    [Senate Hearing 114-859]
    [From the U.S. Government Publishing Office]

                                                           S. Hrg. 114-859

                        THE DOCTOR IS NOT IN: COMBATING
                       MEDICARE PROVIDER ENROLLMENT FRAUD

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

                                    HEARING

                                   BEFORE THE

                           SPECIAL COMMITTEE ON AGING

                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 WASHINGTON, DC

                                   __________

                                 JULY 22, 2015

                                   __________

                               Serial No. 114-10

             Printed for the use of the Special Committee on Aging

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

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

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    48-875                      WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                           SPECIAL COMMITTEE ON AGING

                       SUSAN M. COLLINS, Maine, Chairman

    ORRIN G. HATCH, Utah                 CLAIRE McCASKILL, Missouri
    MARK KIRK, Illinois                  BILL NELSON, Florida
    JEFF FLAKE, Arizona                  ROBERT P. CASEY, JR., Pennsylvania
    TIM SCOTT, South Carolina            SHELDON WHITEHOUSE, Rhode Island
    BOB CORKER, Tennessee                KIRSTEN E. GILLIBRAND, New York
    DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
    TOM COTTON, Arkansas                 JOE DONNELLY, Indiana
    DAVID PERDUE, Georgia                ELIZABETH WARREN, Massachusetts
    THOM TILLIS, North Carolina          TIM KAINE, Virginia
    BEN SASSE, Nebraska

                                  ----------

                  Priscilla Hanley, Majority Staff Director
                     Derron Parks, Minority Staff Director

                             C  O  N  T  E  N  T  S

                                  ----------

                                                                       Page

    Opening Statement of Senator Susan M. Collins, Chairman..........     1
    Opening Statement of Senator Claire McCaskill, Ranking Member....     2

                               PANEL OF WITNESSES

    Seto J. Bagdoyan, Director, Audit Services, Government
      Accountability Office, Washington, D.C.........................     5
    Shantanu Agrawal, M.D., Deputy Administrator, Centers for
      Medicare and Medicaid Services (CMS), and Director, Center for
      Program Integrity (CPI), Washington, D.C.......................     6
    Katherine M. Leff, R.N., Director, Special Investigations Unit,
      Care Source Management Group, Dayton, Ohio.....................     8

                                    APPENDIX
                          Prepared Witness Statements

    Seto J. Bagdoyan, Director, Audit Services, Government
      Accountability Office, Washington, D.C.........................    41
    Shantanu Agrawal, M.D., Deputy Administrator, Centers for
      Medicare and Medicaid Services (CMS), and Director, Center for
      Program Integrity (CPI), Washington, D.C.......................    57
    Katherine M. Leff, R.N., Director, Special Investigations Unit,
      Care Source Management Group, Dayton, Ohio.....................    67

                            Questions for the Record

    Seto J. Bagdoyan, Director, Audit Services, Government
      Accountability Office, Washington, D.C.........................    73
    Shantanu Agrawal, M.D., Deputy Administrator, Centers for
      Medicare and Medicaid Services (CMS), and Director, Center for
      Program Integrity (CPI), Washington, D.C.......................    75

                           Statements for the Record

    GAO Report - Medicare Program....................................    79

                        THE DOCTOR IS NOT IN: COMBATING
                       MEDICARE PROVIDER ENROLLMENT FRAUD

                                  ----------

                            WEDNESDAY, JULY 22, 2015

                                           U.S. Senate,
                                    Special Committee on Again,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:17 p.m., Room
    562, Dirksen Senate Office Building, Hon. Susan M. Collins,
    Chairman of the Committee, presiding.
        Present: Senators Collins, Cotton, Tillis, Sasse,
    McCaskill, Casey, Whitehouse, Donnelly, Warren, Kaine.
        Also present: Senator Carper.

                     OPENING STATEMENT OF SENATOR
                       SUSAN M. COLLINS, CHAIRMAN

        The Chairman. The Committee will come to order. Good
    afternoon. Before I begin my remarks, let me thank our Ranking
    Member, Senator Claire McCaskill, for proposing this hearing on
    improper payments in the Medicare program. This is an
    incredibly important topic to which Senator McCaskill has
    supplied her formidable investigative skills.
        Today we will examine the GAO's latest assessment of
    efforts to prevent these improper payments which are now
    estimated at an astonishing $60 billion, or nearly 11 percent
    of Medicare's total spending. This problem calls to mind the
    old adage, the more things change, the more they remain the
    same, for it was in 1998 when I was Chairman of the Permanent
    Subcommittee on Investigations that I held a series of hearings
    to examine fraud in the Medicare program.
        Those hearings uncovered dramatic examples such as the
    payments of $117,000 to two so-called physicians whose address
    was actually a laundromat in Brooklyn. We also found $6 million
    paid to durable medical equipment companies that supposedly
    were headquartered in the middle of a runway at the Miami
    International Airport.
        We were able to cull PSI's archives to find photos of these
    provider locations which you can see on the monitors. Seventeen
    years later, after I chaired these hearings, I am dismayed to
    learn that improper payments are still flowing to con artists
    who billed the system from fictitious locations.
        Take a look at the provider locations highlighted by the
    GAO in the report that is released today. One turns out to be a
    burger joint. Another, a vacant lot. They say a picture is
    worth a thousand words. These pictures, side-by-side,
    illustrate the ongoing risk of improper payments in the
    Medicare system and the billions of taxpayer dollars that are
    already lost.
        Since 1990, the GAO has identified Medicare as being at
    high risk for improper payments and fraud. The central question
    for us to ask today is why, after so many years, does Medicare
    remain unable to distinguish between legitimate healthcare
    providers seeking payment for services rendered and con artists
    looking to scam the system.
        In part, the answer is that the task of ferreting out
    wasteful and fraudulent spending is made all that much more
    difficult by the ingenuity of scam artists, but it is also true
    that Medicare has dismally failed to take the comprehensive
    actions needed to seal its systems against vulnerabilities.
        For example, the software used by Medicare to check
    provider addresses does not flag invalid locations such as UPS
    stores, mailboxes, or vacant lots, or burger joints, for that
    matter. Just checking these addresses using websites like
    Google Maps or 411.com would be an easy way to spot invalid
    addresses. Yet, inexplicably, CMS issued guidance in March of
    last year discouraging this simple practice.
        Likewise, the procedures used by Medicare to screen
    providers remain inadequate. While they are an improvement over
    past practice, they ought to be strengthened. It is clear that
    we must do more to shift from a pay-and-chase strategy to
    combat Medicare fraud to one that prevents the harm from ever
    occurring in the first place.
        Our witnesses have a wealth of knowledge about Medicare's
    fraud prevention mechanisms and what can be learned from
    private insurers and other stakeholders to reduce improper
    payments. I look forward to their testimony and hope that 17
    years from now we are not complaining about the failure of
    Medicare to implement simple fraud protection procedures. It is
    now my pleasure to turn the hearing over to Senator McCaskill
    for her opening statement, introductions of witnesses, and the
    first round of questions.

                     OPENING STATEMENT OF SENATOR
                    CLAIRE McCASKILL, RANKING MEMBER

        Senator McCaskill. Thank you so much, Chairman Collins.
    Before I get started, I do want to acknowledge on the record
    our colleague, Senator Carper, for his dedication to this
    issue. The GAO report was requested jointly by a number of us
    including him and we have worked together a long time on
    improper payments and improving and safeguarding the Medicare
    program. I know that Senator Collins has also worked with him
    when she previously served on the Homeland Security and
    Government Affairs Committee.
        The Medicare program is an essential commitment that we as
    a society have made to Americans in their golden years. Through
    Medicare, our Government provides high quality medical care to
    seniors at an affordable cost for as long as they need it. We
    owe it to seniors and taxpayers to do our best to eliminate any
    potential fraud in the program so seniors can receive the best
    care and taxpayer dollars are not wasted.
        Unfortunately, it appears that the Centers for Medicare and
    Medicaid Services, known as CMS, is falling down on some key
    aspects of ensuring that it is successfully implementing the
    very first step in eliminating fraud, preventing illegitimate
    providers from enrolling in the program. Before a provider can
    be reimbursed for taking care of beneficiaries, he or she must
    be enrolled in the program. CMS relies on contractors to handle
    and verify these enrollments.
        The enrollment process is intended to ensure that the
    healthcare providers and suppliers in Medicare are licensed and
    legitimate providers of healthcare services. This is a
    relatively straightforward process that has four main steps.
    First, verifying an actual practice location for the provider;
    second, verifying that the licensure information listed in the
    application is accurate; third, verifying that the providers
    are not deceased; and fourth, verifying that providers had not
    previously been excluded from doing business with the Federal
    Government.
        We asked GAO to review whether CMS was accomplishing these
    four steps. Although GAO found no major problems in CMS's
    process for ensuring the providers it enrolls in Medicare are
    alive and not excluded from working with the Federal
    Government, it found that CMS had some pretty big blind spots
    on the other two verification points.
        First, as the illustrations today clearly show, CMS is
    doing a poor job of flagging potentially ineligible practice
    locations. This includes enrolling providers who list their
    practice addresses as rented mailboxes from companies like UPS
    and Mailboxes, Etc., and enrolling those who list their
    practice addresses at fast food restaurants or even vacant
    lots.
        Although GAO did not have access to detailed enough claims
    information to be able to figure out exactly how much CMS paid
    out to ineligible providers, the total amount is in the
    hundreds of millions, perhaps as big as $1 billion. I
    understand that CMS does not have the resources to require its
    contractors to conduct in-person visits to all 1.8 million
    Medicare providers and suppliers, but it is inexcusable for
    CMS, especially in light of today's technology, to not have the
    built-in ability to flag potentially invalid, vacant, or rented
    mailbox addresses when the United States Postal Service flags
    such addresses and provides that information to CMS. This
    should be easy, and yet, CMS has potentially misspent billions
    of dollars throughout the years because it failed to use this
    readily available information. During today's hearing, I plan
    to examine exactly why this has been the case for so long and
    how the Government can better contract for services that
    actually utilize the information it needs to prevent fraud.
        GAO also found that CMS's process for checking adverse
    actions on physicians' licenses before enrolling them in
    Medicare is woefully lacking. CMS currently relies on
    physicians to self-report any adverse action on licenses that
    he or she may have in states other than where he or she is
    enrolling in Medicare.
        Now, if a physician is enrolling to be a Medicare provider
    in Missouri with a clean Missouri medical license and a revoked
    Illinois medical license, that revoked Illinois medical license
    is something that CMS should know about. It is certainly
    something I would want to know about, and although CMS may have
    felt confident in relying on such a physician to self-report
    that revoked license, I believe that both seniors and taxpayers
    deserve much more protection and vigilance from CMS against
    unscrupulous physicians. Relying on self-reporting cannot
    provide the necessary protection.
        I have questions today about why CMS has structured its
    licensure check to rely on self-reporting and I plan to dig
    deep into CMS's current plans for fixing this problem. Next
    week is the 50th anniversary of the Medicare program. For 50
    years, it has protected the health and well-being of millions
    of seniors including the 50 million or so currently enrolled in
    Medicare. This is a stunning achievement by our Government. I
    want to acknowledge and applaud that achievement.
        Today's hearing is not about tearing the program down. It
    is about how we can all work together to make it better and
    ensure that it continues to provide quality care for our
    seniors, living up to the commitment our Government has made to
    them in their golden years. I thank the witnesses for being
    here today. First, we have Dr. Shantanu Agrawal--close?
        Dr. Agrawal. Close. It is Shantanu.
        Senator McCaskill. Shantanu?
        Dr. Agrawal. Yep.
        Senator McCaskill. Agrawal.
        Dr. Agrawal. Agarwal.
        Senator McCaskill. Agarwal?
        Dr. Agrawal. I am good with that.
        Senator McCaskill. Okay. I am sorry. I am sure you have
    this every day, right? You are used to it.
        Dr. Agrawal. More often than not, yes.
        Senator McCaskill. More often than not. He is the Deputy
    Administrator of the Centers for Medicare and Medicaid and the
    Director of the Center for Program Integrity. He comes to this
    position having served as chief medical officer of CPI. He is a
    board-certified emergency medicine physician and fellow of the
    American Academy of Emergency Medicine.
        Mr. Seto Bagdoyan--you guys are killing me today--is the
    Director of Audit Services at the Government Accountability
    Office. During his GAO career, Mr. Bagdoyan has served in a
    variety of positions including as legislative advisor in the
    Office of congressional Relations and as an Assistant Director
    for Homeland Security and Justice. He has also served on
    congressional details with the Senate Finance Committee and the
    House Committee on Homeland Security.
        Finally, Katherine M. Leff--this is very nice--who is a
    registered nurse, is the Director of the Special Investigations
    Unit for CareSource Management Group. CareSource is a non-
    profit managed healthcare plan headquartered in Dayton, Ohio.
    It offers managed healthcare plans including Medicaid plans, in
    Ohio, Kentucky, and Indiana. Ms. Leff is also the current Chair
    of the National Healthcare Anti-Fraud Association.
        We would ask that your oral testimony be no more than five
    minutes. Your written testimony will be printed in the record
    in its entirety. Thank you all and I look forward to hearing
    from you. Mr. Bagdoyan, we will begin with you.

