[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]







 MEDICARE MISMANAGEMENT: OVERSIGHT OF THE FEDERAL GOVERNMENT EFFORT TO 
                        RECAPTURE MISSPENT FUNDS

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

                                HEARING

                               before the

                     SUBCOMMITTEE ON ENERGY POLICY,
                      HEALTH CARE AND ENTITLEMENTS

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 20, 2014

                               __________

                           Serial No. 113-136

                               __________

Printed for the use of the Committee on Oversight and Government Reform





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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan        Vacancy
RON DeSANTIS, Florida

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                    Stephen Castor, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

      Subcommittee on Energy Policy, Health Care and Entitlements

                   JAMES LANKFORD, Oklahoma, Chairman
PATRICK T. McHENRY, North Carolina   JACKIE SPEIER, California, Ranking 
PAUL GOSAR, Arizona                      Minority Member
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
JASON CHAFFETZ, Utah                     Columbia
TIM WALBERG, Michigan                JIM COOPER, Tennessee
PATRICK MEEHAN, Pennsylvania         MATTHEW CARTWRIGHT, Pennsylvania
SCOTT DesJARLAIS, Tennessee          TAMMY DUCKWORTH, Illinois
BLAKE FARENTHOLD, Texas              DANNY K. DAVIS, Illinois
DOC HASTINGS, Washington             TONY CARDENAS, California
ROB WOODALL, Georgia                 STEVEN A. HORSFORD, Nevada
THOMAS MASSIE, Kentucky              MICHELLE LUJAN GRISHAM, New Mexico

























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 20, 2014.....................................     1

                               WITNESSES

Ms. Kathleen King, Director, Health Care, U.S. Government 
  Accontability Office
    Oral Statement...............................................     6
    Written Statement............................................     8
Shantanu Agrawal, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, CMS
    Oral Statement...............................................    25
    Written Statement............................................    27
Mr. Brian P. Ritchie, Assistant Inspector General for Audit 
  Services, Office of Inspector General, HHS
    Oral Statement...............................................    39
    Written Statement............................................    41

                                APPENDIX

Statement of the American Orthotic and Prosthetic Association on 
  Combating Fraud, Waste and Abuse in the Medicare Program.......    94
Questions for Shantanu Agrawal from Chairman James Lankford......   102
Follow-up question/answer from Brian Ritchie.....................   120

 
 MEDICARE MISMANAGEMENT: OVERSIGHT OF THE FEDERAL GOVERNMENT EFFORT TO 
                        RECAPTURE MISSPENT FUNDS

                              ----------                              


                         Tuesday, May 20, 2014

                  House of Representatives,
   Subcommittee on Energy Policy, Health Care, and 
                                      Entitlements,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 9:34 a.m., in 
Room 2154, Rayburn House Office Building, Hon. James Lankford 
[chairman of the subcommittee] presiding.
    Present: Representatives Lankford, Gosar, Chaffetz, Jordan, 
Woodall, Speier, Norton, Lujan Grisham, Horsford, and 
Duckworth.
    Also Present: Representatives Issa and Meadows.
    Staff Present: Brian Blase, Professional Staff Member; 
Molly Boyl, Deputy General Counsel and Parliamentarian; Caitlin 
Carroll, Press Secretary; Sharon Casey, Senior Assistant Clerk; 
Katelyn E. Christ, Professional Staff Member; John Cuaderes, 
Deputy Staff Director; Adam P. Fromm, Director of Member 
Services and Committee Operations; Linda Good, Chief Clerk; 
Meinan Goto, Professional Staff Member; Mark D. Marin, Deputy 
Staff Director of Oversight; Jessica Seale, Digital Director; 
Tamara Alexander, Minority Counsel; Jaron Bourke, Minority 
Director of Administration; Aryele Bradford, Press Secretary; 
Devon Hill, Minority Research Assistant; Jennifer Hoffman, 
Minority Communications Director; Una Lee, Minority Counsel; 
and Donald Sherman, Minority Counsel.
    Mr. Lankford. The committee will come to order. Without 
objection, the chair is authorized to declare a recess of the 
committee at any time. We will take this a little bit out of 
order today. As we walk through this, we have some of the 
Democrat members who are on their way here, but we will have 
the opening statements, and a lot of them will be able to catch 
up.
    This is a subcommittee hearing on the Energy Policy, Health 
Care and Entitlements called Medicare Mismanagement: Oversight 
of the Federal Government Effort to Recapture Misspent Funds.
    I'd like to begin this hearing by saying the Oversight 
Committee mission statement. We exist to secure two fundamental 
principles. First, Americans have the right to know the money 
Washington takes from them is well spent; and second, Americans 
deserve an efficient, effective government that works for them. 
Our duty on the Oversight and Government Reform Committee is to 
protect these rights. Our solemn responsibility is to hold 
government accountable to taxpayers, because taxpayers have a 
right to know what they get from their government.
    We will work tirelessly in partnership with citizen 
watchdogs to deliver the facts to the American people and bring 
genuine reform to the Federal bureaucracy. This is the mission 
of the Oversight and Government Reform Committee.
    Medicare currently pays one-fifth of all health care 
services provided nationwide, making it the largest single 
purchaser of health care in the country. Unfortunately, every 
year the Medicare program wastes an enormous amount of money in 
overpayments, fraud and unnecessary tests and procedures.
    According to the Government Accountability Office, in 2013, 
$50 billion was lost to improper payments, an increase of $5 
billion from 2012. Medicare fee for service accounted for $36 
billion of this total. GAO has related Medicare as a high risk 
since 1990, in part, due to the program's susceptibility to 
this waste, which make up a staggering 47 percent of total 
improper payments identified by the Federal Government last 
year.
    Growth in Medicare misspending and fraud represents a 
significant threat, not only to the 50 million beneficiaries 
who depend on its services, but also the program's finances. At 
present, the Medicare trust fund has been in deficit since 
2008, and the Medicare actuaries predict the fund will be fully 
depleted by 2026.
    The Centers for Medicare and Medicaid Services has the 
responsibility to maintain the program integrity of Medicare. 
To combat fraud, CMS works in partnership with several outside 
organizations, like the Health Care Fraud Prevention and 
Enforcement Action Team, which operates Medicare fraud strike 
forces to combat perpetrators who often steal identities and 
falsify billing documents.
    The agency recently implemented a risk-based screening to 
identify fraudulent Medicare providers and suppliers. In April 
of 2014, CMS also announced that fingerprint-based background 
checks would be conducted on high risk providers.
    Temporary enrollment moratoriums have also been placed on 
some new Medicare providers and suppliers in areas that are 
high risk for fraud. CMS has even begun administering risk-
based private sector technologies, like predictive analytics to 
identify possible fraudulent claims for review.
    CMS also relies on four types of contractors to combat 
improper payments. These contractors, such as the recovery 
audit contractors, or RACs, review claims to identify 
overpayments and then recover the misspent funds. GAO and 
others have found that these contractors' efforts sometimes 
overlap and the requirements to responding to audits are not 
uniform. This puts a greater burden on providers. The GAO has 
recommended that improving consistency among contractors would 
improve efficiency of post-payment reviews of Medicare claims.
    Once improper payments are identified, CMS may take steps 
to reclaim identified overpayments. Providers and beneficiaries 
are given an opportunity to appeal these determinations through 
a lengthy appeals process. This third level of appeal is 
administered by 66 administrative law judges at HHS's Office of 
Medicare Hearings and Appeals.
    There is currently a massive backlog of over 460,000 
pending appeals for ALJ hearings. Due to this backlog, HHS has 
stated it currently takes up to 28 months for a hearing before 
an ALJ, during which, providers have their money held by the 
government. Not many businesses can survive having their money 
held for 28 months while they wait to decide if they're 
actually going to get reimbursed.
    The committee invited chief ALJ Nancy Griswold to testify 
today on these issues, but she was unable to appear, but we 
will follow through on that.
    Today we have three witnesses: Kathleen King, Director of 
Health Care at the Government Accountability Office; Brian P. 
Ritchie, Acting Director Inspector General for Evaluation of 
Inspection at the HHS Office of the Inspector General; and Dr. 
Shantanu Agrawal, Deputy Administrator and Director for the 
Center of Program Integrity at CMS, to discuss how CMS can 
improve Medicare oversight and program integrity. I look 
forward to their testimony.
    The American people deserve a government that protects 
their tax dollars and uses them wisely. We must do more to 
strengthen the integrity of government programs overall, but 
particularly Medicare, given its enormous size and scope.
    Clearly more needs to be done to improve the Federal 
Government's efforts to recover $50 billion in overpayments and 
other improper payments. I hope today's hearing will provide 
the subcommittee with some clarity about these areas, but the 
process cannot drive up the cost of health care for seniors and 
reduce their options for care. I look forward to the 
conversation we will have today.
    With that, I recognize Ms. Lujan Grisham for an opening 
statement.
    Ms. Lujan Grisham. Good morning. Thank you, Chairman 
Lankford, for holding the hearing. I agree with the chairman 
that reducing waste and fraud and abuse in the Medicare program 
is critically important, not only to protect taxpayer funds, 
but as you just heard, it's also incredibly important to 
protect the health of our Nation's seniors and disabled adult 
population. And we have got a hundred--we have got more than 
10,000 seniors aging into the Medicare program each day this 
year. It is now more important than ever that we ensure the 
integrity of Medicare funds and keep the Medicare promise alive 
for generations of future Americans.
    I'm grateful to have Mr. Ritchie here on behalf of the 
Department's Office of Inspector General to speak about the 
OIG's efforts to do exactly that. The OIG, in conjunction with 
the Department of Justice, prosecutes some of the worst 
instances of health care fraud, providers billing for non-
existent beneficiaries or services that were never provided, 
and providers who order unnecessary or, in fact, harmful 
procedures.
    The health care Fraud and Abuse Program, a joint program 
under the direction of the attorney general and the Secretary 
of the Health and Human Services Department is a model for 
inter-agency cooperation and coordination. In fiscal year 2013, 
the HCFAC program recovered a record $4.3 billion in health 
care fraud judgments and settlements. This is remarkable. I 
look forward to hearing from the assistant inspector general 
about how this was achieved and what can be done to strengthen 
the program going forward, but I also think it is important to 
underscore what we've heard, is that these bad actors represent 
a small fraction of all providers.
    A vast majority of providers are not fraudsters and are 
deeply dedicated to the care of their patients. And given the 
size and complexity, the theme of Medicare programs, 
overpayments are going to occur, and CMS must be vigilant in 
detecting and recouping them, but well meaning providers are 
entitled to have their claims administered fairly, efficiently 
and without undue delay so that they can focus on the core 
mission of providing care.
    And I have some serious concerns that the current system of 
post-payment audits by RACs is resulting in a significant 
burden on some providers, particularly smaller entities. 
Smaller providers, such as durable medical equipment, or DME 
suppliers, have more difficulty complying with RAC requests for 
medical documentation and may not have the resources to, in 
fact, even appeal overpayment determinations.
    The considerable backlog in the Office of Medicare Hearings 
and Appeals only makes these matters worse, as these providers 
and suppliers do not have the luxury of waiting months for 
their appeals to be adjudicated.
    I also have concerns about how RAC audits may affect 
beneficiaries. As a representative of the New Mexico's First 
District, the issue of access to care is always paramount in my 
mind. If a provider or a supplier is forced to cut back 
services or close its doors as a result of a RAC audit, I think 
this is a lose-lose situation for everyone, particularly as 
we're working to build access to care, particularly 
preventative care for these populations.
    CMS recently announced that it will implement several 
changes to the RAC program, which will be effective with the 
next RAC program contract awards. Now, I look forward to 
hearing from Dr. Agrawal about CMS's efforts to improve the 
oversight of the RACs in particular.
    I hope that you will also address some of the issues we've 
both raised, the chairman and I, regarding the burden on 
Medicare providers, and with a particular focus on some of 
those smaller providers or providers in rural and frontier 
States like mine, and the impact that that has directly on the 
beneficiaries who are working to access those services.
    I also look forward to hearing from all of the witnesses 
about what CMS is doing to move away from the pay-and-chase 
model to a more proactive model that identifies improper 
payments upfront. Such a model would spare both providers and 
taxpayers from expending resources that could be much better 
spent on providing care, which, in the long-run, shores up 
Medicare for future generations.
    With that, Mr. Chairman, I yield back.
    Mr. Lankford. We'll go to Mr. Meadows for an opening 
statement.
    Mr. Meadows. Thank you, Mr. Chairman, for holding this 
hearing and thank you for continuing to highlight that we need 
to make sure that the American taxpayers' money is well 
protected.
    This particular hearing is of importance to me, primarily 
because I have some constituents that have been caught up in 
this ALJ backlog, and as the ranking member just testified, it 
can be extremely difficult on small businesses. The request for 
a particular company in my district threatens to put them out 
of business, and yet all they want is a fair hearing. I shared 
this with the chairman and shared some of my concerns that 
where we are. And in his own opening statement, he talked about 
the fact that we have a 28-month backlog. Well, actually, it's 
worse than that. If you look at the real numbers, that today, 
if we hired, according to the budget request for CMS, if we 
hired all the adjudicators, it would take close to 10 years to 
work through this backlog, some million--a million appeals. And 
if you look at the rate--and actually the adjudicators have 
been improving their efficiency, they've been getting better 
year after year, and yet what we do is we have a policy of 
where we're saying you're guilty until proven innocent.
    And we're all against waste, fraud and abuse, but what we 
must make sure of is that we do it under the rule of law and 
that we have laws that guide--the guidelines that are there. 
There is law right now that says that if we ask--if a 
constituent asks for a hearing, that the law says that they 
should have some kind of adjudication and a decision within 90 
days, and yet even according to the website there for CMS, 
we're not even opening the mail for weeks and months and months 
and months.
    So it's not even being put in terms of on the docket where 
it can be assigned to a judge for many, many months. We've got 
to do better than this and make sure that in this, we don't 
take those that are innocent and put them out of business.
    Now, I say that because if our overturn rate was not that 
great, we wouldn't have a problem, but according to documents, 
many of these appeals are being overturned by the adjudicators. 
Over 50 percent of them are being overturned. So you have over 
50 percent of the people who are innocent, who are having to 
wait years for a decision, and in that, we must do better and 
we must find a better way to address this.
    So I look forward to hearing your testimony on all these 
things. And I thank you, Mr. Chairman.
    Mr. Lankford. Thank the gentleman for all of his work and 
his research that has gone into this hearing this day, and he's 
been a leader in this.
    I'd be glad to be able to receive the testimony now of our 
three witnesses. Pursuant to committee rules, all witnesses are 
sworn in before they testify, so if you'd please rise and raise 
your right hand.
    Do you solemnly swear that the testimony that you are about 
to give will be the truth, the whole truth, and nothing but the 
truth, so help you God?
    Mr. Lankford. Thank you. Let the record reflect all three 
witnesses answered in the affirmative. You may be seated.
    Ms. Kathleen King is the director for Health Care at the 
United States Government Accountability Office. Thank you for 
being here; Dr. Agrawal is the Deputy Administrator and 
director for the Center for Program Integrity at CMS, and Mr. 
Brian Ritchie is the Acting Deputy Inspector General for 
Evaluation and Inspections at the Office of Inspector General 
at HHS.
    Thank you all for being here and thanks for your testimony 
today. We've all received your written testimony. That will be 
a part of the permanent record. We would now be glad to be able 
to receive your oral testimony as well. In order to allow time 
for discussion, I ask you to limit your oral testimony to 5 
minutes. You'll see the clock there in front of you.
    Ms. King, you are first.

