Health Care Fraud and Abuse Control Program: Indicators Provide Information on Program Accomplishments, but Assessing Program Effectiveness is Difficult
Released: 2013-10-30T00:00:00

Letter

Background

Health Care Fraud and Abuse Control Program

The HCFAC program was established under HIPAA to (1) coordinate federal, state, and local law enforcement efforts to control fraud and abuse associated with health plans; (2) conduct investigations, audits, evaluations, and inspections of delivery and payment for health care in the United States; (3) facilitate the enforcement of federal health care fraud and abuse laws; (4) provide guidance to the health care industry in the form of advisory opinions, safe harbor notices, and special fraud alerts; and (5) establish a national database of adverse actions against health care providers.

HIPAA requires that HHS and DOJ issue a joint annual report to Congress that outlines the amounts returned to the Medicare Trust Funds for the previous fiscal year under various categories, such as amounts of criminal fines and civil monetary penalties—penalties for certain activities, such as knowingly presenting a Medicare claim that is not medically necessary. Additionally, HHS and DOJ are required to report the amounts deposited into and expended from the Medicare Trust Funds to conduct HCFAC activities during the previous fiscal year and the justification for those expenditures. In addition to the mandatory appropriations provided under HIPAA, which Congress increased in 2010, DOJ and HHS-OIG have received discretionary funding through annual appropriations for the HCFAC program since fiscal year 2009.

The annual HCFAC report includes a summary of the key HCFAC activities that the agencies and their components carried out and provides information on the outputs or outcomes of those activities. For example, the report includes information on the amount of money returned to the Medicare Trust Funds as a result of HCFAC activities. Additionally, the report includes sections that describe the activities each agency and component that received HCFAC funding conducted. These sections provide information on the outputs of each component’s activities. For example, DOJ’s USAO section highlights the number of new criminal investigations initiated and the number of civil matters pending.

HCFAC Appropriations

HHS and DOJ receive funding from several appropriations to conduct their HCFAC program activities. Figure 1 describes HCFAC appropriations to HHS, HHS-OIG, and DOJ. Mandatory funds are appropriated by HIPAA from the Medicare Trust Funds, and are available until expended, meaning that the funds can be spent in other years. A large portion of these funds are appropriated to HHS-OIG; the law appropriates the remainder to both HHS and DOJ, which must determine together how to allocate the funds—referred to as the wedge—between the agencies.

In each fiscal year, beginning with fiscal year 2009, Congress appropriated discretionary funding to DOJ and HHS-OIG to finance activities conducted under the HCFAC program. In addition, Congress also appropriated discretionary funds to CMS for program integrity activities it conducts in Medicare and Medicaid, which was outside the scope of our review. Although the FBI is a component of DOJ and was allocated a portion of DOJ’s discretionary HCFAC funding (about $3.4 million), the FBI also received mandatory funding under HIPAA to conduct health care fraud and abuse activities. This mandatory funding was appropriated from the general fund of the U.S. Treasury.

In addition to the HCFAC mandatory and discretionary funding that HHS, DOJ, and its components receive, the agencies use funding from other appropriations to support HCFAC activities. For example, HHS’s Office of General Counsel (OGC) uses appropriations from HHS's General Departmental Management appropriation to support its HCFAC activities.

Activities Conducted Under the HCFAC Program

HHS and DOJ components conduct a variety of activities under the HCFAC program using mandatory and discretionary HCFAC funding. Among other activities, HHS components identify and investigate fraud through programs, including the Administration for Community Living’s (ACL) Senior Medicare Patrol programs, which are designed to educate and train Medicare beneficiaries to identify fraud. HHS’s OGC supports a variety of program integrity work, including assisting DOJ on False Claims Act cases.Pharmaceutical Fraud Program, which is designed to detect pharmaceutical, biologics, and medical device fraud. CMS uses a portion of HHS’s HCFAC funding to improve its financial oversight of the Medicaid program and CHIP, and for a pilot project related to fraud in HHS’s Food and Drug Administration (FDA) conducts the community mental health centers. CMS also uses its portion of HCFAC funding to support its efforts related to the Medicare Fraud Strike Force (Strike Force) teams, which consist of investigators and prosecutors who use advanced data analysis techniques to identify, investigate, and prosecute potentially fraudulent billing patterns in geographic areas with high rates of health care fraud.

HHS-OIG conducts a variety of activities to identify and reduce fraud, waste, and abuse. For example, HHS-OIG assesses civil monetary penalties and imposes other administrative penalties—such as excluding individuals and entities from participating in federal health care programs—against individuals and entities for certain types of conduct. Each of HHS-OIG’s components receives HCFAC funding for the work it conducts. Among other activities:

The Office of Investigations (OI) coordinates and conducts investigations of allegations of fraud, waste, and abuse in Medicare and Medicaid.

The Office of Evaluation and Inspections (OEI) conducts national evaluations on issues related to preventing fraud, waste, and abuse, and promoting economy, efficiency, and effectiveness of HHS programs.

The Office of Audit Services (OAS) conducts independent audits of HHS programs, grantees, and contractors.

The Office of Counsel to the Inspector General (OCIG) exercises the authority to impose civil and administrative penalties related to health care fraud, as well as issue advisory opinions.

The Office of Management and Policy (OMP) provides management, guidance, and resources in support of the other HHS-OIG components.

DOJ’s components have the primary role in enforcing U.S. laws related to health care fraud and abuse, including both criminal and civil matters. For example:

The Criminal Division prosecutes criminal health care fraud and leads the Strike Force teams.

The Civil Division represents the U.S. in civil fraud matters, such as False Claims Act cases and has the authority to bring criminal charges under the Federal Food, Drug, and Cosmetic Act.

The USAOs litigate or prosecute civil and criminal health care fraud cases in their 94 districts throughout the country and are part of the Strike Force teams.

The Civil Rights Division enforces several laws related to cases of abuse, substandard care, or needless institutionalization of certain individuals.

The Justice Management Division (JMD) provides financial oversight of the DOJ components.

The FBI serves as an investigative agency with jurisdiction in both federal and private health insurance programs, and participates in task forces and undercover operations to investigate health care fraud.

