Health Care Fraud and Abuse Control Program: Results of Review of Annual Reports for Fiscal Years 2002 and 2003
Published: 2005-04-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Because of the susceptibility of health care programs to fraud and abuse, Congress enacted the Health Care Fraud and Abuse Control (HCFAC) program as part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Pub. L. No. 104-191. HIPAA requires that the Departments of Health and Human Services (HHS) and Justice (DOJ) issue a joint annual report to Congress on amounts deposited to the Federal Hospital Insurance Trust Fund and amounts appropriated from the trust fund for the HCFAC program. It also requires GAO to submit reports biennially. This, our final report required by law, provides the results of our review of amounts reported as (1) deposits to the trust fund, (2) appropriations from the trust fund and justification for expenditure of such amounts by HHS and DOJ, and (3) savings resulting from expenditures from the trust fund. We also report on the repeated late issuance of the annual HCFAC report as well as the status of our prior recommendations.
section_title: What GAO Found
paragraphs: Our review of the HCFAC program for fiscal years 2002 and 2003 determined that amounts reported as trust fund deposits--$766 million (fiscal year 2002) and $243 million (fiscal year 2003)--were appropriate. The sources of these deposits were primarily penalties and multiple damages and criminal fines collected from health care fraud cases. Amounts reported as appropriations from the trust fund for HCFAC activities--$209 million (fiscal year 2002) and $240 million (fiscal year 2003)--were consistent with HIPAA. The HHS/OIG received funds within the minimum and maximum amounts allowed by HIPAA to carry out Medicare and Medicaid antifraud activities. The expenditures charged against HCFAC funds by HHS and DOJ for fiscal years 2002 and 2003 were reasonable but the HHS/OIG did not record time charges in its workload systems for all staff that worked on HCFAC activities. Also, DOJ did not record all fiscal year 2003 expenditures in its accounting system so they could be readily identified as HCFAC related. Failure to properly record staff hours and expenditure data could hinder DOJ and HHS in monitoring the uses of HCFAC funds. Some reported cost savings--$19.9 billion (fiscal year 2002) and $20.8 billion (fiscal year 2003) can be considered savings to the trust fund, resulting from trust fund expenditures for the HCFAC program, but most can not. For example, $1.5 billion of the cost savings for fiscal year 2002 and $3.9 billion for fiscal year 2003 are the result of HHS/OIG recommendations and other initiatives since the HCFAC program was created. However, the remaining cost savings continued to be largely the result of actions that predate the HCFAC program and cannot be associated with expenditures from the trust fund for HCFAC. HIPAA requires that HHS and DOJ issue to Congress a joint HCFAC report on January 1 of each year. However, DOJ and HHS have issued the last three reports late and the length of the delay has increased each year. HHS and DOJ cited onerous internal review processes as the reason for late issuance.

section_title: Letter
paragraphs: Congress enacted the Health Care Fraud and Abuse Control (HCFAC)  program as part of the Health Insurance Portability and Accountability Act  of 1996 (HIPAA), Public Law 104-191, to help combat fraud and abuse in  health care programs, including the Medicare and Medicaid programs.  Since 1990, we have designated Medicare a high-risk program, vulnerable  to exploitation in part because of its sheer size—estimated fiscal year 2004  outlays were $297 billion with net improper payments of $20 billion,  covering more than 41 million elderly and disabled enrollees. In addition,  in 2003 we designated Medicaid a high-risk program, in part because of  concerns about the quality of fiscal oversight needed to prevent  inappropriate program spending—fiscal year 2003 costs were about   $274 billion.
HCFAC, which is administered by the Department of Health and Human  Services (HHS) and the Department of Justice (DOJ), established a  national framework to coordinate federal, state, and local law  enforcement efforts to detect, prevent, and prosecute health care fraud  and abuse in the public and private sectors.
HIPAA requires that HHS and DOJ issue a joint annual report to Congress  no later than January 1 of each year on (1) amounts deposited to the  Federal Hospital Insurance Trust Fund pursuant to HIPAA for the  previous fiscal year and the source of such amounts and (2) amounts  appropriated from the trust fund for each year and the justification for the  expenditure of such amounts. HHS and DOJ have issued seven joint  reports, which covered HCFAC-related activities for fiscal years 1997  through 2003.
HIPAA, as amended by the Balanced Budget Act of 1997, also mandates  that we issue a report, no later than January 1, 2004, that identifies the  information reported by HHS and DOJ in their fiscal years 2002 and 2003  joint HCFAC report. The law also requires that our report include any  savings resulting from expenditures from the trust fund and any other  aspects of the operation of the trust fund that we consider appropriate.
HHS and DOJ were required to issue the joint HCFAC report for fiscal year  2002 in January 2003 but did not issue the report until September 2003.  Further, the deadline for issuing the fiscal year 2003 joint HCFAC report  was January 2004 but the report was not issued until a year later in  January 2005. Because complete information needed to perform our  review was not available, we could not meet our reporting deadline of  January 1, 2004.
To fulfill our reporting requirements, we assessed the reliability of  information reported by HHS and DOJ for fiscal years 2002 and 2003 as  (1) deposits to the trust fund and the sources of such amounts,   (2) appropriations from the trust fund for HCFAC and justification for the  expenditure of such amounts, and (3) savings resulting from expenditures  from the trust fund. We also provide information on issues related to the  repeated late issuance of the HHS and DOJ joint HCFAC report as well as  a summary of the status of recommendations made in our prior reports  (See app. II).
