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

                       HEALTH CARE FRAUD INVESTIGATIONS

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

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON OVERSIGHT

                                     OF THE

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               SEPTEMBER 28, 2016

                                   __________

                              Serial No. 114-OS14

                                   __________

             Printed for the use of the Committee on Ways and Means

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                                   __________

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                          COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan,
    DEVIN NUNES, California              CHARLES B. RANGEL, New York
    PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
    DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
    CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
    PETER J. ROSKAM, Illinois            XAVIER BECERRA, California
    TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
    VERN BUCHANAN, Florida               MIKE THOMPSON, California
    ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
    LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
    ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
    KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
    DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
    TOM REED, New York                   DANNY DAVIS, Illinois
    TODD YOUNG, Indiana                  LINDA SANCHEZ, California
    MIKE KELLY, Pennsylvania
    JIM RENACCI, Ohio
    PAT MEEHAN, Pennsylvania
    KRISTI NOEM, South Dakota
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    ROBERT J. DOLD, Illinois
    TOM RICE, South Carolina

                         David Stewart, Staff Director

                       Nick Gwyn, Minority Chief of Staff

                                     ______

                           SUBCOMMITTEE ON OVERSIGHT

                      PETER J. ROSKAM, Illinois, Chairman

    PAT MEEHAN, Pennsylvania             JOHN LEWIS, Georgia
    GEORGE HOLDING, North Carolina       JOSEPH CROWLEY, New York
    JASON SMITH, Missouri                CHARLES B. RANGEL, New York
    TOM REED, New York                   DANNY DAVIS, Illinois
    TOM RICE, South Carolina
    KENNY MARCHANT, Texas

                                C O N T E N T S

                                   __________
                                                                       Page

    Advisory of September 28, 2016 announcing the hearing............     2

                                   WITNESSES

    Abhijit Dixit, Special Agent, Office of Investigations, Office of
      Inspector General, Department of Health and Human Services.....    18
    Barbara McQuade, United States Attorney, Eastern District of
      Michigan.......................................................     7
    Scott Ward, Senior Vice President, Health Integrity LLC..........    28

                        HEALTH CARE FRAUD INVESTIGATIONS

                                  ----------

                         WEDNESDAY, SEPTEMBER 28, 2016

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                                     Subcommittee on Oversight,
                                                        Washington, DC.

        The Subcommittee met, pursuant to call, at 10:00 a.m., in
    Room 1100, Longworth House Office Building, the Honorable Peter
    Roskam [Chairman of the Subcommittee] presiding.
        [The advisory announcing the hearing follows:]
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                                     --------

        Chairman ROSKAM. The subcommittee will come to order.
        Good morning and welcome to the Ways and Means Subcommittee
    on Oversight's hearing on health investigations and Medicare
    fraud. Fraud is a serious problem throughout health care with
    some experts estimating that up to 10 percent of healthcare
    spending is fraudulent. That would mean that Medicare alone,
    that this committee has jurisdiction over, the government is
    spending nearly $60 billion a year in fraudulent payments. That
    is an incredible cost. Think about it in the context of this
    time of year where people are trying to negotiate different
    end-of-year spending plans and how much more flexibility you
    would have with $60 billion that weren't being literally thrown
    away. This hearing is a continuation of the subcommittee's work
    over the past 2 years in trying to understand the causes and
    solutions to this incredible problem.
        One aspect to the problem is that not only taxpayers
    impacted, but may fraud schemes actively harm patients. In the
    past, a lot of our discussions have been focused in on the
    financial aspects alone. And while finances do matter, we need
    to recognize that this hurts people. And one of the most
    egregious examples is the case of Dr. Fata, a well-known cancer
    physician in Michigan. He purposely misdiagnosed people, so
    think about that. He misdiagnosed people, went to them falsely,
    told them that they had cancer, which they didn't have. And
    think about the heart sink of that news, manipulating them in
    order to provide them with treatments which he would bill
    Medicare and private health insurance companies for in the
    millions of dollars. Several patients who were perfectly
    healthy ended up dying because of his actions.
        In other instances, fraudsters may bill Medicare for
    opioids and other prescription drugs and then sell them on the
    black market. Here not only is the taxpayer footing the bill
    for unnecessary narcotics, but also this contributes to the
    country's growing opioid and painkiller epidemic. I know nearly
    every Member of Congress has seen this uptick--not just an
    uptick, an incredible high rate of activity--in this area in
    all of our congressional districts across the country. So, even
    when a fraudster doesn't physically harm someone, the fraud
    creates significant and long-term damage down the line.
        Many fraudsters steal beneficiarys' identities and use them
    to bill Medicare, another issue that Congress is dealing with
    and this committee is dealing with. Once a person's identity is
    stolen and used to improperly collect Medicare benefits, that
    person can be prohibited from accessing necessary care down the
    line, because they are already in Medicare system and receiving
    service.
        So think about it: A fraudster gets your benefit. Then you
    legitimately need something. You go to Medicare, and Medicare
    says, ``Sorry, your benefit has already been used up.'' ``Well,
    what do you mean my benefit has been used up? It has not been
    used up. I haven't used it.'' And a fraudster has done it. So,
    if it can be done, fraudsters are finding a way to do it.
        At the beginning of this Congress, this subcommittee held a
    hearing on Medicare fraud and improper payments from the
    10,000-foot level. We heard from the Centers for Medicare &
    Medicaid Services, or CMS, about their methods to detect and
    prevent improper payments, and the results were not
    particularly reassuring.
        Despite the fact that Congress has given the agency
    expanded authority to stop payments before they are made, it
    continues to rely disproportionately on pay-and-chase, or
    making the payment and only checking after the fact to see if
    it was proper. One of the difficulties that we in Congress have
    when trying to legislate to reduce improper payments and also
    fraud is how the budget process works. According to the
    Congressional Budget Office, or CBO, preventing the government
    from spending money improperly is not savings because the money
    should have never been paid in the first place. I mean, this
    logic just completely suspends all bits of rationality that
    should foster it. It makes no sense in the real world, and that
    is not how American families handle their own household
    finances.
        And this committee finds it just outrageous to be told in
    pursuing some of these things, well, that doesn't, quote,
    ``score well.'' The fact is money is going out the door, and
    there are steps Congress can take to stop these crimes and save
    taxpayers from having to pay billions of dollars in improper
    payments in fraud.
        Additionally, CBO does not take into account that cost that
    fraud incurs in addition to the stolen money. These costs
    include the amount of time and resources that law enforcement
    needs to investigate and prosecute cases, attempting to
    retrieve the money already out the door in fraudulent payments,
    or in repairing patient harm.
        And no one can deny that the drug crisis continues to grow.
    We have spent billions of dollars fighting the drug epidemic.
    Just a few months ago, Congress passed CARA, the Comprehensive
    Addiction and Recovery Act, that authorizes $620 million over
    10 years to help fight the opioid epidemic. It is an important
    step, but we also need to focus on healthcare fraud contributes
    to that problem.
        Last year, we got a closer look at some of the tools CMS
    uses to detect fraud. Members of the subcommittee took a field
    trip, and we went up to CMS' Center for Program Integrity in
    Baltimore. We got to see the fraud prevention system, CMS'
    predictive analytics program, firsthand, and we were encouraged
    by what we saw. But we remain concerned that CMS relies too
    heavily on pay-and-chase, rather than preventing potentially
    fraudulent payments from getting out the door. And we hope to
    see greater improvements going forward.
        At our hearing last year, I drew a comparison between how
    the private sector and the government investigate fraud. In the
    private sector, a credit card company can detect unusual
    behavior--and guess what, my credit card has been--whether my
    credit card has been stolen instantaneously, and this actually
    happened to me. A witness from Visa testified that their
    improper payment rate is less than 1 percent. Compare that to
    the numbers that I have been talking about a minute ago, that
    are well over 10 percent. But when I asked CMS why it can't do
    the same thing, the witness from CMS said, ``Well, Medicare
    claims are more complicated.'' And it is one of those answers,
    at first blush, you say, ``Oh, yeah, that's right; Medicare
    claims are more complicated,'' but in fact, if Medicare claims
    are more complicated, it is more complicated for fraudsters to
    make them look legitimate. So then isn't it true and doesn't it
    follow that predictive analytics and other data analysis would
    make it easier for that to be disclosed? It is important not
    only to save taxpayers but also to save patients who are being
    harmed by these criminals.
        But no matter how good data analytics get, there will still
    be the need for investigations and law enforcement, and that is
    the final piece of puzzle, and that is what we are focusing on
    today. We have got an excellent panel of witnesses, who I will
    introduce in a few minutes. They have been active in detecting,
    investigating, and prosecuting fraud cases. Two of our
    witnesses worked on the Dr. Fata investigation that I
    referenced earlier. And thanks in part to their tenacious work,
    he has been sentenced to 45 years in prison. The work these
    witnesses do is incredibly important, and I know I speak for
    the whole subcommittee. I look forward to their insights.
        Now, I would like to yield to my friend and colleague, the
    Ranking Member, Mr. Lewis.
        Mr. LEWIS. Good morning.
        Mr. Chairman, before we begin, I would like to announce
    that today is the last hearing for Drew Crouch, the Democratic
    Oversight Subcommittee staff director. This is actually the
    second time that Drew worked for the committee. He first joined
    the Ways and Means Committee tax staff in 2009 and served with
    us for over 4 years. Drew returned last year to be the
    Oversight Subcommittee staff director. Working with Drew has
    been wonderful. He is pleasant, passionate, and committed. His
    work is so good that others keep stealing him, but I hope that
    he will not forget us and will keep doing the good work, the
    people's work, in his next great position. Drew is a good and
    kind spirit, and he will be deeply must. I want to thank him
    for his years of service and wish him good luck in his next
    position.
        Mr. Chairman, I want to thank you for holding this hearing
    today, but I would also like to thank all of the witnesses for
    being with us today. Each and every person here knows that
    Medicare is an important program for seniors and the disabled.
    Fifty-six million people rely on Medicare to receive health
    care.
        Today, several witnesses will speak about a terrible
    criminal case where a doctor treated healthy patients with
    chemotherapy. Medicare is a key part of the very fabric of our
    country, signed into law by President Lyndon Johnson in 1965.
    What is happening is unbelievable. It is unreal. That is what
    makes these stories so alarming.
        I applaud the Obama Administration on their effort to take
    a hard line on waste, fraud, and abuse. They launched the HEAT
    Task Force, which coordinates resources and information across
    the government agencies. The administration also developed a
    Medicare fraud prevention system which uses advanced technology
    to track possible fraud.
        It is also worth noting that the Affordable Care Act has
    stronger tools to fight fraud. These include new penalties,
    better funding for the healthcare fraud and abuse control
    account, new screening and enrollment tools for Medicare and
    Medicaid.
        Let me be clear: People who are committing fraud in
    Medicare are criminals; no doubt about it. They prey on the
    disadvantaged, the sick, the weak, the elderly among us. Each
    and every one of us must do our best to fight and end Medicare
    fraud. Congress has a duty, a mission, a mandate and a moral
    obligation to provide the necessary resources for law
    enforcement to investigate and prosecute these criminals.
        There is no doubt that the stories we will hear about are
    horrible. But in our fight against fraud, we must be mindful.
    We must be careful, and we must put Medicare patients first.
    Patients must continue to have access to necessary medical
    treatment. We must do all we can to preserve their choice of
    doctors and hospital. My friend, this is not a Democratic issue
    or a Republican issue. This is a question of standing up for
    all Americans, especially for seniors and for the disabled. It
    is what is right. It is what is just. It is what is fair.
        And, again, Mr. Chairman, I want to thank you for holding
    today's hearing. And I look forward to the testimony of our
    witnesses.
        Chairman ROSKAM. Thank you, Mr. Lewis. And I think you said
    it well; this is a question of standing up. And three people
    who have stood up are witnesses today.
        The first is Barbara McQuade, United States attorney of the
    Eastern District of Michigan. You will find two sympathetic
    ears in former U.S. attorneys here, Mr. Meehan and Mr. Holding.
        Abhijit Dixit, special agent, Office of Investigations,
    Office of Inspector General, Department of HHS. Welcome.
        And Scott Ward, senior vice president, Health Integrity,
    LLC.
        You each have 5 minutes for your testimony, and we welcome
    you.
        Ms. McQuade, you are recognized.