                       WITNESS STATEMENTS

                   STATEMENT OF KATHLEEN KING

    Ms. King. Mr. Chairman and members of the subcommittee, 
thank you for inviting me to talk about our work regarding 
Medicare improper payments.
    CMS has made progress in implementing our recommendations 
to reduce improper payments, but there are additional actions 
they should take. I want to focus my remarks today on three 
areas: provider enrollment, pre-payment claims review, and 
post-payment claims review.
    With respect to provider enrollment, CMS has implemented 
provisions of the Patient Protection and Affordable Care Act to 
strengthen the enrollment process so that potentially 
fraudulent providers are prevented from enrolling in Medicare, 
and higher risk providers undergo more scrutiny before being 
permitted to enroll. CMS has recently imposed moratoria on the 
enrollment of certain types of providers in fraud hotspots, and 
has contracted for fingerprint-based background checks for high 
risk providers; however, CMS has not completed certain actions 
authorized in PPACA, which would also be helpful in fighting 
fraud. It has not yet published regulations to require 
additional disclosures of information regarding actions 
previously taken against providers, such as payment 
suspensions, and it has not published regulations establishing 
the core element of compliance programs or requirements for 
surety bonds for certain types of at-risk providers.
    With respect to review of claims for payment, Medicare uses 
pre-payment review to deny payment for claims that should not 
be paid and post-payment review to recover improperly paid 
claims. Pre-payment reviews are typically automated edits and 
claims processing systems that can prevent payment of improper 
claims. For example, some pre-payment edits check to see 
whether the claim is filled out properly and that the provider 
is enrolled in Medicare. Other pre-payment edits check to see 
whether the service is covered by Medicare.
    We found some weaknesses in the use of pre-payment edits 
and made a number of recommendations to CMS to promote 
implementation of effective edits regarding national policies 
and to encourage more widespread use of local policies by 
contractors. CMS agreed with our recommendations and has taken 
steps to implement most of them.
    Post-payment claims reviews may be automated like pre-
payment reviews or complex, which means that trained staff 
review medical documentation to determine whether the claim was 
proper. CMS uses four types of contractors to perform most 
post-payment reviews. We recently completed work that examines 
CMS's requirements for these contractors and found differences 
that can impede efficiency and effectiveness by increasing 
administrative burden on providers. For example, the minimum 
number of days contractors must give providers to respond to a 
request for documentation of a service ranges from 30 to 75 
days. We recommended that CMS make the requirements for these 
contractors more consistent when it would not impede the 
efficiency of efforts to recover improper payments. CMS agreed 
with our recommendation and is taking steps to implement them.
    We also have further work underway on the post-payment 
review contractors to examine whether CMS has strategies to 
coordinate their work and whether these contractors comply with 
CMS's requirements regarding communications with providers.
    Although the percentage of claims subject to post-payment 
review is very small, less than 1 percent of all claims, the 
number of post-payment reviews has increased substantially in 
recent years. From 2011 to 2012, the number of these reviews 
increased from 1.5 million to 2.3 million. This is one factor 
contributing to a backlog and delays in resolving appeals by 
administrative law judges.
    We have been asked to examine the appeals process, 
including reasons for the increase, its effects on 
beneficiaries, providers and contractors, and options to 
streamline the process.
    In conclusion, because Medicare is such a large and complex 
program, it is vulnerable to improper payments and fraud and 
abuse. Given the level of improper payments in Medicare, we 
urge CMS to use all available authorities for preventing, 
identifying and recouping improper payments.
    This concludes my prepared remarks. Thank you.
    [Prepared statement of Ms. King follows:]


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    Mr. Lankford. Thank you.
    Dr. Agrawal.


              STATEMENT OF SHANTANU AGRAWAL, M.D.

    Dr. Agrawal. Thank you. Chairman Lankford, Ranking Member 
Lujan Grisham, and members of the subcommittee, thank you for 
the invitation to discuss the Centers for Medicare and Medicaid 
Service's program integrity efforts.
    Program integrity is a top priority for the administration 
and an agency-wide effort at CMS. We share the subcommittee's 
commitment to protecting beneficiaries and ensuring taxpayer 
dollars are spent on legitimate items and services, both of 
which are at the forefront of our program integrity efforts.
    I view program integrity through the lens of my experience 
as an emergency medicine physician, who fundamentally cares 
about the health of patients. Our health care system should 
offer the highest quality and most appropriate care possible to 
ensure the well-being of individuals and populations. CMS is 
committed to protecting taxpayer dollars by preventing or 
recovering payments for wasteful, abusive or fraudulent 
services, thus helping to extend the life of the trust fund, 
but the importance of program integrity efforts extend beyond 
dollars and health care costs alone. It is fundamentally about 
protecting our beneficiaries and ensuring we have the resources 
to provide for their care.
    As part of our responsibility to taxpayers and 
beneficiaries to see that resources are used appropriately, CMS 
has an obligation to perform audits, medical review and use 
other oversight tools as a part of these efforts.
    I would like to make three points today about the status of 
our efforts: First, we are having real impact in reducing 
waste, abuse and fraud in the Medicare program; second, we 
continuously work to reduce provider burden while meeting our 
obligations to the trust fund; and finally, we continue to 
improve and innovate to meet our mission.
    On the first point, we're seeing success from our efforts 
to detect and prevent waste, abuse and fraud. Through medical 
review activities in fiscal 2013 alone, $5.6 billion in 
payments were prevented from being paid or were returned to the 
trust fund. We've saved an additional $7.5 billion over the 
last several years from payment edits, which prevent bad 
payments from being made in the first place. At the direction 
of Congress, CMS uses the recovery auditors to perform medical 
review to identify and correct Medicare improper payments. 
Recovery auditors have returned over $7 billion to the Medicare 
trust fund since the start of the national program in 2010.
    Our anti-fraud activities have also had impact. Last year, 
HCFAC funding returned about $4 billion to the trust fund, 
resulting in an 8 to 1 return on investment. We have also 
revoked over 17,000 and deactivated over 260,000 providers and 
suppliers since passage of the Affordable Care Act. At the same 
time, we've recognized these efforts can impose burdens on 
providers.
    CMS continually strives to carefully balance our 
responsibilities to protect the Medicare trust fund with our 
desire to limit the burden these efforts can place. To that 
end, we use tools such as educational efforts, data 
transparency and significant contractor oversight to minimize 
burden wherever we can. We also engage in continuous dialogue 
with provider communities to improve our programs. As one 
example, during the next round of recovery audit contracting, 
CMS is making changes to the program based on feedback from 
stakeholders and we believe--that we believe will result in a 
more effective and efficient program with improved accuracy and 
more program transparency.
    We have also utilized other approaches, such as prior 
authorization, to reduce improper payments, while granting more 
security and assurances to the provider community. We will 
continue to listen to stakeholders to make improvements to our 
programs.
    Third, we appreciate this committee's interest in ensuring 
that CMS is improving its program integrity efforts and know 
that the Congress and the public expect real and tangible 
results. To that end, we are also looking to implement new 
authorities or improvements which can enhance our efforts and 
impact.
    In July 2013, CMS imposed moratoria for the first time on 
the enrollment of certain types of new providers in geographic 
areas which have been prone to high amounts of fraud. With the 
moratoria in place, we've revoked the billing privileges of 
over 100 home health agencies in the Miami area and we've 
revoked an additional 179 ambulance suppliers in Texas. We are 
also continuing to work with law enforcement in these hotspot 
areas.
    CMS is also using private sector tools and best practices 
to stop improper payments. Since June 2012, the fraud 
prevention system has supplied advanced analytics on all 
Medicare fee-for-service claims on streaming national basis. In 
its first year, the FPS stopped, prevented or identified over 
$100 million in improper payments, including savings from 
kicking out bad actors.
    We've also begun to use the common private sector tool of 
prior authorization to address an area of high improper 
payments, the use of powered mobility devices. In 2012, CMS 
began a demonstration in seven States to require prior 
authorization. This demonstration has resulted in a significant 
decrease in expenditures, over 66 percent in the demonstration 
States and over 50 percent in the non-demonstration States.
    Support from the provider community has been significant, 
many of whom have requested that CMS expand prior authorization 
to other parts of the country.
    While we know that we have made progress to address areas 
of vulnerability, we also know that more work remains to 
further refine our efforts and prevent improper payments and 
fraud.
    I look forward to answering the subcommittee's questions on 
how we can improve our commitment to protecting taxpayer and 
trust fund dollars while also protecting beneficiaries' access 
to high quality care. Thank you.
    [Prepared statement of Dr. Agrawal follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Lankford. Mr. Ritchie.


