[Senate Hearing 113-910]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-910

                       PREVENTING MEDICARE FRAUD:
                        HOW CAN WE BEST PROTECT
                         SENIORS AND TAXPAYERS?

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

                                HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS


                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                             MARCH 26, 2014

                               __________

                           Serial No. 113-20

         Printed for the use of the Special Committee on Aging
         

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

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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                       SPECIAL COMMITTEE ON AGING

                     BILL NELSON, Florida, Chairman

RON WYDEN, Oregon                    SUSAN M. COLLINS, Maine
ROBERT P. CASEY, JR., Pennsylvania   BOB CORKER, Tennessee
CLAIRE McCASKILL, Missouri           ORRIN G. HATCH, Utah
SHELDON WHITEHOUSE, Rhode Island     MARK KIRK, Illinois
KIRSTEN E. GILLIBRAND, New York      DEAN HELLER, Nevada
JOE MANCHIN III West Virginia        JEFF FLAKE, Arizona
RICHARD BLUMENTHAL, Connecticut      KELLY AYOTTE, New Hampshire
TAMMY BALDWIN, Wisconsin             TIM SCOTT, South Carolina
JOE DONNELLY, Indiana                TED CRUZ, Texas
ELIZABETH WARREN, Massachusetts
                              ----------                              
                  Kim Lipsky, Majority Staff Director
               Priscilla Hanley, Minority Staff Director
                         
                         
                         C  O  N  T  E  N  T  S

                              ----------                              

                                                                   Page

Opening Statement of Senator Bill Nelson, Chairman...............     1

                           PANEL OF WITNESSES

Bettie Hughes, Senior Medicare Patrol Coordinator, The Senior 
  Alliance (Area Agency on Aging 1-C), Wayne, Michigan...........     2
Patricia Gresko, Medicare Fraud Victim, Romeo, Michigan..........     4
Brian Martens, Assistant Special Agent in Charge, Miami Office of 
  Investigations, Department of Health and Human Services, Office 
  of the Inspector General, Miami, Florida.......................     5
Louis Saccoccio, Chief Executive Officer, National Health Care 
  Anti-Fraud Association, Washington, D.C........................     7
Shantanu Agrawal, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, Centers for Medicare and Medicaid 
  Services, Washington, D.C......................................     8

                                APPENDIX
                      Prepared Witness Statements

Bettie Hughes, Senior Medicare Patrol Coordinator, The Senior 
  Alliance (Area Agency on Aging 1-C), Wayne, Michigan...........    31
Patricia Gresko, Medicare Fraud Victim, Romeo, Michigan..........    32
Brian Martens, Assistant Special Agent in Charge, Miami Office of 
  Investigations, Department of Health and Human Services, Office 
  of the Inspector General, Miami, Florida.......................    33
Louis Saccoccio, Chief Executive Officer, National Health Care 
  Anti-Fraud Association, Washington, D.C........................    35
Shantanu Agrawal, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, Centers for Medicare and Medicaid 
  Services, Washington, D.C......................................    46

                        Questions for the Record

Brian Martens, Assistant Special Agent in Charge, Miami Office of 
  Investigations, Department of Health and Human Services, Office 
  of the Inspector General, Miami, Florida.......................    61
Louis Saccoccio, Chief Executive Officer, National Health Care 
  Anti-Fraud Association, Washington, D.C........................    67
Shantanu Agrawal, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, Centers for Medicare and Medicaid 
  Services, Washington, D.C......................................    69

                       Statements for the Record

Opening Statement of Senator Susan M. Collins, Ranking Member....    79
Statement of Senator Robert P. Casey, Jr., Committee Member......    80
GAO High Risk Series--Medicare Program...........................    81
The Senior Citizens League Statement.............................    91

 
                       PREVENTING MEDICARE FRAUD:
                        HOW CAN WE BEST PROTECT
                         SENIORS AND TAXPAYERS?

                              ----------                              


                       WEDNESDAY, MARCH 26, 2014

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:00 p.m., Room 
562, Dirksen Senate Office Building, Hon. Bill Nelson, Chairman 
of the Committee, presiding.
    Present: Senators Nelson, Casey, Donnelly, Warren, Walsh 
and Collins.
    Also present: Senators Carper and Coburn.

                 OPENING STATEMENT OF SENATOR 
                     BILL NELSON, CHAIRMAN

    The Chairman. Good afternoon. Welcome to this hearing of 
the Committee on Aging.
    We have had to improvise here because our normal start time 
was another half-hour from now, but you have to be flexible in 
this place because suddenly there are going to be five votes in 
a row, starting at 2:30, so we wanted to go ahead and get most 
of the testimony on the record ahead of time, and because 
Senator Collins is in a commitment she could not change, she 
will join us at the regular start time.
    This past Sunday we marked the four-year anniversary of the 
Affordable Care Act, and, while there may be pieces of the ACA 
that there is a lot of controversy here on Capitol Hill, I 
think we can be supportive of the new tools that it gave to 
CMS, the Centers for Medicare and Medicaid Services, to use in 
the fight against fraud.
    This Senator had a little bit to do with that in attaching 
some language as we were writing the ACA about going after 
Medicare and Medicaid fraud.
    Now CMS now has more authority than ever before to keep bad 
providers out of the system and to find fraudulent providers 
through sophisticated data analysis. We are going to hear today 
how CMS is using those tools to prevent fraud in Medicare and 
trying to stop the theft of billions of dollars every year.
    Despite all efforts and despite these tools, this country 
continues to lose as much as $60 to $90 billion a year to 
Medicare fraud. We cannot, obviously, afford this, and it is 
clear that we cannot just arrest our way out of the problem of 
this magnitude.
    The Inspector General's Office will talk about their 
efforts to fight Medicare fraud and particularly with some 
reference to Florida, where, interestingly, too many of the bad 
actors are concentrated, in particularly South Florida, and 
prey on our senior citizens.
    While we often think of fraud in terms of dollars and 
cents, it can obviously have a greater cost, and we are going 
to hear firsthand from a lady who has received unnecessary and 
potentially dangerous treatment she did not need just so that 
her doctor could bill Medicare for those so-called treatments, 
and we will hear from a Medicare Senior Patrol Coordinator who 
counsels seniors with similar stories every day.
    When Senator Carper gets here, I want to focus on some of 
the things that he has done against Medicare fraud.
    As we come out of this hearing, I hope we have a new 
appreciation for the human cost of this kind of fraud and what 
we are going to have to do in the future to try to nip as much 
of this in the bud as we can, and so we have a distinguished 
panel.
    First, we are going to hear from Ms. Bettie Hughes, and she 
is the Senior Medicare Patrol Coordinator for the Area Agency 
on Aging in Wayne, Michigan. Then she is joined by Ms. Patricia 
Gresko from Romeo, Michigan, who was a victim of the Medicare 
fraud.
    Then we are going to hear from Mr. Brian Martens, the 
Assistant Special Agent in Charge of the Miami Office of 
Investigations for the Department of HHS and their Inspector 
General, and then hear from Mr. Louis Saccoccio, the CEO for 
the National Health Care Anti-Fraud Association, and then hear 
from Dr. Shantanu Agrawal, who serves as Deputy Administrator 
and Director of Program Integrity at CMS.
    Your full statement will be put in the record. Let's take 
each of you, see if you can condense it down given the time 
constraint that we have, and let's start with you, Ms. Hughes.

          STATEMENT OF BETTIE HUGHES, SENIOR MEDICARE

            PATROL COORDINATOR, THE SENIOR ALLIANCE

                   (AREA AGENCY ON AGING 1-C)

    Ms. Hughes. Chairman Nelson, on behalf of the Medicare 
beneficiaries, the people with disabilities, their families and 
caregivers of Michigan, I want to thank you for giving us this 
opportunity to come and speak to you about Medicare fraud and 
what we experience in Michigan.
    I began working with seniors as a result of being a 
caregiver for my husband. He had gone in for a CAT scan and had 
an anaphylactic shock. This left him completely legally 
impaired, and with that, lots of things happened with billing.
    I was encouraged to put him into a nursing home, but 
instead, I brought him home so that I could care for him. I 
quit my job at that point, after 21 years in retail management, 
and began to take care of him.
    I did not really think too much of it at the time, but we 
did have a number of people coming into the home--physical 
therapy, occupational therapy; kind of strange to have 
occupational therapy for someone who is completely bedridden 
and is unable to move.
    I saw firsthand just exactly how unnecessary medical 
treatments can cost a family thousands and thousands of 
dollars, so, on his passing, I decided to do something, and 
that is when I began working with the Senior Alliance Area 
Agency on Aging and immediately became very involved with the 
Senior Medicare Patrol and later became the Regional 
Coordinator for that program.
    The Senior Medicare Patrol is a volunteer program, and it 
is funded by the Administration on Aging, and what we do is we 
provided education, counseling and outreach to those Medicare 
beneficiaries. We educate beneficiaries on what to look for and 
empower them to be able to report that back to us.
    Today, the Senior Medicare Patrol program nationwide has 
received more than one million inquiries regarding potential 
fraud, waste and abuse, and it is estimated to have saved 
Medicare and Medicaid about $106 million.
    I am proud to serve as the Regional Coordinator for the 
Senior Medicare Patrol. I have the responsibility of managing 
46 volunteers and counselors.
    In the past seven years, our SMP program has identified and 
reported many cases of beneficiaries receiving unnecessary 
treatments, such as Ms. Gresko, tests such as MRIs and CAT 
scans similar to unnecessary treatment. We have also seen 
beneficiaries being billed for services that they did not 
receive.
    We had a gentleman who suffered a massive heart attack and 
then had triple bypass surgery. During the time he was in the 
hospital for six weeks, he was scheduled for, and billed for, 
outpatient physical therapy treatments.
    In another case, we have people that are soliciting and 
bearing gifts of televisions, video games, video equipment, 
having pizza parties and Bingo games at different senior 
housing. They have solicited our Meals On Wheels volunteers, 
followed them, taking addresses, only to return later to the 
beneficiary's and bring them a basket of food, saying that this 
is a gift from Medicare so that they can solicit the services.
    We need to find a better way to identify these fraudsters 
and keep them from marketing their schemes to some of our most 
vulnerable seniors.
    I know that there are many honest doctors, nurses, physical 
therapists. Not everyone is out to commit a crime or to defraud 
someone. We need to let more of the good people into the 
program while keeping some of these bad ones out.
    We need to think how we can work together--government, 
private industry, beneficiary and provider--to stop this 
Medicare fraud.
    We, in the Senior Medicare Patrol, have been doing our 
part. We have worked with our state health insurance program 
counselors to reach as many beneficiaries as we can. We have 
worked with the Office of the Inspector General in Wayne County 
to instruct service coordinators working in government housing 
on how they can protect the residents of their buildings from 
health care fraud.
    Every day, we hear different stories from these 
beneficiaries. We need to try and find solutions.
    We ask you to do what you can to give the Medicare program 
better tools to fight health care fraud. We need to keep the 
fraudsters out of our program. We need to crack down on abusive 
marketing practices, and, we need to find a way to all work 
together to reduce the billions of dollars that we now have in 
Medicare fraud.
    I thank you very much for letting me speak to you today 
about our experiences.
    The Chairman. We want to thank you.
    Before we hear one such example from Ms. Gresko, let me say 
before Senator Collins makes a statement that we are very 
pleased that Senator Carper has joined us because he has been 
involved in this fight against Medicare fraud. He is a former 
member of this Committee, and he is the Chairman of the 
Homeland Security and Governmental Affairs Committee.
    I am a co-sponsor of additional anti-fraud legislation 
which will encourage the reporting of Medicare fraud and impose 
tougher penalties.
    Ms. Gresko, if you can just hold one minute, let me turn to 
our Ranking Member, Senator Collins, for her statement.
    Senator Collins. Thank you, Mr. Chairman.
    In light of the fact that we have votes coming up, I will 
forego my opening statement and just submit it for the record. 
I am very interested in hearing from our witnesses, and I think 
the time would be better spent listening to them rather than 
having them listen to me, and so, with your permission, I will 
put it in the record.
    The Chairman. Well, thank you, Senator Collins, and thank 
you for being a great partner in running this Committee.
    Ms. Gresko--and then we will get to you, Senator, as well. 
I want to get on through the panelists.
    Ms. Gresko.

                 STATEMENT OF PATRICIA GRESKO,
                     MEDICARE FRAUD VICTIM

    Ms. Gresko. Chairman Nelson, Ranking Members of the 
Committee, distinguished Senators, I am honored to be here 
today to give you my story as a victim of Medicare fraud.
    I live in Romeo, Michigan, where I worked for the school 
system for 25 years. My favorite part of the job was working 
with adult and alternative education programs. Getting students 
to stay in school and get their diploma was a very fulfilling 
accomplishment.
    I will also count it as a great accomplishment if in 
sharing my story today I can prevent other seniors on Medicare 
from going through what I did.
    I saw a doctor in Michigan for the first time several years 
ago, who told me I had a problem with my immune system and that 
I needed monthly IV medication. The doctor was personable and 
dignified. I trusted him, so I began these infusions in January 
of 2013.
    During my first treatment, I had side effects of chest 
pains and was worried that it was my heart. The doctor told me 
that he needed to slow down the rate of the infusion, so I 
continued to get these treatments for seven months, each of 
these treatments taking seven hours.
    I was shocked when I heard that my doctor had been arrested 
and taken into custody for Medicare fraud. The newspaper said 
he had diagnosed people with cancer who did not have it just so 
he could bill Medicare for the treatments.
    I started worrying about my own treatments and did some 
research. The deficiency my doctor said I had in my immune 
system, a low level of something called IgM, could not be 
replaced, so I went to see two different doctors, one of them a 
specialist, but both agreed I did not need these treatments.
    Over the course of seven months, I paid this doctor $1,500 
in co-pays. I later found out he had received over $14,000 for 
giving me these treatments.
    I have three grown children--two sons and a daughter--who 
will one day be on Medicare. I do not want them to experience 
what I went through.
    I hope that by telling you my story you will take action to 
prevent doctors like this one from getting into Medicare and 
ensure that the program will be there for many generations to 
come.
    Thank you.
    The Chairman. Ms. Gresko, it is an outrage what you just 
described. Is this doctor in jail?
    Ms. Gresko. Yes.
    Senator Collins. Good.
    The Chairman. Well, Mr. Martens, tell us what you all are 
doing to crack down on what is one of the highest rates of 
Medicare fraud in the country--in South Florida.

         STATEMENT OF BRIAN MARTENS, ASSISTANT SPECIAL

        AGENT IN CHARGE, MIAMI OFFICE OF INVESTIGATIONS,

            DEPARTMENT OF HEALTH AND HUMAN SERVICES,

                OFFICE OF THE INSPECTOR GENERAL

    Mr. Martens. Good afternoon, Chairman Nelson, Ranking 
Member Collins and distinguished members of the Committee.
    I am Brian Martens, an Assistant Special Agent in Charge 
from South Florida. I appreciate the opportunity to describe 
how our special agents are fighting Medicare fraud and 
protecting seniors and taxpayers.
    We are making a positive impact in Florida and across the 
Nation. Criminal prosecutions and financial recoveries have 
increased while payments for services in certain fraud schemes 
have decreased, and the OIG efforts, together with those of our 
law enforcement partners, have led to a record-setting return 
on investment--over $8 to $1.
    Despite our successes, South Florida continues to be a hot 
spot for health care fraud. Miami is ground zero.
    In Florida, fraud schemes evolve quickly and can be both 
viral and migratory in nature. We see fraud schemes moving from 
Medicare Part B to Medicare Part C. Prescription drug fraud now 
involves non-narcotic, high-cost drugs. Home health schemes are 
transitioning to unnecessary physical and occupational therapy 
services.
    Organized criminal enterprises steal money from Medicare by 
creating sham companies or complex networks. Health care fraud 
criminals are dangerous, and we often find weapons when we 
execute warrants. These criminals target the most vulnerable in 
our society--our seniors and the disabled.
    When Medicare fraud is committed, the health of 
beneficiaries can be compromised. Take for example an HIV-
positive beneficiary who lived in a boarded-up mobile home in 
South Florida. A professional patient recruiter paid him to go 
to a clinic that billed Medicare for expensive treatments that 
the patient never received. That beneficiary willingly chose to 
accept cash kickbacks and receive low-cost vitamin infusions 
instead of the appropriate medical treatment.
    A local doctor complained to us that the patients at that 
clinic were using the cash kickbacks to buy drugs and alcohol, 
and those habits only made the patients more sick.
    Thankfully, the majority of cases do not involve direct 
harm to patients that we have in Florida, but beneficiaries can 
be harmed by the Medicare fraud in other ways. For example, 
when a patient's Medicare number is stolen and used to bill 
false claims, the patient's medical record can be permanently 
distorted. This may cause complications or delays in treatment. 
Also, if a Medicare number is compromised and the patient 
cannot get a new number, the patient is susceptible to identity 
theft.
    In Florida, beneficiaries play a role in Medicare fraud in 
three ways:
    One, they are unknowingly involved and are likely the 
victims of identity theft.
    Two, some are unwitting beneficiaries who may have received 
a medical service but did not realize that the provider 
improperly billed Medicare, usually for a more expensive 
service than the one they actually received.
    Three, unfortunately, in some cases, beneficiaries choose 
to participate in the fraud. They sell their Medicare numbers 
in exchange for cash or other benefits. Beneficiaries can make 
around $1,500 in cash per month for participating in Medicare 
fraud.
    Health care providers and beneficiaries can serve as a 
front line of defense by refusing to participate in Medicare 
fraud and reporting any suspected fraud to us, and I would like 
to thank those that already do, such as you, ma'am.
    Senator Collins, Maine is not immune to these fraud 
schemes. I have spoken with my colleagues, and examples of 
their Medicare work include prescription drugs, medical 
identity theft, home health fraud, although most of the case 
work is in Medicaid.
    I started today by telling you about some of our progress, 
but it is also important to tell you that OIG's missions is 
challenged by our declining resources at a time when health 
care fraud is on the rise. Our Medicare Fraud Strike Force 
Teams are not operating at full strength due to funding 
shortfalls and hiring freezes, and, in Florida, over the past 
two years, we have closed over half of our investigative 
complaints due to a lack of resources.
    Among other things, the additional funding in OIG's 2015 
budget request could support additional boots on the ground in 
places like Florida and elsewhere across the country. We 
appreciate this Committee's support.
    In conclusion, I would like to thank our agents in Florida 
and throughout the country for their dedication and hard work.
    Thank you for the opportunity to testify, and I am happy to 
answer any questions.
    The Chairman. Thank you, Mr. Martens.
    When we get to questions, we want to know also about what 
used to be so rife, where somebody would open up a storefront 
that did not provide anything and bill Medicare.
    Mr. Saccoccio.

