[Senate Hearing 112-744]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-744

 
                        ANATOMY OF A FRAUD BUST:
                    FROM INVESTIGATION TO CONVICTION

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 24, 2012

                               __________

                                     
                                     

            Printed for the use of the Committee on Finance



                  U.S. GOVERNMENT PRINTING OFFICE
79-904                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
KENT CONRAD, North Dakota            OLYMPIA J. SNOWE, Maine
JEFF BINGAMAN, New Mexico            JON KYL, Arizona
JOHN F. KERRY, Massachusetts         MIKE CRAPO, Idaho
RON WYDEN, Oregon                    PAT ROBERTS, Kansas
CHARLES E. SCHUMER, New York         MICHAEL B. ENZI, Wyoming
DEBBIE STABENOW, Michigan            JOHN CORNYN, Texas
MARIA CANTWELL, Washington           TOM COBURN, Oklahoma
BILL NELSON, Florida                 JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware
BENJAMIN L. CARDIN, Maryland

                    Russell Sullivan, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)
?



                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman, 
  Committee on Finance...........................................     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     3

                               WITNESSES

Levinson, Hon. Daniel, Inspector General, Department of Health 
  and Human Services, Washington, DC.............................     5
Ferrer, Hon. Wifredo A., U.S. Attorney, Office of the U.S. 
  Attorney for the Southern District of Florida, Miami, FL.......     6
Budetti, Dr. Peter, Deputy Administrator and Director of the 
  Center for Program Integrity, Centers for Medicare and Medicaid 
  Services, Department of Health and Human Services, Washington, 
  DC.............................................................     8
King, Kathleen, Director of Health Care, Government 
  Accountability Office, Washington, DC..........................     9

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    33
Budetti, Dr. Peter:
    Testimony....................................................     8
    Prepared statement...........................................    35
Coburn, Hon. Tom:
    Chart entitled ``Who's Winning: Fraudsters or Taxpayers?''...    49
Ferrer, Hon. Wifredo A.:
    Testimony....................................................     6
    Prepared statement...........................................    50
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement with attachment...........................    67
King, Kathleen:
    Testimony....................................................     9
    Prepared statement...........................................    70
Levinson, Hon. Daniel:
    Testimony....................................................     5
    Prepared statement...........................................    93

                                 (iii)


                       ANATOMY OF A FRAUD BUST: 
                    FROM INVESTIGATION TO CONVICTION

                              ----------                              


                        TUESDAY, APRIL 24, 2012

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:07 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max 
Baucus (chairman of the committee) presiding.
    Present: Senators Wyden, Nelson, Carper, Hatch, Grassley, 
and Coburn.
    Also present: Democratic Staff: David Schwartz, Chief 
Health Counsel; Russ Sullivan, Staff Director; Matt Kazan, 
Professional Staff; Callan Smith, Research Assistant; and John 
Angell, Senior Advisor. Republican Staff: Chris Campbell, Staff 
Director; and Kim Brandt, Chief Healthcare Investigator.

   OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM 
            MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. The committee will come to order.
    Julius Caesar once said, ``Experience is the teacher of all 
things.''
    This morning we are here to learn from the experience of 
Federal officials who fight health care fraud. Each year, the 
Federal Government loses $60 billion to health care fraud. This 
crime adds to the deficit. It wastes taxpayer dollars. It 
forces seniors to spend more out of their tight budgets on 
Medicare premiums.
    Fighting health care fraud involves agencies across the 
Federal Government. The Centers for Medicare and Medicaid 
Services, or CMS, puts tools into place to investigate and 
prevent fraud. The Department of Health and Human Services' 
Inspectors General conduct criminal and civil investigations. 
And the Department of Justice prosecutes the criminals who 
steal taxpayer dollars.
    A problem this big requires teamwork. The agencies involved 
need to work together seamlessly. They must have the right 
tools for the job and the resources available to deploy those 
tools.
    Today we are here to learn from the success story where 
CMS, the HHS Inspector General, and the Justice Department were 
able to work together as a team. We will hear how the 
investigators rooted out the criminals, how the agents led the 
investigation, and whether the government recouped its losses.
    This case was made public last September, and, at the time, 
it was the largest Medicare fraud bust in history. This Miami 
local news report from last fall shows one of the schemes 
involved.
    At this point, I would like to show that video.
    [Whereupon, a video was played.]
    The Chairman. I think that is a pretty good summary. These 
schemes were spread across eight cities, involved 91 defendants 
and almost $300 million in fraudulent billing.
    From this case we hope to learn valuable lessons to further 
protect Medicare from criminals. I would like to know, in 
talking to the witnesses and hearing from you, what challenges 
you faced during the investigation; what lessons you learned; 
what barriers, if any, existed then and continue to exist today 
among the agencies; and how we can help you work better 
together to make sure that more fraud is uncovered more 
quickly.
    I would also like to hear how the Affordable Care Act is 
helping to prevent and fight fraud. We gave law enforcement an 
unparalleled set of new tools in health care reform to prevent 
fraud. Before the health care law, even suspicious claims were 
paid, then investigated later.
    Health reform changed that. It gives law enforcement the 
authority to stop payment and investigate suspicious claims 
before taxpayer money goes out the door. Health care reform 
also improves screening to ensure criminals cannot get into 
Medicare or Medicaid. Prior to health reform, most information 
was entered by hand into an inadequate and out-of-date 
database. As a result, Medicare paid providers who should have 
been prevented from joining the program in the first place.
    Yesterday, GAO released a report, at my request, detailing 
the implementation of the new provider screening tools that 
health reform created. The report says that a new automated 
system should ensure the provider enrollment system is up-to-
date and accurate. As a result, criminals attempting to enter 
Medicare will not slip through the cracks and be able to 
defraud the government.
    As we build upon our achievements fighting fraud, we, of 
course, must remain vigilant. Medicare has been growing at a 
fast rate for a long time. We all have concerns over the 
program's effect on the budget deficit and the health of the 
Medicare trust fund.
    However, we have been making some progress. Our nonpartisan 
scorekeeper, the Congressional Budget Office, says that per 
beneficiary spending in Medicare will grow 1 percent above 
inflation in the next 10 years. This is a major reduction 
compared to the past 2 decades, when Medicare grew 5 percent 
above inflation.
    Our fight against health care fraud is only one key piece 
to this progress. And it is a small piece, but it is still a 
piece, nevertheless. Last year, the Federal Government 
recovered a record $4.1 billion as a result of health care 
fraud prevention and enforcement efforts. That is out of about 
$500 billion we spend on Medicare annually.
    This is a worthy accomplishment, but, of course, much more 
must be done. So let us heed Julius Caesar's advice, learn from 
the success that you have had. Let us take the experience we 
gained achieving the success and use it as a valuable teacher.
    [The prepared statement of Chairman Baucus appears in the 
appendix.]
    The Chairman. Senator Hatch?

           OPENING STATEMENT OF HON. ORRIN G. HATCH, 
                    A U.S. SENATOR FROM UTAH

    Senator Hatch. Thank you, Mr. Chairman. I appreciate your 
work in this area. And I want to thank all of our witnesses 
today for appearing to discuss this timely issue.
    American citizens are sick and tired of stories about 
government's failure to act as a faithful steward of taxpayer 
dollars, and there are few programs as rife with waste as 
Medicare. Estimates of the amount of fraud, waste, and abuse in 
the Medicare system vary widely, anywhere from $20 billion to 
$100 billion. With numbers like those, it is no wonder that 
Americans, on average, believe the Federal Government wastes 
over half of what they pay in Federal taxes each year.
    Taxpayers have reason to be angry about the levels of 
waste, fraud, and abuse in Medicare and Medicaid. We have 
scheduled this hearing, in part, to address their concerns. 
And, as today's written testimony illustrates, progress is 
being made on this front, but much more needs to be done.
    Two years ago, Congress significantly expanded the 
authorities and resources given to the Centers for Medicare and 
Medicaid Services to shore up CMS's historically underfunded 
program integrity efforts. CMS now has over $1 billion 
available annually to use in its fight to ensure payments are 
made properly.
    While CMS has begun to make some strides in this fight 
against fraud, the implementation of congressionally mandated 
program integrity efforts has been lackluster, at best. The CMS 
report card is not one to be proud of, in my opinion.
    Now, this chart is a pretty important chart. CMS has not 
put in any temporary moratoriums to prevent new providers or 
suppliers from enrolling and billing the Medicare program, even 
in areas where more than enough already exists to furnish 
health care services.
    CMS has not established a surety bond on home health 
agencies, even though CMS considers new home health agencies a 
high risk. CMS has not established mandatory compliance 
programs as a condition of participation for suppliers despite 
HHS OIG's continued finding that those programs help prevent 
fraud from recurring.
    CMS has not implemented limits on how much high risk 
suppliers and providers can bill. CMS has not established 
procedures to deny additional Medicare billing privileges to 
suppliers who have an existing overpayment or suspension.
    Until this morning, CMS had not even finalized a rule to 
implement checks to make sure that physicians actually refer a 
Medicare beneficiary for a medical service before paying the 
claim. And CMS has not implemented claims edits to verify that 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
suppliers are accepted for each item or service for which they 
bill Medicare.
    CMS does have new, enhanced provider screening tools 
designed to ensure that only legitimate providers and suppliers 
are allowed into the Medicare program. Yet a recent search, by 
our offices, of convicted felons who are also physicians showed 
that many, including a physician convicted of conspiracy to 
commit murder, still appear on Medicare's public ordering and 
referring file as active Medicare providers.
    Historically, CMS has claimed that for every $1 invested in 
program integrity efforts, the return is at least $14. If that 
is the case, taxpayers and Congress should expect to see proof 
of $14 billion in recoveries in the very near future. Yet, 
given the results provided to date and the effectiveness of 
many of the efforts highlighted by the OIG, I am not going to 
hold my breath.
    Despite many public announcements about enhanced tools, 
flashy new systems and high-profile collaborations to combat 
waste, fraud, and abuse, CMS can show few tangible results from 
these investments. Recoveries by CMS law enforcement partners 
are at their highest rate of return ever, $4.1 billion for the 
last reporting period. That is a 58-percent increase over the 
year before. But the administrative actions and recoveries 
which were under CMS's sole control are far less robust.
    The failure to address fraud, waste, and abuse 
appropriately is a longstanding problem for CMS. Perhaps a 
fresh perspective is necessary, and that is why later this week 
I, along with my colleague, Dr. Coburn, will begin soliciting 
ideas from all interested stakeholders for combating the 
billions in waste, fraud, and abuse in the Medicare and 
Medicaid programs.
    Together we hope to identify innovative solutions that will 
provide taxpayers with a return on the investments being made 
to combat the waste in these programs. Now, I want to be 
absolutely clear. Waste and fraud in the Medicare system is not 
a minor issue. Government agencies can harms U.S. taxpayers by 
acting improperly, as appears to be the case with the GSA 
scandal. But they can also hurt taxpayers through inaction.
    The failure of CMS to address waste, fraud, and abuse, in 
spite of billions in taxpayer dollars dedicated to doing so, is 
quickly becoming its own scandal. Waste in the programs that 
CMS supervises directly harms U.S. taxpayers. That is the way 
that CMS needs to think about this issue.
    This is not some victimless crime. Fraud and waste in these 
programs hurt the American taxpayer no less than if someone 
lifted their wallets. It harms the integrity of a program that 
our seniors depend on, and it undermines citizens' confidence 
in the government's ability to perform its most basic 
functions.
    Thanks, again, Mr. Chairman. I look forward to the 
testimony of our witnesses. And I really appreciate your 
holding this hearing.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. You bet. Thank you, Senator.
    I would like to now welcome our witnesses.
    First, Health and Human Services Inspector General Dan 
Levinson. Welcome, Mr. Levinson. Second, U.S. Attorney for the 
Southern District of Florida, Wifredo Ferrer. Good job in that 
video, and a good job done in this prosecution. Next is CMS 
Deputy Administrator Dr. Peter Budetti. And the GAO Director of 
Health Care, Kathleen King.
    Mr. Levinson, please begin. And our usual rule, as you 
know, is about 5 minutes per statement, and we will put the 
rest of your statement automatically in the record. And I 
encourage you to tell it like it is. Do not pull your punches. 
Life is short.