                 STATEMENT OF BRIAN P. RITCHIE

    Mr. Ritchie. Good morning, Chairman Lankford, Ranking 
Member Grisham, and other distinguished members of the 
subcommittee. Thank you for the opportunity to discuss OIG's 
work on Medicare improper payments.
    Improper payments cost taxpayers and Medicare beneficiaries 
about $50 billion a year. Recovering these lost dollars and 
preventing future improper payments is paramount. In short, 
more action is needed from CMS, its contractors and the 
Department. CMS needs to better ensure that Medicare makes 
accurate, appropriate payments. When improper payments do 
occur, CMS needs to identify and recover them.
    It must also implement safeguards to stop additional 
overpayments. CMS relies on contractors for many of these vital 
functions. This means that ensuring effective contractor 
performance is essential.
    Finally, the Medicare appeals system needs to be 
fundamentally changed to ensure efficient, effective and fair 
outcomes for the program, its beneficiaries and providers.
    My written testimony elaborates on OIG's work and 
recommendations in all of these areas. This morning I'll focus 
on four key points that illustrate our work on these issues.
    First, CMS must do a better job ensuring the payments are 
accurate. For example, CMS needs to better protect Medicare and 
beneficiaries from inappropriate prescribing and billing for 
drugs. This is both a safety issue and a financial issue. We've 
found that Part D paid millions of dollars for drugs prescribed 
by massage therapists, athletic trainers and others with no 
authority to prescribe. CMS is working toward implementing 
several OIG recommendations to tighten up monitoring of billing 
for drugs.
    Second, when improper payments occur, CMS needs to do four 
things.
    Mr. Lankford. Mr. Ritchie, you might check your microphone 
there to see if it--it clicked off. Is it still lit up there?
    Mr. Ritchie. Thanks.
    Mr. Lankford. Okay.
    Mr. Ritchie. Second, when improper payments occur, CMS 
needs to do four things: Identify, recover, assess and address.
    CMS contracts with recovery auditors, or RACs, to identify 
improper payments. In 2010 and 2011, RAC audits result the in 
more than $700 million in overpayments recovered. CMS also 
assesses the RAC findings to understand why the overpayments 
occurred. It then must address these issues to prevent future 
improper payments.
    My third point is that CMS needs to better ensure that its 
contractors perform effectively. CMS contractors pay claims, 
identify and recover overpayments, and protect Medicare from 
fraud and abuse.
    OIG has consistently raised concerns about contractor 
performance and oversight. CMS needs to assess performance more 
effectively and take action when contractors fail to meet 
standards.
    And, finally, the Medicare appeals system needs to be 
fundamentally changed. Even before the recent surge in appeals 
and subsequent backlog, OIG raised concerns about the 
administrative law judge, or ALJ, level. ALJ's overturn prior 
level decisions more than half the time. ALJ's also vary widely 
amongst themselves in decision-making. This happens partly 
because Medicare policies are not clear. OIG recommends 
clarifying Medicare policies and then coordinating training on 
those policies at all levels of appeals.
    Administrative inefficiencies also contribute to the 
problem. We recommend that paper files be standardized and made 
electronic.
    In closing, more needs to be done to reduce and recover 
improper payments, ensure effective contractor performance, and 
improve the appeals process. OIG is committed to finding 
solutions to reduce waste, protect beneficiaries and improve 
the program.
    Thank you for your time, and I welcome your questions.
    [Prepared statement of Mr. Ritchie follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Lankford. Thank you all. I recognize myself for 5 
minutes for opening--for a first round of questioning, and then 
we'll just go back and forth along the dais here.
    Let me set some context for my time that's here. If a 
provider will have something reviewed--let's talk through the 
process and let's set context for everyone on this. Go back to 
Ms. Lujan Grisham's statement about the pay and chase side of 
this. So this is the post-payment has occurred. How will 
someone find out that they're going to be checked, inspected, 
whatever it may be, post-payment for any kind of claim? What's 
the step one? How would they be notified?
    Ms. King. They get a letter from a contractor.
    Mr. Lankford. Okay. They get a letter from a contractor; 
that being with a RAC audit contractor, or that would be who?
    Ms. King. It could be one of four types of contractors. It 
would be MAC, a Medicare administrative contractor; it could be 
a BRAC; it could be the CERT contractor, who--which pulls a 
sample of random claims to estimate the improper payment rate; 
or it could be a ZPIC, a zone program integrity contractor, who 
is looking specifically for potential fraud.
    Mr. Lankford. Okay. So let's back up. Let's take a 
specific--let's take a physical therapy clinic, stand-alone, 
privately-owned clinic seeing patients, a mixture of the 
insurance, private pay and then also Medicare. Okay. So that--
you're saying that one physical therapy clinic could receive a 
request to pull a file from any one of those four, or those 
four are unique four different entities?
    Ms. King. They are--they could receive a request from any 
one of the four.
    Mr. Lankford. Okay. Is it possible that all four of them 
will make requests during the course of a year to pull a file?
    Ms. King. It's not supposed to happen.
    Mr. Lankford. Is it possible?
    Ms. King. Theoretically, but highly unlikely.
    Mr. Lankford. Okay. So how are they notified, then, if one 
of them does it, or could two of them do it in the course of a 
year or could three? You're saying all four, unlikely.
    Ms. King. The RACs are not supposed to duplicate reviews 
that have been done by other contractors.
    Mr. Lankford. Now, to the same provider or to the same 
case?
    Ms. King. To the same case.
    Mr. Lankford. Okay.
    Ms. King. Unless----
    Mr. Lankford. So it could----
    Ms. King. A duplicate claim is considered to be the same 
file for the same service.
    Mr. Lankford. Could a provider get a review from all four 
of those different folks, different cases, but that provider 
itself get reviews from four different groups of people from 
Medicare during the course----
    Ms. King. It's possible, but it's unlikely.
    Mr. Lankford. Okay. So what about from two of those or 
three of those? You're saying four is unlikely. Is it possible 
from them to get two of them?
    Ms. King. Yes. Like, for example, they might get a review 
from a RAC and they also might get a review from a CERT, who's 
estimating the improper payment rate.
    Mr. Lankford. Okay. So when a RAC contacts them, how many 
are they pulling? How many files are they pulling at that 
point? Are they pulling one or are they pulling a sampling? How 
many are they going to pull?
    Ms. King. If they--they're pulling one, I believe. You 
know, overall, the RACs did over a million reviews.
    Mr. Lankford. Correct.
    Ms. King. But when they're reviewing, they--you know, for a 
provider, they're pulling for that service.
    Mr. Lankford. Right. But they're pulling--go back to our 
physical therapy clinic as well.
    Ms. King. Yeah.
    Mr. Lankford. They're not going to reach in and just 
randomly grab one case, are they? Are they going to grab a 
sampling of cases for them to be able to review?
    Ms. King. No. I don't believe so.
    Mr. Lankford. So how do they----
    Ms. King. I mean, that----
    Mr. Lankford. How do they select which--which patient's 
file to review?
    Ms. King. Well, in the case of a RAC, CMS tells the RAC 
what kinds of issues they can look at. They work together with 
CMS, and CMS approves the type of issues that RACs are going to 
investigate.
    Mr. Lankford. So they go and make the request of a certain 
type----
    Ms. King. Yes.
    Mr. Lankford. --of client that's there. But I'm saying, 
they're not just pulling one patient, are they, from that type? 
They may pull 10, they may pull 20? How many do they pull?
    Ms. King. No. I believe the claims are investigated on an 
individual basis.
    Mr. Lankford. Right, but the provider, I'm saying to the 
provider, when they get notification from the RAC.
    Ms. King. Yes. They'll get notification of a claim, 
investigation of a claim.
    I'm sorry. Correction. There could be more than one, but 
there is a limit----
    Mr. Lankford. Right.
    Ms. King. --on the number----
    Mr. Lankford. That's what I'm tying get, is what is that 
limit, how many are they trying to pull? Does anyone else know 
the number on that? How many they're trying to pull at one time 
for a RAC audit?
    Dr. Agrawal. So if I might, Congressman, just take a little 
bit of a step back, because I agree that there are numerous 
contractors that can audit a single provider. Each of those 
contractors actually has--you know, they are set in statute, 
they are supposed to do the job that they're doing.
    Mr. Lankford. Right.
    Dr. Agrawal. The CERT contractor's function is different 
from the RAC contractor. The CERT contractor's function is to 
go in there and actually determine the improper payment rate. 
It's not primarily looking at the provider. It, of course, has 
to do the medical record audit to determine whether or not an 
improper payment has occurred, but it's actually a function to 
evaluate our services.
    So while I agree that numerous contractors can touch 
providers, we also do try to coordinate not touching the same 
claim or not such the same provider too often.
    In answer to your last question, we have set limits for RAC 
contractors so that they can touch a provider and request a 
particular sampling based on the size of the provider 
themselves.
    Mr. Lankford. Right. So how large is that sampling?
    Dr. Agrawal. So just a hypothetical example might be a 
smaller provider that sends in, say, 10,000 claims a year, a 
RAC would be permitted to--to obtain no more than 20 to 25 
claims at a time and no more frequently than, I believe, every 
45 days.
    Mr. Lankford. So they could come in every 45 days and pull 
20 to 25, correct, different files and say we're not going to 
pay these until we get a chance to check them, correct, not 
correct?
    Dr. Agrawal. I think conceivably that's correct, but, 
again, we do provide oversight to ensure that, you know, we are 
not burdening individual providers or individual entities 
during the course of these processes.
    Mr. Lankford. Okay. I've exceeded my time. We'll come back 
to that. I want to honor everyone's time.
    I do want to come back to that statement that we're not 
burdening individual providers. I could name you several dozen 
individual providers in my district that would beg to differ on 
that statement.
    Now, you will find no greater advocates for the taxpayers 
and going after fraud than us at this panel, but we're also 
advocates to make sure that we don't lose providers, that our 
seniors still have access to multiple providers out there, that 
there aren't providers that say this is not worth it and drop 
out, I won't take Medicare anymore, because it's become so 
burdensome for them. So we've got to be able to do that.
    With that, I recognize Ms. Lujan Grisham.
    Ms. Lujan Grisham. Thank you, Mr. Chairman.
    And I'm going to do a couple of things, assuming I don't 
run out of time. I want to follow up on a couple of things that 
Chairman Lankford said. That balance is really tricky, and 
given that this committee clearly wants to focus on waste, 
fraud and abuse, even if the Medicare program and every other 
health care program was flush and that wasn't our being 
efficient and worrying about having services available for a 
growing population, you know, our job is to make sure that 
every tax dollar is being used the way it was intended, and we 
want bad actors and bad providers barred from this system and 
all others, no question about that. We also recognize that you 
have to do a due process system, and we appreciate that, but 
the due process system is clearly broken, because if you're 
waiting years for--and without payment, or having a payment 
removed, that's not due process. And I would agree, too, that 
we've created a very burdensome administrative environment. 
It's not just the Federal touches for the Medicare program, 
although that is federally operated. Remember that most of 
these programs take Medicare, Medicaid, they're serving dual 
eligibles. They're being touched, reviewed, audited, 
administratively regulated by States, and some States with a 
whole different variety of private entities. So these small, 
sometimes small providers are spending an incredible amount of 
time being administratively reviewed. And these recovery 
audits, given that there is a contingency fee where they're 
being incentivized to identify issues and problems, this 
creates a pretty ripe environment for what I think you have 
today, which is we've now--with the Office of Medicare Hearings 
and Appeals, we've recently announced that we're going to 
suspend the ability of providers to have their appeals heard by 
administrative law judges.
    The decision is made as a result of a massive backlog of 
appeals waiting an ALJ hearing, which by the Medicare Hearings 
and Appeals' own admission has grown from 92,000 to over 
460,000 in just 2 years.
    Now, Dr. Agrawal, I understand that the Office of Medicare 
Hearing and Appeals is not part of CMS. I also understand that 
your office oversees these contractors, including the RACs, 
whose audits are the cause of many, if not most, of these 
appeals.
    Given the long wait times for getting an appeal heard by--
wouldn't it would be prudent for CMS to suspend RAC audits 
until the claims backlog is cleared? And I want you to touch, 
Dr. Agrawal, on the fact that there are other ways to make sure 
that we are preventing fraud more than just the RAC audits.
    Dr. Agrawal. Sure. Thank you. So I--I would start at just 
agreeing with you that it is a real challenge in program 
integrity to make sure that we are doing our job protecting the 
trust fund, and at the same time, doing as much as we can to 
lower the burden on providers and make sure that there are no 
access to care issues for our beneficiaries. That is a top 
priority, it's something I said in my opening statement.
    I think it's also important to kind of level set a little 
bit on the amount of burden that we are placing on the system 
through our activities. As pointed out earlier by Ms. King, we 
audit far less than 1 percent of the claims that we receive. 
With respect to RACs in particular, you know, there are clearly 
appeals that occur from RAC audits, but the overall rate of 
appeals from overdeterminations--I'm sorry--the over--the 
overturn rate from all of the overdeterminations is about 7 
percent. That's in the latest publicly available data.
    If you look at just appeals that are initiated after an 
overpayment determination by a RAC, there's--the overpayment 
rate is about 14 percent out of all appeals that are generated.
    So I do think that the appeals process is important for 
providers. It allows them an opportunity to represent their 
claims, to represent their interests, and it provides an 
important check and balance on our approach.
    As far as the third level of appeal that involves the ALJ, 
as you pointed out, that is not directly under our control. We 
have been working with the Department to devise strategies for 
that backlog.
    Well, what is directly under our control are the first two 
levels of appeal, and I can tell you that both the overturn 
rate is not substantially high in those areas, and they are 
being--and the appeals are being heard in a timely fashion. 
There are other--numerous other kind of strategies that we've 
taken to try to decrease the appeals. I want to afford you your 
time, so I'm happy to go into them if you'd like.
    Ms. Lujan Grisham. And I just want to--and I appreciate 
that, except that I would certainly make the statement that, 
and you've heard this, or heard this theme, I think, throughout 
this hearing, we have providers who would differ with you about 
these administrative burdens and whether 14 percent is 
reasonable in terms of what they can manage in terms of cash 
flow for their patients and staff.
    And I would also say that many of the smaller providers 
couldn't afford to appeal, so I'm not sure if this data is 
really relevant, and what strategies have you undertaken to 
identify how many providers certainly come to me, those 
providers, who would love to appeal, because they believe that 
they've been wronged or there has been an administrative error, 
but don't have the ability to do that. Also, I would say fear, 
intimidation and retaliation, and just pay or do whatever it is 
that they're asked to do at the next level.
    And I'm way over time, so if you could respond to that, and 
then I'll come back.
    Dr. Agrawal. Sure. In addition to appeals, Congresswoman, 
there are other controls that we have implemented over our 
contractors. We do determine what areas RACs can look at. They 
have to achieve--sort of get permission from our board at CMS 
before they enter into any particular audit area. That is a 
type of oversight.
    We have an independent validation contractor that looks 
behind the RACs themselves to evaluate whether or not they are 
making these determinations accurately. And all of the RACs 
have, through that validation contractor, achieved well over 90 
percent accuracy rate.
    I think the incentive structure itself actually 
incentivizes getting it right. So, you know, RACs do get paid 
on a contingency basis, as you pointed out, but if they lose on 
appeal, they lose the contingency fee. I think that is an 
enormous incentive on the RACs to make sure that they're making 
the right determinations in the first place.
    And let me correct just one factual issue. I said it was a 
14 percent overturn rate overall. This is in Part A, since a 
lot of--a lot of our issues you identified were in Part A.
    Ms. Lujan Grisham. And, Mr. Chairman, if I can, so the 
answer is, however, we don't know how many providers are unable 
to appeal, and there's no test to determine--I mean, you have 
one side of the data equation, and I'm not sure that that's an 
accurate representation as a result. So I appreciate that 
you're looking at these tests.
    And I'll yield back, Mr. Chairman, but I'd like to explore 
that further.
    Mr. Lankford. Great. We will on the second round. Before I 
yield to Mr. Gosar, let me just make one quick statement to Dr. 
Agrawal as well. You mentioned that there is a--the incentive 
for RACs to be able to limit that, because they lose their 
contingency fee if they lose on appeal. The problem with that 
is, a fishing illustration. Let me give you an Oklahoma 
illustration. If you're fishing, you can put one hook in the 
water or you can put five hooks in the water, and you may only 
catch one fish, but you're going to catch more more often.
    And if a RAC decides they're going to try to just grab 20 
different cases and they hope that they win 10 of them, that's 
better than just grabbing 10 of them. And if it's close, go 
ahead and just grab that file and keep moving from there, and 
we may win it, we may not win it. That's helpful to the RAC in 
their contingency fee. That's definitely not helpful to the 
provider to then have to go through all the process. And we can 
talk about that more in just a little bit.
    With that, I recognize Dr. Gosar.
    Mr. Gosar. Thank you very much, Mr. Chairman.
    You know, while you were on that frame of thought, do you 
have any differentiation in your facts in regards to small 
providers, large providers and their overturn rates?
    Dr. Agrawal. I don't think the data differentiates it in 
terms of the appeals data. I'm not aware of data that 
differentiates between small and large. I think the point I 
made earlier is that we do have different requirements of the 
contractors when they look to audit a smaller provider versus a 
larger one. There is different medical record request 
requirements to make sure--again, to try to limit that burden 
that is being placed, especially on the smaller providers.
    Mr. Gosar. It would be very interesting to know. 
Particularly, I represent rural Arizona, and so I would like to 
see some type of movement to try to make that accountable.
    You know, when you say the overturn rate, you know, with 
Part A, what about Part B?
    Dr. Agrawal. You know, I am actually not aware of--I don't 
have the figure in front of me. We can actually connect with 
your office, if that's okay, to get you a Part B overturn rate.
    Mr. Gosar. I think that's very, very important just because 
most of those Part B aspects are actually institutions, not 
individual providers. Would you agree?
