Medicaid is a joint federal-state health program for the poor that expended $159 billion in fiscal year 1995 to provide health care coverage for over 40 million people. Because of its size and complex structure, Medicaid is vulnerable to fraud and abuse. State Medicaid agencies have the primary responsibility to protect the program’s financial integrity and to ensure that beneficiaries have access to quality care. This includes ensuring that appropriate safeguards are in place to remove providers that commit fraud or abuse, or are incompetent, from state programs. At the federal level, the Secretary of HHS has delegated to the OIG the authority under sections 1128 and 1156 of the Social Security Act to exclude health care providers from most federal health care programs.The OIG, through its Office of Investigations, is required to exclude, nationwide, providers who have been convicted of Medicare- or Medicaid-related fraud and patient abuse or neglect, and felonies related to health care fraud and controlled substances. These actions are termed “mandatory exclusions.” The OIG also has authority to exclude other individuals or entities if the OIG determines that the particular facts in a case meet its criteria. These so-called “permissive exclusions” may be based on, for example, submitting excessive claims, license suspensions and revocations, and sanctions imposed by federal or state health agencies. (See the appendix for a complete list of exclusion authorities.) The OIG field offices receive referrals of sanction actions taken by state Medicaid agencies, licensing boards, Medicaid fraud control units (MFCU),and others. For mandatory cases, they assemble and forward to headquarters the case files containing evidence of a provider’s criminal conviction. For referrals falling under the permissive exclusion authorities, the field offices receive documents related to disciplinary actions taken by state Medicaid agencies, licensing boards, or others. They assess the relevant facts and forward to OIG headquarters the cases they recommend for exclusion. OIG headquarters makes the final decision about whether to exclude the provider from program participation. When the OIG excludes a provider, it sends notification letters to organizations such as state Medicaid agencies, Medicare claims-processing contractors, state licensing boards, and MFCUs in the states where the provider is known to practice or operate. When applicable, the provider’s employer is also notified. In addition, information on excluded providers is disseminated nationally through monthly reports and semiannual cumulative listings. As of February 1996—the latest date for which cumulative data were prepared—the OIG had excluded 8,830 providers from federal health care programs nationwide. Three exclusion categories—conviction for program-related crime, conviction for patient abuse or neglect, and license suspensions and revocations—accounted for 76 percent of these nationwide exclusions. In reviewing the OIG’s exclusion of state-referred cases, we identified a number of cases—including those involving mandatory exclusions or serious quality of care issues—that remained unresolved for long periods of time. In the Chicago and Washington field offices, for example, we found delays that were due, at least in part, to state Medicaid agencies and MFCUs not always submitting documentation the field offices needed to process the exclusion. Thus, the completeness of the documentation provided by these agencies varied, necessitating frequent back-and-forth telephone contacts and correspondence to obtain data. The Washington field office advised us that it could take as long as 2 months to obtain needed documentation from state agencies. In other instances, however, case files showed long periods of inactivity with no apparent explanation for the delays. In one case, a pharmacy was terminated for overbilling the Illinois Medicaid program by over $117,000. It took the Chicago field office 15 months to forward the case to headquarters for exclusion. The case file showed no activity for extended periods of time, including a 10-month period. In another case, the field office referred a provider to headquarters for exclusion 19 months after the Illinois MFCU notified it that the provider had pled guilty in state court to falsely billing for Medicaid services. Two and one-half months after the case was forwarded to OIG headquarters, the provider was excluded nationwide. Another weakness we identified in the OIG’s process involves inconsistencies among its field offices in how they use their discretionary authority and the types of cases they refer to headquarters. This is especially true in the case of permissive exclusions, where the field offices may decide whether to recommend exclusion. year later, however, the OIG rescinded this guidance and state agencies were asked to once again refer all cases. We also observed apparent inconsistencies in the way field offices are processing permissive cases. As a result, providers with equally serious problems could be treated differently by the OIG depending on their location. For example, an official in the Washington field office told us that the office would not consider recommending nationwide exclusion unless the state Medicaid agency had excluded the provider, or a licensing board had revoked a license, for at least 1 year. The Chicago and New York field offices, however, use a 2-year rule of