[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
IMPROVED EFFORTS TO COMBAT
HEALTH CARE FRAUD
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MARCH 2, 2011
__________
Serial No. 112-OS1
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
CHARLES W. BOUSTANY, Jr., Louisiana, Chairman
DIANE BLACK, Tennessee JOHN LEWIS, Georgia
JIM GERLACH, Pennsylvania XAVIER BECERRA, California
VERN BUCHANAN, Florida RON KIND, Wisconsin
AARON SCHOCK, Illinois JIM McDERMOTT, Washington
LYNN JENKINS, Kansas
Jon Traub, Staff Director
Janice Mays, Minority Staff Director
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C O N T E N T S
__________
Page
Advisory of March 2, 2011 announcing the hearing................. 2
WITNESSES
PANEL 1:
Peter Budetti, Deputy Administrator and Director, Center for
Program Integrity, Centers for Medicare and Medicaid Services 6
Lewis Morris, Chief Counsel, Office of Inspector General....... 26
PANEL 2:
Karen Ignagni, President and CEO, America's Health Insurance
Plans........................................................ 51
Louis Saccoccio, Executive Director, National Health Care Anti-
Fraud Association............................................ 63
Aghaegbuna ``Ike'' Odelugo, Plead guilty to state and federal
charges related to Medicare fraud. According to the
Department of Justice, the total amount paid by Medicare as a
result of Odelugo's scheme was approximately $9,933,354.27*.
He has been assisting law enforcement while awaiting
sentencing in May............................................ 79
*http://www.justice.gov/usao/txs/releases/August%202010/
082310%20Odelugo.htm
SUBMISSIONS FOR THE RECORD
Hon. Peter Roskam................................................ 95
Academy of Managed Care Pharmacy................................. 98
Apria Healthcare................................................. 101
Dream Software................................................... 106
Pharmaceutical Care Management Association....................... 113
MATERIAL SUBMITTED FOR THE RECORD
Questions and Responses for the Record:
Hon. Chairman Charles W. Boustany, Jr...................... 116
Hon. Jim Gerlach........................................... 120
Hon. Lynn Jenkins.......................................... 121
IMPROVED EFFORTS TO COMBAT
HEALTH CARE FRAUD
----------
WEDNESDAY, MARCH 2, 2011
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Oversight,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:09 p.m., in
Room 1100, Longworth House Office Building, Hon. Charles
Boustany [Chairman of the Subcommittee] presiding.
[The advisory of the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
Wednesday, February 23, 2011
Boustany Announces Hearing on Improving Efforts to Combat Health Care
Fraud
Congressman Charles W. Boustany, Jr., MD, (R-LA), Chairman of the
Subcommittee on Oversight of the Committee on Ways and Means, today
announced that the Subcommittee will hold a hearing on improving
efforts to combat health care fraud. The hearing will take place on
Wednesday, March 2, 2011, in Room 1100 of the Longworth House Office
Building, immediately after a brief Subcommittee organizational meeting
beginning at 2:00 p.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include experts on health care fraud from both the
public and private sectors. Any individual or organization not
scheduled for an oral appearance may submit a written statement for
consideration by the Committee and for inclusion in the printed record
of the hearing.
BACKGROUND:
Health care fraud costs the American taxpayer tens of billions of
dollars every year, significantly increasing Medicare spending. As a
GAO-designated ``high-risk'' program since 1990, Medicare continues to
attract those who defraud the government through kickbacks, identity
theft, and billing for services and equipment beneficiaries never
receive or do not need. The Medicare program covered 47 million
beneficiaries who are senior citizens or have disabilities in 2010 with
estimated outlays of $509 billion, according to GAO. With the Medicare
Board of Trustees predicting that Medicare expenditures will reach
nearly $1 trillion per year by 2019, a rapidly increasing amount of
taxpayer dollars will be vulnerable to fraud unless greater steps are
taken to stem the tide.
The Federal Bureau of Investigation estimates that between 3 and 10
percent of health care spending is fraudulent. With the Centers for
Medicare and Medicaid Services estimating current health care spending
to be over $2.5 trillion, anywhere from $75 to $250 billion is lost
annually to fraud. As much as $80 billion of this fraud is in the
federal health care programs, including up to $50 billion in Medicare
alone. Though it is difficult to accurately quantify the total costs of
health care fraud, experts at the National Health Care Anti-Fraud
Association predict that with rising health care spending, total health
care fraud, waste, and abuse could rise to as high as $330 billion per
year by 2013.
In announcing the hearing, Chairman Boustany said, ``The Federal
Government borrows 41 cents for every dollar it spends, and a growing
portion of this is within the Medicare program. At a time when the
Federal Government is hemorrhaging money, we have to make every effort
to stop fraud within the health care system. It is important that
Congress oversee what is happening to this money. This hearing will
explore recent efforts to combat Medicare fraud and what the government
can be doing better. It will also explore what the private sector is
doing to stop fraud and how public and private actors might better work
together in this effort.''
FOCUS OF THE HEARING:
The hearing will focus on current policies and programs designed to
prevent and punish Medicare fraud, as well as new and innovative
practices aimed at preventing health care fraud in the private sector.
The hearing will also explore how the public sector and private sector
can learn from each other about new tools to combat Medicare fraud,
waste, and abuse.
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Chairman BOUSTANY. Now we will turn to today's hearing on
health care fraud.
I want to begin this hearing by welcoming our guests, who
are here to join a very important discussion about health care
fraud. And, gentlemen, I know you have been very busy today,
and we appreciate you being here today.
For our first panel, we welcome Dr. Peter Budetti, who
serves as deputy administrator of the Centers for Medicare and
Medicaid Services and is director of its Center for Program
Integrity. Welcome.
We also welcome Mr. Lewis Morris. Mr. Morris serves as the
chief counsel to the Department of Health and Human Services'
Office of Inspector General, an organization that is on the
front lines of the fight against health care fraud. Welcome.
On our second panel, we will hear from Karen Ignagni from
America's Health Insurance Plans, and Lou Saccoccio from the
National Health Care Antifraud Association. Both of these
witnesses will provide insight into how the public and private
sectors work together to fight health care fraud and where we
might be able to improve anti-fraud efforts, and I thank them
for coming as well.
We also have a very rare chance to hear from Mr. Ike
Odelugo. Through a variety of schemes involving durable medical
equipment, Mr. Odelugo defrauded the Medicare program of an
estimated $9 million. Since his days of committing health care
fraud, he has assisted law enforcement efforts to track down
those engaged in similar activities. Today, he will describe
both how he went about defrauding the Medicare system and, in
his experience, just how easy it was.
This promises to be an eye-opening hearing on a very
critical topic. This is not simply about those committing
fraud; it is about the patients and health care providers that
are hurt by it. I come from a family line of physicians, and,
as a cardiothoracic surgeon, I certainly understand that every
dollar lost to health care fraud is a dollar not spent on
patient care.
And we are not talking about small sums of money. Health
care spending accounts for one-sixth of our Nation's economy,
and within this spending is an incredible amount of money lost
to fraudsters. Professor Malcolm Sparrow of the Harvard Kennedy
School said before the Senate Judiciary Committee in 2009,
``The units of measure for losses due to health care fraud and
abuse in this country are hundreds of billions of dollars per
year. We just don't know the first digit.''
The FBI estimates that between 3 and 10 percent of all
health care spending is fraudulent, as much as $250 billion
each and every year. As much as $50 billion of this yearly
fraud is in the Medicare program, and to put it another way,
that is over $135 million per day in the Medicare system alone.
Medicare crooks are robbing the American taxpayer each and
every year of the same amount it took Bernie Madoff decades to
rob from his private investors. Medicare fraud has become such
an attractive target for criminals that the FBI and OIG have
seen an increasing number of foreign criminal groups coming to
America to exploit the program because it is less risky and a
lot more lucrative than other illegal ventures.
Without action, the problem is only going to get worse. The
Medicare program had estimated outlays of $509 billion in the
year 2010, and that number is expected to grow at a rapid pace
as 7,000 baby boomers become eligible for Medicare every single
day in the year 2011. CMS expects annual Medicare spending to
approach $900 billion by 2019, and, as this spending goes up,
so will the amount of taxpayer money potentially lost to fraud.
While the Affordable Care Act included some new anti-fraud
provisions, it left a lot of suggestions by the Office of
Inspector General, Government Accountability Office, and
Members of Congress from both parties on the cutting-room
floor.
At the same time, the law created a host of new health care
spending programs. The Congressional Budget Office estimates
these new programs will cost $940 billion over the next 10
years and much more after that. CBO has estimated the act's
anti-fraud provisions would save about $5.8 billion over the
next 10 years. That is less than 1 percent of the expected
fraud against Federal health care programs during the same
period.
There is also good news on the subject. Just last month a
joint effort by the Departments of Justice and Health and Human
Services resulted in charges against 111 defendants for
allegedly defrauding the Medicare program of over $225 million.
This was the largest crackdown we have seen yet, and we look
forward to hearing about these and other efforts from our
witnesses.
There was also a lot to explore regarding potential
private-public collaborations. As private health insurers
develop new methods in technology to prevent fraud, it is
important that the public and private sector work together in
what should be a mutually beneficial collaboration.
With important reforms, new technology, better use of data,
and increased cooperation between the public and private
sector, it is my hope we can put a substantial dent in the
problem of health care fraud. This hearing seeks to begin that
process.
Before I yield to our ranking member, Mr. Lewis, I ask
unanimous consent that all members' written statements be
included in the record, and without objection, so ordered.
Chairman BOUSTANY. Mr. Lewis, we will now turn to you for
your opening statement.
Mr. LEWIS. Thank you very much, Chairman Boustany, for
holding this important hearing on ways to fight health care
fraud. This is an important topic that touches the lives of
millions of Americans. Our health care dollars are too
precious, and we must ensure that those dollars are spent on
health care.
Last year, this subcommittee held a hearing on fraud in the
Medicare program. We learned about new tools and new approaches
that were being used to protect Medicare patients and return
billions of dollars to the program and the taxpayers. We also
explored the new provisions of the Affordable Care Act that
gave government agents new tools to fight fraud.
Today, I look forward to learning how these tools are being
used to protect the Medicare program. I am interested in the
new initiatives of the Department of Health and Human Services
in this area. I am also interested in learning how people
become involved in Medicare fraud and how health plans,
government agencies, and organizations can work together to
detect and stop this abuse.
In closing, Mr. Chairman, I would like to thank the
witnesses for being here today. I thank you for your testimony
and your willingness to share your experiences and ideas. I
remain committed to protecting the Medicare program and finding
new ways to work together with you and my colleagues to fight
fraud in this important program. Together we can ensure that
the Medicare program remains strong for the next generation of
Americans.
With that, Mr. Chairman, I yield back my time.
Chairman BOUSTANY. Thank you, Mr. Lewis.
We have a vote called. I think what we will do is take the
witnesses' testimony now and then probably recess at that point
for three votes, and then we will return and resume the
hearing.
So now we would like to turn to our first panel of
witnesses. I want to welcome Dr. Peter Budetti, deputy
administrator and director of the Center for Program Integrity
with CMS. Mr. Budetti, you may proceed.
STATEMENT OF PETER BUDETTI, M.D., DEPUTY ADMINISTRATOR AND
DIRECTOR, CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE
AND MEDICAID SERVICES, WASHINGTON, D.C.
