[Senate Hearing 112-310]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-310
 
                  HARNESSING TECHNOLOGY AND INNOVATION

         TO CUT WASTE AND CURB FRAUD IN FEDERAL HEALTH PROGRAMS

=======================================================================


                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT

                   INFORMATION, FEDERAL SERVICES, AND

                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON

               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 12, 2011

                               __________

         Available via the World Wide Web: http://www.fdsys.gov

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs




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20402-0001



        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
               Nicholas A. Rossi, Minority Staff Director
                  Trina Driessnack Tyrer, Chief Clerk
            Joyce Ward, Publications Clerk and GPO Detailee
                                 ------                                

 SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 
              FEDERAL SERVICES, AND INTERNATIONAL SECURITY

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 SCOTT P. BROWN, Massachusetts
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
CLAIRE McCASKILL, Missouri           RON JOHNSON, Wisconsin
MARK BEGICH, Alaska                  ROB PORTMAN, Ohio

                    John Kilvington, Staff Director
                William Wright, Minority Staff Director
                   Deirdre G. Armstrong, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Brown................................................     3
Prepared statements:
    Senator Carper...............................................    37
    Senator Brown................................................    40

                               WITNESSES
                         TUESDAY, JULY 12, 2011

Peter Budetti, M.D., Deputy Administrator and Director for 
  Program Integrity, Centers for Medicare and Medicaid...........     5
Lewis Morris, Chief Counsel, Office of Inspector General, U.S. 
  Department of Health and Human Services........................     7
Joel C. Willemssen, Managing Director, Information Technology 
  Issues, U.S. Government Accountability Office..................     9
Louis Saccoccio, Executive Director, National Health Care Anti-
  Fraud Association..............................................    10

                     Alphabetical List of Witnesses

Buddetti, Peter, M.D.:
    Testimony....................................................     5
    Prepared statement...........................................    43
Morris, Lewis:
    Testimony....................................................     7
    Prepared statement...........................................    55
Saccoccio, Louis:
    Testimony....................................................    10
    Prepared statement...........................................    79
Willemssen, Joel C.:
    Testimony....................................................     9
    Prepared statement...........................................    66

                                APPENDIX

Questions and responses for the Record from:
    Mr. Buddetti.................................................    95
    Mr. Morris...................................................    99
    Mr. Willemssen...............................................   107
    Mr. Saccoccio................................................   113
Chart referenced by Senator Carper...............................   118


                  HARNESSING TECHNOLOGY AND INNOVATION



         TO CUT WASTE AND CURB FRAUD IN FEDERAL HEALTH PROGRAMS

                              ----------                              


                         TUESDAY, JULY 12, 2011

                                 U.S. Senate,      
        Subcommittee on Federal Financial Management,      
              Government Information, Federal Services,    
                              and International Security,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:34 p.m., in 
room 342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper, McCaskill, Brown, and Coburn.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Well, why don't we go ahead and invite our 
first panel to the table, please. Welcome, one and all.
    On most Tuesdays that we are in session, Senate Democrats 
and Senate Republicans eat lunch, never together, always apart, 
and talk about the challenges that we face as a Nation, and we 
spent the last hour, hour-and-a-half in the Senate Democratic 
Caucus talking about the budgetary challenges that we face and 
what to do about them. One of the people who has thought about 
this for a lot longer than this week or this month or this year 
is the fellow who is sitting to my right, Senator Coburn, who 
has just joined us.
    He was a member of a commission created by Executive Order 
(EO) by the President over a year ago called the Deficit 
Commission, co-chaired by Erskine Bowles and by former Senator 
Alan Simpson, and 11 of the 18 members of that Commission voted 
for a deficit reduction package that would basically reduce the 
deficits by about $4 trillion over the next 10 years, mostly on 
the spending side, some on the revenue side. It was an approach 
in which almost everything was on the table--defense spending, 
domestic discretionary spending, entitlement spending, tax 
expenditures, and weighted about two-to-one or three-to-one to 
the spending side in terms of deficit reduction.
    One of the concerns, primarily among Democrats but also by 
Republicans and some Independents, is how do we reduce 
entitlement spending without significantly cutting benefits and 
inflicting real harm on people. Thanks to the good work by 
folks on my staff and on Senator Coburn's staff, some good work 
has been done drilling down on Medicare and on Medicaid to find 
there are ways for us to be able to reduce outlays from those 
programs, but to do so in a way that does not mortally wound 
beneficiaries or, frankly, mortally wound the providers.
    As it turns out, there is a lot that we can do and there is 
a fair amount that we are doing. The health care legislation 
that we passed here a year or so ago actually provides a number 
of tools to the Centers for Medicare and Medicaid Services 
(CMS) to enable them to go out and save some money and to 
reduce the flight of funds, almost the thievery of funds, the 
theft of funds from the Medicare Trust Fund.
    Senator Coburn and I have been working, and our staffs have 
been working to see if there are other things that we can do to 
shore up the Medicare Trust Fund, which is now scheduled to run 
out of money in 2024. As it turns out, there is a fair amount 
that we can do in our role to help some of you at this table, 
especially Dr. Budetti and his folks, to realize additional 
savings. And a lot of us would just say it is common sense.
    The fellow who just handed me my talking points here is 
Peter Tyler. Peter has done great work here along with the 
Republican staff. But one of the things that we learned most 
recently was that in 2007, if you look at the amount of money 
that was spent--what was the expenditure, Peter, what was it 
for 2007? About half of what was spent on power wheelchairs. I 
do not know if this came from the Inspector General (IG) or 
from the Government Accountability Office (GAO) or who. Who did 
it come from, the IG?
    Dr. Budetti. The Office of Inspector General (OIG).
    Senator Carper. Yes, the IG. In the first half of 2007, we 
spent, I think, about $190 million for power wheelchairs that 
year, and roughly half of that was, frankly, pretty hard to 
prove it should have been spent.
    We have dead doctors writing prescriptions for controlled 
substances for folks who should not be receiving those 
substances. They are going out and filling those prescriptions 
and using the drugs to help feed the drug trade. It is far too 
easy for bad people, for folks with criminal intent to get 
their hands on the provider IDs, and they are not only ordering 
controlled substances, but all kinds of durable medical 
equipment (DME). There is just a lot going on.
    You look at improper payments, $125 billion, I think GAO 
tells us, last year, about $47 billion of that for Medicare, 
not counting the Medicare Prescription Drug Program. I am told 
there is about another 20 or so billion dollars last year for 
Medicaid improper payments. Eric Holder, our Attorney General, 
tells us there is $60 billion in Medicare fraud. I do not know 
if he is combining some of those numbers out of improper 
payments or not, but it is a lot of money. And if the President 
says we are going to cut improper payments in Medicare by half 
by the end of next year, if we do that, that is $25 billion a 
year. If you do it for 10 years, that is $250 billion. That is 
a quarter-of-a-trillion. If we take out half of the fraud in 
Medicare, that is another $30 billion a year times 10 years is 
$300 billion. And you add it together and we are talking about 
real money, and none of that has to savage beneficiaries or 
inconvenience providers.
    We are interested in getting better results for less money, 
and we have been interested in that in health care. We are 
interested in a lot of other ways. And one of the ways to do 
that is to, frankly, drill down into some of the stuff we are 
going to talk about today.
    I am just very grateful to each of the witnesses for 
coming, for preparing for today's hearing, and with that, I am 
going to yield to Senator Brown. Thanks very much.

               OPENING STATEMENT OF SENATOR BROWN

    Senator Brown. Thank you, Mr. Chairman. It is good to see 
you again.
    Senator Carper. Nice to see you.
    Senator Brown. We are beginning to face difficult decisions 
that must be made in order to put our Nation back on the path 
to economic prosperity and fiscal sustainability, and one step 
we can all agree on is eliminating the waste, fraud, and abuse. 
Senator Coburn and Senator Carper were working on it long 
before I did. It is about $100 billion a year, and that is why 
I joined both of them in supporting the ``FAST'' Act of 2011, 
as one of the early cosponsors. It is a crucial tool for the 
government to attack this monumental waste of taxpayer dollars.
    This is the second hearing in 5 months that this 
Subcommittee has held, finding out ways to root out waste and 
abuse in the system. It is the key to ensuring the viability 
for these important programs. Simply put, it is no longer 
acceptable, for business as usual, approach and the endless 
promises for action while the problem of waste, fraud and abuse 
continues to grow. This legislation is important and is long 
overdue.
    As I stated at the Subcommittee's March 9 hearing, the 
Patient Protection and Affordable Care Act (PPACA) expands 
Medicaid coverage by an estimated 16 million people by 2019. 
That is a 32 percent increase over the current enrollment in 
the program, and the cost of the Medicaid expansion alone is 
estimated to be about $430 billion over the next 10 years, and 
the Federal Government is responsible for paying over 90 
percent of these increases.
    This expansion in the government's role in health care will 
unduly strain our Nation's already dire fiscal condition and 
entice predators that you referenced, Mr. Chairman, just now, 
to gorge on the cash cow which these programs represent. It is 
the government's chronic mismanagement of Medicare and Medicaid 
fraud prevention that has landed both programs on the GAO's 
High-Risk List for many years. Expanding benefits without first 
establishing the necessary controls, checks, and balances to 
prevent the waste, fraud, and abuse we all hear about is 
putting the cart before the horse.
    The government's performance overseeing these programs in 
the last few decades does not indicate a history of success, 
and in light of the burgeoning wave of health care spending and 
the history of lax oversight, we need to do more and we need to 
do it quickly.
    Today, we will hear about CMS's progress in confronting 
these areas through efforts like creation of the Integrated 
Data Repository (IDR) program. The IDR was created to provide a 
single source of data related to Medicare and Medicaid claims, 
a good first step. They began incorporating data in 2006, but 
have yet to incorporate any Medicaid data. At the behest of 
Congress, CMS recently began the use of predictive modeling 
software to prevent payment of possible fraudulent claims. This 
has historically been at the heart of the problem, is trying to 
identify a lot of these fraudulent claims, and Congress has 
that oversight duty through your leadership, Mr. Chairman, to 
be proactive in pursuing ways to obtain--to curb that waste, 
fraud, and abuse.
    So we have a lot of work to do. The American taxpayers 
expect more. We expect more and we need to move quickly, so I 
appreciate you holding this hearing.
    Senator Carper. Thanks, and I am happy to be here with you.
    Senator Coburn, and I again just want to say thanks for 
letting me be your wingman on some of this stuff, improper 
payments----
    Senator Coburn. I think you have said it all. I will look 
forward to hearing testimony.
    Senator Carper. All right. Great. Thanks so much.
    All right. Let me give some brief introductions for our 
witnesses. Dr. Budetti, I am glad we are not paying you on an 
appearance basis because this could get expensive, but our 
first witness today is Dr. Peter Budetti. He is the Deputy 
Administrator and Director for Program at the Centers for 
Medicare and Medicaid Services. He is, in effect, the person in 
charge of combating waste and fraud for both the Medicare and 
the Medicaid programs--no small job. Dr. Budetti has a long 
history in the health care arena in both government and private 
sector, including Chairman of the Board of Directors at 
Taxpayers Against Fraud and as a professor at the University of 
Oklahoma. Dr. Budetti generously testifies in front of our 
Subcommittee quite frequently and we thank you very much for 
being with us today.
    Lewis Morris, also known as Lew Morris, right?
    Mr. Morris. Yes, sir.
    Senator Carper. There you go. He is the Chief Counsel of 
the Department of Health and Human Services (HHS), Office of 
Inspector General. Mr. Morris has worked for 25 years for the 
Inspector General. He has also served as Special Assistant U.S. 
Attorney for the Middle District of Florida, the Eastern 
District of Pennsylvania, and the District of Columbia. He also 
serves on the Board of Directors of the American Health Lawyers 
Association, and Mr. Morris, it is good to see you and thanks 
so much for your testimony and your preparation for today.
    Joe Willemssen, who joins us today from the Government 
Accountability Office, is the Managing Director of the 
Government Accountability Office's Information Technology Team, 
where he oversees evaluations of technology across the Federal 
Government. This includes assessments of computer security, 
electronic government, privacy and systems acquisition. He has 
been at GAO for over 30 years, and I understand he has 
testified more than 80 times before Congress. Mr. Willemssen 
received both a Bachelor's and Master's degree in business 
administration from the University of Iowa. I think that makes 
you a Hawkeye for life. We are glad that you are here with us 
today.
    And we finally want to welcome Louis--do people call you 
Lou or Louis?
    Mr. Saccoccio. Lou.
    Senator Carper. Lou Saccoccio, who is Executive Director at 
the National Health Care Anti-Fraud Association (NHCAA), a 
national organization focused exclusively on combating health 
care fraud in both the public and the private sectors. We focus 
a lot on the public, fraud in the public sector, but it turns 
out there is a lot in the private sectors, as well, and we can 
learn from them. Maybe they can learn something from us. Mr. 
Saccoccio has served as Executive Director for over 6 years. 
Previously, he worked at the organization America's Health 
Insurance Plans. He is a graduate of the U.S. Naval Academy--
Bravo Zulu--and also of Harvard Law School, and he served as a 
Navy JAG lawyer.
    Mr. Saccoccio, always glad to have another Navy guy.
    You have a common bond with at least two of us, maybe 
three, I do not know, but we are happy to have you.
    Each of you have roughly 5 minutes to make your statement. 
If you go a little bit over that, that is OK. If you go way 
over it, that is not OK. I will rein you in. So I would just 
ask you to go ahead and your full statements will be made part 
of the record.
    So, Dr. Budetti, please proceed. Thank you all, again, for 
joining us.

