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68–015 PDF 2012

S. Hrg. 112–310 

HARNESSING TECHNOLOGY AND INNOVATION 

TO CUT WASTE AND CURB FRAUD IN FEDERAL 

HEALTH PROGRAMS 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JULY 12, 2011 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

MARK BEGICH, Alaska 

SCOTT P. BROWN, Massachusetts 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

JOHN KILVINGTON, Staff Director 

WILLIAM WRIGHT, Minority Staff Director 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Senator Brown .................................................................................................. 3 

Prepared statements: 

Senator Carper ................................................................................................. 37 

Senator Brown .................................................................................................. 40 

WITNESSES 

TUESDAY, JULY 12, 2011 

Peter Budetti, M.D., Deputy Administrator and Director for Program Integrity, Centers for Medicare and Medicaid ........................................................... 5 

Lewis Morris, Chief Counsel, Office of Inspector General, U.S. Department 

of Health and Human Services ........................................................................... 7 

Joel C. Willemssen, Managing Director, Information Technology Issues, U.S. 

Government Accountability Office ...................................................................... 9 

Louis Saccoccio, Executive Director, National Health Care Anti-Fraud Association .................................................................................................................... 10 

ALPHABETICAL LIST OF WITNESSES

Buddetti, Peter, M.D.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 43 

Morris, Lewis: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 55 

Saccoccio, Louis: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 79 

Willemssen, Joel C.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 66 

APPENDIX 

Questions and responses for the Record from: 

Mr. Buddetti ..................................................................................................... 95 

Mr. Morris ......................................................................................................... 99 

Mr. Willemssen ................................................................................................. 107 

Mr. Saccoccio ..................................................................................................... 113 

Chart referenced by Senator Carper ...................................................................... 118 

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(1) 

HARNESSING TECHNOLOGY AND INNOVATION 

TO CUT WASTE AND CURB FRAUD IN 

FEDERAL HEALTH PROGRAMS 

TUESDAY, JULY 12, 2011 

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT,

GOVERNMENT INFORMATION, FEDERAL SERVICES,

AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:34 p.m., in room 

342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, McCaskill, Brown, and Coburn. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Well, why don’t we go ahead and invite our first 

panel to the table, please. Welcome, one and all. 

On most Tuesdays that we are in session, Senate Democrats and 

Senate Republicans eat lunch, never together, always apart, and 

talk about the challenges that we face as a Nation, and we spent 

the last hour, hour-and-a-half in the Senate Democratic Caucus 

talking about the budgetary challenges that we face and what to 

do about them. One of the people who has thought about this for 

a lot longer than this week or this month or this year is the fellow 

who is sitting to my right, Senator Coburn, who has just joined us. 

He was a member of a commission created by Executive Order 

(EO) by the President over a year ago called the Deficit Commission, co-chaired by Erskine Bowles and by former Senator Alan 

Simpson, and 11 of the 18 members of that Commission voted for 

a deficit reduction package that would basically reduce the deficits 

by about $4 trillion over the next 10 years, mostly on the spending 

side, some on the revenue side. It was an approach in which almost 

everything was on the table—defense spending, domestic discretionary spending, entitlement spending, tax expenditures, and 

weighted about two-to-one or three-to-one to the spending side in 

terms of deficit reduction. 

One of the concerns, primarily among Democrats but also by Republicans and some Independents, is how do we reduce entitlement 

spending without significantly cutting benefits and inflicting real 

harm on people. Thanks to the good work by folks on my staff and 

on Senator Coburn’s staff, some good work has been done drilling 

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2 

down on Medicare and on Medicaid to find there are ways for us 

to be able to reduce outlays from those programs, but to do so in 

a way that does not mortally wound beneficiaries or, frankly, mortally wound the providers. 

As it turns out, there is a lot that we can do and there is a fair 

amount that we are doing. The health care legislation that we 

passed here a year or so ago actually provides a number of tools 

to the Centers for Medicare and Medicaid Services (CMS) to enable 

them to go out and save some money and to reduce the flight of 

funds, almost the thievery of funds, the theft of funds from the 

Medicare Trust Fund. 

Senator Coburn and I have been working, and our staffs have 

been working to see if there are other things that we can do to 

shore up the Medicare Trust Fund, which is now scheduled to run 

out of money in 2024. As it turns out, there is a fair amount that 

we can do in our role to help some of you at this table, especially 

Dr. Budetti and his folks, to realize additional savings. And a lot 

of us would just say it is common sense. 

The fellow who just handed me my talking points here is Peter 

Tyler. Peter has done great work here along with the Republican 

staff. But one of the things that we learned most recently was that 

in 2007, if you look at the amount of money that was spent—what 

was the expenditure, Peter, what was it for 2007? About half of 

what was spent on power wheelchairs. I do not know if this came 

from the Inspector General (IG) or from the Government Accountability Office (GAO) or who. Who did it come from, the IG? 

Dr. BUDETTI. The Office of Inspector General (OIG). 

Senator CARPER. Yes, the IG. In the first half of 2007, we spent, I think, about $190 million for power wheelchairs that year, and 

roughly half of that was, frankly, pretty hard to prove it should 

have been spent. 

We have dead doctors writing prescriptions for controlled substances for folks who should not be receiving those substances. 

They are going out and filling those prescriptions and using the 

drugs to help feed the drug trade. It is far too easy for bad people, 

for folks with criminal intent to get their hands on the provider 

IDs, and they are not only ordering controlled substances, but all 

kinds of durable medical equipment (DME). There is just a lot 

going on. 

You look at improper payments, $125 billion, I think GAO tells 

us, last year, about $47 billion of that for Medicare, not counting 

the Medicare Prescription Drug Program. I am told there is about 

another 20 or so billion dollars last year for Medicaid improper 

payments. Eric Holder, our Attorney General, tells us there is $60 

billion in Medicare fraud. I do not know if he is combining some 

of those numbers out of improper payments or not, but it is a lot 

of money. And if the President says we are going to cut improper 

payments in Medicare by half by the end of next year, if we do 

that, that is $25 billion a year. If you do it for 10 years, that is 

$250 billion. That is a quarter-of-a-trillion. If we take out half of 

the fraud in Medicare, that is another $30 billion a year times 10 

years is $300 billion. And you add it together and we are talking 

about real money, and none of that has to savage beneficiaries or 

inconvenience providers. 

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3 

We are interested in getting better results for less money, and 

we have been interested in that in health care. We are interested 

in a lot of other ways. And one of the ways to do that is to, frankly, 

drill down into some of the stuff we are going to talk about today. 

I am just very grateful to each of the witnesses for coming, for 

preparing for today’s hearing, and with that, I am going to yield 

to Senator Brown. Thanks very much. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Thank you, Mr. Chairman. It is good to see you 

again. 

Senator CARPER. Nice to see you. 

Senator BROWN. We are beginning to face difficult decisions that 

must be made in order to put our Nation back on the path to economic prosperity and fiscal sustainability, and one step we can all 

agree on is eliminating the waste, fraud, and abuse. Senator 

Coburn and Senator Carper were working on it long before I did. 

It is about $100 billion a year, and that is why I joined both of 

them in supporting the ‘‘FAST’’ Act of 2011, as one of the early cosponsors. It is a crucial tool for the government to attack this monumental waste of taxpayer dollars. 

This is the second hearing in 5 months that this Subcommittee 

has held, finding out ways to root out waste and abuse in the system. It is the key to ensuring the viability for these important programs. Simply put, it is no longer acceptable, for business as usual, 

approach and the endless promises for action while the problem of 

waste, fraud and abuse continues to grow. This legislation is important and is long overdue. 

As I stated at the Subcommittee’s March 9 hearing, the Patient 

Protection and Affordable Care Act (PPACA) expands Medicaid coverage by an estimated 16 million people by 2019. That is a 32 percent increase over the current enrollment in the program, and the 

cost of the Medicaid expansion alone is estimated to be about $430 

billion over the next 10 years, and the Federal Government is responsible for paying over 90 percent of these increases. 

This expansion in the government’s role in health care will unduly strain our Nation’s already dire fiscal condition and entice 

predators that you referenced, Mr. Chairman, just now, to gorge on 

the cash cow which these programs represent. It is the government’s chronic mismanagement of Medicare and Medicaid fraud 

prevention that has landed both programs on the GAO’s High-Risk 

List for many years. Expanding benefits without first establishing 

the necessary controls, checks, and balances to prevent the waste, 

fraud, and abuse we all hear about is putting the cart before the 

horse. 

The government’s performance overseeing these programs in the 

last few decades does not indicate a history of success, and in light 

of the burgeoning wave of health care spending and the history of 

lax oversight, we need to do more and we need to do it quickly. 

Today, we will hear about CMS’s progress in confronting these 

areas through efforts like creation of the Integrated Data Repository (IDR) program. The IDR was created to provide a single source 

of data related to Medicare and Medicaid claims, a good first step. 

They began incorporating data in 2006, but have yet to incorporate 

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4 

any Medicaid data. At the behest of Congress, CMS recently began 

the use of predictive modeling software to prevent payment of possible fraudulent claims. This has historically been at the heart of 

the problem, is trying to identify a lot of these fraudulent claims, 

and Congress has that oversight duty through your leadership, Mr. 

Chairman, to be proactive in pursuing ways to obtain—to curb that 

waste, fraud, and abuse. 

So we have a lot of work to do. The American taxpayers expect 

more. We expect more and we need to move quickly, so I appreciate 

you holding this hearing. 

Senator CARPER. Thanks, and I am happy to be here with you. 

Senator Coburn, and I again just want to say thanks for letting 

me be your wingman on some of this stuff, improper payments—— 

Senator COBURN. I think you have said it all. I will look forward 

to hearing testimony. 

Senator CARPER. All right. Great. Thanks so much. 

All right. Let me give some brief introductions for our witnesses. 

Dr. Budetti, I am glad we are not paying you on an appearance 

basis because this could get expensive, but our first witness today 

is Dr. Peter Budetti. He is the Deputy Administrator and Director 

for Program at the Centers for Medicare and Medicaid Services. He 

is, in effect, the person in charge of combating waste and fraud for 

both the Medicare and the Medicaid programs—no small job. Dr. 

Budetti has a long history in the health care arena in both government and private sector, including Chairman of the Board of Directors at Taxpayers Against Fraud and as a professor at the University of Oklahoma. Dr. Budetti generously testifies in front of our 

Subcommittee quite frequently and we thank you very much for 

being with us today. 

Lewis Morris, also known as Lew Morris, right? 

Mr. MORRIS. Yes, sir. 

Senator CARPER. There you go. He is the Chief Counsel of the 

Department of Health and Human Services (HHS), Office of Inspector General. Mr. Morris has worked for 25 years for the Inspector General. He has also served as Special Assistant U.S. Attorney 

for the Middle District of Florida, the Eastern District of Pennsylvania, and the District of Columbia. He also serves on the Board 

of Directors of the American Health Lawyers Association, and Mr. 

Morris, it is good to see you and thanks so much for your testimony 

and your preparation for today. 

Joe Willemssen, who joins us today from the Government Accountability Office, is the Managing Director of the Government 

Accountability Office’s Information Technology Team, where he 

oversees evaluations of technology across the Federal Government. 

This includes assessments of computer security, electronic government, privacy and systems acquisition. He has been at GAO for 

over 30 years, and I understand he has testified more than 80 

times before Congress. Mr. Willemssen received both a Bachelor’s 

and Master’s degree in business administration from the University of Iowa. I think that makes you a Hawkeye for life. We are 

glad that you are here with us today. 

And we finally want to welcome Louis—do people call you Lou 

or Louis? 

Mr. SACCOCCIO. Lou. 

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5 

1The prepared statement of Mr. Budetti appears in the appendix on page 43. 

