase model? 

Mr. LANGLOIS. It certainly seems that way. Again, as I testified 

a few minutes ago, recovery processes are the old way of doing 

things, and for the calculation of the MLR to only afford a benefit 

in that regard does seem to be outdated and something that should 

be seriously considered to be changed. That is by far a method and 

an approach that my peers and this industry are going away from 

as quickly as possible for many reasons, but certainly I think that 

should change in our calculation. 

Mr. PITTS. Finally, members from both sides of the aisle have 

stated that Congress should promote policies that encourage young 

people to purchase health coverage. However, doesn’t the MRI penalize enrolling young and healthy individuals in health plans 

since doing so makes complying with the MLR standard more difficult? 

Mr. LANGLOIS. If you consider from the perspective that if the 

MLR calculation continues as it is and that continued investment 

in fraud or the lack thereof allowing fraud to further be perpetrated into larger extent, that will serve only to increase the 

overall cost of health care fraud, and we know that that is the primary factor for the young in which to engage and participate in the 

health system. So for those reasons, as you mentioned, I would say 

the answer is yes. 

Mr. PITTS. Thank you. My time is expired. The Chair recognizes 

the ranking member, Mr. Pallone, 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

A question for Mr. Langlois. You spoke in your testimony about 

concerns about the way antifraud activity is counted as part of the 

Affordable Care Act provisions for calculation of the MLR. But 

didn’t NAIC, the National Association of Insurance—well let me 

ask you this. The Administration felt like it was taking a balanced 

approach in this, giving credit for dollars recovered but not for 

fraud prevention activity, and based on information on the Blue 

Cross and Blue Shield of Louisiana Web site, it looks like your return on investment for fraud-related activity is on the order of 10 

to one. So the National Association of Insurance Commissioners, 

didn’t they support this compromise regarding fraud and abuse 

work at the MLR? 

Mr. LANGLOIS. I am not sure I understand. 

Mr. PALLONE. The NAIC, which is the National Association of Insurance Commissioners, they supported this compromise, the idea 

that—I mean, I am asking you if they did—my understanding is 

that they did—that, you know, we take this balanced approach 

where you give credit for dollars recovered but not for fraud preVerDate Nov 24 2008 12:32 May 15, 2013 Jkt 037690 PO 00000 Frm 00083 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-10 CHRIS
78 

vention activity, and my understanding is that they supported that 

balanced approach. Is that true, and is that a factor in the fact that 

you have this high return on investment for fraud-related activity? 

Mr. LANGLOIS. I think I have two responses to the question. First 

of all, I have worked somewhat with the NAIC on an unofficial 

basis. We happen to be at the same location, and a gentleman was 

speaking on this very issue, and I made the same comments that 

I am making here today to him and asked if there could be reconsideration. I am not aware and did not participate in any request 

for it to be a balanced approach and that this was the result of 

that, but I will say that in my speaking directly to the NAIC on 

this matter, I have echoed the same comments I made today. They 

seemed receptive but of course indicated that there would be have 

to be further evaluation before any changes could be made. 

As to the dollars that you reference on our Web site about our 

activities, those dollars are largely not on a recovery basis. Those 

dollars are largely saved on a prepay basis and depends from year 

to year times and cases and situations will adjust to be flexible 

from year to year but the recoveries are not solely represented by 

the number you read. Those are a function, an aggregation of all 

savings that our office works towards. 

Mr. PALLONE. Well, let me ask you this. Has Blue Cross and 

Blue Shield of Louisiana had to cut back on any of its antifraud 

activities as a result of the MLR requirements? Have you had to 

make any cutbacks? 

Mr. LANGLOIS. Could I ask you to ask the question one more 

time? I missed the first part. 

Mr. PALLONE. In other words, has Blue Cross and Blue Shield of 

Louisiana had to cut back on any of its, you know, basically reduce 

any of its antifraud activities as a result of the MLR requirements? 

Mr. LANGLOIS. You know, the word ‘‘cutback’’ would seem to—— 

Mr. PALLONE. Or to reduce. 

Mr. LANGLOIS. To reduce, and I would say that where we are, we 

have held steady. The organization has recognized since 1990 that 

health care fraud is a problem and as such its investment has held 

steady, but as I mentioned earlier—— 

Mr. PALLONE. But then you haven’t had to cut back or reduce as 

a result of that requirement? 

Mr. LANGLOIS. We have not been allowed to go forward. We have 

not cut back but we have not been allowed to move forward with 

investments that are necessary as the technology increases, and we 

have been looking at technology that is something that we believe 

is needed but has been unable t move forward at this point. 