    Dr. Agrawal. I think the Part--let me just make sure I 
heard you correct, sir. I believe the Part A claims are the 
ones that tend to be more institutional, the hospitals, and 
then the Part B claims can tend to be individual providers or 
groups of providers.
    Mr. Gosar. Okay. Ms. King, from your oversight aspect, do 
you see maybe a change that you would recommend for methodology 
instead of, you know, looking at a provider as being guilty in 
an aspect, kind of an atmosphere like that? Do you see a better 
way of handling this?
    Ms. King. I don't actually think that the--that the post-
payment review starts off with the provider is guilty. I think 
it's not--it's not a criminal matter. It's a matter of either 
an overpayment or an underpayment. And I do think that CMS has 
a responsibility, as stewards of the trust funds, to make sure 
that claims are paid properly, and as part of that, I think 
they need to do as much as they can effectively on the pre-
payment side, but I also think that they need to look at the 
post-payment side.
    That being said, we have found some instances in which the 
requirements are posing administrative burdens on providers, 
and we have recommended that CMS reduce, not the requirements, 
but the differences across contractors so that providers have a 
better understanding of what they're required to do.
    Mr. Gosar. From the standpoint of that process, Dr. 
Agrawal, is there a way that we could actually identify maybe 
frequent fliers? Do we have a frequent flier list? I mean, 
State boards kind of do this. I mean, we're kind of replicating 
something that State boards do.
    Dr. Agrawal. Well, I think we take a different approach. 
So, you know, the spectrum of program integrity is long, and 
there are folks on one side that are totally legitimate 
providers that are trying to abide by our rules that are 
honest, and they are the vast majority of providers. On the 
other side, a much smaller subset are potential criminals, or 
people that are perhaps trying to rob the program.
    So we do take--you know, I would argue that the various 
approaches that we have to oversee the program integrity issues 
do try to take into account where our risk really lies. And I 
think part of why we can take an audit-based or post-pay 
approach for the vast majority of providers is because they are 
legitimate and an audit is a reasonable approach for them.
    We do take a much more kind of risk-based approach on the 
fraud side that really can ratchet up the intensity of how we 
look at a provider based on findings from audits. I think 
that's really appropriate for providers that are pushing the 
line, potentially even committing, you know, criminal 
activities.
    We try on the other side of the house to take a much more 
fact-based approach. We look at issues that are big national 
issues where we know that are improper payments and then, you 
know, we'll do deeper analyses to determine which providers to 
look at, but it tends to be focused on where our improper 
payments are occurring. It isn't sort of a ratcheting up on a 
single provider.
    Mr. Gosar. But wouldn't it would be more efficient in 
regards to looking at the profile--having some type of a 
profiling aspect? You know, in State boards, I mean, you have a 
list. Most of your problems are with 10 percent of the 
population.
    Dr. Agrawal. Right. And I think the comparison to States 
boards, I mean, I would just remind you that State boards are 
often dealing with the most difficult of cases, they're the 
ones on the right side of the house where, you know, these are 
providers that are committing potentially criminal or negligent 
activities, so they are dealing with probably the worst or--the 
worst actors.
    Again, we do do that with a similar set of actors. I think 
what we are looking at perhaps, and again, to try to decrease 
the potential burden from these audits is not ratcheting up, 
but perhaps looking at solutions that might ratchet down. So as 
providers get audited and it turns out that their claims are 
substantiated, that there are not a lot of errors, we can 
perhaps audit them less. That's a solution that, for example, 
we're looking into to see if we can implement it.
    Mr. Gosar. Gotcha. Thank you, Mr. Chairman.
    Mr. Lankford. Can I just follow up on that as well? As of 
when? When will that occur? Because that is one of the 
recommendations that hovers out there. How does someone prove 
basically I'm a good actor, and they don't get someone 
constantly coming in to check them all the time?
    Dr. Agrawal. I think there are a number of solutions that 
we're looking at. As I think somebody pointed out earlier, the 
RAC program is currently in a pause state, where we are 
actually working on the next round of procurements. As part of 
that procurement activities, we are looking at the statement of 
work, taking into account a lot of opinions and input that 
we've gotten from stakeholders, including providers, and are 
trying to solution how RACs can still do their jobs, still meet 
our obligations, but try to decrease that burden, and that's 
one of many solutions we're considering.
    Mr. Lankford. Okay. Let me come back. When?
    Dr. Agrawal. I couldn't promise you an exact date.
    Mr. Lankford. Is that something that providers, they can 
think about for next year? Is that 2 years? Is that 10 years 
from now?
    Dr. Agrawal. Well, I think we are working on the 
procurement now and we hope to complete it some time in the 
next few months, and so it'll be--I think it remains to be seen 
if that's a change that can be pursued in the near term or 
potentially----
    Mr. Lankford. That change is still under discussion. That's 
not a definite--that's under discussion at this point to try to 
figure out, I've got a good actor there, as Dr. Gosar 
mentioned.
    Dr. Agrawal. Yeah. It's one of many solutions that we are 
looking at. Again, we've heard a lot of input from the provider 
community, and we are trying to take action where we can.
    Mr. Lankford. All right. We'll come back to that.
    Mr. Horsford.
    Mr. Horsford. Thank you very much, Mr. Chairman.
    Listening this morning, it gets a little frustrating when 
we're up here, because it seems like despite the fact that we 
all come from different communities and are sharing very clear 
examples of why the approach that's being taken isn't working, 
we continue to get pushback and basically reiterating the same 
points without any clear determination of when things will 
improve.
    And on behalf of the constituents I represent in Nevada, 
Medicare is vitally important to their quality of life. I'm 
talking about the beneficiaries here. And when someone who is 
Medicare eligible can't see an OB/GYN in my community because 
there are no providers who will accept them, because of issues 
ranging from the reimbursement rate, to the delay in being paid 
for services rendered, to other compliance issues, it makes me 
want to know what can we do now in the short term to be able to 
move this forward.
    You know, Medicare is a bedrock of our programs. People 
rely on these services. We have providers who about a third or 
more of their patients are typically Medicare covered. And as 
my colleague, Ms. Grisham explained, it also typically includes 
Medicaid or other pay sources as well, and so when you layer 
that burden on the provider, it's tough to provide services. 
That's what we're hearing.
    So after speaking to several stakeholders in Nevada, 
particularly hospitals and medical providers all around the Las 
Vegas Valley, and I also include some of the rural counties in 
Nevada, which are woefully underserved by enough providers, the 
accountability of the recovery audit contractor program seems 
questionable at best, and I don't understand how you continue 
something that doesn't even--hasn't even been properly 
evaluated.
    While these programs have a noteworthy mission of seeking 
out improper payments of Medicare services, it seems there are 
potentially perverse incentives to these RACs. In 2010, the RAC 
program was expanded to all 50 States and made permanent. Now, 
again, I don't know how you start something, don't evaluate it, 
and then expand it to 50 States, first of all.
    In 2013, over 192,000 claims were filed by these auditors 
to the Office of Medicare Hearings and Appeals, contributing to 
a backlog of over 357,000 claims. The recovery audit contractor 
program, as I said, may have been well intentioned, but there 
have been unintended consequences.
    So, Acting Deputy Inspector Ritchie, in your testimony, you 
include a long list of policy recommendations for CMS to 
address. You reported that 72 percent of denied hospital claims 
at the third level of adjudication are overturned ultimately in 
favor of the hospitals. What recommendations have you offered 
CMS and this committee to address the concerns that RACs are 
not--no pun intended, dramatically racking up the number of 
claims backlog?
    Mr. Ritchie. Thanks. I think first we've offered 
recommendations both in the RAC area and in the appeals area. I 
think it's important, while they're so intertwined, to consider 
those separate in some ways, too.
    In our RAC work, it was--all the work that we have--that 
we're talking about was before this current backlog, but we've 
see things that we still think are relevant. In the RAC work, 
we did see in 2010 and 2011 that they weren't helping--as I 
mentioned in my testimony. We need to make appropriate 
payments, and when inappropriate payments are made, they need 
to be recovered. Only--they did recover $1.3 billion in 2010 
and 2011, and 6 percent of them were appealed. Now, when 
they're appealed, there's a very high overturn rate, so clearly 
something needs to be done.
    I'd point to our ALJ work for the recommendations I'd push 
to the most, because for the system to really work and where 
the backlog is, we think the biggest recommendation that we had 
is these Medicare policies are not clear. And I think, you 
know, all fraud is certainly improper payments, but all 
improper payments are not fraud. And most of these providers 
are not committing fraud; they just don't understand the 
complex system and they're trying to submit claims that's 
complicated.
    Then we saw in our ALJ work that 56 percent of the ALJ's 
overturned 20 percent of the QICs that the prior level 
overturned, and a lot of that was just due to different 
interpretations of the policies, different stuff that they were 
doing there, so our----
    Mr. Horsford. Is there a set of recommendations dealing 
with the Medicare policies?
    Mr. Ritchie. Yeah. Our recommend--in our recommendations, 
because there are so many, it's mainly to clarify, select the 
policies that need to be clarified, clarify those, and then 
educate people on the policies to create less overpayments, 
less appeals in the process. For instance, in my written 
testimony, I talk about our home health work. We found with the 
recent face-to-face requirement that if a physician is 
certifying that you're eligible for home health, they have to 
have a face-to-face encounter. We found $2 billion in improper 
payments in 2011 and 2012 and a third of the claims didn't meet 
the requirement.
    Now, we don't think a third of the claims were fraudulent. 
It's because these are complex policies. As people get more 
used to them, it will probably go down, but to educate people 
on the policies, make them more clear, we think is really a key 
to keeping the appeals backlog lower.
    Mr. Horsford. Okay. I know my time is up for this round, so 
I'll come back to additional questions.
    Mr. Lankford. I recognize the chairman of the full 
committee, Chairman Issa.
    Mr. Issa. Thank you, Mr. Chairman, and thank you for 
holding this important hearing.
    The gentleman from Nevada and I don't always agree, but 
every once in a while there's a nuance of agreement from this 
extreme to that extreme of the dais, and this is one where I 
think the entire committee is frustrated. And Chairman 
Lankford's work on this, in addition to ENC, I think, really 
shows how bad things are. And let me just give you two 
questions and then we'll go into comments.
    Dr. Agrawal, let me just ask you, and for the IG, Mr. 
Ritchie, New York City--New York State owes us $15 billion in 
overpayments. They flat-billed more than the CMS maximum for 
Medicaid for--and we held hearings on that more than a year 
ago.
    What have you done to get $15 billion back while in fact 
you're sending out hordes of people to harass doctors with a 
less than stellar success rate of success and accuracy in the 
audits? What have you done to get back from a State that 
knowingly billed far greater than the rate, and it's $15 
billion? It's 10 years worth of your recovery. Any answers?
    Dr. Agrawal. Sir, that is an area that we are looking at 
now at the----
    Mr. Issa. You're looking at it. $15 billion, and you're 
looking at it.
    Dr. Agrawal. At the request of the committee, we have--we 
are currently taking on an evaluation of the--of New York 
State. We're waiting to get the findings and then release the 
results, after which time I think we can have a conversation 
about how to proceed.
    Mr. Issa. The newspapers make it abundantly aware the 
numbers speak for itself, because they're hard numbers of what 
was sent out versus the maximum allowed in law, and you're 
looking at it more than a year later.
    Dr. Agrawal. Sir, I think these evaluations do take time. 
They are rigorous, they're designed to be rigorous. We----
    Mr. Issa. Oh, they do. Do you know how many doctors have to 
had stop their practices and answer nothing but questions, 
because you take their money and then they try to get it back? 
Isn't that correct?
    Dr. Agrawal. I wouldn't characterize it as stopping their 
practices during----
    Mr. Issa. No. I'm telling you that doctors, in some cases, 
have to stop their practices, because the audits for small 
practitioners are incredible detail, and they don't get their 
money back until they prove their innocence through the 
process.
    So let me go through this again. You have the right to stop 
payments in your State based on a good faith belief they got 
over $15 billion, and then they can spend legions of time 
trying to argue why they should get to keep far more than they 
were supposed to receive, couldn't you?
    Dr. Agrawal. I'd have to look into whether or not we have 
that authority, sir.
    Mr. Issa. Well, why don't you look into it, Doctor. And 
while you're looking into it, pursuant to congressional action 
under the Small Business Jobs Act, you owe ENC and 
subsequently, we get a copy of it, you owe a report, a second 
year report on predictive modeling, don't you?
    Dr. Agrawal. Yes, we do.
    Mr. Issa. And you've owed it since October?
    Dr. Agrawal. I believe the--I believe the report has 
actually been due since earlier this year, but I take your 
point.
    Mr. Issa. No, you don't take my point. We just did away 
with a whole bunch of reports by congressional action, ran it 
through the House. It's over--I think the Senate may have 
already acted on it, because we do ask for reports we don't 
always need, but we didn't just ask for this report, we ordered 
the executive branch to deliver it. It is extremely important, 
because the kinds of things that the gentleman from Nevada were 
talking about, auditors going out half you know what, being 
wrong, and on appeal often being dramatically overturned, even 
to zero dollars in some cases after physicians and clinics go 
through a great process, that--much of that would go away if 
your predictive modeling went and looked for the fraud where it 
was most acceptable--most likely to occur.
    Mr. Issa. Mr. Ritchie, are you concerned that Chase 
Manhattan can see your credit card perhaps being misused and 
calls you, but the organization that you are auditing has no 
such capability?
    Mr. Ritchie. That is definitely a concern. I mean, we do 
think that the fraud prevention system has taken steps and 
shows promise.
    I know--I am tying to the other question with our RAC 
work--one of the things that CMS does when they look at the RAC 
audits is they identify vulnerabilities, if there is cumulative 
issues over 500,000, and they need to address those 
vulnerabilities and then assess them.
    So one of our recommendations was to fully do that because 
we had found, you know, once they identify and recover 
repayments, you need to set up the safeguards to prevent them 
from occurring in the future so you don't have this problem.
    Mr. Issa. And has the IG looked into the excess payments 
requested by and given to the State of New York that this 
committee earlier had as to whether or not any criminal charges 
could be brought?
    Mr. Ritchie. I am not aware of that. I don't believe we 
have looked at criminal charges. I do know that we have----
    Mr. Issa. But they knowingly overcharged more than the 
maximum and then they cross-funded that payment to other 
services not covered by CMS in many cases.
    So the question is: Is it even worth taking a look to see 
whether or not the threat of criminal just might get New York 
to return $15 billion in excess payments, ten times what your 
audits that we are talking about here today, in part, are 
revealing?
    Mr. Ritchie. Personally, yes. I think it is worth it. I am 
not the enforcement person, but my office in Audit--we have 
done a whole series of audits in New York that we have shared 
with the committee. And I can go back to the office and talk to 
our investigators about this and our counsel and look into it.
    Mr. Issa. Okay. Well, Mr. Chairman, I appreciate your 
giving me a little extra time.
    I will say that I am deeply concerned that reports required 
by Congress that ultimately are necessary in order to improve 
the system are clearly done, but are being held back so they 
can be sort of looked at again and again.
    This is the politicking of releases. And I would only 
suggest to the chairman that we have the authority to compel 
the work documents if we need to, if that report doesn't come 
in a timely fashion from here on.
    And I yield back.
    Mr. Lankford. Dr. Agrawal, just before I yield, this was a 
pending question from the chairman: When will that report come? 
We know it is months late. When?
    Mr. Agrawal. So, as you know, the Small Business Jobs Act 
requires us to not only produce a report, but to have the 
results----
    Mr. Lankford. When?
    Mr. Agrawal. --certified by OIG.
    We are in the process of working with the OIG to achieve 
that certification. That is taking some time. I hope to release 
it as soon as we can.
    Mr. Lankford. That doesn't answer a ``when,'' does it?
    Mr. Agrawal. I cannot give you a specific timeframe right 
now.
    Mr. Lankford. Can you give me--is it a week or is it a 
decade?
    Mr. Agrawal. It is less than a decade, sir.
    Mr. Lankford. Great.
    Mr. Agrawal. What I can tell----
    Mr. Lankford. How much less?
    Mr. Agrawal. What I think is----
    Mr. Lankford. This is a report all of us want. It matters 
to all of us because it deals with what we are all dealing with 
with providers. Trying to shift us to where we all want to go.
    When? Is it a month? Is it 2 months? This is a simple 
question from the chairman. When?
    Mr. Agrawal. I cannot give you a specific date. However, I 
think what is important for the committee and for, you know, 
the American people and public transparency is that we not only 
release a report, but that we release it with certification 
from the IG so that people can trust the numbers and base 
future decisions upon a certified report. I think the 
importance of that is clear. So we are working to achieving 
that.
    Mr. Issa. Mr. Chairman, only because the doctor did say 
``public transparency,'' public transparency would be releasing 
all of the work documents that show the reason for the delay, 
the discussion, the political correspondence, the loop to the 
White House that occurs on each of these reports. I rather 
doubt we will get that transparency.
    Mr. Lankford. We will want to have that.
    Ms. Speier. Mr. Chairman, would you yield?
    Mr. Lankford. I would yield.
    Ms. Speier. Doctor, you know, it is a pretty simple 
question. If you can't give us a precise date, is it 3 months? 
Is it 6 months? And what is holding it up?
    Mr. Agrawal. As I mentioned, you know, again, it is the--we 
are working closely with the Office of Inspector General, as 
required in the law, to try to achieve certification for this 
report.
    I think the importance of that is very clear so that people 
can not only get a report, but can trust the numbers that are 
in the report.
    Ms. Speier. You know, we are not stupid up here. We 
understand when people are trying not to answer a question.
    So if you would be kind enough to answer the question. Is 
it 3 months away? Is it 6 months away? And what is holding it 
up?
    Mr. Agrawal. I cannot give you a specific date. The reason 