STATEMENT OF LOUIS SACCOCCIO, CHIEF EXECUTIVE OFFICER, NATIONAL 
               HEALTH CARE ANTI-FRAUD ASSOCIATION

    Mr. Saccoccio. Thank you. Good afternoon, Chairman Nelson, 
Ranking Member Collins and other members of the Committee.
    My name is Lou Saccoccio, and I am the CEO of the National 
Health Care Anti-Fraud Association, or NHCAA, and I appreciate 
the opportunity to discuss with you this afternoon how to best 
protect seniors and taxpayers from health care fraud in 
Medicare.
    On a national level, health care fraud hampers our health 
care system and undermines our Nation's economy. On an 
individual level, no one is left untouched by health care 
fraud.
    It is a serious and costly problem that affects every 
patient and every taxpayer across our Nation. The extent of the 
financial losses due to health care fraud in the United States, 
while not entirely known, is estimated to be in the range of 
tens of billions of dollars.
    To be sure, the financial losses are considerable, but the 
losses are compounded by numerous instances of patient harm, as 
evidenced by Ms. Gresko's case, which are an unfortunate, 
insidious side effect of health care fraud and which impact 
patient safety and diminish the quality of our medical care. 
Health care fraud is not just a financial crime, and it 
certainly is not victimless.
    Fraud does not discriminate between different types of 
medical coverage. The same schemes used to defraud Medicare and 
Medicaid migrate to private insurance, and schemes perpetrate 
against private insurance make their way to Federal programs. 
The providers of health care services and products who commit 
fraud bill multiple payers, both private and public.
    In this environment, dishonest providers bank on the 
assumption that payers are not working together to collectively 
connect the dots and uncover the true breadth of a scheme. It 
is precisely this reason why the sharing of anti-fraud 
information and data among payers is crucial for successfully 
identifying and preventing health care fraud. Payers, whether 
private or public, who limit the scope of their anti-fraud 
information to data from their organization are taking an 
uncoordinated and piecemeal approach to the problem.
    The private-public anti-fraud information sharing sponsored 
by NHCAA routinely helps our private side members and our 
government safeguard and recover funds that would otherwise be 
lost to fraud.
    Seeing that this coordinated approach is critical to anti-
fraud success, NHCAA and other organizations and government 
agencies saw the need to improve and expand the cooperation and 
anti-fraud information-sharing between the private and public 
sectors. As a result, after more than two years of discussions, 
the Healthcare Fraud Prevention Partnership was formally 
announced in July 2012 at the White House.
    The Partnership is a joint initiative of the Department of 
Health and Human Services and the Department of Justice. It is 
a voluntary public-private partnership between the Federal 
Government, state officials, private health insurance 
organizations and health care anti-fraud associations like 
NHCAA, which aims to foster a proactive approach to detect and 
prevent health care fraud across all public and private payers.
    However, despite the proven effectiveness of anti-fraud 
information and data-sharing, many health insurance plans are 
reluctant to fully participate in anti-fraud sharing activities 
for fear of possible litigation brought by health care 
providers who may be the subject of the shared data or 
information.
    This reluctance is demonstrated by the fact that only 40 
percent of the 82 NHCAA health insurance company members enter 
information about their fraud investigations into NHCAA'S SIRIS 
database, which is a database containing information on health 
care fraud investigations opened by private payers. This 40 
percent rate is in stark contrast to the 95 percent of the same 
members who search the database for information entered by 
other companies.
    Clearly, the interest in receiving anti-fraud information 
exists. However, the willingness of a company to share its own 
information is clearly hampered by the perceived risks 
involved. Although the decision to avoid this risk may seem to 
make sense to a particular company, the decision results in a 
negative impact on the overall fight against health care fraud.
    While several states provide some limited form of immunity 
for fraud reporting, there exists no Federal protection for 
insurers that share information about suspected health care 
fraud. NHCAA believes that providing protections for 
organizations that share information and data concerning 
suspected health care fraud is a reasonable and prudent step to 
take and would encourage this essential activity.
    There is no silver bullet for defeating health care fraud. 
A winning fraud prevention strategy from Medicare must be 
multifaceted.
    Just as importantly, health care payers, including 
Medicare, cannot work in isolation and expect to be successful 
in detecting and preventing health care fraud. The 
establishment of Federal protections for these organizations 
engaged in anti-fraud information and data-sharing would be a 
major step in encouraging this essential activity and also 
would lend strong support for the growth and success of the 
Healthcare Fraud Prevention Partnership. In our view, this 
partnership signals a new era of private collaboration and 
holds great promise as a significant step in preventing fraud 
in Medicare.
    Thank you very much for allowing me to speak this 
afternoon, and I would be happy to answer any questions you may 
have.
    The Chairman. Thank you.
    Dr. Agrawal.