     STATEMENT OF BARBARA MCQUADE, UNITED STATES ATTORNEY, EASTERN
                          DISTRICT OF MICHIGAN

        Ms. MCQUADE. Chairman Roskam, Ranking Member Lewis,
    distinguished Members of the Committee, thank you so much for
    inviting me to speak to you today about the Department of
    Justice's efforts to combat healthcare fraud. I am deeply
    honored to be with you here today.
        Every year, the Federal Government spends hundreds of
    billions of dollars to provide health care to the most
    vulnerable members of our society. And while most medical
    providers are doing the right thing, some exploit Medicare and
    other healthcare programs for their own financial benefit. This
    fraud deprives patients of resources needed to pay for medical
    services and places patients at risk of harm from unnecessary
    treatments. Medicare fraud also motivates some doctors to
    overprescribe opioids to patients who don't need them for
    legitimate medical purposes, and that is contributing to our
    Nation's opioid epidemic. For these reasons, fighting
    healthcare fraud is the top priority of Department of Justice.
        The Department brings the vast majority of its civil cases
    under the False Claims Act. Since 2000, our attorneys, working
    with other Federal, State, and local law enforcement agencies,
    have recovered over $1 billion every year in FCA settlements
    and judgments.
        In fiscal year 2015, the Department recovered over $2
    billion in civil healthcare settlements and judgments, and
    anticipates matching, if not exceeding, that amount this fiscal
    year. Since 2009, the Department has recovered over $18.5
    billion in civil healthcare fraud cases.
        The Department's criminal healthcare fraud efforts have
    also been a success. Beginning in March of 2007, the Criminal
    Division's Fraud Section, working with the U.S. Attorney's
    Office, the FBI, HHS OIG, and State, and local law enforcement
    agencies launched the Medicare Fraud Strike Force in Miami.
    Based on the success of these efforts and increased
    appropriated funding for healthcare fraud from Congress and the
    administration, strike force operations are now in nine areas
    of the United States, including Detroit. The strike force
    focuses on the worst offenders in regions with the highest
    known concentrations of fraud.
        Today, our criminal enforcement efforts are at an all-time
    high. In 2016, the Department of Justice organized the largest
    national healthcare fraud takedown in history, both in terms of
    individuals charged and the loss amount. On June 22, Attorney
    General Lynch and Secretary Burwell announced that the
    nationwide takedown, led by the Medicare Fraud Strike Force and
    36 U.S. attorneys' offices, including mine, resulted in charges
    against 301 individuals, including 61 doctors, nurses, and
    other licensed medical professionals, for their alleged
    participation in Medicare fraud schemes involving $900 million
    in false billings.
        In addition, CMS suspended payments to a number of
    providers using authority provided by the Affordable Care Act.
    Cases included schemes to submit claims to Medicare for
    treatments that were medically unnecessary or never provided or
    allegations that patient recruiters were paid cash kickbacks in
    return for supplying beneficiary information to providers so
    that those providers could submit false Medicare claims.
        The AUSAs in my own district, working with the strike
    force, have handled a wide variety of healthcare matters. And I
    would like to talk particularly about the case of Dr. Farid
    Fata, which Chairman Roskam mentioned. Dr. Fata was a licensed
    medical doctor who owned and operated Michigan Hematology
    Oncology, the largest cancer treatment center in Michigan. A
    former office manager at Fata's clinic reported to the
    Department that Fata was administering chemotherapy to patients
    who did no need it. The investigation showed that, from 2007 to
    2013, Fata prescribed and administered unnecessary aggressive
    chemotherapy cancer treatments and intravenous iron and other
    infusion therapies to patients. Some of his patients did not
    have cancer at all. Fata then submitted fraudulent claims to
    Medicare and other insurers for these unnecessary treatments.
    On August 6, 2013, Fata was charged an indictment. He pleaded
    guilty of 13 counts of healthcare fraud and related charges.
    And in July 2015, he was sentenced to 45 years in prison for
    his role in his healthcare fraud scheme that included
    administering unnecessary infusions and injections to 553
    individual patients and submitting bills to Medicare and other
    insurance companies totaling $34 million in fraudulent claims.
        Thank you for this opportunity to provide an overview of
    the Department's healthcare efforts and successes. I would be
    happy to respond to any questions that you might have at the
    appropriate time.
        Chairman ROSKAM. Thank you, Ms. McQuade.
        [The prepared statement of Ms. McQuade follows:]
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        Chairman ROSKAM. Mr. Dixit.

