    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

     MEDICARE AND MEDICAID PROGRAM INTEGRITY: COMBATING IMPROPER PAYMENTS
                            AND INELIGIBLE PROVIDERS

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

                                    HEARING

                                   BEFORE THE

                  SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 24, 2016

                                   __________

                               Serial No. 114-149

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                    __________

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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman
    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Chairman Emeritus                    Ranking Member
    ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
    GREG WALDEN, Oregon                  GENE GREEN, Texas
    TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
    MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
    MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
      Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
    ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
    CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
    GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
    LEONARD LANCE, New Jersey            JERRY McNERNEY, California
    BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
    PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
    DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
    MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
    ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
    H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
    GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
    BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III,
    BILLY LONG, Missouri                     Massachusetts
    RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
    LARRY BUCSHON, Indiana
    BILL FLORES, Texas
    SUSAN W. BROOKS, Indiana
    MARKWAYNE MULLIN, Oklahoma
    RICHARD HUDSON, North Carolina
    CHRIS COLLINS, New York
    KEVIN CRAMER, North Dakota

                  Subcommittee on Oversight and Investigations

                            TIM MURPHY, Pennsylvania
                                     Chairman
    DAVID B. McKINLEY, West Virginia     DIANA DeGETTE, Colorado
      Vice Chairman                        Ranking Member
    MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
    H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
    LARRY BUCSHON, Indiana               JOHN A. YARMUTH, Kentucky
    BILL FLORES, Texas                   YVETTE D. CLARKE, New York
    SUSAN W. BROOKS, Indiana             JOSEPH P. KENNEDY, III,
    MARKWAYNE MULLIN, Oklahoma               Massachusetts
    RICHARD HUDSON, North Carolina       GENE GREEN, Texas
    CHRIS COLLINS, New York              PETER WELCH, Vermont
    KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex
    JOE BARTON, Texas                        officio)
    FRED UPTON, Michigan (ex officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Tim Murphy, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................     1
        Prepared statement...........................................     3
    Hon. Diana DeGette, a Representative in Congress from the state
      of Colorado, opening statement.................................     5
        Prepared statement...........................................     6
    Hon. Fred Upton, a Representative in Congress from the state of
      Michigan, prepared statement...................................    89

                                   Witnesses

    Ann Maxwell, Assistant Inspector General, Office of Evaluation
      and Inspections, Office of Inspector General, U.S. Department
      of Health and Human Services...................................     8
        Prepared statement...........................................    11
        Answers to submitted questions...............................
    Seto J. Bagdoyan, Director, Audit Services, Forensic Audits and
      Investigative Service, U.S. Government Accountability Office...    22
        Prepared statement...........................................    24
        Answers to submitted questions...............................
    Shantanu Agrawal, M.D., Deputy Administrator and Director, Center
      for Program Integrity, Centers for Medicare and Medicaid
      Services, U.S. Department of Health and Human Services.........    45
        Prepared statement...........................................    47
        Answers to submitted questions...............................

                               Submitted Material

    Subcommittee memorandum..........................................    91

     MEDICARE AND MEDICAID PROGRAM INTEGRITY: COMBATING IMPROPER PAYMENTS
                            AND INELIGIBLE PROVIDERS

                                  ----------

                             TUESDAY, MAY 24, 2016

                      House of Representatives,
          Subcommittee on Oversight and Investigations,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:15 a.m., in
    room 2322 Rayburn House Office Building, Hon. Tim Murphy
    (chairman of the subcommittee) presiding.
        Members present: Representatives Murphy, McKinley,
    Griffith, Bucshon, Flores, Brooks, Mullin, Collins, Cramer,
    DeGette, Castor, Tonko, Kennedy, Green, Welch, and Pallone (ex
    officio).
        Staff present: Rebecca Card, Assistant Press Secretary;
    Ryan Coble, Detailee; Emily Felder, Counsel, Oversight and
    Investigations; Charles Ingebretson, Chief Counsel, Oversight
    and Investigations; Chris Santini, Policy Coordinator,
    Oversight and Investigations; Alan Slobodin, Deputy Chief
    Counsel, Oversight; Gregory Watson, Legislative Clerk,
    Communications and Technology; Jeff Carroll, Minority Staff
    Director; Ryan Gottschall, Minority GAO Detailee; Chris Knauer,
    Minority Oversight Staff Director; Una Lee, Minority Chief
    Oversight Counsel; Elizabeth Letter, Minority Professional
    Staff Member; and Andrew Souvall, Minority Director of
    Communications, Outreach and Member Services.

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

        Mr. Murphy. Good morning. The Oversight and Investigations
    Subcommittee will come to order on Medicare and Medicaid
    Program Integrity: Combating Improper Payments and Ineligible
    Providers. Welcome. And I will recognize myself for an opening
    statement.
        The subcommittee convenes this hearing today to examine
    ongoing waste, fraud, and abuse in two of the federal
    government's biggest programs: Medicare and Medicaid. Just last
    year, HHS estimated approximately $89 billion in improper
    payments through Medicare and Medicaid. This means the federal
    government cannot verify the accuracy of one out of every ten
    payments.
        The improper payments occur when federal funds go to the
    wrong recipient or the recipient receives the incorrect amount
    of funds--either an underpayment or overpayment--documentation
    is not available to support a payment, or the recipient uses
    federal funds in an improper manner.
        To be clear, not all the improper payments constitute
    fraud, but when the federal government cannot accurately verify
    that nearly ten percent of program dollars were spent according
    to law it is a major problem. Improper payments muddy the
    waters and make it harder for auditors and investigators to
    root out fraud and abuse. If the system is murky and confusing,
    that only benefits the fraudsters who take advantage of our
    system knowing that the chances are pretty good they can get
    away with it.
        Although high error rates have been a persistent problem
    spanning many years, these rates are nevertheless concerning
    because Medicare and Medicaid spending is growing at a rapid
    pace. In 2014, Medicare spending grew 5.5 percent to $618.7
    billion and Medicaid grew 11 percent to 495.8 billion. Given
    the growth in these programs, it is not surprising they have
    been targets for fraud and abuse. CMS must strengthen program
    integrity now or billions more may be wasted in future years.
        Two nonpartisan watchdogs have released reports critical of
    CMS response to major program integrity challenges confronting
    these programs. Today we will highlight the important work by
    the Government Accountability Office and the Health and Human
    Services Inspector General that tackles two distinct
    challenges: the improper payments and ineligible providers.
        First, I want to highlight three reports released by the
    HHS Inspector General in conjunction with today's hearing.
    These reports examine vulnerabilities within provider
    screening, which is a huge contributor to fraud. Two of the
    reports examine the issue of accuracy of databases used to
    enroll providers into the Medicaid and Medicare programs.
    Specifically, these reports look at the accuracy of provider
    ownership information because inaccurate provider ownership
    information can be a strong indicator of fraud.
        In the Medicaid program, OIG found that 14 state Medicaid
    programs did not verify the completeness or accuracy of
    provider ownership or check all required exclusion databases.
    Moreover, nearly all providers had names on record with state
    Medicaid programs that did not match those on record with CMS.
        For the Medicare provider database, the OIG compared three
    sets of owner names: 1) the names listed on Medicare enrollment
    records; 2) names submitted by providers directly to the OIG
    for their evaluation; and 3) names listed on state Medicaid
    enrollment records. The OIG found that nearly all providers in
    the OIG's review had different names on record than the state
    Medicaid programs.
        The third report released today deals with enhanced
    provider enrollment screenings in the Medicaid program. While
    states are required to screen Medicaid providers using enhanced
    screening procedures, such as fingerprint-based criminal
    background checks and onsite visits, many states have not yet
    implemented these requirements.
        I would like to thank the HHS and OIG for its work on these
    pivotal reports and for the opportunity to highlight them at
    today's hearing. Today we will also examine the larger body of
    work conducted by HHS OIG and the GAO over years of audits and
    investigations.
        And while the GAO and OIG have done a great job of
    highlighting Medicare and Medicaid vulnerabilities to fraud,
    CMS has not yet implemented some recommendations that could
    solve these problems. For example, back in January of 2013, the
    OIG found that Medicare erroneously paid over $33 million to
    physicians rendering services to incarcerated beneficiaries.
    OIG recommended that CMS modify and update its guidance so that
    claims were processed consistently to prevent such improper
    payments. However, CMS has not yet implemented this
    recommendation.
        The subcommittee convened a hearing in June of last year to
    examine a troubling GAO report that highlighted Medicaid
    improper payments. After auditing four states with just over
    nine million Medicaid beneficiaries, GAO found that 200
    deceased beneficiaries received at least 9.6 million in
    Medicaid benefits. The individuals were already deceased before
    apparently receiving any medical services covered by Medicaid.
    And 1 year later, GAO's recommendation to fix this problem is
    still ``open'' indicating CMS has not taken the necessary
    action.
        The same report found that at least 47 Medicaid providers
    in four states had foreign addresses as their location of
    services including Canada, China, India, and Saudi Arabia.
    Nearly 26,600 providers had addresses that did not match any
    United States Postal Service records. However, CMS has not
    implemented GAO's recommendation to fix this problem.
        It concerns me that the subcommittee held two hearings last
    year on wasteful spending in Medicare and Medicaid, and CMS has
    not yet acted on some of the recommendations suggested at those
    hearings. However, I understand that just last week, CMS
    implemented two GAO recommendations to be discussed at today's
    hearing. This is important progress and CMS must continue to
    move forward on outstanding recommendations.
        [The statement of Mr. Murphy follows:]

                     Prepared statement of Hon. Tim Murphy

        The subcommittee convenes this hearing today to examine
    ongoing waste, fraud, and abuse in two of the federal
    government's biggest programs: Medicare and Medicaid.
        Just last year, HHS estimated approximately $89 billion
    dollars in improper payments through Medicare and Medicaid.
    This means that the Federal Government cannot verify the
    accuracy of one out of every ten payments.
        Improper payments occur when federal funds go to the wrong
    recipient, the recipient receives the incorrect amount of
    funds--either an underpayment or overpayment, documentation is
    not available to support a payment, or the recipient uses
    federal funds in an improper manner.
        To be clear: not all of the improper payments constitute
    fraud. But when the Federal Government cannot accurately verify
    that nearly 10 percent of program dollars were spent according
    to the law, it is a major problem. Improper payments muddy the
    waters, and make it harder for auditors and investigators to
    root out fraud and abuse. If the system is murky and confusing,
    that only benefits the fraudsters taking advantage of our
    system.
        Although high error rates have been a persistent problem,
    spanning many years, these rates are nevertheless concerning
    because Medicare and Medicaid spending is growing at a rapid
    pace. In 2014, Medicare spending grew 5.5 percent to $618.7
    billion, and Medicaid spending grew 11 percent to $495.8
    billion. Given the growth in these programs, it is not
    surprising they have been targets for fraud and abuse. CMS must
    strengthen program integrity now, or billions more may be
    wasted in future years.
        Two non-partisan watchdogs have released reports critical
    of CMS' response to major program integrity challenges
    confronting these programs. Today, we will highlight the
    important work by the Government Accountability Office and the
    Health and Human Services Inspector General that tackles two
    distinct challenges: improper payments and ineligible
    providers.
        First, I want to highlight three reports released by the
    HHS Inspector General in conjunction with today's hearing.
    These reports examine vulnerabilities within provider
    screening, which is a huge contributor to fraud. Two of the
    reports examine the issue of accuracy of databases used to
    enroll providers into the Medicaid and Medicare programs.
    Specifically, these reports look at the accuracy of provider
    ownership information, because inaccurate provider ownership
    information can be a strong indicator of fraud.
        In the Medicaid program, the OIG found that fourteen state
    Medicaid programs did not verify the completeness or accuracy
    of provider ownership, or check all required exclusions
    databases. Moreover, nearly all providers had names on record
    with state Medicaid programs that did not match those on record
    with CMS.
        For the Medicare provider database, the OIG compared three
    sets of owner names: (1) the names listed on Medicare
    enrollment records, (2) names submitted by providers directly
    to the OIG for their evaluation, and (3) names listed on state
    Medicaid enrollment records. The OIG found that nearly all
    providers in the OIG's review had different names on record
    than the state Medicaid programs.
        The third report released today deals with enhanced
    provider enrollment screening in the Medicaid program. While
    states are required to screen Medicaid providers using enhanced
    screening procedures such as fingerprint-based criminal
    background checks and site visits, many states have not yet
    implemented these requirements.
        I would like to thank the HHS OIG for its work on these
    pivotal reports, and for the opportunity to highlight them at
    today's hearing.
        Today we also will examine the larger body of work
    conducted by HHS OIG and the GAO, over years of audits and
    investigations.
        And while the GAO and OIG have done a great job of
    highlighting Medicare and Medicaid vulnerabilities to fraud,
    CMS has not yet implemented some recommendations that could
    solve those problems.
        For example, back in January 2013, the OIG found that
    Medicare erroneously paid over $33 million to physicians
    rendering services to incarcerated beneficiaries. OIG
    recommended that CMS modify and update its guidance so that
    claims were processed consistently, to prevent such improper
    payments. However, CMS has not implemented this recommendation.
        The subcommittee convened a hearing in June of last year to
    examine a troubling GAO report that highlighted Medicaid
    improper payments. After auditing four states with just over 9
    million Medicaid beneficiaries, GAO found that 200 deceased
    beneficiaries received at least $9.6 million in Medicaid
    benefits. The individuals were already deceased before
    apparently receiving medical services covered by Medicaid. One
    year later, GAO's recommendation to fix this problem is still
    ``open,'' indicating that CMS has not taken the necessary
    action.
        The same GAO report found that at least 47 Medicaid
    providers in four states had foreign addresses as their
    location of service, including Canada, China, India and Saudi
    Arabia. Nearly 26,600 providers had addresses that did not
    match any United States Postal Service records. However, CMS
    has not implemented GAO's recommendation to fix this problem.
        It concerns me that the Subcommittee held two hearings last
    year on wasteful spending in Medicare and Medicaid, and CMS has
    not yet acted on some of the recommendations suggested at those
    hearings. However, I understand that just last week, CMS
    implemented two GAO recommendations to be discussed at today's
    hearing. This is important progress, and CMS must continue to
    move forward on outstanding recommendations.

        Mr. Murphy. I want to thank all the witnesses for being
    here today and testifying, and I now recognize ranking member
    from Colorado, Ms. DeGette, for 5 minutes.