To assess the reliability of information reported by HHS and DOJ in the  joint HCFAC reports for fiscal years 2002 and 2003, we (1) obtained  documentation supporting the various types of deposits and tested  selected deposit transactions on a statistical basis to determine whether  the proper amounts were deposited to the trust fund; (2) reviewed and  analyzed documentation supporting the certification of appropriations  from the trust fund to HHS and DOJ; (3) reviewed the justification for  expenditures included in the HHS and DOJ reports; (4) analyzed DOJ and  HHS methodologies for charging expenditures against HCFAC  appropriations; (5) tested selected expenditure transactions to determine  whether the expenditures were in support of the HCFAC program;   (6) reviewed the supporting documentation related to selected cost  savings amounts; and (7) interviewed HHS, HHS Office of Inspector  General (OIG), and DOJ personnel.
We conducted our work from August 2003 through January 2005 in  accordance with U.S. generally accepted government auditing standards. A  detailed discussion of our scope and methodology is contained in  appendix I. We requested comments on a draft of this report from the  Secretary of HHS and the Attorney General or their designees. We received  written comments from the Acting Inspector General of HHS and the  Assistant Attorney General for Administration at DOJ. We have reprinted  their responses in appendixes III and IV, respectively.
subsections: section_title: Background
paragraphs: HIPAA established the HCFAC program to consolidate and strengthen  ongoing efforts to combat fraud and abuse in health care programs and  expand resources for fighting health care fraud. The Attorney General and  the Secretary of HHS through the HHS Office of Inspector General  (HHS/OIG) administer HCFAC. The HCFAC program goals are to    coordinate federal, state, and local law enforcement efforts to control  fraud and abuse associated with health plans;   conduct investigations, audits, and other studies of delivery and payment  for health care for the United States;  facilitate the enforcement of the civil, criminal, and administrative statutes  applicable to health care;   provide guidance to the health care industry, including the issuance of  advisory opinions, safe harbor notices, and special fraud alerts; and   establish a national database of adverse actions against health care  providers.
HIPAA requires the following types of collections to be deposited in the  trust fund:    criminal fines recovered in cases involving a federal health care offense;    civil monetary penalties and assessments imposed in health care fraud    amounts resulting from the forfeiture of property by reason of a federal    penalties and damages obtained and otherwise creditable to miscellaneous  receipts of the general fund of the Treasury obtained under sections 3729  through 3733 of Title 31, United States Code (commonly known as the  False Claims Act), in cases involving claims related to the provision of  health care items and services (other than funds awarded to a relator, for  restitution, or otherwise authorized by law); and   unconditional gifts and bequests.
Funds for the HCFAC program are appropriated from the trust fund to an  expenditure account, referred to as the Health Care Fraud and Abuse  Control Account (control account) maintained within the trust fund. The  Attorney General and the Secretary of HHS jointly certify that the funds  transferred to the control account are necessary to finance health care  fraud and abuse control activities. Only a portion of the funds collected  and deposited to the trust fund are appropriated to the control account  annually for the HCFAC program.
The maximum amounts that may be appropriated for HCFAC each year  are specified by HIPAA. The maximum amount for fiscal year 1997, the  first year of HCFAC, was $104 million and HIPAA limited the amounts for  each of the fiscal years 1998 through 2003 to an amount equal to the limit  for the preceding fiscal year increased by 15 percent. For each fiscal year  after 2003, the amount made available was capped at the 2003 limit (See  table 1).
In addition to the annual limits on the total amount made available for  HCFAC, HIPAA includes annual minimum and maximum amounts that are  earmarked specifically for HHS/OIG activities for the Medicare and  Medicaid programs. For example, of the $240.6 million available in fiscal  year 2003, a minimum of $150 million and a maximum of $160 million were  earmarked for the HHS/OIG to ensure continued efforts by the HHS/OIG to  detect and prevent fraud and abuse in the Medicare and Medicaid  programs.
HHS’s Centers for Medicare and Medicaid Services (CMS) performs the  accounting for the HCFAC control account. Prior to fiscal year 2003, CMS  set up allotments in its accounting system for each of the HHS and DOJ  entities receiving HCFAC funds. The HHS and DOJ entities accounted for  their HCFAC obligations and expenditures in their respective accounting  systems and reported them to CMS. CMS then recorded the obligations  and expenditures against the appropriate allotments in its accounting  system. However, for fiscal year 2003, HHS changed the method of  providing funds to DOJ from a direct allotment to a reimbursable  agreement. This change requires DOJ components to prepare and submit  billing packages to CMS to obtain reimbursement from DOJ’s allotment of  the HCFAC funds.
section_title: Amounts Reported As Deposits to the Trust Fund Were Appropriate
paragraphs: HHS and DOJ reported total deposits to the trust fund of about   $766 million in fiscal year 2002 and $243 million in fiscal year 2003. On the  basis of our review of a statistical sample of deposit transactions for fiscal  years 2002 and 2003, we determined that the amounts HHS and DOJ  reported as deposits to the trust fund were appropriate. As shown in  figure 1, these deposits primarily consisted of penalties and multiple  damages and criminal fines collected as a result of health care fraud  cases. The considerable difference in the amount of criminal fines  reported for fiscal year 2002 and 2003 is primarily due to large criminal  fine collections from two major cases settled in prior years. In addition,  the difference in the amount of penalties and multiple damages reported  for fiscal years 2002 and 2003 was primarily due to collections of amounts  from a major case settled in a prior year.
Related to our review of criminal fine deposits, DOJ provided us with  supporting documents related to a $13.0 million adjustment that was  calculated and reported to the Department of the Treasury in September  2002 to correct the amount of criminal fine deposits previously reported in  error. When we reviewed the supporting documents for the adjustment,  we identified a mathematical error of approximately $130,000 in DOJ’s  determination of the adjustment. While the amount of error has a minimal  impact on the trust fund balance, we found that DOJ lacked supervisory  review procedures for deposits, which may have contributed to the error  going unnoticed. Lack of supervisory review could result in undetected  material errors to the trust fund in the future.