         STATEMENT OF ABHIJIT DIXIT, SPECIAL AGENT, OFFICE OF
      INVESTIGATIONS, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES

        Mr. DIXIT. Good morning, Chairman Roskam, Ranking Member
    Lewis, and distinguished Members of the Subcommittee. I am
    Abhijit Dixit, a special agent with the United States
    Department of Health and Human Services, Office of the
    Inspector General. Thank you for the opportunity to testify and
    describe the work that I and my fellow agents perform to
    protect Medicare and Medicaid beneficiaries and to fight
    against healthcare fraud.
        I am here this morning to give you a field agent's
    perspective in the investigation of providers that defraud
    healthcare programs. The work of our special agents has a
    valuable and positive impact across the Nation. During the last
    3 fiscal years, OIG investigations have resulted in over $10.9
    billion, 2,856 criminal actions, 1,447 civil actions, and
    11,343 program exclusions.
        It is important to point out OIG investigations are
    typically conducted in partnership with investigators of other
    Federal and State agencies, as well as private sector. OIG
    participates in Medicare Fraud Strike Force teams that combine
    the resources of Federal, State, and local law enforcement to
    prevent and combat healthcare fraud across the country.
        A clear example of success came in June 2016 when I and
    approximately 350 fellow OIG agents partnered with over 1,000
    law enforcement personnel to execute the largest healthcare
    fraud takedown in history involving approximately $900 million
    in false billings. Despite our success, more work remains to be
    done across the Nation. To accomplish our mission, we employ
    sophisticated data analytics, which is a valuable tool in
    detecting fraud. However, it is necessary to combine the
    insights gained with field intelligence. Traditional field
    intelligence is obtained through witness and subject
    interviews, execution of search of warrants and surveillance,
    which is critical to reveal the scope and nature of the fraud
    scheme and whether patients are being harmed.
        I would like to emphasize that Medicare fraud is not a
    victimless crime. It is not just about the loss of taxpayer
    dollars when fraud is committed. Medicare beneficiaries can
    suffer physical harm. One case of which I was personally
    involved is of a Detroit area hematologist-oncologist, Dr.
    Fata, who was sentenced last year to serve 45 years in prison.
    Dr. Fata used false cancer diagnosis and unwarranted dangerous
    treatments as tools to steal millions of dollars from Medicare.
        Let me describe my work as a field agent for this case. The
    initial phase of the investigation, determining whether the
    allegations were credible, lasted just 5 days. Near real-time
    data was retrieved and analyzed to identify witnesses who could
    give us more information. As evidence was uncovered, it became
    clear that patient-related decisions were made to maximize
    reimbursement rather than to advance the best interest of the
    patient. At this point, traditional law enforcement techniques
    were deployed and a command post was set up to relay
    information directly and immediately to a prosecution team. On
    the fifth day, Dr. Fata was arrested, and six search warrants
    were executed.
        OIG special agents are specifically trained to identify and
    address potential patient harm and work with law enforcement
    team prior to the execution of the operation to protect
    patients. In conjunction with DOJ and the FBI, a victim
    assistance hotline was set up to provide around-the-clock
    information to affected patients. We also deployed additional
    staff to each operational site that morning.
        While such stark cases of direct physical harm in the
    pursuit of profit like this one are not the most common, it is
    far from the only example.
        Another priority for the OIG is the enforcement and
    prevention of prescription drug fraud. In one example of
    prescription drug diversion, a Michigan pharmacist, Mr. Patel,
    and a network of pharmacies were among 37 defendants convicted
    for their roles in a widespread scheme to defraud Medicare and
    Medicaid of nearly $58 million.
        In conclusion, I would like to underscore the commitment of
    the OIG in protecting program beneficiaries in fighting
    healthcare fraud. The highly specialized investigative work of
    our special agents combined with cutting-edge data analytics
    continue to prove effective in making a valuable and positive
    impact.
        Thank for the opportunity to speak to you today. I would be
    happy to answer any questions.
        Chairman ROSKAM. Thank you, Mr. Dixit.
        [The prepared statement of Mr. Dixit follows:]
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        Chairman ROSKAM. Mr. Ward.