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

        Ms. DeGette. Thank you so much, Mr. Chairman. This hearing
    is really an important opportunity to discuss ways to
    strengthen two critically important government programs that
    serve over a hundred million Americans: Medicare and Medicaid.
    We are going to hear today about recent reports from the OIG
    and GAO about provider enrollment and screening in those two
    important programs. The reports remind us that we must be ever
    vigilant in our efforts to fight fraud and abuse.
        Many of us here on the dais and of course those at the
    witness table have been working to fight waste, fraud and abuse
    and Medicare and Medicaid for many, many decades. The idea that
    error rates or improper payments are associated with these
    programs is not new. For example, a 2003 committee report found
    that Medicaid fraud could exceed $17 billion each year. The
    report went on to say, ``this year, the committee will examine
    ways in which states could adopt more rigorous enrollment
    controls to keep unscrupulous providers out of their programs
    and to improve their program integrity standards.''
        I just wish we could wave our magic wands and eliminate
    waste, fraud, and abuse in these programs. In my almost 20
    years on this committee we have assiduously worked to do that
    thing. But unfortunately it has been very difficult to
    permanently root out waste, fraud, and abuse in Medicare and
    Medicaid because keeping fraudulent and unscrupulous providers
    out of the program is just a longstanding and pervasive
    challenge. We are going to hear today that recent GAO and OIG
    reports find there is still progress to make.
        I am encouraged though by recent successes of the program
    integrity measures which were implemented by the Affordable
    Care Act. The ACA provided the Department of HHS and its Office
    of Inspector General with a wide range of new tools and
    authorities for fighting fraud. We are already seeing
    improvements through the use of these new tools, and I believe
    they will continue to make a big difference going forward.
        I am certainly very eager to hear from CMS about the
    progress. Those new tools allow program administrators to
    better protect tax dollars and to prevent bad providers from
    entering the program. For example, the ACA provided nearly $350
    million in new funds for fraud control efforts. It also
    provided new means for collecting and sharing data between
    states and the federal government to screen potential providers
    and suppliers.
        The ACA provided the HHS OIG with new authorities to impose
    stronger penalties on those who commit fraud and provided CMS
    with the ability to temporarily halt payments to suppliers
    suspected of fraud. CMS is also now incorporating predictive
    analytics to screen payments to look for patterns for fraud
    that were previously much harder to detect.
        This new effort called the Fraud Prevention System uses
    computer modeling tools similar to those used by credit card
    companies to look for fraud patterns and to help the government
    recover fraudulent or improper payments. According to CMS, in
    just 3 years this system has allowed the agency to prevent
    nearly $820 million in fraudulent payments.
        Mr. Chairman, I think this is good news and we should
    applaud the progress. New tools and authorities should allow
    CMS and the OIG to move away from the pay and close model and
    spend more time stopping bad actors from entering the program
    in the first place. These important new tools should greatly
    enhance program integrity in the Medicare and Medicaid
    programs, and they will help us to achieve some of the anti-
    fraud goals that have long been out of reach.
        While these are positive developments, we will hear from
    the HHS OIG and from the GAO on some areas we can still
    improve. A recent OIG report, for example, found not all states
    are utilizing the tools as comprehensively as possible. I want
    to understand more about that report today and to hear from CMS
    about why this is the case and how we can work together to make
    sure all of the tools available are being implemented as
    broadly as possible.
        Let me conclude, Mr. Chairman, by thanking all of the
    witnesses before us for the work they do to strengthen these
    important programs. I look forward to hearing from the auditors
    about what more we can do to reduce fraud and prevent fraud
    while maintaining the program's flexibility in delivering
    critical health care services.
        We have consistently worked in this subcommittee on a
    bipartisan basis to strengthen fraud-fighting efforts in
    Medicare and Medicaid, and I know that this will just be
    another one of those important hearings in our ongoing
    oversight. Thank you, Mr. Chairman, and I yield back.
        [The statement of Ms. DeGette follows:]

                    Prepared statement of Hon. Diane DeGette

        Thank you, Mr. Chairman. Today's hearing is an important
    opportunity to discuss ways to strengthen two critically
    important government programs that serve over 100 million
    Americans: Medicare and Medicaid.
        We will hear today about recent reports from the OIG and
    GAO on provider enrollment and screening in Medicare and
    Medicaid. These reports remind us that we must be vigilant in
    our efforts to fight fraud and abuse in these programs.
        Many of us on the dais and at the witness table have been
    working to fight waste, fraud, and abuse in Medicare and
    Medicaid for decades. The idea that error rates or improper
    payments are associated with these programs is not new.
        For example, a 2003 Committee report found that Medicaid
    fraud could exceed $17 billion each year. The report went on to
    say, ``This year, the Committee will examine ways in which
    States could adopt more rigorous enrollment controls to keep
    unscrupulous providers out of their programs and improve their
    program integrity standards.'' We all know that it has been
    very difficult to root out fraud, waste, and abuse in Medicare
    and Medicaid. Keeping fraudulent and unscrupulous providers out
    of the program has been a longstanding challenge. And we will
    hear again today that recent GAO and OIG reports find there is
    still progress to be made. But I am very encouraged by the
    recent success of the program integrity measures implemented by
    the Affordable Care Act.
        The ACA provided the Department of Health and Human
    Services and its Office of Inspector General with a wide range
    of new tools and authorities for fighting fraud. We are already
    seeing improvements through the use of these new tools, and I
    believe they will continue to make a big difference going
    forward. I am eager to hear more from CMS about their progress.
        These new tools allow program administrators to better
    protect tax dollars and prevent bad providers from entering the
    program. For example, the ACA provided nearly $350 million in
    new funds for fraud control efforts. It also provided new means
    for collecting and sharing data between states and the federal
    government to screen potential providers and suppliers. The ACA
    provided the HHS OIG with new authorities to impose stronger
    penalties on those who commit fraud and provided CMS with the
    ability to temporarily halt payments to suppliers suspected of
    fraud.
        CMS is also now incorporating predictive analytics to
    screen payments to look for patterns of fraud that were
    previously much harder to detect. This new effort, called the
    Fraud Prevention System, uses computer-modeling tools similar
    to those used by credit card companies to look for fraud
    patterns and help the government prevent and recover fraudulent
    or improper payments. According to CMS, in just 3 years, this
    system has allowed the agency to identify or prevent nearly
    $820 million in fraudulent payments.
        This is good news, Mr. Chairman, and we should applaud this
    progress. These tools and authorities should allow CMS and the
    OIG to move away from the ``pay and chase'' model and spend
    more time stopping bad actors from entering the program in the
    first place. These important new tools should greatly enhance
    program integrity in the Medicaid and Medicare programs, and
    they will help us achieve some of the anti-fraud goals that
    have long been out of reach.
        While these are positive developments, we will hear from
    the HHS OIG and from GAO on some areas where we can improve. A
    recent OIG report, for example, found that not all of the
    States are utilizing these tools as comprehensively as
    possible. I want to understand more about that report today,
    and hear from CMS about why this is the case and how we can
    work together to ensure all tools available are being
    implemented as broadly as possible.
        Mr. Chairman, let me conclude by thanking all of the
    witnesses before us today for the work they do to help
    strengthen the Medicaid and Medicare programs and for working
    so closely with this Committee.
        I look forward to hearing from the auditors about what
    additional measures they believe we can or should take to
    reduce fraud while maintaining the programs' flexibility in
    delivering critical health care services.
        This Committee has consistently worked on a bipartisan
    basis to strengthen the fraud fighting efforts in both the
    Medicare and Medicaid programs. I hope today's hearing will be
    a continuation of that effort. These critical programs serve
    millions of hard working Americans, and it is our duty to make
    them run as efficiently and effectively as possible.
        With that, Mr. Chairman, I yield back.

        Mr. Murphy. Thank you. I don't think we have anybody else
    on our side that wants to make a statement, am I correct? Do
    you have anybody else on your side? Otherwise we can move
    forward.
        Ms. DeGette. I think we are good.
        Mr. Murphy. All right, thank you. In that case, I ask
    unanimous consent that the members' written opening statements
    be introduced into the record and, without objection, the
    documents will be entered into the record.
        I would now like to introduce the witnesses of our first
    panel for today's hearing. The first witness on today's panel
    is Ms. Ann Maxwell. Ms. Maxwell is the assistant inspector
    general in the Office of Evaluation and Inspections within HHS.
    Ms. Maxwell manages a national office of 145 evaluators
    completing utilization and focused evaluations intended to
    provide Congress and HHS with relevant, timely, and useful
    information.
        We thank you, Ms. Maxwell, for being here and preparing
    your testimony. We look forward to hearing your insights.
        We would also like to welcome Mr. Seto Bagdoyan. Mr.
    Bagdoyan is currently the director for Audit Services in GAO's
    Forensic Audits and Investigative Service, which is the FAIS,
    mission. In the FAIS he has led a broad body of work related to
    fraud, waste, and abuse, and the integrity of internal controls
    in various program areas including health care.
        Thank you also for being here today, and we look forward to
    your comments.
        Our third and final witness on today's panel is Dr.
    Shantanu Agrawal. Dr. Agrawal is currently serving as deputy
    administrator for Program Integrity and director of the Center
    for Program Integrity. His focus is to improve health care
    value by lowering the cost of care through the detection and
    prevention of waste, abuse and fraud in the Medicare and
    Medicaid programs.
        Thank you, Dr. Agrawal, for being here.
        So to our panel here, you are aware that the committee is
    holding an investigative hearing and when doing so has the
    practice of taking testimony under oath. Do any of you have any
    objections to testifying under oath?
        Seeing no objections, the chair then advises you that under
    the rules of the House and the rules of the committee you are
    entitled to be advised by counsel. Do any of you desire to be
    advised by counsel during this hearing today?
        And all indicated they do not desire to be advised by
    counsel, so in that case would you all please rise, raise your
    right hand, and I will swear you in.
        [Witnesses sworn.]
        Mr. Murphy. Thank you. You are all now under oath and
    subject to penalties set forth in Title 18 Section 1001 of the
    United States Code. I am going to ask you all to give a five-
    minute summary of your written statement. One of the most
    important things is to turn the microphone on; put it as close
    to you as possible so we can hear.
        And Ms. Maxwell, we will let you begin and give a 5-minute
    summary. Thank you.

    STATEMENTS OF ANN MAXWELL, ASSISTANT INSPECTOR GENERAL, OFFICE
      OF EVALUATION AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL,
    U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; SETO J. BAGDOYAN,
      DIRECTOR, AUDIT SERVICES, FORENSIC AUDITS AND INVESTIGATIVE
     SERVICE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; AND, SHANTANU
     AGRAWAL, M.D., DEPUTY ADMINISTRATOR AND DIRECTOR, CENTER FOR
    PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND MEDICAID SERVICES,
              U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

                        STATEMENT OF ANN MAXWELL

        Ms. Maxwell. Good morning, Chair Murphy, Ranking Member
    DeGette, and other distinguished members of the subcommittee.
    Thank you for the invitation to share with the subcommittee
    opportunities to better protect Medicaid and Medicare from
    unscrupulous providers and improper payments.
        As you mentioned in your opening statement, Chair Murphy,
    Medicaid and Medicare reported a combined $89 billion in
    improper payments. In addition, OIG found that HHS missed
    important performance targets. For example, Medicare fee-for-
    service reported an improper payment rate of 12 percent,
    exceeding the 10 percent goal established by law. Medicare also
    reported an error rate higher than its established target.
        These findings indicate that HHS must redouble its efforts
    to pay the right provider the right amount for the right
    service, and provider enrollment is where it starts. Enrollment
    is the green light to start billing. To get that, green light
    providers need to clear the provider enrollment process, so the
    provider enrollment process is Medicaid and Medicare's chance
    to make sure they are not doing business with those whose
    business it is to commit fraud.
        No one wants Medicare doing business with abusive and
    fraudulent providers like Dr. Fata, the oncologist who
    administered aggressive cancer treatments to patients who did
    not need them simply to increase his billing; or Medicaid
    paying Small Smiles, a dental chain performing unneeded root
    canals on children.
        To help prevent these sort of egregious cases of
    beneficiary harm and improper payments Congress, through the
    Affordable Care Act, authorized a more rigorous, risk based
    approach to screening providers. As a result, provider types
    deemed by CMS to be a higher risk are now required to undergo
    site visits and sometimes criminal background checks. Today, I
    want to talk about how these ACA tools were implemented in
    Medicaid and in Medicare, and also the problems we've found
    with the databases that support these important tools.
        For Medicaid, we found that state implementation of
    enhanced provider screening is incomplete for higher risk
    providers leaving Medicaid vulnerable. We found that most
    states have not yet started conducting criminal background
    checks while waiting for additional guidance from CMS. Further,
    11 states are not conducting site visits. OIG recommends that
    CMS assist states by offering guidance, technical assistance,
    and improving the ability of states to rely on Medicare
    screening results so they don't need to duplicate that work.
        For Medicare, we found that CMS' implementation of enhanced
    enrollment screening needs strengthening. In particular, we
    found that contractors were inconsistent in applying site visit
    procedures and not always using site visit results in
    enrollment decisions. The OIG recommends improving the process
    by improving the site visit forms, additional training, and
    ensuring the consistent use of site visit results in enrollment
    decisions.
        OIG's reviews also found questionable data in Medicare's
    provider enrollment database. We frequently found different
    information when comparing owner names in Medicare and Medicaid
    databases. In one case, for the same provider Medicare had 14
    owners listed while Medicaid had 63. It is hard to know who
    you're doing business with if you can't even get their names
    straight.
        CMS and states are also lacking complete data on providers
    terminated for reasons of fraud, integrity or quality because
    not all states are reporting that information. As a result,
    states may enroll a provider that's already been terminated in
    another state. In fact, we found 12 percent of providers
    terminated in one state continued to participate in Medicaid
    and other state Medicaid programs. OIG recommends that states'
    reporting of terminated providers to a centralized CMS database
    be made mandatory.
        CMS agreed that our recommendations would strengthen
    provider enrollment and as such we believe they should be
    undertaken immediately. In the longer term, we suggest CMS
    consider working towards consolidating Medicaid and Medicare
    provider enrollment believing that it could lead to a more
    effective and less burdensome enrollment process.
        In closing, I would like to say thank you to the
    subcommittee for your recognition that provider enrollment is
    critically important through your holding of this hearing and
    also your congressional action on H.R. 3716, the Ensuring
    Access to Quality Medicaid Providers Act. We certainly hope
    that our work serves as a catalyst for additional positive
    change to ensure that CMS and states are paying the right
    provider the right amount for the right service. Thank you.
        [The prepared statement of Ann Maxwell follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Murphy. Thank you, Ms. Maxwell.
        Now Mr. Bagdoyan, you are recognized for 5 minutes.