                     STATEMENT OF SETO J. BAGDOYAN,

                  DIRECTOR, AUDIT SERVICES, GOVERNMENT

                ACCOUNTABILITY OFFICE, WASHINGTON, D.C.

        Mr. Bagdoyan. Thank you. Chairman Collins, Ranking Member
    McCaskill, Senator Carper who has joined us, and members of the
    Committee, I am pleased to be here today to discuss the results
    of GAO's recent report on the Medicare eligibility verification
    process for providers and suppliers.
        As Chairman Collins mentioned earlier, Medicare is a
    significant expenditure for the Federal Government. In Fiscal
    Year 2014, Medicare paid $554 billion for healthcare and
    related services, of which CMS estimates that about $60
    billion, or 11 percent, were improper payments. This is an
    increase from the Fiscal Year 202013 level of about $49.9
    billion.
        Earlier this year we reported that Medicare remains on
    GAO's high-risk list partly because of continuing concerns
    about the adequacy of fiscal oversight of the program including
    improper payments. My remarks today highlight key findings from
    our review of four enrollment screening controls CMS uses to
    prevent and detect enrollment fraud involving its provider,
    enrollment chain, and ownership system, also known as PECOS.
        Based on our review, we found that controls used to screen
    for providers and suppliers listed as deceased or excluded from
    participating in Federal or healthcare related programs appear
    to be generally working. However, we identified weaknesses in
    two other controls. First, we identified weaknesses in CMS's
    verification of practice locations.
        Medicare providers must submit the address of the practice
    location from which they offer services. The software CMS uses
    to validate addresses does not flag potentially ineligible
    addresses such as rental mailboxes, and it also does not flag
    vacant or invalid addresses which are those where providers or
    suppliers no longer reside or those not recognized by the U.S.
    Postal Service.
        Of the 980,000 addresses in PECOS, we examined using Postal
    Service software. About 105,000 initially appeared as a CMRA,
    that is essentially a rental mailbox, a vacant address, or an
    invalid address. Based on subsequent analyses of a projectable
    sample of 496 addresses, we estimated that about 22 percent of
    the 105,000 addresses, or 23,400, are potentially ineligible.
        Separately, CMS's March 2014 guidance reduced address
    verification steps conducted by its contractors. CMS's 2013
    guidance encouraged contractors to conduct additional
    verification steps such as using Google Maps and conducting
    site visits. However, CMS's latest guidance does not reference
    such a steps beyond contacting the provider. By reducing
    verification steps, CMS has increased its vulnerability to
    potential fraud.
        We recommended CMS incorporate flags into its software to
    help identify questionable addresses and revise its 2014
    guidance to enhance verification of practice locations. CMS
    agreed with the first recommendation and disagreed with the
    second. We believe additional address verification steps to be
    an essential control and stand behind our recommendation.
        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. Final adverse actions include
    license suspensions or revocations by any State licensing
    authority.
        We found 147 out of the approximately 1.3 million
    physicians listed as eligible in PECOS had received a final
    adverse action and were either not revoked from PECOS or
    revoked at a much later time.
        In March 2014, CMS began providing a report to its
    contractors to improve licensure reviews. While a good first
    step, this report only includes current licensure status for
    the State in which providers enroll. It does not include the
    full adverse action history of these licenses 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.
        In closing, our findings highlight that CMS needs to
    maximize its efforts to promote program integrity to ensure
    ineligible or fraudulent providers and suppliers do not enroll
    into PECOS. Our recommendations in this regard are designed to
    enhance CMS's toolbox and help narrow the window of opportunity
    for potential improper payments and fraud. Madam Chairman, this
    concludes my statement. I look forward to the Committee's
    questions.
        Senator McCaskill. Thank you.
        Dr. Agrawal.

              STATEMENT OF SHANTANU AGRAWAL, M.D., DEPUTY

                ADMINISTRATOR, CENTERS FOR MEDICARE AND

             MEDICAID SERVICES (CMS), AND DIRECTOR, CENTER

             FOR PROGRAM INTEGRITY (CPI), WASHINGTON, D.C.

        Dr. Agrawal. Thank you. Chairman Collins, Ranking Member
    McCaskill, Senator Carper and members of the Committee, thank
    you for the invitation to discuss CMS's work to improve
    provider and supplier enrollment systems. Enhancing program
    integrity is a top priority for the Administration and an
    agency-wide effort at CMS.
        Thanks in part to the authorities provided by the
    Affordable Care Act, CMS has improved the provider and supplier
    enrollment and screening process. We are seeing real results
    from our efforts and have generated over $927 million in
    savings from just our enrollment and screening work in the last
    four years.
        These actions are part of a larger set of provider
    enrollment activities which have saved the program $2.4 billion
    in avoided costs. These savings reflect the actions CMS has
    taken to deactivate billing privileges for more than 540,000
    providers and suppliers that do not meet Medicare requirements
    and to revoke the enrollment and billing privileges of an
    additional 34,000 providers and suppliers.
        As required by the ACA, and in line with broader changes in
    program integrity, CMS has implemented risk-based screening of
    providers and suppliers who want to participate in Medicare and
    Medicaid which require certain categories of providers and
    suppliers that have historically posed a higher risk of fraud
    to undergo greater scrutiny prior to their enrollment or
    revalidation.
        Providers in the limited risk category undergo verification
    of licensure and compliance with Federal regulations and State
    requirements, frequently in an automated manner. Providers and
    suppliers in the moderate and high risk categories undergo
    additional screening including fingerprint-based background
    checks, criminal record searches, and unannounced site visits.
        CMS uses site visits to verify that a provider or
    supplier's practice location meets requirements and helps
    prevent questionable providers and suppliers from enrolling in
    the Medicare program. Since 2011, CMS has completed 220,000
    site visits which have resulted in nearly 1,300 revocations.
    Importantly, these activities have also stopped nearly 5,000
    initial enrollments in the last 12 months which means the
    provider was not able to enroll or enter the Medicare program.
        Today's GAO report confirms that our risk-based approach to
    enrollment is effective, particularly in addressing higher risk
    providers. It also shows that we could do more to scrutinize
    certain limited risk providers like physician practices. We
    appreciate the GAO's recommendations and will take several
    steps to address these recommendations.
        To better target limited risk providers, CMS has begun
    conducting ad hoc site visits to these providers to further
    ensure that every provider entering the Medicare program meets
    program requirements and are valid and operational. CMS already
    uses USPS data in our address verification system, and to
    strengthen the enrollment screening process, CMS will enhance
    the address verification software to better detect potentially
    ineligible addresses in line with GAO's recommendation.
        We are working toward configuring the provider and supplier
    address verification system in PECOS to flag commercial mail
    receiving agencies, vacancies, invalid addresses, and other
    potentially questionable practice locations. We expect this
    enhancement to be complete by early next year.
        In their report, GAO sampled 496 Medicare locations as a
    sample of the enrollment data. GAO referred 92 locations with
    the most concerning questionable addresses to CMS for further
    investigation and appropriate action, as this figure shows. The
    vast majority of these locations were found to be operational,
    contained clerical keying errors, and otherwise legitimate
    providers, or were already previously revoked or deactivated
    through our ongoing efforts.
        Importantly, not a single high risk provider in the GAO
    sample had fallen through the cracks. Some addresses were
    locations of legitimate, limited risk providers with other
    addresses on file, the provider moved without closing out a
    previous address in our system.
        In fact, I would point out that the two examples brought up
    by Chairman Collins were both examples of locations of limited
    risk physicians practices that in fact had moved and had not
    billed the program in over a decade. In all, this accounted for
    80 of the locations out of 92 and only 12 of the locations
    referred by the GAO required CMS to take an administrative
    action.
        Even among this set, eight of these twelve locations did
    not bill the Medicare program during the time period studied by
    GAO. Based on GAO's own methodology, this administrative action
    rate is only .3 percent of all addresses in PECOS. It is
    important to note that these twelve locations were all of
    limited risk providers, suggesting that our risk-based approach
    to targeting our program integrity efforts to higher risk, high
    dollar providers has been effective.
        GAO's report has helped us to better understand where our
    efforts are succeeding and where we have further work to do.
    Their work will help inform our efforts going forward to focus
    on certain limited risk providers which will be driven by data
    analysis and other lead generation approaches. As I stated
    earlier, CMS is committed to strengthening provider and
    supplier enrollment and screening processes to make sure that
    Medicare beneficiaries receive items and services from
    appropriate providers and taxpayer dollars are protected, but
    the importance of program integrity efforts extends beyond
    dollars in healthcare costs alone. It is fundamentally about
    protecting our beneficiaries and ensuring we have the resources
    to provide for their care. We are committed to working with GAO
    as we continue to strengthen program integrity. We look forward
    to working with this Committee and Congress on these efforts.
    Thank you.
        Senator McCaskill. Thank you, Doctor.
        Ms. Leff.

