U.S. GOVERNMENT PUBLISHING OFFICE

48–875 PDF WASHINGTON : 2022

S. HRG. 114–859

THE DOCTOR IS NOT IN: COMBATING

MEDICARE PROVIDER ENROLLMENT FRAUD

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

WASHINGTON, DC

JULY 22, 2015

Serial No. 114–10

Printed for the use of the Special Committee on Aging

(

Available via the World Wide Web: http://www.govinfo.gov
(II)

SPECIAL COMMITTEE ON AGING

SUSAN M. COLLINS, Maine, Chairman

ORRIN G. HATCH, Utah

MARK KIRK, Illinois

JEFF FLAKE, Arizona

TIM SCOTT, South Carolina

BOB CORKER, Tennessee

DEAN HELLER, Nevada

TOM COTTON, Arkansas

DAVID PERDUE, Georgia

THOM TILLIS, North Carolina

BEN SASSE, Nebraska

CLAIRE MCCASKILL, Missouri

BILL NELSON, Florida

ROBERT P. CASEY, JR., Pennsylvania

SHELDON WHITEHOUSE, Rhode Island

KIRSTEN E. GILLIBRAND, New York

RICHARD BLUMENTHAL, Connecticut

JOE DONNELLY, Indiana

ELIZABETH WARREN, Massachusetts

TIM KAINE, Virginia

PRISCILLA HANLEY, Majority Staff Director

DERRON PARKS, Minority Staff Director
(III)

C O N T E N T S

Page

Opening Statement of Senator Susan M. Collins, Chairman .............................. 1

Opening Statement of Senator Claire McCaskill, Ranking Member ................... 2

PANEL OF WITNESSES

Seto J. Bagdoyan, Director, Audit Services, Government Accountability Office,

Washington, D.C. ................................................................................................. 5

Shantanu Agrawal, M.D., Deputy Administrator, Centers for Medicare and

Medicaid Services (CMS), and Director, Center for Program Integrity (CPI),

Washington, D.C. ................................................................................................. 6

Katherine M. Leff, R.N., Director, Special Investigations Unit, Care Source

Management Group, Dayton, Ohio ..................................................................... 8

APPENDIX

PREPARED WITNESS STATEMENTS

Seto J. Bagdoyan, Director, Audit Services, Government Accountability Office,

Washington, D.C. ................................................................................................. 41

Shantanu Agrawal, M.D., Deputy Administrator, Centers for Medicare and

Medicaid Services (CMS), and Director, Center for Program Integrity (CPI),

Washington, D.C. ................................................................................................. 57

Katherine M. Leff, R.N., Director, Special Investigations Unit, Care Source

Management Group, Dayton, Ohio ..................................................................... 67

QUESTIONS FOR THE RECORD

Seto J. Bagdoyan, Director, Audit Services, Government Accountability Office,

Washington, D.C. ................................................................................................. 73

Shantanu Agrawal, M.D., Deputy Administrator, Centers for Medicare and

Medicaid Services (CMS), and Director, Center for Program Integrity (CPI),

Washington, D.C. ................................................................................................. 75

STATEMENTS FOR THE RECORD

GAO Report - Medicare Program ........................................................................... 79

(1)

THE DOCTOR IS NOT IN: COMBATING

MEDICARE PROVIDER ENROLLMENT FRAUD

WEDNESDAY, JULY 22, 2015

U.S. SENATE,

SPECIAL COMMITTEE ON AGAIN,

Washington, DC.

The Committee met, pursuant to notice, at 2:17 p.m., Room 562,

Dirksen Senate Office Building, Hon. Susan M. Collins, Chairman

of the Committee, presiding.

Present: Senators Collins, Cotton, Tillis, Sasse, McCaskill, Casey,

Whitehouse, Donnelly, Warren, Kaine.

Also present: Senator Carper.

OPENING STATEMENT OF SENATOR

SUSAN M. COLLINS, CHAIRMAN

The CHAIRMAN. The Committee will come to order. Good afternoon. Before I begin my remarks, let me thank our Ranking Member, Senator Claire McCaskill, for proposing this hearing on improper payments in the Medicare program. This is an incredibly

important topic to which Senator McCaskill has supplied her formidable investigative skills.

Today we will examine the GAO’s latest assessment of efforts to

prevent these improper payments which are now estimated at an

astonishing $60 billion, or nearly 11 percent of Medicare’s total

spending. This problem calls to mind the old adage, the more

things change, the more they remain the same, for it was in 1998

when I was Chairman of the Permanent Subcommittee on Investigations that I held a series of hearings to examine fraud in the

Medicare program.

Those hearings uncovered dramatic examples such as the payments of $117,000 to two so-called physicians whose address was

actually a laundromat in Brooklyn. We also found $6 million paid

to durable medical equipment companies that supposedly were

headquartered in the middle of a runway at the Miami International Airport.

We were able to cull PSI’s archives to find photos of these provider locations which you can see on the monitors. Seventeen years

later, after I chaired these hearings, I am dismayed to learn that

improper payments are still flowing to con artists who billed the

system from fictitious locations.

Take a look at the provider locations highlighted by the GAO in

the report that is released today. One turns out to be a burger

joint. Another, a vacant lot. They say a picture is worth a thousand

words. These pictures, side-by-side, illustrate the ongoing risk of
2

improper payments in the Medicare system and the billions of taxpayer dollars that are already lost.

Since 1990, the GAO has identified Medicare as being at high

risk for improper payments and fraud. The central question for us

to ask today is why, after so many years, does Medicare remain unable to distinguish between legitimate healthcare providers seeking

payment for services rendered and con artists looking to scam the

system.

In part, the answer is that the task of ferreting out wasteful and

fraudulent spending is made all that much more difficult by the ingenuity of scam artists, but it is also true that Medicare has dismally failed to take the comprehensive actions needed to seal its

systems against vulnerabilities.

For example, the software used by Medicare to check provider

addresses does not flag invalid locations such as UPS stores, mailboxes, or vacant lots, or burger joints, for that matter. Just checking these addresses using websites like Google Maps or 411.com

would be an easy way to spot invalid addresses. Yet, inexplicably,

CMS issued guidance in March of last year discouraging this simple practice.

Likewise, the procedures used by Medicare to screen providers

remain inadequate. While they are an improvement over past practice, they ought to be strengthened. It is clear that we must do

more to shift from a pay-and-chase strategy to combat Medicare

fraud to one that prevents the harm from ever occurring in the

first place.

Our witnesses have a wealth of knowledge about Medicare’s

fraud prevention mechanisms and what can be learned from private insurers and other stakeholders to reduce improper payments.

I look forward to their testimony and hope that 17 years from now

we are not complaining about the failure of Medicare to implement

simple fraud protection procedures. It is now my pleasure to turn

the hearing over to Senator McCaskill for her opening statement,

introductions of witnesses, and the first round of questions.

OPENING STATEMENT OF SENATOR

CLAIRE MCCASKILL, RANKING MEMBER

Senator MCCASKILL. Thank you so much, Chairman Collins. Before I get started, I do want to acknowledge on the record our colleague, Senator Carper, for his dedication to this issue. The GAO

report was requested jointly by a number of us including him and

we have worked together a long time on improper payments and

improving and safeguarding the Medicare program. I know that

Senator Collins has also worked with him when she previously

served on the Homeland Security and Government Affairs Committee.

The Medicare program is an essential commitment that we as a

society have made to Americans in their golden years. Through

Medicare, our Government provides high quality medical care to

seniors at an affordable cost for as long as they need it. We owe

it to seniors and taxpayers to do our best to eliminate any potential

fraud in the program so seniors can receive the best care and taxpayer dollars are not wasted.
3

Unfortunately, it appears that the Centers for Medicare and

Medicaid Services, known as CMS, is falling down on some key aspects of ensuring that it is successfully implementing the very first

step in eliminating fraud, preventing illegitimate providers from

enrolling in the program. Before a provider can be reimbursed for

taking care of beneficiaries, he or she must be enrolled in the program. CMS relies on contractors to handle and verify these enrollments.

The enrollment process is intended to ensure that the healthcare

providers and suppliers in Medicare are licensed and legitimate

providers of healthcare services. This is a relatively straightforward process that has four main steps. First, verifying an actual

practice location for the provider; second, verifying that the licensure information listed in the application is accurate; third,

verifying that the providers are not deceased; and fourth, verifying

that providers had not previously been excluded from doing business with the Federal Government.

We asked GAO to review whether CMS was accomplishing these

four steps. Although GAO found no major problems in CMS’s process for ensuring the providers it enrolls in Medicare are alive and

not excluded from working with the Federal Government, it found

that CMS had some pretty big blind spots on the other two

verification points.

First, as the illustrations today clearly show, CMS is doing a

poor job of flagging potentially ineligible practice locations. This includes enrolling providers who list their practice addresses as

rented mailboxes from companies like UPS and Mailboxes, Etc.,

and enrolling those who list their practice addresses at fast food

restaurants or even vacant lots.

Although GAO did not have access to detailed enough claims information to be able to figure out exactly how much CMS paid out

to ineligible providers, the total amount is in the hundreds of millions, perhaps as big as $1 billion. I understand that CMS does not

have the resources to require its contractors to conduct in-person

visits to all 1.8 million Medicare providers and suppliers, but it is

inexcusable for CMS, especially in light of today’s technology, to

not have the built-in ability to flag potentially invalid, vacant, or

rented mailbox addresses when the United States Postal Service

flags such addresses and provides that information to CMS. This

should be easy, and yet, CMS has potentially misspent billions of

dollars throughout the years because it failed to use this readily

available information. During today’s hearing, I plan to examine

exactly why this has been the case for so long and how the Government can better contract for services that actually utilize the information it needs to prevent fraud.

GAO also found that CMS’s process for checking adverse actions

on physicians’ licenses before enrolling them in Medicare is woefully lacking. CMS currently relies on physicians to self-report any

adverse action on licenses that he or she may have in states other

than where he or she is enrolling in Medicare.

Now, if a physician is enrolling to be a Medicare provider in Missouri with a clean Missouri medical license and a revoked Illinois

medical license, that revoked Illinois medical license is something

that CMS should know about. It is certainly something I would
4

want to know about, and although CMS may have felt confident in

relying on such a physician to self-report that revoked license, I believe that both seniors and taxpayers deserve much more protection

and vigilance from CMS against unscrupulous physicians. Relying

on self-reporting cannot provide the necessary protection.

I have questions today about why CMS has structured its licensure check to rely on self-reporting and I plan to dig deep into

CMS’s current plans for fixing this problem. Next week is the 50th

anniversary of the Medicare program. For 50 years, it has protected the health and well-being of millions of seniors including the

50 million or so currently enrolled in Medicare. This is a stunning

achievement by our Government. I want to acknowledge and applaud that achievement.

Today’s hearing is not about tearing the program down. It is

about how we can all work together to make it better and ensure

that it continues to provide quality care for our seniors, living up

to the commitment our Government has made to them in their

golden years. I thank the witnesses for being here today. First, we

have Dr. Shantanu Agrawal—close?

Dr. AGRAWAL. Close. It is Shantanu.

Senator MCCASKILL. Shantanu?

Dr. AGRAWAL. Yep.

Senator MCCASKILL. Agrawal.

Dr. AGRAWAL. Agarwal.

Senator MCCASKILL. Agarwal?

Dr. AGRAWAL. I am good with that.

Senator MCCASKILL. Okay. I am sorry. I am sure you have this

every day, right? You are used to it.