     STATEMENT OF HON. DANIEL LEVINSON, INSPECTOR GENERAL, 
    DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

    Mr. Levinson. Carpe diem.
    The Chairman. Exactly. [Laughter.]
    Mr. Levinson. Good morning, Chairman Baucus, Ranking Member 
Hatch, and Senator Coburn. I am pleased to provide you with 
insight into how OIG agents investigate Medicare fraud and 
coordinate national strike force takedowns.
    We face a challenging task. Medicare fraud costs billions 
of dollars each year and, in some cases, endangers patients' 
lives. Fraud perpetrators range from street criminals with sham 
operations to practitioners in institutions who may provide 
some legitimate care, but also exploit Medicare.
    Fraud schemes are increasingly sophisticated and dangerous. 
OIG agents often confront lethal weapons. But OIG and our 
partners at Justice and HHS are fighting back. We have 
leveraged data, technology, and expertise. We have cut the 
average time from fraud detection to indictment, and we are 
achieving record-setting recoveries. From 2009 to 2011, we 
returned $7 for every $1 invested in the health care fraud and 
abuse control program.
    The investigation of the ABC and Florida Home Health 
agencies--I will refer to them as ABC--exemplifies one of many 
Strike Force successes. More than 50 individuals have been 
convicted in connection with a $25-million fraud scheme.
    ABC billed Medicare for home health services that were not 
provided or were not medically necessary. They paid doctors up 
to $300 per prescription to falsely certify that patients 
needed diabetes care in their homes. They paid patients up to 
$1,500 per month to falsely attest that they needed and 
received the services.
    So how did we unravel this scheme? In late 2008, the Miami 
Strike Force team began investigating ABC based on a lead from 
another case. ABC's billing was suspicious. For example, ABC 
claimed that virtually all of its patients needed daily insulin 
injections by nurses or physical therapy. Yet we know a small 
proportion of Medicare patients truly need those services.
    We also looked at the time being billed by ABC nurses and 
aides. In some cases, it would be literally impossible for one 
person to provide all of the services billed for on a given 
day. It did not add up.
    Further, we examined bank records and found evidence of 
kickback payments. Within about 6 months, we indicted two ABC 
owners and six co-conspirators. But the investigation did not 
end there. Working with cooperating witnesses, we continued to 
analyze billing data and medical records to ferret out co-
conspirators. Patient recruiters in the ABC case have also led 
us to some other home health agencies running similar schemes.
    Individuals in one of these spinoff cases were among those 
charged in the national takedown announced last September. This 
operation charged 91 defendants across eight cities. These 
fraud schemes in Miami, Houston, Brooklyn, NY, Dallas, Detroit, 
Los Angeles, Chicago, and Baton Rouge, involved almost $300 
million in Medicare billings.
    Nationwide takedowns start with investigations like the ABC 
case. At present, our Strike Forces have about 300 active 
investigations. Coordinating cases into a major takedown 
provides tactical, efficiency, and deterrent benefits.
    When the Justice Department determines that numerous cases 
are nearing indictment, our office or the FBI begins tactical 
planning. This includes conducting surveillance of subjects in 
arrest locations, investigating histories of violence and 
possession of weapons, determining what protective equipment 
and forensic tools are needed, and mapping routes to nearest 
hospitals and emergency services.
    Simultaneously, we support the Justice Department's 
prosecutors in obtaining warrants. Our office and the FBI 
execute the arrests and search warrants with support from 
partner agencies. Ensuring success and safety requires 
extensive planning and communication and long hours of 
preparation and training.
    The September takedown involved more than 400 agents 
government-wide, and forensic specialists. Our suspects were 
arrested and searches conducted without incident. All of our 
agents returned home safely.
    OIG's special agents are on the front lines every day, 
tirelessly fighting fraud and bringing criminals to justice. We 
appreciate your support for our mission and their service.
    Thank you. And I will be happy to answer your questions.
    [The prepared statement of Mr. Levinson appears in the 
appendix.]
    The Chairman. You bet. Thank you very much. That is a good 
summary. It just scratched the surface, I am sure.
    Next, Mr. Ferrer?

 STATEMENT OF HON. WIFREDO A. FERRER, U.S. ATTORNEY, OFFICE OF 
THE U.S. ATTORNEY FOR THE SOUTHERN DISTRICT OF FLORIDA, MIAMI, 
                               FL

    Mr. Ferrer. Good morning, Chairman Baucus, Ranking Member 
Hatch, and Senator Coburn. I am honored to speak with you today 
and to thank you, first of all, for your leadership in 
combating health care fraud.
    As you know and as you have mentioned, health care fraud is 
an extremely costly law enforcement problem. Every year, 
taxpayers spend hundreds of billions of dollars to provide 
health care to the most vulnerable in our society--the elderly, 
the needy, the disabled, and our children.
    We have a duty to ensure that these funds are spent on 
providing proper Medicare treatment to those who need the 
treatment. And, while most doctors and health care providers 
are doing the right thing, there are, unfortunately, others 
that target Medicare and other government health care programs 
to line their own pockets. That is unacceptable, and that is 
why fighting health care fraud is a priority, a top priority 
for the Department of Justice.
    Now, the 93 U.S. Attorney's offices are the principal 
prosecutors of Federal crimes, including health care fraud. 
And, together with the attorneys of the department's civil, 
criminal, and civil rights divisions, we represent the United 
States in both criminal and civil cases in Federal courts all 
across the country. And, with the agents from the FBI, from 
HHS, and with CMS, we are fighting back against this epidemic.
    We investigate, we prosecute, and we secure prison 
sentences for hundreds of defendants every year, and we are 
recovering billions of dollars every year. And, with the 
additional resources provided by Congress, we have made 
incredible strides in this battle.
    As you mentioned right at the start, in fiscal year 2011 
alone, the government was able to recover approximately $4.1 
billion that went back to the Medicare trust fund, the U.S. 
Treasury, other Federal agencies, and individuals. This is the 
highest amount ever recovered in 1 year. The criminal 
prosecutors, the Federal prosecutors, also charged the highest 
number of defendants in 1 year, and that was in fiscal year 
2011, to combat this case and this issue.
    Now, one particular case, the ABC case that was mentioned--
that is more fully described in my testimony--is a perfect 
example of the tools that the department is using to fight this 
problem, and we are talking from data analysis all the way 
through old-
fashioned police work.
    ABC, which is a home health care agency--or was--and 
Florida Health Home Providers, they were home health care 
agencies that, as described, billed Medicare for services that 
were not provided or never needed. And, by looking at the data, 
the agents were able to make sure and see that every 
beneficiary seemed to be getting the same treatment. They were 
either getting insulin, daily insulin injections by nurses or 
other aides and/or they were receiving physical therapy, or 
both. And we know that not every patient needs this every 
single day, and we also know that the same treatment--it does 
not make sense to give the same treatment to every single 
person.
    This scheme involved kickbacks and bribes to doctors who 
filled out forms falsely certifying that the services were 
needed and to refer the patients to these two providers instead 
of sending them to legitimate providers. This case involved a 
lot of kickbacks, as Mr. Levinson stated, thousands of dollars 
to patient recruiters and patients.
    The task of dismantling this fell on the Miami Strike 
Force. And I have to tell you that this was incredible work, 
collaborative work. The agents reviewed bank records. They used 
an informant. They looked at data. They saw that the bank 
records showed that the money was going to sham companies. And 
the agents and prosecutors also used judicially authorized 
search warrants to seize these falsified patient files in order 
to make our case.
    And, in less than 18 months, the Medicare Strike Force in 
Miami resulted in the criminal convictions of 51 defendants in 
just this one case. Since 2009, the defendants convicted by the 
Miami Strike Force, including ABC, collectively billed Medicare 
and Medicaid for more than $127 million, and I am just talking 
about home health care fraud.
    The success of this case was the result of one Strike 
Force. The factors--such as co-location of the agents with the 
prosecutors, reviewing the data in a timely fashion--that is 
what brought our cases to success and what brought our cases to 
a resolution in a much faster fashion.
    The success of this approach demonstrates that the model, 
in fact, not only works, it exceeds traditional models of 
prosecution.
    We will fight this battle up and down the chain of the 
health care fraud scenarios, and we are happy to tell this good 
story, and we look forward to any questions.
    [The prepared statement of Mr. Ferrer appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Ferrer.
    Dr. Budetti, you are next.