Mr. PALLONE. I mean, I am just trying to point out that the 

NAIC, which represents the Nation’s insurance commissioners, 

agrees with the current MLR calculation with respect to fraud. 

Let me ask you one more thing. You know, I was excited to learn 

about your participation in the Health Care Fraud Prevention 

Partnership being led by the Secretary and the Attorney General, 

and are there any activities being undertaken by CMS that you 

think have been particularly helpful or supportive of your efforts? 

Let me ask you that. 

Mr. LANGLOIS. Actually, there was one initiative that I was a 

participant in with a small number of people that I looked up very 

79 

fondly and was very hopeful that the process would carry out. As 

you might imagine, there are times when CMS recognizes that a 

provider is engaged in an activity that is worthy of their attention 

and so they will place a stop-payment or a hold on that provider 

until they can better determine what is taking place. There is a ton 

of Medicare supplemental private products that are on the market 

which my organization also sells. When CMS previously was stopping these payments, we were not made aware so a payment claim 

filed by a provider may not have made its way through CMS but 

was being passed on to us as the private supplemental payer and 

we were unaware of the activity that was taking place. There was 

an initiative that was begun to where that information could be 

shared, and as a result that provider would not see payments that 

could potentially have been fraudulent either from CMS or us, and 

I was very appreciative and fond of that process. Unfortunately, I 

think at this point the process hasn’t made its way to fruition but 

we are hopeful that it will, and that was one that I very much 

looked forward to. 

Mr. PALLONE. Thank you. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the vice chair, Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman, and Mr. Langlois and 

Mr. Greene, thank you both for being here today. I appreciate your 

time spent with the committee. 

Let me ask you as a representative of a private insurance company. You have heard the discussion and the size, the number of 

dollars that are involved at CMS in fraudulent or inappropriate 

transfers of funds. Do you have anything approaching that in the 

Blue Cross Blue Shield world? 

Mr. LANGLOIS. As to an evaluation of what those numbers are? 

Unfortunately, the best measure we have at this point is, we work 

very closely with the other antifraud activities around the country, 

both on the private side, and we also recognize the CMS side, and 

we measure our success according to what we are seeing other payers execute in the antifraud world. I get asked the question a lot, 

and I know it is maybe not the greatest of answers but I will tell 

you, do we know at any particular time how many people are 

speeding down the interstate, and the answer is, we don’t, but we 

know it is happening and it is impossible to gauge that. So I don’t 

have that but I can tell you that the returns on investments that 

we have been turning in the last 20 years has not slowed down, 

has increased, and again, I would just emphasize the stories and 

the cases we are seeing around quality have really brought an 

alarming sense to us. 

Mr. BURGESS. Give us a sense of what you are talking about 

there. Can you give us an example? 

Mr. LANGLOIS. In the quality? 

Mr. BURGESS. Yes. 

Mr. LANGLOIS. Real quickly, there are three cases that recently 

resulted in the State of Louisiana. The first was a cardiologist who 

in the name of money was placing stents in patients who had no 

business undergoing a knife or any surgeries at all. We testified. 

This was a great public-private collaboration. We as victims were 

brought in this case. The government was brought as a victim in 

80 

this case. We both testified, and the cardiologist recently was ordered to head to prison just before Christmas 2012. There were 

millions of dollars involved, and as I spoke at a meeting in that 

area, I had a family member step up and said I just wanted to let 

you know that my brother was one who was unnecessarily operated 

on and was now irreparably harmed. 

This was not identified in a quality improvement program. This 

was not identified by a group of nurses who sit in the back of a 

particular area and work on a diabetic approach with someone. 

This was identified through hard-nosed investigative efforts both at 

the public side and the private side, and we brought it to bear. In 

another example, we had—— 

Mr. BURGESS. Let me stop you there for just a second, and I do 

want to hear your second example, but in the private insurance 

world, somebody is going to call a 1–800 number somewhere and 

get preauthorization for that procedure, are they not? 

Mr. LANGLOIS. Yes, and in this instance, the cardiologist was 

willing to provide the information that would make that appropriate yes answer on the pre authorization. He was capable of giving the information that made that appropriate when in fact the 

information was not accurate. He owned not only the cardiology 

clinic but he owned the lab in which those diagnostic-type studies 

were done to justify the surgery in the first place, and he forged 

that information necessary to make the surgery. 

Mr. BURGESS. Well, do you feel that that is something—I mean, 

was this just a one-off where one person is performing this or do 

you feel that there is a larger problem there? 