Dr. AGRAWAL. More often than not, yes.

Senator MCCASKILL. More often than not. He is the Deputy Administrator of the Centers for Medicare and Medicaid and the Director of the Center for Program Integrity. He comes to this position having served as chief medical officer of CPI. He is a boardcertified emergency medicine physician and fellow of the American

Academy of Emergency Medicine.

Mr. Seto Bagdoyan—you guys are killing me today—is the Director of Audit Services at the Government Accountability Office. During his GAO career, Mr. Bagdoyan has served in a variety of positions including as legislative advisor in the Office of congressional

Relations and as an Assistant Director for Homeland Security and

Justice. He has also served on congressional details with the Senate Finance Committee and the House Committee on Homeland Security.

Finally, Katherine M. Leff—this is very nice—who is a registered

nurse, is the Director of the Special Investigations Unit for

CareSource Management Group. CareSource is a non-profit managed healthcare plan headquartered in Dayton, Ohio. It offers managed healthcare plans including Medicaid plans, in Ohio, Kentucky,

and Indiana. Ms. Leff is also the current Chair of the National

Healthcare Anti-Fraud Association.

We would ask that your oral testimony be no more than five minutes. Your written testimony will be printed in the record in its entirety. Thank you all and I look forward to hearing from you. Mr.

Bagdoyan, we will begin with you.
5

STATEMENT OF SETO J. BAGDOYAN,

DIRECTOR, AUDIT SERVICES, GOVERNMENT

ACCOUNTABILITY OFFICE, WASHINGTON, D.C.

Mr. BAGDOYAN. Thank you. Chairman Collins, Ranking Member

McCaskill, Senator Carper who has joined us, and members of the

Committee, I am pleased to be here today to discuss the results of

GAO’s recent report on the Medicare eligibility verification process

for providers and suppliers.

As Chairman Collins mentioned earlier, Medicare is a significant

expenditure for the Federal Government. In Fiscal Year 2014,

Medicare paid $554 billion for healthcare and related services, of

which CMS estimates that about $60 billion, or 11 percent, were

improper payments. This is an increase from the Fiscal Year

202013 level of about $49.9 billion.

Earlier this year we reported that Medicare remains on GAO’s

high-risk list partly because of continuing concerns about the adequacy of fiscal oversight of the program including improper payments. My remarks today highlight key findings from our review

of four enrollment screening controls CMS uses to prevent and detect enrollment fraud involving its provider, enrollment chain, and

ownership system, also known as PECOS.

Based on our review, we found that controls used to screen for

providers and suppliers listed as deceased or excluded from participating in Federal or healthcare related programs appear to be generally working. However, we identified weaknesses in two other

controls. First, we identified weaknesses in CMS’s verification of

practice locations.

Medicare providers must submit the address of the practice location from which they offer services. The software CMS uses to validate addresses does not flag potentially ineligible addresses such as

rental mailboxes, and it also does not flag vacant or invalid addresses which are those where providers or suppliers no longer reside or those not recognized by the U.S. Postal Service.

Of the 980,000 addresses in PECOS, we examined using Postal

Service software. About 105,000 initially appeared as a CMRA,

that is essentially a rental mailbox, a vacant address, or an invalid

address. Based on subsequent analyses of a projectable sample of

496 addresses, we estimated that about 22 percent of the 105,000

addresses, or 23,400, are potentially ineligible.

Separately, CMS’s March 2014 guidance reduced address

verification steps conducted by its contractors. CMS’s 2013 guidance encouraged contractors to conduct additional verification steps

such as using Google Maps and conducting site visits. However,

CMS’s latest guidance does not reference such a steps beyond contacting the provider. By reducing verification steps, CMS has increased its vulnerability to potential fraud.

We recommended CMS incorporate flags into its software to help

identify questionable addresses and revise its 2014 guidance to enhance verification of practice locations. CMS agreed with the first

recommendation and disagreed with the second. We believe additional address verification steps to be an essential control and

stand behind our recommendation.

Second, we identified weaknesses in the verification of medical licenses. Medicare physicians are required to hold an active license
6

in the State they practice in and report any final adverse actions

to CMS. Final adverse actions include license suspensions or revocations by any State licensing authority.

We found 147 out of the approximately 1.3 million physicians

listed as eligible in PECOS had received a final adverse action and

were either not revoked from PECOS or revoked at a much later

time.

In March 2014, CMS began providing a report to its contractors

to improve licensure reviews. While a good first step, this report

only includes current licensure status for the State in which providers enroll. It does not include the full adverse action history of

these licenses or their licenses in other states, creating the opportunity for ineligible physicians to enroll into PECOS. We recommended CMS collect additional licensure information to ensure

providers are self-reporting all final adverse actions and CMS

agreed with this recommendation.

In closing, our findings highlight that CMS needs to maximize its

efforts to promote program integrity to ensure ineligible or fraudulent providers and suppliers do not enroll into PECOS. Our recommendations in this regard are designed to enhance CMS’s toolbox and help narrow the window of opportunity for potential improper payments and fraud. Madam Chairman, this concludes my

statement. I look forward to the Committee’s questions.

Senator MCCASKILL. Thank you.

Dr. Agrawal.

STATEMENT OF SHANTANU AGRAWAL, M.D., DEPUTY

ADMINISTRATOR, CENTERS FOR MEDICARE AND

MEDICAID SERVICES (CMS), AND DIRECTOR, CENTER

FOR PROGRAM INTEGRITY (CPI), WASHINGTON, D.C.

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

McCaskill, Senator Carper and members of the Committee, thank

you for the invitation to discuss CMS’s work to improve provider

and supplier enrollment systems. Enhancing program integrity is

a top priority for the Administration and an agency-wide effort at

CMS.

Thanks in part to the authorities provided by the Affordable

Care Act, CMS has improved the provider and supplier enrollment

and screening process. We are seeing real results from our efforts

and have generated over $927 million in savings from just our enrollment and screening work in the last four years.

These actions are part of a larger set of provider enrollment activities which have saved the program $2.4 billion in avoided costs.

These savings reflect the actions CMS has taken to deactivate billing privileges for more than 540,000 providers and suppliers that

do not meet Medicare requirements and to revoke the enrollment

and billing privileges of an additional 34,000 providers and suppliers.

As required by the ACA, and in line with broader changes in program integrity, CMS has implemented risk-based screening of providers and suppliers who want to participate in Medicare and Medicaid which require certain categories of providers and suppliers

that have historically posed a higher risk of fraud to undergo greater scrutiny prior to their enrollment or revalidation.
7

Providers in the limited risk category undergo verification of licensure and compliance with Federal regulations and State requirements, frequently in an automated manner. Providers and

suppliers in the moderate and high risk categories undergo additional screening including fingerprint-based background checks,

criminal record searches, and unannounced site visits.

CMS uses site visits to verify that a provider or supplier’s practice location meets requirements and helps prevent questionable

providers and suppliers from enrolling in the Medicare program.

Since 2011, CMS has completed 220,000 site visits which have resulted in nearly 1,300 revocations. Importantly, these activities

have also stopped nearly 5,000 initial enrollments in the last 12

months which means the provider was not able to enroll or enter

the Medicare program.

Today’s GAO report confirms that our risk-based approach to enrollment is effective, particularly in addressing higher risk providers. It also shows that we could do more to scrutinize certain

limited risk providers like physician practices. We appreciate the

GAO’s recommendations and will take several steps to address

these recommendations.

To better target limited risk providers, CMS has begun conducting ad hoc site visits to these providers to further ensure that

every provider entering the Medicare program meets program requirements and are valid and operational. CMS already uses USPS

data in our address verification system, and to strengthen the enrollment screening process, CMS will enhance the address

verification software to better detect potentially ineligible addresses in line with GAO’s recommendation.

We are working toward configuring the provider and supplier address verification system in PECOS to flag commercial mail receiving agencies, vacancies, invalid addresses, and other potentially

questionable practice locations. We expect this enhancement to be

complete by early next year.

In their report, GAO sampled 496 Medicare locations as a sample

of the enrollment data. GAO referred 92 locations with the most

concerning questionable addresses to CMS for further investigation

and appropriate action, as this figure shows. The vast majority of

these locations were found to be operational, contained clerical keying errors, and otherwise legitimate providers, or were already previously revoked or deactivated through our ongoing efforts.

Importantly, not a single high risk provider in the GAO sample

had fallen through the cracks. Some addresses were locations of legitimate, limited risk providers with other addresses on file, the

provider moved without closing out a previous address in our system.

In fact, I would point out that the two examples brought up by

Chairman Collins were both examples of locations of limited risk

physicians practices that in fact had moved and had not billed the

program in over a decade. In all, this accounted for 80 of the locations out of 92 and only 12 of the locations referred by the GAO

required CMS to take an administrative action.

Even among this set, eight of these twelve locations did not bill

the Medicare program during the time period studied by GAO.

Based on GAO’s own methodology, this administrative action rate
8

is only .3 percent of all addresses in PECOS. It is important to note

that these twelve locations were all of limited risk providers, suggesting that our risk-based approach to targeting our program integrity efforts to higher risk, high dollar providers has been effective.

GAO’s report has helped us to better understand where our efforts are succeeding and where we have further work to do. Their

work will help inform our efforts going forward to focus on certain

limited risk providers which will be driven by data analysis and

other lead generation approaches. As I stated earlier, CMS is committed to strengthening provider and supplier enrollment and

screening processes to make sure that Medicare beneficiaries receive items and services from appropriate providers and taxpayer

dollars are protected, but the importance of program integrity efforts extends beyond dollars in healthcare costs alone. It is fundamentally about protecting our beneficiaries and ensuring we

have the resources to provide for their care. We are committed to

working with GAO as we continue to strengthen program integrity.

We look forward to working with this Committee and Congress on

these efforts. Thank you.

Senator MCCASKILL. Thank you, Doctor.

Ms. Leff.

STATEMENT OF KATHERINE M. LEFF, R.N., DIRECTOR,

SPECIAL INVESTIGATIONS UNIT, CARE SOURCE

MANAGEMENT GROUP, DAYTON, OHIO

Ms. LEFF. I want to thank Chairman Collins, Ranking Member

McCaskill, and Senator Carper and the distinguished members of

the Special Committee on Aging for the opportunity so speak to you

today about the GAO report calling for improved eligibility

verification of providers and suppliers.

CareSource agrees with the GAO report recommendations. However, we also recognize the challenges CMS faces in identifying

fraudulent providers in the enrollment process due to CMS’s enormous size and any willing provider requirement. Private plans are

much smaller, have more control over providers entering into and

staying in our network.

The GAO report identified two weaknesses in Medicare provider

enrollment screening, the verification of provider practice locations

and physicians’ licensure status. In my testimony, I offer

CareSource’s process as a means of comparison for the Committee.

At CareSource, we do the following to verify practice locations and

licensure status.

First, we require a Council on Affordable Healthcare Quality

Healthcare credentialing application. We obtain then a report from

the National Practitioner Data Bank which provides licensure,

practice address, malpractice cases, and any adverse actions. We

conduct secret shopper calls to provider offices. We utilize a USPS

address verification software to identify invalid addresses.

However, it is important to note here that providers have multiple addresses. One of those addresses may be a P.O. box at a UPS

store that is used to secure payment, provide access for mailing for

payment by the provider or the providers’ billing company. We also

do periodic onsite visits at providers’ offices. We obtain the pro-
9

viders’ malpractice insurance certificate. We pull providers’ AMA

physician profile. We check license boards in all states.