          STATEMENT OF SHANTANU AGRAWAL, M.D., DEPUTY

               ADMINISTRATOR AND DIRECTOR, CENTER

               FOR PROGRAM INTEGRITY, CENTERS FOR

                 MEDICARE AND MEDICAID SERVICES

    Dr. Agrawal. Thank you. Chairman Nelson, Ranking Member 
Collins and members of the Committee, thank you for the 
invitation to discuss the Centers for Medicare and Medicaid 
Services' program integrity efforts. Enhancing program 
integrity is a top priority for the Administration and an 
agencywide effort at CMS, and we have made important strides in 
reducing waste, abuse and fraud, with the strong support of 
this Committee and Congress.
    Before proceeding, I did want to take a moment to introduce 
myself. I started as Deputy Administrator for Program Integrity 
and Director of the Center for Program Integrity at CMS about 
three weeks ago, but prior to that, I was Chief Medical Officer 
of the Center.
    I am a board-certified emergency medicine physician, and 
for the last several years I have been working concurrently 
with other physicians as an emergency medicine doctor, both in 
large academic centers and a small community hospital in the 
area.
    I view program integrity through the lens of these 
experiences and as a physician who fundamentally cares about 
the health of patients.
    CMS is committed to protecting taxpayer dollars by 
preventing or recovering payments for wasteful, abusive or 
fraudulent services and is helping to extend the life of the 
trust fund, but the importance of program integrity efforts 
extends beyond dollars and health care costs alone. It is 
fundamentally about protecting our beneficiaries, our patients, 
and ensuring we have the resources to provide for their care.
    Numerous experts have cited the waste endemic to our system 
caused by multiple factors, from inefficiencies in care 
delivery to outright fraud.
    Underlying the issues and numbers are real patients. Even 
everyday, common sources of waste have consequences. A patient 
presenting to an emergency department today may get the same 
testing she received at another facility because the results 
are simply unavailable. She may be exposed again to radiation 
or other unnecessary risks from excessive or duplicative 
diagnostics and procedures despite the best intentions of her 
providers.
    Unfortunately, waste can transition to abuse. Providers can 
make clinical decisions, as in the case of Ms. Gresko, to 
prescribe a particular medication, order a specific test, 
perform a procedure, influenced by their own financial 
interests or incentives. These same interests can lead to up-
coding or other gaming of the reimbursement system.
    A few providers will go a step further to commit fraud. 
Fraud is not merely deception for dollars through falsified 
claims. It threatens beneficiary health through blatantly 
unnecessary services, substandard or nonexistence care, 
dangerous prescribing through pill mills and a host of other 
schemes.
    CMS is changing the program integrity paradigm toward a 
focus on prevention and collaboration to identify and combat 
waste, abuse and fraud in our system and in partnership with 
other stakeholders. As Deputy Administrator, I will continue to 
lead CMS on this course with three main areas of attention--
coordination across the agency and the broader health care 
system, excellence in our operations, and a clear view towards 
improving the cost and appropriateness of care.
    First, coordination. The Center for Program Integrity is 
responsible for leading agency efforts to reduce waste, abuse 
and fraud.
    Our work connecting Medicare and Medicaid is especially 
important. For example, the Affordable Care Act enabled us to 
protect beneficiaries from bad actors that cross programs by 
requiring removal from Medicaid if a provider had been removed 
from Medicare or another Medicaid program.
    CMS also considers information received from states in its 
provider enrollment decisions.
    Collaboration with stakeholders external to the agency is 
vital as well to the identification of vulnerabilities and 
increasing our impact.
    We work with our law enforcement colleagues through active 
data-sharing, collaborative investigations and, ultimately, 
enforcement actions.
    We also continue to build on existing partnerships with 
private sectors, health care organizations such as the NHCAA, 
and providers through our public-private partnership.
    Second, operational excellence. Over the last several 
years, medicine has increasingly placed performance measurement 
at its core, and this principle has really become part of my 
DNA.
    CMS has robust measures of the return on investment of 
program integrity appropriations, the result of audit and 
investigation activities, and the impact of advanced data 
analytic systems, all of which show strongly positive returns 
on investment. I intend to build on this foundation by managing 
performance and strategic decision-making based on the areas of 
greatest risk and return.
    In particular, CPI's work on provider enrollment and 
screening, also strengthened by the Affordable Care Act, has 
enhanced program integrity while lowering burden for providers. 
We work with the provider community to close program integrity 
loopholes, devise new initiatives and, ultimately, produce more 
impact for our activities.
    Finally, the cost and appropriateness of care. CMS has a 
comprehensive program integrity strategy that includes multiple 
tools and interventions that are used individually and in 
tandem to tackle specific vulnerabilities. By applying these 
tools across Medicare and Medicaid in a coordinated way, CMS 
can impact the overall cost of care. We can and should aim to 
do even more.
    As just one examples, CMS uses predictive analytics 
technology to identify potentially fraudulent providers for 
investigation and is working to expand that focus to providers 
that may not reach the threshold of fraud but are billing 
inappropriately and may require education or medical review. 
The goal is to target the right intervention for the right 
situation to impact the overall cost of care.
    Thank you for your time and this opportunity. I look 
forward to working together as we continue to focus on 
beneficiaries and strive every day to protect their health and 
well-being, and I am happy to take any questions.
    The Chairman. Well, thanks to all of you.
    Given the fact that we are racing the clock, I am going to 
defer questions. You can see the interest of this Committee in 
the subject matter. I will call on the Senators in the order in 
which they arrived.
    Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Ms. Gresko, I want to start by saying that I am just 
horrified about what happened to you. I think when we 
contemplate Medicare fraud we tend to think of it in terms of 
dollars lost, but in your case you were subjected to grueling, 
unnecessary infusions that could have really harmed your health 
had they continued, so I think it is really important that we 
keep that side of the equation in mind as well.
    Dr. Agrawal, I must say that I felt a sense of great 
frustration when I heard your testimony. Back in 1998, 16 years 
ago, when I was Chair of the Permanent Subcommittee on 
Investigations, I held a series of hearings on Medicare fraud 
in which we heard the Inspector General testify that there were 
billions of dollars lost to Medicare fraud.
    Now I am encouraged to learn that CMS has now revoked the 
ability of more than 17,000 providers and suppliers to bill 
Medicare, but it begs the question of why it has taken so long 
for a crackdown to occur and how do these individuals get 
certified to receive payments from Medicare in the first place. 
How did 17,000--and, undoubtedly, there are many more--bogus 
providers and suppliers get certified to receive Medicare?
    Let me just say one more as part of my rant on this, and 
that is that the IG's Office and GAO have been telling us for 
years that Medicare was a high-risk agency, extremely 
vulnerable to fraud.
    Dr. Agrawal. Thank you for your question, Senator.
    I will say that since the passage of the Affordable Care 
Act we have had a lot more tools at our disposal, which I 
believe Senator Nelson referred to as well, that really allow 
us to take significantly more steps in enrolling and screening 
our providers prior to them being able to bill Medicare.
    I think some of those important steps include being able to 
risk-stratify providers based on their provider type, which was 
a specific authority provided to us by the ACA, that allows us 
to subject higher-risk provider categories to greater amounts 
of screening.
    For example, now--which is a change from prior to the 
Affordable Care Act--all providers are subjected to certain 
screening that is automated, very efficient and leverages 
databases across the Federal Government in order to ensure that 
they meet the basic requirements of enrolling in Medicare.
    For example, we leverage licensure data to make sure that 
providers, like physicians, are appropriately licensed to 
provide care. We utilize GSA debarment data, felony conviction 
data, and that is a whole new level of consistent, automated 
screening that was not in place prior to the statute.
    Senator Collins. Well, let me just say that there was 
nothing that would have prevented CMS from implementing those 
provisions prior to the passage of the ACA. You had plenty of 
authority to do so and as did the previous administration. 
There was just nothing preventing that kind of data-sharing and 
screening and automation from happening.
    I only have one more minute because there are so many of 
us, so I want to quickly go to Mr. Martens.
    One of the things we discovered back when I held these 
hearings 16 years ago was that millions of Medicare dollars 
were sent to durable medical equipment providers that provided 
absolutely no goods or services whatsoever, and I remember 
vividly that one of the companies listed an address that would 
have been in the middle of the runway at the Miami airport had 
it existed.
    It is my understanding that Medicare contractors now 
conduct onsite visits of DME suppliers to make sure that they 
are legitimate, that they are not just a post office box. How 
effective have these onsite inspections been for DME providers 
in detecting businesses that are not legitimate from your 
perspective?
    Mr. Martens. From my perspective, in Miami, you are 
absolutely right. For years, you had that going on.
    Then in about 2006-2007, there was active push to go out 
and do onsites. It was a collaborative effort between OIG, CMS 
and the contractors, and they did all these onsites of these 
various DME suppliers.
    At the time, we were actually out going to financial 
institutions and just collecting money back that was sitting in 
bank accounts that was where people had left and disappeared 
who had owned DME companies.
    Since that time, we saw a significant reduction in the 
amount of DME billing, especially as a boots-on-the-ground 
person in South Florida, and there has been a significant 
reduction in that. Obviously, there are still fraud schemes, 
and there are still times they do it.
    We have had significant effect, and I would like to say one 
example where we ensured that not a dollar was lost to the 
Medicare program, and that was a case that happened in Florida, 
and it was specifically where we identified early through a 
complaint of a beneficiary, in part, who lived in a different 
geographic area, had not gotten the service.
    We worked with the historical owner of the company. We were 
able to get to the company, work with the CMS contractors to 
make sure that the automatic payments that occur with 15 days 
did not go out. Within 30 days, we were able to arrest the 
people, and not a dollar went out, and we charged them with 
$1.5 million in fraud.
    There is a lot of efforts moving forward to stop that. We 
do see durable medical equipment fraud, but that is not the 
primary thing we are seeing anymore in the State of Florida as 
a top thing.
    Senator Collins. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Senator Walsh, Montana is a long way from 
ground zero of Miami, but you have Medicare fraud in Montana.
    Senator Walsh. We do. Thank you, Mr. Chairman.
    I would ask this question to any of, I guess, the three 
members to the center and to the right of the table that is 
prepared to answer.
    My question would be that last year Montana was part of a 
$2.6 million settlement with Kmart over Medicare and Medicaid 
fraud. Kmart was alleged to have overcharged for partial 
filling of prescriptions for seniors and low-income Montanans.
    What are we doing to prevent and detect this type of fraud 
from happening in the future?
    Can we have--do we have any idea?
    Dr. Agrawal. I am happy to take the question. Thank you, 
Senator.
    Part D fraud is an extremely important priority for the 
agency, and we are taking a number of steps to help secure the 
program. While not speaking specifically to the details of that 
case, I can tell you that we do look at pharmacy.
    We conduct, in conjunction with Part D plan sponsors, 
pharmacy stock audits in order to prevent just that situation, 
where we have billing of a certain amount of medications but 
sort of purchasing of supplies of a different and lower amount 
of medications. Should those audits reveal anything, the Part D 
plan sponsors work with us to provide that information to law 
enforcement so action can be taken.
    We do work with Part D plan sponsors in other ways, sharing 
information and data, so that we can help to identify 
vulnerabilities for each other and help to identify courses of 
action.
    Beyond that, we are further trying to build in further 
safeguards, additional safeguards, in the Part D program. 
Earlier this year, we did publish a proposed rule that would 
bring a whole new level of control and oversight to Part D 
that, thus far, has not existed.
    One element to that proposed rule is to require all 
prescribers in Part D to actually enroll in Medicare. 
Currently, if you just prescribe in Medicare, you do not 
necessarily have to be enrolled, which allows you to escape the 
screening and enrollment processes that we have in place. It 
would also prevent us from taking action against you if, for 
example, a provider that has been revoked continues to 
prescribe in Part D.
    The provisions in that rule will do, I think, a lot to help 
us curtail abuse prescribing and take action against that kind 
of behavior.
    Senator Walsh. Okay. Thank you.
    One additional question. In Montana, we have extremely 
rural areas served by Medicare. Montana has 53 rural health 
clinics. In addition, a dozen other hospitals in Montana are 
considered frontier hospitals for purposes of the Medicare wage 
index.
    My question is I am wondering, from the witnesses, what 
special characteristics you may have come across that make 
Medicare fraud more difficult to identify and prosecute in 
rural areas as opposed to the larger cities.
    Dr. Agrawal. I will take that, Senator. Thank you.
    I would say there is a certain consistency, actually, that 
we bring to fraud investigation and fraud detection that takes 
into account some of the particular practice patterns or 
differences that you see across the country but really allows 
us to look at the country as a whole.
    For example, our provider enrollment processes are 
consistent, and actually, that is a change from before, and I 
think it is important because it allows us to perform our job 
efficiently but also decrease provider burden, so it should be 
the case that a physician or a provider in Montana does not 
experience a different process than one in Miami.
    I should also mention that our predictive modeling approach 
is national in scope. It looks at 4.5 million claims a day 
regardless of where they originated, and it subjects those 
claims to sophisticated analytics.
    We will take account in those analytics to geographic 
differences that might actually be appropriate patterns of 
care. We do not want to flag care that is very reasonable in a 
more rural area but unusual in a more urban area.
    I think the consistency is actually one of the more 
important things that I would highlight, and beyond that, I 
think it is sort of working with providers and working with 
beneficiaries to make sure that they are also acting as a 
surveillance network for us, as Ms. Gresko did in a smaller 
part of Michigan actually.
    Senator Walsh. Thank you, Doctor.
    Thank you, Mr. Chairman.
    The Chairman. Senator Coburn.
    Senator Coburn. Mr. Chairman, first of all, thank you for 
the honor of being able to sit on your dais and be able to ask 
questions.
    Thank you, Ranking Chairman Collins.
    I have been working on Medicare fraud since 1995, and Dr. 
Agrawal, I think it is great that you chose to come in and try 
to tackle this. My hope is that you are given the flexibility 
to do what you really need to.
    Most of my questions are going to deal with the FPS system 
because the GAO was pretty unimpressed with the last data that 
came out.
    One, I would like to know where you are on that. What 
percentage of Medicare claims are actually looking at it? Your 
last only detected two-tenths of 1 percent of Medicare fraud at 
its last formal rollout of what you told the Congress.
    The second question I would have for you is, are you now 
using the Death Master File daily? Are you coordinating? Are 
you still paying for dead doctors and dead patients?
    Dr. Agrawal. Thank you for your question.
    Let me just say, Senator Coburn, that I am deeply 
appreciative, and the agency is deeply appreciative, of your 
work on program integrity issues and your support of the 
agency's activities here.
    To answer your questions, the FPS system has continued to 
develop. As you know, from the first year of report, our 
initial investment in that system returned a three to one 
return, so, for every dollar invested, we----
    Senator Coburn. Let me just interrupt for a minute. GAO 
does not agree with that because they said not all the costs 
were associated with your numbers, so where you said 330, they 
said, time out, not accurate numbers.
    Accurate numbers are important. That is the business that 
you are in, and so my hope is when GAO gives us the next report 
on this that they will not have that caveat.
    Dr. Agrawal. I agree, Senator.
    We are working very closely with the OIG as required in the 
statute to obtain certification for our next report. I can tell 
you that work has been diligent, and we are very optimistic 
that we will achieve certification as the next report comes 
out.
    Senator Coburn. When will that be?
    Dr. Agrawal. I cannot give you an exact date, sir, but I 
can tell you that we are working on it, and we hope to release 
the report soon.
    I can also tell you that I am optimistic about the savings 
numbers that were identified in that report. I think the system 
has continued to develop in the right direction, where we are 
implementing far more models and refining the models that are 
already there.
    I can tell you that the system is both identifying new 
cases of fraud as well as augmenting leads that we have had 
before.
    Just one example to make this more concrete for folks who 
may not know as well as you do. There is, for example, a case 
that was on a program integrity contractor screen for about a 
year where they were investigating it. When an FPS model 
suddenly triggered for that provider, it actually provided new 
information that in the course of just a few months prompted a 
site visit and allowed us to revoke that provider.
    Even in augmenting leads, I think the system has produced a 
real efficiency.
    Senator Coburn. How about the Death Master File?
    Dr. Agrawal. We do update all of our data sources 
routinely.
    The Death Master File from the Social Security 
Administration is a very important data source. There are some 
inherent, I think, lag times built into that where there has to 
be reporting that goes to the SSA for them to incorporate it 
and then that data to come to CMS.
    That lag time is there. We are looking at other 
opportunities for trying to eliminate that lag, utilizing 
claims data, but it is firmly integrated in our systems and 
into our modeling.
    Senator Coburn. All right. Just one other comment, Mr. 
Chairman, and if I may, I would love to submit questions for 
the record for these witnesses.
    The Chairman. Absolutely.
    Senator Coburn. The history is CMS is doing the right 
thing, trying to get a prospective system in, and I applaud 
them for doing it.
    The insurance industry has had one for years, and it is 
never pay and chase with the insurance industry. If there is a 
question, we do not pay.
    My final question to you is, where are you on that, where 
we are raising it and, even if there is a suspicion, no payment 
until the suspicion is gone? Where are you on that?
    Dr. Agrawal. Well, I think we are taking a few steps, sir.
    First of all, we have been implementing the payment 
suspension authority given to us both by the ACA and prior to 
that.
    We have, I think, far more streamlined processes that, 
working in conjunction with law enforcement and obtaining leads 
from FPS and other sources, allow us to get to payment 
suspension quicker.
    We also--and that, obviously, as you know, prevents 
payments from going out the door.
    We are also able to implement in the fraud prevention 
system, and have, as you saw in the first year report, 
algorithms, auto denial edits--I do not want to get too wonky 
in sort of the payer vernacular, but edits that essentially 
allow us to deny a claim and prevent a payment.
    Those, I think, are real examples of things that stop 
payment from going out the door.
    In addition, sir, to your comment about the private sector, 
that is one of the main objectives of the public-private 
partnership--is to be able to work with the private sector, 
teach them what we know, which I think is ample, and we can 
certainly teach them but also learn from them what some best 
practices are and what else we could be doing differently to 
help improve our efforts.
    Senator Coburn. Well, once again, thank you for your 
service.
    Dr. Agrawal. Thank you, sir.
    The Chairman. All right. We have Senator Donnelly, Senator 
Warren and Senator Casey, and as you can see, the first vote 
has started.
    I am going to call on Senator Donnelly. If you would go 
vote--now we are going to have a little lag time between this 
first vote and the second vote, but the last four votes are 
going to be 10-minute votes, so let's see if you all can come 
back, get your questions in, and then I will submit my 
questions for the record.
    Okay, Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman.
    Thank you all for being here. We greatly appreciate.
    Mr. Martens and Mr. Saccoccio, if you could tell me, what 
do you ballpark and estimate is the amount of Medicare fraud 
per year right now?
    Mr. Saccoccio. There has never been a very clear answer as 
to what--how much fraud is in the system. The estimates range 
from anywhere from a low of three percent up to 10 percent of 
overall expenditures.
    For Medicare, you are talking about in the range now of 
$600 billion a year, so, if you take 10 percent of that, you 
are in the $60 billion----
    Senator Donnelly. A high of $60 billion, a low of $28 
billion.
    Mr. Saccoccio. [continuing]. $70 billion range, and that is 
probably much more accurate, I would think, than the three 
percent range.
    Mr. Martens. As a boots-on-the-ground individual in Miami, 
Florida----
    Senator Donnelly. Right.
    Mr. Martens. I do not know that I am in a position to give 
you an answer on that. We can probably get something from our 
headquarters back to provide to you, sir.
    Senator Donnelly. What do you--as a boots-on-the-ground 
person in ground zero, what do you figure the percentage is 
down there, about? Any idea, of claims?
    Mr. Martens. I do not know how I could quantify it.
    I do know that with the types of cases we work there is a 
significant number or amount of health care fraud dollars that 
are down there, you know, but when you go across all lines of 
business, I am not sure where that number would be.
    Senator Donnelly. Okay.
    Mr. Martens. It is not something I have ever attempted to 
quantify.
    Senator Donnelly. Thank you for all your hard work down 
there, too. The American--all of us appreciate everything you 
are doing on this.
    What would you say is the highest impact thing you can do 
or that we can do to help you stop this? Like when you look, 
what is the most immediate action that could have significant 
impact?
    Mr. Martens. Well, I would like to give you a couple, if I 
could.
    Senator Donnelly. Yes.
    Mr. Martens. I think the provider enrollment screening 
because part of this is before it ever gets to us is critical, 
and so if that stuff happens and that can be done at the CMS 
level, that is critical.
    The second part for us is that, I mean, from a resource 
perspective for agents on the ground right now, especially in 
our area, we do not have the staff that we need with the amount 
of fraud that goes on there.
    The last part is in something we have here with SMP. When 
you look at the education of seniors and getting people to look 
at their MSNs, their Medicare Summary Notices, and hopefully, 
we can empower them to call in and make sure when they see 
something that does not match up to let us know about it so we 
can get on things quicker. We have numerous examples of cases 
where those things have happened and those calls from seniors 
have been extremely beneficial and allowed us to do our job and 
put people in jail for it.
    Senator Donnelly. Okay. Dr. Agrawal, by the way, when you 
talk about resources, the figure that has been discussed today 
is for every dollar that is spent in trying to find it, we get 
$8 back, I guess.
    Dr. Agrawal. Correct.
    Senator Donnelly. That is a pretty good rate of return by 
any imagination that I could think of.
    Dr. Agrawal. I would like to think so. I would like to 
think that we are a positive return to the American taxpayer.
    Senator Donnelly. Well, my guess is if you tell everybody 
around this town that you will give them $8 for every dollar 
you give them, you would be a very popular guy is my guess.
    Dr. Agrawal, when we look at the way Medicare is being run 
now and the things that are being done--and Dr. Coburn talked 
about learning from the insurance company, the different 
insurance companies out there--do you know what kind of fraud 
insurance companies are experiencing they pay for not just 
Medicare but across the spectrum for medical care that they pay 