The Comptroller General’s Standards for Internal Control in the Federal  Government state that management review is an important control  activity in helping to ensure that all transactions are completely and  accurately recorded. DOJ officials acknowledged the importance of this  control activity and in response they developed new procedures to ensure  proper review of all adjustments and deposit amounts before reports are  sent to Treasury. In addition, in September 2004, DOJ made the necessary  correction to the amount of criminal fine deposits reported to the trust  fund. However, because the correction of the error was not made until  after the end of fiscal year 2003, the HCFAC joint report for fiscal year  2003 did not include the correction.
section_title: Amounts Appropriated from the Trust Fund Were Consistent with HIPAA and Reported Expenditures Were Reasonable
paragraphs: In fiscal years 2002 and 2003, $209 million and $240 million, respectively,  were appropriated from the trust fund for performing HCFAC program  activities. On the basis of our review of supporting documents, we  determined that these amounts were consistent with HIPAA and that the  amount of HCFAC funds specified in the joint reports was made available  to HHS and DOJ. We also determined that HHS’s and DOJ’s expenditure of  amounts appropriated from the trust fund was reasonable. However, we  did note that some data on expenditures were not included in HHS and  DOJ information systems. For example, some staff hours needed to  monitor payroll expenses were not tracked in HHS/OIG workload tracking  systems. Also, DOJ did not record some expenditure data in its accounting  system as HCFAC expenses and therefore could not provide an electronic  file of all nonpayroll expenses from which we could select a statistical  sample of these fiscal year 2003 expenses. We tested nonpayroll expenses,  selected on a nonstatistical basis, from hard copy documents and  determined that they were adequately supported and related to HCFAC.  However, having all data on HCFAC expenses in its accounting system  could help managers in monitoring how HCFAC funds are spent.
subsections: section_title: Reported Amounts Appropriated from the Trust Fund for HCFAC and General Uses of the Funds Were Consistent with HIPAA
paragraphs: HIPAA specifies the maximum amounts that may be appropriated from the  trust fund each year for HCFAC, as well as a minimum and maximum  amount of the appropriations that must go to the HHS/OIG for Medicare  and Medicaid antifraud activities. For fiscal years 2002 and 2003, HHS and  DOJ each received the maximum amount from the trust fund allowed  under HIPAA. In addition, HHS and DOJ entered into memorandums of  agreement to agree on how much of the HCFAC appropriation each HHS  and DOJ unit would receive. The amount allocated to each unit was  included in the HHS and DOJ joint reports and is depicted in figure 2.
In accordance with HIPAA, HHS/OIG was allocated amounts within the  minimum and maximum funding allowed by statute—$145 million and   $160 million, for fiscal years 2002 and 2003 respectively. In the HHS and  DOJ joint report, the HHS/OIG, other HHS units, and DOJ provided  information related to how the HCFAC funds were used. The HHS/OIG  reported that its fiscal years 2002 and 2003 HCFAC funds were used in  carrying out efforts to both detect health care fraud and abuse and prevent  it. These efforts included several fraud prevention activities that reduced  program losses as well as participation in prosecutions and settlements of  cases involving Medicare and Medicaid fraud, and investigations, audits,  and evaluations that helped reveal vulnerabilities or incentives for  fraudulent practices.
Other HHS components also reported on how they had expended their  HCFAC funds including CMS. CMS received $2.7 million in fiscal year 2002  and $23.4 million in fiscal year 2003. The increase in funding for fiscal year  2003 was in support of several projects including the Medicaid Payment  Accuracy Measurement Project, Medicare/Medicaid Data Analysis Project,  and Medicaid Financial Management initiatives, including Medicaid Audits.
DOJ reported that its funding was used to support its role in civil and  criminal prosecution of health care professionals, providers, and others as  well as its role in recovering funds that federal health care programs have  paid as a result of fraud, waste, and abuse.
section_title: HCFAC Expenditures Were Reasonable but Some Expenditure Data Were Not Captured in HHS and DOJ Information Systems
paragraphs: We determined that expenditures charged by HHS and DOJ for HCFAC  activities were reasonable. In evaluating HHS HCFAC expenditures, we  focused on expenditures of the HHS/OIG. The HHS/OIG’s payroll and  nonpayroll expenses represented about 96 percent of all HHS  expenditures charged against HCFAC funds for fiscal years 2002 and 2003.  We reviewed the methodology that the HHS/OIG used to charge  expenditures against its HCFAC funding and determined that it was  reasonable. The OIG charges a percentage of its total payroll and  nonpayroll expenses to the HCFAC program. The percentage that is  charged each year is based on the relative proportion of its annual HCFAC  funding to its total funding. These amounts are then monitored throughout  the year. As table 2 shows, HCFAC funding for fiscal years 2002 and 2003  was 80 and 81 percent, respectively, of the OIG’s total funding.
HHS/OIG management takes several steps to help assure that HCFAC  funds are expended on HCFAC-related activities. For one, management  meets with its component offices at the beginning of the year to determine  how much of each component’s resources will be devoted to HCFAC- related activities. Some component offices make plans to devote resources  to HCFAC in excess of the 80-81 percent funding level, while other  components plan to devote less. OIG management evaluates each  component’s plans in relation to each component’s full-time equivalents  (FTE) to ensure that OIG resources overall are spent on HCFAC activities  in accordance with the funding level. In addition, throughout the year,  three of the components, Office of Audit Services (OAS), Office of  Evaluations and Inspections (OEI), and Office of Investigations (OI) track  the staff time spent on various projects in their workload tracking system.  The information in each component’s system is summarized and  monitored quarterly to ensure that staff time is being spent on HCFAC in  accordance with the funding.