We also enter the providers into a software program that checks

the providers against State licensing boards, the specially designated nationals list, Social Security Death Index, excluded parties list system, HHS OIG exclusions, and State provider sanctions

list.

It is important to note here that while this process is automated,

mitigating the findings are not. Naming conventions in all these

data bases are frequently different and there is not enough information to confirm matches. Matches must be validated manually,

which is a very resource intensive process.

While we cannot always identify fraud in the enrollment process,

many plans have methods in place to identify aberrant provider

billing behavior. At CareSource, our Special Investigations Unit

uses a rules-based post-payment fraud detection software to identify known fraud schemes. We are right now in the process of implementing a new fraud detection software that uses mathematically based predictive analytics. This new software also provides

the opportunity to identify fraud prior to payment.

We share identified fraud schemes and providers under investigations at fraud information sharing meetings, with law enforcement, Government agencies, and other plans. We report new fraud

schemes in provider investigations to SIRIS, which is a national

fraud data base through the National Healthcare Antifraud Association. We review grievance data looking for trends.

We compare our providers’ recredentialing to our investigative

case tracking system to identify providers with issues. We send explanation of benefit forms to members to identify services not provided. CareSource’s Special Investigation Unit works closely with

internal CareSource departments and Federal and State agencies

to proactively and cooperatively prevent and detect fraud, waste

and abuse.

Each year we enhance our prevention detection and investigative

efforts by adding staff, software, and process, resulting in increased

savings and member safety. Already in 2015, we have taken significant actions on DME and allergy—allergy cases, genetic labs, optical cases that have saved considerable taxpayer dollars. In addition, we have identified complicated issues in the home healthcare

arena and are working collaboratively with State agencies and

other plans to address these issues.

Finally, in 2015, we saw the end results of a multiyear provider

investigation by witnessing the provider being sentenced to six and

a half years in prison for behavior that involved excessive CT

scans, excessive knee and perciformis injections out of the country,

drug purchases, et cetera.

Thank you again for the opportunity to appear before you today

to discuss the ways to prevent healthcare fraud. I would be pleased

to address any questions you have.

Senator MCCASKILL. Thank you. Thank you all for your testimony. Dr. Agrawal, let us start with an acknowledgment that the

main way we have gone after fraud in the Medicare program is to

pay and Chase, correct?
10

Dr. AGRAWAL. I think that has been historically true, but in the

last five years, we have changed significantly to a much more preventive footing.

Senator MCCASKILL. Okay. The contractor that you use now, Finalist, is only able to standardize addresses, which I understand is

like correcting misspellings and making sure they are correct. It is

currently unable to flag rented mailboxes, vacant addresses, and

invalid addresses, correct?

Dr. AGRAWAL. The finalist software is used by our contractor. It

has a couple of different data inputs including a USPS data base.

It does have shortcomings compared to the data base that GAO has

described, which is why we are also incorporating that level of

data.

Senator MCCASKILL. Okay. If it does not have the correct data

that it needed, I assume that the employees, the contractor employees, could have gone to USPS and checked their website, right, for

this data? I mean, what I am trying to figure out is, why in the

world would we ever hire a contractor that was not doing a basic

check that is available for free?

Dr. AGRAWAL. I think we should maybe differentiate a little bit,

Senator. We have Medicare administrative contractors that actually do the enrollment work.

Senator MCCASKILL. Right.

Dr. AGRAWAL. We have program integrity contractors that supply

them with tools, resources, technologies, data bases to do that.

Senator MCCASKILL. Well, but do we really need somebody to

supply them with a basic that you can check USPS for free to see

if it is a valid address? We need another layer to do that?

Dr. AGRAWAL. Well, what we have been moving toward in order

to really have that position toward prevention is automated approaches through these kinds of checks. We have been implementing over several years now and working to improve, the automated provider screening system. One of the things that that system does is look at address verification. It also looks for licensure,

and now, most recently, we have been working to incorporate criminal background history into that system. Our approach is to try to

give our enrollment contractors as much consistent automated,

timely, actionable data that we possibly can.

Senator MCCASKILL. How much are we paying to Finalist for address checks that we can do for free through USPS—through the

Postal Service?

Dr. AGRAWAL. Again, we pay—so I do not have a specific number

in front of me, Senator. I am happy to get that for you.

Senator MCCASKILL. Should you not know that coming to this

hearing, what we pay them?

Dr. AGRAWAL. Well, what we do is we bring on board various

data bases, so we have over 100 data bases that perform the kind

of enrollment checks that we need. All of that is filtered through

the automated provider screening system utilizing physician identifiers, other information like that, and made available, so what we

have is, we have costs associated with rolling on those data bases

and relatively few, we hope, for individual manual checks. I mean,

the whole purpose is to move away from manual checks that might

be inconsistent to totally consistent automated checks.
11

Senator MCCASKILL. I know you understand the point I am making.

Dr. AGRAWAL. Sure.

Senator MCCASKILL. That this information, and I think the point

was made very clearly in this audit, it is a good audit, and it points

out that the basic address checks that can be done through technology very simply and for free were not being done by the paid

contractor that was supposed to be doing address checks, correct?

Dr. AGRAWAL. Senator, I agree that this report is useful.

Senator MCCASKILL. That is good.

Dr. AGRAWAL. It definitely has highlighted areas of improvement

for us. I think what the report also highlights is that there is no

such thing as a perfect single data base. What we saw in the sample, as I discussed in my opening remarks, and the sample provided to us by GAO, is that several addresses were actually legitimate, several were truly operational at the address identified for

us by GAO, and indeed some really did need administrative action.

Senator MCCASKILL. Well, I am a little troubled, honestly, with

the chart.

Dr. AGRAWAL. Okay.

Senator MCCASKILL. Let me tell you why. There are two ways to

take an audit. One way is to say, you know, this is a good point.

We can do better. This is basic information that is available with

a few clicks, free from the United States Postal Service, and we

have got to get this integrated as quickly as possible, and by the

way—and I will save these questions for later because I will not

have time on this round—about this contractor. Why in the world

we have a contractor that did not integrate this into their software

check is beyond me since this is a fairly important part of a—it is

a four-step process and this is one of the steps, so your chart, GAO

referred you a list of 92 providers, correct?

Dr. AGRAWAL. Correct.

Senator MCCASKILL. That list of 92 providers was determined

from a generalized sample of 496 providers, correct?

Dr. AGRAWAL. Correct.

Senator MCCASKILL. That generalized sample of 496 represents

.47 percent of the potentially ineligible addresses, correct?

Dr. AGRAWAL. The number I will take as given from you.

Senator MCCASKILL. Well, Mr. Bagdoyan will check my math,

but I believe my math is correct, so your chart shows that four of

these addresses required administrative action, had billing activity.

How much did you indicate was paid to those four providers, how

much money?

Dr. AGRAWAL. I will have to check on that again.

Senator MCCASKILL. I know. It was $1.2 million from 2005 to

2013. You should know. Since GAO used a generalized sample, we

can statistically assume that roughly what applies to those 496 will

apply to the whole group of 105,000, correct?

Dr. AGRAWAL. I would have to defer on methodology to the GAO.

Senator MCCASKILL. Correct, Mr. Bagdoyan?

Mr. BAGDOYAN. That is correct, Senator.

Senator MCCASKILL. Okay, so relying on that statistical projection, if we were able to say that for each group of 496 ineligible,
12

there would be about $1.2 million paid out fraudulently and we

apply it to the entire group, we come up with $254 million.

Now, you coming in here and showing us a chart that there is

only four I think is completely misleading and worries me that you

are not saying, you know, we had a problem and we are going to

get after it and fix it. What you have done instead is created a

chart that we got a half hour before the hearing that skews the

data and makes it look like you only had four addresses out of the

hundreds of thousands that were identified by GAO, which is completely misleading.

Dr. AGRAWAL. Senator, the GAO was most concerned and asked

us to investigate, look into the 92 cases that they had presented

to us. They presented that data, you know, with the expectation

that most of those addresses would be concerning. We tracked

them down with diligence performing the necessary subsequent investigative actions that included site visits, other kinds of data

analytics.

We wanted to be forthcoming with both the GAO that has asked

the data from us, and this Committee, about our findings. Now,

none of that suggests that the GAO’s recommendations are not legitimate or that there are not improvements that we ought to

make. In fact, I believe I stated that up front in my remarks and

I am happy to state it again.

I believe that they have found a tool that will enhance our efforts. We are working to incorporate that tool into our screening

systems. I did not want to leave you with the impression that

somehow all 92 of these locations were truly fraudulent billers because I think that does not reflect the reality on the ground.

Senator MCCASKILL. Well, I appreciate that. I think you can also

appreciate that it looks a little bit like circling the wagons and

gosh, this really is not that big a problem, and I think we do have

a problem when something as simple as checking addresses is not

being done by the contractor. Thank you. I have gone two minutes

over and my colleagues have been very patient. Madam Chairman.

The CHAIRMAN. Thank you very much. I am glad that you went

over it because I share your concern and outrage over this issue.

I want to switch to a different issue and that is the physicians with

active provider numbers were collecting money and yet, have an

adverse action from a State Medical Board that resulted in a suspension or revocation of their license.

First I will start with you, Mr. Bagdoyan. GAO’s review found

that 321 physicians with active provider numbers had received an

adverse action from their State Medical Board, and we are talking

about serious adverse actions. I am going to have the chart put up

so that everyone sees. It is a little hard to read, at least for my

eyes, but I think this will make the point.

Can you tell me how the GAO determined that these physicians’

licenses had been revoked or suspended and why CMS, by contrast,

still considered them to be active providers eligible for Medicare

payments?

Mr. BAGDOYAN. Thank you for your question. What we did was

we used the Federation of State Medical Boards’ data base of licensure which has the most complete history of licensure as well as

adverse actions for all licenses for a particular physician. We also
13

researched the individual State data bases as well as referred to

the PECOS data base as well.

The CHAIRMAN. Is there any reason why CMS could not refer to

those same data bases?

Mr. BAGDOYAN. I would have to refer that question to Dr.

Agarwal for a response.

The CHAIRMAN. I spent five years in State government and part

of my job was reviewing licensing and I know our State board of

medicine always did a check of other states before granting a license in Maine. That was just due diligence on their part, so this

is of great concern to me. Doctor, on April 29th, the GAO referred

147 providers to CMS whom GAO had identified as having had an

adverse action resulting in suspension or revocation of one of their

medical licenses, and yet, they have not been removed from the

Medicare program or they remained an eligible biller for months

after that adverse action against their license.

Now, just so everyone understands in case not everybody can

read this chart, I want to emphasize how egregious the referred

cases are. For example, out of the 78 adverse license actions GAO

identified for sexual misconduct, 48 of those providers, or 61 percent, were either not revoked from the Medicare program until

months after the adverse action or never removed. How can this

happen? Why does not CMS use the same data bases that GAO

did?

Dr. AGRAWAL. Why do I not start there, Senator. What we have

done in order to get licensure information is try to go back to the

source, so as I mentioned just a few minutes ago, we have rolled

in over 100 data bases specifically on licensure, not relying on a

single source of that data, by trying to get actually back to states

and try to get that data, you know, from as much of the source as

possible so that it is timely and accurate, because licensure information can actually change quite a bit even for, you know, valid

physicians.