Senator CARPER. Lou Saccoccio, who is Executive Director at the 

National Health Care Anti-Fraud Association (NHCAA), a national 

organization focused exclusively on combating health care fraud in 

both the public and the private sectors. We focus a lot on the public, fraud in the public sector, but it turns out there is a lot in the 

private sectors, as well, and we can learn from them. Maybe they 

can learn something from us. Mr. Saccoccio has served as Executive Director for over 6 years. Previously, he worked at the organization America’s Health Insurance Plans. He is a graduate of the 

U.S. Naval Academy—Bravo Zulu—and also of Harvard Law 

School, and he served as a Navy JAG lawyer. 

Mr. Saccoccio, always glad to have another Navy guy. 

You have a common bond with at least two of us, maybe three, 

I do not know, but we are happy to have you. 

Each of you have roughly 5 minutes to make your statement. If 

you go a little bit over that, that is OK. If you go way over it, that 

is not OK. I will rein you in. So I would just ask you to go ahead 

and your full statements will be made part of the record. 

So, Dr. Budetti, please proceed. Thank you all, again, for joining 

us. 

STATEMENT OF PETER BUDETTI, M.D.,1 DEPUTY ADMINISTRATOR AND DIRECTOR FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND MEDICAID SERVICES 

Dr. BUDETTI. Thank you, Senator Carper, Ranking Member 

Brown, and Senator Coburn. Good to be here again. It is my pleasure to be here before the Subcommittee and have the chance to tell 

you that there actually is some good news, that on July 1 of this 

year we at CMS implemented a new predictive modeling technology 

that was developed with private industry experts to fight Medicare 

fraud. 

This is built on technology that has been used in the private sector and it will help identify fraudulent Medicare claims prior to 

their being paid on a nationwide basis so that we can begin to take 

action to stop fraudulent payments before they are made. This, of 

course, builds on the anti-fraud tools that we were provided in the 

Affordable Care Act (ACA), including enhanced screening and enrollment requirements, strengthened authority to suspend payments pending credible allegations of fraud and increased coordination of anti-fraud actions and policies across Medicare and Medicaid. This is helping us move from beyond the pay-and-chase mode 

into a new era of preventing problems prior to payment. 

You have all seen my poster before. I just want to use it once 

again to highlight the top three lines. First of all, that we are moving to a prevention mode. Second, that we are targeting our resources based on the actual risk that we are facing. And third, that 

we are moving to use innovative and advanced technologies that 

have not previously been used in this fight against fraud. 

I would like to now move on to telling you about our predictive 

modeling system that we have put into place, and I am pleased to 

be able to bring you up to date on this. This is not easy to do, but 

it is a challenge that we take on willingly. The Administration is 

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6 

committed to this action and we are going to move forward with 

it very enthusiastically. 

The main purpose of this slide is to confuse you. 

Senator CARPER. So far, it is working. [Laughter.] 

Dr. BUDETTI. It is to illustrate how the new system will integrate 

into the claims payment system. You all know that claims go into 

our Medicare Administrative Contractors (MACs). They also then 

go through a series of other steps, and our fraud prevention system 

will intervene in the claims payment cycle. So this is not going to 

interfere with the claims payment process unless and until there 

is a reason to stop a claim from being paid, and I will be delighted 

to talk more about that in just a few minutes. 

The result of the analysis will be fraud alerts, risk alerts that 

will tell us that we need to look more carefully at individual or patterns of claims, and we will use that information to target our investigative resources. This will lead to administrative actions by 

CMS. It will also lead to referrals to our law enforcement partners. 

So this is an important step forward. It is a new system and it 

has been in place now for exactly 12 days. The system uses algorithms and advanced data analytics to look at many different factors, all simultaneously. Another characteristic of the system is 

that it is capable of and will, in fact, grow over time. As we get 

more experience with it, as we know which of our analyses are, in 

fact, paying off with fraud leads that are worth pursuing, that will 

then feed back into the system. As we learn from our law enforcement colleagues information from their investigations and other 

work, patterns that we should incorporate into our system, the system can incorporate that, as well. We can look at information by 

beneficiary, by provider, by service origin, by a variety of different 

approaches, all simultaneously. 

We are also moving to deal with the information that is generated by the system in a number of ways. We are setting up a 

command center that will look at the alerts, will prioritize them, 

will triage them, and will take appropriate action very quickly, 

whether that is referral to our program integrity anti-fraud contractors to do investigations, whether it is immediate action by us, 

whether it is immediate referral to law enforcement. 

We are also going to be prioritizing our vulnerabilities, looking 

more carefully at exactly what the vulnerabilities are that need to 

be expanded in the fraud prevention system that we are implementing. 

And we are building a sandbox, an analytics sandbox that will 

include data from many sources, including the Integrated Data Repository and other sources of information. This will allow us to test 

additional models and additional algorithms and incorporate the 

ones that are likely to pay off into the system. 

I want to emphasize that this system is one that was used in the 

private sector and it was immediately applicable to the Medicare 

system. So we were able to implement it just within 9 months of 

when the President signed the bill and within the statutory deadline that you provided us with. 

I look forward to continuing to tell you about this and I look forward to your support and working with you as we move forward 

to fight fraud in health care. Thank you. 

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7 

1The prepared statement of Mr. Morris appears in the appendix on page 55. 

Senator CARPER. Well, good. Thanks for that opening statement. 

We will look forward to pursuing a number of points that you have 

raised. That is good. Thanks. 

Mr. Morris, please proceed. Again, welcome. We appreciate the 

great work that you and your team have done. 

STATEMENT OF LEWIS MORRIS,1 CHIEF COUNSEL, OFFICE OF 

INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Mr. MORRIS. Thank you very much. Chairman Carper, Ranking 

Member Brown, and Senator Coburn, thank you for the opportunity to testify this afternoon about the role that technology can 

play in cutting waste and fraud in the Federal health care programs. 

The Office of Inspector General’s anti-fraud efforts are substantially enhanced by information technology (IT). Data mining and 

analytics help us conduct risk assessments, target our oversight efforts, and reduce the time and resources required for audits, investigations, and other program integrity activities. By integrating 

data from Medicare Parts A, B, and D into a data warehouse and 

harnessing powerful analytic tools, we have expanded our analysis 

of questionable billing practices. 

For example, through data mining and analytics, we found that 

Medicare was spending about $4,400 per beneficiary for inhalation 

drugs in South Florida compared to $815 for the beneficiaries in 

the rest of the country. By combining the drug manufacturers’ sale 

data and Medicare claims information for a particularly expensive 

inhalation drug, we discovered that South Florida suppliers billed 

Medicare 17 times more units of the drug than was actually distributed for sale in that region. 

Thanks to increased data storage and analytic capabilities, we 

are now more efficiently identifying providers that present compliance risks. For example, we are using data mining techniques to 

construct a comprehensive picture of a hospital’s billing 

vulnerabilities. Two years ago, the analysis would have taken 

weeks or months to execute. Now, it takes approximately 20 minutes to run the computer program for each hospital. 

Senator CARPER. Say that one more time. 

Mr. MORRIS. What took us months 2 years ago to construct the 

actual software package and apply it to a hospital’s set of compliance issues, we can now do in about 20 minutes. We have started 

a series of audits already looking at up to 28 different risk areas 

in a hospital system by pulling samples of claims and then going 

back to that hospital, identifying those compliance issues, and allowing them to not only repay the money owed to our program, but 

take a much closer look at their internal controls so that when we 

come back in a year or two, we hope to have found corrective action 

so we do not need to keep repeating the pay and chase. 

Senator CARPER. Good. Thank you. 

Mr. MORRIS. As exemplified by the Medicare Fraud Strike Force 

data, it is combined with field intelligence to enable us to identify 

fraud schemes and trends more quickly. This data-driven approach 

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8 

pinpoints fraud hot spots, identifies suspicious billing patterns, and 

targets criminal behavior as it occurs. The Strike Force model has 

proven highly successful and has accelerated the government’s response to health care fraud, decreasing by half the average time 

from an investigator’s start to the prosecution in these types of 

cases. Since their inception in 2007, Strike Force teams have 

charged over 1,000 individuals with attempting to defraud Medicare of over $2.4 billion. 

We also recognize that we can learn a great deal from the private 

health care insurers, who have developed technological expertise in 

addressing our common goal of stopping health care fraud. It is axiomatic that most criminals who prey on the Nation’s health care 

system are equal opportunity thieves. They defraud private health 

care insurance as well as the Federal health care programs. 

OI agents actively participate in health care fraud working 

groups, which bring together government agencies and private sector insurers to share field intelligence and ongoing schemes and develop best practices. We also conduct joint investigations with the 

private sector. 

While the use of technology allows for a more efficient and targeted approach, several caveats are in order. First, human intelligence remains a key part of any program integrity strategy. Medicine and the health care system are extremely complex. A data run, 

even if derived from sophisticated metrics and powerful computers, 

cannot replace the role of professionals who bring experience and 

insight into the analysis of that data. 

In addition, while predictive analytics have proven effective in 

identifying potential fraud in the credit card transactions, there are 

characteristics of the Federal health care program that may limit 

the usefulness of these tools in the health care environment. For 

example, a treatment that may be medically unnecessary but may 

not be apparent on the face of the claim for reimbursement. 

It is also important to recognize that fraud schemes will evolve 

in response to these technologies, which introduce new 

vulnerabilities. For example, electronic health records (EHR) may 

not only facilitate more accurate billing and increase quality of 

care, but these electronic health records may also facilitate fraudulent claims. The very aspects of these records that make a physician’s job easier-—cut and paste features and templates—can also 

be used to fabricate information that results in improper payments 

and leads to inaccurate and potentially dangerous information on 

a patient’s record. 

A final caveat. Even the best anti-fraud technology are of limited 

value if not effectively implemented and appropriately overseen. 

The OIG work spanning a decade has revealed persistent problems 

with the performance of CMS’s program integrity contractors and 

vulnerabilities in CMS’s oversight. Because CMS is relying on contractors to perform these data-driven program integrity functions, 

there is a critical need for meaningful performance evaluation and 

adequate oversight of that work. 

In summary, technology can be a powerful weapon in the fight 

against fraud, but it is not a silver bullet. We must be mindful to 

carefully implement and oversee its use, and I would be pleased to 

answer any questions. 

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1The prepared statement of Mr. Willemssen appears in the appendix on page 66. 

Senator CARPER. Great. Thanks so much, Mr. Morris. 

Mr. Willemssen, please proceed. 

STATEMENT OF JOEL C. WILLEMSSEN,1 MANAGING DIRECTOR, 

INFORMATION TECHNOLOGY ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. WILLEMSSEN. Thank you, Mr. Chairman, Ranking Member 

Brown, Senator Coburn. Thank you for inviting us to testify today 

on your hearing on Medicare and practices to reduce fraud and 

waste in Medicare and Medicaid. 

At your request, we produced a report that is being released 

today on two CMS programs intended to improve the ability to detect waste, fraud, and abuse. As requested, I will briefly summarize 

our statement, which is based on that report, and I will also say 

that we have not looked at the initiative that Dr. Budetti discussed, but it sounds intriguing. We are interested to hear more. 

But in talking about our statement today, I will briefly touch on 

three areas. One, discuss the extent to which the Integrated Data 

Repository and One Program Integrity (One PI), have been developed and implemented. Two, address CMS efforts to identify, measure, and track benefits resulting from those programs. And finally, 

I will talk about the recommendations we have made to CMS to 

help achieve its goals of reducing fraud, waste, and abuse. 

Regarding IDR, it has been in use since 2006 and it is a very 

large data warehouse that can be of great benefit to CMS. However, currently, it does not include all the data that were planned 

to be in it by 2010. For example, IDR currently includes most types 

of Medicare claims data but not Medicaid data. IDR also does not 

include data from other CMS systems that can help analysts prevent improper payments. Further, CMS has not finalized plans or 

developed reliable schedules for efforts to incorporate these data. 

