[Senate Hearing 112-393]
[From the U.S. Government Publishing Office]
S. Hrg. 112-393
FIGHTING FRAUD AND WASTE IN MEDICARE AND MEDICAID
=======================================================================
HEARING
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
SPECIAL HEARING
FEBRUARY 15, 2011--WASHINGTON, DC
__________
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COMMITTEE ON APPROPRIATIONS
DANIEL K. INOUYE, Hawaii, Chairman
PATRICK J. LEAHY, Vermont THAD COCHRAN, Mississippi, Ranking
TOM HARKIN, Iowa MITCH MCCONNELL, Kentucky
BARBARA A. MIKULSKI, Maryland RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin KAY BAILEY HUTCHISON, Texas
PATTY MURRAY, Washington LAMAR ALEXANDER, Tennessee
DIANNE FEINSTEIN, California SUSAN COLLINS, Maine
RICHARD J. DURBIN, Illinois LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota LINDSEY GRAHAM, South Carolina
MARY L. LANDRIEU, Louisiana MARK KIRK, Illinois
JACK REED, Rhode Island DANIEL COATS, Indiana
FRANK R. LAUTENBERG, New Jersey ROY BLUNT, Missouri
BEN NELSON, Nebraska JERRY MORAN, Kansas
MARK PRYOR, Arkansas JOHN HOEVEN, North Dakota
JON TESTER, Montana RON JOHNSON, Wisconsin
SHERROD BROWN, Ohio
Charles J. Houy, Staff Director
Bruce Evans, Minority Staff Director
------
Subcommittee on Departments of Labor, Health and Human Services, and
Education, and Related Agencies
TOM HARKIN, Iowa, Chairman
DANIEL K. INOUYE, Hawaii RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin THAD COCHRAN, Mississippi
PATTY MURRAY, Washington KAY BAILEY HUTCHISON, Texas
MARY L. LANDRIEU, Louisiana LAMAR ALEXANDER, Tennessee
RICHARD J. DURBIN, Illinois RON JOHNSON, Wisconsin
JACK REED, Rhode Island MARK KIRK, Illinois
MARK PRYOR, Arkansas LINDSEY GRAHAM, 3South Carolina
BARBARA A. MIKULSKI, Maryland JERRY MORAN, Kansas
SHERROD BROWN, Ohio
Professional Staff
Erik Fatemi
Mark Laisch
Adrienne Hallett
Lisa Bernhardt
Michael Gentile
Alison Perkins-Cohen
Laura A. Friedel (Minority)
Sara Love Rawlings (Minority)
Jennifer Castagna (Minority)
Administrative Support
Teri Curtin
C O N T E N T S
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Page
Opening Statement of Senator Tom Harkin.......................... 1
Prepared Statement of Senator Tom Harkin......................... 3
Statement of Senator Richard C. Shelby........................... 4
Statement of Dr. Peter Budetti, Center for Program Integrity
Centers for Medicare and Medicaid Services, Department of
Health and Human Services, Baltimore, Maryland................. 5
Prepared Statement of Peter Budetti.......................... 8
Bringing Activities Together Into the Center for Program
Integrity...................................................... 8
Strategic Principles for Program Integrity Operations............ 9
CMS' Efforts to Implement the Affordable Care Act................ 9
Other Affordable Care Act Authorities............................ 10
The Healthcare Fraud and Abuse Control (HCFAC) Program........... 12
Engaging our Beneficiaries and Partners.......................... 13
Collaborating with Law Enforcement Partners...................... 14
Data Analytics................................................... 14
Statement of Hon. Tony West, Assistant Attorney General, Civil
Division, Department of Justice................................ 16
Prepared Statement of Tony West.............................. 17
Overview of Combating Fraud and Securing......................... 18
Healthcare Fraud Recoveries...................................... 18
Fiscal Year 2010 Healthcare Fraud and Abuse...................... 20
Healthcare Fraud Resources....................................... 21
Stronger Tools Facilitated Record Recoveries..................... 21
Litigation Tracking System....................................... 28
Criminal Prosecutions in Civil Pharmaceutical Cases.............. 30
Statement of Rebecca Nurick, Project Manager, Pennsylvania Senior
Medicare Patrol Program, Philadelphia, Pennsylvania............ 32
Prepared Statement of Rebecca Nurick......................... 34
SMP.............................................................. 34
Healthcare Fraud................................................. 35
Volunteer Impact................................................. 35
Detect, Protect, and Report...................................... 35
Statement of Robert Rolf, Vice President, CGI Federal, Inc.,
Fairfax, Vir-
ginia.......................................................... 36
Prepared Statement of Robert Rolf............................ 37
Questions Submitted to Dr. Peter Budetti......................... 44
Questions Submitted by Senator Tom Harkin........................ 44
Questions Submitted by Senator Richard C. Shelby................. 47
Questions Submitted by Senator Lamar Alexander................... 48
Questions Submitted to Tony West................................. 48
Questions Submitted by Senator Richard C. Shelby................. 48
Prepared Statement of the National Community Pharmacists
Association (NCPA)............................................. 49
FIGHTING FRAUD AND WASTE IN MEDICARE AND MEDICAID
----------
TUESDAY, FEBRUARY 15, 2011
U.S. Senate,
Subcommittee on Labor, Health and Human
Services, and Education, and Related Agencies,
Committee on Appropriations,
Washington, DC.
The subcommittee met at 10 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Tom Harkin (chairman) presiding.
Present: Senators Harkin, Shelby, and Kirk.
opening statement of senator tom harkin
Senator Harkin. The Subcommittee on Labor, Health and Human
Services, and Education, and Related Agencies (Labor-HHS) will
now come to order.
Today we will discuss the critical challenge of combating
waste, fraud, and abuse in Medicare and Medicaid.
But before we begin I want to welcome Senator Richard
Shelby, the distinguished ranking member of this subcommittee.
Senator Shelby is no stranger to Labor-HHS. He has been on
the subcommittee since 2003. But this is his first hearing as
ranking member, so it's a special day for him and for this
subcommittee.
Since 1989, when I took over the chairmanship from Senator
Lawton Chiles, only three people have ever served as Chair or
ranking member of this subcommittee--Senator Specter, Senator
Cochran and me. During that time we established a strong
tradition of bipartisanship. Senator Specter and I transferred
the gavel several times over the course of 20 years, but no
matter who was in charge, we respected each other's views, we
never surprised each other, and we treated each other as
partners.
I know Senator Shelby very well. I have tremendous respect
for his abilities and his interest in the subject areas that we
cover here. We served together in the House for a number of
years, then I came to the Senate, and then Senator Shelby came
to the Senate, so we've served here together for 24 years. I
count Dick and his wife Annette as two of our friends. And so,
I'm confident that the longstanding spirit of cooperation will
continue with Senator Shelby as ranking member and, of course,
I look forward to working with you, Dick, on all the issues
that come before this subcommittee.
Speaking of things that this subcommittee's been doing for
a long time, we turn to the subject of today's hearing--
fighting fraud and waste in Medicare and Medicaid. This
subcommittee has held four hearings over the last 10 years on
Medicare and Medicaid fraud and billing discrepancies. Today,
as we look for ways to reduce the deficit, the challenge has
never been more urgent. When taxpayer funding for Medicare and
Medicaid is wasted or stolen by criminals, it means the cost of
the program goes up, and so does the pressure to cut back on
benefits for the rest. We in Congress have a responsibility to
do whatever we can to prevent that from happening.
There are two reasons why today's hearing is so timely.
First, we have compelling new evidence that spending Federal
dollars to crack down on fraud and waste in these programs is a
good deal for taxpayers. Two weeks ago, Secretary Sebelius
announced that efforts to prevent and root out healthcare fraud
recovered--recovered--a stunning $4 billion in taxpayer dollars
last year--a record high. On average, every $1 that the Federal
Government spent on these efforts returned $6.80 to the U.S.
Treasury--also a record high. At a time when this country is
struggling with record deficits, this is a success story we
should be proud of.
The second reason for the timeliness of this hearing is
yesterday's release of the President's fiscal year 2012 budget,
which proposes $511 million in discretionary funding for
rooting out healthcare fraud and abuse. This funding is
critically needed. Eighteen years after Attorney General Janet
Reno announced that healthcare fraud was ``the number two crime
problem in America,'' after violent crime, we still cannot say
exactly how much fraud and waste there is in healthcare. One
thing everyone agrees on is that anti-fraud efforts have not
begun to keep pace with the scope of the problem. That's why in
fiscal year 2009 this subcommittee began appropriating funds
for this effort. Until then, only mandatory funding was used to
pay for these efforts. But in fiscal year 2009 this
subcommittee provided $198 million to crack down on healthcare
fraud. The following year, $311 million. If Congress had passed
the fiscal year 2011 omnibus in December, that level would have
risen to $471 million. We hope to maintain that level in the
final fiscal year 2011 bill, whenever that happens.
Unfortunately, the House of Representatives seems
determined to undermine these efforts. The continuing
resolution they proposed last week would cut $160 million from
the omnibus level for combating healthcare fraud and abuse.
Again, I think that's penny wise and pound foolish budgeting.
Given the return on the investment of nearly $7 for every $1
spent, that's like throwing away more than $1 billion in
savings to the taxpayers.
The President's budget is more encouraging. The
discretionary funding provided by this subcommittee has been
essential to the Nation's efforts to reduce healthcare fraud.
It's allowed the Centers for Medicare and Medicaid Services
(CMS) to expand fraud and abuse detection to Medicare Advantage
plans and to the prescription drug benefit. It's created strike
force teams that root out perpetrators in cities that have high
rates of fraud. It's helped the Department of Justice (DOJ)
prevail in complex multi-State cases against criminal
enterprises with deep pockets and high-priced lawyers.
prepared statement
Today, we'll hear from several distinguished witnesses who
are integral to our programs to combat waste, fraud, and abuse.
We'll hear about the partnership between CMS and the DOJ. We'll
hear from a company that has helped to develop the model for
the Recovery Audit Contractor (RAC) program. And we'll hear
about a program that engages seniors in the fight to preserve
the integrity of Medicare.
I look forward to their testimony. But first, I yield to
Senator Shelby for any opening remarks that he may wish to
make.
[The statement follows:]
Prepared Statement of Senator Tom Harkin
The Subcommittee on Labor, Health and Human Services, and
Education, and Related Agencies (Labor-HHS) will now come to order.
Good morning. Today we will discuss the critical challenge of
combating waste, fraud and abuse in Medicare and Medicaid. But before
we begin, I want to welcome Senator Richard Shelby, the distinguished
Ranking Member of this subcommittee.
Senator Shelby is no stranger to Labor-HHS--he has served on this
subcommittee since 2003. But this is his first hearing as Ranking
Member, so this is a special day for him--and for this subcommittee.
Since 1989, when I took over the chairmanship from Senator Lawton
Chiles, only three people have ever served as Chair or Ranking Member
of this subcommittee--Senator Specter, Senator Cochran, and myself.
During that time, we established a strong tradition of bipartisanship.
Senator Specter and I transferred the gavel several times over the
course of 20 years. But no matter who was in charge, we respected each
other's views. We never surprised each other. And we treated each other
as partners.
I know Senator Shelby very well, and have tremendous respect for
his abilities. I am confident that the long-standing spirit of
cooperation will continue with Senator Shelby as Ranking Member.
Senator, I look forward to working with you.
Speaking of things this subcommittee has been doing for a long
time, we turn now to the topic of the day: Fighting fraud and waste in
Medicare and Medicaid. This subcommittee has held four hearings over
the last 10 years on Medicare and Medicaid fraud and billing
discrepancies. Today, as we look for ways to reduce the deficit, this
challenge has never been more urgent. When taxpayer funding for
Medicare and Medicaid is wasted or stolen by criminals, it means the
cost of the program goes up and so does the pressure to cut back on
benefits for the rest of us. We in Congress have a responsibility to do
whatever we can to prevent that from happening.
There are two reasons why today's hearing is so timely. First, we
have compelling new evidence that spending Federal dollars to crack
down on fraud and waste in these programs is a great deal for
taxpayers.
Two weeks ago, Secretary Sebelius announced that efforts to prevent
and root out healthcare fraud recovered a stunning $4 billion in
taxpayer dollars last year--a record high. On average, every $1 that
the Federal Government spent on these efforts returned $6.80 to the
U.S. Treasury--also a record high.
At a time when this country is struggling with record deficits,
this is a success story we should be proud of.
The second reason for the timeliness of this hearing is yesterday's
release of the President's fiscal year 2012 budget, which proposes $511
million in discretionary funding for rooting out healthcare fraud and
waste.
This funding is critically needed. Eighteen years after Attorney
General Janet Reno announced that healthcare fraud was ``the number two
crime problem in America'' after violent crime, we still cannot say
exactly how much fraud and waste there is in healthcare. The one thing
everyone agrees on is that anti-fraud efforts have not begun to keep
pace with the scope of the problem. Some have compared our fraud
detection efforts to standing in a lake with a bucket--the bucket looks
really full, until you look at the lake.
That's why, in fiscal year 2009, this subcommittee began
appropriating funds for fraud prevention and enforcement. Until then,
only mandatory funding was used to pay for these efforts. But in fiscal
year 2009, this subcommittee provided $198 million to crack down on
healthcare fraud, and the following year, $311 million. If Congress had
passed the fiscal year 2011 omnibus in December, that level would have
risen to $471 million. We hope to maintain that level in the final
fiscal year 2011 bill whenever it is completed.
Unfortunately, House Republicans seem determined to undermine these
efforts. The continuing resolution they proposed last week would cut
$160 million from the omnibus level for combating healthcare fraud and
abuse. That is a classic case of penny wise pound-foolish budgeting.
Given the return on investment of nearly $7 for every $1 spent, that's
like throwing away more than $1 billion.
However, the President's proposed increase, to $511 million, is
encouraging. The discretionary funding provided by this subcommittee
has been essential to the Nation's efforts to reduce healthcare fraud.
It has allowed Centers for Medicare & Medicaid Services to expand fraud
and abuse detection to Medicare Advantage plans and to the prescription
drug benefit. It has created strike force teams that root out
perpetrators in cities that have high rates of fraud. It has helped the
Department of Justice to prevail in complex, multi-State cases against
criminal enterprises with deep pockets and high-priced lawyers.
Today we will hear from several distinguished witnesses who are
integral to our programs to combat waste, fraud, and abuse. We will
hear about the partnership between the Centers for Medicare and
Medicaid Services and the Department of Justice. We will hear from a
company that has helped to develop the model for the Recovery Audit
Contractor program, which the Obama administration hopes to expand
Government-wide. And we will hear about a program that engages seniors
in the fight to preserve the integrity of Medicare.
I look forward to their testimony. But first, I yield to Senator
Shelby for any opening remarks he may wish to make.
STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Shelby. Thank you, Mr. Chairman. I'm glad to join
you here as, you, the chairman of the subcommittee, and this is
my first day as ranking member. I look forward to working with
you. We know we have some difficult issues and difficult days
ahead. But we've been together on a number of things. As you
mentioned, we served in the House and the Senate, and we served
on the Appropriations Committee together for a long time. So,
we understand the impediments from time to time.
Mr. Chairman, I want to thank you especially for calling
this hearing to discuss how the Department of Health and Human
Services (HHS) and the DOJ fights fraud and waste in Medicare
and Medicaid.
We have a distinguished panel, as you mentioned, and I look
forward to hearing their testimony. But before, I have a few
opening statements.
This is my first hearing, as I've said, as ranking member
of the Labor-HHS Subcommittee, as the ranking member, and I'm
honored to be here with you.
The total Medicare expenditures were $509 billion in 2009,
and because of an aging population and overall increases in
medical costs, expenditures are projected to increase in future
years at a faster pace than our economy. The Medicare trust
fund is estimated to be exhausted in 2029. The financial
outlook for the Medicare program continues to raise serious
concerns. And yet, fraud analysts and law enforcement officials
estimate that between 3 percent and 10 percent of total
healthcare expenditures are lost to fraud on an annual basis.
That's a lot of money. We must do more to protect the program's
scarce resources.
As Medicare and Medicaid have grown, they have increasingly
become a target for fraudulent activity. As the inspector
general of HHS testified before the House Energy and Commerce
Health Subcommittee in 2009, healthcare fraud has become
attractive to perpetrators of organized crime because the
penalties are lower than for other organized crime-related
offenses. There are low barriers to entry. Fraud schemes are
easily replicated. And a lack of data hampers detection
efforts.
I believe we must preserve, Mr. Chairman, the integrity of
the Medicare and Medicaid programs. Medicare fraud and abuse
affects every person who struggles to pay for healthcare
benefits, every person who worries about Medicare's ability to
cover them, and every taxpayer who helps fund these programs.
Healthcare frauds in my State of Alabama recoveries in 2009
were $26 million and more than $1 million in 2010. The
collaborative effort between the Attorney General's office of
the DOJ and the Secretary of HHS has successfully identified
and prosecuted egregious instances of healthcare fraud and put
money back in the proper hands.
I look forward, Mr. Chairman, to working with you and the
staff to prevent further fraud and abuse and to protect these
important healthcare programs. And I thank you for calling this
hearing.
Senator Harkin. Thank you very much, Senator Shelby. I look
forward to working with you, as you said we have for so many
years together in both the House and the Senate.
We now turn to our panel. We welcome first Dr. Peter
Budetti. He serves as the Deputy Administrator of the CMS and
the Director of the CMS Center for Program Integrity.
A board-certified pediatrician, Dr. Budetti earned his
medical degree from Columbia University, law degree from the
University of California, and undergraduate degree from the
University of Notre Dame.
Mr. Tony West was confirmed Assistant Attorney General for
the Civil Division of the DOJ in April 2009, having previously
served numerous posts in California for the DOJ and being a
partner at Morrison & Foerster, LLP. He graduated with honors
from Harvard College and received his law degree from Stanford
Law School, where he was elected president of the Stanford Law
Review.
So, we welcome you both here. Your statements will be made
a part of the record in their entirety.
We'll start with you, Dr. Budetti, and then we'll go to Mr.
West. If you could sum up your testimony in several minutes,
we'd appreciate that. So, please proceed, Mr. Budetti. Thank
you.
STATEMENT OF DR. PETER BUDETTI, CENTER FOR PROGRAM
INTEGRITY CENTERS FOR MEDICARE AND MEDICAID
SERVICES, DEPARTMENT OF HEALTH AND HUMAN
SERVICES, BALTIMORE, MARYLAND
Dr. Budetti. Good morning. And thank you, Chairman Harkin
and Ranking Member Shelby, and welcome--your first day as
ranking member. I appreciate being here at that point.
Thank you for this invitation to discuss CMS' efforts to
reduce fraud, waste, and abuse in the Medicare, Medicaid and
Children's Health Insurance Program, and the new tools provided
and authorities provided under the Affordable Care Act. And I'm
particularly glad to be here with my distinguished colleague
and partner in fighting fraud, Assistant Attorney General Tony
West.
I've had the privilege now of leading the Center for
Program Integrity for a little more than 1 year, and from the
first day that I took my position, I've been asked two
questions practically every day. Number 1, why do you let
crooks into the programs? Number 2, why do you pay their claims
when they're fraudulent?
Well, I'm pleased to be able to tell you that with the
support that's provided by this subcommittee, and the new
authorities and support that was provided under the Affordable
Care Act, we're making progress on both fronts. We're in a
position now to keep the bad guys out of the programs when they
try to get in, to kick them out when they are in, and to stop
payments when we believe that they present an allegation of
fraud.
CMS now has the flexibility to tailor our resources to the
actual risks that we're facing, and to target the most serious
problems on the basis of the actual risk that we're seeing, and
to do this in a transformative way that's really different than
we have done in the past.
The program management and discretionary funds provided
under the Health Care Fraud and Abuse Control (HCFAC) Program
by this subcommittee are of vital importance in making it
possible for us to implement the new initiatives necessary to
get the full benefit of the Affordable Care Act provisions.
CMS has taken a number of administrative steps to better
meet the emerging needs and challenges in fighting fraud and
abuse. CMS consolidated the Medicare and Medicaid Integrity
Programs under the unified Center for Program Integrity, which
I now lead, precisely in order to pursue a more coordinated set
of program integrity policies and activities across both
Medicare and Medicaid. This change has also facilitated our
collaboration on anti-fraud initiatives with our law
enforcement partners both in the DOJ and the Department of
HHS's Office of Inspector General. The Affordable Care Act
enhances this organizational change by providing us with an
opportunity to jointly develop Medicare, Medicaid, and CHIP
policies on these new authorities.
A number of the Affordable Care Act provisions apply
equally to both Medicare and Medicaid, and this ensures better
consistency in our approach to fraud prevention across all of
our programs.
One point bears stressing, which is that as we crack down
on those who would commit fraud, we are mindful of the
necessity to be fair to all of the legitimate providers and
suppliers who are our partners in caring for beneficiaries, and
to protect beneficiary access to necessary healthcare services.
This requires striking the right balance between preventing
fraud and other improper payments without impeding the delivery
of critical services to beneficiaries. That's what our programs
are all about--delivering healthcare to people in need of those
services. And, as both of you remarked, any dollar that is
wasted, deprives those people of those services. CMS is
committed to providing the healthcare services while cracking
down on fraud and abuse.
The implementation of the Affordable Care Act provisions,
as well as other fraud efforts, will require ongoing resources
to succeed. I'm particularly grateful for the continuing
support this subcommittee has provided to the HCFAC Program,
which provides the critical resources necessary to fight fraud.
To continue the administration's focus on fraud prevention, the
President's fiscal year budget released yesterday includes a
program integrity legislative package that will save $32.3
billion over 10 years, as well as the requested $270 million
increase in HCFAC Program funding. The proposed increase would
allow us to build on the recent successes, which just reported
the highest return on investment in history in fiscal year
2010.
The discretionary HCFAC resources that this subcommittee
has appropriated the last 2 years are essential to the success
of our program integrity efforts. These funds pay for a variety
of new, innovative fraud detection and prevention activities.