Although the agencies and components conduct certain activities without assistance from other agencies and components, HHS, CMS, HHS-OIG, and DOJ—including the FBI—frequently collaborate to investigate and prosecute fraud in federal health care programs. For example, HHS-OIG, FBI, and DOJ investigators and prosecutors comprise Strike Force teams. Table 2 in appendix I provides further detail on these activities.

Agencies Obligated $583.6 Million for HCFAC Activities in Fiscal Year 2012; Most Obligations Were for Personnel

In fiscal year 2012, HHS, HHS-OIG, and DOJ obligated approximately $583.6 million to fund HCFAC activities. About 78 percent of obligated funds were from mandatory HCFAC appropriations, 11 percent of obligated funds were from discretionary HCFAC appropriations, and 12 percent of obligated funds were from other appropriations.the obligations for HCFAC activities were for personnel costs; some agencies reported obligating funds for services under contract and supplies. Additionally, HHS-OIG and DOJ obligated over 8 percent of their HCFAC funds to support Strike Force teams located in 9 cities nationwide.

HHS, HHS-OIG, and DOJ Obligated $583.6 Million in Fiscal Year 2012; 12 Percent of Obligated Funds Came From Other Appropriations

In fiscal year 2012, HHS, HHS-OIG, and DOJ reported $583.6 million in obligations for HCFAC activities. This total includes obligations of mandatory (about 78 percent) and discretionary (about 11 percent) HCFAC appropriations and other appropriations not specific to the HCFAC program (about 12 percent). HCFAC mandatory funds are available until expended, while discretionary HCFAC funds are available for 2 fiscal years. Other appropriations that agencies use for HCFAC activities vary in how long they are available. Because agencies reported in fiscal year 2012 obligating funds that were carried over from prior fiscal years, and because agencies obligated funds from other appropriations not specific to the HCFAC program, the obligations the agencies reported for HCFAC activities in fiscal year 2012—$583.6 million—exceed the HCFAC funds appropriated to the agencies for that year. For example, HHS, HHS-OIG, and DOJ were appropriated $486.1 million in HCFAC mandatory and discretionary funding for fiscal year 2012. However, for fiscal year 2012, these agencies reported HCFAC obligations of $583.6 million, including over $67 million in obligations of other appropriations, as well as obligations of funds appropriated in prior fiscal years.

In fiscal year 2012, DOJ incurred about 48 percent of the agencies’ total HCFAC obligations (about $280.3 million), while HHS-OIG incurred about 44 percent ($258.8 million), and HHS incurred the remaining 8 percent ($44.4 million). See figure 2 for the distribution of HCFAC obligations by appropriations type—HCFAC mandatory, HCFAC discretionary, and other appropriations—by HHS, HHS-OIG, and DOJ’s components for fiscal year 2012. See table 3 in appendix II for the distribution of HCFAC obligations by appropriations type—HCFAC mandatory, HCFAC discretionary, and other appropriations—for HHS, HHS-OIG, and DOJ’s components for fiscal years 2008 through 2012.

A portion of the mandatory HCFAC appropriation that supports HHS and DOJ’s HCFAC activities—or wedge funds—is allocated to each agency. According to a HHS official, in fiscal year 2010, the departments reached a standing agreement for the following allocations: approximately 38 percent for HHS and 62 percent for DOJ. Prior to fiscal year 2010, HHS and DOJ negotiated each year how to divide the wedge funds between the two agencies, which a HHS official described as time- consuming.

HHS distributes its wedge funds to HHS components based on their annual funding requests that the Secretary approves. In fiscal year 2012, HHS distributed mandatory funding to ACL for the Senior Medicare Patrol programs, OGC to support program integrity work of its clients, FDA to support the Pharmaceutical Fraud Program, and CMS to support Medicaid and CHIP financial specialists and a pilot project related to fraud in community mental health center providers in Texas, Florida, and Louisiana.HCFAC funds—its portion of wedge funds—to its components to carry out their HCFAC activities, and the distribution of such funds has not varied much since the inception of the program. Separately, HHS-OIG receives a mandatory appropriation for its HCFAC activities. This appropriation is HHS-OIG’s primary source of funding for Medicare and Medicaid fraud investigations, as well as for audits, evaluations, and inspections it conducts related to the Medicare and Medicaid programs.

According to a DOJ official, DOJ distributes mandatory In fiscal year 2012, DOJ and HHS-OIG obligated discretionary HCFAC appropriations. According to the information each agency reported to us, each DOJ component received a share of DOJ’s discretionary HCFAC appropriation for their HCFAC activities. A DOJ official told us that DOJ components generally received the same amount of funding from the agency’s discretionary HCFAC appropriation for their HCFAC activities in fiscal year 2012 as they had in prior fiscal years. Additionally, the official indicated that a large portion of DOJ’s HCFAC discretionary appropriation supports the Strike Force teams because DOJ believes that these teams reduce fraud. One component in HHS-OIG—OMP—received discretionary HCFAC appropriations.obligations of these funds are for overhead expenses for the HHS-OIG components that are handled by OMP (such as rent and utilities).

HHS, HHS-OIG, and DOJ components obligated over $67 million in funds from other appropriations in addition to the mandatory and discretionary HCFAC appropriations they obligated for HCFAC activities in fiscal year 2012. Within HHS, one component—OGC—used other appropriations to To carry out its HCFAC activities, OGC supplement its HCFAC funding. obligated funds from the annual HHS General Department Management appropriation, which accounted for almost half of its overall obligations for HCFAC activities in fiscal year 2012. ACL, CMS, and FDA did not use other appropriations to support their HCFAC activities.

HHS-OGC’s reported estimated obligations of other appropriations, which also included reimbursements for attorney services provided to OGC clients within HHS that supported HCFAC activities.

Each of HHS-OIG’s components obligated funds from other appropriations to support HCFAC activities in fiscal year 2012. From other appropriations, HHS-OIG obligated about $18.9 million of these appropriations for HCFAC activities in fiscal year 2012, which represented about 7 percent of its overall HCFAC obligations. HHS-OIG reported that the other appropriations used to support HCFAC activities included funds appropriated specifically to support HHS-OIG’s Medicare and Medicaid program integrity work. For example, in fiscal year 2012, each HHS-OIG component reported obligating funds appropriated in section 6034 of the Deficit Reduction Act (which, among other things, established the Medicaid Integrity Program and provided HHS-OIG with increased funding for Medicaid fraud and abuse control activities) to conduct HCFAC activities.