One PI is a web-based portal that is to provide CMS staff and 

contractors with a single source of access to the data contained in 

IDR as well as tools for analyzing those data. While One PI has 

been developed and deployed, we found that few analysts were 

trained in using the system. Program officials planned for 639 analysts to be using the system by the end of Fiscal Year 2010. However, as of October 2010, only 41 were actively using the portal and 

tools. Until program officials finalize plans and schedules for training and expanding the use of One PI, the agency may continue to 

experience delays. 

With One PI, CMS anticipated that it would achieve financial 

benefits of $21 billion. As we have previously reported, agencies 

should forecast expected benefits and then measure the actual results accrued through the implementation of programs. However, 

CMS is not yet positioned to do this. As a result, it is unknown 

whether the program has provided any financial benefits yet. CMS 

officials added it is too early to determine whether the program has 

provided benefits since it has not yet met its goals for widespread 

use. 

To help ensure that the development and implementation of IDR 

and One PI are successful in helping CMS meet the goals of its 

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10 

1The prepared statement of Mr. Saccoccio appears in the appendix on page 79. 

program integrity initiatives and possibly save tens of billions of 

dollars, we are making several recommendations to CMS. Among 

those, one, to finalize plans and schedules for incorporating additional data into the data repository. Two, finalize plans and schedules for training all program integrity analysts intended to use One 

PI. Three, establish and communicate deadlines for program integrity contractors to complete training and use of One PI. And four, 

to establish and track measurable outcome-based performance 

measures that gauge progress toward meeting program goals. 

In commenting on a draft of our report, CMS agreed with our 

recommendations. CMS’s timely implementation of these could lead 

to reduced fraud and waste and overall substantial savings in the 

Medicare and Medicaid programs. 

That concludes a summary of my statement. I look forward to 

your questions. Thank you. 

Senator CARPER. Thanks, Mr. Willemssen. Thank you so much. 

Mr. Saccoccio, please proceed. 

STATEMENT OF LOUIS SACCOCCIO,1 EXECUTIVE DIRECTOR, 

NATIONAL HEALTH CARE ANTI-FRAUD ASSOCIATION 

Mr. SACCOCCIO. Thank you. Chairman Carper, Ranking Member 

Brown, and Senator Coburn, thank you for the opportunity this 

afternoon to testify. 

The National Health Care Anti-Fraud Association was established in 1985 and is the leading national organization focused exclusively on combating health care fraud. We are uncommon among 

associations in that we are a private-public partnership. Our members comprise more than 85 of the Nation’s most prominent private 

health insurers along with more than 85 Federal, State, and local 

government, law enforcement, and regulatory agencies that have 

jurisdiction over health care fraud who participate in NHCAA’s law 

enforcement liaisons. 

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

care fraud. The magnitude of this mission remains the same regardless of whether a patient has health coverage as an individual 

or through an employer or has coverage under a public program, 

such as Medicare, Medicaid, or TRICARE. 

Health care fraud is a serious and costly problem that affects 

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

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

health care delivery. Patients are physically and emotionally 

harmed by health care fraud. As a result, fighting health care 

fraud is not just a financial necessity, it is a patient safety imperative. 

Health care fraud does not discriminate also between types of 

medical coverage. The same schemes used to defraud Medicare 

mitigate over to private insurers and schemes perpetrated against 

private insurers make their way into government programs. Additionally, many private insurers are Medicare Part C and D contractors that provide Medicare coverage and Medicaid coverage in the 

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11 

States, making clear the intrinsic connection between private and 

public interest. 

As a result, the main point I want to emphasize is the importance of anti-fraud cooperation and collaboration between private 

and public payers. NHCAA has stood as an example of the power 

of a private-public partnership against health care fraud since its 

founding, and we believe that health care fraud should be addressed with private-public solutions. 

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

response to the challenge of health care fraud schemes in South 

Florida, including fraud schemes involving infusion therapy and 

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

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

brought together representatives of private insurers, FBI headquarters and 10 FBI field divisions, CMS, HHS’s Office of Inspector 

General, the Justice Department, the Miami U.S. Attorney’s Office, 

and local law enforcement to address the health care fraud 

schemes emerging from South Florida. The details of the emerging 

schemes, investigatory tactics, and the results of recent prosecutions were discussed with the dual goals of preventing additional 

losses in South Florida and preventing the schemes from spreading 

and taking hold in other parts of the Nation. 

This type of anti-fraud information sharing, sharing between the 

Federal and State programs and between private and public payers, is critical to the success of anti-fraud efforts. The HHS Office 

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

have demonstrated a strong commitment to information sharing 

and are working with NHCAA to identify the barriers, both actual 

and perceived, to effective anti-fraud information sharing with the 

goal of increasing the effectiveness of this critical tool in the fight 

against health care fraud. 

In addition to information sharing, the other critical means needed to detect and identify emerging fraud patterns and schemes in 

a timely manner is to apply effective and cutting-edge data analytics to aggregated claims data. The pay-and-chase model of combating health care fraud, while necessary in certain cases, is no 

longer tenable as the primary method of fighting this crime. 

In this regard, we applaud CMS for its recent implementation of 

predictive modeling using rules and pattern recognition for Medicare claims. NHCAA is also encouraged by the expanded provisions 

provided in the Affordable Care Act. The Act mandates an expanded integrated data repository that will incorporate data from 

all Federal health care programs. 

Progress is also being made by commercial health insurers. In 

addition to the business rules and outlier models used by insurers 

to detect potential fraud, some companies have begun to utilize or 

are in the process of evaluating the use of predictive modeling technology and other advanced data analytics, applying them to fraud 

prevention efforts on the front end prior to medical claims being 

paid. Although the health care industry has not achieved the level 

of real-time data analytics used in the financial services industry, 

it is moving in the right direction. 

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12 

1The chart referenced by Senator Carper appears in the appendix on page 118. 

NHCAA is encouraged by the renewed Federal emphasis given to 

fighting health care fraud. We know continued investment and innovation are critical, and as greater attention is given to eradicating fraud from our government health care programs, we urge 

decisionmakers to also recognize and encourage the important role 

that private insurers play in minimizing fraud in our Nation’s 

health care system. 

Thank you for allowing me to speak today. I will certainly answer any questions from you. 

Senator CARPER. Thanks for that testimony. I thought your testimony was just excellent and enjoyed reading it and hearing it in 

here today. Thanks. 

Let me start, if I could, with Dr. Budetti. First, I would like to 

address an issue that has been raised by GAO. First, before I do 

that, I just want to say, Dr. Budetti, that the Office of Program Integrity under your leadership has made, I think, a lot of progress, 

and there are a number of people responsible for that, but I just 

want to say to you, thank you. Since you took your position last 

year, there have been any number of positive efforts underway, including the implementation of program integrity provisions within 

the Affordable Care Act. I think you deserve a lot of credit. So does 

your team, as do many of your colleagues at the Center for Medicare and Medicaid Services. 

However, as I say oftentimes in this room, everything I do, I 

know I can do better. The same is true for all of us, and the enormous waste and fraud challenges that we have, that we have heard 

about again here today, we have heard about in the past and, hopefully, we will hear about in smaller magnitudes in the future. But 

those challenges call out for very large efforts and require that the 

Congress ensures that the Federal Government takes many more 

strides to cut back on waste and fraud and abuse where we can. 

Now, in the GAO testimony and their audit report released 

today, the fraud detection system, that is the combined Integrated 

Data Repository and One PI, is presented as an important new tool 

to examine Medicare and Medicaid payments in order to detect 

fraud, and it is depicted on this chart1 up to my left and to your 

right. In fact, the Centers for Medicare and Medicaid Services own 

estimates show that if it is fully implemented, the new fraud detection systems will save some $21 billion—$21 billion—over 10 years 

by detecting and avoiding improper payments. The cost to date for 

the system is about $161 million, and to complete and operate the 

system for 10 years, the additional cost is roughly $184 million. 

That is quite a return on investment (ROI), if you think about it, and curbing $21 billion in waste and fraud would represent a 

lot of progress—a lot more progress. I think it makes sense that 

the timely implementation would help get these cost savings, obtain these cost savings more rapidly. That is what we want to do. 

However, the GAO has clearly shown that the system is not fully 

deployed. Despite the Centers for Medicare and Medicaid Services 

declaring the system up and running, only, as we have heard, 42 

people were trained in 2010, and despite the stated requirement 

for, I think, 639 people. Further, the system has yet to include 

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13 

Medicaid data. Also, GAO reported that there are no clear plans 

nor projected dates with specific milestones to either train more 

people nor to include the Medicaid data. And despite being part of 

the original design, there are no solid plans to give access to Medicaid State offices, I am told. 

Obviously, without the system being fully implemented as well 

as ensuring that Federal staff, oversight contractors, and law enforcement have access and are fully engaged, we will not realize 

that $21 billion in savings and that would be a shame. 

So, Dr. Budetti, let me just ask, what is your plan schedule to 

fully implement and deploy the new fraud detection system? When 

will we have more people trained? And when will State Medicaid 

offices have access to this system? 

Dr. BUDETTI. Thank you very much for your comments, Senator. 

I want to add that we always welcome the kind of arms’ length 

oversight that we receive from the General Accounting Office—the 

Government Accountability Office—I dated myself there—and from 

our colleagues at the Office of Inspector General. And, in this case, 

we do, in fact, concur with their recommendations. 

Senator CARPER. Can I just make a comment? 

Dr. BUDETTI. Certainly. 

Senator CARPER. I say this a lot. We are all in this together. 

Dr. BUDETTI. Yes. 

Senator CARPER. We are all in this together. And the only way 

for us to get out of this hole, this fiscal hole that we are in, including some that we are talking about here, is to get out together. Go 

ahead. 

Dr. BUDETTI. And we very much appreciate the interest and support you have shown in this. 

The Integrated Data Repository and the One PI system are ones 

that were started some 5 years ago or so. The agency did set rather 

ambitious goals for itself in terms of the implementation of those 

and some of those goals have been met. Some of them have not 

been met. This illustrates a number of factors. First of all, it does 

illustrate to some degree the challenges of implementing systems, 

especially, for example, with respect to the Medicaid data because 

States have different kinds of data systems and different formats 

and different responsibilities on the States in terms of their ability 

to supply the data. The structure of the Integrated Data Repository 

at first had to be, as I understand it, had to be redone somewhat. 

So there were some problems along the line in terms of meeting 

certain deadlines. Others were met. 

But in terms of your specific questions, I would like to make a 

couple of points, sir. One is that the Integrated Data Repository is 

intended for many purposes other than just fighting fraud. It is a 

valuable resource and it still continues to be a valuable resource 

and it will be as we move forward with our new and advanced technological solutions that I mentioned earlier. But the Integrated 

Data Repository is not strictly for that purpose. It also has a variety of other uses within CMS and that is an important aspect of 

this. 

The other question that you asked about, the training, we have, 

in fact, now trained an additional 55 personnel so far this year. We 

now have a schedule for training all of the private sector personnel 

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14 

who are going to be working with the One PI and Integrated Data 

Repository—— 

Senator CARPER. Give us some idea what that schedule is. That 

would be—— 

Dr. BUDETTI. That is—— 

Senator CARPER [continuing]. Forty-two plus about 58, so that is 

about a hundred. 

Dr. BUDETTI. All of the ones who are in our Zone Program Integrity Contractors (ZPICs), the anti-fraud contractors who will be 

using the system. I am told that they are all on schedule to be 

trained this year, and so that is—we did have to, after getting feedback from the people who were trained in the initial courses, we 

did redesign the program. We had some user feedback and realized 

that we were not—the agency was not adequately preparing them 

for using the system. These are complicated systems and the training program was restructured and revised and we believe it is now 

an extremely effective one and we have moved forward with an aggressive schedule. We have trained 55 and we are going to finish 

the ZPIC staff training, I am told, this year. So that is a very important aspect of all of this. 