            STATEMENT OF KATHERINE M. LEFF, R.N., DIRECTOR,

                SPECIAL INVESTIGATIONS UNIT, CARE SOURCE

                     MANAGEMENT GROUP, DAYTON, OHIO

        Ms. Leff. I want to thank Chairman Collins, Ranking Member
    McCaskill, and Senator Carper and the distinguished members of
    the Special Committee on Aging for the opportunity so speak to
    you today about the GAO report calling for improved eligibility
    verification of providers and suppliers.
        CareSource agrees with the GAO report recommendations.
    However, we also recognize the challenges CMS faces in
    identifying fraudulent providers in the enrollment process due
    to CMS's enormous size and any willing provider requirement.
    Private plans are much smaller, have more control over
    providers entering into and staying in our network.
        The GAO report identified two weaknesses in Medicare
    provider enrollment screening, the verification of provider
    practice locations and physicians' licensure status. In my
    testimony, I offer CareSource's process as a means of
    comparison for the Committee. At CareSource, we do the
    following to verify practice locations and licensure status.
        First, we require a Council on Affordable Healthcare
    Quality Healthcare credentialing application. We obtain then a
    report from the National Practitioner Data Bank which provides
    licensure, practice address, malpractice cases, and any adverse
    actions. We conduct secret shopper calls to provider offices.
    We utilize a USPS address verification software to identify
    invalid addresses.
        However, it is important to note here that providers have
    multiple addresses. One of those addresses may be a P.O. box at
    a UPS store that is used to secure payment, provide access for
    mailing for payment by the provider or the providers' billing
    company. We also do periodic onsite visits at providers'
    offices. We obtain the providers' malpractice insurance
    certificate. We pull providers' AMA physician profile. We check
    license boards in all states.
        We also enter the providers into a software program that
    checks the providers against State licensing boards, the
    specially designated nationals list, Social Security Death
    Index, excluded parties list system, HHS OIG exclusions, and
    State provider sanctions list.
        It is important to note here that while this process is
    automated, mitigating the findings are not. Naming conventions
    in all these data bases are frequently different and there is
    not enough information to confirm matches. Matches must be
    validated manually, which is a very resource intensive process.
        While we cannot always identify fraud in the enrollment
    process, many plans have methods in place to identify aberrant
    provider billing behavior. At CareSource, our Special
    Investigations Unit uses a rules-based post-payment fraud
    detection software to identify known fraud schemes. We are
    right now in the process of implementing a new fraud detection
    software that uses mathematically based predictive analytics.
    This new software also provides the opportunity to identify
    fraud prior to payment.
        We share identified fraud schemes and providers under
    investigations at fraud information sharing meetings, with law
    enforcement, Government agencies, and other plans. We report
    new fraud schemes in provider investigations to SIRIS, which is
    a national fraud data base through the National Healthcare
    Antifraud Association. We review grievance data looking for
    trends.
        We compare our providers' recredentialing to our
    investigative case tracking system to identify providers with
    issues. We send explanation of benefit forms to members to
    identify services not provided. CareSource's Special
    Investigation Unit works closely with internal CareSource
    departments and Federal and State agencies to proactively and
    cooperatively prevent and detect fraud, waste and abuse.
        Each year we enhance our prevention detection and
    investigative efforts by adding staff, software, and process,
    resulting in increased savings and member safety. Already in
    2015, we have taken significant actions on DME and allergy--
    allergy cases, genetic labs, optical cases that have saved
    considerable taxpayer dollars. In addition, we have identified
    complicated issues in the home healthcare arena and are working
    collaboratively with State agencies and other plans to address
    these issues.
        Finally, in 2015, we saw the end results of a multiyear
    provider investigation by witnessing the provider being
    sentenced to six and a half years in prison for behavior that
    involved excessive CT scans, excessive knee and perciformis
    injections out of the country, drug purchases, et cetera.
        Thank you again for the opportunity to appear before you
    today to discuss the ways to prevent healthcare fraud. I would
    be pleased to address any questions you have.
        Senator McCaskill. Thank you. Thank you all for your
    testimony. Dr. Agrawal, let us start with an acknowledgment
    that the main way we have gone after fraud in the Medicare
    program is to pay and Chase, correct?
        Dr. Agrawal. I think that has been historically true, but
    in the last five years, we have changed significantly to a much
    more preventive footing.
        Senator McCaskill. Okay. The contractor that you use now,
    Finalist, is only able to standardize addresses, which I
    understand is like correcting misspellings and making sure they
    are correct. It is currently unable to flag rented mailboxes,
    vacant addresses, and invalid addresses, correct?
        Dr. Agrawal. The finalist software is used by our
    contractor. It has a couple of different data inputs including
    a USPS data base. It does have shortcomings compared to the
    data base that GAO has described, which is why we are also
    incorporating that level of data.
        Senator McCaskill. Okay. If it does not have the correct
    data that it needed, I assume that the employees, the
    contractor employees, could have gone to USPS and checked their
    website, right, for this data? I mean, what I am trying to
    figure out is, why in the world would we ever hire a contractor
    that was not doing a basic check that is available for free?
        Dr. Agrawal. I think we should maybe differentiate a little
    bit, Senator. We have Medicare administrative contractors that
    actually do the enrollment work.
        Senator McCaskill. Right.
        Dr. Agrawal. We have program integrity contractors that
    supply them with tools, resources, technologies, data bases to
    do that.
        Senator McCaskill. Well, but do we really need somebody to
    supply them with a basic that you can check USPS for free to
    see if it is a valid address? We need another layer to do that?
        Dr. Agrawal. Well, what we have been moving toward in order
    to really have that position toward prevention is automated
    approaches through these kinds of checks. We have been
    implementing over several years now and working to improve, the
    automated provider screening system. One of the things that
    that system does is look at address verification. It also looks
    for licensure, and now, most recently, we have been working to
    incorporate criminal background history into that system. Our
    approach is to try to give our enrollment contractors as much
    consistent automated, timely, actionable data that we possibly
    can.
        Senator McCaskill. How much are we paying to Finalist for
    address checks that we can do for free through USPS--through
    the Postal Service?
        Dr. Agrawal. Again, we pay--so I do not have a specific
    number in front of me, Senator. I am happy to get that for you.
        Senator McCaskill. Should you not know that coming to this
    hearing, what we pay them?
        Dr. Agrawal. Well, what we do is we bring on board various
    data bases, so we have over 100 data bases that perform the
    kind of enrollment checks that we need. All of that is filtered
    through the automated provider screening system utilizing
    physician identifiers, other information like that, and made
    available, so what we have is, we have costs associated with
    rolling on those data bases and relatively few, we hope, for
    individual manual checks. I mean, the whole purpose is to move
    away from manual checks that might be inconsistent to totally
    consistent automated checks.
        Senator McCaskill. I know you understand the point I am
    making.
        Dr. Agrawal. Sure.
        Senator McCaskill. That this information, and I think the
    point was made very clearly in this audit, it is a good audit,
    and it points out that the basic address checks that can be
    done through technology very simply and for free were not being
    done by the paid contractor that was supposed to be doing
    address checks, correct?
        Dr. Agrawal. Senator, I agree that this report is useful.
        Senator McCaskill. That is good.
        Dr. Agrawal. It definitely has highlighted areas of
    improvement for us. I think what the report also highlights is
    that there is no such thing as a perfect single data base. What
    we saw in the sample, as I discussed in my opening remarks, and
    the sample provided to us by GAO, is that several addresses
    were actually legitimate, several were truly operational at the
    address identified for us by GAO, and indeed some really did
    need administrative action.
        Senator McCaskill. Well, I am a little troubled, honestly,
    with the chart.
        Dr. Agrawal. Okay.
        Senator McCaskill. Let me tell you why. There are two ways
    to take an audit. One way is to say, you know, this is a good
    point. We can do better. This is basic information that is
    available with a few clicks, free from the United States Postal
    Service, and we have got to get this integrated as quickly as
    possible, and by the way--and I will save these questions for
    later because I will not have time on this round--about this
    contractor. Why in the world we have a contractor that did not
    integrate this into their software check is beyond me since
    this is a fairly important part of a--it is a four-step process
    and this is one of the steps, so your chart, GAO referred you a
    list of 92 providers, correct?
        Dr. Agrawal. Correct.
        Senator McCaskill. That list of 92 providers was determined
    from a generalized sample of 496 providers, correct?
        Dr. Agrawal. Correct.
        Senator McCaskill. That generalized sample of 496
    represents .47 percent of the potentially ineligible addresses,
    correct?
        Dr. Agrawal. The number I will take as given from you.
        Senator McCaskill. Well, Mr. Bagdoyan will check my math,
    but I believe my math is correct, so your chart shows that four
    of these addresses required administrative action, had billing
    activity. How much did you indicate was paid to those four
    providers, how much money?
        Dr. Agrawal. I will have to check on that again.
        Senator McCaskill. I know. It was $1.2 million from 2005 to
    2013. You should know. Since GAO used a generalized sample, we
    can statistically assume that roughly what applies to those 496
    will apply to the whole group of 105,000, correct?
        Dr. Agrawal. I would have to defer on methodology to the
    GAO.
        Senator McCaskill. Correct, Mr. Bagdoyan?
        Mr. Bagdoyan. That is correct, Senator.
        Senator McCaskill. Okay, so relying on that statistical
    projection, if we were able to say that for each group of 496
    ineligible, there would be about $1.2 million paid out
    fraudulently and we apply it to the entire group, we come up
    with $254 million.
        Now, you coming in here and showing us a chart that there
    is only four I think is completely misleading and worries me
    that you are not saying, you know, we had a problem and we are
    going to get after it and fix it. What you have done instead is
    created a chart that we got a half hour before the hearing that
    skews the data and makes it look like you only had four
    addresses out of the hundreds of thousands that were identified
    by GAO, which is completely misleading.
        Dr. Agrawal. Senator, the GAO was most concerned and asked
    us to investigate, look into the 92 cases that they had
    presented to us. They presented that data, you know, with the
    expectation that most of those addresses would be concerning.
    We tracked them down with diligence performing the necessary
    subsequent investigative actions that included site visits,
    other kinds of data analytics.
        We wanted to be forthcoming with both the GAO that has
    asked the data from us, and this Committee, about our findings.
    Now, none of that suggests that the GAO's recommendations are
    not legitimate or that there are not improvements that we ought
    to make. In fact, I believe I stated that up front in my
    remarks and I am happy to state it again.
        I believe that they have found a tool that will enhance our
    efforts. We are working to incorporate that tool into our
    screening systems. I did not want to leave you with the
    impression that somehow all 92 of these locations were truly
    fraudulent billers because I think that does not reflect the
    reality on the ground.
        Senator McCaskill. Well, I appreciate that. I think you can
    also appreciate that it looks a little bit like circling the
    wagons and gosh, this really is not that big a problem, and I
    think we do have a problem when something as simple as checking
    addresses is not being done by the contractor. Thank you. I
    have gone two minutes over and my colleagues have been very
    patient. Madam Chairman.
        The Chairman. Thank you very much. I am glad that you went
    over it because I share your concern and outrage over this
    issue. I want to switch to a different issue and that is the
    physicians with active provider numbers were collecting money
    and yet, have an adverse action from a State Medical Board that
    resulted in a suspension or revocation of their license.
        First I will start with you, Mr. Bagdoyan. GAO's review
    found that 321 physicians with active provider numbers had
    received an adverse action from their State Medical Board, and
    we are talking about serious adverse actions. I am going to
    have the chart put up so that everyone sees. It is a little
    hard to read, at least for my eyes, but I think this will make
    the point.
        Can you tell me how the GAO determined that these
    physicians' licenses had been revoked or suspended and why CMS,
    by contrast, still considered them to be active providers
    eligible for Medicare payments?
        Mr. Bagdoyan. Thank you for your question. What we did was
    we used the Federation of State Medical Boards' data base of
    licensure which has the most complete history of licensure as
    well as adverse actions for all licenses for a particular
    physician. We also researched the individual State data bases
    as well as referred to the PECOS data base as well.
        The Chairman. Is there any reason why CMS could not refer
    to those same data bases?
        Mr. Bagdoyan. I would have to refer that question to Dr.
    Agarwal for a response.
