[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
                           
                     
                           
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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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