Dr. BUDETTI. Thank you very much, Chairman--Dr. Boustany
and Ranking Member Lewis and Members of the Subcommittee for
the invitation to discuss the Centers for Medicare & Medicaid
Services' efforts to reduce fraud, waste, and abuse in the
Medicare, Medicaid, and CHIP programs. I am also very pleased
to be sharing the table with my distinguished colleague in
fighting fraud, the chief counsel for the Office of the
Inspector General, Lewis Morris.
Mr. Chairman, from the first day that I had the privilege
of accepting this job about a year ago, I have been asked two
questions over and over again: Why do you let crooks into the
Medicare and Medicaid programs, and why do you pay their claims
when they are fraudulent? And I am very pleased to be able to
report to you today that we are making a great deal of progress
on both fronts. We will be keeping the bad guys out of the
programs, the people who don't belong there, while working to
make sure that the good providers and suppliers who are our
partners have, if anything, less difficulties with our
processes, and we will be moving to deny claims and screen them
out when they are fraudulent and should not be paid. And we
actually will be doing that in collaboration with our
colleagues at the Office of the Inspector General.
Under the leadership of Secretary Sebelius, CMS has taken
several administrative steps to better meet the emerging needs
and challenges in fighting fraud and abuse. The Secretary
consolidated within CMS, program activities into four centers,
one of which is the new Center for Program Integrity, and that
is the one that I have the privilege of leading. This has
served our purposes well. It has also helped foster our
collaboration with our law enforcement partners.
The Affordable Care Act also enhances this organizational
change by providing us with an opportunity to jointly develop
Medicare and Medicaid policies together, because the new center
combines the Medicaid Program Integrity Group and the Medicare
Program Integrity Group under the same roof for the first time;
and because the Affordable Care Act, for example, the screening
provisions in the Affordable Care Act apply equally to Medicare
and Medicaid, this gives us a new opportunity to consolidate
and to coordinate the programs and activities and policies
across both programs to assure better consistency in what we
are about.
You might wonder whether administrative changes at an
organization really mean anything. I can tell you that in our
case, creating a Center for Program Integrity that is on a par
with the other major components within the Centers for Medicare
& Medicaid Services, elevates the issue substantially for both
internally and also sends a message to the would-be fraudsters
that we are taking this seriously.
To explain how we have been transforming our fraud
detection and prevention work, I now draw your attention to our
chart which I believe we have also given you some hard copies
of--but this is a poster that depicts how we are moving from
our historical state which was based on ``pay and chase''--pay
claims first and then try to find problems afterwards--to
preventing fraud. That is our number one goal.
Number two, we are committed not to pursuing a monolithic
approach but, rather, to use our resources to apply to bad
actors and to identify those who pose the most serious risks to
our programs.
Third, we are taking advantage of advances in technology
and other innovations to modernize our approaches to doing
this.
Four, consistent with this administration's commitment to
being transparent and accountable, we are developing
performance measures that will specify what our targets are for
improvement.
Five, we are actively engaging our public and private
partners from across the spectrum because there is much to
learn from others who are engaged in fighting fraud, and we
know that the private sector is oftentimes victim to the same
schemes and to the same fraudsters as the public sector is.
Finally, we are committed to coordination and integration
among all the CMS fraud fighting programs wherever possible.
I would like to particularly stress one point, Mr.
Chairman, which is that as we crack down on those who would
commit fraud, we are mindful of the necessity to be fair to
health care providers and suppliers who are our partners in
caring for beneficiaries, and to protect beneficiary access to
necessary health services. This requires striking the right
balance between preventing fraud and other improper payments
without impeding the delivery of critical health care services
to beneficiaries.
We will always respect the fact that the vast majority of
health care providers and suppliers are honest people who
provide critical health care services to millions of Americans
every day, and we are committed to providing health care
services to our beneficiaries while reducing the burden on
legitimate providers, targeting fraudsters, and saving taxpayer
dollars.
I appreciate the opportunity to meet with you today, and I
will be happy to answer any of your questions later on. Thank
you very much.
Chairman BOUSTANY. Thank you, Dr. Budetti, and I should say
also that your full written statements will be made part of the
record, as is customary.
[The prepared statement of Dr. Budetti follows:]
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Chairman BOUSTANY. Now, Mr. Morris, you may present your
testimony.
STATEMENT OF LEWIS MORRIS, CHIEF COUNSEL, OFFICE OF INSPECTOR
GENERAL, WASHINGTON, D.C.
Mr. MORRIS. Good afternoon, and thank you for the
opportunity to testify about the efforts of the Office of
Inspector General and our partners to combat health care waste,
fraud, and abuse.
The OIG has been fighting the fight against health care
waste, fraud, and abuse for over 30 years. Most of our health
care integrity efforts are funded by the Health Care Fraud and
Control program account, or HCFAC, and this anti-fraud program
is a prudent investment of taxpayer dollars. Last fiscal year,
HCFAC activities returned an unprecedented $4 billion in
fraudulent and misspent funds. Over the last 3 years, for every
dollar spent on the program integrity and enforcement efforts,
the government has returned an average of $6.80. But despite
our successes, there is much more to be done.
Those intent on breaking the law are becoming more
sophisticated, and the schemes more difficult to detect. Some
fraud schemes are viral. They replicate easily and they
migrate. As law enforcement cracks down on a particular scheme,
the criminals may redesign it or relocate to another city. When
their schemes are detected, some perpetrators have fled with
stolen Medicare funds and become fugitives.
To fight health care fraud, our response must be swift,
agile, and well-organized. My written testimony describes in
more detail our collaborative efforts and fraud-fighting
initiatives, and this afternoon I would like to highlight three
of the government's ongoing initiatives.
First, our Medicare Strike Forces are cracking down on
criminals in fraud hot spots across the country. Since their
inception in 2007, Strike Force operations have charged almost
1,000 defendants whose fraud schemes have involved more than
$2.3 billion in Medicare claims. Just last month, as you
referenced, sir, Strike Forces engaged in the largest Federal
health care fraud takedown in history. The teams charged more
than 100 defendants in nine cities, including doctors, nurses,
and health care company owners. The alleged fraud schemes
involved more than $225 million in Medicare billings.
Second, the OIG is using its exclusion authorities to bar
from the Federal health care program those individuals who lack
integrity and pose a threat to our beneficiaries. In
particular, we are holding responsible the corporate executives
who are accountable for their company's criminal behavior.
Health care is not limited to career criminals and sham
providers. Unfortunately, major corporations also commit fraud,
sometimes on a grand scale. We are concerned that some
executives of these health care companies may believe that as
long as the ill-gotten profits outweigh civil penalties and
criminal fines, health care fraud is worth the risk. The long
and short of it is that we aim to change that cross-benefit
calculus by excluding the executives who are responsible for
the fraud either directly or because of their position of
responsibility in the company. We are mindful of our obligation
to exercise this authority judiciously, but if an executive
knew or should have known of the criminal misconduct of his
organization, we will operate on the presumption in favor of
excluding in order to protect our program and its
beneficiaries.
Our third initiative enlists the public and the vast
majority of honest health care providers to help prevent fraud.
For example, we are conducting free compliance seminars in six
cities. One of those is taking place in Tampa, Florida, today.
These seminars educate providers on fraud risks and share
compliance best practices. We also recently published a fraud
and abuse booklet for new physicians. It provides guidance on
how physicians can comply with the fraud and abuse laws in
their relationship with papers, vendors, and fellow providers.
We have had over 27,000 hits on our Web site for this booklet
alone.
We are also reaching out to the public to play a very
special role in helping us track down Medicare fraud fugitives.
We have posted online on our Web site OIG's most wanted health
care fraud fugitives, and I have included a snapshot of that
Internet posting for your consideration. Our current most
wanted list includes 10 individuals who allegedly defrauded
taxpayers of more than $136 million.
In conclusion, the OIG is building on our successes and
employing all the oversight and enforcement tools available to
us to protect our health care programs, the people served by
them, and the American taxpayer.
Thank you for your support of our mission, and I would be
pleased to answer any questions.
[The prepared statement of Mr. Morris follows:]
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Chairman BOUSTANY. Thank you, Mr. Morris and Dr. Budetti.
What we are going to do now, since we have this pending
vote, we are going to recess and we will return promptly--we
have three votes--and resume with questioning. And I appreciate
your indulgence.
[Recess.]
Chairman BOUSTANY. The committee will resume its
proceedings, and we will start off with questions, now that you
all have both given your testimony.
Mr. Morris, I think you were before our committee last
year, and we spoke about fostering better cooperation between
health care providers and anti-fraud efforts, and both of you
alluded to this in your oral testimony.
I am interested in further exploring the role of physicians
in preventing health care fraud; identifying it, helping you on
the front end to identify it. Certainly physicians, nurses,
other medical professionals, are in a unique position to pick
up on fraudulent activity on the ground, as sort of direct
intelligence on the ground as to what is happening. And I know
you and I spoke about the case in Lafayette, in my hometown,
and how it involved a whistle-blower who was actually a partner
of a physician who brought something to light that maybe for
years had been ongoing and really--was really not detectable
until that whistle-blower activity.
So what barriers are there now that you are seeing that
would inhibit physicians and other providers from coming
forward and helping you in your efforts to identify potentially
fraudulent activity?
Mr. MORRIS. I think there are a number of opportunities. We
have to do a better job of reaching out to physicians and other
professionals. Part of it is through education. I made
reference in my written testimony to the Road Map for new
physicians, and the idea behind that actually came from medical
residents who told us they didn't understand what the fraud and
abuse laws were. OIG put together a booklet that will help them
not only protect themselves but also be able to recognize when
a practice is doing something that they might not want to get
involved in. Education is part of our outreach.
Every time we go out and demonstrate our commitment to
compliance, demonstrate that we recognize that this is a
complex program and that there are lots of opportunities to
make mistakes, and that it is incumbent on physicians to
embrace compliance, that that is the way to go. We are not a
hammer looking at everything as a nail. Building that trust
goes a long way.
Next week we are meeting with the American Medical
Association to get their ideas on how we can work together
better and ways we can spot opportunities for collaboration. I
think a big part of it is education. A large part of our
efforts is also sending a message of compliance, that
physicians and nurses and other professionals can be our
partners in ensuring that waste, fraud, and abuse don't harm
our program.
Chairman BOUSTANY. Thank you. Dr. Budetti.
Dr. BUDETTI. Yes. Thank you, Mr. Chairman.
We have had a series of regional fraud prevention summits,
and at each one of the summits, the Attorney General and the
Secretary have chaired them, and then we have had panels with
law enforcement and providers and beneficiaries. And then I
have put together breakout sessions with providers at each one
of the regional fraud prevention summits, and I have to say, I
am extremely encouraged by the response of physicians and
providers that I have been meeting with in these groups; that
they are now very interested in working with us on this, to the
point where I have been so impressed that I actually have
created a position within the Center for Program Integrity of a
medical officer.
So I am hiring a full-time medical officer to work with the
physicians and other health care providers around the country
on program integrity issues, both to get the message to them
but also to listen and to figure out what it is that we can
work on together and what we could do different inside of CMS
that would be more responsive. Because the message we have
gotten from the providers was very straightforward, but it went
in two directions. It was, on the one hand, they really want to
work on this. On the other hand, they want us to do what Mr.