The other thing I would tell you is that the Integrated Data Repository will be one of the sources of data that we will be using in 

the sandbox that I described, so that the Integrated Data Repository, which holds all of the claims over a prolonged period of time, 

is very different than the claims processing system that we are 

using with our new predictive analytics. So one is a repository and 

one—the IDR is a repository that will hold all the information. The 

other is being implemented on top of the claims processing system. 

So they will go hand-in-glove. 

We are moving forward. We already have the Medicare claims 

data in, as you described. We anticipate finishing the different 

stages of the Medicare data by next year and we are moving very 

aggressively with a variety of systems to improve the Medicaid 

data, as well, and doing that in a way that we believe will serve 

a variety of purposes, both for the States and providing access to 

the States and also for our purposes, both fraud fighting and otherwise. So I—— 

Senator CARPER. I am going to ask you to hold there. I am well 

over my time—— 

Dr. BUDETTI. OK. 

Senator CARPER [continuing]. So I want to be fair to my colleagues. When we come back, I am going to ask our friend from 

GAO just to respond to what we just heard from Dr. Budetti—— 

Mr. WILLEMSSEN. Sure. 

Senator CARPER [continuing]. And if you can tell us whether or 

not we should feel reassured. Do not do it now, but I am going to 

ask you to tell us if we should feel reassured by what he has just 

presented, all right? Thanks. 

Dr. BUDETTI. Thank you, sir. 

Senator CARPER. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

So just to followup a little bit, so 41 people, and you are training 

another 55, so you are a little under a hundred. You are supposed 

to have 639 done by the end of the fiscal year, and I have a little 

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15 

sheet here to look at. We have 41, so we can increase that a little 

bit. We are supposed to have 639 and it looks like we are a little 

short. Ultimately, when we get it done, we have spent $100 million, 

if I am not mistaken, on this system and we are trying to obviously 

identify, for example, despite deployment of the One PI program, 

Medicare fee-for-service (FFS) improper payments amounted to 

$34.3 billion for Fiscal Year 2010, an astonishingly high rate of 

10.4 percent of all Medicare fee-for-service payments. So when will 

they be all trained? You are saying that the remaining 539, give 

or take, will be trained by the end of this year? 

Dr. BUDETTI. The 55 that have already been trained and the rest 

of the workers in our contractors will all be trained by the end of 

this year. We are also doing training for law enforcement personnel 

and other—— 

Senator BROWN. Yes, but in terms of the 639, though—— 

Dr. BUDETTI. Well, the 639 was a number that was established 

as a goal a number of years ago, and whether that is ultimately 

the correct number, we are constantly revisiting who needs to use 

what in terms of fraud fighting capabilities. But we are proceeding 

with both the law enforcement personnel and with the ones in our 

contractors on a newly structured training program and an aggressive schedule. So I can tell you exactly how many people we plan 

to train by when, but I can tell you what I have said so far, which 

is what we have done to date and what we expect to do the rest 

of this year—— 

Senator BROWN. Right. 

Dr. BUDETTI [continuing]. So that will—— 

Senator BROWN. Thank you. You said, though, this was implemented quite a few years ago and—— 

Dr. BUDETTI. Right. 

Senator BROWN [continuing]. We have started the program, and 

yet quite a few years ago, still have only done, as of recently, under 

100 of these folks to implement this system that is a $100 million 

system. I mean, are we getting a good value? Is it reaching its full 

potential? It does not seem to be, but maybe I am missing something. 

Dr. BUDETTI. Well, I think we—we have admitted that there 

have been some deadlines that we had established that we did not 

meet, and we are now working—— 

Senator BROWN. Well, what ones have you actually met? 

Dr. BUDETTI. All of the Part A and Part B and Part D data were 

put into the Integrated Data Repository in terms of the post-payment data, in fact, as I understand it, I think two of those were 

actually put in ahead of schedule and the additional data to support the use has also been put in. 

I would like to emphasize that the IDR with the One PI system 

on top of it is a very valuable tool. We are moving to fully implement it. It is not the only resource that is available either to us 

or to our fraud fighting partners, either in law enforcement or in 

our systems. But it represents a major step forward. And in terms 

of the savings, we believe that the savings from moving forward 

with the IDR will not only be reflected in the fraud fighting capabilities, but also efficiencies in our contracting structure, because 

H605-41331-79W7 with DISTILLER

16 

instead of having a series of small data systems set up all around 

the country, we will have this one integrated system. 

So we are moving forward with that, Senator, and we do view 

it as valuable. But I want to emphasize that it is not our only fraud 

fighting tool. 

Senator BROWN. Sure. I understand that. Do you know if the 

$150 million or so spent on either system has been a good investment if no outcome performance metrics have been established to 

measure their actual benefit? 

Dr. BUDETTI. So one of the things that we did commit to in concurring with the GAO’s report was to establish and put into place 

a measurement of exactly those—— 

Senator BROWN. Have you done that? 

Dr. BUDETTI. This is what we have now committed to doing. 

Senator BROWN. Oh, OK. 

Mr. Morris, on the PPACA legislation that provides additional 

funds to strengthen the program’s integrity, it contains other fraud 

prevention provisions such as the ability of CMS to withhold Medicare payments to providers or suppliers. States also have this ability in the Medicaid program. How many payments have actually 

been withheld, if you know? 

Mr. MORRIS. We took a look at our data and it appears that since 

the passage of the Affordable Care Act, there have been 53 payment suspensions which were initiated at the Inspector General’s 

request—— 

Senator BROWN. Fifty-three out of how many? Out of billions, 

right? 

Mr. MORRIS. Oh, of potential payment suspensions? 

Senator BROWN. No, out of payments, how many have actually 

been withheld? 

Mr. MORRIS. Well, we identified approximately $8 million in 

money that was either on the payment floor, about to go out to the 

target of an investigation, or money that was otherwise stopped. So 

the 50 payment suspensions I referenced realized a withholding of 

about $8 million in monies in the Trust Fund. We have been working with CMS to strengthen this process. We have entered into an 

memorandum of understanding (MOU) that will facilitate more 

rapid exchange of information, and particularly in our strike force 

areas where we are identifying career criminals. These are not 

health care providers. 

Senator BROWN. Sure. 

Mr. MORRIS. These are people exploiting our program. Payment 

suspensions are more and more becoming the standard. 

Senator BROWN. Great. As the opportunity for fraud grows with 

the expansion of Medicaid, will CMS be able to meet the added 

threat, or is it inevitable, as with past expansions of benefits, that 

it will lead to more fraud, or is it a kind of in between? 

Mr. MORRIS. Well, certainly with the expansion of the benefit 

and thus an increase in the volume of claims, there will be a greater threat to the program. But we think that if many of the provisions that are both in the Affordable Care Act and are part of the 

program integrity efforts that Dr. Budetti has been talking about 

are implemented, there should be safeguards. 

H605-41331-79W7 with DISTILLER

17 

For example, effectively screening at the enrollment so that we 

only let in honest providers will go a long way to keeping the 

crooks out of the system. Similarly, having payment methodologies 

that reflect what the true cost of a service is and does not have 

enormous fluff which is then used to perpetuate a fraud scheme, 

and making sure that we are actually paying for legitimate services. These sorts of internal controls will go a long way to protecting the Medicaid program as it expands. 

Senator BROWN. Thank you, Senator Coburn. 

Senator COBURN. [Presiding.] Well, I thank each of you for your 

testimony. I was not a big fan of the Affordable Care Act, but the 

fraud provisions in it, I readily support. 

And I want to emphasize this next point in as nice a way as I 

can: Having the testimony at 9pm last night for a hearing that has 

been announced, getting questions for the record (QFRs) answered 

last night from 3 months ago from a Finance Committee hearing 

is not acceptable for us to be able to do our job. And my hope would 

be that those of you that turned in your testimony or your QFRs 

late would understand that. Otherwise, it seems to me the way we 

get QFRs answered is have another hearing, so we will have another hearing in 2 weeks to get our QFRs back because that seems 

to be the only way to get them back. 

Dr. Budetti, what is the cost of the new contract with Raytheon? 

And is it a cost-plus contract? 

Dr. BUDETTI. The new contract with Northrop Grumman and 

their subcontractors—— 

Senator COBURN. With Northrop Grumman, yes. 

Dr. BUDETTI [continuing]. Is set at $77 million for just over a 4- 

year period. It is an initial implementation period of several 

months followed by 1 year of award, and then there are 3 years, 

three option years to follow. 

Senator COBURN. So that is a fixed-price contract? 

Dr. BUDETTI. That is my understanding, sir, yes. 

Senator COBURN. Well, you all have let that contract, correct? 

Dr. BUDETTI. We let the contract. 

Senator COBURN. OK. So it is a fixed-price contract and—— 

Dr. BUDETTI. I know that there is a cap on it of the $77 million. 

That much, I know—— 

Senator COBURN. And my question is, this is a great company. 

I do not have any problem with it. When was the last—did they 

have experience in doing predictive modeling for the insurance industry? 

Dr. BUDETTI. So the system that Northrop Grumman and its 

partners put forward was one that was developed for the private 

sector, was developed and used in Verizon. They used it for their 

own transactions and also for their credit card transactions. And 

part of our solicitation requirement was that the system would be 

immediately applicable to Medicare claims processing, that there 

would not have to be a major startup period. And so they partnered 

with the National Government Service (NGS) and they were able 

to demonstrate to the satisfaction of the people who were reviewing 

the proposals that they could apply this immediately, and, in fact, 

we have been able to show that is actually happening. 

H605-41331-79W7 with DISTILLER

18 

Senator COBURN. Good. What is your goal? You have showed us 

what the plan is with IDR and One PI. What is your goal in terms 

of fully implementation of predictive modeling on everything that 

CMS does? 

Dr. BUDETTI. As of, actually, June 30, July 1, all Medicare feefor-service claims nationwide are being screened before the claims 

are paid. Our goal is to advance that, to build into the system more 

and more of our analytics. Our goal is also to develop the ways that 

we can then apply this, as well, to the Medicaid program. That is 

a very different set of challenges. We are committed to doing it. We 

are also—we are already beginning to look at that, at the possibilities of doing that. 

But we have the system in place and operating nationwide and 

it is looking at all Medicare claims right away. It will become more 

sophisticated. It will add more and more analytics, and we also will 

then be taking great care to make sure that we are interpreting the 

results properly and going after the bad guys and not the good 

guys with it. 

Senator COBURN. What percentage of claims that are going 

through this now are halted for review? 

Dr. BUDETTI. At the moment, what we have done is put it into 

place in a way that we have the ability to stop the claims before 

they are paid, but we want to get a track record. We want to get 

some traction here in terms of knowing what to do with respect to 

the kinds of risk scores that we are getting. 

We are getting some very impressive results. We are getting 

some—a very large number of fraud risk scores. But we do not 

know for sure yet that those are fraudulent. Now, many of the—— 

Senator COBURN. So you are going on and paying these claims? 

Dr. BUDETTI. I am sorry? 

Senator COBURN. So they are going on and being paid at this 

point? 

Dr. BUDETTI. We are taking a much closer look and we are exploring the ways that we can take action right now on an administrative basis before they get paid. 

Senator COBURN. But right now, of the claims that come 

through—— 

Dr. BUDETTI. Right. 

Senator COBURN [continuing]. And they get flagged, what percentage of them are the payments halted on and what percentage 

are gone on and paid? 