 STATEMENT OF PETER BUDETTI, M.D.,\1\ DEPUTY ADMINISTRATOR AND 
   DIRECTOR FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND 
                       MEDICAID SERVICES

    Dr. Budetti. Thank you, Senator Carper, Ranking Member 
Brown, and Senator Coburn. Good to be here again. It is my 
pleasure to be here before the Subcommittee and have the chance 
to tell you that there actually is some good news, that on July 
1 of this year we at CMS implemented a new predictive modeling 
technology that was developed with private industry experts to 
fight Medicare fraud.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Budetti appears in the appendix 
on page 43.
---------------------------------------------------------------------------
    This is built on technology that has been used in the 
private sector and it will help identify fraudulent Medicare 
claims prior to their being paid on a nationwide basis so that 
we can begin to take action to stop fraudulent payments before 
they are made. This, of course, builds on the anti-fraud tools 
that we were provided in the Affordable Care Act (ACA), 
including enhanced screening and enrollment requirements, 
strengthened authority to suspend payments pending credible 
allegations of fraud and increased coordination of anti-fraud 
actions and policies across Medicare and Medicaid. This is 
helping us move from beyond the pay-and-chase mode into a new 
era of preventing problems prior to payment.
    You have all seen my poster before. I just want to use it 
once again to highlight the top three lines. First of all, that 
we are moving to a prevention mode. Second, that we are 
targeting our resources based on the actual risk that we are 
facing. And third, that we are moving to use innovative and 
advanced technologies that have not previously been used in 
this fight against fraud.
    I would like to now move on to telling you about our 
predictive modeling system that we have put into place, and I 
am pleased to be able to bring you up to date on this. This is 
not easy to do, but it is a challenge that we take on 
willingly. The Administration is committed to this action and 
we are going to move forward with it very enthusiastically.
    The main purpose of this slide is to confuse you.
    Senator Carper. So far, it is working. [Laughter.]
    Dr. Budetti. It is to illustrate how the new system will 
integrate into the claims payment system. You all know that 
claims go into our Medicare Administrative Contractors (MACs). 
They also then go through a series of other steps, and our 
fraud prevention system will intervene in the claims payment 
cycle. So this is not going to interfere with the claims 
payment process unless and until there is a reason to stop a 
claim from being paid, and I will be delighted to talk more 
about that in just a few minutes.
    The result of the analysis will be fraud alerts, risk 
alerts that will tell us that we need to look more carefully at 
individual or patterns of claims, and we will use that 
information to target our investigative resources. This will 
lead to administrative actions by CMS. It will also lead to 
referrals to our law enforcement partners.
    So this is an important step forward. It is a new system 
and it has been in place now for exactly 12 days. The system 
uses algorithms and advanced data analytics to look at many 
different factors, all simultaneously. Another characteristic 
of the system is that it is capable of and will, in fact, grow 
over time. As we get more experience with it, as we know which 
of our analyses are, in fact, paying off with fraud leads that 
are worth pursuing, that will then feed back into the system. 
As we learn from our law enforcement colleagues information 
from their investigations and other work, patterns that we 
should incorporate into our system, the system can incorporate 
that, as well. We can look at information by beneficiary, by 
provider, by service origin, by a variety of different 
approaches, all simultaneously.
    We are also moving to deal with the information that is 
generated by the system in a number of ways. We are setting up 
a command center that will look at the alerts, will prioritize 
them, will triage them, and will take appropriate action very 
quickly, whether that is referral to our program integrity 
anti-fraud contractors to do investigations, whether it is 
immediate action by us, whether it is immediate referral to law 
enforcement.
    We are also going to be prioritizing our vulnerabilities, 
looking more carefully at exactly what the vulnerabilities are 
that need to be expanded in the fraud prevention system that we 
are implementing.
    And we are building a sandbox, an analytics sandbox that 
will include data from many sources, including the Integrated 
Data Repository and other sources of information. This will 
allow us to test additional models and additional algorithms 
and incorporate the ones that are likely to pay off into the 
system.
    I want to emphasize that this system is one that was used 
in the private sector and it was immediately applicable to the 
Medicare system. So we were able to implement it just within 9 
months of when the President signed the bill and within the 
statutory deadline that you provided us with.
    I look forward to continuing to tell you about this and I 
look forward to your support and working with you as we move 
forward to fight fraud in health care. Thank you.
    Senator Carper. Well, good. Thanks for that opening 
statement. We will look forward to pursuing a number of points 
that you have raised. That is good. Thanks.
    Mr. Morris, please proceed. Again, welcome. We appreciate 
the great work that you and your team have done.

    STATEMENT OF LEWIS MORRIS,\1\ CHIEF COUNSEL, OFFICE OF 
INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. Morris. Thank you very much. Chairman Carper, Ranking 
Member Brown, and Senator Coburn, thank you for the opportunity 
to testify this afternoon about the role that technology can 
play in cutting waste and fraud in the Federal health care 
programs.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Morris appears in the appendix on 
page 55.
---------------------------------------------------------------------------
    The Office of Inspector General's anti-fraud efforts are 
substantially enhanced by information technology (IT). Data 
mining and analytics help us conduct risk assessments, target 
our oversight efforts, and reduce the time and resources 
required for audits, investigations, and other program 
integrity activities. By integrating data from Medicare Parts 
A, B, and D into a data warehouse and harnessing powerful 
analytic tools, we have expanded our analysis of questionable 
billing practices.
    For example, through data mining and analytics, we found 
that Medicare was spending about $4,400 per beneficiary for 
inhalation drugs in South Florida compared to $815 for the 
beneficiaries in the rest of the country. By combining the drug 
manufacturers' sale data and Medicare claims information for a 
particularly expensive inhalation drug, we discovered that 
South Florida suppliers billed Medicare 17 times more units of 
the drug than was actually distributed for sale in that region.
    Thanks to increased data storage and analytic capabilities, 
we are now more efficiently identifying providers that present 
compliance risks. For example, we are using data mining 
techniques to construct a comprehensive picture of a hospital's 
billing vulnerabilities. Two years ago, the analysis would have 
taken weeks or months to execute. Now, it takes approximately 
20 minutes to run the computer program for each hospital.
    Senator Carper. Say that one more time.
    Mr. Morris. What took us months 2 years ago to construct 
the actual software package and apply it to a hospital's set of 
compliance issues, we can now do in about 20 minutes. We have 
started a series of audits already looking at up to 28 
different risk areas in a hospital system by pulling samples of 
claims and then going back to that hospital, identifying those 
compliance issues, and allowing them to not only repay the 
money owed to our program, but take a much closer look at their 
internal controls so that when we come back in a year or two, 
we hope to have found corrective action so we do not need to 
keep repeating the pay and chase.
    Senator Carper. Good. Thank you.
    Mr. Morris. As exemplified by the Medicare Fraud Strike 
Force data, it is combined with field intelligence to enable us 
to identify fraud schemes and trends more quickly. This data-
driven approach pinpoints fraud hot spots, identifies 
suspicious billing patterns, and targets criminal behavior as 
it occurs. The Strike Force model has proven highly successful 
and has accelerated the government's response to health care 
fraud, decreasing by half the average time from an 
investigator's start to the prosecution in these types of 
cases. Since their inception in 2007, Strike Force teams have 
charged over 1,000 individuals with attempting to defraud 
Medicare of over $2.4 billion.
    We also recognize that we can learn a great deal from the 
private health care insurers, who have developed technological 
expertise in addressing our common goal of stopping health care 
fraud. It is axiomatic that most criminals who prey on the 
Nation's health care system are equal opportunity thieves. They 
defraud private health care insurance as well as the Federal 
health care programs.
    OI agents actively participate in health care fraud working 
groups, which bring together government agencies and private 
sector insurers to share field intelligence and ongoing schemes 
and develop best practices. We also conduct joint 
investigations with the private sector.
    While the use of technology allows for a more efficient and 
targeted approach, several caveats are in order. First, human 
intelligence remains a key part of any program integrity 
strategy. Medicine and the health care system are extremely 
complex. A data run, even if derived from sophisticated metrics 
and powerful computers, cannot replace the role of 
professionals who bring experience and insight into the 
analysis of that data.
    In addition, while predictive analytics have proven 
effective in identifying potential fraud in the credit card 
transactions, there are characteristics of the Federal health 
care program that may limit the usefulness of these tools in 
the health care environment. For example, a treatment that may 
be medically unnecessary but may not be apparent on the face of 
the claim for reimbursement.
    It is also important to recognize that fraud schemes will 
evolve in response to these technologies, which introduce new 
vulnerabilities. For example, electronic health records (EHR) 
may not only facilitate more accurate billing and increase 
quality of care, but these electronic health records may also 
facilitate fraudulent claims. The very aspects of these records 
that make a physician's job easier---cut and paste features and 
templates--can also be used to fabricate information that 
results in improper payments and leads to inaccurate and 
potentially dangerous information on a patient's record.
    A final caveat. Even the best anti-fraud technology are of 
limited value if not effectively implemented and appropriately 
overseen. The OIG work spanning a decade has revealed 
persistent problems with the performance of CMS's program 
integrity contractors and vulnerabilities in CMS's oversight. 
Because CMS is relying on contractors to perform these data-
driven program integrity functions, there is a critical need 
for meaningful performance evaluation and adequate oversight of 
that work.
    In summary, technology can be a powerful weapon in the 
fight against fraud, but it is not a silver bullet. We must be 
mindful to carefully implement and oversee its use, and I would 
be pleased to answer any questions.
    Senator Carper. Great. Thanks so much, Mr. Morris.
    Mr. Willemssen, please proceed.