                     STATEMENT OF SETO J. BAGDOYAN

        Mr. Bagdoyan. Thank you. Chairman Murphy, Ranking Member
    DeGette, and members of the subcommittee, I am pleased to be
    here today to discuss key findings from our complementary
    reviews of screening controls CMS uses to detect and prevent
    enrollment fraud from Medicare providers and suppliers in its
    provider enrollment chain and ownership system, also known as
    PECOS.
        As context, Medicare, which is on GAO's high risk list for
    potential improper payments and fraud, involves significant
    expenditures for the federal government totaling about $569
    billion in fiscal year 2015. CMS estimates that about 60
    billion of these expenditures, or 11 percent, involved improper
    payments.
        In our June 2015 review, we found that controls for
    screening providers and suppliers listed as deceased or
    excluded from participating in federal health care related
    programs appear to be generally working. However, we identified
    weaknesses in two other controls.
        First, we identified weaknesses in CMS' verification of
    practice locations. Medicare providers must submit addresses of
    practice locations from which they offer services. The software
    CMS used at the time to validate addresses didn't flag
    potentially ineligible addresses such as commercial mail
    receiving agencies, also known as CMRA, which include mailbox
    rental stores. It also didn't flag vacant or invalid addresses,
    i.e., those where providers or suppliers no longer reside or
    those not recognized by Postal Service systems.
        Of about 981,000 addresses in PECOS we examined using
    Postal Service software, about 105,000 initially appeared
    questionable. That is, they were either CMRAs, vacant, or
    invalid. Based on a projectable sample of 496 addresses, we
    estimated that about 23,400 of the questionable addresses were
    potentially ineligible and 5,500 of these had associated to
    claims paid.
        CMS' 2014 guidance revision actually scaled back address
    verification steps conducted by its contractors. CMS' previous
    guidance had encouraged contractors to conduct additional
    verification steps such as using Google Maps and performing
    site visits. However, CMS' revised guidance doesn't require
    such steps beyond contacting the provider. And accordingly, by
    reducing verification steps, CMS has increased Medicare's
    vulnerability to potential fraud.
        We recommended CMS incorporate flags into its software to
    help identify questionable addresses and revise its current
    guidance to enhance verification of practice locations. CMS
    agreed with the first recommendation and recently implemented
    it and is considering implementing the second recommendation.
    We continue to believe additional address verification steps to
    be an essential control.
        Second, we identified weaknesses in the verification of
    medical licenses. Medicare physicians are required to hold an
    active license in the state they practice in and report any
    final adverse actions to CMS. Such actions include license
    suspensions or revocations by any state licensing authority.
        We found 147 of the 1.3 million physicians in PECOS had
    received a final adverse action, but were either not revoked
    from the system or revoked much later, and 47 were paid about
    $2.6 million in claims. In March 2014, CMS began providing a
    report to its contractors to improve licensure reviews, however
    this report only included current licensure status for states
    in which providers enrolled. It didn't include the full adverse
    action history of these providers or their licenses in other
    states, creating the opportunity for ineligible physicians to
    enroll into PECOS.
        We recommended CMS collect additional licensure information
    to ensure providers are self-reporting all final adverse
    actions, and CMS agreed with this recommendation and has
    recently implemented it. In our April 2016 review, we reported
    that while CMS has taken steps to improve Medicare provider
    criminal background check controls, it has opportunities to
    recover about $1.3 million in potential overpayments made prior
    to control improvements to 16 enrollees we identified with
    criminal backgrounds. CMS said it is considering action in this
    regard.
        Finally, as I close, we made 600 referrals from our work to
    CMS for action. To date, CMS has removed 251 providers from
    PECOS while affirming the eligibility of 227 others with action
    pending on the rest. The removal of ineligible providers
    originally missed by existing controls underscores our ongoing
    concerns about inherent risk of improper payments and fraud in
    PECOS.
        Mr. Chairman, this concludes my statement. I look forward
    to the subcommittee's questions.
        [The prepared statement of Seto J. Bagdoyan follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Murphy. Thank you. I appreciate it.
        Dr. Agrawal, you are recognized for 5 minutes. Make sure
    the mic is close to you, please.

