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


 
                MEDICARE PROGRAM INTEGRITY: SCREENING OUT 
                         ERRORS, FRAUD, AND ABUSE

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 25, 2014

                               __________

                           Serial No. 113-156
                           
                           
                           
                           
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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               FRANK PALLONE, Jr., New Jersey
JOSEPH R. PITTS, Pennsylvania        BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon                  ANNA G. ESHOO, California
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey                Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas                    JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia     BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado               PETER WELCH, Vermont
MIKE POMPEO, Kansas                  BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois             PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia         JOHN A. YARMUTH, Kentucky
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MARSHA BLACKBURN, Tennessee          BRUCE L. BRALEY, Iowa
PHIL GINGREY, Georgia                BEN RAY LUJAN, New Mexico
STEVE SCALISE, Louisiana             JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
PETE OLSON, Texas                    KATHY CASTOR, Florida
CORY GARDNER, Colorado               PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
BILL JOHNSON, Ohio                   JOHN A. YARMUTH, Kentucky
BILLY LONG, Missouri                 GENE GREEN, Texas
RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the state 
  of Colorado, opening statement.................................     4
Hon. Fred Upton, a Representative in Congress from the state of 
  Michigan, opening statement....................................
    Prepared statement...........................................     6
Hon. Henry A. Waxman, a Representative in Congress from the state 
  of California, opening statement...............................     8

                               Witnesses

Shantanu Agrawal, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, Centers for Medicare and Medicaid 
  Services.......................................................    10
    Prepared statement...........................................    12
    Answers to submitted questions...............................   105
Gary Cantrell, Deputy Inspector General, Investigations, Office 
  of Inspector General, Department of Health and Human Services..    24
    Prepared statement...........................................    26
    Answers to submitted questions...............................   138
Kathleen M. King, Director, Health Care, U.S. Government 
  Accountability Office..........................................    39
    Prepared statement...........................................    41
    Answers to submitted questions...............................   154

                           Submitted Material

Subcommittee memorandum..........................................    96
Department of Health and Human Services memorandum, submitted by 
  Mrs. Ellmers...................................................   103


   MEDICARE PROGRAM INTEGRITY: SCREENING OUT ERRORS, FRAUD, AND ABUSE

                              ----------                              


                        WEDNESDAY, JUNE 25, 2014

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:03 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Members present: Murphy, Burgess, Blackburn, Olson, 
Griffith, Johnson, Long, Ellmers, Upton (ex officio), DeGette, 
Braley, Schakowsky, Tonko, Green, and Waxman (ex officio).
    Staff present: Clay Alspach, Chief Counsel, Health; Gary 
Andres, Staff Director; Matt Bravo, Professional Staff Member; 
Leighton Brown, Press Assistant; Karen Christian, Chief 
Counsel, Oversight; Noelle Clemente, Press Secretary; Brad 
Grantz, Policy Coordinator, O&I Brittany Havens, Legislative 
Clerk; Sean Hayes, Deputy Chief Counsel, O&I Robert Horne, 
Professional Staff Member, Health; Emily Newman, Counsel, O&I 
Macey Sevcik, Press Assistant; Alan Slobodin, Deputy Chief 
Counsel, Oversight; Josh Trent, Professional Staff Member, 
Health; Tom Wilbur, Digital Media Advisor; Peter Bodner, 
Democratic Counsel; Brian Cohen, Democratic Staff Director, 
Oversight and Investigations, Senior Policy Advisor; Lisa 
Goldman, Democratic Counsel; Elizabeth Letter, Democratic Press 
Secretary; and Stephen Salsbury, Democratic Investigator.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good morning. I convene this hearing of the 
Subcommittee on Oversight and Investigations. Today we will be 
revisiting a subject that every member of this committee 
believes has gone on for far too long: the fraud, waste, and 
abuse rampant in our Medicare program.
    Last year the Medicare program helped finance the medical 
services of approximately 51 million individuals and in doing 
so spent approximately $604 billion. Sadly, a budget that large 
makes the program a high target for fraud and abuse. Last year 
the Centers for Medicare and Medicaid Services estimated that 
improper payments were almost $50 billion. Outside news reports 
have also pegged the amount lost to fraud as high as $60 
billion. This is a shocking amount of taxpayer money to lose 
every year, especially considering that some experts tell us 
that we do not even know the full extent of the problem. These 
financial losses are simply unacceptable.
    To someone unfamiliar with the topic, some of the ways the 
government improperly pays out Medicare funding may seem 
completely unbelievable. For example, according to the 
Department of Health and Human Services Office of Inspector 
General, just a few years ago the Federal Government managed to 
pay out $23 million in Medicare funding to dead people. One 
news story involved an Ohio doctor learning that he was the CEO 
of a medical practice only when a reporter called him to ask 
about it, and the practice he was allegedly running. Just a 
mailbox. Earlier this month news broke about an accusation that 
one doctor in California was able to help facilitate 
approximately $22 million in inappropriate Medicare payments 
for wheelchairs. The economics of this also incentivize abusing 
the Medicare program as well. Last year the Department of 
Justice issued a release noting that an individual was able to 
bill Medicare $6,000 for a wheelchair that cost $900 wholesale.
    These are but a few of the more darkly humorous examples. 
But this is no laughing matter. Quite frankly, it is a national 
outrage.
    It is not only the stories or amounts of money that should 
shock us all but also the length of time the government has 
allowed this to continue. Since 1990, 24 years ago, the 
Government Accountability Office has designated the Medicare 
program as a high risk for fraud and abuse, a quarter century 
of wasted taxpayer dollars. When does it all stop? Think for a 
moment about a single company in the private sector that could 
lose this much money, year after year. How could they still be 
in business today?
    We recognize that the administration is attempting to solve 
this problem. In the past few years CMS has implemented new 
programs to provide enhanced screening for certain categories 
of providers. If a provider is servicing an area that typically 
is more susceptible to fraud, they may undergo additional 
scrutiny. I hope today to hear about how this is working and 
the number of fraudulent providers that have been stopped 
before they even entered the Medicare system.
    Meanwhile, the administration testified before the 
Committee on Ways and Means earlier this year on new 
collaborations with state governments on ways to combat 
fraudsters from moving their Medicare or Medicaid schemes from 
one state to another. I hope to also hear an update on this 
today.
    One of the main problems in the past with Medicare fraud 
was that those combatting it often relied on a pay-and-chase 
model, that is, pay out claims for Medicare, learn of potential 
fraudulent activity, and then try to stop the fraud. Our 
government simply must do better. Today I hope to hear about 
ways the administration is using new methods to use analytics 
to stop fraud before it happens. With the technological 
advances that the Medicare program has seen in its lifetime it 
simply should be much more difficult for individuals to defraud 
the program.
    And one of the easiest ways to prevent fraud on the system 
and protect Medicare patients is by excluding the bad actors 
who have committed crimes in the past, that is, make sure 
there's a pre-approved list of providers. Yet, news reports 
indicate that doctors who should not be billing Medicare 
continue to do so. Earlier this year one news outlet reported 
that several doctors who had a lost a medical license were 
still able to bill the Medicare program for millions of 
dollars.
    Committee staff has identified more problems as well. At 
least 14 individuals convicted of FDA-related crimes--health 
providers that have been debarred by the FDA--do not appear to 
be excluded from the Medicare program. Worse, 6 doctors 
debarred by the FDA actually were paid over $1 million in 
Medicare payments in 2012.
    Finally, today I hope we hear about the steps that can be 
taken to further combat fraud. GAO has recommended some common 
sense steps that would reduce fraud, such as removing social 
security numbers from Medicare cards, but CMS has yet to 
implement this recommendation.
    I want to thank the witnesses for joining us. And by the 
way, I also want to note that last night HHS and CMS finally 
released their report to Congress on the second implementation 
of the fraud prevention system. We are pleased we finally got 
this. We hope that these new technologies can yield even 
greater returns in the future. And I believe this is a 
committee that pushed for this, and we are pleased we finally 
got that. Unfortunately, it was last night, so we haven't had a 
chance to review it fully. It is 9 months late, and if we are 
truly serious about combatting Medicare fraud, we can't have 
these delays.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    I convene this hearing of the Subcommittee on Oversight and 
Investigations. Today we will be revisiting a subject that I 
and every Member of this Committee believe has gone on for far 
too long: the fraud, waste, and abuse rampant in our Medicare 
program.
    Last year the Medicare program helped finance the medical 
services of approximately 51 million individuals and in doing 
so spent approximately $604 billion. Sadly, a budget that large 
makes the program a high target for fraud and abuse. Last year 
the Centers for Medicare and Medicaid Services estimated that 
improper payments were almost $50 billion. Outside news reports 
have also pegged the amount lost to fraud as high as $60 
billion. This is a shocking amount of taxpayer money to lose 
every year, especially considering that some experts tell us 
that we do not even know the full extent of the problem. These 
financial losses are simply unacceptable.
    To someone unfamiliar with the topic, some of the ways the 
government improperly pays out Medicare funding may seem 
completely unbelievable. For example, according to the 
Department of Health and Human Services Office of Inspector 
General, just a few years ago the federal government managed to 
pay out $23 million in Medicare funding to dead people. One 
news story involved an Ohio doctor learning that he was the CEO 
of a medical practice only when a reporter called him to ask 
about it; and the ``practice'' that he was allegedly running? 
Just a mailbox. Earlier this month news broke about an 
accusation that one doctor in California was able to help 
facilitate approximately $22 million in inappropriate Medicare 
payments for wheelchairs. The economics of this also 
incentivize abusing the Medicare program as well-last year the 
Department of Justice issued a release noting that an 
individual was able to bill Medicare $6,000 for a wheelchair 
that cost $900 wholesale. These are but a few of the more 
humorous examples. But this is no laughing matter: it should be 
a national outrage.
    It is not only the stories or amounts of money that should 
shock you, but also the length of time the government has 
allowed this to continue. Since 1990--24 years ago-the 
Government Accountability Office has designated the Medicare 
program as a high risk for fraud and abuse. A quarter century 
of wasted taxpayer dollars--when does it stop? Think for a 
moment about a single company in the private sector that could 
lose this much money, year after year, and still be in business 
today.
    We recognize that the administration is attempting to solve 
this problem. In the past few years CMS has implemented new 
programs to provide enhanced screening for certain categories 
of providers. If a provider is servicing an area that typically 
is more susceptible to fraud, they may undergo additional 
scrutiny. I hope today to hear about how this is working and 
the number of fraudulent providers that have been stopped 
before they even entered the Medicare system. Meanwhile, the 
administration testified before the Committee on Ways and Means 
earlier this year on new collaborations with state governments 
on ways to combat fraudsters from moving their Medicare or 
Medicaid schemes from one state to another. I hope to also hear 
an update on this today.
    One of the main problems in the past with Medicare fraud 
was that those combatting it often relied on a ``pay and 
chase'' model. That is: pay out claims for Medicare, learn of 
potentially fraudulent activity, then try to stop the fraud. 
Our government simply must do better. Today I hope to hear 
about ways the administration is using new methods to use 
analytics to stop fraud before it happens--with the 
technological advances that the Medicare program has seen in 
its lifetime it simply should be much more difficult for 
individuals to defraud the program.
    And one of the easiest ways to prevent fraud on the system 
and protect Medicare patients is by excluding the bad actors 
who have committed crimes in the past. Yet, news reports 
indicate that doctors who should not be billing Medicare 
continue to do so: Earlier this year one news outlet reported 
that several doctors who had lost a medical license were still 
able to bill the Medicare program for millions of dollars. 
Committee staff has identified more problems as well: at least 
14 individuals convicted of FDA-related crimes--health 
providers that have been debarred by the FDA--do not appear to 
be excluded from the Medicare program. Worse, 6 doctors 
debarred by the FDA actually were paid over $1 million in 
Medicare payments in 2012.
    Finally, today I hope we will hear about the steps that can 
be taken to further combat fraud. GAO has recommended some 
common sense steps that would reduce fraud, such as removing 
social security numbers from Medicare cards, but CMS has yet to 
implement this recommendation. I would like to thank the 
witnesses joining us today-you all have the ability to save the 
American taxpayer a massive amount of money, and we hope to 
hear from you today on how you plan to do that.