        The Chairman. I spent five years in State government and
    part of my job was reviewing licensing and I know our State
    board of medicine always did a check of other states before
    granting a license in Maine. That was just due diligence on
    their part, so this is of great concern to me. Doctor, on April
    29th, the GAO referred 147 providers to CMS whom GAO had
    identified as having had an adverse action resulting in
    suspension or revocation of one of their medical licenses, and
    yet, they have not been removed from the Medicare program or
    they remained an eligible biller for months after that adverse
    action against their license.
        Now, just so everyone understands in case not everybody can
    read this chart, I want to emphasize how egregious the referred
    cases are. For example, out of the 78 adverse license actions
    GAO identified for sexual misconduct, 48 of those providers, or
    61 percent, were either not revoked from the Medicare program
    until months after the adverse action or never removed. How can
    this happen? Why does not CMS use the same data bases that GAO
    did?
        Dr. Agrawal. Why do I not start there, Senator. What we
    have done in order to get licensure information is try to go
    back to the source, so as I mentioned just a few minutes ago,
    we have rolled in over 100 data bases specifically on
    licensure, not relying on a single source of that data, by
    trying to get actually back to states and try to get that data,
    you know, from as much of the source as possible so that it is
    timely and accurate, because licensure information can actually
    change quite a bit even for, you know, valid physicians.
        I think to your broader point, Senator, there is absolutely
    no way that I defend the presence of a criminal or a convict, a
    felon in the Medicare program. I think it is clearly our job,
    when those cases are identified either proactively by us or
    even in responses to report by GAO or others, to react swiftly.
        Now, GAO did give us, to your point, 147 leads to
    investigate which were concerning from their perspective for
    licensure issues. I am happy to share the results with them. I
    want to be careful when I do that, I am not sending the message
    that we have not taken their recommendations seriously. We
    still do, but I am happy to share the results on the ground in
    terms of what we found with these 147 cases.
        The Chairman. Well, GAO asked for a response from you by
    June 29th. Has that response occurred?
        Dr. Agrawal. I do not believe we have formally sent it to
    them in writing yet. We will obviously be doing that. We have
    been working diligently on looking at each and every one of
    these cases, trying to get underneath the potential licensure
    issues. What we have generally found is there were 19
    revocations for licensure issues that we were able to take out
    of the 147, so we are grateful to the GAO for those leads.
        The remainder of the cases, which we will obviously be
    sharing, were cases where we had already taken an action like a
    revocation or deactivation, or where we could not corroborate
    the licensure issue, or the licensure issue would not have been
    a disqualifying event in Medicare.
        The Chairman. Well, Doctor, I can tell you that I know from
    talking to GAO that CMS has not responded, and so you are
    overdue with your response.
        Dr. Agrawal. Correct.
        The Chairman. To me, if I were in your position and GAO,
    which has done all this work for you, gave you this list, I
    would be really concerned that you have individuals with
    revocation of their license who are still receiving Medicare
    payments or at least are eligible for those payments,
    especially when GAO was able to identify them from just going
    to a consolidated data base. Thank you.
        Senator McCaskill. Thank you.
        Senator Kaine.
        Senator Kaine. Thank you to Madam Chair and Ranking Member
    and to our witnesses. Dr. Agarwal, you are getting the
    attention today, so I think I am going to stick with you for a
    second. Here is a fraud and abuse issue that I am very
    concerned about.
        Not this GAO study, but other recent reports have really
    focused upon the number of opioid prescriptions and fraud and
    abuse in the Medicare Part D program. A lot of challenges with
    opioids. We are seeing them all across the Nation. We are
    seeing them in the VA system. We are seeing them in the private
    pay. We are seeing them in Medicare. The studies have shown
    that the opioid prescriptions within Medicare Part D have
    increased dramatically higher than other drug prescriptions and
    there are some geographical hot spots in that.
        I hear about this all the time. In Virginia, it does not
    respect class or geography. It is a serious problem. Talk to us
    about CMS's efforts to try to control the fraud and abuse and
    especially with respect to opioid prescriptions in Medicare
    Part D.
        Dr. Agrawal. Senator, thank you. That is obviously a very
    important area and as a physician who has seen the ravages of
    substance abuse and other related issues, I completely agree
    that it is a priority. We have been doing more work in the Part
    D program to address beneficiary issues as well as provider
    issues, and then the various intermediaries, Part D plan
    sponsors as well as pharmacies.
        On the provider side, one of the biggest actions that we
    are working to implement over the next year is full enrollment
    of Part D prescribers. This hearing so far has focused on
    enrollment on the Medicare A-B side. We are implementing
    similar authorities and controls in Part D so that every
    prescription written in Part D is by a Medicare approved
    provider.
        That is a radically new stance in Medicare than has been
    adopted historically. That will allow non-qualified providers,
    really for Part D plan sponsors, to place edits in their system
    so that prescriptions from those providers simply cannot be
    filled. I think that will help really make sure that providers,
    again, are licensed to have DEA licensure and other things that
    are more germane to----
        Senator Kaine. This is not opioid-specific. This is general
    systemwide improvement to try to track, right?
        Dr. Agrawal. Correct. On the beneficiary side, we look at--
    we have an over-utilization monitoring system that focuses on
    particular beneficiaries that are above what we would consider
    and what the CDC considers safe thresholds of opioid
    utilization.
        We share that information about specific beneficiaries with
    Part D plan sponsors and then they are able to take, you know,
    elevated steps like case management and other utilization-
    related steps to address these over-utilizing beneficiaries.
        We have noted through that kind of data sharing that there
    is a 28 percent reduction in those high-utilizer beneficiaries,
    that they are brought back down under safer thresholds. There
    are other kinds of data sharing that we do with Part D plan
    sponsors. We provide them, on a quarterly basis, information
    about aberrant pharmacies, aberrant prescribers so that they
    are able to take their own investigative actions and
    administrative actions as relevant.
        We have a healthcare fraud prevention partnership which Ms.
    Leff is a part of that encourages exactly that kind of data
    exchange and encourages exactly that kind of administrative
    action since a number of elements of the Part D program are
    actually directly administered by the plan sponsors not CMS, so
    it is very important to work with them and through them.
        Senator Kaine. Just to put on the record some statistics,
    between 2006 and 2014, Medicare spending on opioids went up
    from $1.5 billion to $3.9 billion in that eight year period,
    and in some regions of the country, Alabama, Tennessee,
    Oklahoma, and Alaska, more than 40 percent of Medicare
    beneficiaries file at least one prescription that includes a
    narcotic. That is really staggering, so these anti-fraud
    measures in that particular area in Medicare Part D are
    appreciated.
        Let me ask you just one more question for any of the
    witnesses. This is a panel that does significant oversight. We
    are not a legislative panel. We do not initiate legislation,
    but we are very interested in it. You have oversight tools and
    we will stay on you about them. Are there legislative
    improvements that could be made, in any of your opinion, that
    would advance an anti-fraud agenda so that we could better deal
    with this problem? Are there other things that we ought to be
    doing?
        Ms. Leff. One thing that I would suggest, Senator Kaine, is
    that in the Medicaid side, we have lock-in programs for
    members, and so what happens is when we find them abusing
    controlled substances, doctor shopping to get those substances,
    we lock them into one pharmacy, one provider. That is very
    effective.
        Then we have case managers working with them to get them
    into the right level of care. If they need psych care and that
    sort of thing, we get them into those type of areas, making
    sure that they are compliant with the program. It seems to be
    very effective in the Medicaid side, but it is not something
    that is permitted under Medicare. That would certainly be an
    opportunity.
        Senator Kaine. Do you know if that is a regulatory matter
    or a legislative matter?
        Ms. Leff. I am not certain.
        Senator Kaine. Dr. Agarwal, do you know?
        Dr. Agrawal. It is a legislative matter. We agree that
    lock-in programs can be beneficial. They are utilized in
    Medicaid by the private sector. We do not currently have this.
    In fact, we are statutorily not permitted to do and it is part
    of the President's budget that we would be happy to work with
    this Committee around to get that kind of authority.
        Senator Kaine. Great. Thank you very much. Thank you, Madam
    Chair.
        Senator McCaskill. Senator Warren.
        Senator Warren. Thank you, Madam Chair. You know, when the
    little guys, doctors' offices or pharmacies are caught breaking
    the law, they sometimes get kicked out of the Medicare program,
    but the consequences for giant corporations are very different.
    Instead of kicking these big time bad actors out of the
    Medicare program or putting CEOs in jail, the Government
    settles with a fine and the company enters a corporate
    integrity agreement, basically a promise not to break the law
    again.
        I want to consider one for-profit hospital chain, Tenet
    Health. It is a $5.8 billion corporation. Now, back in 1994,
    Tenet paid a $379 million fine, suggesting some pretty serious
    activity here, for illegal kickbacks to doctors, and it signed
    one of these corporate integrity agreements.
        Then in 2006, Tenet got caught fraudulently billing
    Medicare and giving illegal kickbacks to doctors for which they
    paid a $900 million fine, suggesting some pretty significant
    activity here, and signed a new corporate integrity agreement.
    Then in 2012, Tenet admitted to breaking the law again, while
    under the 2006 corporate integrity agreement, and it paid a $42
    million fine, and then just a year later, Tenet got another $4
    million slap on the wrist for misconduct that occurred while
    they were under the corporate integrity agreement.
        If a big company can commit major fraud again and again and
    again, and each time they just pay a fine and promise to be
    good and move on, I am not sure what incentive there is for
    them to stop breaking the law. Dr. Agrawal, why is it that a
    company like Tenet--we know about lots of other examples--are
    allowed to settle allegations of fraud over and over with just
    a fine and a promise not to break the law again? When is it
    that you say enough is enough?
        Dr. Agrawal. Senator, thank you for the question. We are an
    administrative agency, as you know. We have a variety of
    authorities that allow us to review medical records, recover
    overpayments, deny enrollment, revoke enrollment. From our
    perspective, there is no such thing as too big to fail. There
    is no provider that we cannot medically review. In fact, some
    of the providers that you cited we have conducted medical
    reviews of and secured overpayments.
        We perform the same screening activities for those
    providers and we have revoked or kicked out of the program
    institutional providers, larger institutional providers. With
    respect to settlements and CIAs in particular, those are
    activities that we as an administrative agency do not engage
    in. Those are conducted by the DOJ and Office of Inspector
    General. I could not really address for you what their
    thresholds are for taking action beyond those.
        Senator Warren. Well, so fair enough that you do not speak
    for them, but you testified here last year and when you did, I
    asked you about how CMS, the HHS Inspector General, and the DOJ
    do not coordinate their actions to deter these bad corporate
    actors.
        As the Director of the Center for Program Integrity, have
    you worked with HHS IG and the DOJ to implement any shared
    policies or guidelines among the agencies that will help assure
    that the actions taken by one agency, like imposing a fine and
    putting in place this corporate integrity agreement, will be
    strong enough to defer future corporate bad acts? What have you
    done since we met last time?
        Dr. Agrawal. Yes, I completely remember that line of
    questioning.
        Senator Warren. Good.
        Dr. Agrawal. So we----
        Senator Warren. I thought you might.
        Dr. Agrawal. We work very closely with the Office of
    Inspector General on a daily basis. We coordinate with them on
    investigations. We make referrals to them on a routine basis.
    We have referred thousands of cases in the last year to the OIG
    for further investigation and their actions.
        They have full access to all of our data analytics and
    other systems so that they know what we are working on. They
    have real-time access to the same data that we do. Indeed, we
    coordinate on cases where if it looks like we want to take a
    revocation action, we coordinate with them and make sure that
    they are aware of that action. There are certain authorities--
    --
        Senator Warren. Well, this sounds good. It sounds like you
    are working together.
        Dr. Agrawal. It is promising. There is more.
        Senator Warren. All right.
        Dr. Agrawal. There are certain authorities that they have
    such as exclusion authority, that I think is very useful and
    obviously they leverage whenever they can. That exclusion
    authority goes beyond kicking somebody out of Medicare. It
    keeps that person or that entity from getting any healthcare
    dollars, so we do make referrals of cases to leverage that
    exclusion authority, and another area of collaboration, there
    is a legislative proposal in the President's budget around
    expanding that exclusion authority. We are very supportive of
    that because it is another place where we can work together.
        Senator Warren. Okay, but let me just track this down just