                   STATEMENT OF DR. SHANTANU AGRAWAL

        Dr. Agrawal. Thank you. Chairman Murphy, Ranking Member
    DeGette, and members of the subcommittee, thank you for the
    invitation to discuss the Centers for Medicare and Medicaid
    Service's efforts to strengthen program integrity in the
    Medicare and Medicaid programs. We share the subcommittee's
    commitment to protecting beneficiaries and taxpayer dollars by
    ensuring only legitimate providers participate in our programs
    and reducing improper payments. I appreciate your longstanding
    interest in these important issues and I know you're interested
    in hearing about results and progress that we are making.
        A critical component of progress comes from working with
    our colleagues in the HHS Office of Inspector General and the
    Government Accountability Office to address vulnerabilities
    they've uncovered. In the last year, CMS has implemented 38 GAO
    recommendations and 122 OIG recommendations across all CMS
    programs and has submitted documentation for approximately 100
    additional GAO recommendations and 129 OIG recommendations for
    their review and closure. For example, we've made the address
    verification improvements that GAO recommended as part of their
    report last year. We also appreciate the work that the OIG is
    releasing today.
        Provider enrollment is the gateway to the Medicare program.
    In the past, the provider enrollment process was a largely
    manual process which included manual checks of the information
    providers submitted. Since the ACA, we have made significant
    improvements to provider enrollment.
        We've moved to a largely automated system utilizing risk
    based screening and other mechanisms to target our efforts and
    protect beneficiaries and taxpayer dollars. In 2015, we
    completed revalidating all current providers and suppliers
    under these new requirements. These new provider enrollment
    authorities have saved the Medicare program an estimated $1.4
    billion since March 2011.
        These administrative actions are part of a larger set of
    provider enrollment and screening activities which have saved
    the Medicare program 2.4 billion in avoided costs in total.
    This includes stopping the billing of more than 570,000
    providers or suppliers. Increased screening efforts have led
    CMS to deny nearly 7,300 applications last year alone,
    preventing these providers or suppliers from ever submitting a
    single claim. Additionally, CMS has performed over 290,000 site
    visits to verify that a provider or supplier's practice
    location meets Medicare requirements.
        The Affordable Care Act also requires that states conduct
    similar screening of providers participating in their Medicaid
    programs. While states and the federal government share
    Medicaid program integrity responsibilities, states bear the
    primary accountability for provider screening, credentialing
    and enrollment.
        As their partners, CMS has taken a number of steps to
    assist states in fulfilling these requirements. CMS has
    dedicated staff to coordinate directly with each state, and we
    are providing technical assistance and extensive guidance such
    as the Medicaid Provider Enrollment Compendium to assist states
    on those efforts. This includes giving states direct access to
    the PECOS database and allowing states to use a Medicare
    enrollment screening to meet Medicaid screening requirements,
    thereby reducing duplication of efforts.
        We are also continuing our work to prevent improper
    payments across our programs. While we have made some progress,
    we know we have more work to do. It's important to remember
    that improper payments are not typically fraudulent payments.
    Rather, they are usually payments made for items or services
    that do not include the necessary documentation, that are
    incorrectly coded, or that do not meet Medicare's coverage and
    medical necessity criteria.
        For example, over two-thirds of the Medicare fee-for-
    service improper payment rate comes from insufficient
    documentation. These are often instances in which a well-
    intentioned legitimate provider treated a Medicare beneficiary
    but didn't successfully complete their paperwork.
        CMS has taken a number of corrective actions to address
    improper payments including expanding the use of prior
    authorization to make sure services are provided in compliance
    with Medicare coverage, coding and payment rules before
    services are rendered and claims are paid. We're increasing
    efforts to educate providers by offering additional guidance
    and simplifying policy requirements as well as conducting probe
    and educate pre-payment reviews for certain services.
        As I stated earlier, we're also working with states in a
    number of ways to help them meet Medicaid provider enrollment
    requirements which are a significant driver of the Medicaid
    improper payment rate. CMS is committed to our efforts to
    prevent waste, abuse, and fraud in the Medicare and Medicaid
    programs, protecting both taxpayers and beneficiaries. The GAO
    and OIG are critical partners in these continuous improvements
    and these continuous efforts.
        We look forward to continuing our partnership with GAO and
    OIG to work together on additional ways to identify and
    eliminate vulnerabilities and to strengthen both of these
    programs. Thank you, and I look forward to your questions.
         [The prepared statement of Dr. Agrawal follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Murphy. Thank you. We will now begin questions. I will
    begin and recognize myself for 5 minutes. First, Ms. Maxwell, I
    want to discuss what this improper payment rate really does
    mean. Some kinds of fraud would not actually be captured in the
    improper payments, am I correct?
        Ms. Maxwell. That's correct.
        Mr. Murphy. And some fraud schemes would remain undetected
    through auditing and data mining, and sometimes you actually
    need human intelligence such as whistle blowers or
    investigators especially when it comes to patient services, is
    that correct?
        Ms. Maxwell. Absolutely.
        Mr. Murphy. And even though there are data mining tools for
    provider addresses that are inaccurate, you still are going to
    have to have some investigators go on site, those boots on the
    ground to determine whether or not a provider is legitimate. Is
    that your view as well?
        Ms. Maxwell. Absolutely.
        Mr. Murphy. OK. And Mr. Bagdoyan, if improper payments
    don't capture many types of fraud, then is the CMS improper
    payment rate really a good indicator of payments that should
    not have been made?
        Mr. Bagdoyan. Well, I think it's probably not the best
    indicator for fraud----
        Mr. Murphy. Bring your microphone closer.
        Mr. Bagdoyan. I'm sorry. It's probably not the best
    indicator for fraud monitoring, but in terms of improper
    payments it's probably the best available as long as the
    methodology used to develop it is executed properly. But that's
    obviously a contingency on each agency that reports these
    numbers.
        Mr. Murphy. Exactly. Dr. Agrawal, both HHS and GAO have
    cited numerous concerns with the Medicare administrative
    contractors' decision to enroll and revalidate providers into
    the Medicare program. CMS hires outside contractors to verify
    provider eligibility.
        So specifically, reports from both agencies identify
    several instances in which the contractors approved enrollment
    applications even though the provider site visit did not meet
    CMS standards. So in one OIG report, contractors conducting
    site visits found that 651 provider facilities were not even
    operational despite notes such the facility is closed, on the
    doors, or this building has been vacated and suite appears
    closed and abandoned, over half of those providers still made
    it on to Medicare's enrollment system. So how is CMS holding
    the contractors accountable for poor enrollment decisions? What
    are you doing?
        Dr. Agrawal. Yes. I think that's an important question and
    I appreciate the work of the OIG in this area. There were
    specific recommendations contained in their report which we
    have acted on. So they have, for example, recommended
    streamlining, simplifying the site visit forms which we are
    working on.
        Mr. Murphy. Well, is it the form's fault? I am asking how
    you are going to hold them accountable.
        Dr. Agrawal. I think in part we want to make sure that the
    process works well. That if----
        Mr. Murphy. Well, it doesn't.
        Dr. Agrawal. Well, that if that there are elements of the
    process that need to be changed like the way contractors
    interact with each other, the forms that they utilize, that we
    make those changes. Then----
        Mr. Murphy. I don't want to go down that road. If it says
    this place is closed, there is nothing there, there is a
    padlock on the door, what paperwork is going to help you to
    understand that that facility is closed and you shouldn't be
    billing out of that facility? That is you.
        Dr. Agrawal. Sure.
        Mr. Murphy. What are you going to do? Are you going to
    revoke their ability to have a contract? Are they going to be
    fined for sending you fraudulent information? What is it?
        Dr. Agrawal. I think part of the answer is prevention to
    make sure that changes are made to ensure better processes in
    the future. Part of it is looking at the referrals that the OIG
    has given us, which we are working through to better understand
    exactly what----
        Mr. Murphy. That is enough. I have had enough double talk.
    Look, show me that slide up here of the trend. I want to--no,
    because I want to get the point. I want you to hold these guys
    accountable.
        Dr. Agrawal. Sir, if you'll give me a couple minutes or
    even a few seconds, I can add to that point.
        Mr. Murphy. OK, I will give you a chance.
        Dr. Agrawal. Thank you. So like I said, I think getting to
    specific cases where things might have fallen through the
    cracks as indicated in the OIG report is really important,
    because then we can have specific discussions with the
    contractors about what transpired and hold them appropriately
    accountable.
        Mr. Murphy. OK.
        Dr. Agrawal. Without that evidence and data we would be
    having a, you know, high level, general discussion.
        Mr. Murphy. Well, I appreciate that because they have given
    you some real valuable data, and I know you are a problem
    solver because you are an emergency room physician.
        I want to show a slide up here of a trend, if they can show
    that slide, please. This is on the Medicare fee-for-service
    programs. And does it look like the error rate is moving in the
    right direction here over the last--which one is it? There we
    go. Does that look like it is moving in the right direction,
    that error rate? It doesn't seem to me. Am I correct?
        Dr. Agrawal. I think what you see in that chart is a
    significant increase in the error rate when new requirements
    are created that providers have to meet.
        Mr. Murphy. OK.
        Dr. Agrawal. And that was driven largely by the ACA.
    Necessary requirements for program integrity to make sure that
    we are paying for the right service to the right beneficiary.
        Mr. Murphy. Is it a valid metric? Do you think these are
    valid metrics or do we need to be looking at other metrics when
    it comes to----
        Dr. Agrawal. I think we have to be careful about what it is
    and what it isn't. It is not a very good measure of fraud. It
    would not capture the most common fraud scheme which is
    prosecuted on a daily basis which is the presence of kickbacks
    in a provider relationship.
        Mr. Murphy. Sure.
        Dr. Agrawal. What the improper payment rate does is it
    compares billing, the claims that we receive against medical
    records that the provider has and that we don't see at the time
    of claims payment. If you were to just look at claims payments
    in and of itself, CMS pays claims accurately an extremely high
    percentage of the time, well over 99 percent of the time.
        What the cert contractor does or the improper payment
    contractor does is it grabs a sample of 50,000 claims out of a
    pool of a billion, and then it asks for the underlying medical
    record documentation from the physician or DME company or
    whatever, and it looks at that documentation and compares it
    against the claim.
        Again, we don't see that documentation at the time of
    claims payment, something that we are changing through things
    like prior authorization. And roughly 12 percent of the time
    there's a discrepancy between what's in the medical record
    simply not being sufficient enough to justify a claim----
        Mr. Murphy. Thank you. I know I am over time. And I
    appreciate that and that is important to get those records
    correct, and I appreciate what Ms. DeGette brought up in terms
    of the number of payments that you are correcting. I think it
    was about 800 and some million dollars, and that is good news.
        It is just with these other things, I am sure you are aware
    of the frustration of the American people in this, and
    Congress. When we are trying to find money for programs we are
    told we don't have it. To see it going to foreign offices or
    places that are closed it is very frustrating to us,
    particularly as we are trying to find funding for some things
    to help save lives in mental health.
        Dr. Agrawal. Could I just comment on that a little bit? So
    removing all of those places, again because the way the
    improper payment rate is measured and it looks at medical
    records, it does not do site visits, it does not talk to
    beneficiaries or providers, closing those places would not have
    an impact on the improper payment rate, right. This is a
    medical record review that is compared against claims.
        Mr. Murphy. I understand. I understand. I am talking about
    payments to places that are closed.
        And Ms. DeGette, you are recognized for 5 minutes.
        Ms. DeGette. Thank you, Mr. Chairman. I think we all agree
    we need to reduce waste, fraud and abuse. We can just stipulate
    to that on a permanent basis, OK. Yes.
        Mr. Murphy. So ordered.
        Ms. DeGette. One of the problems that we have had as we
    heard from the OIG is that the states with respect to Medicaid
    have not fully implemented provider screening tools like
    fingerprinting, criminal background checks and site visit. The
    deadline for the states to complete revalidation from all the
    providers has slipped as has the deadline for full
    implementation of criminal background checks.
        And so I guess I want to ask you, Dr. Agrawal, if you have
    some sense if the states are having to lead in preventing fraud
    in Medicaid, what can we do to make those states who are
    lagging behind comply?
        Dr. Agrawal. Yes, I appreciate the question. You correctly
    point out that states really have to take the lead in terms of
    safeguarding their own----
        Ms. DeGette. This is a state-administered program.
        Dr. Agrawal. Exactly right. So, and I appreciate very much
    the recommendations from both OIG and GAO on these issues. We
    have responded by trying to provide technical assistance to the
    states, literally giving states a person that they can call
    directly on my team to make sure that they are aware of the
    requirements and can get whatever assistance they need to meet
    them.
        Ms. DeGette. And what kind of response are you getting from
    the states?
        Dr. Agrawal. I think generally it's really interactive. I
    mean, they do want more guidance. That led us to release the
    Medicaid Provider Enrollment Compendium earlier this year to
    give them that. They wanted more access to Medicare enrollment
    data so we gave them real-time access to our enrollment data.
        They wanted access to law enforcement data so we actually
    negotiated on their behalf real-time access to the FBI state
    level criminal data, which we believe all of those efforts and
    states really taking a proactive stance on this will help get
    them into compliance.
        Ms. DeGette. Well, I also want to ask you about the
    improper payment rate for the Medicaid program that the
    chairman was referencing with his chart which increased last
    year from 6.7 percent to 9.8 percent. Do you know what has
    driven the uptick in the improper payment rate?
        Dr. Agrawal. Yes. First, let me say the way the improper
    payment rate in Medicaid is calculated is that we sample 19
    states every year at three cycles of--I'm sorry, 17 states that
    then get us over a 3-year period to assess the entire Medicaid
    program. What that means is we are currently in cycle 3 now.
    The first cycle was 2 years ago, and that was the first time
    that new ACA requirements were introduced in the PERM
    measurement.
        These ACA requirements are things like provider enrollment,
    things like making sure that we have the NPI----
        Ms. DeGette. Right, OK.
        Dr. Agrawal [continuing]. Of attending physician on every
    claim. So those are driving the rate at this point.
        Ms. DeGette. So this is your third year. So why has the
    rate gone up, because you are still completely getting the
    data?
        Dr. Agrawal. No. Well, I think the rate has gone up because
    of lack of complete state compliance with these new ACA
    requirements. And so we expected to see a trend of frankly
    increase every year as we sampled more and more states and
    looked at how they were implementing----
        Ms. DeGette. And so what can we do to make the rate go
    down?
        Dr. Agrawal. Yes, great question. So----
        Ms. DeGette. Thank you.
        Dr. Agrawal. I think it is the combination of numerous
    different efforts. It is working with states, collaborating
    with them, making sure that they're clear on these
    requirements, giving them access to the data if they need it.
    We have provided federal matching funds for system changes so
    that they can get NPIs reported on claims.
        It's not a single solution, it's a multitude of solutions
    to ultimately get states moving in the right direction. And if
    they don't, if, you know, those solutions don't work, then I
    think we have to talk seriously about accountability for the
    states.
        Ms. DeGette. So I just want to thank you for that and I
    just want to add, if there is something your agency thinks
    Congress can be doing to help this nudge this along we are
    happy to do it.
        And I would like to point out, earlier this year the House
    passed H.R. 3716, the Ensuring Access to Quality Medicaid
    Providers Act which our own Representative Bucshon and Welch
    co-sponsored. And what this does is it requires states to
    report the termination of an individual or entity from its
    Medicaid program to a database maintained by the CMS. The
    Administration supports the bill. The House passed it by 406 to
    0, so maybe we could get our friends on the other side of the
    Capitol to pass it. That might be beginning assistance, but
    anything else we can do, we are really serious about this.
        And the chairman is right. People say all the time, well,
    we can fund this. We should just eliminate waste, fraud, and
    abuse. But it is not so easy to do especially when you are
    relying on the states. So I appreciate you and your efforts and
    I appreciate the other agencies in helping you to find new
    tools to do it. Anything we can do to participate, let us know.
        Thanks, and I yield back.
        Dr. Agrawal. Thank you.
        Mr. Murphy. The gentlelady yields back. I now recognize the
    vice chairman of this committee, Mr. McKinley of West Virginia,
    for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman. To try to get
    through a series of questions quickly with you, the first is
    perhaps with Mr. Bagdoyan. Just quickly, do you think that
    telemedicine is contributing to the potential abuse?
        Mr. Bagdoyan. That's an excellent question, Mr. McKinley,
    but that's not in the scope of the work I've done and I have no
    expertise in that. So I couldn't respond to that.
        Mr. McKinley. OK. Could you find out from someone in the
    panel or elsewhere is what the impact that could be, because
    people practicing without license in a state there could be
    abuse. I would like to follow up with that.
        Now with Dr. Agrawal, thank you for once again appearing
    before us, there are a series of questions I have quickly with
    you. We talk about this pay and chase, but before I get to the
    pay and chase issue what about using the technology that we
    have today, the internet, Skype, whatever, to be able to try to
    get some of that utilization particularly for people that have,
    groups that have abused the system or maybe have been
    mischarging?
        Could we, do you have an idea of what the cost would be to
    implement something, then in real time you would be able to
    make a phone call or a Skype information or something to be
    able to get that for a pre-approval before they offer these
    services? Have you looked into that what that cost could be?
        Dr. Agrawal. Yes. I think very important question. We have
    tried diligently over the last few years to move away from a
    pay and chase model to one that emphasizes prevention. Along
    the lines of your question, we've implemented the Fraud
    Prevention System which is a predictive analytics technology.
    Congress authorized the implementation of this system as well
    as funded it for its initial 4 years of implementation.
        Mr. McKinley. What about just someone picking up the phone
    or talking to someone, a real person? Not a press one or press
    two, but actually talking to somebody. I have got this patient
    and these are the conditions, is this going to be OK?
        Dr. Agrawal. Well, what you are highlighting essentially is
    a prior authorization process which is used extensively.
        Mr. McKinley. I don't want to do it for everyone, as that
    penalizes everyone. I am looking at people that have perhaps
    been known to have made mistakes before so that we clarify, so
    it is a very single. So you have not looked into it--because I
    really want to get to my last two questions quickly.
        We have one of the things when we meet back in the district
    we keep hearing there is a lack of uniformity in the
    application for reimbursement and different rules are being
    applied to different regions of the country.
        I know in West Virginia and in Ohio there is a separation
    of just over a thousand feet. The river separates between West
    Virginia and Ohio. But yet the contractors are two different
    contractors, and using almost exactly the same circumstance the
    one in Ohio is being reimbursed differently than the one in
    West Virginia. And similarly to that, that the denial rate, the
    initial denial rate is 90 percent. Ninety, 89 percent for West
    Virginia, but in Ohio it is only ten percent.
        So as a result of that denial rate, a lot of the West
    Virginia providers are having to go out and get lines of credit
    and increase their cost of doing business because they are not
    being reimbursed in a timely fashion. What are we going to do?
    Why is there such a disparity between two regions separated by
    merely a thousand feet?
        Dr. Agrawal. Without the specifics of a case it's hard to
    comment, but there are legitimate----
        Mr. McKinley. We sent CMS those specifics. So we have not
    heard back, so we can send them again.
        Dr. Agrawal. I would love to certainly see them and be
    happy to follow up with you. There are lots of things that can
    drive differences across geographies. First, the way that
    providers practice, the way that they submit bills to the
    agency----
        Mr. McKinley. Ninety percent versus ten percent?
        Dr. Agrawal. There are also other coverage decisions that
    are different, like local coverage determinations that can vary
    from one region of Medicare to another. So a multitude of
    factors can figure into this. Again, I'm happy to work on a
    particular case if that would be relevant for you.
        Mr. McKinley. Well, I think it is more than just a
    particular case. It is something uniformly when I go back to
    the district this is something we hear from providers time and
    time again. Because we enjoy the--we are right there on the
    border. We can contrast what they are doing in Ohio for
    reimbursement as compared to what they are in West Virginia. So
    I guess we can have further conversation, but I appreciate your
    answers on this and I hope we can work together.
        The last is this thing, you have instituted a 3-year
    demonstration program to possibly do a prior authorization. Why
    is it across the board? Why isn't it more just for those that
    have a history of perhaps violating the system? Because that
    way everybody is being punished this way. This doesn't make
    sense.