Mr. LANGLOIS. No, you will find if you read the literature among 

the government health care fraud and you talk to others, I believe 

previous testimony was heard by Alanna Lavelle at WellPoint. She 

spoke about cardiology and stent procedures in her world, and she 

does not do business in Louisiana, so clearly this is not a perception or a one-off situation. 

Mr. BURGESS. And what have you done as an industry to more 

carefully define and refine that so that you not only prevent the inappropriate transfer of funds but you also prevent the inapt delivery of care? I mean, basically that is up-selling someone who came 

in with a problem that was not of cardiac origin who then got a 

cardiac procedure. Am I correct? 

Mr. LANGLOIS. Correct. The use of data analysis, again, the three 

points I talked about earlier, use of data analysis, the direct collaboration with the Federal Government and reviewing things on 

a more prepayment basis in refining those. We talked about—I was 

asked the question, have we cut back. We haven’t cut back but of 

course we haven’t extended forward the way we want to. If I were 

still doing the things 20 years ago today as I was doing then, I 

wouldn’t be successful. We have had to evolve and move forward, 

and not being able to do that is some ways hurtful. 

Mr. BURGESS. Give us quickly your other example. 

Mr. LANGLOIS. Of course, this is throughout the country and 

probably throughout the world, but we had an internal-medicine 

practitioner who was willing to dole out OxyContin and various 

other controlled substances to patients despite in his own practice 

he had newspaper articles that articulated that his patients were 

81 

distributing the same drugs he was prescribing on the street yet 

he continued to prescribe those drugs. There were at least eight 

deaths associated with overdosages and other things to the point 

that one of his patients actually sold the drug to another individual, who died as a result. So it wasn’t even a patient of that doctor, yet death followed his prescription onto another unsuspecting 

individual. That individual has currently lost his license and is 

serving 16 years in federal prison, again, another collaborative effort between public and private, not identified in a quality improvement arena, rather identified in an investigation angle, but certainly taking a bad doctor out of the system that we all had to pay 

for. 

Mr. BURGESS. Thank you, Mr. Chairman. I will yield back. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentlelady, Dr. Christensen, 5 minutes for questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

Mr. Greene, I wanted to ask some questions around your testimony. Since 1986, over $35 billion, I understand, has been recovered through the False Claims Act for the government, and the majority of those recoveries come, as you have stated, as a result of 

whistleblower-initiated cases, health care-related recoveries from 

pharmaceutical companies, hospitals and clinical laboratories. Can 

you give us a few brief examples of what some of the kind of fraud 

involved were involved in those cases, and what other kind of cases 

other than the pharmaceutical, which you said represented the 

vast majority of dollars, what other kinds of cases have successfully 

returned money to the States or Federal Government? 

Mr. GREENE. I can, and I touch on this in more detail in my written testimony but I can summarize here. First, I would like to say 

that the majority of health care recoveries under the False Claims 

Act come from whistleblower-initiated qui tam cases rather than 

cases initiated by the government. Qui tam cases outnumber the 

ones initiated by the government by five to one. Health care cases 

under the False Claims Act come in many different forms. You 

might have a hospital or nursing home that up-codes claims to get 

higher reimbursements or for billing services that were not actually 

performed, testing labs cause billing for unnecessary lab tests or 

again for tests not performed. There are cases that are based on 

violation of the Anti-Kickback statute or the Stark law where physicians are getting illicit payments or benefits for lucrative self-referrals. Durable-equipment companies bill for equipment that was 

never delivered, and you can have medical supply companies that 

can be the basis for actionable fraud. One of my cases was just recently unsealed. It involves unnecessary delivery of oxygen supplies. So really, there are many different types of cases. Somebody 

usually sees this fraud occur and sometimes someone will step forward and blow the whistle. 

Mrs. CHRISTENSEN. You know, and while the False Claims Act 

specifically deals with getting money back to the government, it 

seems to me that private payers, insurance companies, employer 

benefit plans can be equally victimized by these fraudulent practices, and I think we have heard some of that already in the testimony. Can you please elaborate on how private parties are affected 

and what recourse they have at this time? 

