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63–186 PDF 2011

S. HRG. 111–785 

EFFECTIVE STRATEGIES FOR PREVENTING HEALTH 

CARE FRAUD 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

OCTOBER 28, 2009 

Serial No. J–111–59 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

EDWARD E. KAUFMAN, Delaware 

ARLEN SPECTER, Pennsylvania 

AL FRANKEN, Minnesota 

JEFF SESSIONS, Alabama 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

NICHOLAS A. ROSSI, Republican Chief Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Leahy, Hon. Partick J., a U.S. Senator from the State of Vermont .................... 1 

prepared statement .......................................................................................... 100 

Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama .......................... 3 

WITNESSES 

Corr, Bill, Deputy Secretary, U.S. Department of Health and Human Services ......................................................................................................................... 4

West, Tony, Assistant Attorney General, Civil Division, U.S. Department 

of Justice ............................................................................................................... 6 

QUESTIONS AND ANSWERS 

Responses of Bill Corr to questions submitted by Senators Coburn and Specter .......................................................................................................................... 28 

Responses of Tony West to questions submitted by Senators Coburn, Specter 

and Grassley ......................................................................................................... 44 

SUBMISSIONS FOR THE RECORD 

American Orthotic and Prosthetic Association, Tom Fise, Executive Director, 

Alexandria, Virginia, statement .......................................................................... 52 

Carlin, David M., Kensington, Maryland, statement ........................................... 54 

Corr, Bill, Deputy Secretary, U.S. Department of Health and Human Services, statement ...................................................................................................... 81 

Silverman, Charles J., Director, Government Affairs and Regulatory Policy, 

Quest Diagnostics, Madison, New Jersey, letter ............................................... 103 

West, Tony, Assistant Attorney General, Civil Division, U.S. Department 

of Justice, statement ............................................................................................ 105 

(1) 

EFFECTIVE STRATEGIES FOR PREVENTING 

HEALTH CARE FRAUD 

WEDNESDAY, OCTOBER 28, 2009 

U.S. SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:03 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Patrick J. Leahy, 

Chairman of the Committee, presiding. 

Present: Senators Leahy, Cardin, Klobuchar, Kaufman, Specter, 

Franken, Sessions, Hatch, Grassley, and Cornyn. 

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. 

SENATOR FROM THE STATE OF VERMONT 

Chairman LEAHY. Good morning. Today the Committee will 

refocus on the problem of health care fraud. I think we all know 

we are engaged in a great national debate about health care reform. I would hope that those who, like myself, are in favor of the 

public option or those who feel that they should oppose the President on health care, whatever thing, I would hope both sides would 

agree on one issue: that health care fraud is an enormous problem 

and is something that cannot be tolerated. Whether it is Federal 

dollars or private dollars, fraud is draining billions and billions 

away from providing effective health care. We have to work together to ensure that we have tough and effective measures in 

place to prevent health care fraud and provide accountability. 

I am pleased that we have with us today Deputy Secretary Bill 

Corr from the Department of Health and Human Services and Assistant Attorney General Tony West from the Department of Justice. Both are distinguished public servants; both are heavily engaged in the Government’s efforts to combat health care fraud. We 

know health care fraud is wrong. It is insidious. It not only pushes 

up our health care costs and wastes taxpayer money, but also puts 

lives in danger. 

As health care reform moves through the Senate, I want to make 

sure we do all we can to tackle the fraud that could undermine efforts to reduce the skyrocketing costs of health care. 

The scale of health care fraud in America today is staggering. According to conservative estimates, about 3 percent of the funds 

spent on health care are lost to fraud; that is more than $60 billion 

dollars a year. In the Medicare program alone, the General Accounting Office estimates that more than $10 billion was lost to 

fraud last year. 

2 

And there are specific incidents that illustrate the problem even 

more clearly than these astronomical numbers. In April, Quest 

Diagnostics settled a $300 million lawsuit filed by California businessman and biochemist Thomas Cantor. Quest continued to sell a 

certain kind of medical test kit from 2000 to 2006 despite complaints of inaccurate results. Now, the tests put the health of hundreds of thousands of dialysis patients at risk. Even though it was 

putting them at risk, the company continued to sell it. They were 

making a lot of money. The fact that people may die or have their 

health seriously injured did not bother them. They just made 

money. And the settlement covers claims that the bad tests led to 

unnecessary surgeries and overtreatment which risked causing 

deadly diseases. 

Just last month, the Department of Justice settled a case against Pfizer for $2.3 billion, including more than $1 billion in recovered 

losses—the largest health care fraud settlement in the Department’s history. Pfizer had promoted drugs for uses and at dosages 

that the Food and Drug Administration specifically declined to approve for safety reasons. Pfizer made a lot of money, but they 

placed millions of Americans at risk for serious health problems including heart attack, stroke, and pulmonary embolism. 

That case was exposed by a whistleblower, and several whistleblowers who have come forward to expose outrageous instances of 

fraud are here today. 

Incidentally, I want to applaud Senator Grassley who has 

worked so hard in bipartisan efforts on whistleblowers over the 

years. I have been pleased to join him in those. 

Bruce Boice, a former sales representative for the pharmaceutical 

company Cephalon, blew the whistle at great cost to his career and 

livelihood on a similar scheme of marketing drugs for purposes for 

which they were not approved on which Cephalon made money. He 

helped the Government recover $425 million. Chuck Bates and 

Craig Patrick, two former employees of the medical device company 

Kyphon, are also here today. They blew the whistle on a practice 

aimed at inflating the bills sent to Medicare for a surgical procedure and helped the Government recover $86 million. 

To stop the drain on our health care system caused by these 

types of fraud, we must make anti-fraud enforcement stronger and 

more effective. A lot has been done, but more can be done. 

Much attention has been devoted to fraud in the Medicare and 

Medicaid programs. This fraud is significant. It undermines taxpayers, doctors and patients, and we have to do everything we can 

to stop it. But it is important to remember that health care fraud 

does not occur solely in the public sector. Private health insurers 

also see billions of dollars in fraud. That fraud is often harder for 

the Government to track. Private companies have less incentive to 

report it, but it is a grave problem that we need to address. 

I am heartened by the significant and impressive steps the administration has taken to step up health care fraud prevention and 

enforcement. I am also pleased with the real progress represented 

by the anti-fraud provisions of the Finance and HELP Committee 

bills. I was glad to contribute to those efforts. But we have to make 

sure we are all working on that. I have been working closely with 

Senator Kaufman and Senator Specter and others to develop imVerDate Nov 24 2008 10:09 Jan 13, 2011 Jkt 063193 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\63186.TXT SJUD1 PsN: CMORC
3 

portant additional anti-fraud measures. We will be introducing a 

bill soon that we hope will add to the already impressive anti-fraud 

efforts we are seeing this year. 

We all agree that reducing the cost of health care for American 

citizens is a critical goal of health care reform. I hope we can find 

a way and a consensus in this area. We will hear the efforts of the 

Justice Department and the Department of Health and Human 

Services, and I think we are going to see what we can do in Congress to make sure that we help. One thing to unite all of us, we 

should be against crime, and fraud in the medical areas is crime. 

Senator Sessions. 

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM 

THE STATE OF ALABAMA 

Senator SESSIONS. Thank you. I would sincerely say that I appreciate what you are doing here today because I think it has potential to help us combat fraud. 

We have a plan before us to massively increase the Federal involvement in health care. In 2007, we spent nearly $2.3 trillion on 

health care. According to the Centers for Medicare & Medicaid 

Services, by the year 2016 health care spending will reach $4.3 trillion, or 19 percent of gross domestic product. Medicare and Medicaid are considered one of the largest purchasers of health care 

really worldwide. In fact, over 13 percent of the Federal budget is 

allocated to Medicare alone. No wonder health care fraud is viewed 

as a lucrative business for criminals. Wasn’t it Willie Sutton—they 

said, ‘‘Why do you rob banks? ’’ And he said, ‘‘That is where the 

money is.’’ And there is certainly a lot in health care. Estimates 

place the fraud from 3 to 10 percent of total health care costs. 

When I was United States Attorney, we formed a medical care 

fraud task force, and I believe the estimates then were as high as 

10 percent fraud. When you consider how much money is being 

spent, if you could reduce that in any significant way, it could be 

some of the biggest savings we could ever achieve in health care 

in America. 

I would cite this cautionary fact. Periodically, Federal officials 

and others launch efforts against Medicare fraud, and I see the 

numbers still are a 3- to 10-percent rate out there, so it would suggest that we maybe have not been as effective as we should be, 

gentlemen, and hopefully we can talk about that. 

A study conducted by George Washington University Medical Center pointed out that fraud cost Americans approximately $220 

billion in 2007 alone. Other numbers are not that high, but that 

is a dramatic figure. And I am sure they had some basis for making that estimate. 

CBS’ ‘‘60 Minutes,’’ I have already had a lot of calls over the 

show that aired Sunday night about some of the fraud in South 

Florida and other problems. They attributed $60 billion in cost to 

American taxpayers for Medicare fraud alone. 