Dr. BUDETTI. Well, we are 12 days into it and right now, what 

we are doing is taking the results of the most egregious findings 

that we have, taking those to our new rapid response system that 

we are setting up to get our contractors to look more carefully— 

our Zone Program Integrity Contractors to look more carefully at 

them. And if it comes back that our strong suspicions are confirmed, we will have the ability to stop those payments. So I am 

not ready to tell you that we are—we are—yes, we are making payments now, but we are positioning ourselves to be able to stop 

them. But we want to do this correctly. We did not set this up to 

automatically stop claims on day one because we wanted to make 

sure that we were getting results that were responsible first. 

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19 

Senator COBURN. All right. Then let me get you on the record. 

When is it that you are going to have suspicious claims stopped 

pay? 

Dr. BUDETTI. I expect that we will have some suspicious 

claims—— 

Senator COBURN. No. Every one of them is being reviewed now, 

every one of them that hits your risk profile. When is it CMS is 

going to quit paying those claims and send them for review? 

Dr. BUDETTI. That is exactly our goal, Senator Coburn. 

Senator COBURN. But when? 

Dr. BUDETTI. Well, let me—so my answer is that, first of all, we 

get a risk score that covers a very wide range. So we are taking 

the very top, the most egregious ones. We are looking at them, first 

of all, to see whether or not they are already under law enforcement investigation of some kind. We do not want to interfere unnecessarily with a law enforcement investigation if there is one underway. And then the others we are looking at very carefully to 

start—and we expect to start cutting off payments very soon. 

I am not going to give you an exact date because we are going 

through this process for the first time. We are going through it in 

a responsive and responsible way. But we are set up for doing this 

and we will have the system integrated into the—fully integrated 

and automated into the claims processing system over the course 

of the next year. But at the moment, we are going to do it ourselves, taking the time to make sure that we are not interrupting 

claims payments that should not be interrupted. 

Senator COBURN. Yes, I agree. So I guess the answer is, within 

a year—— 

Dr. BUDETTI. Within a year we will have—— 

Senator COBURN [continuing]. You plan to have this implemented 

and working so that we are not sending payments to—— 

Dr. BUDETTI. We will stop making payments sooner than that, 

but we will have it fully—we will have it set up so that we are interrupting on a much more rapid basis the claims that fall into the 

patterns that we have confidence should be interrupted. 

Senator COBURN. Yes. 

Dr. BUDETTI. And, yes, this is a step-wise process, but we are 

committed to getting there and we are going to get there. This is 

the whole purpose of doing it. We want to stop these payments before they go out the door, but we want to do it right. 

Senator COBURN. OK. All right. Thank you. 

Senator CARPER. [Presiding.] I think you can feel Senator 

Coburn’s sense of urgency, and it is one that we all feel. 

Senator McCaskill, good to see you. Welcome. And thank you 

very much for cosponsoring our legislation. 

Senator MCCASKILL. Yes, thank you. 

Senator CARPER. We very much appreciate your interest and 

your leadership. 

Senator MCCASKILL. I apologize. Just say if there is any question 

I am asking that you have been asked before. I could not get here 

at the beginning of the hearing. I wish I could have, and I want 

to make sure I do not cover any ground that has already been covered. Did Northrop provide CMS an off-the-shelf product for this? 

H605-41331-79W7 with DISTILLER

20 

Dr. BUDETTI. The product that Northrop Grumman and its partners provided to us was built on the one that Verizon and its subsidiary had developed for use within the telecommunications industry, both for their telecommunications fraud and for their own credit card transactions. What the partnership together provided was 

an approach that was proved in one industry but that was immediately applicable to the Medicare payment system, which, of 

course, is very different than either telecommunications or credit 

card transactions. So this is the system that was selected. This is 

the one that has shown itself to be capable of being implemented 

immediately and is now up and running on all Medicare fee-forservice claims as of the beginning of this month. 

Senator MCCASKILL. I am cynical about buying IT systems because my experience in the Armed Services Committee and, frankly, dealing with other parts of government in contracting issues is 

that if we say we want somebody to do something, typically, they 

say they are going to design a system and it takes years and a lot 

more money than we thought it was originally going to take. Then, 

ultimately, sometimes it does not even work like it is supposed to 

and it gets abandoned. And so it is interesting to me that you were 

able to essentially get an off-the-shelf product. Was it specified that 

you wanted an off-the-shelf product? 

Dr. BUDETTI. We specified that we wanted a product that had 

been proven in the private sector that could be immediately applicable to the Medicare system and that was capable of being implemented to meet the rather impressive time line that we were working under, and we met all of those requirements. 

Senator MCCASKILL. OK. I think it is great that you were able 

to do that and I wish the rest of government would take note that 

we are way behind in terms of the integration of data and the systems that are available for analysis in government and we use the 

excuse of siloed agencies and we want our own system and, well, 

we have already got this and it needs to talk to that. Way too 

often, we are not specifying that we want something that has already been proven that, frankly, is off the shelf. That is the good 

news. 

Now, the bad news. IDR was supposed to contain Medicaid data, 

and we began this, what, in 2006? 

Dr. BUDETTI. Yes, Senator. You are correct that there are some, 

as I mentioned a minute ago, there were some deadlines that the 

agency had set out, some goals that the agency had set out that, 

for a variety of reasons, were not met. One of them was the full 

integration of Medicaid data into the Integrated Data Repository. 

There are a number of reasons why that did not happen—— 

Senator MCCASKILL. Give me, like, the top three. 

Dr. BUDETTI. The top three are, No. 1, the States really were not 

under any requirement that they had to submit the data to us. 

They also faced serious resource constraints. They also have their 

data in many different formats and many different systems, and so 

the integration of those into one place was complicated. And as I 

understand it—this, of course, was all somewhat before my time 

here—and I also understand that the way that the initial design 

for the system was structured, that it might have made it more difficult to get the Medicaid data into it. 

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21 

Those are all things that we are well aware of as the major initiative to get much better Medicaid data, both for the States and 

also for the Federal Government. That is very much a cross-CMS 

initiative. It is not just program integrity. It involves the Centers 

for Medicare and Medicaid Services, the Children’s Health Insurance Program (CHIP), and survey and search the MCS, as well, 

and there is a great deal of work going on to improve that system. 

But we do expect to be able to phase in the Medicaid data over 

time, and in the meantime, we are doing quite a bit working with 

the States directly, as well. 

Senator MCCASKILL. What is the date that you think you will get 

the Medicaid data in? 

Dr. BUDETTI. We are currently targeting 2014 for the ultimate, 

but that includes the entire revised system that we are talking 

about that would be restructured and much more useful for everybody. In the meantime, we are working very closely with individual 

States and with other approaches, and we are currently exploring 

ways that we can apply our predictive modeling system, which is 

not exclusively dependent on or the same as the IDR, ways that we 

can work with the States to use the predictive modeling approach, 

because we do not get the same flow of claims data directly to the 

Federal Government for Medicaid that we get for Medicare. Medicare, we get their claims. They send us their claims—— 

Senator MCCASKILL. Right. 

Dr. BUDETTI [continuing]. Because they want to get paid. 

Senator MCCASKILL. No, I understand. 

Dr. BUDETTI. And in Medicaid, we are dependent upon the States 

who are processing the claims—— 

Senator MCCASKILL. And they are dependent on our money. 

Dr. BUDETTI [continuing]. To report to us, and they are dependent upon our money and other resources—— 

Senator MCCASKILL. And I have found that can be a very persuasive tool. 

Dr. BUDETTI. And that is a challenge to everybody, yes. Yes, Senator. 

Senator MCCASKILL. Yes. And I think the more that you begin 

to exercise that muscle, I think the more cooperation you will get 

from the States. They are all gasping right now and incredibly dependent on the help that they are getting from the Federal Government, and I, for one, think that it makes more sense that we are 

giving them that help as opposed to jacking up costs for everybody 

by all the uninsured care that would occur the more we cut back 

on the Medicaid program. So I encourage you to use that muscle, 

that we have money and you need it to get the data that we need 

to provide the integrity to the program. 

Let me know the acronyms, you all are not nearly as bad as the 

Department of Defense (DOD), but you have a dizzying array of 

contractors that are supposed to be fighting fraud. We have the 

MACs, the Recovery Audit Contractors (RACs), the ZPICs, the Program Safeguard Contractors (PSCs), and that is not counting the 

IDRs, the IDIQs, and now the new program. Obviously, all these 

contractors that were supposed to be doing all this, it has not 

worked out as well as we hoped. What are you doing to clean up 

this mess in terms of how many contractors we have and is everyH605-41331-79W7 with DISTILLER

22 

body on the same page, is everybody working together, are we 

working at cross-purposes? What efforts are being made to allow 

people to track how well we are doing on integrity without a scorecard? 

Dr. BUDETTI. Senator, it took me several months on the job to get 

all those acronyms down and I do not think I have mastered all 

of them yet. But in answer to your question, we are doing a number of things. For one thing, we have restructured the way that we 

are overseeing our anti-fraud contractors, the Zone Program Integrity Contractors, and we are working to finish the transition to 

have Zone Program Integrity Contractors uniformly across the 

country. 

We have also assigned more staff. We are conducting onsite reviews instead of paper reviews. We have a number of oversight 

changes that we have put into place. We have put them under a 

new group within the Center for Program Integrity. We are doing 

a lot to improve our oversight of those contractors. 

The Medicaid administrative contractors, the ones that handle 

the claims, of course, are responsive to a number of different components within CMS, but we are working very closely with them, 

as well. They interact with the Recovery Audit Contractors, the 

RACs, as well. 

We have done a lot to improve the ability of the programs to 

work together. One of my goals is exactly that, to have a much 

more efficient system. One of the characteristics of our new fraud 

prevention system that is very useful is that it is also a management tool, because as we do these analytics and we send to the 

Zone Program Integrity, the anti-fraud contractors, we send them 

the results and say, here are 10 people with astronomical fraud 

scores. Do something. Look at these real carefully and get back to 

us right away. That is our rapid response strategy that we have 

developed. That is a new use of the interaction with them, but it 

is also a management tool because we know when we sent them 

that information and when they responded. So we have a number 

of—— 

Senator CARPER. Dr. Budetti—— 

Dr. BUDETTI [continuing]. Doing this. 

Senator CARPER. I am just going to ask that we draw—finish 

your sentence, but then—— 

Senator MCCASKILL. No, I do not have any more. I just wanted 

to— 

Senator CARPER. No. Go ahead and finish your sentence and we 

will have a second round, I promise. 

Senator MCCASKILL. Yes. I would just—— 

Senator CARPER. Go ahead and finish your sentence, Dr. Budetti. 

Senator MCCASKILL. The only request I would make for the 

record is if you could provide me a flow chart of all of the different 

anti-fraud contractors that are currently working for our Federal 

Government and how they work together and what their responsibilities are. Somebody someplace has diagramed that out, I bet. 

Senator CARPER. Would that be with or without acronyms? 

[Laughter.] 

Senator MCCASKILL. It would be helpful if the acronyms would 

be front, bold, and center, because I think for oversight purposes, 

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23 

it is going to be helpful for us to understand how they work together now, and then hopefully when you come back in a year or 

two and show us the $20 billion a year you have saved, you can 

point to which part of the system worked and we can get rid of 

some of these contractors that are not working. 

Dr. BUDETTI. I will be delighted to do that for you, Senator. 

Senator MCCASKILL. Thank you, Mr. Chairman. 

Senator CARPER. I want to lower expectations. It is actually $20 billion over 10 years, but if you can do the $20 billion a year, we 

will take it. 

I said earlier when I was asking the first round of questions and 

my time was expiring, I said I was going to come back to, I think 

I said to Mr. Willemssen, but I am going to ask the other witnesses 

to do this, as well. I want you to reflect on what Dr. Budetti has 

said in his testimony and his responses to our questions. What 

should we feel good about? What should we feel concerned about? 

Do you want to go first, Mr. Willemssen? 

Mr. WILLEMSSEN. Certainly, Mr. Chairman. One, we are pleased 

that CMS has concurred with all seven of our recommendations 

and planned to act to implement those recommendations. If they 

act appropriately and implement them fully, then we can see figures like that $21 billion on the chart up there. 