Morris just said, which is not treat everybody the same;
recognize the big difference between fraudsters and honest
physicians, and we are committed to doing that. So I think
there is a real opportunity here to work very closely with the
medical community and other providers because the enthusiasm
seems very strong on their side.
Mr. MORRIS. If I could add one more thing, we share the
view that physicians should be part of our team, and we also
have a chief medical officer who provides valuable counsel to
us as we do our work, planning and ensuring that we best
understand what is going on from the physician's perspective.
Chairman BOUSTANY. I know in the private sector, the
private insurers often go through credentialing processes. Can
you talk a little bit about what you are doing now at CMS in
that regard?
Dr. BUDETTI. One of the major provisions in the recent
legislation that will take effect, our final regulation will
take effect on March 25, speaks to screening of applicants to
be able to bill Medicare and Medicaid. We all know that that
has been kind of a soft spot in the programs, people getting in
too easily. But under the new authorities, we are doing risk-
based screenings so that categories of providers and suppliers
are assigned to different levels of risk with different levels
of screening. Then they also have to revalidate periodically,
every 3 or 5 years depending upon the categories. So this is a
new approach. It is going to mean a much greater degree of
scrutiny for the high-risk providers, and about the same
scrutiny, but maybe done more efficiently for other providers.
We get something on the average of 19,000 applications
every month to become a provider in Medicare. So it is a large
number of people that we have to screen through because most of
them are going to be honest, of course, but with our new
screening systems, we are very pleased to have that authority
and we are putting it into place with a great deal of energy.
Chairman BOUSTANY. Thank you. Mr. Lewis, you may inquire.
Mr. LEWIS. Thank you very much, Mr. Chairman. Welcome.
Dr. Budetti, in your testimony, you talk about the new
fraud fighting tools because of the Affordable Care Act. If the
Affordable Care Act is repealed, what would that do to your
ability to fight fraud in Federal health programs?
Dr. BUDETTI. Thank you, Mr. Lewis.
Yes, the Affordable Care Act did provide us with very
powerful new tools, as well as resources. Both of those are
extremely important to us. I mentioned the screening
provisions. The Secretary also has authority to declare a
moratorium on enrollment of new providers or suppliers, where
necessary, to fight fraud. We have a different test for when we
can suspend payments when there is a credible allegation of
fraud. We have coordination of a number of activities such as
termination of Medicare and Medicaid, linking those two
together. There is a variety of other provisions related to
enhancing the requirements for durable medical equipment and
home health that are areas of high risk. There are additional
penalties for violation of the statutes that are involved.
There is a wide range of very important authorities in the
Affordable Care Act, and we are very pleased to have them and
look forward to implementing all of them.
Mr. LEWIS. Could you explain to Members of the Committee
why the Medicare Strike Forces have been so successful, and do
you plan to expand them?
Dr. BUDETTI. Mr. Lewis, I am very pleased with the success
of the Strike Forces. I think I will turn to my colleague, Mr.
Morris, who is more directly involved in those.
Mr. MORRIS. The Medicare Fraud Strike Forces represent a
collaborative effort that includes the Inspector General's
Office, CMS, the Department of Justice, and U.S. Attorneys'
Offices. Part of the reason they are successful is we are
working better together. We are using data to spot fraud hot
spots and get to the problem quicker. Instead of waiting 6
months or a year to identify an abusive provider, we know
within weeks if someone is engaged in Medicare fraud.
By putting resources into these fraud spots and focusing
prosecutors and dedicated investigative resources, we are able
to more effectively deploy them in strategic fashion. We are
getting remarkable results as a result of those efforts.
Mr. LEWIS. Thank you very much.
Mr. Morris, in your testimony you discuss the agency's
ability to exclude providers from Medicare. On average, how
many providers do you bar from Medicare each year, and how has
your focus on corporate executives helped you fight fraud?
Mr. MORRIS. On average, we exclude around 3,300 individuals
and entities each year from the Federal health care programs.
The basis of those exclusions include convictions related to
Medicare fraud and patient abuse, as well as a number of
discretionary authorities; loss of licensure in a State, for
example.
One of the things that we would like to close a loophole on
is our ability to go after corporate executives who are
responsible for corporate crime but evade our exclusion tool by
simply quitting the company. The current statute only allows us
to exclude if the person continues to be employed by that
sanctioned entity. We think we need to close that loophole.
We also need the ability to focus on related entities. If
we identify one nursing home that has committed criminal abuse
of its residents, ofttimes that is because the corporate heads
have denied needed resources to that facility. It has been very
difficult for us to get up to the corporate heads and hold them
responsible for the abuse of residents in an individual
facility, and the amendment of our discretionary exclusion
authority would give us the ability to do that and be able to
say to that corporate executive, you are out of our program
because you are not treating our residents the way we expect
you to.
Mr. LEWIS. Again, I want to thank the two of you for being
here and thank you for your service. I yield back, Mr.
Chairman.
Chairman BOUSTANY. I thank the ranking member for his
questions.
The chair now recognizes Ms. Black, if you are ready, or I
can now move on.
Ms. BLACK. Is there someone else ready?
Chairman BOUSTANY. We will give you some time. Ms. Jenkins,
you may inquire.
Ms. JENKINS. Thank you, Mr. Chairman. Thank you for joining
us.
Mr. Budetti, one of the new tools put in place by the new
health care law was the requirement for face-to-face meetings
for certain Medicare services. In Section 6407 of the bill, it
requires that a provider conduct face-to-face meetings before
certifying that patient is eligible for their home health
services. And while I understand the intent of this regulation
to fight abuse of the system, I wonder if your agency has taken
regional concerns into consideration.
In a rural State like Kansas, we already have a shortage of
physicians, and this requirement is simply not feasible for
direct supervision for outpatient therapeutic services for
critical access in rural hospitals. If the regulations are
followed as written, many of my hospitals would have to
eliminate a lot of outpatient services, and that is creating
access and cost issues for the beneficiaries.
So I was just wondering if you could speak to any
discussions that you have had or any ideas for how to make this
new requirement work in our rural communities.
Dr. BUDETTI. Well, thank you, Ms. Jenkins. I think that, of
course, we are in the position of enforcing the statute as
written, but we are also very much interested in not cutting
off beneficiary access, and we are very sensitive to the kinds
of issues that you are raising.
This area of home health and also the area of durable
medical equipment have been high-risk areas for us, and so it
is quite important for us to move forward with implementing
some of the different approaches. But that is an area that we
did listen to some of the comments that we received about the
timetable, and we are responding to that, and we are very
interested in working on this.
And I would be delighted to listen to any specific incident
that you would like to relate from your home State of Kansas. I
would be pleased to meet with you and listen to that and try to
understand exactly what the kinds of issues are and how we
might address those.
Ms. JENKINS. Okay. Thank you. We will look forward to
taking you up on that offer.
On another note, CMS is expanding their use of recovery
audit contractors, the RACs, and authority given to them by
this new law. And I have some concerns that these contracts are
for profit and aggressively going after claims with cash-
strapped hospitals, especially in rural States like Kansas.
While I agree that waste and fraud needs to be found and
addressed, this seems to me to be a duplication of audit
services. Search and probe audits were already occurring before
this RAC process was authorized. The rate of denied claims by
the RAC which are then being overturned is over 70 percent.
During this time, if a hospital does not pay the recoupment
requested and allows it to follow the automatic process,
interest is then charged on the claim amount to the hospital at
over 13 percent; and even if the claims are reversed, they
don't get their interest back.
So questions for you: What is the net cash to CMS on the
RAC program, and can you speak to whether this is actually
saving money in the health care system and increasing quality
patient care, or is it simply shifting more of the cost to
these small hospitals by requesting payment after the fact and
adding to their administrative costs?
Dr. BUDETTI. The recovery audit contractor program is, as
you mentioned, one that is based on contingency fees, and so
they are paid for out of their recoveries, and so that is the
structure of the RAC program, as you mentioned.
And the RAC program was implemented, first, in a small
number of States, and it did experience a number of issues. And
so the feedback that we got during the initial implementation
phase has been taken into very strong consideration in shaping
the way the program is being implemented going forward. We
phased in the full national implementation for just that
reason, and we are also taking that experience into account as
we also follow the new provisions that require the expansion of
RACs to Medicaid and to Part C and D of Medicare.
So the way that the RACs work is, as you mentioned, in
terms of a portion of the recoveries is how they are funded,
but we are working very, very hard to make sure that the kinds
of things that the RACs learn both provide a basis for
education to other providers so that they can deal with those
kinds of issues and also so that we understand how to improve
the RAC program.
I would have to get back to you on the exact recoveries. I
do know that the rate of being overturned on appeal was much
higher. I don't offhand remember the exact numbers but it was
much higher during the initial phase, the pilot phase, and that
many of the issues that came up in that setting are now being
taken into consideration on implementation of the full program.
But I will be happy to get you those numbers.
Ms. JENKINS. Okay. I would appreciate it. Thank you. I
yield back.
[The information follows, The Honorable Ms. Jenkins:]
[GRAPHIC] [TIFF OMITTED] T7652.028
Chairman BOUSTANY. The gentlelady, Ms. Black, is
recognized.
Ms. BLACK. Thank you, Mr. Chairman.
My question is for you, Mr. Morris, and I am going to
borrow on my experiences at my State level. Tennessee was the
pilot project for initiating universal care, and that program
was called TennCare. It was unsuccessful. It failed and we had
to disassemble it because of its high costs.
And one of the problems in that program that caused it to
fail is the sheer amount of waste and fraud. And we do have an
Office of Inspector General, and one of the things that we saw
that was so effective is to have a hotline for people to
actually call and report abuses, and it was very successful.
I didn't notice in your testimony--and of course, you have
the most-wanted fugitives up here and the hotline for that--but
do you have something in place that if just an individual knew
of someone that was abusing the program, that they would be
able to make a call so that you could investigate?
Mr. MORRIS. Yes, we do. The number is 1-800-HHSTIPS, T-I-P-
S. We have operators standing by. They are trained to process
complaints and concerns, many of which actually don't pertain
to our program.
As an example, we get calls about Social Security checks.
The operators are trained to send those over to Social
Security. Operators also vet the continuing complaints and
refer many of them to our Office of Investigations or our
Office of Audit Services. We get thousands of hotline calls
every month, and one of the jobs of these operators is to go
through them, and those that have potential to start a criminal
investigation or a civil investigation are sent to our
investigative teams.
Ms. BLACK. And to follow up on that, can you give me some
kind of an idea about how effective those calls are? Are you
finding that you are able to pick up fraud, waste, and abuse on
those calls--or from those calls?
Mr. MORRIS. I would need to get back to you with the
specific percentages within the universe of what actually turn
into viable criminal investigations. As I mentioned, a number
of the calls come from citizens who just need to talk to
someone about a problem with the government. When we are not
able to be directly responsive because it is an issue outside
of our agency, we do make sure they get to the right place. But
I will be glad to get back to you on the specifics of what
percentage of those calls translate into a viable investigative
lead.
Ms. BLACK. And how is it that you let the public know that
this line is accessible and available to them?
Mr. MORRIS. Well, it is on our Web site, which gets
thousands of hits every week. We make a point of bringing it to
the attention of communities that we speak to.