And I agree with you, Mr. Chairman, that whistleblowers can be 

a critical part of discovering frauds that may be of a massive nature, and I know you and Senator Grassley have really advocated 

this, and others have, and I think it is a legitimate part of our enforcement effort. 

4 

According to the FBI, defrauding Medicare is simple. A criminal 

simply has to ‘‘rent a cheap storefront office, find or create a front 

man to get an occupational license, bribe a doctor or forge a prescription pad, and obtain the names and ID numbers of legitimate 

Medicare patients.’’ That is a statement that may be oversimplified, but it is, in fact, happening today, as we know. 

Given the massive number of claims and the Government’s inability to monitor these claims, Medicare has basically evolved into 

a pay-and-chase system—pay the claim and then later look to 

chase down the improper payments. For some companies, that may 

work. For others who are fly by-night, it does not. If Government 

has difficulty combating fraud in the current program, we know 

that if we expand those programs, it will be even greater. 

So I look forward to working with you. I believe the private sector has an interest in containing this fraud also, that partnerships 

can be reached, and that is what we tried to achieve between the 

various Federal agencies on a collaborative basis along with private 

insurers and others who are taking losses, too. And they have computer programs and other ways to identify red flags, identify areas 

where claims exceed rationality or are disproportionate in others, 

and those can be the basis for commencing investigations. 

I would like to see how you are doing on that. I think we need 

to do better, and thank you, Mr. Chairman. 

Chairman LEAHY. Thank you very much. 

Our first witness is William Corr. He is the Deputy Secretary of 

the Department of Health and Human Services. He was confirmed 

unanimously by the Senate on May 6th. Before joining the Department, Mr. Corr served as Executive Director of the Campaign for 

Tobacco-Free Kids. He has also spent significant time working on 

Capitol Hill, most recently as chief counsel and policy director for 

Senator Tom Daschle, previously in senior positions with Senator 

Howard Metzenbaum, Congressman Henry Waxman, and others. 

He has had prior experience at the Department of Health and 

Human Services where he served as chief of staff to Secretary 

Donna Shalala and before that as Deputy Assistant Secretary for 

Health as counselor to the Secretary. He received his undergraduate degree from the University of Virginia and his law degree 

from Vanderbilt University School of Law. And, of course, Mr. Corr 

is known to many of us. Many of us, myself included, have known 

him for years. 

We are delighted to have you here. 

STATEMENT OF BILL CORR, DEPUTY SECRETARY, U.S. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Mr. CORR. Thank you, Chairman Leahy, for those gracious remarks, Senator Sessions and Members of the Committee. Thank 

you for the opportunity to testify today about the joint DOJ–HHS 

Task Force on Health Care Fraud and, in particular, Project 

HEAT, which was created by Secretary Sebelius and Attorney General Holder on May 20. 

The President’s creation of a Cabinet-level task force demonstrates his commitment to addressing fraud in our Federal 

health care programs. Our joint efforts have sped up prosecutions 

and increased recovery of funds lost to fraud. 

5 

As has been noted by both the Chairman and the Ranking Senator, health care fraud is a very serious challenge to the integrity 

of our Medicare and Medicaid programs. Our response to it needs 

to be strong and aggressive, and it will be, because we are in a better position today than ever before to fight health care fraud. 

The collaboration between our two Departments has resulted in 

the use of new methods of data analysis that allows us to learn the 

profiles of criminals entering the programs, including the regions 

of the country where they are most prevalent and the types of payments that are most vulnerable to fraud. Using this new information, our strike forces are more effective, and we can pursue policy 

changes and develop innovative methods of preventing fraud. 

For example, when the strike force in Miami focused on fraudulent claims for durable medical equipment and the Centers for 

Medicare & Medicaid Services instituted more rigorous reviews of 

claims and providers, the result was an over 60-percent reduction 

in DME claims in South Florida. That represents a decrease in 

claims of almost $2 billion in 1 year alone. 

Fraud and abuse is not limited to Federal health insurance programs, as has been noted. Health care fraud is a national problem 

requiring collaboration among public and private health organizations. Our colleagues at DOJ tell us that they see the same fraud 

schemes in the private sector that we are seeing in Medicare and 

Medicaid. Criminals who commit health care fraud are becoming 

more sophisticated and are often parts of organized crime enterprises. 

The best efforts of the public and private sectors will be required 

to substantially reduce health care fraud. Therefore, our joint 

Health Care Task Force is planning and will soon convene a national summit on health care fraud. We plan to invite participants 

from every affected group, including private insurers, beneficiaries, 

law enforcement, and providers. The summit will bring fresh ideas 

and collaborations that we believe will result in more effective 

methods of preventing, detecting, and prosecuting fraud. 

The collaboration between our Departments is primarily funded 

through the Health Care Fraud and Abuse Control Program, 

known as HCFAC. Since its inception, HCFAC-funded activities 

have resulted in the return of over $13 billion to the Medicare 

Trust Fund. The investigative and prosecutorial activities performed by the HHS Office of Inspector General and the Department of Justice with HCFAC resources have returned well over 

dollar per dollar for all the expenses, as high as $8 to $1 for every 

investment in 2008 alone. 

The success of the HCFAC program would not have occurred 

without the outstanding efforts of the HHS Office of the Inspector 

General, which has provided essential investigative and auditing 

services, and the work of the Department of Justice with its prosecutors. 

Experts agree that the most effective way to eliminate fraud is 

to stop it before it starts. Some of the most important work of the 

HEAT task force and its partners is focused on enhancing the 

fraud prevention programs in Medicare and Medicaid. 

Our focus on durable medical equipment is an example. DME 

fraud appears to be the most prevalent type of criminal activity in 

6 

Medicare and Medicaid, particularly in hot spots like South Florida. Using authorities provided by Congress, we are requiring DME 

providers to post surety bonds; be certified by nationally recognized 

accreditation organizations, which includes onsite review of the 

supplier; and submit to new rigorous competitive bidding processes. 

This unprecedented level of pre-enrollment screening will be complemented by onsite inspections of new providers and greater scrutiny of suspicious claims. DME is the first step in our strategy to 

add more rigor to the fraud prevention efforts across the board. 

CMS is instituting other prevention measures as well. For the 

first time in Medicare’s history, by year’s end CMS will bring all 

Medicare claims data together into one centralized data repository. 

CMS, the Inspector General, and the Department of Justice strike 

forces will be able to use sophisticated new technology to review 

claims data for aberrations anyplace across the country. 

In summary, Chairman Leahy, we are adding resources to existing programs and evaluating funding needs for the future. We are 

coordinating efforts across the Government, led by the joint DOJHHS HEAT task force, with great initial success. HHS is building 

new prevention programs to stop fraud before it happens and using 

new analytical techniques to identify and then strike against individuals and criminal organizations that have targeted Medicare 

and Medicaid. 

While this task ahead of us is enormous, the commitment is very 

strong, and with the continued support of the President, this Committee, and the entire Congress, and joining forces with the private 

sector, we can continue our success in the war against health care 

fraud. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Corr appears as a submission for 

the record.] 

Chairman LEAHY. Thank you very much, Mr. Corr. What I am 

going to do is have you both testify and then we will open it to 

questions. 

Tony West is the Assistant Attorney General for the Civil Division in the Department of Justice. He was confirmed to that position on April 20th. But prior to his time in the Civil Division, Mr. 

West worked as a partner at Morrison & Foerster, LLP, where he 

represented individuals and companies in civil and criminal matters. Mr. West also spent 5 years working as Assistant U.S. Attorney for the Northern District of California, 2 years working as a 

special assistant for the Justice Department on crime policy issues, 

and served as a State Special Assistant Attorney General in California. He earned his bachelor’s degree from Harvard University, 

and his J.D. from Stanford University Law School, where he was 

elected president of the Stanford Law Review. 

Mr. West, delighted to have you here. 

STATEMENT OF TONY WEST, ASSISTANT ATTORNEY GENERAL, 

CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE 

Mr. WEST. Thank you, Mr. Chairman. 

Mr. Chairman, Senator Sessions, and members of the Committee, thank you for inviting me here today to testify on the Department of Justice’s efforts in fighting and deterring health care 

7 

fraud. Under the leadership of the Attorney General, Deputy Attorney General David Ogden is supervising the Department’s day-today efforts to marshal our resources in combating health care 

fraud, recovering Medicare funds stolen through fraud and abuse, 

and coordinating with the Department of Health and Human Services. The Deputy Attorney General very much wanted to be here 

today, but was unable to attend because of a prior commitment. He 

asked me to relay to you the important work that DOJ is doing in 

close coordination with HHS and our other law enforcement partners to deter, detect, and defend against health care fraud and to 

express how important this issue is to both him and the Attorney 

General. 

Mr. Chairman, every year hundreds of billions of dollars are 

spent to provide health security for American seniors, children, and 

the disabled. While most medical or pharmaceutical providers are 

doing the right thing, we know that when Medicare and Medicaid 

fraud occurs, it costs the American taxpayers billions of dollars. 