    Mr. Murphy. But now I would like to recognize the ranking 
member of this committee, Ms. DeGette, for 5 minutes.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you very much, Mr. Chairman. This is the 
third hearing that the committee has had on Medicare fraud in 
the last 3 years, and I think it is perfectly appropriate to do 
that. Medicare fraud wastes money and endangers the care of 
seniors and the disabled. That is why I think we can work in a 
bipartisan way, and I am pleased.
    We have witnesses today from CMS, the HHS Inspector 
General, and the GAO with us. I appreciate all of you joining 
us and look forward to hearing your perspective on where we 
stand and what we need to do to further reduce Medicare fraud, 
waste, and abuse.
    The administration has also made some important strides in 
this area. The Healthcare Fraud Prevention and Enforcement 
Action, or HEAT Teams, a joint effort between HHS and DOJ, have 
played a critical role in these efforts. Medicare strike forces 
are a key component of HEAT, interagency teams of analysts, 
investigators, and prosecutors who can target emerging or 
migrating fraud schemes, including fraud by criminals masking 
as healthcare providers or suppliers. These efforts have 
produced immediate returns. In fiscal year 2012, the government 
recovered $4.2 billion in fraud, and from 2009 through 2012, it 
has returned a record-breaking $14.9 billion to taxpayers, more 
than doubling returns compared to the previous 4 years. CMS has 
also implemented many of the new tools provided to the agency 
under the Affordable Care Act. These new provisions of law have 
marked a dramatic shift in the way CMS fights fraud, moving 
from the old pay-and-chase model to the newer and much more 
effective approach of keeping fraudulent providers out of the 
Medicare system entirely.
    New Medicare providers are screened before they are allowed 
into the program. Providers in risky programs face additional 
scrutiny. CMS has embarked on an ambitious project to 
revalidate the enrollments of all existing 1.5 million Medicare 
providers and suppliers by 2015. This revalidation effort has 
deactivated or revoked almost 200,000 providers so far.
    The Affordable Care Act also limits the ability of 
fraudulent providers and suppliers to move from state to state 
or program to program by requiring all states to terminate 
providers whose billing privileges have been revoked by 
Medicare or have been terminated by another state Medicaid 
program for costs. And the administration has invested in 
predictive analytic tools that use algorithms and other 
sophisticated information technology to identify potentially 
fraudulent behavior. This technology has resulted in leads for 
more than 500 new fraud investigations and has provided new 
information for more than 500 existing investigations.
    Mr. Chairman, this is good news, but we also have some 
unfinished work for CMS that we are going to hear from the IG 
and GAO about. I am particularly concerned about reports that 
Medicare Part C and D plans may not be doing enough to identify 
and report fraud. The private Part C and D providers are 
popular with many beneficiaries and have become a key and 
growing part of Medicare, and that is why we need to make sure 
that they are doing as much as traditional Medicare to fight 
fraud.
    And finally, Mr. Chairman, Congress needs to do our part, 
especially when it comes to financial support for the fraud 
fighters. Sequestration meant that the CMS program integrity 
funding declined in the last 2 years, and the majority staff's 
official hearing memo describes how funding cuts for the OIG 
will limit the agency's ability to carry out its mission, 
forcing staff reductions of over 200 people and forcing the IG 
to close over 2,000 investigative complaints and cut Medicare 
and Medicaid oversight by 20 percent. So at the same time we 
are trying to increase a robust program of oversight, we are 
cutting the funding for investigations. Now, I think we can all 
agree, this is penny-wise and pound-foolish. There is 
bipartisan agreement that we need to do more to wipe out 
Medicare fraud, and there is bipartisan agreement that every 
dollar spent to reduce fraud brings back more than a dollar in 
return.
    So we should fix this problem. I know a number of members 
on this and other committees have discussed bipartisan fraud 
prevention legislation. We should work diligently on that to 
give the CMS the tools they need to fight fraud, and we need to 
make sure that all of the fraud fighters have the funding they 
need to do this important work. And I yield back, Mr. Chairman.
    Mr. Murphy. The gentlewoman yields back. I now recognize 
the Chairman of the Full Committee, Mr. Upton, for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman. I do share my 
colleagues' frustration on this issue for sure. It was 24 years 
ago when the GAO first announced the Medicare program was a big 
high risk for fraud and abuse. The program's financial 
sustainability has also been under threat for years. This 
committee has routinely, on a bipartisan basis, conducted 
oversight of the Medicare program in an effort to eliminate 
waste, fraud and abuse. Our goal is to save taxpayer dollars 
and strengthen the program. While rooting out waste, fraud, and 
abuse cannot alone keep the promise of Medicare, it is an 
important step that has the potential to benefit both seniors 
as well as taxpayers.
    To our witnesses here today, we have got a simple question. 
How can the government continue losing tens of billions of 
taxpayer dollars every year?
    For years, HHS has relied on a pay-and-chase model to 
recover Medicare losses, learning far too late that fraudsters 
routinely tricked the Federal Government into paying them. But 
today there are some predictive methods that can help the 
government detect the fraud before the payments go out the 
door.
    I hope that today's witnesses will do more to make these 
tools work.
    We should not pay potential fraudsters a dime, let alone 
the billions we actually do. All taxpayers, and those relying 
on Medicare, deserve better.
    Thank you for being here.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    I share my colleagues' frustration on this issue. It was 24 
years ago when the Government Accountability Office first 
announced the Medicare program was a high risk for fraud and 
abuse. The program's financial sustainability has also been 
under threat for years. This committee has routinely conducted 
oversight of the Medicare program in an effort to eliminate 
waste, fraud, and abuse. Our goal is to save taxpayer dollars 
and strengthen the program. While rooting out waste, fraud, and 
abuse cannot alone keep the promise of Medicare, it is an 
important step that has the potential to benefit both seniors 
and taxpayers.
    To our witnesses here today, we have a simple question: How 
can the government continue losing tens of billions of taxpayer 
dollars every year?
    For years, the Department of Health and Human Services has 
relied on a pay-and-chase model to recover Medicare losses, 
learning far too late that fraudsters routinely tricked the 
federal government into paying them. But today there are some 
predictive methods that can help the government detect the 
fraud before the payments go out the door. I hope that today's 
witnesses will do more to make these tools work. We should not 
pay potential fraudsters a dime, let alone the billions we 
actually do. All taxpayers, and those relying on the Medicare 
program, deserve better.
    To our witnesses here today: thank you for being here. I 
realize that bad actors will always be present. But we need to 
do better. I hope that today we can have a productive 
discussion about how we can finally move to a fraud-free 
Medicare system.

    Mr. Upton. I yield now to Dr. Burgess.
    Mr. Burgess. I thank the chairman for yielding and, too, 
want to welcome our witnesses. I appreciate your being here.
    Earlier this year, the CEO of a Texas hospital chain was 
indicted for defrauding the government of $18 million. The 
money continued to flow from the Center for Medicare and 
Medicaid Services despite the hospital's long record of patient 
safety violations and billing fraud. Conditions at these 
facilities were bad. Patients died. In 2012, regulators moved 
to cut off funds, but a few months later, other officials at 
the Center for Medicare and Medicaid Services provided well 
over $1 million to these hospitals.
    This case in Texas raises broader questions about CMS's 
ability to prevent improper payments to fraudulent or even 
dangerous providers. Providers that are excluded from one 
federal program because of improper or illegal conduct can 
often continue to be paid by other programs. It is my belief 
that providers that have been banned from federal programs for 
wrongdoing should be excluded from all federal programs. 
Period. The incident in Texas prompted me to work with Chairman 
Upton and Mr. Barton. We sent a letter to CMS and the Office of 
Inspector General. We asked about the screening of providers 
receiving Medicare payments and other types of federal funds. 
Dr. Agrawal was kind enough to come into my office to brief me 
in response to these letters. They have been very helpful and 
informative, but you still can't help but be disappointed to 
learn that little progress has been made in this area over 
several decades.
    Numerous audits have been performed. Recommendations have 
been made in ways to improve the system. Through the miracle of 
Google you can find these recommendations going back well over 
20 years. But 2 decades later, these recommendations continue 
to be ignored, and taxpayers continue to lose money. The fact 
is that the Center for Medicare and Medicaid Services is not 
doing all they can to prevent this type of fraud and abuse of 
the system. You have the authority to implement tools to 
prevent abuse. Yet, you have not done so. We are here today to 
find out why.
    I look forward to hearing from our witnesses today and 
yield the balance of the time to the vice chair of the Full 
Committee, Ms. Blackburn.
    Mrs. Blackburn. Thank you, Dr. Burgess, and I want to 
welcome all of you. You have heard us talk about Medicare 
fraud, and we know that it is tens of billions of dollars. And 
it seems like it continues despite RAC audits and ZPICS and 
CERTS and the additional authorities that you all at CMS have 
been given, and we still have a permissive approach that allows 
providers with questionable backgrounds to continue to bill 
taxpayers. We have heard about doctors enrolled in Medicare who 
have been convicted of crimes. We have heard about companies 
that have been found guilty of fraud that are continuing to 
benefit. They rename themselves. They stay in the process.
    People are sick of this. And what we want to hear from you 
today is what are you going to do about it? If you can't clean 
it up, let me tell you what. We are going to clean it up. But 
this is something that just absolutely has to stop. It is not 
your money. It is not the Federal Government's money. It is the 
money of the taxpayer and they are fed up with the inept 
attitudes and approaches that are coming out of some of these 
agencies.
    So we thank you for being here. We are concerned about the 
persistence of this issue, and we look forward to solving it. I 
yield back.
    Mr. Murphy. The gentlelady yields back, and now I will 
recognize the ranking member of the Full Committee, Mr. Waxman, 
for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Mr. Chairman, I appreciate your holding this 
hearing today. I care passionately about the Medicare program, 
and I want to make sure that we are doing everything we can to 
wipe out fraud. When I was chairman of this committee, we held 
hearings and passed legislation as part of the Affordable Care 
Act that gave CMS new authorities, new resources and a whole 
new approach to reducing fraud.
    We are going to hear today about some of the successes of 
that new approach. We are also going to hear from Members of 
the Congress' outrage if there is any fraud. Well, it is 
outrageous to have any fraud, but it is also outrageous for 
Members of Congress to say this is outrageous, we are going to 
solve the problem, and then not hear a solution.
    We are seeing some progress. We have seen increases in 
enforcement, recovery for the taxpayers of that money that has 
been taken by fraud, and questionable providers have been 
kicked out of the program. CMS is using new, predictive 
analytics to sniff out and take action against fraud. And I 
know the IG and GAO will tell us about the work that CMS still 
has left to do, and I expect the agency to take additional 
action to fully implement the Affordable Care Act's anti-fraud 
provisions and to address other concerns raised by the experts 
of these two agencies.
    I suppose one of the things the Republicans want to do to 
solve this problem is repeal the Affordable Care Act anti-fraud 
provisions which they would have done in over 50 times they 
have tried to get the Congress to repeal the whole law, 
everything.
    We should be working in a bipartisan way in Congress to 
address anti-fraud funding shortfalls caused by the sequester 
and close gaps in Medicare law identified by the administration 
and by GAO and by the IG. There is no reason we can't work 
together on these issues, unless we just want to use them for 
talking points in an election year or the year before the next 
election.
    But Mr. Chairman, we need to address Medicare waste, fraud, 
and abuse. We need to look at all three of these areas, and 
probably the biggest source of waste of taxpayer funds in 
Medicare are the high prices that Medicare Part D plans pay for 
prescription drugs.
    Mr. Chairman, last week I wrote a letter to you and 
Chairman Upton requesting that the committee hold a hearing on 
the implications of the high cost on the Medicare Part D 
program of Sovaldi, the new Hepatitis C drug manufactured by 
Gilead Pharmaceuticals, and I hope we hold this hearing. 
Sovaldi has been hailed as a breakthrough treatment for 
individuals suffering from Hepatitis C, but it is costly: 
$1,000 per pill, or $84,000 for the entire 12-week course of 
treatment. And there are an estimated 350,000 Medicare Part D 
beneficiaries with Hepatitis C.
    As a result, a recent analysis was done by researchers from 
Georgetown University and Kaiser Family Foundation that said 
Medicare Part D will be spending $6.5 billion or 8 percent in 
2015 for this one drug.
    Mr. Chairman, this problem is exacerbated by the fact that 
Medicare Part D plans are not able to effectively negotiate for 
lower prices for Sovaldi or any other drug. While Gilead 
provides substantial discounts on the drug in other countries, 
and for the VA and the Medicaid program, these discounts are 
not available to Medicare Part D plans.
    The result of this inability of Medicare Part D plans to 
negotiate for lower drug prices is the waste of hundreds of 
billions of taxpayers' dollars. This is a problem we should 
solve, at least examine. I hope this committee will hold a 
hearing, but I have written a lot of letters asking for 
hearings and if it affects the fossil fuel industry, forget 
about it. If it affects the pharmaceutical industry, well, they 
are big campaign contributors. But we ought to look into this 
issue.
    We could save money, and we could be doing the Medicare 
program a great service and we could be doing people who need 
this drug a great service. At least we ought to look at the 
problem.
    But today's hearing on reducing Medicare fraud is useful. 
Let us approach it in a constructive manner. I thank the 
witnesses for being here today, and I yield back the balance of 
my time.
    Mr. Murphy. The gentleman yields back. And I would like to 
introduce the witnesses on the panel for today's hearing. Dr. 
Shantanu Agrawal. Did I say that correctly?
    Dr. Agrawal. That is correct.
    Mr. Murphy. Thank you. The Deputy Administrator and 
Director of the Center for Program Integrity of the Centers for 
Medicare and Medicaid Services. Mr. Gary Cantrell is a Deputy 
Inspector General for Investigations, the Office of Inspector 
General at the Department of Health and Human Services. Today 
Mr. Cantrell is accompanied by Ms. Gloria Jarmon. She is the 
Deputy Inspector General for Audit Services in the Office of 
Inspector General at the Department of Health and Human 
Services. Ms. Kathleen King is the Director of Health Care at 
the U.S. Government Accountability Office.
    I will now swear in the witnesses. You are aware that the 
committee is holding and investigative hearing and when doing 
so has the practice of taking testimony under oath. Do any of 
you have any objections to testifying under oath?
    None of the witnesses have indicated that. So the chair 
then advises you that under the rules of the House and the 
rules of the committee, you are entitled to be advised by 
counsel. Do any of you desire to be advised by counsel during 
your testimony today?
    All the witnesses decline that. So in that case, would you 
all please rise and raise your right hand and I will swear you 
in?
    [Witnesses sworn.]
    Mr. Murphy. Thank you. All of the witnesses said yes, so 
you are now under oath and subject to the penalties set forth 
in Title 18, Section 1001 of United States Code.
    I will ask all of you to give a 5-minute opening statement 
summary. Dr. Agrawal, we will begin with you.