82 

Mr. GREENE. Well, I will start off by saying private payers don’t 

have the potent tool, the False Claims Act, that the Federal Government has, but yet they can be the victim of frauds, they can be 

the victim of medical tests or products that are ordered as a result 

of kickbacks. Really, what they are faced with, the only thing they 

can rely on really are patchwork of State laws or RICO claims, and 

those are imperfect. If Congress would consider pass a private right 

of action, that might give private payers like Blue Cross sitting 

here at the table an opportunity to recover the costs that they 

spent as a result of fraud. Like I say, it has been difficult to try 

to put together a large group of health insurance plans across the 

country to bring these cases in the form of class actions. Courts are 

not always receptive to that, again, because of the patchwork of 

State laws that these claims are brought under or RICO. I think 

if we had a private right of action for third-party payers that perhaps offered double damages and an attorney fee-shifting provision, 

that would begin to give private payers the tools that they would 

need to recover some of the monies they have lost as a result of 

fraud. 

Mrs. CHRISTENSEN. Mr. Langlois, I think you have answered 

most of my questions around MLR and the public-private partnership, so I don’t know if you want to comment on the last question 

around False Claims Act not, you know, being an avenue where 

companies such as yours might be able to recover. 

Mr. LANGLOIS. It is a great question, and I appreciate you bringing it up, and I respect Mr. Greene for his attempt to benefit us. 

We identified 2 years ago in my State, particularly myself and a 

State senator of Louisiana, the need for this, and we in the last legislative session actually passed a false claim trouble damage act 

provision at the State law level that allows whenever I am a victim 

of a health care fraud to bring about damages and penalties to 

those who do such similar to the federal level. 

Now, the way it works—and I won’t belabor this point—but the 

way it works is, I retain the monies that I was a victim of and lost. 

The second and third level of payment from the trouble damage 

calculation returns to the State in its effort to fight and better fund 

health care fraud efforts. So I very much appreciate the point he 

made and I do think that there are opportunities there. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. I guess my concern relates to the lawsuit type, 

and Mr. Greene, I am going to ask you, I know you are trying to 

ferret out people who are doing things that are just fraudulent outright but don’t you think it might have a chilling effect on those 

folks who are using an off-label use in cases with patients who 

might have severe illnesses such as AIDS, rare diseases, cancer, 

etc.? Don’t you think that if you take that too far that you can actually hurt some of the patients who may need an off-label use? 

Mr. GREENE. Well, I think what you are pointing out, and I recognize and of course courts recognize that physicians have and will 

always have the right based on the exercise of their independent 

medical judgment to prescribe a drug for an off-label use. There is 

nothing wrong with that. 

83 

Mr. GRIFFITH. But here comes the question, based on your written testimony. The question then becomes, though, that as I understand your testimony, your written forms says that if a company, 

though, has a study that says you can use this for a rare form of 

cancer and that some doctors have found it successful, that they 

may then open themselves up if the pharmaceutical—because if I 

am treating somebody in Abington, Virginia, I may not know that 

somebody in California or New York was successfully using-another 

physician was using an off-label drug to successfully treat this particular condition or disease that may be very severe. How am I supposed to find that out if the pharmaceutical company is barred 

from sending out the information? 

Mr. GREENE. Well, they are not barred from sending out the information, Doctor. 

Mr. GRIFFITH. I am not a doctor; I am a lawyer. 

Mr. GREENE. Sorry. There are guidances and guidelines that 

allow the dissemination of scientific articles. What I am talking 

about is fraudulent promotion of off-label uses. What I am talking 

about is when a drug company comes up with a marketing strategy 

that is signed off by the president of the company, as was the marketing for Neurontin, that they are going to do an end run around 

the FDA approval process and they are only going to publish positive results, not negative. So we are talking about fraud. We are 

not talking about interfering with a physician’s right to prescribe 

off-label. We are not talking about a drug company’s right to disseminate truly scientific articles that talk about off-label uses provided they comply with safe harbors. 

Mr. GRIFFITH. And I appreciate that and understand the distinction. Now, as I was reading this and listening to it, one of the 

things that I noticed was, you talked about how much money was 

recovered on the Neurontin. Is that how you say it? 

Mr. GREENE. Yes, sir. 

Mr. GRIFFITH. I am just curious how many folks were negatively 

impacted. Were there deaths? Because I am not familiar with that. 

Mr. GREENE. I don’t have the—— 

Mr. GRIFFITH. Were there deaths? 

Mr. GREENE. —answer to that question. 

Mr. GRIFFITH. Do you know if there were deaths? 

Mr. GREENE. There were. 

Mr. GRIFFITH. There were? 

Mr. GREENE. There were. Keep in mind, with regard to 

Neurontin, the FDA, it was approved for adjunctive therapy for epilepsy in December of 1993, and the FDA told the company back in 

1992 when they looked at the clinical trial data that it showed that 

the subjects were suffering from depression, suicidal ideation, and 

it can lead to suicide, and the FDA told the drug company that this 

drug will have a limited widespread usefulness. But they approved 

it as adjunctive therapy for epilepsy. What did the company do? It 

turned around and it marketed it to bipolar patients. That was offlabel, and they never disclosed what the FDA had pointed out to 

them. 