While there is no official Federal estimate of the level of fraud 

in Medicare or Medicaid or the health care sector more generally, 

external estimates project the amount at 3 to 10 percent of total 

spending, and this fraud affects public and private insurers alike. 

It is those wrongdoers who we must stop. Those billions represent health care dollars that could otherwise be spent on services 

for Medicare and Medicaid beneficiaries, on seniors, children, and 

families, but instead are wasted on fraud and abuse. This is unacceptable. 

We have a duty to our citizens who receive treatment paid for 

by the Medicare, Medicaid, and other Government programs to see 

to it that the integrity and quality of their care is not undermined 

by fraud, because when Medicare and Medicaid fraud occurs, it can 

corrupt the medical decisions health care providers make with respect to their patients and thereby put the public health at risk. 

The Department of Justice recognizes both the urgency and the 

need to recover funds that are lost to fraud as well as to ensure 

that such fraud does not reoccur. That is why the Department of 

Justice, through its Civil, Criminal, and Civil Rights Divisions, 

along with the U.S. Attorneys’ Offices and the FBI, have prioritized 

much of our enforcement efforts on protecting the integrity of 

health care that is provided to patients. 

However, we must also recognize that we cannot combat this 

problem alone. Coordination across agencies is an integral part of 

preventing and prosecuting health care fraud, which is why Secretary Sebelius and Attorney General Holder announced in May 

2009 the creation of the Health Care Fraud Prevention and Enforcement Action Team, or HEAT. And with the creation of the 

HEAT team, as Deputy Secretary Corr put it, fighting Medicare 

and Medicaid fraud became a Cabinet-level priority for both DOJ 

and HHS. 

HEAT, through its emphasis on agency coordination and resource 

and data sharing, is helping to solidify a partnership between DOJ 

and HHS begun by the Health Care Fraud and Abuse Control Program, or HCFAC. 

Since HCFAC’s inception, our two Departments have returned 

more than $15 billion to the Federal Government, of which over 

8 

$13 billion went back to the Medicare Trust Fund. These efforts 

have resulted in more than 5,600 criminal convictions for health 

care fraud offenses, with the average return on the public’s investment being $4 for every $1 spent. 

During fiscal year 2008, the Department of Justice’s vigorous ef- forts to combat health care fraud accounted for more than $1 billion in civil settlements and judgments. During that same time period, the Department opened 849 new civil health care fraud matters and filed complaints or intervened in 226 civil health care 

fraud cases. During that same time period, Federal prosecutors 

filed criminal charges in more than 500 health care fraud cases involving charges against nearly 800 defendants and obtained 588 

convictions for health care fraud offenses. And they opened over 

950 new criminal health care fraud investigations involving more 

than 1,600 defendants. 

Now, in addition to strengthening exist programs to fight illegal 

conduct, we have also worked cooperatively to prevent health care 

fraud before it happens, through increased compliance training for 

providers and expanded public education so that the American people can be part of the solution by reporting suspected fraud to the 

HEAT task force. 

Mr. Chairman, we hope that you will look at the Department’s 

successes thus far in combating waste, fraud, and abuse and recognize the role we continue to play and can continue to play with the 

help of our Federal and State government partners in making sure 

taxpayers’ funds are protected and patient safety is preserved. 

As we have seen time and again, the only way we can truly be 

effective in protecting the integrity of our public health care programs is by combining the full panoply of our Federal resources, 

our expertise, and our information across agency and jurisdictional 

lines. 

The Department of Justice looks forward to working with Congress as we continue to prevent, deter, and prosecute health care 

fraud. 

Mr. Chairman, this concludes my prepared statement, and I am 

happy to answer any questions you or the Committee have. 

[The prepared statement of Mr. West appears as a submission for 

the record.] 

Chairman LEAHY. Well, thank you very much, Mr. West. 

You know, I thought it was a good sign when the Obama administration launched the Health Care Fraud Prevention and Enforcement Action Team, the HEAT initiative. Several of us on this Committee once had the opportunity to be prosecutors, and we know 

how important it is if you can combine forces when you want to go 

after fraud of any sort, and the high-level joint agency task force 

sends a pretty strong message you are going to do that. And I 

think the sharing of information is extremely important, especially 

as some of these frauds become more and more complex. People 

make a lot of money out of them, and if we cannot share the information, we are never going to find them, especially for those who 

think that the only cost of getting found out is that it may cost 

them some money. I would like to think the cost of them being 

found out is some of them will go to jail. That might actually prove 

a deterrent. 

9 

Now, it is my understanding the HEAT team is using new technology to improve real-time data sharing and analysis between 

HHS and DOJ. Is that what is happening, Mr. Corr? 

Mr. CORR. Senator Leahy, one of the most important results of 

the collaboration that has developed so far has been not only a 

commitment but the realization of providing real-time access to the 

Department of Justice, to its investigators, and to the Office of the 

Inspector General. By the end of the year, we will have a single 

data base for all Part A, Part B, and Part D of Medicare, and the 

investigators will be able to review claims as they come into the 

Centers for Medicare & Medicaid Services. 

That means that at the earliest possible moment our investigators can be evaluating whether there are trends that indicate fraud 

in a particular area or a particular field, a particular category of 

service. It enables CMS to do additional and tougher claims review. 

So the collaboration has been extremely valuable in making sure 

that—one of the most important things we heard from day one 

from the Justice Department and our Inspector General was that 

we have to have access to the data, to the claims as they come into 

CMS, and we are doing everything we can to make sure that happens. 

Chairman LEAHY. Mr. West, are you finding that this is helpful 

to the Department of Justice? 

Mr. WEST. Yes, Senator. Mr. Chairman, when you look at the 

strike forces, for instance, the strike forces have on them representation by CMS. I think that underscores how important it is to not 

only share data and information, but to make sure that we are 

using that information to identify trends early on, to communicate 

that back to CMS, as well as use that data to drive our enforcement decisions. It is helpful both in the civil investigations of 

health care fraud as well. 

Chairman LEAHY. I have found over the years that so many 

times these areas of fraud, whether in this area or in military contracting or any other area, the most important information often 

comes from an insider, from a whistleblower through the False 

Claims Act. I mentioned Senator Grassley’s work in this, and he 

and I and Senator Kaufman and others worked over many years 

to strengthen this anti-fraud tool, and we passed the Fraud Enforcement and Recovery Act of 2009. That amended the False 

Claims Act for the first time in nearly a quarter century, and the 

day the President signed it, I was there, and a number of law enforcement people seemed pretty excited that we had this. 

Will this help under the False Claims Act? And I ask the question not just seeking affirmation of it, but I want to know: Is it 

working? Will it work? Are there other things we should do? 

Mr. WEST. Mr. Chairman, yes, the False Claims Act, and particularly the FERA amendments that were passed earlier this year, 

have been an important tool in our ability to continue to combat 

health care fraud. And we are very much appreciative of this Committee’s work, and the Senate, for passing those amendments. 

The vast majority of cases that we pursue under the False 

Claims Act come from qui tam relators. They originate with whistleblowers. And so making sure that we have the tools that allow 

us to use information that is provided by qui tam relators, to be 

10 

able to investigate those cases, to make sure we will not be unduly 

restricted in our ability to bring false claims actions, all of those 

have proven to be quite important in our efforts. 

Chairman LEAHY. Well, I notice also we had reference to studies 

by George Washington University. There was one that showed the 

kind of fraud that is also perpetrated by the private health insurance industry. When I first saw these numbers, I asked if they 

were correct, and they are. In 2009, United Health, a leading insurance company, paid $350 million to settle losses by the American 

Medical Association and other physician groups for overcharging 

patients and physicians for medical services, a 28-percent cost increase for some doctors and patients. Private insurance companies 

have no requirement to report fraud, and some studies suggest 

they have strong initiatives to hide fraud and simply pass on the 

cost to consumers. 

Why don’t we hear more about this fraud in the private sector? 

Mr. WEST. Well, Mr. Chairman, I think when you are talking 

about fraud, of course, and a covert activity, it is always difficult 

to get a handle on what the actual numbers are. I can say that 

through the use of the False Claims Act, and particularly the qui 

tam provisions, I think we have a valuable tool in allowing us to 

ferret out fraud where it is occurring. 

I would also say that an important part of the approach is making sure that we are talking with private insurers who are also victims of fraud. I would say about 6 weeks after I was confirmed, I 

addressed the board of the Coalition Against Insurance Fraud, and 

what became quite clear is the private sector as well as the public 

sector are victims of fraud. And so coordinating, sharing information where permitted by law, sharing strategies, I think all of these 

are important efforts to augment our abilities to combat fraud. 

Chairman LEAHY. Thank you very much, and I apologize. I went 

over my time. I was not paying attention. 

Senator SESSIONS. Thank you, Mr. Chairman. I would just say 

that you raise an important issue. You can count on my strong support in moving forward to make progress. I think you will have bipartisan support. 