I think to your broader point, Senator, there is absolutely no way

that I defend the presence of a criminal or a convict, a felon in the

Medicare program. I think it is clearly our job, when those cases

are identified either proactively by us or even in responses to report by GAO or others, to react swiftly.

Now, GAO did give us, to your point, 147 leads to investigate

which were concerning from their perspective for licensure issues.

I am happy to share the results with them. I want to be careful

when I do that, I am not sending the message that we have not

taken their recommendations seriously. We still do, but I am happy

to share the results on the ground in terms of what we found with

these 147 cases.

The CHAIRMAN. Well, GAO asked for a response from you by

June 29th. Has that response occurred?

Dr. AGRAWAL. I do not believe we have formally sent it to them

in writing yet. We will obviously be doing that. We have been

working diligently on looking at each and every one of these cases,

trying to get underneath the potential licensure issues. What we

have generally found is there were 19 revocations for licensure

issues that we were able to take out of the 147, so we are grateful

to the GAO for those leads.
14

The remainder of the cases, which we will obviously be sharing,

were cases where we had already taken an action like a revocation

or deactivation, or where we could not corroborate the licensure

issue, or the licensure issue would not have been a disqualifying

event in Medicare.

The CHAIRMAN. Well, Doctor, I can tell you that I know from

talking to GAO that CMS has not responded, and so you are overdue with your response.

Dr. AGRAWAL. Correct.

The CHAIRMAN. To me, if I were in your position and GAO, which

has done all this work for you, gave you this list, I would be really

concerned that you have individuals with revocation of their license

who are still receiving Medicare payments or at least are eligible

for those payments, especially when GAO was able to identify them

from just going to a consolidated data base. Thank you.

Senator MCCASKILL. Thank you.

Senator Kaine.

Senator KAINE. Thank you to Madam Chair and Ranking Member and to our witnesses. Dr. Agarwal, you are getting the attention today, so I think I am going to stick with you for a second.

Here is a fraud and abuse issue that I am very concerned about.

Not this GAO study, but other recent reports have really focused

upon the number of opioid prescriptions and fraud and abuse in the

Medicare Part D program. A lot of challenges with opioids. We are

seeing them all across the Nation. We are seeing them in the VA

system. We are seeing them in the private pay. We are seeing them

in Medicare. The studies have shown that the opioid prescriptions

within Medicare Part D have increased dramatically higher than

other drug prescriptions and there are some geographical hot spots

in that.

I hear about this all the time. In Virginia, it does not respect

class or geography. It is a serious problem. Talk to us about CMS’s

efforts to try to control the fraud and abuse and especially with respect to opioid prescriptions in Medicare Part D.

Dr. AGRAWAL. Senator, thank you. That is obviously a very important area and as a physician who has seen the ravages of substance abuse and other related issues, I completely agree that it is

a priority. We have been doing more work in the Part D program

to address beneficiary issues as well as provider issues, and then

the various intermediaries, Part D plan sponsors as well as pharmacies.

On the provider side, one of the biggest actions that we are working to implement over the next year is full enrollment of Part D

prescribers. This hearing so far has focused on enrollment on the

Medicare A-B side. We are implementing similar authorities and

controls in Part D so that every prescription written in Part D is

by a Medicare approved provider.

That is a radically new stance in Medicare than has been adopted historically. That will allow non-qualified providers, really for

Part D plan sponsors, to place edits in their system so that prescriptions from those providers simply cannot be filled. I think that

will help really make sure that providers, again, are licensed to

have DEA licensure and other things that are more germane to——
15

Senator KAINE. This is not opioid-specific. This is general systemwide improvement to try to track, right?

Dr. AGRAWAL. Correct. On the beneficiary side, we look at—we

have an over-utilization monitoring system that focuses on particular beneficiaries that are above what we would consider and

what the CDC considers safe thresholds of opioid utilization.

We share that information about specific beneficiaries with Part

D plan sponsors and then they are able to take, you know, elevated

steps like case management and other utilization-related steps to

address these over-utilizing beneficiaries.

We have noted through that kind of data sharing that there is

a 28 percent reduction in those high-utilizer beneficiaries, that they

are brought back down under safer thresholds. There are other

kinds of data sharing that we do with Part D plan sponsors. We

provide them, on a quarterly basis, information about aberrant

pharmacies, aberrant prescribers so that they are able to take their

own investigative actions and administrative actions as relevant.

We have a healthcare fraud prevention partnership which Ms.

Leff is a part of that encourages exactly that kind of data exchange

and encourages exactly that kind of administrative action since a

number of elements of the Part D program are actually directly administered by the plan sponsors not CMS, so it is very important

to work with them and through them.

Senator KAINE. Just to put on the record some statistics, between

2006 and 2014, Medicare spending on opioids went up from $1.5

billion to $3.9 billion in that eight year period, and in some regions

of the country, Alabama, Tennessee, Oklahoma, and Alaska, more

than 40 percent of Medicare beneficiaries file at least one prescription that includes a narcotic. That is really staggering, so these

anti-fraud measures in that particular area in Medicare Part D are

appreciated.

Let me ask you just one more question for any of the witnesses.

This is a panel that does significant oversight. We are not a legislative panel. We do not initiate legislation, but we are very interested

in it. You have oversight tools and we will stay on you about them.

Are there legislative improvements that could be made, in any of

your opinion, that would advance an anti-fraud agenda so that we

could better deal with this problem? Are there other things that we

ought to be doing?

Ms. LEFF. One thing that I would suggest, Senator Kaine, is that

in the Medicaid side, we have lock-in programs for members, and

so what happens is when we find them abusing controlled substances, doctor shopping to get those substances, we lock them into

one pharmacy, one provider. That is very effective.

Then we have case managers working with them to get them into

the right level of care. If they need psych care and that sort of

thing, we get them into those type of areas, making sure that they

are compliant with the program. It seems to be very effective in the

Medicaid side, but it is not something that is permitted under

Medicare. That would certainly be an opportunity.

Senator KAINE. Do you know if that is a regulatory matter or a

legislative matter?

Ms. LEFF. I am not certain.

Senator KAINE. Dr. Agarwal, do you know?
16

Dr. AGRAWAL. It is a legislative matter. We agree that lock-in

programs can be beneficial. They are utilized in Medicaid by the

private sector. We do not currently have this. In fact, we are statutorily not permitted to do and it is part of the President’s budget

that we would be happy to work with this Committee around to get

that kind of authority.

Senator KAINE. Great. Thank you very much. Thank you, Madam

Chair.

Senator MCCASKILL. Senator Warren.

Senator WARREN. Thank you, Madam Chair. You know, when

the little guys, doctors’ offices or pharmacies are caught breaking

the law, they sometimes get kicked out of the Medicare program,

but the consequences for giant corporations are very different. Instead of kicking these big time bad actors out of the Medicare program or putting CEOs in jail, the Government settles with a fine

and the company enters a corporate integrity agreement, basically

a promise not to break the law again.

I want to consider one for-profit hospital chain, Tenet Health. It

is a $5.8 billion corporation. Now, back in 1994, Tenet paid a $379

million fine, suggesting some pretty serious activity here, for illegal

kickbacks to doctors, and it signed one of these corporate integrity

agreements.

Then in 2006, Tenet got caught fraudulently billing Medicare

and giving illegal kickbacks to doctors for which they paid a $900

million fine, suggesting some pretty significant activity here, and

signed a new corporate integrity agreement. Then in 2012, Tenet

admitted to breaking the law again, while under the 2006 corporate integrity agreement, and it paid a $42 million fine, and then

just a year later, Tenet got another $4 million slap on the wrist for

misconduct that occurred while they were under the corporate integrity agreement.

If a big company can commit major fraud again and again and

again, and each time they just pay a fine and promise to be good

and move on, I am not sure what incentive there is for them to stop

breaking the law. Dr. Agrawal, why is it that a company like

Tenet—we know about lots of other examples—are allowed to settle

allegations of fraud over and over with just a fine and a promise

not to break the law again? When is it that you say enough is

enough?

Dr. AGRAWAL. Senator, thank you for the question. We are an administrative agency, as you know. We have a variety of authorities

that allow us to review medical records, recover overpayments,

deny enrollment, revoke enrollment. From our perspective, there is

no such thing as too big to fail. There is no provider that we cannot

medically review. In fact, some of the providers that you cited we

have conducted medical reviews of and secured overpayments.

We perform the same screening activities for those providers and

we have revoked or kicked out of the program institutional providers, larger institutional providers. With respect to settlements

and CIAs in particular, those are activities that we as an administrative agency do not engage in. Those are conducted by the DOJ

and Office of Inspector General. I could not really address for you

what their thresholds are for taking action beyond those.
17

Senator WARREN. Well, so fair enough that you do not speak for

them, but you testified here last year and when you did, I asked

you about how CMS, the HHS Inspector General, and the DOJ do

not coordinate their actions to deter these bad corporate actors.

As the Director of the Center for Program Integrity, have you

worked with HHS IG and the DOJ to implement any shared policies or guidelines among the agencies that will help assure that the

actions taken by one agency, like imposing a fine and putting in

place this corporate integrity agreement, will be strong enough to

defer future corporate bad acts? What have you done since we met

last time?

Dr. AGRAWAL. Yes, I completely remember that line of questioning.

Senator WARREN. Good.

Dr. AGRAWAL. So we——

Senator WARREN. I thought you might.

Dr. AGRAWAL. We work very closely with the Office of Inspector

General on a daily basis. We coordinate with them on investigations. We make referrals to them on a routine basis. We have referred thousands of cases in the last year to the OIG for further

investigation and their actions.

They have full access to all of our data analytics and other systems so that they know what we are working on. They have realtime access to the same data that we do. Indeed, we coordinate on

cases where if it looks like we want to take a revocation action, we

coordinate with them and make sure that they are aware of that

action. There are certain authorities——

Senator WARREN. Well, this sounds good. It sounds like you are

working together.

Dr. AGRAWAL. It is promising. There is more.

Senator WARREN. All right.

Dr. AGRAWAL. There are certain authorities that they have such

as exclusion authority, that I think is very useful and obviously

they leverage whenever they can. That exclusion authority goes beyond kicking somebody out of Medicare. It keeps that person or

that entity from getting any healthcare dollars, so we do make referrals of cases to leverage that exclusion authority, and another

area of collaboration, there is a legislative proposal in the President’s budget around expanding that exclusion authority. We are

very supportive of that because it is another place where we can

work together.

Senator WARREN. Okay, but let me just track this down just to

make sure—I realize I am running out of time, but I just want to

see if I can finish this point, so you are working together. You are

making referrals. Do you know if DOJ and HHS IG have official

policies or informal practices with regard to whether or not they

are really deterring future wrongdoing? I do not understand how

Tenet can keep showing up like this in the records, promising not

to break the law and breaking the law over and over.

Dr. AGRAWAL. In my day to day interactions with the IG and

DOJ, it is very clear to me that they are committed to stemming

as much healthcare fraud as possible, either by kicking entities out

of Medicare or the healthcare system or getting them into compliance. I think the specific policies they would have to reference, but
18

I have seen nothing in my daily interactions with them that would

suggest otherwise.

Senator WARREN. Well, let me tell you the part I see and that

is the part where we are watching the same actors appear again

and again and again, which suggests to me that whatever it is you

are doing or they are doing is not getting us where we need to be,

and the consequence of that is we are seeing repeating bad acts

and the American taxpayers are losing a lot of money over this.

Companies should not be allowed to get away with fines and a

promise that they will do better in the future and a wrist slap.