I mentioned in my oral remarks that OIG staff are in Tampa,
Florida, today, talking about compliance training to the
provider communities down there, and the hotline is one of the
features that we talk to them about. That way, if they see a
problem, they know there are avenues to bring it to our
attention.
Ms. BLACK. I would really like to get further feedback from
you on how effective those calls are and whether you really are
seeing some actual useful information.
Ms. BLACK. My second question along that same line is, you
actually have in your written testimony how critical it is for
the Office of Inspector General to obtain real-time data on
Medicare claims from CMS. Are you able to get that data in a
timely fashion?
Mr. MORRIS. We are make important strides, thanks to our
partnership with Dr. Budetti and his team. The challenge right
now, frankly, is one of technology. Dr. Budetti can speak
better to this, but I believe that many of the claims
processing systems that CMS has are somewhat antiquated, and
there are about 20 different systems in play. CMS is making
great efforts to move those systems into the 21st century so
that we will be able to get data more quickly.
The other challenge, of course, we face is being able to do
something with the data once it arrives at our door; and we are
committing significant resources to be able to analyze the data
so we can spot fraud trends and get to the site of a crime as
quickly as possible.
Ms. BLACK. Well, thank you. And I do absolutely agree with
you, because that is one thing we found in our State is that
the data was there, and being able to mine that data was very,
very helpful. So I certainly will encourage that we continue to
do that. Thank you. I yield back my time.
Chairman BOUSTANY. Thank you. The chair now recognizes Mr.
Becerra to inquire.
Mr. BECERRA. Thank you, Mr. Chairman, and again, thank you
very much for having this be the very first hearing that the
Oversight Subcommittee does.
Gentlemen, thank you very much actually for your patience,
the interruption with votes. We appreciate you being here and
the work you are doing.
Quick question. How much are you able to do with the health
community in the private sector? We are talking about Medicare
for the most part, Medicaid, but we know that there is a lot
going on that overlaps between the private sector health care
system and the public sector health care system. Any quick
examples--and I want to get to some other questions--but any
quick examples of how CMS is able to work with the private
sector in health care to try to deal with fraud that hits both
public and private sector health care?
Dr. BUDETTI. Sure. We are doing two things that I can speak
to right off the top of my head. One is that we are now in the
process of moving into, as Mr. Morris said, the 21st century,
with the technology and the sophisticated analytics that are
currently being applied in the private sector both in the
health care industry and in other industries. So we are
reaching out to get the best ideas and the best approaches from
the private sector and use them in the public programs. That is
one thing that we are doing.
We also have been engaged for some time in a dialogue with
the private sector about building a public-private partnership
to work together to fight fraud, and that is something that my
colleague from the Inspector General could also speak to.
Mr. MORRIS. I did a quick check last night of the number of
cases that our Office of Investigations is working with its
private sector counterparts. We have 50 ongoing cases where we
are sharing intelligence and resources, to tackle a problem
which is both in the private and the public side. The NHCAA--
you will be hearing from its representative in the next panel--
I think will tell you that we are working very effectively
together in finding new ways to improve. We are working on a
best practices document, for example, so that we can find
additional ways to multiply our efforts.
Mr. BECERRA. Excellent. I hope you continue to give us
reports on how you are working together because we know that
the costs of health care outside of Medicare and Medicaid are
helping drive the costs of Medicare and Medicaid higher. And so
to the degree that we help them tamp down costs on the private
side, it helps us control them on the public side.
A question--and I had ask asked my staff what the acronym
stood for, because last year my father ended up having a
difficult time, and he survived an episode with a heart
condition, but he got a CPAP machine, and it stands for
continuous positive airway pressure. I just got to the point of
calling it the CPAP, the air machine. It helps him breathe.
We know that there has been an issue with fraud in the area
of DME, durable medical equipment, the CPAP machine, the oxygen
equipment, the wheelchairs, the hospital beds that are often
provided to beneficiaries under Medicare. And in the next
panel, we are going to hear from an individual who was
convicted of Medicare fraud involving durable medical
equipment.
I wonder if you could tell me what was done in the historic
health care reform of the Affordable Care Act which is going to
help us address what we know is pretty aggressive fraud in the
area of durable medical equipment.
Dr. BUDETTI. The area of durable medical equipment, as you
mentioned, also is in fact one of the high-priority areas. And
I mentioned before that we had structured, as the act requires,
our screening processes by categories, and the highest level of
risk includes new durable medical equipment suppliers, and so
they will be subject to the highest level of screening for new
entrants.
There are also provisions in the Affordable Care Act that
provide for increased surety bonds and other kinds of oversight
of new DME providers and initial claims. We are also very much
involved in a completely different approach which has to do
with the implementation of competitive bidding for durable
medical equipment, because when you have a limited number of
bidders who undergo scrutiny to get into that program, we
believe that will also be helpful in terms of having controls
on it. And we have had a series of durable medical equipment
specific initiatives in the past in south Florida and
elsewhere.
So it is something that we are attacking from multiple
points because that is an area that we have to do a better job
of preventing fraud.
Mr. BECERRA. Mr. Morris, instead of answering to that
question--I know I am going to run out of time--can I ask one
last question? You are obviously using personnel. They are
obviously having success in helping us detect and track down
some of this fraud. What happens if you have to furlough or
reduce your personnel because of budget constraints?
Mr. MORRIS. Because the significant part of our funding is
off of the general appropriations--it is through the HCFAC
account--we are going to be able to keep a law enforcement
presence. It will be reduced, unfortunately.
I think the other challenge we will face will be just the
general disruption when the government goes through a shutdown
process. We will spend a lot of time on that instead of
catching bad guys, but to the extent possible, with the funds
available, we will continue to fight against fraud.
Mr. BECERRA. Thank you. Thank you, Mr. Chairman.
Chairman BOUSTANY. Mr. Gerlach, you may inquire.
Mr. GERLACH. Thank you, Mr. Chairman, and thank you,
gentlemen.
Really quickly, want to give you a constituent matter that
I just uncovered 2 months ago, and I would like to get your
reaction to it based upon your testimony that you have
presented to the subcommittee.
About 2 months ago, a constituent of mine, someone who is
on Medicare, sought medical advice from his orthopedic surgeon
regarding an MCL problem he was having with his knee. The
orthopedic surgeon then prescribed a knee brace for him to help
him with his recovery of that situation.
When Medicare was billed for that knee brace, it was billed
for about $690. That really struck this gentleman as being very
odd, based upon the knee brace that he got. So he went online
to the manufacturer's Web site and saw online that the
manufacturer is only retailing this knee brace for about $190,
about 2\1/2\ to 3 times more being reimbursed by Medicare for
what the manufacturer is retailing this knee brace for.
So with that as a background, Mr. Budetti, for example, in
your testimony you indicate that the Affordable Care Act has
offered more opportunities and more provisions to combat fraud,
as well as new tools for deterring wasteful and fiscally
abusive practices to ensure the integrity of the program. So
what would your specific recommendation be today to immediately
halt this practice of Medicare paying 2\1/2\ to 3 times for
this kind of medical product? And I am sure there are thousands
of kinds of medical products that the system or the program
reimburses for that are probably out of whack for what you
could pick it up retail for. What are you doing specifically to
halt that practice immediately?
Dr. BUDETTI. Thank you for that question, Mr. Gerlach.
What I mentioned just a minute ago, the competitive bidding
for durable medical equipment projects a very substantial
reduction in the prices that will be paid by Medicare. I
believe it is on the order of 32 percent are based upon
competitive bidding, and we believe that introducing this level
of competition into the provision of durable medical equipment
supplies is an important step towards combating exactly what
you just mentioned.
I would also add in follow-up to Ms. Black's question from
a minute ago----
Mr. GERLACH. May I interrupt just so I understand exactly
what you are saying?
So you are going to have folks competitively bid to have
the ability to be the entity that provides the product for that
particular medical condition. Are you going to relate at all
whatever those bids are to the real-world retail price for
those products, or are you just going to allow bidding among
certain entities but they still, even though you picked the
lowest bid, may not be tied to what the reality is in terms of
what that product retails for in the real world?
Dr. BUDETTI. You know, I would be very--I can't--I can't
speak to the exact market dynamics that governed our initial
implementation of the competitive bidding, Mr. Gerlach. I would
be happy to look at exactly that issue for you and get back to
you on how well the bids that we took compared to the market
prices that we otherwise would have seen, because that is the
core of what we are trying to do is to get to a point where we
are paying either market price or whatever the market should be
charging for things.
Mr. GERLACH. When was the last time, if you know, this
competitive bidding process was used for a knee brace product
in the program so that that would have been the basis to set
this new brace price at $690?
Dr. BUDETTI. We are just implementing the competitive
bidding this year, and it was in nine areas, but the projection
is for it to be phased in across the country. I will be happy
to get you all the details.
[The information follows, The Honorable Mr. Gerlach:]
[GRAPHIC] [TIFF OMITTED] T7652.029
Mr. GERLACH. Thank you, sir.
And real quickly, Mr. Morris, your office is obviously
responsible for auditing, evaluating these programs. Have you
at any time in the past looked at the overcharging, overpayment
for products of this nature? And if so, what have your
recommendations been, and how has CMS handled those
recommendations; or has this been an issue you have not looked
at before?
Mr. MORRIS. This is an issue we have looked at a great deal
over the last 10 years or more. The OIG, of course, does not
set prices. It merely does the audits. But we have looked at
everything from wheelchairs to oxygen concentrators to
orthotics and, in each case, reported back to CMS that we
believed that the program is paying way too much.
Mr. GERLACH. What has been the response by CMS to those
recommendations?
Mr. MORRIS. It has varied a great deal on the particular
product, but CMS has generally been receptive to our
recommendations. In some instances, they put it out they felt
they had legal barriers to actually reducing the prices. The
competitive bidding process----
Mr. GERLACH. Have you had a systematic recommendation to
cover all of the products that are utilized through the
program, or have your recommendations been product specific, a
wheelchair or a knee brace or an oxygen tank?
Mr. MORRIS. They have been product specific, but with
broader programmatic recommendations that would go to the
principle of we ought to pay at market rate and not above it.
Mr. GERLACH. It seems to me there ought to be some
systematic recommendations, not individual equipment specific
recommendations. There are probably problems across the entire
spectrum of product reimbursement in the program. So,
appreciate your additional thoughts on that.
Thank you, Mr. Chairman.
Chairman BOUSTANY. Mr. Kind, you may inquire.
Mr. KIND. Thank you, Mr. Chairman. Thank you for holding
what I think is a very important hearing, and hopefully we will
have an opportunity in the course of this session of Congress
to get into this as well. I think it is very helpful.
Nothing drives people crazier than the thought of wasteful
payments going out to fraudulent claims being made against the
Medicare system. So I appreciate the work both of you gentlemen
and your agencies are doing to combat this.
Mr. Morris, let me start with this. Have you had a chance
to quantify the type of return we get on the dollar that we
spend on anti-fraud measures, what type of return that we are
recovering from that?
Mr. MORRIS. Yes, we have. We are very mindful of how
valuable the taxpayers' dollars are, and we want to make sure
we are a good investment. If you look at the money spent on our
health care anti-fraud efforts in the last 3 years, we brought
back to the government $6.80. That is a great ROI. So the short
answer is yes, and it is a great number.