for?
    Dr. Agrawal. Thank you for the question.
    I would echo Mr. Saccoccio's comment that there is not 
really an accepted universal fraud methodology for knowing the 
rate of fraud, either in the public or private sector. There 
are estimates.
    I can tell you in working with the partners, with the 
private plans through the public-private partnership, that they 
face many of the similar issues that we do. Fraud does tend to 
cross the public-private divide, which I think in and of itself 
is an important lesson for folks to know--that fraud is not 
either just a Medicare or Medicaid problem.
    As far as the volume of fraud, what I can say is that there 
are some tools that the private plans have at their disposal 
that we can learn from and indeed are. One example I would 
highlight is prior authorization, which we instituted recently 
in a demonstration for powered wheelchairs, and that actually 
has shown a good impact.
    Senator Donnelly. I am about out of time, so let me ask 
this last one real quick, and that is in regards to a number of 
the insurance companies who provide Medicare Advantage programs 
and others.
    Are you sitting down with them and saying, what are your 
best practices, and then finding out the best practices from 
this one and from this one and from this one--because number 
one and most important is we can make sure that Ms. Gresko and 
the rest of our seniors never have to deal with this kind of 
fraudulent and criminal and, more than anything else, painful 
and heartbreaking conduct by these people, but number two is 
that all of a sudden you look up and the United States 
Government has saved $40 billion each year and at the same time 
we have made it so that these businesses operate more 
effectively.
    Have you talked to them, and are there any plans to sit 
down individually with each one to see what we can do?
    Dr. Agrawal. Yes, sir. Thank you.
    I would highlight that many of the members in the 
Healthcare Fraud Prevention Partnership, while they have their 
purely private side, are also MA plans, and so in that regard 
we do work with MA through that partnership. We work with MA 
plans directly. We ensure that they have compliance programs in 
place so that their efforts in fighting fraud are also robust.
    Yes, we do get best practices from them as well. Not only, 
actually, do we get qualitative information from them about 
best practices; we are actually engaged in data-sharing with 
them so that we can identify bad actors together.
    Senator Donnelly. Well, to all of you, thank you. You are 
doing amazing work on behalf of every citizen.
    Ms. Gresko, our goal is to make sure it does not happen to 
anybody else ever again. Thank you so much for being here.
    I am from Indiana, right next door to your home state of 
Michigan, and we are still angry about you beating us up in 
basketball this year.
    The Chairman. Senator Carper, have you already voted?
    Senator Carper. I have not.
    The Chairman. You have not?
    Senator Carper. No.
    The Chairman. Well, we are down to about six minutes to 
vote.
    Senator Carper. Okay.
    The Chairman. Do you want to go and vote and come back?
    Senator Carper. I am happy to. Are there six minutes on the 
clock?
    The Chairman. Yes. We are down to----
    Senator Carper. If there are six minutes on the clock, I 
would like to go ahead and talk. If there is not--that would 
mean we have eleven minutes.
    The Chairman. Okay. You are recognized.
    Senator Carper. Oh, thanks so much.
    The Chairman. Would you recess the Committee?
    Senator Carper. I will. I will. I am happy to.
    The Chairman. Then members will come back.
    Senator Carper. Good. Thanks so much.
    All right, everybody, thanks so much.
    This is sort of a crazed atmosphere today. We have all 
these votes that have been crammed into a regular already busy 
schedule, and it looks like these started at 2:33, and it will 
run 20 minutes, so it will be 2:53.
    I would just ask, Peter, just make sure I am out of here at 
2:48.
    Staff. Yes, sir.
    Senator Carper. Thanks, pal.
    I went to Ohio State, so most people would think I would 
not care much about Michigan.
    I am a huge Detroit Tigers fan, and I have been watching 
them closely in spring training all the season, so I hope our 
Tigers do well.
    They let me throw out one of the last opening game pitches 
at Tiger Stadium the week they closed Tiger Stadium, so, a huge 
fan and sat in the broadcast booth with Ernie Harwell, a Hall 
of Fame sports announcer, and used to do play by play with him.
    I love the Tigers and have a great affection for that part 
of your State.
    I am going to ask--thank you all for being a part of this 
and for bearing with us as our schedules are pulled and 
twisted.
    I want to ask a question. Is it Dr. Agrawal? How do you 
pronounce your last name?
    Dr. Agrawal. It is Agrawal, sir.
    Senator Carper. Agrawal. Agrawal, okay.
    Dr. Agrawal, I think this is the first time we have had a 
chance to meet. We spent a lot of time with Peter Budetti and 
enjoyed working with him. We look forward to working with you 
and your team as well.
    Dr. Coburn, who has been here--I think he has been here and 
gone. He and I have teamed up to introduce legislation. He 
probably mentioned it--the PRIME Act, and the idea is to do 
even more to try to reduce where we can improper spending and 
improper payments but also fraudulent payments as well.
    We saw an uptick in the Medicare numbers, about a $5 or $6 
billion uptick from 2012 to 2013, which was a matter of some 
concern for us, but I am delighted we have this opportunity to 
collaborate with Senator Nelson and Senator Collins on this 
area and also with you and the folks that you lead.
    I am not going to spend much time talking about our 
legislation, the PRIME Act, other than to say what I said. The 
bill includes some improvements to the Senior Medicare Patrol.
    I would just ask, what are your priorities, Dr. Agrawal, to 
work to improve program integrity? More specifically, how do 
you plan on reducing the level of Medicare improper payments?
    I understand the level of improper payments, as I said 
earlier, went up significantly, about $5 or $6 billion, from 
year to year.
    Just take a shot at that just for a couple of minutes, and 
I will be on my way. Thank you.
    Dr. Coburn and I are hugely interested in these issues, so 
are Senator Collins and Nelson, but we just do not have time, 
unfortunately, to drill down like I would like to, but we want 
to have plenty of chances to talk to you later on.
    Dr. Agrawal. That would be great, Senator. Thank you.
    I do, and I know the agency does, very much appreciate your 
longstanding support on these issues.
    Specifically, to talk about the improper payment rate, 
obviously, you are absolutely correct that the improper payment 
rate did go up. What I would ask is sort of just to remember 
the context--that the rate went up and primarily it was driven 
by improper payments in certain institutional providers like 
SNFs and home health agencies.
    What we are finding is that is actually the outcome, most 
likely, of actually more specific regulation, more specific 
policy for those providers to respond to, which I think is 
obviously good from a program integrity standpoint, but it does 
create sort of a requirement that those providers be aware of 
the policies and respond appropriately to them. One, for 
example, is the face to face requirement for home health 
services.
    The policies are clearly important. The policies clearly do 
help program integrity, but, if the providers are not educated 
about them well enough and have not gotten up to speed, then it 
is very possible that they will fail to submit the appropriate 
documentation or take some appropriate steps which will then 
drive up the improper payment rate.
    I do think the improper payment rate is a symptom of that.
    What we can do, I think, to work on it more is rather than 
backing away from real program integrity measures and 
initiatives is to do more and do better about educating 
providers, working with them, communicating with them, which we 
already do, and certainly I think that can help.
    I think other activities, like the prior authorization 
demo, have shown that even an area like power mobility devices, 
which can be somewhat complex from a regulatory standpoint, can 
be clarified for providers if they know on the front end what 
they have to submit, and, indeed, we work with them to make 
sure that they submit things correctly on the front end, and 
therefore, they sort of get a guarantee on the back end that 
they will not be audited and the improper payment rate will not 
rise as a result.
    I think we can--and there is some language in the 
President's budget to do more and take additional measures like 
that I think would help on the rate.
    Senator Carper. Good.
    I am going to run.
    I like to say whenever I talk to people who have been 
married a long time they always say the secret to--not always, 
but a lot of people say the secret to a vibrant, long marriage 
is the two Cs--communicate and compromise. Pretty good, huh? 
Communicate and compromise.
    The third C would be collaborate, and what we need here is 
collaboration, communication as well and probably some 
compromise, but especially collaboration.
    We are pleased to see our Committees here collaborating.
    We very much look forward to collaborating with you and 
your folks and with others as well.
    Welcome here, and we will look forward to see you at the 
ball game.
    Thank you.
    With that, the hearing is recessed for a few minutes.
    They are not leaving.
    Now, Senator Warren.
    Senator Warren. Thank you.
    I realize we are kind of a tag-team here. Thank you very 
much for bearing with us.
    This means we are very efficient. We are getting our votes 
done and able to address this really important question.
    I want to think some more about Medicare fraud. Part of 
preventing fraud is deterrence. The government can invest 
billions of dollars in identifying fraud, but if major 
wrongdoers only get a slap on the wrist, then it does not mean 
much in terms of deterrence and there is not much incentive to 
quit doing it.
    Let's examine how much real deterrence there is. I have 
pulled some examples here.
    Last year, the Department of Justice convicted 718 people 
of health care fraud. CMS has more thoroughly scrutinized about 
a third of current Medicare providers and revoked over 17,000 
providers' ability to bill Medicare--I think this is what you 
were talking about--since the passage of the ACA.
    Those are very impressive raw numbers, and it is a lot 
better than the track record of many other enforcement 
agencies, so, good work on that.
    Most of these cases involve individual actors or small and 
mid-sized companies. When major health care entities are 
accused of defrauding Medicare, the cases seem to end in a 
settlement and a corporate integrity agreement, which is an 
alternative to being excluded from Medicare participation, 
where big companies are accused of breaking the law and are 
asked only to set up internal fraud prevention controls.
    I want to start out by asking, do CMS, the HHS Inspector 
General and DoJ have policies that guide them about when to 
pursue prosecution and when to bar Medicare participation 
versus when to just settle and write up a corporate integrity 
agreement?
    Mr. Martens, could I start with you?
    Mr. Martens. Absolutely, ma'am.
    For us--and I will just start with an example in Florida.
    I mean, currently, right now there is a huge corporation, 
WellCare, which was an HMO. We took over 200 Federal agents 
when we had information and executed search warrants on their 
facility in Tampa. Subsequently, we charged the executives, 
they went through a long trial, and they were convicted. We 
were actually onsite that day the trading on Wall Street was 
shut down on that stock ticker.
    The more important thing there is that we have to have the 
proof to get there. We have to have the information, so, in a 
lot of cases, we need to have witnesses that can specifically 
show the intent, and we are able to prove that in conjunction 
with DoJ and our other law enforcement partners, so many times, 
when you see these settlements and things, I think what happens 
is we have not gotten to the point in those matters to be able 
to get inside and prove the direct intent on a specific 
individual, not necessarily the corporation.
    Senator Warren. Yes, but it is a corporation we are talking 
about here and the corporation that should be held responsible, 
and you are telling me that it was easy to do for little tiny 
providers, but you have these large providers that have many 
employees and millions of dollars that are churning through in 
activities, and the reason you ended up with so many 
settlements was because you could not prove your case?
    Mr. Martens. Well, no, we are--I mean, we are proving the 
case, right, just in a civil perspective that we know there are 
false claims, right, or there is some sort of false claim, and, 
when we move it into the justice arena to go through with that, 
we may not have been able to get to the level to prove the 
criminal intent.
    Senator Warren. That is what I am just trying to 
understand.
    The policy is that if you think you can prove criminal 
intent you actually would charge and take to trial to pursue 
banning them from further Medicare participation?
    Mr. Martens. In the case of WellCare, just as an example 
there, the corporation----
    Senator Warren. What I am trying to ask about is whether or 
not you have a policy in place for when it is that you make the 
decision that you are just going to settle and tell them to 
clean it up internally, or you are actually going to pursue 
it--you are going to pursue criminal remedies or you are going 
to pursue keeping them out of the Medicare system altogether.
    Mr. Martens. There is not a policy.
    Senator Warren. Okay. That was my question
    Mr. Martens. I mean, when we investigate a case, we are 
looking to find the evidence and wherever the evidence takes 
us, and, if we can get the evidence to prove the intent and 
work with DoJ to get that prosecuted, we do it.
    Senator Warren. Well, but that is the question I am asking 
about, what the level of prosecution is.
    Maybe Dr. Agrawal, could you speak to that a little bit?
    Dr. Agrawal. Sure, and I appreciate the question.
    We have pursued administrative, I should say, authorities 
against institutional providers on the CMS side. Obviously, we 
hand off cases in terms of to law enforcement to take them to 
trial or other kinds of law enforcement activities, but we have 
had revocations against institutional providers, hospitals, 
skilled nursing facilities.
    Senator Warren. Again, the question, Dr. Agrawal, is not 
whether or not you have ever taken anyone forward. The question 
is whether there is a policy in place that distinguishes why 
sometimes these things settle out and do not.
    I just want to turn to a couple of examples on this--HCA, 
the largest for-profit hospital chain in the country. In 2000, 
HCA paid $840 million after pleading guilty to charges of fraud 
and illegal kickbacks. Then in 2003, it paid $631 million to 
settle the associated civil claims. At the time, this was the 
largest health care fraud settlement in U.S. history.
    Despite the guilty pleas, HCA was not barred from Medicare. 
Instead, it entered into an eight-year corporate integrity 
agreement that required the company simply to improve its 
compliance efforts.
    What happened? Two years ago, HCA got in trouble again, 
this time over allegations that one of its subsidiaries was 
again engaged in an illegal kickback scheme that dated back to 
2007, the time when they were operating under this corporate 
integrity agreement. The next time now, HCA's punishment was a 
$16.5 million settlement and another corporate integrity 
agreement for the subsidiary. All of this was in a year when 
HCA made $1.6 billion in profits.
    The question I am trying to ask is about whether or not we 
really have enough punishment associated with violating the law 
to act as an effective deterrent, Dr. Agrawal.
    Dr. Agrawal. I do appreciate what you are asking, and I 
understand the case.
    We do not get involved nor do we have authority to levy 
exclusions or corporate integrity agreements. Those are actions 
taken by law enforcement. We are happy to provide assistance 
and support wherever we can, but ultimately, those decisions 
are not made at CMS.
    What I can tell you is that we do have significant 
administrative authorities which are preventive and deterrent 
in nature, and when the bar for those administrative 
authorities is met, we do take action, whether it is revocation 
or payment suspension or whatever the authority.
    Senator Warren. I understand this is not strictly within 
your authority.
    Perhaps I could ask the question just slightly differently, 
and that is, do you think that these settlements and the 
corporate integrity agreements are working as an effective 
deterrent?
    Dr. Agrawal. I appreciate the question.
    Unfortunately, I do not have the appropriate expertise to 
be able to address that. I do think that needs to be a question 
that is addressed by law enforcement or the folks that actually 
administer those remedies.
    The Chairman. Senator, I can answer the question----
    Senator Warren. Please, Mr. Chairman.
    The Chairman. [continuing]. Because the fine was actually 
$1.7 billion.
    Senator Warren. Yes.
    The Chairman. Guilty in the corporation, but nobody in the 
corporation went to jail.
    Where is the example of this is a no-no and people should 
not be doing this?
    Senator Warren. You know, I am just very concerned, Mr. 
Chairman, that Medicare fraud has become a game of catch-me-if-
you-can.
    If you do catch me, it is just the price of doing business. 
You pay a few million. Shoot, maybe even a billion dollars, 
but, pay a fine and move on and alter your business practices 
only to the extent of figuring out where to minimize the odds 
of being caught.
    If that is the case, we are always going to be behind on 
Medicare fraud. We are never going to do much to shut it down.
    Like I said, I started out with the good numbers, but they 
mostly were small-time operators, so you go after the small-
time operators, but you let the big guys continue to keep 
everybody in business and continue in the same operations. It 
just seems to me that is not going to be a very effective 
deterrent.
    Mr. Chairman, do I have time for one more question?
    The Chairman. Of course.
    Senator Warren. Oh, thank you because there is another one 
I want to ask you about, and that is when we talk about the 
settlements it seems like many, if not most, that we are 
talking about here, of these Medicare and Medicaid fraud cases, 
involve both large health care corporations and they result in 
settlements, so, if there is going to be this much reliance on 
settlements, then we need to look closely at the information 
that is available to the American public about the settlements.
    I want to think about--you mentioned, Mr. Martens, about 
the False Claim Act.
    We have a lot of cases brought under the False Claim Act. 
Department of Justice recently reported that $2.6 billion was 
recovered from the False Claims Act settlements of health care 
fraud cases in fiscal year 2012.
    Accordingly to the IRS audit guidelines, here are the 
quotes they used: Experience has shown that almost every 
defendant deducts the entire amount of a False Claims Act 
settlement as a business expense.
    When the government announces one of these settlements and 
trumpets a large sticker price, I think they ought to tell us 
whether or not the taxpayers are going to end up picking up a 
substantial amount of the tab.
    Dr. Agrawal, my question for you is, do you agree that more 
clarity around the details of these settlements would be 
beneficial?
    Dr. Agrawal. I think there are a number of initiatives to 
make various parts of health care more transparent. CMS is 
implementing transparency initiatives where we can, where we 
have both the requisite data and the transparency is sort of in 
our arena. I could give you examples of that.
    This is not an area that falls within CMS's bailiwick, so I 
could not comment on the likelihood or potential impact of that 
kind of transparency, but I would be happy to give you 
transparency initiatives that we do control.
    Senator Warren. Well, I appreciate that.
    I will put it this way. I have introduced with Senator 
Coburn, who was here earlier, a truth in settlements bill that 
would require that whenever settlements are done, whether it is 
here in Medicare fraud or it is somewhere else, when 
settlements are made with the government, that the details are 
made clear and that the financial implications, including 
whether or not these are going to be tax-deductible and the 
taxpayer is going to end up picking up part of the tab, be made 
clear at the time that the settlement is announced.
    I just want to be clear on this part of it, though, while 
we have introduced this as legislation and would like to make 
it apply to all of the agencies, there is no reason that those 
who are negotiating the settlements cannot adopt that level of 
transparency on their own and with each one of these 
settlements make it clear what the details are and who is 
paying how much, in truth.
    I think it is an important thing to do, and I ask for help 
on that.
    The Chairman. Dr. Agrawal, we want you all to crack down on 
this.
    Senator Warren, let me give you another example. In 
Florida, a man by the name of Armando Gonzalez pled guilty to a 
conspiracy to defraud Medicare of $63 million. He was a 
convicted cocaine dealer before he entered the Medicare 
program.
    Now the question is, how did he get into the Medicare 
program?
    One of the things that we did in the ACA that I mentioned 
at the outset, that this Senator did when we marked up the ACA 
in the Finance Committee, was that we wanted the requirement to 
perform background checks on Medicare providers.
    I am getting ready to get to my question about the vacant 
storefronts that used to be rampant--nothing, but they would 
bill, or they would have a post office box.
    I think if we are going to do this we are going to have to 
do these background checks.
    Now I know you have limited budgets. I agree with you on 
all your plea for additional funds and so forth, but, you want 
to comment on that?
    Dr. Agrawal. Sure, sir. Thank you.
    We are performing criminal background checks. As you know, 
from the ACA, we have the ability to utilize new screening 
resources, and for our highest-risk providers, which include 
new DME companies as well as home health agencies, we have 
implemented criminal background checks for them.
    We have also, in addition, conducted those site visits that 
you have mentioned. We have conducted literally tens of 
thousands of site visits, and that has helped to lead to the 
over 17,000 revocations that you heard about and--I think an 
important number to keep in mind also--over 200,000 
deactivations from failing to report or communicate with CMS.
    The Chairman. Okay. We passed the ACA in 2009. It became 
law that year. The background checks were mandated within the 
confines of your budget.
    This guy is a convicted cocaine dealer, and he still gets 
through and rips off $63 million.
    Of course, Medicare equipment suppliers receive improper 
payments, and then some of them are accused of abusive 
telemarketing practices.
    It is just hard to understand how somebody like this can 
get through the system at the expense of the taxpayer.
    I would ask you, since you are saying that you have already 
testified you are doing the background checks on the high-risk 
providers, how do you decide which providers are high-risk?
    Dr. Agrawal. That is a great question. Thank you.
    We were given the authority to decide that certain provider 
groups were high-risk or moderate-risk or limited. What we did 
was we worked very closely with our law enforcement colleagues 
actually to help make that determination.
    Currently, in the high-risk categories are new entrants who 
are DME suppliers or home health agencies and also folks that 
have exemplified themselves and earned the credit to be high-
risk by being revoked before or having some other kind of 
program integrity action taken against them. All of those folks 
are now subject to our highest level of scrutiny, which 
includes the automated checks, the site visits, the criminal 
background checks.
    In addition, we have provider groups in the moderate 
category that are subject to a great number of screenings.
    If you have a question about that, I am happy to answer it.
    As far as the improper payment rate, sir, with respect to 
DME, one thing I would ask you to keep in mind is that improper 
payments are not the same as fraud. Most of the improper 
payments that Medicare makes and that we are able to assess on 
an annual basis are due to documentation errors or medical 
necessity issues. The vast majority of the time those services 
would have been appropriate in another setting or with 
appropriate documentation.
    The Chairman. Mr. Martens, have you seen storefronts, post 
office boxes that offer nothing, and they still rip off the 
taxpayer?
    Mr. Martens. Obviously, that was something that was 
historical and was there.
    You know, there are different potential schemes and ways to 
try to move around, and as things are created they will morph 
into different methods of doing that. We are not really seeing 
the storefront issue specifically right now, but there are some 
methods and means to try and move around that.
    Hopefully, that answers it. We do not really see them now 
in that sense relating to Medicare Part A and Part B kind of 
services.
    The Chairman. All right. I want to thank everybody.
    We are going to have to adjourn the hearing because we are 
down to five minutes with no give time at the end for this next 
vote and then a series of votes, one right thereafter, and I do 
not want you all sitting here until we could get back in 
another hour after all of these votes.
    We will submit for all the members of the Committee 
additional questions. I have a number here that will be 
submitted for the record.
    We want to thank you for lending your expertise and time as 
we go after this very significant question of Medicare and 
Medicaid fraud. Thank you very much.
    The meeting is adjourned.
    [Whereupon, at 3:07 p.m., the Committee was adjourned.]
=======================================================================