        STATEMENT OF SCOTT WARD, SENIOR VICE PRESIDENT, HEALTH
                             INTEGRITY LLC

        Mr. WARD. Good morning, Chairman Roskam, Ranking Member
    Lewis, and distinguished Members of the Subcommittee. I am
    Scott Ward, senior vice president of Health Integrity and
    program director of ZPIC Zone 4. I am here today, and I
    appreciate the opportunity, to tell the committee about the
    important work that we do at the Centers for Medicare &
    Medicaid Services in protecting the integrity of the Medicaid
    and Medicare program.
        Health Integrity is a nonprofit corporation incorporated in
    2006 and is a wholly owned subsidiary of the Quality Health
    Strategies. Our corporate headquarters are in Easton, Maryland,
    and we have offices located throughout the United States. We
    have 285 nationwide employees. And we also have a large
    resource pool of statisticians, data analysts, predictive
    modeling specialists, medical directors, nurses, certified
    coders, subject-matter experts on policy, communication
    specialists, auditors, and investigators. Our staff understands
    the healthcare delivery system and the differences in provider
    fraud, waste, and abuse actions across all provider types in
    all settings and in the fee-for-service and managed-care
    payment environments.
        We also understand how fraud is committed and how abusive
    practices lead to poor and inadequate patient care and program
    vulnerabilities. We also know how beneficiary and provider
    improper actions cause wasteful expenditures of program funds
    and ultimately improper payments. Our contracts with CMS
    include all aspects of the Medicare program integrity
    operation. We are the Zone Program Integrity Contractor for
    Zone 4, which investigates fee-for-service claims for Medicare
    and Medicaid in Texas, Oklahoma, New Mexico, and Colorado. We
    are also the National Benefit Integrity Medicare Prescription
    Drug Contractor with a responsibility to identify and
    investigate incidents of fraud, waste, and abuse in the
    Medicare Advantage and the Medicare prescription drug programs.
        We also have the Audit Medicaid Integrity Contractor that
    identifies Medicaid overpayments in 34 States and the District
    of Columbia. Additionally, we hold a UPIC IDIQ as well.
        Health Integrity was awarded the ZPIC Zone 4 contract on
    September 30, 2008, and was the first ZPIC awarded by CMS. The
    primary focus of the ZPIC is to protect the Medicare trust fund
    by preventing, detecting, and deterring fraud, waste, and abuse
    in the Medicare and Medicaid programs.
        The ZPIC authority includes investigating and analyzing
    Medicare Parts A, B, durable medical equipment, home health,
    hospice, and the Medicare and Medicaid data match programs
    operating in conjunction with State Medicaid agencies.
        These investigative activities are conducted through
    proactive and reactive methods and actions that may be taken to
    correct these problems to help ensure that future fraudulent
    billing practices or improper payments are not made.
    Investigative leads are both reactive and proactive. Reactive
    leads are identified from outside source complaints, such as
    referrals from Medicare Administrative Contractor, beneficiary
    complaints, ex-employees, Office of Inspector General hotline
    complaints, and the CMS fraud prevention system. Proactive
    leads are identified through data analysis, local knowledge,
    subject-matter expertise, and policy review.
        During Health Integrity's investigative process, Health
    Integrity is constantly looking to implement any available
    administrative action that can be taken to effectuate a
    correction or elimination of the identified fraudulent or
    abusive claim submission or medical service scheme. ZPIC uses
    multiple tools to combat fraud, waste, and abuse. These efforts
    are effective through or collaborative partnerships with CMS,
    law enforcement and other stakeholders. The work that ZPIC does
    is an important function in the overall CMS effort to combat
    fraud, waste, and abuse in the Medicare and Medicaid programs.
    We are proud of our contributions we have made in this process.
        This concludes my statement, and I would be welcome to take
    any questions you may have.
        Chairman ROSKAM. Thank you, Mr. Ward. I thank all of you.
        [The prepared statement of Mr. Ward follows:]
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                     --------
        Chairman ROSKAM. I think it is so interesting. We have a
    lot of questions for you. And the first person that you will
    hear from is Mr. Holding.
        Mr. HOLDING. Thank you, Mr. Chairman.
        Ms. McQuade, Mr. Dixit, it is truly a notable case, the
    Fata case.
        Ms. McQuade, how did you originally find out about the
    case? What was the trigger that got you looking at Dr. Fata?
        Ms. MCQUADE. The Dr. Fata case to us from a whistleblower.
    The office manager in his office was someone who heard from
    some of the doctors, noticed that some of them were resigning,
    and found out that Dr. Fata was prescribing unnecessary medical
    treatment. So he came into the office, and as Agent Dixit said,
    we took it very seriously. We, frankly, thought it sounded too
    outrageous to be true, but we knew that, if it was true, we
    needed to act quickly. And so I am very proud of how hard the
    agents and prosecutors worked around the clock to be able to
    take him down within 5 days, to make sure that, as Ranking
    Member Lewis has said, patient care needs to be of paramount
    concern. And it was in that case, and that is why I am so proud
    of the work of those prosecutors and agents.
        Mr. HOLDING. Did you have a grand jury open looking at
    fraud and just plugged that in there? Did you bring it to a
    grand jury, or did you just have enough evidence to go and get
    an arrest warrant?
        Ms. MCQUADE. We charged him in a complaint initially and
    then continued to investigate additional incidents, continued
    to talk to additional witnesses, and ultimately presented it to
    a grand jury. But we were able to act quickly by charging him
    in a compliant and executing the six search warrants on a
    Tuesday morning.
        One thing that was very important to us was making sure
    that patient care continued and so, again, due to the good
    thinking of the agents and the prosecutors, came up with a
    protocol so that patients could obtain their patient records
    and patient files even after they had been seized by agents so
    that they could take them to another cancer provider and to
    ensure continued patient care.
        Mr. HOLDING. And how long--it was a period of 6 years that
    he had been doing this, $34 million, multiple patient deaths.
        Mr. Dixit, you referenced sophisticated data analysis that
    you all used, I assume, to proactively to look for fraud. So
    how was he able to elude data--your sophisticated data analysis
    for so long to such a great extent?
        Mr. DIXIT. Thank you for that question, Congressman. Data
    analytics is a very valuable tool, as I stated in my statement.
    But it has to be combined with field intelligence. We do, along
    with the ZPIC and CMS folks, we actually do a lot of proactive
    work. However, unless you actually go to the field and find out
    who the actual provider is and how many providers are in that
    particular practice, all we know is that he will be an outlier.
    That is indicative of fraud, but it is not necessarily fraud.
    It does not rise to an----
        Mr. HOLDING. So, in the scope of your work, when you see an
    outlier like that, what do you do?
        Mr. DIXIT. We further the investigation. We combine it with
    surveillance. We find out--we get a better picture. We have
    ZPIC and folks, analysts, who are experts in data analysis. We
    find out, is it one provider billing say $30 million, or is it
    10 providers billing $30 million? It makes a big difference.
        Once he is an outlier, we start doing our investigative
    techniques, like surveillance, talking to witnesses,
    beneficiaries, and we get a better picture of whether or not we
    should proceed on the criminal side.
        Mr. HOLDING. Can you give me some idea of the scope of
    outliers out there that you would be looking at on any given
    quarter, month?
        Mr. DIXIT. I can't exactly quantify it with a number. But I
    can give you an example of one of the cases I worked, which
    came straight from a proactive data analysis system. We had a
    physician in Michigan who, through proactive data analysis--the
    ZPIC actually forwarded it to us--stated that if this provider
    would have provided these services, that particular doctor
    would have had to travel 450 miles in that one day and perform
    36 hours of services, which is practically impossible. Yes, we
    opened the case for further investigation, and that individual
    was indicted and convicted.
        Mr. HOLDING. Ms. McQuade, did this go to trial?
        Ms. MCQUADE. No, the case did not go to trial. Ultimately,
    Dr. Fata entered a guilty plea and was sentenced to 45 years in
    prison.
        Mr. HOLDING. During the process of negotiating that, did he
    raise any defense at all?
        Ms. MCQUADE. He really did not. Ultimately, at his
    sentencing hearing, he admitted to the judge that he had been
    motivated both by greed and by power, so it was an interesting
    statement on his part. But he never really mounted much of a
    defense. I think his goal was mitigating his sentence at the
    end of the day. But we were pleased that the judge imposed a
    sentence--although we sought a higher sentence--a sentence of
    45 years, which, for a 50-year-old man, is a substantial
    sentence.
        Mr. HOLDING. Right.
        Mr. Chairman, I yield back.
        Chairman ROSKAM. Mr. Lewis.
        Mr. LEWIS. Thank you very much, Mr. Chairman.
        Let me thank each of the witnesses for being here.
        Can you tell me maybe just speculate, what motivates
    doctors or other medical professionals to engage in fraud,
    Medicare fraud? Is it simple greed? People have to conspire and
    have to engage in a conspiracy to get doctors and other health
    providers, pharmacists and others.
        Mr. DIXIT. Thank you for that question, Congressman. What
    we see in Detroit, what I have seen personally in Detroit, I
    will give you an example, which will make a better point of
    this case. We worked a home health agency case where the
    defendant won, out of 20 defendants that were indicted in that
    $13 million case. The defendant was arrested. The day of his
    arrest, he was interviewed. He cooperated with law enforcement.
    And he told us that he was not a medical professional. He
    worked at a Church's Chicken. For him, it was easier to get
    into the field, sign up with Medicare, and start billing for
    services that were never rendered. However, he did learn a
    scheme from a different health agency owner and wanted to start
    his own because he did not want to make just dimes and dollars.
    He wanted to make millions of dollars. So that is one part of
    it.
        We also see another part of it where individuals that try
    to do the right thing at the beginning get sidelined because
    there is a lot of fraud. Fraud is a problem. Obviously, we all
    know that fraud is a problem. But we do have doctors who have
    come in and proffered with U.S. attorneys and agents who tell
    us it was impossible for them to actually perform the services
    without getting involved. Did they stop? No. So were they
    convicted? Eventually, yes. Greed got the better of all of them
    at one point, but the motivation we see in Detroit is all about
    money.
        Mr. LEWIS. Is organized crime involved?
        Mr. DIXIT. We see a variety of cases, we see simple folks
    who have no medical background all the way up to sophisticated
    doctors like Dr. Farid Fata. In this particular case that I was
    talking about, the home health agency case, we had four home
    health agency owners, three doctors, physical therapists. They
    all operated exactly like a criminal enterprise. One would not