Without these additional discretionary funds, CMS would be left
with its mandatory base funding, forcing us to remain primarily
in what we've always called a pay-and-chase mode, rather than
moving toward the prevention of fraud in the first place.
Let me highlight a couple of the new and pioneering
activities that will be funded with the additional
discretionary funds. This will allow for the expansion of the
Health Care Fraud Prevention and Enforcement Action Team
initiative, the joint Cabinet-level effort established by the
President and led by Secretary Sebelius and Attorney General
Holder, and will allow the expansion of the Strike Forces to as
many as 20 areas.
The funding that you have provided has helped fund a number
of successful program integrity activities, including the
development of prepay automatic, automated edits that deny
claims on the front end--and that's an integral part of our new
initiative to prevent fraud in the first place. Additionally,
the funds have supported the National and Regional Fraud
Prevention Summits that have raised awareness of the risks of
fraud, waste, and abuse in the Medicare and Medicaid programs.
A major new initiative, which is what this poster is all
about, is our work to implement an innovative risk-scoring
technology that applies effective predictive models to identify
complex patterns of fraud and improper claims and billing
schemes, and trigger effective, timely administrative actions
by CMS, and timely referral to law enforcement. Given the
changing landscape of healthcare fraud, any successful
technology will need to be nimble and flexible, identifying and
adjusting to new schemes as they appear.
This just diagrams the fact that we will be developing
these systems and implementing them, on the basis of the actual
risk presented by a particular problem that we're seeing, into
our payment system, in order to avoid making those payments in
the first place.
One other point I would mention is that I'm particularly
pleased that we continue to work with, and rely on, our
beneficiaries through the Senior Medicare Patrol (SMP) program
led by the Administration on Aging. And I know you will be
hearing from the SMP program a little later on. We have
partnered with the SMP program to expand their activities and
to get more Medicare beneficiaries involved in, and aware of,
the problems of fraud and the need to participate in fighting
fraud and preventing it.
In conclusion, healthcare fraud and improper payments
undermine the integrity of Federal healthcare programs.
Taxpayer dollars lost to fraud, waste, and abuse harm some of
our most vulnerable seniors and other people in this country,
not just the Federal Government. Eliminating the problem
requires the long-term, sustained commitment that brings
together beneficiaries, healthcare providers, the private
sector, Federal, State and local governments and law
enforcement agencies in a collaborative partnership to develop
and implement long-term solutions. The administration's made a
firm commitment to rein in fraud and wasteful spending. With
the Affordable Care Act and the financial support from this
subcommittee, we have more tools than ever before to implement
important and strategic changes.
PREPARED STATEMENT
We thank the Congress for providing us with these new
authorities and resources, and we look forward to working with
you in the future as we continue to make improvements in
protecting the integrity of Federal healthcare programs and
safeguarding taxpayer resources.
Thank you very much for this opportunity to speak to you.
Senator Harkin. Dr. Budetti, thank you very much, Dr.
Budetti.
[The statement follows:]
Prepared Statement of Peter Budetti
Chairman Harkin, Ranking Member Shelby, and members of the
subcommittee, thank you for the invitation to discuss the Centers for
Medicare & Medicaid Services' (CMS) efforts to reduce fraud, waste, and
abuse in Medicare, Medicaid, and the Children's Health Insurance
Program (CHIP) and the new tools and authorities provided in the
Affordable Care Act.
As CMS implements the new authorities in the Affordable Care Act,
we have a significant opportunity to enhance our existing efforts to
combat fraud, waste, and abuse in Federal healthcare programs. These
new authorities offer more front-end protections to keep those who are
intent on committing fraud out of the programs and new tools for
deterring wasteful and fiscally abusive practices, identifying and
addressing fraudulent payment issues promptly, and ensuring the
integrity of Medicare, Medicaid, and CHIP. CMS is pursuing an
aggressive program integrity strategy that seeks to prevent payment of
fraudulent claims, rather than chasing fraudulent providers after a
payment has been made. CMS now has the flexibility to proactively
tailor resources and quickly initiate activities in a transformative
way. We believe the Affordable Care Act provisions will greatly support
the effectiveness of our work. This historic moment also presents CMS
with a valuable opportunity to partner with the private sector and
collaborate on fraud detection efforts based on tools and methods that
are already succeeding in other sectors.
CMS recognizes the importance of having strong program integrity
initiatives that will deter and end criminal activity that attempts to
defraud Medicare, Medicaid, or CHIP. I share your commitment to
ensuring taxpayer dollars are being spent on legitimate items and
services, which is at the forefront of our program integrity mission.
bringing activities together into the center for program integrity
CMS has taken several administrative steps to better meet the
Agency's future needs and challenges. CMS realigned its internal
organizational structure last year, consolidating the Medicare and
Medicaid program integrity groups under a unified Center for Program
Integrity (CPI). This centralized approach has enabled CMS to pursue a
more strategic and coordinated set of program integrity policies and
activities across the Federal healthcare programs and has formed a
bridge that facilitates collaboration on anti-fraud initiatives with
our law enforcement partners, such as the Health and Human Services
Office of Inspector General (OIG), the Department of Justice (DOJ), and
State Medicaid Fraud Control Units. We are also working closely with
our colleagues in the Office of the Secretary at HHS, as they implement
the Secretary's Program Integrity Initiative across the Department. We
are actively sharing best practices and lessons learned as we move
forward together.
The Affordable Care Act enhances this organizational change by
providing CMS with the ability to improve and streamline its program
integrity capabilities by providing us with an opportunity to jointly
develop Medicare, Medicaid and CHIP policy on these new authorities.
For example, many Affordable Care Act provisions, such as enhanced
screening requirements for new providers and suppliers, apply across
the programs. The new integrated operation of program integrity
activities within CMS ensures that there is better consistency in CMS'
approach to fraud prevention across all of our programs.
strategic principles for program integrity operations
As we continue the process of implementing these authorities and
strengthening the integrity of the Federal healthcare programs, we are
mindful of the necessity to be fair to healthcare providers and
suppliers, who are our partners in caring for beneficiaries, and to
protect beneficiary access to necessary healthcare services, supplies
or medication. CMS is committed to improving care for our
beneficiaries; engaging States and law-abiding providers and suppliers
to ensure our activities reflect their interests is a foundation of our
program integrity work. As we seek to reduce fraud, waste, and abuse in
Medicare, Medicaid, and CHIP, we are mindful of striking the right
balance between preventing fraud and other improper payments without
impeding the delivery of critical healthcare services to beneficiaries.
At their core, Federal healthcare programs are designed to provide
affordable healthcare to families in need, people with disabilities,
and aging Americans. Additionally, the vast majority of healthcare
providers are honest people who abide by their legal and professional
duties and provide critical healthcare services to millions of CMS
beneficiaries every day. CMS is committed to providing healthcare
services to beneficiaries, while reducing the burden on legitimate
providers, targeting fraudsters and saving taxpayer dollars.
This administration is committed to minimizing fraud, waste, and
abuse in Federal healthcare programs. While improper payments are not
necessarily fraudulent, CMS is committed to reducing all waste within
our programs. In order to focus on the prevention of improper payments
while remaining vigilant in detecting and pursuing problems when they
occur, we have increased provider education on proper documentation and
are re-examining our claims and enrollment systems. With these efforts
and others, we are confident that we will meet the President's goal to
reduce the Medicare fee-for-service error rate in half by 2012.
Moreover, we are implementing a number of measures that will shift our
enforcement and administrative actions from a ``pay and chase'' mode to
the prevention of fraudulent and other improper payments. This involves
many different activities, which we are carrying out with the powerful
new antifraud tools provided to CMS and our law enforcement partners
under the Affordable Care Act.
We are steadily working to incorporate targeted screening and
prevention activities into our claims payment and provider and supplier
enrollment processes where appropriate. Our goal is to keep those
individuals and companies that intend to defraud Medicare, Medicaid,
and CHIP out of these programs in the first place, not to pay
fraudulent claims when they are submitted, and to remove such
individuals and companies from our programs if they do get in. The
first step to preventing fraud in the Federal healthcare programs is to
appropriately screen providers and suppliers who are enrolling or
revalidating their enrollment in Medicare, Medicaid, and CHIP to verify
that only legitimate providers and suppliers who meet our stringent
enrollment standards are providing care to our beneficiaries.
cms' efforts to implement the affordable care act
New Actions--Medicare, Medicaid, and CHIP Screening and Fraud
Prevention Rule (CMS-6028-FC)
On January 24, 2011, HHS and CMS announced rules that implement new
Affordable Care Act tools to fight fraud, strengthen Federal healthcare
programs, and protect taxpayer dollars. This rule puts in place
prevention safeguards that will help CMS move beyond the ``pay and
chase'' approach to fighting fraud.
Enhanced Screening.--The Affordable Care Act requires providers and
suppliers who wish to enroll in the Medicare, Medicaid or CHIP programs
to undergo a level of screening tied to the level of risk of fraud,
waste, or abuse such providers and suppliers present to the programs.
This new rule will require high-risk providers and suppliers, including
newly enrolling suppliers of Durable Medical Equipment, Prosthetics,
Orthotics and Supplies (DMEPOS) and home health agencies, to undergo a
higher level of scrutiny based on CMS' and law enforcement's experience
with these suppliers. CMS has also established certain triggers that
would move a provider or supplier into the highest screening level,
including exclusions by the OIG or other final adverse actions.
In addition, CMS-6028-FC implements the Affordable Care Act
provision that authorizes CMS to require that providers who order and
refer certain items or services for Medicaid beneficiaries be enrolled
in the State's Medicaid program; this is similar to the new Medicare
requirement included in an interim final rule published this past
spring, CMS-6010-IFC, described in more detail below.
This new rule implements the statutory authority for CMS to impose
a temporary enrollment moratorium if the Secretary determines such a
moratorium is necessary to prevent or combat fraud, waste, or abuse. We
will assess the impact of any proposed moratorium on beneficiary
access, and we will publish a notice of the moratorium including a
rationale for the moratorium in the Federal Register. Other preventive
measures include new levels of coordination between Medicare and State
Medicaid agencies. For example, State Medicaid programs are now
required to terminate a provider that has been terminated for cause by
Medicare or another State Medicaid agency.
Stopping Payment of Suspect Claims.--CMS-6028-FC allows Medicare
payments to be withheld from providers or suppliers if there is a
credible allegation of fraud pending an investigation or final action.
The law also requires States to withhold payments to Medicaid providers
where there is a credible allegation of fraud. This enhanced authority
will help prevent taxpayer dollars from being used to pay fraudulent
suppliers.
New Resources To Strengthen Program Integrity.--The Affordable Care
Act provides an additional $350 million over 10 years, plus an
inflation adjustment, to ramp up program integrity efforts, which will
be used along with additional discretionary funding sought in the
President's budget request to place more ``feet on the street'' by
hiring more law enforcement agents and other efforts to reduce improper
payments and fight fraud in the healthcare system.
Other Implementation Steps--CMS-6010-IFC
CMS published an interim final rule with comment period (CMS-6010-
IFC) in the Federal Register on May 5, 2010 that implemented some new
anti-fraud authorities and provisions of the Affordable Care Act. This
rule, which took effect July 6, 2010, requires all providers of medical
or other items or services and suppliers that qualify for a National
Provider Identifier (NPI) to include their NPI on all applications to
enroll in Federal healthcare programs and to also include their NPI on
all claims for payment submitted to Medicare and Medicaid. CMS-6010-IFC
also requires that physicians and eligible professionals who order or
refer most Medicare-covered items and services for Medicare
beneficiaries be enrolled in Medicare. In addition, it adds
requirements for providers, physicians, and other suppliers
participating in the Medicare program to provide and maintain
documentation on referrals to for items or services at high risk of
fraud, waste, and abuse. Specifically, it includes suppliers of DMEPOS,
home health services, and certain other items or services as specified
by the Secretary.
other affordable care act authorities
There are many other Affordable Care Act program integrity
provisions that we will also be busy implementing this year. For
example, CMS will be issuing additional surety bond requirements under
the Affordable Care Act for DMEPOS suppliers and home health agencies
and certain other providers of services and supplies. These surety
bonds are a condition of enrollment and help ensure that DMEPOS
suppliers and home health agencies, and certain other providers of
services and supplies, are legitimate and financially solvent.
In addition, providers and suppliers will be required to establish
compliance plans that contain certain anti-fraud requirements and
reflect good governance practices. Such plans will help ensure that
providers and suppliers have incorporated anti-fraud protections into
their operations. Other preventive measures focus on certain categories
of providers and suppliers that historically have presented concerns to
our program including DMEPOS suppliers, home health agencies, and
Community Mental Health Centers (CMHCs). For example, as an additional
safeguard to address longstanding concerns with CMHCs, such facilities
will be required to provide at least 40 percent of its items and
services to non-Medicare beneficiaries.
Expanded Use of Recovery Audit Contractors
CMS is drawing from the lessons learned from the Fee-For-Service
(FFS) Recovery Audit Program to implement the new statutory authority
given in the Affordable Care Act to expand the program to Medicare
parts C and D and Medicaid. In order to address the fundamental
differences in payment structure between FFS, managed care Medicare,
the part D drug benefit and Medicaid, CMS has taken a multi-pronged
approach to implement the new Affordable Care Act authorities. In
January, CMS awarded a contract to identify incorrect payments and
recoup overpayments in Medicare part D. Additionally, we are seeking
public comment through a solicitation issued on December 27, 2010 in
the Federal Register on innovative strategies for review of additional
Medicare parts C and D data, including the effectiveness of sponsors'
anti-fraud plans.
In the Medicaid Program, CMS issued a State Medicaid Director
letter in October 2010 that offered initial guidance on the
implementation of the Medicaid Recovery Audit Contractors (RAC)
requirements and published a Notice of Proposed Rulemaking on November
10, 2010. CMS has provided significant technical assistance to States
through all-State calls and webinars and has begun the coordination
with States that have RAC contracts in place, as required by the
statute. CMS will also work to ensure that States and their Medicaid
RACs coordinate their recovery audits with other entities to minimize
the likelihood of overlapping audits. CMS is working with States to
implement this program and plans to disseminate information on how
States are utilizing RACs in the Medicaid program.
Increased Flexibility in Medicaid Recovery Rules
Further, CMS issued a State Medicaid Director letter in July 2010,
providing initial guidance on the recovery of Medicaid overpayments as
required by the Affordable Care Act. Under this new authority, States
now have up to 1 year from the date of discovery of an overpayment in
Medicaid to recover, or attempt to recover, such overpayment before
being required to refund the Federal share of the overpayment. Prior to
passage of the Affordable Care Act, States were allowed only up to 60
days from the date of discovery of an overpayment to recover such
overpayment before making the adjustment to the Federal share. CMS
appreciates this new flexibility for States. The additional time
provided under the Affordable Care Act will enable States to more
thoroughly root out fraud and overpayments. However, for overpayments
resulting from fraud, if an ongoing administrative or judicial process
prevents a State from recovering an overpayment within 1 year of
discovery, the State has until 30 days to recover the overpayment
before making the adjustment to the Federal share.
Guidance on Self-disclosure of Actual or Potential Violations of
Physician Self-referral Statute
In September 2010, CMS published the Self-Referral Disclosure
Protocol on its Web site to enable providers and suppliers to disclose
actual or potential violations of the physician self-referral statute.
Section 1877 of the Social Security Act contains instructions for
providers and suppliers who make self-disclosures, and advises that the
Affordable Care Act gives the Secretary the discretion to reduce the
penalty otherwise owed for a violation of the physician self-referral
statute. The protocol states the factors CMS may consider in reducing
the amounts otherwise owed, which include: (1) the nature and extent of
the improper or illegal practice; (2) the timeliness of the self-
disclosure; (3) the cooperation in providing additional information
related to the disclosure; (4) the litigation risk associated with the
matter disclosed; and (5) the financial position of the disclosing
party. This new process reflects CMS' goal to be transparent to the
public about program requirements and compliance.
Fraud Detection and Reporting
CMS has improved the processes for fraud detection by our
contractors and reporting, analyzing, and investigating complaints of
potential fraud from beneficiaries.
In order to take a more holistic approach to detecting and
addressing fraud, CMS has worked to integrate Program Safeguard
Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs).
Before these reforms, each PSC focused on benefit integrity in limited
parts of the Medicare program, making it possible for providers and
suppliers to continue to submit fraudulent claims to one part of the
Medicare program even after questionable claims had been identified in
another part of the program. Instead, CMS is currently in the process
of contracting with one ZPIC in seven separate geographic zones, with
an emphasis on designated high-fraud areas. Unlike PSCs, ZPICs perform
program integrity functions for all parts of Medicare. These
contracting reforms have allowed CMS to break down silos in program
integrity contracting and better identify potentially fraudulent
behavior across all parts of the Medicare program.
Another of these improvements involves modifications to the 1-800-
MEDICARE call center procedures. In the past, if a caller reported that
they did not recognize a physician or provider or did not receive the
service documented on their Medicare Summary Notice form, they were
asked to followup with the provider prior to filing a fraud complaint.
However, now 1-800-MEDICARE will review the patient's claims records
with them and if the discrepancy is not resolved, it will take action
and file a complaint immediately, regardless of whether the caller has
attempted to contact the provider. Also, CMS is using the information
from beneficiaries' complaints in new ways. For instance, CMS is
generating weekly ``fraud complaint frequency analysis reports'' that
compile provider-specific complaints and flags providers who have been
the subject of multiple fraud complaints for a closer review. This is
just one example of using available data in more intuitive ways.
As part of our commitment to applying innovative analytics to
existing data sources to prevent fraud, CMS has developed the
capability to map shifts and trends in fraud allegations reported to 1-
800-MEDICARE over time using geospatial maps and sophisticated data
tools. These tools will allow CMS to gather more information from 1-
800-MEDICARE calls for data analysis. The various parameters include
claim type, geographic location, and fraud type. CMS is also exploring
new options for streamlining the process and timeframe for
investigating fraud complaints, while seeking to preserve the
efficiencies and cost-effectiveness of a single call center like 1-800-
MEDICARE.
the healthcare fraud and abuse control (hcfac) program
HCFAC Funding
I appreciate this subcommittee's long-time support of the HCFAC
program and CMS' administrative budget requests, which provide the
critical resources CMS uses to pay claims accurately and fight fraud.
The fiscal year 2011 President's budget request includes a little
more than $1.7 billion for the HCFAC program, including mandatory and
discretionary sources, divided between CMS' Medicare and Medicaid
programs and our law enforcement partners at the OIG and DOJ. The
fiscal year 2011 discretionary HCFAC request is $561 million, a $250
million increase over the fiscal year 2010 enacted level. Described in
more detail below, these new HCFAC resources would support and advance
the goals of the Health Care Fraud Prevention and Enforcement Action
Team (HEAT) initiative, a joint Cabinet-level effort established by the
President and led by Secretary Sebelius and Attorney General Holder.
The budget request is necessary to continue expanding the Strike Force
to as many as 20 areas with ongoing and emerging fraud threats.
Further, if provided by Congress, discretionary HCFAC funding would
also support ongoing efforts to strengthen audit and oversight activity
in Medicare parts C and D, expand data sharing and coordination between
DOJ and CMS, increase data capabilities and targeted special
demonstrations to identify fraudulent schemes and practices before they
take root, and eliminate systemic vulnerabilities being exploited by
fraudulent providers and suppliers.
To help implement the new prevention tools and legislative
authorities in the Affordable Care Act, the legislation provided $350
million in mandatory funding over 10 years, plus an inflation
adjustment, for the HCFAC account, the Medicare Integrity Program, and
the Medicaid Integrity Program. This funding provides important
financial resources for the HCFAC program over the next decade and,
combined with our discretionary funding request, will enable us to
pursue critical new prevention focused activities and address emerging
healthcare fraud schemes. In fiscal year 2010, CMS was allocated
approximately $16.5 million by HHS in HCFAC Wedge funds and $251.4
million in discretionary funds to support a variety of projects related
to fraud, waste, and abuse in the Medicare and Medicaid programs. CMS
invested $158 million of the discretionary funds in strengthening
Medicare parts C and D oversight by aligning the functions of the
Medicare Drug Integrity Contractors (MEDICs) with specific contracting
functions of compliance and enforcement and benefit integrity, plan
performance assessment, audits of programs and vulnerability analysis
of policy and operational processes. HCFAC funds were also used to
develop and validate prepay automated fraud edits that deny claims on
the front end. Additionally, these funds have supported the National
and Regional Fraud Summits (discussed below) and fraud prevention media
campaign that have raised awareness of the risks of fraud, waste and
abuse, as well as educated key stakeholders, including beneficiaries,
how to prevent, identify and report fraud. In the Medicaid program,
HCFAC resources have supported enhanced audits and payment error rate
measurement efforts.
HCFAC Program Successes
HCFAC has been steadily growing since it began in 1997 and, as
shown in the recently released fiscal year 2010 HCFAC report, this
investment in fraud fighting resources is paying dividends. The HCFAC
report demonstrates the value of this program; since its inception and
through fiscal year 2010, HCFAC has resulted in the return of $18
billion to the Medicare trust funds. In fiscal year 2010, $2.8 billion
was returned to the Medicare Trust Funds and $683 million was returned
to the Federal Treasury from Medicaid recoveries. The return-on-
investment (ROI) from various HCFAC activities ranges from 6 to 1 for
audit, investigative, and prosecutorial work performed by OIG and DOJ
to 14 to 1 for the Medicare Integrity Program's activities. The HCFAC
return-on-investment (ROI) is currently the highest it has ever been,
according to the fiscal year 2010 HCFAC report. The 3-year average for
ROI (2008-2010) averaging all HCFAC activities is $6.8 to $1; this is
$1.9 more than the historical average. Additionally, the ROI for the
Medicare Integrity Program's activities is 14 to 1.