Although some DOJ components reported obligating funds from other appropriations for HCFAC activities, they also reported carrying over some of their HCFAC funding into other fiscal years. A DOJ official told us that funds are often carried over to a new fiscal year, such as in the situation of a continuing resolution, which may shorten the number of months in which they are able to obligate the appropriated funds. work, such as to investigate qui tam cases alleging false claims and to prepare cases for trial. The Civil Rights Division reported using DOJ's Salaries and Expenses, General Legal Activities appropriation to fund the rent for office space used by personnel, and the FBI reported using its annual appropriation to cover personnel expenses for investigators working health care fraud cases beyond those covered by HCFAC funds.

Most HCFAC Obligations Were for Personnel in Fiscal Year 2012

HHS, HHS-OIG, and DOJ reported that most of their HCFAC obligations were for personnel costs in fiscal year 2012, with some exceptions based on the type of HCFAC activities each component performs (see table 3 of appendix II for HCFAC obligations for fiscal years 2008 through 2012 for HHS, HHS-OIG, and DOJ’s components). A large portion of most HHS components’ HCFAC obligations were for personnel costs. The same was true for HHS-OIG and DOJ. Each agency relied on personnel to conduct HCFAC activities—HHS-OIG employed investigators to examine potential fraud cases and DOJ employed investigators, attorneys, and other support personnel to investigate and prosecute fraud cases. Additionally, HHS-OIG employed auditors and evaluators to study issues related to the Medicare and Medicaid programs, including issues related to fraud in these programs, as well as a variety of other issues.

HHS, HHS-OIG, and DOJ components also reported that their next largest amount of HCFAC obligations was for contractual services and supplies. Components reported using these contractual services and supplies for transportation, rent, supplies, or other contractual services— such as for litigation consultants (for example, medical experts) and litigation support (for example, paralegals to review case documentation), among other things. Obligations for personnel and contracted services and supplies generally accounted for almost all of a component’s HCFAC obligations.

Specifically, for HHS’s components, obligations for personnel costs represented the largest portion of FDA’s, CMS’s, and OGC’s obligations for HCFAC activities for fiscal year 2012. In contrast, most of ACL’s obligations in fiscal year 2012 were for expanding grants to the Senior Medicare Patrol programs.

Each of HHS-OIG’s components, with the exception of OMP, reported obligations for personnel costs as their largest HCFAC obligations for fiscal year 2012, devoting 87 percent or more of their obligations to personnel in fiscal year 2012. For OMP, over 70 percent of its obligations were devoted to rent, communication, utilities, equipment, printing, and other contractual services. OMP officials told us that certain overhead expenses incurred by the HHS-OIG components—for example, rent payments—are handled by OMP.

About half or more of DOJ components’ obligations for HCFAC activities were for personnel costs. In fiscal year 2012, the USAOs, Civil Division, Criminal Division, Civil Rights Division, and FBI reported that obligations for personnel costs ranged from 47 percent (Civil Division) to 84 percent (USAOs) of their obligations. For example, for the Civil Division, obligations for contractual services and supplies represented 53 percent of its HCFAC obligations; and officials told us that they use contracted services for litigation consultants (such as medical experts to review medical records or to prepare exhibits to be used at trial) and for litigation support (such as paralegals to review case documentation).

Over $47 Million in Obligations in Fiscal Year 2012 Supported Strike Force Teams in Nine Cities

In fiscal year 2012, HHS-OIG and DOJ obligated over $47 million in HCFAC funds to support Strike Force teams. This represented about 8.1 percent of the $583.6 million in obligations for HCFAC activities. DOJ officials told us that Strike Force teams are an important and valuable tool for identifying potential health care fraud schemes. (See table 1 for the HCFAC obligations by Strike Force location for fiscal year 2012, and see appendix II, table 4 for information on HCFAC obligations devoted to Strike Force teams for fiscal years 2008-2012.)

In fiscal year 2012, DOJ and HHS-OIG obligated over $12.9 million for the Strike Force team in Miami, which represented over 27 percent of funding for all Strike Force teams. The first Strike Force team was officially launched in Miami in fiscal year 2007, based in part on an HHS- OIG evaluation that found aberrant claims patterns for infusion therapy for Medicare beneficiaries with HIV/AIDs that differentiated South Florida Medicare providers and beneficiaries from the rest of the country. Additionally, obligations for Miami’s Strike Force team were more than twice as much as in Detroit, the team with the second highest obligations for fiscal year 2012 ($5.1 million).

Based on the obligations reported for fiscal year 2012, HHS-OIG’s Office of Investigations accounted for 45 percent of the total obligations used for Strike Force teams. The FBI incurred 25 percent, DOJ’s Criminal Division incurred 17 percent, and the USAOs incurred 13 percent of obligations for the Strike Force teams. HHS-OIG’s Office of Investigations and the FBI’s agents conduct investigations and gather evidence, such as through surveillance for Strike Force cases, while DOJ’s Criminal Division and the USAOs’ attorneys are the primary prosecutors of Strike Force cases. Additionally, although not reflected in the table above, CMS obligated approximately $350,656 in discretionary HCFAC appropriations to support Strike Force Teams. CMS’s HCFAC obligations were not associated with any one individual Strike Force city.

Since fiscal year 2010, the USAOs have used some of their HCFAC discretionary appropriation for three Special Focus teams—in San Francisco, Boston, and Philadelphia. These Special Focus teams are similar to the Strike Force teams, but handle pharmaceutical civil cases rather than criminal cases. Approximately $2.8 million of the USAOs’ HCFAC obligations in fiscal year 2012 were for these Special Focus teams. This amount was in addition to the HCFAC obligations they used for the Strike Force teams.

Agencies Use Several Indicators to Assess HCFAC Activities, and Some Key Outputs Changed Over Time

HHS, HHS-OIG, and DOJ use several indicators to assess HCFAC activities as well as to inform decision-makers about how to allocate resources. These indicators include those listed in the annual HCFAC report as well as others outlined in agency reports. For example, FDA assesses the work of its Pharmaceutical Fraud Program by tracking the number of criminal investigations opened and the outcomes of criminal convictions obtained, among other indicators. Additionally, many of the indicators that HHS, HHS-OIG, and DOJ use reflect the collective work of multiple agencies since they work many health care fraud cases jointly. Outputs from some of these key indicators have changed in recent fiscal years. For example, the return-on-investment has increased from $4.90 returned for every $1.00 invested for fiscal years 2006-2008 to $7.90 returned for every $1.00 invested for fiscal years 2010-2012.