    STATEMENT OF JOEL C. WILLEMSSEN,\1\ MANAGING DIRECTOR, 
 INFORMATION TECHNOLOGY ISSUES, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Mr. Willemssen. Thank you, Mr. Chairman, Ranking Member 
Brown, Senator Coburn. Thank you for inviting us to testify 
today on your hearing on Medicare and practices to reduce fraud 
and waste in Medicare and Medicaid.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Willemssen appears in the 
appendix on page 66.
---------------------------------------------------------------------------
    At your request, we produced a report that is being 
released today on two CMS programs intended to improve the 
ability to detect waste, fraud, and abuse. As requested, I will 
briefly summarize our statement, which is based on that report, 
and I will also say that we have not looked at the initiative 
that Dr. Budetti discussed, but it sounds intriguing. We are 
interested to hear more.
    But in talking about our statement today, I will briefly 
touch on three areas. One, discuss the extent to which the 
Integrated Data Repository and One Program Integrity (One PI), 
have been developed and implemented. Two, address CMS efforts 
to identify, measure, and track benefits resulting from those 
programs. And finally, I will talk about the recommendations we 
have made to CMS to help achieve its goals of reducing fraud, 
waste, and abuse.
    Regarding IDR, it has been in use since 2006 and it is a 
very large data warehouse that can be of great benefit to CMS. 
However, currently, it does not include all the data that were 
planned to be in it by 2010. For example, IDR currently 
includes most types of Medicare claims data but not Medicaid 
data. IDR also does not include data from other CMS systems 
that can help analysts prevent improper payments. Further, CMS 
has not finalized plans or developed reliable schedules for 
efforts to incorporate these data.
    One PI is a web-based portal that is to provide CMS staff 
and contractors with a single source of access to the data 
contained in IDR as well as tools for analyzing those data. 
While One PI has been developed and deployed, we found that few 
analysts were trained in using the system. Program officials 
planned for 639 analysts to be using the system by the end of 
Fiscal Year 2010. However, as of October 2010, only 41 were 
actively using the portal and tools. Until program officials 
finalize plans and schedules for training and expanding the use 
of One PI, the agency may continue to experience delays.
    With One PI, CMS anticipated that it would achieve 
financial benefits of $21 billion. As we have previously 
reported, agencies should forecast expected benefits and then 
measure the actual results accrued through the implementation 
of programs. However, CMS is not yet positioned to do this. As 
a result, it is unknown whether the program has provided any 
financial benefits yet. CMS officials added it is too early to 
determine whether the program has provided benefits since it 
has not yet met its goals for widespread use.
    To help ensure that the development and implementation of 
IDR and One PI are successful in helping CMS meet the goals of 
its program integrity initiatives and possibly save tens of 
billions of dollars, we are making several recommendations to 
CMS. Among those, one, to finalize plans and schedules for 
incorporating additional data into the data repository. Two, 
finalize plans and schedules for training all program integrity 
analysts intended to use One PI. Three, establish and 
communicate deadlines for program integrity contractors to 
complete training and use of One PI. And four, to establish and 
track measurable outcome-based performance measures that gauge 
progress toward meeting program goals.
    In commenting on a draft of our report, CMS agreed with our 
recommendations. CMS's timely implementation of these could 
lead to reduced fraud and waste and overall substantial savings 
in the Medicare and Medicaid programs.
    That concludes a summary of my statement. I look forward to 
your questions. Thank you.
    Senator Carper. Thanks, Mr. Willemssen. Thank you so much.
    Mr. Saccoccio, please proceed.