HCFAC funds support HEAT and many complementary anti-fraud
initiatives, including:
--DOJ-FBI-HHS Strike Forces.--This coordinated effort is needed in
order to fight fraud on the ground, by supporting field offices
in high risk regions of the country that will protect seniors
and recover funds stolen from the Medicare Trust Fund.
--Increased Prevention and Detection.--CMS is committed to working
with law enforcement to efficiently use existing systems and
collaborate on future improvements, and has provided numerous
training sessions for law enforcement personnel on CMS data
analytic systems. Further, CMS will do rapid response projects
as well as long-term in-depth studies.
--Expanded Law Enforcement Strategies.--HCFAC will further expand
existing criminal and civil healthcare fraud investigations and
prosecutions, particularly related to emerging fraud schemes in
areas such as pharmaceutical services, medical devices, and
durable medical equipment. It will allow the use of cutting-
edge technology in the analysis of electronic evidence to
better target and accelerate enforcement actions. Finally, the
increase will expand Medicare and Medicaid audits and OIG's
enforcement, investigative, and oversight activities.
--Oversight.--HCFAC will help to further strengthen oversight in
Medicare, Medicaid, and CHIP.
We are excited about the tools and resources available to CMS
through HCFAC. In particular, because of changes in the Affordable Care
Act, we will now have flexibility to utilize HCFAC funds to enhance our
own expertise for pursuing fraud, waste, and abuse in Medicare.
engaging our beneficiaries and partners
Meanwhile, HHS and CMS continue to work with and rely on our
beneficiaries and collaborate with our partners to reduce fraud, waste,
and abuse in Medicare, Medicaid and CHIP. The Senior Medicare Patrol
(SMP) program, led by the Agency on Aging (AoA), empowers seniors to
identify and fight fraud through increased awareness and understanding
of Federal healthcare programs. This knowledge helps seniors protect
themselves from the economic and health-related consequences of
Medicare and Medicaid fraud, waste, and abuse. In partnership with
State and national fraud control/consumer protection entities,
including Medicare contractors, State Medicaid Fraud Control Units,
State Attorneys General, the HHS OIG, and CMS, SMP projects also work
to resolve beneficiary complaints of potential fraud. Since the
program's inception, the program has educated more than 3.84 million
beneficiaries in group or one-on-one counseling sessions and has
reached almost 24 million people through community education outreach
events. CMS is partnering with AoA to expand the size of the SMP
program and put more people in the community to assist in the fight
against fraud.
In addition to working with AoA on expanding the SMPs, CMS is
implementing a number of new mechanisms to better engage beneficiaries
in identifying and preventing fraud. As part of that effort, CMS
encourages its beneficiaries to check their Medicare claims summaries
thoroughly. Medicare Summary Notices (MSNs) are sent to beneficiaries
every 90 days; CMS is working with beneficiaries to redesign the MSNs
to make them easier to understand so beneficiaries can spot potential
fraud or overpayments on claims submitted for their care. Additionally,
some 10 million beneficiaries are enrolled into www.mymedicare.gov, a
secure Web site, and can now check their claims within 24 hours of the
processing date. This information is also available through the 1-800-
MEDICARE automated system. A fact sheet and informational card have
been developed to educate and encourage beneficiaries or caregivers to
check their claims frequently and to report any suspicious claims
activity to Medicare. These materials are being used at the regional
fraud prevention summits (described below) and have been shared with
both State Health Insurance Plans (SHIPs) and SMPs.
Further, CMS is implementing a number of new educational and
awareness initiatives in identifying and preventing fraud among those
Americans who receive services under the Medicaid program.
collaborating with law enforcement partners
CMS is committed to working with our law enforcement partners, who
take a lead role in investigating and prosecuting alleged fraud. CMS
provides support and resources to the Strike Forces, which investigate
and track down individuals and entities defrauding Medicare and other
Government healthcare programs. Strike Force prosecutions are ``data
driven'' and target individuals and groups actively involved in ongoing
fraud schemes. These efforts started in Miami in 2007 and expanded to
Los Angeles in 2008. In 2009 and 2010 under the HEAT initiative, we
continued expanding the Strike Force to Detroit, Houston, Brooklyn,
Tampa, and Baton Rouge using the additional discretionary funding that
Congress provided in response to the President's budget requests. HEAT
consolidated the anti-fraud efforts of DOJ's Civil Division and U.S.
Attorneys' Offices, HHS/OIG and CMS. The HEAT task force is working to
identify new enforcement initiatives and areas for increased oversight
and prevention, including how to increase efficiency in pharmaceutical
and device investigations.
In the 3\1/2\ years since their inception, Strike Force prosecutors
filed 465 cases charging 829 defendants who collectively billed the
Medicare program more than $1.9 billion; 481 defendants pleaded guilty
and 48 others were convicted in jury trials; and 358 defendants were
sentenced to imprisonment for an average term of nearly 44 months.\1\
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\1\ These statistics are for the period of May 7, 2007 through
September 30, 2010.
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Sharing information and performance metrics broadly and engaging
internal and external stakeholders requires establishing new
partnerships with Government and private sector groups. Because the
public and private sectors have common challenges in fighting fraud and
keeping fraudulent providers at bay, it makes sense that we should work
together to develop common solutions. In addition to the HEAT
initiative, agencies including HHS, CMS, OIG, and DOJ have co-hosted a
series of regional summits on healthcare fraud prevention, bringing
together Federal and State officials, law enforcement experts, private
insurers, healthcare providers, and beneficiaries for a comprehensive
discussion on the scope of fraud, weaknesses in the current healthcare
system, and opportunities for collaborative solutions.
Building on the momentum generated by the National Health Care
Fraud Summit in January 2010, regional healthcare fraud prevention
summits have been held across the country. These summits, held to date
in Miami, Los Angeles, New York, and Boston with plans for three
additional cities, brought together Federal and State officials, law
enforcement experts, private insurers, beneficiaries, caregivers, and
healthcare providers to discuss innovative ways to eliminate fraud
within the Nation's healthcare system. These summits also featured
educational panels that discussed best practices for providers,
beneficiaries and law enforcement in preventing healthcare fraud. The
panels included law enforcement officials, consumer experts, providers
and representatives of key Government agencies. CMS looks forward to
continuing these summits in 2011 as well as more opportunities to bring
these stakeholder communities together in other cities to continue this
important dialogue and strengthen our cooperative efforts across the
Federal Government and with the private sector.
data analytics
The Affordable Care Act also requires increased data sharing
between Federal entities to monitor and assess high-risk program areas
and better identify potential sources of fraud. CMS is expanding its
Integrated Data Repository (IDR) which is currently populated with 5
years of historical part A, part B and part D paid claims, to include
near real time pre-payment stage claims data; this additional data will
provide the opportunity to analyze previously undetected indicators of
aberrant activity throughout the claims processing cycle. CMS intends
to develop shared data models and is pursuing data sharing and matching
agreements with the Department of Veterans Affairs, the Department of
Defense, the Social Security Administration, and the Indian Health
Service to identify potential waste, fraud, and abuse throughout
Federal healthcare programs. Also, the Affordable Care Act requirement
that States report an expanded set of data elements from their Medicaid
Management Information System (MMIS) will strengthen CMS' program
integrity work both within State Medicaid programs and across CMS. This
robust State data set will be harmonized with Medicare claims data in
the IDR to detect potential fraud, waste and abuse across multiple
payers.
CMS will implement an innovative risk-scoring technology that
applies effective predictive models to Medicare. Innovative risk
scoring technology applies a combination of behavioral analyses,
network analyses, and predictive analyses that are proven to
effectively identify complex patterns of fraud and improper claims and
billing schemes. CMS is integrating the advanced technology as part of
an end-to-end solution that triggers effective, timely administrative
actions by CMS. Prior to applying predictive models to claims
prepayment, CMS will rigorously test the algorithms to ensure a low
rate of false positives, allowing payment of claims to legitimate
providers without disruption or additional costs to honest providers;
confirm that the algorithms do not diminish access to care for
legitimate beneficiaries; and identify the most efficient analytics in
order to appropriately target resources to the highest risk claims or
providers. Given the changing landscape of healthcare fraud, any
successful technology will need to be nimble and flexible, identifying
and adjusting to new schemes as they appear.
As we pursue and test new technology, CMS is working to involve the
private sector and State partners to incorporate strategies that have
already proven successful. As the first phase of partnership building
with private sector entities, CMS held an industry day in October 2010
that was attended by approximately 300 industry representatives. This
event highlighted CMS' strategic goals, priorities, and objectives in
the use of information technology solutions for fraud prevention in our
programs and provided an opportunity for attendees to determine whether
their firm's services, methods and products fit with CMS' mission and
vision. In December 2010, CPI issued a Request for Information asking
vendors to identify their capabilities in the areas of provider
screening/enrollment and data integration. CMS will review the
responses and incorporate innovative ideas into the strategy for
integrated, automated, providers screening and data integration.
The Small Business Jobs and Credit Act of 2010 provided $100
million, beginning in fiscal year 2011 to phase-in the implementation
of predictive analytics in Medicare FFS, Medicaid, and CHIP over 4
years. The new predictive modeling technology will incorporate lessons
learned through pilot projects. For example, CMS partnered with the
Federal Recovery Accountability and Transparency Board (RATB) to
investigate a group of high-risk providers. By linking public data
found on the Internet with other information, like fraud alerts from
other payers and court records, we uncovered a potentially fraudulent
scheme. The scheme involved opening multiple companies at the same
location on the same day using provider numbers of physicians in other
states. The data confirmed several suspect providers who were already
under investigation and, through linkage analysis, identified
affiliated providers who are now also under investigation.
Delivery System Reforms
Beyond the traditional program integrity initiatives, the delivery
system reforms created by the Affordable Care Act will further help to
deter and prevent fraudulent activities within Medicare. When there are
large disparities between the cost of goods and services, as compared
to the allowed reimbursement, we know that these excessive payments
often make Medicare a more attractive and lucrative target for those
attempting to commit fraud. For instance, OIG, the Government
Accountability Office (GAO), and other independent analysts have
repeatedly highlighted that the fee schedule prices paid by Medicare
for many DMEPOS items are excessive, as much as three or four times the
retail prices and amounts paid by commercial insurers or cash
customers. These inflated prices in turn increase the potential profits
of those intending to defraud the Medicare program. To that end, CMS
implemented supplier contracts and new payment rates based on the round
1 rebid of DMEPOS competitive bidding on January 1, 2011 in nine
Metropolitan Statistical Areas. The Office of the Actuary estimates
that once fully implemented this program is projected to save more than
$17 billion in Medicare expenditures over 10 years. Outside of DMEPOS,
CMS is working to redesign our Medicare payment systems and institute
delivery system reforms that will realign Medicare payments in line
with market prices and in turn, reduce the incentive for ``bad-actors''
to target Medicare.
All of these new authorities and analytical tools will help move
CMS beyond its historical ``pay and chase'' mode to a prevention-
oriented approach with strong fraud deterrents and increased enrollment
screenings, new disclosure and transparency guidelines, and early
identification of high-risk providers and suppliers.
conclusion
Healthcare fraud and improper payments undermine the integrity of
Federal healthcare programs. Taxpayer dollars lost to fraud, waste, and
abuse harm multiple parties, particularly some of our most vulnerable
seniors, not just the Federal Government. Eliminating the problem
requires a long-term, sustainable approach that brings together
beneficiaries, healthcare providers, the private sector, and Federal,
State, and local governments and law enforcement agencies, in a
collaborative partnership to develop and implement long-term solutions.
New authorities in the Affordable Care Act offer additional front-end
protections to keep those who intend to commit fraud out of Federal
healthcare programs, as well as new tools for deterring wasteful and
fiscally abusive practices, and promptly identifying and addressing
fraudulent payment issues, which will ensure the integrity of Medicare,
Medicaid and CHIP.
This administration has made a firm commitment to rein in fraud and
wasteful spending, and with the Affordable Care Act, we have more tools
than ever before to implement important and strategic changes. CMS
thanks the Congress for providing us with these new authorities and
resources, and looks forward to working with you in the future as we
continue to make improvements in protecting the integrity of Federal
healthcare programs and safeguarding taxpayer resources.
Senator Harkin. And how we turn to Mr. West.
Mr. West, please proceed.
STATEMENT OF HON. TONY WEST, ASSISTANT ATTORNEY
GENERAL, CIVIL DIVISION, DEPARTMENT OF
JUSTICE
Mr. West. Thank you, Mr. Chairman.
And Ranking Member Shelby, it's a privilege to welcome you
on your first day and to address you to talk about the work
that we're doing at the DOJ and in the Civil Division and, in
collaboration with HHS, to combat healthcare fraud and recover
taxpayer dollars on behalf of the American people.
And let me say it is always a pleasure to be able to be
with my good colleague Dr. Budetti from CMS.
As this subcommittee knows, the Civil Division represents
the United States in a whole range of litigation. As the
Department's largest litigating component, we defend Congress
and the executive branch against challenges in court, and the
cases that we handle touch upon nearly every aspect of
Government operations, as well as this administration's
national security, domestic, and foreign policy objectives. And
central to our mission is the recovery of taxpayer dollars
which are lost through fraud. Nowhere is this more evident than
in the Civil Division's efforts to fight fraud perpetrated
against our own public healthcare programs.
When I appeared before the Senate Judiciary Committee less
than a month ago, I reiterated then something that I have said
many times since assuming my role as head of the Civil
Division, and that is, we in the DOJ have recognized the
urgency posed by healthcare fraud--that it's not only something
that costs taxpayers millions of dollars, but also undermines
the quality, integrity, and safety of patient care. And our
efforts to curb healthcare fraud have paid off.
DOJ has never been more aggressive nor more successful in
the anti-fraud battle than it has been in the last 2 years.
Indeed, since January 2009 the Civil Division has, working with
our U.S. Attorney partners throughout the country, opened more
healthcare fraud matters, secured larger fines and judgments,
negotiated higher settlements, and recovered more than $8.5
billion for the taxpayers in healthcare fraud cases. This is a
record, representing more healthcare fraud monies recovered in
any 2-year period than in any other time in the history of the
DOJ.
And the cases that we work on, that comprise that record-
breaking amount, span the broad spectrum of healthcare fraud,
from sophisticated illegal over-billing schemes, to individual
doctors who endanger the lives of those in their care just to
bump up their Medicaid reimbursements.
Now, we know that most healthcare providers, most
companies, most individuals who are doing business with the
Government when it comes to providing healthcare services, we
know that they are dealing fairly, that they are playing by the
rules, and that they are careful with the taxpayer dollars that
they receive. They are trying to do the right thing.
But we've also found that it is the case at times that
there are those who attempt to cut corners, to take advantage
and put profits over patient safety. And those companies and
individuals, I submit to you, are those who attract our
enforcement attention.
Now, the historic recoveries that we've been able to
achieve in the fight against healthcare fraud have not happened
by accident. It's what happens when we maximize the efficient
use of resources and we combine that with the data sharing,
enhanced collaboration, and cooperative strategizing that has
occurred since we formed this collaboration between HHS and the
DOJ--also known as HEAT--the Health Care Fraud Prevention and
Enforcement Action Team. That commitment has resulted, Mr.
Chairman, as you noted, in a record amount of civil, criminal
and administrative recoveries of more than $4 billion in the
last fiscal year, fiscal year 2010. That's $4 billion that has
been returned to the Medicare Trust Fund, victim agencies, and
others in that last fiscal year. And that success also
demonstrates the impact that we can have when we invest in our
anti-fraud law enforcement efforts, as the President proposes
to do in his budget announced yesterday.
We've already seen what additional resources devoted to
fighting healthcare fraud can produce. In fact, the 3-year
rolling average return on investment, something else you noted,
Mr. Chairman, is $6.80. That's nearly $7 for every $1 we spend
on healthcare enforcement efforts. And given that these are
complex, difficult cases that are often resource-intensive--
they take years to investigate and pursue, requiring the
interviews of countless witnesses, the review of millions of
documents, and the hiring of scores of consultants and
experts--the money that we spend on healthcare fraud
enforcement is one of the best investments we make as
taxpayers.
PREPARED STATEMENT
Mr. Chairman, my written testimony outlines in more detail
some of the things that we are doing at the DOJ to fight
healthcare fraud, and I look forward to working with you, with
Ranking Member Shelby, and the members of this subcommittee, as
we continue to tackle the challenges posed by fraud on the
American taxpayers. I thank you so much for the opportunity to
be here. And I'm happy to answer any questions you might have.
[The statement follows:]
Prepared Statement of Tony West
Chairman Harkin, Senator Shelby, and members of the subcommittee: I
am honored to appear before you today on behalf of the Department of
Justice (DOJ) and I appreciate the opportunity to discuss the work of
the Civil Division to combat fraud and secure the recovery of monies on
behalf of American taxpayers. I also am pleased to be here today with
our valued partner in these enforcement efforts, Deputy Administrator
Peter Budetti from the Centers for Medicare & Medicaid Services.
The Civil Division represents the United States, its agencies and
instrumentalities, Members of Congress, Cabinet officers, and other
Federal employees. The Division is made up of approximately 1,400
permanent employees, more than 1,000 of whom are attorneys. Each year,
Division attorneys handle thousands of cases that collectively involve
billions of dollars in claims and recoveries. In my capacity as
Assistant Attorney General, I oversee much of the Federal Government's
civil litigation across the country, including many of the DOJ's
efforts to protect consumers and recapture billions of taxpayer dollars
lost to fraud, such as healthcare fraud, procurement fraud, and
mortgage fraud.
overview of combating fraud and securing
Recoveries on Behalf of American Taxpayers
The DOJ takes seriously its obligation to guard the United States
Treasury. Over the last year, the DOJ has made significant strides in
protecting taxpayer dollars--as well as the integrity of Government
programs that depend on those dollars--through aggressive civil
enforcement actions aimed at rooting out waste, fraud, and abuse. For
fiscal year 2010, the Civil Division, working with our partners in
United States Attorneys' offices throughout the country, secured $3
billion in civil settlements and judgments in cases involving fraud
against the Government. Our primary tool in these fraud enforcement
matters is the False Claims Act, which requires that wrongdoers repay
the Government three times the amount of their false or fraudulent
claims and also imposes significant penalties. Although the False
Claims Act dates back to the Civil War, it has been significantly
strengthened in recent years to enhance its whistleblower provisions
and to strengthen the Government's ability to recover taxpayer dollars.
I am glad to say that amounts recovered under the False Claims Act
since January 2009 have eclipsed any previous 2-year period, with $7
billion in taxpayer dollars returned to the Medicare Trust Fund, the
Treasury, and others since 1986, when Congress substantially
strengthened the civil False Claims Act, now total nearly $29 billion.
These matters have consisted of fraud against a variety of Federal
agencies and programs. Our most significant recoveries, however, have
been those alleging fraud and false claims schemes perpetrated against
Government healthcare programs, most notably the Medicare and Medicaid
programs. It is this area to which I will devote the remainder of my
testimony today.
healthcare fraud recoveries
Fighting fraud committed against public healthcare programs is a
top priority for the administration. On May 20, 2009, Attorney General
Eric Holder and Secretary of the Department of Health and Human
Services (HHS) Kathleen Sebelius, announced the creation of a new
interagency task force, the Health Care Fraud Prevention and
Enforcement Action Team (HEAT), to elevate coordination in these
matters to the Cabinet level and to optimize criminal and civil
enforcement. These efforts not only protect the Medicare Trust Fund for
seniors and the Medicaid program for the country's neediest citizens,
they also help to maintain the integrity of services and to prevent the
costs of fraud from being passed on to patients and taxpayers. The
evils of healthcare fraud are many: it undermines the judgment of
healthcare professionals, deprives people of the treatment that they
need, and, in some cases, can put patients' health and safety at risk.
The high-level, inter-agency collaboration made possible by HEAT
has led to extraordinary results. Since January 2009, the Civil
Division, working with HHS, our partners in U.S. Attorneys' offices
around the country, and our State and Federal colleagues, has opened
more healthcare fraud cases, secured larger fines and judgments, and
recovered more than $8.5 billion for the taxpayers in healthcare fraud
cases--more than in any other 2-year period. That total includes more
than $5.54 billion in taxpayer funds recovered from healthcare
providers and others in the industry under the False Claims Act--
another 2-year record. In fiscal year 2010, the DOJ secured $2.5
billion in civil healthcare fraud recoveries--the largest single-year
recovery in the DOJ's history.
Violations of the Food, Drug and Cosmetic Act (FDCA) are pursued by
the Civil Division's Office of Consumer Protection Litigation (OCPL),
which is authorized to bring both civil and criminal actions for
violations of that statute. Together with our partners in the United
States Attorneys' offices around the country, OCPL pursues the unlawful
marketing of drugs and devices, fraud on the Food and Drug
administration, and the distribution of adulterated products, among
other violations. Since January 2009, the DOJ has secured more than
$3.3 billion in fines, forfeitures, restitution, and disgorgement under
the FDCA and we have convicted 28 defendants in criminal cases. In
fiscal year 2010, our efforts yielded more than $1.8 billion in
criminal fines, forfeitures, restitution, and disgorgement--the largest
healthcare-related amount under the FDCA in a single year in the DOJ's
history.
A significant component of the DOJ's healthcare fraud caseload
consists of cases that allege misconduct by manufacturers of
pharmaceutical and device products. For example, in December of last
year, we announced settlements totaling more than $700 million with
multiple pharmaceutical manufacturers resolving allegations that they
had engaged in a scheme to report false and inflated prices for many of
their pharmaceutical products, knowing that Federal healthcare programs
such as Medicare and Medicaid relied on those reported prices to set
payment rates. In April of last year, we obtained a $520 million
settlement with AstraZeneca LP and AstraZeneca Pharmaceuticals LP to
resolve allegations that the marketing of the anti-psychotic drug
Seroquel for uses that were not ``medically accepted indications'' and
therefore, not covered by Medicare and State Medicaid programs which
caused false claims to be submitted to Federal healthcare programs. In
2009, the DOJ announced the largest healthcare fraud settlement in its
history in a case that arose from Pfizer's illegal promotion of several
pharmaceutical products. Pfizer pled guilty to misbranding the
painkiller Bextra in violation of the FDCA and agreed to pay $2.3
billion in fines and civil recoveries. Last October, a subsidiary of
GlaxoSmithKline pled guilty to violating the FDCA and the company paid
fines and civil recoveries totaling $750 million to resolve allegations
that it manufactured and distributed certain adulterated drugs made at
its now-closed plant in Cidra, Puerto Rico.