HHS, HHS-OIG, and DOJ Use Several Indicators to Assess HCFAC Activities and Inform Decisions about Resource Allocation and Prioritization of Activities

HHS, HHS-OIG, and DOJ officials reported using several indicators to assess HCFAC activities and that those indicators serve multiple purposes. Several indicators are included in the annual HCFAC report, while other indicators are reported in agency documents or used internally. Additionally, some indicators are collective—in that they reflect the work of multiple agencies—and other indicators outline the activities conducted by a particular agency or component. Appendix III, tables 5 through 8, provides detailed information on indicators used to assess the activities conducted using HCFAC funding, including those outlined in the HCFAC report, as well as other indicators the agencies use, by agency and component.

Each HHS component conducts unique activities related to health care fraud and abuse. As a result of these different types of activities, the indicators that each HHS component uses to highlight the accomplishments of its HCFAC activities vary.

FDA uses indicators associated with its Pharmaceutical Fraud program— which focuses on detecting, prosecuting, and preventing pharmaceutical, biologic, and medical device fraud—including the number of criminal investigations opened during a fiscal year and the outcomes of criminal convictions obtained (such as amount of jail time, probation, or amount of restitution). FDA officials told us that the indicators they use are outlined in the annual HCFAC report. For example, FDA reported in the fiscal year 2012 HCFAC report that it had opened 42 criminal investigations since the inception of the Pharmaceutical Fraud Program, and 17 investigations during fiscal year 2012.

ACL primarily uses indicators that track information related to the Senior Medicare Patrol (SMP) programs—which train senior volunteers to inform fellow beneficiaries on how to detect and prevent fraud, waste, and abuse in the Medicare program—such as indicators related to beneficiary education and training, outreach activities, and events the SMP programs conduct, and cases that were referred for investigation. For instance, ACL tracks the number of group education sessions the SMPs conduct and the estimated number of beneficiaries who attended the sessions. Many of the indicators ACL uses are outlined in an annual HHS-OIG report on According to the SMP programs, as well as the annual HCFAC report.ACL officials, ACL has hired a contractor to assess the adequacy of the current indicators used by ACL and to determine if the indicators are appropriate for evaluating the performance of the SMPs.

HHS’s OGC uses several indicators to assess the HCFAC activities it conducts. These indicators include amounts of recoveries for matters on which OGC has assisted—such as False Claims Act matters and civil monetary penalties—and the number of physician self-referral disclosures in which OGC advised. indicators are outlined in the annual HCFAC report.

According to the fiscal year 2012 HCFAC report, OGC advised CMS on the new voluntary Self Referral Disclosure Protocol established by the Patient Protection and Affordable Care Act. Pub. L. No. 111-148, § 6409(a), 124 Stat. at 772. Under this protocol, providers of services and supplies may self-disclose actual or potential violations of the physician self-referral law, commonly known as the Stark law. The Stark law prohibits physicians from making certain referrals for “designated health services” paid for by Medicare to entities with which the physician (or immediate family members) has a financial relationship, unless the arrangement complies with a specified exception, such as in-office ancillary services. 42 U.S.C. § 1395nn(a)(1), (b)(2). officials told us that one indicator they use is the drop in number of claims for particular services, which they believe coincides with the efforts of the Strike Force teams to investigate and prosecute fraud. For example, according to information that CMS provided to us, payments for home health services dropped by nearly one-half from 2008 to 2011 in Miami- Dade County, which officials believe was, in part, due to the Strike Force team’s efforts focused on reducing fraud in home health care.

HHS-OIG uses a variety of indicators to assess the work it conducts using HCFAC funds. Some of these indicators reflect the collective work of HHS-OIG’s components and some are unique to the activities conducted by a particular component. For example, HHS-OIG tracks the health care savings attributable to HHS-OIG investigations, audits, and evaluations. This indicator includes work from nearly all HHS-OIG components, including the Office of Investigations, the Office of Audit Services, and the Office of Evaluation and Inspections. Among many other indicators, HHS- OIG’s Office of Counsel to the Inspector General tracks the number of corporate integrity agreements monitored for compliance, which is specific to the work of that office. HHS-OIG officials told us that the indicators they use to assess HCFAC activities are reported in the annual HCFAC report and in other HHS-OIG reports (such as its semi-annual reports to Congress).

DOJ uses several indicators to assess the work it conducts with HCFAC funding. The indicators it uses relate to the activities that each DOJ component conducts to enforce health care fraud and abuse laws. For example, the USAOs use indicators related to criminal prosecutions, including the number of defendants charged and the number of convictions. In addition to those measures, the USAOs also track information related to civil matters, such as the number of pending civil investigations.

In addition to the indicators listed in the annual HCFAC report, officials from DOJ’s components told us that they use other indicators to assess the work they conduct related to health care fraud and abuse. Officials told us that these indicators are tracked at the departmental level and aggregate the work of multiple DOJ components. For example, DOJ tracks the percentage of criminal and civil cases resolved favorably. These indicators include health care fraud cases, as well as other cases that DOJ components handle.

Officials from HHS, HHS-OIG, and DOJ told us that they use indicators to inform decision-makers about how to allocate resources. For example, officials from DOJ’s Civil Rights Division told us that they use indicators to help determine what resources they need to handle their current caseload. The Civil Rights Division considers the number of cases the division is currently working along with the number of remedial agreements with facilities that the division needs to monitor in the upcoming year when developing requests for funding. Additionally, officials from FDA told us that they review the preceding year’s number of investigations and the costs associated with those investigations, when requesting annual funding.

Additionally, HHS, HHS-OIG, and DOJ officials indicated that they use data to inform their decisions about which activities to prioritize, including what cases or studies to undertake, as well as where to locate specific resources. For example, officials from HHS-OIG told us that they use Medicare claims data to identify which service areas to target for investigations, audits, or evaluations, as well as which geographic regions to focus their efforts. Officials said that they continually review whether HHS-OIG staff are located in the most appropriate geographic areas and have relocated staff to areas to enhance the efficiency of HHS-OIG resources. HHS-OIG officials also told us that the agency uses several indicators for internal management purposes. Additionally, officials from DOJ’s Criminal Division told us that one factor they consider when deciding how to prioritize cases is to review data analyses to focus on cases with large amounts of alleged fraudulent billing.