Mr. GRIFFITH. So as you send out the positive and the negative? 

You are not against pharmaceutical companies sending out articles 

84 

that highlight that this might also be helpful in some other disease 

area but that, you know, here is what we have got thus far? 

Mr. GREENE. Provided they comply with the safe harbor guidelines. They can do that. They can disseminate truly scientific articles that describe accurately the results of their clinical research. 

The FDA has given them a safe harbor to do that. That is not 

fraudulent promotion. 

Mr. GRIFFITH. All right. I thank you. I have 30 seconds if anybody wants it. I yield back. 

Mr. PITTS. The Chair thanks the gentleman. The Chair thanks 

the second panel for your testimony, and I remind members that 

they have 10 business days to submit questions for the record, and 

I ask the witnesses to respond to the questions promptly. Members 

should submit their questions by the close of business on Wednesday, March 6. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:40 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

85 


80160.038

Peter Budetti's Heariug 

"Fostering Innovation to Fight Fraud, Waste and Abuse in Health Care" 

Energy & Commerce Health Subcommittee 

February 27, 2013 

Additional Questions for the Record 

The Honorable Renee Ellmers 

1. In 2008, Congress passed Section 1940 as an amendment to the Social Security Act. 

Section 1940 requires the Dept. of Health and Human Services, through CMS, to ensure 

that each of the 50 states implement an electronic asset verification system for their 

Medicaid programs to ensure current and future beneficiaries meet the eligibility 

standards to qualify for assistance. To date, only one state, Florida, has fully 

implemented the program. For every day that the electronic asset verification system is 

not in place in my home state of North Carolina, our state loses $275,000. Over 5 years, 

the cost is over $500 million to my state. As of today, 75% of states should have an 

electronic asset verification system in place. I'm deeply discouraged by the fact that this 

legislation continues to not be implemented, costing the state and federal government 

millions every day. I'd like your office to report back to this subcommittee what steps 

your agency can take to ensure full compliance with Section 1940 by the original 

deadline date of Sep. 30, 2013. 

Answer: Through FY 2012. 37 states were scheduled to implement asset verification 

system (A VS) programs. We are working with states to facilitate their compliance with the A VS 

requirement. Since all states are in the process of either replacing or modernizing their eligibility 

systems, and because eMS believes A VS would be a core component of a new eligibility 

system, we believe states can come into compliance with the A VS requirement by integrating the 

development of their A VS programs in their eligibility system upgrades. During this process, 

states will have to demonstrate their efforts to implement their systems. Specifically, states 

would necd to show that the AVS is accounted for in thc state's concept of operations and 

architectural diagrams lor a modernized eligibility system; provide a justification for why 

implementing the A VS based on the modernized platform would be more efficient and 

economical for the Medicaid program; and provide interface control documents and business 

requirements reflecting the A VS system or, at a minimum, a schedule for producing them. eMS 

has offered states technical assistance and is working with states to proactively incorporate A VS 

into their planning for the current and upcoming fiscal year. 

While the statute does not permit eMS to waive or otherwise delay the statutory requirement that 

all states implement an A VS program, the statute does provide flexibility with respect to the 

process for determining whether states are in fact in compliance with the A VS requirement. If a 

state were to take concrete steps to include the elements of an A VS in its advance planning 

documents for establishing a new eligibility determination system in preparation for 2014, eMS 

could consider such work to be a good faith effort toward compliance. 
86 


80160.039

2. Medicaid provides billions of dollars in payments to tax cheats who owe millions in 

unpaid taxes. According to a GAO investigation, almost 7,000 Medicaid providers in 

just three states owed $791 million in unpaid federal taxes, but received $6.6 billion in 

Medicaid reimbursements in just one year. For example, one nursing business owes 

over $3 million in unpaid taxes and has collected $200,000 from the Medicaid program. 

The business's owners - a married couple - "purchased a new home while their 

business was accumulating debt. The Iuternal Revenue Service (IRS) had to refer the 

case to the Department of Justice. What is eMS doing to stop this fraud and abuse? 

Answer: We are working with the Department of the Treasury and the IRS to explore 

appropriate ways to enhance collection of unpaid Federal taxes from Medicaid providers in ways 

that are administratively feasible, cost effective, and will not inappropriately impact the 

structural relationship states have with Medicaid providers. 