Second, I do not want to underestimate the—— 

Senator CARPER. Now, how do we make sure that they actually 

follow those recommendations? You give them the recommendations. They say, yes, these are good recommendations—— 

Mr. WILLEMSSEN. That would be my second point—— 

Senator CARPER. OK. 

Mr. WILLEMSSEN [continuing]. And that is related to committing 

to milestones and deadlines on when those actions are going to be 

put in place. For example, when will CMS put in place the ability 

to establish tracking mechanisms associated with those two systems to demonstrate what kind of benefits are we getting and what 

kind of cost reductions are we getting, what kind of fraud are we 

identifying and preventing? 

And a third point is related to the Integrated Data Repository. 

I do not want to underestimate how important that is. That is a 

tremendous tool, to have one massive database—— 

Senator CARPER. Let me interrupt here just a minute. If somebody on the other side of the moon were listening in to this conversation and trying to understand what an IDR is, who can explain it so that a regular person off the street or just a mortal like 

me—— 

Mr. WILLEMSSEN. One way to think of it—— 

Senator CARPER [continuing]. Could actually understand it and it 

actually be meaningful. 

Mr. WILLEMSSEN [continuing]. Is if you are—— 

Senator CARPER. Give me a good example. Somebody just give 

me a good example of this, OK, and I do not care who does it. 

Mr. MORRIS. The way I have been led to think about it, because 

I do not understand it, either, is that instead of going to five little 

grocery stores to pick up all the parts you need for a dinner, an 

IDR is a supermarket where you get all the components, all the information you need to build your dinner. 

H605-41331-79W7 with DISTILLER

24 

Senator CARPER. All right. That is great. Even I understand that. 

Dr. BUDETTI. And the One PI system that sits on it is the recipe 

book. 

Mr. WILLEMSSEN. Yes. Very good. 

Senator CARPER. All right. 

Mr. WILLEMSSEN. In fact, it would give you instant access to the 

data you are looking for because you do not have to go through a 

lot of iterations. It is sitting right there on your desktop. So I want 

to emphasize the importance of that, and that is why it reinforces 

why we get as much data on there as possible. 

In terms of concerns, I am a little bit concerned with the change 

in going from an incremental approach to adding State Medicaid 

data to now the approach will be to do all 50 States in September 

2014. Our experience shows going in an incremental fashion is 

often a more prudent risk-based approach, kind of a lessons 

learned, what works, what does not. So just based on what I heard 

and what I know of, doing all 50 in 1 month in 2014 sounds a little 

risky as opposed to the incremental approach. 

Senator CARPER. Would you suggest that the course we take 

would be to maybe start with the first State that ratified the Constitution, then the second State? [Laughter.] 

Mr. WILLEMSSEN. I will defer to you, Mr. Chairman. 

Senator CARPER. All right. OK. Thanks for those responses. Mr. 

Saccoccio. 

Mr. SACCOCCIO. Yes. We are very excited about what CMS is 

doing, and we understand it is going to take some time. But when 

you look at the Medicare system, and then if you bring the Medicaid data, as well, there are enormous opportunities there, because 

unlike on the private side where, say, an Aetna has its own data 

or Cigna has its own data or Blue Cross-Blue Shield of Louisiana 

has its own data, here—and although they could take a look at that 

data, they are looking at a very small slice of what is going on out 

there. 

With Medicare and Medicaid, because of the enormous numbers 

and integrating all of that data into one place, there is enormous 

opportunity there not only for Medicare and Medicaid as they begin 

to analyze that data, suspend payments go after fraud, but then to 

take that information and share that information also with the private side, as well, not giving the private side access to the data, 

but taking the trend information that they see, the schemes that 

they see arising out of that data. 

For example, J codes, the codes used for infusion therapy are 

being abused in South Florida and we are starting to see a lot of 

that based on the analysis that we are doing. Let the private side 

know, the payers that are in those areas know that they should 

look at their data so that they can focus efforts, too. So I think it 

is an enormous opportunity, given the enormous amount of data 

that is there for Medicare and Medicaid. 

Senator CARPER. All right. Thanks. 

Mr. Morris, what should we feel encouraged about and what 

should we still have some concerns about? 

Mr. MORRIS. From the perspective of the Inspector General’s Office, we are very pleased with the sense of partnership and CMS’s 

interest in engaging us in designing a system that works for law 

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25 

enforcement as well as program integrity. And having worked in 

the IG for a number of decades, I can tell you it is refreshing compared to prior interactions we have had with CMS. 

I would say areas of concern, as touched on in my written testimony, we think it is going to be critical to monitor how the contractors perform in this context because our past experience is that 

contractors oftentimes disappoint us. 

The other particular interest we have is moving to what we call 

real-time data. Much of the information that we use as part of our 

criminal investigative work is pre-adjudicated. It is data that has 

not been scrubbed and perhaps may not even get paid. But it tells 

us that criminals are pinging the system. They are testing to see 

where claims get rejected because then they shape their strategy 

around those screens. So knowing when a criminal has tried to get 

in and has been unsuccessful is as valuable to us for fraud detection as spotting the claims through the predictive analytics. It is 

what we are building on. It is something we look forward to getting. 

Senator CARPER. All right. That is a good point. 

Dr. Budetti, just take a minute and respond to what you just 

heard from your three colleagues here, just a minute. 

Dr. BUDETTI. Senator, I think that we are very encouraged by 

the partnership that we have been able to establish with the Office 

of Inspector General and our other law enforcement colleagues and 

I will be delighted to look at whatever suggestions the GAO has for 

other ways to implement the Medicaid data. I will tell you that 

there is a lot of work going on right now to try to make sure that 

we are in position to be able to do that and do it properly. 

Senator CARPER. All right. Thanks. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman, and you asked a 

good question, Mr. Chairman, about IDR and explain it for the average person listening at home. Doctor, you referred to it as a recipe book and then a grocery store. It is interesting. It is a recipe 

book and a grocery store that does not have all the required items 

to either look up or purchase. The shared systems are not in there. 

There are a lot of holes in it. 

So I am curious, like, when is the recipe book going to be completed and the grocery store going to have all the products you 

need, because every hearing that I participate in, it is, like, oh, yes, 

we all get along. Everyone is great. We agree with this. We agree 

with that. And at the end of the day, we are kind of in the same 

situation, and doing the legislative history and the committee histories as we have done, being the newer person here, it is like deja 

vu. It is like Groundhog Day. You hear the same thing over and 

over and over. You have a new guy coming in. He has all the greatest intentions and he is picking up the slack where the other person left off and here we are. 

So I guess my question ultimately is to you, Mr. Willemssen. You 

have testified previously that one system, the old Medicare Transaction System (MTS), was terminated after we spent $80 million, 

and you stated that it was a huge learning experience. Yes, it was 

a very expensive learning experience, too, in my estimation. In 

your opinion, at this point, has CMS learned from its past failure 

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26 

and do you have confidence that they will be able to meet its stated 

deadline of 2014 for incorporating all Medicaid data into the IDR? 

Mr. WILLEMSSEN. Yes—— 

Senator BROWN. That is the recipe and grocery store we were 

just referring to. 

Mr. WILLEMSSEN. I did testify on that failed Medicare Transaction System about 14 years ago. There are similarities. There are 

differences. One of the similarities and lessons learned is there was 

some underestimation of complexity going into this. 

One area I would point to is in Medicaid. When asked earlier, 

Dr. Budetti talked about three reasons that made it difficult for 

why those were problematic in bringing into the IDR. I would echo 

the third reason that he talked about. All those State Medicaid 

Management Information Systems are separate. They often have 

different data element definitions and different file structures. So 

trying to aggregate those all together is very difficult. 

So we are encouraged to hear that there are efforts underway to 

do that, but I think the way you have to hold the agency’s feet to 

the fire is you have to have them commit to milestones and deadlines—— 

Senator BROWN. Right, and—— 

Mr. WILLEMSSEN [continuing]. On when are certain activities 

going to be done, and we would like you to come and—the way to 

enforce that, continuing congressional oversight. I think there were 

comments earlier about QFRs coming at a certain point in time relative to a certain hearing. There is a lot to be said for congressional 

oversight and actions that get taken. 

Senator BROWN. And it is interesting you say that, because my 

next followup question was, what are key indicators we should look 

for to ensure that these progress results are being made. 

Mr. WILLEMSSEN. The key indicator I would look for is to ask 

CMS what kind of benefits are accruing. Now that they have 

agreed to implement a system to track those benefits, what is happening? What kind of fraud reduction are we accruing? What kind 

of chunk out of that $21 billion, which, as the Chairman mentioned, was for a 10-year period, but that 10-year period was 2006 

to 2015, and right now, CMS does not know if they have accrued 

any benefits. 

Senator BROWN. Right. That is part of the problem that the 

Chairman and Senator Coburn and others have been working on 

before I got here. But, I guess, getting back to you, Dr. Budetti, 

how can you convince us that this time—and when I say ‘‘you,’’ it 

is not you, obviously, because you are new—your entity, your group 

that you are representing, how do we know that you are going to 

get it right this time? What confidence should we have? 

I think we are kind of optimistic here. We will try to work together. The Senator and I, out of the people that work here, are 

probably the two closest people that work together when we have 

an opportunity. What assurances can you give us that, in fact, you 

are getting it right this time, based on previous testimony and previous experiences? 

Dr. BUDETTI. I appreciate that question, Senator Brown, and 

there is a lot of history in a lot of these situations that it is important for us to learn from. All I would cite is one example, the fact 

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that we did get a major system implemented and up and running 

within 9 months of when the President signed the legislation and 

it has already reviewed all Medicare claims for the last 12 days 

and that we are setting up systems to deal with the results of that. 

Senator BROWN. And if I could just interrupt—— 

Dr. BUDETTI. Certainly. 

Senator BROWN [continuing]. I want to congratulate you on that. 

Aside from just throwing bombs, I think it is important to recognize a good job, as well, so congratulations on that effort. 

Dr. BUDETTI. I appreciate that very much, and, of course, I pass 

along your nice words to the people who actually did the work, who 

were my colleagues. 

The other thing I can say is that I think that you have heard 

from me before and you know that the intense commitment that we 

bring to this task. I think this is something that we want to accomplish, we are dedicated to accomplishing. We want to know exactly 

the kinds of results that the GAO mentioned, which is we want to 

know whether this is working, and we are developing metrics. We 

are looking to be able to measure not just money that we recover, 

which is very difficult in some of these situations, but in avoidance 

of payments that otherwise would have gone out the door. So we 

are, in fact, developing those metrics and looking at the ways that 

we can collect those data and I am delighted to continue with your 

oversight and report back to you regularly on our progress. 

Senator BROWN. Thank you. 

Mr. Saccoccio, you look lonely, so I wanted to ask you a question. 

[Laughter.] 

In your testimony, you discussed how FICO, an expert in credit 

risk analysis, was built on its expertise in the financial services industry to provide a predictive modeling for the private health care 

industry. Are any of your members currently using predictive modeling to prevent fraudulent payments? 

Mr. SACCOCCIO. Yes, several are. On the private side, it is kind 

of a mixed bag in the sense that you do have some companies that 

are well ahead of others. Obviously, you have the national companies that have more resources than, say, the smaller regional insurers. But some of them are using predictive modeling. They are 

trying to get a handle on the whole prepayment thing. Remember, 

it is not just an issue of predictive modeling but when are you applying it. Are you looking at claims before they are being paid or 

are you taking a look at them after they have been paid. 

So the push is to try to do this prepayment as much as possible, 

and that is a real challenge because there are requirements to pay 

claims in a certain amount of time. Every State has a prompt pay 

law. ERISA requires claims to be paid in a certain amount of time. 