 STATEMENT OF SHANTANU AGRAWAL, M.D., DEPUTY ADMINISTRATOR AND 
 DIRECTOR, CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE 
AND MEDICAID SERVICES; GARY CANTRELL, DEPUTY INSPECTOR GENERAL, 
  INVESTIGATIONS, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF 
  HEALTH AND HUMAN SERVICES; AND KATHLEEN M. KING, DIRECTOR, 
       HEALTH CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

                 STATEMENT OF SHANTANU AGRAWAL

    Dr. Agrawal. Thank you. Chairman Murphy, Ranking Member 
DeGette, and members of the committee and subcommittee, thank 
you for the invitation to discuss the Centers for Medicare & 
Medicaid Services' program integrity efforts. Enhancing program 
integrity is a top priority for the administration and an 
agency-wide effort at CMS. We share a commitment to protecting 
beneficiaries and ensuring taxpayer dollars are spent on 
legitimate items and services. I would like to make three major 
points in my oral remarks this morning. First, our work in 
implementing new provider enrollment and screening standards at 
CMS has had significant, tangible program integrity impacts and 
moved us firmly towards prevention on these issues.
    Second, we recognize that further work remains to improve 
our safeguards, and we are taking specific, proactive steps 
toward those improvements. And finally, one of our many tools 
is our advanced predictive analytic system, the fraud-
prevention system, which has continued to develop and deliver a 
positive return on investment in just the second year of 
operation. That ROI has been certified by the Office of 
Inspector General.
    Thanks in part to the authorities and resources provided by 
the Affordable Care Act and the Small Business Jobs Act of 
2010, CMS is changing the program integrity paradigm toward a 
focus on prevention to identify and combat waste, abuse, and 
fraud in our system. Our enhanced screening requires certain 
categories of providers and suppliers that have historically 
posed the higher risk of fraud to undergo greater scrutiny 
prior to their enrollment in Medicare.
    The Affordable Care Act also required CMS to revalidate all 
existing 1.5 million Medicare suppliers and providers under the 
new screening requirements. We have real, tangible results from 
these efforts to share. Since March 25, 2011, more than 930,000 
providers and suppliers have been subject to these new 
screening and validation requirements. Over 350,000 providers 
and suppliers have had their billing privileges deactivated as 
a result of revalidation and other screening efforts, and over 
20,000 providers and suppliers have had their billing 
privileges entirely revoked. Just since the start of this year, 
CMS has revoked over 800 providers for lack of appropriate 
licensure. These deactivations and revocations mean these 
providers can no longer bill or be paid by Medicare.
    Our experiences with provider screening tell us that there 
is more work to be done to continue to enhance the screening 
process. We already rely on over 200 databases in our current 
screening processes, but challenges remain. For example, CMS 
has historically relied on Medicare exclusion and GSA debarment 
data to identify relevant felony convictions because there is 
not a centralized or automated means of obtaining felony 
conviction data. Using these databases on an automated basis, 
CMS ensures that individuals convicted of healthcare fraud, 
related crimes or other conduct that bars them from contracting 
with the Federal Government are denied enrollment to Medicare 
or swiftly removed from the program as part of our routine 
screening and validation.
    However, to address the lack of an off-the-shelf solution 
for all criminal data, CMS is developing a process to match 
enrollment data against numerous public and private data 
sources to ensure receipt of timely conviction data. 
Additionally, in April 2014, CMS announced that high-risk 
providers will now be subject to fingerprint-based background 
checks to gain or maintain billing privileges for Medicare.
    We are also applying our enrollment and screening processes 
more broadly. Just a few weeks ago, CMS issued a final rule to 
extend enrollment requirements to Part D which prevents revoked 
or excluded providers from prescribing to Medicare 
beneficiaries. The same rule also allows us to use data from 
the Drug Enforcement Agency to ensure prescribers are 
appropriately licensed to prescribe certain drugs and enable 
CMS to remove them from Medicare when the DEA has taken an 
action against an individual's license.
    In addition to enhanced provider screening procedures, CMS 
is using private-sector tools and best practices to stop 
improper payments of all types. Since June 2012, the fraud 
prevention system has applied advanced analytics on all 
Medicare fee-for-service claims on a streaming national basis. 
In its second year of operations and through over 70 active 
models in the system, FPS identified or prevented more than 
$210 million in improper Medicare payments, double the previous 
year, and resulted in CMS taking action against 938 providers 
and suppliers. The tool is part of CMS comprehensive program 
integrity strategy. For example, the FPS is used as part of an 
agency focus on home health services in South Florida which 
includes our screening processes, implementation of an 
enrollment moratorium, on-the-ground investigations and 
collaboration with law enforcement.
    CMS is expanding the use of FPS beyond the initial focus on 
identifying potential fraud into the areas of waste and abuse 
which we expect to increase future savings. While we have made 
significant progress to address areas of vulnerability, we also 
know that more work remains to further refine our efforts and 
prevent improper payments and fraud in the first place.
    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, I think very 
importantly, beneficiaries' access to safe, high-quality care. 
Thank you.
    [The prepared statement of Dr. Agrawal follows:]
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    Mr. Murphy. Thank you. Mr. Cantrell, you have 5 minutes.

                   STATEMENT OF GARY CANTRELL

    Mr. Cantrell. Good morning, Mr. Chairman, and other 
distinguished members of the committee. I am Gary Cantrell, 
Deputy IG for Investigations, and I am joined today by my 
colleague, Gloria Jarmon, who is Deputy IG for Audit Services.
    Thank you for the opportunity to testify about OIG's 
efforts to fight fraud, waste and abuse in Medicare and 
Medicaid. OIG utilizes a range of tools in this fight including 
audits, evaluations, investigations, enforcement authorities 
and educational outreach. We focus our resources on areas most 
vulnerable to fraud so we obtain the greatest impact from our 
work.
    OIG works closely with the Department of Justice, CMS, and 
other federal and state law enforcement partners to bring those 
who commit fraud against our programs to justice. Our Medicare 
fraud strike force teams, located in nine cities throughout the 
country, exemplify this approach. The OIG and our partners are 
committed to fighting and preventing fraud, waste, and abuse.
    Our efforts have produced impressive results. In 2013, our 
work resulted in record numbers of criminal convictions and 
civil actions, and over the last 5 years, we have recovered 
more than $19 billion from those defrauding federal healthcare 
programs, and our return on investment is over $8 for every 
dollar spent. Perhaps even more important, we are seeing strong 
indicators of a deterrent effect. When we work together to shed 
light on program vulnerabilities, put criminals behind bars and 
CMS takes appropriate administrative actions, our efforts are 
most successful. We have seen significant declines in Medicare 
payments across several program areas in strike force cities 
where we focused our efforts.
    For example, following federal enforcement and oversight 
activities, there have been sustained declines in Medicare 
payments for DME, home health, ambulance, and community mental 
health centers, or CMHCs. Nationwide, Medicare payments for 
CMHCs have decreased by approximately $250 million annually.
    Total Medicare payments for ambulance services in Houston 
are down approximately 50 percent. Miami area DME payments have 
decreased by approximately $100 million annually since the 
launch of the strike force. And since 2010, home health 
payments have decreased nationally more than $1 billion 
annually.
    Despite these successes, more needs to be done. Fraud 
schemes are constantly evolving and migrating, and some of the 
IG's top oversight priorities include the rise in prescription 
drug fraud and schemes involving home base services.
    Rarely are these schemes perpetrated by one provider 
operating independently. There is often a network of 
individuals including business owners, patient recruiters, 
healthcare practitioners, and sometimes even the patients. 
Kickbacks in the form of cash or drugs bind these networks 
together.
    The federal forfeitures are a valuable tool to help defund 
and disrupt illegal activities and can serve as a powerful 
deterrent. Empowering OIG to execute forfeiture warrants would 
help curb the profitability of healthcare fraud and exert a 
deterrent effect. Removing Social Security numbers from 
Medicare cards could also protect patient data and disrupt 
fraud schemes. The theft of patient and provider data underpins 
many of our cases. In a recent case, criminals perpetrated a 
$100 million fraud scheme by stealing the identities of doctors 
and thousands of patients.
    In conclusion, I must note that OIG's mission is challenged 
by declining resources at a time when our oversight 
responsibilities are growing. OIG is responsible for oversight 
of about 25 cents of every federal dollar. However, since 2012, 
we have lost 200 employees and expect to reduce our Medicare 
and Medicaid oversight by 20 percent by the end of the fiscal 
year. Now is not the time to reduce oversight in the face of a 
growing and changing program, and OIG is a proven investment. 
We would appreciate the committee's support in securing full 
funding of OIG's 2015 budget request. And thank you for the 
interest and opportunity to testify. We would be happy to 
answer any questions.
    [The prepared statement of Mr. Cantrell follows:]
    [GRAPHICS NOT AVAILABLE TIFF FORMAT]
               
    Mr. Murphy. Thank you. Ms. Jarmon, I don't think you have a 
statement, do you?
    Ms. Jarmon. No.
    Mr. Murphy. Ms. King, do you have a statement? Thank you. 
You are recognized for 5 minutes.

                 STATEMENT OF KATHLEEN M. KING

    Ms. King. I do. Chairman Murphy, Ranking Member DeGett,e 
and members of the subcommittee, thank you for inviting me to 
talk about our work regarding Medicare fraud, waste, and abuse. 
CMS has made progress in implementing several recommendations 
we identified through our work to help protect Medicare from 
fraud and improper payments. But there are additional actions 
they should take.
    I want to focus my remarks today on three areas: provider 
enrollment, pre- and post-payment claims review and addressing 
vulnerabilities to fraud.
    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. These are positive steps.
    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 taken against providers such 
as payment suspensions, and it has not published regulations 
establishing the core elements of compliance programs or 
requirements for surety bonds for certain types of at-risk 
providers, including home health agencies.
    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 in 
claims processing systems that can prevent payment of improper 
claims. Post-payment reviews are those that are made after the 
fact and recover payments. We have found some weaknesses in the 
use of pre-payment edits and have made a number of 
recommendations to CMS to promote the implementation of 
effective edits regarding national policies and to encourage 
more widespread use of local pre-payment edits by Medicare 
administrative contractors.
    With respect to post-payment claims review, we recently 
completed work that recommended greater consistency in the 
requirements under which four post-payment review contractors 
operate when it can be done without reducing the efforts to 
reduce improper payments. CMS agreed with our recommendations 
and is taking steps to implement them.
    We also recommended to CMS that they collect and evaluate 
how quickly one type of post-payment review contractor, the 
Zone Program Integrity Contractors, or ZPICS, takes action 
against suspect providers. CMS did not comment on this 
recommendation.
    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.
    With respect to vulnerabilities to fraud, we have made 
recommendations to CMS over the last several years, and CMS has 
implemented several of them, including establishing a single 
vulnerability tracking process and requiring the MACs to report 
on how they have addressed vulnerabilities. However, CMS has 
not taken action to address our recommendations to remove 
Social Security numbers from Medicare cards because display of 
these numbers increases beneficiaries' vulnerability to 
identity theft. We continue to believe that CMS should act on 
our recommendations, and we are currently studying the use of 
electronic card technologies, such as smart cards, for Medicare 
cards, including potential benefits and limitations and 
barriers to implementation.
    Because Medicare is such a large and complex program, it is 
vulnerable to fraud and abuse. Constant vigilance is required 
to prevent, detect and deter fraud so that Medicare can 
continue to meet the needs of its beneficiaries.
    I would be happy to answer questions. Thank you.
    [The prepared statement of Ms. King follows:]
    [GRAPHICS NOT AVAILABLE TIFF FORMAT]   
        