Federal funds are provided to states at a specific Federal medical assistance percentage (FMAP) 

rate through a grant award process, which provides authority for states to draw down Federal 

matching funds to match states' Medicaid expenditures. Under this process, the Federal 

Government does not have a direct relationship with providers nor does it pay providers directly. 

Each state establishes and maintains the direct relationship with the Medicaid providers that 

participate in the state's Medicaid program, and make the payments to providers participating in 

the state's Medicaid program. As such, CMS cannot preclude a state from allowing a provider to 

participate in the state's Medicaid program. However, CMS is committed to supporting our state 

partners in their Medicaid program integrity efforts and working collaboratively with states to 

identify issues and providers for audit. 

3. We understand that we need to foeus more efforts on true fraud, waste and abuse, but 

we also hear that many providers are being harassed by more aggressive audits and 

auditors. eMS itself admits in its 2014 eallietter that PBMs are auditing for routine 

clerical and administrative errors and not true fraud. How does eMS distinguish 

between true fraud and abuse and administrative errors? 

Answer: We released the proposed 2014 call letter on February 15,2013. We will accept 

comments on the proposed call letter until March I, 2013, and will release the final call letter on 

April 1,2013. 

We understand your concern that aggressive audits could be overly burdensome for providers 

and suppliers, and try to maintain a balance between ensuring that our payments go to the 

appropriate person, for the appropriate service, at the appropriate time, while also ensuring that 

we do not distract providers and suppliers from their important responsibility - providing quality 

care to Medicare beneficiaries. We are working with the provider and supplier community to 

explore ways to streamline the process and minimize the impact of multiple audits. CMS does 

have certain limitations to protect providers from overly burdensome audits. For example, 

Recovery Auditors may only request a certain number of records from a particular provider in a 

time period, depending upon the size of the provider. Moreover, ZPICs and RACs coordinate 

their audit target areas in an effort to minimize burden and duplication. 

2 
87 


80160.040

4. When coding a healing shoe or walking boot, instead of only coding for the healing shoe 

or walking boot, suppliers and providers are instructed to code for liners within the 

boot or shoe, as well as buckles and or straps / fasteners on the boot. This coding 

practice was also used in the fabrication of shoe orthotics. Instead of coding only the 

shoe orthotic as one product, suppliers and providers are instructed to code the various 

layered materials that were used to fabricate thc orthotic. This is just one example of 

Medicare abuse within the health care systcm, but this example compounded 

throughout the country certainly coutributes to the massive waste within the system. 

What is eMS doing to prevent this? 

Answer: The durable medical equipment, prosthetic. orthotic, and supply (DMEPOS) payment 

policy is discussed in local coverage determinations (LeDs) and Pricing Data Analysis and 

Coding (PDAC) articles. It is sometimes necessary for providers and suppliers to bill separately 

for certain DMEPOS products because the items may have both covered and non-covered uses, 

as defined by the Medicare benefit category for orthoses, and must be coded based on the 

beneficiary'S condition. There are system edits in place to prevent payment for certain 

component items that should not be paid separately from the base orthosis, even if additional 

codes for those items appear on a claim. Also, billing ofreplacement components is not payable 

at initial issue of a base orthosis, or when provided on a routine basis, without regard to whether 

the original item is worn out. 

5. I heard recently from a constituent who had a patient at his clinic that had not filled a 

prescription that had been prescribed chronically to her for months. He thought she 

was being non-compliant and asked her she had not filled it. She said that she has 

several months stock of this prescription at home already, and said that she had told 

her mail order (closed door) pharmacy that she did not need this prescription, since she 

had tcmporarily stopped nsing the injection. But the mail order (closed door) pharmacy 

kept sending the prescription three months supply at a time. The cost ofthis 

prescription per month to Medicare is approximately $3400. Is eMS aware of such 

waste? What is eMS doing to prevent this waste? 

Answer: CMS has received complaints that beneficiaries have had medications delivered via 

mail order pharmacy services after the medications had been previously discontinued or were 

otherwise unwanted and unnecessary at the time of delivery. Once the prescription is delivered, 

phannacies are unable to return the medication to stock and generally do not reverse the claim if 

the patient does not want the prescription. Consequently, automatic delivery practices are 

potentially generating significant waste and unnecessary additional costs for beneficiaries and 

the Part D program overall. 