    do without the other. One had to do--for example, the physical
    therapists had to make up these sheets if Medicare came looking
    whether or not the service was provided. It was all done at the
    back end. They would bill Medicare upfront, but all the
    fraudulent paperwork, everything else was done on the back end.
    Everyone served a purpose. It was a criminal enterprise, yes.
        Mr. LEWIS. Would others like to comment?
        Ms. MCQUADE. Congressman Lewis, I don't know that we see
    traditional organized crime groups being involved in Medicare
    fraud, but as Agent Dixit said, there are sometimes very
    complex and sophisticated conspiracies designed to defraud
    Medicare and other insurance programs. I do believe that the
    motivation is greed, that there is substantial money to be
    made, and that is what motivates this work.
        Another case that we had that does result in patient harm
    and harm to the community involved a doctor in Monroe,
    Michigan, named Oscar Linares, who set up what can be described
    as a pill mill. And I am certain that he did it for greed
    because he used his funds to buy things like Rolex watches and
    luxury vehicles, like a Bentley and a Ferrari. And so I believe
    that his motivation was greed, but he was prescribing
    oxycodone, pain pills, to people who did not need it for
    medical necessity. He saw more than 250 patients a day and was
    putting these pills out into the community. And in exchange, he
    would have the patient submit to unnecessary medical treatments
    or unprovided medical treatments for which he would bill
    Medicare. So he made a lot of money. And in the process, many,
    many people were provided with prescription opioids that I
    believe contributes to our Nation's opioid epidemic. And as you
    know, it is a gateway to heroin use and overdose deaths. So it
    is a serious problem that does, as you said, impacts patient
    harm.
        Mr. LEWIS. Thank you.
        I yield back, Mr. Chairman.
        Chairman ROSKAM. Mr. Rice of South Carolina.
        Mr. RICE. Thank you, Mr. Chairman.
        Medicare is certainly a noble and essential program
    provided by the Federal Government. It is a promise made to our
    seniors, and we have to make that promise solid and keep it--
    and make sure it is kept. It is also one of the largest, most
    expensive programs run by the Federal Government. We paid more
    for Medicare services in 2015, about 20 percent more than we
    paid for our national defense. With $20 trillion in debt, we
    have to make sure that those dollars are spent wisely.
    Obviously, we have to eliminate every drop of fraud that we
    possibly can. I know that 99 percent of the people using
    Medicare are certainly honest and deserving people, but there
    are always crooks out there. And I appreciate very much what
    you do to detect those and to bring them to justice.
        The Fata case is an example that is shocking to everybody
    that he could bill I think it was $60 million--is that right?--
    over 6 years and not be detected until a whistleblower came
    along.
        Mr. Dixit, why is it that a whistleblower had to come
    along? How long would it have been had that whistleblower not
    come along? Had somebody not within his practice not come and
    turned him in, how long would it have taken us to detect this
    astounding level of fraud?
        Mr. DIXIT. Thank you for that question, Congressman.
    Unfortunately, I do not have an answer for that. Unless the
    office manager or citizens that are concerned or beneficiaries
    that see fraud happening, unless they come forth, which is one
    of our main sources of referrals, along with the OIG hotline,
    referrals from ZPIC, proactive data analysis, I wouldn't be
    able to tell you with any assurance that anybody would have
    come forward or we would have found that particular issue.
        Mr. RICE. Okay. Well, can you tell me--we have these tools
    for predictive analysis--can you tell me what percentage of
    these fraud cases are brought as a result of predictive
    analysis versus whistleblowers, people coming forward and
    fessing up.
        Mr. DIXIT. I can't quantify a percentage, but I would be
    happy to get back to the subject-matter experts who actually
    work in this area and get back to you at a later date with a
    percentage.
        Mr. RICE. I would love to see that. I would love to know.
    That would give me some indication of the effectiveness of the
    predictive analysis.
        Mr. Ward, I think your job is detecting this fraud, right?
        Mr. WARD. Yes, sir.
        Mr. RICE. You talked about outliers. You look at
    statistical analysis of Medicare providers I suppose and you
    look at things that just don't make sense, right? You look at
    outliers?
        Mr. WARD. That is correct.
        Mr. RICE. Is there a procedure for auditing those outliers?
    Do we have an ongoing, like the IRS, annual audit procedure
    where we select providers for review?
        Mr. WARD. Yes. That actually occurs at the Medicare
    Administrative Contractor level. The contractor that actually
    pays the claims, they do, on an annual basis, they develop a
    probe plan of audits that they are going to conduct on specific
    services that are billed when they see--when they do data
    analysis, and then they coordinate with the ZPICs to determine
    areas that they think could potentially be fraudulent as well
    as they review the OIG's annual plan for areas that they are
    going to focus on.
        Mr. RICE. All right. So, coming back to you, Mr. Dixit, can
    you tell me, as a result of these audits, what percentage of
    the criminal prosecutions that you do are as a result of these
    audits versus whistleblowers versus predictive analysis?
        Mr. WARD. Well----
        Mr. RICE. Mr. Dixit.
        Mr. DIXIT. Thank you, again, but once again, I can't
    quantify the number in terms of percentage, but we would be
    more than happy to get back to you. We have data analysts who
    actually work in this field, and we will get you a percentage
    for sure.
        Mr. RICE. Thank you.
        Mr. Ward, in the process of these contractors that you say
    are doing the audits, so the government is hiring independent
    contractors to do--the government is not doing it itself,
    right? Is that what you said?
        Mr. WARD. Correct.
        Mr. RICE. So do you know the mechanics of choosing who they
    are going to audit? Do they focus on outliers? Do they do
    random audits like the IRS? Do you have any idea of the
    procedure?
        Mr. WARD. My knowledge of how the Medicaid--Medicare
    Administrative Contractor develops that is limited. They do
    statistically valid sampling. They look at areas where maybe
    there is over utilization of certain claims, you know, code
    types, different--or just billing spikes, things of that
    nature, and then they determine from that who they might probe.
        Mr. RICE. My time is up, but I have one more question for
    you, and that is, based on your--I have read this memo, and it
    says that we don't have a good number on what the actual fraud
    is, but that is your job. So I would just like your opinion.
    What percentage of the actual fraud and abuse are we catching?
        Mr. WARD. Are you taking about nationwide or just area?
        Mr. RICE. Yeah, nationwide.
        Mr. WARD. That would be hard for me to----
        Mr. RICE. Is it more or less than 50 percent?
        Mr. WARD. Probably less than 50 percent.
        Mr. RICE. Thank you, sir.
        Chairman ROSKAM. Mr. Crowley of New York.
        Mr. CROWLEY. Thank you all. I will be very brief. I thank
    you all for your testimony this morning before the committee.
    And I want to thank the chairman and the Ranking Member, all
    the members, for continuing to delve into what has been a
    historical problem facing our Nation, and that is Medicare
    fraud.
        Mr. Dixit, I applaud your work in protecting beneficiaries
    from Medicare fraud every day. Thank you to all of you for what
    you do every day. This is important work that you are engaged
    in and you outline very clearly how fraud harms beneficiaries
    as well as the taxpayers, and some of these cases horrendously
    in terms of poisoning, literally poisoning people, not only
    with opiates but with other drugs intended to fight cancer, but
    in their own nature are in essence poison themselves to kill
    those bad cells.
        The Affordable Care Act added several important tools to
    fight against fraud. Always knowing that those who are intent
    on committing fraud will find ways around the law. We did give
    additional tools. It gave increased funding to combat fraud and
    provided new tools to screen providers so that we can prevent
    criminals from getting into the system on the front end,
    improved data analytics, and instituted more payment review to
    check for problems before money goes out the door.
        Mr. Dixit, can you talk about how increased funding,
    improved data analytics, and more forward fighting tools has
    helped you do your job?
        Mr. DIXIT. Thank you, Congressman. Data analytics, as I
    stated earlier, has been an extremely powerful tool for agents
    to analyze and protect fraud. At least they are indicative of
    fraud. Combined with agents and resources on the ground, we
    work with State and local law enforcement. Data has always
    pointed us in the right direction, taken--combined with agents
    going into the field and following up on surveillance
    techniques. And to get a better picture of what we are actually
    seeing has helped us immensely. So data analytics, the more
    analysis we do on data, we figure out where the problems are.
    We can identify geographic hot spots. We can identify, for
    example, if there is a physician billing for services and it is
    in cahoots with a home health agency owner, we can actually do
    data analysis to see who the highest paid home health agency is
    through data analytics. Of course, we will have to combine that
    to see--because data analytics is not going to tell us whether
    the home health agency owner is paying any kickbacks to that
    doctor. So, combined, it is a very valuable tool.
        Mr. CROWLEY. It is one of a number of tools that were added
    through the Affordable Care Act, is that correct, including
    additional funding and other tools to fight fraud?
        Mr. DIXIT. I cannot speak to the funding portion of it. I
    am a field agent, so my expertise is limited in the funding
    portion as to what we are getting regarding where the funding
    stream is coming from. I can have the folks at our office
    headquarters get back to you on that particular issue.
        Mr. CROWLEY. I would suggest additional funding has been
    made through the Affordable Care Act that is there to help you
    fight the fraud that you are involved in every day. So, on
    behalf of the American people, I want to thank you for your
    efforts, all of your efforts. I yield back the balance of my
    time.
        Chairman ROSKAM. Thank you.
        Mr. Reed of New York.
        Mr. REED. Thank you, Mr. Chairman.
        And before I get started, I just want to kind of put in
    perspective what we are talking about here. We are spending
    about $600 billion, to my understanding, looking at the
    material before me on Medicare. The improper payments,
    including fraud payments, totals about $60 billion I think is
    what the reports show us. Out of that of $60 billion, there is
    a debate whether it is 18 to 50 percent of it is actual fraud
    as opposed to just improper billing situations, which is also
    an issue, which is outside the scope of this hearing today.
        But just to put that $60 billion figure in perspective, we
    are talking about an amount of money that is twice the level at
    $60 billion that the entire U.S. Government spends on the
    National Institutes of Health. National Institutes of Health is
    a leading public agent trying to fight cures for some of the
    most devastating diseases amongst us as American citizens. It
    is three times as much as the Nassau--NASA budget. Not Nassau,
    that is in New York. My colleague from New York had me thinking