   STATEMENT OF DR. PETER BUDETTI, DEPUTY ADMINISTRATOR AND 
   DIRECTOR OF THE CENTER FOR PROGRAM INTEGRITY, CENTERS FOR 
MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN 
                    SERVICES, WASHINGTON, DC

    Dr. Budetti. Good morning, Chairman Baucus, Ranking Member 
Hatch, and other distinguished members of the committee. I am 
delighted to be here this morning to discuss with you the 
significant progress that we have made at the Centers for 
Medicare and Medicaid Services in our fight against health care 
fraud.
    In conjunction with our law enforcement partners, we have 
played a substantial role in takedowns and busts, fraud busts 
such as the one that is being described today. This is a very 
good example of how the government agencies are working 
together to identify, investigate, and prosecute health care 
fraud.
    CMS and our antifraud investigators play an important role 
in this process. In this particular scheme that my colleagues 
have already mentioned, the ABC Home Health Care case that was 
just described, CMS's data and analytic and investigative work 
played an important role in helping to build the case, and our 
investigators and members of our staff played important roles 
during the entire prosecution of the case, providing both data 
analysis and witnesses at the trial itself.
    The case demonstrates that the team from different 
government entities working together can be extremely 
successful in coming in, identifying, and prosecuting fraud 
cases such as the one that you have heard about.
    What I would like to discuss right now really picks up, Mr. 
Chairman, on the point that you made about learning our 
lessons. We have learned lessons from these investigations and 
from similar kinds of activities to fight fraud. In the past, 
all too often, we have been behind the fraudsters and having to 
catch up to them as we did in this case.
    That has long been known as the pay-and-chase approach, and 
our new, innovative approaches at the Centers for Medicare and 
Medicaid Services are moving forward to prevent these kinds of 
problems from occurring in the first place.
    Our initiatives are built around what we are calling the 
``twin pillars.'' The first pillar is the Fraud Prevention 
System that a number of you have heard me talk about before. 
That is the claims-based analytics, predictive analytics, that 
was put into place under the authority and requirements of the 
Small Business Jobs Act to detect aberrant billing patterns and 
is now screening all Medicare Part A, B, and DME claims.
    The second pillar is the one that was referred to a little 
bit earlier and was also mentioned in the GAO report, which is 
our new, enhanced provider enrollment and screening 
initiatives. This is the Automated Provider Screening (APS) 
system that will provide rapid and automated screening of all 
providers and suppliers when they seek to enroll in the 
program, when they come up for revalidation, and on an ongoing 
basis while they are enrolled in the program.
    The APS technology is a major step forward in bringing 
about a way to keep the people out of the program who do not 
belong in the program, to keep them out and to identify them 
and kick them out should they get into the program.
    The other point I would like to make about our twin pillars 
is that they are not stand-alone entities. They interact with 
each other. Information from the Fraud Prevention System that 
looks at claims in an innovative, new way can feed into the 
system that looks at the enrollments, and vice versa. When we 
find out something about a provider or supplier during the 
enrollment screening process, that information can be used to 
strengthen the way that we are looking at the claim.
    These are interactive and very advanced and sophisticated 
systems.
    We recently, very recently, in fact--just this past week 
and weekend--had a situation in which the advanced systems 
helped us identify aberrant billing patterns with a certain 
kind of provider and supplier. And, working closely with our 
colleagues at the Office of the Inspector General, we are at 
this moment in the process of taking administrative actions to 
cut off payments to the providers and suppliers who were 
identified in this new way.
    This allows us to investigate, coordinate, and rapidly take 
action. We share very much the passion that many of you have 
expressed that this is a situation that needs to be brought 
under control, and we are dedicated to doing that.
    Thank you very much. And I look forward to taking your 
questions.
    The Chairman. Thank you, Dr. Budetti.
    [The prepared statement of Dr. Budetti appears in the 
appendix.]
    The Chairman. Ms. King, you are next.