I would just ask, Mr. Corr, will you be the person that is going 

to head this task force? Or will someone else be assigned the specific duties? Both of you are good witnesses, but I would like to 

know who is going to head this effort. 

Mr. CORR. The Secretary and the Attorney General organized the 

task force, and the Deputy Attorney General, David Ogden, and I 

are the co-chairs of the task force. I wanted to just mention that— 

and I do not want to sound bureaucratic, but the fact that we have 

this task force—it is meeting regularly. We have organized committees. We are going to stay with this every day, every month, every 

year, until we get a handle on it. 

So I will be the one responsible for working with Deputy Attorney General Ogden to make sure that the task force performs. 

Senator SESSIONS. And, Mr. West, on DOJ’s side, the Department of Justice, who is the point person for these task forces? 

Mr. WEST. Well, as the Deputy Secretary indicated, Deputy Attorney General David Ogden is heading up the day-to-day responsibilities for our task force. But I can assure you that it has the 

11 

attention of all of the—at the highest levels of the Department of 

Justice. Not only is it a key priority for me in the Civil Division, 

Assistant Attorney General Lanny Breuer, who heads the Criminal 

Division, it is a key priority for him. 

So this issue has the absolute full attention of the highest levels 

of the Department of Justice. 

Senator SESSIONS. Have you selected people? Mr. Ogden I do not 

think is a prosecutor. You are not, Mr. Corr. You came from a different background. You have, Mr. West. You have tried some cases, 

but you have got the whole Civil Division to run. Mr. Ogden is 

Deputy for the whole Department of Justice. Have you empowered 

some really capable people who know about these cases, have experience in it, to actually ensure the effectiveness of these efforts? 

Because I just want to tell you, I have been at this business since 

1981 when I was appointed U.S. Attorney, and every President 

that has ever held the office has announced a fraud task force on 

health care. That has just been the way it is. And that is not bad, 

but it takes sustained effort and support from the top—probably 

not so much the management from the top, but support from the 

top. 

Do you think you have made that commitment, Mr. Corr? Do you 

have the people selected that have had experience in this that can 

help make it work? 

Mr. CORR. Absolutely. The senior leadership of CMS, the senior 

leadership in the Inspector General’s office, the Secretary herself 

will be involved in this. We believe we have the right people, and 

we will be holding them accountable, and the Secretary will certainly be holding me accountable—and I think the President will 

expect both of our Departments to make sure that we are not just 

more talk—and we believe we have a record so far that our collaboration is paying results. And we expect to continue that. 

Senator SESSIONS. You also recognize, Mr. West, do you not, that 

the fraud schemes impact the private sector, the Veterans Administration, the Department of Defense, State Medicaid programs and 

other programs, disability claims, and Indian health care claims? 

Are those persons going to be—do you have people from each one 

of those and they will be working together? And are you attempting 

to coordinate the data that they may have in their systems that 

could identify aberrational charging levels in certain areas that 

could help you identify criminal activity? 

Mr. WEST. You are quite right, Senator, that this involves a 

number of public agencies and data that perhaps we can get from 

a number of public agencies. And the answer is yes, we are actively 

seeking to try to coordinate that information through the HEAT 

task force. 

And I should mention that the HEAT task force not only has, as 

you have pointed out, support from the top, from the Attorney General, from the Secretary, and then the actual chairing by the Deputy Secretary and the Deputy Attorney General, but there are a 

number of subcommittees that are a part of HEAT. One of them, 

in fact, is a data-sharing committee, and there is where you have 

the real expertise, the line lawyers from my Division, from the 

Criminal Division, the professionals from the HHS side, who are 

meeting regularly and talking regularly and figuring out the best 

12 

ways to share the data, to share the information, to go out and figure out what we do not have, so that we can make the most informed law enforcement decisions we can. 

Senator SESSIONS. Well, thank you, Mr. West, and both of you. 

I think we can do better. I hope and believe that you can do better. 

I would just say the ‘‘60 Minutes’’ program caused quite a lot of 

national discussion. People do not like that. They do not appreciate 

their tax money being stolen. And it has been going on for years. 

We have been hearing about the South Florida problem for years. 

Let me just ask it simply. Do you guys intend to address the 

abuses in other areas, but in particular South Florida that we have 

been hearing about and seen so much about? 

Mr. WEST. Yes, Senator. And, in fact, we have a strike force that 

is there. In fact, I think it was featured in the ‘‘60 Minutes’’ program. And one of the great advantages of that—and just last week 

I think we had one disposition down in South Florida. You are 

right, it is a hot spot, and it has a lot of attention from our Criminal Division as well as our Civil Division. 

Senator SESSIONS. Thank you. 

Chairman LEAHY. Well, thank you. 

As Senator Sessions said, on rooting out fraud you are going to 

have strong bipartisan support here in the Senate, certainly in the 

Congress, and one of the reasons we put the tools in here, both in 

the fraud bill and the whistleblower bills, is to help you on that. 

But we will count on you if you find that the tools are inadequate 

or contradictory, to let us know so we can change it. 

I am going to turn the chair over to Senator Kaufman, who has 

joined me in all these, and I apologize for leaving for a doctor’s appointment. Take care. 

Senator KAUFMAN. [presiding]. Good luck. 

Mr. West, can you tell us about the role of kickbacks in health 

care fraud? Who pays them to whom and why? 

Mr. WEST. Well, yes, Senator. What we find when we find fraud 

in this area is sometimes physicians will be paid by providers to 

refer patients to a particular provider. That is illegal. We will 

sometimes find that a physician who has a financial relationship 

with a provider will try to refer patients to that provider or that 

provider will try to refer patients to the physician. That, too, is illegal. So when we see the kickback activity, it is an indication that 

there is fraud going on. 

Senator KAUFMAN. In your view, what is the impact of the payment of such kickback on not just health care costs but also the 

quality of care? 

Mr. WEST. Well, we think it really corrupts the quality of care 

because patients have a right to depend upon the integrity of advice that they get from their physicians, and they have a right to 

believe that that advice is not tainted by any financial interest or 

any other inducement that a physician may get. It ought to be advice that is given in the best interest of the patient. And so we believe it harms public health. 

Senator KAUFMAN. Mr. Corr. 

Mr. CORR. I would certainly agree with those remarks. 

Senator KAUFMAN. OK. One significant form of health care fraud 

is off-label marketing, Mr. West. Please tell us what form of fraud, 

13 

what problems it creates, and what the Department is doing to 

fight it. 

Mr. WEST. Well, off-label marketing usually involves, Senator, a 

situation when a pharmaceutical company will market a drug for 

a use that it has not been approved by the FDA for. So, for instance, if there is a drug that is designed to fight headaches and 

that company were to market it as a weight loss drug, that would 

be an off-label marketing purpose. 

The problem is, of course, that, again, patients and purchasers 

have a right to depend upon the integrity of the FDA process, and 

if the FDA has approved a drug for a specific process and then that 

drug is marketed for something else, that corrupts the ability for 

a patient or a consumer to make an informed choice. 

Senator KAUFMAN. Great. Mr. Corr, as we discussed, Medicare 

has a statutory mandate to pay out claims quickly. Can you talk 

about how the mandate works and how it interacts with anti-fraud 

efforts? 

Mr. CORR. Thank you, Senator. It is a very important question 

as we grapple with trying to improve our prevention efforts. 

When a claim comes into the Centers for Medicare & Medicaid 

Services, we are obliged to pay within 14 to 30 days—no early than 

14, but by 30 days. So the review that has to be done of those 

claims is immediate. We get 4.4 million claims each day, so there 

is a huge volume, and providers rely upon Medicare to be paying 

in accordance with that schedule. 

So there is pressure for us to move those claim forms along. We 

do do claims review, and some of those, about 3 percent, are pulled 

out and go through further medical review. But it just indicates the 

difficulty of spotting fraud early and recognizing it, but not undermining the medical practice that needs to go forward. 

Senator KAUFMAN. Ranking Member Sessions asked a really 

good question about we have been doing about this for years and 

how difficult it is. Do we have enough resources directed toward 

fighting fraud, in your opinion? 

Mr. CORR. Senator, what I can tell you is that we believe we 

have identified practices that are making a difference and that are 

successful. We need to do more enrollment review. We need to do 

more stricter claims review. We know that the strike forces have 

been quite successful in identifying fraud and reducing it. 

All of those activities could be expanded and would have a significant impact. 

Senator KAUFMAN. OK. Thank you. 

Senator Grassley. 

Senator GRASSLEY. Thank you, Senator Kaufman. 

I want to thank Senator Leahy for holding this hearing, trying 

to get to the bottom of this, although I think it is a never-ending 

job. There are always so many sophisticated crook out there who 

are always going to sit around and laugh at us in Government that 

we cannot get ahead of them. I think in the years that Senator 

Baucus and I worked together on the Finance Committee, we have 

had at least 20 oversight hearings, investigative hearings on such 

fraud. So I compliment the expansion of that through Senator 

Leahy and this Committee as well. 