    of that. NASA budget. It is about the size of my home State of
    New York State, Department of Parks and Recreation budget. All
    the money we spend in New York State for our parks and
    recreation services for the entire State of New York is
    equivalent to what we are talking about here today. And so what
    I am very interested in looking at--and Mr. Ward, I am very
    interested in your testimony that you have submitted here,
    because I am too also a firm believer in data analytics,
    predictive analytics, the algorithms that go into the software
    that create that analytic possibility. So I just want to ask
    some--because you are the contractor, you are the contractor
    that is utilizing a lot of these analytics on a day-to-day
    basis is my understanding from your testimony. Is that correct?
        Mr. WARD. Yes.
        Mr. REED. Okay. So I just want to make sure, are there any
    issues with the data itself that you are getting from CMS, from
    Medicare, that is a problem in order for you to run it through
    that computer software analytic program the algorithms that are
    there. Are there any data exchange? Are you getting the data
    you need in order to input that into the system?
        Mr. WARD. Yes, we are actually getting the data.
        Mr. REED. And the data comes in a way that you can read it
    and run it through the programs.
        Mr. WARD. Yes.
        Mr. REED. Okay. That is very good to hear, because we
    haven't heard that in other agencies and departments.
        So let's talk a little bit about what other data could you
    be interested in looking at that would improve the analytic
    capacity that you have as a contractor looking at this issue?
        Mr. WARD. Well, in addition to the Medicare claims data, if
    we had--we do have some abilities, and we have been looking at
    areas of using like doing Web analysis to look at social media
    and things of that to compare. There have been some piloting
    efforts that we have used to identify, to kind of put some----
        Mr. REED. How about other agencies of the U.S. Government?
        Mr. WARD. If we had access to, like, maybe Internal Revenue
    Service records, maybe State Department records, Immigration
    records as well, that might be helpful too.
        Mr. REED. And why would that be helpful?
        Mr. WARD. Well, using the State Department records or maybe
    Immigration, we would be able to tell if someone maybe has a
    physician--for example, we had a physician that we are
    currently working an investigation in the Houston area where he
    was billing for Medicare, and then we ended up contacting him,
    and we found out that he has been in Dubai for several months,
    because we were going to interview him. So we looked at his
    claims history, and we coordinated with the Office of Inspector
    General, who--they coordinated with Immigration and found out
    that, yes, they could give us specific dates of when his
    passport, when he left, and never returned to the country. We
    would be able to identify immediately the provider needs to be
    put on a payment hold and ultimately could be revoked for
    billing for services not rendered.
        Mr. REED. I appreciate that. Mr. Dixit, as a field agent,
    what other data would you be looking for outside the Medicare
    sphere that might be helpful to you?
        Mr. DIXIT. I would double down on what Mr. Ward said. We as
    law enforcement agents do have access to multiple systems where
    we can work in conjunction with other Federal agencies. For
    example, we work a lot with marshals on our fugitive program.
    We work a lot with----
        Mr. REED. Do you interact on a data analytic basis? If had
    you that data stream coming in--you are talking about
    physically you have to go march to the Marshals Office and say:
    Who are you working on? This is Mr. John Doe that triggered--
    one of our analytics produced him as a target, and now I have
    to call you and do that.
        That is very--that is time-consuming. Is there anything you
    could do on a more proactive predictive analytic basis that
    would help you?
        Mr. DIXIT. Not that I can think of off the top of my head.
    But we do data analysis in terms of like--for example, we see
    dead beneficiaries that are being billed over and over and over
    again in our data analytic program. When we analyze the data,
    we find out that Medicare beneficiaries have been billed
    thousands of dollars and have died 2 years ago; they are
    deceased.
        Mr. REED. And you don't have access to that info?
        Mr. DIXIT. No, we do have access to that. I am just saying
    that is one of those.
        Mr. REED. An example.
        Mr. DIXIT. Just an example. If we could--I can't--off the
    top of my head, I can't think of anything else that might help
    us, but those are the things that we ask the ZPIC to provide.
    We get a data download, and we will ask ZPIC to give us, ``Can
    you also include the date of death, if possible?'' So they add
    that, and it is helpful.
        Mr. REED. Thank you very much.
        I yield back.
        Chairman ROSKAM. Mr. Davis of Illinois.
        Mr. DAVIS. Thank you very much, Mr. Chairman.
        I also want to thank all of our witnesses for being here
    today. You know, nothing is more important, I don't believe,
    that the government does to intervene on behalf of individual
    citizens than the Medicare program, especially as we see the
    continuing aging of individuals who reach that point and who,
    without these services, in many instances, would have no
    resources at all to get the medical care that they need.
        I less remember the days when we used to have the great big
    discussions about Medicare mills and Medicaid mills and the
    high level of fraud that existed, so much to the extent that
    there would be people lined up in some of these places to go in
    and see physicians.
        Unfortunately, there have always been a number of people in
    our country who operate on the principle that if you find a
    sucker, bump his head. And, unfortunately, many of those have
    been involved in the practice of medicine. They have been
    involved in the administration and management of activities.
    And so I applaud the Federal Government, especially in what we
    have done in the last few years through the Affordable Care Act
    to try and put an end to as much of this fraud as we can
    possibly do. And I note that, in the last 3 years, we recovered
    a record-breaking $10.7 billion, which certainly is not chump
    change, and it is certainly an indication that there is some
    effort underway.
        Let me ask each one of you, I have always been told that an
    ounce of prevention is worth much more than a pound of cure.
    What can we do more proactively to try and prevent fraud and
    abuse?
        And we will just perhaps start with you, Ms. McQuade.
        Ms. MCQUADE. Yes, thank you Congressman. I think that is an
    outstanding strategy to prevent any kind of crime from
    happening in the first place. Some of the things that we are
    doing is gathering stakeholders together for regular meetings
    to talk about fraud trends so that we can share information
    with each other and identify the trends, because they evolve.
    Criminals are very entrepreneurial, and when one scheme gets
    detected, they move on to another. So that is one thing we are
    doing and certainly probably could be done more of in other
    parts of country.
        We also do outreach work to citizens to talk to them and
    ask them to help us by reading their explanations of benefits
    and ensure that Medicare is not being billed for services that
    were not rendered. And there is a website there, StopFraud.gov
    and a phone number that they can call if they see that.
        One of the other things that is being done is HHS is
    sending letters to the top billers that can be identified as
    the outliers in the home healthcare arena and explaining to
    them what the rules are in hopes of deterrence in fraud. If
    they might be those outliers because they are engaged in fraud,
    maybe a letter saying, ``We are watching you and just wanted to
    make sure you understood the rules,'' maybe will prevent some
    fraud from occurring.
        And then, finally, under the Affordable Care Act, there is
    a new provision that helps stop the flow of fraudulent funds in
    that CMS may now suspend Medicare payments upon credible
    allegations of fraud so an indictment can at least stop the
    flow of funds at that point. So those are some of the things
    that we are doing. But I agree with you that prevention is
    certainly a worthwhile endeavor.
        Mr. DAVIS. Mr. Dixit.
        Mr. DIXIT. Thank you for that question, Congressman. Let me
    give you a field agent's perspective on what we do as agents in
    the field to try to prevent further fraud. We reach out to
    Medicare beneficiaries on a daily basis. We do a lot of witness
    interviews. So we educate Medicare beneficiaries to look at
    their explanation of benefits: ``If you see something that you
    never received, please call us.'' We will hand out our cards.
    That is one we try to prevent.
        Another very important point I want to make is indicted
    folks who come in and cooperate with the government, they give
    a lot of information about fraud that is just beginning. That
    is another very valuable tool that we have, but we have
    cooperators, informants. Agents do a lot of outreach while they
    are working cases, while asking us to give us information,
    leads, anything new, and also to just watch their benefits and
    let us know if there is anything----
        Mr. DAVIS. Thank you very much.
        Mr. WARD. Thank you for that question, Congressman. Just to
    bolster what my colleagues have said, we think that
    communication, more communication, is probably one of the
    things you can do to help stop more of the fraud, waste, and
    abuse, but from a ZPIC perspective, one of the things that we
    have done over the last couple of years is we have utilized
    more of the administrative actions and tools that we have had
    put forth to us. We have utilized payment suspension and
    prepayment review of providers much more to get a better
    picture of what they are doing and stopping the money
    immediately from going out the door. And then we have had more
    of use of revocation of the healthcare provider as well. We try
    really hard to make sure that we look at the providers that are
    in question to see if they do meet the criteria to be revoked
    and not be allowed to participate in the program.
        Mr. DAVIS. Thank you very much, Mr. Chairman.
        Chairman ROSKAM. Mr. Marchant of Texas.
        Mr. MARCHANT. Thank you, Mr. Chairman.
        I would like to talk about a case that broke in 2012 in
    Dallas. In Dallas, it was known as the Dr. Roy case, and it
    involved a doctor who used home health agencies kind of as a
    recruiting group, fed the clients, patients to him. And,
    frankly, it was something that was on the front page of every
    newspaper, all the TV stations, radio stations. It created
    quite a level of awareness in the Dallas-Fort Worth area about
    this that we still today in my office get emails and calls from
    time to time because people are a little frightened that this
    fraud undermines a program that they depend very heavily on.
    And because there is so much fraud, they are not getting the
    reimbursement or the care they deserve because there are so
    many dollars going away from the program that could be plowed
    back into the program.
        So the public is very interested. I don't think they are
    particularly accusatory toward the government in that they
    think we are part of it, but they are very concerned that it
    takes so long from the beginning of the crime to when the
    people are convicted. And they don't understand that long time
    lapse. And I think you can understand that.
        We have a unique system. You get a bill; we pay it. You
    come back later and investigate whether it is a good bill.
    Almost--even if I get an electric bill, I look at my electric
    bill, and I kind of say, ``Does this sound right?'' You know, I