        Dr. Agrawal. We have implemented through a demo approach
    prior authorization in ambulance services, again in certain
    geographies, in certain DME supplies and certain geographies.
    We have found that prior auth can be a really useful tool
    because it narrows that gap between the medical record and the
    claim which helps to reduce the improper payment rate and
    reduce expenditure kind of accordingly.
        I'm very open to more focused prior authorization, really
    focused on bad actors and folks that have high denial rates.
    However, I think before we get there we have to get more
    experience.
        Mr. McKinley. What I want to get at it is the use of
    technology that we have today.
        Dr. Agrawal. Sure.
        Mr. McKinley. If we have all this internet access let's use
    it and be able to--so I yield back my time.
        Dr. Agrawal. I appreciate it.
        Mr. Murphy. The gentleman yields back, and I recognize the
    gentlelady from Florida, Ms. Castor, for 5 minutes.
        Ms. Castor. Thank you very much, Mr. Chairman, and good
    morning and thank you to the panel. I am glad we have the
    opportunity to discuss rooting out the fraudsters in Medicare
    and Medicaid and tackling the problem of insufficient
    documentation, because we want every dollar in Medicare and
    Medicaid to go to the health services of our neighbors.
        And when you look at the size and scope of all of the
    health services under Medicare and Medicaid it really is
    daunting. Over 125 million Americans receive their health
    services that way, whether it is in the hospital or the
    doctor's office or under Medicaid in skilled nursing or for our
    neighbors with disabilities. So because of the size and the
    scope, fraud and improper payments have been an ongoing
    challenge.
        But with the passage of the Affordable Care Act in 2010, we
    now have these more effective, more significant new tools to go
    out to go after these fraudsters and try to reduce some of the
    improper payments. I think everyone wants the agencies to be as
    nimble and as aggressive and as effective as you can be about
    doing this.
        So Dr. Agrawal, I would like to ask you about the
    Affordable Care Act's anti-fraud measures and how they have
    strengthened Medicare and Medicaid. Share with us, what are the
    most effective tools now that we are 6 years after the adoption
    of the ACA? I know it was kind of cloudy early on. People,
    heck, we are still voting to repeal it here in the Congress,
    but in the meantime we have wanted you to be as aggressive as
    possible on using these new tools.
        What are the most effective new tools so far that were
    provided under the Affordable Care Act?
        Dr. Agrawal. Sure. So in the ACA, provider enrollment is an
    extremely useful tool. I think we have significantly changed
    the way we enroll providers from pre-ACA years. And while there
    are clearly are refinements that we can continue to make, I
    just want to remind everybody that we have revalidated every
    single provider and supplier in Medicare.
        Through that and other actions we have disenrolled over
    500,000 providers who are no longer able to build a program.
    Just from site visits and finding nonoperational providers
    we've removed 1,900 providers from the system, from licensure
    checks over 19,000. So again I think the numbers are important.
    We can clearly continue to make progress, but that's a really
    useful set of tools for us.
        We also have new tools that put us on the prevention end of
    our activities, so things like payment suspensions where we are
    able to suspend all payments to a provider pending an
    investigation and potentially other administrative actions.
    That prevents us from making payments to potentially bad
    providers on the front end.
        Working with Medicare and increased Medicare and Medicaid
    data sharing, another feature of the ACA, I think extremely
    important, can continue to be improved. But that allows us to
    see when a state has taken an action against a provider to see
    if it should be duplicated in Medicare, and for states to
    exchange data with each other.
        We've seen significant state uptake of that kind of
    transparency to each other and seen some real results with
    refinements that we will continue to work on. So I think
    without the ACA we would be in a substantially different place
    in this program than where we are today.
        Ms. Castor. Ms. Maxwell, the same question. You highlighted
    at the beginning of your testimony that the Affordable Care Act
    provisions now provide more rigorous tools to root out
    fraudsters and to tackle insufficient documentation. From your
    point of view, what have been the most effective tools provided
    under the ACA?
        Ms. Maxwell. Thank you for the question. We do believe the
    tools really change the possibilities for the strengthening of
    the provider enrollment. And while we looked at the
    implementation of both Medicaid and Medicare, what we really
    came away with was the potential for maximizing their
    utilization.
        We think the tools have great promise and we want to make
    sure that Medicaid and Medicare are extracting the full promise
    from those tools, so that the Medicaid systems implement all
    the tools that are available to them and the Medicare program
    implements them to their fullest degree. So we think they have
    tremendous potential and we hope that our recommendations will
    be of assistance in making them even stronger.
        Ms. Castor. So you have both highlighted problems with
    state implementation, whether it is the criminal background
    checks or getting some things done. My time is running out, but
    if you could quickly say is this a capacity problem at the
    state level? Is there a reluctance at the state level because
    of the political cloud that has hung over the Affordable Care
    Act for many years? Or is it just a lack of funds, a lack of
    action, a lack of technical know-how?
        Ms. Maxwell. Well, the states reported to us that they were
    facing operational challenges with specifics in terms of the
    fingerprint background checks. It's a new process for them.
    It's difficult to operationalize, and also resource concerns.
        Ms. Castor. Dr. Agrawal.
        Dr. Agrawal. I think that's right. These are complicated
    expectations that we are placing on the states. There's lots of
    requirements. There are, I think, a lot of operational
    challenges. I think that is why they're asking for more data,
    access to more guidance, which we are providing. These things
    will take time, but I see states making progress.
        Ms. Castor. Thank you very much.
        Mr. Murphy. The gentlelady's time is expired. I recognize
    the gentleman from Virginia, Mr. Griffith, for 5 minutes.
        Mr. Griffith. Thank you very much, Mr. Chairman. If I could
    pick up on the questioning that the gentlelady was asking, you
    indicated, and I may have misunderstood that there were some
    complications and I would address this to Ms. Maxwell or Dr.
    Agrawal, there were some complications but it sounded like when
    I was listening to the testimony that we were talking about
    fingerprinting and criminal background checks and many of the
    states are already doing that for lots of other things. Why is
    that complicated?
        Dr. Agrawal. I think what we've heard from the states is
    that they'd like better access to real-time law enforcement
    data so that their fingerprint checks are higher in accuracy.
    And we heard that loud and clear from a number of states. They
    also wanted more guidance about how we implemented these checks
    in Medicare.
        So we've given them that guidance, and then on their behalf
    got them access to FBI state level criminal data so that they
    can bump their fingerprint checks against that database. And so
    we look to states now making significant progress since we've
    armed them with these tools.
        Mr. Griffith. I guess I am just curious, because checking
    both the national and the state with the fingerprint has been
    something that has been done, background checks have been done
    for quite some time at least in the Commonwealth of Virginia
    that I represent, but I didn't realize some states were not
    doing that.
        Mr. Bagdoyan, in your testimony you have indicated of
    course, and we have already heard today about the weaknesses in
    the CMS' verification of provider practice location, physician
    licensure status, et cetera, and you said you had made some
    recommendations which CMS indicated they would implement or are
    taking steps to address.
        What specifically did you recommend to them that they might
    do to improve that because obviously it is a little shocking
    when you find out that we have got money potentially going to
    empty office buildings or to a UPS mail drop?
        Mr. Bagdoyan. Right. Well, thank you for your question.
    Regarding the locations it was a software issue, a screening
    software issue where it was lacking some critical flags like
    whether it's a mailbox, whether it's an empty lot, or it's just
    not recognized by the Postal Service. So CMS took this to
    heart, they did some work and went ahead and upgraded the
    software with a new package that has these flags. This is a
    relatively recent development so we'll see going forward how
    effective that's going to be.
        Regarding----
        Mr. Griffith. And do you think that was the software
    providers' problem? Because it seems to me that that would have
    been something normal that we shouldn't in 2016 or even in 2015
    be thinking, well, shucks, we ought to check to see if somebody
    really is there. Is that something new, or is this just that
    their software failed them?
        Mr. Bagdoyan. It's not new. We have the software from the
    Postal Service that we use at GAO for various forensic audits.
    It's relatively inexpensive and easy to use. However, at the
    time CMS purchased its own software, I'm not sure what kinds of
    requirements definitions they made of the contractor or
    requirements to the contractor regarding requirements of the
    software. So I can't speak to that in any depth, but forward-
    looking CMS is moving in the right direction.
        Mr. Griffith. And I appreciate that. But Ms. Maxwell, if
    the Postal Service has a system that they use for this that GAO
    uses to check up on things, why did you all go out and spend
    money on something else? And can you tell me, I know you may
    not have that off the top of your head, but can you give us the
    information on how much you spent on a software program when
    the Postal Service had one that was fairly effective and easy
    to use, according to Mr. Bagdoyan?
        Ms. Maxwell. If I'm understanding your question correctly,
    I believe that's directed to CMS, about the database?
        Mr. Griffith. Yes.
        Ms. Maxwell. We did not look particularly at that. The work
    that we did looked at the information that was in the data
    system about provider ownership and found discrepancies in that
    information as well. And in totality, I would say having the
    correct address, having the correct owner's name is critical to
    making the proper enrollment decision. You need that
    information to make a decision.
        Mr. Griffith. So I should have asked that question of you.
        Dr. Agrawal. I was thinking of bailing her out, but then--
    --
        Mr. Griffith. So why are we, I mean, how do I tell my
    taxpayers back home that we are getting our dollars' worth when
    we are going out and reinventing the wheel, when the Postal
    Service already has something that would at least tell us
    whether or not that was an address that actually existed or was
    in the middle of the river somewhere?
        Dr. Agrawal. Right. So the Postal Service, I think the GAO
    identified a very useful tool for us. We have integrated that
    into our systems. Now, there's a difference in integrating a
    tool like that into your systems, making sure that it cross-
    talks with other databases, making sure that you have a process
    behind it that's very different than what's conducted in an
    audit where a few people get access with a license to the
    database. So it will inherently be more expensive to actually
    get it fully integrated with our other work.
        I also do want to make the point that the data is a great
    source of lead information, but it also can produce false
    positives. So we saw that in the sample provided to us by the
    GAO as well.
        Mr. Griffith. My apologies because my time is out, but I
    have got two things I would like for you all to respond to at a
    later date. One, how do you rank with the private industry as
    far as your being able to identify fraud; and two, I like
    telemedicine, so let's figure out a way we can make that work
    because I heard somebody else say earlier they were worried
    about that creating fraud, but for rural districts it is very
    important. And I yield back.
        Dr. Agrawal. Thank you.
        Mr. Murphy. Thank you. Mr. Pallone is recognized for 5
    minutes.
        Mr. Pallone. Thank you.
        Dr. Agrawal, thank you for appearing here today. The
    Affordable Care Act gives CMS a number of new tools and
    expanded authorities to reduce fraud and improper payments in
    both Medicaid and Medicare. For example, the ACA required
    increased scrutiny of providers and suppliers who have
    historically posed a higher risk of fraud or abuse to either
    program, and this heightened screening process applies to
    providers and suppliers that are attempting to enroll in these
    programs or are revalidating their participation.
        So let me ask, Dr. Agrawal, can you describe how CMS uses
    this risk based screening method and applies different
    standards to providers and suppliers in each category of risk,
    and how does this approach help us protect against fraud and
    how does this compare to what private payers do before they
    enroll providers and suppliers?
        Dr. Agrawal. Sure. So the ACA required that we segment
    provider categories into three different risk groups: a high
    risk, a moderate risk, and a limited risk. Certain enrollment
    and screening requirements are applied across the board, often
    the ones that we can do in an automated fashion like confirming
    licensure or certification.
        There are certain other screening requirements that are
    leveraged against a higher risk provider types. Newly enrolling
    DME companies, for example, or home health agencies, these are
    provider categories that have had historical issues with fraud
    in that group. And so we've leveraged greater tools to address
    their enrollment like site visits, criminal background checks
    that are fingerprint based.
        So what this enrollment approach allows us to do is really
    respond to the risk where it exists. We've done that in
    collaboration with law enforcement, with the Office of
    Inspector General in making sure that we are not overburdening
    providers but at the same time getting additional data so that
    we can make the right enrollment decision.
        Mr. Pallone. Now how many providers and suppliers have been
    subject to the enhanced screening requirements at this point in
    the Medicare program?
        Dr. Agrawal. So at this point all of them have. We've done
    that in an automated fashion, but also through the revalidation
    process which went to every single provider and supplier in
    Medicare, about 1.6 million. What we've seen as far as results
    is 500,000 providers that don't meet our requirements for one
    reason or another. Nineteen thousand of those were merely for
    licensure requirements. They didn't have the appropriate
    certification. Another about 1,900 that weren't operational. So
    again these are, I think, important numbers. They show the
    impact of this kind of screening.
        Mr. Pallone. And certain ones of those have lost their
    ability to bill Medicare then as a result?
        Dr. Agrawal. Absolutely.
        Mr. Pallone. OK. I wanted to go Ms. Maxwell. I think these
    screening tools show promise in lowering fraud rates and I am
    sure that HHS OIG sees the importance of using them, but also
    understand that you believe they need to be more widely used
    particularly by some state Medicaid programs, and the OIG found
    that a number of states were lagging behind in implementing
    provider enrollment and screening procedures.
        So Ms. Maxwell, does the HHS OIG see value in these tools,
    and how do we help states use them more comprehensively?
        Ms. Maxwell. The goal of our work is to ensure the maximum
    value from these tools both for the Medicaid program and for
    the Medicare program. And you're absolutely right that we
    believe that the way to do that for the Medicaid program is to
    have all the tools implemented. We know not many states are
    already doing the criminal background checks, some states are
    not doing site visits, and some states are going to miss their
    revalidation deadline. So I think that's the way to strengthen
    the Medicaid program.
        Mr. Pallone. But how are you going to help the states use
    these things more comprehensively?
        Ms. Maxwell. Our recommendation is for CMS to assist. As
    we've been talking about here it does certainly rely on the
    states to step up and to implement many of these tools, but we
    see a way for CMS to assist them, providing technical
    assistance, providing more guidance that we heard states really
    wanted.
        In addition, there's a possibility of reducing burden on
    the states by allowing them to better substitute their
    screening for Medicare screening. And we heard from states that
    they often were reluctant to do that out of concerns with the
    data in the Medicare enrollment database.
        Mr. Pallone. OK. Let me go back to Dr. Agrawal for my last
    question. Can you give us an update on what you are doing to
    help the states get to the finish line, and what is the crux of
    the issue here? Do states need additional technical assistance
    and guidance?
        Dr. Agrawal. Sure, and I think it dovetails nicely with
    what the OIG has recommended. We are providing more technical
    assistance. Every single state has a person they can call in my
    office for help and guidance on how to implement these
    requirements. We put out the most comprehensive set of
    guidances really in the last few months that we have ever
    provided to the states so that they know step by step what they
    have to do to meet all of their enrollment requirements.
        We've given them real-time access to Medicare data and the
    guidance that if we have already enrolled and screened a
    Medicare provider they don't have to duplicate that effort on
    their end, which is better for the state, better for the
    provider. And finally we've given them access to criminal
    justice or law enforcement data to make sure that they can
    implement the fingerprint based background checks through an
    FBI database that they have now real-time access to.
        Mr. Pallone. All right. Thanks so much. Thanks, Mr.
    Chairman.
        Mr. Murphy. I now recognize Mr. Bucshon for five minutes.
        Mr. Bucshon. Thank you, and thank you to the witnesses. I
    had practiced cardiovascular and thoracic surgery before. I
    think most of you, many of you know that. So I understand some
    of this from a provider perspective.
        We did pass legislation in the House, 3716, and I think the
    Senate will be taking that up. It is common sense to prevent
    providers from going to another state and getting on the system
    when they have been fraudulent or ineffective practitioners in
    the previous state.
        Medicare by the way does a good job in their billing
    services. I mean, when I was in practice electronic claims paid
    more quickly in general than the private sector and more
    accurately in many respects. So I just want to say that there
    are things that the Medicare system does very well.
        There are things that because of the size of the program
    there is some trouble. One of those, and you talk about
    incorrect payments being, Dr. Agrawal, two-thirds being
    documentation issues. I can tell you why that is and you
    probably can tell me too, because it has to do with the
    complexity of sometimes physician documentation.
        I was a surgeon. I will give you an example. Right after
    the surgery I always did a handwritten note about what I did in
    the case. I didn't have the codes specifically in front of me
    and describe the procedure exactly the way that it might say,
    especially now under ICD-10, so and that will be paid probably
    fairly quickly based on my handwritten operative note.
        And then when the dictated note comes through, which
    sometimes can be weeks, there may be a slight discrepancy, and
    then when you go back and review the case you will find a
    discrepancy in billing and say that that is an improper
    payment. So some of that I don't know what you can do to
    address, I mean, address that situation. It is difficult as a
    provider sometimes to make everything perfectly line up even
    though there is no intent to defraud the program.
        Dr. Agrawal. Yes. That's a great and very concrete example,
    Dr. Bucshon. So I think you might be right that you might
    generate an improper payment unfortunately from that note,
    maybe not. But I think what's important to keep in mind for you
    and your colleagues is that is not fraud, right, nor would
    anybody at the agency----
        Mr. Bucshon. Right.
        Dr. Agrawal [continuing]. Say that you have tried to commit
    fraud. That shows you in a real-world, I think, example how we
    differentiate improper payments from the more concerning fraud
    and abuse activity. You're absolutely right, also, about our
    documentation requirements, so I think there's a few things we
    can do. We are working on educating physicians and other
    providers about what those requirements are through our probe
    and educate and other kinds of approaches.
        Second, I think we can streamline some of our requirements
    where appropriate, so if there are excess requirements that no
    longer belong I think we have looked at them and decreased them
    wherever possible. You saw this in the two-midnight rule and
    the home health face-to-face requirement.
        And three, and I think again a useful tool that we are
    exploring is prior authorization. It's getting to see that
    medical record before a service is offered so that the
    physician isn't on the hook, and then before a payment is made
    so that we are really being preventive of issues.
        Mr. Bucshon. Yes, I think that is good because a lot of
    those numbers could be improved. I mean, well intended
    practitioners, you know, you end up having an improper payment
    and you are on this percentage list, but it really is not.
        Another thing is, is fraud a moving target? Obviously it
    is. I mean, my concern is as I mentioned, Medicare and many
    other payers are going to electronic payment method. In fact,
    Medicare, I think you have to do that if you want to
    participate. Do we have strong enough cyber experts? Is any of
    this related to cyber related type of issues through Medicare?
    I mean, is--or not?
        Dr. Agrawal. Yes. You're absolutely right that fraud is a
    moving target, which is why I think it's important to invest in
    flexible tools that you can use across a variety of issues. I
    mean, things like automated screening. Things like automated
    real-time claims checking.
        I think cybersecurity is definitely a priority for the
    agency. We have focused on it. We track medical identity theft
    issues or potential issues so that we can intervene where
    appropriate. Congress has recently required and funded a change
    to the Medicare HICN number so that we can be more proactive on
    these kind of identify theft issues. I do think that that's a
    component of the world that we are seeing and we're being
    proactive in making sure our systems are secure and then we
    respond to vulnerabilities where they are.
        Mr. Bucshon. OK, and I am running out of time. But the
    other thing is, is in certain respects maybe we need to look at
    whether or not criminal penalties for defrauding the federal
    government and this type of thing are strong enough to deter
    people from trying to do it. Someone said years ago, they asked
    a bank robber why they robbed banks, and because they said that
    is where the money is. These programs have billions and
    billions of potential money and that is why this is an ongoing
    struggle.
        And Dr. Agrawal, I just want to say I appreciate your
    efforts in what you are doing. I know that it is a difficult
    problem to tackle and I know that you are trying to do the best
    job that you can to get ahead of this. Thank you. I yield back.
        Dr. Agrawal. Thank you. I appreciate it.
        Mr. Murphy. Now Mr. Tonko is recognized for 5 minutes.
        Mr. Tonko. Thank you, Mr. Chair, and welcome to our