Some Key Outputs that Reflect Work of Multiple Agencies Have Changed in Recent Years

Since HHS-OIG and DOJ’s components work many health care fraud cases jointly, many of the indicators included in the annual HCFAC report highlight the work of both HHS-OIG and DOJ, as well as various components within each agency. For example, the report includes information on the results of HCFAC activities, such as the dollar amount recovered as a result of fraud cases, which HHS-OIG and DOJ officials say reflects the investigative work done by HHS-OIG and FBI, as well as the work of DOJ’s components in prosecuting the cases. Additionally, the report presents several indicators related to the work of the Strike Force teams, such as the number of indictments and complaints involving charges that were filed, the outcomes of the cases, and the total amount of alleged billing to Medicare as a result of these Strike Force cases.

The return-on-investment is another indicator that reflects the work of multiple agencies and has changed in recent years. We have recognized that agencies can use a return-on-investment as a valuable tool for assessing a program’s activities and for determining how best to target resources. The return-on-investment is included in the annual HCFAC report and compares the amount of funds that were returned to the Medicare Trust Funds, such as restitution and compensatory damages awarded, with the amount of appropriations for HCFAC activities. Specifically:

The total returns—the numerator—includes deposits to the Medicare Trust Funds. The calculation includes amounts that were deposited into the Medicare Trust Funds rather than amounts that were ordered or negotiated in health care fraud and abuse cases, but not yet transferred to the Medicare Trust Funds. Officials reported that although there may be large amounts of restitution ordered or agreed upon in health care fraud cases, the amounts actually returned to the Medicare Trust Funds may be lower. By including only those funds that have been returned to the Medicare Trust Funds, the return-on-investment is not artificially inflated.

For example, officials told us that although a defendant convicted of health care fraud may be ordered to pay restitution and penalties in a specific amount, the defendant may pay less than what is ordered as the ability to pay often affects how much is actually received.

Many cases discussed in the annual HCFAC report include settlements reached with pharmaceutical and device manufacturers for criminal and civil liabilities. For example, the fiscal year 2012 HCFAC report describes many settlements reached with pharmaceutical and device manufacturers and the settlements ranged from about $200,000 to $3 billion.

The total investment—the denominator—includes mandatory and discretionary HCFAC funds that were appropriated to HHS, HHS-OIG, and DOJ (including the FBI’s mandatory funds devoted to health care fraud and abuse reduction activities) and does not include funding from other appropriations. DOJ officials told us that the HCFAC funding that CMS receives through HHS’s wedge fund is included in the return-on-investment calculation, and a small portion of HCFAC discretionary funds that CMS uses to support the Strike Force teams.

Return-on-investment is calculated using a 3-year moving average. To account for differences in the amounts returned to the Medicare Trust Funds between years, the return-on-investment is calculated using a 3-year average. For example, a case may have been investigated in fiscal year 2010 but not settled until fiscal year 2012, and thus the funds received from that case would not be deposited until 2012. Similarly, although agencies may carry over HCFAC appropriations into future fiscal years, the amount of appropriations included in the calculation is also based on a 3-year average with carry over amounts included in the year in which they were appropriated.

According to the annual HCFAC report, the return-on-investment for fiscal years 2010-2012 was $7.90 returned to the Medicare Trust Funds for every $1.00 of HCFAC funds appropriated for HCFAC activities. The return-on-investment increased steadily from fiscal year 2008 to 2012. In fiscal years 2006-2008, the return-on-investment was $4.90 to $1.00, and in fiscal years 2010-2012, the return-on-investment was the highest at $7.90 to $1.00. See figure 3 for additional information on the return-on- investment for fiscal years 2008-2012.

A review of other key outputs listed in the annual HCFAC reports from 2008 through 2012 that reflect accomplishments or outputs of activities conducted by multiple agencies using HCFAC funding shows some key outputs have generally increased and some have remained stable. During the same time period, HCFAC obligations and funding from other appropriations used to support HCFAC activities increased about 38 percent. See figure 4 for data on selected key outputs for fiscal years 2008 to 2012, and see appendix IV, table 9 for additional detailed information on the key outputs for fiscal years 2008 to 2012.

One key output that has increased since fiscal year 2008 is the number of defendants convicted of health care fraud. For example, the number of defendants convicted of health care fraud generally increased from around 588 in fiscal year 2008 to 826 in fiscal year 2012 (a 40 percent increase).

Some key outputs did not change between fiscal years 2008 and 2012. While funding has increased since 2008, there has not been a consistent pattern of increasing outputs. For example, the number of new criminal health care fraud investigations opened increased from fiscal year 2008 (957 investigations) to fiscal year 2012 (1,131 investigations). Additionally, the number of new civil health care fraud investigations opened did not vary much between 2008 (843 cases) and 2012 (885 cases).

HHS-OIG and DOJ officials indicated that there are a number of factors that might contribute to these trends. DOJ officials told us that the complexity of fraud cases has increased in recent years and requires more substantial resources to investigate and prosecute than other, less- complex cases. Officials stated that this limits the amount of resources they are able to commit to other cases. HHS-OIG and DOJ officials also cited other factors, including external factors (such as an increase in the number of defendants opting to go to trial) and significant changes to federal health care programs (such as the implementation of the Medicare Part D prescription drug program), which might influence these trends.

Nonetheless, HHS-OIG and DOJ officials indicated that they consider the increase since 2008 in some of the key outputs to be significant. For example, HHS-OIG officials noted that there was an increase of 42 civil fraud investigations from 2008 to 2012, and they consider the increase to be of significance given the complexity of fraud schemes and the resources needed to handle these civil cases. Additionally, DOJ officials told us that they consider increases to the number of new criminal fraud investigations opened (an increase of 18 percent) to be significant. DOJ officials also indicated that several key outputs related to the Strike Force teams have increased since 2008. See appendix IV for detailed information on key outputs related to HCFAC activities, including the Strike Force teams.