                                APPENDIX

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


                      Prepared Witness Statements

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

      Prepared Statement of Bettie Hughes, Senior Medicare Patrol
      Coordinator, The Senior Alliance (Area Agency on Aging 1-C)

    Chairman Nelson, Senator Collins, ranking members of the 
Committee, and distinguished senators, on behalf of older 
adults, people with disabilities and their families and 
caregivers of Michigan, I thank you for this opportunity to be 
here today to share with you some of our first hand experiences 
with detecting and reporting Medicare fraud.
    My inspiration for working with older adults came from my 
own experiences as a caregiver for my husband. My husband had 
just retired when he was shot in the leg during an armed 
robbery. He had some persistent pain in his abdomen and back, 
so the doctors ordered a CAT scan. He went into anaphylactic 
shock from the dye used in the CAT scan, and stopped breathing. 
Even though the doctors tried to resuscitate him, he wound up 
with significant brain damage. They tried to get me to put him 
in a nursing home, but I said ``no''. I had one daughter in 
college and the other in high school--how could I put their 
father in a nursing home? I took him home on a ventilator.
    I had to quit my job of 21 years in retail management to 
take care of him. I didn't think anything of it at the time, 
but I paid for a bed bound man to have occupational therapy; 
and to be on a ventilator doctors later said he didn't need. I 
saw firsthand how unnecessary medical treatments can cost a 
family thousands of dollars.
    I decided to do something. In Michigan, I began working at 
the Senior Alliance area agency on aging, and quickly became 
involved with the Senior Medicare Patrol. The Senior Medicare 
Patrol is a volunteer program funded by the Administration on 
Aging which provides education, counseling, and outreach to 
Medicare beneficiaries on how to protect themselves against 
Medicare fraud. To date, the Senior Medicare patrol program 
nationwide has received more than one million inquiries 
regarding potential fraud, waste and abuse in the program, and 
is estimated to have saved Medicare and Medicaid about $106 
million. I am proud to serve as Regional coordinator for the 
Senior Medicare Patrol, with the responsibility for managing 
and training 46 volunteers and counselors.
    In the past seven years, our SMP program has identified and 
reported cases of beneficiaries receiving unnecessary 
treatments or tests like MRI and CAT scans, similar to what 
happened to Ms. Gresko. We have also seen beneficiaries being 
billed for services they did not receive, and we have seen 
organizations that bill Medicare target vulnerable seniors with 
abusive marketing practices. In one case, an elderly man was 
billed for outpatient physical therapy services on the same day 
he was having triple bypass surgery after having a heart 
attack. He remained in the hospital for six weeks, and then 
went to a rehabilitation facility. While he was in the 
hospital, Medicare was billed for 12 outpatient physical 
therapy visits that he never received. In other cases, Seniors 
have been offered gifts of television and video games, weekly 
pizza parties and bingo games have been arranged, and 
solicitors from these organizations have even followed our 
Meals-On-Wheels volunteers to find out where Medicare 
beneficiaries live so that they can return with gifts as 
incentives to sign up for care from that organization. In one 
case, a home health representative followed a volunteer driver 
and was able to record all the addresses the driver delivered 
to and then returned later to the beneficiaries' homes with 
baskets of food, saying it was a gift from Medicare.
    We need to find better ways of identifying who these 
fraudsters are, and keep them from marketing their schemes to 
some of our most vulnerable seniors. I know that there are many 
honest doctors, nurses, physical therapists, and home health 
aids which every day help Seniors to live healthy and 
productive lives. We need to let more of the good ones into the 
program, while keeping out the bad. We need to think about how 
we can all work together, government and private industry, 
beneficiary and provider, to stop Medicare fraud.
    We in the Senior Medicare Patrol have been doing our part. 
We have worked with our State health insurance program 
counselors to reach as many beneficiaries as we can. We have 
worked with the Office of Inspector General to instruct service 
coordinators working in government housing on how they can 
protect the residents of their buildings from health care 
fraud. Every day we hear these stories, and try to find 
solutions.
    We ask you to do what you can to give the Medicare program 
better tools to fight health care fraud. We need to keep 
fraudsters out of the program; we need to crack down on abusive 
marketing practices; and we need to find a way to all work 
together to reduce the billions of Federal dollars lost each 
year to health care fraud.
    Thank you for letting me share my experiences with you.

    Prepared Statement of Patricia A. Gresko, Medicare Fraud Victim

    Chairman Nelson, Ranking members of the Committee, 
distinguished senators, I am honored to be here today to give 
you my story as a victim of Medicare Fraud.
    I live in Romeo, Michigan where I worked for the public 
school system for 25 years. My favorite part of that job was 
working with adult and alternative education programs. Getting 
students to stay in school and get their diploma was a very 
fulfilling accomplishment. I will also count it a great 
accomplishment if in sharing my story today, I can prevent 
other Seniors on Medicare from going through what I did.
    I saw a doctor in Michigan for the first time several years 
ago, who told me I had a problem with my immune system, and 
that I needed IV medication monthly. This doctor was personable 
and dignified, and I trusted him. I thought, like all doctors, 
he would have my best interests at heart.
    I began these infusions in January 2013. During my very 
first treatment, I had side effects. I had chest pains, and was 
worried that it was my heart. The doctor told me that he needed 
to slow down the rate of the infusion, so, I continued to get 
these treatments for seven months. Each of these treatments 
took seven hours.
    I was shocked when I heard that my doctor had been arrested 
and taken into custody for Medicare fraud. The newspapers said 
he had diagnosed people with cancer who didn't have it, just so 
he could bill Medicare for the treatments.
    I started worrying about my own treatments, and did some 
research. The deficiency my doctor said I had in my immune 
system, a low level of something called IgM, couldn't be 
replaced, so I went to see two different doctors, one of which 
was a specialist. Both agreed that I did not need the IV 
medication.
    Over the course of seven months, I had paid this doctor 
over $1500 in co-pays. I later found out he had received over 
$14,000 for giving me these treatments.
    I have three grown children (two sons and a daughter) who 
will one day be on Medicare. I don't want them to ever 
experience what I went through, and, if there are doctors out 
there like this one, I worry that Medicare will not be there 
for my children.
    I am hopeful that by telling my story, you will take action 
to prevent doctors like that from getting into Medicare, and 
ensure that the program will be there for many generations to 
come.
    Thank you.

         Prepared Statement of Brian Martens, Assistant Special

      Agent in Charge, Miami Office of Investigations, Department

     of Health and Human Services, Office of the Inspector General

    Good morning, Chairman Nelson, Ranking Member Collins, and 
distinguished Members of the Committee. I am Brian Martens, an 
Assistant Special Agent in Charge based in the Miami Region 
with the U.S. Department of Health and Human Services (HHS) 
Office of Inspector General (OIG). I appreciate this 
opportunity to describe the work of our Special Agents in South 
Florida to fight Medicare fraud and protect seniors.
    We are having a positive impact in Florida and across the 
country. As reflected in the most recent Health Care Fraud and 
Abuse Control Program (HCFAC) Report,\1\ OIG efforts, together 
with those of our law enforcement partners, have led to a 
record setting return on investment of over $8 to $1. Through 
coordinated enforcement efforts across the country, including 
those of the Medicare Fraud Strike Force teams, criminal 
prosecutions and monetary recoveries have increased while we 
have seen a measurable decrease in payments for certain medical 
services targeted by fraud schemes. One such example is the 
drop we have seen in Community Mental Health Center (CMHC) 
Medicare payments. Following targeted enforcement activities, 
nationwide Medicare CMHC payments fell from an annual $273 
million to $31 million over a four-year period. Florida is an 
area where CMHCs were geographically concentrated. Despite our 
measurable successes in combating fraud, South Florida 
continues to be a hot spot of health care fraud and Miami is 
considered ``ground zero.''
---------------------------------------------------------------------------
    \1\ Report produced annually by the Department of Health and Human 
Services and the Department of Justice, available at http://
oig.hhs.gov/reports-and-publications/hcfac/index.asp.
---------------------------------------------------------------------------
    In Florida, we are seeing fraud schemes quickly evolve. As 
enforcement efforts target certain schemes, new permutations of 
those schemes arise. Not only are fraud schemes mutating, they 
are migrating--geographically and even between parts of the 
Medicare program. We are seeing an evolution of beneficiaries' 
roles in health care fraud--including unknowing victims and 
complicit participants. We also continue to see organized 
criminal networks operating in a systematic approach to steal 
money from Medicare. The criminals committing these crimes are 
often dangerous and we regularly encounter stockpiles of 
weapons when we execute arrests and enforcement operations. 
These criminals are taking advantage of those most vulnerable 
in our society--the elderly and the disabled.
    Medicare fraud is not a typical white collar financial 
crime, and it is not a victimless crime--it can affect 
patients, their families, the health care system and all 
taxpayers, and it's not just about the money--when fraud is 
committed, Medicare beneficiaries can suffer physical harm.
    Take for example the case of an HIV-positive beneficiary 
who lived in a socio-economically depressed area in South 
Florida. He lived in a boarded up mobile home and was being 
paid cash by a professional patient recruiter to go to a 
specific clinic for his HIV treatment. Only instead of getting 
the expensive HIV drug treatment he needed and paid for by 
Medicare, he willingly accepted a vitamin mixture in exchange 
for cash. During our investigation, a medical doctor in the 
community complained that the patients in that clinic were 
using the cash kickbacks to purchase drugs and alcohol, yet 
those habits only made the HIV-positive patients sicker.
    Thankfully, the majority of our cases don't involve direct 
physical harm to patients. However, Medicare fraud can create 
hardships for beneficiaries in many ways:
      Medicare fraud can distort a patient's medical 
history when false records are created to support false claims. 
If a patient's identification number is stolen and used for 
false claims, that patient may be denied necessary equipment or 
care because Medicare's records indicate that patient already 
received those services. For instance, if a patient needs a 
wheelchair, but a fraudulent claim has already been submitted 
for one, what is the patient to do?
      If a Medicare beneficiary number is compromised, 
there is currently no way for the patient to get a new number, 
which leaves the patient vulnerable to identity theft. We had a 
recent case in Tampa in which stolen Medicare numbers and 
personally identifiable information were used to file tax 
returns and the criminals received fraudulent tax refunds.
    Beneficiaries are vulnerable and can be adversely affected 
by Medicare fraud, but it is important that I tell you today 
about another role that beneficiaries play in Medicare fraud, 
particularly in Florida.
    Medicare fraud needs at least two elements to succeed: (1) 
health care providers who bill Medicare; and (2) patients, or 
``beneficiaries,'' on whose behalf Medicare is billed. 
Beneficiary roles can be categorized into three types:
    1. Unknowing victims--for example, victims of medical 
identity theft.
    2. Unwitting beneficiaries--for example, beneficiaries who 
have received some type of medical service or product but were 
not aware that it was medically unnecessary or was billed 
improperly to Medicare. Some of these beneficiaries suffer 
physical harm from the medical service.
    3. Complicit participants--for example, beneficiaries who 
use their Medicare numbers for personal financial gain. This 
can take the form of beneficiaries selling their Medicare 
number to be used in fraud schemes, or receiving payments to 
obtain unnecessary or inappropriate medical treatment solely 
for the purpose of defrauding Medicare. Beneficiaries can make 
around $1,500 in cash per month plus other benefits for 
participating in such schemes. Unfortunately, we see complicit 
beneficiary participants involved in a lot of our Medicare 
fraud cases in South Florida.
    Fraud schemes can be both viral and migratory. For example, 
we first saw the HIV fraud scheme in Miami. Through aggressive 
targeted prosecution and increased enforcement efforts in 
Miami, we saw the decrease of those services billed under 
Medicare Part B in Miami and saw the fraud scheme surface in 
Detroit, Michigan. In Detroit, the schemes were even organized 
by some of the relatives and co-conspirators of the Miami 
perpetrators.
    Now, the HIV scheme is again resurfacing in Miami; however, 
it is now being billed under Medicare's managed care program, 
Part C, perhaps in part because of fraud prevention measures 
implemented in Medicare Part B.
    Medicare Part D, specifically pharmacy fraud, is an area 
where we are seeing the largest increase in our South Florida 
case work. Prescription drug fraud is a complex crime that can 
involve many co-conspirators--drug distributors and 
traffickers, health care professionals, patient recruiters, 
drug-seeking patients, and pharmacies may all play a role. 
Criminal enterprises are also becoming an increasing presence 
in prescription drug fraud.
    It is important to note that OIG prescription drug fraud 
cases are not limited to investigating schemes involving only 
controlled substances. Our work is increasing in matters 
involving high-cost, noncontrolled, name brand prescription 
drugs such as respiratory, anti-psychotic, and HIV/AIDS 
medications.
    Another area in which the schemes continue to evolve is 
home health services. Although we have seen a decrease in home 
health payments, the area remains rife with fraud and is one of 
our top priorities. Home health schemes were initially 
characterized by billing Medicare for expensive long term 
skilled nursing visits to administer insulin injections to 
diabetics. However, the scheme has changed and now involves 
billing for physical therapy and occupational therapy.
    To combat these and other schemes, we strategically 
leverage partnerships with other law enforcement agencies, CMS, 
and the private sector. For example, in Maine where we have 
only four agents, our partnerships are extremely important. Our 
agents in Maine have successfully worked Medicare cases 
involving prescription drugs, medical identity theft, and home 
health fraud as we see in Florida; however, Medicaid fraud 
comprises the majority of our work in Maine.
    Health care providers and beneficiaries can serve as the 
front line of defense by refusing to participate in these 
schemes and reporting suspected fraud.
    I began my testimony by telling you about some of the 
outstanding results of our Medicare fraud enforcement efforts. 
However, it is important to note that OIG's mission is 
challenged by declining resources at a time when prescription 
drug fraud and other schemes are on the rise. Our Part D 
investigative caseload has almost quadrupled over the past five 
years, while at the same time, Strike Force teams are not 
operating at full strength due to funding shortfalls and hiring 
freezes. The additional funding in OIG's 2015 budget request 
would, among other things, support additional boots on the 
ground in Florida and in other high health care fraud areas 
across the country. We appreciate this Committee's support.
    Thank you for the opportunity to testify. I would be happy 
to answer any questions.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]  
      
    
=======================================================================


                        Questions for the Record

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

                U.S. Senate Special Committee on Aging

                ``Preventing Medicare Fraud: How Can We 
                 Best Protect Seniors And Taxpayers?''

                             March 26, 2014

                        Questions for the Record

                             Brian Martens

                     Senator Bill Nelson, Chairman

    Question:

    What will the fraud schemes of tomorrow look like in 
Florida?

    Response:

    While it is difficult to predict specific fraud schemes of 
the future, we suspect the actions of criminals will continue 
to meld and merge in reaction to enforcement crackdowns. If 
recent history is a predictor, prescription drug schemes will 
increase including the more profitable schemes involving non-
controlled substances. We have recently seen increases in our 
investigations under the Medicare Part C program where schemes 
are more difficult to detect because our data access is 
severely limited.

    Question:

    CMS testified about its fraud prevention system today. Does 
OIG track how many leads you get from this system? If not, can 
you just tell us based on your experience in Florida whether 
you are getting a lot of leads from the fraud prevention 
system, and give some examples of those leads?

    Response:

    OIG receives referrals from the ZPIC and does not track if 
the lead originated from the fraud prevention system.

    Question:

    How does OIG coordinate investigations with State agencies 
and CMS contractors in Florida and elsewhere?

    Response:

    In Florida, the OIG Office of Investigations (OI) meets 
monthly with the CMS contractor (ZPIC) to discuss potential 
case referrals, recent issues and coordination of ZPIC support. 
OI co-chairs several Healthcare Fraud Working Groups with other 
Federal, State, and local law enforcement agencies throughout 
the State. In Miami, one investigative team is comprised of OI 
special agents, State agency law enforcement agents and a State 
prosecutor specially designated to prosecute joint cases in 
Federal court. OI meets regularly with State law enforcement to 
share information and work cooperatively to maximize 
effectiveness of human intelligence and resources. When working 
in various task force teams, law enforcement coordination of 
investigations are managed in a systematic approach depending 
on the task force. Strike Force teams include HHS OIG special 
agents, FBI special agents, and prosecutors from the US 
Attorney's Office and/or the US Department of Justice. Other 
agencies may supplement the teams, but the core Strike Force 
team is comprised of those members. Otherwise, law enforcement 
coordination of each investigation is handled on an ad hoc 
basis depending on the case specifics and the jurisdictions 
involved.

    Question:

    You mentioned that OIG does not have the resources it needs 
to fight fraud. If you are fully funded this year, what will 
your office (meaning your office in Florida) use the money for?

    Response:

    OIG's request includes funding to support the Health Care 
Fraud and Abuse Control (HCFAC) program and expand the 
Administration's multiagency initiative to prevent health care 
fraud and enforce current antifraud laws through the Healthcare 
Fraud Prevention and Enforcement Action Team (HEAT) initiative. 
Medicare Fraud Strike Forces, a part of HEAT, have been central 
to our successes in combating Medicare Fraud, particularly in 
South Florida. In fiscal year 2013 alone nationwide Strike 
Force activity resulted in the filing of charges against 274 
individuals or entities, 251 criminal actions, and $333 million 
in investigative receivables. Of those results, although 
understaffed, the Miami Strike Force was responsible for the 
filing of charges against 128 individuals or entities, 174 
criminal actions and over $247 million in investigative 
receivables. OIG's budget request will allow OIG to further 
implement Strike Forces by alleviating current Strike Force 
staffing challenges and using data analysis to target new 
efforts to combat current and emerging fraud schemes in new and 
existing locations. This approach ensures that our enforcement 
efforts target the areas and activities most vulnerable to 
health care fraud.
    Due to reduced funding OIG is currently in a hiring freeze 
and has lost over 200 people over the past two years. During 
fiscal year 2013 OIG offered two rounds of buyouts. As a result 
OIG has fewer resources available to fight Medicare and 
Medicaid fraud--by the end of fiscal year 2014, we expect to 
reduce Medicare and Medicare oversight by 20 percent due to 
lack of resources. The HCFAC program, which OIG is a key 
participant, has significant and demonstrated success. The 2013 
HCFAC Annual Report notes that $8.1 was returned for every $1 
expended. Since 1997 the program has returned over $25.9 
billion to the Medicare Trust Funds. Funding OIG's budget 
request will allow OIG to stop its hiring freeze and expand its 
efforts in these highly successful fraud enforcement and 
oversight activities.