So the private payers do have that pressure to try to pay those 

claims as quickly as possible, which then kind of offsets some of 

their efforts on the prepayment side. 

But some of the companies have started to use predictive modeling. Some are ahead of others. They all have some sort of data 

analytics that they do, but they are all moving in that direction 

with the emphasis trying to be pushed to the prepayment side of 

things. 

Senator BROWN. All right. Thank you, Mr. Chairman. 

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Senator CARPER. No, thank you. 

One of the things that Senator Coburn and I had worked on for 

a number of years was the issue of improper payments, and the 

earlier legislation, I think, passed in the first term of George W. 

Bush on improper payments, I think basically said, Federal agencies, we want you to be mindful of improper payments and start 

writing them down, or at least noting what they are. 

Senator Coburn and I came back a year or so ago and legislation 

signed by President Obama basically said, we not only want you to 

note the improper payments, we want you to stop making them. 

Federal agencies, we want you to report them. And last, we want 

you to go out and recover as much money as you can from those 

improper payments, particularly when there are overpayments that 

were made. And we had a fair amount of discussion in this hearing 

room in the past on recovery audit contractors, folks that literally 

we send out to recover overpayments, in some cases fraud, in other 

cases just mistakes. 

One of the questions that we got into here—I think, Dr. Budetti, 

we discussed this with you and the folks at CMS in the past—but 

just give us—I think maybe when you appeared at our last Subcommittee hearing on this topic, I think you said that CMS plans 

as expeditiously as possible to implement the final rule on Medicaid recovery audit contracting, and I think that was in the early 

part of maybe March this year. It has been 3 or 4 months. And now 

that we are meeting again in July, could you give us just maybe 

a more definitive date on when the final rule for Medicaid recovery 

audit contracting might be issued. 

Dr. BUDETTI. Thank you, Senator. Yes, I did use words probably 

to that effect. I have also said that it would be forthcoming soon. 

We do expect—— 

Senator CARPER. Those are the kind of answers that we give. You 

are not supposed to do that. You have to be more specific. 

Dr. BUDETTI. I can never commit to a specific date on a—— 

Senator CARPER. I have noticed that. 

Dr. BUDETTI [continuing]. Promulgating regulation. 

Senator CARPER. That troubles me. 

Dr. BUDETTI. But we are expecting this to be out by the end of 

the summer. 

Senator CARPER. The end of the summer, OK. Now, could that 

be, like, September 21? 

Dr. BUDETTI. You are very good at knowing the calendar, Senator. [Laughter.] 

Senator CARPER. Well, sometimes, like on the beaches, we close 

our beaches down on Labor Day, so we will see. OK. End of the 

summer. We will take your word on that. 

I want to go back to the—this is really one for all the panelists, 

and we will start with you, Mr. Saccoccio, and this is regarding 

public-private partnerships. Sometimes we think fraud is something that only happens in the Federal Government or State Governments or local governments. Actually, a lot of fraud occurs, at 

least with respect to health care, I am told, with the private health 

insurance companies. 

I once remember talking to folks from MBNA, a big credit card 

bank headquartered in Delaware, now part of Bank of America. 

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But I could not understand why they kept hiring all these folks 

who had been, like, top senior-level FBI and any number of other 

law enforcement agencies around the country, and I thought, what 

do they know about credit cards? And as it turns out, they knew 

a lot about ferreting out fraud and trying to stop it where it raised 

its head. 

A lot of folks in financial services know some things that we 

could learn from, and certainly the folks in the private health insurance companies that we could then learn from them, as well. 

And I think, if I understood your response to Senator McCaskill, 

Dr. Budetti, one of the reasons why we are able to get something 

off the shelf is because other sectors of our country, our economy, 

our health care delivery system, they had already worked on this 

issue and had come up with a way we were able to actually take 

that off the shelf. I think that is what I heard you say. 

But let me just—here is a question to all of our panelists on public-private partnerships. We have heard, I think from each of our 

witnesses here today, the importance of information sharing, public 

and private partnerships. Health care fraud criminals target everyone, whether they happen to be a private health insurance company or Medicare, and unless we find a way to work together to 

identify those who would steal from us, prevent improper payments, and prosecute those who have already committed fraud, we 

will continue to struggle to root out and defeat these fraudsters. I 

think it was Mr. Morris—I think it was you, sir—who referred to 

the public-private partnership, and Mr. Saccoccio has shared with 

us how the National Health Care Anti-Fraud Association brings together representatives from private insurers and public health care 

providers. 

What I want to ask each of you to do, just take a minute or so, 

a minute or maybe two, to tell us how those of us in Congress could 

help strengthen and formalize these types of working relationships 

or other improvements that we should encourage in these important public-private partnerships. Maybe there is nothing we can do. 

Maybe there is plenty of incentive just to do it on its own. But if 

there is something that we ought to be doing, we would like to 

know about it. Mr. Saccoccio, do you want to go first? 

Mr. SACCOCCIO. Sure. Thank you, Senator. I think a lot of, as you 

discussed, private-public partnerships, a lot of it is something that 

can be done independent necessarily of additional laws or statutes. 

But there are some areas that you may want to take a look at. 

First of all, with respect to—as we go down the road here with 

respect to predictive modeling in the Medicare program, is there an 

opportunity to allow the private insurers, again, access to information, not, again, access to the data, but access to trending information, schemes, those kinds of things. I suspect that a lot of that 

could be done by CMS without legislation, but to the extent that 

those issues are addressed in legislation, for example, your FAST 

Act bill that you have proposed, allowing the private side to participate as much as possible in those types of activities that make 

sense, and information sharing, obviously, is the biggest one. 

The other thing is, are there any other areas of the law that in 

some way undermine the ability of law enforcement to share information with the private side unnecessarily. Obviously, if there is 

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a law enforcement investigation, you do not want to compromise 

that investigation in any way. But if there are some statutes out 

there that in some ways undercut or undermine the ability to share 

information that do not make any sense, to maybe take a look at 

those and maybe look at maybe changing that. 

Senator CARPER. All right. Good. Thanks. Mr. Willemssen. 

Mr. WILLEMSSEN. I would echo a lot of those comments. I think 

to the extent—looking at the predictive modeling, to the extent that 

you can see some best practices and share those best practices, I 

think you will find a lot of private sector organizations willing to 

share their tools, in some cases at not that high of a cost because 

they want to get the word out. They want to be shown as best in 

class and what they are doing may be at a discounted rate for the 

Federal Government in a variety of important areas. 

I also would second the comment about enhanced information 

sharing and just to ensure that as that occurs, that we take into 

account privacy and security considerations. 

Senator CARPER. All right. Thanks. Mr. Morris. 

Mr. MORRIS. I would first note, as was set out in my written testimony, that since 1996, the law has charged us, the Attorney General’s Office and the Secretary through the Inspector General, with 

working with the private sector to identify ways to share information, and one of the results of that has been the Health Care Fraud 

Working Groups, which are based in U.S. Attorneys’ Offices, many 

of which have a collaborative relationship with the private side. So 

encouraging the spirit of the law be embraced and that we look for 

more opportunities to collaborate would be part of it. 

I should also tell you that the Inspector General’s Office, through 

the leadership of Inspector General Levinson, has really pushed for 

greater collaboration, and one of the things that we have done is 

undertaken a survey of both our agents, our partners at the Department of Justice, and the private sector to get an idea of what 

are best practices. What are the work groups doing that are bringing about successful identification and prosecution of fraud, both on 

the private and public side. We are going to be generating a report 

as a result of that work and hope to spread the good news about 

what works and what best practices should be embraced. 

The other thing I would note is that bringing people together to 

share ideas is a great way to identify barriers and break them 

down, and through the leadership of the Attorney General and the 

Secretary, we have had a series of HEAT summits around the 

country where the private sector and government agencies have 

come together and shared ideas about identifying, preventing, and 

prosecuting fraud. So I think knowing that the law is in place and 

then having the commitment of leaders to see that its spirit is met 

goes a long way to getting greater collaboration. 

Senator CARPER. Good. Thank you. Dr. Budetti. 

Dr. BUDETTI. I would echo the comments of my co-panelists 

today, and I would also—the only thing I would add to that is that 

working together with the private sector is both something that we 

have done with this particular initiative that we are talking about 

today, the predictive modeling, but also there is a very strong interest at the highest levels of the Department of Health and Human 

Services to work out a specific framework for additional interH605-41331-79W7 with DISTILLER

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actions with the private sector and working with our colleagues in 

law enforcement, as well. 

So one of the first things we are going to be doing is sharing information on payment suspensions with our private sector insurance companies that provide Medigap plans. If we are not going to 

pay a claim, why should the Medigap plan pay a claim? But we are 

exploring many other ways for us to proceed along the public-private partnership to fight fraud. We recognize that everybody has 

to be in this together, so—— 

Senator CARPER. Well, might that work the other way for the private health insurance companies if they decide not to pay a claim 

under the Medigap—— 

Dr. BUDETTI. Those are the kinds of things that are very much 

of interest and under discussion, yes. 

Senator CARPER. Good. All right. One hand washes the other. 

Senator Brown. 

Senator BROWN. Mr. Chairman, I just have two quick questions, 

and I appreciate you holding this hearing again. 

So when I am back home talking to people about the overpayment issue, I say, you buy an insurance policy. You pay the monthly premiums. You have a beneficiary. That person dies. The beneficiary gets the check, right. Well, in the government’s instance, 

sometimes they get that check three or four or five times, and as 

a result we have overpayments, or we are paying people that are 

actually dead and they are not supposed to be getting payments 

from the government. 

So I am wondering, I know in the FAST Act that Senators Carper and Coburn pushed, that requires a daily view of the Social Security Administration (SSA) death master to prevent that type of 

fraud. Is that something that you folks are doing or plan to do, or 

would support, or what is that so that we do not keep paying people who are already dead, giving them benefits? 

Dr. BUDETTI. Senator, one of the things that we are doing—I 

have not talked about this today yet, but one of the other major 

initiatives that we are undertaking, and, in fact, we are in the 

process of looking for contractors to work on this with us, is to 

automate the screening process that puts into place the more detailed screening that was required under the Affordable Care Act. 

A lot of that is being done right now, but it is being done in more 

cumbersome ways and we are going to be doing it in a way that 

will be checking databases and will be checking databases as often 

as is necessary to keep them updated. We are going to be checking 

on databases continually, not just when people apply to the program, but while they are in the program, on an ongoing basis. 

So, yes, we are very much interested. We do not want to pay any 

claims to or on behalf of someone who was not alive when the service is either delivered or received, and so we are committed to all 

of the ways that we can do that, and one of the ways is through 

greatly improving and enhancing our screening process so that we 

are checking all of those databases and checking them regularly. 

Senator BROWN. It would just be nice to have an alert on the 

screen, ‘‘Alert, alert, he is dead. Do not pay him.’’ Something pretty 

simple. 

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32 

Dr. BUDETTI. We want to head in that direction, but as you 

know, when somebody is entered into the death file, they are entered as a person who dies—— 

Senator BROWN. Sure. 

Dr. BUDETTI [continuing]. Not necessarily as a physician, and so 

we have some other connections to make. 

Senator BROWN. Well, governmentwide, I mean, we had a hear- ing, $150 billion a year that we are giving out in just overpayments. That is a lot of money when we are looking for ways to kind 

of balance the budget and get our fiscal and financial house in 

order again. 

Mr. Morris, I just have one final question. How concerned are 

you about cybersecurity, the safety and security of the networks 

and having people get into private issues with not the best of intentions? 

Mr. MORRIS. It is a great concern of ours and we have been doing 

a lot of work, both with the Office of the National Coordinator, focusing on how to build safe systems as we move into an electronic 

health record. There is additional work we are doing right now 

which we would be pleased to brief you about, probably more appropriate in a private setting. 