Consistent with regulatory requirements on Part D sponsors to control fraud, waste and abuse 

and in order to ensure that Medicare beneficiaries receive only new prescriptions and refills that 

are requested, CMS proposed in the draft Call Letter published February 15 that Part D sponsors 

should require their network retail and mail phannacies to obtain patient consent to deliver a 

prescription, new or refill, prior to eaeh delivery. CMS believes unintended waste and costs 

could be avoided if pharmacies con finned with the patient that a refill, or new prescription 
88 


80160.041

received directly from the physician, should be delivered. Such confirmation would be 

unnecessary if the beneficiary personally initiates the refill or new prescription request. This 

recommendation would not affect retail refill reminder programs that require the patient to pickup the prescription. 

While CMS is proposing this policy in the draft Call Letter for coverage for 2014, CMS is 

strongly encouraging sponsors to make this a requirement of their network pharmacies that offer 

such automatic refill programs for 2013. CMS believes shipment of unwanted medications is not 

only wasteful, but also a source of significant beneficiary aggravation and a financial imposition 

that can negatively affect enrollee satisfaction with the plan. 

6. I hear from a constituent recently about diabetic testing supplies. He hears the 

complaint regularly that his patients have too many diabetic testing supplies and the 

mail order diabetic supplier keep sending them even when they've asked them to stop. 

Is CMS aware of this waste? What step are you taking to prevent this? 

Answer: CMS continues working to identify suppliers who are improperly billing Medicare for 

diabetic testing supplies. CMS encourages beneficiaries to call the Fraud Hotline of the HHS 

Office ofinspector General at 1-800-HHS-TIPS (1-800-447-8477) if they receive diabetic 

supplies that they have not ordered. In addition, CMS encourages beneficiaries to refuse the 

delivery and/or return the supplies to the sender and keep a record of the sender's name and the 

date the items were returned. 

Beginning July 1,2013, Medicare will be contracting with a limited number of National Mail 

Order suppliers to furnish diabetes testing supplies to beneficiaries as part of the competitive 

bidding program. In addition to saving the Medicare program and beneficiaries money. the 

program will apply higher standards to suppliers and result in increased oversight and monitoring 

of this area of the program. 

7. There has been a great deal of concern over the use of the Social Security Number for 

identifying Medicare beneficiaries. Additionally, many technical experts indicate that 

the use of a single identifier like a Social Security Number is technologically insufficient 

to protect patients' personal information and identity. What specifically is eMS doing 

and what is the timeframe for implementation to implement a more sophisticated 

patient data machining strategy? 

Answer: CMS shares your concern regarding the risk and potential harm of identity theft for 

Medicare beneficiaries and works to educate beneficiaries about steps they can take to protect 

themselves and to minimize the unnecessary use of the Social Security number in our 

communications with beneficiaries. CMS is in the process of conducting a rigorous cost estimate 

for options to remove the Social Security number from the Medicare beneficiary card. including 

for the extensive systems changes that would be required for any transition to a new, non-SSN 

based identifier. CMS has begun exploring the potential for new technologies for beneficiary 

identification. including smart cards that use multiple authentication factors, such as an 

additional personal identification number or biometric identification, such as fingerprints. 

However, there are costs associated with such technologies, and use of biometrics has additional 

4 
89 


80160.042

operational and cost implications, including for other agencies such as SSA. Therc are also 

concerns about operationalizing under the current beneficiary enrollment processes and how 

requiring multi-factor authentication would impact beneficiaries' access to medical care. CMS is 

always interested in the potential for new technologies to improve our ability to detect and 

prevent fraud, including ideas regarding implementation of a more sophisticated patient data 

matching strategy. 

8. How will the nationwide adoption of electronic health records and health information 

cxchange capability have on the ability to help minimize Waste, Fraud, and Abuse in 

Medicare and Medicaid? 

Answer: Electronic Health Records (EHRs) allow health care providers to record patients' 

health care or treatment infonnation electronically, instead of using paper records. Ifproviders 

use EHRs, they can join a network to securely share your records with each other. EHRs can 

help lower the chances of medical errors, eliminate duplicate tests, and may improve overall 

quality of care. EHRs can help providers have the same up-to-date infonnation about a patient's 

conditions, treatments, tests, and prescriptions. Through better electronic tracking and health 

care coordination, EHRs can minimize waste within Medicare and Medicaid. 

9. Recently there has been speculation in the media that Electronic Health Records 

(EHRs) have contributed to inappropriate over-coding and over-billing, especially in 

the area of Evaluation and Management Services. (I) Will not the nationwide adoption 

of the International Classification of Diseases ICD-IO coding system contribute 

substantially to Waste, Fraud, and Abuse prevention and detection? (2) What is the 

Administration doing to help providers, especially small providers move toward the 

new ICD-IO environment to which the nation is committed? 