    to make sure--I realize I am running out of time, but I just
    want to see if I can finish this point, so you are working
    together. You are making referrals. Do you know if DOJ and HHS
    IG have official policies or informal practices with regard to
    whether or not they are really deterring future wrongdoing? I
    do not understand how Tenet can keep showing up like this in
    the records, promising not to break the law and breaking the
    law over and over.
        Dr. Agrawal. In my day to day interactions with the IG and
    DOJ, it is very clear to me that they are committed to stemming
    as much healthcare fraud as possible, either by kicking
    entities out of Medicare or the healthcare system or getting
    them into compliance. I think the specific policies they would
    have to reference, but I have seen nothing in my daily
    interactions with them that would suggest otherwise.
        Senator Warren. Well, let me tell you the part I see and
    that is the part where we are watching the same actors appear
    again and again and again, which suggests to me that whatever
    it is you are doing or they are doing is not getting us where
    we need to be, and the consequence of that is we are seeing
    repeating bad acts and the American taxpayers are losing a lot
    of money over this.
        Companies should not be allowed to get away with fines and
    a promise that they will do better in the future and a wrist
    slap. Until we get serious about holding these big bad actors
    accountable when they defraud Medicare and Medicaid, the big
    guys who cheat the system are not going to have a reason to
    stop. Thank you, Madam Chair.
        Senator McCaskill. Thank you. I want to turn it to Senator
    Carper who is visiting our Committee today, but he is welcome
    because this audit, he was one of the primary requesters of
    this audit. He is a one-man vigilante when it comes to improper
    payments. This is somebody who has been on this for as long as
    I have been in the Senate. He has been working on improper
    payments. We are happy to have you today and welcome your
    questions.
        Senator Carper.
        Senator Carper. Thank you. Thank you so much. My thanks to
    you, to our Chair, for giving me the opportunity to come by. I
    used to serve on this Committee and I said to Senator Casey one
    day, Senator Reid said to me, would you like to be on the
    Finance Committee? I said yes. He said would you be willing to
    give up Banking? I said yes. Would you be willing to give up
    the Commerce Committee? I said yes. He said would you be
    willing to give up Aging? I said no. I ultimately gave it up
    and now I no longer serve on any of those Committees, but I am
    glad to be where I am on the others. Thanks for giving me a
    chance. You can come home again and so I thank you for the
    opportunity to come back.
        I may have been a vigilante, but I am not a one-man and you
    have been part of the posse, and God knows Senator Collins has
    been along with Tom Coburn, all of us who have served at one
    time or another on Homeland Security and Governmental Affairs.
        When they asked Willie Sutton, why do you rob banks, he
    says, that is where the money is. There is a lot of money at
    stake in Medicare and Medicaid, and it is a lot to say grace
    over and we acknowledge that and applaud CMS and those who are
    trying to be vigilant in making sure they are good stewards
    with all of those dollars.
        Having said that, I watched with dismay as we learned at
    the beginning of this year that improper payments for last
    year, 2014, did not go down despite all of our collective
    efforts, including all of what we put in the Affordable Care
    Act to kind of strength the hand of CMS to go after improper
    payments, to actually see them go up, and not by a little bit,
    by 20 percent, by $10 billion from roughly $50 billion the year
    before to last year at $60 billion.
        Let me just start off by saying to the representative from
    GAO, Mr. Bagdoyan, why did it go up? Why so much? I was
    astounded.
        Mr. Bagdoyan. Well, thank you for your question, Senator
    Carper. That bit of insight was beyond the scope of our work.
    There may be a range of reasons for that, but I cannot really
    comment on specifics.
        Senator Carper. Okay. Same question, if I could, Dr.
    Agrawal. Why did it go but, just very briefly?
        Dr. Agrawal. Sure, thank you.
        Senator Carper. $10 billion, 20 percent after all this
    effort that we put into it. We have, you have.
        Dr. Agrawal. The improper payment rate is definitely an
    area that we are continuing to focus on and appreciate your
    leadership on. We have seen a few major drivers of the improper
    payment rate. One thing that we have seen is as our program
    integrity efforts increase, as we get more vigilant, providers
    can sometimes have a hard time keeping up, which can drive up
    the improper payment rate for a while until they learn our new
    rules.
        One example of that is the home health face-to-face
    requirement which I think is obviously a very sensible policy.
    It makes a lot of common sense, but it has led to now over 50
    percent of home health claims being improperly paid. In other
    words, where the medical record documentation of the face-to-
    face requirement is not there, is not sufficient to meet the
    standards of the requirement.
        As you know, certainly, Senator, the improper payment rate
    is not a fraud rate, it is not overlapping with fraud. I think
    these are usually vigilant providers that are trying to keep up
    with the rules that we can do a better job to educate. We can
    also do a better job to move our reviews to a prepayment world
    through efforts like prior authorization, as we are doing, to
    help drive down the improper payment rate.
        Senator Carper. I thank you. Mr. Bagdoyan, has anyone ever
    mispronounced your name?
        Mr. Bagdoyan. Always.
        Senator Carper. Okay. Well, good.
        Mr. Bagdoyan. You are not the first one, Senator.
        Senator Carper. I will try not to do that that as well. In
    his testimony, Dr. Agrawal said that he recognizes the
    importance of the problem that we are talking about here today,
    and he is just trying to take steps to address those problems.
    Could you just comment on CMS's plan for addressing the
    vulnerabilities that GAO has identified? Do you think this plan
    is adequate?
        Mr. Bagdoyan. Sure. Thank you for your question and I
    appreciate Dr. Agarwal stating that CMS has agreed with the
    recommendations, that they have already initiated some steps to
    respond to them, including providing us with responses to the
    referrals we have made.
        I think the absolute key here is sustained execution and
    attentiveness to a strong internal control regime, front,
    middle, and end to help address some of the issues that we
    identified.
        Senator Carper. All right. Dr. Agarwal, your testimony
    demonstrates, I think, fairly clearly that you and your
    colleagues take seriously what GAO, the findings of GAO, and
    you stated your commitment to addressing the identified
    vulnerabilities. Could you just give us a little more detail as
    to when you will have implemented these steps and what is your
    timeline for closing the vulnerabilities described by GAO?
        I will just say, for me, one of my frustrations here is we
    have all heard the term low hanging fruit. This is not low
    hanging fruit we are talking about. This is a fruit that is
    laying on the ground. I just want to hear a sense of urgency
    that we are going to seize this day, we are going to seize this
    day. Go ahead.
        Dr. Agrawal. Absolutely, Senator, and we do have a sense of
    urgency. We have staff that are focused on provider enrollment
    every day as their main job and they want to get all of these
    bad actors out of the program as well. For example, when it
    comes to ineligible addresses, the GAO has recommended on-
    boarding a new data base through the USPS to essentially
    replicate the work that they did. We agreed with that
    recommendation.
        The time for--we need a certain amount of time to get
    access to the data base, verify it, get it incorporated into
    our systems, and so we are targeting doing that by early next
    year. However, in the intervening timeframe, we are also going
    to do other work as we on-board the final fix.
        One is we are going to be doing more ad hoc site visits of
    these limited risk providers since again, those were the ones
    that kind of fell through the cracks in our screening process.
    We are going to do several thousand site visits right away and
    then work to ramp that up in the coming months.
        When it comes to mailboxes, we are also going to
    immediately start comparing lists of the CMRAs, these
    commercial mailbox agencies, bump that list up against PECOS.
    We are going to do that on a routine monthly basis and then,
    you know, visit, investigate, whatever comes out of that in
    this intervening phase until we get this data base
    incorporated.
        Senator Carper. All right. If I could, Madam Chair, you and
    I worked for a lot of years on postal reform and one of the
    things we have tried to do is to help the Postal Service figure
    out how to take a 200-plus-year-old legacy distribution network
    and find new ways to make money out of it, to monetize it in a
    digital age.
        It occurs to me that in a time when we have thousands of
    so-called Medicare providers that are operating out of a
    mailbox or that may be operating, if you will, out of an empty
    building or a vacant building, a vacant lot, you have got the
    Postal Service over here that literally knows what is there,
    what is there in each of these delivery sites.
        There has got to be some way that the Postal Service is
    looking for a way to make money. They have this information.
    There ought to be a way to provide a great partnership, which
    enables the folks at CMS to save a ton of money in Medicare and
    provide, frankly, a revenue stream that the Postal Service
    could use.
        I am going to pursue that and my hope would be that the two
    of you would join me in that pursuit. Thank you so much for
    letting me come by. Thank you.
        Senator McCaskill. Thank you, Senator Carper. We are
    thrilled to have you here today.
        Senator Casey.
        Senator Casey. I want to thank Senator McCaskill for this
    hearing today. Madam Chairman, I thank you as well. I thank
    both of you for this opportunity and for your work a lot of
    years working hard to make sure we are doing everything
    possible to root out waste and fraud.
        Look, I am a believer that when you have any program,
    especially one as consequential and significant in the lives of
    Americans as Medicare whenever you have waste, fraud or abuse,
    that is a taking. It is like stealing resources from people
    that need it, and apparently people that are both vulnerable
    and their families have a reasonable and legitimate expectation
    that the program will be secure, that will be efficient, and
    that the services will be delivered, and services means quality
    care.
        This is serious business and we cannot do enough to make
    sure that we are insisting on much greater strides than we have
    made to date on rooting out waste, fraud and abuse, so it is
    both a taking, but I think it is also an issue that arises in
    the context of our own responsibilities. If we say we support a
    program, we must be willing to support strategies to root out
    waste and fraud.
        We are grateful for the efforts so far, but we have got a
    long way to go. Every minute of every day that there is waste
    and fraud in a program like this, it gives legitimacy or
    momentum to those who would like to slash a program. You cannot
    just be for a program and be for funding if you are not going
    to be for the integrity of the program.
        I wanted to start with Dr. Agarwal and I may not get to our
    other two witnesses, but I wanted to ask him at least two
    questions. First, was on Senior Medicare Patrol, which, as you
    know, is legislation that was--I should say the program itself
    is part of our law for a number of years now.
        We had an extension added to the Older Americans Act and we
    know the basics of what that Medicare patrol does. It helps to
    educate Medicare beneficiaries and their families about how to
    spot and report waste, fraud and abuse. We know that through
    the year 2013, the program saved Medicare 120 million bucks and
    that is not bad.
        I was noticing the error rate in Medicare, that is a lot
    more than $120 million, but it is a contributor. This program
    is a contributor to that goal of rooting out waste and fraud,
    so using that as kind of a point of departure, Doctor, that
    program, is that something we can build on? Is that something
    we can replicate or enlarge?
        Dr. Agrawal. Yes. I am a big fan of the Senior Medicare
    Patrol. We do work closely with that program. I speak routinely
    with that organization. In fact, next week we have another
    meeting. One of the biggest things that we have focused on from
    a beneficiary standpoint is the use of the Medicare summary
    notice or the EOB to make sure that beneficiaries are aware of
    and educated about their health care utilization patterns and
    making sure that they give us leads if they see something on
    the MSN that is not accurate.
        We get 40,000 complaints from beneficiaries related to
    program integrity alone and use that information in our
    automated practices. We have it as part of our predictive
    analytics system. We use it in investigations. Many of those
    complaints have led to significant investigations and outcomes
    for us, so I think that is certainly a foundation we build on.
    The agency conducts an annual sort of educational campaign for
    beneficiaries, particularly around the open enrollment periods,
    to make sure that they are aware of program integrity efforts,
    how to protect their private information and things like that.
        Senator Casey. Are there other resources or tools that you
    would need to accomplish that or you think you have the
    resources you need right now?
        Dr. Agrawal. You know, I appreciate the question. I think
    we are building on the foundations that we have. I think there
    is lots that we could do with beneficiaries. That relationship
    clearly matters a lot. There are potentially 50 million
    investigators on the ground for us, so I would not make a
    particular ask at this point. That might be unusual, but no, I
    really appreciate the support around this kind of program and
    the support of the beneficiaries that we have.
        Senator Casey. I appreciate that. Second, before I wrap up,
    I will put it on the record. It might be a brief answer and you
    could amplify it in writing, but the provider screening
    process. We, of course, want to get the balance right between
    being thorough and vigorous and making sure that the process is
    strict and thorough, but at the same time make it fair and
    navigable. I guess the basic question I would ask you is, do