    panelists. Under the ACA, the secretary of HHS has the
    authority to implement a temporary moratorium on the enrollment
    of new Medicare providers and suppliers. This is particularly
    useful, I believe, because if CMS sees a possible trend in
    fraud such as overutilization of a certain type of service or
    product, new enrollment can be temporarily suspended while
    suspect activity is investigated. This approach ensures that if
    a bad actor enters the program, the fraud can be limited and
    corrective actions or additional controls can be put in place.
        So with that said, Ms. Maxwell, can you tell us why having
    the ability to temporarily suspend enrollment for suppliers or
    providers is an important tool, and what can it do for reducing
    fraud or abuse?
        Ms. Maxwell. Thank you for that question. We are here to
    talk about the critical role that provider enrollment plays and
    that is part of the tools that are available. We want to make
    sure that the programs are not doing business with people whose
    intent is to defraud the program, and the way to do that
    ideally is to prevent them from getting in the program in the
    first place. So we were talking about the particular role of
    screening tools, but the moratorium offers a different tool to
    prevent that from happening.
        Mr. Tonko. And also, Ms. Maxwell, can you explain for us
    why having a temporary moratorium helps us from further
    limiting the pay and chase problem that has been so problematic
    over the years?
        Ms. Maxwell. Absolutely. As I said in my opening statement,
    enrollment is the green light to start treating beneficiaries
    and to start billing. And so our best opportunity to not let
    that happen is to prevent them getting in the program in the
    first place. So that would be strong provider enrollment
    screening tools, moratorium, and other ways to make sure that
    we know exactly who we're doing business with and we are
    comfortable letting them treat our patients and paying them.
        Mr. Tonko. And also, CMS has the authority to temporarily
    suspend enrollment in certain categories of suppliers or
    providers. This is a useful tool, I would think, in reducing
    fraud and abuse also. So Dr. Agrawal, can you explain how
    enrollment moratoria have boosted the agency's efforts to limit
    fraud and improper payments in the Medicare programs?
        Dr. Agrawal. Sure. And I agree with Ms. Maxwell that
    closing that doorway to Medicare can be a very important tool.
    The moratoria essentially allows us to pause enrollment in a
    certain geographic area for certain providers.
        We have implemented it in the areas of home health and
    ambulance services in a number of geographic areas. We're
    currently evaluating the impact of the moratorium. It certainly
    allows us to step up our efforts in those areas as well as
    working with law enforcement. What we have found so far is that
    in moratoria area we have removed about 900 providers that no
    longer meet our requirements or that after an investigation are
    found to be fraudulent or abusive of the program.
        So I think it can be a very useful tool to open up that
    investigative possibility. And we have also, we are working
    with states to approve any moratoria that they would like to
    implement in the Medicaid program.
        Mr. Tonko. Great. And how often would you say these tools
    are reached to?
        Dr. Agrawal. I'm sorry?
        Mr. Tonko. How often are you reaching to this kind of tool
    in the kit? Is it frequent? Is it----
        Dr. Agrawal. I think with respect to the moratoria we want
    to be careful with it. We want to make sure that we are
    implementing it in clear geographic areas where there is
    saturation of certain provider types. We put out data for the
    public recently to better understand where we are seeing these
    issues, clearly showing problems in the areas we have the
    moratorium.
        I think while we gather data on what it's doing, what it
    allows us to accomplish, I want to be very careful that we
    don't just sort of use it all over the place and potentially
    impact legitimate access to services.
        Mr. Tonko. And then also, Dr. Agrawal, what steps are being
    taken by CMS to ensure that enrollment moratoria do not
    adversely affect Medicare beneficiaries' access to medical
    assistance?
        Dr. Agrawal. Yes. So I think part of it is being really
    methodical about where we implement the moratoria, making sure
    that we're responding to clear indicators of market saturation.
    We are also tracking access to services in real time, making
    sure that beneficiaries continue to enjoy the legitimate access
    to services, and working with states so that there's on the
    ground reporting. If the data doesn't show it we might still
    hear anecdotes and other inputs from the states.
        So far I will tell you, given where we started and the
    extreme levels of market saturation, we are not at a place yet
    really in any of the moratoria area where we would start to
    impinge upon legitimate access to services.
        Mr. Tonko. OK. Well, it is good to know, and I thank you
    all again for serving as witnesses on this important topic, so
    thank you. I yield back.
        Mr. Murphy. The gentleman yields back. Thank you. I now
    recognize Mr. Collins of New York for 5 minutes.
        Mr. Collins. Thank you, Mr. Chairman. And boy, I thought I
    was upset the last time we got together, and I can't even get
    my mind around this, Dr. Agrawal. And since you are part of my
    stump speech on pretty much a weekly basis, and I don't mean
    that in a complimentary way, I do know your name well.
        So 2013, error rate 5.8. Oh, what was your goal in '14?
    5.8. Not exactly a private sector mindset. Didn't hit 5.8, hit
    6.7. Oh, so the next year your goal was 6.7. Ah, didn't hit
    that either. It was 9.8. Can I kind of connect these dots? Is
    your goal this year 9.8? You just keep raising it. What is your
    goal this year?
        Dr. Agrawal. Congressman, I think what you're referring to
    is what we expect to see in the Medicaid improper payment rate
    as----
        Mr. Collins. Yes, that is all I am asking. It was 5.8, went
    to 6.7, went from 6.7 to 9.8. What is your goal this year? Do
    you have one? Is it 9.8?
        Dr. Agrawal. Congressman, I can get you that goal, but I
    will tell you that----
        Mr. Collins. Oh, you don't even have it.
        Dr. Agrawal. I will tell you that we expect to see the
    numbers----
        Mr. Collins. Now you have really blown my mind. We are
    halfway into 2016, and in your position you can't even tell me
    what your expected error rate is this year? We don't work in
    the same universe. Lean Six Sigma, as I brought that up last
    time. We allow in the private sector three errors, 3.4 errors
    per million transactions. 3.4. You had 97,800 errors per
    million last year. 97,800.
        Could you imagine, Mr. Chairman, what we would be talking
    about today if American Express screwed up 97,800 transactions
    out of a million? Could you imagine if Google or Amazon screwed
    up 97,800 transactions out of a million? I can't even conceive
    of the outrage.
        And Dr. Agrawal, here we sit today with last year your goal
    was 67,000 per million, you got 97,800, and here we are at the
    end of May in 2016 and you can't even tell me today what error
    rate is your goal for 2016. I am guessing you have blown the
    mind of everybody in this room and anybody watching this.
        Taxpayers in my world as we have argued on this committee
    and others, even the other day Zika virus, we need more money.
    We want more money. We don't have more money. We want more
    spending for NIH cancer research. That is the one thing that I
    can assure you that the Democrats remind us of all the time, we
    want more money. You know, we have to balance our deficits, our
    debt and our obligation to taxpayers and future generations.
        And here you are in your seat accepting 97,800 errors per
    one million transactions, and from the tone of what I have
    heard so far I would presume you actually think you are doing a
    good job. Is that a fair statement? Do you think you are doing
    a good job? That is a yes or no. Do you think you are doing a
    good job?
        Dr. Agrawal. There are clearly improvements that we are
    working on making.
        Mr. Collins. You know what, again you can't even answer a
    question. Are you doing a good job? That is a yes or no. Do you
    think you are? Yes or no.
        Dr. Agrawal. There are clearly improvements that we are
    working on making.
        Mr. Collins. And has everyone heard me ask him a yes or no
    question and you heard the answer? He couldn't even answer yes
    or no. I think you can understand why--last year I asked Dr.
    Agrawal a straightforward question. I said, ``Dr. Agrawal, if
    you worked for me how long do you think you would last?'' Took
    Agrawal about 20 seconds to answer that question and at the end
    his comment was, respectfully, Mr. Congressman, I hope I never
    work for you.
        So let me answer the question right now and be clear
    because we never really got there. If you worked for me you
    would be fired this afternoon. And I yield back.
        Mr. Murphy. The gentleman yields back. Do you need to----
        Ms. DeGette. Chairman, I find it very abusive of the
    witnesses and I just, I think that is really objectionable. I
    would just like to put that in the record.
        Mr. Murphy. Well, I would like to see if the witness has an
    answer that he wants to respond.
        Dr. Agrawal. No, I don't.
        Mr. Murphy. Thank you. Then I recognize Mr. Green for 5
    minutes.
        Mr. Green. Thank you, Mr. Chairman. Last year, CMS reported
    that its advanced analytics computer system called the Fraud
    Prevention System did find and prevented 820 million in
    improper payments for the first 3 years of use. This system
    assisted predictive analytics to identify billing patterns that
    appear suspect, may be improper or even fraudulent. The Fraud
    Prevention System is similar to systems used by credit card
    companies.
        Dr. Agrawal, can you explain in more detail how this system
    works and how it is applied and how CMS has used it to protect
    tax dollars?
        Dr. Agrawal. Sure. So the Fraud Prevention System--and we
    do appreciate the support Congress has provided to implement
    and fund this system--what it does is it streams Medicare
    claims in real time, about four and a half million claims per
    day. It bumps those claims against established algorithms,
    which are predictive algorithms and other kinds, based on what
    we find going on in the field that are indicative of potential
    fraud or abuse. And it flags both the claims and the associated
    providers so that it can prioritize and protect the downstream
    investigations.
        The impact from the FPS has clearly been extremely
    important. It put us clearly on a path away from pay and chase
    towards prevention where we can prioritize the right
    investigations and take actions more quickly. The OIG has
    certified the ROI from the system showing that it is very
    positive, and we look forward to releasing more data soon on
    how the system has continued to progress.
        Mr. Green. And since that system was similar to those used
    by credit card companies in the private sector, do you compare
    your successes, compare your failures, with the private sector?
        Dr. Agrawal. We are constantly communicating with the
    private sector. I meet regularly with my correlates in the
    private sector to see how they do their business on, across the
    range of things that we're engaged in from analytics to
    provider enrollment.
        What we see, what we are using the FPS for is sort of two
    main missions. One is to directly deny claims wherever we can,
    so if a claim comes in that shouldn't be paid on the face of it
    we will deny that claim through the FPS. And second, to really
    direct our investigative resources so that they're being well
    spent and producing real return.
        And again, here, I think we've seen significantly improved
    returns on investment, 5 to 1, 2 years ago, 10 to 1 last year,
    and we're--oh, I'm sorry, 10 to 1, 2 years ago, and we're
    working on numbers for last year to release.
        Mr. Green. OK. As I mentioned in the beginning of my
    questions, CMS reported last year that the Fraud Prevention
    System has assisted in identifying and preventing about 820
    million in inappropriate or improper payments. Can you tell me
    more about this figure and how did CMS accomplish this?
        Dr. Agrawal. Sure. The FPS, in addition to being able to
    deny claims where there's clear payment policy and the claim
    doesn't meet it, what it's also able to do is identify new
    providers that might not have yet sort of shown up on our radar
    based on the field work and intelligence that we have and it
    can also corroborate data that we already have, making the
    investigation more efficient.
        What we do is we work with our investigators to get from
    them knowledge that they have from the field in doing this kind
    of work to let us know what kind of analytical models would be
    helpful in their work, what kind of data they need to see on
    the front end that would be helpful.
        What we've found is that by taking that input in and
    putting it into the Fraud Prevention System, we can actually
    give investigators access to data that they might otherwise
    take weeks, maybe even months to put together themselves. This
    allows them to act as quickly as possible on the data that
    they're seeing and to intervene. I'll give you one example.
        We have a model that's focused on ambulance providers,
    ambulance services. What we found was by giving access to an
    investigator for in that model they were able to take an action
    based on $1,500 worth of claims that had been sent in to the
    agency because we had short cut the time for that data
    investigation and for them to get to the administrative action.
        That really moves us towards a prevention system where,
    otherwise without the FPS that provider might have billed the
    program for far more money before they were ultimately caught.
        Mr. Green. Well, and I know, and I represent a Houston area
    where one time we were the wheelchair, motorized wheelchair
    capital of the world, I think, and also with ambulance with
    transfers. How do you anticipate the program will work in the
    coming years? Do you see similar results getting better, so to
    speak?
        Dr. Agrawal. Yes. We are focused on continuous improvement
    of that program. So we have recently acquired a new contractor
    and we'll be building the 2.0 version of the system. Our aims
    are to make the system more efficient so that models can be
    implemented more quickly, more efficiently for lower cost to
    help continue to improve the ROI.
        We also would like to direct these models to address a
    wider spectrum of activities so that there are still fraud and
    abuse oriented models, but also other ones that are looking at
    waste and outlier behavior to help direct other kinds of audit
    resources. And finally, really bolstering and boosting the
    kinds of edits that we have in the system so that claims can be
    denied even without the need for a subsequent investigation.
        Mr. Green. OK. Thank you, Mr. Chairman.
        Mr. Murphy. The gentleman yields back. I now recognize Mr.
    Flores of Texas for 5 minutes.
        Mr. Flores. Thank you, Mr. Chairman, and I thank the panel
    for joining us today. I want to expand on some of the prior
    questions from Mr. Green and Mr. Collins. Let me start by
    saying this.
        Earlier, the panel discussed the new tools that resulted
    from the ACA, but all of us here today know that HHS and CMS
    reportedly made $89 million in improper payments in 2015 alone.
    We also know that there are additional costs associated with
    these improper payments. So the critical issue is, what is HHS
    and CMS doing to deal with these?
        And so I want to continue, I want us to think outside the
    box for a minute. Not in the typical model the way the federal
    bureaucracy thinks about things, but about how would we do this
    if we were a private entity. And Mr. Collins talked about the
    differences in the error rates between the federal government
    and also between that and between the private sector. We have
    seen the same issues at the IRS in terms of improper refunds.
    It seems to be a bureaucracy culturally related issue more than
    anything else.
        And so, Mr. Agrawal, I would ask you this question. Well,
    let me say this. I will give you some stats that I have that
    are a little different than what Mr. Collins had. If you look
    at Visa's global fraud rate it's 0.06 percent or 6 cents for
    every $100 that has been of transactions. If you look at CMS it
    is $10 per $100. So could you tell us, Dr. Agrawal, why the
    error rate is so high for a federal program versus the private
    sector?
        Dr. Agrawal. Yes. I think it's important, Congressman, to
    differentiate again the improper payment rate from fraud. As
    we've been discussing the improper payment rate is primarily
    driven by documentation issues. Really, it's incapable of
    uncovering the kind of fraud that we are clearly all concerned
    about.
        Those documentation issues are what we are working on. They
    drive 70 percent of the Medicare fee-for-service rate. There's
    a host of things that we can do to try to get it down, but
    primarily focused around getting providers more up to speed
    with our requirements, making sure the requirements are right,
    and then as much as possible in areas of high error really
    looking at that documentation before payments are made so that
    we can make sure that errors are not produced, that the right
    payments are being made, and ultimately that appeals are
    unnecessary because we won't be denying claims or there won't
    be a post-pay review that then leads to a denial.
        So I think it can be better in that regard, but those are
    the major initiatives that we have around us.
        Mr. Flores. Earlier today you had said something that you
    collaborate with your private sector colleagues or peers. What
    has CMS learned from the private sector and what do you intend
    to try to implement based on those learnings?
        Dr. Agrawal. Sure. Yes, so we have, I think, near constant
    contact with the private sector, my analogs in private
    insurance companies that are looking at the same issues. The
    first thing I'd say is, as a government agency we have to be
    transparent, appropriately so, about things like the improper
    payment rate.
        Private insurers also have the same sets of issues. They
    have documentation errors and coding errors that they see in
    their systems that are just not made transparent to the public
    because they're not required to be. So their approaches are
    very similar to ours. They have implemented prior authorization
    to a far greater degree than what we've been able to do so far
    because we are acting within the authorities that we have and
    there are proposals, a President's budget proposal to increase
    those authorities. So they use that as a very common tool.
        I think, secondly, they use provider enrollment just as we
    do. What I often hear from my colleagues is that they use
    Medicare enrollment as their gold standard. If somebody has met
    Medicare enrollment requirements they assume that they can meet
    their own enrollment requirements, but where they have extra
    flexibility is the ability to network however they choose.
        So if there is a provider that is simply not driving value
    for their network that they don't need that many of a
    particular provider type in their network, the provider's
    producing a lot of errors, they can just remove them from the
    network. They don't have to actually go through the process of
    trying to prove that the provider was fraudulent or abusive.
    That's a level of flexibility that frankly doesn't exist in the
    Medicare or Medicaid programs.
         Mr. Flores. Ms. Maxwell, what are some things that the
    federal government can do to emulate the private sector to be
    more judicious with taxpayer dollars?
        Ms. Maxwell. I can offer some ways in which the Office of
    Inspector General has tackled this issue that I think have been
    successful, and that is really targeting our approach and
    putting a wide array of disciplines and resources where we see
    problems, watching those problems get driven down and then
    moving our focus to someplace else.
        So for example, we have a concerted effort in home health
    and we watch those payments go down a billion dollars a year.
    We know there's a high payment rate in ERFs in patient rehab
    facilities. We're focusing resources there. So I think we have
    found tremendous success in the IG's office in gathering people
    across disciplines and really focusing them on high risk areas.
        Mr. Flores. OK. I have run out of time, but if any of my
    colleagues have some leftover time I will take that and
    continue this line of questioning. Thank you, and I yield back.
        Mr. Murphy. Thank you. I will recognize Mr. Mullin of
    Oklahoma for 5 minutes.
        Mr. Mullin. Thank you, Mr. Chairman. Excuse me, Doctor, if
    I get your name wrong, but it is Agrawal?
        Dr. Agrawal. Agrawal. I think you got it.
        Mr. Mullin. OK. Well, it is the Oklahoma accent if I didn't
    get it. You know, a couple of questions and some follow-up
    questions, the controls that CMS has put in how do we know they
    are working?
        Dr. Agrawal. Well, I think there's a variety of controls
    and we see that they're working because they're having impact.
    So something like provider enrollment we can see----
        Mr. Mullin. Measurable impact how? And I say this because
    in our state in Oklahoma we are having to take some serious
    cuts to Medicaid. And the one thing we have been looking at in
    our task force is from cutting down on the fraud and abuse. So
    what specifically can you show us that the controls are
    actually working?
        Dr. Agrawal. I can show you, including in Oklahoma, the
    over 500,000 providers that are no longer allowed to bill the
    program. I can show you, including in Oklahoma, the site visits
    that have produced nonoperational settings that have been
    kicked out of the program; the providers that don't have
    appropriate licensure that have been kicked out of the program.
    I can show you the $5 billion in payments that we have stopped
    from going out the door just last year prior to any payments
    being made. There's impact from the Fraud Prevention System.
        Mr. Mullin. What is the percentages of the improper
    payments right now?
        Dr. Agrawal. In the Medicare fee-for-service program it's
    12.1 percent.
        Mr. Mullin. What was it in 2014?
        Dr. Agrawal. It was lower. I'm sorry, it was higher. It was
    12.5 or 12.6 percent.
        Mr. Mullin. So we have dropped two percentage points?
        Dr. Agrawal. About 0.5, I think.
        Mr. Mullin. Well, you said 0.2 and 0.7; is that what you
    said?
        Dr. Agrawal. Yes.
        Mr. Mullin. And how long have these controls been in
    effect?
        Dr. Agrawal. Well, every year we have to do new things to
    try to get the improper payment rate down, so sometimes it's
    expanding efforts that we have already underway, other times
    it's new efforts.
        Mr. Mullin. But we are talking about a half of a percentage
    point. It is still well over ten percent. In a company, in any
    company that would be disastrous. I mean, in any company making
    that much improper payments would sink any business. And we are
    OK with that?
        Dr. Agrawal. We are not OK with that. We are----
        Mr. Mullin. Then if we can identify where the improper
    payments are, then why can't we do something to change it?
        Dr. Agrawal. Well, it's----
        Mr. Mullin. If you can identify the percentage at 12.2
    percent, then you can identify the source because that is the
    only way you can come up with the dollars. So----
        Dr. Agrawal. Correct, we can. So the primary sources of the
    improper payment rate are home health providers. They have an
    over 50 percent rate in home health billing.
        Mr. Mullin. Does it have anything to do with, because you
    keep talking about the doctors themselves of the facilities
    themselves. Are we looking at the patient?
        Dr. Agrawal. The improper payment rates are it's driven by
    documentation----
        Mr. Mullin. I am talking about fraud and abuse as a whole.
        Dr. Agrawal. But it is not driven by fraud and abuse,
    right. The improper payment rate is driven by documentation
    problems. Seventy percent of the rate is provider-driven
    documentation issues. That is in, for example, the home health
    space, lack of coordination between the ordering physician and
    the home health agency to take care of the patient.