 STATEMENT OF LOUIS SACCOCCIO,\1\ EXECUTIVE DIRECTOR, NATIONAL 
               HEALTH CARE ANTI-FRAUD ASSOCIATION

    Mr. Saccoccio. Thank you. Chairman Carper, Ranking Member 
Brown, and Senator Coburn, thank you for the opportunity this 
afternoon to testify.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Saccoccio appears in the appendix 
on page 79.
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    The National Health Care Anti-Fraud Association was 
established in 1985 and is the leading national organization 
focused exclusively on combating health care fraud. We are 
uncommon among associations in that we are a private-public 
partnership. Our members comprise more than 85 of the Nation's 
most prominent private health insurers along with more than 85 
Federal, State, and local government, law enforcement, and 
regulatory agencies that have jurisdiction over health care 
fraud who participate in NHCAA's law enforcement liaisons.
    NHCAA's mission is simple: To protect and serve the public 
interest by increasing awareness and improving the detection, 
investigation, civil and criminal prosecution, and prevention 
of health care fraud. The magnitude of this mission remains the 
same regardless of whether a patient has health coverage as an 
individual or through an employer or has coverage under a 
public program, such as Medicare, Medicaid, or TRICARE.
    Health care fraud is a serious and costly problem that 
affects every patient and every taxpayer in America. Just as 
importantly, health care fraud is a crime that directly affects 
the quality of health care delivery. Patients are physically 
and emotionally harmed by health care fraud. As a result, 
fighting health care fraud is not just a financial necessity, 
it is a patient safety imperative.
    Health care fraud does not discriminate also between types 
of medical coverage. The same schemes used to defraud Medicare 
mitigate over to private insurers and schemes perpetrated 
against private insurers make their way into government 
programs. Additionally, many private insurers are Medicare Part 
C and D contractors that provide Medicare coverage and Medicaid 
coverage in the States, making clear the intrinsic connection 
between private and public interest.
    As a result, the main point I want to emphasize is the 
importance of anti-fraud cooperation and collaboration between 
private and public payers. NHCAA has stood as an example of the 
power of a private-public partnership against health care fraud 
since its founding, and we believe that health care fraud 
should be addressed with private-public solutions.
    One salient example that illustrates the power of 
cooperative efforts against health care fraud can be found in 
South Florida. In response to the challenge of health care 
fraud schemes in South Florida, including fraud schemes 
involving infusion therapy and home health care, NHCAA formed 
the South Florida Work Group. In meetings held in 2009 and 
2010, this NHCAA work group brought together representatives of 
private insurers, FBI headquarters and 10 FBI field divisions, 
CMS, HHS's Office of Inspector General, the Justice Department, 
the Miami U.S. Attorney's Office, and local law enforcement to 
address the health care fraud schemes emerging from South 
Florida. The details of the emerging schemes, investigatory 
tactics, and the results of recent prosecutions were discussed 
with the dual goals of preventing additional losses in South 
Florida and preventing the schemes from spreading and taking 
hold in other parts of the Nation.
    This type of anti-fraud information sharing, sharing 
between the Federal and State programs and between private and 
public payers, is critical to the success of anti-fraud 
efforts. The HHS Office of Inspector General, CMS, the FBI, and 
the Justice Department have demonstrated a strong commitment to 
information sharing and are working with NHCAA to identify the 
barriers, both actual and perceived, to effective anti-fraud 
information sharing with the goal of increasing the 
effectiveness of this critical tool in the fight against health 
care fraud.
    In addition to information sharing, the other critical 
means needed to detect and identify emerging fraud patterns and 
schemes in a timely manner is to apply effective and cutting-
edge data analytics to aggregated claims data. The pay-and-
chase model of combating health care fraud, while necessary in 
certain cases, is no longer tenable as the primary method of 
fighting this crime.
    In this regard, we applaud CMS for its recent 
implementation of predictive modeling using rules and pattern 
recognition for Medicare claims. NHCAA is also encouraged by 
the expanded provisions provided in the Affordable Care Act. 
The Act mandates an expanded integrated data repository that 
will incorporate data from all Federal health care programs.
    Progress is also being made by commercial health insurers. 
In addition to the business rules and outlier models used by 
insurers to detect potential fraud, some companies have begun 
to utilize or are in the process of evaluating the use of 
predictive modeling technology and other advanced data 
analytics, applying them to fraud prevention efforts on the 
front end prior to medical claims being paid. Although the 
health care industry has not achieved the level of real-time 
data analytics used in the financial services industry, it is 
moving in the right direction.
    NHCAA is encouraged by the renewed Federal emphasis given 
to fighting health care fraud. We know continued investment and 
innovation are critical, and as greater attention is given to 
eradicating fraud from our government health care programs, we 
urge decisionmakers to also recognize and encourage the 
important role that private insurers play in minimizing fraud 
in our Nation's health care system.
    Thank you for allowing me to speak today. I will certainly 
answer any questions from you.
    Senator Carper. Thanks for that testimony. I thought your 
testimony was just excellent and enjoyed reading it and hearing 
it in here today. Thanks.
    Let me start, if I could, with Dr. Budetti. First, I would 
like to address an issue that has been raised by GAO. First, 
before I do that, I just want to say, Dr. Budetti, that the 
Office of Program Integrity under your leadership has made, I 
think, a lot of progress, and there are a number of people 
responsible for that, but I just want to say to you, thank you. 
Since you took your position last year, there have been any 
number of positive efforts underway, including the 
implementation of program integrity provisions within the 
Affordable Care Act. I think you deserve a lot of credit. So 
does your team, as do many of your colleagues at the Center for 
Medicare and Medicaid Services.
    However, as I say oftentimes in this room, everything I do, 
I know I can do better. The same is true for all of us, and the 
enormous waste and fraud challenges that we have, that we have 
heard about again here today, we have heard about in the past 
and, hopefully, we will hear about in smaller magnitudes in the 
future. But those challenges call out for very large efforts 
and require that the Congress ensures that the Federal 
Government takes many more strides to cut back on waste and 
fraud and abuse where we can.
    Now, in the GAO testimony and their audit report released 
today, the fraud detection system, that is the combined 
Integrated Data Repository and One PI, is presented as an 
important new tool to examine Medicare and Medicaid payments in 
order to detect fraud, and it is depicted on this chart\1\ up 
to my left and to your right. In fact, the Centers for Medicare 
and Medicaid Services own estimates show that if it is fully 
implemented, the new fraud detection systems will save some $21 
billion--$21 billion--over 10 years by detecting and avoiding 
improper payments. The cost to date for the system is about 
$161 million, and to complete and operate the system for 10 
years, the additional cost is roughly $184 million.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Carper appears in the appendix 
on page 118.
---------------------------------------------------------------------------
    That is quite a return on investment (ROI), if you think 
about it, and curbing $21 billion in waste and fraud would 
represent a lot of progress--a lot more progress. I think it 
makes sense that the timely implementation would help get these 
cost savings, obtain these cost savings more rapidly. That is 
what we want to do.
    However, the GAO has clearly shown that the system is not 
fully deployed. Despite the Centers for Medicare and Medicaid 
Services declaring the system up and running, only, as we have 
heard, 42 people were trained in 2010, and despite the stated 
requirement for, I think, 639 people. Further, the system has 
yet to include Medicaid data. Also, GAO reported that there are 
no clear plans nor projected dates with specific milestones to 
either train more people nor to include the Medicaid data. And 
despite being part of the original design, there are no solid 
plans to give access to Medicaid State offices, I am told.
    Obviously, without the system being fully implemented as 
well as ensuring that Federal staff, oversight contractors, and 
law enforcement have access and are fully engaged, we will not 
realize that $21 billion in savings and that would be a shame.
    So, Dr. Budetti, let me just ask, what is your plan 
schedule to fully implement and deploy the new fraud detection 
system? When will we have more people trained? And when will 
State Medicaid offices have access to this system?
    Dr. Budetti. Thank you very much for your comments, 
Senator. I want to add that we always welcome the kind of arms' 
length oversight that we receive from the General Accounting 
Office--the Government Accountability Office--I dated myself 
there--and from our colleagues at the Office of Inspector 
General. And, in this case, we do, in fact, concur with their 
recommendations.
    Senator Carper. Can I just make a comment?
    Dr. Budetti. Certainly.
    Senator Carper. I say this a lot. We are all in this 
together.
    Dr. Budetti. Yes.
    Senator Carper. We are all in this together. And the only 
way for us to get out of this hole, this fiscal hole that we 
are in, including some that we are talking about here, is to 
get out together. Go ahead.
    Dr. Budetti. And we very much appreciate the interest and 
support you have shown in this.
    The Integrated Data Repository and the One PI system are 
ones that were started some 5 years ago or so. The agency did 
set rather ambitious goals for itself in terms of the 
implementation of those and some of those goals have been met. 
Some of them have not been met. This illustrates a number of 
factors. First of all, it does illustrate to some degree the 
challenges of implementing systems, especially, for example, 
with respect to the Medicaid data because States have different 
kinds of data systems and different formats and different 
responsibilities on the States in terms of their ability to 
supply the data. The structure of the Integrated Data 
Repository at first had to be, as I understand it, had to be 
redone somewhat. So there were some problems along the line in 
terms of meeting certain deadlines. Others were met.
    But in terms of your specific questions, I would like to 
make a couple of points, sir. One is that the Integrated Data 
Repository is intended for many purposes other than just 
fighting fraud. It is a valuable resource and it still 
continues to be a valuable resource and it will be as we move 
forward with our new and advanced technological solutions that 
I mentioned earlier. But the Integrated Data Repository is not 
strictly for that purpose. It also has a variety of other uses 
within CMS and that is an important aspect of this.
    The other question that you asked about, the training, we 
have, in fact, now trained an additional 55 personnel so far 
this year. We now have a schedule for training all of the 
private sector personnel who are going to be working with the 
One PI and Integrated Data Repository----
    Senator Carper. Give us some idea what that schedule is. 
That would be----
    Dr. Budetti. That is----
    Senator Carper [continuing]. Forty-two plus about 58, so 
that is about a hundred.
    Dr. Budetti. All of the ones who are in our Zone Program 
Integrity Contractors (ZPICs), the anti-fraud contractors who 
will be using the system. I am told that they are all on 
schedule to be trained this year, and so that is--we did have 
to, after getting feedback from the people who were trained in 
the initial courses, we did redesign the program. We had some 
user feedback and realized that we were not--the agency was not 
adequately preparing them for using the system. These are 
complicated systems and the training program was restructured 
and revised and we believe it is now an extremely effective one 
and we have moved forward with an aggressive schedule. We have 
trained 55 and we are going to finish the ZPIC staff training, 
I am told, this year. So that is a very important aspect of all 
of this.
    The other thing I would tell you is that the Integrated 
Data Repository will be one of the sources of data that we will 
be using in the sandbox that I described, so that the 
Integrated Data Repository, which holds all of the claims over 
a prolonged period of time, is very different than the claims 
processing system that we are using with our new predictive 
analytics. So one is a repository and one--the IDR is a 
repository that will hold all the information. The other is 
being implemented on top of the claims processing system. So 
they will go hand-in-glove.
    We are moving forward. We already have the Medicare claims 
data in, as you described. We anticipate finishing the 
different stages of the Medicare data by next year and we are 
moving very aggressively with a variety of systems to improve 
the Medicaid data, as well, and doing that in a way that we 
believe will serve a variety of purposes, both for the States 
and providing access to the States and also for our purposes, 
both fraud fighting and otherwise. So I----
    Senator Carper. I am going to ask you to hold there. I am 
well over my time----
    Dr. Budetti. OK.
    Senator Carper [continuing]. So I want to be fair to my 
colleagues. When we come back, I am going to ask our friend 
from GAO just to respond to what we just heard from Dr. 
Budetti----
    Mr. Willemssen. Sure.
    Senator Carper [continuing]. And if you can tell us whether 
or not we should feel reassured. Do not do it now, but I am 
going to ask you to tell us if we should feel reassured by what 
he has just presented, all right? Thanks.
    Dr. Budetti. Thank you, sir.
    Senator Carper. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    So just to followup a little bit, so 41 people, and you are 
training another 55, so you are a little under a hundred. You 
are supposed to have 639 done by the end of the fiscal year, 
and I have a little sheet here to look at. We have 41, so we 
can increase that a little bit. We are supposed to have 639 and 
it looks like we are a little short. Ultimately, when we get it 
done, we have spent $100 million, if I am not mistaken, on this 
system and we are trying to obviously identify, for example, 
despite deployment of the One PI program, Medicare fee-for-
service (FFS) improper payments amounted to $34.3 billion for 
Fiscal Year 2010, an astonishingly high rate of 10.4 percent of 
all Medicare fee-for-service payments. So when will they be all 
trained? You are saying that the remaining 539, give or take, 
will be trained by the end of this year?
    Dr. Budetti. The 55 that have already been trained and the 
rest of the workers in our contractors will all be trained by 
the end of this year. We are also doing training for law 
enforcement personnel and other----
    Senator Brown. Yes, but in terms of the 639, though----
    Dr. Budetti. Well, the 639 was a number that was 
established as a goal a number of years ago, and whether that 
is ultimately the correct number, we are constantly revisiting 
who needs to use what in terms of fraud fighting capabilities. 
But we are proceeding with both the law enforcement personnel 
and with the ones in our contractors on a newly structured 
training program and an aggressive schedule. So I can tell you 
exactly how many people we plan to train by when, but I can 
tell you what I have said so far, which is what we have done to 
date and what we expect to do the rest of this year----
    Senator Brown. Right.
    Dr. Budetti [continuing]. So that will----
    Senator Brown. Thank you. You said, though, this was 
implemented quite a few years ago and----
    Dr. Budetti. Right.
    Senator Brown [continuing]. We have started the program, 