I cannot is because it is a process that is being worked in 
collaboration between CMS and the Office of Inspector General.
    Ms. Speier. Well, you can give us a precise date. You need 
to maybe ask someone else, but we expect to know. We have the 
right to know. If there is a problem holding it up, we have a 
right to know what is holding it up.
    Mr. Agrawal. It isn't an issue of holding up the report, 
Congresswoman.
    Ms. Speier. You have a draft report that is complete.
    Is it just being agreed to by various parties that then 
makes it available to be released?
    Mr. Agrawal. Again, I think our----
    Ms. Speier. Just answer that question.
    Mr. Agrawal. Our objective is----
    Ms. Speier. Answer the question.
    Mr. Agrawal. We are working with----
    Ms. Speier. Is the draft complete?
    Mr. Agrawal. There is a draft report that is--that utilizes 
the methodology to arrive at savings numbers that the Office of 
Inspector General is reviewing or is in the process of 
reviewing.
    We hope to be able to release that report in the next month 
or two. I cannot be more specific than that because it does 
depend----
    Ms. Speier. That is helpful. That is a lot better than 
earlier.
    Mr. Lankford. Ms. Duckworth.
    Ms. Duckworth. Thank you, Mr. Chairman.
    I would like to follow up a little bit on what the chairman 
of the full committee, Mr. Issa, was talking about, these RAC 
audits.
    I agree that combatting Medicare waste and fraud is a 
critical goal. In fact, there are studies that show that as 
much as $50 billion are wasted each year due to fraud, waste 
and abuse in both Medicare and Medicaid. We need to go after 
that.
    But it has also become clear to me that the well-
intentioned efforts of CMS to accomplish that goal are not 
working and are badly in need of reform.
    I want to talk specifically about how these audits--these 
RAC audits affect the orthotic and prosthetic industry and the 
patients that they serve.
    I have personally heard from providers all over the 
country, many of whom are small businesses, how they are being 
targeted by overzealous and misdirected audits that are 
threatening to put them out of business.
    They are having to wait years and carry hundreds of 
thousands of dollars on the books that they are not getting 
paid for, and these businesses simply cannot survive this.
    Taken collectively, the stain on the industry undermines 
access to critical services for patients who have suffered from 
limb loss or limb impairment.
    Oftentimes, these businesses are the only providers of 
prosthetics and orthotics in their local area, which now means 
that the patients cannot get access and must go without the 
limbs and medical equipment they need for their lives.
    The volume of audits has led to a huge backlog in appeals 
for providers who feel that they have been wrongly denied 
payment for very legitimate services.
    I am particularly concerned that CMS has chosen to deal 
with this backlog by suspending for 2 years the ability of 
providers to appeal decisions at the administrative law judge 
level.
    With ALJs siding fully with providers in over half of our 
decisions and in a context of increasingly aggressive CMS 
audits, it is simply unacceptable to deal with the problem by 
denying the providers due process.
    They are continuing the audits. You are taking these 
people's money by not paying them and saying, ``Now you have no 
right of appeal. You are going to have to wait for over 2 
years.''
    That is not the way businesses work. And you are going to 
drive these hard-working Americans, these small business 
owners, out of business, and you are going to leave all of 
their patients out there without the limbs and the equipment 
that they need to--in order to live their lives.
    At the public hearing on this issue, the Chief 
Administrative Law Judge Griswold gave an explanation of how 
the Office of Medicare Hearings and Appeals of--their position, 
but really offered no short-term remedies that would restore 
the right of a timely due process to providers.
    If you are going to suspend the hearing by 2 years, then 
suspend the RAC audits for 2 years. Give them their money back 
and collect it 2 years later. It seems blatantly unfair and un-
American to take these folks' money and not give them the right 
to due process.
    Mr. Agrawal, does CMS have any plans to restore fairness to 
the system for our providers?
    Mr. Agrawal. So just to clarify at the outset, the third 
level of appeals or the administrative law judge level is 
outside of the jurisdiction and oversight of CMS. It is 
overseen by OMHA. What we have direct oversight over is the 
first two levels of appeal.
    Ms. Duckworth. Okay.
    Mr. Agrawal. Everybody is afforded--you know, any over-
determination, whether by a MAC, RAC or other contractor, 
providers are afforded the opportunity to use that appeals 
process as part of their oversight of us to make sure that the 
audits are being conducted appropriately and the right 
determinations are being arrived at.
    Ms. Duckworth. What is the backlog at the first two levels? 
How long are they waiting for--to get into the appeal process 
and getting a result?
    Mr. Agrawal. At the first two levels, the second of which 
is an independent level of appeal or oversight, the OIG has 
actually published a report that shows that there is no 
substantial backlog at the first two levels of appeal. The 
backlog issue really arrives later. And, on average, we are 
within the timeframes that are required of us.
    I would say, you know, in addition, with respect to the 
orthotics and prosthetics issue that you brought up earlier, 
this is clearly an important area. And if there are, you know, 
issues of access to care with respect to specific beneficiaries 
or companies, I am happy to work with you on that. That is a 
priority for us. So I am happy to work with you on it.
    Ms. Duckworth. Excellent. I will have the orthotics and 
prosthetics industry come in and sit down and talk with you.
    Let me ask this: So what you are telling me is the third 
level of appeals is holding everything up and they have 
suspended for 2 years the right to due process and, even though 
this is being caused by the RAC audits that CMS is continuing 
to conduct, it is not your fault, it is someone else's fault, 
but you are still going to shove more people into the system 
who now have no access to this?
    I mean, it is kind of convenient, don't you think, that you 
are pushing people into the system with these aggressive RAC 
audits, but, on the other hand, you are saying, ``It is not our 
fault that they can't get through the third level?'' What are 
you doing to work with the administrative law judges to fix the 
delay in the appeal process?
    Mr. Agrawal. Sure. So we have taken a number of approaches 
to ensure that, number one, the audits are being conducted 
appropriately and then wherever we can to help address appeals 
issues. We are actively working with OMHA on their backlog and 
trying to arrive at solutions in conjunction with them.
    I think on the front end, where we have, again, more direct 
oversight and authority, we have implemented certain strategies 
to ensure that the audits are being conducted correctly, that 
they are being achieved with high accuracy.
    As just one example in the RAC program, we do have a 
validation contractor that looks behind the RACs to make sure 
the RACs are following CMS requirements, CMS payment rules, CMS 
guidelines. And all of the RACs have achieved a well above 98 
percent accuracy rate of their findings.
    I think that goes a long way to ensuring that the RAC 
activities are, in fact, being monitored. And while providers 
will always have the opportunity and should have the 
opportunity to appeal, we want to make sure that the initial 
determination is accurate.
    Ms. Duckworth. I don't think it is accurate when over 50 
percent are being overturned on appeal. I think that that is a 
pretty high failure rate of your RAC audits.
    I am out of time, Mr. Chairman.
    Mr. Lankford. I would like to ask unanimous consent. There 
is a statement that has been sent to us by the American 
Orthotic and Prosthetic Association. I would like to ask 
unanimous consent that this be entered into the record. Without 
objection.
    Mr. Lankford. Mr. Meadows.
    Mr. Meadows. I want to follow up on that because you are 
acting like you have nothing to do with this backlog, and I 
think that that is an unfair characterization.
    Do you not agree? You have nothing to do with the backlog?
    Mr. Agrawal. I think, you know, clearly providers would not 
have a lot to appeal if we didn't enforce our rules and deny 
certain payments from being made.
    Mr. Meadows. Okay. Well, let us look at this, the Inspector 
General's report. And they said that the overturn rate at the 
appellate level is anywhere between 5---depending on how you 
read it, between 56 to 76 percent, according to the OIG.
    And so those don't get to that adjudication level without 
you doing something. Isn't that correct?
    Mr. Agrawal. We, you know, clearly do--I think we have a 
number of steps that----
    Mr. Meadows. You have to review them first before they get 
here.
    Mr. Agrawal. They do have to be reviewed by a contractor 
first.
    Mr. Meadows. And then they get overturned between 56 to 76 
percent of the time, according to this OIG report in 2010.
    Do you disagree with that?
    Mr. Agrawal. No, sir. Not only do we----
    Mr. Meadows. So you do have part of the reason why we have 
a backlog because it is on the front end. You are just denying 
claims and denying claims.
    I have talked to physicians. I have talked to hospitals. I 
have talked to healthcare providers. And you know what?
    They say the first fair hearing they get is at the 
administrative law side of things and that what happens is you 
guys are just denying them and you are saying, ``It is tough. 
You have to pay it and wait for your turn in the queue to get 
the hearing.''
    Do you think that is fair?
    Mr. Agrawal. I don't think that is a correct 
characterization.
    Mr. Meadows. Okay. All right. Well, let me ask you another 
question. This comes from the hhs.gov Web site. And you all 
changed that within the last 30 days. It has been changed.
    And what this says is that the average processing time for 
appeals are decided in 356 days. Would you agree with that for 
fiscal year 2014?
    Mr. Agrawal. Again, sir, if you are talking about the third 
level of appeal or the ALJ level, I couldn't comment on their 
data.
    Mr. Meadows. Well, this is on your site. Fiscal year 2014, 
the average appeals time is 356 days.
    Would you agree with that for fiscal year 2014?
    Mr. Agrawal. I think, if that is what the data shows, then 
that is clearly what it shows. I think our number----
    Mr. Meadows. So how do we know that? Fiscal year 2014 
hasn't even ended yet. It doesn't end until September 30. So 
how would you know this?
    Mr. Agrawal. Sir, I am not exactly sure what data you are 
looking at or how it reflects----
    Mr. Meadows. It is on your site. I will be glad--we can 
give you a copy of it. Somebody in your office knows because 
you have changed it within the 30 days.
    Because what you were saying is that they were not being 
assigned for 28--and I will give you--28 months that they 
weren't being assigned and that has been changed.
    Who changed it?
    Mr. Agrawal. I think all of the issues that you are 
describing, if, hopefully, this is accurate, is that they are 
really the third level of appeal or ALJ level sort of issues.
    What I stated earlier is that we have oversight of the 
first two level of appeals and we are abiding by the time lines 
required in those appeals.
    Mr. Meadows. Let me tell you. Moms and dads back home, they 
could care less about the internal divisions. They see it as 
all part of CMS. They see it as one in the same. They see it as 
the government. And so here we are for the budget request that 
we have got that says the backlog is going to reach 1 million.
    At what point does it become a crisis? At what point? When 
does it become a crisis? When do you start putting companies 
out of business? Because you already are. When does it become a 
crisis that you are willing to do something about? This is your 
document. 1 million backlog by the end of this year. So is that 
a crisis?
    Mr. Agrawal. Well, sir, if there are individual companies 
that are being put out of business by these audits, we do have 
flexibility in how we achieve----
    Mr. Meadows. But you don't. I have already called on behalf 
of some of my constituents, you know. And that would be a great 
response, but it is not true.
    Because you know what? I have dealt with Jonathan Blum. I 
have called to make sure that Kathleen Sebelius knew about it. 
I have called the White House. And you know what? You say, 
``Too bad.''
    So what do I tell the moms and dads who are going to lose 
their job because they do not get a fair hearing? What do we 
tell them?
    Mr. Agrawal. Well, sir, we are able to do what we are 
authorized to do. So whether it is an alternative payment 
arrangement or something else working with a provider, we can 
do what we have----
    Mr. Meadows. All right. So you have got 5 years for an 
alternative payment arrangement. I know this stuff. I have been 
studying it for the last 6 months. 5 years.
    So if the backlog is 10 years, what do they do? They just 
pay it?
    Because right now, at 1 million people--at 1 million 
appeals, your rate--the best rate that we have had from the 
adjudicators is 79,000 a year. And even with your budget 
increase, that would still be a 10-year delay. That is a 
taking, in my book.
    Would you wait for 10 years for your salary? Yes or no.
    Mr. Agrawal. Sir, we do whatever we are authorized to do in 
terms of working with providers to try to make the system less 
burdensome for them.
    We can stretch out payments. We can change things in 
individual cases. But, again, we cannot overstep the authority 
that has been granted to us by Congress.
    Mr. Meadows. All right. But something changed. Something 
changed. Because you know what? The audits went from 1,500 a 
week to 15,000 a week. So what did you change?
    Because, I mean, it is in your documents. I will be glad to 
give you that, too. Actually, it is worse than that. They said 
it went from 1,200 and change a week to 15,000 appeals a week. 
What did you change?
    Mr. Agrawal. So, again, I think it is important to level-
set on this. It is our obligation to audit. We have improper 
payments that you have heard about from other witnesses, that 
you have heard about from the rest of the committee.
    It is our obligation to go after those improper payments to 
try to reduce the rate and make recoveries where possible or, 
you know, where they should be made. That is an obligation 
created in law.
    And to also level-set, sir, on the amount of auditing that 
we do, we audit far less than 1 percent of all claims we 
receive.
    In fact, all of the overpayment determinations made by RACs 
in the latest available data to the public account for less 
than 1 day of claims that come to the Medicare program.
    Mr. Meadows. All right. My time has expired.
    I would like one answer to this: The law says that they 
need a decision in 90 days. Is that law being violated? And who 
makes the choice on what laws we enforce and what laws we 
ignore? The law says 90 days.
    Mr. Agrawal. I cannot comment on the processes that are 
outside of the jurisdiction of CMS.
    Mr. Meadows. This is in your jurisdiction. I will be glad 
to give you a copy.
    Mr. Agrawal. That is at OMHA.
    Mr. Meadows. No. This actually talks about qualified 
independent contractors, which is under yours, and then the ALJ 
is after that--90 days after that.
    Mr. Agrawal. Great.
    So as far as the second level of appeal at the qualified 
independent contractor level, there is recent reporting from 
the OIG that shows that we are remaining on track as far as the 
expectations of how long it takes to, you know, go through that 
appeals process.
    Mr. Meadows. Jonathan Blum said you changed something in 
2012. What did you change?
    Mr. Agrawal. Sir, I was not a part of that conversation. If 
you can----
    Mr. Meadows. Do you know of any changes that happened in 
20---I am out of time.
    I yield back. I apologize, Mr. Chairman.
    Mr. Lankford. We will come back around in a second round.
    I would like unanimous consent to have Ranking Member 
Speier's opening statement be entered into the record.
    Mr. Lankford. Without objection, Ms. Speier, you are 
recognized.
    Ms. Speier. Mr. Chairman, thank you. And I apologize for my 
late arrival. We had a memorial service at Arlington Cemetery 
for servicewomen and I felt compelled to be there. So I 
apologize for not being here for your opening statements.
    Let me say at the outset I have had local hospitals that 
have gotten embroiled in the RAC situation. I have a hospital 
that is teetering on bankruptcy right now, and the RAC 
experience has exacerbated it.
    But I also think it is really important for those of us who 
sit on this committee to recognize that we have an obligation 
beyond just beating up on those who come before us like this to 
recognize that, if we want to fix the backlog, we have got to 
pay for it.
    There is a backlog because, in 2007, RAC claims amounted to 
20,000. Today that number is 192,000 a year. That is 10 times 
what it was in 2007, and we have not added one single person to 
respond to those claims.
    So if we want to deal with this backlog, if we want to 
erase it, we have got to recognize that you cannot expect 
people to do 10 times the work with the same number of work-
hours.
    Now, let me start with Mr. Ritchie, if I could.
    You have had a pretty remarkable run in terms of the 
efforts by the Healthcare Fraud and Abuse Program which 
resulted in $4.3 billion in recoveries to the Treasury in 2013. 
That represents an 8-to-1 return.
    Is that the highest level of recovery to date, Mr. Ritchie?
    Mr. Ritchie. Yes. That is.
    Ms. Speier. And how is that achieved?
    Mr. Ritchie. We partner with our other partners in 
enforcement and the HCFAC Program to fight fraud, waste and 
abuse through investigations, through audits, through the 
evaluations that we have done. The recoveries that were 
reported in fiscal 2013 were record recoveries.
    Ms. Speier. Now, I think in your testimony you reference 
that sequestration will result in a 20 percent reduction in 
OIG's Medicare and Medicaid oversight capabilities. Is that 
correct?
    Mr. Ritchie. Unfortunately, yes.
    Ms. Speier. So what does that mean in terms of what you are 
going to do and what we are going to see in terms of waste, 
fraud and abuse being properly handled?
    Mr. Ritchie. For our office, it is--I mean, it is not good. 
It means less investigations, less audits, less evaluations.
    I mean, I am not the budget expert, but I certainly live 
this every day. I work in our audit office and I am acting in 
charge of our evaluation office.
    At this point, between 2012 and 2014, Medicare and Medicaid 
outlays went up 20 percent, and during that same time, my 
office has had to reduce our focus on Medicare and Medicaid by 
20 percent.
    It is really challenging, given we have a $50-billion 
improper payment, a 10 percent error rate, that we are dealing 
with this, that it means less auditors, investigators, 
evaluators on the ground to handle this.
    I have been working in IG for 27 years and I can just tell 
you personally, I mean, I have never felt quite as challenged 
looking ahead to see with the growing programs and growing 
responsibility how we go about doing this because----
    Ms. Speier. So should we just roll out a red carpet for the 
fraudsters of this country?
    Mr. Ritchie. I would certainly hope not.
    I mean, in our office, we try to do a risk assessment to 
pick the best topics. You know, we certainly--we make our 
budget request.
    And for us personally, I mean, the best thing that could 
happen would be to fully fund our budget request to try to get 
us back on target. It has definitely decreased.
    We have gone down by 200 FTEs--full-time employees--over 
that time. You know, we have had to stop evaluations and 
audits. We have had to stop following up on investigation 
leads.
    Ms. Speier. So is it safe to say that, because of the 
reduction, there are investigations that haven't moved forward 
that probably would have resulted in savings to the taxpayers 
in this country?
    Mr. Ritchie. Yeah. Absolutely. I mean, investigations and 
audits, both, that we have to make tough choices every day for 
what we start in and what we can't start.
    I mean, it is been a very difficult time in sort of looking 
at this. I think you are making tough choices. With things that 
look very good, you do a risk assessment and feel like there is 
so much to look at, but you know you only have so many 