    Mr. Murphy. Thank you. I thank all the witnesses. I will 
now begin some questions for 5 minutes. Dr. Agrawal, you need 
to know whether the agency's actions have been successful in 
reducing fraud and abuse, and one way that the agencies examine 
the effect on this is by measuring performance as required by 
the Government Performance and Results Act of 1993 as amended 
by the GPRA Modernization Act. One of CMS's goals is to fight 
fraud and work when they've made improper payment. Isn't that 
right?
    Dr. Agrawal. We are absolutely focused on the improper 
payment rate and working to reduce that rate.
    Mr. Murphy. And isn't it correct that CMS's target improper 
payment rate for Medicare fee for service for fiscal year 2013 
was 8.3 percent? Is that about what the target was?
    Dr. Agrawal. Yes.
    Mr. Murphy. Now, that translates to about $36 billion in 
losses. So what I don't understand is why is it acceptable to 
have about a $36 billion loss rate that is acceptable?
    Dr. Agrawal. I don't think it is about acceptability, sir. 
We are focused on the improper payment rate and reducing that 
rate as much as feasible.
    I will say just two points on the improper payment rate. 
One is it is not equivalent to the fraud rate. Improper 
payments do not measure the amount of criminal behavior that is 
in the Medicare program. That is often an area of confusion I 
find among stakeholders. Second, what it really does I think 
show, demonstrate, is the ability of providers to follow our 
strict payment guidelines and requirements, namely and most 
particularly, documentation requirements. So we see for example 
areas where the improper payment rate continues to rise, like 
certain institutional providers, DME suppliers, home health 
services, and we do think----
    Mr. Murphy. It went up for 2013 for you to 10.7 percent, I 
think.
    Dr. Agrawal. Well, I think what we have done is institute a 
lot more specific requirements in those areas in order to 
reduce fraud, waste and abuse. Those requirements can take time 
for providers to catch up with, and what we see is 
documentation lags and the improper payment rate goes up.
    Mr. Murphy. I guess I am concerned about that you went from 
8.5 percent to 10.7 percent which says it is getting worse.
    Dr. Agrawal. Again, I think it is an outcome of our more 
stringent requirements. I think this shows the balancing act 
between trying to be very strong on program integrity which is 
really enforced by strong rules and regulations and then those 
rules and regulations being difficult for providers to follow.
    Mr. Murphy. The bottom line up front, though, is you didn't 
meet your goals and it is getting worse.
    Dr. Agrawal. Correct. Well, we did not meet our goal, and 
we have taken proactive steps to help reverse that trend. One 
is we work very closely with providers to help educate them on 
our rules to make sure that they are able to follow our rules, 
follow our documentation requirements. We have instituted point 
audits that allow us to look at specific----
    Mr. Murphy. I get all that. I am just saying bottom line 
for taxpayers is the amount of money that has been done in 
improper payments is greater than the entire budget of the 
State of Pennsylvania. So I hope you will improve that.
    Let me ask this. I am trying to find ways that can 
facilitate you on this because you are probably familiar with 
that old quote from the bank robber Willie Sutton why he robbed 
banks, and he says because that is where the money is. So with 
$600 billion in Medicare spending, that looks like a ripe 
target for a lot of people. But the fact that he was convicted 
as a bank robber, I believe the way the laws and regulations 
are written right now, those types of criminal convictions 
wouldn't prevent you from giving someone Medicare payments, am 
I correct? They could still slip through the system?
    Dr. Agrawal. Certain convictions we can revoke from the 
Medicare program for----
    Mr. Murphy. Would bank robbery be one of them?
    Dr. Agrawal. Felony convictions? So I am no lawyer. I 
assume bank robbery is a felony conviction.
    Mr. Murphy. A felony conviction.
    Dr. Agrawal. If it is a felony conviction, then yes, we can 
kick people out of the Medicare program.
    Mr. Murphy. I just want to be sure. Mr. Cantrell, would you 
know if someone with some felony conviction--we are trying to 
improve this. So if it is not there, I would like to know. 
Insurance fraud, auto insurance fraud, tax fraud. I believe tax 
fraud is still acceptable, that they wouldn't be kicked out of 
the program. Do either of you know that?
    Mr. Cantrell. As it relates to our exclusion authority?
    Mr. Murphy. Yes.
    Mr. Cantrell. There are requirements that link it to in 
connection with the delivery of a healthcare item or service.
    Mr. Murphy. But if it is not healthcare. So if someone was 
involved with auto insurance fraud or assault or convicted of 
clinical research fraud, if it is not health, right, they can 
still be a Medicare provider, am I correct----
    Dr. Agrawal. We have----
    Mr. Murphy [continuing]. The way the law is currently 
written?
    Dr. Agrawal. We have very proscribed guidelines for what we 
can revoke for. They are four types of felony convictions.
    Mr. Murphy. I am trying to help you so----
    Dr. Agrawal. These are not----
    Mr. Murphy. If you would like it stricter, we need to know 
this. So if someone has a history of criminal fraud, criminal 
felony behavior, and you can't exclude them, I think one of the 
best predictors of future problems is past. And if someone has 
a pattern of this, can they still slip through and be a 
provider for Medicare?
    Dr. Agrawal. Yes, I think the agency agrees with you, sir. 
In fact, we have taken steps in the last year to put out a 
proposed rule that would actually expand our use of this felony 
conviction.
    Mr. Murphy. Well, we would like to work with you on that. 
Let me ask one other thing. Can someone with a foreign address 
or just a box number also be a Medicare provider? Do you go 
through and check those records?
    Dr. Agrawal. We do check records. We have automated checks 
for addresses as well as the ability to conduct on-site visits 
to make sure that these are legitimate places of business.
    Mr. Murphy. Can someone with a foreign address be a 
Medicare provider?
    Dr. Agrawal. I would have to check specifically on that, 
but I believe the answer is no.
    Mr. Murphy. OK. We will find out. Ms. DeGette, you are 
recognized for 5 minutes.
    Ms. DeGette. Dr. Agrawal, in your testimony you discussed 
how taxpayers get a significant return on investments to reduce 
Medicare fraud, is that right?
    Dr. Agrawal. Yes.
    Ms. DeGette. And I have been told for each dollar we spend, 
we save more than a dollar. Is that right?
    Dr. Agrawal. Yes.
    Ms. DeGette. Why is that true?
    Dr. Agrawal. Our activities are having impact. I think we 
have clearly----
    Ms. DeGette. But why for each dollar that we spend do we 
save more than a dollar?
    Dr. Agrawal. I think our activities have a cumulative 
effect, so they can actually prevent dollars from going out the 
door in the first place. They have sentinel effects where we 
see impact beyond just the specific providers and suppliers 
that we are looking at. I think all those things cumulatively 
lead to that higher ROI.
    Ms. DeGette. It is a systemic issue?
    Dr. Agrawal. Correct.
    Ms. DeGette. OK. And what are the sources of funds for CMS 
program integrity efforts?
    Dr. Agrawal. We have a variety of funds. We have both 
Medicare and Medicaid funds. We have Small Business Jobs Act 
funds that are connected, for example, to the FPS, HCFAC funds.
    Ms. DeGette. How much will CMS spend this year on Medicare 
and Medicaid program integrity efforts?
    Dr. Agrawal. I would have to come back to you with a 
specific number. I am not sure about----
    Ms. DeGette. I would appreciate it----
    Dr. Agrawal [continuing]. The total application----
    Ms. DeGette [continuing]. If you would supplement your 
response.
    Dr. Agrawal. Absolutely.
    Ms. DeGette. Do you remember how much you spent in 2012?
    Dr. Agrawal. No, ma'am.
    Ms. DeGette. OK. Do you know if there has been an increase 
or a reduction in funding for fighting fraud over the last 2 
years?
    Dr. Agrawal. Well, we have experienced between the 
sequester and then sort of flat-funding is a general flattening 
out of our funding and that has forced us to make certain 
budgetary decisions about what programs and tools to focus on.
    Ms. DeGette. Now, you mentioned the layoffs, and I talked 
about that in my opening statement. What other programmatic 
adjustments have you made?
    Dr. Agrawal. Well, I might just point out that the layoffs 
most significantly impacted the Office of Inspector General----
    Ms. DeGette. OK.
    Dr. Agrawal [continuing]. Which we take seriously obviously 
as well.
    Ms. DeGette. So Mr. Cantrell, maybe you can answer that.
    Mr. Cantrell. Sure. Our budget is primarily funded--our 
healthcare oversight is primarily funded by the Healthcare 
Fraud and Abuse Control Act, and that fund is--we get about 
$300 million a year. But with sequestration, it takes about $14 
million out of that healthcare oversight fund. We have another 
funding stream that we call our discretionary fund that funds 
all of our other activity related to the Department of Health 
and Human Services but not the Medicare and Medicaid programs.
    Ms. DeGette. Have you made programmatic adjustments to 
account for the budget cuts or have you just laid people off?
    Mr. Cantrell. We haven't laid people off. We have lost 
people through attrition.
    Ms. DeGette. OK.
    Mr. Cantrell. We have reduced investments in things like 
training, equipment----
    Ms. DeGette. Now you have fewer people doing the job.
    Mr. Cantrell. That is correct.
    Ms. DeGette. Right?
    Mr. Cantrell. That is correct.
    Ms. DeGette. So are you trying to make them figure out how 
to do the job more efficiently?
    Mr. Cantrell. We do. We are trying to focus our work on the 
areas where we can have the greatest impact. So the biggest 
thing we are doing is picking our work. There is much more work 
in this program than we have the ability to do. So we are being 
very strategic about the work that we select, and placing our 
resources in areas where they can have the greatest impact is 
our strategy here.
    Ms. DeGette. So this is really a situation. If we 
adequately funded you, then you could actually do more 
investigations and pick more cases, correct?
    Mr. Cantrell. Absolutely.
    Ms. DeGette. Now, for either one of you who knows the 
answer to this, while we have been having a slight reduction in 
the funding, at the same time, the Medicare population has 
increased and Medicare expenditures have increased. Is that 
correct, Dr. Agrawal?
    Dr. Agrawal. That is correct.
    Ms. DeGette. You know, Mr. Chairman, I think that there are 
some things you can do by efficiencies and by being smart and 
so on. But when you cut $30 million from CMS's integrity 
efforts, I am not sure how much you can make up for that.
    Dr. Agrawal, the administration has asked for significant 
increase in program integrity funding for fiscal year 2015, 
over $400 million. Is that correct?
    Dr. Agrawal. Yes.
    Ms. DeGette. And what would you do with that funding?
    Dr. Agrawal. That funding would really allow us to expand 
programs that we know have impact. As an example, our prior 
authorization demo could be expanded nationally into program 
areas that it doesn't currently cover. We know that that could 
have impact.
    Ms. DeGette. Do you think that would assist you?
    Dr. Agrawal. Absolutely.
    Ms. DeGette. Perhaps you can also add to your supplement, 
to your testimony, some of the things, some of your plans for 
this money if Congress appropriates the money.
    Dr. Agrawal. I will do that.
    Ms. DeGette. OK. Thanks. Mr. Cantrell, let us see, what 
would you be able to do with the funding if we adequately 
funded your agency?
    Mr. Cantrell. Well, first we would hire more investigators, 
auditors, evaluators, attorneys to support the work that we are 
doing and actually have more boots on the grounds performing 
this type of oversight work. We also need investments in 
technology. As we deploy electronic health record systems 
throughout the country and that becomes a greater adoption of 
EHR, that creates digital evidence that we have to collect, 
store, maintain and sort through. So we need investments in 
technology to maintain, to kind of stay above water here in 
this area that continues to evolve.
    Ms. DeGette. Thank you. Thank you, Mr. Chairman. I yield 
back.
    Mr. Murphy. Thank you. Now I recognize Mr. Burgess, or Dr. 
Burgess, for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman. So again, I 
appreciate everyone being here this morning. If I understood 
your testimony correct, we are doing a great job. If you just 
give us a little bit more money, we will do a better job, and 
yet the problem continues. Year after year after year we are 
here having these same hearings.
    Let me just ask--I have got questions that I must ask, but 
at the same time, I feel obligated to make the statement that, 
yes, I supported the sequester. It was a policy that I 
supported, but it was the President who signed it into law. 
Now, we all knew after the President signed it into law that it 
was going to affect the Department of Health and Human Services 
significantly at a time when the President's healthcare law was 
being implemented. So I had asked repeatedly for someone, the 
Secretary of HHS, to come to this committee and talk about how 
you were going to deal with an 8- to 10-percent reduction in 
across-the-board funding, how were you going to prioritize. I 
would think, Mr. Cantrell, you would prioritize your 
department. I don't know why you would prioritize money going 
to build an exchange that you then had to reinvest when they 
didn't build the exchange the right way. But I am not the head 
of HHS, so I don't make those decisions. So please forgive me 
if I am a little bit circumspect about people coming in here 
and saying more money for my agency, more money for my agency, 
when my God, you have wasted so much money in that agency in 
the last 4 years that it is just absolutely astounding.
    Now, let us get to the reason why we are here. Mr. 
Cantrell, do you have recommendations, your office, the Office 
of Inspector General, have recommendations and have you made 
recommendations to the Centers for Medicare and Medicaid 
Services relating to improvements in the screening of providers 
that have not been adopted?
    Ms. Jarmon. I can answer that question. We have several 
recommendations. In fact, we posted in March 2014 a compendium 
of priority recommendations that are unimplemented, and that 
has over 100 recommendations to CMS, many related to Medicare 
and Medicaid payment and process issues and some related to 
quality of care. So we do have several recommendations that we 
have been working with CMS, and they have been unimplemented 
but----
    Mr. Burgess. Let me just ask----
    Ms. Jarmon [continuing]. We are still working with them.
    Mr. Burgess [continuing]. The question, Dr. Agrawal or Mr. 
Cantrell. What is the status of the implementations of those 
recommendations from the Office of Inspector General?
    Dr. Agrawal. You know, we have appreciated the 
recommendations that are provided to us, both by the OIG as 
well as GAO. We work diligently to implement those 
recommendations based on our ability to do so, and budgetary 
and other resource constraints.
    Since January 2013, we have completed or closed out over 60 
recommendations provided to us by GAO and OIG. We continue to 
work through the remaining recommendations in order of priority 
based on their potential impact on our program. But we do 
appreciate those recommendations.
    Mr. Burgess. Will you provide to the committee a list of 
those recommendations that have been made which have not yet 
been implemented? Are you able to do that?
    Dr. Agrawal. I can do that.
    Mr. Burgess. And the committee would appreciate that 
information.
    There was an article in Bloomberg not too terribly long ago 
talking about doctors who have lost their licenses and 
continued to get paid by Medicare. I mean, I always lived in 
fear--as a practicing physician, I always lived in fear of 
getting a bad mark at the National Practitioner Data Bank. I 
would assume that all of these doctors have recorded activity 
in the National Practitioner Data Banks. Dr. Agrawal, do you 
query the National Practitioner Data Bank when you authorize or 
when you permit someone to bill the Medicare system?
    Dr. Agrawal. Yes. And I share your feelings about my 
medical license as well, Dr. Burgess. It is something that I 
guard very carefully and want to make sure is untarnished.
    We access a lot of different data sources including the 
NPDB and over 200 other data sources to check things like 
licensure. As I said in my opening remarks, we revoked over 800 