and yet quite a few years ago, still have only done, as of 
recently, under 100 of these folks to implement this system 
that is a $100 million system. I mean, are we getting a good 
value? Is it reaching its full potential? It does not seem to 
be, but maybe I am missing something.
    Dr. Budetti. Well, I think we--we have admitted that there 
have been some deadlines that we had established that we did 
not meet, and we are now working----
    Senator Brown. Well, what ones have you actually met?
    Dr. Budetti. All of the Part A and Part B and Part D data 
were put into the Integrated Data Repository in terms of the 
post-payment data, in fact, as I understand it, I think two of 
those were actually put in ahead of schedule and the additional 
data to support the use has also been put in.
    I would like to emphasize that the IDR with the One PI 
system on top of it is a very valuable tool. We are moving to 
fully implement it. It is not the only resource that is 
available either to us or to our fraud fighting partners, 
either in law enforcement or in our systems. But it represents 
a major step forward. And in terms of the savings, we believe 
that the savings from moving forward with the IDR will not only 
be reflected in the fraud fighting capabilities, but also 
efficiencies in our contracting structure, because instead of 
having a series of small data systems set up all around the 
country, we will have this one integrated system.
    So we are moving forward with that, Senator, and we do view 
it as valuable. But I want to emphasize that it is not our only 
fraud fighting tool.
    Senator Brown. Sure. I understand that. Do you know if the 
$150 million or so spent on either system has been a good 
investment if no outcome performance metrics have been 
established to measure their actual benefit?
    Dr. Budetti. So one of the things that we did commit to in 
concurring with the GAO's report was to establish and put into 
place a measurement of exactly those----
    Senator Brown. Have you done that?
    Dr. Budetti. This is what we have now committed to doing.
    Senator Brown. Oh, OK.
    Mr. Morris, on the PPACA legislation that provides 
additional funds to strengthen the program's integrity, it 
contains other fraud prevention provisions such as the ability 
of CMS to withhold Medicare payments to providers or suppliers. 
States also have this ability in the Medicaid program. How many 
payments have actually been withheld, if you know?
    Mr. Morris. We took a look at our data and it appears that 
since the passage of the Affordable Care Act, there have been 
53 payment suspensions which were initiated at the Inspector 
General's request----
    Senator Brown. Fifty-three out of how many? Out of 
billions, right?
    Mr. Morris. Oh, of potential payment suspensions?
    Senator Brown. No, out of payments, how many have actually 
been withheld?
    Mr. Morris. Well, we identified approximately $8 million in 
money that was either on the payment floor, about to go out to 
the target of an investigation, or money that was otherwise 
stopped. So the 50 payment suspensions I referenced realized a 
withholding of about $8 million in monies in the Trust Fund. We 
have been working with CMS to strengthen this process. We have 
entered into an memorandum of understanding (MOU) that will 
facilitate more rapid exchange of information, and particularly 
in our strike force areas where we are identifying career 
criminals. These are not health care providers.
    Senator Brown. Sure.
    Mr. Morris. These are people exploiting our program. 
Payment suspensions are more and more becoming the standard.
    Senator Brown. Great. As the opportunity for fraud grows 
with the expansion of Medicaid, will CMS be able to meet the 
added threat, or is it inevitable, as with past expansions of 
benefits, that it will lead to more fraud, or is it a kind of 
in between?
    Mr. Morris. Well, certainly with the expansion of the 
benefit and thus an increase in the volume of claims, there 
will be a greater threat to the program. But we think that if 
many of the provisions that are both in the Affordable Care Act 
and are part of the program integrity efforts that Dr. Budetti 
has been talking about are implemented, there should be 
safeguards.
    For example, effectively screening at the enrollment so 
that we only let in honest providers will go a long way to 
keeping the crooks out of the system. Similarly, having payment 
methodologies that reflect what the true cost of a service is 
and does not have enormous fluff which is then used to 
perpetuate a fraud scheme, and making sure that we are actually 
paying for legitimate services. These sorts of internal 
controls will go a long way to protecting the Medicaid program 
as it expands.
    Senator Brown. Thank you, Senator Coburn.
    Senator Coburn. [Presiding.] Well, I thank each of you for 
your testimony. I was not a big fan of the Affordable Care Act, 
but the fraud provisions in it, I readily support.
    And I want to emphasize this next point in as nice a way as 
I can: Having the testimony at 9pm last night for a hearing 
that has been announced, getting questions for the record 
(QFRs) answered last night from 3 months ago from a Finance 
Committee hearing is not acceptable for us to be able to do our 
job. And my hope would be that those of you that turned in your 
testimony or your QFRs late would understand that. Otherwise, 
it seems to me the way we get QFRs answered is have another 
hearing, so we will have another hearing in 2 weeks to get our 
QFRs back because that seems to be the only way to get them 
back.
    Dr. Budetti, what is the cost of the new contract with 
Raytheon? And is it a cost-plus contract?
    Dr. Budetti. The new contract with Northrop Grumman and 
their subcontractors----
    Senator Coburn. With Northrop Grumman, yes.
    Dr. Budetti [continuing]. Is set at $77 million for just 
over a 4-year period. It is an initial implementation period of 
several months followed by 1 year of award, and then there are 
3 years, three option years to follow.
    Senator Coburn. So that is a fixed-price contract?
    Dr. Budetti. That is my understanding, sir, yes.
    Senator Coburn. Well, you all have let that contract, 
correct?
    Dr. Budetti. We let the contract.
    Senator Coburn. OK. So it is a fixed-price contract and----
    Dr. Budetti. I know that there is a cap on it of the $77 
million. That much, I know----
    Senator Coburn. And my question is, this is a great 
company. I do not have any problem with it. When was the last--
did they have experience in doing predictive modeling for the 
insurance industry?
    Dr. Budetti. So the system that Northrop Grumman and its 
partners put forward was one that was developed for the private 
sector, was developed and used in Verizon. They used it for 
their own transactions and also for their credit card 
transactions. And part of our solicitation requirement was that 
the system would be immediately applicable to Medicare claims 
processing, that there would not have to be a major startup 
period. And so they partnered with the National Government 
Service (NGS) and they were able to demonstrate to the 
satisfaction of the people who were reviewing the proposals 
that they could apply this immediately, and, in fact, we have 
been able to show that is actually happening.
    Senator Coburn. Good. What is your goal? You have showed us 
what the plan is with IDR and One PI. What is your goal in 
terms of fully implementation of predictive modeling on 
everything that CMS does?
    Dr. Budetti. As of, actually, June 30, July 1, all Medicare 
fee-for-service claims nationwide are being screened before the 
claims are paid. Our goal is to advance that, to build into the 
system more and more of our analytics. Our goal is also to 
develop the ways that we can then apply this, as well, to the 
Medicaid program. That is a very different set of challenges. 
We are committed to doing it. We are also--we are already 
beginning to look at that, at the possibilities of doing that.
    But we have the system in place and operating nationwide 
and it is looking at all Medicare claims right away. It will 
become more sophisticated. It will add more and more analytics, 
and we also will then be taking great care to make sure that we 
are interpreting the results properly and going after the bad 
guys and not the good guys with it.
    Senator Coburn. What percentage of claims that are going 
through this now are halted for review?
    Dr. Budetti. At the moment, what we have done is put it 
into place in a way that we have the ability to stop the claims 
before they are paid, but we want to get a track record. We 
want to get some traction here in terms of knowing what to do 
with respect to the kinds of risk scores that we are getting.
    We are getting some very impressive results. We are getting 
some--a very large number of fraud risk scores. But we do not 
know for sure yet that those are fraudulent. Now, many of the--
--
    Senator Coburn. So you are going on and paying these 
claims?
    Dr. Budetti. I am sorry?
    Senator Coburn. So they are going on and being paid at this 
point?
    Dr. Budetti. We are taking a much closer look and we are 
exploring the ways that we can take action right now on an 
administrative basis before they get paid.
    Senator Coburn. But right now, of the claims that come 
through----
    Dr. Budetti. Right.
    Senator Coburn [continuing]. And they get flagged, what 
percentage of them are the payments halted on and what 
percentage are gone on and paid?
    Dr. Budetti. Well, we are 12 days into it and right now, 
what we are doing is taking the results of the most egregious 
findings that we have, taking those to our new rapid response 
system that we are setting up to get our contractors to look 
more carefully--our Zone Program Integrity Contractors to look 
more carefully at them. And if it comes back that our strong 
suspicions are confirmed, we will have the ability to stop 
those payments. So I am not ready to tell you that we are--we 
are--yes, we are making payments now, but we are positioning 
ourselves to be able to stop them. But we want to do this 
correctly. We did not set this up to automatically stop claims 
on day one because we wanted to make sure that we were getting 
results that were responsible first.
    Senator Coburn. All right. Then let me get you on the 
record. When is it that you are going to have suspicious claims 
stopped pay?
    Dr. Budetti. I expect that we will have some suspicious 
claims----
    Senator Coburn. No. Every one of them is being reviewed 
now, every one of them that hits your risk profile. When is it 
CMS is going to quit paying those claims and send them for 
review?
    Dr. Budetti. That is exactly our goal, Senator Coburn.
    Senator Coburn. But when?
    Dr. Budetti. Well, let me--so my answer is that, first of 
all, we get a risk score that covers a very wide range. So we 
are taking the very top, the most egregious ones. We are 
looking at them, first of all, to see whether or not they are 
already under law enforcement investigation of some kind. We do 
not want to interfere unnecessarily with a law enforcement 
investigation if there is one underway. And then the others we 
are looking at very carefully to start--and we expect to start 
cutting off payments very soon.
    I am not going to give you an exact date because we are 
going through this process for the first time. We are going 
through it in a responsive and responsible way. But we are set 
up for doing this and we will have the system integrated into 
the--fully integrated and automated into the claims processing 
system over the course of the next year. But at the moment, we 
are going to do it ourselves, taking the time to make sure that 
we are not interrupting claims payments that should not be 
interrupted.
    Senator Coburn. Yes, I agree. So I guess the answer is, 
within a year----
    Dr. Budetti. Within a year we will have----
    Senator Coburn [continuing]. You plan to have this 
implemented and working so that we are not sending payments 
to----
    Dr. Budetti. We will stop making payments sooner than that, 
but we will have it fully--we will have it set up so that we 
are interrupting on a much more rapid basis the claims that 
fall into the patterns that we have confidence should be 
interrupted.
    Senator Coburn. Yes.
    Dr. Budetti. And, yes, this is a step-wise process, but we 
are committed to getting there and we are going to get there. 
This is the whole purpose of doing it. We want to stop these 
payments before they go out the door, but we want to do it 
right.
    Senator Coburn. OK. All right. Thank you.
    Senator Carper. [Presiding.] I think you can feel Senator 
Coburn's sense of urgency, and it is one that we all feel.
    Senator McCaskill, good to see you. Welcome. And thank you 
very much for cosponsoring our legislation.
    Senator McCaskill. Yes, thank you.
    Senator Carper. We very much appreciate your interest and 
your leadership.
    Senator McCaskill. I apologize. Just say if there is any 
question I am asking that you have been asked before. I could 
not get here at the beginning of the hearing. I wish I could 
have, and I want to make sure I do not cover any ground that 
has already been covered. Did Northrop provide CMS an off-the-
shelf product for this?
    Dr. Budetti. The product that Northrop Grumman and its 
partners provided to us was built on the one that Verizon and 
its subsidiary had developed for use within the 
telecommunications industry, both for their telecommunications 
fraud and for their own credit card transactions. What the 
partnership together provided was an approach that was proved 
in one industry but that was immediately applicable to the 
Medicare payment system, which, of course, is very different 
than either telecommunications or credit card transactions. So 
this is the system that was selected. This is the one that has 
shown itself to be capable of being implemented immediately and 
is now up and running on all Medicare fee-for-service claims as 
of the beginning of this month.
    Senator McCaskill. I am cynical about buying IT systems 
because my experience in the Armed Services Committee and, 
frankly, dealing with other parts of government in contracting 
issues is that if we say we want somebody to do something, 
typically, they say they are going to design a system and it 
takes years and a lot more money than we thought it was 
originally going to take. Then, ultimately, sometimes it does 
not even work like it is supposed to and it gets abandoned. And 
so it is interesting to me that you were able to essentially 
get an off-the-shelf product. Was it specified that you wanted 
an off-the-shelf product?
    Dr. Budetti. We specified that we wanted a product that had 
been proven in the private sector that could be immediately 
applicable to the Medicare system and that was capable of being 
implemented to meet the rather impressive time line that we 
were working under, and we met all of those requirements.
    Senator McCaskill. OK. I think it is great that you were 
able to do that and I wish the rest of government would take 
note that we are way behind in terms of the integration of data 
and the systems that are available for analysis in government 
and we use the excuse of siloed agencies and we want our own 
system and, well, we have already got this and it needs to talk 
to that. Way too often, we are not specifying that we want 
something that has already been proven that, frankly, is off 
the shelf. That is the good news.
    Now, the bad news. IDR was supposed to contain Medicaid 
data, and we began this, what, in 2006?
    Dr. Budetti. Yes, Senator. You are correct that there are 
some, as I mentioned a minute ago, there were some deadlines 
that the agency had set out, some goals that the agency had set 
out that, for a variety of reasons, were not met. One of them 
was the full integration of Medicaid data into the Integrated 
Data Repository. There are a number of reasons why that did not 
happen----
    Senator McCaskill. Give me, like, the top three.
    Dr. Budetti. The top three are, No. 1, the States really 
were not under any requirement that they had to submit the data 
to us. They also faced serious resource constraints. They also 
have their data in many different formats and many different 
systems, and so the integration of those into one place was 
complicated. And as I understand it--this, of course, was all 
somewhat before my time here--and I also understand that the 
way that the initial design for the system was structured, that 
it might have made it more difficult to get the Medicaid data 
into it.
    Those are all things that we are well aware of as the major 
initiative to get much better Medicaid data, both for the 