    you think you are getting that balance right or do you think we
    have got a ways to go on that?
        Dr. Agrawal. I think you are absolutely right about the
    need for balance. I think we think about that balance on a
    daily basis in our work. I think as long as we have one, you
    know, illegitimate provider in the program, we need to continue
    to be vigilant. I think that balance is something that we need
    to continue to work to achieve, but we are not there yet on the
    numbers, and like I said, if there is one, we need to get them
    out of the program.
        Senator Casey. Thanks very much.
        Senator McCaskill. Senator Cotton.
        Senator Cotton. Thank you. Thank you all for attending
    today. Mr. Bagdoyan, thank you in particular for the good work
    that you and the GAO have done on this issue. In your years of
    doing this, but especially over the last year since the CMS
    changed the steps that are necessary for verifying information
    of Medicare providers, do MACS tend to take steps over and
    above what CMS requires of them?
        Mr. Bagdoyan. Thank you for your question, Senator Cotton,
    first of all. I think based on what we have encountered during
    this work, the MACS seem to be following the guidance that
    originated in March 2014. In fact, we encountered a couple of
    instances where the MACS, pretty much acting on that guidance,
    actually verified providers that should have been flagged for
    potential action.
        Senator Cotton. What were some of the main reasons why they
    verified those providers that should have been flagged? What
    was omitted? What did they not check that they might have
    checked if the CMS steps were slightly different?
        Mr. Bagdoyan. From my recollection, basically what they did
    is they made calls to a single location and asked over the
    phone to see whether the address that they had on record was
    the actual address for providing services.
        Senator Cotton. Some of the examples are pretty arresting,
    you know, of addresses that are open fields or fast food
    restaurants or so forth. Would it be possible to verify or at
    least provide a more complete picture needed for verification
    by, say, using Google Maps?
        Mr. Bagdoyan. Sure. That is part of our analytical approach
    to our work. What we did was we started with the USPS address
    data base and then we employed the Google Maps, we did Internet
    research.
        Senator Cotton. When you are saying we, you are saying the
    GAO?
        Mr. Bagdoyan. This is my colleagues and I on the team, yes.
    We looked at the providers' purported websites and then on 30
    occasions we had a site visits including taking photographs,
    some of which were displayed earlier today.
        Senator Cotton. Do you think that is an onerous process?
        Mr. Bagdoyan. Well, I think we did it with a fairly small
    team. It is work, but as you see from the results of our
    report, it is solid work. We certainly stand by it. I am very
    proud of my colleagues for doing a great job, and these are
    things that are available to be done, the commercially
    available USPS software, for example, and the Internet, site
    visits. Those are all things within one's purview.
        Senator Cotton. Certainly the Internet and Google Maps.
        Mr. Bagdoyan. Sure.
        Senator Cotton. Or MapQuest, to be agnostic about one's
    preferred choice.
        Mr. Bagdoyan. Whichever works best for the circumstance,
    yes.
        Senator Cotton. Dr. Agarwal, do you think it is too much to
    ask MACS to say, use Google Maps or MapQuest, at least to see
    that providers are not using addresses that are fast food
    chains or UPS stores or empty lots?
        Dr. Agrawal. We perform similar tests as what the GAO had
    utilized in the generation of this report. Again, as I stated
    earlier, we do appreciate the work of the GAO and these
    findings. We conducted 220,000 site visits since new enrollment
    and screening standards were implemented. We have revoked 1,300
    providers for being non-operational due to those site visits.
    We conducted similar work related to the leads that the GAO
    gave us.
        Overall, we are moving toward an approach that is more
    automated, so one thing that we will be doing as a result is
    folding in the data base identified by the GAO which will
    augment existing data bases that we have that do licensure
    checks, address checks.
        If there is a way to enhance those things, we are
    absolutely looking forward to doing that, but what we want to
    move away from are lots of potentially inconsistent manual
    checks, rather, a system that is highly automated with very
    timely data and MACS are free to elevate their levels of
    concern and trigger even non-required site visits if there is
    anything potentially concerning about an enrollment.
        Senator Cotton. Well, automation is great and centralized
    data bases are great, but we have seen the Government does not
    have the best track record with those. Using something as
    simple as Google Maps or MapQuest would seem to be a reasonable
    step to ask MACS to take, would it not?
        Dr. Agrawal. Well, we have geospatial software in our
    system. Again, you know, I think with the risk of potential
    variability in how different operators, different contractors
    do the work, we have opted toward a system that is much more
    consistent, much more automated, and yet, still gives the
    contractors all the tools they need to do the work. I think GAO
    has identified a good tool that we will be incorporating into
    those, rather than making a significant strategic change and
    moving back toward manual processing.
        Senator Cotton. How are these MACS held accountable
    whenever they make an inaccurate verification, in particular,
    when it could be so easily confirmed as visiting the site or
    even using an Internet search engine like Google Maps or
    MapQuest?
        Dr. Agrawal. Sure. We hold MACS like other contractors
    accountable in a similar manner, so we assess their performance
    on a routine basis. We conduct our own site visits of the
    contractors to make sure that they have the right tools,
    processes, operations in place to do the work.
        We look at the performance metrics and where necessary, we
    take actions like expressing letters of concern reflecting our
    findings in their performance reviews, and then, you know,
    increasing scrutiny from there as necessary, putting them on
    corrective action plans, for example.
        Senator Cotton. Well, thank you. My time has expired, but I
    do think some more work is probably needed.
        Senator McCaskill. Thank you, Senator Cotton.
        Senator Donnelly.
        Senator Donnelly. Thank you, Madam Chair. You know, one of
    the areas that is growing very fast is data analytics, big
    data, data mining. The Chair's--St. Louis Cardinals use all
    kinds of data analytics, can tell you exactly where the ball is
    going, how many times it rotates on the way in is a curveball.
        Senator McCaskill. The best record in baseball.
        Senator Donnelly. For now.
        As you look at this, there are markers that will indicate
    to you, when they do data mining, they can tell exactly what
    that 59-year-old male who happens to like Coca-Cola and this
    particular ball club and this matter and this matter and tell
    you from all of those exactly what they are going to do next.
    This is all predictive. This is all easily determined.
        You can put about 20 markers together and find out very,
    very quickly who your top suspects are and where you can go to
    find them, use the Google Maps that Senator Cotton talks about,
    and go locate them, but an extensive use of data analytics can
    completely change this. I am wondering what your plans are in
    that area, and have any of the biggest data analytics firms in
    the country taken a look at the processes you are using and
    said, hey, this is up to snuff or not?
        Dr. Agrawal. Yes, I absolutely agree that data analytics is
    vital to program integrity work, especially in a system with
    the volume of Medicare. For that reason, three years ago, we
    began implementation of the fraud prevention system which is
    exactly the kind of system that you are describing. It is the
    claims analytics system that looks at all 4.5 million claims
    that come into Medicare every single day.
        That was, again, a sizable change from the historic
    approach to processing claims which was just to pay them. We
    now have eyes on our--automated eyes on every single claim
    looking for outlier claims and outlier providers. That system
    allows us to implement predictive models that are exactly as
    you describe, multi-variant models that are trying to identify
    outlier behavior that is highly indicative of waste, abuse or
    fraud. We base those models on historical patterns, on other
    data analytics, on conversations and discussions with law
    enforcement.
        Senator Donnelly. Then the next question is, with all of
    those, how did we go up 20 percent last year?
        Dr. Agrawal. Well, I think the improper payment rate is
    different from the fraud rate, so you asked if we had had
    anybody come in and assess the system. The answer is yes. The
    OIG came in and did an assessment of our fraud prevention
    system.
        Senator Donnelly. Anybody outside of government, anybody
    who are the very, very best in the data analytic field?
        Dr. Agrawal. Well, I will remind you that our contractors
    are private-sector contractors and the scrutiny that the system
    has faced has been higher than any predictive analytics system
    in program integrity, and what the OIG has found and certified
    as a ten to one ROI for the system, that is still different
    from the 20 percent rise in the improper payment rate, and that
    is because improper payments are not the same as fraud.
        Most of the time, improper payments are lack of appropriate
    documentation or the ability of the provider to substantiate in
    the medical record what they actually billed to the agency. We
    do not see medical records at the time of claims payment or
    actually very, very few of them, so 60 percent of the improper
    payment rate is just from that documentation issue.
        Senator Donnelly. As you look at the data analytics and the
    opportunity to do data mining and you have private-sector
    companies that are providing this to you, what do you do
    continue to make sure that you have best practice modeling
    going on with this?
        Dr. Agrawal. I think that is a great question, so one thing
    that we are required to do by law is to re-procure the system
    periodically. We are actually in the process of doing that,
    which allows us to compete again the system, what our needs
    are, to make sure that if there is a company that is now doing
    better at it than the ones that we have, we will get the
    appropriate company in the door.
        We continue to work on refining models. We implement new
    models on an annual basis, really on quarterly cycles, as well
    as refine models that are already existing in the system to
    help improve their accuracy and the impact that they deliver.
        We are also moving the system into other arrays now that we
    have proven its worth and the positive ROI to the taxpayer,
    focusing mainly on the worst cases like fraud. We are going to
    apply the system against other patterns that are concerning
    like waste and abuse, implementing things like system edits and
    other models so that we can really start to tackle some of the
    biggest areas of losses in the program.
        Senator Donnelly. Ms. Leff, when you look at the fraud
    prevention activities that CareSource and other private
    companies use, do you have any suggestions that CMS should
    adopt that could help them to do a better job?
        Ms. Leff. CMS--we have worked very closely with CMS on
    many, many programs. For example, the Health Fraud Prevention
    Partnership, which I think is a phenomenal collaborative effort
    that pulling data together from all the plans and putting it
    together running algorithms trying to identify fraud from a
    bigger perspective, I think that is going to be a phenomenal
    thing going forward.
        I certainly encourage, you know, that process to continue.
    The prepay system, predictive analytics are certainly another
    area that I think is very important in the fraud space. We in
    the past have always depended on post-payment fraud detection
    systems that had known fraud schemes built in, so it was only
    looking for certain things.
        These new predictive systems, and they can be morphing
    every day, every week, have phenomenal capability to find
    abberancies that most of us could not find on our own, so using
    those new technologies are just very crucial.
        Senator McCaskill. Thank you. Thank you, Madam Chair.
        Senator Whitehouse.
        Senator Whitehouse. Thank you very much. Let me first thank
    Mr. Bagdoyan and GAO for their work that led to this hearing. I
    was one of the signators of the original letter requesting this
    report, and I know that the Chairman and the Co-Chairmen--are
    you Chairman and Ranking Member?
        Senator McCaskill. I am the Ranking Member. She is the
    Chairman.
        Senator Whitehouse. Chairman and ranking member have been
    very energetic in pursuing this and making sure that we had
    this hearing. I express my appreciation to Senator Collins and
    Senator McCaskill as well, but job well done. I am glad we have
    this report.
        There is another report that was done by the Office of
    Inspector General for the U.S. Department of Health and Human
    Services about questionable billing in geographic hot spots,
    and I am wondering, Mr. Agarwal, what you think the geographic
    hot spot effect is for Medicare fraud? My layman's impression
    is that there are places where this is an industry, like
    Florida, and there are places where people rent a place, set up
    shop, send out millions of dollars in bills.
        As soon as they get a big pile, close the doors and they
    are gone and they move on. Hard to pull that off in Rhode
    Island because everybody kind of knows each other. We are a
    small State, but I do have the impression that there are
    serious geographic hot spot issues here and I wonder if you
    would comment on whether that is the case and what you are
    doing to look into that question.
        Dr. Agrawal. Sure, and let me just start by confirming
    Rhode Island is not a huge hot spot for us, so there are. I
    think what you see when you look at almost any healthcare
    system, including Medicare utilization, is that there are
    significant geographic variability. A lot of internal and
    external folks have commented on that. In the particular area
    of fraud----
        Senator Whitehouse. Geographic variability consistent
    through time, i.e., it is the same places?
        Dr. Agrawal. Correct.
        Senator Whitehouse. Okay.
        Dr. Agrawal. Specifically in fraud, there are certain hot
    spot areas that do always, it seems, tend to originate schemes
    and kind of spread them from there. South Florida, obviously,
    is an example, Detroit, Southern California around Los Angeles,