resources and those resources are declining.
    I mean, we have had a hiring freeze for 2 years and people 
have left through buyouts. So we have just been consistently 
reducing.
    Ms. Speier. So give us an example of the kind of case that 
you had to let drop by the wayside. I mean, do you drop cases 
that are just so big that it would take so many resources? So 
are the big fraudsters getting away with it more than the 
little fraudsters?
    Mr. Ritchie. Well, I am not in our Audit and Evaluation 
Offices. So I am not there. I do know that our Investigation 
Office told me that they have closed 2,200 investigative 
complaints since 2012.
    I think it is a mix. I mean, we try to do the best risk 
assessment we can and put resources on the biggest cases, but 
certainly we can't afford to do all those.
    I know our StrikeForce activities have been a big success. 
In our StrikeForce cities, we have had a reduction in 
resources. So it is been across the board in every aspect of 
the IG's enforcement.
    Ms. Speier. All right. My time has expired. I will follow 
up with the second round.
    Mr. Lankford. Mr. Chaffetz.
    Mr. Chaffetz. I thank the chairman.
    And, Ms. King, I appreciate this GAO report that you put 
out. I want to go to the first complete page. This is the 
second paragraph, the latter half of it. I will read it to 
catch everybody up: For example, CMS has hired contractors to 
determine whether providers and suppliers have valid licenses, 
meet certain Medicare standards, and are at legitimate 
locations. CMS also recently contracted for fingerprint-based 
criminal history checks of providers and suppliers is has 
identified as high-risk. However, CMS has not implemented other 
screening actions authorized by the Affordable Care Act that 
could further strengthen provider enrollment.
    Can you help enlighten me where you think they have not 
implemented other actions to strengthen the process?
    Ms. King. Yes. I think there are a few things that we point 
out.
    One is in relation to surety bonds, establishing a 
regulation regarding surety bonds for certain types of 
providers.
    One is in not publishing a regulation that has to do with 
disclosure of past actions that have been taken against 
providers, such as payment suspensions.
    Mr. Chaffetz. So, Doctor, why not do that?
    Mr. Agrawal. I think these are great ideas. And we have 
really appreciated--the Agency has appreciated working with the 
GAO on ferreting out where our vulnerabilities and weaknesses 
are and trying to do something about them.
    There is, you know, nothing conceptually wrong with these 
recommendations. We continue to have the conversations. We have 
to prioritize changes----
    Mr. Chaffetz. Yeah. But I am just wondering why you haven't 
done it. I mean, we are trying to get rid of the waste, fraud 
and abuse. Right? And it is authorized by the law. Why haven't 
you done that?
    Mr. Agrawal. Absolutely. It isn't, I think, you know, a 
disagreement over the objectives. We have done a lot in the 
last couple of years to really, you know, beef up our approach 
to provider enrollment and screening.
    Some of the stuff, like fingerprinting, is just coming 
online now. So, you know, there are just bandwidth limitations 
in terms of what we can get to and how quickly, based on 
resources, based on budget.
    Mr. Chaffetz. Is there a prioritized list or summary that 
you could share with the committee so we can understand what 
you are prioritizing, what you are doing and what you are not 
doing?
    Mr. Agrawal. Well, I think you are clearly seeing some of 
the priorities already occurring.
    Mr. Chaffetz. I know.
    But where do I find that? Where do I--is that something you 
can provide the committee?
    Mr. Agrawal. I don't know that we have a list. I am happy 
to have further conversations with the office----
    Mr. Chaffetz. Can you create a list?
    Mr. Agrawal. Um----
    Mr. Chaffetz. We are trying to get some exposure, some 
transparency, which you say you are in favor of, of what you 
are doing or not doing. The GAO right at the front is saying 
you are not doing all that you could do.
    I am sure there--you have got to make some choices. I want 
to understand what you have prioritized and what you are doing 
and not doing.
    Is that fair, to put that on a piece of paper and share 
that with the Congress?
    Mr. Agrawal. Well, I think perhaps it would be useful to 
get your insights and, you know, we can continue----
    Mr. Chaffetz. No. No. No. Wait. Wait.
    Mr. Agrawal. --to have conversations with GAO on, you 
know----
    Mr. Chaffetz. If you want me to run your agency, I will run 
it for you.
    But GAO is making recommendations authorized by the law to 
do these things. I just want to see what you are doing and not 
doing.
    I am not looking for a 700-page report. I am looking for a 
couple-page summary to understand what you are implementing and 
what you are not.
    Mr. Agrawal. Sure.
    Mr. Chaffetz. You have got to have some sort of document.
    Mr. Agrawal. We will work on----
    Mr. Chaffetz. I didn't expect to spend 5 minutes asking you 
if you had a prioritized list of what you are working on.
    Is that something you can or cannot provide to Congress?
    Mr. Agrawal. Sure. We will work with your office and we 
will provide it.
    Mr. Chaffetz. When is a reasonable time to get that 
document? You come up with a date.
    Mr. Agrawal. Can you give me a few weeks to do it?
    Mr. Chaffetz. Sure.
    Mr. Agrawal. Great.
    Mr. Chaffetz. Pick a date.
    Mr. Agrawal. How about a month? We will get it back to your 
office within a month.
    Mr. Chaffetz. The end of June. How's that?
    Mr. Agrawal. Perfect.
    Mr. Chaffetz. Okay. Thank you very much.
    One of the things that I have been working on that I am 
worried about are these providers.
    Are we engaging in allowing people that have serious 
delinquent tax debt to be engaged in this process?
    This is a big government-wide problem I see, is that we 
have contractors out there who have serious delinquent tax 
debt. We, yet, hand them new additional contracts and allow 
them to continue to be involved and engaged.
    I would provide--and I don't expect you right off the top 
of your head to understand the answer to that question, but 
that is something else that I personally and I think the 
committee would benefit from understanding.
    What are the policies that you have there? What are--it 
should be a key indicator to me that, if you are unable to pay 
your Federal taxes, why do we continue to contract and give you 
more and more business?
    The President has been supportive of this when he was 
Senator Obama. I think this is a very bipartisan thing. This 
committee has dealt with a bill very specific to that.
    If you could also provide me information about what you do 
with that. And the answer may be, ``We don't do anything with 
that.'' I would just like to know the answer to that question.
    Can we also shoot for the end of June that you give me that 
information? Is that fair?
    Mr. Agrawal. Yeah. I think that is fair.
    But I think, just to comment on that a little bit, we 
have--you know, there is all kinds of information that we could 
conceivably collect from providers.
    I think the question often, you know, that we have is: What 
information can we collect that is actionable for us? So there 
are some clear bright lines in the program.
    If you don't have the right license to practice medicine in 
the State in which you want to enroll, then you don't get to 
enroll in that State. There are certain other types of 
disqualifiers, like certain felony convictions.
    So I think, conceptually, it makes a lot of sense to 
include as much kind of risk assessment data and analysis as 
one could to look at providers.
    But, again, I think we have to--there is really just a 
subset of those potential risks that pushes us over the line 
and allow us to take action. If a provider ends up on, you 
know, the exclusion list or the do-not-pay list, that is 
helpful.
    Mr. Chaffetz. Well, and I am also worried about the 
contractors that you are engaging that are supposed to help 
ride herd on this, that are supposed to help you engage these 
people. Those are some of the specifics that I would like to 
see as well.
    It is not just--I am not talking about the providers as 
much as I am the contractors that you are contracting with in 
order to make these things happen.
    Thank you, chairman. Yield back.
    Mr. Lankford. Thank you.
    I am going to open this up for the second round for 
questioning. During this questioning time, there is full 
interaction on the dais. You can jump in at any time. There is 
no clock running this time period if you have interaction.
    Also, for our witnesses, if you have specific things that 
you want to get into the conversation, you are free to be able 
to initiate the topics in the conversations as well to make 
sure that you are clear.
    Our goal of this conversation is to make sure that we bring 
all the issues out, find the areas that need to be resolved and 
what is the timeline for resolution on those things. So you are 
free to be able to bring the issues up as well to make sure we 
have clarity on this.
    I want to reaffirm again--let me take first crack at a few 
things here.
    I want to reaffirm again that this panel, myself included, 
is committed to how do we deal with fraud. There is $50 billion 
in unaccounted-for money, possible overpayments in fraud.
    We affirm that we are pursuing that fraud. That is the 
taxpayer dollar and it is essential both for the solvency of 
the program long term and for the taxpayers themselves. So 
continue to do that.
    I think the frustration is the prepayment side of this. We 
all know that is the direction it should go so we are not 
having to chase. That is why we want to know the report.
    We want to know what is happening at this point, how we get 
ahead of this in the days ahead, so we are not having to 
constantly go back to good providers and to say, ``We are going 
to hold some of your dollars.''
    Many of these providers may have a 2 or 3 or 4 percent 
profit rate and, for them to have a portion of their cases 
pulled and not paid for for an indefinite period of time as 
they go through the appeals process is untenable to them.
    So I want you to hear from me and from us. We are not 
opposed to going after fraud. We are opposed to the methods 
that is--currently and as it is being executed.
    There have been changes in the RAC audit process as CMS has 
learned its way through this. We are proposing additional 
changes in this to say what can we do to help expedite this 
process and to make sure, when it is right and it is overturned 
in appeals, they get their money faster and they have fewer 
people engaged.
    So let me run through a couple of these things again.
    We have gone through the revalidation process. Is that 
complete at this point for providers nationwide where we 
revalidated the providers?
    I know we have done fingerprinting, we have done 
background, they have had to reenroll. Is that complete at this 
point? What stage is that in?
    Mr. Agrawal. So the revalidation process that was initiated 
after the ACA puts us on a 5-year cycle. I believe the latest 
number is we are--we have revalidated over 770,000 providers at 
this point. That puts us on track to be complete in time for 
the first cycle.
    Mr. Lankford. So 2 more years still left of that is what 
you are saying or----
    Mr. Agrawal. I think that is about right, yes, if I am 
remembering correctly.
    Mr. Lankford. Okay. And then the prepayment pursuit of 
fraud, we have a report that is due to us. Obviously, we have 
already discussed that is coming in the next couple of months 
to give us the details and the progress on that.
    Then we move into the post-payment. Do you want to make any 
comments on the prepayment side?
    Mr. Agrawal. Well, I think just that, clearly, the 
Affordable Care Act did provide us a lot of authorities to make 
changes on the prepayment front, such as, you know, payment 
suspensions, which we are now able to leverage against the 
worst actors.
    I think the only point that I would make, Congressman, is 
to differentiate what we do when we are going after potential 
fraudsters, sort of criminals, the worst actors.
    From those providers, the vast majority that are perhaps 
producing waste or producing inefficiency in Medicare, not 
quite following our rules, but have the intention to follow our 
rules, are trying to actually do their best.
    I would just ask us to sort of keep this framework in mind 
because I think it sort of determines for us what tools we 
utilize so that they are not overly pejorative.
    I think payment suspension, for example, is a great tool 
for the worst actors and, though it is prepayment, it is not a 
great tool for legitimate actors because it essentially 
suspends all the payments that they would be getting.
    Mr. Lankford. Right. Well, you are dealing with the same 
thing. It is the hammer that is down in the area.
    Even for the high-risk areas where there is a moratorium, 
some of those areas may have a deficiency of a number of good 
companies that are actually providing. And as we continue to 
have more people entering into Medicare, there is a need for 
providers.
    And so even, when a moratorium occurs on that, that is a 
pretty incredible hammer for that region to say there is lots 
of small businesses that won't start up during that time period 
that could be legitimate providers.
    Mr. Agrawal. It is--I agree with you, sir. It is a notable 
piece of authority that we implemented with a lot of care and 
over time. So it took us years to go from having the authority 
in the ACA to actually implementing it for the first time.
    I would say the areas that we tried to address, both the 
geographies and then home health services as well as ambulance 
services, are areas that we knew there was a lot of market 
saturation. There was very little concern, though we have been 
looking at it continuously, about access-to-care issues.
    You know, home health and ambulance services in Texas and 
South Florida are areas of a lot of agreement with the Office 
of Inspector General, the Department of Justice within CMS, 
with State Medicaid agencies, that there is just a lot of 
market saturation, sort of three to five times the number of 
providers than on average areas.
    So while access to care is clearly something we care about 
and we are looking at in realtime to make sure the moratorium 
does not have negative impact on access, we are currently not 
seeing it in those areas.
    Mr. Lankford. Okay. Let me come back to one last thing. I 
want to open this, but I don't want to take all the time on it.
    The four appeals that are total, I would like to get just a 
timeline for everyone the length of time. You have said they 
are on schedule.
    So let's talk about Appeal Number 1. If someone has a 
problem with the RAC audit, Appeal Number 1 is to who and how 
long does that take?
    Mr. Agrawal. Sure. So I believe the first level of appeals 
providers have 120 days to file the appeal and then there is a 
60-day time limit for the decision to be achieved on the 
appeal.
    Mr. Lankford. Okay. So they filed it right away, let's say. 
Let's talk about your end of it. Their responsibility is their 
responsibility.
    So you have 60 days to respond. Correct?
    Mr. Agrawal. Correct.
    Mr. Lankford. Who is that that is responding to them? They 
are appealing to who?
    Mr. Agrawal. I believe in almost all cases it is the MAC 
administrative contractor that would handle the first level.
    Mr. Lankford. Okay. So you have got--the RAC folks make a 
decision and then the MAC folks then are making the response in 
the appeal. Is that correct?
    Mr. Agrawal. Correct.
    Mr. Lankford. Okay. So they have 60 days to respond. You 
are saying that is on time?
    Mr. Agrawal. Yes.
    Mr. Lankford. They disagree with that. They come back in 
the second level.
    Who is that? How long does it take?
    Mr. Agrawal. So the second level goes to the qualified 
administrative contractor, the QIC. They have, again, 180 days 
to file the appeal--the provider does--and then we have 60 days 
to make a decision on the appeal.
    Mr. Lankford. And you are saying that is on time as well?
    Mr. Agrawal. So I have average times that are below the 60-
day mark. Correct. Sort of 53 and 54 days for most appeals.
    Mr. Lankford. And do you have the overturn rate on both of 
those?
    Mr. Agrawal. It would depend on the specific audit.
    So is there a particular audit that you are referring to?
    Mr. Lankford. Yeah. Either one. The first or the second 
level.
    Mr. Agrawal. And RAC audit, sir?
    Mr. Lankford. RAC audits. Yes, sir.
    Mr. Agrawal. I would have to look.
    Mr. Lankford. All right.
    Mr. Agrawal. So I think--while I am looking, let me just 
say I think the overall overturn rate for the RAC audits are, 
you know, between parts A and B, about 6 to 7 percent. That is 
in the latest data. That is public.
    Mr. Lankford. But you are not talking through the ALJ 
process. You are just talking through the first--that is what 
we are trying to figure out. We are trying to get a cumulative 
number. We have yet to see a cumulative number.
    Mr. Agrawal. No. I believe--so I believe that the 6 and 7 
percent numbers are--all the way through are ever overturned.
    Mr. Lankford. Okay. I am trying to figure that out because 
the latest numbers we have seen on the ALJs are between 56 and 
70-some-odd percent of overturned just in that level.
    Mr. Agrawal. Correct. So--if I could perhaps explain it a 
bit, so the RACs, you know, make determinations. I think the 
latest public data is 1.6--roughly 1.6 million claims were 
found to have contained some kind of overpayment.
    Providers then make a decision about whether or not to 
appeal those overpayment determinations. And, basically, at 
every level of appeal, as you go from one, two, and three, the 
number of claims going to the next level comes down and the 
overturn rate might vary between the levels.
    So I am not finding the number right away, but I think at 
the first two level--oh. That is very helpful. Thank you.
    So at the first two levels, we are seeing a 9 percent 
overturn rate for the RACs in specific.
    Mr. Lankford. Both of them or each one? 9 percent at the 
first level and then another----
    Mr. Agrawal. No. At the first level of appeal, 9 percent 
for part A.
    Mr. Lankford. But you don't have part B?
    Mr. Agrawal. 3 percent.
    Mr. Lankford. All right. And for the second level of 
appeal?
    Mr. Agrawal. At the second level, for part A, it is 14.9 
percent.
    Mr. Lankford. So 15 percent, basically.
    And then part B?
    Mr. Agrawal. .5 percent--no. I am sorry. I am not sure if 
that is right. You know, I don't have it called out.
    I have just the percentage of RAC appeals that actually 
make it to the second level, but I don't have the overturn rate 
for part B on the second level. We can get that to you.
    Mr. Lankford. Okay. That one is unknown.
    And then they go to--after that, they have done 60 days in 
the first one, they have done 60 days in the second one, and 
then they disagree with that as well, and now we are headed to 
the ALJs, which, as Mr. Meadows has commented on, now could 
take 10 years to get to that spot, depending on the perspective 
you get.
    Now, we have heard 28 months, but 28 months is pretty 
ambitious, based on the number of people that are in the queue 
and the number that have been typically handled.
    I know you have said over and over again that is not your 
responsibility. We will visit with chief ALJs on this. But that 
is the next level.
    Then the fourth level is what after that? If they disagree 
with ALJs, then what?
    Mr. Agrawal. There is another level that they can go to 
which is, I think, at Federal District Court level. I am sorry. 
It is the Departmental Appeals Board and then, after that, it 
is the Federal District Court.
    Mr. Lankford. So that is a fifth level?
    Mr. Agrawal. Correct.
    Mr. Lankford. Okay. Thank you. I wanted to get the context 
for everyone.
    Jump in at any point.
    Mr. Meadows. I guess my question is: --so let's look at 
part B, DME only. What is the overturn rate for that, which 
would include, you know, some of the other stuff?
    Well, let me ask--I have got a report here from your office 
prepared on April 2 of 2014. It says that the overturn rate is 
about 52 percent. Is that correct? Is this report correct from 
your office? Would it be about 52 percent for DME overturn 
rate?
    Mr. Agrawal. I think it really depends on what document and 
what level you are looking at. If you look at all DME claims, 
again, it is--about 7.5 percent of all overpayment 
determinations end up in an overturn on appeal.
    Mr. Meadows. We are talking about on the appellate part. 
This is Office of Medicare Hearings and Appeals, their report.