14 

In the 1986 law, we set up something that we call CIDs, civil investigative demands, and the idea was to get investigations during 

the investigative stage. Now, where we evidently made a mistake 

in 1986 was that the law then required the Attorney General to 

sign all those CIDs himself, so earlier this year in the bill that Senator Leahy referred to, the FERA legislation, we permitted the Attorney General to delegate CID authority to a designee. That provision allows the Department to share CID information with qui tam 

relators and Federal and State and local agencies. These provisions 

will help streamline CIDs and speed up the inventory decisions by 

the Department. However, nearly 6 months after FERA was signed 

into law, I have heard that there has been no decision from the Attorney General regarding who the authority is delegated to. 

So update me on this, if you can, Mr. West. What is the status 

of the CID delegation authority? And has the Attorney General decided who will have final delegated CID authority? And if not, why 

not? Because we made a mistake in 1986. An Attorney General is 

so busy, any Attorney General is so busy and maybe overlooks this. 

We want to get it so it can be used. 

Mr. WEST. Well, thank you, Senator. That is exactly right, and 

we welcomed that amendment to FERA to allow the CID authority 

to be sub-delegated. And I have taken steps to ensure that that 

happens. It is within the Department’s internal process right now. 

Hopefully within fairly short order we will have that sub-delegation, so that is moving through the internal DOJ process. 

Senator GRASSLEY. Do you have kind of a deadline to getting 

that decision made? 

Mr. WEST. We do not have a deadline per se, Senator, but I can 

tell you that there is a great deal of desire to see that effected sooner rather than later. It is something that I talk regularly with U.S. 

Attorneys around the country about, and it is something that we 

are moving through as quickly as we can the internal process at 

DOJ. 

Senator GRASSLEY. Well, do we have any problems in that process with whether or not the Attorney General is considering adding 

additional requirements prior to allowing delegated authority to 

CIDs? And if so, what might those conditions be? Or maybe that 

is not a problem. 

Mr. WEST. I do not think that that is a problem, Senator. I appreciate it, but I do not think that is an issue. 

Senator GRASSLEY. OK. Will that delegation go down to the U.S. 

Attorneys, or would it stay at Main Justice? 

Mr. WEST. Well, that is one thing that we are looking into, and 

part of the reason is we want to make sure we get that right. But 

that is one of the questions that we are currently considering. 

Senator GRASSLEY. OK. On another point—and this may sound— 

I hope I am considered an equal opportunity oversight person and 

I am not—you know, you folks are new to me, so these questions 

go to Republicans or Democrats. And so I am going to bring up a 

problem that we have had around for a while. 

There are 1,040 false claim cases that are under seal in Federal 

courts waiting on the Department of Justice to make a decision to 

join the lawsuit. This is on top of the 130 pending cases the Department has joined and the 340 that it has declined. Of the cases 

15 

awaiting a decision, 985 of them allege allegations of health care 

fraud, so overwhelmingly, you know, this whole False Claims Act 

is going after health care fraud. You know, when we first wrote it, 

it was to go after defense industry fraud. But wherever it is used, 

it is important. 

This number of 1,040 is higher than the 1,000 cases under seal 

when I asked the same question a year ago, which, of course, I was 

asking of another administration. Averaged out, it takes about 12.3 

months for the Justice Department to make a decision. Twelve 

months is a long time for the Government to figure out if it is willing to pursue fraud. 

As the author of the 1986 amendments, I wanted to attest that 

Congress indeed intended that the Department make an intervention decision in a timely manner. So I find it troubling that some 

cases are lingering for 36 months. 

Questions—and this will be the last series of questions, and they 

will go pretty quickly. Does the Justice Department have a plan to 

clear this backlog in a timely manner? If so, what is it? And if you 

do not have a plan, you know, I would just want to know that. 

Mr. WEST. Yes, thank you, Senator, and I appreciate the concern. 

This is actually something that I asked my folks in the Civil Division not long after I arrived to look into because I was curious 

about it as well. And here is what I have learned. 

Those cases that you have identified, the 1,000, they are indeed 

cases which are actively being investigated, not just in my Division 

in the Civil Division, but throughout the country in all of the U.S. 

Attorneys’ Offices throughout the country. So that represents 1,000 

cases that are actively in various stages of investigation throughout 

the country. 

What we also know is that one of the reasons it may take time 

to investigate these cases, not only are they complex, as I know you 

appreciate, and we have a duty to thoroughly investigate the allegations of wrongdoing, which we take seriously, but oftentimes 

they involved parallel criminal as well as civil allegations or investigations. And we always want to make sure that we are not doing 

anything in the civil case that might adversely impact a potential 

criminal case and vice versa. 

The other thing that I think is important to point out is that 

when these cases are under seal, oftentimes there is an active negotiation to globally resolve the case. So in the majority of cases 

that are unsealed, what you see is not only an announcement of 

allegations, but you also see an announcement of a settlement. And 

we believe that actually serves everybody’s interest best. 

Senator GRASSLEY. Could I make a statement? I am done asking 

questions. Maybe for the benefit of my colleagues, as much as anybody else. 

Now, I understand there are 1,000 cases, and if the Federal Government is involved, there is more money going to go to the Federal Treasury. If the private litigator goes ahead themselves, they 

get a higher percentage. But, on the other hand, if there are 1,000 

cases there, it would seem to me that some of those decisions can 

be made, to get the private litigator moving ahead, we would accomplish at least more for the Federal Treasury than maybe waiting so long to make such a decision. 

16 

Thank you very much. 

Mr. WEST. Thank you, Senator. 

Senator KAUFMAN. Senator Franken. 

Senator FRANKEN. Thank you, Mr. Chairman. I will go to Mr. 

West first. 

Historically, Federal anti-fraud efforts have focused on Medicare 

and Medicaid, but criminals do not distinguish—or do they?—between public and private health insurance when they engage in 

fraudulent activity, right? 

Mr. WEST. You are quite right, Senator. They do not distinguish. 

Senator FRANKEN. So are we doing enough to go after private 

health care fraud? And what would be the benefit of jointly addressing fraud in the public and private sectors? And how can we 

best create a coordinated strategy for fraud across the entire health 

care system? 

Mr. WEST. Well, I think the point you raise, Senator, of trying 

to coordinate is very important. It is one reason why I met with 

the Coalition Against Insurance Fraud early on in my tenure to 

talk about coordination, sharing strategies, sharing information 

where permitted by law. And, in fact, I should say that that has 

led to an ongoing dialog with my office where we hold meetings 

with private insurers to talk about ways in which we can better coordinate. 

I would also point out something that Deputy Secretary Corr 

mentioned in his testimony about the summit that is being planned 

which would involve the participation of private insurers just for 

that very point that you raise, that it is important to look at this 

problem of fraud in health care as a holistic problem, not just a 

public problem or not just a private sector problem. 

Senator FRANKEN. And do you feel that private insurers really 

feel that they have been reached out to by the Department of Justice? 

Mr. WEST. Well, I can only tell you that the letter that I received 

from the Coalition Against Insurance Fraud—and I should mention 

that that is a coalition of private insurers, along with some participants from the public sector—was very complimentary and one 

which appreciated the fact that the Department of Justice is making an active effort to reach out to private insurers. So I was heartened by that, and I think they have been heartened by the ongoing 

dialog that we have had with them, and the ongoing dialog that we 

are having with them through HEAT. 

Senator FRANKEN. But there is no statutory requirement to collaborate between public and private. Correct? 

Mr. WEST. That is correct. You are right. 

Senator FRANKEN. I would like to take a little time—for either 

of you, we have been hearing about the fraud, and we do not 

hear—I would just like to get some examples of it, because we just 

hear these numbers and incidents. 

There was one that I saw which was in Florida where these— 

infusion therapy, fake infusion therapy. Can one of you explain 

that? Mr. Corr. 

Mr. CORR. It would be an example of someone with HIV/AIDS 

that needed intravenous treatment. But infusion therapy, home 

17 

health care, and durable medical equipment are three areas where 

the—— 

Senator FRANKEN. Explain, though. Explain the fraud. I mean, 

you are—— 

Mr. CORR. What I was going to say is that in each of those three 

areas, we have a similar problem where the barriers to entry for 

providers are quite low; where a criminal could, as Mr. West was 

pointing out earlier, get a physician to agree to prescribe certain 

treatments for a kickback. The criminal could very well take a provider’s billing number as well as get beneficiaries’ billing numbers 

and bill Medicare for services that have never been rendered or bill 

for services that were unnecessary. 

Senator FRANKEN. So kickbacks, billing for procedures that were 

never done, OK. Now, in your testimony you mentioned 189 convictions. What are the penalties? Are these people in prison? 

Mr. WEST. Many of them do go to prison. In fact, when you look 

at the average length of prison sentence and you include the strike 

force activity, it is about 37 months for a health care fraud offense. 