Mr. KIND. So, under the Affordable Care Act, if I got my
numbers right, roughly $350 million was authorized over a 10-
year period for the feet-on-the-street effort, and I think the
President's 2012 effort was asking for about $270 million for
HCFAC. You think that is going to be a wise use of the money as
far as the potential for return?
Mr. MORRIS. I confess that I have a somewhat self-
interested answer here. Yes, of course. More seriously, I can
tell you that there are cases that we want to get to that our
current resources do not allow us to. By way of example, we
have put a lot of resources into the Medicare Strike Forces and
realized a tremendous return both in taking bad guys off the
street and saving Medicare money, but it has meant that some of
our civil cases, civil cases involving pharmaceutical fraud and
others, have had to wait. The ability to bring more feet to the
job and focus on those cases I think will return very positive
benefits.
Mr. KIND. So you don't have to answer this, but it just
seems intuitively, then, that this is an area where further
budget cuts may end up costing us more in the long run if we
are taking away that enforcement capability or investigative
capability.
To follow up on what I think Ms. Black was referring to
earlier, are we getting better at being able to distinguish
innocent errors that are submitted versus outright fraudulent
practices? Mr. Budetti.
Dr. BUDETTI. This is a very high priority for us to do
exactly that, and that is why I mentioned the risk-based
approach that we are taking. We are implementing a variety of
different private sector approaches analyzing data and not just
claims data, but moving into a much wider range of data. We
have set a goal of having essentially zero false positives. We
want to be very sure that we have reached the right conclusions
in analyzing the data. So, yes, so I believe that we are making
great progress in that direction.
Mr. KIND. Let me ask both of you if you have an opinion on
this. But I think ultimately the key to whether health care
reform is successful or not is our ability to change the way we
pay for health care in this country, starting with Medicare and
moving from the fee-for-service system we currently have under
Medicare to a fee-for-value or a quality- or outcome-based
reimbursement system. If we are successful in making that
transition to a new reimbursement, rewarding value over volume,
what impact is that going to have on fraudulent practices
throughout the country?
Mr. MORRIS. I think it is going to have the potential of
reducing conventional fraud, in for example the paying of a
kickback to get a service ordered. The challenge we will face
is that in any system of reimbursement, there are opportunities
to exploit it. As we move into an integrated delivery system
where we are rewarding quality, we are going to also need to
make sure that some of the other reverse incentives don't
result in skimping on care or steering of patients. We are
mindful of those risks, but I think it is critical that we move
to an integrated system and that we are going to have to give
the system an opportunity to sort of try itself out. Every
system has opportunities for exploitation and we are going to
need to be vigilant.
Mr. KIND. Sure. Dr. Budetti.
Dr. BUDETTI. Yes. I think that, as you are well aware, we
are moving towards implementing a number of new ways of
organizing and paying for care with accountable care
organizations and medical or health homes, value-based
purchasing, a variety of different initiatives. In each case,
we are raising exactly what Mr. Morris raised which is, if we
are going to approach this from a new direction, let's look at
what the vulnerabilities are. Let's do that prospectively so
that we don't set ourselves up for a different kind of problem
going forward.
So, yes, we might very well escape some of the past
problems that we have had. We want to also be on the lookout
for what kind of new situations we might encounter as we change
the system.
Mr. KIND. All right. Thank you both. Thank you, Mr.
Chairman.
Chairman BOUSTANY. Mr. Buchanan, you may inquire.
Mr. BUCHANAN. Thank you, Mr. Chairman for holding this
important hearing. Gentlemen, I was curious because I hear so
many numbers and I am a Member from Florida. But when you look
at just the fraud or abuse or whatever for Medicare and
Medicaid, what is the best number? What is the range that you
use? Because there are so many numbers out there. I hear $100
billion, $60 billion. What is the estimate as it relates to
basically Medicare and Medicaid?
Mr. MORRIS. We share your frustration that there is not one
number and that there seem to be estimates all over the place--
you hear everything from 3 to 10 percent, 3 percent being what
the NHCAA estimates, 10 percent being what the GAO estimated
about 10 years ago. To be honest with you, I don't think we
know with precision how much fraud there is out there. That is
in part because fraud is, by the nature of the crime,
concealment. Good frauds go undetected.
Mr. BUCHANAN. But what is your best estimate? As someone
who deals in this every day, what would you say is a range from
a high to a low or whatever?
Mr. MORRIS. My best estimate, not based on any empirical
proof but just everything we see, is that the fraud ranges
anywhere from about $60 to $100 billion a year across all
systems, public and private.
Mr. BUCHANAN. And how much is the public system, Medicare
and Medicaid; just your estimate? And I am not holding you to
it. I am just trying to get a sense of what that might be.
Mr. MORRIS. Well, if we assume that both public and private
systems are preyed on by the same set of criminals, I think we
can presume that we would share our proportion of the total
health care expenditures. So it is going to be in the tens of
billions of dollars. It is way too high.
Mr. BUCHANAN. Doctor, what is your thought on it?
Dr. BUDETTI. Yes, sir. I think that whatever it is, it is
too high. I think that whether we have a number or not, that
one thing that we do see is that the more we look for it, the
more we find.
Mr. Morris mentioned the return on investment. The return
on investment has been going up consistently over time as we
have spent more money to fight fraud. I view that as both good
news and bad news. It means that it is a wise investment of
public funds. It also means that we are not on the flat of the
curve, so to speak; that there is still quite a bit of fraud
out there for us to find and to deal with. So I think that
whatever the number is, it is very substantial, and it needs
our attention.
Mr. BUCHANAN. Let me mention, you always hear--you brought
it up here a few minutes ago about south Florida, Miami/Dade/
Broward Counties. And being the only member on Ways and Means
in Florida, I hear a lot of that even in my own district.
But let me state something that I read. It was reported by
the University of Miami. There was a recent report out that
said it is their understanding that six of the Nation's top
most-wanted Medicare fraud fugitives have been given refuge in
Cuba. Could this be the case? Is it ongoing? Is there any
organized crime component that you are aware of as it relates
to fraud? And can it be any kind of a tie-in with the Cuban
Government?
Mr. MORRIS. I am not aware of any tie-in to foreign
governments as it relates to the health care fraud perpetrators
that we either have listed here or elsewhere.
Mr. BUCHANAN. Have you heard about the six of the Nation's
most-wanted Medicare fraud victims are in Florida--or, I mean,
are in Cuba?
Mr. MORRIS. I have not. I have heard rumors that three of
them are in Cuba in a Cuban jail.
Mr. BUCHANAN. Okay. Well, we hear different information.
Doctor, do you have anything to add to that?
Dr. BUDETTI. No, I don't.
Mr. BUCHANAN. The other thought is, and you touched on this
a little bit earlier, that you are working with the private
sector together to combat fraud. In terms of the various
agencies--you know, and I heard you touch on it a little bit--
could you expand on that a little bit more, what you are doing?
I know you can't be everywhere at all times. But in terms of
working with the private sector to deal with fraud, what are
you actually doing?
Mr. MORRIS. Well, let me give you a great example. The
Investigation of the Year, awarded by the NHCAA last year, was
for a collaborative effort in Kansas, focusing on a pill mill,
two defendants who were pushing painkillers. They were
associated with potentially 60 deaths from drug overdoses. The
DEA, FBI, OIG teams and a number of private insurers came
together, pooled their information on the prescription patterns
and practices, identified the trends and were able to focus and
build a case that would have otherwise taken far longer and
taken far more resources.
The result is we got the convictions and we were able to
close down a pill mill that was threatening citizens' lives.
That is a great example of how we can work with the private
sector to pool our resources and our intel to get to a just
result.
Mr. BUCHANAN. We have 1,300 pill mills. We are dealing with
that right now. I will yield back.
Chairman BOUSTANY. Yes. Gentlemen, thank you for your
testimony and your answers to these questions. Please be
advised that members may have written questions they would like
to submit, and I would ask you to oblige. Thank you for the
work you are doing, and we look forward to hearing from you
again on this ongoing problem that we are having to deal with
on Medicare health care fraud.
Mr. MORRIS. Thank you very much, Mr. Chairman. Members.
Chairman BOUSTANY. I would now ask the second panel to take
their seats.
I want to thank and welcome Karen Ignagni, President and
CEO of America's Health Insurance Plans; Mr. Louis Saccoccio,
Executive Director of the National Health Care Anti-Fraud
Association; and Mr. Ike Odelugo who has pled guilty to State
and Federal charges related to Medicare fraud. And I want to
thank all of you for being here as we try to delve into this
important subject and try to understand what more might need to
be done.
You will each have 5 minutes to present your oral
testimony. Your full written statements will be made a part of
the record. And Ms. Ignagni, we will begin with you. Thank you.
STATEMENT OF KAREN IGNAGNI, PRESIDENT AND CEO, AMERICA'S HEALTH
INSURANCE PLANS, WASHINGTON, D.C.
Ms. IGNAGNI. Thank you, Mr. Chairman, Dr. Boustany, Ranking
Member Lewis, and Members of the Subcommittee. We are pleased
to have the opportunity today to discuss how health plans are
playing a leadership role in fighting and preventing health
care fraud; how we are working with the Department of Health
and Human Services--a number of you inquired about that; how we
are working with law enforcement and where there are
opportunities to do even more.
Our members have developed cutting-edge techniques, as you
have heard this afternoon, to identify fraud and halt practices
that lead to substandard care. We are involved in flagging the
delivery of inappropriate or unnecessary services that may harm
patients, inappropriate charges or charges for phantom
services; detecting unlicensed or unqualified personnel, and
identifying substance abuse and increasingly identity theft.
Our members' anti-fraud initiatives have prioritized preventing
fraud before it takes place rather than paying and chasing
after the fact.
We are proud that these initiatives were models for the
important new efforts being made in the public sector and
believe now even more progress can be made. Health plans fight
fraud by operating special investigations units that are
staffed with personnel with clinical, statistical, and law
enforcement expertise. They do four things: They perform
intensive license and qualification review. That is the
credentialing function. They work to identify potential fraud
before a claim is paid by employing sophisticated software
techniques to detect anomalies in billing. They investigate the
clinical basis for the claim that has been flagged and tagged
by relying on physicians, pharmacists, and other trained
personnel. Quite a number of these matters, as you heard this
afternoon, involve medical equipment, infusion, and narcotics
prescribing. We take action by suspending payments when fraud
is detected, jettisoning providers from networks, and providing
information to law enforcement.
Increasingly, efforts are focused on preventing identity
theft. When a patient borrows a friend's identity to obtain
insurance coverage, harm can result to the real beneficiary of
that insurance policy who may be inappropriately or incorrectly
tagged with the wrong blood type or identified inappropriately
as having a condition they do not have. We detect substance
abuse as a very, very high-priority activity, a current fraud
and abuse initiative that literally has life-and-death
significance.
Looking ahead we have offered the committee this afternoon
four recommendations:
First, we are urging a reconsideration of how fraud
prevention and credentialing programs are treated under the
interim final regulation for the new medical loss ratio
requirement. The Department of Health and Human Services'
interim final rule adopts the recommendations that were made by
the National Association of Insurance Commissioners which, in
those recommendations, only allowed fraud recoveries to be
considered as quality improvement, not the cost of programs
that have been the focus of discussion this afternoon, the
prevention and early intervention. This is at odds with the
promising efforts now being incorporated into the public sector
programs which are based on the very programs that our members
have pioneered. Similarly, the MLR interim final regulation
excludes provider credentialing from the definition of
activities that improve health care quality which is now
recognized as a critical function, and we applaud the
Department for doing that in the efforts that are underway. We
urge the committee to ask for reconsideration of how these
programs are handled.