STATEMENT OF KATHLEEN KING, DIRECTOR OF HEALTH CARE, GOVERNMENT 
             ACCOUNTABILITY OFFICE, WASHINGTON, DC

    Ms. King. I am pleased to be here today to discuss our work 
regarding fraud and recent agency actions and recent laws that 
could help the agency and their law enforcement agencies fight 
fraud.
    Multimillion-dollar convictions demonstrate that fraud is a 
serious problem in Medicare, but the full extent of the problem 
is not known. There are no reliable estimates of fraud in the 
Medicare program or in the health care industry as a whole. 
This is because fraud is difficult to detect because people are 
acting with ill intent and trying to deceive the program.
    My testimony today focuses on the steps CMS has taken to 
reduce fraud and on additional steps we have recommended to 
them.
    Congress provided new tools to CMS to reduce fraud in the 
Patient Protection and Affordable Care Act and the Small 
Business Jobs Act. I want to focus on three key strategies: 
strengthening provider enrollment standards and procedures; 
improving pre- and post-payment claims review; and developing a 
robust process for addressing vulnerabilities, which are 
weaknesses that can lead to improper payments.
    With respect to provider enrollment, CMS has taken 
important steps to ensure that only legitimate providers and 
suppliers are enrolled to bill Medicare. Specifically, in 
accordance with the Patient Protection and Affordable Care Act, 
CMS designated three levels of risk. Those at the highest risk 
level are subject to the most rigorous screening.
    In addition, as Dr. Budetti mentioned, CMS recently 
contracted with two companies to automate enrollment processes 
and to conduct site visits for new providers in the moderate- 
and high-risk categories.
    We urge CMS to fully implement other key PPACA provisions, 
such as requiring surety bonds for providers designated as 
high-risk; conducting fingerprint-based criminal background 
checks; and requiring key disclosures from providers and 
suppliers before enrollment, such as whether they have ever 
been suspended from a Federal health care program.
    Our work has also shown that prepayment reviews are 
essential to help ensure that Medicare pays correctly the first 
time. CMS's contractors use automated prepayment controls 
called edits, which are instructions programmed into IT systems 
to check if providers are eligible for payment and if the 
claims comply with Medicare's coverage and payment policies. We 
have previously found weaknesses in some of these edits and are 
currently evaluating prepayment edits that implement coverage 
and payment policies.
    We are currently reviewing CMS's newest effort, the Fraud 
Prevention System, which uses predictive analytic technologies 
to analyze fee-for-service claims on a prepayment basis. These 
technologies are used to review claims for potential fraud by 
identifying unusual or suspicious patterns or abnormalities in 
Medicare provider networks, claims billing patterns, and 
beneficiary utilization.
    We have also found that CMS could take additional steps in 
improving post-payment review of claims, which is critical to 
identifying payment error. In particular, the agency could make 
better use of two information technology tools designed to help 
provide them with more data and analytical tools for fighting 
fraud. These are the Integrated Data Repository and One Program 
Integrity.
    We have found that CMS needs a more robust process for 
addressing vulnerabilities. In our work on the Medicare 
recovery audit program, we recommended that CMS improve its 
process for implementing corrective actions regarding 
vulnerabilities.
    In conclusion, CMS has several tools at its disposal and 
has taken important steps toward preventing fraud. However, 
more work is ahead. Those intent on committing fraud will find 
ways to do so. So, continuing vigilance is critical.
    We will continue to assess efforts to fight fraud and 
provide recommendations to CMS based on our work that we 
believe will assist them in this important task. We urge CMS to 
continue its efforts as well.
    Thank you very much for allowing me to speak today.
    [The prepared statement of Ms. King appears in the 
appendix.]
    The Chairman. Thank you very much, Ms. King. Thank you all.
    My first question is, what is the biggest area of fraud? Is 
it home health? Is it just medical clinics? Is it hospitals? Is 
it equipment--medical equipment manufacturers? What is it? What 
is probably the biggest, richest asset--what is your target 
asset in trying to fight fraud? Any of the four of you could 
answer that question.
    But what areas are most fraudulent? I will start with you, 
Mr. Levinson.
    Mr. Levinson. Chairman Baucus, in terms of financial 
recoveries, actually, pharmaceutical cases constitute by far 
the largest recoveries. But for purposes of what we are talking 
about mostly this morning, there are, I think, significant 
challenges in Part B, the range of outpatient services.
    You mentioned home health, and home health is a very, very 
important subject to focus on, because we are heading really 
into an era where there is going to be increasing reliance on 
using community-based health facilities, getting people out of 
hospitals, out of institutions, and trying to do more care at 
home.
    That, at least in theory, should be good for the taxpayer. 
It should reduce costs, because you are getting out of 
significant overhead costs, creating venues, places where 
health care can be delivered less expensively.
    But there is also risk. It is a more fluid and flexible 
environment. It is more difficult to exercise appropriate 
internal controls. So, for example, we did do a study of home 
health agency compliance records and found actually that, from 
a compliance records standpoint, home health agencies looked to 
be doing very good. Then we uncover cases like this, where you 
have conspiracies between various providers, doctors, nurses, 
and others, and, all of a sudden, notwithstanding that people 
are getting the paperwork right, the people who are doing the 
paperwork right, in an unfortunate number of cases, are people 
who know exactly what they are doing. They are stealing from 
the taxpayer in just the right way that gets the boxes correct.
    So areas like home health, I think, present an especially 
sophisticated challenge. And we, I think, have done a more 
successful job of attacking DME fraud, which, to a certain 
extent, is a lazy man's fraud--I mean, having a sham storefront 
and being able to simply provide durable medical equipment is, 
in many cases, or historically has been, an easier scam.
    Once you get into home health, now you are getting into 
professionals who need to document more extensive paperwork 
records.
    The Chairman. What is the most efficient way to prevent 
home health fraud?
    Mr. Levinson. Well, I think there is still a challenge in 
developing the analytics that will do a better job of being 
able to assure that those who are in the home health field are 
legitimate providers who are also not just filling in boxes, 
and that we have the technology that will demonstrate that 
those services actually are necessary and being delivered 
correctly.
    The Chairman. Could you expand on that a little bit more? 
Like analytics; what do you mean, ``better analytics''?
    Mr. Levinson. Well, I think this is--in the ABC case, I 
think this is a good example of being able to see that the 
record was clinically incoherent. It did not make sense for 
people to be able to provide the level of services.
    Once you were able to drill down and understand the pattern 
of data--for someone to provide 15 patients that many visits in 
the course of a given day is literally impossible. Being able 
to get that kind of information quickly and to be able to act 
on it promptly is very, very important.
    The Chairman. That is more prosecution, remedial. What 
about prevention? How do you prevent home health care fraud?
    Mr. Levinson. I think it is very important to focus on who 
gets into the field and to be able to come up with measures of 
being able to see, what actually is the performance like over 
the course of a period of time, to be able to monitor that more 
effectively.
    The Chairman. In your judgment, what is probably the most 
effective way to screen, the most effective way to prevent 
fraud in the first place? If you could expand just a little bit 
more, please.
    Mr. Levinson. Well, I think, ultimately, it is a matter of 
the program being able to come up with metrics that will do a 
better job of being able to separate out--hopefully before they 
get into the program, but at least early into the program--
those who really do not belong in that field, in that area of 
health care activity.
    The Chairman. And you think the metrics are not yet 
developed.
    Mr. Levinson. I have not seen them. And when I get a 
report, which I certainly share with the Congress, about how 
good home health agencies generally seem to be in terms of 
compliance records, and knowing that there are cases like ABC 
that we see, I know that we are not there.
    The Chairman. Thank you.
    Senator Hatch?
    Senator Hatch. Thank you, Mr. Chairman.
    Dr. Budetti, let me just say, in your testimony and other 
public statements, you have indicated the array of new tools 
and approaches CMS is utilizing to do more on the front end to 
prevent fraud, waste, and abuse from occurring.
    While there is certainly much to point to in terms of 
enforcement results over the past year, I am somewhat curious 
about what tangible and quantifiable results CMS has seen from 
the money and tools specifically given to them.
    Can you please give us some specific examples of where CMS 
has seen some actual return on investment from the money 
provided from PPACA, the Patient Protection and Affordable Care 
Act? What other types of results can this committee expect to 
see from this investment, and how will you be measuring the 
success of these efforts?
    Just one last question. Why do you believe that these new 
approaches will deter or prevent the rampant fraud that has 
continued unabated over the last 20 years?
    Dr. Budetti. Thank you for those questions, Senator Hatch, 
and I very much appreciate your interest in this matter.
    Senator Hatch. Thank you.
    Dr. Budetti. I can tell you that just looking, for example, 
at the results from the application of our Fraud Prevention 
System so far, as of the end of January, we were able to 
identify some $35 million in funds that had either been 
stopped, identified, or avoided.
    And I would like to make the point that the way that our 
systems work is going to force us to think in terms of a new 
way of identifying when we have solved a problem, because 
recoveries mean that money has already gone out the door. And 
when we do get money back in as, of course, we should, when we 
can, that is a relatively easy thing to measure.
    When we identify a provider or supplier who does not belong 
in the program and we toss them out, as we have, when we 
identify providers and suppliers who are still on the books but 
who are not licensed to practice in the areas where they are 
enrolled in Medicare or are, in fact, dead, that is a 
vulnerability that we have addressed.
    So we have to think in terms of the return on our 
investment in a broader fashion than we have in the past, other 
than simply the recoveries.
    When we stop somebody from submitting a claim, that could 
be a very large amount of money, but it is a difficult one to 
measure. Nevertheless, that is what we want to do, and we do 
want to measure it. And as you know, at the end of the first 
year of the Fraud Prevention System this summer, we will be 
preparing our first annual report, and we will have a wide 
range of metrics in there to look at how well that system has 
performed; and not just that system in isolation, but that 
system as part of our overall efforts, because, after all, the 
Fraud Prevention System is not yet even a year old and is still 
a relatively moderate part of our overall activities.
    But when we installed the claims processing edits to 
follow-up on some of the leads that were identified in the 
Fraud Prevention System, we were able to identify over $14 
million that we would have paid out over the coming year. When 
we installed a variety of other kinds of edits, we were able to 
block millions in addition.
    So we are looking at it on every level. We are looking at 
it in terms of the providers and suppliers who do not belong in 
the program that we are investigating, and we are revoking 
their billing privileges or otherwise getting them out. We are 
looking at it in terms of the dollars that are saved by getting 
them out. We are also looking at the actual payments that we 
are blocking one way or another, either through payment 
suspensions or through prepayment controls or through automatic 
denials.
    So we are very much committed to looking at the outcomes of 
our efforts. But I just want to make the point that we need to 
move beyond just thinking in terms of money that actually comes 
back into the government, because we do not want it to go out 
the door in the first place.
    Senator Hatch. Thank you, Doctor.
    Inspector General Levinson, in your oral and written 
testimony, you have noted the length of time it takes to 
investigate and prosecute a case. However, how long does it 
take between a conviction and when OIG finalizes the exclusion 
of a provider from the Federal health care programs?
    And what can be done to streamline this process to ensure 
less of a gap between sentencing and exclusions from the 
Federal health care programs? And how are you working with CMS 
to ensure administrative actions, such as payment suspensions, 
are occurring much sooner in the process to stop Federal 
dollars from going out the door rather than having taxpayer 
dollars at risk for months, if not years, before your 
investigation is completed?
    Mr. Levinson. Senator Hatch, on payment suspensions, we do 
see real progress being made on being able to act more 
promptly. There is a recent case actually in which 78 payment 
suspensions were made very quickly once the fraud was 
understood.
    That is a matter really of CMS and OIG working 
cooperatively, and I think that we have really done an 
increasingly better job together being able to make those 
things happen. We have an increasing number of payment 
suspensions. They need to happen quickly, I would agree.
    The area which I think remains a major challenge for us 
that we have at this point only limited control over is that 
point between conviction and exclusion. Right now, we are 
probably--when you look at the total--we have several thousand 
exclusions a year. On average, we are within the range of about 
8 months from one to the other, and that is too long. 
Government should be able to do a better job of that.
    I think that the structural issue outside of our office is 
that we have 50 different programs in the States and we have 
various licensing boards and courts, and so much of it is a 
paper process. We have both a jurisdictional challenge, we have 
still paper, getting it to an IT, getting it really to a 21st-
century way of being able to provide prompt notice.
    Within our own office, we have taken significant measures 
to streamline what we do, but we still need to look at the 
record, because the exclusion is not for any specific period of 
time necessarily. We need to actually look at the record, our 
agents do, to determine the period of exclusion, to look at 
mitigating factors and the more serious circumstances.
    So there is a certain amount of due process built in that 
is going to trigger some delay, but government needs to do a 
better job.
    Senator Hatch. Thank you.
    The Chairman. Senator Grassley?
    Senator Grassley. Thank you, Mr. Chairman. And thank you 
folks for helping us with this very important issue, because 
there is so much waste. We have to get to the bottom of it, and 
I know you are trying to.
    Dr. Budetti, Senator Hatch and I have sent two separate 
letters asking for answers on why you have not yet used the 
temporary moratorium authority given to you under the Patient 
Protection Act which you finalized regulations on in February.
    Despite numerous requests for information and an in-person 
briefing, we have yet to receive a satisfactory explanation of 
why you are not aggressively using the authority in areas where 
it is clear there are a high number of providers and suppliers 
and where fraud seems to be rampant.
    It is unacceptable that we sent our first letter in October 
last year and still have not received the information requested 
or an acceptable answer for why you are not moving forward to 
utilize the tool.
    When can we expect to get more detailed answers to our 
questions and for you to begin using this authority?