Until we get serious about holding these big bad actors accountable

when they defraud Medicare and Medicaid, the big guys who cheat

the system are not going to have a reason to stop. Thank you,

Madam Chair.

Senator MCCASKILL. Thank you. I want to turn it to Senator

Carper who is visiting our Committee today, but he is welcome because this audit, he was one of the primary requesters of this

audit. He is a one-man vigilante when it comes to improper payments. This is somebody who has been on this for as long as I have

been in the Senate. He has been working on improper payments.

We are happy to have you today and welcome your questions.

Senator Carper.

Senator CARPER. Thank you. Thank you so much. My thanks to

you, to our Chair, for giving me the opportunity to come by. I used

to serve on this Committee and I said to Senator Casey one day,

Senator Reid said to me, would you like to be on the Finance Committee? I said yes. He said would you be willing to give up Banking? I said yes. Would you be willing to give up the Commerce

Committee? I said yes. He said would you be willing to give up

Aging? I said no. I ultimately gave it up and now I no longer serve

on any of those Committees, but I am glad to be where I am on

the others. Thanks for giving me a chance. You can come home

again and so I thank you for the opportunity to come back.

I may have been a vigilante, but I am not a one-man and you

have been part of the posse, and God knows Senator Collins has

been along with Tom Coburn, all of us who have served at one time

or another on Homeland Security and Governmental Affairs.

When they asked Willie Sutton, why do you rob banks, he says,

that is where the money is. There is a lot of money at stake in

Medicare and Medicaid, and it is a lot to say grace over and we

acknowledge that and applaud CMS and those who are trying to

be vigilant in making sure they are good stewards with all of those

dollars.

Having said that, I watched with dismay as we learned at the

beginning of this year that improper payments for last year, 2014,

did not go down despite all of our collective efforts, including all of

what we put in the Affordable Care Act to kind of strength the

hand of CMS to go after improper payments, to actually see them

go up, and not by a little bit, by 20 percent, by $10 billion from

roughly $50 billion the year before to last year at $60 billion.

Let me just start off by saying to the representative from GAO,

Mr. Bagdoyan, why did it go up? Why so much? I was astounded.

Mr. BAGDOYAN. Well, thank you for your question, Senator Carper. That bit of insight was beyond the scope of our work. There
19

may be a range of reasons for that, but I cannot really comment

on specifics.

Senator CARPER. Okay. Same question, if I could, Dr. Agrawal.

Why did it go but, just very briefly?

Dr. AGRAWAL. Sure, thank you.

Senator CARPER. $10 billion, 20 percent after all this effort that

we put into it. We have, you have.

Dr. AGRAWAL. The improper payment rate is definitely an area

that we are continuing to focus on and appreciate your leadership

on. We have seen a few major drivers of the improper payment

rate. One thing that we have seen is as our program integrity efforts increase, as we get more vigilant, providers can sometimes

have a hard time keeping up, which can drive up the improper payment rate for a while until they learn our new rules.

One example of that is the home health face-to-face requirement

which I think is obviously a very sensible policy. It makes a lot of

common sense, but it has led to now over 50 percent of home

health claims being improperly paid. In other words, where the

medical record documentation of the face-to-face requirement is not

there, is not sufficient to meet the standards of the requirement.

As you know, certainly, Senator, the improper payment rate is

not a fraud rate, it is not overlapping with fraud. I think these are

usually vigilant providers that are trying to keep up with the rules

that we can do a better job to educate. We can also do a better job

to move our reviews to a prepayment world through efforts like

prior authorization, as we are doing, to help drive down the improper payment rate.

Senator CARPER. I thank you. Mr. Bagdoyan, has anyone ever

mispronounced your name?

Mr. BAGDOYAN. Always.

Senator CARPER. Okay. Well, good.

Mr. BAGDOYAN. You are not the first one, Senator.

Senator CARPER. I will try not to do that that as well. In his testimony, Dr. Agrawal said that he recognizes the importance of the

problem that we are talking about here today, and he is just trying

to take steps to address those problems. Could you just comment

on CMS’s plan for addressing the vulnerabilities that GAO has

identified? Do you think this plan is adequate?

Mr. BAGDOYAN. Sure. Thank you for your question and I appreciate Dr. Agarwal stating that CMS has agreed with the recommendations, that they have already initiated some steps to respond to them, including providing us with responses to the referrals we have made.

I think the absolute key here is sustained execution and attentiveness to a strong internal control regime, front, middle, and end

to help address some of the issues that we identified.

Senator CARPER. All right. Dr. Agarwal, your testimony demonstrates, I think, fairly clearly that you and your colleagues take

seriously what GAO, the findings of GAO, and you stated your

commitment to addressing the identified vulnerabilities. Could you

just give us a little more detail as to when you will have implemented these steps and what is your timeline for closing the

vulnerabilities described by GAO?
20

I will just say, for me, one of my frustrations here is we have all

heard the term low hanging fruit. This is not low hanging fruit we

are talking about. This is a fruit that is laying on the ground. I just

want to hear a sense of urgency that we are going to seize this day,

we are going to seize this day. Go ahead.

Dr. AGRAWAL. Absolutely, Senator, and we do have a sense of urgency. We have staff that are focused on provider enrollment every

day as their main job and they want to get all of these bad actors

out of the program as well. For example, when it comes to ineligible addresses, the GAO has recommended on-boarding a new

data base through the USPS to essentially replicate the work that

they did. We agreed with that recommendation.

The time for—we need a certain amount of time to get access to

the data base, verify it, get it incorporated into our systems, and

so we are targeting doing that by early next year. However, in the

intervening timeframe, we are also going to do other work as we

on-board the final fix.

One is we are going to be doing more ad hoc site visits of these

limited risk providers since again, those were the ones that kind

of fell through the cracks in our screening process. We are going

to do several thousand site visits right away and then work to

ramp that up in the coming months.

When it comes to mailboxes, we are also going to immediately

start comparing lists of the CMRAs, these commercial mailbox

agencies, bump that list up against PECOS. We are going to do

that on a routine monthly basis and then, you know, visit, investigate, whatever comes out of that in this intervening phase until

we get this data base incorporated.

Senator CARPER. All right. If I could, Madam Chair, you and I

worked for a lot of years on postal reform and one of the things

we have tried to do is to help the Postal Service figure out how to

take a 200-plus-year-old legacy distribution network and find new

ways to make money out of it, to monetize it in a digital age.

It occurs to me that in a time when we have thousands of socalled Medicare providers that are operating out of a mailbox or

that may be operating, if you will, out of an empty building or a

vacant building, a vacant lot, you have got the Postal Service over

here that literally knows what is there, what is there in each of

these delivery sites.

There has got to be some way that the Postal Service is looking

for a way to make money. They have this information. There ought

to be a way to provide a great partnership, which enables the folks

at CMS to save a ton of money in Medicare and provide, frankly,

a revenue stream that the Postal Service could use.

I am going to pursue that and my hope would be that the two

of you would join me in that pursuit. Thank you so much for letting

me come by. Thank you.

Senator MCCASKILL. Thank you, Senator Carper. We are thrilled

to have you here today.

Senator Casey.

Senator CASEY. I want to thank Senator McCaskill for this hearing today. Madam Chairman, I thank you as well. I thank both of

you for this opportunity and for your work a lot of years working
21

hard to make sure we are doing everything possible to root out

waste and fraud.

Look, I am a believer that when you have any program, especially one as consequential and significant in the lives of Americans

as Medicare whenever you have waste, fraud or abuse, that is a

taking. It is like stealing resources from people that need it, and

apparently people that are both vulnerable and their families have

a reasonable and legitimate expectation that the program will be

secure, that will be efficient, and that the services will be delivered,

and services means quality care.

This is serious business and we cannot do enough to make sure

that we are insisting on much greater strides than we have made

to date on rooting out waste, fraud and abuse, so it is both a taking, but I think it is also an issue that arises in the context of our

own responsibilities. If we say we support a program, we must be

willing to support strategies to root out waste and fraud.

We are grateful for the efforts so far, but we have got a long way

to go. Every minute of every day that there is waste and fraud in

a program like this, it gives legitimacy or momentum to those who

would like to slash a program. You cannot just be for a program

and be for funding if you are not going to be for the integrity of

the program.

I wanted to start with Dr. Agarwal and I may not get to our

other two witnesses, but I wanted to ask him at least two questions. First, was on Senior Medicare Patrol, which, as you know,

is legislation that was—I should say the program itself is part of

our law for a number of years now.

We had an extension added to the Older Americans Act and we

know the basics of what that Medicare patrol does. It helps to educate Medicare beneficiaries and their families about how to spot

and report waste, fraud and abuse. We know that through the year

2013, the program saved Medicare 120 million bucks and that is

not bad.

I was noticing the error rate in Medicare, that is a lot more than

$120 million, but it is a contributor. This program is a contributor

to that goal of rooting out waste and fraud, so using that as kind

of a point of departure, Doctor, that program, is that something we

can build on? Is that something we can replicate or enlarge?

Dr. AGRAWAL. Yes. I am a big fan of the Senior Medicare Patrol.

We do work closely with that program. I speak routinely with that

organization. In fact, next week we have another meeting. One of

the biggest things that we have focused on from a beneficiary

standpoint is the use of the Medicare summary notice or the EOB

to make sure that beneficiaries are aware of and educated about

their health care utilization patterns and making sure that they

give us leads if they see something on the MSN that is not accurate.

We get 40,000 complaints from beneficiaries related to program

integrity alone and use that information in our automated practices. We have it as part of our predictive analytics system. We use

it in investigations. Many of those complaints have led to significant investigations and outcomes for us, so I think that is certainly

a foundation we build on. The agency conducts an annual sort of

educational campaign for beneficiaries, particularly around the
22

open enrollment periods, to make sure that they are aware of program integrity efforts, how to protect their private information and

things like that.

Senator CASEY. Are there other resources or tools that you would

need to accomplish that or you think you have the resources you

need right now?

Dr. AGRAWAL. You know, I appreciate the question. I think we

are building on the foundations that we have. I think there is lots

that we could do with beneficiaries. That relationship clearly matters a lot. There are potentially 50 million investigators on the

ground for us, so I would not make a particular ask at this point.

That might be unusual, but no, I really appreciate the support

around this kind of program and the support of the beneficiaries

that we have.

Senator CASEY. I appreciate that. Second, before I wrap up, I will

put it on the record. It might be a brief answer and you could amplify it in writing, but the provider screening process. We, of

course, want to get the balance right between being thorough and

vigorous and making sure that the process is strict and thorough,

but at the same time make it fair and navigable. I guess the basic

question I would ask you is, do you think you are getting that balance right or do you think we have got a ways to go on that?

Dr. AGRAWAL. I think you are absolutely right about the need for

balance. I think we think about that balance on a daily basis in our

work. I think as long as we have one, you know, illegitimate provider in the program, we need to continue to be vigilant. I think

that balance is something that we need to continue to work to

achieve, but we are not there yet on the numbers, and like I said,

if there is one, we need to get them out of the program.

Senator CASEY. Thanks very much.

Senator MCCASKILL. Senator Cotton.

Senator COTTON. Thank you. Thank you all for attending today.

Mr. Bagdoyan, thank you in particular for the good work that you

and the GAO have done on this issue. In your years of doing this,

but especially over the last year since the CMS changed the steps

that are necessary for verifying information of Medicare providers,

do MACS tend to take steps over and above what CMS requires of

them?