Healthcare fraud that affects the health, safety, and well-being of
Medicare and Medicaid beneficiaries is of paramount concern to the DOJ.
In January 2010, the DOJ negotiated a $24 million settlement to resolve
allegations that a national chain of Small Smiles dental clinics was
providing unnecessary dental services to children on Medicaid in order
to maximize the company's Medicaid reimbursements. The services
included unnecessary tooth extractions that resulted in healthy teeth
being pulled and needless crowns and excessive root canals for baby
teeth.
The DOJ also leads an Elder Justice and Nursing Home Working Group,
which focuses on healthcare fraud involving elderly patients, such as
when a skilled nursing facility bills Medicare or Medicaid for grossly
deficient services. Such conduct not only wastes taxpayer dollars, but
also threatens the health of some of our most vulnerable citizens. Last
year, the DOJ announced criminal pleas and civil recoveries arising
from our investigation of five nursing homes operated by Cathedral
Rock, a Texas corporation, and its chief executive officer. Our
investigation found that these homes were staffed inadequately, that
residents often did not receive their medications as prescribed, and
that medical records were falsified to appear that the medications were
given properly. The resolution of this case required that the homes
institute a rigorous compliance program to ensure that this conduct is
not repeated. Earlier this year, I personally launched a training
program that involved more than 50 attorneys and investigators intended
to hone their skills in this difficult enforcement area. This training
is part of our emphasis in ensuring that our most vulnerable citizens
receive the care for which Medicare and Medicaid pay.
Finally, I should note that most of the cases resulting in
recoveries were brought to the Government by whistleblowers under the
False Claims Act. In 1986, Congress amended the False Claims Act to
revise the statute's qui tam (or whistleblower) provisions, which
encourage whistleblowers to come forward with allegations of fraud. The
changes enacted in 1986 made the record-setting recoveries of last year
possible, and they also resulted in an increase of the number of qui
tam complaints filed with the DOJ from a total of 30 in fiscal year
1987 to 574 in fiscal year 2010--an increase of more than 1,800
percent. Indeed, just last year there was an increase in qui tam
filings from the previous year of more than 32 percent--from a total of
443 qui tam actions filed in fiscal year 2009 to 574 filed in fiscal
year 2010. In the last 3 years, the number of these filings greatly
contributed to our current caseload of pending matters. The False
Claims Act requires the Attorney General to diligently investigate each
one of these qui tam matters when they are filed and to obtain the
court's consent to extensions of time to do so. We are now confronted
with increasingly complex allegations that often implicate multiple
defendants, and investigating these allegations in a limited timeframe
is extremely challenging. This requires that we dedicate more resources
to fully and effectively investigate our growing caseload.
In order to properly investigate these matters and prevail in any
ensuing litigation, the Government is forced to expend considerable
sums. A typical fraud case requires that we review massive amounts of
documentation, interview countless witnesses, hire consultants to
assist us in areas where we may lack in-house expertise, and engage
experts who can testify for the Government if the matter proceeds to
trial. We must also develop databases to organize the documents and
assist us in analyzing them. The Government's continuing obligation to
preserve documents necessary for fraud litigation often requires
agencies, most notably HHS in healthcare investigations, to incur
additional expenses as they suspend routine document preservation
policies. Agencies such as HHS incur costs to provide their personnel
as witnesses for depositions or trial and to produce reams upon reams
of material requested by the other side during discovery. Once we have
completed our investigation and allege fraud in a lawsuit, well-funded
defendants are often able to mount a costly defense that includes teams
of lawyers far in excess of the number we are able to devote to any
particular case. They also are able to engage sophisticated (and
costly) expertise to bolster their defenses, including state-of-the-art
technology to manage and present extensive evidence. While we cannot
match those costs dollar-for-dollar, and indeed often spend only a
fraction of the amount our defense counterparts spend, we nevertheless
have an obligation to pursue these matters with sufficient resources
that permit us to maximize the potential for a recovery on behalf of
the taxpayer.
fiscal year 2010 healthcare fraud and abuse
Control Program Report
Thus far, I have spoken of the efforts of the Civil Division and
our partners in the United States Attorney community. However, HEAT has
drawn together various other components of the DOJ, such as the
Criminal Division, U.S. Attorneys' offices, the Federal Bureau of
Investigation (FBI), and those of HHS to produce record-breaking
results. The Medicare Fraud Strike Force (Strike Force)--launched in
2007 and part of HEAT--is a recent example of the collaborative efforts
now used to further combat healthcare fraud. The Strike Force is now
operating in seven locations across the country and has successfully
indicted hundreds of individuals and obtained substantial prison terms.
In fiscal year 2010 alone, the Strike Force filed 140 indictments
involving charges against 284 defendants who collectively billed the
Medicare program more than $590 million.
For example, in one of the largest Medicare Fraud Strike force
cases ever brought, Assistant Attorney General Lanny Breuer and I
announced the unsealing of parallel criminal and civil enforcement
actions against two Miami healthcare companies, American Therapeutic
Corporation (ATC) and Medlink Professional Management Group, Inc., as
well as ATC's owner and other senior executives in October 2010. The
ATC prosecution, which alleges a $200 million fraud scheme against
Medicare for purported mental health services, is the first Strike
Force case that indicted a corporation and reflects the important
coordination that is occurring between the DOJ's Criminal and Civil
Divisions to hold fraudsters accountable who are stealing taxpayer
dollars.
Last month, the DOJ and HHS issued their annual Health Care Fraud
and Abuse Control Program Report--the HCFAC Report--for fiscal year
2010. The report reflected historic accomplishments in fiscal year
2010, including the fact that our collective efforts returned more than
$4 billion in healthcare fraud resources to the Medicare Trust Fund,
victim programs, and others. This amount, consisting not only of our
civil recoveries under the False Claims Act, but also criminal fines,
civil monetary penalties and administrative recoveries, was the largest
in the history of our collective efforts and was made possible in large
part by funding provided by Congress through the HCFAC program. In
addition to the monetary results mentioned above, the report also noted
that the DOJ opened 1,116 new criminal healthcare fraud cases involving
2,095 potential defendants. The DOJ filed criminal charges in 488 cases
involving 931 defendants, and a total of 726 defendants were convicted
for healthcare fraud-related crimes during the year. This represents
the highest number of defendants charged and convicted in a single year
in the history of the HCFAC program.
In 1996, Congress required the establishment of the HCFAC program
under the joint direction of the Attorney General and HHS, acting
through HHS's Inspector General, to coordinate Federal, State, and
local law enforcement activities with respect to healthcare fraud and
abuse. Since its inception, the funds expended by HCFAC to provide
oversight of the Nation's healthcare expenditures have been dwarfed by
the amounts returned to the Medicare Trust Fund as a result of those
oversight efforts--more than $18 billion from 1997 through the end of
fiscal year 2010. Historically, the average return on investment (ROI)
for the HCFAC program has been 4.90:1. That is, for every $1 spent by
HCFAC to fund enforcement efforts, $4.90 is collected. In fiscal year
2010, the 3-year average ROI was $6.80 collected for every $1
expended--an increase of almost $2 more than the historical average.
Results such as these show the cost effectiveness of the HCFAC program
and highlight the importance of additional investigative and
prosecutorial resources. Of course, we also cannot lose sight of the
fact that these efforts not only return money to the various healthcare
programs, they also provide an effective and incalculable deterrence to
those who would otherwise cheat the Nation's most vulnerable citizens,
such as our elders and our disabled, who rely on these programs for
their vital healthcare. HCFAC has been a resounding success in both
regards and it is crucial to our continued success that we not only
maintain our HCFAC resources, but that they grow to keep pace with
increased Government health expenditures and the growing caseload of
qui tam matters.
As we move forward with the tough choices necessary to rein in our
deficit and put the country on a sustainable fiscal path, we must
balance those efforts with the investments and actions necessary to
provide adequate oversight of such investments to ensure they are
properly used for their intended purposes. The HCFAC program is one
such investment that pays for itself many times over. With the
discretionary resources sought in the President's fiscal year 2012
budget request, we can hire additional criminal prosecutors, civil
attorneys, agents and professional support personnel who will help
identify and seek redress for future fraud schemes. These funds also
enable us to adequately support our investigations and litigation with
the expertise and automated litigation support necessary to bring these
actions to a resolution most beneficial to the taxpayers.
healthcare fraud resources
In fiscal year 2012, the DOJ is requesting a total of $283.4
million in reimbursable funding to combat healthcare fraud. These funds
are provided directly to both the DOJ and the FBI, and represent an
increase of $63.4 million more than the fiscal year 2011 continuing
resolution level. Historically, the DOJ and the FBI received only
mandatory reimbursable funding from the HHS. However, beginning in
fiscal year 2009, the DOJ began receiving discretionary reimbursable
resources, and it is these funds which have allowed the DOJ to expand
its workforce of attorneys, agents, and professional support staff to
address healthcare fraud. As I have indicated, these funds are used to
address the myriad of healthcare fraud schemes that afflict the
Medicare and Medicaid programs, the Federal Employees Health Benefits
Programs and other federally funded healthcare plans and programs.
stronger tools facilitated record recoveries
The enactment of the Fraud Enforcement and Recovery Act of 2009
(FERA) made additional improvements to the False Claims Act and other
fraud statutes. Among other important changes, FERA authorized the
delegation of the Attorney General's authority to issue civil
investigative demands, which has substantially increased the use of
this critical investigative tool in healthcare and other fraud matters.
FERA also has clarified and added important liability provisions to
the False Claims Act. The statute now makes clear that it is a
violation for a defendant knowingly to retain an overpayment, which is
particularly important in the healthcare context. The Affordable Care
Act adds a new section to the Social Security Act that addresses what
constitutes such an overpayment under the FCA in the context of Federal
healthcare program and requires the reporting and returning of
overpayments to Federal and State governments. Combined, these
provisions enable the Government to more effectively pursue those who
obtained money from Medicare and other Federal healthcare programs to
which they are not entitled.
I already have mentioned the qui tam provisions of the False Claims
Act. Of the $3 billion in total False Claims Act settlements and
judgments obtained in fiscal year 2010, more than $2.4 billion was
recovered in lawsuits filed under the Act's qui tam provisions. Under
these provisions, whistleblowers (known as ``relators'')--many of whom
face considerable personal risk in coming forward with allegations of
fraud--are entitled to recover between 15 and 30 percent of the
proceeds of a successful suit. In fiscal year 2010, relators were
awarded $386 million. Since 1986, when the qui tam provisions were
strengthened by Congress, recoveries in qui tam cases have exceeded
$19.7 billion, and relators have obtained more than $3.2 billion in
awards.
The enactment of the Affordable Care Act, which included the
additional HCFAC resources to which I previously referred, also
provided the Civil Division with additional tools to combat fraud.
Among many other changes, the Affordable Care Act amended the False
Claims Act's public disclosure provision and strengthened the
provisions of the Federal healthcare Anti Kickback Statute. On a much
broader scope, and as Dr. Budetti will testify in greater detail, the
Affordable Care Act also provided for enhanced provider screening and
enrollment requirements, increased data sharing across Government,
expanded overpayment recovery efforts, and greater oversight of private
insurance abuses. All of these tools are now in use in our efforts to
combat healthcare fraud, and they will go a long way in facilitating
our continued success.
On behalf of the DOJ, let me again express my thanks for allowing
me to highlight the DOJ's efforts in this important area. On behalf of
the Attorney General, we welcome the opportunity to continue to work
with you and your staffs as we find ways to more effectively safeguard
Government healthcare resources and, in so doing, protect taxpayers and
consumers.
Senator Harkin. Thank you both very much for excellent
testimonies, and thank you for the work that you do.
We'll start rounds of 5-minute questions now.
Dr. Budetti, first, we're about halfway through the fifth
month of a continuing resolution. I don't see any compromise in
sight right now. What's the impact of the continuing resolution
on your program, where we are right now?
Dr. Budetti. Senator, as you know, when we're under a
continuing resolution there are several things that happen. One
is, we're not in a position to start new initiatives, and many
of the things that I've mentioned, and that are very important
for our fighting fraud, are new initiatives. And those are
constrained.
We're also not able to plan very well in terms of putting
things into place that we know will require a longer-term
investment, so that's a problem. So, things like the
enhancements to our data systems and data sharing with law
enforcement, things like the work that we're doing with respect
to the improvements in the information that go out to Medicare
beneficiaries, our field office support, to work with the
prosecutors and other law enforcement personnel around the
country, our ability to expand some of our innovative
approaches such as the compromised number database, which lists
the beneficiaries and providers whose identities have been
compromised.
There are a lot of initiatives that will have to be either
pared back or not implemented. And most important, we don't
have a sense as to the longer-term structure and stability of
the programs. And so, that's a major impediment.
Senator Harkin. Thank you.
Now, I'm going to ask both of you this question. We hear a
lot of varying estimates about how much fraud is out there.
I've heard 20 percent of claims, I've heard $60 billion, and
even the HHS actuary says that the return on investment will
soon go down--presumably because we're finding the majority of
fraud--so it will become harder to find, a point of diminishing
returns. You're the experts. How much fraud is out there? Are
we close to a saturation point? Are we close to where we're not
going to get $7 for every $1?
Dr. Budetti. Senator, I'd love to see the day when we don't
have to fight fraud at all because we've eliminated all of it.
I don't think we're anywhere near the saturation point. It's
already clear that the more we spend, the more we invest, the
more we look for fraud, the more we find. I think that's very
unfortunate. I think that the return on investment is
particularly striking. But I would love to see the return on
investment be eliminated as we prevent fraud in the first
place, because that's much more efficient, and much more
protective of our beneficiaries and our programs. I don't think
we're anywhere near the flat of the curve, though,
unfortunately.
Senator Harkin. Yes, thank you.
Mr. West.
Mr. West. Mr. Chairman, as I think you know, we use a 3-
year rolling average when we talk about that return on
investment number, so that we can get a pretty accurate picture
of where it is. And the one thing we know is that that return
on investment number continues to increase.
There is no question that the more we invest in law
enforcement efforts aimed at curbing healthcare fraud, it has
an impact in rooting out more fraud and increasing that return
on investment. But that said, whatever that saturation point
is, we are not there yet. I agree with Dr. Budetti. We're
certainly not there yet. And all of the evidence seems to
suggest the more we invest here, the better we do.
Senator Harkin. And, shouldn't we keep in mind, I was
startled to find this figure out, that we add 19,000 providers
to the Medicare system every month. Nineteen thousand new
providers. And with the baby-boom generation coming on, that's
going to accelerate. So it seemed to me, is that the potential
for more fraud and abuse. And 2.8 million baby boomers are
eligible to enroll this year. That's just this year. So the
potential for fraud seems to be growing. Is that why we're not
near the saturation point?
Mr. West. Well, I think there's no question that, as you
pointed out, an aging population program that continues to
grow, that spends billions of dollars--and I think many of the
reasons that Dr. Budetti pointed out, namely that these schemes
are constantly changing, evolving. People become very
sophisticated. When you look at the cases that the Civil
Division handles, they really do span the full spectrum. And
some of them take years to investigate and pursue because they
are so sophisticated. We don't see that changing anytime soon.
Senator Harkin. Thank you very much.
Senator Shelby.
Senator Shelby. Thank you, Mr. Chairman.
Dr. Budetti, could you take the first, I believe it was the
first chart you had, and lead us through that, if you would?
Because I think it's very interesting predictive modeling.
Dr. Budetti. Thank you for the question, Senator. Yes.
What we need to do is to take into account a wide range of
different kinds of data and information in order to figure out
what's going on with the fraudsters and where they're headed,
and be able to spot things before the claims get paid. So, the
left-hand box, where it's kind of gray, talks about the
different kinds of data that we're looking at. Claims data?
Yes, of course, claims data. But also, the information that we
get when providers, when the 19,000 providers and suppliers
apply every month to get into the programs, information from
our law enforcement partners that, from investigations,
complaints--we're taking a lot of complaints now from the 1-
800-MEDICARE system, and we're putting them into a new
analytical system so that we can learn more about the fraud
that's being reported by our beneficiaries, and stolen
identities--a very serious problem for both providers and
beneficiaries around the country.
So, we're taking all of that data and using sophisticated
new technologies to analyze all of it simultaneously, so that
when a claim comes in, we know, we can apply a risk score based
upon all of those factors, and we can alert our contractors
who, as you know, pay the bills in Medicare. We can put this
into our case management system so that we know what our law
enforcement colleagues are doing and, based upon our
interactions, it's a cycle, so that it feeds on itself, and we
get more information, and it improves over time.
This is new for us. This is something that we are currently
in the process of implementing, and we believe that it will be
very useful in terms of advancing our ability to both prevent
and detect fraud, Senator Shelby.
Senator Shelby. Compare this, where you are today with
this, as to where you were, say, 10 years ago. It's night and
day?
Dr. Budetti. It's night and day, Senator. I think there are
things that could have been done 10 years ago with the
technologies. I think there are things that could have been
done 10 years ago with index cards, frankly. But now I think
we're in a new position with the sophistication and the
computer systems that are available to make a much greater
impact, Senator.
Senator Shelby. I have a number of questions for the
record, Doctor.
In your testimony you stated that HCFAC funds would be used
to expand existing criminal and civil healthcare fraud
investigations and prosecution, particularly related to, and
I'll quote your words, ``emerging fraud schemes in areas such
as pharmaceutical services, medical devices, and durable
medical equipment.'' Would you expand on some of these emerging
fraud schemes and how fraud and abuse has evolved, and why
criminals are getting more creative? Because these, put
together in the aggregate, are big tickets, aren't they? A lot
of money?
Dr. Budetti. Thank you for that question, Senator. Yes. I
think one of the challenges that we face is that the fraud
schemes are getting more sophisticated, and we need to stay
ahead of them.
In the durable medical equipment area, in the other areas
that you mentioned, what we see is, people who have the
sophistication to submit claims and get them rejected over and
over again, but to keep learning from the rejections so that
they get them right eventually, and they look like real
claims--they're able to set up phony enterprises and make them
look like real enterprises until we really go and visit them
and make sure whether or not they're operating. They can have
beneficiary IDs and provider IDs that look real, because they
are real. They're just not part of that actual enterprise. They
belong to somebody else somewhere else in the country.
So, all of that lends to the increased sophistication, and
it's something that we need to be equally or even more
sophisticated about, Senator.
Senator Shelby. Of course, predictive analytics, the credit
card, the banking system uses that----
Dr. Budetti. Absolutely.
Senator Shelby [continuing]. Now to predict fraud and so
forth.
Could you tell us how the return on investment is coming?
That's important from the standpoint of appropriations.
Dr. Budetti. Thank you for that question, because we've
learned from our private sector partners and from other
industries that their return on investment in this kind of
analytics has been tremendous. We've had conversations with
people in the banking industry. We've had conversations with
people in a number of other industries about their use of
advanced technologies and how dramatically it's lowered their
fraud rates. So, we believe that their investment, what they've
learned, can be readily applied to us in the Federal healthcare
programs, and that's the direction we're moving in.
Senator Shelby. A lot of it's basic--not basic for
yesterday, but for tomorrow--information technology, the----
Dr. Budetti. Absolutely.
Senator Shelby [continuing]. Explosion is, and you're using
those tools, are you not?
Dr. Budetti. Yes, sir. That's exactly where we're going. We
have a solicitation that's open right now. We're looking at
some of the best ideas from around the country, from private
sector companies that are offering these new solutions. And I
think we're going to be very well poised to put those into
place very soon.
Thank you, Senator.
Senator Harkin. Thank you, Senator Shelby.
And now we welcome not only a new member to the Senate but
to this subcommittee, my neighbor to the East, as I say, in
Illinois. Senator Kirk was also on the House Appropriations
Committee. And so we welcome him not only to the full
committee, but to the best subcommittee of the full
Appropriations Committee.
Senator Kirk.
Senator Kirk. I thank the chairman, and recall Chairman
Natcher, who always called the bill that was produced by this
subcommittee the people's bill. And we share the admiration of
a former staffer for Chairman Harkin, Jim Sweeney, who I worked
with very much until his tragic death, and remember Jim very
much in the foreign policy work he did for the chairman.
I am new and old--new to the Senate 60 days, old in the
sense that I am, first attended a Labor-HHS meeting for, with
Congressman Porter back in 1984, and remember the subcommittee
and its work, and what it's done. And I apologize for making a
typical freshman mistake of actually showing up at a hearing in
which he's not the ranking member. But I care very much about
this bill and where we're going, and this topic.
I'm wondering, we're talking about predictive models, and
we're talking about a high degree of bureaucratic involvement
in finding waste, fraud, and abuse. I'm wondering if we can
look to any thoughts you have or academic peer review data on
empowering patients to help in this process.
First question is, the Medicare card itself, very much like
the Social Security card, is highly outdated, compared to the
cards regularly available elsewhere. This, for example, is a
military ID card, called a common access card (CAC). The
Department of Defense (DOD) has now put out about 20 million of
these at a cost of roughly $8 each. It not only has the
picture, the signature, the computer chip, the bar code, and
the magnetic strip picture on the back and another bar code. To
my knowledge, DOD has yet to find a counterfeit version of this
since the CAC card rolled out. My question is, would this card
pay for itself, as Medicare beneficiaries had this technology
available? Any thought of upgrading the card itself to help
enforcement in where we go?