States and also for the Federal Government. That is very much a 
cross-CMS initiative. It is not just program integrity. It 
involves the Centers for Medicare and Medicaid Services, the 
Children's Health Insurance Program (CHIP), and survey and 
search the MCS, as well, and there is a great deal of work 
going on to improve that system.
    But we do expect to be able to phase in the Medicaid data 
over time, and in the meantime, we are doing quite a bit 
working with the States directly, as well.
    Senator McCaskill. What is the date that you think you will 
get the Medicaid data in?
    Dr. Budetti. We are currently targeting 2014 for the 
ultimate, but that includes the entire revised system that we 
are talking about that would be restructured and much more 
useful for everybody. In the meantime, we are working very 
closely with individual States and with other approaches, and 
we are currently exploring ways that we can apply our 
predictive modeling system, which is not exclusively dependent 
on or the same as the IDR, ways that we can work with the 
States to use the predictive modeling approach, because we do 
not get the same flow of claims data directly to the Federal 
Government for Medicaid that we get for Medicare. Medicare, we 
get their claims. They send us their claims----
    Senator McCaskill. Right.
    Dr. Budetti [continuing]. Because they want to get paid.
    Senator McCaskill. No, I understand.
    Dr. Budetti. And in Medicaid, we are dependent upon the 
States who are processing the claims----
    Senator McCaskill. And they are dependent on our money.
    Dr. Budetti [continuing]. To report to us, and they are 
dependent upon our money and other resources----
    Senator McCaskill. And I have found that can be a very 
persuasive tool.
    Dr. Budetti. And that is a challenge to everybody, yes. 
Yes, Senator.
    Senator McCaskill. Yes. And I think the more that you begin 
to exercise that muscle, I think the more cooperation you will 
get from the States. They are all gasping right now and 
incredibly dependent on the help that they are getting from the 
Federal Government, and I, for one, think that it makes more 
sense that we are giving them that help as opposed to jacking 
up costs for everybody by all the uninsured care that would 
occur the more we cut back on the Medicaid program. So I 
encourage you to use that muscle, that we have money and you 
need it to get the data that we need to provide the integrity 
to the program.
    Let me know the acronyms, you all are not nearly as bad as 
the Department of Defense (DOD), but you have a dizzying array 
of contractors that are supposed to be fighting fraud. We have 
the MACs, the Recovery Audit Contractors (RACs), the ZPICs, the 
Program Safeguard Contractors (PSCs), and that is not counting 
the IDRs, the IDIQs, and now the new program. Obviously, all 
these contractors that were supposed to be doing all this, it 
has not worked out as well as we hoped. What are you doing to 
clean up this mess in terms of how many contractors we have and 
is everybody on the same page, is everybody working together, 
are we working at cross-purposes? What efforts are being made 
to allow people to track how well we are doing on integrity 
without a scorecard?
    Dr. Budetti. Senator, it took me several months on the job 
to get all those acronyms down and I do not think I have 
mastered all of them yet. But in answer to your question, we 
are doing a number of things. For one thing, we have 
restructured the way that we are overseeing our anti-fraud 
contractors, the Zone Program Integrity Contractors, and we are 
working to finish the transition to have Zone Program Integrity 
Contractors uniformly across the country.
    We have also assigned more staff. We are conducting onsite 
reviews instead of paper reviews. We have a number of oversight 
changes that we have put into place. We have put them under a 
new group within the Center for Program Integrity. We are doing 
a lot to improve our oversight of those contractors.
    The Medicaid administrative contractors, the ones that 
handle the claims, of course, are responsive to a number of 
different components within CMS, but we are working very 
closely with them, as well. They interact with the Recovery 
Audit Contractors, the RACs, as well.
    We have done a lot to improve the ability of the programs 
to work together. One of my goals is exactly that, to have a 
much more efficient system. One of the characteristics of our 
new fraud prevention system that is very useful is that it is 
also a management tool, because as we do these analytics and we 
send to the Zone Program Integrity, the anti-fraud contractors, 
we send them the results and say, here are 10 people with 
astronomical fraud scores. Do something. Look at these real 
carefully and get back to us right away. That is our rapid 
response strategy that we have developed. That is a new use of 
the interaction with them, but it is also a management tool 
because we know when we sent them that information and when 
they responded. So we have a number of----
    Senator Carper. Dr. Budetti----
    Dr. Budetti [continuing]. Doing this.
    Senator Carper. I am just going to ask that we draw--finish 
your sentence, but then----
    Senator McCaskill. No, I do not have any more. I just 
wanted to--
    Senator Carper. No. Go ahead and finish your sentence and 
we will have a second round, I promise.
    Senator McCaskill. Yes. I would just----
    Senator Carper. Go ahead and finish your sentence, Dr. 
Budetti.
    Senator McCaskill. The only request I would make for the 
record is if you could provide me a flow chart of all of the 
different anti-fraud contractors that are currently working for 
our Federal Government and how they work together and what 
their responsibilities are. Somebody someplace has diagramed 
that out, I bet.
    Senator Carper. Would that be with or without acronyms? 
[Laughter.]
    Senator McCaskill. It would be helpful if the acronyms 
would be front, bold, and center, because I think for oversight 
purposes, it is going to be helpful for us to understand how 
they work together now, and then hopefully when you come back 
in a year or two and show us the $20 billion a year you have 
saved, you can point to which part of the system worked and we 
can get rid of some of these contractors that are not working.
    Dr. Budetti. I will be delighted to do that for you, 
Senator.
    Senator McCaskill. Thank you, Mr. Chairman.
    Senator Carper. I want to lower expectations. It is 
actually $20 billion over 10 years, but if you can do the $20 
billion a year, we will take it.
    I said earlier when I was asking the first round of 
questions and my time was expiring, I said I was going to come 
back to, I think I said to Mr. Willemssen, but I am going to 
ask the other witnesses to do this, as well. I want you to 
reflect on what Dr. Budetti has said in his testimony and his 
responses to our questions. What should we feel good about? 
What should we feel concerned about? Do you want to go first, 
Mr. Willemssen?
    Mr. Willemssen. Certainly, Mr. Chairman. One, we are 
pleased that CMS has concurred with all seven of our 
recommendations and planned to act to implement those 
recommendations. If they act appropriately and implement them 
fully, then we can see figures like that $21 billion on the 
chart up there.
    Second, I do not want to underestimate the----
    Senator Carper. Now, how do we make sure that they actually 
follow those recommendations? You give them the 
recommendations. They say, yes, these are good 
recommendations----
    Mr. Willemssen. That would be my second point----
    Senator Carper. OK.
    Mr. Willemssen [continuing]. And that is related to 
committing to milestones and deadlines on when those actions 
are going to be put in place. For example, when will CMS put in 
place the ability to establish tracking mechanisms associated 
with those two systems to demonstrate what kind of benefits are 
we getting and what kind of cost reductions are we getting, 
what kind of fraud are we identifying and preventing?
    And a third point is related to the Integrated Data 
Repository. I do not want to underestimate how important that 
is. That is a tremendous tool, to have one massive database----
    Senator Carper. Let me interrupt here just a minute. If 
somebody on the other side of the moon were listening in to 
this conversation and trying to understand what an IDR is, who 
can explain it so that a regular person off the street or just 
a mortal like me----
    Mr. Willemssen. One way to think of it----
    Senator Carper [continuing]. Could actually understand it 
and it actually be meaningful.
    Mr. Willemssen [continuing]. Is if you are----
    Senator Carper. Give me a good example. Somebody just give 
me a good example of this, OK, and I do not care who does it.
    Mr. Morris. The way I have been led to think about it, 
because I do not understand it, either, is that instead of 
going to five little grocery stores to pick up all the parts 
you need for a dinner, an IDR is a supermarket where you get 
all the components, all the information you need to build your 
dinner.
    Senator Carper. All right. That is great. Even I understand 
that.
    Dr. Budetti. And the One PI system that sits on it is the 
recipe book.
    Mr. Willemssen. Yes. Very good.
    Senator Carper. All right.
    Mr. Willemssen. In fact, it would give you instant access 
to the data you are looking for because you do not have to go 
through a lot of iterations. It is sitting right there on your 
desktop. So I want to emphasize the importance of that, and 
that is why it reinforces why we get as much data on there as 
possible.
    In terms of concerns, I am a little bit concerned with the 
change in going from an incremental approach to adding State 
Medicaid data to now the approach will be to do all 50 States 
in September 2014. Our experience shows going in an incremental 
fashion is often a more prudent risk-based approach, kind of a 
lessons learned, what works, what does not. So just based on 
what I heard and what I know of, doing all 50 in 1 month in 
2014 sounds a little risky as opposed to the incremental 
approach.
    Senator Carper. Would you suggest that the course we take 
would be to maybe start with the first State that ratified the 
Constitution, then the second State? [Laughter.]
    Mr. Willemssen. I will defer to you, Mr. Chairman.
    Senator Carper. All right. OK. Thanks for those responses. 
Mr. Saccoccio.
    Mr. Saccoccio. Yes. We are very excited about what CMS is 
doing, and we understand it is going to take some time. But 
when you look at the Medicare system, and then if you bring the 
Medicaid data, as well, there are enormous opportunities there, 
because unlike on the private side where, say, an Aetna has its 
own data or Cigna has its own data or Blue Cross-Blue Shield of 
Louisiana has its own data, here--and although they could take 
a look at that data, they are looking at a very small slice of 
what is going on out there.
    With Medicare and Medicaid, because of the enormous numbers 
and integrating all of that data into one place, there is 
enormous opportunity there not only for Medicare and Medicaid 
as they begin to analyze that data, suspend payments go after 
fraud, but then to take that information and share that 
information also with the private side, as well, not giving the 
private side access to the data, but taking the trend 
information that they see, the schemes that they see arising 
out of that data.
    For example, J codes, the codes used for infusion therapy 
are being abused in South Florida and we are starting to see a 
lot of that based on the analysis that we are doing. Let the 
private side know, the payers that are in those areas know that 
they should look at their data so that they can focus efforts, 
too. So I think it is an enormous opportunity, given the 
enormous amount of data that is there for Medicare and 
Medicaid.
    Senator Carper. All right. Thanks.
    Mr. Morris, what should we feel encouraged about and what 
should we still have some concerns about?
    Mr. Morris. From the perspective of the Inspector General's 
Office, we are very pleased with the sense of partnership and 
CMS's interest in engaging us in designing a system that works 
for law enforcement as well as program integrity. And having 
worked in the IG for a number of decades, I can tell you it is 
refreshing compared to prior interactions we have had with CMS.
    I would say areas of concern, as touched on in my written 
testimony, we think it is going to be critical to monitor how 
the contractors perform in this context because our past 
experience is that contractors oftentimes disappoint us.
    The other particular interest we have is moving to what we 
call real-time data. Much of the information that we use as 
part of our criminal investigative work is pre-adjudicated. It 
is data that has not been scrubbed and perhaps may not even get 
paid. But it tells us that criminals are pinging the system. 
They are testing to see where claims get rejected because then 
they shape their strategy around those screens. So knowing when 
a criminal has tried to get in and has been unsuccessful is as 
valuable to us for fraud detection as spotting the claims 
through the predictive analytics. It is what we are building 
on. It is something we look forward to getting.
    Senator Carper. All right. That is a good point.
    Dr. Budetti, just take a minute and respond to what you 
just heard from your three colleagues here, just a minute.
    Dr. Budetti. Senator, I think that we are very encouraged 
by the partnership that we have been able to establish with the 
Office of Inspector General and our other law enforcement 
colleagues and I will be delighted to look at whatever 
suggestions the GAO has for other ways to implement the 
Medicaid data. I will tell you that there is a lot of work 
going on right now to try to make sure that we are in position 
to be able to do that and do it properly.
    Senator Carper. All right. Thanks. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman, and you asked a 
good question, Mr. Chairman, about IDR and explain it for the 
average person listening at home. Doctor, you referred to it as 
a recipe book and then a grocery store. It is interesting. It 
is a recipe book and a grocery store that does not have all the 
required items to either look up or purchase. The shared 
systems are not in there. There are a lot of holes in it.
    So I am curious, like, when is the recipe book going to be 
completed and the grocery store going to have all the products 
you need, because every hearing that I participate in, it is, 
like, oh, yes, we all get along. Everyone is great. We agree 
with this. We agree with that. And at the end of the day, we 
are kind of in the same situation, and doing the legislative 
history and the committee histories as we have done, being the 
newer person here, it is like deja vu. It is like Groundhog 
Day. You hear the same thing over and over and over. You have a 
new guy coming in. He has all the greatest intentions and he is 
picking up the slack where the other person left off and here 
we are.
    So I guess my question ultimately is to you, Mr. 
Willemssen. You have testified previously that one system, the 
old Medicare Transaction System (MTS), was terminated after we 
spent $80 million, and you stated that it was a huge learning 
experience. Yes, it was a very expensive learning experience, 
too, in my estimation. In your opinion, at this point, has CMS 
learned from its past failure and do you have confidence that 
they will be able to meet its stated deadline of 2014 for 
incorporating all Medicaid data into the IDR?
    Mr. Willemssen. Yes----
    Senator Brown. That is the recipe and grocery store we were 
just referring to.
    Mr. Willemssen. I did testify on that failed Medicare 
Transaction System about 14 years ago. There are similarities. 
There are differences. One of the similarities and lessons 
learned is there was some underestimation of complexity going 
into this.
    One area I would point to is in Medicaid. When asked 
earlier, Dr. Budetti talked about three reasons that made it 
difficult for why those were problematic in bringing into the 
IDR. I would echo the third reason that he talked about. All 
those State Medicaid Management Information Systems are 
separate. They often have different data element definitions 
and different file structures. So trying to aggregate those all 
together is very difficult.
    So we are encouraged to hear that there are efforts 
underway to do that, but I think the way you have to hold the 
agency's feet to the fire is you have to have them commit to 
milestones and deadlines----
    Senator Brown. Right, and----
    Mr. Willemssen [continuing]. On when are certain activities 