Several Factors Contribute to Lack of Information about the Effectiveness of HCFAC Activities

The indicators used by agencies to track the outputs of HCFAC activities provide information on the accomplishments of HCFAC activities, not on the effectiveness of the activities in reducing health care fraud and abuse. HHS, HHS-OIG, and DOJ officials reported that they consider the indicators to be the outputs or accomplishments of the HCFAC activities they conduct and in that sense they provide a composite picture of the achievements of the HCFAC program. However, difficulty in establishing a causal link between HCFAC activities and output indicators, difficulty in determining the deterrent effect HCFAC activities may have on potential health care fraud and abuse, limited research on the effectiveness of health care fraud interventions, and the lack of a health care fraud baseline hinder a broader understanding of the effectiveness of the HCFAC program in reducing health care fraud and abuse.

Indicators Agencies Use to Assess HCFAC Activities Provide Information on Accomplishments, but Not Effectiveness

The indicators that HHS, HHS-OIG, and DOJ use to track HCFAC activities offer insights on the accomplishments and outputs of HCFAC activities, but they do not measure the effectiveness of the HCFAC program in reducing health care fraud and abuse. HHS, HHS-OIG, and DOJ officials reported that they consider the indicators they use to be the accomplishments or outputs of the HCFAC activities they conduct. For example, the key program outputs discussed earlier in this report reflect accomplishments of activities agencies conduct using HCFAC funding. Officials from HHS, HHS-OIG, and DOJ told us that these indicators can be used to provide insights on program activities or the number of actions a component has been able to accomplish in a specific time frame (e.g., the number of defendants convicted in a fiscal year). However, several HHS and DOJ agency officials told us that they do not consider these indicators to be measures of the performance or the effectiveness of the HCFAC program in reducing health care fraud. The return-on- investment is an example of an indicator that describes program results but does not measure program effectiveness. We found that the return- on-investment provides information on the accomplishments of HCFAC activities in relationship to the amount of funds appropriated for these activities, but does not provide information on the extent to which the HCFAC program reduces health care fraud.

Additionally, most of the indicators used to track HCFAC activities do not have targets or goals associated with them. Although standard practices for internal controls indicate that ongoing performance monitoring should include comparison of performance indicator data against planned targets, our previous work has recognized that establishing measures and setting specific targets in the law enforcement area can be challenging. Officials from HHS, HHS-OIG, and DOJ told us that they intentionally do not set performance targets for indicators such as the number of health care fraud investigations or prosecutions undertaken because such targets could cause the public to perceive law enforcement as engaging in “bounty hunting” or pursuing arbitrary targets merely to meet particular goals.law enforcement actions that are based on merit and avoid the appearance that they strive to achieve certain numerical quotas.

Several Factors Make Assessing the Effectiveness of the HCFAC Program Challenging

HHS, HHS-OIG, and DOJ officials, as well as literature we reviewed, indicate that there are several factors that make assessing the effectiveness of the HCFAC program in reducing health care fraud and abuse challenging.

It is difficult to establish if the HCFAC program has a direct relationship to changes in the amount of health care fraud and abuse. HHS, HHS-OIG, and DOJ officials told us that HCFAC activities—as well as other efforts by federal agencies and others, including non-government entities—may have helped reduce health care fraud; however, the effect that any of these actions may have had on health care fraud and abuse is difficult to isolate. For example, HHS-OIG officials stated that compliance training and guidance provided by the HHS-OIG to health care organization directors—an activity conducted with HCFAC funding—may have had an effect on health care fraud but that it is difficult to isolate how much of an effect the activity has had. However, according to HHS-OIG officials, a rise in the number of provider compliance programs established by hospital organizations in response to shareholder interest in improving compliance with federal and state health care program requirements may also contribute to reductions in health care fraud. Moreover, many efforts within CMS aim to reduce health care fraud and abuse, in addition to those identified as HCFAC activities, and it is difficult to know which CMS program or activity has had an effect on the incidence of fraud. For example, CMS has implemented a number of initiatives to prevent health care fraud and abuse that are not funded with HCFAC funds. One such effort is a change to the provider enrollment process, which is designed to better ensure that only legitimate providers and suppliers are allowed to bill Medicare. However, it is difficult to isolate the effect that either HCFAC activities or broader CMS efforts may have had in reducing health care fraud and abuse.

Another factor that limits understanding of the effectiveness of the HCFAC program in reducing health care fraud and abuse is the difficulty in quantifying the HCFAC program’s effect in deterring health care fraud and abuse. DOJ officials provided anecdotal evidence that HCFAC activities help to deter would-be offenders. For example, a Justice Management Division official asserted that DOJ prosecutions that result in doctors being sentenced to prison for health care fraud and abuse deter other doctors who are contemplating committing fraud. Other DOJ officials reported that cooperating witnesses in health care fraud investigations have told officials of instances where a provider committing potentially fraudulent acts had ceased operations because of the pressure brought on by Strike Force prosecutions. DOJ officials stated that they could recall about a dozen examples of specific individuals who have said they were deterred from committing fraud or ceased a fraudulent operation because they saw another individual get caught. However, these examples are anecdotal and DOJ and HHS-OIG officials stated that it is difficult to know how much health care fraud is deterred as a result of HCFAC activities.

Research on the effectiveness of health care fraud and abuse interventions, and on ways to measure the effectiveness of health care fraud and abuse interventions has been limited. We found that none of the 49 articles we selected to review for this study evaluated the effectiveness of the HCFAC program specifically, and few studies examined the effectiveness of health care fraud and abuse interventions in general. A recent review of literature conducted by experts in the field found similar results.

Another challenge that limits the ability to determine whether HCFAC activities are effective in reducing health care fraud and abuse is the lack of a baseline for the amount of health care fraud that exists at any point in time. Having such a baseline could provide information on the amount of health care fraud and how much it has changed in a given year or over time. We have previously reported that there currently is no reliable baseline estimate of the amount of health care fraud in the United States. Several experts told us or have written about the importance of establishing a baseline in assessing the effectiveness of law enforcement programs. A baseline estimate could provide an understanding of the extent of fraud and, with additional information on program activities, could help to inform decision-making related to allocation of resources to combat health care fraud.