Dr. Budetti. Senator, and welcome to the hearing as well. I
appreciate the honor of being here for your first hearing, as
well.
Senator Kirk. Thank you.
Dr. Budetti. The Medicare card does pose, I think, many of
the questions that you've raised. We are in the process of
looking into exactly what you just mentioned. Over the years
this has been looked at, and the emphasis, in my opinion, has
been largely on the costs of switching over. I think it is
time, as you mentioned, that we also look at what the payoff
would be of doing exactly that, and decide whether that is a
good investment.
I can tell you that in my Center for Program Integrity we
have initiated a pilot program to use card reading technologies
in a limited way, precisely to get experience with that. And
we'll be issuing special cards in certain, in a limited pilot
study. And when we get the results of that study, we'll be able
to--you mentioned peer-reviewed research. We're not going to
publish this. But we do want to know exactly what we're doing
and try to follow through on a step-wise fashion. And so, we
are conducting this technology in the DME area to verify the
identities and the locations at which the durable medical
equipment is being provided. And we view that as a first step
toward understanding what the payoff would be of a major shift,
as you mentioned.
Senator Kirk. Thank you.
I would just think, Mr. Chairman and Senator Shelby, it
might be something for us to explore in the bill, to fund, or
to give direction to the administration to look into. And I
would hope that we not reinvent the wheel. Since DOD has
already worked out this technology and has $20 million on the
street, moving from $20 million to $40 million for Medicare
could help the internal integrity of the system and would
assist investigators. And so, I think it's productive for us to
look into.
One last question. Our Federal employees can smell fraud
faster than anyone else, especially at a local level. But, is
there a way to further incentivize them--for example, a 1
percent reward for what they find in the system? Any sort of
studies or review that have been done to look at what an actual
cash percentage for the recovery would be to the Federal
employee that you have determined has actually found the
misdoings?
Dr. Budetti. Senator, I think you're very well aware of the
major impact that the Federal False Claims Act and the State
false claims acts have had in terms of creating incentives for
people to report fraud, and they get a recovery of, a share of
the recovery.
Interestingly enough, there actually is a program on the
books, a Medicare incentive program that would allow us to pay
a proportion of the recoveries to Medicare beneficiaries who
report information that leads to fraud. We're in the process
right now of looking very carefully at ways to reinvigorate
that program. It has not been a major tool in our approach to
this in the past. And we're right now redesigning the program,
and believe that it could be of major importance in terms of
further creating incentives for Medicare beneficiaries and
others to report fraud in the program.
Mr. West. Senator, welcome to the subcommittee.
Senator Kirk. Thank you.
Mr. West. Welcome to the Senate.
As you know, the False Claims Act, as Dr. Budetti has
mentioned, has been a very important tool for the Civil
Division and for the Department of Justice when it comes to
getting at waste, fraud, and abuse in any of our public
programs, but particularly in our healthcare fraud programs. I
would say about two-thirds of our cases that we pursue are
cases that come under the qui tam provisions that come from
whistleblowers. And I think that is due not only to the
publicity that those efforts that we've been making has
generated, but also Congress' good judgment that there is an
incentive for individuals who are on the inside and who are
willing to oftentimes risk their careers, risk an awful lot, to
come forward and uncover or disclose fraud, that there is an
incentive to do that.
I will say that the Department has had quite a few
conversations--and we are always happy to engage in many, many
more--on this topic of whether or not public government
employees, Federal Government employees ought to have the type
of incentive that you describe. And I think it's fair to say
that at this time we're not convinced that it will actually
increase our efforts to get at waste, fraud, and abuse. I
think, you know, we do have some concerns about whether or not
that conflicts with the duties of a public employee,
particularly a public employee whose job as a public servant is
to, as part of their role, identify these types of waste, this
type of fraud, and to report it, to then have personal gain
from doing that person's job. We do have some concerns about
whether or not that's inconsistent with what a public servant's
role is.
But, as I said before, you know, there are ongoing
conversations about this, and we're happy to engage in those.
Senator Kirk. Mr. Chairman, just, our Federal employees
generally are overwhelmingly patriots. I was a Federal employee
in the State Department where a rewards program was provided
and available--it was not a common practice, but--to enable and
incentivize the workforce to do the right thing, or even more
exciting, we all have had beneficiaries tell us about fraud
that they've seen. And allowing a 1 percent recovery for
confirmed fraud I think empowers every senior in America to
police their own care and program. And woe be unto the provider
that now faces beneficiaries like this. And so, it's an area
for us to explore.
But, thank you Mr. Chairman.
Senator Harkin. Well, Senator, thank you very much. I want
to explore that with you about that card. As I understand it,
what you're saying is that if they had this card, that before a
provider puts in for reimbursement using their number and the
supposed patient's number, the patient would have to somehow
swipe that card for every procedure. You'd have two inputs
coming in.
Senator Kirk. Right. It depends, you know, for DOD, in very
rough environments they'll just Xerox it. And then, for normal
DOD applications, they'll have what's called a common access
card reader, which is about $2 per computer.
Senator Harkin. I'd like to see how that would work. In
other words, right now when a provider puts in for
reimbursement they put in their number and the patient number,
and whatever code for whatever they provided. So, the card's
not even used.
What you're saying, I think, is that maybe we should have a
card where, if that provider puts in for reimbursement, there
has to be a parallel input from that card.
Senator Kirk. Where the secretary at the doctor's office
then sees if, you know, if the photo even matches.
Senator Shelby. Just common sense.
Senator Harkin. I'd like to take a look at that.
You say you're looking at things like that? Do you have a
pilot program on that?
Dr. Budetti. As I mentioned, Senator, we do have a pilot
program. The reason we started with a pilot program is that
this would be a major change. This would not be a simple
overnight change, or an inexpensive one, and----
Senator Shelby. How long has the pilot program been going?
Dr. Budetti. The pilot program just started within the last
few months, Senator, on our watch. But it's definitely worth
thinking about. But I just, the caution, of course, has been
that because there's so many people involved, and because it
involves the coordination between the Social Security system
and the Medicare system both--not that that can't be done, but
that it needs to be looked at very carefully and implemented
properly, and thought about over time, as well.
Senator Harkin. Yes. I'd like to also know, what is the
proportion? In other words, of all the different things that
you go after in terms of fraud, how much of the total is
undocumented claims that are made by providers, as opposed to,
say, pharmaceutical companies using off-brand, off----
Mr. West. Off-label?
Senator Harkin [continuing]. Off-label uses. I don't know
what the proportion of that is.
Mr. West. Well, certainly, a large, large proportion--and I
can get the exact number here--but a large proportion of our
cases do involve the large pharmaceutical companies. When you
talk about the recoveries and the numbers that we were just
talking about, off-label marketing, as you point out, and other
types of fraud related to marketing drugs that have not been
approved as safe and effective by the Food and Drug
Administration (FDA), there is, of course--and then, you know,
a smaller proportion of our cases would involve other types of
healthcare fraud. But there's no question that the big
pharmaceutical company cases that you've just mentioned are a
very large share.
[The information follows:]
Litigation Tracking System
The litigation tracking system used by the Civil Division
does not allow for the tracking of cases by case type. As such,
the Civil Division is unable to state what percentage of all
healthcare fraud cases are cases which involve pharmaceutical
companies and off-label marketing.
Dr. Budetti. The only thing that I would add to that,
Senator, is that--I mentioned the compromised number database
that we are putting together and that we're expanding--we now
have about a quarter of a million Medicare beneficiary
identities that we believe, or that we know, have been
compromised and used to nefarious purposes. And I think that's
an indicator of the scope of the problem. This is something
that we're beginning to use in a more extensive and creative
way to track who is submitting claims using those Medicare
beneficiary identities.
Of course, there are still real people who need real care
from real providers, and so we want to be cautious that we
don't cut them off from care just because somebody stole their
ID. But, this is clearly a growing problem, and it is something
that we're taking very seriously as we put into place our
advanced analytics. And----
Senator Harkin. When I was going through your testimonies
last night, reading them and then thinking about our past
hearings on this, it came to my mind that, why is no one going
to jail?
Senator Shelby. That's a good question.
Senator Harkin. Why is no one going to jail? Let me just
pursue that just a little bit further. So, you've got $2.3
billion from Pfizer. Well, CEOs, the managers, whoever did all
this, there's no money out of their pockets. It comes from the
shareholders. And if they don't go to jail, then it's just, so
what? They tried it. They got caught. The shareholders paid it
off. And they don't have anything to worry about. Maybe they'll
try it again and next time they'll get by with it. And it seems
like every time we go down this path, someone gets fined, but
no one ever goes to jail. Am I wrong?
Mr. West. Well, I would take issue with the premise a
little bit. I think now----
Senator Harkin. Well, give me some idea of who goes to
jail. I've never seen any yet.
Mr. West. Well, here's maybe three examples. I think the
first comes from our Strike Forces, which have been very, very
successful in identifying individuals who are perpetrating
fraud, and not just identifying them, but prosecuting them,
convicting them, and sentencing them. So, you've had a number
of convictions which have come out of our Strike Force efforts,
which are in seven cities now. The plan with the President's
budget is to move that to 20 cities, because it has been such a
successful effort. So, that would be the first one.
The second one is, in the Pfizer case you mentioned, there
were two individuals who were criminally charged. And we do
look at individuals that, I think it's fair to say that we are
equally aggressive whether it is against an individual or a
corporate defendant. If the evidence and facts allow us to
pursue individuals, we will do so. And I've been very, very
clear about that in the last 21 months in this role, that we
will look very closely at individual culpability.
Two examples of cases that we brought just last year. One
case, or, actually, two cases involved two individual doctors
who were performing heart surgeries when they were not
qualified to do so, and were billing the taxpayers for the work
that they did. Those cases actually resulted in significant, we
believe significant, patient harm. And last year we charged the
in-house counsel of a major company because we believe she was
engaged in obstruction of justice when it came to an FDA
investigation.
And so, we try to be very, very clear that, whether it's
the biggest of companies or the smallest of individuals, if you
are perpetrating fraud on the American people in our public
healthcare programs, then we will pursue you.
Senator Harkin. Well, I'd like to know how many of these
cases you've brought. When you got fines, how many people
actually were charged criminally and how many actually were
prosecuted to the extent that they actually served some time?
Mr. West. I'll be happy to get you that data, Mr. Chairman.
[The information follows:]
Criminal Prosecutions in Civil Pharmaceutical Cases
Together with its partners in the U.S. Attorney's Offices,
since January 2009, the Office of Consumer Protection
Litigation has brought charges against 11 individuals relating
to Food, Drug, and Cosmetic Act healthcare offenses. Seventeen
individuals have been convicted.\1\ Ten individuals have been
sentenced, and four of those were sentenced to a term of
imprisonment. Seven others await sentencing.
---------------------------------------------------------------------------
\1\ The number of charges during a given time period and the number
of convictions do not necessarily represent the same defendants, due to
the fact that proceedings often span beyond that time period. This
response reports the number of charges that were brought after January
2009, and the number of convictions that were entered since that time,
regardless of when the cases were filed.
---------------------------------------------------------------------------
The Department of Justice has charged and obtained
convictions of individuals, including corporate executives and
other individuals engaged in illegal activity in connection
with the sale and marketing of pharmaceuticals and medical
devices. Consistent with Department policy, upon conviction, we
advocate for sentences of imprisonment within the advisory
Sentencing Guidelines range in all but extraordinary cases.
This policy reflects the Department's belief that the
Sentencing Guidelines help us to achieve tough, fair, and
consistent sentences in the Federal criminal justice system.
Mr. West. You know, it actually brings up something that
you brought up earlier in the hearing. And that is, the impact
of the CR, the continuing resolution, on our efforts. As I
alluded in the opening statement, you know, these cases,
particularly the kinds of cases involving the larger companies
where you're looking for officers of the company, CEOs, you
know, CFOs, people who are in charge with individual
culpability, those are extremely, extremely intense, resource-
intensive cases. Not only do they take time to investigate, but
they take experts, they take lawyers, they take people who are
willing to sit down and do multiple interviews. And, as you
well know, these are well-funded adversaries on the other side,
with lots and lots of lawyers in the room.
Senator Harkin. That's true.
Mr. West. And that, of course, means that we have to, if we
want to be able to match that type of firepower, then we're
going to have to invest in our efforts to combat healthcare
fraud. And so, to the extent we have the CR, and we're unable
to expand our efforts, I think that has an impact. To the
extent that we have a CR, and we can't expand to 20 cities with
our Strike Force efforts, which have been amazingly successful,
we have to stay in seven cities, which has an impact as well.
Senator Harkin. Okay. Thank you.
Have you got anything else?
Senator Shelby. Yeah.
Senator Harkin. Senator Shelby.
Senator Shelby. I want to pick up on what Senator Harkin
said.
You're in the DOJ, and you're in the law enforcement. One
of the strongest emotions that we have is fear. And if it's
individual fraud, they ought to be prosecuted. If it's
corporate fraud, they ought to be prosecuted, not just pay the
fine. Because you know it will send a message to everybody. And
what Senator Harkin was, I think, getting at is very important.
What kind of message is it if you can pay a little fine or a
big fine, and you can go home, and the culprits are never
called to account? Isn't that basically what he's talking
about?
So, I think you can do both. Are you in complex litigation?
Are you on this absolutely? Are they--people are going to fight
you, the bigger they are and the resources they have.
Absolutely. But I think you've got to do it both ways, with the
little person who commits fraud, and the big person. Because
justice should be across the board, should it not?
Mr. West. I could not agree with you more, Senator Shelby.
I'm a former prosecutor. And I always say, nothing focuses the
mind like jail time. So, I couldn't agree with you more on
that.
But I will say, when you look at our record over the last 2
years----
Senator Shelby. Well, I'm not getting on your record. I'm
just----
Mr. West. Right, right, right. No. I appreciate it. But I
think when you look at the sort of cases that we've brought,
they include both cases against individuals as well as
companies.
And I would also say, you know, the fines in these cases,
the judgments and settlements in these cases are record-
breaking. And that's for a reason. Because I could not agree
with you more. It cannot be that a company sees healthcare
fraud enforcement, law enforcement, imposing a fine as a cost
of doing business.
Senator Shelby. That's right.
Mr. West. That cannot be the case. And I think----
Senator Shelby. Just a cost of doing business.
Mr. West. Right. It cannot be that. And so, I couldn't
agree with you more. We need to deploy the full range of our
criminal and civil law enforcement tools to bring to bear on
healthcare fraud.
Senator Shelby. I know we want to move on, but I want to
pick up on the theme of what Senator Kirk was onto. And that's
preventing fraud as much as you can. Of course, a good card
won't prevent all fraud because there's a lot of fraud in the
people who provide the services, and some fraud in the people
who use the services. But if you can prevent fraud before it
happens as a national healthcare integrity strategy, it will
pay dividends big-time, would it not?
Mr. West. No question. No question. I've often said we
can't prosecute our way out of this problem. And that's why I
think the reforms that Dr. Budetti has just described here are
so critical to our law enforcement efforts.
Senator Shelby. And when people cheat, they're cheating
everybody else, aren't they?
Mr. West. Absolutely.
Senator Shelby. I mean, they're cheating some beneficiary
that might be in need----
Mr. West. That's right.
Senator Shelby [continuing]. Because the money won't be
there. Especially in the future.
Thank you, Mr. Chairman.
Senator Harkin. Thank you, Senator Shelby.
Well, I thank our panel. Thank you very much.
Our first panel will be excused. We'll call our second
panel.
Rebecca Nurick has served as the Project Manager of the
Pennsylvania SMP program since June 2005. She has previously
worked as Assistant Coordinator of the Philadelphia Elder Abuse
Task Force, Assistant Coordinator of the Guardianship Advisory
Project, and a caregiver assistant service counselor. She's a
graduate of Penn State University.
Robert Rolf serves as Vice President of Consulting Services
for CGI Federal and manages the Health Care Business Process
Services Business Unit. In his 15-year tenure with CGI, Mr.
Rolf has presented at national conferences, including the
National Health Care Anti-fraud Association and the National
Association for Medicaid Program Integrity. A graduate of Ohio
State University.
Welcome. Your statements will be made a part of the record
in their entirety. I'll ask you to sum them up in about 5
minutes, if you could.
And, Ms. Nurick, welcome. Please proceed.
STATEMENT OF REBECCA NURICK, PROJECT MANAGER,
PENNSYLVANIA SENIOR MEDICARE PATROL
PROGRAM, PHILADELPHIA, PENNSYLVANIA
Ms. Nurick. Thank you very much.
My name is Rebecca Nurick, and I am the Program Manager of
the Pennsylvania SMP at the Center for Advocacy for the Rights
and Interests of the Elderly (CARIE).
Established in 1977, CARIE is a private nonprofit
organization dedicated to improving the quality of life for
frail older adults.
Good morning, Chairman Harkin, members of the subcommittee
and staff. Thank you very much for convening these hearings and
for the opportunity to present testimony today.
The national SMP, has been very busy since its inception in
the mid-90s. The Pennsylvania SMP began as 1 of 12 local
demonstration projects across the country through an initiative
called Operation Restore Trust, begun by Senator Harkin.
Senator Harkin had the foresight to see the need for a
grassroots approach to curbing fraud and abuse in Medicare.
Today there are 45 SMP programs--1 in every State, as well as
the District of Columbia, Guam, U.S. Virgin Islands, and Puerto
Rico.
Healthcare fraud is a serious problem. In 2009, more than
48 billion was lost to fraud, waste, and abuse. SMP staff and
volunteers have spoken to beneficiaries in communities
throughout the country about a myriad of issues, such as
durable medical equipment fraud, providers charging for more
costly procedures than those that were actually rendered, home
health agencies billing for services provided by unauthorized
and/or unqualified personnel, and marketing abuses by health
insurance companies, just to name a few.
To address these issues, our project and other SMPs utilize
a peer education model envisioned by Senator Harkin. SMPs
recruit and train senior volunteers, Medicare beneficiaries, to
conduct outreach and education to their peers, caregivers and
professionals about Medicare and Medicaid fraud prevention.
The primary message here is that there is something that
beneficiaries can do about this problem.
The project's goals are twofold. First, to educate and
motivate consumers on how to prevent, detect and report
healthcare fraud, errors, and abuse, and second, to receive,
investigate and refer, as appropriate, complaints of potential
healthcare fraud.
So, why is this important? Indeed, fraud costs Medicare
more than $48 billion each year of massive financial loss to
the Government and beneficiaries. Fraud can also cause people
to lose access to care, suffer inappropriate or low-quality
care, lose benefits, receive bad equipment, the wrong drugs, or
other things they do not need, all affecting their health and
well-being.
What does healthcare fraud look like? I will tell you about
a couple of the scams and fraud that our SMP has encountered.
We were contacted by a beneficiary, a retired medical
office worker, about a company that was coming around in a van
dropping off scooters to people and collecting personal
information such as Medicare numbers and birth dates and so on.
When the company came to her home, she told them that she would
not divulge any information and demanded that the van driver
and his counterpart leave her property immediately. After 2
days of harassing her, she threatened to call the police, and
they left her alone. The company ultimately did have some
information about her and managed to bill her Medicare number
for a $5,000 scooter that she never received. Company employees
are currently under indictment because SMPs, in addition to
other organizations, reported this problem to CMS.
Another beneficiary called our SMP with a concern about
charges on her Medicare summary notice, or her MSN. The
beneficiary went to her primary doctor with a sore throat and a
fever. The doctor used a tongue depressor to look down her
throat. He wrote a prescription for her and she went home. She
later checked her summary notice and saw that the doctor had
billed for an expensive procedure called a laryngoscopy. The
office corrected the mistake after our office called it to
their attention.
The success of the SMP program is a direct result of its
volunteers. Volunteers have extensive training and show extreme
dedication to the fight against fraud.
Terri Ivers, a retired Government worker from Langhorne,
Pennsylvania, became a SMP volunteer because she has strong
feelings about justice and law. She has been a volunteer for 14
years and was recognized for her work by the U.S.
Administration on Aging.
I am attaching a flier that was recently created for
outreach purposes. It features a few of our SMP volunteers
here, and the photo really does reflect what a serious matter
the volunteers consider fraud to be.
Nationwide, the SMP program has trained 60,000 volunteers,
handled more than 104,000 complaints, and educated 2.3 million
people. Millions more have been made aware of the problems
through television, radio and newspaper interviews, as well as
distribution of consumer education materials.
The numbers are significant, but what is more important
here is why those numbers matter. Beneficiaries are the first
line of defense in the fight against fraud and abuse. They are
on the front lines. When more people become aware of the issues
that confront Medicare, the better able they will be to protect
themselves, as well as the essential healthcare on which they
depend. SMP volunteers teach their peers practical, simple and
effective ways to protect themselves and their healthcare
system. The essence of the message is to detect problems,
protect personal information, and report suspicious activity or
charges.
PREPARED STATEMENT
We hope that our testimony today will help to strengthen
the message that Medicare and Medicaid fraud abuse prevention,
through protecting information, detecting problems, and
reporting concerns, is essential, and that beneficiaries across
the Nation are ready and willing to protect themselves and this
vital healthcare.
Thank you for the opportunity to speak with you today about
this critical issue, and for championing the fight against
Medicare and Medicaid fraud.
Senator Harkin. Thank you, Ms. Nurick. Thank you very much.
[The statement follows:]
Prepared Statement of Rebecca Nurick
My name is Rebecca Nurick and I am the Program Manager of the
Pennsylvania Senior Medicare Patrol (SMP) at the Center for Advocacy
for the Rights and Interests of the Elderly (CARIE). Established in
1977, CARIE is a private nonprofit organization dedicated to improving
the quality of life for frail older adults.