And I should note that the strike force activities or enforcement activity, that is in addition to what is already going on in U.S. Attorneys’ Offices around the country. But this is a very serious crime, 

and it is being treated that way by the Department of Justice, and 

we seek serious penalties. 

Senator FRANKEN. OK. I think the biggest fraud was by Pfizer. Is that right? And they paid a fine of over $2 billion. 

Mr. WEST. That was the biggest fraud in connection with misbranding or off-label marketing, yes. 

Senator FRANKEN. OK. Is anyone in prison for that? 

Mr. WEST. No, Senator. What happened there is you had two individuals who were charged criminally, and through a plea agreement, as to one, and a conviction after trial, as to the other, those 

individuals—those cases were resolved. 

Senator FRANKEN. Because people go to prison for having, you 

know, a bag of marijuana. These are people who are responsible for 

ripping off Medicare to the tune of a couple billion dollars, and they 

are not in prison. Now, how are we going to deter this? How are 

we going to deter people doing this if they can plea bargain and 

stay out of prison? Why don’t we send them to prison? 

Mr. WEST. Well, there are two things I would say in response to 

that, Senator. 

First is that I can assure you that when we have the evidence, 

and the facts and the law allow us to pursue criminal cases against 

individuals such that we can put them in prison for these offenses, 

we will do that. That is the commitment that the Department of 

Justice has, and that is how seriously we take it. 

Unfortunately, the evidence is not always as clear-cut as one 

would like it to be, particularly when you are talking about large 

organizations in which the decisionmaking is quite diffuse, it is 

very difficult to find out exactly who made what decision. 

So we have to be vigilant, on the one hand, and aggressive, and 

we are that. But at the same time, we want to be responsible to 

make sure that we are actually targeting those individuals who are 

responsible as opposed to simply going out and capturing activity 

that may not be warranted by the facts or the law. 

18 

Senator FRANKEN. Thank you. 

Thank you, Mr. Chairman. 

Senator KAUFMAN. Senator Cornyn. 

Senator CORNYN. Thank you, Mr. Chairman. I would like to express my appreciation to the witnesses for being here today, and 

thank you for serving your country in your capacities that you are 

holding now. I have to confess, though, that the bad guys outnumber the good guys, and I agree with Attorney General Holder 

that the lack of resources is a real problem, and I have some personal experience as a former State Attorney General in the Medicaid fraud area where we work with the Federal and State authorities to try to deal with this. 

But I would like to—so I know you are doing as well as you can 

with the resources you have, and I want to do everything I can to 

be supportive of that, and that is one reason why earlier this year 

I reintroduced a bill called the STOP Act, which I think addresses 

this problem of pay and chase and would change it to detect and 

prevent when it comes to Medicaid fraud. 

But, Mr. Corr, I do not know how we can expect CMS to do a 

much better job when they are only able, out of the 4.4 million 

claims they get a day, to review 3 percent of them. So that is why 

I would like to work with you to try to figure out how we can 

change the paradigm to one that will actually work, because I am 

not sure we will ever have enough good guys to outnumber the bad 

guys in this area. 

But I do want to explore, because there is a lot of difference 

about public options in health care reform and public plans, we obviously have two prominent Government-run health care plans— 

Medicare and Medicaid. And I just want to contrast and get your 

reaction to some statistics, because I think, Mr. West, you pointed 

out that anywhere between 3 to 10 percent of what is spent on 

these Government plans now is stolen by fraud. 

And just for example, I would note that in recent testimony 

about the credit card industry, which has $2 trillion in transactions 

per year, which is nearly the size of the health care sector, there 

are more than 700 million credit card transactions and circulations, 

millions of vendors, and yet their total fraud is roughly 1 percent 

compared to 3 to 10 percent for Medicare and Medicaid-–1 percent 

for credit card transactions. 

According to a chapter on Medicare fraud in a book called ‘‘Stop 

the Crooks’’ that I want to cite to you here, one statistics that intrigues me is that in private health insurance claims, fraud is 

roughly 1.5 percent or less, 1.5 percent compared to the Federal 

Government 3 percent to 10 percent. And that is why I think we 

have to change our paradigm and how we deal with these issues 

to go from a pay-and-chase system to a detect and prevent system. 

But I would like to ask you, other than resources, what else can 

we do to make sure that the Government-run health care plans we 

have now, Medicare and Medicaid, what is in the vernacular of 

today the public option that is being discussed more generally to 

create yet another Government plan, what can we do to reduce the 

fraud and the theft in the current Government plans to more closely approximate what we see both in the credit card industry at 1 

19 

percent or in the private health care claims, which is about 1.5 percent? Do you have any thoughts about that? 

Mr. CORR. Senator, we currently have under review the additional authorities, particularly at the enrollment period, that would 

benefit CMS as these 4.4 million claims come in. We have around 

18,000 new providers seeking provider numbers from Medicare 

every month. We have about 900 durable medical equipment providers seeking new numbers every month. So there is not only a 

flood of claims coming in but also providers, and we are taking a 

very careful look at what additional authorities to review without 

undermining the ability of the Medicare program and Medicaid 

program to pay claims to providers who are rendering quality care 

and deserve to be paid quickly, how we can better identify the bad 

guys as they start into our system. And we will be bringing that 

to the Congress as soon as we can. 

Senator CORNYN. Mr. West. 

Mr. WEST. Senator, thank you. First I would say that with the 

FERA amendments, that has been a very big help to our efforts, 

and we appreciate that. 

I think one other way in which you can be quite supportive is 

to support the HEAT priorities. What that task force represents is 

really an unprecedented level of coordination between DOJ and 

HHS, and supporting the data-sharing initiatives that are underway there, supporting the dual criminal and civil enforcement efforts that we are undertaking there, and I will note that I recall 

when I was here for my confirmation hearing, you asked both Assistant Attorney General Breuer and myself if we would work together to combat health care fraud and at least, you know, do a few 

things. I think you said, ‘‘We know you cannot get it all, but if you 

do at least a few things, you can at least begin to deter some of 

the bad guys.’’ And I am happy to report that in the last 6 months 

we have taken that suggestion and we have done that. And so your 

help and the Senate’s help in continuing to support our efforts 

through HEAT I think will be quite helpful. 

And then I would simply say that we are always open to a dialogue and hearing your suggestions, the suggestions of your colleagues on how we might better enhance the enforcement tools and 

prevention tools that are available to us when it comes to dealing 

with health care fraud. 

Senator CORNYN. Mr. Chairman, I want to just say that one of 

the reasons why I think it is so important to have False Claim Act 

authority and the qui tam process that you and Senator Leahy and 

Senator Grassley—and I have made some minor contribution to, 

because we need more good guys on the field investigating and 

prosecuting these claims because, frankly, the Federal Government 

and the State government is outnumbered, and we need to get 

more resources on the front lines to deal with this. 

But I think we also have to look at this pay-and-chase system 

and realize that we are never going to be able to catch up with all 

the fraud, particularly, as Mr. Corr points out, under a situation 

where you have to pay those claims within 14 to 30 days, and you 

are getting 4.4 million of them a day and can only review 3 percent 

of them. I mean, we have to change the game, I think, in order to 

win. 

20 

Thank you very much. 

Senator KAUFMAN. Thank you. 

Senator Klobuchar. 

Senator KLOBUCHAR. Thank you very much. Thank you, Mr. 

Chair, and thank you to our witnesses. I think we have discussed 

this before, but when I was a prosecutor, I made a high priority 

out of prosecuting these types of white-collar cases, and particularly these fraud cases involving Medicare and Medicaid, because 

the saddest part of these cases was the money. Ultimately, the people ripped off are the most vulnerable people in our society. And 

I saw firsthand how these crooks would cheat the system, so I really appreciate the work that you have done. 

A bill that I introduced with former Senator Martinez, which I 

think would be somewhat helpful here, focuses on—it is called the 

IMPROVE Act, which improves the payment policy for reimbursement through oversight and efficiency by requiring direct deposits 

of all payments made to providers under Medicare and Medicaid. 

And we know of several recent incidences involving the use of 

check-cashing facilities. 

For example, in November of 2007, a woman was indicted for 

billing Medicare for motorized wheelchairs that beneficiaries did 

not need. According to the indictment, the woman then laundered 

the money through a Houston check-cashing business, cashing several Medicaid checks each for more than $10,000. 

So my first question, I guess of you, Mr. Corr, is: Does CMS have 

the capacity to administer payment electronically? And do you 

think this would be an effective way to prevent fraud? 

Mr. CORR. Senator, I apologize for not being more up to speed on 

the pros and cons of what you are proposing. We certainly want to 

consider every avenue that gives us and gives the Department of 

Justice a greater chance to track down who is ripping off Medicare 

and Medicaid. 

Where the checks are sent I think is not as big an issue. Paying 

electronically as opposed to paying by check is not as big an issue 

for Medicare. But what I would prefer to do, if you do not mind, 

is talk with our experts about any issues that we have, and also 

talk with the Justice Department about how that would assist in 

tracking down the criminals. 