providers just since the beginning of this year for licensure 
issues. This was an area of vulnerability for us, even a couple 
of years ago, that we have really worked hard to close by 
getting access to all the right data at the state level so that 
we can do automated checks on licenses literally every week and 
revoke any providers that don't have appropriate licensure.
    Mr. Burgess. You know, a lot of the substance of this 
hearing came about because of the local article in the 
newspaper back home where you had a doctor, a CEO of a hospital 
chain, who had received $17 million from the stimulus to 
improve medical records in his system. And then it was found 
that the medical records were boxed up and sitting in the 
basement being eaten by rodents. So I guess you would classify 
that as meaningless use of health information technology. But 
yet, at the same time, with this bad and egregious an offense, 
he continues to get paid by CMS. Is this just a one-off or are 
there other such stories out there in the country?
    Dr. Agrawal. I think it is a notable case. It is one that I 
know well personally. I can tell you that we have a lot of 
checks in place to ensure that that kind of thing does not 
happen both before payments are made and after.
    Mr. Burgess. But it did happen.
    Dr. Agrawal. I agree that it did. I think in part this 
person was providing misleading information to the agency, and 
we were also made aware about law enforcement concerns well 
into their process. And I think OIG would agree here that early 
collaboration between our agencies is very helpful. That allows 
us to take the actions that we can take very quickly, and we 
can work with law enforcement to facilitate their actions as 
well.
    Mr. Burgess. Then do it.
    Mr. Murphy. Thank you.
    Mr. Burgess. Early collaboration is the key. I yield back, 
Mr. Chairman.
    Mr. Murphy. Just a quick question. When you are getting 
that clarifying data for the committee with regard to 
recommendations you have made that have not been implemented, 
if they have not been implemented, could you let us, with each 
one, explain some reason of why that is, if it is some federal 
action, if there is any state action, if states are not sending 
you data. That is extremely important. We want to help you, but 
we need to have that thorough report.
    I now recognize the gentleman from Texas, Mr. Green, for 5 
minutes.
    Mr. Green. Thank you, Mr. Chairman, and ranking member. Dr. 
Agrawal, can you tell me more about how the Affordable Care Act 
helps CMS in fighting Medicare fraud? Specifically, can you 
expand a little on CMS's provider enrollment and screening 
process?
    Dr. Agrawal. Absolutely, and thank you for the question. 
The Affordable Care Act has had significant impact on our 
ability to safeguard the program and particularly in the area 
of provider enrollment and screening. The ACA really required 
us to, for the first time, categorize providers based on the 
risk of fraud and subject higher risk providers to greater 
levels of scrutiny. That includes automated checks, site 
visits, fingerprinting. All of that was made possible by the 
Affordable Care Act.
    In addition, our moratorium authority, our requirement to 
revalidate all providers on a cyclic basis, again, comes out of 
the ACA.
    Mr. Green. OK. I appreciate it because some of the savings 
from the ACA was actually giving CMS the tools to go after the 
fraud. We would prefer not to read it on the front page of the 
papers before we can get to you.
    The health reform bill includes the authority for CMS enact 
moratorium on enrolling new providers. Has CMS used this new 
tool yet?
    Dr. Agrawal. We have. So we implemented the first moratoria 
last summer in July. We have moratoria in two different 
provider categories, ambulance services, and home health 
services in seven different metropolitan areas and are closely 
monitoring the impact of that moratorium.
    I should also say while the moratorium is in place, we have 
really stepped up our activities to make sure that we are 
taking action on the providers that are already in the 
moratoria area.
    Mr. Green. OK. Good. Because I represent the Houston area, 
and it seems like we are ground zero for some of the fraud, and 
I appreciate that. How does the moratorium help fight the 
fraud?
    Dr. Agrawal. Well, what the moratoria really allows us to 
do is essentially close the door for enrollment, in this case, 
for new ambulance services as in Houston or home health 
agencies in other parts of the country. That gives us an 
opportunity to clean up the providers or suppliers that are 
already there and work very closely with law enforcement. We 
actually work very closely with them in identifying these areas 
for the moratoria and then in the stepped-up activities to make 
sure that we are cleaning up those areas before eliminating the 
moratoria.
    Mr. Green. OK. The Affordable Care Act required Medicare 
providers to report and return overpayments once they are 
identified. Failing to do so would constitute a federal crime 
under the False Claims Act. Was this requirement necessary and 
have you seen evidence of providers complying with this 
requirement and is it being enforced?
    Dr. Agrawal. I am sorry, Mr. Congressman. I missed the 
beginning part of your question.
    Mr. Green. The Affordable Care Act required Medicare 
providers to report and return overpayments once they are 
identified, and failing to return those payments would 
constitute a federal crime under the False Claims Act. I was 
wondering if this is being enforced and how it is working.
    Dr. Agrawal. Yes, we published a proposed rule on this, and 
we are looking to finalize that. We do see providers actually 
taking just the statutory authority seriously itself and 
actually returning overpayments voluntarily. We have also 
promulgated another proposed rule that would actually have 
overpayments follow providers if they try to close down one 
location and open up another one. They will have to pay the 
overpayment before they can get into the program again.
    Mr. Green. OK. Ms. King, do you have a view on how CMS is 
doing at implementing the broad range of new Affordable Care 
Act anti-fraud positions? And after you, I would like to give 
Dr. Agrawal a chance to respond.
    Ms. King. Yes, we view the new provisions in the Affordable 
Care Act as a positive step because we are in favor of keeping 
people out of the program who shouldn't be in the program, and 
right now our investigative team has work under way to 
determine whether people are being kept out of the program as 
they should be and whether people who have committed bad acts 
and should be thrown out of the program are being thrown out. 
And we should be able to report on that by the end of the year.
    Mr. Green. OK. Thank you. Dr. Agrawal, do you have a 
comment on that, how CMS is doing with the GAO?
    Dr. Agrawal. Sure. And again, I appreciate Ms. King's 
comments and agree that their recommendations are very 
important. We have done a lot based on their recommendations to 
strengthen our program in Part D, in basic provider enrollment 
and screening. There are other recommendations that we continue 
to work through, but they are very helpful to us.
    Mr. Green. OK. Thank you, Mr. Chairman. I yield back.
    Mr. Murphy. Thank you. Now I recognize Ms. Blackburn for 5 
minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman. Dr. Agrawal, I 
want to come to you. You mentioned in your testimony that since 
2011, 20,000 providers and suppliers had their participation in 
Medicare revoked and some from felony convictions and some from 
administrative actions. And also, you mentioned that CMS has 
issued a proposed rule that would clarify the list of felony 
convictions that may result in a denial of participation. And 
yet, I have heard from constituents that some of these bad 
actors that are out there continue to do business because they 
change their names and they start a new business. But it is the 
same bad group of people. And we have seen this time and again, 
and I know the chairman, a couple of years ago, had a piece of 
legislation that went through judiciary, didn't get very far at 
the time. We need to bring it back. It would say if you have 
ever been convicted, you can in no way participate and benefit.
    GAO has recommended that CMS could potentially thwart this 
type of behavior by strengthening enrollment procedures as is 
currently authorized, and CMS could require additional 
disclosure information on the front end. And yet, according to 
GAO, it hasn't been done. My question to you is this. After 20 
years after being on a fraud high-risk list, when can the 
taxpayers expect to see results from some common-sense activity 
in this arena?
    Dr. Agrawal. Well, I think we clearly are seeing results, 
and I think you saw that in the testimony that I provided to 
the committee this morning that there are clear results of our 
activities. Now, I, too, am frustrated by the kind of case that 
you are identifying. If there are cases like that specific ones 
that we can work on with your office, I would be happy to do 
that.
    Let me just say that we are working toward strengthening 
disclosure requirements. We actually have a proposed rule that 
would require far more disclosure to resolve issues just like 
that so that we can actually prevent people from entering the 
program that are just changing names and switching from company 
to company. I think that kind of approach is indeed very 
frustrating, and we are working to expand our authorities to 
get greater clarity.
    Mrs. Blackburn. Well, you are not giving me the granular 
level that I am seeking. Tell me specifically what you are 
going to do because when I talk to my constituents, they say we 
want to know specifically what is going to be done about this. 
It is our money, and you are wasting it.
    Dr. Agrawal. Well, beyond the overall approach that I have 
described, there are two things that I think will affect the 
situation. One is we are expanding our ability to actually 
revoke or deny enrollment for a broader list of felony 
convictions than we currently are authorized to do, and second, 
we are requiring greater transparency at the time of attempted 
enrollment so that if there are overpayments from other 
enrollments that that provider had, we can actually deny 
enrollment until those overpayments are recovered. Those are 
two very specific things that I think will go directly at the 
cases that you are talking about.
    Mrs. Blackburn. But why did we let them in the program in 
the first place?
    Dr. Agrawal. Well, again, historically, I think Medicare 
has had a more open enrollment process than it has had since 
the passage of the Affordable Care Act. So we are working very 
diligently every day to clean up those records and hence, the 
numbers that you have seen of over 300,000 deactivations and 
over 20,000 revocations ----
    Mrs. Blackburn. OK. Does CMS give bonuses?
    Dr. Agrawal. Pardon me?
    Mrs. Blackburn. Does CMS give performance bonuses to 
employees?
    Dr. Agrawal. I am not sure. I don't really manage our HR 
function. I don't know what kind of bonuses----
    Mrs. Blackburn. Do you get a performance bonus?
    Dr. Agrawal [continuing]. That we do. I joined the agency 
in this role 3 \1/2\ months ago.
    Mrs. Blackburn. OK.
    Dr. Agrawal. I haven't qualified for bonuses.
    Mrs. Blackburn. Mr. Cantrell, did you get a performance 
bonus?
    Mr. Cantrell. We do pay performance bonuses in OIG based on 
our ranking of record.
    Mrs. Blackburn. OK. Ms. Jarmon, HHS, do they do performance 
bonuses?
    Ms. Jarmon. I am in the same office with Mr. Cantrell. 
There are performance bonuses based on performance.
    Mrs. Blackburn. OK. All right. Let me come back, Mr. 
Cantrell and then also--let me talk to you about this issue. I 
have got a prop back here.
    [Chart shown.]
    Mrs. Blackburn. Identity theft and privacy is a huge issue, 
and this is something we have tried repeatedly to get cleaned 
up. This is a copy of a Medicare card. Now, what we have that 
is a problem with identity theft, you have got the program, the 
health insurance program it is in, Medicare. You have got the 
name. And this Medicare claim number is the Social Security 
number. When are you going to delink these and make certain 
that a Social Security and a name do not appear on this card? 
When are you going to change that?
    Dr. Agrawal. I think you are probably asking me, not Mr. 
Cantrell. So we have----
    Mrs. Blackburn. I am sorry. I thought I called for you and 
then I would like to know from Ms. King, has GAO recommended 
doing this?
    Ms. King. We have.
    Mrs. Blackburn. OK. Back to you, Doctor.
    Dr. Agrawal. So this is an area----
    Mrs. Blackburn. Why not?
    Dr. Agrawal [continuing]. We have looked at. We have 
appreciated the recommendations. We are not, as an agency, 
opposed to the idea. It is, however, a challenging idea that 
requires a lot of sort of rigor to implement----
    Mrs. Blackburn. Do something. Take an action. Be brave.
    Dr. Agrawal. I think we need to be adequately resourced----
    Mrs. Blackburn. I yield back.
    Dr. Agrawal [continuing]. By the Congress to be able to do 
that. But yes, we appreciate the ability.
    Mr. Murphy. Dr. Agrawal, do you have the authority to make 
that decision to eliminate the Social Security number from the 
cards?
    Dr. Agrawal. I think we as an agency could do that. Again, 
however, as we have discussed this with the GAO, making this 
change would require changes to over 70 systems that CMS has. 
It would also require changes to state Medicaid agency systems, 
private insurers that deal with us in Part C and D as well as 
even potentially on the provider side. So there is quite a bit 
of burden across the healthcare community to make this change. 
Again, we are not opposed to it. I think as an agency we just 
need to be adequately resourced to be able to take on that 
challenge.
    Mr. Murphy. Just don't hire the same company that did the 
Obamacare rollout. You can do better. Ms. Schakowsky first.
    Ms. Schakowsky. I would like to talk a little bit about 
fraud and the Medicare Part D program. Dr. Agrawal, CNS 
released a Medicare Part D proposed rule in January of 2005. 
What steps did that rule take to reduce fraud in Medicare Part 
D?
    Dr. Agrawal. So just to clarify, this is the rule that we 
finalized now 3 weeks ago, or roughly 3 weeks ago, is that 
correct?
    Ms. Schakowsky. Yes.
    Dr. Agrawal. Yes. I think that rule is going to have really 
important impact for us in Part D. One thing is it extends our 
controls and safeguards in Parts A and B to Part D. It will 
actually require an enrollment of providers in the Medicare 
program to--even if all they do is prescribe in the Part D 
program. So we will have much more transparency into who those 
providers are, and I think importantly, we can keep revoked and 
excluded providers out of the Part D program so they can no 
longer prescribe.
    A second big impact is that it will allow us for the first 
time to go after abusive prescribing. So this will be not just 
those prescribers that have actually committed fraud but will 
allow us to go upstream of the problem and actually be much 
more preventive to make sure that prescribers that are 
endangering the safety and health of our beneficiaries, for 
example, can be taken action against and we can actually kick 
them out of the program.
    Ms. Schakowsky. So it is a financial issue, but also a 
health issue for a patient?
    Dr. Agrawal. Absolutely.
    Ms. Schakowsky. OK. So I appreciate these steps. Fraud in 
Part D appears to be a problem that is increasing, and it is 
important that CMS act quickly to nip this fraud in the bud.
    Mr. Chairman, fraud is not the only problem with Medicare 
Part D. Waste and abuse is also a problem. In particular, 
taxpayers and beneficiaries are forced to pay too much for 
prescription drugs because Medicare Part D plans are not able 
to negotiate for lower prices. The poster child for high 
Medicare Part D prices will soon be Sovaldi, which Mr. Waxman 
was talking about, the Hepatitis C drug manufactured by Gilead. 
The company charges $84,000 for a course of treatment. A recent 
analysis by researchers from Georgetown University and the 
Kaiser Family Foundation found that Medicare Part D coverage 
for Sovaldi alone would increase Medicare drug spending by $6.5 
billion, or 8 percent, in 2015 which is an astounding amount of 
money for one drug. While Gilead provides substantial discounts 
on this same drug in other countries and for the VA and the 
Medicaid program, these discounts are not available to Medicare 
Part D plans. According to the studies' authors, ``It is likely 
to be hard for Part D plans to have an impact on the price in 
the case of Sovaldi. Part D sponsors have little negotiating 
power.''
    Mr. Chairman, Sovaldi is not unique. Part D plans are not 
able to obtain significant discounts on many expensive drugs. 
So Mr. Cantrell, the Inspector General has conducted analyses 
of Part D drug prices and compared prices charged for the same 