Senator BROWN. Sure. Are you confident at this point that our 

systems are safe and secure? 

Mr. MORRIS. I think there are opportunities for improvement. 

Senator BROWN. OK. 

Senator CARPER. What I always say here, and Scott has heard 

this a million times already, everything I do, I know I can do better. That is true for all of us, and it is true here, too. We just have 

to constantly improve, because the bad guys, they are not stupid 

and they are testing us and we just have to be smarter, get smarter faster. 

Anything else? 

Senator BROWN. I am all set, Mr. Chairman. Thanks for holding 

this hearing. 

Senator CARPER. Thanks very much for being a part of it and for 

joining us in cosponsoring the legislation. 

I am going to ask just maybe one or two more and then we will 

wrap it up. 

This would be for, I think, Mr. Morris and Dr. Budetti. Let me 

just ask a question about the program integrity provisions of the 

Affordable Care Act, the health care law. There were several provisions of the law, as you may recall, that strengthen new Medicare 

and Medicaid provider screening. It allowed for the suspension of 

payments—we have had some discussion of that here today—where 

there is credible evidence of fraud, and that expanded recovery 

audit contracting. Since the passage of the Affordable Care Act, the 

Centers for Medicare and Medicaid Services has taken many steps 

to implement these provisions. 

I would ask, Mr. Morris, maybe you, Dr. Budetti, if you would, 

could each of you just outline briefly for us the areas where you 

think CMS has done a very good job implementing a provision and 

where have we seen the most success. Could you tell us also a little 

bit about activities that might still be wanting, where CMS should 

focus more or perhaps where we need improvements to get the 

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most out of its new authorities. We had some discussion of this already here today. I just wanted you to drill down on it one more 

time. 

Mr. MORRIS. I would say that, across the board, the Inspector 

General’s Office has been very impressed by how quickly CMS has 

developed the regulations and put into practice many of the statutory requirements. It is no small undertaking and they have really 

put their shoulder to the wheel. We have seen this in a wide range 

of the program integrity functions. 

If there is one area that we have identified where we think there 

are opportunities for improvement, it would be in the area of enrollment screening. There are regulations out now that implement 

the Affordable Care Act’s authority to create different tiers of 

prescreening based on the risk presented by a class of suppliers. 

We think that there are opportunities for greater flexibility in 

using those tools and there are ways that we could encourage CMS 

to use that tool to keep the bad guys out more effectively. But 

across the board, we have been very impressed by how hard CMS 

has worked to get these integrity tools in place, and as I have said 

previously, how open they have been to collaborating with us and 

taking advantage of our expertise as they have gone through that 

process. 

Senator CARPER. The second half of that question—anything you 

want to add about activities where CMS’s performance might be 

wanting in this regard? 

Mr. MORRIS. Well, I think I touched on one, which is we think 

there are opportunities to enhance the enrollment screening process. I should say that because so many of these provisions have 

just recently been implemented, we still need some time to be able 

to see how they are actually put into effect and some opportunity 

to study. We will be, as part of our general oversight function, 

going back and reviewing many of these. Some of them are required by the statute for us to do an assessment, for example, 

screening of background for long-term care providers. Others, we 

will be taking on as part of our general work planning. So we will 

look forward to being able to come up here and give reports of 

progress as the implementation goes forward. 

Senator CARPER. All right. Somebody said to me, I think in anticipation of this hearing today, he said, this is about as exciting 

as watching wet paint dry. [Laughter.] 

For somebody who has—those of us who have worked on these 

issues for a while, it is actually more exciting than that. What 

would be exciting is when it gets to be 2024 and we run out of 

money in the Medicare Trust Fund. What would be exciting is to 

say to the people who depend on Medicare in 2024 or 2025 or beyond, I am sorry, we do not have any more money to pay for your 

coverage. 

What would be exciting is as we try to get into these deficit reduction negotiations and we can actually say to the President and 

bipartisan leadership of the Congress we think we can save some 

money in Medicare and Medicaid that we had anticipated because 

of the good work that is being done, in part in response to the passage of the Affordable Care Act and in part maybe out of some of 

the ideas that come out of Senator Coburn’s legislation and mine, 

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ideas that, I might add, were fed to us by some of our friends here 

at the table from the IG’s office and from GAO and from CMS, as 

well, and from smart guys like Mr. Saccoccio. That would be exciting. 

What I want to do is make sure that we have some of the latter 

kind of excitement and none of the excitement that I talked about 

earlier, when we run out of money and have to turn to a whole couple of generations of people and say, that great Medicare program 

that has been around since 1965 is going away. We do not want 

to do that. 

I appreciate the spirit with which CMS has tackled these challenges. Dr. Budetti, how long have you been in your job now? 

Dr. BUDETTI. Since February of last year, Senator. 

Senator CARPER. I remember the first time we met. Your hair 

was all dark. It was black. 

Dr. BUDETTI. It was. [Laughter.] 

Senator CARPER. And here we are, not very much later. But, obviously, you and your folks are putting a lot of effort into this. 

One of the things I liked to do as Governor—I still like to do it— 

is I like to do customer calls. I still call on businesses in our State, 

outside of our State that have operations in our State, and the 

questions we ask those businesses are, how are we doing, in this 

case, the Federal Government or State Government, and what can 

we do to help you? 

And one of the ways I want to close out here is to sort of say, 

what else can we do on our side, on the legislative side, to help 

make sure that there will be Medicare around after 2014, and to 

make sure that some of the savings that we are talking about here 

actually are available to put on the table to help move these deficit 

discussions. What else can we be doing? Dr. Budetti. 

Dr. BUDETTI. Well, Senator, I just want to express our appreciation for the support and interest that you have shown in this area 

because that is probably the key for us. We have absolutely terrific 

tools, both in previous laws but also powerful new tools in the Affordable Care Act and we need to make sure that we continue to 

have those supported in a way that will allow us to carry out our 

job. So we look forward to continuing to have your support, and, 

of course, we are always open to engaging in dialog with you at any 

time on ways to move even further forward. And I know, as you 

always say, we are doing a good job, somebody, but they could always do better. Well, we are happy to keep talking to you about 

that. Thank you. 

Senator CARPER. Yes, thanks. Mr. Morris. 

Mr. MORRIS. We have had the pleasure of working with your 

committee staff on a number of ideas around the FAST Act—— 

Senator CARPER. Are any of them sitting behind me today? 

Mr. MORRIS. They are, sir. 

Senator CARPER. Do you want to mention any names? Who has 

been especially helpful? 

Mr. MORRIS. I would say Peter Tyler has been amazing. 

Senator CARPER. Oh, really. You did not have to say that. How 

about on the Republican side? We have some pretty good people 

over here, too. 

H605-41331-79W7 with DISTILLER

35 

Mr. MORRIS. So outstanding that I would not even know where 

to begin. 

Senator CARPER. OK, fair enough. [Laughter.] 

All right. Well, Peter has mentioned a couple of them to me and 

we are grateful for the sense of partnership that we have here. 

Mr. MORRIS. I could offer as just one example of a small way that 

we could expand the ability to protect the integrity of the program, 

under the FAST Act, the bill would expand access to CMS for the 

National Director of New Hires so they could use that information 

for their integrity work. We would suggest that you consider also 

expanding that access to the Inspector General’s Office. We would 

like to use that tool to screen health care providers to ensure they 

have not hired excluded individuals who might be compromising 

both beneficiaries as well as the integrity of the program. 

Senator CARPER. All right. That is a good point. Thank you. Mr. 

Willemssen. 

Mr. WILLEMSSEN. I would again echo one thing I mentioned earlier. I think continued congressional oversight through hearings 

such as this can, among other things, help spur action. They can 

help identify issues. They can identify obstacles that maybe the 

Congress can assist the agency, in this case CMS, in overcoming. 

Senator CARPER. All right. That is good. I am a big believer in 

oversight. Good. Mr. Saccoccio. 

Mr. SACCOCCIO. Senator, I think a lot of the—all the aspects in 

the FAST Act are very good, especially those dealing with drug diversion. That is a major, major issue now with respect to fraud. 

Senator CARPER. Have you heard a price tag put on that? 

Mr. SACCOCCIO. No, I would not have a price tag for that, but 

it is a major problem, and it is obviously not just a financial issue. 

It is a real person issue, as well, as far as—— 

Senator CARPER. Yes. Well, take just a second and just explain 

to the folks that are listening here or following the hearing, the 

Drug Diversion Act, just tell them what we are talking about 

here—— 

Mr. SACCOCCIO. What we are talking about there is basically narcotic-type prescription drugs that are being abused and—— 

Senator CARPER. Controlled substances, that kind of thing—— 

Mr. SACCOCCIO [continuing]. Controlled substances, the types 

that are used many times for pain management, and what is happening is either through providers that are doing, turning their 

practices into pill mills or patients that go from doctor to doctor to 

doctor shop to try to get those pills, or pharmacies or pharmacists 

that may be involved, and basically getting those drugs and then 

selling them on the street because they have a very high street 

value and it has just become a very big problem. 

Last year, our organization gave our Investigation of the Year 

Award to a case out of Kansas where, basically, a physician and 

his wife were running a pill mill that was responsible for—— 

Senator CARPER. And when you say ‘‘pill mill,’’ I know what it 

means, but why do you not tell others. 

Mr. SACCOCCIO. Basically, they were open 24 hours a day and 

anybody that wanted those narcotic controlled substances could 

come get a prescription for them without any examinations or anything like that. Basically, you just pay me the money, I will give 

H605-41331-79W7 with DISTILLER

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you the prescription so you could go out and get those drugs for 

your use or to sell them on the street. 

And based on that investigation that was both a private-public 

type of investigation, there were at least about 64 deaths that were 

attributed to overdoses based on drugs coming out of that particular physician’s office. 

Senator CARPER. That one place. 

Mr. SACCOCCIO. That one place. So it is an enormous problem 

and the State entities that would take a look at drug diversion and 

try to share that information, some of the provisions that are in the 

FAST Act, I think, are very important. 

But I think the one message that is critically important is that 

this has to be an effort that is not just focused on 1 year or 2 years. 

It is going to take a long time. It has to be consistent, and it has 

to be a continuous-type effort from year to year. I know there is 

a lot of focus on it right now because of the deficit and trying to 

find recovery of funds, but it is something that has to be focused 

on year in and year out and it has to have a commitment by this 

Administration and, quite frankly, any subsequent Administrations, to just keep at it year after year, and that is the only way 

that you are going to really make an enormous dent in the problem. 

Senator CARPER. Thanks for that. I really think all the testimony 

has been helpful. The thing that you have done is to remind us 

that there are human consequences here. It is not just fraud. It is 

not just money that is being stolen out of the Medicare Trust Fund, 

but there are real implications for people, for human lives, and I 

thank you for humanizing this. 

Does anybody have anything else you want to add or take away? 

I think one of the people I asked, Peter Tyler, I said, who on the 

Republican side working for Senator Coburn has been especially 

helpful, and he said, ‘‘Well, not Josh Trent—’’ [Laughter.] 

No, he said Josh was a lot of help, so, Josh, thank you, and everybody else who has been a part of that, we thank you, as well. 

Well, this is a little bit like a marathon, not a sprint, but like 

a marathon, and we all just need to stay on task. My hope is if we 

do that, we will actually save a lot of money and we will help preserve the integrity of this program and we will help restore some 

fiscal sanity in this country, and to Mr. Saccoccio’s point, maybe 

save some human lives at the same time. So that would be a good 

day’s work. 

I thank you all for joining us, for your preparation. What we will 

do is, I think—Peter, help me, but I think my colleagues have 2 

weeks to submit questions and then if they do, I would just ask 

that you respond to those questions promptly. 

With that, this hearing is adjourned. Thank you all very much. 

[Whereupon, at 4:25 p.m., the Subcommittee was adjourned.] 

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