    Thank you.
    Dr. Budetti. Senator, it is good to see you again. And I 
appreciate your question. And we certainly do intend to use 
this very powerful tool of imposing a moratorium. I think it is 
very important for us to focus on which tool is the most 
appropriate for a given circumstance, and one of the 
characteristics of imposing a moratorium, which we have every 
intention of using, is that it will block new people, new 
providers and suppliers from coming into an area or coming in 
to deliver a type of service.
    It does not do anything about the existing fraudsters who 
are already there. It just blocks the new ones, and it could 
also apply equally to new fraudsters, but to new legitimate 
providers or suppliers who want to come in.
    So we think that we need--we, in fact, are demonstrating 
that we need to be very thoughtful about making sure that the 
moratorium is the right tool to address a specific problem. And 
we are developing the analytics to see what kinds of situations 
are the most promising for a moratorium, where it would be a 
temporary block for all providers and suppliers of a given type 
to come into the market in a given area.
    And we want to make sure, when we look at that, first of 
all, that we can demonstrate that stopping new ones from 
getting in serves exactly the purpose that we are getting at, 
number one; number two, that we are not threatening the 
potential access of Medicare beneficiaries by limiting perhaps 
new legitimate providers and suppliers from coming in.
    So we have every intention of using this tool. We 
appreciate very much the authority that was granted to the 
agency. We have been working at great lengths to identify 
exactly the right circumstances, and we will be using this 
tool.
    Senator Grassley. Also, Dr. Budetti, on another issue, 
earlier this month, Senator Kohl and I sent a letter to CMS 
requesting a status report on the implementation of the 
Physician Payment Sunshine Act. Most importantly, we asked that 
the final rule on implementation of the Sunshine Act be 
released ``no later than June of this year so that partial data 
collection for 2012 can commence.''
    I also asked you to work with stakeholders to finalize the 
rule so that your team can comprise a feasible approach to 
providing the data to the public. I understand there were a 
significant number of comments that CMS is sorting through, and 
the technical and complicated nature of the comments make your 
task a challenge.
    We are here today talking about how to stop fraud and 
abuse. And so I think the Sunshine Act, getting it up and 
running, is a concrete way to help achieve that goal.
    So my question to you: is CMS on track to promulgate the 
final rule for the Sunshine Act in June of this year?
    Dr. Budetti. Senator, again, as you mentioned, we are 
dealing both with complicated issues and with the substantial 
number of comments that we received on this complicated issue, 
but we have every intention of putting the system into place 
and promulgating the final rule as soon as we have finished 
dealing with all of the comments and getting through all of the 
requirements of a properly promulgated rule.
    And we do anticipate getting that rule out--I cannot tell 
you for sure that it will be done by June, but we do anticipate 
getting it out during the course of this year and getting the 
information out that is necessary for the manufacturers and 
distributors who have to report under that system to have 
sufficient advanced warning to know what it is that they will 
have to report and when.
    And I appreciate your interest in this, sir.
    Senator Grassley. General Levinson, we spent resources 
figuring out who was committing fraud so we can prevent it. In 
the case that we are discussing today, you spoke about how 
important it was that we had boots on the ground where fraud 
was being committed. As more information was gathered, the 
number of defendants grew.
    So my question: Congress has made investments to increase 
the number of people trying to stop Medicare fraud. Do you 
believe having more eyes and ears on the ground will lead to 
more fraud investigations and convictions?
    Mr. Levinson. It certainly should, although that is only 
half of it. I think it is important to have boots on the 
ground, to have people, and to have people who are trained. But 
they need to be trained in computer forensics. They need to 
understand the IT part of that equation.
    It really is a combined effort of the right talent--and I 
am a strong believer in the talent that we have been able to 
assemble in our office--and we actually could use more of the 
kind of folks that we already have.
    They are being trained in the new Fraud Prevention System 
as we speak. And what is really important is that we keep 
current with, if not ahead of, the IT curve--the need to get 
really modern technology that will master what the experts call 
big data. Because, when you are dealing with 1.4 million claims 
a day and more than $1 billion that the government spends a 
day, you are dealing with a universe of data that really is on 
a scale much larger than anything we experienced in the 20th 
century in this field.
    So we really need to keep up with modern IT. That is a very 
important resource challenge.
    Senator Grassley. Mr. Chairman, may I call to the 
chairman's attention the bill that Senator Wyden and I 
introduced called the Medicare Data Act that we think would 
bring more public attention and accountability to the claims 
submitted? It basically overturns a court decision of a long 
time ago that I think would be very helpful.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Coburn?
    Senator Coburn. Thank you all for your efforts.
    Mr. Ferrer, did the doctors who falsely certified home 
health needs in your case go to jail, and if not, why not?
    Mr. Ferrer. In the case of ABC, two doctors pled guilty.
    Senator Coburn. Did they go to jail?
    Mr. Ferrer. I believe so. Yes. They were sentenced to jail.
    Senator Coburn. That is an important signal for you all to 
publicize. When we are talking about home health, there are a 
lot of things--one of the things we have is--this is a gray 
area because nobody looks at it closely. If the doctors who are 
signing false certifications for home health are not going to 
jail, you are not sending the signal for other doctors to 
change their behavior. That is number one.
    Number two is, all that it would require is the simple rule 
that home health care cannot solicit patients. In other words, 
they would have to come from a doctor's referral based on need 
rather than home health care soliciting patients who then go to 
the doctor to get the certification. And all that it would 
require is to make it illegal for home health to solicit 
patients themselves rather than a doc or a caregiver knowing 
who needs it and who does not, because the pressure on the 
physicians in this country is to certify it to get it out of 
the way.
    So, if you would just tweak the rule as to where the doctor 
or the primary caregiver, whether it be a PA or a nurse 
practitioner, is certifying this, because it should be based on 
a need rather than being solicited.
    Dr. Budetti, you sent me a letter on January 27th of this 
year outlining a couple million dollars in terms of the new 
system. Yet, you just quoted $35 million to the committee. So 
that is where we are today.
    Dr. Budetti. The number that I just quoted, Dr. Coburn, is 
as of the end of January. Those were numbers that we were 
collecting at the time that we brought back to you, sir.
    Senator Coburn. Thank you. Let me talk with General 
Levinson just for a moment. The Medi-Medi program, where we 
spent $60 million, 10 States chose to participate in it and 
recouped $57.8 million.
    So, are we going to continue that program? Is it going to 
work? We are spending more than we are recouping. The same 
thing in terms of Medicaid integrity contractors. We recouped 
less than $300,000 on that program. Should we continue that? 
That is a negative return on investment as well.
    The third point I would make is, we collected $4 billion 
this year. Half of that was with corporate settlements. But we 
spent $1 billion. But the reports--what we are hearing all the 
time is that there is a 14-to-1 return on investment.
    I see a 4-to-1 return on investment. Straighten me out on 
that, if you would.
    Mr. Levinson. Well, with respect to return on investment, 
we use a figure, and I will readily say that sometimes you will 
get different figures from different parts of the government--
--
    Senator Coburn. But you will not disagree that we spent $1 
billion and got $4 billion back.
    Mr. Levinson. Well, our 7-to-1, when the government invests 
a dollar, when the Congress puts a dollar into OIG, we return 
$7, we do have documentary work that we can share with you and 
your staff.
    Senator Coburn. But overall, government total spending was 
$1 billion, and we got $4 billion in savings. So maybe 7-to-1 
for you all, but overall, we are getting a 4-to-1 return.
    I have a lot of questions, but it seems to me we are 
working on some of the areas that are very hard to try to 
defraud when, in fact, the system is designed to be defrauded.
    In other words, what can we do structurally in the rules 
for Medicare to take away the opportunity to defraud, like I 
just suggested on home health? In other words, if you have a 
rule where you cannot solicit other than a doctor or a 
provider--if we change the rules, a lot of the fraud would go 
away. And if, in fact, we have publicized the fact that if you 
violate this, not only are you going to lose your ability to be 
a provider for Medicare, you are actually going to spend time 
in jail, that has a cold, hard effect on doctors who are 
certifying services that do not need to be done.
    Mr. Levinson. And on the Medi-Medi match and on the 
Medicaid integrity contractors, when you have a negative rate 
of return, which right now, as you pointed out, we have, we 
have recommended to CMS that they need to reevaluate and 
restructure, because it is one thing to be thinking about 
whether it is a 4-to-1 return or a 7-to-1, but when you have a 
negative rate, which you have in the ones that you mentioned, 
that is structurally a problem.
    Senator Coburn. I would make one other point to the panel. 
There is more we need to do. You all recognize that. We applaud 
your efforts. But what we need to see is, how is it working? 
And in terms of Dr. Budetti, Senator Grassley and I sent you a 
letter several weeks ago and asked for a response by April 20th 
on the fraudsters' use of shell companies and nominees.
    GAO work has shown that CMS has still not utilized all its 
screening tools. You have explained some of that. Can you give 
us a firm date on when you are going to have the tools that are 
available to you in place and working?
    Dr. Budetti. On the specific issue of the nominee owners 
and shell companies or more broadly?
    Senator Coburn. More broadly.
    Dr. Budetti. Many of our tools, as I have described, are 
certainly in place right now. The Automated Provider Screening 
system will allow us to look in much greater depth at who the 
owners are, and we will also be able to, with the analytics 
that were developed that we have in place and that we are 
putting into action, we will be able to look at the----
    Senator Coburn. I understand that. I am asking when.
    Dr. Budetti. Well, many of them are already in place.
    Senator Coburn. Well, the ones that are not, when will they 
be in place?
    Dr. Budetti. I would have to take it tool-by-tool, Senator. 
But the Automated Provider Screening system, for example, we 
already ran all 800,000 physicians who were in our database 
through it to check for licensure.
    We then ran all 1.5 million providers and suppliers through 
it in order to establish a baseline of all of the information 
on all of their credentials and other relevant information so 
that we can detect changes over time.
    We are going through the revalidation process, which, as 
you know, we started with the highest-risk providers and 
suppliers, and we have done several hundred thousand towards 
the 1.5 million already, and we will then be implementing later 
this year the direct connection between the Fraud Prevention 
System and the claims payment system.
    We now have a somewhat more indirect connection that is 
going into effect later this year. So there are a variety of 
tools that are in place. There are a number of others that are 
being phased in.
    Our goal is the same as yours, which is to get them in 
place as quickly as possible and to get them to be as effective 
as possible.
    Senator Coburn. Thank you.
    The Chairman. Senator Carper?
    Senator Carper. Mr. Chairman, thanks very much for holding 
this hearing. This is important stuff.
    And Senator Coburn and I have worked in these venues for a 
number of years, as Dr. Budetti and others know. And I think we 
are actually starting to make a little progress, and we do not 
take time and say that, but I think we are.
    My father used to say, if a job is worth doing, it is worth 
doing well, and from that I have taken away life's lesson. 
Everything I do, I know I can do better. And when you have 
fraud that is $40 billion or $50 billion a year and you have 
some improper payments that could be $115 billion a year, then 
we can do better here, and we need to.
    Senator Coburn and I have introduced legislation--we have 
34 cosponsors, plus ourselves--something called the FAST Act, 
that is designed to go after more really wasteful spending and 
fraudulent spending, principally within Medicare and Medicaid.
    We do it through a number of provisions. They include 
increasing the antifraud coordination from Federal and State 
governments, increasing criminal penalties, and making sure we 
do a better job deploying some of the data analysis 
technologies that are commonly used, for example, in the credit 
card business and also, in the private sector, health insurance 
companies.
    Also, we have the Senior Medicare Patrol out there. They 
need to be energized. Frankly, one of the things that helps to 
make them more energized and more effective in helping to 
identify fraud in the first place is that the Department of 
Health and Human Services said, ``You know, we are going to 
simplify these statements, these monthly statements that come 
to the senior citizens who are on Medicare so they can actually 
read the stuff and understand it and say, `Well, this doesn't 
look right.'''
    So there are a number of things that we want to do with our 
FAST Act legislation on top of the things we are already doing. 
And I understand, Dr. Budetti, you have expressed a willingness 
to spend a little time with Dr. Coburn and myself to talk about 
how we might want to make some modest changes to that bill to 
make it even more effective. So we welcome that.
    Here is what I want to ask. Ms. King, you have been working 
this beat for a while. We thank you and your colleagues at GAO 
for your efforts.
    Listening to what has been done down in Florida--good 
work--listening to some of the efforts that Dr. Budetti and 
others are leading in Medicare, what seems to be working? Where 
do we seem to be doing a good job, and where are we not doing a 
good job? Where do we need to do more? Where do we, especially 
us, need to do more in terms of our oversight responsibilities?
    Ms. King. We have several efforts underway to evaluate 
Medicare safeguards. The enrollment report that we just issued 
yesterday points out that CMS has taken important steps to get 
those new screening efforts in place and the new contractors, 
but it is too soon, I think, for us to evaluate how effective 
they will be. They are definitely a step in the right 
direction.
    We are also evaluating prepayment edits to see how 
effective they are, what more could be done there. We are 
looking at fraud convictions and trying to identify for the 
first time the types of providers who have been involved in 
fraud so that that can inform future efforts on the fraud 
fighting front.
    So there are things that are going on that we are 
evaluating that look to us like steps in the right direction. 
But, since we are an 
evidence-based organization, we are going to wait until the 
evaluations are done and then come back and tell you what we 
think.
    But, certainly, the enrollment and the Fraud Prevention 
System, the ability to detect claims, not just on a one-by-one 
basis, but to look at patterns by providers and beneficiary 
utilization----
    Senator Carper. The kind of patterns that our second 
witness mentioned, where you had--some of the providers were 
basically saying there are two things or two kinds of 
treatments that are being provided. One was physical therapy. 
And what was the other one?
    Mr. Ferrer. Daily insulin shots.