    make kind of a quick analysis on all my bills. And I think
    everybody here in the room probably does the same thing. And
    then I pay it. But our system is very unique, and because of
    that, I understand that there are long delays.
        Can each of you just talk about how you discovered, those
    of you that were involved in that case, how you discovered this
    fraud, and what tools did you use that were at your disposal at
    that time to solve this case, and what additional tools you
    might have needed to solve this case faster? Let's start with--
    I think, Mr. Dixit, you were involved with this.
        Mr. DIXIT. Thank you for that question, Congressman. I
    personally did not work on the Dr. Roy case. Let me take that
    back, actually. I did do an interview for the Dr. Roy case in
    Detroit. Dr. Roy's scheme was so widespread that his employees
    at some point started leaving with fear of prosecution.
        One of the individuals, I got a lead from the Dallas
    office. One of the Dallas agents contacted me to interview this
    particular individual, and that is how I got involved in this
    case. But let me just go back and tell you that the scheme for
    the Dr. Roy case is something that we have seen nationwide.
    What we refer to as recruiters or marketers or they call
    themselves community liaisons, they go door-to-door, grocery
    stores, homeless shelters, solicit beneficiaries for their
    numbers.
        They might pay them cash and oral prescriptions--narcotic
    prescriptions--in exchange for their Medicare number, which is
    then billed by the home health agency owners for no services
    ever provided. And Dr. Roy was one of those individuals who
    would sign off on those prescriptions and also those home
    health referrals.
        This actually, just so you know, is, and I am sure you are
    aware of it, is the largest healthcare fraud, home health
    agency fraud takedown, perpetrated by one single doctor. We see
    a lot of multiple doctor cases that come to that amount, but
    this is one single doctor.
        Mr. MARCHANT. And in 2012, did we have the same level of
    data analytics then in place that we do now, Mr. Ward?
        Mr. WARD. We, actually, in 2012, we had better data
    analytics than when Dr. Roy was first discovered. He was first
    identified back in 2010, and a referral was made on that, but
    it was such a complex case that it required a lot of field
    investigative work, in addition to the original data analytics
    that were done. From a ZPIC standpoint, we did over 700
    beneficiary interviews related to Dr. Roy. That is individual
    patient interviews to identify where patients weren't homebound
    and things of that nature.
        So our data analytics are much more improved from 2009
    today, and in 2012, they were much better as well. They
    improve, you know, on an almost weekly basis.
        Mr. MARCHANT. Thank you.
        Thank you, Mr. Chairman.
        Chairman ROSKAM. Mr. Smith of Missouri.
        Mr. SMITH. Thank you, Chairman Roskam.
        Thank you to the witnesses for being here. We are here to
    discuss a topic that is very important to me and the folks that
    I represent in southeast and south central Missouri. We hear a
    lot about fraud, and we hear estimates of more than 50 billion
    in fraud each year paid by Medicare. We talk a lot about loss
    to taxpayers, but I want to talk about damage to patients.
        In many cases, patients are harmed. One important aspect of
    investigating healthcare fraud is whether there is patient
    harm. In July, I learned that the University of Missouri, where
    I graduated from, agreed to pay the Federal Government $2.2
    million to settle a claim that their healthcare program
    physicians committed fraud.
        According to a U.S. attorney prosecuting the case, a
    Federal investigation found that physicians had not reviewed
    radiology images. I am curious how these types of settlements
    are reached, and that is why I ask you, Ms. McQuade, can you
    discuss the considerations you use to determine an appropriate
    sentence or settlement for Medicare fraud?
        Ms. MCQUADE. Thank you, Congressman.
        So I am not familiar with the Missouri case in particular,
    but in other kinds of cases, in a criminal case, we are
    governed by sentencing guidelines, and so those will offer an
    advisory range for what a sentence ought to be in terms of a
    prison sentence and will also offer an advisory range for a
    fine. So that is the starting point for any negotiations in a
    criminal case.
        In a civil case, there are a number of different ways one
    might quantify an appropriate settlement. You could look to
    fraudulent dollars actually expended. Some of the False Claims
    Act permits triple damages, so you could start at that as a
    triple point and, for the certainty and swiftness of a
    settlement, come down from that number. Oftentimes, ability to
    pay of an organization is also a factor that is considered.
        So all of those things are considered. But I can assure you
    that at the U.S. Attorney's Office, perhaps unlike private law
    firms, we constantly strive for what is in the best interest of
    justice and what is in the best interest of the victims and
    prepare to go to trial in cases where we cannot reach an
    appropriate settlement that we believe meets those aspirational
    goals.
        Mr. SMITH. Is patient harm a consideration in your
    settlement negotiations?
        Ms. MCQUADE. It is. It is certainly considered an
    aggravating factor. Under those sentencing guidelines, patient
    harm is an aggravating factor, and it is something that we
    would consider in terms of the egregiousness of the conduct.
        Mr. SMITH. Do you have a list of crimes that are considered
    egregious to determine an appropriate sentence?
        Ms. MCQUADE. It is difficult to talk about all of them, but
    we have a few examples. There is the Dr. Fata case, which in my
    view is the most egregious, providing chemotherapy to patients
    who did not need it, some of whom did not have cancer. We had
    another case involving a Dr. Sabit who installed medical
    devices--claimed to install a medical device into people's
    backs, performing back surgeries, instead replaced it with a
    cheaper material for his own cost savings, resulting in real
    patient harm and the need for additional surgeries by some of
    those patients.
        So the patient harm can really range from a whole number of
    things--exposure to unnecessary nuclear stress tests and
    radiation--so it is a wide spectrum of things. But patient harm
    is certainly something that is considered in imposing any kind
    of sentence or fine.
        Mr. SMITH. Thank you, Ms. McQuade.
        I yield back, Mr. Chairman.
        Chairman ROSKAM. Mr. Renacci of Ohio.
        Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the
    witnesses for being here. You know, it is frustrating. I was in
    the healthcare profession for almost three decades before I
    came here, and I know back home people are very frustrated
    because they know there is fraud and abuse. And as a healthcare
    provider, I saw it around me. At least I thought I saw it
    around me, but you can never prove it. So I realize you guys
    are in a very tough situation, and I appreciate the work you
    are doing.
        But the American people are sitting here listening, and
    look, there are three types of people out there: There are
    those that commit fraud and are caught, and we have talked
    about some of those. There are those that commit fraud and are
    not caught. And there are those that don't commit fraud that
    are accused, which is even worse.
        So I hear a lot from those that are accused and then are
    not convicted or committed, and they have to go through a
    process. In fact, I heard from one agency that spent more in
    defending themselves in legal fees than the total revenues of
    the whole company for that year, so those are the issues that
    concern me as well too.
        But that still doesn't mean we shouldn't be going after
    those that have committed fraud and haven't been caught. And I
    am trying to figure out, in that universe, those that are
    caught--we already know those, those are the ones you are
    talking about--those that have been potentially said you have
    committed fraud and then aren't, and then those that we haven't
    caught. Is there any--and maybe, Mr. Ward, can you tell me, out
    of those that are potential fraud abusers, do we have a
    statistic that says, ``We have gone after, you know, 100 and
    convicted 10, 5, 20, 30, 70,'' is there a number on that, at
    least?
        Mr. WARD. I don't know that I would be qualified to answer
    that question.
        Mr. RENACCI. I mean, because these are the statistics and
    these are the things I know would help everybody up here on the
    dais and would also help the American people understand we are
    going after fraud.
        I mean, if you say that, ``Look, we went after 100 people
    and we caught 99,'' that is a pretty good statistic. If you
    say, ``We went after 100 and caught 5,'' people are going to
    say, what are we doing wrong?
        But the problem that I am hearing today, which is very
    frustrating for me and very frustrating for anybody watching
    this, is that we are not quantifying this in numbers. We are
    not saying, ``Look, there are''--one member up here asked how
    many people--what is the estimate of fraud, and we are not
    getting any numbers, so it is very frustrating.
        You can come here and tell us about the ones you caught,
    but what frustrates the American people are the ones you
    haven't caught, and I would love to hear what we are doing.
        The other thing that is so important--I also heard this
    from one of the members--you can catch somebody after they have
    committed 50, 100, 300 million dollars' worth of fraud. You are
    never going to get that money back. They are going to prison,
    but we have lost a lot of money. So how do we somehow put
    this--wrap this package up and be able to say to the American
    people, ``We know there is fraud; here is our percentages''? I
    mean, I would have loved for somebody to come today and say:
    Look, we have this analytic procedure. We know that there is,
    you know, 20 percent fraud. We are--we do an analysis that
    means we look at 1,000 people. Out of those 1,000 people, we
    catch 200.
        These are the kind of numbers that I make us feel
    comfortable. Are there any answers you can give me to make me
    feel comfortable--who is frustrated and the American people
    that are frustrated?
        Mr. DIXIT. Well, I can say that we have folks back at
    headquarters who do keep a tab of the complaints that come in,
    how many cases are investigated, how many are criminal actions,
    how many are civil actions. I guess, in my oral statement, I
    had a quick short paragraph regarding the numbers, but we can
    get back to you in detail regarding numbers, if you want,
    though. We do have folks that will get back to you at a later
    date on that particular question.
        Mr. RENACCI. I would appreciate that.
        Mr. DIXIT. I also want to answer the question regarding the
    money. I do want to make one--I do want to emphasize that one
    of the missions of OIG agents is to make that trust fund whole.
    We do want to bring money back to Medicare and all the
    government programs that lost it. So we work with the
    Department of Justice and FBI and try, during our investigative
    process, forfeiture warrants is one of the things that we
    always do and try and seize and take back whatever we can.
        Mr. RENACCI. And I am not taking away anything the three of
    you are doing. I am very happy to hear what you are doing. I am
    trying to figure out the big picture of how we can do it
    better, and this--but I also want the make sure that any
    constituent that has been accused of fraud, it would be great
    to hear how many have been accused, and I hope at some point I
    can get that information: if they have been accused and then
    how many have been convicted. That is an important number,