Good morning Chairman Harkin, members of the subcommittee and
staff. Thank you for convening these hearings and for the opportunity
to present testimony today.
smp
The national SMP has been very busy since its inception in the mid-
1990's. The Pennsylvania SMP began as 1 of 12 local demonstration
projects across the country through an initiative called Operation
Restore Trust begun by Senator Harkin. Senator Harkin had the foresight
to see the need for a grass roots approach to curbing fraud and abuse
in Medicare. Today there are 54 SMP programs, one in every State as
well as the District of Columbia, Guam, U.S. Virgin Islands, and Puerto
Rico. These programs are well supported by the national SMP Resource
Center.\1\ Healthcare fraud is a serious problem. In 2009, more than
$48 billion was lost to fraud, waste, and abuse. SMP staff and
volunteers have spoken to beneficiaries in communities throughout the
country about a myriad of issues, such as durable medical equipment
fraud, providers charging for more costly procedures than those
actually rendered, home health agencies billing for services provided
by unauthorized and/or unqualified personnel, and marketing abuses by
health insurance companies, just to name a few.
---------------------------------------------------------------------------
\1\ The National Consumer Protection Technical Resource Center at
www.smpresource.org.
---------------------------------------------------------------------------
To address these issues, our project and other SMPs, utilize a peer
education model envisioned by Senator Harkin: SMPs recruit and train
senior volunteers, Medicare beneficiaries, to conduct outreach and
education to their peers, caregivers, and professionals about Medicare
and Medicaid fraud prevention. The primary message here is that there
is something that beneficiaries can do about the problem.
The project's goals are twofold: first, to educate and motivate
consumers on how to prevent, detect and report healthcare fraud,
errors, and abuse; and second, to receive, investigate and refer, as
appropriate, complaints of potential healthcare fraud. So why is this
important? Indeed, fraud costs Medicare more than $48 billion each
year--a massive financial loss to the Government and beneficiaries.
Fraud also can cause people to lose access to care, suffer
inappropriate or low-quality care, lose benefits, and receive
unnecessary or faulty equipment, the wrong drugs or other things they
do not need--all affecting their health and well-being.
healthcare fraud
What does healthcare fraud look like? I will tell you about some of
the scams and fraud that our SMP has encountered.
We were contacted by a beneficiary who was a retired medical office
worker about a company that was going around in a van, getting personal
information from residents (Medicare numbers, birth dates) and dropping
off scooters. When the company came to her home, she told them that she
would not divulge any information, and demanded that the van driver and
his counterpart leave her property immediately. After 2 days of
harassment, she threatened to call the police and they left her alone.
The company ultimately did have some information about her, and managed
to bill her Medicare number for a $5,000 scooter that she never
received. Company employees are currently under indictment because
SMPs, in addition to other organizations, reported the problem to
Centers for Medicare & Medicaid Services.
Another beneficiary called our SMP with a concern about charges on
her Medicare Summary Notice (MSN). The beneficiary went to her primary
doctor with a sore throat and fever. The doctor used a tongue depressor
to look at her throat, wrote a prescription for her and then she went
home. Her total visit time was about 10 minutes. She later checked her
MSN and saw that the doctor had billed for an expensive laryngoscopy.
The office corrected the ``mistake'' after we called it to their
attention.
The last example concerned a healthcare provider going to senior
housing buildings in Philadelphia and buying Medicare numbers for $10,
then providing a cursory diagnostic exam. The exams consisted merely of
checking blood pressure and taking a temperature, but Medicare was
billed for multiple, costly tests. Since no one should offer money or
free items for Medicare numbers, we tell people to guard their Medicare
number as if it were a credit card number.
volunteer impact
The success of the SMP program is a direct result of its
volunteers. Volunteers have extensive training and show extreme
dedication to the fight against fraud. Terri Ivers, a retired
Government worker from Langhorne, Pennsylvania became a SMP volunteer
because she had strong feelings about justice and law. She has been a
volunteer for 14 years and was recognized for her work by the U.S.
Administration on Aging. I am attaching a flyer recently created for
outreach purposes. It features a few of our Pennsylvania SMP
volunteers. The photo reflects what a serious matter the volunteers
consider fraud to be.
Nationwide, the SMP program has trained 60,000 volunteers, handled
more than 104,000 complaints, and educated 2.3 million people. Millions
more have been made aware of the problem through television, radio, and
newspaper interviews, as well as distribution of consumer education
materials.
The numbers are significant, but what is more important here is why
those numbers matter: beneficiaries are the first line of defense in
the fight against fraud and abuse. They are on the front lines. When
more people become of aware of the issues that confront Medicare, the
better able they will be to protect themselves as well as the essential
healthcare on which they depend.
detect, protect, and report
So what can beneficiaries do to protect themselves? SMP volunteers
teach their peers practical, simple, and effective ways to protect
themselves and their healthcare system. The essence of the message is
to ``Detect, Protect, and Report.''
SMP volunteers suggest that beneficiaries:
--Keep a calendar of all healthcare visits and services (tests,
equipment, etc.) Compare these records to Explanations of
Benefits or Medicare Summary Notices to detect any
inaccuracies.
--Protect Medicare or Medicaid numbers as if it were a credit card
number.
--Trust Their Instincts.--If something sounds too good to be true, it
probably is. Beneficiaries should report suspicious callers or
charges.
--Never give any personal information (such as Medicare or bank
account numbers, birth date) to callers or people who show up
at your door.
--Always rely on their personal doctor to recommend all medical
services and equipment.
--Know that Medicare and Social Security will never try to sell a
service or product.
conclusion
We hope that our testimony today will help to strengthen the
message that Medicare and Medicaid fraud and abuse prevention, through
protecting information, detecting problems, and reporting concerns, is
essential, and that beneficiaries across the Nation are ready and
willing to protect themselves and their vital healthcare.
Thank you for the opportunity to speak with you today about this
critical issue and for championing the fight against Medicare and
Medicaid fraud.
Senator Harkin. And, Mr. Rolf, please proceed.
STATEMENT OF ROBERT ROLF, VICE PRESIDENT, CGI FEDERAL,
INC., FAIRFAX, VIRGINIA
Mr. Rolf. Good morning, Chairman Harkin, Senator Shelby,
members of the subcommittee.
My name is Rob Rolf. I'm vice president for CGI Federal, an
information technology and business process services company
that has been partnering with Government for nearly 35 years.
In my role, I'm responsible for CGI's efforts to implement
the RAC program in region B, a seven State region in the
Midwest, as well as similar audit and recovery efforts that CGI
performs for its State government and commercial clients.
It is my pleasure to appear before you today at this
hearing to examine the use of RAC in the Medicare program.
Originally authorized by the Tax Relief and Health Care Act
of 2006, the Medicare Recovery Audit Contractor program is a
nationwide program focused on the identification of improper
payments made to hospitals, physicians, clinics, durable
medical equipment suppliers, and other providers of services
under Medicare parts A and B. The nationwide program follows a
successful 3-year pilot that resulted in the identification of
$1 billion in improper payments from six States.
Under CGI's contract with CMS, CGI is tasked with the
identification of improper payments utilizing both automated
and manual claim review processes intended to identify provider
overpayments and underpayments.
Although most of this work involves catching improper
payments on the back end, CGI fully supports all efforts to
prevent such payments from happening in the first place. CGI
currently assists CMS in the development of an improper payment
prevention plan, a mission that CGI takes very seriously.
As a result of CGI's experience with the RAC program, I'd
like to share a few observations about this important CMS
program and some lessons learned about recovery audit efforts
with the subcommittee.
First, transparency and communication are critical to the
success of the program. It is important that RACs provide
transparent information to Medicare providers regarding the
program and the issues under investigation, as well as
information about the basis for an improper payment
determination.
Second, the RAC program promotes continuous process
improvement for claims processing and payment. CGI participates
along with the other RACs in major finding discussions with
CMS. This process informs CMS of areas representing the
greatest vulnerabilities to the program, along with
recommendations for corrective action.
Third, the contingency payment approach works well in
practice. Medicare Administrator Contractors have many
significant duties under the Medicare program, including claim
review prior to payment. The MACs simply aren't able to catch
every error or omission on the front end. The RACs have one
primary mission, and that's to catch improper payments on the
back end and correct them. The contingency payment approach
allows RACs to dedicate the necessary resources to this task.
Fourth, the potential for this contingency approach to
expand to other areas across Government has been recognized by
Congress. Several legislative provisions in the Affordable Care
Act expand the RAC approach to Medicaid as well as Medicare
parts C and D, and the Improper Payments Elimination and
Recovery Act passed last year requires the RAC approach to
improper payment recovery across Federal agencies.
As the Medicaid RAC program is being implemented in each
State, CGI is pleased to have been selected by the Commonwealth
of Pennsylvania as its RAC contractor and by the Commonwealth
of Massachusetts for improper payment reviews. Our contract is
a continuation of over a decade of work in identifying improper
Medicaid payments in partnership with the Department of Public
Welfare, while our work with Massachusetts represents a new
partnership in providing recovery audit work.
The Medicare RAC program is an essential element in the
broader effort of program integrity. A comprehensive approach
that CGI has been advocating for nearly two decades involves
clearly defined program policies, pre-edit payment edit rules
and audits of claims, postpayment recovery audits, and
investigation of fraudulent activities. Each element is
essential to ensuring compliance with the program and the
ultimate goal of protecting the trust funds.
CGI prides itself on combining cutting-edge technology with
years of domain expertise in creating valuable solutions for
our clients. We are especially proud of our ability to deliver
successfully on the RAC program by featuring our healthcare
expertise and broad experience in our programs.
PREPARED STATEMENT
More than that, CGI remains passionate about the
opportunity to partner with CMS and other public agencies in
one of the most critical good Government efforts underway
today.
I appreciate the chance to appear before you all today. I
would be pleased to answer any questions you may have.
Senator Harkin. Thank you very much, Mr. Rolf.
[The statement follows:]
Prepared Statement of Robert Rolf
Good morning, Chairman Harkin, Ranking Member Shelby, and members
of the subcommittee: My name is Rob Rolf. I am Vice President for CGI
Federal (CGI), an information technology and business process services
company that has been partnering with Government for nearly 35 years.
In my role, I am responsible for CGI's efforts to implement the
Recovery Audit Contractor (RAC) program in region B, which is comprised
of seven States in the Midwest, as well as similar audit and recovery
efforts that CGI performs for its State government and commercial
clients. It is my pleasure to appear today before you at this hearing
to discuss the role of RACs in the Medicare program.
Originally authorized by the Tax Relief and Healthcare Act of 2006,
the Medicare Recovery Audit Contractor program is a nationwide program
focused on the identification of improper payments made to hospitals,
physicians, clinics, durable medical equipment suppliers, and other
providers of services under Medicare parts A and B. The nationwide
program follows a successful 3-year pilot that resulted in the
identification of $1 billion in improper payments from six States.
Under CGI's contract with Centers for Medicare & Medicaid Services
(CMS), CGI is tasked with the identification of improper payments
utilizing both automated and manual claims review processes intended to
identify provider overpayments and underpayments. Although most of this
work involves catching improper payments on the back end, CGI fully
supports all efforts to prevent such payments from happening in the
first place. CGI currently assists CMS in the development of an
improper payment prevention plan, a mission that CGI takes very
seriously.
Since contract inception in February 2009, CGI, much like our
fellow RACs, has worked diligently to implement the program in an open
and transparent fashion. Our efforts to date involved extensive
outreach to the provider community in each State served, through town
hall style meetings, as well as Internet and audio conferences,
providing education on the program and CGI's processes. To date, CGI
has conducted more than 80 such meetings and taken more than 15,000
calls at our call center, which we established to field provider
questions and concerns.
In February 2010, CGI began sending notices of improper payments to
the Medicare Claims Processors for recovery. As a result of CGI's
experience with the RAC program, I'd like to share a few observations
about this important CMS program and some lessons learned about
recovery audit efforts with the subcommittee:
--Transparency and Communication are Critical to the Success of the
Program.--It is important that RACs provide transparent
information to Medicare providers regarding the program and the
issues under investigation, as well as information about the
basis for an improper payment determination. In this way,
providers are kept informed during each step of the audit
process. CGI also has established monthly conference calls with
provider associations and continues to conduct provider
outreach sessions to facilitate two-way communication. These
activities will continue to enhance the program as it matures.
--The Contingency Payment Approach Works Well in Practice.--Medicare
Administrative Contractors (MACs) have many significant duties
under the Medicare program, including claim review prior to
payment. The MACs simply aren't able to catch every error or
omission on the front end. The RACs have one primary mission--
to catch improper payments on the back end and correct them.
The contingency payment approach allows RACs to dedicate the
necessary resources to this task. Contrary to some assertions,
the contingency approach does not incentivize the pursuit of
questionable recoveries or disincentivize the pursuit of
underpayments for three important reasons. First, RACs do not
get paid unless and until a recovery is received by the
Government. Second, fees earned on recoveries that end up
reversed on provider appeals must be returned to the
Government. Third, RAC contractors receive an equal fee for
finding provider underpayments.
--The RAC Program Promotes Continuous Process Improvement for Claims
Processing and Payment.--CGI participates along with the other
RAC companies in major finding discussions with CMS. This
process informs CMS of areas representing the greatest
vulnerability to the program along with recommendations for
corrective action. Additionally, CGI has identified situations
where providers were paid in a manner that seemed incorrect,
but was not addressed by an existing CMS rule forbidding
payment. CGI informed CMS of the potential need for rule
changes to close loopholes and front end coding edits to avoid
future under/overpayments. In other cases, CGI has reviewed
provider billing and reimbursement situations that seemed to
warrant investigation only to conclude that the arrangements
were entirely appropriate. This review process provides an
important check and balance function for and promotes
continuous improvement of the claims payment system.
--The Potential for This Contingency Approach To Expand to Other
Areas Across Government has Been Recognized by Congress.--
Several legislative provisions in the Affordable Care Act
expand the RAC approach to Medicaid as well as Medicare parts C
and D and the Improper Payments Elimination and Recovery Act
passed last year requires a RAC approach to improper payment
recovery across Federal agencies.
As the Medicaid RAC program is being implemented in each State, CGI
is pleased to have been selected by the Commonwealth of Pennsylvania as
its RAC contractor and by the Commonwealth of Massachusetts for
improper payment reviews. Our contract in Pennsylvania is a
continuation of over a decade of work in identifying improper Medicaid
payments in partnership with the Department of Public Welfare while our
contract in Massachusetts represents a new partnership in providing
recovery audit work.
While Medicare parts C and D are significantly different programs
than the work being performed in parts A and B, CGI believes that the
expansion of the RAC approach to these programs creates the potential
for greater synergies to be found in contracting with single entities
to perform both scopes of work. The lessons learned from current audits
being conducted can be applied directly to the work of part C plans.
Similarly, having access to the part D pharmacy data would allow a RAC
to conduct audits that would not otherwise be possible if the medical
and pharmacy data were audited separately. Matching this data together
allows for a deeper level of analysis that identifies improper payments
across claims.
The Medicare RAC program is an essential element in the broader
effort of program integrity. A comprehensive approach that CGI has been
advocating for nearly two decades involves clearly defined program
policies; pre-payment edit rules and audits of claims; postpayment
recovery audits; and investigation of fraudulent activity. Each element
is essential to ensuring compliance with the program and the ultimate
goal of protecting the trust funds.
CGI prides itself on combining cutting-edge technology with years
of domain expertise in creating valuable solutions for our clients. We
are especially proud of our ability to deliver successfully on the RAC
program by featuring our healthcare expertise and broad experience in
audit recovery programs. More than that, CGI remains passionate about
the opportunity to partner with CMS, and other public agencies, in one
of the most critical ``good government'' efforts underway today.
I appreciate the chance to appear before you all today and would be
pleased to answer any questions you may have.
Senator Harkin. Ms. Nurick, I was just telling Senator
Shelby how this came about.
One time back in the mid-90s I was, you know, we all have
different meetings in our States, and I was having a senior
meeting with seniors. And a person came up to me. She came up
to me and said, ``I just got this bill, and look at this bill.
I got charged for this.'' And she said, ``I didn't get those.''
Someone else was standing there and said, ``Well, you don't
have to pay it.'' She said, ``Well, I know I don't have to pay
it, but it's not right.'' And then another man says, ``Senator,
I'm a retired CPA. Let me take a look at that.''
Then I had another meeting where a similar kind of thing
happened. A guy--he was a retired doctor--he said, ``Maybe I
could take a look at that.'' All of a sudden a light went on in
my head--we've got a lot of retired people out there that are
pretty expert in a lot of different things--they're
accountants, they're doctors, they're lawyers, they're nurses,
they're health professionals. They've been involved in this. So
I thought, maybe we ought to get them involved in some kind of
voluntary system to do this. And that's what's grown into this
Operation to Restore Trust, or the SMPs now.
And I did not know until today the figures that you had,
they've trained 60,000 volunteers, 104,000 complaints. Do you
have any idea how much money's been recovered by this group?
Ms. Nurick. A recent figure that I saw through the
Administration on Aging was more than $103 million, I believe.
I can double-check that for you.
Senator Harkin. And these, if I'm not mistaken, these are
usually the small amounts. A couple thousand there, a
thousand----
Ms. Nurick. This is true. A number of cases that come in to
us are not very, very large sums.
Senator Harkin. Right.
Ms. Nurick. They are smaller amounts. But these smaller
amounts do add up.
Senator Harkin. Is there anything that we need to do to
help expand this? I mean, obviously it seems to be working
well. Seniors are volunteering for this. There's a lot of
expertise, a lot of retired people out there that know how to
look at these things. Is there anything we need to do to expand
this?
Ms. Nurick. I think that the continued funding of the
program is essential. We----
Senator Harkin. Well it doesn't cost--how much do we put
into that? Thirteen million dollars?
Senator Shelby. And gotten a lot back.
Senator Harkin. We get a lot back from that.
Ms. Nurick. Right. There are a lot of very dedicated, very
caring people out there, volunteers, who really want to see
this system be well. Our volunteers come from many different
backgrounds--homemakers, retired pharmacists, physicians,
school teachers, all who very much understand the mission of
why protecting Medicare and protecting themselves is very
important.
The more people that we can reach--I can speak for my
State, for Pennsylvania, it's a large State. We've got 67
counties, we've got a lot of older adults, a lot of Medicare
beneficiaries throughout the State, rural areas as well as
urban areas. And it's a lot of work to get the word out to all
of these people. So, the more beneficiaries that we can train
on this subject matter, the more beneficiaries we can reach.
Senator Harkin. Well, thank you for what you're doing. I'm
pleased to see this is working. And it seems to me this is,
nationwide, a small amount of money, we get a big bang for the
buck on that one.
Ms. Nurick. We really do. We really do.
Senator Harkin. Mr. Rolf, let me ask you a provocative
question.
First of all, I like what you're doing. I think your
company has provided an excellent service in this regard. But
one thing that I have heard is that the RACs, as they're
called, that paying RACs only for an improper payment leads to
a ``bounty hunter'' approach. How would you respond to that?
And as we look to other areas of Government, what do you think
is the right balance here? I've heard that complaint, ``Well,
the RACs are just bounty hunters'' and so, you, I don't know.
How do you respond to something like that?
Mr. Rolf. Well, thank you, Mr. Chairman, for the question.
Let's start with the premise that I don't think anybody
enjoys being audited. But I think that there are a number of
things that CMS has done in the permanent program that have put
the correct incentives in place for proper action on behalf of
both providers and the recovery audit contractors.
First and foremost, the transparency and outreach efforts
that have been, set this program aside, in the 20 years that
I've been involved in these types of efforts I have not seen a
program on a commercial, State, or Federal level that has the
level of transparency this program does. Providers are educated
on every single audit initiative that is underway. They know
before the audits even begin what specific rules and what
specific audits are going to be implemented in their region.
And I leave this subcommittee today to fly to Indiana for a
provider outreach session with several hundred hospital
employees to educate them about the RAC program and the nature
of the work that we're doing. And that represents 1 of more
than 70 outreach efforts that we've done across our seven State
region. And we also hold monthly conference calls with the
associations to understand what their concerns are about the
program, give them updates on our activities and, again, create
the sense of fairness and openness as part of that program.
I think also that you need to understand that in the
contingency audit approach, with the rules that are in place
with the RAC program, the Government only receives its benefits
if we find an actual improper payment. And if the improper
payment is eventually overturned on any level of appeal, CGI
and the other RAC contractors owe that fee back to the
Government. So we have every incentive to make the right
determination the first time. We take a look at it and make
sure that we're only looking at black and white issues.
And I think it's also important to note that there's an
equal incentive--CMS defines improper payment as both an
overpayment and an underpayment, and so we have equal incentive
to find both instances.
Senator Harkin. That's important.
Senator Shelby. It is.
Senator Harkin. I think that answers that question on the
bounty hunter thing because it's equal on both sides.
Senator Shelby.
Senator Shelby. Thank you, Mr. Chairman.
Ms. Nurick, how do you reach out to Medicare beneficiaries
and educate them about the importance of keeping this program
of Medicare and Medicaid honest, and it's to everybody's
benefit, and they have the obligation and responsibility? We're
taught that in school and home. I know this. But sometimes you
have to re-emphasize it, that when people are cheating they're
cheating us all. When there's fraud, they're milking the
system, and it hurts a program that most people benefit from,
and most people are honest. Do you agree?
Ms. Nurick. Yes. Thank you for the question, Senator
Shelby. I do agree.
And we teach our volunteers that most people are honest,
and the purpose of this initiative is to weed out those who are
using the system for personal profit.
Our volunteers go into a wide array of different venues to
teach their peers, which we find to be a very effective model--
having a Medicare beneficiary teaching another beneficiary what
they need to know about fraud and abuse prevention. They will
go into senior centers, into libraries, buildings, subsidized
housing buildings where there are activities going on, retiree
groups, all sorts of places where you're going to have
beneficiaries there or--caregiver groups are also very
important, because caregivers are maybe taking care of their
loved ones' financial and healthcare issues. So, we're, we go
into as many places in the community as possible to reach
beneficiaries directly.