    Senator Carper. Daily insulin shots. It seems like we would 
not need a very complicated detection system to look at that 
and say, ``You know, that just seems strange.''
    My wife allowed our oldest son, when he was traveling in 
India, to use her credit card, and the first time he used it 
over there, the credit card company called and said, ``Mrs. 
Carper, are you in India? What is going on with your credit 
card in India?'' It turned out it was a legitimate use, but 
that was just by phone. They picked it up like that and got it 
right back to her and to us.
    We ought to be able to take that kind of technology that is 
used broadly across the world to help ferret out fraud, and I 
know we want to. I am not sure we are doing it or realizing the 
potential there.
    Dr. Budetti. Senator, just on that particular point, the 
technology that we are using is very similar to the credit card 
technology. But I would like to remind everyone that, when the 
credit card company called you because the card was in India, 
somebody at some point had to actually associate the use of the 
credit card out of an area with a fraud problem and tie that 
in.
    That is our predictive modeling technique, to learn from 
experience what things look like problems and how do you build 
them into the system so that you not only can spot things, but 
you know what to spot.
    And so that is the----
    The Chairman. I am sorry, if I might interrupt here. But 
credit card companies look at outliers. It seems to me you 
could find outliers. I do not mean to encroach upon the 
Senator's time here at all.
    Senator Carper. It is all right.
    The Chairman. But it is an outlier. That should not be 
difficult to find outliers.
    Dr. Budetti. No. It is not difficult, Senator, at all.
    The Chairman. I am sorry. I do not want to take Senator 
Carper's time, but I was just----
    Senator Carper. Liars and outliers.
    Dr. Budetti. Liars and outliers. [Laughter.]
    Senator Carper. All right. Let me close with--go ahead, and 
then I need to wrap it up.
    Ms. King. Maybe I can be helpful here, because, in the 
claims payment system, they look at things one by one. They 
look to see is that provider eligible, does that claim meet the 
claims payment requirements. If it does, they pay it.
    Compare that to the Fraud Prevention System, where you are 
able to look at patterns across providers, across 
beneficiaries, across services. So it is a big step up in terms 
of the ability to look at patterns of billing rather than 
looking at claims one by one.
    Senator Carper. Mr. Chairman, I know my time has expired. 
If I can just wrap it up really quickly.
    The Chairman. Go ahead. Take your time.
    Senator Carper. This is really not rocket science, all 
right? Part of what I think you are trying to do is to make 
sure that the providers and the suppliers who are getting into 
the system, that they are legitimate.
    Part of what we are trying to do is to make sure that the 
names of beneficiaries stay out of the hands of the bad guys. 
Part of what we are trying to do is to make sure that criminal 
sanctions that we have in place really bite on people who are 
miscreants.
    Part of what we are trying to do is make the Senior 
Medicare Patrol relevant and to make sure that we seize the 
full advantage of that. Part of what we are trying to do here 
is have recovery audit contractors in the field recovering 
moneys that have been overpaid, improperly paid, recover that 
money and learn lessons from what they have seen and learned in 
doing so.
    And part of what we are trying to do here is just the data 
analysis that has shown great promise in other fields. But we 
need to do it all. We need to do it all. We need to do it well. 
We know what works. We need to do more of what works.
    Thank you very much.
    The Chairman. Thank you, Senator.
    Senator Nelson?
    Senator Nelson. Thank you, Mr. Chairman.
    Mr. Chairman, when we were doing the health care bill, you 
were very kind to this Senator. And given the fact that so much 
of this fraud is down in Miami, we went through and reduced 
outlier payments. We encouraged face-to-face visits with 
physicians. And very importantly, we increased the provider 
screenings before they would be allowed to bill Medicare.
    Of course, what was happening, especially in Miami, was 
people would open up a storefront and it never provided any 
services or equipment, and they would bill Medicare. And how 
are you going to know unless you have some kind of check, some 
kind of screening?
    And yet, it has been explained to me that we cannot do this 
for everybody, that CMS just does not have enough people to do 
this.
    So I want to ask our U.S. Attorney. What do you think about 
these kind of things that we put in the health care bill? And, 
when you went after the ABC Florida case, if that had been in 
place, what do you think would have been the outcome with 
regard to ABC?
    Mr. Ferrer. Good morning, Senator Nelson. It is good to see 
you again.
    I think that the tools that we now have will help us in 
following the patients' billing records and looking at the data 
in a much more advanced manner to see where the outliers are, 
to find out which providers are really doing suspicious 
activity and basically providing services supposedly for things 
that just do not make sense.
    The ABC case, a lot of the cases that we had in the past, 
we used the data to point us in the right direction, to make 
sure that we could start looking at a particular company or 
area. And then we use the old-fashioned police work and follow 
and do interviews and maybe have consensual recordings of 
someone who is cooperating with the government.
    But I think that what we now have with the data, the more 
advanced data analysis, what you have all done with the 
Affordable Care Act and expanding the definition of what health 
care fraud is, what the offense is like, and allowing us to 
bring more charges, you have given us more subpoena power, you 
have increased the sentences, which also serve to be an 
incredible deterrent in this type of crime.
    Senator Nelson. In the case of ABC, for example, in the 
home health aide who had billed for visits that never occurred, 
was this a home health aide who was working through a home 
health agency that was actually a legitimate Medicare provider, 
that had actually provided legitimate services before?
    Mr. Ferrer. That is what makes these cases very difficult, 
because a lot of these providers in the home health field will 
provide some legitimate services, but they funnel--they create 
all this wealth by going and recruiting, getting doctors to 
help them in referring patients who really should not be 
referred to their agencies.
    And what makes it very difficult as well is that we are 
dealing in an area where everything is doctored--the patient 
records, all those forms. It is very different from what you 
described early on, the durable medical equipment companies, 
which are really shell, they are abandoned storefronts, no one 
is there, there is no personnel. This is very different.
    When you look at it from the outside, it looks legitimate. 
That is why advanced data analysis can help us pinpoint those 
home health care agencies that are really an aberration when it 
comes to the billing. But then we also need the other side, 
which are the informants, those who really are in the inside 
who will cooperate with law enforcement.
    And that is why I think it is very important that we 
prosecute up and down the health care fraud chain, because, if 
we are prosecuting not only the managers, but we are also 
prosecuting some lower-level employees, that gives them the 
incentive to cooperate and come to us and tell us what is going 
on.
    Senator Nelson. To what degree do you think the storefronts 
that are shells are still a problem?
    Mr. Ferrer. Well, I will tell you, I am now seeing an 
evolution of the health care fraud problem in Miami. The 
durable medical equipment types of cases are declining, because 
now the fraudsters know that we are looking. They know that 
that is an area that we have really focused on.
    So what have they done? They now have gone to home health 
care.
    And to answer another question that you had, Senator 
Baucus, in the beginning, what is the new trend in Miami, 
community mental health is now the new thing after home health. 
The fraudsters will always look for programs and different 
services that give them the biggest return and the biggest 
reimbursement.
    It is like that game of whack-a-mole. You hit them in one 
area, they will find another scheme; you hit them there and 
another scheme will come up.
    So we are now seeing a transition from the DMEs to HIV 
infusion therapy to home health and now community mental 
health.
    Senator Nelson. Well then, Mr. Chairman, it is certainly a 
compliment to you and the health care bill that at least those 
shells, those storefronts, that is moving out of there. But 
they always find a way to try to stay one step ahead of us.
    So I want you to know how much I appreciate you having this 
hearing.
    I want to ask Dr. Budetti one final question. What about 
the Senior Medicare Patrol? Is this a way of involving senior 
citizens on Medicare to really be our eyes and ears, like we 
have tried to do with citizens with regard to the terrorist 
threat?
    Dr. Budetti. Senator Nelson, thank you for that question. 
When I started on the job, one of my first goals was to invent 
the Senior Medicare Patrol, and then I found out it already 
existed. That is how much a supporter I am of the idea of using 
all of our Medicare beneficiaries.
    And so we have actually funded grants to Senior Medicare 
Patrol through our CMS funds. We have actually funded grants to 
support the Senior Medicare Patrol activities over the last 
couple of years.
    We believe very strongly in them. We are working on a 
number of other activities that will create even larger 
incentives for people to participate in the Senior Medicare 
Patrol. We think that the idea of 45 million, 46 million, 47 
million people out there, virtually all of whom are not only 
honest and legitimate beneficiaries but also are absolutely 
outraged at the money being stolen from them, from their 
program, that the more they can help us, the better.
    So we are a big supporter of that, sir.
    Senator Nelson. Thank you.
    The Chairman. Thank you, Senator. Boy, no one fights harder 
than the Senator from Florida. I want to thank you very much 
for what you are doing to help protect seniors. Obviously, 
Florida is a big State and a big senior interest, but, 
obviously, you are fighting very, very hard to make sure that 
seniors are getting their fair share out of Medicare and not 
being ripped off. But I really appreciate your efforts very 
much.
    Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman. I think it has been 
an excellent hearing. I want to commend you. And I think your 
point, Mr. Chairman, about Senator Nelson is absolutely right. 
He has been on the vanguard of senior rights for a lot of 
years.
    And I really want to pick up on Senator Nelson's point and 
perhaps direct this toward you, Mr. Levinson, and you as well, 
Mr. Ferrer.
    What Senator Nelson is really talking about with respect to 
seniors on patrol really elaborates on the concept you have 
been talking about, Mr. Levinson, which is really to have more 
people looking at the data.
    I have listened to you talk about this for a number of 
years, and you have talked about data analytics and data 
forensics, and it really is another way of addressing what 
Senator Nelson was talking about, which is having seniors on 
patrol and sort of getting more eyes on this whole topic.
    Now, Senator Grassley and I have proposed an effort to open 
up the Medicare database to make it possible for us, in a 
fashion that allows for more eyes to be on the subject, to stop 
these sort of abnormal trends, the kind of people who are 
ripping off the system, acknowledging what Dr. Budetti said, 
that most people are honest.
    Given the fact that I may even be one of the last Senators 
to ask questions, is this not really what the panel is trying 
to get us to zero in on, to have more eyes on the data, more 
people trying to give us an early warning sign of developments?
    As you know, we have had some of the most outlandish cases 
on the west coast, one of them in Portland, but we have tried 
to follow this. And I would just ask you, Mr. Levinson and Mr. 
Ferrer, about this question of trying to really put more people 
looking at the data, whether it is the approach Senator 
Grassley and I are talking about in terms of opening up the 
Medicare database or other approaches.
    That is really the bottom line here. Is that your view, Mr. 
Levinson?
    Mr. Levinson. Thank you, Senator Wyden. Well, I have been 
on record for a long time as encouraging as much transparency 
as policymakers and the lawyers will allow us. I think it is 
very, very healthy for the system.
    And the notion of citizen involvement and especially 
Medicare beneficiary involvement is absolutely crucial in 
trying to ensure the integrity of the system. And in every 
summit that HHS has held on the fraud prevention challenge 
around the country--and there have been half a dozen over the 
last year--in my remarks, I always underscore the importance of 
having our beneficiaries as our frontline protectors, if you 
will.
    And, when you look at the record of our OIG cases open for 
investigation, I have to assume that a considerable number of 
the hotline complaints that come in and that are then forwarded 
to CMS, their sources, their origins most likely are from 
exactly this cohort, the people who are on the front lines.
    So, while all parts of our government, enforcement and 
compliance structure, have very critical roles to play, a 
crucial partner needs to be the beneficiaries themselves.
    Senator Wyden. Mr. Ferrer, tell me about your thoughts with 
respect to approaches like the Medicare database, because that 
is the one place where you can really, on an ongoing basis, 
spot abnormalities, spot trends.
    Do you have any thoughts on that?
    Mr. Ferrer. Well, I could not agree with you more with 
respect to the importance of reviewing that data. And let me 
tell you why we have been so successful in the Strike Forces 
and in our efforts.
    In Miami, we actually have what we call the fusion center 
for Medicare fraud. It is a stand-alone facility, the only one 
of its kind in the Nation. Why has that worked? Because we have 
a CMS contractor working in that facility with agents, with a 
nurse investigator and agents whose job really is to look at 
the data.
    So we have a national database, and it is called STARS. 
They review the STARS database to see where there is some 
aberration, some suspicious billing spikes, and then they then 
come to us and to the agent and then point us in the right 
direction so we can know which providers we need to sort of 
examine and investigate.
    The beneficiaries getting involved also in this effort is 
crucial. We have cases where it is the beneficiary, it is the 
patient who comes to us after examining their explanation of 
benefits from Medicare and says, ``Hey, listen, I am being--
Medicare just got billed for a prosthetic, and, look here, I 
don't need anything.''
    One of the beneficiaries, a Federal judge--someone got his 
information and was billing Medicare for some prosthetics, and 
he had to go to court and tell the judge, ``Here I am, and I've 
got my limbs.''
    I mean, we need everybody. We go out there, do a lot of 
public outreach. The regional summits that Inspector General 
Levinson is talking about are crucial. We tell everybody that 
they need to speak up and be aware.
    And I have to tell you that--at least I can speak for South 
Florida--the community there is fed up. That is why we put a 
lot of research into this. That is why our sentences have 
increased.
    Senator Coburn was asking about doctors being sentenced. We 
have had doctors sentenced to 19.5 years and 30 years. The 
judges are trying to send a message in this area.
    But reviewing the data and anything we can do to continue 
to facilitate the sharing of quality data in a timely fashion 
is crucial in our efforts.
    Senator Wyden. Mr. Chairman, my time is up. I just look 
forward to working with you. And Senator Grassley and I have 
put a lot of years into this, and the fact that you are 
constantly looking for ways to beef up the fight against fraud 
and these kinds of rip-offs is really appreciated. I look 
forward to working with you.
    The Chairman. Thank you, Senator, very much.
    Are there any areas other than data-sharing that we should 
explore here? Does anybody have a thought? I am kind of blue-
skying here, just curious whether somebody has an idea.
    Dr. Budetti. Senator, did you particularly want to--did you 