going to be done, and we would like you to come and--the way to 
enforce that, continuing congressional oversight. I think there 
were comments earlier about QFRs coming at a certain point in 
time relative to a certain hearing. There is a lot to be said 
for congressional oversight and actions that get taken.
    Senator Brown. And it is interesting you say that, because 
my next followup question was, what are key indicators we 
should look for to ensure that these progress results are being 
made.
    Mr. Willemssen. The key indicator I would look for is to 
ask CMS what kind of benefits are accruing. Now that they have 
agreed to implement a system to track those benefits, what is 
happening? What kind of fraud reduction are we accruing? What 
kind of chunk out of that $21 billion, which, as the Chairman 
mentioned, was for a 10-year period, but that 10-year period 
was 2006 to 2015, and right now, CMS does not know if they have 
accrued any benefits.
    Senator Brown. Right. That is part of the problem that the 
Chairman and Senator Coburn and others have been working on 
before I got here. But, I guess, getting back to you, Dr. 
Budetti, how can you convince us that this time--and when I say 
``you,'' it is not you, obviously, because you are new--your 
entity, your group that you are representing, how do we know 
that you are going to get it right this time? What confidence 
should we have?
    I think we are kind of optimistic here. We will try to work 
together. The Senator and I, out of the people that work here, 
are probably the two closest people that work together when we 
have an opportunity. What assurances can you give us that, in 
fact, you are getting it right this time, based on previous 
testimony and previous experiences?
    Dr. Budetti. I appreciate that question, Senator Brown, and 
there is a lot of history in a lot of these situations that it 
is important for us to learn from. All I would cite is one 
example, the fact that we did get a major system implemented 
and up and running within 9 months of when the President signed 
the legislation and it has already reviewed all Medicare claims 
for the last 12 days and that we are setting up systems to deal 
with the results of that.
    Senator Brown. And if I could just interrupt----
    Dr. Budetti. Certainly.
    Senator Brown [continuing]. I want to congratulate you on 
that. Aside from just throwing bombs, I think it is important 
to recognize a good job, as well, so congratulations on that 
effort.
    Dr. Budetti. I appreciate that very much, and, of course, I 
pass along your nice words to the people who actually did the 
work, who were my colleagues.
    The other thing I can say is that I think that you have 
heard from me before and you know that the intense commitment 
that we bring to this task. I think this is something that we 
want to accomplish, we are dedicated to accomplishing. We want 
to know exactly the kinds of results that the GAO mentioned, 
which is we want to know whether this is working, and we are 
developing metrics. We are looking to be able to measure not 
just money that we recover, which is very difficult in some of 
these situations, but in avoidance of payments that otherwise 
would have gone out the door. So we are, in fact, developing 
those metrics and looking at the ways that we can collect those 
data and I am delighted to continue with your oversight and 
report back to you regularly on our progress.
    Senator Brown. Thank you.
    Mr. Saccoccio, you look lonely, so I wanted to ask you a 
question. [Laughter.]
    In your testimony, you discussed how FICO, an expert in 
credit risk analysis, was built on its expertise in the 
financial services industry to provide a predictive modeling 
for the private health care industry. Are any of your members 
currently using predictive modeling to prevent fraudulent 
payments?
    Mr. Saccoccio. Yes, several are. On the private side, it is 
kind of a mixed bag in the sense that you do have some 
companies that are well ahead of others. Obviously, you have 
the national companies that have more resources than, say, the 
smaller regional insurers. But some of them are using 
predictive modeling. They are trying to get a handle on the 
whole prepayment thing. Remember, it is not just an issue of 
predictive modeling but when are you applying it. Are you 
looking at claims before they are being paid or are you taking 
a look at them after they have been paid.
    So the push is to try to do this prepayment as much as 
possible, and that is a real challenge because there are 
requirements to pay claims in a certain amount of time. Every 
State has a prompt pay law. ERISA requires claims to be paid in 
a certain amount of time. So the private payers do have that 
pressure to try to pay those claims as quickly as possible, 
which then kind of offsets some of their efforts on the 
prepayment side.
    But some of the companies have started to use predictive 
modeling. Some are ahead of others. They all have some sort of 
data analytics that they do, but they are all moving in that 
direction with the emphasis trying to be pushed to the 
prepayment side of things.
    Senator Brown. All right. Thank you, Mr. Chairman.
    Senator Carper. No, thank you.
    One of the things that Senator Coburn and I had worked on 
for a number of years was the issue of improper payments, and 
the earlier legislation, I think, passed in the first term of 
George W. Bush on improper payments, I think basically said, 
Federal agencies, we want you to be mindful of improper 
payments and start writing them down, or at least noting what 
they are.
    Senator Coburn and I came back a year or so ago and 
legislation signed by President Obama basically said, we not 
only want you to note the improper payments, we want you to 
stop making them. Federal agencies, we want you to report them. 
And last, we want you to go out and recover as much money as 
you can from those improper payments, particularly when there 
are overpayments that were made. And we had a fair amount of 
discussion in this hearing room in the past on recovery audit 
contractors, folks that literally we send out to recover 
overpayments, in some cases fraud, in other cases just 
mistakes.
    One of the questions that we got into here--I think, Dr. 
Budetti, we discussed this with you and the folks at CMS in the 
past--but just give us--I think maybe when you appeared at our 
last Subcommittee hearing on this topic, I think you said that 
CMS plans as expeditiously as possible to implement the final 
rule on Medicaid recovery audit contracting, and I think that 
was in the early part of maybe March this year. It has been 3 
or 4 months. And now that we are meeting again in July, could 
you give us just maybe a more definitive date on when the final 
rule for Medicaid recovery audit contracting might be issued.
    Dr. Budetti. Thank you, Senator. Yes, I did use words 
probably to that effect. I have also said that it would be 
forthcoming soon. We do expect----
    Senator Carper. Those are the kind of answers that we give. 
You are not supposed to do that. You have to be more specific.
    Dr. Budetti. I can never commit to a specific date on a----
    Senator Carper. I have noticed that.
    Dr. Budetti [continuing]. Promulgating regulation.
    Senator Carper. That troubles me.
    Dr. Budetti. But we are expecting this to be out by the end 
of the summer.
    Senator Carper. The end of the summer, OK. Now, could that 
be, like, September 21?
    Dr. Budetti. You are very good at knowing the calendar, 
Senator. [Laughter.]
    Senator Carper. Well, sometimes, like on the beaches, we 
close our beaches down on Labor Day, so we will see. OK. End of 
the summer. We will take your word on that.
    I want to go back to the--this is really one for all the 
panelists, and we will start with you, Mr. Saccoccio, and this 
is regarding public-private partnerships. Sometimes we think 
fraud is something that only happens in the Federal Government 
or State Governments or local governments. Actually, a lot of 
fraud occurs, at least with respect to health care, I am told, 
with the private health insurance companies.
    I once remember talking to folks from MBNA, a big credit 
card bank headquartered in Delaware, now part of Bank of 
America. But I could not understand why they kept hiring all 
these folks who had been, like, top senior-level FBI and any 
number of other law enforcement agencies around the country, 
and I thought, what do they know about credit cards? And as it 
turns out, they knew a lot about ferreting out fraud and trying 
to stop it where it raised its head.
    A lot of folks in financial services know some things that 
we could learn from, and certainly the folks in the private 
health insurance companies that we could then learn from them, 
as well. And I think, if I understood your response to Senator 
McCaskill, Dr. Budetti, one of the reasons why we are able to 
get something off the shelf is because other sectors of our 
country, our economy, our health care delivery system, they had 
already worked on this issue and had come up with a way we were 
able to actually take that off the shelf. I think that is what 
I heard you say.
    But let me just--here is a question to all of our panelists 
on public-private partnerships. We have heard, I think from 
each of our witnesses here today, the importance of information 
sharing, public and private partnerships. Health care fraud 
criminals target everyone, whether they happen to be a private 
health insurance company or Medicare, and unless we find a way 
to work together to identify those who would steal from us, 
prevent improper payments, and prosecute those who have already 
committed fraud, we will continue to struggle to root out and 
defeat these fraudsters. I think it was Mr. Morris--I think it 
was you, sir--who referred to the public-private partnership, 
and Mr. Saccoccio has shared with us how the National Health 
Care Anti-Fraud Association brings together representatives 
from private insurers and public health care providers.
    What I want to ask each of you to do, just take a minute or 
so, a minute or maybe two, to tell us how those of us in 
Congress could help strengthen and formalize these types of 
working relationships or other improvements that we should 
encourage in these important public-private partnerships. Maybe 
there is nothing we can do. Maybe there is plenty of incentive 
just to do it on its own. But if there is something that we 
ought to be doing, we would like to know about it. Mr. 
Saccoccio, do you want to go first?
    Mr. Saccoccio. Sure. Thank you, Senator. I think a lot of, 
as you discussed, private-public partnerships, a lot of it is 
something that can be done independent necessarily of 
additional laws or statutes. But there are some areas that you 
may want to take a look at.
    First of all, with respect to--as we go down the road here 
with respect to predictive modeling in the Medicare program, is 
there an opportunity to allow the private insurers, again, 
access to information, not, again, access to the data, but 
access to trending information, schemes, those kinds of things. 
I suspect that a lot of that could be done by CMS without 
legislation, but to the extent that those issues are addressed 
in legislation, for example, your FAST Act bill that you have 
proposed, allowing the private side to participate as much as 
possible in those types of activities that make sense, and 
information sharing, obviously, is the biggest one.
    The other thing is, are there any other areas of the law 
that in some way undermine the ability of law enforcement to 
share information with the private side unnecessarily. 
Obviously, if there is a law enforcement investigation, you do 
not want to compromise that investigation in any way. But if 
there are some statutes out there that in some ways undercut or 
undermine the ability to share information that do not make any 
sense, to maybe take a look at those and maybe look at maybe 
changing that.
    Senator Carper. All right. Good. Thanks. Mr. Willemssen.
    Mr. Willemssen. I would echo a lot of those comments. I 
think to the extent--looking at the predictive modeling, to the 
extent that you can see some best practices and share those 
best practices, I think you will find a lot of private sector 
organizations willing to share their tools, in some cases at 
not that high of a cost because they want to get the word out. 
They want to be shown as best in class and what they are doing 
may be at a discounted rate for the Federal Government in a 
variety of important areas.
    I also would second the comment about enhanced information 
sharing and just to ensure that as that occurs, that we take 
into account privacy and security considerations.
    Senator Carper. All right. Thanks. Mr. Morris.
    Mr. Morris. I would first note, as was set out in my 
written testimony, that since 1996, the law has charged us, the 
Attorney General's Office and the Secretary through the 
Inspector General, with working with the private sector to 
identify ways to share information, and one of the results of 
that has been the Health Care Fraud Working Groups, which are 
based in U.S. Attorneys' Offices, many of which have a 
collaborative relationship with the private side. So 
encouraging the spirit of the law be embraced and that we look 
for more opportunities to collaborate would be part of it.
    I should also tell you that the Inspector General's Office, 
through the leadership of Inspector General Levinson, has 
really pushed for greater collaboration, and one of the things 
that we have done is undertaken a survey of both our agents, 
our partners at the Department of Justice, and the private 
sector to get an idea of what are best practices. What are the 
work groups doing that are bringing about successful 
identification and prosecution of fraud, both on the private 
and public side. We are going to be generating a report as a 
result of that work and hope to spread the good news about what 
works and what best practices should be embraced.
    The other thing I would note is that bringing people 
together to share ideas is a great way to identify barriers and 
break them down, and through the leadership of the Attorney 
General and the Secretary, we have had a series of HEAT summits 
around the country where the private sector and government 
agencies have come together and shared ideas about identifying, 
preventing, and prosecuting fraud. So I think knowing that the 
law is in place and then having the commitment of leaders to 
see that its spirit is met goes a long way to getting greater 
collaboration.
    Senator Carper. Good. Thank you. Dr. Budetti.
    Dr. Budetti. I would echo the comments of my co-panelists 
today, and I would also--the only thing I would add to that is 
that working together with the private sector is both something 
that we have done with this particular initiative that we are 
talking about today, the predictive modeling, but also there is 
a very strong interest at the highest levels of the Department 
of Health and Human Services to work out a specific framework 
for additional interactions with the private sector and working 
with our colleagues in law enforcement, as well.
    So one of the first things we are going to be doing is 
sharing information on payment suspensions with our private 
sector insurance companies that provide Medigap plans. If we 
are not going to pay a claim, why should the Medigap plan pay a 
claim? But we are exploring many other ways for us to proceed 
along the public-private partnership to fight fraud. We 
recognize that everybody has to be in this together, so----
    Senator Carper. Well, might that work the other way for the 
private health insurance companies if they decide not to pay a 
claim under the Medigap----
    Dr. Budetti. Those are the kinds of things that are very 
much of interest and under discussion, yes.
    Senator Carper. Good. All right. One hand washes the other. 
Senator Brown.
    Senator Brown. Mr. Chairman, I just have two quick 
questions, and I appreciate you holding this hearing again.
    So when I am back home talking to people about the 
overpayment issue, I say, you buy an insurance policy. You pay 
the monthly premiums. You have a beneficiary. That person dies. 
The beneficiary gets the check, right. Well, in the 
government's instance, sometimes they get that check three or 
four or five times, and as a result we have overpayments, or we 
are paying people that are actually dead and they are not 
supposed to be getting payments from the government.
    So I am wondering, I know in the FAST Act that Senators 
Carper and Coburn pushed, that requires a daily view of the 
Social Security Administration (SSA) death master to prevent 