Second, we have recommended that existing partnerships
between the private and public sectors be strengthened. We have
made a recommendation about how that can happen. We think a
simple aspect of more clarity about the ability of law
enforcement to share information is important in this endeavor.
Third, we recommend that the health plans should be
included in restitution agreements when the Department of
Justice or other enforcement agencies enter into agreements and
obtain restitution from people who commit health care fraud.
This is done sometimes, not always; and we think there are
opportunities here.
Fourth, we recommend creating a safe harbor for health
plans that supply information concerning suspected health care
fraud to any public or private entity.
Mr. Chairman, there has been a great deal of progress made
in certain States. We are encouraged by that. We think there
should be a more uniform approach, and we hope that the
committee might consider that more attention could be paid to
that matter. This concludes our testimony. We appreciate the
opportunity to be here.
And, Mr. Chairman, we are very happy to have the
opportunity to sit next to Mr. Saccoccio who has done a
fantastic job operating his group that has brought many in the
public and private sectors together to share this kind of
information. Thank you very much.
Chairman BOUSTANY. I thank you.
[The prepared statement of Ms. Ignagni follows:]
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Chairman BOUSTANY. Mr. Saccoccio, you may proceed.
STATEMENT OF LOUIS SACCOCCIO, EXECUTIVE DIRECTOR, NATIONAL
HEALTH CARE ANTI-FRAUD ASSOCIATION, WASHINGTON, D.C.
Mr. SACCOCCIO. Thank you. Good afternoon, Chairman
Boustany, Ranking Member Lewis, and other distinguished Members
of the Committee. I am Louis Saccoccio, Executive Director of
the National Health Care Anti-Fraud Association, NHCAA.
NHCAA was established in 1985 and it is the leading
national organization focused exclusively on combating health
care fraud. We are uncommon amongst associations in that we are
a private-public partnership. Our members comprise more than 85
of the Nation's most prominent private health insurers, along
with more than 80 Federal, State, and local government law
enforcement and regulatory agencies that have jurisdiction over
health care fraud who participate in NHCAA's law enforcement
liaisons.
NHCAA's mission is simple: to protect and serve the public
interests by increasing awareness and improving the detection,
investigation, civil and criminal prosecution, and prevention
of health care fraud. The magnitude of this mission remains the
same regardless of whether the patient has health care coverage
as an individual or through an employer or through Medicare,
Medicaid, TRICARE, or other Federal or State program.
Health care fraud is a serious and costly problem that
affects every patient and every taxpayer in America. Just as
importantly, health care fraud is a crime that directly affects
the quality of health care. Patients are physically and
emotionally harmed by health care fraud. As a result, fighting
health care fraud is not only a financial necessity, it is a
patient safety imperative. Also, health care fraud does not
discriminate between types of medical coverage. The same
schemes used to defraud Medicare migrate over to private
insurers, and schemes perpetrated against private insurers make
their way into government programs.
Additionally, many private insurers are Medicare Part C and
D contractors or provide Medicaid coverage in the States,
making clear the intrinsic connection between private and
public interests.
As a result, the main part I want to emphasize is the
importance of anti-fraud information-sharing between private
and public payers. NHCAA has stood as an example of the power
of a private-public partnership against health care fraud since
its founding, and we believe that health care fraud should be
addressed with private-public solutions.
One salient example that illustrates the power of
cooperative efforts against health care fraud can be found in
south Florida. In response to the challenge of health care
fraud schemes in south Florida, including fraud schemes
involving infusion therapy in home health care, NHCAA formed
the South Florida Work Group. In meetings held in 2009 and
2010, this NHCAA work group brought together representatives of
private insurers, FBI headquarters, and field divisions, CMS,
HHS, OIG, DOJ, the Miami U.S. Attorney's Office, and other
Federal and State law enforcement agencies, to address the
health care fraud schemes emanating in south Florida. The
details of the emerging schemes, investigatory tactics and the
results of recent prosecutions were discussed with the dual
goals of preventing additional losses in south Florida and
preventing the schemes from spreading and taking hold in other
parts of the country.
This type of anti-fraud information-sharing is critical to
the success of anti-fraud efforts. HHS, OIG, CMS, and DOJ have
demonstrated a strong commitment to information-sharing with
private insurers and are working with NHCAA to identify the
barriers, both actual and perceived, to effective anti-fraud
information-sharing with the goal of increasing the
effectiveness of this critical tool in the fight against health
care fraud.
It would greatly enhance the fight against health care
fraud if Federal and State agencies clearly communicate to
their agents the guidelines for sharing information with
private insurers, emphasizing that information-sharing for the
purposes of preventing, detecting, and investigating health
care fraud is authorized and encouraged, consistent with
applicable legal principles.
In addition to information-sharing, the other effective way
to detect emerging fraud patterns and schemes in a timely
manner is to apply cutting-edge technology to the data to
detect risk and emerging fraud trends. The pay-and-chase model
of combating health care fraud, while necessary in certain
cases, is no longer tenable as the primary method of fighting
this crime. In recognition of this fact, many private sector
health insurers now devote additional resources to predictive
modeling technology and real-time analytics, applying the fraud
prevention methods on the front end, prior to medical claims
being made.
The Federal Government has also recognized the value of
real-time data analysis as a key aspect of its interagency HEAT
initiative. The Medicare Strike Force model, as you have heard,
employed by the HEAT program combines Medicare paid claims into
a single searchable database, identifying potential fraud more
quickly and effectively. Additionally, CMS is working to
implement risk-scoring technology to apply effective predictive
models to Medicare.
NHCAA is encouraged by the renewed Federal emphasis given
to fighting health care fraud, and NHCAA knows continued
investment and innovation are critical. And as greater
attention is given to eradicated fraud from government health
care programs, we urge decisionmakers to also recognize and
encourage the important role that private insurers play in
keeping our health care system healthy and free from fraud.
Thank you for allowing me to testify today. I would be
happy to answer any questions. Thank you.
Chairman BOUSTANY. Thank you Mr. Saccoccio.
[The prepared statement of Mr. Saccoccio follows:]
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Chairman BOUSTANY. And, Mr. Odelugo, thank you for being
here. You may proceed, sir.
STATEMENT OF AGHAEGBUNA ``IKE'' ODELUGO, PLED GUILTY TO STATE
AND FEDERAL CHARGES RELATED TO MEDICARE FRAUD; HAS BEEN
ASSISTING LAW ENFORCEMENT WHILE AWAITING SENTENCING IN MAY;
HOUSTON, TEXAS
Mr. ODELUGO. Thank you, Mr. Chairman and Members of the
Committee. It is with profound humility and deep gratitude for
this opportunity that I come before the Members of the
Committee today to provide testimony on the pressing issue of
Medicare fraud in the durable medical equipment (DME) sector of
the health care services industry.
My name is Aghaegbuna ``Ike'' Odelugo. I am from Nigeria
and came to the United States in 1998 with the sincerest of
intentions to eventually acquire my master's degree. Instead,
beginning in 2005 and extending to 2008, I engaged in a
business that presents unique opportunities for fraud and
abuse. I am speaking of the DME sector of the health care
services industry. I engaged in fraud and abuse in this
industry. I participated with others in 14 different companies,
reaching 11 different States.
DME fraud is incredibly easy to commit. The primary skill
required to do it successfully is knowledge of basic data entry
on a computer. Additionally required is the presence of so-
called ``marketers'' who recruit patients and often falsify
patient data and prescription data. With these two essential
ingredients, one possesses a recipe for fraud and abuse. The
oven in which this recipe is prepared is the Medicare system.
This system has a number of weaknesses which are easily
exploitable. This is a nonviolent crime and is often committed
by very educated people, including business people, hospitals,
doctors and administrators. It reaches across all ethnic and
racial lines. It relies on an often unsuspecting victim base of
Medicare recipients, elderly citizens who long for attention
and care, who simply want someone to talk to. It also at times
involves patients who willingly participate in the fraud.
DME providers who engage in this type of fraud either do
their own billing or outsource the billing to persons such as
myself. In my own experience, I dealt with 14 DME companies and
did their billing. I often dealt directly with marketers who
provided patient referrals, most of them fraudulent. I also
dealt with physicians who knowingly participated in this fraud
by knowingly writing prescriptions when they knew they were not
medically necessary, or at times writing prescriptions for
patients they never saw.
I am not here today to appear proud of what I have done,
yet I want the Members of the Committee to understand that I
have done everything humanly possible to correct my past
wrongs. The opportunity to testify today before this
subcommittee is something I am very grateful to be able to do.
Mr. Chairman and Members of the Committee, I want to thank
you for allowing me the opportunity to address the Subcommittee
on Oversight. I sincerely regret my actions over the past years
and today's testimony, I hope, will be understood as part of a
continuing effort on my part to help in any way I can to
correct my wrongs and prevent future wrongs.
I also wish to take this opportunity to publicly thank
Assistant United States Attorney Al Balboni and Special Agent
Joseph Martin of Health and Human Services for the confidence
they have placed in me during the course of my continued
cooperation.
Finally, I wish to publicly apologize to this body and,
most of all, to the American taxpayers. I am now prepared to
answer any questions the Members of the Committee may have.
Thank you.
Chairman BOUSTANY. Thank you, Mr. Odelugo. We appreciate
your testimony.
[The prepared statement of Mr. Odelugo follows:]
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Chairman BOUSTANY. Ms. Ignagni, in your testimony you
mentioned the possible negative impact of the medical loss
ratio rules on a private insurer's anti-fraud efforts. Could
you elaborate more on that? What will happen if this rule is
fully implemented, and what the impact will be on your efforts
or your private insurer companies, their efforts to conduct
anti-fraud activities?
Ms. IGNAGNI. Thank you, Mr. Chairman. We appreciate the
opportunity to speak more about this. Essentially what the MLR
requirements involve in a very direct way is that it allows
plans to categorize expenditures for health care quality
activities. What is not included in the quality activities are
two buckets, basically. Number one, credentialing of providers.
Dr. Budetti talked, I think very effectively, about the
importance of that being added to government programs. We agree
with that. We have pioneered those techniques. We are not
allowed to account for those under quality in the present
recommendation that was submitted by the NAIC to the Department
of Health and Human Services, number one.
Number two, also the preventive aspects that I talked about
and Mr. Saccoccio talked about; the data mining, the predictive
modeling, the early detection prevention that now the
Department is working very hard also to incorporate into their
public programs, again, important activities underway at HHS.
We have had those activities underway for very, very many years
and have been very successfully undergoing and engaging in
programs and efforts. So we flagged that both for the NAIC, we
flagged it for the Department, and we wanted to flag it today
as the committee is focusing on the progress that is being made
now in public programs, particularly incorporating these very
techniques. It is penny-wise and pound-foolish, essentially.
Chairman BOUSTANY. So in addition to that, both you and the
panel before you talked about the importance of public-private
partnerships.
Ms. IGNAGNI. Yes, sir.