Senator Shelby. What do they do with, generally, with
doctors or hospital administrators, or people that cheat and
steal, so to speak? Senator Harkin brought up a question
earlier--he didn't read about anybody going to jail, you know,
from time to time and so forth. But wouldn't tough treatment of
people who commit fraud, no matter who they are or how big they
are, or how small they are, be a deterrent in a sense?
Ms. Nurick. I think that would make a strong statement.
Yes. I do. I think that would go a long way.
Senator Shelby. Okay.
Mr. Rolf, I know you do, your company does some good
things. You have to work for an incentive and, otherwise, a
whistleblower program probably wouldn't work as much. You know,
we'd like some of that. And, you have facilities everywhere.
You have opened a facility in my State, you know, 300 jobs.
That means there's probably fraud there, you know, here and
there, in any program.
What are your impressions of how providers perceive RACs?
Are they generally receptive and view you as someone who's
there to help? Or do they fear you? I think they have to fear
you some. No, I, but continuing, if they've done nothing wrong,
they have nothing to fear. If they've made a mistake and can
explain that, you know, that's good. People make mistakes. But
just pure, unadulterated fraud, and continuing fraud, they've
got to fear you on an audit sometimes.
Mr. Rolf. Thank you for the question, Senator Shelby.
The RAC program, it's important to note, is focused on
improper payments, the waste and abuse part of the equation.
Not true fraud. If we identify true fraud in going through our
reviews we refer it back----
Senator Shelby. You give it to somebody?
Mr. Rolf. Correct.
Senator Shelby. Do you do that, too, Ms. Nurick? If there's
fraud there you give to the law enforcement people to look at
it?
Ms. Nurick. We, the SMPs----
Senator Shelby. Or, what you might believe is fraud.
Ms. Nurick. Right. We don't determine what is fraud.
Senator Shelby. Sure.
Ms. Nurick. We will submit those cases to CMS or to
contractors----
Senator Shelby. Okay.
Ms. Nurick [continuing]. For investigation, yes.
Senator Shelby. Go ahead.
Mr. Rolf. So, the, we've made, we do a lot of activities in
order to ensure that we're reducing the administrative burden
of our reviews on the provider community. And so, working in
partnership with the associations--keep in mind that most of
what we identify is a result of data entry errors, payment
processing errors, errors understanding, misunderstanding of
rules----
Senator Shelby. Are you working basically to, in the
improper payment prevention area?
Mr. Rolf. Correct.
Senator Shelby. Okay. And, by improper, prevention area,
give us some examples of that.
Mr. Rolf. Improper payment could be the miscoding of
services----
Senator Shelby. Okay.
Mr. Rolf [continuing]. Billing for services that would----
Senator Shelby. As opposed to pure fraud?
Mr. Rolf. Correct.
Senator Shelby. Okay.
Mr. Rolf. Right.
Senator Shelby. And do you see a lot of that?
Mr. Rolf. We do. There's, again, it's a direct result of
misunderstanding of CMS program rules in some cases, data entry
errors, entering in the wrong number of units on a----
Senator Shelby. That would come under waste?
Mr. Rolf. Correct.
Senator Shelby. And that would get into, probably, in a
program like this, millions of dollars, would it not?
Mr. Rolf. As I said, in the 3-year pilot it cost six States
more than $1 billion was identified and ultimately corrected.
Senator Shelby. How is, do you believe, are you always
trying to innovate in this program to make it work better?
Mr. Rolf. It's an ongoing effort at----
Senator Shelby. Evolution?
Mr. Rolf. It's an evolutionary effort. I think, as Dr.
Budetti stated earlier, there's a lot of advances technology-
wise with the types of data analysis and reviews that we do to
help target----
Senator Shelby. Okay.
Mr. Rolf [continuing]. And identify those issues that are
the prime issues to go after.
Senator Shelby. Well, both of you, keep up your work. Be
diligent, and don't quit. And we appreciate it very much. Thank
you very much.
Mr. Rolf. Thank you, Senator.
Senator Harkin. Thank you, Senator Shelby.
Again, thank you both.
Do either one of you have anything to add before we close
down our hearing?
Again, I thank both of you in your respective areas for
what you're doing to help us cut down on Medicare fraud and
abuse. The RACs, I believe, are providing an important service,
and now we're expanding that under the Affordable Care Act. The
SMP people are out there volunteering, and I think that's a
good thing.
So, I'm sure that Senator Shelby and I are going to
continue to use this subcommittee to make sure that we have as
good a system as possible to go after fraud and abuse wherever
it occurs. So, we're going to work together hand in glove on
that one.
ADDITIONAL COMMITTEE QUESTIONS AND STATEMENTS
The record will remain open for 10 days for any further
questions or statements from Senators who couldn't make it here
today.
[The following questions were not asked at the hearing, but
were submitted to the witnesses for response subsequent to the
hearing:]
Questions Submitted to Dr. Peter Budetti
Questions Submitted by Senator Tom Harkin
Question. I understand it takes 10 days for the current CMS data
system to do automated fraud checks. That seems like a long time for
modern technology. On top of that, you have a statutory requirement
that you pay providers within 14 days of receipt of the claim. That
doesn't leave a lot of time to do anything more than a cursory review
of claims before you put the money out the door. Why does it take so
long to conduct the automated fraud checks? Would the data initiative
proposed in the President's fiscal year 2012 budget give you more time
to prevent improper payments?
Answer. CMS leverages automated checks or edits at a variety of
places throughout the claims processing lifecycle. Automated checks are
conducted at the front end of the process, on day one, as the claim is
submitted to the Medicare Administrative Contractor (MAC). Additional
automated checks take place as the claim is moved to the claims
processing systems hosted in the CMS Enterprise Data Center (EDC). Once
again, a different set of automated checks are applied in the Common
Working File as the claim moves through the adjudication process.
The President's fiscal year 2012 budget request includes funds to
support CMS' enterprise IT investments that support all parts of
Medicare. Moreover, CMS is aggressively implementing and utilizing the
anti-fraud and abuse tools and new statutory authorities provided by
the Affordable Care Act, including enhanced and risk-based provider
enrollment screenings, payment suspension when a credible allegation of
fraud exists, and a moratorium on new provider and supplier enrollments
when necessary to combat fraud.
In addition, section 4241 of the Small Business Jobs Act of 2010
requires the Secretary to ``use predictive modeling and other analytics
technologies . . . to identify improper claims for reimbursement and to
prevent the payment of such claims under the Medicare fee-for-service
program.'' CMS is integrating the advanced technology as part of an
end-to-end solution that triggers effective, timely administrative
actions by CMS as well as referrals to law enforcement when
appropriate. Innovative risk scoring technology will apply a
combination of behavioral analyses, network analyses, and predictive
analyses in order to identify complex patterns of fraud and improper
claims and billing schemes.
Question. Are RACs able to receive and process electronic medical
records, electronic claim information, or other types of electronic
data from providers? If not, does the department have a plan to give
them that capacity?
Answer. Yes, the RACs are currently able to receive and process
electronic claims and records. Under the Medicare Fee-For-Service
national program, which began in January 2010, CMS requires Recovery
Auditors to accept medical records from providers in an electronic
format, instead of a paper-based system as was required in the
demonstration.
Question. Please provide more detail on the legislative proposal to
give the Secretary more flexibility implementing the predictive
modeling provisions of the Small Business Jobs Act (Public Law 111-
240).
What is the current status of predictive modeling implementation
efforts?
Answer. CMS has been piloting information technology solutions
including predictive analytics, refining the technology, and addressing
systematic vulnerabilities that the analytics identify for several
months. During 2010, CMS began one pilot in April and another in
September. CMS also held an Industry Day in October to let experts know
about CMS' strategic goals, priorities, and objectives in the use of
information technology solutions for fraud prevention in our programs.
In keeping with the predictive modeling requirements of the Small
Business Jobs Act, CMS issued a request for capabilities and a
solicitation December 16, 2010. Responses to the solicitation were
received from bidders on January 31, 2011 and are currently being
reviewed. CMS intends to make an award during the spring of 2011 and is
on track to meet the implementation deadline of July 1, 2011.
Question. How have predictive analytical capabilities already been
integrated into CMS information systems?
Answer. CMS is in the early stages of implementing predictive
modeling and working it into our information systems. Thus far,
predictive analytic pilots have only been tested on claims that have
already been paid, and continue to be refined based on the results of
these tests. As the models are refined and have a low number of false-
positives, we intend to expand their use and apply the models to claims
before payment has been made. This will trigger additional review of
high-risk claims before payment when appropriate. The first models will
be implemented in July, per the statutory requirements in the Small
Business Jobs Act.
Question. Please describe future plans for implementation of
predictive modeling systems.
Answer. CMS is implementing a National Fraud Prevention Program
that integrates all of its analytic models and innovative technologies
into a cohesive antifraud strategy. It includes an analytics
laboratory, which will develop effective algorithms that will
incorporate data from many sources, including HHS Office of Inspector
General findings, complaint trends, policy concerns, and identified
vulnerabilities. Further, the National Fraud Prevention Program will
analyze multiple databases at a national level, including claims,
complaints, and enrollment data, in addition to targeted analysis. In
addition, CMS is relying on its newly granted legislative authority in
both the Affordable Care Act and the Small Business Jobs Act to support
the expansion of predictive modeling systems in Medicare.
CMS was charged with implementing Section 4241 of the Small
Business Jobs Act that mandated the award and implementation of
Predictive Modeling technology in the CMS environments by July, 2011.
CMS will implement an innovative risk scoring technology that applies
effective predictive models to Medicare. Innovative risk scoring
technology applies a combination of behavioral analyses, network
analyses, and predictive analyses in order to identify complex patterns
of fraud and improper claims and billing schemes. CMS is integrating
the advanced technology as part of an end-to-end solution that will
trigger effective, timely administrative actions by CMS as well as
referrals to law enforcement when appropriate. Prior to applying
predictive models to claims prepayment, CMS will rigorously test the
algorithms to ensure a low rate of false positives, allowing payment of
claims to legitimate providers without disruption or additional costs
to honest providers; confirm that the algorithms do not diminish access
to care for legitimate beneficiaries; and identify the most efficient
analytics in order to appropriately target resources to the highest
risk claims or providers. Given the changing landscape of healthcare
fraud, any successful technology will need to be nimble and flexible,
identifying and adjusting to new schemes as they appear.
Further, the Small Business Jobs Act of 2010 provided $100 million,
beginning in fiscal year 2011, to phase-in the implementation of
predictive analytics in Medicare FFS. The Small Business Jobs Act of
2010 additionally provides that the Secretary shall start to phase-in
the use of predictive analytics technologies to Medicaid and CHIP
beginning April 1, 2015. The new predictive modeling technology will
incorporate lessons learned through pilot projects. For example, in one
pilot, CMS partnered with the Federal Recovery Accountability and
Transparency Board (RATB) to investigate a group of high-risk
providers. By linking public data found on the Internet with other
information, like fraud alerts from other payers and court records, we
uncovered a potentially fraudulent scheme. The scheme involved opening
multiple companies at the same location on the same day using provider
numbers of physicians in other States. The data confirmed several
suspect providers who were already under investigation and, through
linkage analysis, identified affiliated providers who are now also
under investigation.
Question. Why is the legislative proposal described above
necessary? What provisions of Public Law 111-240 need to be changed and
why?
Answer. The predictive modeling provisions in Public Law 111-240
are very prescriptive and require CMS to deploy predictive modeling in
certain programs at specific times. Allowing the flexibility we are
seeking in the fiscal year 2012 legislative proposal does not mean that
CMS will not continue to aggressively develop predictive analytics.
Rather, it would allow CMS to expand predictive analytics in a way that
targets our resources as efficiently as possible. Greater flexibility
sought in the legislative proposal would allow CMS to target technology
in areas with the greatest return on investment, and enable us to
adjust the implementation timeline, scope of services subject to
predictive analytics, and the time period under which models need to be
evaluated as necessary. The proposal would also recognize that some
States may require extra time to implement and perfect their predictive
models. The legislative proposal is estimated to result in $100 million
in savings over 10 years, due to increased efficiency.
Question. In her letter to the Nation's Governors, dated February
3, 2011, Secretary Sebelius outlined a number of solutions that could
help reduce States' Medicaid expenditures. Specifically, the Secretary
identified greater use of generic drugs as a possible way to decrease
prescription drug costs. Secretary Sebelius noted that the department
would ``also share additional approaches that States have used to drive
down costs, such as relying more on generic drugs . . .''. Has CMS
examined and quantified the potential savings that would accrue to
States and the Federal Government by improving generic utilization in
Medicaid? Has CMS identified which policies act as a barrier to or help
facilitate greater access to safe, lower-cost generic medicines? If so,
what efforts has the agency taken to communicate its findings with
State Medicaid officials?
Answer. As you noted, in addition to encouraging States to ensure
that their pharmacy reimbursement costs more accurately reflect the
actual acquisition costs of drugs, the Secretary encouraged States to
consider relying more heavily on generic drugs in their Medicaid Drug
Programs.
The President's fiscal year 2012 budget includes two proposals to
encourage greater generic drug use. First, the Administration proposed
shortening the length of the exclusivity period for generic biologics
from 12 to 7 years. Second, the Administration proposes giving the
Federal Trade Commission authority to prohibit ``pay-for-delay''
arrangements between brand-name and generic pharmaceutical companies to
delay the entry of generic drugs into the market. These proposals are
estimated to save the Medicaid program nearly $2.5 billion over the 10-
year budget window.
In a recent paper by the National Health Policy Forum (NHPF),
published in September 2010, NHPF found that the State of Minnesota
saves $10 million annually on their program to substitute generic drugs
when available. However, it is important to note, as the Office of the
Inspector General found in a 2006 report, ``that single source drug
prescribing caps the level of generic drug utilization that a State
Medicaid program can attain.''
In order to achieve the available savings through generic drug
prescribing, States may need to encourage the prescribing of
multisource drugs which have generic equivalents, use preferred drug
lists, impose prior authorization requirements, or pursue supplemental
rebates with generic drug manufacturers in exchange for providing drugs
more favorable status in utilization management.
CMS recently created the Medicaid State Technical Advisory Teams
(M-STAT) that are responsible for working directly with States to
address steps they can take to improve efficiency in their programs and
develop effective cost containment strategies. As we work with States
and identify areas where savings can be achieved, increasing the use of
generic drugs is an important priority.
Question. As you may know, the practice of chiropractic care
originated in my State of Iowa, and Palmer College of Chiropractic is
still one of the leading schools in the Nation. There seems to be some
confusion among my constituents about what kinds of chiropractic care
are covered by Medicare. Can you outline for me the guidelines of what
is and what is not covered? Are there any misconceptions about what
Medicare covers in this area? What is the biggest billing error that
you see in this practice area?
Answer. Medicare makes payment for covered chiropractic services
under the Physician Fee Schedule. For chiropractors, coverage extends
only to treatment by means of manual manipulation of the spine to
correct a subluxation when such treatment is legal in the State where
performed. This requirement is specified in section 1861(r)(5) of the
Social Security Act (the Act).
Chiropractic maintenance therapy is defined as a treatment plan
that seeks to prevent disease, promote health, and prolong and enhance
the quality of life; or therapy that is performed to maintain or
prevent deterioration of a chronic condition. Under the Medicare
program, chiropractic maintenance therapy is not a covered service
because it is not ``manual manipulation of the spine to correct a
subluxation'' as specified in section 1861(r)(5) of the Act.
Question. Can you explain the distinction between a covered service
and a reimbursable service? I would think if a service is covered in
the Medicare benefit, then a provider administering that service should
be reimbursed by Medicare for providing it. For example, your guidance
on chiropractic care says: ``Acute, chronic, and maintenance
adjustments are all `covered' services, but only acute and chronic
services are considered active care and may, therefore, be
reimbursable.'' What does it mean for a service to be covered by
Medicare but not reimbursable?
Answer. As noted in the answer to the prior question, Medicare
makes payment for covered chiropractic services under the Physician Fee
Schedule. For chiropractors, coverage extends only to treatment by
means of manual manipulation of the spine to correct a subluxation when
such treatment is legal in the State where performed. This requirement
is specified in section 1861(r)(5) of the Social Security Act (the
Act).
In some instances, Medicare payment for covered services may be
bundled and no separate payment is made for a covered item or service.
As such, a service may be covered, but not separately reimbursed. For
example, some chiropractors use hand-held manual devices in the course
of furnishing their services. While the manual manipulation service
using the hand-held device may be covered, there is no separate payment
for the cost or use of the device.
Chiropractic maintenance therapy is defined as a treatment plan
that seeks to prevent disease, promote health, and prolong and enhance
the quality of life; or therapy that is performed to maintain or
prevent deterioration of a chronic condition. Under the Medicare
program, chiropractic maintenance therapy is not a covered service
because it is not ``manual manipulation of the spine to correct a
subluxation'' as specified in section 1861(r)(5) of the Act.
Question. I've heard that one of the triggers for an audit is
providing service to a larger number of Medicare clients than is
typical. Coming from a State that regularly ranks high for our
proportion of residents over 65 years of age, I'm curious about this
practice. What might it indicate that a provider serves a lot of
Medicare patients? If the audit comes out clean, is the provider
penalized for seeing a great number of Medicare patients?
Answer. Medicare contractors conduct data analysis and use
comparative statistics to analyze claims. A high volume of billings
does not in itself trigger an audit. However, if a provider appears to
have aberrant billing patterns that suggest he/she is an outlier
compared to his/her peer group, CMS may conduct medical review to
determine if claims for services are medically reasonable and
necessary, and as appropriate, collect overpayments that are
identified. Depending on the nature of the errors found through medical
review, contractors implement corrective actions which range from
provider education to 100 percent pre-payment medical review.
______
Questions Submitted by Senator Richard C. Shelby
Question. Describe the interaction between CMS fraud and abuse
efforts and private sector insurers. You mentioned National Health Care
Fraud Summits in your testimony. Are there other examples of ways you
can collaborate on the common goal of reducing healthcare costs by
eliminating fraud in the Nation's healthcare system?
Answer. Sharing information and performance metrics broadly and
engaging internal and external stakeholders requires establishing new
partnerships with government and private sector groups. Because the
public and private sectors have common challenges in fighting fraud and
keeping fraudulent providers at bay, it makes sense that we should work
together to develop common solutions. As we pursue and test new
technology, CMS is working to involve the private sector and State
partners to incorporate strategies that have already proven successful.
As the first phase of partnership building with private sector
entities, CMS held an industry day in October 2010 that was attended by
approximately 300 industry representatives. This event highlighted CMS'
strategic goals, priorities, and objectives in the use of information
technology solutions for fraud prevention in our programs and provided
an opportunity for attendees to determine whether their firm's
services, methods, and products fit with CMS' mission and vision. In
December 2010, CMS issued a Request for Information asking vendors to
identify their capabilities in the areas of provider screening/
enrollment and data integration. CMS will review the responses and
incorporate innovative ideas into our strategy for integrated,
automated, provider screening and data integration.
Question. As we face a tight fiscal environment, our Subcommittee
will face tough decisions with regard to allocating funding. You
identify the Health Care Fraud and Abuse program as one initiative that
has led to increasing returns to the Medicare Trust Fund as a result of
oversight efforts. Can you identify any programs that have not been as
effective and may potentially be cut or eliminated to allow for
increasing resources to be directed toward HCFAC?
Answer. I understand that during pressing economic times, tough
choices have to be made. I fully support the President's efforts to
consolidate activities and reduce duplicative or ineffective programs
as laid out in his fiscal year 2012 budget request. While CMS programs
were not eliminated in that effort, we are certainly seeking
efficiencies within our existing efforts to reduce unnecessary program
growth.
The Health Care Fraud and Abuse Control Program (HCFAC) is an
important and prudent investment for the Federal healthcare programs.
Over time our recoveries have demonstrated that the more resources
invested into this program, the higher the return on investment has
been. The HCFAC account has a 3-year rolling average of 6.8 to 1 and
the Medicare Integrity Program averages 14 to 1. Further, CMS'
Actuaries have determined that the multi-year discretionary program
integrity investment, starting with the request of $581 million for
fiscal year 2012, is estimated to save $4.6 billion over 5 years and
$10.3 billion over 10 years, which more than pays for itself.
______
Questions Submitted by Senator Lamar Alexander
Question. Given the extensive fraud problem we have in the United
States--and the fact that this endangers patients and drives premiums
ever higher, why doesn't the medical loss ratio (MLR) interim final
rule allow all fraud expenses to be included in the numerator of the
MLR? Why would we want to penalize insurers for the investment they
make in antifraud efforts? I understand that efforts to prevent fraud
from occurring is not being considered as a quality expenditure.
Answer. Quality Improvement (QI) expenses, for the purpose of the
MLR, are all plan activities that are designed to improve healthcare
quality and increase the likelihood of desired health outcomes in ways
that are capable of being objectively measured and of producing
verifiable results and achievements. The expenses must be directed
toward individual enrollees or incurred for the benefit of specified
segments of enrollees.
The Affordable Care Act required the National Association of
Insurance Commissioners (NAIC) to develop uniform definitions of MLR
activities, including activities that improve healthcare quality. The
NAIC, in its model MLR regulation, determined that fraud prevention
activities do not qualify as a quality improving activity. However, the
NAIC also determined that, when factoring the MLR, an adjustment may be
made to incurred claims to account for the amount of claims payments
recovered through fraud reduction efforts not to exceed the amount of
the fraud reduction expense. The MLR interim final regulation adopted
and certified those recommendations in the model regulation of the
NAIC.
Question. Given that the key rationale for the expensive transition
of the coding system to ICD-10 is that ICD-10 will improve the quality
of care, why doesn't the MLR include ICD-10 costs as part of quality?
Answer. As discussed above, the only expenses that are included in
the Quality Improvement section of the MLR calculation are those that
have the potential to have a positive impact on enrollee health
outcomes through improvements in the quality of services.