drugs on Medicaid. Can you tell us what those investigations 
have found?
    Mr. Cantrell. I can tell you that Part D drug prices are 
higher. We are paying more in Medicare than we are in Medicaid, 
and our work has come out of the Office of Evaluation and 
Inspections and somewhat from the Office of Audit Services. So 
I will pass on to Ms. Jarmon.
    Ms. Schakowsky. OK.
    Ms. Jarmon. One of the things we have looked at are 
rebates--the Part D drug prices were higher than Medicaid 
prices because Medicaid received higher rebates. Average 
rebates for Medicaid drugs were 45 percent of the cost while 
average rebates from Part D drugs were only 19 percent of cost. 
And in the Compendium of Unimplemented Recommendations, we 
actually have several recommendations related to payment 
policies, looking at lab costs, and the differences between 
Medicare and Medicaid prices for these same services.
    Ms. Schakowsky. And how much would the--so you are saying 
that there is an administration proposal that would end the 
waste and require higher rebates for Part D drugs, is that 
right?
    Ms. Jarmon. I am not sure if there is a proposal.
    Ms. Schakowsky. Dr. Agrawal?
    Dr. Agrawal. There is. There is an item in the President's 
budget that would put Medicare payments on par with the 
Medicaid rebates.
    Ms. Schakowsky. And how much would that proposal save 
taxpayers?
    Dr. Agrawal. I would have to look back at the O Act 
estimation. I can get back to you about that.
    Ms. Schakowsky. OK. The number I have heard, and you can 
confirm it, is about $150 billion would be saved by that one 
change.
    Dr. Agrawal. Right.
    Ms. Schakowsky. And I would certainly support that change. 
Thank you, and I yield back.
    Mr. Murphy. Thank you. Now I recognize Mr. Olson for 5 
minutes.
    Mr. Olson. I thank the chair for having this hearing that 
is required by our rules. Welcome to all the witnesses. Before 
I get to my questions, I want to tell you about what Medicare 
fraud looks like back home in Texas 22, in Houston in 
particular. These are some stories that have been in local 
papers. January 24, 2014, ``Houston medical device supplier 
charged with $3.4 million in Medicare fraud.'' February 2, 2 
weeks later, Houston psychiatrist indicted for $158 million in 
Medicare fraud. February 29, Houston physician arrested in 
healthcare fraud conspiracy. In that case, CMS missed the fact 
that one person had been tested 1,000 times and billed those 
tests over a 3-year period. April 3 of 2014: ``Houston 
businesswoman convicted of $1.5 million in Medicare fraud.'' 
April 24, 3 weeks later: ``$70 million alleged healthcare scam 
busted in Texas.'' And finally, June 4 of 2014: ``Houston 
physician and four others indicted for $2.9 million in 
healthcare fraud in state and federal case.'' That is 6 months 
and $200 million in fraud in Houston. And that is what we have 
known. That is what has been charged, what has been put in the 
press. We know that it is much, much worse in Houston and all 
across America.
    One area of abuse is billing Medicare for ambulance 
services that aren't given or provided or needed. As was 
mentioned by some of our witnesses, Houston is one of seven 
cities in America that have a moratorium on new ambulance 
services under Medicare. And I believe, Mr. Cantrell, in your 
testimony you said that because of the moratorium, Houston's 
costs have gone down 50 percent since 2010. Is that correct?
    Mr. Cantrell. I am not linking it directly to the 
moratorium, sir, but based on our collective efforts, yes, our 
enforcement efforts and administrative efforts.
    Mr. Olson. You anticipate my question. So it is not due to 
moratorium. It may be due to putting people in jail as opposed 
to some sort of combination thereof?
    Mr. Cantrell. Absolutely. We think putting people in jail 
who commit these crimes is paramount to success in this area.
    Mr. Olson. Can you get us that data, separate the 
moratorium from actually putting people in jail? Is that 
possible?
    Mr. Cantrell. We haven't studied that, the impact of the 
moratoria. I don't know if Dr. Agrawal----
    Mr. Olson. Dr. Agrawal, any possibility of having that 
information?
    Dr. Agrawal. Well, we are monitoring the certain measures 
like utilization and cost in the moratoria area. I think 
statistically it is very hard to desegregate all the work that 
we are doing from the moratorium alone. In fact, we bring a 
package of activities between us and the Office of Inspector 
General that allow us to attack these problems head on. The 
moratorium is one component. We also have, as you saw the 
report, the fraud prevention system enrollment requirements. So 
I think all of those things together clearly have impact. It is 
very hard to desegregate and say that this is the impact of one 
of those things.
    Mr. Olson. Do you plan to expand the moratorium?
    Dr. Agrawal. Pardon me?
    Mr. Olson. Do you--expand the moratorium with the seven 
cities, make it go longer?
    Dr. Agrawal. Well, what we are doing currently, since this 
is a new authority and the first time that CMS has really 
implemented it, is that we are studying it to see what impact 
it does have, making sure that it plays a useful role in our 
toolbox and that it allows us to take action against providers 
that are already in those areas.
    So until we know the answers to those questions I think, 
given that it has a real impact on even potentially legitimate 
providers, we want to be careful about expanding that authority 
until we really have a sense of what it does for us.
    Mr. Olson. Any idea of when that timeframe will come out 
and when you can tell us this is working, we will expand it in 
a year, 2 years, 3 years, 4 years?
    Dr. Agrawal. Well, we are required by the statute to 
publish a federal register notice every 6 months in order to 
continue the moratorium or eliminate it or implement new ones. 
So we will be looking forward to publishing a notice within the 
next month with that decision.
    Mr. Olson. So if you expand it to the seven cities 
currently involved in the moratorium that you will take more 
cities, 12, 14, 15, 20, 25 to see if it is working? It seems to 
be working. Costs have gone down 50 percent since 2010. Let us 
go forward.
    Dr. Agrawal. Yes, again, I think we are very open to using 
this authority more. I think we just want to be able to know 
what its impact is and make sure that we are not negatively 
impacting legitimate providers or beneficiary access to care. I 
think that is really paramount for us as an agency.
    Mr. Olson. Thank you, and I have 47 seconds left. Mr. 
Burgess, would you like my time or----
    Mr. Burgess. Yes, let me just ask a question on the 
predictive modeling issue. Prior to the passage of the 
Affordable Care Act, was there any prohibition on using 
predictive modeling?
    Dr. Agrawal. Well, sir, in fact the predictive modeling 
became a requirement from the Small Business Jobs Act which 
preceded the ACA. There was no prohibition. I think what the 
Small Business Jobs act really gave us was the necessary 
funding to be able to implement this kind of advanced 
technology.
    Mr. Burgess. But predictive modeling has long been known, 
particularly among the credit card agencies. I mean, I don't 
know how many years they have used this, but it has been some 
time. It is a reliable way to cut down on fraud. One of the 
things I have never understood is why CMS has been so slow to 
embrace it. I will yield back.
    Mr. Murphy. Thank you. I now recognize Mr. Tonko for 5 
minutes.
    Mr. Tonko. Thank you, Mr. Chair, and welcome to our 
panelists. Yesterday the Second Annual Fraud Prevention System 
Report to Congress was released which detailed some of the 
accomplishments of CMS in the fiscal year 2013 to identify bad 
actors and again protect Medicare. If we could just visit those 
report findings for a moment, for starters, Dr. Agrawal, can 
you just give us a basic description of what the fraud 
prevention system is and just how it works?
    Dr. Agrawal. Sure. So the fraud prevention system is an 
advanced piece of technology. It allows us to perform 
predictive analytics and other kinds of analytics on claims in 
Medicare as they are streaming through the system in real time. 
So the Medicare program sees about 4.5 million claims per day. 
This allows us to more quickly and specifically identify those 
claims that need to be evaluated by our investigators, and 
further develop to see if they represent aberrancies or even 
fraud.
    Mr. Tonko. And beyond that, are there other things that 
enable your office to do that that was not previously 
available? Are there new opportunities here with that system?
    Dr. Agrawal. Yes. I think the system itself is a great 
piece of technology that allows us to, again it would be 
impossible for a human being to lay eyes on all 4.5 million 
claims per day. The fact that we have an automated system to 
pull out those claims and those providers that are really 
problematic is an amazing step forward for us.
    In addition to that, it allows us to do certain things as 
well, like simply deny claims that don't meet payment 
requirements, which is an ability that the agency had before 
but the FPS allows us to do it more flexibly and quickly.
    Mr. Tonko. And what kind of investment has been made by CMS 
in the prevention system?
    Dr. Agrawal. The Small Business Jobs Act came with about 
$100 million of funding for the fraud prevention system that we 
have been utilizing in its implementation. You know, as I think 
we have pointed out earlier, we implemented the system on a 
very rapid timeframe and actually exceeded the expectations of 
the statute by going to a national view as opposed to a 
regional view which the statute required initially. We have 
also shown good progress in the implementation, going from a 3-
to-1 ROI to now this year a 5-to-1 ROI that I would point out 
has actually been certified by the Office of Inspector General.
    Mr. Tonko. So any expanded opportunities there in terms of 
fiscal impact? You see it improving even beyond that?
    Dr. Agrawal. Yes. We have undertaken various measures to 
increase the value and return of the FPS. We are, for example, 
applying it against a wider spectrum of program integrity 
issues, actually using it to identify providers for medical 
review, as one example, being able to implement those automated 
edits as another example. We do look forward to the value of 
this program increasing.
    Mr. Tonko. OK. Thank you. And Mr. Cantrell, are you 
familiar with the FPS system and with the results that were 
released yesterday?
    Mr. Cantrell. I think Ms. Jarmon is the person to answer 
that question, if you don't mind.
    Mr. Tonko. Ms. Jarmon?
    Ms. Jarmon. Yes. It is not a part of the Office of 
Investigations--the OIG office of Audit Services actually did 
that work looking at the fraud prevention system the second 
year. The first year we weren't able to certify the information 
because of inconsistencies, and the second year we were able to 
certify both the unadjusted number, the number before 
adjustments, and the adjusted number to reflect what actually 
gets returned to the Medicare trust fund. We were able to 
certify both numbers in the report that went out late 
yesterday, the larger number being $210 million of unadjusted 
projected actual and projected savings, and the adjusted number 
of $54.2 million is a 1.34-to-1 return on investment.
    Mr. Tonko. And basically what is the significance of the 
certification?
    Ms. Jarmon. The significance is that the auditors actually 
looked at supporting documentation. They actually did work 
similar to financial audit work to determine the reasonableness 
of the numbers. So the numbers actually started out as the 
larger number, and we worked closely with CMS on any concerns 
we had if we couldn't directly associate these savings to the 
fraud prevention system so we really got comfortable with the 
unadjusted number. Like I said, it started out as a larger 
number. So it was the audit work that was done to make us feel 
comfortable that we could certify the numbers this year.
    Mr. Tonko. Thank you. And earlier you were quizzed as a 
panel about the legislative recommendations for further 
improvements in anti-fraud. Could any of you highlight which of 
those recommendations would be your top priority?
    Mr. Cantrell. From a law enforcement perspective, our 
ability to have asset seizure authority is important to OIG, 
but also removing the Social Security number from the Medicare 
beneficiary card is important from an identity theft 
perspective, preventing identity theft.
    Mr. Tonko. Do you all share that same priority?
    Ms. King. Yes. I think from our perspective the removal of 
the Social Security number from the cards is a very high 
priority.
    Mr. Tonko. OK, and Dr. Agrawal?
    Dr. Agrawal. Well, being from the agency that I am, I don't 
get to make the recommendations. I get to implement them. So, 
again, we look at all of them. There are others that I think 
have very high priority because of their impact on our 
enrollment and screening work. The SSN issue is one that we 
have looked at specifically. Again, we are open to that 
recommendation, but need to be resourced appropriately to meet 
its requirements.
    Mr. Tonko. Thank you very much. I yield back.
    Mr. Murphy. Thank you, Mr. Tonko. I would like to get some 
clarification on something the gentleman asked you. On page II 
of the Executive Summary of this document you released last 
night, the Report to Congress, Fraud Prevention, you indeed say 
in this little blue box, ``The results are a 5-to-1 return on 
investment almost double the value of the FPS in the first 
implementation year.'' But then when we get into the meat of 
the text on--it also says in here, what we found, it says 
Medicare fee for service program and return on investment on--
it is only $1.34 for every dollar spent on the FPS. Can you 
justify for us what that distinction is?
    Dr. Agrawal. Sure. So number one, let me just say, either 
number, both numbers, demonstrates that the fraud prevention 
system has had a positive ROI. The two numbers are something 
that Ms. Jarmon alluded to. There is an unadjusted savings 
number and then an adjusted savings number. We believe in the 
agency that the unadjusted savings number most directly 
measures the impact of the fraud prevention system.
    Mr. Murphy. In which one of those, the $5 or the $1.34?
    Dr. Agrawal. The 5-to-1 ROI. And the reason for that is 
because the FPS is a piece of technology, again, as I have 
pointed out earlier that points to those claims and those 
providers that need further investigation. What the adjusted 
number gives you is the downstream impact of all of a series of 
work. So not only the outcomes of the investigation, the 
outcomes of any administrative processes, any recovery 
processes and the work of law enforcement referrals.
    So it reflects dollars returned to the trust fund, but the 
FPS was not designed to impact the entire downstream process.
    Mr. Murphy. Ms. Jarmon and Mr. Cantrell, then he is saying 
your numbers aren't accurate. Is it $1.34 or is it 5-to-1?
    Ms. Jarmon. Well, both numbers show again the positive 
effect of the fraud prevention system.
    Mr. Murphy. Sure.
    Ms. Jarmon. But in Office of Inspector General, we feel 
more comfortable with the adjusted number which shows the 
return on invest of 1.34-to-1 because that reflects the actual 
amount that is expected to be returned to the Medicare trust 
fund. The larger number is the number before adjustments. In 
some cases assets were not there to be collected. So the larger 
number--while it was identified by the Medicare contractors, 
what actually is going to come in is the adjusted number with 
the expected return of investment of 1.34-to-1.
    Mr. Murphy. Thank you. I appreciate that. I now recognize 
Mr. Johnson of Ohio for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman, and I thank the panel 
for being with us today. You know, one of the ways that has 
been suggested to fight fraud is increase disclosure of prior 
actions against providers and suppliers that were enrolling or 
revalidating their Medicare enrollment. So Dr. Agrawal, has CMS 
issued a rule on increasing disclosure of prior actions?
    Dr. Agrawal. Yes, we have actually put out a proposed rule 
that will allow for more disclosure. But one thing I would 
point out is, again, disclosure is one aspect of a program 
integrity approach. If these are really criminals, then they 
probably won't have much of a problem lying on an application. 
So we have a lot of other resources at our disposal that 
include data checks that go beyond anything that somebody puts 
on an application. And those I think data checks have had 
significant impact on our ability to keep people out of the 
program or remove them if necessary.
    Mr. Johnson. OK. Mr. Cantrell, Ms. Jarmon, would, in your 
opinion, would such disclosure help fight fraud, for instance? 
Would contractors that CMS currently works with, say Medicare 