HHS and CMS have taken steps to try to establish a health care fraud baseline because, according to the fiscal year 2012 HCFAC report, they appreciate that a baseline would allow the agencies to evaluate the success of fraud prevention activities. HHS officials stated that the Assistant Secretary for Planning and Evaluation initiated work to establish a baseline measurement, and that work was subsequently transferred to CMS’s Center for Program Integrity. According to the fiscal year 2012 HCFAC report, the project is designed to measure probable fraud in home health care agencies and will pilot test a measurement approach and calculate an estimate of probable fraud for specific home health care services. CMS and its contractor will collect information from home health care agencies, the referring physicians, and Medicare beneficiaries selected in a national random sample of home health care claims. The pilot will rely on the information collected along with a summary of the service history of the home health care agency, the referring provider, and the beneficiary to estimate the percentage of total payments that are associated with probable fraud, and the percentage of all claims that are associated with probable fraud for Medicare fee-for-service home health care. CMS reports that after completion of the pilot, it will determine whether the measurement approach should be expanded to other areas of health care. Officials from the Center for Program Integrity stated that as of May 2013, they were beginning the data collection phase of the fraud baseline measurement pilot, which they expect will last two years.

Some HCFAC-funded agencies have attempted to determine the effect of HCFAC activities on specific types of fraud in certain locations. DOJ officials provided examples of reductions in billings for certain services in specific locations and told us that they believe these reductions are associated with the work of the Strike Force teams. For example, DOJ officials reported assessing the amount of home health care billings in certain Strike Force cities before the Strike Force began operations and then again after the Strike Force had begun operations. Since the amount of home health care billing was measured before and after the Strike Force was implemented, HHS, HHS-OIG, and DOJ officials are able to estimate some effect that the Strike Force team had on the amount of billing in that area. For example, in a May 14, 2013 press conference, the Attorney General noted that after the Detroit Strike Force began investigating cases of potential group-psychotherapy fraud, claims for this type of treatment in Detroit dropped by more than 70 percent since January 2011.

Concluding Observations

Making progress in preventing and reducing health care fraud and abuse is an essential yet challenging task. HHS and DOJ use a number of indicators to assess the activities they conduct to reduce health care fraud and abuse. However, the indicators do not provide information about the effectiveness of the program, and little is known about whether and how well the HCFAC program reduces health care fraud. While positive results on the program’s return-on-investment can be seen as an indication of program success, the return-on-investment does not indicate the extent to which the program is reducing fraud. For example, the increasing returns from the fraud that is being investigated and prosecuted may indicate that HCFAC programming is effective in detecting or deterring potentially fraudulent schemes or indicate that there is simply an increase in potentially fraudulent activity. CMS’s recent efforts to establish a home health care fraud baseline is a good first step to understanding the extent of the problem and, if implemented as planned, could provide policymakers with information on how much fraud exists and in coming years, how potentially fraudulent activity has increased or decreased over time. However, CMS has not yet determined whether the methodology used to establish a baseline of probable fraud in home health care could be used to assess the amount of fraud in other health care services. Additionally, even with a baseline estimate of the total amount of probable fraud, there will likely be continuing challenges in understanding the effectiveness of the HCFAC program, such as isolating the program’s ability to reduce or prevent fraud and abuse. Despite these inherent challenges, if a health care fraud baseline is established more broadly, it may become feasible to study how individual HCFAC activities, and possibly the program as a whole, affects changes in health care fraud. Results from these studies could provide HHS and DOJ with additional information regarding which activities are the most effective in reducing health care fraud and abuse, and could potentially inform agency decisions about how best to allocate limited resources.

Agency Comments

GAO provided a draft of the report to HHS and DOJ. In its written comments reproduced in appendix V, HHS discussed its program integrity efforts to reduce fraud, waste, and abuse. HHS also provided examples of CMS’s efforts to reduce fraud, waste, and abuse in Medicare. The examples provided were not included in our review because they were not included in the funding used to calculate the return-on-investment for the HCFAC program. While not commenting specifically on our report, DOJ sent us examples of reductions in Medicare billings for specific services (such as durable medical equipment, home health services, and community mental health center services) in certain Strike Force cities. In their comments, DOJ officials stated that based on their examples, the Strike Force efforts have had a lasting effect on savings to Medicare payments. In addition, HHS and DOJ provided technical comments, which we have incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS, the Attorney General, the Inspector General of HHS, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Kathleen M. King at (202) 512-7114 or kingk@gao.gov or Eileen R. Larence at (202) 512-8777 or larencee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI.

Appendix I: Health Care Fraud and Abuse Control (HCFAC) Program Activities Conducted by Agencies in Fiscal Year 2012

The activities listed in table 2 below represent only activities that are supported with HCFAC funds (as reported in agency documents or interviews with agency officials). The table does not include other activities conducted by the agencies that are not related to health care fraud and abuse control.

Appendix II: Health Care Fraud and Abuse Control (HCFAC) Program Obligations for Fiscal Years 2008 through 2012

Table 3 summarizes the HCFAC obligations for the Department of Health and Human Services (HHS), including the HHS Office of Inspector General, and Department of Justice components for fiscal years 2008 through 2012 by type of appropriations. An obligation is a definite commitment that creates a legal liability of the government for payment of goods and services ordered or received. The table includes obligations of mandatory HCFAC appropriations, discretionary HCFAC appropriations, and other appropriations used to support HCFAC activities. Mandatory HCFAC appropriations refer to the HCFAC budgetary resources controlled by a law, principally the Health Insurance Portability and Accountability Act of 1996, rather than appropriations acts. Discretionary HCFAC appropriations refer to budgetary resources provided in annual appropriation acts, other than those that fund mandatory programs. Congress appropriated mandatory funding for HCFAC activities beginning in fiscal year 1997, and appropriated discretionary funding for HCFAC activities beginning in fiscal year 2009. Other appropriations include funding from other appropriations not specific to the HCFAC program that the agencies used, in addition to the HCFAC funds, to carry out activities related to health care fraud and abuse. In addition, the table shows the percentage of HCFAC obligations for personnel services and contracted services and supplies.

Table 4 summarizes HCFAC obligations for Strike Force teams for fiscal years 2008 through 2012 by the geographic location of the Strike Force teams. Strike Force teams consist of investigators and prosecutors who use data analysis techniques to identify, investigate, and prosecute potentially fraudulent activities in geographic areas with high rates of fraud.

Appendix III: Indicators Used by Agencies to Assess Health Care Fraud and Abuse Control (HCFAC) Program Activities

Appendix III: Indicators Used by Agencies to Assess Health Care Fraud and Abuse Control (HCFAC) Program Activities indicates that measure is included in Fiscal Year 2012 annual HCFAC report indicates that measure is included in Department of Health and Human Services’ Office of Inspector General (HHS-OIG) July 2013 report on Senior Medicare Patrol programs.