have anything particular in mind, or are you just 
brainstorming?
    The Chairman. No, just brainstorming. You are the guys on 
the ground. I am just curious, from your perspective. It is 
kind of the point, the more people--if you have more data, you 
might be able to connect more dots than otherwise would be 
connected.
    Dr. Budetti. That is a very intriguing challenge, Senator. 
In fact, in the two systems that I have been talking about, the 
goal of each system is to have as much capacity to deal with 
inputs from various sources.
    So the Automated Provider Screening system, that will tap 
into literally thousands of data sources in order to create the 
most robust picture possible of just who it is who is trying to 
get into the program.
    In the Fraud Prevention System, we are tying together 
information not only from claims, but we are also tying 
information from 1-800-MEDICARE calls. We are tying information 
from prosecutions and other kinds of investigations, a wide 
range of kinds of information, as well as data.
    So any ideas that you or anybody else might come up with 
for additional aspects of this would be not only welcome, but 
our systems are now constructed so that we could actually deal 
with even a wider range of information.
    The Chairman. Now, with fraud--to what degree are these 
fraudsters independent operators and to what degree are they 
organized; that is, either organized as two or three in some 
location or more or across a city, across the country? Is 
organized crime involved in this at all? I am just curious to 
what degree are these individuals small groups, small 
entrepreneurs, if you will, or to what degree is this some 
organization.
    Mr. Ferrer. Senator, we have seen all types of groups 
involved in this. One interesting sort of tidbit that I would 
see in the cases in South Florida is, a lot of families would 
do this together. Sometimes the idea or the venom started with 
the grandmother, and then it went to the son and then to the 
grandchildren.
    We have also seen organized crime. We have also seen 
criminals who do organize and commit health care fraud to sort 
of fund their criminality. We have seen single bystanders. We 
have seen medical professionals involved in this because of the 
lucrative nature of this type of crime.
    I think that it all depends on where you are. There are 
different cities or regions around the country where you will 
see different trends in fraud. Like I said, in South Florida, 
home health and community mental health seems to be the big 
one. In other jurisdictions, I have heard of the independent 
diagnostic testing facilities, of hospices' services being 
targeted. It depends on where you are, but we have seen all 
types of groups involved in this fraud, unfortunately.
    Mr. Levinson. Mr. Chairman, if I can just point to the 
poster on your right. We had a case out west in which our 
agents were investigating a clinic that was suspected of health 
care fraud and money laundering as part of an organized crime 
enterprise, and agents executing a search warrant found 15 
guns, including assault rifles, submachine guns, handguns, and 
an Uzi, as well as other weapons, including clubs, knives, and 
brass knuckles.
    There are enough instances like this so that our agents, I 
can honestly tell you, put their lives on the line with respect 
to some of the investigative work that they do.
    So in terms of the health care fraud portfolio, it ranges 
in a very broad spectrum from corporate front offices down to 
the kind of very dangerous street crime demonstrated by posters 
like this.
    The Chairman. I am just curious how well organized all of 
you are. Clearly, you have put together this strike team, and 
you described the organizations working together, and that 
seemed to have worked in the ABC case.
    But to what degree do you continually talk and compare 
notes, share ideas, and so forth? Are you it, or are there 
other folks who are involved?
    Mr. Ferrer. We talk all the time. In South Florida, we meet 
on a monthly basis where we have CMS down there in South 
Florida with the agents, the prosecutors, investigators, and 
analysts, and we go through our cases. And something that Dr. 
Budetti was talking about, when the prosecutors--when we see a 
particular trend or something in our cases, we share that 
immediately so that they can then start looking at that in 
terms of their data to figure out who else is doing the same 
short of scheme.
    So at least--and I know that we all--we talk on a regular 
basis. This is a priority.
    The Chairman. In South Florida, you are basically it. We 
are looking at the team, basically.
    Mr. Ferrer. Yes. Right. In South Florida, we have the local 
CMS, we have my office, we have the department's criminal 
division here in the Department of Justice, and the civil 
division and civil rights also working in South Florida as part 
of our team.
    So it is not just the South Florida agents, but it is also 
the lawyers and prosecutors.
    The Chairman. Next to South Florida, what is another rich 
target to go after in the country? What geographic location?
    Mr. Levinson. Well, when you look at the Strike Force 
cities, I think that gives a pretty good indication of where 
concentrations of fraud schemes exist. It is certainly not an 
exclusive--it is not a comprehensive list.
    But when you are talking about not just Miami, but Houston 
and Los Angeles, these are cities where there are significant 
concentrations of scams----
    The Chairman. Right.
    Mr. Levinson [continuing]. And where the Strike Force model 
is especially effective. It really brings in the efficiency.
    The Chairman. So the U.S. Attorney in Houston is just as 
involved as Mr. Ferrer?
    Mr. Levinson. And we also get great support from----
    The Chairman. Is that right?
    Mr. Ferrer. There is no question. I mean, we have nine--so 
far, nine Strike Forces. But it is not just the U.S. Attorneys 
and the Strike Forces. All 93 U.S. Attorneys work on this, 
because the Strike Force is just--it is a supplement. It is a 
very specific sort of model to help us target Medicare fraud in 
the hotspots, but Medicare fraud, as you know, is nationwide.
    All the prosecutors in the U.S. Attorney's offices and in 
the department nationwide are working on this. That is why last 
year the 1,430 defendants that we charged, that is nationwide. 
That is not just the Strike Forces.
    So this is all about partnership, Senator. I have to tell 
you that as a prosecutor, as someone who worked on these cases 
as a line prosecutor back in 2004 and 2005, the level of 
collaboration, partnership, sharing of information, is 
remarkable. We have come a long way since then.
    The Chairman. Well, it is partnership and, clearly, you can 
tell from the questions asked by members of this committee that 
we want to be a partner with you, and that means you need to 
tell us if there are any changes in the law you think would be 
advisable.
    It also means, to me, that it would be helpful if we just 
delegate to you to get the job done. After all, you are the 
executive branch of government. And it would help if you were 
to give some benchmarks to us, like by what date would you like 
to have recovered Y dollars in terms of fraudulent billing.
    Does it make sense that your team, your Strike Force in 
South Florida, set some benchmarks to say, all right, we have 
done this well this year, next year we would like to recover, 
conservatively, Y number of dollars? Does that make sense?
    Mr. Ferrer. We do that all the time. And, as I was 
explaining, we have seen an evolution of the types of fraud. 
The criminals now are getting more sophisticated.
    The Chairman. So are you.
    Mr. Ferrer. Yes. And that is becoming a real challenge, 
because they know the techniques that we have used in the past. 
They are no longer in the business of--or, I should say, they 
are less in the business of the empty storefronts. Now, 
everything is masked under the veil of legitimacy.
    They are getting more sophisticated in the way that they 
doctor their files and in making sure they have all their 
stories straight.
    The Chairman. I am sure they are. I will ask a loaded 
question. To what degree are the fraudsters winning the war, 
and to what degree are the Feds winning the war?
    Mr. Ferrer. Well, I think we have made an incredible amount 
of progress, but, as we have mentioned here before, 
prevention--we cannot prosecute our way out of this, at least 
from my point of view.
    We can continue to prosecute this over and over and over 
again, but----
    The Chairman. I think that is right. It gets more on the 
prevention side.
    Mr. Ferrer. On the prevention.
    The Chairman. So what is your benchmark for next year? Do 
you have a number?
    Dr. Budetti. I am sorry. Are you asking me, sir?
    The Chairman. Yes. Do you have a number?
    Dr. Budetti. Well, my number ultimately is zero.
    The Chairman. Of course.
    Dr. Budetti. No fraud anywhere. But we are right now in the 
process, for purposes of knowing what the effect is that we are 
having and, also, in order to file our first annual report with 
you, we are in the process of developing all of those metrics.
    But we have every intention of keeping score, of seeing 
where we are going. One thing that I think is important to note 
is that one of the things that we have set out to do, and we 
are in the final stages of getting this underway, is to 
actually measure fraud.
    We have a probable fraud measurement project underway that 
is going to, for the first time, establish a baseline of fraud. 
We are starting off in the home health area.
    It is a very difficult thing to do. You heard Ms. King 
refer to this early on. But as far as I am concerned, the best 
benchmark will be, when we can establish a benchmark, a 
baseline for how much fraud there is, and then we can see 
whether we are having an effect or not, because recoveries 
alone are not going to do it if we are moving into the 
prevention area.
    The Chairman. That is a good question. Ms. King said it is 
unknown how much health fraud there is. When will it be known?
    Ms. King. Well, I wish I could answer that. Part of it is 
that people are lying, cheating, and stealing. So not being 
detected is a measure of how successful they are at that. And, 
as a legal matter, fraud is only determined in a court of law.
    So it is not fraud until a court determines that. But I 
think there are other strategies. There are efforts that you 
can put in place, as Congress has granted CMS authority to do 
and they have done, to try to keep people out of the programs 
who are intent on fraud.
    The other thing government-wide that is being done is to 
measure improper payments, some of which includes fraud, but 
which also includes waste and abuse. And it is a useful thing, 
I think, for everyone to focus on trying to drive that number 
down. That number is known, it is measurable, and agencies can 
push forward on that.
    The Chairman. Right. I do not want to be too difficult 
here, but is it possible to have a rough guess as to how much 
fraud, Medicare fraud, is committed? By a certain date, is it 
possible to have a rough guess?
    Ms. King. Well, GAO is not in the guessing business. 
[Laughter.]
    So I cannot answer that, but perhaps----
    Dr. Budetti. Everything that Ms. King said is accurate, 
Senator. That is why the project that we have started is called 
``probable fraud,'' because we are going to use very 
sophisticated techniques to get to the point where we will then 
turn it over to people who are expert and experienced in 
deciding when something looks enough like fraud that they would 
refer it to law enforcement for investigation. And so that will 
be the baseline that will be established.
    The Chairman. Is it reasonable to assume that you three 
will, by a year from now, have reduced fraud, Medicare fraud? 
Is that a reasonable assumption?
    Dr. Budetti. I certainly hope it is.
    The Chairman. That is not my question, whether you hope it 
is. Do you think it is--is it reasonable for the Congress to 
assume that your Strike Force will reduce fraud even more a 
year from now, or have more cases prosecuted, or have uncovered 
more, put more heat on the bad guys in some measurable way?
    Mr. Ferrer. We will not relent. This is a priority. We put 
a lot of resources into this. You have heard that the return on 
the investments, for every $1 that is allocated to fight fraud, 
the government gets $7 back, which is pretty good.
    The Chairman. I hear that. I know you will not relent, but 
we need to have some way to measure how well we are doing.
    Mr. Ferrer. I think we are doing well. We keep going up 
every year. Now, I can only talk about the prosecutions. Every 
year, nationwide, the number of defendants is going up. I do 
not know if that means we are decreasing fraud, but we are 
certainly on it, and we are basically sending a message of 
deterrence; that if you do cheat the taxpayers and Medicare of 
their dollars, we will come after you.
    The Chairman. But is the number of dollars uncovered also 
going up?
    Mr. Ferrer. Well, yes; we recovered $4.1 billion last year, 
and that was more than the previous year. So we are making 
progress, but, again, that is not--prosecutions is not the 
answer.
    Mr. Levinson. And I would just add that, when we 
established this very effective partnership in the Southern 
District of Florida back in 2007, the DME billings were at a 
certain level. And I do not have the figures at my fingertips, 
but DME billings are significantly down from what they were a 
few years ago.
    And when we talk about recoveries, we really cannot 
capture--at least I do not know a way to capture the sentinel 
effect, the idea that government has become more nimble and 
more effective in shutting down avenues for fraud.
    So I am not sure exactly how you account for dollars saved, 
fraud dollars avoided, but there unquestionably, I think, is an 
impact that I feel we make not just over the course of the 
year, but every day our agents walk into the office saying, we 
are going to reduce fraud today.
    The Chairman. Do you think you are the most effective 
Strike Force in the country? [Laughter.]
    Mr. Ferrer. Our Strike Forces are all very effective. 
[Laughter.]
    We have been at it longer, Senator. In South Florida, we 
started our health care fraud initiative in 2005, and then we 
created the first Strike Force in 2007. So it has been a 
growing problem.
    The Chairman. Obviously, I am just trying to find ways to 
make sure we get to the bottom of all this, because I think 
most people believe, and I think accurately, that there is just 
too much Medicare fraud in this country, and we have to stop it 
the best we can.
    And I can tell that you are surely working at it. You have 
done a pretty good job, but we have just begun to fight. We 
have further to go, and I am trying to determine the degree to 
which your intensity and your efficiency can be duplicated in 
other parts of the country so that we get a handle on this 
problem.
    Do you have any advice on how we--I know you say the right 
things, the Strike Forces are doing a great job--but any advice 
for the Strike Forces?
    Mr. Ferrer. I think that we could always do more with more 
resources, which is why we support the President's budget plan, 
which calls for a lot more money for the Strike Forces and for 
the general health care fraud initiatives in the Department of 
Justice--criminal, civil, and civil rights.
    I think that what you have done with the Affordable Care 
Act has given us great tools. You have allowed us to pursue 
more charges. You have made it easier for us to bring our 
cases. You have given us more subpoena power. All of those 
tools will help us. And, again, that was just last year.
    So those things--and we have already seen in our cases how 
that has helped us, where we can bring money laundering charges 
on kickbacks, which we were not allowed to do before in health 
care fraud.
    So I think the combination of the legislation that you have 
provided and the tools you provided us, with an increased 
partnership in reviewing the data--we have a subcommittee in 
our initiative that constantly reviews ways that we can be 
better at sharing quality data in a timely fashion. All of 
those things are helpful.
    The Chairman. Well, I compliment you, all of you, on your 
efforts here very, very much. I think, though, to keep on the 
ball here, to keep the pressure up, it would be advisable for 
us to review this question, say, a year from now. And so we are 
going to have another hearing on this very subject, hopefully 
with the same cast of characters, a year from now. So be ready. 
We are going to take stock.
    Thank you very much for all that you are doing. The hearing 
is adjourned.
    [Whereupon, at 11:50 a.m., the hearing was concluded.]