Advantage and drug plan sponsors, be better able to identify 
fraudulent providers up front if they had access to such 
information?
    Mr. Cantrell. Well, I think for one thing, if they lied on 
the application, it would be a means for us to charge them with 
that actual crime. So we like that attestation by the provider 
or whoever is attesting to the facts on the application so that 
we, or in this case, someone might withhold some information, 
to use against them as evidence if you will of intent to commit 
fraud. So I think it would help our efforts on the prosecution 
and enforcement side.
    Mr. Johnson. OK. Ms. Jarmon, any comment?
    Ms. Jarmon. Yes, and it is in line with what we have also 
been recommending that the Part C and Part D contractors report 
fraud also so that they can use that information to try to make 
sure the bad actors are not in the program.
    Mr. Johnson. OK. Ms. King, are Medicare contractors able to 
share such information with each other? For instance, if a 
patient or provider is suspected of fraud and they change plans 
during open enrollment, would a plan a beneficiary is leaving 
be able to communicate with a plan they are joining about the 
suspected fraud?
    Ms. King. I am not sure of the answer on that. Let me get 
back to you.
    Mr. Johnson. Can you take that for the record and get 
back----
    Ms. King. I don't believe they can, but I am not positive.
    Mr. Johnson. OK. All right. Well, certainly it would be 
good if they could, right? OK. Also for Ms. King, Medicare 
administrative contractors known as MACs, MACs were created 
about a decade ago. Today they serve as the primary bill payers 
for Medicare claims. Given that the bulk of Medicare 
reimbursements are processed by MACs, the bulk of improper 
payments are also made by MACs. I know GAO is currently 
wrapping up work examining the work of the MACs. Do you have 
any early observations on your work that you can share with our 
committee?
    Ms. King. Not from the work that is ongoing, but we did 
release some work recently that looked at a lot of their 
requirements. There are different types of contractors that do 
post-payment review for fee-for-service claims, and we found a 
lot of variety among the requirements that they are subject to 
which is a source of confusion for providers. And we 
recommended that the CMS take steps to align those requirements 
where it wouldn't hurt program integrity efforts.
    Mr. Johnson. OK.
    Ms. King. So streamlining--not streamlining but making the 
requirements more consistent across contractors--we think would 
be helpful.
    Mr. Johnson. OK. And then a follow-up, Ms. King. GAO has 
conducted work looking at CMS's management of all program 
integrity contractors. GAO made several interesting findings 
including the fact that CMS did not standardize its 
requirements for all contractors. One of the consistent 
findings from GAO's work over the years is that CMS will often 
sign a contract for a program integrity function but either 
fail to measure the right functionality and activities from the 
contractor or failed to assess progress as the contractor 
conducts the work.
    So in what ways do you think the current contracting 
mechanism that CMS uses, which is subject to the federal 
acquisition rules or the FAR, might hinder CMS's flexibility to 
manage the program well?
    Ms. King. Are you referring to the MAC's or the program 
integrity contractors', if I might ask a clarifying question?
    Mr. Johnson. I think we are talking about management of all 
program integrity contractors.
    Ms. King. OK. We did some work recently that evaluated the 
program integrity contractors that are called ZPICs, and we did 
find that they had a positive return on their investment. And 
they are FAR contracts subject to the FAR and they are cost 
plus award fee contracts. We made some recommendations to CMS 
that they could further link the program integrity contracts 
with the agency's higher goals in the GPRA Act so that the 
goals from the top of the agency flow down through the program 
integrity contractors.
    Mr. Johnson. OK. So do you think that the current 
contracting mechanism that CMS uses would hinder their 
flexibility to manage the program well?
    Ms. King. I don't have reason to believe that it does.
    Mr. Johnson. I yield back, Mr. Chairman.
    Mr. Murphy. Thank you. I now recognize Mr. Long for 5 
minutes.
    Mr. Long. Thank you, Mr. Chairman, and thank you all for 
being here today. Ms. King, I want to direct my questioning 
toward you, and in my questioning I would like to focus on the 
issue of post-payment audits within the Medicare program and 
the effect they are having on hospitals and small businesses 
across the State of Missouri.
    In the Dallas airport last Friday I ran into a fellow that 
happened to be one of my constituents. We both happen to be 
flying back to Springfield, and he owns a prosthetics and 
orthotics company. If you go to Google and look that up, O&P, 
it is the evaluation, fabrication, and custom fitting of 
artificial limbs and orthopedic braces. I am sure you know 
that--but custom fitting. He sat and told me that Medicare is 
sitting on a quarter million dollars or better in these RAC 
audits. And so as I go through this little line of questioning 
that I have here, I want you to keep in mind that fellow. It is 
him and his wife and his son. They own a little O&P business in 
my district, and think about a small businessman that is 
sitting around waiting for a quarter million dollars and when 
he might see that money.
    But as you know, Medicare currently contracts with private 
vendors referred to as recovery audit contractors, RACs, to 
perform these payment audits. These contractors are paid on a 
contingency fee basis receiving a share of the improper 
payments they identify, and they are not penalized if the 
alleged improper payments are overturned on appeal. So they are 
going to hold this money and try and prove--because they are 
going to benefit if they are going to make money by proving 
that these were paid when they shouldn't have been paid. But if 
they are wrong and they hold this guy's money forever and put 
him out of business, if it is overturned on appeal, there is no 
penalty for those companies. As a result, the demands with the 
contractor for medical and billing records have nearly doubled 
since 2012. Ultimately this has resulted in administrative 
quagmire where the Office of Medicare Hearings and Appeals has 
suspended the ability for providers to appeal their decisions 
due to the backlog of almost 357,000 cases they are backlogged. 
So they have suspended it.
    I recognize that the post-payment audits are an appropriate 
tool for HHS to employ and have also successfully recovered 
millions from genuine bad actors in the system. But there are a 
lot of small business people just like my constituent that are 
out there waiting for this money. Now it has been suspended. 
The people that are doing the audits are getting paid for what 
they find, and even if it is overturned on appeal there is no 
penalty for those people.
    So one question I have is do you believe that the current 
structure of the system is designed in such a way that it 
incentivizes quantity over quality of these audits?
    Ms. King. Let me answer your question in several parts. You 
are correct that the RACs are paid on a contingency fee basis, 
and they are paid differently from all of the other post-
payment review auditors who are paid on a cost basis. And 
initially, the RACs were not penalized if payments were 
overturned on appeal, but now they are. So if they lose on 
appeal, they have to----
    Mr. Long. OK. I----
    Ms. King. There is a penalty there.
    Mr. Long. I had incorrect information on that, ma'am.
    Ms. King. It was initially correct. The volume of audits 
done by the RACs has increased substantially over the last 
several years, and they do by far----
    Mr. Long. Have they doubled since 2012?
    Ms. King. Oh, more than that. Well, not since 2012 but 
probably since 2010 or 2011. And for example----
    Mr. Long. My information says 2012, but OK.
    Ms. King. They have gone up a lot and your----
    Mr. Long. Are there 357,000?
    Ms. King. Yes, they are out of the----
    Mr. Long. Backlogged?
    Ms. King. Of the $2.3 million of--2.3 million post-pay 
audits in 2012, about 2.1----
    Mr. Long. Those are audits, not dollars, right?
    Ms. King. Audits, yes.
    Mr. Long. OK.
    Ms. King. 2.1 million of them were done by the RACs. You 
are also correct that there is a huge backlog in appeals, and 
we have----
    Mr. Long. What do you do for a small business guy like 
mine? He and his wife and his son are trying to make a living 
in a custom-fit part that is not returnable. Nobody else can 
use that. If they say, oh, you shouldn't have got that part, we 
should not reimburse you for that part, what do you do in that 
situation? I mean, what can we do?
    Ms. King. Well, I think there are a few things. One is that 
I would be curious to know what the reason is for the payment 
being declared improper. If it is a documentation error----
    Mr. Long. But the company that is declaring it is going to 
get compensated if they can prove that it is, whether it is or 
not.
    Ms. King. No. But there----
    Mr. Long. Maybe you can correct me on this, too.
    Ms. King. There----
    Mr. Long. Excuse me, ma'am.
    Ms. King. Oh, I am sorry.
    Mr. Long. It is my understanding that like it is 93 and 
above, maybe 97--93, 97, somewhere in that range of these 
357,000 cases are going to be adjudicated have been fine in the 
first place, and the small business guy should have been paid 
his money. Is that correct? Is it over 90-some percent that 
were----
    Ms. King. I don't know the numbers on that.
    Mr. Long [continuing]. Proper in the first place and they 
were holding this money?
    Ms. King. I don't know. I don't know the numbers on that 
but----
    Mr. Long. OK. Well, can you find out for me and see if that 
is accurate, if it is above 90-some percent that they say, oh, 
yes, we should have paid you months and months and months ago, 
maybe after he's out of business?
    Ms. King. Well, I have been asked to look at the appeals 
process and look at the backlog and determine what some of the 
underlying reasons are and to figure out whether we have any 
recommendations for solutions.
    Mr. Long. Has the GAO ever made any recommendations and 
more efficiently reviewed claims after payments were made?
    Ms. King. We have made some recommendations to improve the 
consistency of the requirements that the post-payment review 
audit contractors are subject to, and we have further work 
under way that is looking at the post-payment review process, 
and that should be out later this summer.
    Mr. Long. OK.
    Mr. Murphy. Gentleman's time has expired.
    Mr. Long. Thank you. I yield back.
    Mr. Murphy. Now I recognize Ms. Ellmers for 5 minutes.
    Mrs. Ellmers. Thank you, Mr. Chairman, and thank you to our 
panel. I have a number of questions, so I would really like to 
get right into my questioning. And I just want to start by 
saying, just as my colleague, Mr. Long--I also, as we all do, 
have constituents who are very, very concerned about this 
issue. They are small business owners. They are medium-sized 
business owners. They are taking care of our patients. They are 
taking care of Medicare patients.
    Now, I just want to outline for you just how ridiculous 
this process is in relation to the MAC, both RAC and MAC, 
absolutely ridiculous.
    Oxygen, CPAP, hospital beds. They outline for me over a 
year's time--we are talking about 2,600 of those filled. Of 
those, they have 1,228 audits. That is 46 percent. Why would 
any business have to be audited 46 percent? Dr. Agrawal?
    Dr. Agrawal. Thank you for the question. I think you 
highlight a really important and complex topic, so I think what 
this highlights is--and we try to achieve a balance every day 
between not being burdensome on providers, making sure that 
beneficiaries can get access to the services that they need, 
and yet being fiscal stewards of the trust fund as required by 
law.
    Mrs. Ellmers. And----
    Dr. Agrawal. And these are areas--just to complete the 
thought, if you don't mind. DME supplies, orthotics and 
prosthetics are areas that the OIG has identified as being very 
high for improper payment rates.
    Mrs. Ellmers. OK. I am going to stop you right there----
    Dr. Agrawal. Seventy percent of DME alone.
    Mrs. Ellmers [continuing]. And reclaim my time because the 
issue here is they are not getting paid. The product has gone 
out to the patients, to the family that is taking--the 
caregivers who are taking care of this patient. This patient 
has oxygen, this patient has a hospital bed. But they have not 
been paid. And the timeline, the ridiculous timeline. You know, 
we are talking about the process of the audit, and then we have 
the redetermination period. Then we have the reconsideration 
period, and now the Administrative Law Judge, they are coming 
in and saying, you know what? We can't even take anymore new 
appeals. You know, there is going to be a 2-year waiting list 
just to get a hearing. How can anyone run a business if they 
are not going to get paid for some of the most basic--I am a 
nurse. These are basic items that our seniors need and use 
every day. How can these gentlemen that run this business in my 
district continue to keep their doors open when they are not 
getting paid? Can you please just tell me how that can be 
possibly addressed?
    Let me back up also. One of the issues in talking about the 
fraud--and this is what I see here. There is fraud. We all know 
that there is fraud and abuse of the system. But you are going 
after the good guys to make up the dollar difference. You are 
not addressing the real fraud issues that are there. You are 
not taking recommendations and applying them. Your own 
recommendations--let me ask a question, Dr. Agrawal. As far as 
the audit system, if the provider is found to, you know, have a 
low denial rate, why are we not rewarding them? Why are we not 
saying, look, you are in this category, whether you want to 
score them, grade them. Why are we not rewarding them?
    Dr. Agrawal. I think that is a great point and idea. In 
fact, that is something that we got from the provider community 
and we are actually implementing in the next round of RAC 
contracts.
    Mrs. Ellmers. And when will that round be?
    Dr. Agrawal. Well, we have been engaged in that procurement 
for a while now, but the procurement itself has come under 
protest. So we would have looked forward to actually having it 
completed by now. But it is currently in that protest process.
    Mrs. Ellmers. And who is protesting it?
    Dr. Agrawal. Other contractors.
    Mrs. Ellmers. So these folks, my constituents and every 
other provider is just left in limbo right now, not getting 
paid?
    Dr. Agrawal. Well, I would point out----
    Mrs. Ellmers. You know, being good actors, playing by the 
rules, doing everything they can. They are not getting paid, 
and we are waiting because someone is protesting?
    Dr. Agrawal. Let me just say that these audits are required 
by law. The contingency fee structure was set up in statute. 
This is not typically the way that--most of our other 
contractors are not paid that way, either. They also post-pay 
audit, so they did in fact get paid. These are--and just to 
differentiate sort of improper payments from fraud, these are 
tools that we actually utilize to lower the improper payment 
rate, which this committee has identified as a priority, I 
think we can agree. And you know, the areas that the RACs have 
gone after are areas where there is high cost and high improper 
payments. The DME supplies I just pointed out----
    Mrs. Ellmers. Well, how is it----
    Dr. Agrawal [continuing]. Are those areas----
    Mrs. Ellmers. How does the RAC auditor--how do they 
determine--what is it that makes them, that puts the red flag 
up that they need to go in and audit? What is it?
    Dr. Agrawal. I think one of the best early indicators is 
where the improper payments are based on our CERT audits that 
are also required by law. So the CERT audits pointed out for 
example that the improper payment rate in DME is about 70 
percent so----
    Mrs. Ellmers. OK. But why--OK. So XYZ provider now has 
auditors, and what is it that they did that alerted the RAC 
auditor to come in?
    Dr. Agrawal. Oftentimes it is the area in which they 
operate. Again, the areas of high----
    Mrs. Ellmers. What do you mean the area?
    Dr. Agrawal. So if they are a DME supplier and 70 percent 
of DME payments are improper, then you are obviously going to 
go----
    Mrs. Ellmers. So DME provider is just subject to a random 
audit at any given time?
    Dr. Agrawal. It is not typically random. It is based on 
real analytical work to see where improper payments could 
reside among the specific suppliers. In addition, as I 
mentioned to you, we are very interested in rewarding those 
that have low denial rates so that they get audited less 