    Question:

    Mr. Martens, I commend you for your work to crack down on 
Community Mental Health Centers. As you may know, in October of 
last year, CMS issued final--and much needed--guidance for 
Conditions of Participation for Community Mental Health Centers 
that are officially in effect this October. That guidance 
should help to reduce fraud. However, the final rule States 
that CMS will survey CMHCs only once every five years to ensure 
requirements are met. This does not seem very often.
    Given resource constraints, how can CMS work with folks on 
the ground in hot-fraud areas like Miami, for instance, to 
ensure that we have more oversight than just once every five 
years?

    Response:

    We would encourage CMS to consider measures such as 
performing unannounced site visit spot checks, maximizing the 
use of technological resources and delivering via tracking 
service or courier a secured laptop with camera recording 
capabilities to facilities and performing virtual unannounced 
sight visit spot checks. If billing patterns are suspicious, we 
encourage CMS to communicate their concerns directly and 
promptly with OIG special agents. CMS could also consider 
annual re-enrollment license verification, and temporary 
projects to address CMHC fraud in fraud-prone areas.

    Question:

    Are there any strategies beyond full certification that CMS 
could have in place that would provide at least some additional 
oversight given that CMHCs have been such a problem for us in 
the past?

    Response:

    Strategies to consider could include:
      CMS inspection ``jump'' teams equipped with video 
cameras could help with oversight if they conduct unannounced 
site visits.
      Penalties and recoveries against those involved 
in fraud to the fullest extent possible, including complicit 
beneficiaries, to serve as a deterrent against future fraud.
      Public service announcements and educational 
campaigns.
      State licensure/certification.
      Accrediting authority for CMHCs.

    Question:

    Mr. Martens, as you may know, based on the IG's findings 
with CMHCs, this Committee requested a broader investigation 
into provider credentialing in the Medicare mental health 
benefit.
    Can you provide examples of any other potentially 
concerning areas of mental health fraud that you've seen on the 
ground?

    Response:

    Medicare has been billed for full therapy sessions when 
only partial sessions took place or they never occurred. Staff 
have been instructed to alter patient charts and notes from 
therapy sessions in order to make it appear that the patients 
being treated qualified for partial hospitalization program 
(PHP) treatments, when, in fact, they did not. False patient 
charts were signed authorizing unnecessary treatment or 
continued treatment for patients who were not eligible for PHP 
treatment, without a physician examination of the patients or 
the charts. Diagnoses and medication types and levels have been 
falsified by clinic employees and doctors to make it appear 
that patients qualified for PHP treatments. Group therapy 
sessions are billed as higher-reimbursing individual therapy 
sessions and often those group therapy sessions consist of 
patients watching a movie or eating lunch and playing games. We 
have also seen cases in which patients have not received 
expensive anti-psychotic drugs paid for by Medicare.

    Question:

    Do you think adequate compliance checks are in place to 
ensure that only Medicare-eligible mental health providers that 
meet both State and Federal certification requirements bill 
Medicare for services?

    Response:

    OIG has investigated many types of mental health providers 
who committed Medicare fraud. The providers conducted sham 
therapy sessions for patients ineligible for PHP treatment, 
altered records, paid kickbacks and billed Medicare for 
services not rendered. When individuals intend to steal from 
Medicare, we have found that they do so despite any number of 
certifications or advanced degrees they have achieved.

    Question:

    We believe this report will be completed by this summer. If 
you could communicate that back to the IG, that would be 
appreciated.
    Response:

    OIG is examining CMS's processes for ensuring that mental 
health care providers are appropriately credentialed (i.e., 
licensed/certified) to bill for Medicare services. We expect to 
have the work completed by August 2014 and to share our results 
with Hill staff at that time.

    Question:

    Mr. Martens, I was particularly interested to hear that 
within Medicare Part D, specifically, pharmacy fraud is an area 
where you are seeing huge growth--the caseload has quadrupled. 
I think it is very important to highlight that you said that 
OIG drug fraud cases are not limited to investigating schemes 
involving only controlled substances--but are increasingly 
involved in matters involving high-cost, brand-name 
prescription drugs. This Committee has been working on a report 
looking at the reasons behind certain discrepancies in use 
between popular brand-name and generic drugs, and pharmacy 
fraud and improper prescribing of high-cost brand-name drugs is 
one issue under exploration.
    Can you describe the types of schemes that you see on the 
ground with respects to pharmacy fraud of high-cost, brand-name 
drugs, and the impact that such schemes may have more broadly 
on taxpayer dollars in the Part D program?

    Response:

    OIG has conducted a series of studies on questionable 
billing patterns in Medicare Part D. In our first study, we 
identified over 2,600 retail pharmacies with questionable 
billing. Many of these pharmacies billed extremely high dollar 
amounts per beneficiary or per prescriber. Others billed for 
extremely high percentages of Schedule II controlled substances 
or brand-name drugs. In a second study, we identified over 700 
general-care physicians with questionable prescribing patterns. 
Many of these physicians prescribed extremely high percentages 
of Schedule II or III controlled substance; while others 
prescribed high numbers of prescriptions per beneficiary. A 
third report found that Part D inappropriately paid for drugs 
ordered by individuals who clearly did not have the authority 
to prescriber, such as message therapists and athletic 
trainers. The last report in the series is forthcoming. It 
focuses on questionable utilization patterns of Human 
Immunodeficiency Virus (HIV) drugs. The report will identify 
beneficiaries such as those who received HIV drugs from an 
extremely high number of pharmacies or prescribers. We expect 
this report to be released this summer.

    Reports:
      Retail Pharmacies With Questionable Part D 
Billing (OEI-02-09-00600)
      Prescribers With Questionable Patterns in 
Medicare Part D (OEI-02-09-00603)
      Medicare Inappropriately Paid for Drugs Ordered 
by Individuals Without Prescribing Authority (OEI-02-09-00608)
      Forthcoming: Part D Beneficiaries With 
Questionable Utilization Patterns for HIV Drugs

    Pharmacy fraud under Medicare Part D represents the largest 
increase in our investigative casework. Fraud schemes involved 
high-cost, brand-name non-controlled drugs, create a massive 
financial burden upon Federal healthcare programs--specifically 
to Medicare and Medicaid. An individual pharmacy can easily 
bill millions of dollars in these types of fraudulent 
pharmaceuticals.
    Most pharmacies maintain a small brand-name drug inventory. 
Audits of those pharmacies are ineffective because the PBMs 
(pharmacy benefit managers) only have claims information from 
their individual respective clients, which represent only a 
small portion of the pharmacy's inventory. Unless a 
comprehensive audit from all PBMs is completed at a pharmacy 
simultaneously, drug shortages will not be identified.
    Categories of non-controlled fraud schemes include drugs 
such as the atypical anti-psychotics, pulmonary medications, 
some GI medications, and chemotherapy agents. The list of drugs 
of concern is in the hundreds.
    This fraud scheme is perpetrated in various ways. First, 
pharmacies bill for the drugs but do not dispense them. This 
often involves a provider writing medically unnecessary 
prescriptions for beneficiaries who are co-conspirators in the 
fraud. A patient ``recruiter'' will then take the beneficiaries 
to a pharmacy participating in the scheme. The prescriptions 
are filled, but the recruiter then pays the beneficiary a cash 
kickback in exchange for the medication. The medication is then 
recycled back to the pharmacy to be put back into the pharmacy 
inventory. Federal health programs are billed for the 
medication and can eventually purchase the same medication 
multiple times.
    Another common scheme is for medically unnecessary drugs to 
be dispensed to be used as ``potentiators.'' When these drugs 
are combined with opiates or stimulants on the street, they 
cause a higher serum level of the opiate active ingredient, 
which enhance the euphoria from the opiate. An example of this 
is the HIV medication Ritonavir, which releases 3-4 times the 
active ingredient oxycodone, versus taking the oxycodone by 
itself. This creates a street demand for these non-controlled 
drugs and invites diversion.

    Question:

    What types of Medicare beneficiaries are targeted in these 
types of schemes?

    Response:

    In our case work we have seen a range of beneficiaries 
targeted in fraud schemes, including:
      Beneficiaries prone to drug abuse in need of pain 
relievers or seeking pain relievers.
      Beneficiaries receiving Medicare due to 
disability.
      Beneficiaries living in socio-economically 
depressed geographical areas or group residences such as 
retirement communities.
      Various ethnic groups are sometimes targets of 
coercion. They are threatened in various manners to comply and 
participate.
      Unwitting beneficiaries will be approached or 
cold-called by individuals misrepresenting themselves with 
sound alike names such as ``Med-E-Care'' or ``Med Care.'' The 
beneficiary then falls prey to a ``survey'' or ``verification'' 
scam, thinking the individual is from Medicare. We have seen 
similar internet scams.

    Question:

    How does OIG hold fraudsters accountable for what they owe 
beneficiaries--for example, co-payments charged for medically 
unnecessary procedures? Do you typically require any type of 
community restitution in corporate integrity agreements?

    Response:

    The vast majority of civil health care fraud cases are 
resolved through the False Claims Act, which is administered by 
the Department of Justice (DOJ), which could provide additional 
insights. In many cases, the government is not aware of the 
identity of the patients involved in the underlying fraud 
because damages are based on a statistically valid sample of 
claims.
    DOJ has required patient notification to occur in cases 
where there are allegations of patient harm. In standard 
settlement language, DOJ typically includes the following 
provision which protects beneficiaries from collection of 
payment by the settling entity for the settlement amount: ``X 
agrees that it waives and shall not seek payment for any of the 
health care billings covered by this Agreement from any health 
care beneficiaries or their parents, sponsors, legally 
responsible individuals, or third party payors based upon the 
claims defined as Covered Conduct.''
    Corporate Integrity Agreements (CIA) are intended to 
improve compliance in an organization as it moves forward after 
a health care settlement. CIAs are forward-looking and do not 
include repayment provisions for the conduct that has already 
been resolved. CIAs require providers to notify the OIG if 
certain ``reportable events'' occur. Standard CIA language, in 
cases where quality of care issues are resolved, include 
required reporting to the OIG ``a violation of the obligation 
to provide items or services of a quality that meets 
professionally recognized standards of health care where such 
violation has occurred in one or more instances and presents an 
imminent danger to the health, safety, or well-being of a 
Federal health care program beneficiary or places the 
beneficiary unnecessarily in high-risk situations.''
    When criminal matters are accepted for prosecution by the 
U.S. Department of Justice, the Department of Justice's Victim-
Witness Specialists coordinate victim notification of 
restitution eligibility, rights and procedures. Additional 
information can be found at http://www.justice.gov/criminal/
vns/.
    In an OIG case prosecuted by the U.S. Department of 
Justice, United States v. Hoffman-Vaile, the court rejected the 
defendant's argument that losses in a Medicare fraud be reduced 
from the billed amount where the losses to Medicare were only 
80 percent of the amount billed by the defendant. The court 
noted that private insurers and patients were also victims of 
the fraud and their losses, collectively, encompassed the other 
20 percent. While not charged, those acts constituted relevant 
conduct for the purposes of loss calculation. Victims who 
submitted claims to the court for restitution of their co-
payments were reimbursed. See page two of the 2010 US 
Sentencing Commission report: http://www.ussc.gov/
Education_and_Training/Annual_National_Training_Seminar/2010/
004b_Loss_Primer.pdf.

                        Senator Elizabeth Warren

    Many Medicare and Medicaid fraud cases involving large 
health care corporations result in settlements. A significant 
portion of the government's Medicare and Medicaid fraud cases 
are brought under the False Claims Act. The Department of 
Justice reported that $2.6 billion was recovered from False 
Claims Act settlements of healthcare fraud cases in fiscal year 
2012.\1\ According to the IRS's audit guidelines,\2\ quote 
``experience has shown that almost every defendant deducts the 
entire amount of a False Claims Act settlement as a business 
expense.'' Not all of these deductions hold up under IRS 
auditor scrutiny, but it is clear that companies try, and get 
away with, these deductions if they continue to file their 
taxes in this manner. Given the reliance on settlements to 
recoup funds and punish entities that defraud the government, 
the American people should be given the information necessary 
to understand the details. I introduced Truth in Settlements 
with Senator Coburn to require agencies to publicly disclose 
the details of settlements, like how they are calculated and 
whether they are tax deductible.
---------------------------------------------------------------------------
    \1\ http://www.justice.gov/opa/pr/2013/December/13-civ-1352.html.
    \2\ http://www.irs.gov/Businesses/Attachment-I-to-Industry-
Director-Directive-on-Government-Settlements-Directive-%231.

---------------------------------------------------------------------------
    Question:

    1. Do CMS and the HHS OIG agree that more clarity about 
exactly what these settlements mean can help taxpayers to 
understand the effectiveness of our government's enforcement 
efforts?
    2. The HHS OIG and CMS could commit to more transparency 
about settlement agreements without legislation. Will you 
commit to posting information about the details of Medicare and 
Medicaid fraud settlements on your joint, consumer-friendly 
Medicare fraud website,\3\ the HHS OIG website,\4\ and in your 
press releases, including how the settlements are calculated, 
and whether they are tax deductible? And if not, why not?
---------------------------------------------------------------------------
    \3\ http://www.stopmedicarefraud.gov.
    \4\ http://oig.hhs.gov/.

---------------------------------------------------------------------------
    Response:

    OIG agrees that transparency is an important goal. 
Consistent with this goal, OIG has for many years posted on our 
website summaries of the relevant facts of all civil monetary 
penalty settlements and judgments. We also recognize that 
transparency can have costs as well as benefits in the context 
of settlement negotiations, because the Department of Justice 
(DOJ) has primary responsibility for the litigation and 
resolution of health care fraud cases, OIG defers to DOJ 
regarding the appropriate level of detail about settlement 
calculations and negotiations that can be released without 
compromising ongoing and future settlement negotiations or 
jeopardizing other law enforcement activities. OIG does not 
determine the appropriate tax treatment of settlement amounts.

                           Senator Jeff Flake

CMS Moratorium

    It is my understanding that the underlying premise of the 
Medicare home health benefit is that, if properly used, it can 
lower Medicare spending by moving patients sooner from higher 
cost settings to their own homes. However, recently released 
Medicare claims data reveal that nearly 90 percent of all 
excessive home health spending is occurring in about 25 
counties in five States. It is my understanding that the Center 
for Medicare and Medicaid Services (CMS) has instituted a 
moratorium on new providers in certain areas but that this 
moratorium has not been implemented in every area that CMS has 
identified with issues related to excessive home health 
spending.

    Question:

    What steps have been taken to evaluate the effectiveness of 
the moratorium?

    Response:

    OIG would defer to CMS as the cognizant program agency for 
response.

    Question:

    How many new home health agencies applicants were submitted 
during the moratorium?

    Response:

    OIG does not process home health agency application and 
would defer to CMS for response.

    Question:

    What authority does the Secretary, CMS, or the Office of 
Inspector General have to review existing providers in these 
areas that are targeted for abusing the current system and what 
else is being done to address the problem of excessive home 
health spending?

    Response:

    OIG has many fraud enforcement tools that can be used to 
identify and stop fraud or excessive spending in the home 
health arena. These tools include investigating and bringing 
cases under the Civil Monetary Penalties Law and excluding 
individuals through OIG's exclusion authorities.

Utilization Issue

    The Medicare Payment Advisory Commission (Medpac) data 
seems to recognize the higher rates of home health use in just 
five States. It is estimated that reducing utilization in just 
25 counties to the 75th percentile could save Medicare over $1 
billion annually.

    Question:

      What further steps to address this problem beyond 
the moratoria you have proposed?
      Has there been any consideration of placing a 
reasonable limit on homecare episodes?

    Reponse:

    OIG would defer to CMS as the programmatic agency for 
response.

    Question:

    In your opinion, would a limit on homecare episodes reduce 
fraud and save the Federal Government money?

    Reponse:

    We have found that criminals try to find ways to bill 
around any caps, limits, edits or barriers that are established 
in order to maximize their ability to steal from Medicare in as 
few attempts as possible. Therefore, it is important to explore 
additional safeguards to reduce and deter fraud.
    While OIG has not specifically evaluated potential 
strategies to limit homecare episodes, factors to consider 
should include whether placing a limit on home health episodes 
could have implications on patient access to care and 
potentially result in patients seeking care in more expensive 
settings if they do not want to use up their home health 
benefit or have already exceeded the limit.

                 U.S. Senate Special Committee on Aging

                ``Preventing Medicare Fraud: How Can We 
                 Best Protect Seniors And Taxpayers?''

                             March 26, 2014

                        Questions for the Record

                             Lou Saccoccio

                     Senator Bill Nelson, Chairman

    Question: Mr. Saccoccio, what's the single most important 
way we can strengthen the efforts of the Healthcare Fraud 
Prevention Partnership?