    Mr. Agrawal. Okay.
    Mr. Meadows. So those hearings and appeals.
    It says that the overturn rate is--52 percent is either 
fully favorable or partially favorable. 24.87 was unfavorable. 
And so, with that, it would indicate that the overturn rate is 
much higher than what you would indicate on DME.
    Mr. Agrawal. There is a calculated overturn rate at each 
level. So what I just communicated about the first two levels 
just gives you the overturn rate for those levels. There is 
clearly a third rate.
    Mr. Meadows. Okay. I may not be real sophisticated. So I am 
trying to figure out--how does your report say 52 percent here 
and what you testified says--where's the difference? Help me 
understand that.
    Mr. Agrawal. So, generally, as you go up at the various 
levels of appeal, providers make a decision at each level about 
whether or not they are going to appeal to the next level.
    What we see are some general trends. So providers do tend 
to--the number of claims that are appealed at each level does 
trend to drop and the overpayment--or the overturn rate can 
increase.
    So at the third level of appeal, at the ALJ level, the 
overturn rate is--I can totally agree with what is on your 
piece of paper, that it probably does approach 50 percent for 
DME.
    Mr. Meadows. All right. So----
    Mr. Agrawal. But at lower levels of appeal, given that 
there is more claims that are appealed and fewer are decided in 
the provider's favor, the overturn rate is much lower.
    Mr. Meadows. That makes sense.
    So out of the 1 million in backlog that your budget request 
talked about, how many of those would you anticipate, based on 
this rate, are going to be overturned out of the 1 million 
backlogged appeals going to ALJ?
    Mr. Agrawal. I think that is an individual case-to-case 
determination----
    Mr. Meadows. It is. But based on historical evidence, how 
many of those would be overturned?
    Mr. Agrawal. Sir, I can't----
    Mr. Meadows. 520,000 of them. I mean, based on these 
numbers, would that not be correct?
    Mr. Agrawal. Based on those numbers.
    Mr. Meadows. Okay. So let me ask you one other question.
    The American Hospital Association--they have RAC facts. Per 
RAC track, which this is all Greek to me, 47 percent of 
hospital denials are appealed and ``almost 70 percent of these 
appeals are overturned.'' Is that incorrect?
    Mr. Agrawal. I can't really speak to their data, sir. What 
we know--what we--we track the data, of course, very closely 
internally.
    Our numbers would not agree with that. If you look at the 
first level of appeal for part A, we see about a 5 percent 
actual appeal rate that makes it to the first level.
    Ms. Speier. Mr. Ritchie, if I could interject, there is a 
problem here.
    Why is it that, if you have got enough money to go to the 
third appeal with the ALJ, if you could hold out that long, if 
you are not a single provider, if you are a big hospital--if 
you could hold out, if you go to the ALJ, you have got a 60 to 
70 percent chance of winning. Why wouldn't everyone just go to 
that appeal process if they can afford it?
    So the question I have is: Why the discrepancy? What do you 
know about the ALJ system that allows for such huge swings in 
the determination?
    Mr. Ritchie. Okay. What we looked at, again, was prior to 
the backlog, but I think it is still relevant. We looked at the 
ALJs and, at the time, found a 56 percent overturn rate. This 
was 2010 data. For the prior level, the qualified independent 
contractors, there was a 20 percent overturn rate.
    The big differences that we saw--again, I have mentioned 
earlier the unclear Medicare policies we think are a trigger to 
a lot of this.
    At the ALJ level, we found that they tend to interpret them 
less strictly than at the prior level, at the QIC level, 
because they are confusing, they are complex policies and they 
are open to different interpretations.
    The other thing, at the QIC level, it is more specialized. 
They have specific people looking only at part A, specific 
people looking only at part B, and they have clinicians 
reviewing that.
    Whereas, at the ALJ level, they are dealing with DME, part 
A, part B, everything that comes their way, and they are 
relying on documentation and testimony of the treating 
physician to make their decisions. So the process is different.
    We have also seen the case files are different. I mean, it 
is more of an administrative thing. But the things that they 
are maintaining and holding in the case files are different 
from level to level and I think really creates some of the 
inefficiencies.
    For example, the ALJ level is still on paper. So the QIC 
has everything electronic. They have to print it out and send 
it to the ALJ. They will also get a paper file of the records 
maybe from the contractor. So they are trying to sort those two 
out.
    So some of our recommendations are definitely to clarify 
the Medicare policies, but also to create one system that is 
electronic that can----
    Ms. Speier. So if I understand you correctly, at the QIC 
level, they are very specialized, they know precisely what they 
are looking for, and they make their determination because they 
are trained to look for certain things, I guess.
    I guess that is part of what you are saying?
    Mr. Ritchie. Correct. We didn't assess and make a judgment 
of which level is better. They are just very different.
    But at the QIC level, we have seen they have clinicians 
looking at it and they are specific. If an appeal comes in 
specific to part B, it is going to the QIC. If it comes in to 
part A, it is going there. Whereas, the ALJ, they have got 
everything----
    Ms. Speier. And ALJs aren't clinicians.
    Mr. Ritchie. Right.
    Ms. Speier. And they are using discretion in terms of 
interpreting the law.
    Mr. Ritchie. In terms of interpreting the law and then they 
are relying more on the treating physician's testimony and 
evidence. Whereas, at the QIC level, they are relying more on 
their own clinicians to interpret the documentation.
    Ms. Lujan Grisham. But--oh, I am sorry.
    Ms. Speier. Go ahead.
    Ms. Lujan Grisham. If Congresswoman Speier will yield, I 
mean, it speaks to a couple of larger issues.
    And I want to get back at, you know, what are the real 
overturn rates? Are we targeting correctly? And what can we do 
to improve the system so that we are not harming good providers 
and which means that we are harming just the beneficiaries 
going after fraudulent and wasteful behavior.
    Medicare is an incredibly complex system and the reality is 
that, if we don't start dealing up front with the Medicare 
complexities, we are not--we can chase this all day long and go 
from one extreme to the other and we are going to find 
significant flaws in our ability to hold providers accountable 
and to support providers to do a better job.
    And what we haven't done in this conversation is--I am as 
concerned as anyone else about getting it wrong and 
overpayments.
    I am also very concerned that your part A providers are 
large providers. Your part B providers, even though we might 
have, if you will, hot spots with the DME providers, that--they 
can't afford to go through this process. So, in that regard, 
your data is skewed for one group.
    And I am not trying to vilify one group over another. But 
hospitals--large hospitals and large hospital groups can afford 
to wait a decade, potentially. Smaller hospitals, as 
Congresswoman Speier identified, my colleague from California, 
cannot.
    I want to get back to maybe a couple of things, one--and 
then yield back.
    Can you give us some recommendations--you talked about the 
predictive modeling. You said we are identifying prescription 
practices that are clearly problematic.
    Is there a way to be targeting those areas? And is there a 
way to start targeting areas where we have got real issues with 
access?
    Because CMS has a responsibility to assure access. We are 
only doing one side of this here. We are eliminating 
potentially access and no response about that.
    Mr. Ritchie. So I am sorry. Could you clarify? 
Recommendations for what?
    Ms. Lujan Grisham. Well, a couple.
    And the first is you identified in your testimony that 
there are areas that you have identified that we could start 
looking at much more directly in art. So we could do predictive 
modeling in terms of where folks commonly make mistakes and 
where we have got potential fraud.
    And, two, you identified in that discussion--I don't know 
that it was tied to the predictive modeling, per se, but you 
have identified prescription practices that are clearly 
problematic. You said, I think, that you have got folks who are 
not prescribers, as an example, prescribing medications for 
beneficiaries.
    Why aren't we focused more in those areas?
    And then I wanted either Dr. Agrawal or someone else to 
talk to me about what you are doing--if you have got hot spots 
for fraud, what are you doing to shore up mistakes so that we 
don't lose those providers by providing better education and 
support to those providers and creating in low access areas, 
frontier and rural states--what are you doing to ensure you 
don't lose providers?
    Mr. Ritchie. Okay. Yeah. Thanks for clarifying.
    We make those type of recommendations all the time. We have 
a series of reports that we call our questionable billing 
reports, several of which I have referred to in the testimony, 
finding questionable prescribers, questionable pharmacies and 
questionable home health agencies.
    In all of those cases, we take the ones that we have 
identified that are extreme outliers, based on a statistical 
test, and give it to our Investigations Office to see if they 
want to further pursue because these look severe.
    After that, we send them to CMS and CMS will share it with 
their contractors to take appropriate action. And we always 
recommend that they take the kind of questionable criteria that 
we have and implement.
    I know the fraud prevention system is starting to build 
some of that in. I think specific to the example that is 
mentioned in the testimony--and you mentioned on the 
prescribers--we saw, you know, $5 million in a year prescribed 
by people without authority to prescribe massage therapists and 
things.
    Just yesterday--I have to look at this because it was late 
last night that I got it--but CMS actually issued--or published 
a final rule that requires prescribers of part D drugs to 
enroll in the Medicare Fee-for-Service Program starting next 
June, June 1 of 2015, and this is going to allow CMS the plans 
and the Medicare program integrity contractors to verify that 
they actually have the authority to prescribe.
    Because now they aren't--a massage therapist isn't billing 
Medicare, but they could write the prescription for drugs that 
we found that were pretty severe. So that problem will be fixed 
based on this rule.
    So we are working with CMS to get some of the 
recommendations implemented, but I think it is a combination of 
doing things like that and implementing edits on a prepay basis 
to try to stop future improper payments.
    Ms. Lujan Grisham. I think what we are interested in--and I 
am taking too long--but it is to get that information to the 
committee so we know when so that we can weigh in on how you 
are balancing these issues.
    And if the chairman doesn't mind, can we get something on 
the access? What are you doing to assure that small providers 
aren't discriminated even further in this process because of 
the size of the provider and the capacity of the provider?
    And have you thought about treating them differently like 
we have tiered regulatory environments? What is your thought 
about making sure that access is protected?
    Mr. Agrawal. Again--and I appreciate the question. That is 
an extremely important area for us.
    So as far as tiering providers by--we do currently tier 
providers by size. We actually have medical record request 
limits specifically for the RAC contractors based on the size 
of the provider.
    I had also mentioned earlier a sort of future solution 
where we would ratchet down the number of reviews that a 
particular provider would face if the reviews are generally in 
their favor, in other words, they are basically following the 
rules. We are putting that solution into our RAC procurement 
process right now. So it will be part of the RACs going 
forward.
    I think--you know, in addition to that, we do take--if 
there are overpayment determinations, we have a process for the 
provider to work with us and change the payment rate in order 
to still meet our requirements and still meet the requirements 
of the law, but to be able to afford them a longer opportunity 
so that we don't put providers out of business unnecessarily.
    I would also say just on the front end we are undertaking a 
lot of efforts to better educate providers about our specific 
payment policies. You know, I think the DME face-to-face--or 
the home health agency face-to-face requirement is a good 
example of that where the improper payment rate is very high.
    Because of this new requirement, providers need to be 
brought up to speed, and we are trying to do both specific 
audits that will look at that issue in order to educate both 
the home health agencies and the related prescribing providers.
    We also have just more general educational materials that 
providers can take advantage of. We also do try to be very 
transparent on the front end about what audits we are 
conducting.
    So once a new audit area is approved by CMS, that we put 
that information on a Web site that providers can look at, both 
big and small, to shore up their own self-audits, make sure 
that their compliance programs are working and be prepared for 
audits in those areas.
    We hope that all of this helps to make the process more 
open----
    Ms. Lujan Grisham. And if it doesn't, what do you do to 
assure access?
    Mr. Agrawal. Right. So I think--you know, part of it is 
just we have an open-door policy for providers. So we do want 
to hear about the shortcomings of these programs if there is an 
access issue or a burden issue.
    Ms. Lujan Grisham. And you don't think that providers by 
and large are going to be somewhat concerned about that open-
door policy, particularly in the context of audits and your 
efforts for fraud, waste and abuse?
    Because when I was the Secretary of Health and Secretary of 
Aging, I was often--I appreciate that mindset. ``We are here to 
help you.'' And, by golly, no one believes that.
    And so I didn't really find that to be an environment that 
was very productive, particularly when somebody came to us and, 
in fact, they were fraudulent and we did our job. And so that 
certainly precluded that kind of a relationship.
    Can you please collect data for us, if you don't already, 
and provide it to the committee so that I can see--we can see 
what--the percentage of small providers that are engaged in any 
level of these appeals versus the large providers?
    Mr. Agrawal. Yeah. And I think--we can do that. And I think 
it would be helpful to kind of work out a definition for 
``small provider'' that we could focus on.
    Ms. Lujan Grisham. Yeah. And the last thing I would say--
and I am trying the patience of this committee and, I am sure, 
our witnesses.
    But I would--again, this committee wants you to ferret out 
fraud and to stop those bad actors and actually move those to 
criminal prosecutions and to prevent those folks from ever 
being able to engage in any of our healthcare systems or any 
government contracting ever again. We are that serious about 
fraud.
    Now, we also want waste addressed. But I am getting very 
concerned really about that access issue and that this is 
completely imbalanced.
    And I would like you to consider and mitigate that by 
telling us what the risks are about changing the withholding of 
payments for the third level of appeal, taking into 
consideration, though, a new definition potentially or a 
refined definition for ``small providers'' and to entertain 
that and maybe come back to us in writing about what that would 
look like.
    Thank you, Mr. Chairman.
    Mr. Meadows. Dr. Agrawal, the passion of which you have 
heard me today is not meant to be directed at you. It is a 
passion based on a number of people back in my district that 
potentially will lose their jobs. And I, for one, nor you, do I 
believe you want them to lose their jobs because we have a 
system that is broken.
    When the chairman called this hearing, it was really a 
hearing about making sure that those who steal from seniors--
because that is really what this is about, is fraud--those who 
steal from seniors get caught. But in the process, there are a 
lot of potentially innocent people that are getting caught up 
in that dragnet that we have to find a better system to do 
that.
    I would ask for you to submit to this committee, if you 
would, two legislative changes. If you are saying that your 
hands are tied, what are the legislative changes that you would 
support and recommend for this committee to perhaps have the 
chairman introduce where we can fix it to make sure that we do 
go after waste, fraud and abuse, but those that are innocent 
don't have to wait forever to get that innocent verdict and, in 
the meantime, potentially go out of business?
    And I yield back to the chairman. I thank his patience and 
his foresight in having this particular hearing.
    Mr. Lankford. Let me ask a couple questions still to follow 
up on it, and it goes back to what Mr. Meadows was saying as 
well.
    Good actors we want to keep. Our seniors need to know, ``In 
my neighborhood, in my community, in my town, in my county, 
there is a good actor that is there.''
    We have all talked to folks, I am sure you are aware as 
well, on several areas. I had--last weekend I had a gentleman 
that came to talk to me that wanted to tell me about the last 
year of his life because he was a durable medical equipment 
provider. Was. He has now been put out of business.
    He was a good guy. He was willing to meet the price that 
was out there made publicly available in the competitive 
bidding process, but was not allowed to actually join into that 
because, as this group knows well, when the competitive bid was 
put out, if you didn't get the bid, you are out, and not just 
out, you can't join in even at the new low price. You are just 
out the business.
    He is one of those that came to me and said, ``I just want 
to tell you about the last year of my life, when my family 
business went out of business and closed down a company and 
laid off employees, and here is what that looked like.''
    I have individual providers that come to me and say, ``I 
had a group of files grabbed, not being paid for, that are 
going through the appeals process and I am fighting my way 
through that. And then, as I am fighting my way through that, I 
had another group of files that was grabbed, and now I am 
fighting through those, and I am on a different time period and 
I am not making payroll.''
    I understand the comment of saying it is 1 percent or it is 
2 percent of files, but if they start getting a set grabbed and 
then 60, 90 days later, another set grabbed when they are still 
unresolved from the previous one, they are not going to make 
payroll for these smaller companies. These are very real 
issues.
    We want Medicare providers to be there. We want our seniors 
to have access. We want individual healthcare folks to know, 
``If you take care of seniors, the bills will be paid.'' That 
certainty is disappearing at this point, and that is a bad 
formula for where we are 5 years from now, 6 years from now.
    That is why the urgency of this is extremely important, 
that we get ahead of fraud rather than constantly chasing it, 
because, when we are chasing it, we are also hurting companies 
that are the good actors that are trying do it right. We are 
all for shutting down bad actors, aggressively going after 
that.
    But when the good actors made a mistake, made an error, but 
now they are having a difficult time making payroll on it, we 
are losing the good guys in this, and that is going to hurt us 
long term.
    So let me shift a little bit.
    With the RAC audits--Dr. Agrawal, you and I talked briefly 
earlier about this--the incentive for them to--if there is a 
question that this is going to get lost in an appeal, for them 
to not pull that, for them to actually work with them.
    I will tell you--you have probably heard the term as well--
many of the hospitals and providers call the RAC audit folks 
``bounty hunters.'' They come in, land, go through stuff until 
they find something, because they get paid based on what they 
find.
    So the incentive is not to be able to sit down with someone 
and say, ``Hey, you made a mistake on this. Let me show you how 
to do this different.'' The incentive is, ``I got you and I am 
going to get paid.'' That is a bad relationship that is forming 