Unless otherwise noted, the information on outcomes/output for each measure is for fiscal year 2012. For the outcomes and outputs for indicators associated with ACL’s Senior Medicare Patrol program, we used the most currently available data, which was calendar year 2012 data obtained from the July 2013 HHS-OIG report on the Senior Medicare Patrol program. The outcomes and output for these indicators is also included in the fiscal year 2012 HCFAC report; however, the outcomes and output is calendar year 2011 data.

In HHS-OIG’s July 2013 report on Senior Medicare Patrol program, this indicator for Medicare and Medicaid funds recovered attributable to the programs was expanded to account for both expected and actual funds recovered. However, in the fiscal year 2012 report, the indicator included only actual funds recovered.

HHS-OIG Component Collective indicators in which more than one HHS- OIG component contributes

Amount of expected recoveries, including audit receivables and investigative receivables and non-HHS investigative receivables resulting from work in areas such as states’ shares of Medicaid restitution $6.9 billion consisting of $923.8 million in audit receivables and $6 billion in investigative receivables (which includes $1.7 billion in non-HHS investigative receivables resulting from work in areas such as the states’ shares of Medicaid restitution)

Ratio of expected return on investment measuring the efficiency of HHS-OIG’s health care oversight efforts (Target: $12.0)

HHS-OIG Component

Office of Audit Services (OAS)

Questioned cost recommendations (dollar value)

Funds put to better use recommendations Timeliness of draft reports (or final reports if issued without a draft) (Target: 63 percent)

Audit receivables (disallowed questioned cost recommendations)

Office of Counsel to the Inspector General (OCIG)

HHS-OIG Component

Office of Evaluation and Inspections (OEI)

Number of evaluations started (Target: 57 evaluations)

Percentage of final reports completed within a year (Target: 55 percent)

Office of Investigations (OI)

Complaints received (Target: 6,290 complaints) indicates that the indicator is included in Fiscal Year 2012 annual HCFAC report. indicates that the indicator is included in at least one of the two HHS-OIG’s Semiannual Report to Congress for fiscal year 2012. indicates that the indicator is included in HHS-OIG’s Fiscal Year 2014 Justification of Estimates for Appropriations Committees, which includes outcomes/output of indicators for fiscal year 2012.

DOJ Component Civil Division

Number of new civil health care fraud investigations opened Number of civil health care fraud matters pending at the end of the fiscal year Number of investigations completed per Department of Justice attorney working on financial fraud and health care fraud cases (Target: 11.92 investigations per attorney)

Percentage of civil cases favorably resolved for litigating divisions (Target: 80 percent of civil cases favorably resolved)

Civil Rights Division

DOJ Component

Number of cases favorably resolved for litigating components (Target: 80 percent of civil cases favorably resolved)

Criminal Division

Average number of months of prison sentences in health care fraud cases Amount secured through court-ordered restitution, forfeiture, and fines Number of investigations completed per Department of Justice attorney working on financial fraud and health care fraud cases (Target: 11.92 investigations per attorney)

Percentage of criminal cases favorably resolved for litigating divisions (Target: 90 percent of criminal cases favorably resolved)

DOJ Component Federal Bureau of Investigation (FBI)

Number of new health care fraud investigations initiated by the FBI (Targets vary by field office)

Number of pending health care fraud investigations (Targets vary by field office)

Number of FBI health care fraud investigators and analysts that received training (Targets vary by field office)

Number of dismantled criminal enterprises engaging in white-collar crime (Target: 360 criminal enterprises)

In fiscal year 2011: $1.2 billion in restitutions; $1 billion in fines; $96 million in seizures; $320 million in civil restitution; and over $1 billion in civil settlements.

United States Attorneys’ Offices (USAOs)

Number of Federal health care fraud related convictions Number of new civil health care fraud investigations opened Number of civil health care fraud investigations pending Number of investigations completed per Department of Justice attorney working on financial fraud and health care fraud cases (Target: 11.92 investigations per attorney)

DOJ Component

Indicators used by agencies to assess activities (Associated target, if applicable) Percentage of criminal cases favorably resolved for litigating divisions (Target: 90 percent of criminal cases favorably resolved; 80 percent of civil cases favorably resolved)

Percent of white collar crimes cases concerning mortgage fraud, health care fraud, and official corruption favorably resolved (Target: 90 percent of white collar cases favorably resolved)

92.2 percent of white collar crime cases favorably resolved in fiscal year 2010 indicates that measure is included in Fiscal Year 2012 annual HCFAC report indicates that measure is in DOJ’s Performance and Accountability report ¡ indicates that the measure is in DOJ’s Performance Plan for Fiscal Year 2012 ⁄ indicates that the measure is in FBI’s Financial Crimes Report to the Public for Fiscal Years 2010 – 2011.

Unless otherwise noted, the information on outcomes/output for each measure is for fiscal year 2012. The outputs for these indicators are included in the summary of the HCFAC report and in the section regarding USAO activities. We report the outputs in the Civil Division section and USAO section of this table because the outputs include civil matters handled by the USAOs and/or Civil Division. These measures are reported at the departmental level for DOJ, in which several DOJ components contribute, and include health care fraud cases in addition to other cases.

Appendix IV: Key Outcomes and Outputs of Health Care Fraud and Abuse Control (HCFAC) Program Activities

HCFAC Key Program Outcomes/Outputs in Selected Years Program outcome/output Obligations of other appropriations $67,274,025

Some of the outcomes/outputs associated with the Strike Force teams are subsets of outcomes/outputs reported for the HCFAC program as a whole. For example, the number of defendants charged in Strike Force cases is a subset of the total number of defendants in health care fraud-related cases where criminal charges were filed. As a result, the outcomes/outputs reported in this table may be duplicative.

Appendix V: Comments from the Department of Health and Human Services

Appendix VI: GAO Contacts and Staff Acknowledgements

GAO Contacts

Staff Acknowledgements

In addition to the contacts named above, Martin T. Gahart, Assistant Director; Tom Jessor, Assistant Director; Christie Enders; Sandra George; Drew Long; Lisa Rogers; and Meghan Squires made significant contributions to the work.