The OIG’s Office of Management and Policy (OMP) requests summary  reports from the component offices that include the staff time spent on  HCFAC activities and uses the information in determining if the OIG  overall is performing HCFAC work as planned. The lead OMP staff person  said that when material variances are identified in the amount of staff time  devoted to HCFAC, the components are instructed to adjust the type of  work performed. We reviewed the monitoring reports that the OMP staff  prepares and these reports showed that the amount of time devoted to  HCFAC activities for the OIG as a whole was in line with the planned  amount.
We also performed several tests on the information maintained in  components’ workload systems as they are relied on in monitoring HCFAC  payroll expenditures. For example, we analyzed the data in the  components’ workload tracking systems to determine if the projects  identified as HCFAC were appropriately classified as HCFAC-related in  each component. We analyzed titles and supporting documents for all of  the projects in the workload tracking systems of OAS and OEI—two  components that account for about 55 percent of the OIG staff. We  determined that the projects were appropriately classified as HCFAC or  non-HCFAC.
We also compared hours in the OAS, OEI, and OI workload tracking  systems to hours in the payroll system to determine if the components’  systems included hours for all staff. We found that the hours recorded in  OAS’s system agreed with hours in the payroll system. However, hours in  OI’s and OEI’s systems did not agree with the payroll system. The OI  system included approximately 52 percent fewer hours for fiscal year 2002  and 44 percent fewer hours for 2003 than were in the payroll system. OI  managers were aware of the variance and explained that until they  recently implemented a new system, their workload system did not  include staff hours for administrative and supervisory staff. In determining  the amount of staff hours spent on HCFAC-related assignments, OI  concluded that administrative and supervisory time was spent in the same  relative percentages as the staff who recorded their time in the workload  system.
In June 2003, OI upgraded its workload tracking system to record hours  for all staff. In addition, OI implemented new procedures to help ensure  that all hours were recorded in its workload system. The procedures  include weekly automatic, system-generated electronic mail messages that  are sent to supervisors informing them of employees that did not record  their time and a reconciliation of hours in the HHS payroll system to hours  in the workload system that is performed during periodic inspections at  regional offices.
The OEI workload tracking system included about 12 percent fewer hours  than the payroll system for fiscal years 2002 and 2003. OEI officials said  that they did not have procedures in place to identify missing hours.  However, they believed that most of the people not entering data into the  workload system were probably managers and administrative personnel  whose hours would probably reflect the same allocation of hours between  HCFAC and non-HCFAC work as those staff recording hours. In addition,  the OMP staff person who monitored staff hours applied the HCFAC and  non-HCFAC hours recorded in the workload system against the total FTEs  for OEI to determine that the OIG as a whole performed HCFAC work as  planned. Therefore, while this issue did not appear to impact the propriety  of HCFAC payroll expenditures during our review period, incomplete staff  hours in the component workload tracking systems could hinder OIG  managers in monitoring the amount of HCFAC work performed in the  future. Therefore, it is critical that all OIG components have procedures in  place to ensure that workload data are complete.
In assessing the reliability of DOJ fiscal year 2002 expenditures, we tested  a statistical sample of the largest category of fiscal year 2002 nonpayroll  expenses, which accounted for 69 percent of nonpayroll and 34 percent of  DOJ’s total fiscal year 2002 HCFAC expenditures. We determined that  nonpayroll expenses were adequately supported and related to HCFAC on  the basis of our review of supporting documentation.  In addition, we  reviewed the payroll expenses charged by DOJ’s United States Attorneys  Office (USAO) against HCFAC funds that represented 76 percent of DOJ’s  fiscal year 2002 HCFAC payroll expenditures and 38 percent of DOJ’s total  fiscal year 2002 HCFAC expenditures.
We determined that the USAO methodology for charging salaries to  HCFAC was reasonable. USAO charged the full annual salaries of 160  individuals against HCFAC program funds in fiscal year 2002 as a  surrogate for the 160 FTEs that were funded by the program. USAO  managers said that this was administratively easier than trying to charge a  portion of the salary of all the staff that perform health care fraud and  abuse work. To assess the reasonableness of this approach, we reviewed  the hours recorded in the USAO workload system for fiscal year 2002.  According to data in the system, USAO staff devoted about 587,168 staff  hours (282.3 FTEs) to health care fraud-related activities during fiscal year  2002, which was about 76 percent more than the 160 FTEs (332,800 hours)  funded by the program. In addition, to ensure that the salaries charged to  HCFAC were reasonable, we compared the average annual salaries for the  160 staff (i.e., attorneys, paralegals, and administrative staff) charged to  the HCFAC account to the average annual salary for the same positions  USAO-wide. We found that the salaries were generally comparable.
Our review of DOJ’s fiscal year 2003 HCFAC expenditures also included a  review of USAO salaries charged against HCFAC funds as these amounts  represented 75 percent of DOJ’s fiscal year 2003 HCFAC payroll  expenditures and 49 percent of all fiscal year 2003 HCFAC expenses.  USAO charged the salaries of 162 individuals against HCFAC funding in  fiscal year 2003. Our review procedures were similar to our work on 2002  payroll expenditures, and we again found the payroll expenditure amounts  to be reasonable.
We also tested a nonstatistical selection of nonpayroll expenses for fiscal  year 2003 from hard copy documentation included in DOJ billing  packages. We determined that these expenses were adequately supported  and related to HCFAC. We did not select a statistical sample of fiscal year  2003 nonpayroll HCFAC expenses because DOJ could not provide an  electronic file of detailed transactions from its accounting system for all  nonpayroll HCFAC expenditures. Only one of the four DOJ components  properly recorded expenditures under the specific HCFAC account class  in the accounting system. DOJ accounting policy, issued March 2003,  required that each DOJ component record expenses charged against  HCFAC funds under a specific HCFAC account class so that they can be  readily identified as related to HCFAC.