Mr. BAGDOYAN. Thank you for your question, Senator Cotton,

first of all. I think based on what we have encountered during this

work, the MACS seem to be following the guidance that originated

in March 2014. In fact, we encountered a couple of instances where

the MACS, pretty much acting on that guidance, actually verified

providers that should have been flagged for potential action.

Senator COTTON. What were some of the main reasons why they

verified those providers that should have been flagged? What was

omitted? What did they not check that they might have checked if

the CMS steps were slightly different?

Mr. BAGDOYAN. From my recollection, basically what they did is

they made calls to a single location and asked over the phone to

see whether the address that they had on record was the actual address for providing services.

Senator COTTON. Some of the examples are pretty arresting, you

know, of addresses that are open fields or fast food restaurants or
23

so forth. Would it be possible to verify or at least provide a more

complete picture needed for verification by, say, using Google

Maps?

Mr. BAGDOYAN. Sure. That is part of our analytical approach to

our work. What we did was we started with the USPS address data

base and then we employed the Google Maps, we did Internet research.

Senator COTTON. When you are saying we, you are saying the

GAO?

Mr. BAGDOYAN. This is my colleagues and I on the team, yes. We

looked at the providers’ purported websites and then on 30 occasions we had a site visits including taking photographs, some of

which were displayed earlier today.

Senator COTTON. Do you think that is an onerous process?

Mr. BAGDOYAN. Well, I think we did it with a fairly small team.

It is work, but as you see from the results of our report, it is solid

work. We certainly stand by it. I am very proud of my colleagues

for doing a great job, and these are things that are available to be

done, the commercially available USPS software, for example, and

the Internet, site visits. Those are all things within one’s purview.

Senator COTTON. Certainly the Internet and Google Maps.

Mr. BAGDOYAN. Sure.

Senator COTTON. Or MapQuest, to be agnostic about one’s preferred choice.

Mr. BAGDOYAN. Whichever works best for the circumstance, yes.

Senator COTTON. Dr. Agarwal, do you think it is too much to ask

MACS to say, use Google Maps or MapQuest, at least to see that

providers are not using addresses that are fast food chains or UPS

stores or empty lots?

Dr. AGRAWAL. We perform similar tests as what the GAO had

utilized in the generation of this report. Again, as I stated earlier,

we do appreciate the work of the GAO and these findings. We conducted 220,000 site visits since new enrollment and screening

standards were implemented. We have revoked 1,300 providers for

being non-operational due to those site visits. We conducted similar

work related to the leads that the GAO gave us.

Overall, we are moving toward an approach that is more automated, so one thing that we will be doing as a result is folding in

the data base identified by the GAO which will augment existing

data bases that we have that do licensure checks, address checks.

If there is a way to enhance those things, we are absolutely looking forward to doing that, but what we want to move away from

are lots of potentially inconsistent manual checks, rather, a system

that is highly automated with very timely data and MACS are free

to elevate their levels of concern and trigger even non-required site

visits if there is anything potentially concerning about an enrollment.

Senator COTTON. Well, automation is great and centralized data

bases are great, but we have seen the Government does not have

the best track record with those. Using something as simple as

Google Maps or MapQuest would seem to be a reasonable step to

ask MACS to take, would it not?

Dr. AGRAWAL. Well, we have geospatial software in our system.

Again, you know, I think with the risk of potential variability in
24

how different operators, different contractors do the work, we have

opted toward a system that is much more consistent, much more

automated, and yet, still gives the contractors all the tools they

need to do the work. I think GAO has identified a good tool that

we will be incorporating into those, rather than making a significant strategic change and moving back toward manual processing.

Senator COTTON. How are these MACS held accountable whenever they make an inaccurate verification, in particular, when it

could be so easily confirmed as visiting the site or even using an

Internet search engine like Google Maps or MapQuest?

Dr. AGRAWAL. Sure. We hold MACS like other contractors accountable in a similar manner, so we assess their performance on

a routine basis. We conduct our own site visits of the contractors

to make sure that they have the right tools, processes, operations

in place to do the work.

We look at the performance metrics and where necessary, we

take actions like expressing letters of concern reflecting our findings in their performance reviews, and then, you know, increasing

scrutiny from there as necessary, putting them on corrective action

plans, for example.

Senator COTTON. Well, thank you. My time has expired, but I do

think some more work is probably needed.

Senator MCCASKILL. Thank you, Senator Cotton.

Senator Donnelly.

Senator DONNELLY. Thank you, Madam Chair. You know, one of

the areas that is growing very fast is data analytics, big data, data

mining. The Chair’s—St. Louis Cardinals use all kinds of data analytics, can tell you exactly where the ball is going, how many times

it rotates on the way in is a curveball.

Senator MCCASKILL. The best record in baseball.

Senator DONNELLY. For now.

As you look at this, there are markers that will indicate to you,

when they do data mining, they can tell exactly what that 59-yearold male who happens to like Coca-Cola and this particular ball

club and this matter and this matter and tell you from all of those

exactly what they are going to do next. This is all predictive. This

is all easily determined.

You can put about 20 markers together and find out very, very

quickly who your top suspects are and where you can go to find

them, use the Google Maps that Senator Cotton talks about, and

go locate them, but an extensive use of data analytics can completely change this. I am wondering what your plans are in that

area, and have any of the biggest data analytics firms in the country taken a look at the processes you are using and said, hey, this

is up to snuff or not?

Dr. AGRAWAL. Yes, I absolutely agree that data analytics is vital

to program integrity work, especially in a system with the volume

of Medicare. For that reason, three years ago, we began implementation of the fraud prevention system which is exactly the kind of

system that you are describing. It is the claims analytics system

that looks at all 4.5 million claims that come into Medicare every

single day.

That was, again, a sizable change from the historic approach to

processing claims which was just to pay them. We now have eyes
25

on our—automated eyes on every single claim looking for outlier

claims and outlier providers. That system allows us to implement

predictive models that are exactly as you describe, multi-variant

models that are trying to identify outlier behavior that is highly indicative of waste, abuse or fraud. We base those models on historical patterns, on other data analytics, on conversations and discussions with law enforcement.

Senator DONNELLY. Then the next question is, with all of those,

how did we go up 20 percent last year?

Dr. AGRAWAL. Well, I think the improper payment rate is different from the fraud rate, so you asked if we had had anybody

come in and assess the system. The answer is yes. The OIG came

in and did an assessment of our fraud prevention system.

Senator DONNELLY. Anybody outside of government, anybody

who are the very, very best in the data analytic field?

Dr. AGRAWAL. Well, I will remind you that our contractors are

private-sector contractors and the scrutiny that the system has

faced has been higher than any predictive analytics system in program integrity, and what the OIG has found and certified as a ten

to one ROI for the system, that is still different from the 20 percent

rise in the improper payment rate, and that is because improper

payments are not the same as fraud.

Most of the time, improper payments are lack of appropriate documentation or the ability of the provider to substantiate in the

medical record what they actually billed to the agency. We do not

see medical records at the time of claims payment or actually very,

very few of them, so 60 percent of the improper payment rate is

just from that documentation issue.

Senator DONNELLY. As you look at the data analytics and the opportunity to do data mining and you have private-sector companies

that are providing this to you, what do you do continue to make

sure that you have best practice modeling going on with this?

Dr. AGRAWAL. I think that is a great question, so one thing that

we are required to do by law is to re-procure the system periodically. We are actually in the process of doing that, which allows us

to compete again the system, what our needs are, to make sure

that if there is a company that is now doing better at it than the

ones that we have, we will get the appropriate company in the

door.

We continue to work on refining models. We implement new

models on an annual basis, really on quarterly cycles, as well as

refine models that are already existing in the system to help improve their accuracy and the impact that they deliver.

We are also moving the system into other arrays now that we

have proven its worth and the positive ROI to the taxpayer, focusing mainly on the worst cases like fraud. We are going to apply the

system against other patterns that are concerning like waste and

abuse, implementing things like system edits and other models so

that we can really start to tackle some of the biggest areas of losses

in the program.

Senator DONNELLY. Ms. Leff, when you look at the fraud prevention activities that CareSource and other private companies use, do

you have any suggestions that CMS should adopt that could help

them to do a better job?
26

Ms. LEFF. CMS—we have worked very closely with CMS on

many, many programs. For example, the Health Fraud Prevention

Partnership, which I think is a phenomenal collaborative effort

that pulling data together from all the plans and putting it together running algorithms trying to identify fraud from a bigger

perspective, I think that is going to be a phenomenal thing going

forward.

I certainly encourage, you know, that process to continue. The

prepay system, predictive analytics are certainly another area that

I think is very important in the fraud space. We in the past have

always depended on post-payment fraud detection systems that

had known fraud schemes built in, so it was only looking for certain things.

These new predictive systems, and they can be morphing every

day, every week, have phenomenal capability to find abberancies

that most of us could not find on our own, so using those new technologies are just very crucial.

Senator MCCASKILL. Thank you. Thank you, Madam Chair.

Senator Whitehouse.

Senator WHITEHOUSE. Thank you very much. Let me first thank

Mr. Bagdoyan and GAO for their work that led to this hearing. I

was one of the signators of the original letter requesting this report, and I know that the Chairman and the Co-Chairmen—are

you Chairman and Ranking Member?

Senator MCCASKILL. I am the Ranking Member. She is the

Chairman.

Senator WHITEHOUSE. Chairman and ranking member have been

very energetic in pursuing this and making sure that we had this

hearing. I express my appreciation to Senator Collins and Senator

McCaskill as well, but job well done. I am glad we have this report.

There is another report that was done by the Office of Inspector

General for the U.S. Department of Health and Human Services

about questionable billing in geographic hot spots, and I am wondering, Mr. Agarwal, what you think the geographic hot spot effect

is for Medicare fraud? My layman’s impression is that there are

places where this is an industry, like Florida, and there are places

where people rent a place, set up shop, send out millions of dollars

in bills.

As soon as they get a big pile, close the doors and they are gone

and they move on. Hard to pull that off in Rhode Island because

everybody kind of knows each other. We are a small State, but I

do have the impression that there are serious geographic hot spot

issues here and I wonder if you would comment on whether that

is the case and what you are doing to look into that question.

Dr. AGRAWAL. Sure, and let me just start by confirming Rhode

Island is not a huge hot spot for us, so there are. I think what you

see when you look at almost any healthcare system, including

Medicare utilization, is that there are significant geographic variability. A lot of internal and external folks have commented on that.

In the particular area of fraud——

Senator WHITEHOUSE. Geographic variability consistent through

time, i.e., it is the same places?

Dr. AGRAWAL. Correct.

Senator WHITEHOUSE. Okay.
27

Dr. AGRAWAL. Specifically in fraud, there are certain hot spot

areas that do always, it seems, tend to originate schemes and kind

of spread them from there. South Florida, obviously, is an example,

Detroit, Southern California around Los Angeles, the Brooklyn

area in New York. These are areas that come up all the time.

Senator WHITEHOUSE. What have you done to focus on those

areas?

Dr. AGRAWAL. We take an approach that obviously is looking at

the entire country. We have regionalization, to some degree,

through our contractors, but our strategic focus has been to create

national resources that can still focus on these areas as needed.

One thing that I just discussed was the fraud prevention system,

this predictive analytics system. Our contractors that are regionally based can actually tell us about specific schemes that they are

encountering in their area, so it might be geographically very specific, but we can get those in as models into the FPS. That will be

then primarily for those contractors, so these models can be both

national in scope, but also be designed to address particular pockets of issues.