Senator KLOBUCHAR. Very good. We think it would be a good 

idea. Patrick Murphy has a bill in the House, and we are hoping 

to get it included in this health care reform. 

The other thing that I have found interesting, Mr. Corr, in your 

testimony is that you mentioned that the strike force prosecutions 

in Miami have focused on fraudulent claims for durable medical 

equipment and that new prevention efforts have resulted in a 63- 

percent reduction in these claims, which is something to be proud 

of. 

Can you talk about these prevention efforts? And why is this 

type of product more susceptible to these fraud claims? 

Mr. CORR. It is more susceptible because it is easier for a criminal to become a durable medical equipment supplier, to put in to 

CMS fake claims for individuals who are not receiving the equipment, or to bill for a more sophisticated, more expensive piece of 

equipment than they actually have provided. 

21 

We oftentimes see criminals who will set up several corporations 

with different family members, so we are trying to track down individuals who are very smart about our payment limits and they understand how much we pay for certain things and when certain 

bills get kicked out of the system, caught with our computer 

checks. So what we have to do is be more focused, and we are, and 

the durable medical equipment is the best example. 

On screening these providers before they get into the system. We 

have just instituted surety bonds for all durable medical equipment 

suppliers. We now require accreditation of those providers, which 

includes an onsite visit to be sure that there actually is a provider 

there that is legitimate. We look at their staffing, at their licenses. 

We are improving our claims review so that it is more sensitive. 

And as I mentioned earlier when you were not here, by the end of 

the year CMS will have a single integrated data base of all Part 

A, Part B—— 

Senator KLOBUCHAR. No, I actually came in for that part. 

Mr. CORR. I apologize. 

Senator KLOBUCHAR. I remember you saying Part A, Part B. 

That will be helpful. 

Another area I thought was interesting when we look at all these 

statistics is the Homeland Security Committee found that Medicare 

claims contained the identification numbers of an estimated 16,500 

to 18,200 deceased physicians, which involved something like 

385,000 to 572,000 claims for medical equipment. In every case 

study cited by the Senate Committee, the deceased physicians were 

merely unwitting instruments—or their names were—in transactions that meant easy money for these crooks. 

What is CMS doing to combat criminals from using these deceased physicians’ identification numbers? 

Mr. CORR. One of the most important is to create a single integrated data base for the entire country that allows us to avoid 

criminals using a physician’s name or number in multiple jurisdictions where we have separate contractors and separate data bases. 

We also are improving our compromised—we call it a compromised 

provider number and compromised beneficiary number data base so 

that when we have the first indication that a claim has been filed 

for someone and it should not have been, that number then triggers a rejection of all future claims or at least a review of all future 

claims. 

So as you heard, with so many claims coming in and with the 

requirement to pay quickly, we are trying our best to get much better control on the front end of who is in the program so that we 

do not run into these situations. 

Senator KLOBUCHAR. Very good. We will probably have time for 

a second round, but just quickly, Mr. West, we have been talking 

a lot about resources here. And as you know, it is more than just 

prosecutors; it is also accountants and other people that are needed 

to work on cases like this. And I was a strong supporter of our recent legislation, the FERA legislation. But, again, there may be 

more needed in this area given the amount of money at stake. 

But one thing we have not talked about is I would assume that 

it would be helpful for the tools in the toolbox to have U.S. AttorVerDate Nov 24 2008 10:09 Jan 13, 2011 Jkt 063193 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\63186.TXT SJUD1 PsN: CMORC
22 

neys confirmed to actually prosecute these cases. Would that be 

correct? 

Mr. WEST. Well, I think that is right, Senator. I think clearly the 

U.S. Attorneys around the country are an important force, frontline force in prosecuting fraud—all crimes, not just fraud, but 

fraud—and we rely on them heavily to help us combat Medicare 

fraud. 

Senator KLOBUCHAR. Would it also help to have judges confirmed 

and marshals confirmed? 

Mr. WEST. Well, the criminal justice system works well when it 

is fully complemented. 

Senator KLOBUCHAR. Thank you very much, Mr. West. 

Mr. WEST. Thank you, Senator. 

Senator FRANKEN. Senator Specter, would you like to question or 

would you like to wait a couple minutes? 

Senator SPECTER. Thank you, Mr. Chairman. I just walked in, 

having attended the hearing on—— 

Senator KAUFMAN. Your ‘‘talk’’ button. 

Senator SPECTER. I said I just walked in, having attended the 

hearing in Environment and Public Works, and I know our hearing 

today is on the issue of fraud, waste, and abuse on the health care 

legislation. And I think it is important that the final bill will include a provision for mandatory jail sentences. 

Under our current system, jail sentences are discretionary with 

the trial judges. They may follow the recommendations of the 

guidelines, or they may not. But we have seen an increasing number of sentences, fines, where there is very egregious, reprehensible, serious conduct involved. And the fines are simply added into 

the cost of doing business. 

A jail sentence is different. Senator Graham and I have taken 

the lead in introducing a bill which would provide a mandatory 

sentence of 6 months for fraud in the medical field, whether it is 

Medicare, Medicaid, or against private insurance companies in excess of $100,000. There is an aversion in many quarters to having 

any mandatory sentences, and I think there is something to that 

if you deal with the crack cocaine issue, the disparity. And there 

is legislation pending there which Senator Durbin has championed 

and others have introduced. 

But where you deal with white-collar crime, it is especially susceptible to deterrence. If you talk about a bar-room homicide on a 

Saturday night when people are intoxicated, you are not going to 

deter anybody by a jail sentence there. But if you are dealing with 

Medicare and Medicaid fraud or insurance company fraud, people 

are going to go to jail, and any jail, even 6 months—one of the concerns that we have had in trying to structure what a sentence 

should be—kind of looks too light if you have a multi-million-dollar 

fraud scheme. 

So I just wanted to make that comment. If I knew what had gone 

on, if I knew how to formulate a relevant question, I would do so. 

[Laughter.] 

Senator SPECTER. But since I do not, that customarily is not any 

standard around the U.S. Senate, but occasionally I follow it. 

Thank you, Mr. Chairman. 

23 

Senator KAUFMAN. Senator Specter, you always ask relevant 

questions. I have watched you for a long time. 

To follow up on that and what Senator Franken said, Mr. West, 

you have done both criminal and civil work. What kind of deterrence do you think jail time is? 

Mr. WEST. Well, I think jail time is certainly a strong deterrent, 

and I think that when we have the evidence and we have the law 

and we have the ability to seek jail sentences, we certainly do that, 

and we do that aggressively. In fact, it is the policy, the sentencing 

policy of the Department of Justice to recommend sentences that 

fall within the applicable guideline range. Only in extraordinary 

cases do we depart from that. But, clearly, we take health care 

fraud very seriously. We will seek the most serious penalties that 

we can, given the law and the facts of every specific case. 

Senator KAUFMAN. Mr. Corr, do you have any comments you 

want to make on that? 

Mr. CORR. Nothing to add. Thank you. 

Senator KAUFMAN. Let us talk about CRIPA for a minute, if we 

can, Mr. West. Tell us how the act relates to health care. 

Mr. WEST. Well, CRIPA is an act—Civil Rights of Institutionalized Persons Act, and this really is a tool that we use with the Civil 

Rights Division responsible for enforcing to ensure that the rights 

of individuals who are institutionalized in some way, shape, or 

form are not being abused and are not being eclipsed. And it is an 

important part of the full panoply of Federal enforcement tools that 

we have at our disposal. 

Senator KAUFMAN. Now, right now you do not have the authority 

to subpoena institutions being investigated, but you have to rely on 

their cooperation. Is that right? 

Mr. WEST. That is absolutely correct. 

Senator KAUFMAN. And what impact does that have on investigating and doing the work that you should be doing? 

Mr. WEST. Well, I do think, Mr. Chairman—I believe that the situation involving investigations, as we have seen by analogy in the 

CID context, certainly can be facilitated with the ability of making 

either civil investigative demands or administrative subpoenas 

where that is appropriate. 

I think I would invite further conversation with you and with 

others who are interested in this as to what the exact correct mix 

of tools is in the CRIPA context. 

Senator KAUFMAN. Mr. Corr, what technologies or techniques 

would help HHS better leverage existing personnel to engage in 

anti-fraud opportunities? 

Mr. CORR. The Justice Department and our Inspector General 

look to us to manage the enormous data that comes into the Department in a way that promotes oversight and investigation. And 

I think one of our challenges is in making that data base most usable. It might seem remarkable, but it will take us until the end of 

this year to create a single data base, and it will be an enormous 

benefit. And I think we need to continue to make improvements in 

the accessibility of that data for review for purposes of fraud. 

As we identify new techniques and new systems that we need, 

we will be the first to let you know. 

24 

Senator KAUFMAN. A number of commentators, including the 

head of the Medicare Program Integrity Director Kimberly Brandt, 

assert that prescreening of Medicare providers could substantially 

reduce fraud. Is that correct? Do you believe that? 