Managers for the components that did not follow this accounting policy  told us that they recorded their fiscal year 2003 HCFAC expenses at a  summary level under an account class for general expenses and not under  the HCFAC account class as required because they instead prepared the  hard copy billing packages for reimbursement, which were supposed to  provide details on HCFAC expenditures. However, we found that the  billing packages contained varying levels of detail. Without the full detail  recorded in the accounting system it is difficult to monitor HCFAC  expenditures. In addition, the lack of such expenditure detail could  impede DOJ officials’ ability to prepare meaningful budgets to support  future HCFAC funding requests.
section_title: Some Reported Cost Savings Are Related to Trust Fund Expenditures for HCFAC, but Most Are Not
paragraphs: For the first time, some of the reported cost savings can be considered  savings to the trust fund, resulting from trust fund expenditures for the  HCFAC program. The joint reports cited cost savings of nearly   $19.9 billion for fiscal year 2002 and $20.8 billion for fiscal year 2003, as a  result of HHS/OIG recommendations and other initiatives. Of these  amounts, about $1.5 billion in cost savings for fiscal year 2002 and   $3.9 billion for fiscal year 2003 resulted from actions taken since the  HCFAC program was created. However, the remaining cost savings   ($18.4 billion for fiscal year 2002 and $16.9 billion for fiscal year 2003)  continued to be related to actions that predate the HCFAC program and  cannot be associated with expenditures from the trust fund for HCFAC  activities. Further, since audit, evaluation, investigation, and litigation  activities typically span several years, savings from such activities in fiscal  years 2002 and 2003 may not be realized until future years.
As has been the case in the past, most of the audits and evaluations related  to the reported cost savings (i.e., 47 of the 50 audits cited by the OIG) were  done by the OIG before the HCFAC program was created. However, the  HHS/OIG cited cost savings related to three reports that were issued in  fiscal year 2000.
One of the three reports, which consolidated the results of seven HHS/OIG  audits on Medicaid enhanced payments, found that payments to some  providers were not based on the cost of providing services. The report  included recommendations that resulted in changes in program  regulations and administrative actions. For example, in January 2001, CMS  issued a final rule to change Medicaid payment policies, placing limitations  on enhanced payments under Medicaid upper-payment limit requirements  for hospital services, nursing facility services, intermediate care facility  services for the mentally retarded, and clinic services.
In addition, CMS issued a final rule in January 2002 placing additional  limitations on enhanced payments for hospitals. CMS projected that the  regulatory changes would result in cost savings of $79.3 billion over   10 years beginning with about $1.4 billion in fiscal year 2002 and about  $3.8 billion in fiscal year 2003. The two other reports issued in fiscal year  2000 that resulted in costs savings of about $100 million for both fiscal  years 2002 and 2003 were related to recovering overpayments to nursing  homes and Medicaid drug rebates. Because the three reports were issued  since the HCFAC program was created and the savings occurred in fiscal  years 2002 and 2003, the savings can be linked to expenditures from the  trust fund.
We reviewed the support for the total cost savings amounts reported by  the HHS/OIG for fiscal years 2002 and 2003. We initially found an  overstatement of $840 million in the amounts included in the draft report  for fiscal year 2003. The overstatement occurred because the HHS/OIG did  not record an adjustment for the revised cost savings amounts issued by  the Congressional Budget Office (CBO). The annual cost savings amounts  reported by the HHS/OIG are based on estimates issued by CBO of savings  that are expected from implementation of health-care-related legislation.  CBO revised its estimate of fiscal year 2003 cost savings that would be  realized from implementation of the Medicare, Medicaid, and SCHIP  Balanced Budget Refinement Act of 1999, but HHS officials did not  recognize and factor in the effect of the adjustment in the fiscal year 2003  draft HCFAC report. HHS officials explained that the responsibility for  preparing the cost savings amounts had recently been reassigned to  another staff person who had not looked for CBO adjustments. The cost  savings amounts were corrected and restated in the final report.
section_title: Repeated Delays in Issuing the HHS and DOJ Joint HCFAC Reports Impact Relevance of Data
paragraphs: HIPAA requires that HHS and DOJ issue a joint report on the HCFAC  program for each fiscal year by January 1 of the following calendar year.  For fiscal years 1997 through 2000, the joint HCFAC report was issued on  or close to January 1 of the subsequent year. However, beginning with the  report for fiscal year 2001 the report has been issued late and the length of  the delay has increased each year. See table 3 for the timing of reports for  fiscal years 2001, 2002, and 2003.
The fiscal year 2003 report was more than a year late when it was released.  HHS and DOJ officials told us that the joint reports have been issued late  because of lengthy review processes within each agency. They have  attempted to expedite the process but with little apparent success. Delays  in issuing the HCFAC reports significantly erode the usefulness of these  reports to Congress and others in making decisions about HCFAC  program funding and oversight.
section_title: Conclusions
paragraphs: While the information on HCFAC trust fund activity provided in the HHS  and DOJ fiscal years 2002 and 2003 joint reports was reasonable, better  tracking of time charges by HHS/OIG and nonpayroll expenditures by DOJ  would improve their ability to monitor the use of HCFAC funds. In  addition, the usefulness of the fiscal year 2002 and fiscal year 2003 joint  annual reports was severely impaired due to their untimely issuance. Until  HHS and DOJ streamline their internal review processes, the annual joint  reports will continue to be delinquent and therefore of limited use to  congressional decision makers and other interested parties.
section_title: Recommendations for Executive Action
paragraphs: To improve HHS’s accountability over HCFAC program expenditures, we  recommend that the HHS Inspector General require all HHS/OIG  components to develop procedures for ensuring that all key staff hours  spent on HCFAC activities are recorded in OIG workload tracking  systems.
To improve DOJ’s accountability for HCFAC program expenditures, we  recommend that the Attorney General develop monitoring procedures to  ensure that DOJ components record key HCFAC program expenditure  data under the appropriate HCFAC account class in DOJ’s accounting  system.