        Mr. Mullin. So where would you see it to be in a year from
    now? You recognize 12.2 percent, so where would you like it to
    be in a year?
        Dr. Agrawal. I would like it to be significantly lower.
        Mr. Mullin. What is significant, a half of a percentage
    point?
        Dr. Agrawal. I don't wake up every day trying to figure out
    how I can massage----
        Mr. Mullin. I would.
        Dr. Agrawal [continuing]. The number by 0.1, 0.2.
        Mr. Mullin. You would if as a business owner----
        Dr. Agrawal. I wanted to implement----
        Mr. Mullin. I have been a business owner my whole life. And
    I promise you, you pay attention to the pennies, the dollars
    take care of themselves. So a half a percentage point here and
    there and everywhere else, yes, it does take a significant
    impact over time. So if I was you I would wake up every
    morning.
        Dr. Agrawal. Congressman, I think you have connected two
    things that shouldn't be. So lowering the improper payment rate
    will not necessarily change the amount of expenditure of the
    program, and that is because in order to----
        Mr. Mullin. How do you figure if you have got 12.2 percent
    of improper payments that it wouldn't make a significant
    impact? What is 12.2 percent? How much is that?
        Dr. Agrawal. Let me answer that question, sir. So since
    documentation problems are the primary driver of the rate, what
    we can do by better educating providers and looking at
    documentation on the front end is that they meet our
    requirements. That would knock down the rate but not
    necessarily the expenditure.
        Mr. Mullin. How much did we spend on improper payments last
    year?
        Dr. Agrawal. I believe in the Medicare fee-for-service
    program it was on the order of about 45 billion, according to
    the number.
        Mr. Mullin. $45 billion.
        Dr. Agrawal. Right.
        Mr. Mullin. And we don't think that is going to have a
    significant impact?
        Dr. Agrawal. What I said, and I want to be specific about
    that is lowering the improper payment rate might not alter the
    expenditure. We have seen that in certain examples.
        Mr. Mullin. Well, it would sure help the taxpayers knowing
    that $45 billion isn't going out the door when we can identify
    that it is 12.2 percent and yet we can't stop it.
        Mr. Chairman, I yield back.
        Mr. Murphy. I now recognize Mr. Bilirakis for 5 minutes.
        Mr. Bilirakis. Thank you. Thank you, Mr. Chairman. Thanks
    for letting me sit in on this hearing.
        Ms. Maxwell, back in December, the IG's Office issued a
    report titled, CMS Could Not Effectively Ensure That Advanced
    Premium Tax Credit Payments Made under the Affordable Care Act
    Were Only for Enrollees Who Paid Their Premiums. The question,
    can you talk about what the Inspector General's Office found
    and what they recommended, please?
        Ms. Maxwell. Thank you for the question. Yes, ensuring
    appropriate payments in the marketplace program is a priority
    for the OIG just like it is for the Medicaid and Medicare
    program. And I am generally aware of the audit that you are
    talking about, although I was not specifically involved in it.
        So generally, my understanding of the findings is that we
    found some weaknesses in CMS's internal controls to ensure the
    accuracy of cost sharing payments for qualified individuals in
    the marketplace. And my understanding of those internal
    weaknesses is that CMS at the time was relying on self-
    attestation from the insurers about the amounts that CMS owed
    the insurers and had no independent way to verify that
    information.
        But as I said, that's what I know of the topic but I am not
    an expert. We do have experts on that topic back in the office
    and I'd be happy to get them in touch with you to brief you
    further and in more detail about that report.
        Mr. Bilirakis. Oh, I appreciate that. Has CMS implemented
    all the IG's recommendations?
        Ms. Maxwell. I am not familiar with that but I'd be sure to
    get back to you with that information, yes.
        Mr. Bilirakis. OK. How about this? Has the Inspector
    General inspected CMS' new automated processing system?
        Ms. Maxwell. The APS?
        Mr. Bilirakis. I do not believe that is in our work plan
    right now. We are looking more broadly at the totality of their
    enhanced provider screening system.
        Mr. Bilirakis. How about this? Is CMS' automated processing
    system in place for both federal-run and state-run exchanges?
        Ms. Maxwell. I am not aware, and again I would refer you to
    the experts back in the office.
        Mr. Bilirakis. My understanding is that CMS did not comment
    on your second recommendation, the IG's recommendation for
    sharing payment data with the IRS to verify an individual's
    Form 1095-A at tax time. Can you explain what needs to be done
    and why is this so important?
        Ms. Maxwell. We take all of our recommendations seriously
    and expect engagement with the operating division around them.
    Again, I think you'd be best off talking to the team that did
    the work and could brief your staff on all the details and
    where we are with our engagement with CMS to implement those
    recommendations.
        Mr. Bilirakis. But you can't tell me why it is important
    that they comply?
        Ms. Maxwell. I am so sorry, but that is outside of the work
    that I typically do and I am not that familiar with that study.
        Mr. Bilirakis. All right. Well, I am going to follow up.
        Ms. Maxwell. Please do. Thank you.
        Mr. Bilirakis. All right, thank you. I yield back, Mr.
    Chairman.
        Mr. Bucshon. Would the gentleman yield some of his time for
    me?
        Mr. Bilirakis. Yes, I will, absolutely.
        Mr. Bucshon. Thank you. I just want to clear up with Dr.
    Agrawal, we were talking that last line of questioning about
    improper payments because I made the comments about physician
    documentation.
        I mean, and again clarify the difference between an
    improper payment, what percentage of improper payments do you
    think ultimately are resolved and found to be proper payments?
    I would imagine they are a very, very high percentage. And what
    percentage approximately would be considered fraudulent? There
    is a separation. I just want to clarify that and give you a
    chance to clarify that again.
        Dr. Agrawal. Yes, I appreciate it. So I think what we find
    when we work with providers, make sure that they're educated on
    the documentation requirements, simplify those requirements
    where necessary that we can actually get significant
    improvements in the rate.
        I'll give you two examples. In the DME space, which is
    historically at a very high rate, we've seen a 30 percent
    reduction in just the last year; a similar 30 percent reduction
    in the hospital inpatient rate. Both of those are driven by new
    policy, the two-midnight rule as one example, as well as a
    probe and educate approach where we literally have gone to
    every single hospital in the country, pulled a claim sample to
    educate them on how better to send in the supporting
    documentation for that claim.
        So we can see significant impact in the improper payment
    rate, but again we might be spending very similar if not the
    same amount of money because we're bringing people up to speed
    on what's required. I can't give you an actual estimate of
    fraud either as it relates to the improper payment rate or on
    its own. There just isn't a validated statistical methodology
    for generating a fraud rate. We are working on that in a pilot
    approach at CMS. Part of the challenge is for fraud you have to
    prove intentionality, and so that's challenging from a
    methodological standpoint.
        Mr. Bucshon. Thank you, I yield.
        Mr. Bilirakis. And I will yield back. Thank you.
        Mr. Murphy. Mr. Flores, did you want the next 30 seconds?
        Mr. Flores. I don't think--no.
        Mr. Murphy. OK, then I will recognize Ms. Brooks for 5
    minutes.
        Ms. Brooks. Thank you, Mr. Chairman. In 2014, nine
    employees in a dental center from my district in Anderson,
    Indiana, were charged with Medicaid fraud. Not only did the
    dental center submit false and inflated bills for dental
    services to the Indiana Medicaid program costing taxpayers well
    over $300,000, one of the practices, one of the individuals was
    not even licensed to practice yet continued to bill the
    Medicaid program for services.
        Indiana's Attorney General Greg Zoeller put it best when he
    said, and I quote, when an ineligible provider engages in fraud
    to wrongly bill Medicaid for millions of dollars it is a
    violation of the public trust as we know and demonstrates
    contempt for the taxpayers, and it is as simple as that.
        And this story is not unique. In the last 10 years, GAO has
    released at least seven reports indicating the possibility of
    fraud or improper payments in the Medicaid program. Health and
    Human Services OIG has released at least 31 reports and three
    more reports were released today.
        So it truly is astonishing that after 10 years of albeit
    thoughtful reports, many reports, we have continued to allow
    our nation's largest health insurance programs to run really
    with this much fraud for this long of a period of time. But I
    am encouraged that we are continuing as a subcommittee to push
    for answers that protect beneficiaries as well as taxpayer
    dollars.
        Ms. Maxwell, I am curious. The OIG report released today
    deals with enhanced provider enrollment screening in the
    Medicaid program. And while states are required to screen
    Medicaid providers using the enhanced screening procedures such
    as fingerprint based criminal background checks and site
    visits, many states haven't yet implemented these requirements.
    What is the significance of this finding in the report and how
    will it impact improper payment rates?
        Ms. Maxwell. Thank you for the question. It is critical to
    get provider enrollment correct for the very reasons you
    mentioned. We do not want Medicaid paying providers who are
    unlicensed. We do not want Medicaid paying providers who are
    intent on defrauding the program. Our report points to the
    vulnerabilities that still exist in Medicaid provider
    enrollment, and primarily those vulnerabilities have to do with
    they have not instituted all of the tools available to them.
        You mentioned the fingerprint criminal background check.
    There is also site visits. And in terms of the impact I can't
    quantify that precisely, but I do know from our report that 27
    states reported that 25,000 high risk providers were enrolled
    in the Medicaid program without the benefit of those criminal
    background checks.
        Ms. Brooks. And so is it fair to say that CMS with respect
    to these findings you have provided a pretty clear pathway
    forward as to how they should implement these provider
    screenings.
        Ms. Maxwell. Yes. In the body of six reports that I'm
    addressing here today, we have over 20 recommendations that we
    believe are practical implementation fixes to make the tool
    stronger.
        Ms. Brooks. With respect to the Medicare provider database,
    OIG compared three sets of owners' names: the names listed on
    Medicare enrollment records, names submitted by providers
    directly to OIG for their evaluation, and names listed on state
    Medicaid enrollment records. And the OIG found that nearly all
    providers in the OIG's review had different names on record
    than the state Medicaid programs.
        What is the significance of this finding and why does it
    matter that the databases didn't match? And is this an
    administrative issue or is it a possible indicator of fraud
    from your view?
        Ms. Maxwell. We are very concerned about that finding and I
    thank you for bringing it up. We think it is a concern that
    needs to be addressed to strengthen provider enrollment. And to
    just start with your methodological question, we matched those
    names. If those names were similar but the not the same we
    counted them as a match.
        So we don't think we're actually capturing just clerical
    error, we think we're capturing a real schism between the two
    databases. The reason it's important is we want to know who
    we're doing business with. And if we don't know who we're doing
    business with we don't know whether or not they were excluded,
    and we have a lot of history with fraud of people being
    excluded from the program and then getting back in behind a
    straw owner.
        And in fact, recently, the New York Medicaid program paid a
    straw owner $60 million over the course of multi-years' fraud
    scheme, three pharmacies, he was a front for his father who had
    been excluded from the program. So it has significant
    consequences, this mismatched data.
        Ms. Brooks. And like you mentioned in the previous
    question, there was a list of 20 recommendations that you have
    made. How about with respect to this matching of the databases?
    What should CMS do with your findings with respect to this?
        Ms. Maxwell. Well, first of all, we have referred the
    mismatches to CMS to look particularly at those cases so they
    can rectify the discrepancies between the data that we found.
    More long term, there are recommendations to improve the data,
    to verify the data, and then ultimately to think about better
    coordination between Medicaid and Medicare. We think better
    coordination could lead to a more effective system and a system
    that's less burdensome on providers.
        Ms. Brooks. Thank you. My time is up and I will yield back.
        Mr. Murphy. Thank you. We are going to wrap up. I am going
    to recognize Ms. DeGette for 5 minutes for any other comments
    or questions.
        Ms. DeGette. Thank you. Thank you, Mr. Chairman. I just
    want to clarify a couple of things. Frequently here in Congress
    we try to get our government agencies to act like private
    businesses and it doesn't always translate a hundred percent.
        But Ms. Maxwell, something you said kind of rang a bell
    with me which is the way that your agency is dealing with a lot
    of these thorny problems is you are taking this
    interdisciplinary approach, you are focusing on one problem,
    you are applying all of your resources to that and then you are
    moving to the next one. That is very similar to what they do at
    Toyota.
        And in fact at Denver Health, which is my, in Denver it is
    the public safety net hospital, and provider in Denver, Pattie
    Gabow who was our previous CEO of Denver Health, she applied
    that same kind of thinking to when they would have thorny
    problems there and they actually were able to do things like
    reduce medical care errors and so on and so forth. And so I
    think some of those principles can be applied.
        Dr. Agrawal, I am wondering what your agency thinks about
    taking some of those innovative approaches to approaching
    really thorny problems, focusing in on the issue, taking an
    interdisciplinary approach, coming up with solutions and moving
    on.
        Dr. Agrawal. Yes. I absolutely agree with you that is the
    right way of continuous improvement and making the changes that
    we're describing. We do work in an interdisciplinary way across
    and, you know, within CMS and across different agencies.
        We work very closely with OIG and GAO having, you know,
    frequent interaction to make sure that we are thinking about
    the recommendations in the right manner, that we are working
    towards a common solution that we can both agree with. We also
    work very closely with our payment policy experts, our coverage
    experts, and coding experts to making sure that we are
    implementing good solid controls on the front end.
        Ms. DeGette. Now you heard a lot of concerns on both sides
    of the aisle today, Dr. Agrawal, about this increasing number
    for the inaccurate or improper payments. And while you are not
    able to give a specific number today, if we had this very same
    hearing next year given the changes that you are implementing
    in consultation with the other agencies, do you believe this
    number will be substantially lower?
        Dr. Agrawal. I believe it will be lower. My hope is that it
    will be lower, and it is because we are implementing a
    multitude of changes around some of the biggest drivers of the
    rate that we are trying to impact the numbers.
        Ms. DeGette. I am going to tell the chairman to schedule
    this hearing again next year. And one last thing, Ms. Maxwell
    talked about 20 recommendations and there are a lot of other
    recommendations that the GAO and the IG have made. What is your
    agency's position with respect to those recommendations and do
    you disagree with any of them, are you implementing them?
        Dr. Agrawal. I think the recommendations are generally very
    important. All the recommendations that we have talked about
    today I think the agency has agreed with. The issue with the
    recommendations is that some are quite relatively easier to
    implement than others, systems changes that we can make
    relatively quickly. Others take far more time. They require
    larger programmatic changes, regulatory changes, perhaps even
    some statutory changes, and that's where I think you see
    certain recommendations open for a longer period of time.
        But as I mentioned in the opening, we have worked to close
    between GAO and OIG over a hundred recommendations this past
    year and have shared with them over a hundred more that we
    believe can be closed based on the work that we have done.
        Ms. DeGette. And Ms. Maxwell, would you agree that CMS is
    trying to implement your recommendations?
        Ms. Maxwell. Yes, I would. Our goal is to push positive
    change and so we work very, very closely with CMS to implement
    a recommendation.
        Ms. DeGette. And Mr. Bagdoyan.
        Mr. Bagdoyan. Yes, I would agree with that definitely. As
    Dr. Agrawal mentioned, it is a back and forth. Sometimes we
    don't see eye to eye in terms of what they've done and whether
    it meets the spirit of a recommendation we would like to close,
    but the interaction is very active and quite productive.
        Ms. DeGette. And just one last thing, Dr. Agrawal. You
    mentioned that sometimes you might need statutory changes. If
    you do, please come to us because we would be happy to work
    with you on that. Thank you, and I yield back.
        Dr. Agrawal. Thank you.
        Mr. Murphy. I think I am going to recognize myself. Just
    some wrap-up questions here.
        Mr. Bagdoyan, on June 2015, the GAO report found
    vulnerabilities in the provider eligibility system for both
    invalid addresses and physicians with revoked licenses. CMS
    issued guidance in March of 2014 to reduce the amount of
    independent verifications conducted by contractors, and GAO
    says this guidance increases the program's vulnerability to
    potential fraud. So why would this guidance increase fraud?
        Mr. Bagdoyan. Well, if you dial back the verification steps
    and you essentially can meet the new guidance by picking up the
    phone, dialing a provider and asking them is this your address
    and the provider says yes and you leave it at that, that
    obviously is a potential concern that as to the thoroughness of
    the verification.
        Now to CMS' credit, they are going to take another look at
    the guidance issue once they've had a chance to test the new
    software in terms of screening for addresses and then make a
    determination as to whether to upgrade the guidance to what it
    was before or change it further.
        Mr. Murphy. Well, we will look forward also to get us a
    follow-up on if that worked.
        Ms. Maxwell, is it true that unscrupulous providers
    continue to enroll in the Medicare program?
        Ms. Maxwell. Unfortunately, yes.
        Mr. Murphy. And by implementing screening requirements we
    can keep bad providers out we hope and reduce improper payment?
        Ms. Maxwell. That is absolutely the goal.
        Mr. Murphy. Can you explain what kind of changes will help?
        Ms. Maxwell. Absolutely. I would say out of the 20-plus
    recommendations that we're featuring in our reports, the most
    critical are to ensure that the ACA tools are implemented
    fully. And that for Medicaid means all the tools are in place,
    and for Medicare that means full implementation of the tools
    they have in place.
        I would say another critical recommendation is featured in
    H.R. 3716 which is to ensure that providers that are terminated
    in one state are not able to enroll in another state. Finally,
    we recommend a better coordination between the two systems
    leading to less duplication of resources across federal and
    state government, as well as less duplicate burden on
    providers.
        Mr. Murphy. All right, thank you. I just want to say too,
    and my colleague and others have talked about this, really
    getting some of the private sector involved in this. We look at
    models such as we talked about Toyota, there are other
    companies out there doing this whose job it is to find more
    effective and efficient ways of doing this.
        I appreciate the work that GAO has done in this to try and
    improve things. And look, it is frustrating for us as members
    here to come back year after year in meeting after meeting as
    Oversight Committee and try and find ways, an indication that
    something is improving. It is very frustrating as we see those
    graphs increasing as the amount that is there.
        I strongly encourage you to, just because you can't meet a
    metric, that isn't a reason to change it from something and 5
    percent to 6 percent or whatever else that might be. No doubt
    you would never do that in medicine. I would never do that in
    my practice. None of us would do that. It is a matter of always
    trying to drive it down to zero, otherwise we become tolerant
    of that.
        So what we want to know in terms of your goal of recovering
    here and particularly the concern I have is how are you going
    to measure this? It sounds like the metrics have changed over
    time. And so how do we measure a success or failure in this in
    a way that you can be held accountable for that is appropriate?
    It sounds like these are changing. Can you give me some
    feedback?
        Dr. Agrawal. Yes. I think the improper payment rate
    measurement is a validated methodology that does measure
    something important, right. It does measure provider compliance
    with our rules and requirements. Now addressing the rate isn't
    just a matter of, it's a matter of frankly working with
    providers to make sure that they're doing their best to adhere
    to these requirements.
        I think the other thing that would help is making sure that
    our dialogue around the rates are pretty clear about what they
    measure, what they don't, what leads to improvement. If the
    improper payment rate is viewed primarily as expenses that
    should not have occurred in the first place, I think frankly
    that is a misunderstanding of the rate. I think it's a
    misunderstanding of what it measures. For us to assume that
    it's a measure of fraud sort of implies that almost every
    provider interacting with the program would then be guilty of
    some level of fraud. I think that is an inappropriate
    conclusion.
        So I think what would help, certainly we can look at other
    ways of measuring impact. We have moved to ROI as a really
    common measurement across all of our programs. We have looked
    at administrative actions and where we have been able to take
    those actions, the number of providers impacted. I think
    improper payment still has a utility to it as long as we can
    get the discussion around it correct.
        Mr. Murphy. Well, we want to see that and as Ms. DeGette
    said we are going to have you back here. We need to know this.
    We want to find these things out. We want to see success. We
    want to see change on this. I repeat again, our frustration
    with finding funding for programs specifically in Medicare and
    Medicaid. We have got to make some changes.
        We have to, for one it is clear we want to provide some
    different services for people who are mentally ill and it is
    frustrating to have to tell them no, that we can't get service
    for those who need it, but money goes to those who are
    committing crimes and we want that to stop.
        That being the case, having no further questions, I want to
    state here that I would like to thank all the members and the
    witnesses and members that participated in today's hearing. I
    remind members they have 10 business days to submit questions
    for the record, and ask that the witnesses all agree to respond
    promptly to the questions. We will have some further questions
    for you. So with that this subcommittee is adjourned.
        [Whereupon, at 12:09 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                     Prepared statement of Hon. Fred Upton