Mr. CORR. That is certainly our view. 

Senator KAUFMAN. OK. Thank you. 

Senator Franken. 

Senator FRANKEN. Mr. Corr, we have heard the statistic today, 

and I have heard several times the statistic that fraud in private 

health insurance occurs at 1.5 percent. Do we have good data to 

verify this statistic? 

Mr. CORR. Unfortunately, we do not. We have estimates from a 

number of different organizations, but it is sometimes very hard to 

distinguish fraud from unnecessary care that is simply wasteful. So 

getting a clear reading on fraud, we know it is substantial and way 

too large, but we do not have a clear sense of exactly how much. 

Senator FRANKEN. So when that statistic is trotted out, it is sort 

of trotted out especially when it is trotted out to compare the fraud 

rate in private insurance to Medicare, it is really maybe not—there 

might be, I do not know, some reason that someone is doing that 

other than—— 

Mr. CORR. There is no requirement—— 

Senator FRANKEN [continuing].—Trying to get at the facts? Could 

that—— 

Mr. CORR. There is no requirement for private insurance companies to report fraud rates. As you know, in Medicare and Medicaid 

we do report an annual error rate that is more than just fraud. It 

also includes mispayments over at—— 

Senator FRANKEN. We are here trying to figure out what is really 

going on. It is probably maybe not useful to use something that has 

no data behind it. Would that be fair to say? 

Mr. CORR. I am sorry. The estimates, you mean? 

Senator FRANKEN. Never mind. 

[Laughter.] 

Senator FRANKEN. I just have a question—first of all, to speak 

to Mr. Cornyn’s concerns, I was very impressed with the sort of return on investment. I would like either of you to speak to that— 

or maybe, Mr. Corr, you can speak to that—on increases in spending in your work and what it yields. Can you speak to that a little 

bit? 

Mr. CORR. The numbers that we provided to you involve the 

work of our strike forces in areas where we have concentrated our 

time and energy. In 2008 alone, there was a return of $8 for every 

$1 we spent from our HCFAC fund, which is the basic source of 

revenue for our prevention and enforcement efforts. The prepayment restrictions and claims audits that we have instituted we believe have returned $13 for every $1 we have spent over the last 

3 years. And these are lessons learned. We are trying our best to 

identify those techniques that most quickly and most effectively 

identify when fraud is occurring. 

Senator FRANKEN. I imagine at some point the investment and 

the yield would reach a point of diminishing returns. But is it fair 

to say that it has not yet? 

Mr. CORR. That is fair to say. 

25 

Senator FRANKEN. OK. Thank you. 

This is for both of you. This is just a curiosity of mine. How 

many of these people who end up doing fraud start out doing this 

legally and say, ‘‘Hmm, you know, I could have billed for a more 

expensive wheelchair. I think I will do that’’ ? And then they do 

that and they get away with it, and now they are doing it routinely, and they buy a nicer condo. And then they start doing it. 

Is that common? Is that a common thing? 

Mr. WEST. Unfortunately, we do not have very precise numbers 

on fraud generally or on how many individuals who might start out 

as legitimate providers migrate. 

Senator FRANKEN. You do not collect stories. 

Mr. WEST. We do not have that, unfortunately, Senator. 

Senator FRANKEN. OK. And it is fair to say, is it, Mr. Corr, that 

electronic records, electronic health records, really is an area—because you are talking about the data base you are getting together. 

That is a place where we can really start increasing our efficiency 

in attacking fraud. Is that right? 

Mr. CORR. Absolutely, as well as improving the quality of medical 

care. 

Senator FRANKEN. So it is a tremendous investment. It is a winwin, right? 

Mr. CORR. It is an investment that Congress has made and that 

we are doing our best to implement. 

Senator FRANKEN. OK. I want to thank both you guys for the 

work you do. 

Mr. CORR. Thank you. 

Mr. WEST. Thank you. 

Senator FRANKEN. Thank you, Mr. Chairman. 

Senator KAUFMAN. Senator Klobuchar. 

Senator KLOBUCHAR. Thank you very much, Mr. Chairman. 

I know, Mr. West, that you talked about—when you talked about 

the HEAT team—how you have been able to analyze this data and, 

in coordination with HHS, identify fraud hot spots and then focus 

on those hot spots. So what are the factors that determine whether 

a place is a hot spot? 

Mr. WEST. Well, I think one of the key things we look for are patterns of activity. If we see patterns of, say, overutilization or if we 

see patterns of overbilling, if you have a particularly small provider 

and they are a large percentage of claims that are made in a particular area, that is an indicator that there may be fraudulent activity going on. So there are a number of data points that we look 

at. 

Senator KLOBUCHAR. So hot spots are parts of an area, is what 

you are looking at? 

Mr. WEST. When I talked about hot spots, I was referring geographically. I think we know that—and I think the deployment of 

our law enforcement resources as manifest by the strike forces indicates where we see—— 

Senator KLOBUCHAR. And where are—can you tell me where 

these hot spots are? 

Mr. WEST. I think you will see it in South Florida—— 

Senator KLOBUCHAR. Are they places that are hot? Florida. 

Mr. WEST. Houston. 

26 

Senator KLOBUCHAR. I just knew it. 

Mr. WEST. And Houston where it is also warm, but you also have 

Los Angeles, where I guess it is warm most of the year, and Detroit, where you have 50–50. 

Senator KLOBUCHAR. I think what would be interesting with this 

is that we are very focused on the highest quality, low-cost areas 

of the country in terms of putting incentives into this bill to get 

Medicare reimbursement rates to reward that kind of behavior. 

And I find it interesting that the places that you mention tend to 

be some of the places, particularly Florida, Texas, that have some 

of the higher-cost, lower-quality care, and that is nothing to say 

about these States, but sometimes it is because there is a lack of 

organization in their health care systems. Sometimes it is because 

they just have had a culture of medicine delivery that just is not 

the same as the way a place like Mayo clinic would do it. And I 

find it so interesting you mentioned two of the areas that tend to 

have—I think most people would think it is like a hotel. You pay 

more and you get a better room. Not true with health care. For the 

most part, you pay more and you get a worse room, whether it is 

in a hospital or whether it is the treatment you get. 

So I just wonder if you have any thoughts on the interrelationship between disorganized health care systems and the propensity 

for fraud. 

Mr. WEST. Well, I think whenever you have—I think Senator 

Sessions actually said it best. Whenever you have large amounts 

of money, you have the propensity for fraud. I think that is why 

we have efforts to combat not only health care fraud at the Federal 

level, but also financial fraud in all of its forms. And so I do not 

know if I am the best person to comment on the interrelationship 

between disorganized health systems and fraud, but I do know that 

where we see it, it is usually because we see patterns that are occurring. 

Senator KLOBUCHAR. And then are you able with this hot-spot 

analysis to learn from that and then prevent certain locations from 

being hot spots, you kind of put the word out on the kind of fraud 

you are seeing? 

Mr. WEST. Well, the data flows both ways. Not only is it important for us to share data with HHS to try to identify where we are 

going to deploy our law enforcement resources, what we pick up in 

the field and the information we pick up in the field, it is very important for the Department of Justice to share that with HHS so 

they can in turn identify providers who may be falling into these 

patterns. Absolutely, it flows both ways. 

Senator KLOBUCHAR. Did you want to add anything, Mr. Corr. 

Mr. CORR. Simply to say that that is exactly right, and it is the 

reason the collaboration is paying off. 

Senator KLOBUCHAR. I found that interesting, and what I would 

hope then also would come out of it is some suggestions about how 

to, you know, organize the systems and put in place these protections to prevent fraud. And it is just no surprise to me that there 

is a pattern. 

Mr. CORR. Senator, just as one example, the lack of accountability within a disorganized health care system does open the possibility for fraud. For example, if you bundled payments for certain 

27 

kinds of services and one aspect of that bundled payment was durable medical equipment, it would be more difficult for a fly bynight criminal to set up a corporation and start billing Medicare 

than if they had to participate as a part of a more organized system where there was a single payment for all the services that 

were rendered. 

Senator KLOBUCHAR. Because the other providers would have an 

interest, and there would be a double-check for you, not just the 

Government checking. 

Mr. CORR. Yes. 

Senator KLOBUCHAR. I would think the other people that want 

to get paid have an interest in not getting ripped off by some fly 

by-night criminal that comes in and takes part of their money 

when they do not get the durable medical equipment. That is very 

interesting, because I am a big fan of these bundled payments. So 

thank you very much. 

Senator KAUFMAN. Well, I want to thank you both for your excellent testimony on what obviously is a critical subject. As we move 

toward meaningful health care reform, we must ensure that criminals who engage in health care fraud and those who contemplate 

doing so understand that they face swift prosecution and substantial punishment. I look forward to working with the Department of 

Health and Human Services and with the Justice Department and 

with Chairman Leahy and others on the Committee to promote this 

goal. 

Thank you very much, and the hearing is adjourned. 

[Whereupon, at 11:34 a.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

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