frequently and at less volume.
    Mrs. Ellmers. But we don't know when that will happen 
because we are in a protest.
    Dr. Agrawal. We want to get the RACs up and running as 
quickly as anybody else.
    Mrs. Ellmers. OK. Thank you, Mr. Chairman, for indulging 
me. I am over my time, but I would like to submit for the 
record and ask unanimous consent, there is a memorandum to OMHA 
Medicare appellants on the time, the length of time for the 
Administrative Law Judge hearings on the claims and entitlement 
appeals.
    Mr. Murphy. Thank you. Any objections?
    Ms. DeGette. Let me see that document.
    Mr. Murphy. Could you send that document over here for a 
second. Thank you. While that is being looked over, let me just 
ask a question here that I think is important, too. When people 
get caught for Medicare fraud--is that acceptable? That is 
acceptable for the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Murphy. When people get caught for Medicare fraud, are 
they going to jail? Are you fining them? What kind of examples 
can they be made of, if I can end with a preposition there? So 
are there current penalties that are incurred upon folks who 
are involved with Medicare fraud? Mr. Cantrell?
    Mr. Cantrell. They are going to jail more and more. The DOJ 
reported in strike force cases over 2013, the average length of 
sentence was 52 months. And that is a fairly substantial time 
for this kind of crime, and that is an average from 2013. Over 
the last several years the average has been since the 
implementation of the strike force, 47 months. So they are 
going to jail. There are criminal fines. There are criminal 
forfeitures that are applied, and that is the work that results 
in the recoveries that the government has received.
    Mr. Murphy. So can I ask then, of those who are--when you 
catch someone, the likelihood that they will serve time, they 
will pay a fine, any idea what those numbers are like?
    Mr. Cantrell. I don't have the percentage, sir.
    Mr. Murphy. That would be important if we get those----
    Ms. King. I believe that we have some information on that, 
sir.
    Mr. Murphy. Yes? You do, Ms. King? If you can get that to 
us----
    Ms. King. We do.
    Mr. Murphy. Do you know anything offhand or can you get 
those to us?
    Ms. King. I don't remember off the top, but I can tell you 
that most of the people--we did some work on 2010 data that 
came out I think in 2012--most of the people who are 
investigated for fraud, both criminally and civilly, those 
actions do not go forward. On the criminal side, only about 15 
percent of the investigations actually result in the action 
going forward.
    Mr. Murphy. What is that percent?
    Ms. King. 15 percent.
    Mr. Murphy. 15 percent? Only 15 percent actually go forward 
to some criminal prosecution?
    Ms. King. Yes.
    Mr. Murphy. Are the rest somehow settled or does that mean 
you have an 85 percent chance of getting away with it?
    Ms. King. No, that is the settlements. You know, some 
investigations just do not go forward for a host of reasons.
    Mr. Murphy. OK. So for example, they are not really guilty 
of fraud or if there is no fraud charges there. Is that what 
that is--am I correct in that?
    Ms. King. Well, there are no fraud charges finally brought 
or there is no settlement.
    Mr. Murphy. I guess what we want to know, if someone is--
there is a fraud charge, what is the likelihood they are going 
to see the inside of a prison cell or pay a fine? The rate of 
success?
    Ms. King. I believe we have some high-level data on what 
the results are not bound to the length of the sentence but the 
types of penalties imposed.
    Mr. Murphy. We would like to--Ms. DeGette, do you have a 
quick question?
    Ms. DeGette. I just have a follow-up. Mr. Cantrell, the IG 
identified problems with Medicare C and D plans not reporting 
data and recommended that the CMS make the reporting mandatory. 
Is that correct?
    Mr. Cantrell. That is correct.
    Ms. DeGette. And Dr. Agrawal, has CMS done that?
    Dr. Agrawal. Well, we have taken a number of steps to 
better align Medicare C, D and you know, the fee-for-service 
programs. I talked earlier about the Part D rule that was going 
to allow us to require provider enrollment in Part D.
    We are also working on other activities like the healthcare 
fraud prevention partnership that actually allows us to 
exchange data and best practices directly with the private 
sector so that we can jointly, you know, work to detect and 
prevent fraud.
    Ms. DeGette. Right. So I am going to take that answer as a 
no, you have not made it mandatory, is that right?
    Dr. Agrawal. We have currently not yet made it mandatory.
    Ms. DeGette. Yes. Thanks. I think frankly, Mr. Chairman, I 
think CMS needs to do that because we know there is a lot of 
fraud in those Part C and Part D programs. I appreciate the 
efforts that the agency has made on those other ends, but I 
think making it mandatory would really help. And I appreciate 
your indulgence, Mr. Chairman.
    Mr. Murphy. Thank you. Mr. Long and Ms. Ellmers have each 
asked for 1 minute.
    Mr. Long. Just a quick follow-up, Dr. Agrawal. When you 
were answering Congresswoman Ellmers' questions, you said 70 
percent. Are you talking about O&P or are talking about 
prosthetics? That business? 70 percent of them are not correct 
on their billing?
    Dr. Agrawal. No, what I was identifying was that there is a 
high improper payment rate for DME, but there is also a high 
improper payment rate in orthotics and prosthetics.
    Mr. Long. OK.
    Dr. Agrawal. Those are reports that the OIG has also 
published.
    Mr. Long. OK, because if what my constituent is telling me 
is accurate, isn't it 93 or 97 percent they go ahead and pay 
eventually, some time, a couple years from now. The 70 percent 
didn't match. So I just wanted a clarification on that.
    Dr. Agrawal. Well, if I could clarify on that point, sir, 
so of all of the RAC overpayment determinations, only 7 percent 
are actually overturned on appeal. That is 7. So of all the 
overpayments that the RACs actually get from providers, 7 
percent go onto appeal and at any level of appeal----
    Mr. Long. Yes, but we are talking apples and oranges. We 
are talking about how many were not improper in the first place 
is what my question is, not how many were overturned on appeal.
    Dr. Agrawal. OK. Got you, sir.
    Mr. Murphy. Thank you. Ms. Ellmers, 1 minute.
    Mrs. Ellmers. Thank you, Mr. Chairman. Dr. Agrawal, I have 
a question, too, about what is the period of time--a provider 
has an audit and maybe they haven't been educated. I know that 
you said that there is an effort to educate. Is there a grace 
period? Is there a time? What time limit from a change that is 
made to the time that the auditor goes in are we looking at? If 
something is flagged to, you know, for an audit?
    Dr. Agrawal. So if I am understanding the question, a 
change in payment policy that would then----
    Mrs. Ellmers. Right.
    Dr. Agrawal [continuing]. Downstream be enforced?
    Mrs. Ellmers. Yes. So a change is made. The provider may or 
may not have had time to--what does CMS consider a reasonable 
time that that provider should know that a change has occurred?
    Dr. Agrawal. Sure. So I don't think there is a set time 
period, the kind of set time period that you are identifying. I 
will point out that a lot of the audits----
    Mrs. Ellmers. So the change could be made and the next day 
the auditor can be in the office?
    Dr. Agrawal. It is typically not like that. The majority of 
audits that we conduct are around rules and policies that are 
very well known by the provider community. So the high improper 
payment rates in DME for example are based on documentation 
requirements that have been around for a while.
    Mrs. Ellmers. OK. So that is not what I am hearing from my 
constituents. My constituents are looking at the situation. 
They are saying, look, we weren't even aware of that change. 
Ms. King, is that something GAO has recommended, that there be 
a grace period time or anything like that?
    Ms. King. It is not an issue that we have looked at.
    Mrs. Ellmers. OK.
    Ms. King. But you raise an interesting question about 
education of providers about the documentation requirements and 
the rules.
    Mrs. Ellmers. One last question, Dr. Agrawal. You did say 
that one of the things that you are suggesting in the change in 
the next RAC audit time period is the idea that those are 
rewarded. What would you say the percentage, if you have got a 
low denial rate? Throw out a number.
    Dr. Agrawal. I don't have a specific number. You know, we 
can actually get that for you based on the----
    Mrs. Ellmers. Well, I would like to work with you----
    Mr. Murphy. Thank you.
    Mrs. Ellmers [continuing]. On that. Thank you so much, and 
thank you, Mr. Chairman.
    Mr. Murphy. Dr. Burgess, you have some concluding 
questions?
    Mr. Burgess. Thank you, Mr. Chairman. OK. Well, I want to 
go back for a minute to the article, the Bloomberg article, 
that I referenced that was published on April 28th of this 
year. Doctors get millions from Medicare after losing their 
licenses. And this article goes through sometimes in rather 
painful detail of how a doctor would lose their license in one 
state and then be able to bill Medicare in another state. I 
realize that states have a responsibility here as well. But you 
as the payer for Center for Medicare and Medicaid Services, you 
ultimately have the responsibility about those dollars going 
out, and even though New Mexico may have erred in not checking 
a database for someone who lost their license in Ohio, which 
was the case of one of the doctors that was referenced here, 
Medicare paid that doctor an additional $660,000 for that 
doctor to treat patients in New Mexico. You know, the question 
is, why won't CMS at least do the basics on checking with the 
National Practitioner Data Bank to see if there is a problem 
with this doctor's license?
    Dr. Agrawal. Congressman, it is not a question of will, it 
is a question of authorities. So loss of licensure is one of 
the best triggers that we have for removing somebody from the 
Medicare program. If a provider loses their license in one 
state, however, and they have a license that is active in 
another state, we are bound by limits of authority about, you 
know, whether or not we can revoke that person across the 
entire Medicare program. We can certainly revoke or eliminate 
any enrollment in the state in which they lost their license. 
But loss of licensure in one state is not in and of itself a 
basis for losing enrollment nationally.
    Now, if there was something underlying the licensure loss--
--
    Mr. Burgess. I have to stop you there. I find that 
absolutely incredulous. A guy loses his license, and some of 
these doctors were charged with fairly serious crimes. And 
because they had good lawyers, they were able to keep their 
license in another state. But I mean, does that at least not 
trigger some sort of basic curiosity on the part of CMS as to 
why the doctor lost their license in a given state, what was 
the crime of which they were accused and should we keep sending 
them checks for $660,000?
    Dr. Agrawal. Of course, and I, again, as a physician am 
very frustrated when loss of licensure in one state is not 
followed by loss of licensure in all states. We do look at 
those providers to investigate or understand what they have 
done. But again, this comes down to due process. If there is 
just not an authority that we can trigger to cause the 
revocation, then we simply can't do it. These are the 
constraints that are placed on us rightfully by taxpayers to 
make sure we don't go too far.
    Mr. Burgess. I don't want you to go too far, and we have 
certainly heard from other members about some of the problems 
when you go too far. But should this at the very least, should 
this not trigger some type of heightened scrutiny on the bills 
that are coming in from a doctor who has lost their license in 
another state because of the death of a patient or because they 
are charged with a serious crime?
    Dr. Agrawal. It can absolutely be a risk factor. I don't 
think that that is what is under contention. I think the real 
issue is whether we can just revoke summarily across the 
country for loss of licensure in one state, and that is where 
there are significant restrictions or limitations in our 
authority.
    Mr. Burgess. Do you not have the authority for heightened 
scrutiny? I mean, you paid this guy $660,000. Apparently we 
weren't scrutinizing very highly.
    Dr. Agrawal. That may or may not be true. I don't know 
about the data on that particular case or what the report was. 
But we can subject providers to medical review based on a 
multitude of factors. We can certainly do that in these kinds 
of cases. But again, providers can--as you know as well as I 
do, providers can lose their licenses for a variety of reasons, 
some of them having nothing to do with healthcare fraud or the 
extent of our authorities and concern.
    Mr. Burgess. Yes, but it just raises or begs the question, 
should the Medicare system be paying those doctors? I mean, 
should they even be taking care of Medicare patients? The 
fundamental question, is there a way that you have of debarring 
someone who has been accused of or been convicted of a fairly 
serious allegation and lost their license as a consequence?
    Dr. Agrawal. So we have a specific revocation authority 
that we utilize on a consistent basis. The OIG has an exclusion 
authority. GSA has a debarment authority. We utilize as 
triggers for our actions the GSA debarment list as well as the 
OIG exclusion list.
    Mr. Burgess. Is that the exclusion list here?
    Dr. Agrawal. Yes.
    Mr. Burgess. I mean, one of the permissive exclusions is 
license revocation or suspension. One of the mandatory is 
conviction on three or more occasions of mandatory exclusion 
offenses. I mean, what have you got to do? What have you got to 
do to lose your ability to bill Medicare and have you guys pay?
    Dr. Agrawal. Well, I would have to defer exclusion 
questions to the OIG since we don't put people on the exclusion 
list.
    Mr. Murphy. The gentleman's time is expired.
    Mr. Burgess. Can we let Mr. Cantrell answer the question?
    Mr. Murphy. Mr. Cantrell?
    Mr. Cantrell. We also have a variety of limitations to our 
exclusions authority. There are situations--often it is the 
underlying crime or offense that resulted in the loss of 
license. But the real vulnerability that we face is we don't 
have 100 percent of the data that we would need to implement 
exclusions in 100 percent of the cases where we would have the 
opportunity and the authority. We have a voluntary reporting 
system to the OIG from the state boards, from other federal 
agencies, and so that is an area where we know we have 
incomplete information. But we get--we currently have 57,000-
plus entities and individuals who are excluded, and we exclude 
over 3,000 every year. So there is a lack of complete data that 
we have access to, but there is still a great number of 
exclusions that occur.
    Mr. Burgess. I just have to ask you. Can you not query the 
National Practitioner Data Bank? Can you?
    Mr. Cantrell. I believe that we can. There were some 
restrictions on law enforcement access to the National 
Practitioner Data Bank. I can't speak to whether that is 
actually a continuing concern or not.
    Mr. Murphy. Let me----
    Mr. Burgess. Can you find out and get me that information, 
please?
    Mr. Cantrell. Certainly.
    Mr. Murphy. Let me ask in general for that for this 
committee if Dr. Agrawal, Mr. Cantrell and Ms. King, to the 
extent you can, you have heard a number of things there. We 
recognize also that you are aware that there is more 
information that would be valuable to you to help prescreen out 
people who have some tendency towards crime. The example I gave 
before, if someone has robbed a bank or involved with some 
other fraud that is not Medicare fraud, they can still be 
involved in this I think raises all of our questions, and Mr. 
Cantrell, you just said you don't have a lot of data.
    If you would please in a timely manner get that data back 
to the committee, as I was talking to Ms. DeGette, too, as I 
think this is something I think this committee would be 
interested in moving forward on some legislation to assist you 
in that rather than just pay and chase moving forward.
    I am going to ask unanimous consent that the members' 
written opening statements be introduced in the record, and 
without objection, the documents will be there. Also, in 
conclusion, I thank all the witnesses and members who 
participated in today's hearing. I remind members, I am sure 
many people have some other follow-up questions for you. They 
have 10 business days to get them to you, and I do ask that you 
do all agree to respond promptly to the questions. So with 
that, this committee is adjourned. Thank you.
    [Whereupon, at 12:00 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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