    the Brooklyn area in New York. These are areas that come up all
    the time.
        Senator Whitehouse. What have you done to focus on those
    areas?
        Dr. Agrawal. We take an approach that obviously is looking
    at the entire country. We have regionalization, to some degree,
    through our contractors, but our strategic focus has been to
    create national resources that can still focus on these areas
    as needed.
        One thing that I just discussed was the fraud prevention
    system, this predictive analytics system. Our contractors that
    are regionally based can actually tell us about specific
    schemes that they are encountering in their area, so it might
    be geographically very specific, but we can get those in as
    models into the FPS. That will be then primarily for those
    contractors, so these models can be both national in scope, but
    also be designed to address particular pockets of issues.
        Senator Whitehouse. Where there are geographic pockets, let
    me suggest that you try to establish working relationships with
    local investigative authorities. We have a Medicaid fraud
    control unit in Rhode Island that is part of the Attorney
    General's office. Every State has one. If folks are cheating
    Medicare, they may well also be cheating Medicaid, and so, you
    have kind of a natural group of allies there.
        I noticed that your hot spot areas you mentioned were all
    in very big states, Florida, Michigan, California, so it may be
    that the Medicaid fraud control unit has so much span there
    that they cannot really focus, in which case you would have to
    look at district attorneys.
        I would encourage you to follow Senator Cotton's suggestion
    that there are people who would be willing to take a drive by,
    if you had the relationship with them, to say, look, we just
    got billed a million dollars out of this address in the last
    month and nobody has ever billed us from that address before.
    Would you mind just go checking it out? If it looks like it is
    an abandoned garage, boom, you have learned something. I would
    encourage you to do that.
        The other thing I would suggest, and I would ask you to
    comment on this, is that there are prescription drug monitoring
    programs out there. They are kind of an under-utilized thing.
    It is not quite clear who owns them. It is not quite clear, you
    know, where they--there is a lot of variability State to State.
        The HHS IG report was heavily about the problem of opioids.
    I wonder what your thoughts are and how you are working with
    the prescription drug monitoring programs in the states and
    trying to develop them to the point where they are a valuable
    asset for your anti-fraud as well as anti-opioid abuse efforts.
        Dr. Agrawal. Sure. Let me just say on the first point, we
    totally agree. I totally agree that a relationship with local
    entities is extremely important. Our contractors are indeed
    required to work with local law enforcement entities, including
    regional OIG offices. We also have Federal staff located in
    many of these hot spot areas so that we can address the hot
    spots directly.
        To your second point about opioid utilization, there is a
    variety of programs in place at CMS, primarily through the Part
    D program and Medicaid, to address opioid over-utilization. We
    look at prescribers of these medications as well as the
    beneficiaries who utilize them. We have controls, utilization
    management protocols, case management approaches to the
    beneficiaries, and then we have the same oversight approaches
    to the prescribers that we do in the rest of the program,
    including enrollment and screening, claims analytics or
    prescription analytics, and investigations, so you know, we are
    doing more and more to incorporate Part D into this overall
    work. In the Medicaid work, of course, we have to work very
    closely with states in their monitoring approaches so that we
    are addressing providers that might be particular to the
    Medicaid program.
        Senator Whitehouse. If I could, with the Chairman's
    permission, make a query for the record, I would like to ask
    Dr. Agrawal to have the opportunity to respond in writing to
    where they see themselves going with the PDMPs, prescription
    drug monitoring programs, as an enforcement and public safety
    device. That way I do not have to use any more of my time since
    I am over it.
        Senator McCaskill. Certainly.
        Senator Whitehouse. Thank you.
        Senator McCaskill. Thank you. Thank you, Senator. Senator
    Collins.
        The Chairman. Thank you very much. Mr. Bagdoyan, I want to
    go back to a comment that the doctor made in his opening
    statement. He said that both the hamburger joint and the vacant
    lot had not received any payments in 10 years, and in the
    interest of time, I am going to focus on the vacant lot.
        That comment bothered me greatly because it was so
    dismissive of the concern that brings us here today. According
    to the GAO report, and I am looking at page 21, GAO made a site
    visit and found that the lot was vacant in December 2014. Is
    that accurate?
        Mr. Bagdoyan. That is accurate, Senator.
        The Chairman. Then according to GAO, the provider went
    through a re-validation process using this vacant lot as the
    address and was approved by the MAC the very next month, in
    January 2015. Is that accurate?
        Mr. Bagdoyan. Looks to be, yes.
        The Chairman. Does that not mean that the provider remained
    eligible to bill Medicare in the future from that lot as long
    as you are in the provider system, the PECOS system. Is that
    accurate?
        Mr. Bagdoyan. That is the risk, Madam Chair.
        The Chairman. Is that not the problem? Even if someone has
    not billed from an address in some time, if they remain in the
    system and eligible to bill, then the potential for fraud is
    still there.
        Mr. Bagdoyan. That is correct, yes.
        The Chairman. Doctor, I want to turn to another issue that
    we did not complete on providers that have had their licenses
    either revoked or suspended and yet are still eligible for
    Medicare. Is it correct that CMS primarily relies on self-
    reporting by physicians?
        Dr. Agrawal. Providers are required in their enrollment
    application to self-report license information. However, we
    have, in recent years, implemented the automated provider
    screening system which then does continuous monitoring of
    licensure, which is what has allowed us in these--since the APS
    was created, to revoke 11,000 providers for licensure issues,
    so no, we do not rely entirely on self-reported data, but of
    course that is part of the enrollment application.
        The Chairman. Sure. Someone who is determined to keep
    drawing money out of the system and is not ethical and has had
    his or her license revoked is not likely to report honestly,
    are they?
        Dr. Agrawal. Well, correct. That is why we have implemented
    other data checks around exactly those issues, and where a
    provider has falsely reported information, we can take action
    against them. The reporting is actually useful as a lever for
    that purpose, because that, in and of itself, if they have
    inaccurately reported data to the agency, we can kick them out
    of the program for that reason, so getting the reports is
    actually useful for us from an investigative standpoint.
        The Chairman. Do you use the Federation of State Medical
    Boards data, the FSMB data, as a check automatically?
        Dr. Agrawal. We go upstream of the FSMB, actually going
    back to the states themselves. Since the FSMB is an umbrella
    organization for the states, they get information from the
    states, so what we have done to try to get more accurate, more
    timely information, is to go back to the states themselves,
    which is why we have to use so many different data bases to get
    license information.
        The Chairman. Well, do you use this consolidated data base
    at all?
        Dr. Agrawal. We do. Again, we do and we perform continuous
    monitoring on licenses, which is why we have been able to
    revoke 11,000 providers for license issues.
        The Chairman. Okay. If you are doing continuous monitoring,
    how is it that GAO was able, in a relatively short time, and
    not doing--and not that it took years and years--to come up
    with hundreds of providers that had had their licenses either
    revoked or suspended, and yet, under your system, were still
    eligible?
        Dr. Agrawal. Yes. I think it is important to keep in mind
    that there were 19 providers on the list that we ultimately
    took an action on against--you know, with GAO's input and
    recommendations. I think where the GAO has clearly added a lot
    of value----
        The Chairman. Well----
        Dr. Agrawal. Just permit me to answer the question because
    I think it is important.
        The Chairman. Sure, certainly.
        Dr. Agrawal. Thank you. Where the GAO has clearly added a
    lot of value is they said to us, we should be monitoring more
    than just the licenses of active enrollments, the licenses for
    states in which a provider is actively enrolled, but looking at
    the provider's entire set of licenses. That is an enhancement
    of the program and enhancement of the use of our continuous
    monitoring system. We agreed with that approach and we are
    implementing that change so that additional licenses are being
    monitored in the system.
        The Chairman. Mr. Bagdoyan, do you agree that there were
    only 19 physicians on that list? It was my understanding that
    you had not gotten a report back from CMS despite it being
    overdue.
        Mr. Bagdoyan. That is right, Madam Chairman. We would be
    happy to look at what CMS provides us in response to our
    referrals, which is a matter of routine for my mission team. We
    do that, work closely with the agencies to make referrals for
    action on their part and a response to us in terms of what they
    have done, so once I have had a chance to look at the details,
    we would be happy to consider any additional actions.
        The Chairman. I would officially ask you on behalf of the
    Committee to undertake the review that you did of the referrals
    to CMS, compare it with the response we have received today,
    that there were only 19 physicians on that list who warranted
    being kicked out of the Medicare program, and help us better
    understand the discrepancy. It is my understanding that part of
    it is that you referred the names of physicians that were not
    removed until many months after adverse action.
        Mr. Bagdoyan. That is right.
        The Chairman. That obviously puts the system at risk. Is
    that accurate?
        Mr. Bagdoyan. It is. Even though the numbers may be
    relatively small, obviously these are potentially bad actors,
    to use a term of art, so it is important to flag each and every
    one of them to the extent possible. What we are looking for
    here is reasonable assurance, not absolute assurance, that
    everybody is going to be flagged. I had that as an action item
    for followup.
        The Chairman. Thank you, and in fact, I think that one of
    the providers had billed something like $600,000. I mean, there
    can be a lot of money at issue here.
        Mr. Bagdoyan. That is right.
        The Chairman. Ms. Leff, just one final quick question for
    you. If you were to compare your system to that used by CMS,
    what one improvement would you suggest that CMS use?
        Ms. Leff. I think CMS is working on the same issues that
    CareSource is working on. We are looking at new analytic
    systems, predictive analytics. Prepay, I do not know how
    possible that is, but you are doing some of that, I believe, in
    the CMS area.
        I think those are the things right now that seem to be the
    focus in the fraud program integrity area, really trying to get
    ahead of the game, preventing the dollars from going out the
    door, and instead of trying to pay it and chase it and trying
    to get it back.
        The Chairman. Thank you. Thank you.
        Senator McCaskill. Thank you. Mr. Bagdoyan, do you know
    what the amount of fraud is? Dr. Agrawal pointed out that
    improper payments does not mean all fraud. Do we have any
    estimates of what percentage of the improper payments represent
    fraud?
        Mr. Bagdoyan. We do not. It is inherently difficult to
    estimate, so the big top line number is improper payments, some
    of which may be fraud, but it is very difficult to ascertain
    the exact extent.
        Senator McCaskill. Has there ever been an attempt at CMS to
    determine what the level of fraud is on an annual basis out of
    the $554 billion that we are spending on this program?
        Dr. Agrawal. Nothing on the scale of the improper payment
    rate measurement that is done. We have been working on a
    project to essentially pilot some kind of fraud rate
    calculation. I totally agree with Mr. Bagdoyan. That is
    actually very complicated, to try to generate a fraud rate
    since, of course, once you have identified a potential issue,
    you have got to investigate it, you know, take appropriate
    actions, and if it truly is fraud, remove it from the system,
    which inherently alters the rate itself.
        We have started--we have been working on a pilot in the
    home health area. We will actually be piloting that methodology
    very soon working with law enforcement, with other entities, to
    see if we can generate an initial sample in home health of what
    a fraud rate might look like. That will be the first time the
    agency has done such a thing.
        Senator McCaskill. Well, is anybody compiling the cases
    around the country of Medicare fraud that are brought and the
    dollar amounts they represent? I know with some regularity, our
    attorney general trumpets a multimillion dollar settlement on
    Medicare fraud. I am sure every attorney general in the country
    does that. Are you all making any attempt to compile that so
    that we can begin to get some kind of--it is unsettling to me
    that we so easily do improper payments, but we are not doing
    fraud.
        I do not really--I mean, I understand there has to be a
    determination legally that it was fraud, but at least we could
    be identifying potential fraud, just like you are identifying
    potential improper payments. The improper payment figure, there
    is some money included in there that turns out not to be
    improper payment.
        Dr. Agrawal. Well, that is exactly the approach that we are
    trying to take in this home health example that I provided, is
    to look at potential fraud. When you look at improper payments,
    that is a statistical sample of claims that we then compared to
    medical records. It is on the order of, I believe, 100,000
    claims, if I remember correctly, and then it is extrapolated
    since it is a statistically valid random sample.
        That is the improper payment rate in Medicare and it is
    corroborated with medical records. The challenge of determining
    a fraud rate is that you cannot just go to the medical record.
        Senator McCaskill. I understand.
        Dr. Agrawal. You have to conduct a site visit. You have to