Senator WHITEHOUSE. Where there are geographic pockets, let

me suggest that you try to establish working relationships with

local investigative authorities. We have a Medicaid fraud control

unit in Rhode Island that is part of the Attorney General’s office.

Every State has one. If folks are cheating Medicare, they may well

also be cheating Medicaid, and so, you have kind of a natural group

of allies there.

I noticed that your hot spot areas you mentioned were all in very

big states, Florida, Michigan, California, so it may be that the Medicaid fraud control unit has so much span there that they cannot

really focus, in which case you would have to look at district attorneys.

I would encourage you to follow Senator Cotton’s suggestion that

there are people who would be willing to take a drive by, if you had

the relationship with them, to say, look, we just got billed a million

dollars out of this address in the last month and nobody has ever

billed us from that address before. Would you mind just go checking it out? If it looks like it is an abandoned garage, boom, you

have learned something. I would encourage you to do that.

The other thing I would suggest, and I would ask you to comment on this, is that there are prescription drug monitoring programs out there. They are kind of an under-utilized thing. It is not

quite clear who owns them. It is not quite clear, you know, where

they—there is a lot of variability State to State.

The HHS IG report was heavily about the problem of opioids. I

wonder what your thoughts are and how you are working with the

prescription drug monitoring programs in the states and trying to

develop them to the point where they are a valuable asset for your

anti-fraud as well as anti-opioid abuse efforts.

Dr. AGRAWAL. Sure. Let me just say on the first point, we totally

agree. I totally agree that a relationship with local entities is extremely important. Our contractors are indeed required to work

with local law enforcement entities, including regional OIG offices.

We also have Federal staff located in many of these hot spot areas

so that we can address the hot spots directly.
28

To your second point about opioid utilization, there is a variety

of programs in place at CMS, primarily through the Part D program and Medicaid, to address opioid over-utilization. We look at

prescribers of these medications as well as the beneficiaries who

utilize them. We have controls, utilization management protocols,

case management approaches to the beneficiaries, and then we

have the same oversight approaches to the prescribers that we do

in the rest of the program, including enrollment and screening,

claims analytics or prescription analytics, and investigations, so

you know, we are doing more and more to incorporate Part D into

this overall work. In the Medicaid work, of course, we have to work

very closely with states in their monitoring approaches so that we

are addressing providers that might be particular to the Medicaid

program.

Senator WHITEHOUSE. If I could, with the Chairman’s permission, make a query for the record, I would like to ask Dr. Agrawal

to have the opportunity to respond in writing to where they see

themselves going with the PDMPs, prescription drug monitoring

programs, as an enforcement and public safety device. That way I

do not have to use any more of my time since I am over it.

Senator MCCASKILL. Certainly.

Senator WHITEHOUSE. Thank you.

Senator MCCASKILL. Thank you. Thank you, Senator. Senator

Collins.

The CHAIRMAN. Thank you very much. Mr. Bagdoyan, I want to

go back to a comment that the doctor made in his opening statement. He said that both the hamburger joint and the vacant lot

had not received any payments in 10 years, and in the interest of

time, I am going to focus on the vacant lot.

That comment bothered me greatly because it was so dismissive

of the concern that brings us here today. According to the GAO report, and I am looking at page 21, GAO made a site visit and found

that the lot was vacant in December 2014. Is that accurate?

Mr. BAGDOYAN. That is accurate, Senator.

The CHAIRMAN. Then according to GAO, the provider went

through a re-validation process using this vacant lot as the address

and was approved by the MAC the very next month, in January

2015. Is that accurate?

Mr. BAGDOYAN. Looks to be, yes.

The CHAIRMAN. Does that not mean that the provider remained

eligible to bill Medicare in the future from that lot as long as you

are in the provider system, the PECOS system. Is that accurate?

Mr. BAGDOYAN. That is the risk, Madam Chair.

The CHAIRMAN. Is that not the problem? Even if someone has not

billed from an address in some time, if they remain in the system

and eligible to bill, then the potential for fraud is still there.

Mr. BAGDOYAN. That is correct, yes.

The CHAIRMAN. Doctor, I want to turn to another issue that we

did not complete on providers that have had their licenses either

revoked or suspended and yet are still eligible for Medicare. Is it

correct that CMS primarily relies on self-reporting by physicians?

Dr. AGRAWAL. Providers are required in their enrollment application to self-report license information. However, we have, in recent

years, implemented the automated provider screening system
29

which then does continuous monitoring of licensure, which is what

has allowed us in these—since the APS was created, to revoke

11,000 providers for licensure issues, so no, we do not rely entirely

on self-reported data, but of course that is part of the enrollment

application.

The CHAIRMAN. Sure. Someone who is determined to keep drawing money out of the system and is not ethical and has had his or

her license revoked is not likely to report honestly, are they?

Dr. AGRAWAL. Well, correct. That is why we have implemented

other data checks around exactly those issues, and where a provider has falsely reported information, we can take action against

them. The reporting is actually useful as a lever for that purpose,

because that, in and of itself, if they have inaccurately reported

data to the agency, we can kick them out of the program for that

reason, so getting the reports is actually useful for us from an investigative standpoint.

The CHAIRMAN. Do you use the Federation of State Medical

Boards data, the FSMB data, as a check automatically?

Dr. AGRAWAL. We go upstream of the FSMB, actually going back

to the states themselves. Since the FSMB is an umbrella organization for the states, they get information from the states, so what

we have done to try to get more accurate, more timely information,

is to go back to the states themselves, which is why we have to use

so many different data bases to get license information.

The CHAIRMAN. Well, do you use this consolidated data base at

all?

Dr. AGRAWAL. We do. Again, we do and we perform continuous

monitoring on licenses, which is why we have been able to revoke

11,000 providers for license issues.

The CHAIRMAN. Okay. If you are doing continuous monitoring,

how is it that GAO was able, in a relatively short time, and not

doing—and not that it took years and years—to come up with hundreds of providers that had had their licenses either revoked or

suspended, and yet, under your system, were still eligible?

Dr. AGRAWAL. Yes. I think it is important to keep in mind that

there were 19 providers on the list that we ultimately took an action on against—you know, with GAO’s input and recommendations. I think where the GAO has clearly added a lot of value——

The CHAIRMAN. Well——

Dr. AGRAWAL. Just permit me to answer the question because I

think it is important.

The CHAIRMAN. Sure, certainly.

Dr. AGRAWAL. Thank you. Where the GAO has clearly added a

lot of value is they said to us, we should be monitoring more than

just the licenses of active enrollments, the licenses for states in

which a provider is actively enrolled, but looking at the provider’s

entire set of licenses. That is an enhancement of the program and

enhancement of the use of our continuous monitoring system. We

agreed with that approach and we are implementing that change

so that additional licenses are being monitored in the system.

The CHAIRMAN. Mr. Bagdoyan, do you agree that there were only

19 physicians on that list? It was my understanding that you had

not gotten a report back from CMS despite it being overdue.
30

Mr. BAGDOYAN. That is right, Madam Chairman. We would be

happy to look at what CMS provides us in response to our referrals, which is a matter of routine for my mission team. We do that,

work closely with the agencies to make referrals for action on their

part and a response to us in terms of what they have done, so once

I have had a chance to look at the details, we would be happy to

consider any additional actions.

The CHAIRMAN. I would officially ask you on behalf of the Committee to undertake the review that you did of the referrals to

CMS, compare it with the response we have received today, that

there were only 19 physicians on that list who warranted being

kicked out of the Medicare program, and help us better understand

the discrepancy. It is my understanding that part of it is that you

referred the names of physicians that were not removed until many

months after adverse action.

Mr. BAGDOYAN. That is right.

The CHAIRMAN. That obviously puts the system at risk. Is that

accurate?

Mr. BAGDOYAN. It is. Even though the numbers may be relatively

small, obviously these are potentially bad actors, to use a term of

art, so it is important to flag each and every one of them to the

extent possible. What we are looking for here is reasonable assurance, not absolute assurance, that everybody is going to be flagged.

I had that as an action item for followup.

The CHAIRMAN. Thank you, and in fact, I think that one of the

providers had billed something like $600,000. I mean, there can be

a lot of money at issue here.

Mr. BAGDOYAN. That is right.

The CHAIRMAN. Ms. Leff, just one final quick question for you.

If you were to compare your system to that used by CMS, what one

improvement would you suggest that CMS use?

Ms. LEFF. I think CMS is working on the same issues that

CareSource is working on. We are looking at new analytic systems,

predictive analytics. Prepay, I do not know how possible that is,

but you are doing some of that, I believe, in the CMS area.

I think those are the things right now that seem to be the focus

in the fraud program integrity area, really trying to get ahead of

the game, preventing the dollars from going out the door, and instead of trying to pay it and chase it and trying to get it back.

The CHAIRMAN. Thank you. Thank you.

Senator MCCASKILL. Thank you. Mr. Bagdoyan, do you know

what the amount of fraud is? Dr. Agrawal pointed out that improper payments does not mean all fraud. Do we have any estimates of what percentage of the improper payments represent

fraud?

Mr. BAGDOYAN. We do not. It is inherently difficult to estimate,

so the big top line number is improper payments, some of which

may be fraud, but it is very difficult to ascertain the exact extent.

Senator MCCASKILL. Has there ever been an attempt at CMS to

determine what the level of fraud is on an annual basis out of the

$554 billion that we are spending on this program?

Dr. AGRAWAL. Nothing on the scale of the improper payment rate

measurement that is done. We have been working on a project to

essentially pilot some kind of fraud rate calculation. I totally agree
31

with Mr. Bagdoyan. That is actually very complicated, to try to

generate a fraud rate since, of course, once you have identified a

potential issue, you have got to investigate it, you know, take appropriate actions, and if it truly is fraud, remove it from the system, which inherently alters the rate itself.

We have started—we have been working on a pilot in the home

health area. We will actually be piloting that methodology very

soon working with law enforcement, with other entities, to see if

we can generate an initial sample in home health of what a fraud

rate might look like. That will be the first time the agency has

done such a thing.

Senator MCCASKILL. Well, is anybody compiling the cases around

the country of Medicare fraud that are brought and the dollar

amounts they represent? I know with some regularity, our attorney

general trumpets a multimillion dollar settlement on Medicare

fraud. I am sure every attorney general in the country does that.

Are you all making any attempt to compile that so that we can

begin to get some kind of—it is unsettling to me that we so easily

do improper payments, but we are not doing fraud.

I do not really—I mean, I understand there has to be a determination legally that it was fraud, but at least we could be identifying potential fraud, just like you are identifying potential improper payments. The improper payment figure, there is some

money included in there that turns out not to be improper payment.

Dr. AGRAWAL. Well, that is exactly the approach that we are trying to take in this home health example that I provided, is to look

at potential fraud. When you look at improper payments, that is a

statistical sample of claims that we then compared to medical

records. It is on the order of, I believe, 100,000 claims, if I remember correctly, and then it is extrapolated since it is a statistically

valid random sample.

That is the improper payment rate in Medicare and it is corroborated with medical records. The challenge of determining a fraud

rate is that you cannot just go to the medical record.

Senator MCCASKILL. I understand.

Dr. AGRAWAL. You have to conduct a site visit. You have to try

to get at the intentionality of the provider.

Senator MCCASKILL. Could you compile the amount of Medicare

fraud that has been determined through DOJ and attorney generals across the country. Do you do that?