that type of fraud. Is that something that you folks are doing 
or plan to do, or would support, or what is that so that we do 
not keep paying people who are already dead, giving them 
benefits?
    Dr. Budetti. Senator, one of the things that we are doing--
I have not talked about this today yet, but one of the other 
major initiatives that we are undertaking, and, in fact, we are 
in the process of looking for contractors to work on this with 
us, is to automate the screening process that puts into place 
the more detailed screening that was required under the 
Affordable Care Act. A lot of that is being done right now, but 
it is being done in more cumbersome ways and we are going to be 
doing it in a way that will be checking databases and will be 
checking databases as often as is necessary to keep them 
updated. We are going to be checking on databases continually, 
not just when people apply to the program, but while they are 
in the program, on an ongoing basis.
    So, yes, we are very much interested. We do not want to pay 
any claims to or on behalf of someone who was not alive when 
the service is either delivered or received, and so we are 
committed to all of the ways that we can do that, and one of 
the ways is through greatly improving and enhancing our 
screening process so that we are checking all of those 
databases and checking them regularly.
    Senator Brown. It would just be nice to have an alert on 
the screen, ``Alert, alert, he is dead. Do not pay him.'' 
Something pretty simple.
    Dr. Budetti. We want to head in that direction, but as you 
know, when somebody is entered into the death file, they are 
entered as a person who dies----
    Senator Brown. Sure.
    Dr. Budetti [continuing]. Not necessarily as a physician, 
and so we have some other connections to make.
    Senator Brown. Well, governmentwide, I mean, we had a 
hearing, $150 billion a year that we are giving out in just 
overpayments. That is a lot of money when we are looking for 
ways to kind of balance the budget and get our fiscal and 
financial house in order again.
    Mr. Morris, I just have one final question. How concerned 
are you about cybersecurity, the safety and security of the 
networks and having people get into private issues with not the 
best of intentions?
    Mr. Morris. It is a great concern of ours and we have been 
doing a lot of work, both with the Office of the National 
Coordinator, focusing on how to build safe systems as we move 
into an electronic health record. There is additional work we 
are doing right now which we would be pleased to brief you 
about, probably more appropriate in a private setting.
    Senator Brown. Sure. Are you confident at this point that 
our systems are safe and secure?
    Mr. Morris. I think there are opportunities for 
improvement.
    Senator Brown. OK.
    Senator Carper. What I always say here, and Scott has heard 
this a million times already, everything I do, I know I can do 
better. That is true for all of us, and it is true here, too. 
We just have to constantly improve, because the bad guys, they 
are not stupid and they are testing us and we just have to be 
smarter, get smarter faster.
    Anything else?
    Senator Brown. I am all set, Mr. Chairman. Thanks for 
holding this hearing.
    Senator Carper. Thanks very much for being a part of it and 
for joining us in cosponsoring the legislation.
    I am going to ask just maybe one or two more and then we 
will wrap it up.
    This would be for, I think, Mr. Morris and Dr. Budetti. Let 
me just ask a question about the program integrity provisions 
of the Affordable Care Act, the health care law. There were 
several provisions of the law, as you may recall, that 
strengthen new Medicare and Medicaid provider screening. It 
allowed for the suspension of payments--we have had some 
discussion of that here today--where there is credible evidence 
of fraud, and that expanded recovery audit contracting. Since 
the passage of the Affordable Care Act, the Centers for 
Medicare and Medicaid Services has taken many steps to 
implement these provisions.
    I would ask, Mr. Morris, maybe you, Dr. Budetti, if you 
would, could each of you just outline briefly for us the areas 
where you think CMS has done a very good job implementing a 
provision and where have we seen the most success. Could you 
tell us also a little bit about activities that might still be 
wanting, where CMS should focus more or perhaps where we need 
improvements to get the most out of its new authorities. We had 
some discussion of this already here today. I just wanted you 
to drill down on it one more time.
    Mr. Morris. I would say that, across the board, the 
Inspector General's Office has been very impressed by how 
quickly CMS has developed the regulations and put into practice 
many of the statutory requirements. It is no small undertaking 
and they have really put their shoulder to the wheel. We have 
seen this in a wide range of the program integrity functions.
    If there is one area that we have identified where we think 
there are opportunities for improvement, it would be in the 
area of enrollment screening. There are regulations out now 
that implement the Affordable Care Act's authority to create 
different tiers of prescreening based on the risk presented by 
a class of suppliers. We think that there are opportunities for 
greater flexibility in using those tools and there are ways 
that we could encourage CMS to use that tool to keep the bad 
guys out more effectively. But across the board, we have been 
very impressed by how hard CMS has worked to get these 
integrity tools in place, and as I have said previously, how 
open they have been to collaborating with us and taking 
advantage of our expertise as they have gone through that 
process.
    Senator Carper. The second half of that question--anything 
you want to add about activities where CMS's performance might 
be wanting in this regard?
    Mr. Morris. Well, I think I touched on one, which is we 
think there are opportunities to enhance the enrollment 
screening process. I should say that because so many of these 
provisions have just recently been implemented, we still need 
some time to be able to see how they are actually put into 
effect and some opportunity to study. We will be, as part of 
our general oversight function, going back and reviewing many 
of these. Some of them are required by the statute for us to do 
an assessment, for example, screening of background for long-
term care providers. Others, we will be taking on as part of 
our general work planning. So we will look forward to being 
able to come up here and give reports of progress as the 
implementation goes forward.
    Senator Carper. All right. Somebody said to me, I think in 
anticipation of this hearing today, he said, this is about as 
exciting as watching wet paint dry. [Laughter.]
    For somebody who has--those of us who have worked on these 
issues for a while, it is actually more exciting than that. 
What would be exciting is when it gets to be 2024 and we run 
out of money in the Medicare Trust Fund. What would be exciting 
is to say to the people who depend on Medicare in 2024 or 2025 
or beyond, I am sorry, we do not have any more money to pay for 
your coverage.
    What would be exciting is as we try to get into these 
deficit reduction negotiations and we can actually say to the 
President and bipartisan leadership of the Congress we think we 
can save some money in Medicare and Medicaid that we had 
anticipated because of the good work that is being done, in 
part in response to the passage of the Affordable Care Act and 
in part maybe out of some of the ideas that come out of Senator 
Coburn's legislation and mine, ideas that, I might add, were 
fed to us by some of our friends here at the table from the 
IG's office and from GAO and from CMS, as well, and from smart 
guys like Mr. Saccoccio. That would be exciting.
    What I want to do is make sure that we have some of the 
latter kind of excitement and none of the excitement that I 
talked about earlier, when we run out of money and have to turn 
to a whole couple of generations of people and say, that great 
Medicare program that has been around since 1965 is going away. 
We do not want to do that.
    I appreciate the spirit with which CMS has tackled these 
challenges. Dr. Budetti, how long have you been in your job 
now?
    Dr. Budetti. Since February of last year, Senator.
    Senator Carper. I remember the first time we met. Your hair 
was all dark. It was black.
    Dr. Budetti. It was. [Laughter.]
    Senator Carper. And here we are, not very much later. But, 
obviously, you and your folks are putting a lot of effort into 
this.
    One of the things I liked to do as Governor--I still like 
to do it--is I like to do customer calls. I still call on 
businesses in our State, outside of our State that have 
operations in our State, and the questions we ask those 
businesses are, how are we doing, in this case, the Federal 
Government or State Government, and what can we do to help you?
    And one of the ways I want to close out here is to sort of 
say, what else can we do on our side, on the legislative side, 
to help make sure that there will be Medicare around after 
2014, and to make sure that some of the savings that we are 
talking about here actually are available to put on the table 
to help move these deficit discussions. What else can we be 
doing? Dr. Budetti.
    Dr. Budetti. Well, Senator, I just want to express our 
appreciation for the support and interest that you have shown 
in this area because that is probably the key for us. We have 
absolutely terrific tools, both in previous laws but also 
powerful new tools in the Affordable Care Act and we need to 
make sure that we continue to have those supported in a way 
that will allow us to carry out our job. So we look forward to 
continuing to have your support, and, of course, we are always 
open to engaging in dialog with you at any time on ways to move 
even further forward. And I know, as you always say, we are 
doing a good job, somebody, but they could always do better. 
Well, we are happy to keep talking to you about that. Thank 
you.
    Senator Carper. Yes, thanks. Mr. Morris.
    Mr. Morris. We have had the pleasure of working with your 
committee staff on a number of ideas around the FAST Act----
    Senator Carper. Are any of them sitting behind me today?
    Mr. Morris. They are, sir.
    Senator Carper. Do you want to mention any names? Who has 
been especially helpful?
    Mr. Morris. I would say Peter Tyler has been amazing.
    Senator Carper. Oh, really. You did not have to say that. 
How about on the Republican side? We have some pretty good 
people over here, too.
    Mr. Morris. So outstanding that I would not even know where 
to begin.
    Senator Carper. OK, fair enough. [Laughter.]
    All right. Well, Peter has mentioned a couple of them to me 
and we are grateful for the sense of partnership that we have 
here.
    Mr. Morris. I could offer as just one example of a small 
way that we could expand the ability to protect the integrity 
of the program, under the FAST Act, the bill would expand 
access to CMS for the National Director of New Hires so they 
could use that information for their integrity work. We would 
suggest that you consider also expanding that access to the 
Inspector General's Office. We would like to use that tool to 
screen health care providers to ensure they have not hired 
excluded individuals who might be compromising both 
beneficiaries as well as the integrity of the program.
    Senator Carper. All right. That is a good point. Thank you. 
Mr. Willemssen.
    Mr. Willemssen. I would again echo one thing I mentioned 
earlier. I think continued congressional oversight through 
hearings such as this can, among other things, help spur 
action. They can help identify issues. They can identify 
obstacles that maybe the Congress can assist the agency, in 
this case CMS, in overcoming.
    Senator Carper. All right. That is good. I am a big 
believer in oversight. Good. Mr. Saccoccio.
    Mr. Saccoccio. Senator, I think a lot of the--all the 
aspects in the FAST Act are very good, especially those dealing 
with drug diversion. That is a major, major issue now with 
respect to fraud.
    Senator Carper. Have you heard a price tag put on that?
    Mr. Saccoccio. No, I would not have a price tag for that, 
but it is a major problem, and it is obviously not just a 
financial issue. It is a real person issue, as well, as far 
as----
    Senator Carper. Yes. Well, take just a second and just 
explain to the folks that are listening here or following the 
hearing, the Drug Diversion Act, just tell them what we are 
talking about here----
    Mr. Saccoccio. What we are talking about there is basically 
narcotic-type prescription drugs that are being abused and----
    Senator Carper. Controlled substances, that kind of thing--
--
    Mr. Saccoccio [continuing]. Controlled substances, the 
types that are used many times for pain management, and what is 
happening is either through providers that are doing, turning 
their practices into pill mills or patients that go from doctor 
to doctor to doctor shop to try to get those pills, or 
pharmacies or pharmacists that may be involved, and basically 
getting those drugs and then selling them on the street because 
they have a very high street value and it has just become a 
very big problem.
    Last year, our organization gave our Investigation of the 
Year Award to a case out of Kansas where, basically, a 
physician and his wife were running a pill mill that was 
responsible for----
    Senator Carper. And when you say ``pill mill,'' I know what 
it means, but why do you not tell others.
    Mr. Saccoccio. Basically, they were open 24 hours a day and 
anybody that wanted those narcotic controlled substances could 
come get a prescription for them without any examinations or 
anything like that. Basically, you just pay me the money, I 
will give you the prescription so you could go out and get 
those drugs for your use or to sell them on the street.
    And based on that investigation that was both a private-
public type of investigation, there were at least about 64 
deaths that were attributed to overdoses based on drugs coming 
out of that particular physician's office.
    Senator Carper. That one place.
    Mr. Saccoccio. That one place. So it is an enormous problem 
and the State entities that would take a look at drug diversion 
and try to share that information, some of the provisions that 
are in the FAST Act, I think, are very important.
    But I think the one message that is critically important is 
that this has to be an effort that is not just focused on 1 
year or 2 years. It is going to take a long time. It has to be 
consistent, and it has to be a continuous-type effort from year 
to year. I know there is a lot of focus on it right now because 
of the deficit and trying to find recovery of funds, but it is 
something that has to be focused on year in and year out and it 
has to have a commitment by this Administration and, quite 
frankly, any subsequent Administrations, to just keep at it 
year after year, and that is the only way that you are going to 
really make an enormous dent in the problem.
    Senator Carper. Thanks for that. I really think all the 
testimony has been helpful. The thing that you have done is to 
remind us that there are human consequences here. It is not 
just fraud. It is not just money that is being stolen out of 
the Medicare Trust Fund, but there are real implications for 
people, for human lives, and I thank you for humanizing this.
    Does anybody have anything else you want to add or take 
away?
    I think one of the people I asked, Peter Tyler, I said, who 
on the Republican side working for Senator Coburn has been 
especially helpful, and he said, ``Well, not Josh Trent--'' 
[Laughter.]
    No, he said Josh was a lot of help, so, Josh, thank you, 
and everybody else who has been a part of that, we thank you, 
as well.
    Well, this is a little bit like a marathon, not a sprint, 
but like a marathon, and we all just need to stay on task. My 
hope is if we do that, we will actually save a lot of money and 
we will help preserve the integrity of this program and we will 
help restore some fiscal sanity in this country, and to Mr. 
Saccoccio's point, maybe save some human lives at the same 
time. So that would be a good day's work.
    I thank you all for joining us, for your preparation. What 
we will do is, I think--Peter, help me, but I think my 
colleagues have 2 weeks to submit questions and then if they 
do, I would just ask that you respond to those questions 
promptly.
    With that, this hearing is adjourned. Thank you all very 
much.
    [Whereupon, at 4:25 p.m., the Subcommittee was adjourned.]


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