    try to get at the intentionality of the provider.
        Senator McCaskill. Could you compile the amount of Medicare
    fraud that has been determined through DOJ and attorney
    generals across the country. Do you do that?
        Dr. Agrawal. Well, that is a good point. DOJ and OIG do
    compile their own casework. They compile, obviously,
    settlements, other actions that are taken, and that we do
    publish on a routine basis.
        Senator McCaskill. What is that number?
        Dr. Agrawal. Well, in our HCFAC report, I believe we have
    reported between seven to eight to one ROI last year in terms
    of dollars recovered in all of these civil----
        Senator McCaskill. I do not want to hear ROI because
    sometimes that justifies a lot of contracts. What I want to
    know is, what is the cumulative amount of Medicare fraud that
    was determined by various agencies, whether it is OIG or DOJ or
    State law enforcement or Agencies, what was the total amount of
    Medicare fraud identified last year?
        Dr. Agrawal. Right. Clearly that is on the law enforcement
    side of the house. We do not keep those kinds of figures. I am
    happy to----
        Senator McCaskill. Well, should you not? Should you not
    know what it is?
        Dr. Agrawal. Well, you know, again, I think fraud is
    determined through very extensive legal process.
        Senator McCaskill. I know that.
        Dr. Agrawal. Our goal----
        Senator McCaskill. That is not my point. My point is, if
    you are sitting there doing your job, the reason we have GAO is
    because they allow us to go in and see how agencies are doing.
    Your job is, in fact, to provide integrity to the program,
    correct?
        Dr. Agrawal. Yes.
        Senator McCaskill. That would be not just improper
    payments, but fraud. Now, if I had your job, one of the first
    things I would want to figure out is, are we getting after
    fraud and are we doing it well? One of the first things I would
    want to ask is, how much do we recover in fraud, how much fraud
    has been identified over the last 10 years? Are we doing better
    or worse? I am puzzled why this is not something you are
    curious about.
        Dr. Agrawal. It is absolutely something that we are working
    to know. However, you know--so what we do is we look at a
    variety of indicators. Where are the cases that we are spending
    most of our time on geographically? What kind of cases are
    they? You know, different utilization areas. We look at overall
    cost to health care or to Medicare and actually see if there
    are changes in that as we press our activities in certain
    areas. There are a variety of indirect indicators that we use
    to substantiate that we are focused in the right areas,
    including, obviously, talking to law enforcement, that we are
    spending our resources wisely.
        I think a basic practical question is, how much time,
    effort, energy, and resources we should spend to determining a
    fraud rate, which at some point becomes an academic exercise,
    as opposed to doing the work and trying to get these bad actors
    out of the program.
        Senator McCaskill. Well, you know, it was interesting. I
    had the same experience when I asked the people at Immigration,
    Customs Enforcement, how many employers they had prosecuted for
    hiring--knowingly hiring illegal immigrants when I first came
    to the Senate, and I actually got an answer that they did not
    know.
        I was stunned that they would not know that, and then they
    said they could not really get me that because it would take
    too much time, too much energy, too many people, so we had our
    interns Google, you know, a few phrases, illegal immigrants
    arrested, employer charged, and we were able to, in a fairly
    short period of time, begin coming up with some significant
    numbers, and when confronted with that, there was some
    embarrassment at ICE about it.
        I guess what I am telling you is, when these prosecutors
    announce it, it is really common knowledge. This is not hard to
    compile. All you would have to do is write a letter to all the
    attorney generals saying, would you send us all the Medicare
    fraud cases that you successfully identified last year and the
    dollar amount. I mean, at least having that--what I am worried
    about is that we are not keeping track if we are doing better
    or worse, so let me go on to the next question. What does
    Finalist do?
        Dr. Agrawal. Finalist is a piece of software. What it does
    is it does similar address verification, although again, we
    agree not to the enhanced level that GAO had undertaken, but it
    does similar address verification activity for CMS in the
    enrollment and revalidation process.
        Senator McCaskill. Was it written for CMS?
        Dr. Agrawal. You know, honestly I am not totally aware. I
    think this was a product that we purchased.
        Senator McCaskill. Do you know, Mr. Bagdoyan? Was this
    written--was this software designed for CMS or was it off-the-
    shelf?
        Mr. Bagdoyan. I do not know off the top of my head, Senator
    McCaskill, but I would be happy to get back to you.
        Senator McCaskill. That would be great. I would love that
    for the record, because one of the things we are trying to get
    at is that sometimes Government has a tendency, people come in
    the door and say, we can do this for you, and you get so
    focused on somebody who can do it for you that you do not
    realize there is a product sitting on the shelf like Google
    Maps or like USPS or like other places that you could do the
    same thing, so you said earlier you do not know what it costs.
    Do you know when your contract with Finalist is expiring?
        Dr. Agrawal. I do not.
        Senator McCaskill. I believe you do know, Mr. Bagdoyan,
    right?
        Mr. Bagdoyan. My colleagues can correct me, but I believe
    it is toward the end of this year.
        Senator McCaskill. That is correct, the end of this year,
    so the question is, are there any plans to replace Finalist?
        Dr. Agrawal. Well, I think what is less important to us is
    the specific name of the product or, you know, what a
    particular company has. I think what we want to do is we have
    actually taken the approach that you are describing, which is
    to try to use as many off-the-shelf tools as possible.
        That is why we have rolled into our enrollment systems
    things like the GSA debarment list, the law enforcement
    exclusions data base, other existing data bases that allow us
    to do our work and that do not have to be customized a lot so
    that there is----
        Senator McCaskill. I think that is great.
        Dr. Agrawal. That is definitely the approach that we have
    taken. That is the approach that we will take to roll in the
    USPS system that GAO has identified.
        Senator McCaskill. What I am anxious to know is, when it
    gets near the end of the year, is there someone somewhere in
    CMS that is going to renew the contract with Finalist when
    perhaps it is not even necessary, when perhaps it is much more
    expensive than the products you can get off-the-shelf that
    could easily be programmed together?
        I think the people at GAO could help you with this. They
    are very good at it. They do it for living. There seems to be
    this kind of default in Government. We do not want to do
    anything differently because if we do anything differently, you
    know, it might not work in PECOS and people are going to have
    to learn different software, and then we get these legacy
    customized systems that go on and cost our Government a
    fortune. I will be anxious to hear how much Finalist costs, and
    what I really want to know for the record, I not only want to
    know what Finalist costs, I want to know how long it has been
    used. I want to know whether it was designed and scoped by the
    Government or whether it was off-the-shelf.
        I want to know how much time they have been spending
    adjusting the program, and what, if any, plans are already in
    place to compete it for the end of this year, because I believe
    with what you are trying to do with all the data analytics that
    are out there and all the off-the-shelf programs that are out
    there, I believe you could compete this program, and I am
    willing to bet you are going to be able to save some money, but
    you know, we need to know all this information.
        Dr. Agrawal. Sure. We are--I am happy to get that to you. I
    will just say, Senator, that we definitely do not have the
    mentality that systems that are in place need to stay in place,
    or that off-the-shelf products are not useful to us. We have
    specifically made strategic decisions to try to take advantage
    of existing high-value products, and in fact, do competitions
    between products to make sure that we are on-boarding the ones
    that are most useful.
        Senator McCaskill. Okay. Let me move on to something else.
    If I am fraudulently registering as a Medicare provider and
    somebody calls me and I lie about the address, or if someone
    calls me or I failed to report that I have lost my medical
    license in New Hampshire and I am currently in Mississippi,
    what happens to them? How many of them have been referred for
    prosecution?
        Dr. Agrawal. Maybe those are two different questions.
        Senator McCaskill. Same question. Somebody lying to you,
    you know, whether it is a failure to self-report, adverse
    action, in another jurisdiction, or lying about the address.
        Dr. Agrawal. All right. If it is very clear, we have done
    the investigative work, we found out that they operated in a
    non-operational setting or they clearly lied, we can work with
    law enforcement and consider, in all of those cases, whether to
    make a referral to law enforcement. Then obviously law
    enforcement makes a determination about whether they will
    accept that referral and continue to move it along the process.
        Senator McCaskill. Obviously.
        Dr. Agrawal. We--I mean, I think you know this, but we do
    not engage in the direct prosecution itself.
        Senator McCaskill. Correct. I am asking how many you have
    referred.
        Dr. Agrawal. I can get you a formal number, but I know that
    it is in the thousands just from last year alone.
        Senator McCaskill. Whatever delineation you have, I mean,
    these are all performance measures.
        Dr. Agrawal. Sure.
        Senator McCaskill. We did not ask GAO to do a performance
    audit, but they do a lot of good ones, and these are
    performance measures. It is very hard to judge your performance
    if we have no baseline. If we do not know what fraud was at any
    point in the last 10 years, we have no idea if we are doing
    better or worse.
        The same thing with criminal referrals. There a lot of
    things that we can, if we get a baseline, then if you are doing
    great work, Doctor, then you are going to get acknowledged for
    it. The only thing we have got now is that improper payments
    have gone up by billions of dollars and that does not look good
    for you.
        I am trying to give you some other tools. It looks like to
    me you are trying to get after it. I do not think anybody is
    trying to pick on you here. I think we are just trying to do
    basic oversight. If we could get some basic baseline on fraud
    referrals and those kinds of things, then I think it helps us
    measure your progress in a way that taxpayers really expect of
    us.
        Dr. Agrawal. Sure. We will send you that data.
        Senator McCaskill. Okay, great. Finally, my last question
    is just about the prescription meds. When you were talking
    about that, as you know, it is a huge, huge problem and I think
    it is one that is going to become part of the everyday national
    discourse in this country since so many of our children are now
    dying of heroin overdose as opposed--more in my State dying of
    heroin overdose than in car accidents.
        I think it is true in many, many states in our country,
    that young people are turning to heroin because it is so cheap,
    much cheaper than oxy, much cheaper than Vicodin and Percocet
    that they get on the street, so when you see a pattern of over-
    prescription for someone, are you contacting the prescribing
    doctors?
        Dr. Agrawal. Yes, so this is an area of focus for us. One
    of the basic tools that we need is to get these prescribers
    enrolled in the program, because once they are enrolled, we
    would then have the same administrative authorities to oversee
    them, to audit them, ultimately kick them out of the program if
    that is what is required.
        Senator McCaskill. Put them in jail maybe?
        Dr. Agrawal. Again, we would refer them to law enforcement
    to do that, and because our main--you know, our main tool has
    not been in place, you know, we promulgated a rulemaking last
    year, we are working to get 400,000 prescribers enrolled this
    year so that we have that direct oversight with them.
        We have definitely been focusing on referrals to law
    enforcement in the interim because that is a major tool that
    we, you know, of course can access.
        Senator McCaskill. Okay, great. Anything else, Senator?
        The Chairman. No.
        Senator McCaskill. We appreciate all of you being here very
    much, appreciate your work. Please give my best to what I
    consider a home away from home for me in Washington and that is
    that gorgeous building down off of 4th and Mass. where all of
    you hang out at GAO. I appreciate so much the work you do and
    the audits you produce. This was a good one and I think we have
    made some progress today.
        I want to thank you, Doctor, and thank you, Ms. Leff, for
    your contributions, also. I particularly want to thank the
    Chairman because every once in a while she throws me a bone and
    lets me believe that I have some semblance of control over what
    is going on here, which I very much appreciate. I think it was
    a terrific hearing and it would not have happened without her
    agreement and her corporation, and obviously her willingness to
    let us focus on this issue. Thank you.
        The Chairman. Thank you very much and thank you for your
    leadership in pulling this hearing together. Committee members
    will have until Friday, July 31st to submit additional
    questions for the record. I want to note that there were two
    members who were here, Senator Sasse and Senator Tillis, who
    did not get an opportunity to question you even though they
    were here for testimony, and they may be submitting some
    additional questions for the record.
        I want to join Senator McCaskill in thanking all of our
    witnesses today and this concludes the hearing.
        [Whereupon, at 4:10 p.m., the hearing was adjourned.]

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                                    APPENDIX

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                          Prepared Witness Statements

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                            Questions for the Record

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                           Statements for the Record

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