    Response:

    I would actually like to offer two ideas in response to the 
question above.
    First, it is vital that the funding and resources necessary 
to realize the full potential of the Healthcare Fraud 
Prevention Partnership (HFPP) be provided. The HFPP is a 
groundbreaking effort aimed at aligning efforts of the public 
and private sectors against health care fraud. It is an entity 
with a thoughtful, well-defined structure that requires 
administrative and technical investment. In essence, the HFPP 
is an exercise in trust and collaboration that depends upon 
broad participation by interested parties. Therefore, it is 
important that we do what we can to ensure its success from the 
start by dedicating adequate funding and resources. Adequate 
funding will convey confidence in the program and attract 
participation. In contrast, a lack of support will convey 
uncertainty.
    Government funding dedicated to health care anti-fraud 
efforts has proven consistently to be a good investment. The 
Health Care Fraud and Abuse Control Program (HCFAC) was 
established under HIPAA and operates under the joint direction 
of the Attorney General and the Secretary of the Department of 
Health and Human Services (acting through the Inspector 
General). The program, now in its seventeenth year, is designed 
to coordinate Federal, State and local law enforcement 
activities with respect to health care fraud and abuse. The 
HCFAC annual report for fiscal year 2013 (published in February 
2014) shows a return-on-investment (ROI) for the program over 
the last three years (2011-2013) to be $8.1 returned for every 
$1.00 expended. The average ROI for the life of the HCFAC 
program is $5.4 returned for every $1.00 expended. NHCAA 
conducts its own biennial survey of private insurers which 
reliably reveals similar ROI outcomes for anti-fraud 
investments made in the private sector.
    Second, to help ensure that the HFPP is as effective as it 
can be as a facilitator of information exchange, Congress 
should consider enacting a Federal immunity statute that 
protects information sharing that takes place between HFPP 
participants. Many States provide immunity for fraud reporting 
(typically to law enforcement and regulatory agencies, although 
protections, as well as reporting requirements, vary by State). 
However, there exists no Federal protection for insurers that 
share information with one another or with the government about 
suspected health care fraud. NHCAA believes that we should 
remove unnecessary obstacles that inhibit fraud fighting 
efforts, and that providing protections for individuals and 
entities that share information and data concerning suspected 
health care fraud is a reasonable and prudent step to take.

    Question:

    Mr. Saccoccio, what do you count as the single greatest 
success of NHCAA in the fight against Medicare fraud?

    Response:

    I believe that NHCAA's greatest success in the fight 
against Medicare fraud has been our ability for nearly 30 years 
to bring the private and public sectors together to work 
collaboratively on the issue of health care fraud. NHCAA has 
always been a private-public partnership with a straightforward 
mission: To protect and serve the public interest by increasing 
awareness and improving the detection, investigation, civil and 
criminal prosecution and prevention of health care fraud and 
abuse.
    Our commitment to this mission is the same regardless of 
whether a patient has private health care coverage or is a 
beneficiary of Medicare, Medicaid, or other Federal or State 
program. Health care fraud is a complex crime that does not 
discriminate between types of medical coverage. NHCAA's ability 
to bring private sector and government payers together in order 
to exchange health care fraud information is pivotal in 
connecting the dots to give a more complete picture of health 
care fraud.
    In its role as a convener and facilitator of health care 
fraud information-sharing, NHCAA employs several tools. These 
include a secure, online data base of health care fraud cases 
and schemes accessible by members and law enforcement; regular 
in-person investigative case discussion roundtable meetings; a 
request for investigative assistance program aimed at assisting 
law enforcement; a listserv tool where members can query their 
industry peers about unusual, pressing or particularly 
challenging issues; and regular communication vehicles (e-
newsletters, fraud alerts, etc.) that disseminate relevant and 
timely health care fraud fighting insights and information.
    It's worthy to note that government agencies such as HHS 
Office of Inspector General, the FBI and the Centers for 
Medicare & Medicaid Services (CMS) are all regular participants 
in NHCAA information sharing activities. These agencies often 
offer feedback that they view participation with NHCAA as an 
important aspect of fighting health care fraud in Medicare and 
other government health care programs. NHCAA has long been a 
champion of anti-fraud information exchange and this experience 
has taught us that it is very effective in combating health 
care fraud--whether it be in Medicare, Medicaid, or private 
health insurance.

                 U.S. Senate Special Committee on Aging

                ``Preventing Medicare Fraud: How Can We 
                 Best Protect Seniors And Taxpayers?''

                             March 26, 2014

                        Questions for the Record

                            Shantanu Agrawal

                     Senator Bill Nelson, Chairman

    In January of this year, you announced a temporary 
moratorium on Medicare enrollment of home health agencies in 
several cities including Fort Lauderdale, and extended the 
current moratorium on new home health agency enrollment in 
Miami for another six months. Many home health providers 
applauded this decision because they are doing the right thing 
and want to see the bad actors caught.

    Question:

      This is a great example of CMS using one of the 
Affordable Care Act's anti-fraud tools, and I applaud CMS for 
finally using this authority. From CMS's standpoint, why are 
these moratoria so integral to fighting fraud?
      What has CMS has been doing while these moratoria 
are in place to prepare for when home health agencies will be 
able to enroll in Medicare again?

    Response:

    In the last year, CMS has imposed moratoria in seven 
geographic areas \1\ for two service types as part of our 
comprehensive strategy to fight fraud, waste, and abuse while 
ensuring patient access to care is not interrupted. These 
moratoria are critical to our efforts because they allow CMS to 
pause provider and supplier entry into high risk markets while 
using other tools and authorities in collaboration with our law 
enforcement partners to remove bad actors from the program. In 
imposing these enrollment moratoria, CMS considered both 
qualitative and quantitative factors suggesting a high risk of 
fraud, waste, or abuse. CMS relied on law enforcement's 
longstanding experience with ongoing and emerging fraud trends 
and activities through civil, criminal, and administrative 
investigations and prosecutions. CMS' determination of high 
risk fraud in these provider and supplier types within these 
geographic locations was then confirmed by CMS' data analysis, 
which relied on factors the agency identified as strong 
indicators of fraud risk.
---------------------------------------------------------------------------
    \1\ The seven metropolitan areas where CMS has issued moratoria 
are: Miami, FL (Miami-Dade and Monroe Counties); Chicago, IL (Cook, 
DuPage, Kane, Lake, McHenry and Will Counties); Dallas, TX (Dallas, 
Collin, Denton, Ellis, Kaufman, Rockwall, and Tarrant counties); 
Houston, TX (Harris, Brazoria, Chambers, Fort Bend, Galveston, Liberty, 
Montgomery and Waller Counties); Detroit, MI (Wayne, Macomb, Monroe, 
Oakland, and Washtenaw Counties); Philadelphia, PA (Philadelphia, 
Bucks, Delaware, and Montgomery Counties in Pennsylvania and 
Burlington, Camden, and Gloucester Counties in New Jersey); and Fort 
Lauderdale, FL (Broward County).
---------------------------------------------------------------------------
    For example, CMS determined that Miami-Dade County, Dallas 
County and Harris County (which contains the city of Houston) 
have the three highest ratios of home health providers to 
beneficiaries compared to similarly sized counties, and the 
Houston and Philadelphia metropolitan areas have some of the 
highest ratios of ambulance companies to beneficiaries--an 
important indicator of provider oversupply. CMS also considered 
the annual growth rate of the provider type, and found that in 
Chicago the number of home health agencies has grown at almost 
twice the national rate. In Detroit, CMS determined that, in 
addition to other factors, law enforcement activity is 
significant, and has resulted in 44 guilty pleas and six trial 
convictions since 2010, because fraud schemes are highly 
migratory and transitory in nature, the laws and regulations 
governing the moratoria authority provide CMS flexibility to 
use any and all relevant criteria to determine the need for a 
moratoria.
    Imposing a moratorium can help reduce the risk of fraud, 
waste and abuse without compromising access to care. CMS 
carefully examined Medicare beneficiary access to services in 
all of these areas, and concluded that the moratoria will not 
affect access to care. The Agency also worked closely with each 
of the affected states to evaluate patient access to care, and 
these states reported that Medicaid and CHIP beneficiaries will 
continue to have access to services. During the moratoria 
period, CMS and the affected states are monitoring access to 
care to ensure that Medicare, Medicaid, and CHIP beneficiaries 
are receiving the services they need.
    In each moratoria area, CMS is taking administrative 
actions such as payment suspensions and revocations of home 
health agencies and ambulance companies, as well as working 
with law enforcement to support investigations and 
prosecutions. For example, CMS has revoked or deactivated 
billing privileges of 21 Miami home health agencies in the 
first 60 days of the moratorium. Additionally, law enforcement 
made arrests in a $48 million home health scheme, and secured 
guilty pleas against three home health recruiters in that 
scheme as well as guilty pleas from the owners of a clinic 
involved in an eight million dollar fraud scheme.
    These activities are ensuring that only legitimate 
providers are enrolled in Miami, and CMS has other efforts that 
will strengthen the enrollment policies to better prevent bad 
actors from getting enrolled in the first place. For example, 
CMS issued a proposed rule \2\ that would permit the denial of 
billing privileges of a provider, supplier, or individual if 
they were affiliated with an entity that has an existing bad 
debt. This proposal is targeted to providers that may be 
removed from the Medicare program with large outstanding debts, 
but then seek re-entry to the program as another entity. CMS is 
also in the process of awarding the contract for fingerprint-
based background checks, which will be required for the entire 
category of providers in the geographic area where a moratorium 
was imposed. This screening process complements the database 
and other checks that CMS performs on all providers and 
suppliers seeking entry into the Medicare program. CMS 
anticipates that these enhanced enrollment safeguards will be 
in place by the end of calendar year 2014.
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    \2\ http://www.gpo.gov/fdsys/pkg/FR-2013-04-29/html/2013-09991.htm.

    Question: In your testimony, you talk about how you have 
imposed additional screening for community mental health 
centers in Florida as part of an enrollment study. Have these 
intensive screening methods been applied nationwide, and if 
---------------------------------------------------------------------------
not, why not?

    Response:

    The joint Medicare Fraud Strike Force effort between the 
Departments of Justice and Health and Human Service began 
targeting Community Mental Health Center (CMHC) fraud in 2008, 
when total Medicare payments peaked at more than $70 million 
per quarter. CMS and its law enforcement partners actively 
pursued the suspension, investigation, prosecution of 
fraudulent CMHC providers nationwide. The actions correspond to 
a national decline in CMHC billing to Medicare that has 
persisted to the present time. Now total Medicare payments are 
well under $10 million per quarter, a savings to the Trust Fund 
exceeding $60 million per quarter. As part of that effort, in 
2009, CMS designed an enrollment special study targeting 
certain provider types, including CMHCs, for site visits and 
other administrative actions based on elevated risk factors in 
South Florida.
    As a result of the Affordable Care Act, CMS has imposed 
additional scrutiny on CMHCs and other high risk providers. The 
law required CMS to implement categorical risk-based screening 
of providers and suppliers who want to participate in the 
Medicare and Medicaid programs, and CMS put these additional 
requirements in place for newly enrolling and revalidating 
Medicare and Medicaid providers and suppliers in March 2011. 
This enhanced screening requires certain categories of 
providers and suppliers that have historically posed a higher 
risk of fraud to receive greater scrutiny prior to their 
enrollment or revalidation in Medicare. States may rely on 
screening performed for Medicare. CMS has designated CMHCs to 
the moderate level of screening,\3\ which subjects them to the 
basic level of screening--including licensure and database 
checks--as well as announced or unannounced site visits prior 
to enrollment or re-enrollment. As part of the enhanced 
Medicare screening, 72 CMHCs have successfully revalidated, and 
since that time, six have been deactivated.
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    \3\ http://www.gpo.gov/fdsys/pkg/FR-2011-02-02/pdf/2011-1686.pdf.
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    On October 29, 2013, CMS published a Final Rule 
establishing a formal set of conditions of participation for 
CMHCs, which are the health and safety regulations that 
Medicare providers must meet to participate in the Medicare 
program. The new Conditions of Participation will help raise 
standards for the 100 CMHCs that participate in Medicare and 
ensure high quality and safe care for the more than 13,000 
Medicare beneficiaries they serve. To ensure that the mental 
health centers are meeting the new health and safety 
requirements, CMS will survey community mental health centers 
at least once every five years, although surveys may occur more 
frequently if a complaint is received by CMS or the state 
survey agency.

                       Senator Sheldon Whitehouse

    Question:

    The Small Business Jobs Act appropriated $100 million to 
CMS to implement predictive analytics technologies. According 
to GAO, CMS spent $26 million on the implementation of the 
Fraud Prevention System as of May 2012. How much has CMS spent 
on the system to date?

    Response:

    The Small Business Jobs Act required the HHS Office of 
Inspector General (OIG) to certify the actual and projected 
savings that result from the Fraud Prevention System (FPS). A 
critical component of that certification is the review of the 
methodology to calculate all costs associated with the FPS. In 
the first implementation year report, CMS reported an estimated 
cost of $34.7 million. OIG recommended that CMS refine its 
methodology for the second year report, and CMS is in the 
process of doing so. We anticipate issuing the report soon.
    Early results from the FPS show significant promise and CMS 
expects increased returns as the system matures over time. As 
reported in the FPS FY 2012 Report to Congress,\4\ in its first 
year of implementation, the FPS stopped, prevented or 
identified an estimated $115.4 million in improper payments. 
The FPS achieved a positive return on investment, saving an 
estimated three dollars for every one dollar spent in the first 
year; CMS anticipates that the ability of FPS to identify bad 
actors and focus investigative resources on most egregious 
schemes will continue to expand.
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    \4\ http://www.stopmedicarefraud.gov/fraud-rtc12142012.pdf.

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    Question:

    In its 2012 report, GAO wrote that through July 2012 CMS 
had implemented a total of 25 predictive analytic models in 
that fell into three different model types. Can you please 
provide an update on the number and type of analytic models CMS 
has to date?

    Response:

    Since June 30, 2011, when CMS launched the FPS, CMS has 
been applying advanced analytics to Medicare fee-for-service 
(FFS) claims on a streaming, national basis. CMS designed the 
FPS to accommodate a variety of model types to address multiple 
kinds of fraud schemes. The most important indicator of success 
is that the models in the FPS have led to real world action--we 
have kicked bad actors out of the Medicare program, the surest 
way to protect Trust Fund dollars and beneficiaries into the 
future, and stopped identified overpayments and referred cases 
to law enforcement.
    A key component of CMS's success using the FPS tool is the 
rigorous and structured governance process established that 
brings oversight, management, and control of selecting and 
developing new models. This structure allows CMS to examine 
innovative ideas from multiple stakeholders and move approved 
ideas into production to enhance the FPS. When OIG, GAO or 
other investigators identify vulnerabilities or schemes, the 
governance process converts ideas into functioning models that 
identify quality leads for CMS and its partners to investigate.
    During the second implementation year, CMS added 39 new 
models to the FPS, of which eight were sophisticated predictive 
models focused on vulnerable service areas, which raises the 
total number of models to 74 models running simultaneously to 
monitor fraud, waste, and abuse. Predictive models are issue or 
service area focused; one predictive model includes many 
indicators that could each have been put into the technology as 
single models. A single predictive model is often as effective 
as multiple non-predictive models. The value of the FPS is the 
successful identification of leads based on a combination of 
models and model types. In addition, CMS refined 17 existing 
models based on the feedback received through the FPS and 
insights from field investigators, policy experts, clinicians, 
and data analysts.

    Question:

    The Small Business Jobs Act requires the Secretary, after 
considering an evaluation of ongoing efforts, to expand the use 
of the predictive analytics technologies to Medicaid and CHIP 
beginning April 1, 2015. That deadline is about year away. Does 
CMS expect to meet the April 2015 deadline for expanding the 
predictive analytics system? Has CMS developed benchmarks with 
its contractors on this expansion project?

    Response:

    Under the Small Business Jobs Act, CMS is required to 
evaluate the cost-effectiveness and feasibility of expanding 
predictive analytics technology to Medicaid and the Children's 
Health Insurance Program (CHIP) during the third implementation 
year of the FPS. Based on this analysis, the law requires CMS 
to determine whether to expand predictive analytics to Medicaid 
and CHIP by April 1, 2015. As required by the Small Business 
Jobs Act, the third-year implementation report will include an 
analysis of the cost-effectiveness and feasibility of expanding 
predictive analytics technology to Medicaid and CHIP. As we 
conduct this analysis we are considering the challenges posed 
by the differences between Medicare and Medicaid/CHIP, 
including the differences in availability of prepayment data 
amongst the programs.
    However, several State Medicaid programs are already in the 
process of implementing predictive analytics technology as part 
of their program integrity efforts. CMS may approve enhanced 
Federal Financial Participation for certain allowable 
activities and resources for predictive analytics technologies 
that are integrated with State Medicaid Management Information 
Systems. CMS approved enhanced funding for five states to 
implement predictive analytics. Currently, CMS is working to 
identify specific FPS algorithms relevant to Medicaid and 
planning to conduct an analysis of one state's Medicaid claims 
data using the identified algorithms. Once this analysis is 
complete, CMS will share the results with that state.

    Question:

    HHS concurred with GAO's recommendation that outcome-based 
performance targets and milestones should be established for 
the Fraud Prevention System, and noted that CMS intended to 
establish such targets and milestones based on the first 
performance year of the Fraud Prevention System. Can you please 
provide a few examples of the targets and milestones CMS has 
established for the system?