To help ensure that the joint HHS and DOJ HCFAC reports are issued in a  more timely manner, we recommend that the Secretary of HHS and the  Attorney General    develop a more expedited review process and    notify congressional committees with oversight responsibility for the  HCFAC program of delays in issuing the joint report within 1 month after  missing the January 1 deadline and provide updates until the report is  issued.
section_title: Agency Comments and Our Evaluation
paragraphs: A draft of this report was provided to HHS and DOJ for their review and  comment. Written comments from HHS and DOJ are reprinted in  appendixes III and IV. HHS and DOJ also provided technical comments  that we incorporated as appropriate.
In written comments, HHS concurred with our recommendation that the  HHS Inspector General require all of its components to develop  procedures for ensuring that all key staff hours spent on HCFAC activities  are recorded in its workload tracking systems and noted that it is already  moving to implement such procedures. Similarly, in its written comments,  DOJ concurred with our recommendation for ensuring that DOJ  components record key HCFAC program expenditure data under the  appropriate HCFAC account class in DOJ’s accounting system and noted  that its Justice Management Division will meet with the components to  assist them in using the accounting classes designated for HCFAC funds.
Regarding our recommendation for ensuring that HCFAC reports are  issued in a more timely manner, HHS and DOJ agreed to develop a more  expedited review process for the HCFAC reports. DOJ commented that it  has already instituted several new procedures that it believes will shorten  the time needed for future reports and HHS stated that it will work with  DOJ in developing changes to the review process. HHS and DOJ, however,  did not agree that they should report to Congress delays in issuing the  HCFAC report by the mandated deadline. In their comments, HHS and  DOJ noted that additional reporting, which requires clearance through  both departments, would be counterproductive to clearing the annual  HCFAC report. HHS added that such notification would not provide  Congress with any substantial information and DOJ added that reporting  on delays would be of little value to congressional oversight committees.  Instead, DOJ officials stated that they propose to expedite the review and  approval process, to the extent that source data are available and  circumstances are within the department’s control.
We disagree with HHS’s and DOJ’s position that Congress would not gain  any value in knowing that the HCFAC report is going to be issued after the  date that Congress mandated in law. Congress should be informed if  reports that it may use in making future program funding and oversight  decisions are not expected to be issued by the mandated report deadline.  In addition, it appears that HHS and DOJ interpreted our recommendation  for reporting delays in issuing the HCFAC report to mean sending  Congress a report that would require a formal clearance process through  both agencies. This was not our intent. HHS and DOJ officials can and  should develop a mechanism for notifying Congress of delays that would  not place an undue burden on their staff or interfere with issuing and  clearing the HCFAC report itself. Such a mechanism could be as simple as  sending an electronic mail message to all the committees of jurisdiction.
DOJ also commented on the status of two remaining open  recommendations from our prior report. We will continue to work with  DOJ to obtain documentation to support the actions that DOJ said it is  implementing.
We are sending copies of this report to the Secretary of HHS, the Attorney  General, and other interested parties. Copies will be made available to  others on request. In addition, the report will be available at no charge on  the GAO Web site at http://www.gao.gov. If you or your staffs have any  questions, please contact me at (202) 512-8341 or by e-mail at  calboml@gao.gov. Additional GAO contacts and acknowledgments are  provided in appendix IV.
section_title: Appendix I: Scope and Methodology
paragraphs: To assess the reliability and reasonableness of information reported by  HHS and DOJ in the joint HCFAC reports for fiscal years 2002 and 2003 as  deposits to the trust fund and the sources of such amounts, we did the  following.
We reviewed the joint HHS and DOJ HCFAC reports for fiscal years 2002  and 2003 to identify amounts deposited to the trust fund.
We interviewed HHS and DOJ officials to update our understanding of  procedures related to deposits.
We obtained data from HHS and DOJ reports and electronic databases for  the various deposits as of September 30, 2002, and September 30, 2003,  and selected deposit transactions on a statistical basis to determine  whether the proper amounts were deposited to the trust fund. We assessed  the reliability of the data by (1) performing electronic testing of required  data elements, (2) reviewing existing information about the data and the  system that produced them, and (3) interviewing agency officials  knowledgeable about the data. We determined that the data were  sufficiently reliable for the purposes of this report. The transactions that  we selected on a statistical basis included the following:   We selected a dollar unit sample of penalties and multiple damages  totaling $276.8 million from a population totaling $322.6 million for fiscal  year 2002, and a dollar unit sample totaling $181.2 million from a  population totaling $229.8 million for fiscal year 2003.
We selected a dollar unit sample of criminal fines totaling $435.5 million  from a population totaling $443.5 million for fiscal year 2002 and a dollar  unit sample totaling $1.9 million from a population totaling $2.5 million for  fiscal year 2003.
We selected a dollar unit sample of civil monetary penalties totaling   $1.7 million from a population totaling $6.9 million for fiscal year 2002 and  a dollar unit sample totaling $1.7 million from a population totaling   $7.1 million for fiscal year 2003.
We obtained supporting documentation for each sample transaction from  various sources depending on the type of deposit. We traced amounts  reported on the supporting documentation to reports and other records to  confirm that proper amounts were reported as deposits.
To assess the reliability of information reported by HHS and DOJ in the  joint HCFAC reports for fiscal years 2002 and 2003 as appropriations from  the trust fund for HCFAC, we    obtained and reviewed the HIPAA legislation, which includes the  maximum and minimum amounts that can be appropriated from the trust  fund for HCFAC;   obtained and reviewed the HCFAC funding requests for the HHS and DOJ  components to determine whether activities included in the requests were  consistent with the stated purposes of the HIPAA legislation;   obtained the funding decision memorandum detailing how the funds  would be distributed between HHS and DOJ, and obtained related  documentation for fiscal years 2002 and 2003 to verify the HCFAC funds  certified by HHS and DOJ officials; and   compared amounts reported in the joint HCFAC reports to the approved  funding decision memorandum and compared amounts from the decision  memorandum to the OMB documentation (Apportionment Schedule   SF-132) to verify that the amounts were made available.