Chairman BOUSTANY. And if this rule goes forward, it really
hurts your ability to conduct anti-fraud activity at a time
when we are trying to enhance and move forward on these
collaborations between the private sector and the public
sector. Is that correct?
Ms. IGNAGNI. The incentives are, as you have correctly
stated, now under the recommendations that were made originally
by the NAIC, and there was considerable discussion about that
here. It is only for the pay-and-chase situation. And that is
precisely what everyone wants to get away from and what our
plans have worked very, very hard to actually not only think
about executing programs but actually operating programs very
effectively and very successfully.
And as you heard from Mr. Morris who spoke very effectively
about this as well, we are now turned to by law enforcement
agencies for help in their activities, and are very effectively
doing that.
Chairman BOUSTANY. Mr. Saccoccio, do you want to comment on
that as well?
Mr. SACCOCCIO. Yes. You know, we feel that if you look at
the Federal side, a lot of resources have been put into anti-
fraud efforts. And the President's budget I know asks for an
increase of discretionary funding for the health care fraud and
abuse control program. There are additional fundings in the
Affordable Care Act. It doesn't make sense to put all those
investments on the Federal side and then create a rule that is
really a disincentive for private plans to invest in the type
of preventive-type techniques that you want to use to go after
fraud.
Chairman BOUSTANY. It runs counter to the whole effort, it
seems.
Mr. SACCOCCIO. That is correct.
Chairman BOUSTANY. Okay. Thank you.
With regard to the interaction between private sector and
public, when a private insurance company highly suspects fraud
or actually detects fraud, you do contact CMS to notify them,
right? Most of the time or all the time?
Ms. IGNAGNI. The first place that normally this contact is
made is law enforcement. Oftentimes there are criminal cases
that our plans suggest and expect based on what they are seeing
in their data. So oftentimes that is the first place.
Increasingly, Mr. Chairman, there will be this exchange of
information now with the new activities that are being built in
the public sector. We have similar kinds of activities. So it
is easier to go back and forth. And there has been a great deal
of communication both in Mr. Saccoccio's association as well as
with law enforcement directly. We think there is an
opportunity--more opportunity for information-sharing from law
enforcement to the private sector, when there is a case that
has been opened, to more routinely share information. And we
think that there needs to be some clarification in that regard
to make sure that agents are aware that that is permissible and
that they can do that.
Chairman BOUSTANY. So you still are encountering some
barriers there whereby a Federal agent may not feel comfortable
cooperating or collaborating with----
Ms. IGNAGNI. In some cases. We think there is just an
opportunity for clarity here and there could be more
consistency and more uniformity of practice.
Chairman BOUSTANY. And if you have further suggestions
specifically on how we might do that, you might bring it
forward to the committee.
Ms. IGNAGNI. Thank you, sir.
Chairman BOUSTANY. Thank you. Mr. Kind, you may inquire.
Mr. KIND. Thank you, Mr. Chairman. And I thank the
panelists for their testimony here today. Karen, let me
continue with you for a second. You said first referral goes to
local law enforcement for follow-up and possible prosecution.
Have you found that they have the level of competency or
expertise in order to pursue these investigations?
Ms. IGNAGNI. It is a very good question that you are
posing. And it really depends on the issue at hand. This is a
very important question. In some cases they are very active--we
had a case recently where one of our special fraud
investigative units found that they were being billed for
phantom procedures by infusion clinics that weren't providing
services to anyone. They were just being billed. And they
noticed that in the data because they noticed an uptick from
what was going on usually in the community. So it caused them
to ask questions and so on.
That is fairly straightforward in terms of how that
compares statistically with norms. If you have certain
overutilization of procedures which are very clinical, very
high tech, we have found now that there is a great deal of
activity going on in law enforcement to make sure that they are
getting the kind of medical expertise that Mr. Morris talked
about, frankly, with the medical director being involved in the
OIG activities. There is quite a lot of that going on.
And I know Mr. Saccoccio has far more experience than I do.
So I am happy to yield to him, Mr. Kind, for more explanation
about this.
But generally we are finding that in our units, we have
staffed them with people who know about law enforcement, people
who are clinicians, people who know about pharmacy, and people
who are statisticians. And that served our plans very, very
well, to have a full panel of techniques they can deploy.
Mr. KIND. Mr. Saccoccio, do you have anything to add?
Mr. SACCOCCIO. Mr. Kind, one of our goals and one of our
missions at NHCAA is to educate investigators about fraud. So
we probably educate between 150 to 200 FBI agents every year,
about 50 to 70 IG agents every year. So that that is an
important part of what we do, too, and that was the concept
behind this public-private partnership. And when this education
takes place, it is both private and public investigators coming
together, sharing their experiences, sharing what they know,
their best practices. And that is really critical.
So I think we are seeing that. For example, the FBI and the
IG does have that expertise. As they bring in new agents, we
take them into our programs, educate them about what they need
to know, because you are dealing with coding and medical jargon
and those kinds of things that you know, say, maybe a new FBI
agent isn't aware of. But I know the agency is very good about
getting their agents trained, and we do a lot of that with
them.
Mr. KIND. Karen, if we eventually move from fee-for-service
to fee-for-value reimbursement, is that going to have any
impact on anti-fraud measures?
Ms. IGNAGNI. This is also a thoughtful question. I heard
you pose it to the last panel. I think, Yes, but. Let me just
tell you the ``but'' I was thinking when I was sitting back
there listening. What we are seeing in some of our fraud units
also is when you go to bundling of payments and you have more
integration, there are new skills that are required to make
sure that we are not seeing up coding in that situation. So,
yes. But I want to provisionally say that there are new skills
and tools that we are already deploying to make sure that we
can spotlight problems.
Also moving from the ICD-9 to ICD-10 coding system, you are
going to be creating thousands of new codes. We are very
concerned about upcoding there as well. So we will be deploying
new skills to make sure we are spotlighting that early.
Mr. KIND. And what about the build-on on the HIT systems
and the integration of those systems? Is that going to enhance
data collection?
Ms. IGNAGNI. It has in our case. What we have seen is just
the investment that we have made in infrastructure in HIT, has
really allowed the statistical tools to be deployed. They are
very sophisticated and you need the right kinds of personnel to
operate them, obviously. But this investment in IT allows that
to move much faster.
In the old days we used to be looking at clinical charts.
Now we are looking at data and we can look at reports and we
look at statistical profiles, frankly, of areas and different
practitioners.
Mr. KIND. Thank you. I have to go run and vote.
Mr. GERLACH. [Presiding.] Let me follow up on some of the
points you made in your testimony. And you see members moving
off of the dais here because we had a vote series called about
15 minutes ago, so that is why they are running over to the
floor and voting and then some of them are coming back as well,
given the space that we have between a couple of the votes. So
we would like to try to conclude the hearing today, and
hopefully we can do that with your continued testimony here
over the next few minutes.
Mr. Odelugo, if I may go to you, sir. Thank you for
testifying today. And thank you for your insights. We heard
from the other two presenters on the panel with you, some of
their more systematic views of what is happening with health
care fraud, their experiences out there in the system from a
systematic standpoint.
You were very much involved in fraudulent activity through
your individual activity and those of those you partnered with.
You said in your testimony that it was incredibly easy to
commit fraud, and as a result you billed the system for over $1
million, if our information is correct. Is that accurate?
How long did it take you to put in place the plan of action
that you engaged in, getting other folks to participate with
you to the point where you were able to make claims and
ultimately collect over $1 million in Medicare reimbursement
payments?
Mr. ODELUGO. It didn't take me that long. It was just a
matter of understanding the system.
Mr. GERLACH. I am sorry. Say that again?
Mr. ODELUGO. I said it didn't take that long. It was a
matter of understanding the system and setting up the
structures. Not more than a month.
Mr. GERLACH. Okay. The people you worked with in this
process, in this scheme, how did you approach them? And how
willing were they to participate? Because, obviously, they were
going to make money out of this scheme that they shouldn't have
been making. Was it pure greed? Or what was it that got you to
entice them to participate in this fraudulent activity?
Mr. ODELUGO. Basically I didn't approach them. I found--
well, like I found a loop in the system where I could bill for
some things on a patient--maybe out of a patient bill up to
$4,000, $5,000. And I kind of set up a billing system. Where
most of them were interested in billing for wheelchairs, I was
concentrating on billing for these ortho-kits. And they
couldn't figure it out on how to do it. So most of them had to
come to me to bill for their provider services.
Mr. GERLACH. Was there somebody that gave you this idea
initially to participate in this activity? Or did somehow you
decide, you have accessed physician identifier numbers on the
computer and figured out how to move forward?
Mr. ODELUGO. No. Just like I heard your last question you
were asking about the knee brace. My understanding, the cost of
the back brace which was about $960, against $80. And then, you
know, from there, I started getting into more of it. Then I got
to know about the hinged knee braces. All of this is right in
the computer. You go online, you can see them and how much they
pay for it. And you just get the correct code and bill it. That
is all it takes.
Mr. GERLACH. Okay. Ms. Ignagni and Mr. Saccoccio, have you
had an opportunity to read the Affordable Care Act's anti-fraud
provisions that were enacted in this law? And if so, what is
your overall sense of how effective they might be? Or what
other recommendations would you have that are not included in
those provisions that we ought to be looking at making into law
to try to really address the fraud and waste and abuse problems
that we have?
Mr. SACCOCCIO. The anti-fraud provisions in the Affordable
Care Act I think are going to be effective, with respect to the
screening, as Dr. Budetti and Mr. Morris spoke about earlier.
Screening, the moratorium, bringing in certain classes of
providers, given the circumstances, the Secretary's ability to
suspend payments when there is a credible allegation or
credible evidence of fraud. All those things I think are good
things.
The additional resources as far as money that is there, I
think also obviously is a good thing, especially given the
return on investment that you get. It is unlike maybe some
other Federal spending. This is money that you put in, that you
get back a nice return on investment.
As far as other things, I think there is--as CMS goes
forward and develops their analytical tools, their data
analytics, to the extent that they are able to share that
information with private insurers, I think that would be very
helpful. In other words, as they, say, get into the 21st
century with respect to looking at Medicare data, as they begin
to find trends and schemes, to be sure to share that with the
private side. I mean, we do a lot of that now. But I think it
is going to be important as they--because they have probably
the largest group of data than any--the other private insurers
obviously are divided up, you know, by company. Here with
Medicare, to be able to get that information that they develop
based on those analytics, I think would be very helpful and
critical once they are able to do that.
Mr. GERLACH. Ms. Ignagni, do you agree?
Ms. IGNAGNI. I agree with Mr. Saccoccio. And I think
further that one could provide more clarity about the sharing
of information so that particularly law enforcement agents know
that that is permissible.
Second, I do believe that there should be more thought to
this issue of having safe harbors for health plans that
actually provide information to State insurance commissioners,
provide information to law enforcement, to the agency, to make
sure that it is very clear that that is permissible and there
will not be countersuits from providers who are at the other
end of that information.
And then I do believe that in the area of restitution, it
should be more routine that the private sector is included in
those restitution agreements and efforts. And then finally the
MLR, sir.
Mr. GERLACH. I will yield back to the chairman. Thank you.
Chairman BOUSTANY. [Presiding.] The chair recognizes the
ranking member of the subcommittee, Mr. Lewis.