    because if we are going after--we can say we are going after
    1,000 people, but if we are only convicting 1 out of 1,000,
    that is not a good number.
        Ms. MCQUADE. Congressman, I believe the conviction rate is
    around 95 percent in healthcare fraud cases.
        Mr. RENACCI. Now, I am talking about the ones that we go
    after on a statistical basis because I did hear that we don't
    have that number, I thought.
        Mr. WARD. Well, we can get you those numbers. I didn't come
    prepared for that. I mean, one of the things that we do is we--
    there are several different levels of how the investigative
    work and some do not meet--are not egregious enough. We
    prioritize them in a manner to where some of them can be
    handled administratively.
        So I am not sure if this is the answer to your question,
    but some of the things, when we identify through data
    analytics, outliers or things that do not meet medical policy
    or outside of what the local or national coverage
    determination, we do things like we put auto deny edits into
    the Medicare claim system, meaning that, when those claims hit
    the system, they are just automatically denied out. They are
    not--there is no cost to process.
        I mean, they are submitting claims that will be
    automatically captured and denied and never paid or processed,
    so that is something we can give you some numbers on cost
    savings. But then you have other levels where they may require
    more investigative methods and will require referrals to the
    Office of Inspector General to look at it for criminal or civil
    investigation and then essentially go to the Department of
    Justice for prosecution.
        Mr. RENACCI. All right. Thank you.
        I yield back.
        Chairman ROSKAM. Thank you. I just have a couple of
    questions to follow up and then maybe some wrap-up comments.
        Mr. Dixit, Mr. Reed was asking you about the billing with
    dead beneficiaries. Can you just walk us through that? It is
    kind of one of those things, we hear that and say, how can this
    possibly happen? So what is it that we--and that seems just a
    fundamental thing.
        So what is it that, number one, how does it happen? Number
    two, how can we be intentional about stopping that one? That
    seems like it is low-hanging fruit.
        Mr. DIXIT. Thank you, Chairman.
        Doctors who actually bill for services not rendered never
    see the beneficiaries. They never realize that the beneficiary
    has passed away 4 months ago. They keep billing for the
    beneficiary on what is allowable under the Medicare guidelines.
        When ZPIC, sometimes through proactive analysis, data
    analysis, ZPIC will send us this particular complaint and say
    something to the effect of, ``There is a doctor who is billing
    for dead beneficiaries.'' That is when we start opening the
    investigation. Of course, we go to the beneficiary's home, make
    sure that we go to vital statistics, other Federal, State, and
    local partners that we work with and get the necessary
    documentation to make sure that the beneficiary is deceased.
    The reason it happens is because the doctor never sees anyone
    to begin with.
        Chairman ROSKAM. How is it--I understand. I understand your
    point. How is it possible, in your view--or Mr. Ward, weigh in
    here as well--how is it possible that there is not--I mean, at
    some point the Social Security office makes a declaration that
    this person has passed away, and there is a recognition that
    that person has passed away. How is it--how is this continuing
    to be possible? Can you just walk through the mechanics of it,
    when everybody else knows that the individual has passed away,
    that the payment system doesn't know that the individual has
    passed away?
        Mr. WARD. Well, one of the things that we have noticed from
    the ZPIC standpoint is that we see there is a delay in the
    Social Security databases known as the common working file,
    which links bake to CMS' files and updating, so sometimes you
    can have a delay in a report of the death of a beneficiary,
    sometimes 60, sometimes 90 days, and in that period of time,
    you can get those billings, and the system won't recognize it.
        Chairman ROSKAM. Okay. So then can we at least get some
    comfort in the knowledge that after that 60- or 90-day period,
    those kinds of claims are not--false claims are not happening
    anymore?
        Mr. WARD. Yes. They will--once that is hitting the system
    where the beneficiary is deceased, those claims should be
    kicked out through edits that will show that the beneficiary
    has deceased and that it is not a valid claim. But, on
    occasion, sometimes, if that information is missed or if
    certain modifiers are put into place, claims can go through the
    system. There are some occasions where, when there is hospice
    related or sometimes durable medical equipment, where services
    may have been rendered and then the beneficiary ends up being
    deceased, where the claim will continue to pay.
        Chairman ROSKAM. For how long, would you estimate?
        Mr. WARD. Maybe 30 days, maybe 45 days.
        Chairman ROSKAM. Okay. So, Mr. Dixit, did I over interpret
    your response to Mr. Reed? I thought you said that this could
    happen for years, and what Mr. Ward is saying is that it is a
    shorter duration than that. So what is your view?
        Mr. DIXIT. I guess what I was trying to say is that there
    are multiple beneficiaries. I might have misspoken. Multiple
    beneficiaries that are billed every 2 to 3 weeks. We don't see
    a dead beneficiary being billed for 5 or 6 years. I don't have
    the exact number off the top of my head how long they actually
    bill a dead beneficiary for, but what we do see is like, for
    example, a doctor that I worked had 1,700 beneficiaries. You
    saw 1,700 active beneficiaries, but he was not seeing all these
    beneficiaries.
        So, when a person passed away--there are multiple
    beneficiaries that are passing away--he would keep billing
    them. So we have close to about $200,000 in billings within a
    span of 60 days for multiple beneficiaries that have passed
    away.
        Chairman ROSKAM. Uh-huh. I want to piggyback a little bit
    on Mr. Renacci's point a couple of minutes ago. And I think
    that there is the--I think what is actually emerging is a
    consensus on this issue and that there are a lot of people
    now--and it is a consensus that is based on necessity.
        You know, in the old days, there was a lot of money around
    Washington, D.C. You know what I mean. These budgets were flush
    and so forth. And now, with this increasing downward pressure
    from a financial point of view, I think folks are looking over
    the landscape and saying: We have got to do things better,
    smarter, faster, and cheaper, and more efficiently. And the
    first place to start is the notion of not paying people who are
    ripping off a system.
        You know what I mean? That is just so intuitive, and that
    is why you hear this unanimous cheering for you but also asking
    a very simple question: What can we do? What can we do more to
    help you?
        So what recommendation would you have, each of you? Ms.
    McQuade, let's start with you. You kind of got into it a little
    bit with Mr. Davis from Illinois in that he was asking you a
    question, and your response was what you are doing, which is,
    hey, listen, we are all in the business of selling, so good for
    you. But can you give us a sense of what would actually--what
    do you want us to know? What is helpful for us to know moving
    forward?
        Ms. MCQUADE. Well, we appreciate the investment that
    Congress makes into our work. And as you know, the return on
    investment is $6 for every $1 that is spent in terms of
    recovery. I would like to think that the work we do and when we
    publicize our work with convicting doctors and other healthcare
    fraud criminals, that that has a deterrent effect on others
    when they see that there are criminal consequences to that
    action, so I think continuing to fund our work is one thing
    that can be done.
        But of course, that is more of a pay-and-chase model that
    occurs after the fact. One tool that would be helpful to us is
    to continue to enhance the data that we have available to us.
    An emerging area is pharmaceutical fraud, prescription drugs. I
    know, in Michigan, our electronic database that doctors can
    enter data into for prescriptions is incomplete and imperfect,
    and an improved database would help us to see which doctors are
    prescribing medication, so that would be one tool that would
    helpful to us to improve our work.
        Chairman ROSKAM. Okay. Improved pharmaceutical database.
    Okay.
        Mr. Dixit, what do you think? What do you want us to know?
        Mr. DIXIT. Thank you for that question, Congressman, and
    thank you for your continued support for the OIG and its
    mission.
        As a field agent, in my perspective, more agents, more
    resources, more boots on the ground as a force multiplier for
    agents who are doing this work. That would help every agent in
    every jurisdiction to investigate more, spread the wealth, so
    to speak, will be more efficient and effective.
        Chairman ROSKAM. Okay. Mr. Ward, how about from your point
    of view?
        Mr. WARD. You know, I can say over the span of my career, I
    have seen very many iterations of how this program has
    progressed and how I have seen fraud progress as well with it,
    and I can't--I can say right now, with our work that we do with
    the CMS and with our law enforcement partners, that it is
    probably the most aggressive that it has ever been in my career
    as far as how successful we are being, so I appreciate your
    continued support.
        I think probably the most important thing to continue this
    fight is that we do get your support and collaboration with CMS
    and with the OIG and the Department of Justice as well.
        Chairman ROSKAM. Yeah, I think--you know, one of the areas,
    kind of in closing, one of the areas that Mr. Blumenauer and I
    are working on, a member of the Ways and Means Committee, from
    Oregon, and that is a secure ID bill, in other words, having
    a--using the same technology that the Department of Defense
    uses to limit access to sensitive places. It is well deployed
    in the Federal Government, and we have got a pilot program that
    says let's use this in Medicare and let's make sure that there
    is data that matches between a beneficiary and a provider so
    that, you know, the sale of a Medicare number underneath, you
    know, a bridge somewhere to manipulate and rip the system off,
    that can't happen, so that that is part of the legislative
    remedy.
        I think this idea of more boots on the ground, I
    understand. We wrestle with that same question on intelligence
    issues, national intelligence issues, the tension between, you
    know, the data side and having people in country and so forth.
    You are describing essentially the same thing.
        There is an element of prevention that really, I think, we
    can be very satisfied with, and these numbers are so big, they
    just take your breath away. So while they are impressive, the
    work that you are doing, we would be so much better off if we
    basically put you out of business. If it were up at the front
    end, and these claims data were so tight and so well screened
    and so intuitive, that you--the types of fraudulent claims that
    you had to chase down were, you know, were just di minimis,
    that would be so satisfying, I think, all the way around. And
    then we could have great debates in this Congress about how to
    spend an additional $60 billion that we could save, and we can
    figure out ways to do it more much efficiently.
        But on behalf of the entire subcommittee, thank you very
    much for what you are doing, number one, the work that you are
    doing and your willingness to spend time with us today. I
    appreciate it.
        The committee is adjourned.
        [Whereupon, at 11:20 a.m., the subcommittee was adjourned.]

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