                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              




[GRAPHIC] [TIFF OMITTED] T9904.002

[GRAPHIC] [TIFF OMITTED] T9904.003

[GRAPHIC] [TIFF OMITTED] T9904.004

[GRAPHIC] [TIFF OMITTED] T9904.005

[GRAPHIC] [TIFF OMITTED] T9904.006

[GRAPHIC] [TIFF OMITTED] T9904.007

[GRAPHIC] [TIFF OMITTED] T9904.008

[GRAPHIC] [TIFF OMITTED] T9904.009

[GRAPHIC] [TIFF OMITTED] T9904.010

[GRAPHIC] [TIFF OMITTED] T9904.011

[GRAPHIC] [TIFF OMITTED] T9904.012

[GRAPHIC] [TIFF OMITTED] T9904.013

[GRAPHIC] [TIFF OMITTED] T9904.014

[GRAPHIC] [TIFF OMITTED] T9904.015

[GRAPHIC] [TIFF OMITTED] T9904.016

[GRAPHIC] [TIFF OMITTED] T9904.017

[GRAPHIC] [TIFF OMITTED] T9904.018

[GRAPHIC] [TIFF OMITTED] T9904.019

[GRAPHIC] [TIFF OMITTED] T9904.020

[GRAPHIC] [TIFF OMITTED] T9904.021

[GRAPHIC] [TIFF OMITTED] T9904.022

[GRAPHIC] [TIFF OMITTED] T9904.023

[GRAPHIC] [TIFF OMITTED] T9904.024

[GRAPHIC] [TIFF OMITTED] T9904.025

[GRAPHIC] [TIFF OMITTED] T9904.026

[GRAPHIC] [TIFF OMITTED] T9904.027

[GRAPHIC] [TIFF OMITTED] T9904.028

[GRAPHIC] [TIFF OMITTED] T9904.029

[GRAPHIC] [TIFF OMITTED] T9904.030

[GRAPHIC] [TIFF OMITTED] T9904.032

[GRAPHIC] [TIFF OMITTED] T9904.033

[GRAPHIC] [TIFF OMITTED] T9904.034

[GRAPHIC] [TIFF OMITTED] T9904.035

[GRAPHIC] [TIFF OMITTED] T9904.036

[GRAPHIC] [TIFF OMITTED] T9904.037

[GRAPHIC] [TIFF OMITTED] T9904.038

[GRAPHIC] [TIFF OMITTED] T9904.039

[GRAPHIC] [TIFF OMITTED] T9904.040

[GRAPHIC] [TIFF OMITTED] T9904.041

[GRAPHIC] [TIFF OMITTED] T9904.042

[GRAPHIC] [TIFF OMITTED] T9904.043

[GRAPHIC] [TIFF OMITTED] T9904.044

[GRAPHIC] [TIFF OMITTED] T9904.045

[GRAPHIC] [TIFF OMITTED] T9904.046

[GRAPHIC] [TIFF OMITTED] T9904.047

[GRAPHIC] [TIFF OMITTED] T9904.048

[GRAPHIC] [TIFF OMITTED] T9904.049

[GRAPHIC] [TIFF OMITTED] T9904.050

[GRAPHIC] [TIFF OMITTED] T9904.051

[GRAPHIC] [TIFF OMITTED] T9904.052

[GRAPHIC] [TIFF OMITTED] T9904.053

[GRAPHIC] [TIFF OMITTED] T9904.054

[GRAPHIC] [TIFF OMITTED] T9904.055

[GRAPHIC] [TIFF OMITTED] T9904.056

[GRAPHIC] [TIFF OMITTED] T9904.057

[GRAPHIC] [TIFF OMITTED] T9904.058

[GRAPHIC] [TIFF OMITTED] T9904.059

[GRAPHIC] [TIFF OMITTED] T9904.060

[GRAPHIC] [TIFF OMITTED] T9904.061

[GRAPHIC] [TIFF OMITTED] T9904.062

[GRAPHIC] [TIFF OMITTED] T9904.063

[GRAPHIC] [TIFF OMITTED] T9904.064

[GRAPHIC] [TIFF OMITTED] T9904.065

[GRAPHIC] [TIFF OMITTED] T9904.066

[GRAPHIC] [TIFF OMITTED] T9904.067

[GRAPHIC] [TIFF OMITTED] T9904.068

[GRAPHIC] [TIFF OMITTED] T9904.069

[GRAPHIC] [TIFF OMITTED] T9904.070

[GRAPHIC] [TIFF OMITTED] T9904.071


                                   