To assess the reliability of information reported by HHS and DOJ in the  joint HCFAC reports for fiscal years 2002 and 2003 as the justification for  the expenditure of HCFAC funds, we did the following.
We reviewed the justifications provided in the reports and discussed them  with HHS and DOJ officials.
We obtained and analyzed data from the HHS/OIG components’ workload  tracking systems on the number of hours recorded as worked on HCFAC  projects. We reviewed these data for obvious errors and completeness and  compared these data for the four selected components with hardcopy  documents we obtained from these components, and to the HHS payroll  system data. When we found discrepancies we brought them to the  attention of the specific component and worked with them to obtain  explanations for the discrepancies before conducting our analyses. On the  basis of this, we determined that the data were sufficiently reliable for the  purposes of this report.
We evaluated the methodology used by the HHS/OIG to charge payroll  expenses against HCFAC funds for fiscal years 2002 and 2003—these  expenses represented 76 percent and 78.6 percent respectively of total  HCFAC expenses. For our evaluation, we (1) obtained the total number of  staff hours recorded in the workload tracking systems for each of the OIG  components and compared the hours in these systems to hours in the HHS  payroll system; (2) obtained a list of HHS/OIG projects and related staff  hours included in the workload tracking systems for two OIG components,  OAS and OEI (staff in OAS and OEI accounted for 55 percent of all OIG  employees), and reviewed the project subjects to assess whether projects  identified as HCFAC were appropriately classified; and (3) for the project  subjects that were unclear, we obtained and reviewed documentation  describing the work performed for the jobs to assess whether the job was  appropriately classified as HCFAC or non-HCFAC.
We analyzed HHS/OIG nonpayroll expenditures charged against HCFAC  funds for fiscal years 2002 and 2003—these represented 20 and   17.4 percent respectively. We obtained reports from HHS on the amount of  HCFAC and non-HCFAC expenditures by expenditure category (travel,  rent, supplies, etc.) for each fiscal year; we then calculated the percentage  charged to HCFAC and non-HCFAC funds for each category and compared  them to the percentages used by the OIG to allocate expenses against  HCFAC funding—80 percent for HCFAC in fiscal year 2002 and 81 percent  in fiscal year 2003.
We obtained DOJ expenditure and allotment reports for all five  components that charge activity to the HCFAC program and calculated the  total amount of payroll and nonpayroll expenditures.
We evaluated the methodology used by the U.S. Attorney Offices (USAO)  to charge payroll expenses against the HCFAC fund. These expenses  accounted for 38 percent and 49 percent respectively of total DOJ  expenses charged against fiscal years 2002 and 2003 HCFAC funds and   76 percent and 75 percent respectively of DOJ’s total fiscal years 2002 and  2003 HCFAC payroll expenses. USAO payroll expenses were equal to the  annual salaries for 160 FTEs for fiscal year 2002 and 162 FTEs for fiscal  year 2003. We reviewed the hours recorded in USAO’s workload system to  ensure that the office devoted staff time to HCFAC-related activities equal  to or greater than the annual hours of the 160 FTEs for both fiscal years.  We compared the average annual salary for USAO staff positions  (attorney, paralegal, administrative) charged to the HCFAC account to the  average annual salary for the same staff positions USAO-wide to ensure  that the salary amounts charged against HCFAC were reasonable. We  interviewed an agency official knowledgeable about the data obtained  from USAO’s workload system to identify any data problems and  determined that the data were sufficiently reliable for the purposes of this  report.
We tested a statistical sample of the largest category of nonpayroll  expenses, the Civil component advisory services, which accounted for   34 percent of total DOJ expenses charged against fiscal year 2002 HCFAC  funds and 69 percent of the total nonpayroll expenses. We selected a  dollar unit sample of 19 transactions totaling $13.1 million from a  population totaling $16.5 million and compared the transaction data to  supporting documentation such as invoices and advisory services  contracts to make sure they agreed.
We tested nonpayroll expenses charged against fiscal year 2003 HCFAC  funds selected on a nonstatistical basis. We did not select a statistical  sample of nonpayroll expenses because DOJ’s accounting system did not  identify the complete population of expenditure transactions charged  against HCFAC funds. We modified our methodology and (1) obtained  copies of all billing packages submitted by DOJ to HHS for reimbursement,  (2) selected a nonstatistical sample equal to 50 percent ($6.7 million of a  total $13.4 million) of the total summary amounts listed on each billing  package, and (3) traced and compared the data to supporting  documentation, such as invoices and advisory services contracts.
To assess the reliability of information reported by HHS and DOJ in the  joint HCFAC reports for fiscal years 2002 and 2003 as cost savings, we    obtained the schedule of HHS/OIG Cost Savings 1998-2011 and compared  the data for fiscal years 2002 and 2003 to the HCFAC joint reports;   obtained the fiscal years 2002 and 2003 HHS/OIG semiannual reports and  traced and compared the amounts identified as cost savings to the  amounts reported in the fiscal years 2002 and 2003 HCFAC joint reports;   selected cost saving transactions on a nonstatistical basis, traced and  compared the data to supporting documentation; and  reviewed the dates of reports that the OIG cited as having findings and  recommendations that resulted in the reported cost savings.
In assessing the status of recommendations made in our prior report, we  reviewed the recommendations included in our prior report and the  comments provided by DOJ on our prior report to identify corrective  actions that had been implemented or were to be implemented in the  future;   provided a list of the prior-year recommendations and their status per DOJ  comments to DOJ management and requested supporting documentation  for the corrective actions taken; and reviewed the supporting documentation to verify that the corrective  actions were implemented and that the corrective actions completely  addressed the recommendations.