Mr. LEWIS. Thank you very much, Mr. Chairman. And welcome.
Thank you for your testimony. I have had an opportunity to read
over it.
Mr. Odelugo, we understand that you have been cooperating
with law enforcement for over 2 years. Why did you initially
get involved with Medicare fraud? And why have you chosen to
come forward? What moves you? What suggested to you to
cooperate, to come forward?
Mr. ODELUGO. Before I came forward, I really stopped doing
it. I stopped doing that in December of 2007 when I knew there
was an ongoing investigation on me. So I approached my attorney
right here, and he advised me that the best thing for me to do
was to come forward and get them to know me and talk to me. And
that is how I got to turn myself in. And from then on, I
started cooperating with them, based on their suggestion.
Mr. LEWIS. Do you have any regrets? Would you tell others
that may have the desire, the urge to participate in defrauding
Medicare or some other Federal health program, suggest to them
that this is not the way to go?
Mr. ODELUGO. I have been doing that already.
Mr. LEWIS. All right. I appreciate that.
Mr. Saccoccio, on your Web site, you warn consumers about a
new scam involving health care. What are the types of scams you
have seen to date? What tips do you give consumers?
Mr. SACCOCCIO. I think probably if I had to pick the one
top scam, it would be identity theft. And that is not just
identity theft where person A steals person B's identity in
order to get health care, but large-scale identity theft that
occurs in Medicare and Medicaid, regrettably on a regular
basis, where folks on the inside that is somebody, say, working
at a clinical laboratory or a hospital, decides that they are
going to take this information and sell it on the outside. So
folks could still make false claims. Sometimes the information
is obtained through misrepresentations, phone calls where
seniors are fooled into giving their information over the
phone.
So I think the biggest one right now is medical identity
theft. And the biggest recommendation we give to consumers is
to protect your health insurance information, whether it be
Medicare, private insurance, whatever it happens to be. Make
sure you protect that just like you would a credit card, your
Social Security number. Just do not give that information out
to anyone on the phone unless you particularly know who you are
speaking to. So I think identity theft is really the biggest
one.
And the other hot areas that we have seen I think are
similar to Medicare. It has been DME. It has been home health
care. It has been infusion therapy. And the other one,
community mental health centers, are now I think becoming a
challenge as well. But you know, from a patient and a consumer
perspective, I think identity theft is the number one thing
they need to look out for.
Mr. LEWIS. Thank you. Ms. Ignagni, I understand your
members have experience in analyzing claims and they are using
this to predict fraud. Based on their experience, what
recommendation or best practice will you share with us and CMS?
Ms. IGNAGNI. I think, sir, that CMS now is in the process
of adopting exactly the kinds of tools and techniques that we
use. It is called in statistical terms ``predictive modeling,''
software packages that actually detect anomalies in data. In
other words, in a particular area, there are patterns of
practice. When you see in the data that a particular physician,
a particular pharmacy, a particular area, is up significantly
or we have seen situations where physicians are billing over
50-some patients in a day, that would be an anomaly that this
software would flag.
We have been very pleased that CMS now, and the Department,
is adopting the same kind of tools and techniques, and they
work very, very well to really give you that early intervention
and that kind of emphasis on prevention so you want to detect
fraud before any claim is paid.
It is much harder when you are paying and chasing, and it
is much better when you can do this earlier on. And that is
where we have really focused a great deal of our activities.
And, frankly, that was the model on which there was a lot of
discussion last year, and now the Department is actually
operating those same skills.
Mr. LEWIS. I just want to thank you for being here and for
your testimony. Mr. Chairman, thank you for holding this
hearing.
Chairman BOUSTANY. Thank you. Ms. Jenkins, you may inquire.
Ms. JENKINS. Thank you, Mr. Chairman. And I, too, want to
thank you for this hearing and thank you all for your
testimony.
Ms. Ignagni, as you are aware, the Medicaid program was
designated as high risk by the Government Accountability Office
in 2003 and Medicare has been designated that way since 1990.
In the last update on these high-risk programs back in February
of this year, GAO states that CMS has not met their criteria
for having the Medicare program removed from this list. And
while they have implemented certain recommendations for
Medicaid, more Federal oversight of the fiscal and program
integrity is needed. The new health reform law expands
eligibility to both of these programs.
So, could you just please address how this will affect your
Association's ability to reduce fraud over an even larger
population and pool of taxpayer dollars?
Ms. IGNAGNI. What our plans have done is actually pioneer a
number of different practices which are very, very important.
First, credentialing. We have put a lot of resources into
making sure that physicians have the qualification that
patients expect, that they are licensed, that they don't have
malpractice efforts, that they have not been convicted of
fraud, et cetera. They just go down the line. Those are very
robust activities that we have worked very, very hard to make
sure as we are putting together panels of practitioners,
clinicians, that we can guarantee to our beneficiaries that we
have executed those processes, number one.
Number two, the whole area that the chairman was inquiring
about a few minutes ago in terms of how do you step back and
prevent fraud, getting the statistical packages operating
with--they are called SIUs, special investigative units, with
clinicians, with statisticians, with pharmacy experts, with law
enforcement experts, so that you can look at what we are seeing
in the data; where are their hot spots, if you will; where is
there trouble? What needs to be done? We flag claims and then
we do further investigations. So that is on the front end.
Also, when payments are made, there are similar processes
that are executed to make sure you are following those; if we
have missed anything, to make sure that we are catching it also
on the back end. Similarly for pharmacy, in the area of
pharmacy, we have found clinics that are prescribing pain
medications. There have been a number of efforts to shut those
clinics down, detect them, et cetera. There has been a great
deal of work between our health plans and law enforcement and
public officials to do exactly that. And you will see that
expanding.
Infusion, as Mr. Saccoccio said, we have seen a very, very
significant uptick in problems related to infusion; clinics
springing up, billing, and no patients behind those bills. So
we have worked very hard to put in place practices that will
detect that.
Unnecessary procedures that can be life-threatening for
patients. We have seen situations where physicians have
operated on patients who didn't need those operations. Or in
some cases people weren't qualified to actually practice the
services they were providing. So unnecessary services, a very,
very big area. I must say, of course, that the majority of
physicians, of course, are upstanding, ethical individuals. But
there are some bad apples. So our tools and techniques are
designed to detect those.
We worked very closely with Mr. Saccoccio's Association
that has brought together health plans, law enforcement, and
public officials to share this kind of information. Mr.
Saccoccio does a great deal of training, as he indicated, which
is very, very important to make sure that all sides have access
to the best practices that work and that work effectively.
And now that the public agencies have adopted the practices
of private sector plans, then I think there is reason to be
very, very hopeful about the ability to do even more to share
information under the auspices of Mr. Saccoccio's Association
and the activities that are underway at the Department that we
heard about earlier.
Ms. JENKINS. Okay. Thank you.
Ms. IGNAGNI. Sure.
Ms. JENKINS. Ten years ago, back in Kansas City, we had one
of the most horrendous cases of health care fraud that I ever
heard of. A local pharmacist was convicted of diluting nearly
100,000 prescriptions for 4,000 patients. His profits came from
diluting expensive chemotherapy medications. A local
pharmaceutical sales rep was the first one to suspect foul
play. He discovered that pharmacist was selling more of a
specific drug than he was purchasing from him. He worked with a
doctor who used this pharmacy and the local authorities to
bring charges against the pharmacist.
Mr. Ignagni and Mr. Saccoccio, you both mentioned the need
for more public-private cooperation to help combat health care
fraud. The case I just mentioned was greatly assisted by
private companies. Can either one of you elaborate on what else
those of us in Congress can do to allow and encourage private
companies to work with CMS and our law enforcement to reduce
fraud in the system?
Mr. SACCOCCIO. Well, I think, as I mentioned, data analysis
is going to become critical going forward. CMS is in the
process of looking for and putting in place the right type of
system as far as predictive modeling for Medicare. I think it
is going to be critically important as they develop these
systems on the set of data that they have, which is an enormous
set of data, that that data be shared, that what comes out of
that data be shared with the private side.
It is critically important not just for the commercial
side, but remember again the private insurers have Medicare
Part C, Part D. They are doing Medicaid in the State. So there
is a lot of tie-in both on the private side and public side in
the public program. So I think that sharing of data is going to
be critically important.
And then I think the other thing is, there is a commitment
I believe on the part of the IG and HHS, CMS, and DOJ to share
information with the private side. I think a lot of that
information has to filter down to the agents in the field; that
they need very specific guidance about what they can and can't
do. And we have been working with Mr. Morris, with Dr. Budetti,
and others to try to address that particular issue. And
hopefully in the near future we are going to see some progress
along those lines, too. Where agents are in the field though,
okay, this is not only okay for me to do, it is something that
I should be doing.
Ms. JENKINS. Thank you. We will look forward to working
with you. I yield back.
Chairman BOUSTANY. One final question for you. Mr. Odelugo,
how easy is it to get physician provider numbers in your
experience and to file additional claims? You know, if you get
denied, getting a different number and filing additional
claims. Could you talk a little bit more about your experience
with that?
Mr. ODELUGO. Thank you, Mr. Chairman. Basically to get a
physician's UPIN number, you just have to go online and pick it
out. It is public information.
Chairman BOUSTANY. So just go online and you can find these
numbers?
Mr. ODELUGO. Yes. You just get it from there. You can even
get the one that has the closest ZIP Code to wherever the
patient lives, and you can input it on the system and transmit.
Chairman BOUSTANY. Is there a method to what provider
numbers you would pinpoint? Do you look for those who perhaps
may be licensed in multiple States versus just in a single
location?
Mr. ODELUGO. Well most providers will want to get licensed
in every four regions of Medicare. That way they can bill for
any patient, depending on where they are. That is why if you
look at my statement or my recommendations, I was trying to
suggest that any claim that doesn't cross-reference with the
doctor's billing for the services should not be paid. That way,
providers cannot just turn in a claim without the doctor
billing for the services of, you know, doing the prescription.
So try to implement it that way because most of businesses
are done by the billers. Most billers know whatever is going on
between the doctors and the providers. But they transmit the
claims. If they can have it where they can get the billers to
be held responsible for a little bit of whatever that is going
on, that can help assist them.
Chairman BOUSTANY. Thank you. Mr. Lewis, do you have any
further questions?
Mr. LEWIS. Mr. Chairman, I don't have any further
questions.
Chairman BOUSTANY. Thank you. Well, that will conclude our
questioning of the witnesses. I want to thank all of you for
being here today and providing your testimony and answering
questions of the members. I want to remind you that members may
have some written questions they would like to submit later to
you, and I would ask you if you would oblige and make those
answers a part of the record.
One final thing, Mr. Ranking Member, Mr. Roskam, a member
of the full committee, has a statement that he would like to
submit for the record.
Mr. LEWIS. Without objection.
Chairman BOUSTANY. Without objection, so ordered.
[The information follows, The Honorable Mr. Roskam:]
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Chairman BOUSTANY. With that, we will conclude this
hearing, and the hearing is adjourned.
[Whereupon, at 4:22 p.m., the subcommittee was adjourned.]
[Submissions for the Record follow:]
Academy of Managed Care Pharmacy, Letter
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MATERIAL SUBMITTED FOR THE RECORD
Questions from the Honorable Chairman Boustany
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Questions from Mr. Gerlach
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Questions from Ms. Jenkins
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