between our government and the people that we are supposed to 
serve.
    Now we have got to setup environment where the incentive is 
for them not to work with someone to find and work this out and 
how to learn on it, but to punitively pull a file. That is a 
whole different set of relationships there.
    So the question is: How do we get back to the incentive 
with the RAC folks to be helpful rather than punitive, but we 
still go after fraud?
    Ms. King, do you have an idea on that?
    Ms. King. Sir, if I might, the other types of contractors 
that do post-payment reviews--the MACs, the CERT and the 
ZPICs--are not paid on the incentive basis. They are paid on 
the basis of cost under contract. The payments for the RACs 
were actually established by law----
    Mr. Lankford. Right.
    Ms. King. --how they were----
    Mr. Lankford. Correct.
    Ms. King. So that--if you are concerned about the 
incentives, it is something to consider.
    Mr. Agrawal. I think that is a very helpful point.
    I would also say, you know, we do provide--so I think--let 
me make two points on this.
    One is we do provide oversight to the RACs. So, you know, 
the characterization that they might be on a fishing expedition 
or that they are making judgments just to receive the incentive 
payment is, I think, not accurate because we do, again, do that 
validation work behind them to make sure their accuracy rate is 
very high.
    That accuracy rate would not be----
    Mr. Lankford. Is there an incentive to be helpful while 
they are there, to teach someone how to do this better, or is 
the incentive to be able to pull it?
    Mr. Agrawal. I think there is two kinds of incentives that 
work in the favor of providers.
    One is the RACs are equally incentivized to find 
underpayments to providers. They get the same contingency fee 
if they return money to a provider that they deserved as they 
would when they make an overpayment determination. That is just 
one.
    The second thing is we have made it a priority in the 
program both for RACs and MACs and other auditors to use 
education as a tool. So when deficiencies are identified, they 
can communicate those to providers and, hopefully, providers 
can, you know, rectify that deficiency going forward.
    Mr. Lankford. Are they--are they paid for that, paid for 
the education?
    Mr. Agrawal. Well, the RACs are not specifically paid for 
that, but the MAC contractors do work very closely with 
providers in all their regions to, you know, teach them about 
Medicare policy and payment requirements.
    We also utilize the results of both MAC and RAC audits to 
alter our programs, you know, be more specific on policy issues 
where necessary, make changes to processes.
    So that is a priority for the agency. We do try to use the 
outcomes of these audits to alter our interactions with 
providers.
    Mr. Lankford. So what is the incentive for them to educate?
    Mr. Agrawal. I think what RACs have been able to do is take 
areas that we know have high improper payments in them, again, 
differentiating improper payments from fraud.
    Mr. Lankford. Right.
    Mr. Agrawal. RACs are not necessarily designed to go after 
fraud. Those are other contractors in other areas of work.
    What we have asked them to do is focus on areas of high 
improper payments and make recoveries where appropriate. Along 
the way, they do identify educational needs or, you know, 
clarity deficiencies that we can address either through other 
contractors or directly.
    Mr. Lankford. Okay.
    Mrs. Norton.
    Ms. Norton. Thank you very much. Mr. Chairman, thank you 
for this hearing.
    When--perhaps because Medicare is a necessarily costly 
program--and I say ``necessarily''--we do the best we can to 
provide the maximum care for the elderly when they are ill--
there is particularly concern when there are reports--and they 
are always quite sensational--reports of fraud or particular 
abuses in the program.
    I know that the Affordable Healthcare Act gave the CMS 
several new--or at least expanded authorities to deal with 
fraud.
    And I would be very interested in hearing about how you 
deal with those at higher risk, who are they, and how you deal 
with them when they apply--when it applies to providers and 
suppliers who are newly enrolling and those who want to re-
validate their participation in the program.
    Mr. Agrawal. Sure. Thank you for the question.
    So as a result of the Affordable Care Act, we have been 
required to implement a whole new approach to provider 
enrollment and screening that takes into account the risk level 
of that category of provider.
    Higher-risk categories of provider, like, say, newly 
enrolling DME or home health agencies, are subject to greater 
scrutiny.
    That scrutiny can include--or, you know, everybody 
certainly gets certain data--analytical work to make sure that, 
you know, providers of all types have the right licensure, have 
the ability to practice in their provider category.
    Higher levels of scrutiny also include site visits, 
criminal background checks, fingerprinting most recently. As a 
result of those activities----
    Ms. Norton. Had you done fingerprinting before?
    Mr. Agrawal. Fingerprinting we are just bringing online. We 
procured that contractor last month and we are----
    Ms. Norton. For all providers or for the high risk?
    Mr. Agrawal. The highest-risk providers will be subject to 
the fingerprinting requirement.
    As a result of those activities, we have revoked--and 
through the re-validation process, we have revoked over 17,000 
providers since the ACA and deactivated an additional 260,000.
    Ms. Norton. For example, for what kinds of abuses or 
fraud--or is it fraud?
    Mr. Agrawal. All manner of activities. Really, wherever 
they do not meet our requirements. So lack of appropriate 
licensure would result in a revocation. The presence of certain 
felony convictions on criminal background checks would result 
in revocation. Failure to disclose information required on the 
Medicare application or to report that accurately.
    Ms. Norton. So would these providers be barred, period, 
permanently barred?
    Mr. Agrawal. We--the actions that we take, of course, are 
governed by the authorities that we have. Revocation allows us 
to remove these providers for, I think--I believe up to a 
maximum of 3 years, based on the infringement.
    Beyond that, law enforcement has exclusion authority that 
lasts for longer and is more sort of widespread in its impact, 
and we do work with law enforcement on utilizing that 
authority.
    Ms. Norton. Have you had occasion to refer any of these to 
the U.S. Attorney or other law enforcement?
    Mr. Agrawal. Yes. We actively work with law enforcement on 
referrals, but, also, even prior to the referral.
    So I think we have given law enforcement an unprecedented 
access to CMS data, realtime access to our systems, the same 
that we utilize in our analytical work.
    And then, as cases develop, we are in regular connection 
with law enforcement about cases that they may be interested in 
and ultimately do make formal referrals that they can choose to 
accept.
    We also work with them on the entire investigational 
process, as they deem necessary, to provide them additional 
data or, you know, any assistance that we can.
    Ms. Norton. I am interested in this temporary moratorium. 
This is apparently a new authority under the ACA for new 
Medicare providers and suppliers.
    What would evoke that? And how does it work?
    Mr. Agrawal. Sure. So since the ACA, we have implemented 
essentially two phases of the moratoria essentially against 
home health agencies--or newly enrolling home health agencies 
and newly enrolling ambulance suppliers in a few different 
geographies across the country.
    Before implementing that moratorium--this was a big step 
because it is a--I think a notably important piece of authority 
that we were granted.
    Before implementing it, we worked very closely with law 
enforcement to make sure we were looking at the right 
geographies and the right provider types.
    We worked with State Medicaid agencies and across the 
Agency, across CMS, to ensure that we are going after the right 
areas and, also, not having--or potentially would have a 
deleterious effect on the access to care.
    Well, we ultimately chose both the geographies and the 
provider types were markets that were saturated by these 
provider types, roughly, 3 to 5 percent higher market 
saturation in home health agencies and ambulance suppliers than 
the average, you know, geography across the country.
    So far, the moratoria have been in place for--the first 
phase was put in in July of last year, a second phase in 
January. We continue to monitor both cost issues as well as 
access to care, and we have not noted any access issues thus 
far.
    I would say the moratorium has been a useful tool. I 
believe law enforcement finds it a useful tool as, essentially, 
a pause in the program so that no new providers enter a 
geography and bad actors can meanwhile be rooted out.
    Just as examples of work that we have done, we have revoked 
over 100 home health agencies in Miami alone, more than half of 
those during the moratorium period, and 170 revocations of 
ambulance suppliers in Texas.
    Ms. Norton. Now, how do you keep beneficiaries from being 
affected, particularly with that large number in one location?
    Mr. Agrawal. Right. That is absolutely a priority of ours. 
We started by choosing areas that were very saturated to begin 
with. These are not areas where access to home health services 
or ambulance services was threatened in any way. Even MedPAC 
had agreed that both of these provider types, as well as the 
geographies, were appropriate to go after.
    Since implementing them, we have, you know, stayed in 
constant contact with the specialty societies that oversee 
these areas.
    We have worked with State Medicaid agencies, with CMS 
regional offices that directly receive complaints from either 
providers or beneficiaries, to monitor for access-to-care 
issues. And as I stated earlier, we have not identified those 
issues so far.
    Ms. Norton. Finally, Ms. King, have you had occasion, since 
these are new authorities, to look at their effectiveness and 
their implementation?
    Ms. King. We have not. We evaluated the enrollment process 
just as these new authorities were going online, but we have 
not been back to look at it yet.
    But we concur that front-end strategies on the enrollment 
side--that making sure that the right providers are enrolled 
and the ones that are at risk for being fraudulent are 
prevented from being enrolled is a very effective strategy.
    Ms. Norton. Thank you very much.
    Mr. Lankford. Let me just run through some quick questions, 
and then we are nearing the end. So the end is near.
    I want to confirm again the percent of patient files pulled 
for a RAC audit. You have used the 1 percent number several 
times. Is that accurate, around 1 percent, or you say 1 percent 
or less?
    Ms. King. The 1 percent actually is not just the RAC 
audits. It is all the post-payment audits.
    Mr. Lankford. Okay. That is in every category, whether that 
be durable medical equipment, physical therapy, hospitals, 
labs, whatever it may be? In every category, it is 1 percent or 
less?
    Ms. King. Yes.
    Mr. Lankford. Okay.
    Ms. King. Well, the aggregate number is less than 1 
percent.
    Mr. Lankford. That is what I am asking----
    Ms. King. Yes.
    Mr. Lankford. --for each category.
    Are there categories that are higher--that are considered 
more high risk and, so, there are more that are pulled in in 
that category?
    Ms. King. I don't know the answer to that.
    Mr. Lankford. Do you, Dr. Agrawal?
    Mr. Agrawal. I can't answer the claim question. But in 
terms of prioritization, we clearly do focus on high improper 
payment rate areas.
    I think that is a requirement of the contractor itself, of 
the program, that we focus on areas where the improper payment 
rate is just much higher than in other areas.
    So you would expect to see a greater portion of audits in, 
say, for example, durable medical equipment or home health 
agency services because those are where a lot of the improper 
payments are----
    Mr. Lankford. That is what I am trying to figure out.
    Is that category higher than 1 percent of what is pulled?
    Ms. King. You know, we can look into this. But I believe 
that most of the RAC audits are focused on the part A side, 
even though that the rate--the rate of improper payments is 
higher in durable medical equipment and home health providers, 
but the actual dollar amounts of the improper payments are 
higher----
    Mr. Lankford. Sure.
    Ms. King. --on part A.
    Mr. Lankford. Where you have larger bills, whether it is 
part A, it is going to be larger than what is going to be in 
part B and most of the smaller providers. So I would understand 
that, but it may be large to them.
    So if you have got a--again, going back to the physical 
therapy clinic, privately owned, fewer number of patients 
there, it may be a very big deal to them to have 2 percent of 
their files pulled than it would be to a hospital, as far as 
just general overhead.
    Okay. Dr. Agrawal, you mentioned as well about good actors 
in this, the possibility--and I heard a lot of, you know, 
variances of that to put it in the maybe is possible. You know, 
we are looking at statements in it for good actors that are out 
there.
    Once they have gone through, they have proved it to do 
well, they didn't have a lot of inaccuracies, how do we slow 
down the process so they are not coming just as fast to them, 
again, coming to, again, an entity that is set up to do 
compliance now more than it is to take care of people? Where 
are we on that? Give me the process.
    Mr. Agrawal. Sure. So one solution that has been proposed 
is to lower the volume of medical record requests that could go 
to a provider that in previous requests has actually had a low 
denial or overpayment determination rate.
    That, I think, is a good idea. We have heard it from a 
number of sources, and we are implementing that approach in our 
next round of RAC contracts precisely so that providers that 
have been audited, that have done well in the audits and shown 
that they are following the rules will face fewer audits and 
lower volumes going forward.
    Mr. Lankford. Okay. Is that less frequency of audits or is 
that they are grabbing a smaller number of files when they 
come, they are coming just as often, they are maybe just doing 
half of 1 percent rather than 1 percent, or are they coming 
maybe only once every 2 years so they are in their building 
less often?
    Mr. Agrawal. I would have to confirm. I know the volume, 
you know, per audit will be decreased, but I have to confirm if 
the frequency would also be----
    Mr. Lankford. Okay. I would just recommend to you both are 
important, especially to part B folks. They are trying to run a 
business and, if they prove to be good actors in this, the 
frequency matters to them.
    When they have to stop--now, obviously, the volume that is 
being withheld from them, not being paid to them, makes a big 
difference for them making payroll.
    But it is also extremely important they are able to focus 
on their business and not every 60 days, 90 days, have to stop 
and do another one of these if they have already proven they 
are doing well, they are following the rules.
    So I would recommend to you both, both frequency and number 
of files that they are pulling.
    Has there been a study to look at the compliance costs for 
the providers?
    Mr. Ritchie, you mentioned before around $700 million has 
been recovered this year. Is that correct?
    Mr. Ritchie. Yes.
    Mr. Lankford. Okay. Do we know what the compliance cost is? 
Has anyone seen a figure for that?
    Ms. King. Not to my knowledge.
    Mr. Lankford. Because in most of the regulations that are 
out there, when they are promulgated, there is an estimated 
compliance cost for the promulgation of the rule it has to go 
through, based on the number of requirements.
    The question is: Do we now know with more certainty what 
the actual compliance cost is? Where would I get that?
    Ms. King. I am not aware that such a study has been done. 
We have not done one.
    Mr. Lankford. Okay.
    Mr. Ritchie. We haven't either. I am not aware of it.
    Mr. Lankford. Okay. I can go back and look at the beginning 
because, when it was originally promulgated, there would have 
had to have been an initial estimate that was put out at that 
time as well.
    I'll go back and pull that. We'll work through that on our 
side, since we don't know of another one that has been done 
since then.
    Then last set of questions here on this.
    The pausing of the RACs. Administrator Tavenner and I have 
had a conversation that, when there is an intermediary change, 
very typically when the intermediary changes to a new one, what 
happen is the old intermediary starts losing employees quickly 
and they are trying to still maintain all the RAC audits during 
that time period with fewer and fewer staff, but everyone is 
leaving because that company is shutting down or shifting to a 
different spot.
    The other company is still trying to fire up and to be able 
to get ready. So it is very slow. But the speed of RACs can be 
the same across that, though the old intermediary can't keep up 
and the new intermediary can't keep up and you have got a drag 
there in response time.
    So my conversation has been, ``Can we reduce the number of 
RACs during that transition time when the intermediary 
changes?''
    If the authority exists to do that, where is the authority 
to also slow down the process to allow us to catch up on this 
backlog somewhat, to look at it and say, ``We are still going 
to continue to do this. We have got to slow this down''?
    Because if we are approaching a million files sitting out 
there with more still coming, they will never catch up. It 
doesn't matter how much we fund it. We are not going to catch 
up. And that is a lot of money to be held from individuals.
    What is the conversation out there related to that?
    Mr. Agrawal. Yeah. So we do realize that, as we procure the 
next round of RAC contractors, that there is a sort of 
transition issue.
    What we have done is paused the RAC program during this 
transition. What we don't want to happen is for one contractor 
to initiate an audit and for a second contractor to then 
complete that audit.
    So we are working----
    Mr. Lankford. Happens all the time.
    Mr. Agrawal. --we are working to avoid it this time.
    So the last round of audits were initiated--or were 
permitted to be initiated at beginning of February. Those 
audits must be completed in a timely manner so that--and then 
the RACs--the current batch of RACs can wind down and then the 
new batch of RACs can wind up.
    During this pause, we are also, you know, using it to--
taking advantage of it to alter the RAC program based on input 
that we have gotten from providers and other stakeholders to 
make it more transparent to providers, to provide more 
education and to make sure that it is focused on all areas of 
improper payment.
    Mr. Lankford. And when will that be public?
    Mr. Agrawal. The procurement process is going on right now. 
We are following, you know, sort of standard Federal 
procurement requirements.
    There are statements of work that I--you know, in order to 
be--to actually get proposals that either have hit or will soon 
hit, you know, public transparency and contractors will be able 
to respond to.
    Mr. Lankford. Okay. Any other final comments?
    Well, I appreciate----
    Ms. King. No, sir.
    Mr. Lankford. Okay. I appreciate you being here and for the 
conversation. Your work is extremely important both in 
transparency and in helping us deal with improper payments and 
fraud.
    But I think you have heard from this committee pretty 
clearly we need a balance. We need providers. Right now with 
what is happening in healthcare across the country, we are 
losing providers, and anything that discourages a provider from 
continuing to stay open makes the problem worse.
    We have more seniors every day joining into Medicare, and 
we have a problem with providers staying in, based on 
reimbursements and based on just sheer compliance and the 
frustration of that.
    This is reaching a really bad spot, and we have got to make 
sure we are working with providers to keep the good actors and 
then weed out the bad actors and educate those that just made a 
mistake rather than push them out of business.
    So, with that, we are adjourned.
    Ms. King. Thank you.
    Mr. Agrawal. Thank you.
    [Whereupon, at 12:01 p.m., the subcommittee was adjourned.]


                                APPENDIX

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               Material Submitted for the Hearing Record


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