thumb. During our state visits we found that states were not always notifying the OIG of certain providers effectively excluded from the respective state’s Medicaid program. One state we visited sometimes permits providers who are being considered for removal from their Medicaid programs to “voluntarily” withdraw rather than face formal sanction. Another state sometimes terminates on short notice providers it suspects of engaging in improper or inappropriate activities. Neither type of withdrawal is reported to the OIG. While this results in safeguards for those states’ Medicaid programs and beneficiaries, it affords no protection for Medicare or other states’ Medicaid programs. not report these actions to the state licensing board or the OIG, the providers may continue to provide harmful, unnecessary, or excessive services to beneficiaries in other federal or state programs. Currently, about 23 percent of the physicians not allowed to participate in the Illinois Medicaid program have withdrawn in lieu of an action against them. We found that some of the providers who had withdrawn for what appeared to be serious quality of care problems were still able to bill Medicare in Illinois. For example, Medicare paid a podiatrist over $20,000 for services provided to program beneficiaries since he withdrew from the Illinois Medicaid program in August 1995. The podiatrist withdrew from the program after the state alleged that he had provided grossly inferior care to Medicaid recipients. An Illinois Medicaid official told us that he did not believe that the settlement agreements preclude the state from formally referring withdrawals to outside organizations. If the state agency started to do so, however, he believed that providers would soon opt to pursue the formal sanction route rather than withdrawing. Consequently, the state might lose a valuable tool for removing undesirable providers from Medicaid and would be forced to spend more time pursuing exclusion. This official speculated that had Illinois not aggressively moved to remove these providers from the Medicaid program through voluntary withdrawals, the providers would still be in the program. We do not know how prevalent voluntary withdrawals are nationwide. Most of the other states we visited told us they do not allow providers to withdraw from their programs to avoid formal sanction. Although New York sometimes allows providers to withdraw from its program, state Medicaid officials told us these cases are reported to the OIG, the state licensing board, and others. Certain providers New York suspects of abuse, however, are terminated but not reported to the OIG. We were informed by New York officials that state program regulations permit either the provider or state Medicaid agency to terminate a provider’s participation in the program upon 30 days’ written notice. According to state officials, this practice has been used primarily against pharmacies that the state suspected were heavily involved in dispensing drugs with a street market. As a result, the state agency has been able to deal quickly with pharmacies that it believed were involved in drug diversion. Like voluntary withdrawals in Illinois, however, these cases are not reported to the OIG. The OIG widely disseminates information on excluded providers through monthly reports and periodic cumulative listings to various state and federal agencies so that they, too, will remove these providers from their programs. We found, however, that for several reasons states sometimes have difficulty identifying and excluding providers who appear on the lists. First, the states have difficulty identifying individuals—such as nurses, pharmacists, or physicians—who are employed by hospitals, nursing homes, pharmacies, and health maintenance organizations that bill the program under the entities’ billing number. These providers, once sanctioned, can change employers or move to other states and potentially continue to provide services through federal health care programs without detection. Second, providers sometimes are not identified because states tend to use the OIG’s monthly list for a onetime check against their active provider files. However, they may not review prior monthly lists to check a provider who applies for program participation in a subsequent month. Thus, a provider could later enroll in the state’s Medicaid program after being excluded nationwide by the OIG and not be detected. Finally, some states do not always check providers appearing on the list who have out-of-state addresses. An official in Missouri, for example, told us that although they check the OIG monthly list with in-state and border state addresses, they do not check names from other states. New York officials also told us that it would be time-consuming to check the list of their Medicaid providers against the entire OIG list each month; instead, they only check for New York addresses. In addition, they said the OIG’s cumulative list is cumbersome to use and the information is not formatted in a way that would permit a large state, such as New York, to match provider names. When we performed a computer match of the OIG exclusion list to Illinois’ enrolled provider file, we found 13 out-of-state providers who had been excluded by the OIG between 1988 and 1995 but who were still enrolled in the Illinois Medicaid program. One of them had received almost $25,000 in Medicaid payments since being excluded by the OIG.