The Secretary adopted the NAIC's recommendation to exclude the
conversion of code sets from ICD-9 to ICD-10 as a quality improvement
activity. In general, the development and maintenance of claims
adjudication systems are not designed primarily to improve the quality
of care received by an individual. However, since there is general
recognition that the conversion to ICD-10 will enhance the provision of
quality care through the collection of more refined data, HHS intends
to examine the reported conversion costs along with other quality
activity costs in the NAIC supplemental form in 2011 to determine
whether the policy in the MLR regulation should be revisited.
______
Questions Submitted to Tony West
Questions Submitted by Senator Richard C. Shelby
Question. In your testimony, you highlight that in fiscal year 2010
the Justice Department secured $2.5 billion in civil healthcare fraud
recoveries and $1.8 billion in criminal fines and forfeitures, which
were the largest amounts in the Department's history. Can you elaborate
further in your view, what led to these record amounts for fiscal year
2010?
Answer. The HEAT initiative instituted by the Attorney General and
the Secretary of Health and Human Services in May 2009 has brought an
unprecedented degree of coordination to healthcare fraud enforcement
matters at very high levels within the Departments of Justice and
Health and Human Services. This coordination has improved information
sharing between our Departments and has enhanced our collective ability
to allocate resources to pending matters. This cooperation greatly
contributed to the record recoveries obtained in fiscal year 2010. The
resolution of some of these matters also was hastened by the additional
resources given to the Department of Justice by recent appropriations
which enabled the Department to hire additional attorneys, agents, and
support personnel dedicated to healthcare fraud matters.
Nearly every healthcare fraud investigation requires extensive
document review, interviews of many witnesses, and a myriad of other
analyses. In the more complex matters involving large corporate
entities, such as pharmaceutical and device manufacturers, the
investigative resources required by the Government to successfully
investigate allegations are magnified considerably. These complex,
nationwide investigations commonly require reviewing millions of
documents and interviewing hundreds of witnesses, while also consuming
months (and sometimes years) of attorney, investigative, and litigation
support resources. The President's budget has sought additional funding
to further enhance these efforts.
Question. Given your experience litigating fraud, what
recommendations would you make to prevent fraud before it happens as
part of a national healthcare integrity strategy? Are there actions
that Congress could take to ensure that the tools are available to
engage in proactive fraud prevention?
Answer. Preventing healthcare fraud requires a multipronged
strategy and close coordination between the Departments of Justice and
Health and Human Services (HHS). Earlier this year, HHS published a
final rule implementing several significant anti-fraud provisions that
will materially enhance its ability to screen potential providers and
prevent payment to those committing fraud. See Medicare, Medicaid, and
Children's Health Insurance Programs; Additional Screening
Requirements, Application Fees, Temporary Enrollment Moratoria, Payment
Suspensions and Compliance Plans for Providers and Suppliers, 76 Fed.
Reg. 5862 (Feb. 2, 2011) (to be codified at 42 C.F.R. 405.370). As
noted by Dr. Peter Budetti, Deputy Administrator and Director of the
Center for Program Integrity, Centers for Medicare & Medicaid Services,
in his March 2, 2011 testimony before United States Senate Committee on
Finance, the final rule implements many anti-fraud provisions that
Congress passed under the Affordable Care Act. While the Department of
Justice does not play a direct role in screening those seeking to
enroll in government healthcare programs, the enforcement actions
brought by the Department provide an effective deterrent to those who
would seek to commit fraud against government healthcare programs.
Question. The fiscal year 2012 budget requests $283.4 million for
the Department of Justice for reimbursable funding to combat healthcare
fraud. This amount represents an increase of $63.4 million, or nearly
30 percent, over the fiscal year 2011 Continuing Resolution level.
Recognizing the need for Congress to balance the importance of fighting
fraud and waste against the backdrop of the current fiscal climate, can
you provide additional detail with regard to the request?
Answer. In fiscal year 2012, the Department of Justice (DOJ) is
requesting an increase of $63.4 million in reimbursable Health Care
Fraud Abuse and Control (HCFAC) funding to support the expansion of the
Medicare Fraud Strike Forces (MFSF), increase our efforts to support
civil healthcare fraud enforcement, and provide additional resources to
ensure that home health facilities and nursing homes are providing
proper care to their patients. In fiscal year 2010, DOJ received $29.8
million in reimbursable funding for the discretionary HCFAC account.
These funds provided additional investigators and prosecutors at
existing MFSF locations, as well as supported the expansion to two
additional locations. The additional funds requested in the fiscal year
2012 budget will allow the Department to expand to additional
locations, as well as support the annualization of the personnel added
in fiscal year 2010 and fiscal year 2011.
In addition to providing additional resources for MFSF locations,
the resources requested in the fiscal year 2012 President's budget will
also allow DOJ to expand our efforts in civil fraud enforcement, in
areas such as pharmaceutical fraud. DOJ's civil fraud enforcement
efforts are responsible for generating the largest share of returns to
the Medicare Trust Fund. The increase in funding will support
additional investigatory personnel and attorneys to address the
increase in qui tam filings which has occurred in recent years.
Finally, the requested funds will also support additional personnel
to investigate home health facilities and nursing homes to ensure that
patients of these facilities receive the care they need within Federal
guidelines and to prevent any abuse that may be occurring.
______
Prepared Statement of the National Community Pharmacists Association
(NCPA)
NCPA recommends that Congress:
--Pass legislation to rein in the waste being generated by PBMs
within Medicare and Medicaid.
--Pass legislation to increase the transparency of PBM audit
practices within Medicare and Medicaid and to prohibit certain
abusive auditing practices by PBM auditors.
--Address through oversight or legislation CMS's failure, in certain
circumstances, to assert its authority to fight fraud, waste
and abuse.
Chairman Harkin, Ranking Member Shelby, and Members of the
Subcommittee: The National Community Pharmacists Association (``NCPA'')
welcomes and appreciates this opportunity to provide input and
suggestions regarding efforts to combat fraud, waste and abuse in
Medicare and Medicaid as they relate to pharmacy care providers and the
healthcare arena in general. NCPA represents the pharmacist owners,
managers and employees of more than 23,000 independent community
pharmacies across the United States. The Nation's independent
pharmacies, independent pharmacy franchises and independent chains
dispense nearly half of the Nation's retail prescription medicines.
NCPA strongly believes in the mission to cut fraud, waste and abuse
in Medicare and Medicaid in order to bolster the integrity of the two
programs and maximize the benefits provided to beneficiaries. NCPA and
our members strive hard to do their part to help ensure the integrity
of Medicare and Medicaid and to cooperate with Medicare and Medicaid
auditors. In fact, statistics demonstrate that independent community
pharmacists are not a significant part of the fraud, waste and abuse
problem.
NCPA thanks Congress for recognizing the integrity demonstrated by
independent community pharmacists in their participation in Medicare
and Medicaid. While no industry can claim to be completely void of bad
actors, Congress has recognized that independent community pharmacists,
as a whole, represent a very low risk in terms of fraud, waste and
abuse of the Medicare and Medicaid programs.
For example, in 2008, Congress enacted the Medicare Improvements
for Patients and Providers Act (MIPPA), which, in part, required Part D
sponsors to pay all clean claims submitted by or on behalf of
pharmacies within 14 days for electronic claims and within 30 days for
claims submitted otherwise. Similarly, just this past year, through the
Patient Protection and Affordable Care Act (PPACA), Congress enacted
legislative provisions to allow most independent community pharmacists
to be exempt from Medicare DME accreditation requirements. Recent
legislative history demonstrates the trust that Congress has in the
integrity of independent community pharmacies. We appreciate that trust
and try to live up to high standards every day.
Contrary to the trust that Congress holds for independent community
pharmacies, the same cannot generally be said of policymakers' view of
Pharmaceutical Benefit Managers (PBMs). Through recent legislative
action, Congress has seemingly demonstrated that it continues to be
concerned regarding how PBMs run their businesses. While Congress
provided additional flexibility for independent community pharmacies
through accreditation exemptions under the PPACA, in the same
legislation Congress imposed new transparency requirements on the PBMs
operating within the Medicare Part D program and for PBMs operating in
the new State-based health insurance exchanges, which come on line in
2010.
Congress apparently has strong reservations regarding the integrity
of the PBMs and, we believe, rightfully so. From 2004-2008, the three
major PBMs (Medco, CVS Caremark, and Express Scripts) faced six major
Federal or multidistrict cases over allegations of fraud;
misrepresentation to plans, patients, and providers; improper
therapeutic substitution; unjust enrichment through secret kickback
schemes; and failure to meet ethical and safety standards. These cases
have resulted in over $370 million in payments for fines and damages to
States, plans, and patients so far. The most prominent cases were
brought by a coalition of over 30 States and the Department of Justice.
Because NCPA and independent community pharmacists are committed to
fighting fraud, waste and abuse within Medicare and Medicaid, we have a
number of concerns regarding existing fraud, waste and abuse within
Medicare and Medicaid and how those problems are presently being
addressed. First, NCPA is concerned that some PBMs are apparently
contributing to waste within the Medicare and Medicaid system. Second,
NCPA believes that PBMs, in their auditing capacity, are abusing their
oversight authority to the detriment of independent community
pharmacists and the beneficiaries that they serve. Finally, NCPA
believes that CMS, in some instances, is not effectively performing its
oversight role for fraud, waste and abuse.
PBM Waste within Medicare and Medicaid
PBMs administer the pharmacy benefit within some Medicaid managed
care programs and many in Medicare Part D. These complex business
entities have multiple, extremely profitable, revenue streams. The
``Big 3 PBMs'' (Medco, Express Scripts, and CVS/Caremark) manage drug
benefits for approximately 95 percent of Americans with prescription
drug coverage, and each of these companies have annual revenues
exceeding $15 billion. In spite of these facts, PBMs are virtually
unregulated at the State or Federal level--even though they manage
numerous prescription plans funded by billons of taxpayer dollars.
PBMs negotiate contracts with many participants in the
pharmaceutical supply chain; two of the most important contracts are
with pharmacies (``the pharmacy network'') and plan sponsors. PBMs
primary profit streams include rebates provided by drug manufacturers
for driving brand drug market share; administrative fees charged
directly to the health plans; revenues from PBM-owned mail service
pharmacies and the clinical programs sold to health plans. From each of
these revenue streams the PBMs are earning sizeable profits, which are
enhanced by potential conflicts of interest built into the payment
system. Such profits are a waste of taxpayer money used to fund
Medicaid managed care and Medicare Part D. Outlined below is a
description of how these large profits arise under each revenue stream
and the conflicts of interest within each revenue stream.
PBMs Pocket Manufacturer Rebates
Pharmaceutical manufacturers provide ``rebates'' to PBMs on brand
name drugs purchased on behalf of PBM clients. The manufacturers pay
billions of dollars to the PBMs to drive/increase certain brand drug
usage by Medicare and Medicaid beneficiaries. These manufacturer
incentives and the resulting PBM behavior conflict with the interests
of patients and Medicare/Medicaid, which seek to maximize the use of
generic drugs that are equally as effective as brand name drugs, but
are less costly and save money. In 2009, retail pharmacies drove a 69
percent generic dispensing rate (GDR) while the mail order PBMs Medco
Health Solutions, Inc., Express Scripts, Inc. and CVS/Caremark had GDRs
under 58 percent generic dispensing rate. In the end, the PBMs do not
share all of the rebate savings with the patients, the plans or the
government.
PBMs ``Play the Spread'' in Retail Pharmacy Networks
The PBMs also generate substantial profits by charging Part D plans
and Medicaid one price for a given drug and then reimbursing retail
pharmacies a lower dollar amount. This practice needlessly adds costs
for the government and squeezes retail providers.
PBM-Owned Mail Order Pharmacies
Along with supplying drugs to retail pharmacies, the PBMs also own
and operate their own mail order pharmacies. These mail order
pharmacies are automated dispensing facilities that fill and ship
prescriptions requiring 90-day supplies. They operate in a ``Black
Box'' environment without transparency. Accordingly, these mail order
pharmacies are able to engage in practices that can provide the PBMs
with large profits, with little or no scrutiny.
Not only do the PBM mail order pharmacies pad the PBM's profits,
but they do so without delivering to the patient the benefits of a
traditional community pharmacy. Face-to-face consultation between a
pharmacist and patient, the most effective type of intervention to
ensure that patients adhere to their prescribed medication regime and
are counseled about possible negative side effects, is replaced with
patient e-mail and calls to 1-800 numbers to seek assistance from
rotating out-of-State corporate pharmacists. Outlined below are a
couple of examples of problems faced by mail order patients.
First, no patient can ``fire'' their PBM-owned mail service, no
matter how poorly it performs. Patients have reported numerous delivery
(or non-delivery) issues that have caused patients to be unable to take
medications that are vital to their health and well-being, yet they are
forced to continue using the PBM-owned mail service.
Second, when given a choice, 83 percent of customers prefer to fill
their prescription at a community pharmacy rather than at a so called
mail order pharmacy. Nonetheless, PBMs support policies that penalize
patients for using community pharmacies.
PBMs Make Money on Provider Reimbursement Float
PBMs also pocket the monetary interest generated from the lag time
between the pharmacy dispensing a drug to plan members and the time
when reimbursements are paid to the pharmacy. While this practice was
all but eliminated in Medicare Part D, it continues to exist in other
Federal programs and the commercial market. On a macro-scale the amount
of interest generated during this time lag period is significant and it
is inequitable that community pharmacies do not share in the value of
the interest generated during this lag time.
Legislative Solutions
In light of the PBM generated Medicare/Medicaid waste and abuse
outlined above, NCPA urges Congress to pass legislation that includes
the following provisions:
--Requiring PBMs to fully disclose to Part D plans and Medicaid
potential conflicts of interest in PBM service contracts.
--Establishing an ``any willing provider provision'' in all PBM mail
service contracts.
--Requiring PBMs to fully disclose ``spread'' pricing to all impacted
parties, including pharmacies, patients and Part D plans/
Medicaid.
--Require PBMs to pass through to pharmacies at least a portion of
the interest earned by the PBM on the pharmacy reimbursement
``float.''
PBM Audit Abuses
Not only do PBMs generate their own waste within Medicare and
Medicaid, but they also seem to abuse their role as auditors of
pharmacies within both programs, as well. PBMs typically audit
pharmacies in order to detect any improper payment by the PBM on behalf
of Medicare or Medicaid and to verify that the patient received the
correct medication in the appropriate dose. NCPA believes that auditing
is a necessary activity in order to detect and prevent fraud, waste and
abuse in Federal healthcare programs.
However, many times PBM auditors, some of whom are paid based on
the number of ``discrepancies'' found, go beyond the basic intent of
the audit (to detect fraud, waste and abuse) and instead focus on
typographical or administrative errors for which they use as the basis
to recoup money from the pharmacy.
In most cases, if a PBM auditor does identify an administrative
error, he or she will ``take back'' 100 percent of the value of the
prescription--an extreme financial penalty that is out of proportion to
the gravity of the offense.
In most cases, money recouped from a pharmacy as the result of an
audit is not returned to the plan sponsor--but is simply pocketed by
the PBM. Many times, PBM audits of pharmacies--operating under the
guise of combating fraud, waste and abuse--are simply an additional
revenue stream for the PBM.
One way many PBMs ``ensure'' that discrepancies will be found is to
establish elaborate record keeping requirements well in excess of what
is required under State or Federal law. Pharmacies typically maintain
contracts with multiple PBMs. The result is a myriad of conflicting
documentation requirements that can make operating a busy pharmacy and
responding to patient concerns an even greater challenge.
Another abusive audit practice involves PBM auditors who, in order
to maximize revenue generation, zero in on auditing high dollar
specialty prescriptions. One pharmacist reported that he gets audited
very frequently based on the fact that he serves a large number of HIV
patients--typically prescribed very expensive medications. Pharmacists
also report that auditors frequently question the directions for use
that the pharmacist typically types onto the medication. Many
physicians will include ``take as directed'' on the prescription that
they issue to a patient and the pharmacist is therefore charged with
providing the appropriate instructions. Auditors frequently question
whether or not the directions are specific enough. One particularly
egregious example of this occurs when auditors question the adequacy of
instructions included on a ``Z-Pak''. A Z-Pak is a pre-packaged dosage
form that simply requires the patient to ``punch out'' a specified
number of pills per day at designated intervals from the blister
packaging.
To increase the chances of a ``successful'' audit and more revenue,
PBMs also focus on claims in which they can easily question the
professional judgment of the pharmacist. Many times a physician will
issue a prescription that directs the pharmacist to dispense a certain
number of days supply of a medication. There are times when this is
open to interpretation--particularly with respect to lotions, creams or
particularly eye drops. Another area of concern is dispensing a certain
number of days supply of insulin; depending on blood sugar levels, the
amount of insulin that a patient needs on any particular day can vary.
Pharmacists frequently report that many times elderly patients need
an additional quantity of eye drops that somewhat exceeds that which
may be necessary for other patients. Many elderly patients have
difficulty instilling just one or two drops or due to hand tremors, and
typically end up spilling a fair quantity of the product. Auditors
typically do not accept these types of explanations, which boil down to
questioning the professional judgment of the pharmacist. In response,
many pharmacists have had to stop dispensing larger sized ophthalmic
solutions.
PBM's audit revenue is also enhanced inappropriately through the
questionable statistical methods that some of them use to assess fines.
Sometimes PBM auditors will use extrapolation or other statistical
expansion techniques to calculate the amount of any audit recoupment.
With extrapolation, a few prescriptions are extracted from the
total number of prescriptions filled for the particular PBM--and those
are examined for any errors. The number of errors detected in the small
sample is then extrapolated across a pool of prescriptions to arrive at
a questionably inflated number of discrepancies and corresponding
penalties.
One pharmacist recounted an example of the use of this technique in
connection with a recent Medicaid audit by a PBM. After the auditor
complimented the pharmacist on his ``clean documentation'' for the
audit sample, she presented him with an audit findings report that
detailed over $137,000 in alleged extrapolated clerical errors based on
findings from two prescription claims. Ultimately, the pharmacist was
able to prove that the auditor made a mistake on one of the two claims,
and the recoupment amount was then reduced to $3,000. Extrapolation has
been widely criticized as an auditing technique and a number of States
have passed legislation to prohibit or limit its use.
Finally, pharmacists have little recourse to fight back against PBM
abusive auditing practices. Pharmacists faced with significant
recoupments that they believe are in error are frequently without
recourse. Even if the PBM does have an appeals process, the PBM still
may withhold funds while waiting for the appeals process to be
completed. In addition, PBMs are not required to resolve appeals in a
timely manner and many pharmacists fear that if they complain too much,
the PBM may simply drop their contract. Many pharmacists, when faced
with unfair audit recoupments, are forced to weigh the amount of the
threatened recoupment with the likely cost of hiring legal counsel.
Some pharmacists are reporting a recent trend in which PBMs are keeping
recoupments to just under a certain dollar amount in recognition of the
fact that the threatened dollar loss to the pharmacist will not
outweigh the cost of hiring an attorney.
Legislative Solutions
In light of the PBM audit abuses outlined above, NCPA urges
Congress to enact H.R. 5234, the PBM Audit Reform and Transparency Act
of 2010, sponsored by Congressman Anthony Weiner (D-NY). Generally,
H.R. 5234 provides for the following: (1) Requiring PBM's to make
certain disclosures in an annual report to drug plan sponsors; (2)
increased regulation of PBM contracts with pharmacies; (3) prohibitions
against certain conflicts of interest involving PBMs and the entities
that they own; (4) restrictions on PBM auditing practices of
pharmacies; and (5) restrictions on PBM use of HIPAA information.
Turning more specifically to auditing practices, NCPA endorses the
following protections against abusive PBM audit practices:
--Requiring, where an audit results in the identification of solely
clerical or record keeping errors, that the pharmacy not be
subject to recoupment of funds by the PBM unless: (i) the PBM
can provide objective proof of intent to commit fraud; or (ii)
such error results in actual financial harm to the PBM, a
health insurance plan managed by the PBM, or a consumer.
--Prohibiting PBMs from requiring more stringent record keeping by a
pharmacy than is required by State or Federal law and
regulation.
--Requiring that PBMs accept records of a hospital, physician or
other authorized practitioner to validate pharmacy records and
prescriptions with respect to confirming the validity or claims
in connection with prescriptions, refills, or changes in
prescriptions.
--Requiring that PBM audits be conducted by or in consultation with a
pharmacist who is licensed in the State in which the audit is
being conducted, where the audit requires the application of
clinical or professional judgment.
--Prohibiting PBMs from using extrapolation or other statistical
expansion techniques in calculating the amount of any
recoupment or penalty resulting from an audit.
--Requiring PBMs to establish a written appeals process that shall
include procedures to allow pharmacies to appeal to the PBM the
preliminary reports and final reports resulting from the audit
and any resulting recoupment or penalty.
--Prohibiting the period covered by an audit from exceeding 2 years
from the date that the claim was submitted to or adjudicated by
the PBM.
--Providing that any legal prescription may be used to validate
claims in connection with prescriptions, refills or changes in
prescriptions.
--Requiring that each pharmacy be audited under the same standards
and parameters as other similarly situated pharmacies.
Conclusion
NCPA and its members remain committed to combating fraud, waste and
abuse within Medicaid and Medicare, and eagerly wish to be a part of
the solution. However, NCPA has concerns about certain aspects of
existing efforts to combat Medicare/Medicaid fraud, waste and abuse. To
summarize, as to the PBMs, NCPA is concerned that more needs to be done
to address the waste generated by some PBMs within Medicaid and Part D.
NCPA is also concerned that there needs to be more transparency and
oversight over PBM auditing practices under Medicaid and Medicare.
CONCLUSION OF HEARING
Senator Harkin. And with that, the subcommittee will stand
recessed.
Thank you.
[Whereupon, at 11:28 a.m., Tuesday, February 15, the
hearing was concluded, and the subcommittee was recessed, to
reconvene subject to reconvene at the call of the Chair.]
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