    Response:

    CMS developed the appropriate measures needed to estimate 
savings with respect to both improper payments recovered and 
improper payments avoided through the FPS in the first 
implementation year report. As part of cost savings, CMS 
identified cost avoidance associated with revoking provider 
billing privileges, amounts denied by prepayment edits, bill 
amounts denied by auto-denial edits, amounts held by payment 
suspension, the amount of overpayments referred for recovery, 
and the value of law enforcement referrals. CMS also 
established process measures, including the number of new or 
augmented leads generated by FPS. CMS developed schedules and 
plans to integrate the FPS with CMS's claims processing system, 
and committed to doubling the number of models in the second 
year of the FPS.\5\ Creating performance targets for program 
integrity work is challenging because it is necessary to 
balance incentives between developing merit-based efficiencies 
and achieving targeted savings outcomes. This is especially 
important in cases that are developed and referred to law 
enforcement by the Zone Program Integrity Contractors and 
Program Safeguard Contractors.
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    \5\ See page iv at http://www.stopmedicarefraud.gov/fraud-
rtc12142012.pdf.

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                        Senator Elizabeth Warren

    Many Medicare and Medicaid fraud cases involving large 
health care corporations result in settlements. A significant 
portion of the government's Medicare and Medicaid fraud cases 
are brought under the False Claims Act. The Department of 
Justice reported that $2.6 billion was recovered from False 
Claims Act settlements of healthcare fraud cases in fiscal year 
2012. According to the IRS's audit guidelines, quote 
``experience has shown that almost every defendant deducts the 
entire amount of a False Claims Act settlement as a business 
expense.'' Not all of these deductions hold up under IRS 
auditor scrutiny, but it is clear that companies try, and get 
away with, these deductions if they continue to file their 
taxes in this manner. Given the reliance on settlements to 
recoup funds and punish entities that defraud the government, 
the American people should be given the information necessary 
to understand the details. I introduced Truth in Settlements 
with Senator Coburn to require agencies to publicly disclose 
the details of settlements, like how they are calculated and 
whether they are tax deductible.

    Question:

    1. Do CMS and the HHS OIG agree that more clarity about 
exactly what these settlements mean can help taxpayers to 
understand the effectiveness of our government's enforcement 
efforts?
    2. The HHS OIG and CMS could commit to more transparency 
about settlement agreements without legislation. Will you 
commit to posting information about the details of Medicare and 
Medicaid fraud settlements on your joint, consumer-friendly 
Medicare fraud website, the HHS OIG website, and in your press 
releases, including how the settlements are calculated, and 
whether they are tax deductible? And if not, why not?

    Response:

    CMS has supported greater transparency in healthcare data 
through a number of initiatives but defers to the Department of 
Justice regarding the appropriate level of detail about 
settlement agreements that can be released without compromising 
ongoing settlement negotiations or jeopardizing other law 
enforcement activities.

                           Senator Jeff Flake

CMS Moratorium

    It is my understanding that the underlying premise of the 
Medicare home health benefit is that, if properly used, it can 
lower Medicare spending by moving patients sooner from higher 
cost settings to their own homes. However, recently released 
Medicare claims data reveal that nearly 90 percent of all 
excessive home health spending is occurring in about 25 
counties in five states. It is my understanding that the Center 
for Medicare and Medicaid Services (CMS) has instituted a 
moratorium on new providers in certain areas but that this 
moratorium has not been implemented in every area that CMS has 
identified with issues related to excessive home health 
spending.

    Question:

    What steps have been taken to evaluate the effectiveness of 
the moratorium?

    Response:

    In the last year, CMS has imposed moratoria in seven 
geographic areas for two service types as part of our 
comprehensive strategy to fight fraud, waste, and abuse while 
ensuring patient access to care is not interrupted. These 
moratoria are critical to our efforts because they allow CMS to 
pause provider and supplier entry into high risk markets while 
using other tools and authorities in collaboration with our law 
enforcement partners to remove bad actors from the program. In 
imposing these enrollment moratoria, CMS considered both 
qualitative and quantitative factors suggesting a high risk of 
fraud, waste, or abuse. CMS relied on law enforcement's 
longstanding experience with ongoing and emerging fraud trends 
and activities through civil, criminal, and administrative 
investigations and prosecutions. CMS' determination of high 
risk fraud in these provider and supplier types within these 
geographic locations was then confirmed by CMS' data analysis, 
which relied on factors the agency identified as strong 
indicators of fraud risk.
    For example, CMS determined that Miami-Dade County, Dallas 
County and Harris County (which contains the city of Houston) 
have the three highest ratios of home health providers to 
beneficiaries compared to similarly-sized counties, and Houston 
and Philadelphia have some of the highest ratios of ambulance 
companies to beneficiaries--an important indicator of provider 
oversupply. CMS also considered the annual growth rate of the 
provider type, and found that in Chicago the number of home 
health agencies has grown at almost twice the national rate. In 
Detroit, CMS determined that, in addition to other factors, law 
enforcement activity is significant, and has resulted in 44 
guilty pleas and six trial convictions since 2010, because 
fraud schemes are highly migratory and transitory in nature, 
the laws and regulations governing the moratoria authority 
provide CMS flexibility to use any and all relevant information 
to determine the need for a moratoria.
    Imposing a moratorium can help reduce the risk of fraud, 
waste and abuse without compromising access to care. CMS 
carefully examined Medicare beneficiary access to services in 
all of these areas, and concluded that the moratoria will not 
affect access to care. The Agency also worked closely with each 
of the affected states to evaluate patient access to care, and 
these states reported that Medicaid and CHIP beneficiaries will 
continue to have access to services. During the moratoria 
period, CMS and the affected states are monitoring access to 
care to ensure that Medicare, Medicaid, and CHIP beneficiaries 
are receiving the services they need.

    Question:

    How many new home health agencies applicants were submitted 
during the moratorium?
    Response:

    When a moratorium is imposed, existing providers and 
suppliers may continue to deliver and bill for services, but no 
new applications are approved for the designated provider or 
supplier-types in the designated areas, allowing CMS and its 
law enforcement partners use other tools and authorities to 
remove bad actors from the program while pausing provider entry 
or re-entry into markets that CMS has determined have a 
significant potential for fraud, waste or abuse.
    Between the implementation of the first set of moratoria on 
July 31, 2013, and March 21, 2014, CMS has denied 297 
applications in the impacted areas. Some providers may not 
submit applications because they are aware that a moratorium is 
in place. Imposing a moratorium can help reduce the risk of 
fraud, waste and abuse without compromising access to care. CMS 
carefully examined Medicare beneficiary access to services in 
all of these areas, and concluded that the moratoria will not 
affect access to care.

    Question:

    What authority does the Secretary, CMS, or the Office of 
Inspector General have to review existing providers in these 
areas that are targeted for abusing the current system and what 
else is being done to address the problem of excessive home 
health spending?

    Response:

    In each moratoria area, CMS is using its existing authority 
to impose administrative actions such as payment suspensions 
and revocations of home health agencies and ambulance 
companies, as well as working with law enforcement to support 
investigations and prosecutions. For example, during the first 
six-month period of the moratorium on home health in Miami, law 
enforcement made arrests in a $48 million home health scheme, 
and secured guilty pleas against three home health recruiters 
in that scheme as well as guilty pleas from the owners of a 
clinic involved in an eight million dollar fraud scheme. CMS 
also took action, and revoked or deactivated billing privileges 
of 21 home health agencies in the first 60 days of this 
moratorium.
    The moratoria complement CMS's outlier policy that limits 
the percentage of outlier payments that each home health agency 
can claim to address abuses of home health payments. This 
policy and the coordination with the Medicare Strike Force have 
contributed to a dramatic decline in payment for home health 
care in Miami and throughout Florida, and there has been a 
similar decline in Detroit.
    Additionally, CMS has implemented the Affordable Care Act 
requirement that prior to certifying a patient's eligibility 
for an initial 60 day episode of home health care, the 
certifying physician must document that a face-to-face 
encounter has occurred with the patient. The face-to-face 
requirement ensures that the orders and certification for the 
home health services are based on a physician's current 
knowledge of the patient's clinical condition and provides 
additional accountability for the utilization of the home 
health benefit. At the end of the 60 day episode, a decision 
must be made whether or not to recertify the patient for a 
subsequent 60-day episode. CMS will continue to work with 
health care providers, specifically physicians, non-physician 
practitioners and home health agencies, to help them comply 
with the face-to-face requirements.

Utilization Issue

    The Medicare Payment Advisory Commission (Medpac) data 
seems to recognize the higher rates of home health use in just 
five states. It is estimated that reducing utilization in just 
25 counties to the 75th percentile could save Medicare over $1 
billion annually.

    Question:

    What further steps to address this problem beyond the 
moratoria you have proposed?

    Response:

    CMS has proposed other safeguards that will strengthen the 
enrollment policies to better prevent bad actors from getting 
enrolled in the first place. For example, CMS issued a proposed 
rule \6\ that would permit the denial of billing privileges of 
a provider, supplier, or individual if they were affiliated 
with an entity that has an existing bad debt. This proposal is 
targeted to providers and suppliers that may be removed from 
the Medicare program with large outstanding debts, then seek 
re-entry to the program as another entity. CMS is also in the 
process of awarding the contract for fingerprint-based 
background checks, which will be required for the entire 
category of providers in the geographic area where a moratorium 
was imposed once it has been lifted and these providers seek 
Medicare billing privileges. This screening process complements 
the database and other checks that CMS performs on all 
providers and suppliers seeking entry into the Medicare 
program. CMS anticipates that these enhanced enrollment 
safeguards will be in place by the end of calendar year 2014.
---------------------------------------------------------------------------
    \6\ CMS-6045-P.
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    CMS is also looking across service areas to expand tools 
that are impacting cost on a significant scale. CMS has also 
implemented private-sector strategies that are reducing 
Medicare expenditures, such as the use of prior authorization 
for certain services or benefits. CMS implemented a prior 
authorization process for scooters and power wheelchairs in 
seven states with high populations of fraud- and error-prone 
providers in 2012. As of August 2013, Medicare expenditures for 
these devices have decreased by $117 million since the 
demonstration began, with decreases in both demonstration 
states and non-demonstration states. In the President's Budget, 
CMS proposed to expand its authority to use prior authorization 
to all Medicare fee-for-service items, particularly those 
service items that are at the highest risk for improper 
payment.

    Question:

    Has there been any consideration of placing a reasonable 
limit on homecare episodes?

    Response:

    It is important to remember that in most cases home health 
agencies are providing an important service to beneficiaries. 
When utilized appropriately, this benefit can help provide 
beneficiaries with much needed care, while maintaining 
independence and reducing the need for inpatient care. CMS must 
carefully balance the health needs of beneficiaries while when 
considering new approaches to fighting waste, fraud and abuse.

    Question:

    In your opinion, would a limit on homecare episodes reduce 
fraud and save the federal government money?
    Response:

    Any decision to place limits on any type of services 
beneficiaries receive needs to be balanced with the health 
needs of beneficiaries. Placing an arbitrary limit on the 
number of home visits a beneficiary would be eligible to 
receive could lead to some beneficiaries with complex or 
multiple health care needs to seek inpatient care, at which 
could result in higher costs to both the beneficiary and 
Medicare.
     
=======================================================================


                       Statements for the Record

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

                  Opening Statement for the Record of

                Senator Susan M. Collins, Ranking Member

    Thank you, Mr. Chairman, for calling this hearing to 
highlight both the human and financial costs associated with 
fraud in the Medicare program and to examine ways that Medicare 
can work with private insurers and other stakeholders to 
improve fraud prevention.
    The GAO has identified Medicare as being at high risk for 
improper payments and fraud for decades, since 1990. In 2012, 
Medicare reported that it had lost more than $44 billion in 
improper payments due to waste, fraud, abuse, and 
mismanagement, and that estimate may well be too low.
    This is simply unacceptable. The loss of these funds not 
only compromises the financial integrity of the Medicare 
program, but it also undermines our ability to provide needed 
health care services to the more than 54 million older and 
disabled Americans who depend on this vital program.
    In far too many cases, Medicare fraud schemes have directly 
affected the quality of care and put some of our most 
vulnerable patients at risk. Many patients are harmed as a 
result of unnecessary procedures or medical services provided 
as part of schemes to defraud Medicare. We will hear this 
afternoon about one Michigan physician who allegedly gave 
seniors cancer treatments they did not need simply so he could 
bill Medicare for his services.
    In the late 1990's, when I was Chairman of the Permanent 
Subcommittee on Investigations, we held a series of hearings to 
examine fraud in the Medicare program. We identified the 
dangerous trend of an increasing number of bogus providers 
entering the system with the sole and explicit purpose of 
robbing it. One of our witnesses told us that he went into 
Medicare fraud because it was easier than dealing drugs. He 
could make a lot more money at far less risk.
    In other cases investigated by the Subcommittee, more than 
$6 million in Medicare funds were sent to durable medical 
equipment companies that provided no goods or services 
whatsoever. One of these companies even listed an absurd 
fictitious address that, had it existed, would have been in the 
middle of the runway of the Miami International Airport.
    We have made some progress in the battle against Medicare 
fraud since I chaired those hearings but the con artists have 
become increasingly clever in their schemes to rip off 
Medicare. We are devoting increased funding to Medicare program 
integrity activities to prevent improper payments and to detect 
fraud and prosecute offenders. Since it is estimated that we 
recover more than $8 for every dollar spent on anti-fraud 
activities, these are wise investments of Federal funds.
    In addition, Medicare contractors are now conducting onsite 
visits of durable medical equipment suppliers and other 
providers to make sure that they are legitimate businesses and 
meet required standards before they enroll in Medicare, and, we 
are doing a better job of screening Medicare providers by using 
licensing and background checks to stop fraudsters from 
entering the program in the first place.
    I do want to emphasize one important point. The vast 
majority of medical professionals are caring, dedicated 
providers whose top priority is the welfare of their patients. 
They, too, are appalled at the unscrupulous bandits who take 
advantage of weaknesses in Medicare to bleed billions of 
dollars from the program.
    Unfortunately, there is no line item in the budget titled 
``Waste, Fraud, and Abuse'' that we can simply strike to 
eliminate this problem. The task of ferreting out wasteful and 
fraudulent spending is made all the more difficult by the 
ingenuity of the scam artists, but it is clear that we must do 
more to shift from a ``pay and chase'' strategy to combat 
Medicare fraud to one that prevents the harm from ever 
occurring in the first place.
    Again, Mr. Chairman, thank you for calling this hearing.

                  Statement for the Record of Senator

                 Robert P. Casey, Jr., Committe Member

    Chairman Nelson and Ranking Member Collins, thank you for 
holding today's hearing on Medicare fraud and methods of 
prevention. With over 50 million Medicare beneficiaries 
nationally, and over two million in Pennsylvania, Medicare 
benefits payments totaled over $530 billion in 2012. 
Unfortunately, an estimated $60-90 billion is lost annually in 
overpayments from the Medicare program. I was dismayed to learn 
about the extent to which health care providers and facilities 
in Pennsylvania have engaged in Medicare fraud.
    Steps are being taken to improve the way that Medicare 
fraud is prevented and detected. In 2011, the Fraud Prevention 
System was launched, and a December 2012 report from CMS 
indicated that the Fraud Prevention System had identified 
approximately $115.4 million in potential improper payments in 
the first year. A GAO report offered many recommendations to 
improve upon the integration with other systems and the 
measurement of performance milestones for the Fraud Prevention 
System, but no follow-up report from CMS has yet been made 
available. Addressing inefficiencies in our systems will limit 
fraud and abuse as we also improve service delivery.
    In 1997, the first funding for the Senior Medicare Patrol 
(SMP) program was made available through the Administration on 
Aging, and Pennsylvania has had an SMP program since the 
program was introduced. The SMP program educates and trains 
older adults on identifying and reporting health care fraud. In 
Pennsylvania, the Center for Advocacy for the Rights and 
Interests of the Elderly (CARIE) administers the PA-SMP. 
Recently, over 10,000 community outreach events occurred 
nationally and reached an estimated 996,000 people. The PA-SMP 
had nearly 1,400 beneficiary inquiries in 2013. In addition, 
the PA-SMP was involved with 360 onsite outreach activities 
(e.g., senior centers, health and wellness fairs) which reached 
an estimated 14,400 people. To assure the ongoing and important 
work of the SMP program, I worked with Senator Sanders and my 
colleagues on the Health, Education, Labor and Pensions 
Committee to ensure continued support through the Older 
Americans Act reauthorization.
    With 8,000 Baby Boomers turning 65 every day, we are at a 
critical point. Each of these new Baby Boomers is eligible for 
Medicare. An increase in the number of Medicare beneficiaries, 
will lead to an increase in Medicare spending which can also 
lead to increases in Medicare fraud. A hearing such as this one 
reinforces the importance of protecting our seniors, as well as 
the funds which are so needed to provide older adults the care 
they need.
    I again would like to thank the Chairman and Ranking Member 
for calling this hearing. I look forward to hearing the 
testimony and working with my colleagues to continue the fight 
to stop waste and fraud and to improve the effectiveness of 
government services and agencies.
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