Dr. AGRAWAL. Well, that is a good point. DOJ and OIG do compile their own casework. They compile, obviously, settlements,

other actions that are taken, and that we do publish on a routine

basis.

Senator MCCASKILL. What is that number?

Dr. AGRAWAL. Well, in our HCFAC report, I believe we have reported between seven to eight to one ROI last year in terms of dollars recovered in all of these civil——

Senator MCCASKILL. I do not want to hear ROI because sometimes that justifies a lot of contracts. What I want to know is, what

is the cumulative amount of Medicare fraud that was determined

by various agencies, whether it is OIG or DOJ or State law enforce-
32

ment or Agencies, what was the total amount of Medicare fraud

identified last year?

Dr. AGRAWAL. Right. Clearly that is on the law enforcement side

of the house. We do not keep those kinds of figures. I am happy

to——

Senator MCCASKILL. Well, should you not? Should you not know

what it is?

Dr. AGRAWAL. Well, you know, again, I think fraud is determined

through very extensive legal process.

Senator MCCASKILL. I know that.

Dr. AGRAWAL. Our goal——

Senator MCCASKILL. That is not my point. My point is, if you are

sitting there doing your job, the reason we have GAO is because

they allow us to go in and see how agencies are doing. Your job is,

in fact, to provide integrity to the program, correct?

Dr. AGRAWAL. Yes.

Senator MCCASKILL. That would be not just improper payments,

but fraud. Now, if I had your job, one of the first things I would

want to figure out is, are we getting after fraud and are we doing

it well? One of the first things I would want to ask is, how much

do we recover in fraud, how much fraud has been identified over

the last 10 years? Are we doing better or worse? I am puzzled why

this is not something you are curious about.

Dr. AGRAWAL. It is absolutely something that we are working to

know. However, you know—so what we do is we look at a variety

of indicators. Where are the cases that we are spending most of our

time on geographically? What kind of cases are they? You know,

different utilization areas. We look at overall cost to health care or

to Medicare and actually see if there are changes in that as we

press our activities in certain areas. There are a variety of indirect

indicators that we use to substantiate that we are focused in the

right areas, including, obviously, talking to law enforcement, that

we are spending our resources wisely.

I think a basic practical question is, how much time, effort, energy, and resources we should spend to determining a fraud rate,

which at some point becomes an academic exercise, as opposed to

doing the work and trying to get these bad actors out of the program.

Senator MCCASKILL. Well, you know, it was interesting. I had

the same experience when I asked the people at Immigration, Customs Enforcement, how many employers they had prosecuted for

hiring—knowingly hiring illegal immigrants when I first came to

the Senate, and I actually got an answer that they did not know.

I was stunned that they would not know that, and then they said

they could not really get me that because it would take too much

time, too much energy, too many people, so we had our interns

Google, you know, a few phrases, illegal immigrants arrested, employer charged, and we were able to, in a fairly short period of

time, begin coming up with some significant numbers, and when

confronted with that, there was some embarrassment at ICE about

it.

I guess what I am telling you is, when these prosecutors announce it, it is really common knowledge. This is not hard to compile. All you would have to do is write a letter to all the attorney
33

generals saying, would you send us all the Medicare fraud cases

that you successfully identified last year and the dollar amount. I

mean, at least having that—what I am worried about is that we

are not keeping track if we are doing better or worse, so let me go

on to the next question. What does Finalist do?

Dr. AGRAWAL. Finalist is a piece of software. What it does is it

does similar address verification, although again, we agree not to

the enhanced level that GAO had undertaken, but it does similar

address verification activity for CMS in the enrollment and revalidation process.

Senator MCCASKILL. Was it written for CMS?

Dr. AGRAWAL. You know, honestly I am not totally aware. I think

this was a product that we purchased.

Senator MCCASKILL. Do you know, Mr. Bagdoyan? Was this written—was this software designed for CMS or was it off-the-shelf?

Mr. BAGDOYAN. I do not know off the top of my head, Senator

McCaskill, but I would be happy to get back to you.

Senator MCCASKILL. That would be great. I would love that for

the record, because one of the things we are trying to get at is that

sometimes Government has a tendency, people come in the door

and say, we can do this for you, and you get so focused on somebody who can do it for you that you do not realize there is a product sitting on the shelf like Google Maps or like USPS or like other

places that you could do the same thing, so you said earlier you do

not know what it costs. Do you know when your contract with Finalist is expiring?

Dr. AGRAWAL. I do not.

Senator MCCASKILL. I believe you do know, Mr. Bagdoyan, right?

Mr. BAGDOYAN. My colleagues can correct me, but I believe it is

toward the end of this year.

Senator MCCASKILL. That is correct, the end of this year, so the

question is, are there any plans to replace Finalist?

Dr. AGRAWAL. Well, I think what is less important to us is the

specific name of the product or, you know, what a particular company has. I think what we want to do is we have actually taken

the approach that you are describing, which is to try to use as

many off-the-shelf tools as possible.

That is why we have rolled into our enrollment systems things

like the GSA debarment list, the law enforcement exclusions data

base, other existing data bases that allow us to do our work and

that do not have to be customized a lot so that there is——

Senator MCCASKILL. I think that is great.

Dr. AGRAWAL. That is definitely the approach that we have

taken. That is the approach that we will take to roll in the USPS

system that GAO has identified.

Senator MCCASKILL. What I am anxious to know is, when it gets

near the end of the year, is there someone somewhere in CMS that

is going to renew the contract with Finalist when perhaps it is not

even necessary, when perhaps it is much more expensive than the

products you can get off-the-shelf that could easily be programmed

together?

I think the people at GAO could help you with this. They are

very good at it. They do it for living. There seems to be this kind

of default in Government. We do not want to do anything dif-
34

ferently because if we do anything differently, you know, it might

not work in PECOS and people are going to have to learn different

software, and then we get these legacy customized systems that go

on and cost our Government a fortune. I will be anxious to hear

how much Finalist costs, and what I really want to know for the

record, I not only want to know what Finalist costs, I want to know

how long it has been used. I want to know whether it was designed

and scoped by the Government or whether it was off-the-shelf.

I want to know how much time they have been spending adjusting the program, and what, if any, plans are already in place to

compete it for the end of this year, because I believe with what you

are trying to do with all the data analytics that are out there and

all the off-the-shelf programs that are out there, I believe you could

compete this program, and I am willing to bet you are going to be

able to save some money, but you know, we need to know all this

information.

Dr. AGRAWAL. Sure. We are—I am happy to get that to you. I

will just say, Senator, that we definitely do not have the mentality

that systems that are in place need to stay in place, or that offthe-shelf products are not useful to us. We have specifically made

strategic decisions to try to take advantage of existing high-value

products, and in fact, do competitions between products to make

sure that we are on-boarding the ones that are most useful.

Senator MCCASKILL. Okay. Let me move on to something else. If

I am fraudulently registering as a Medicare provider and somebody

calls me and I lie about the address, or if someone calls me or I

failed to report that I have lost my medical license in New Hampshire and I am currently in Mississippi, what happens to them?

How many of them have been referred for prosecution?

Dr. AGRAWAL. Maybe those are two different questions.

Senator MCCASKILL. Same question. Somebody lying to you, you

know, whether it is a failure to self-report, adverse action, in another jurisdiction, or lying about the address.

Dr. AGRAWAL. All right. If it is very clear, we have done the investigative work, we found out that they operated in a non-operational setting or they clearly lied, we can work with law enforcement and consider, in all of those cases, whether to make a referral

to law enforcement. Then obviously law enforcement makes a determination about whether they will accept that referral and continue to move it along the process.

Senator MCCASKILL. Obviously.

Dr. AGRAWAL. We—I mean, I think you know this, but we do not

engage in the direct prosecution itself.

Senator MCCASKILL. Correct. I am asking how many you have

referred.

Dr. AGRAWAL. I can get you a formal number, but I know that

it is in the thousands just from last year alone.

Senator MCCASKILL. Whatever delineation you have, I mean,

these are all performance measures.

Dr. AGRAWAL. Sure.

Senator MCCASKILL. We did not ask GAO to do a performance

audit, but they do a lot of good ones, and these are performance

measures. It is very hard to judge your performance if we have no
35

baseline. If we do not know what fraud was at any point in the last

10 years, we have no idea if we are doing better or worse.

The same thing with criminal referrals. There a lot of things that

we can, if we get a baseline, then if you are doing great work, Doctor, then you are going to get acknowledged for it. The only thing

we have got now is that improper payments have gone up by billions of dollars and that does not look good for you.

I am trying to give you some other tools. It looks like to me you

are trying to get after it. I do not think anybody is trying to pick

on you here. I think we are just trying to do basic oversight. If we

could get some basic baseline on fraud referrals and those kinds of

things, then I think it helps us measure your progress in a way

that taxpayers really expect of us.

Dr. AGRAWAL. Sure. We will send you that data.

Senator MCCASKILL. Okay, great. Finally, my last question is

just about the prescription meds. When you were talking about

that, as you know, it is a huge, huge problem and I think it is one

that is going to become part of the everyday national discourse in

this country since so many of our children are now dying of heroin

overdose as opposed—more in my State dying of heroin overdose

than in car accidents.

I think it is true in many, many states in our country, that

young people are turning to heroin because it is so cheap, much

cheaper than oxy, much cheaper than Vicodin and Percocet that

they get on the street, so when you see a pattern of over-prescription for someone, are you contacting the prescribing doctors?

Dr. AGRAWAL. Yes, so this is an area of focus for us. One of the

basic tools that we need is to get these prescribers enrolled in the

program, because once they are enrolled, we would then have the

same administrative authorities to oversee them, to audit them, ultimately kick them out of the program if that is what is required.

Senator MCCASKILL. Put them in jail maybe?

Dr. AGRAWAL. Again, we would refer them to law enforcement to

do that, and because our main—you know, our main tool has not

been in place, you know, we promulgated a rulemaking last year,

we are working to get 400,000 prescribers enrolled this year so that

we have that direct oversight with them.

We have definitely been focusing on referrals to law enforcement

in the interim because that is a major tool that we, you know, of

course can access.

Senator MCCASKILL. Okay, great. Anything else, Senator?

The CHAIRMAN. No.

Senator MCCASKILL. We appreciate all of you being here very

much, appreciate your work. Please give my best to what I consider

a home away from home for me in Washington and that is that

gorgeous building down off of 4th and Mass. where all of you hang

out at GAO. I appreciate so much the work you do and the audits

you produce. This was a good one and I think we have made some

progress today.

I want to thank you, Doctor, and thank you, Ms. Leff, for your

contributions, also. I particularly want to thank the Chairman because every once in a while she throws me a bone and lets me believe that I have some semblance of control over what is going on

here, which I very much appreciate. I think it was a terrific hear-
36

ing and it would not have happened without her agreement and

her corporation, and obviously her willingness to let us focus on

this issue. Thank you.

The CHAIRMAN. Thank you very much and thank you for your

leadership in pulling this hearing together. Committee members

will have until Friday, July 31st to submit additional questions for

the record. I want to note that there were two members who were

here, Senator Sasse and Senator Tillis, who did not get an opportunity to question you even though they were here for testimony,

and they may be submitting some additional questions for the

record.

I want to join Senator McCaskill in thanking all of our witnesses

today and this concludes the hearing.

[Whereupon, at 4:10 p.m., the hearing was adjourned.]
APPENDIX

Prepared Witness Statements

41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
Questions for the Record

73
74
75
76
Statements for the Record

79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142

Æ