(1) Will not the nationwide adoption of the International Classification of Diseases ICD10 coding system contribute substantially to Waste, Fraud, and Abuse prevention 

and detection? 

Answer: A successful transition to ICD-JO is an important step in improving our Nation's 

health care system. On October I, 2014, the ICD-9 code sets used to report medical diagnoses 

and inpatient procedures will be replaced by lCD-I 0 code sets. The transition is occurring 

because ICD-9 codes have limited data about patients' medical conditions and hospital inpatient 

procedures. lCD-9 is 30 years old, it has outdated and obsolete terms, and is inconsistent with 

current medical practices. Also, the structure ofICD-91imits the number of new codes that can 

be created, and many ICD-9 categories are full. 

An important benefit of the transition to ICD-lO is that the coding system could help provide 

better data to prevent and detect health care fraud and abuse. ICD-IO provides much more 

specific reporting on diagnoses and procedures. Sectors of the body are catalogued 

meticulously, making it more difficult to submit duplicate claims, and making it easier to spot 

deceptive activity. 
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80160.043

(2) What is the Administration doing to help providers, especially small providers move 

toward the new lCD-tO environment to which the nation is committed? 

Answer: CMS has been actively working with all segments of the industry, including small 

providers, to raise awareness of the transition to ICD-IO. Many industry leaders such as health 

plans and hospital networks are already well into various phases of implementation. As with any 

transition. there will be a learning curve. CMS is continuing its outreach and education efforts 

and has developed a comprehensive implementation strategy to include training and technical 

assistance; forums for best practices; and research to assess ICD-J 0 readiness. CMS has also 

developed implementation handbooks tailored to small provider groups and hosted ongoing 

technical assistance trainings. Many resources are available to help small providers on CMS' 

ICD-IO website for providers: 

http://www.cms.govlMedicare/Coding/ICDI0/ProviderResources.html 

The Honorable Jim Matheson 

l. Can you discuss how this Fraud Prevention System is generating savings, as well as ifit 

is reducing administrative burdens on legitimate providers who are doing the right 

thing? 

Answer: The Fraud Prevention System (FPS) is a key element in our comprehensive approach 

to combating fraud. waste. and abuse. For the first time in Medicare's history, all Medicare feefor-service claims are being streamed through a single fraud prevention screening system, the 

FPS, before they are paid. Since June 30. 2011, every claim, more than one billion, has been 

screened and the FPS has achieved early results that prove the value of this innovative approach 

to fraud prevention. As the fraud detection computer models within the FPS grow in 

sophistication, the results will continue to improve. 

In its first year, the FPS generated leads for 536 new fraud investigations, provided new 

information for 51l pre-existing investigations, and triggered thousands of provider and 

beneficiary interviews to verify that legitimate items and services were provided to Medicare 

beneficiaries. Within the first year of implementing the FPS, CMS stopped, prevented, or 

identified an estimated $115.4 million in payments. Based on investigations triggered by FPS 

leads CMS stopped payments worth an estimated $16.2 million using auto-denial and 

prepayment edits in the first FPS implementation year. For more information on our first year of 

FPS implementation please see our Report to Congress available at: 

http://www.stopmedicarefraud.gov/fraud-rtcI2142012.pdf 

We try to maintain a balance between ensuring that our payments go to the appropriate person, 

for the appropriate service, at the appropriate time, while also ensuring that we do not distract 

providers and suppliers from their important responsibility providing quality care to 

beneficiaries. We are working with the provider and supplier community to explore ways to 

streamline the process and minimize the impact of multiple audits. 

6 
91 

Æ 


80160.044

2. Is this similar to what you are doing with the Fraud Prevention System? Are there 

other health sectors where similar proposals are being employed or would it be 

beneficial ifthey were employed? 

Answer: The Fraud Prevention System (FPS) is a key element in our comprehensive approach 

to combating fraud. waste, and abuse. For the first time in Medicare's history, all Medicare feefor-service claims are being streamed through a single fraud prevention screening system, the 

FPS, before they are paid. We are engaging the private sector through our Healthcare Fraud 

Prevention Partnership. The goal of the partnership is to improve fraud detection and prevent 

payment of fraudulent health care billings by finding and stopping schemes that cut across public 

and private payers. The partnership will enable those on the front lines of industry anti-fraud 

cfforts to share information more easily with investigators, prosecutors, policymakers and other 

stakeholders. It will help law enforcement officials to more effectively identify and prevent 

suspicious activities and use the full range of tools and authorities provided by the Affordable 

Care Act and other essential statutes to combat and prosecute illegal actions.