        Today, we take a close look at strengthening program
    integrity within the Medicare and Medicaid programs.
        This is a bad news--good news hearing.
        The bad news is that reports from the Government
    Accountability Office and the Health and Human Services
    Inspector General identify weaknesses in how CMS roots out
    fraud, waste and abuse.
        These reports tell the story of CMS paying out millions of
    taxpayer dollars on behalf of beneficiaries who turned out to
    be incarcerated or deceased. They tell the story of physicians
    who enrolled for Medicare payments and listed addresses located
    in Saudi Arabia, and at the location of a Five Guys' burger
    joint, and CMS did not notice. They explain how CMS continued
    to pay some physicians whose licenses were revoked, or had been
    convicted of health care fraud or patient abuse. Overall, these
    reports show that, despite recent strides, CMS must stay
    vigilant to combat new and emerging threats to program
    integrity.
        The good news is that there are more tools available to CMS
    to combat these improper payments. As Medicare and Medicaid
    continue to grow in size and cost, CMS must use every tool in
    its box to prevent taxpayer dollars from being spent
    fraudulently or wastefully.
        CMS has recently implemented some new enrollment methods to
    help screen out fraudulent or ineligible providers. However,
    there are concerns that they are not being implemented in the
    best way. A report published last month by the OIG found
    missing data in the enrollment system, and ``gaps'' in
    contractors' verification of key information on enrollment
    applications that could leave Medicare vulnerable to
    illegitimate providers.
        For example, contractors conducting site visits found 651
    provider facilities were not operational. Despite notes such as
    the ``facility does not exist,'' ``building has been vacated,''
    and ``suite appeared closed and abandoned,'' over half of those
    providers made it into Medicare's enrollment system.
        Even though this one example constitutes a small percentage
    of the 16,000 site visits total, it is a symptom of the larger
    problem. It does not matter how good the processes are if they
    are not implemented correctly.
        But there have been steps toward improvement. Just days
    before today's hearing CMS implemented two open GAO
    recommendations. We look forward to CMS implementing additional
    recommendations, so we can continue the important work of
    strengthening the integrity of these critical programs. Every
    dollar is important when it comes to Medicare and Medicaid. And
    we owe it to our seniors and the most vulnerable folks in
    Michigan and across the country to ensure resources are being
    spent wisely on their quality of care.
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