We conducted our work from August 2003 through January 2005 in  accordance with U.S. generally accepted government auditing standards.  We provided a draft of this report to HHS and DOJ for their comments.  Written comments from the Acting Inspector General of HHS and the  Assistant Attorney General for Administration at DOJ are included in  appendixes III and IV, respectively. We also received technical comments  from HHS and DOJ that were incorporated as appropriate.
section_title: Appendix II: Status of Prior-Year Recommendations
subsections: section_title: To improve DOJ’s accountability for the HCFAC program collections, we recommend that the Attorney General:
paragraphs: DOJ determined the amount of the  overstatement and submitted an  adjustment to the Bureau of Public Debt  (BPD) in September 2002. However, in our  review of the supporting documentation we  identified a mathematical error in DOJ’s  calculations. DOJ agreed with the revised  amount and submitted the adjustment to  BPD in September 2004. reports submitted to the Department of  the Treasury are accurate.
DOJ developed and implemented new  procedures for reviewing collections reports  for accuracy and approving them prior to  submission to BPD.
According to DOJ officials, the misposted  non-HCFAC charge, along with the HCFAC  charge that was posted to another account,  have been corrected in the Financial  Management Information System. GAO  requested, but had not received at the end  of fieldwork, documentation that supports  the correction of the charges.
According to DOJ officials, the department  is continuing its ongoing financial  management training efforts to reinforce  the importance of accurate financial  management processing and the  minimization of data entry and errors. Also,  the issue is also emphasized in monthly  Financial Managers Council meetings and  “clean audit” training. GAO requested, but  had not received at the end of fieldwork,  documentation to verify whether DOJ staff  responsible for HCFAC accounting  functions have completed the designated  training.
To facilitate providing Congress and  other decision makers with relevant  information on program performance  and results, we recommend that the  Attorney General and the Secretary of  HHS assess the feasibility of tracking  cost savings and expenditures  attributable to HCFAC activities by the  various federal programs affected.
This recommendation is closed because of  recent changes to HIPAA legislation.  HIPAA had required GAO to report on cost  savings and expenditures attributable to  HCFAC activities by the various federal  programs affected but did not require HHS  and DOJ to track cost savings and  expenditures in this manner. In December  2003, Congress passed Public Law 108- 173, which amended the HIPAA legislation.  The amendment removed the language  requiring GAO to identify any expenditures  from the Trust Fund with respect to  activities not involving the Medicare  program.
section_title: Appendix III: Comments from the Department of Health and Human Services
section_title: Appendix IV: Comments from the Department of Justice
section_title: Appendix V: GAO Contact and Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: W. Ed Brown, H. Donald Campbell, Lisa Crye, Kelly Lehr, Kathryn  Peterson, and Matthew Wood made key contributions to this report.  Sharon Byrd provided statistical sampling technical assistance.
section_title: Related GAO Products
paragraphs: High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 1,  2005.
Medicare: CMS’s Program Safeguards Did Not Deter Growth in Spending  for Power Wheelchairs. GAO-05-43. Washington, D.C.: November 17, 2004.
Medicare Hospice Care: Modifications to Payment Methodology May Be  Warranted. GAO-05-42. Washington, D.C.: October 15, 2004.
Medicare Physician Payments: Concerns about Spending Target System  Prompt Interest in Considering Reforms. GAO-05-85. Washington, D.C.:  October 8, 2004.
Comprehensive Outpatient Rehabilitation Facilities: High Medicare  Payments in Florida Raise Program Integrity Concerns. GAO-04-709.  Washington, D.C.: August 12, 2004.
Medicaid Program Integrity: State and Federal Efforts to Prevent and  Detect Improper Payments. GAO-04-707. Washington, D.C.: July 16, 2004.
Comptroller General’s Forum on  Health Care: Unsustainable Trends  Necessitate Comprehensive and Fundamental Reforms to Control  Spending and Improve Value. GAO-04-793SP. Washington, D.C.: May 2004.
Criminal Debt: Actions Still Needed to Address Deficiencies in Justice’s  Collection Processes. GAO-04-338. Washington, D.C.: March 5, 2004.
Medicare Home Health: Payments to Most Freestanding Home Health  Agencies More Than Covered Their Costs. GAO-04-359. Washington, D.C.:  February 27, 2004.
Medicaid: Improved Federal Oversight of State Financing Schemes Is  Needed. GAO-04-228. Washington, D.C.: February 13, 2004.
Financial Management: Status of the Governmentwide Efforts to  Address Improper Payment Problems. GAO-04-99. Washington, D.C.:  October 17, 2003.
Medicare Provider Enrollment: Opportunities to Enhance Program  Integrity Efforts. GAO-03-185. Washington, D.C.: March 17, 2003.
Medicare: Payment for Blood Clotting Factor Exceeds Providers’  Acquisition Cost. GAO-03-184. Washington, D.C.: January 10, 2003.
High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 1,  2003.
Medicaid Financial Management: Better Oversight of State Claims for  Federal Reimbursement Needed. GAO-02-300. Washington, D.C.:   February 28, 2002.
Medicare: Health Care Fraud and Abuse Control Program for Fiscal  Years 2000 and 2001. GAO-02-731. Washington, D.C.: June 3, 2002.
Civil Fines and Penalties Debt: Review of CMS’ Management and  Collection Processes. GAO-02-116. Washington, D.C.: December 31, 2001.
Medicare: Reporting on the Health Care Fraud and Abuse Control  Program for Fiscal Years 1998 and 1999. GAO/AIMD-00-51R. Washington,  D.C.: December 13, 1999.