Medicare Fraud and Abuse: DOJ Has Improved Oversight of False	 
Claims Act Guidance (30-MAR-01, GAO-01-506).			 
								 
The Department of Justice (DOJ) issued guidance on the fair and  
responsible use of the False Claims Act in civil health care	 
matters in June 1998. This report is part of GAO's evaluation of 
DOJ's efforts to ensure compliance with the guidance and focuses 
on the application of the guidance in two recent DOJ		 
initiatives-the Prospective Payment System (PPS) Transfer and	 
Pneumonia Upcoding Project. GAO found that DOJ has taken steps to
further strengthen its oversight of compliance with its False	 
Claims Act guidance. These steps include (1) reviewing each U.S. 
Attorneys Office's compliance with the guidance as part of the	 
periodic evaluation of all U.S. Attorneys' Offices, (2) requiring
all U.S. Attorneys' Offices involved in civil health care fraud  
control to certify their compliance with the guidance, (3)	 
forming working groups to coordinate national initiatives, and	 
(4) maintaining ongoing contacts with participating U.S.	 
Attorneys' Offices to help ensure that they are complying with	 
the guidance. GAO also found that DOJ is implementing the PPS	 
Transfer and Pneumonia Upcoding projects in a manner consistent  
with the guidance.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-506 					        
    ACCNO:   A00729						        
    TITLE:   Medicare Fraud and Abuse: DOJ Has Improved Oversight of  
             False Claims Act Guidance                                        
     DATE:   03/30/2001 
  SUBJECT:   Internal controls					 
	     Fraud						 
	     Medical expense claims				 
	     Health insurance					 
	     Program abuses					 
	     Investigations by federal agencies 		 
	     DOJ Prospective Payment System Transfer		 
	     Initiative 					                                                     
	     DOJ Pneumonia Upcoding Initiative			 
	     Medicare Program					 
	     Medicare Prospective Payment System		 

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GAO-01-506

Report to Congressional Committees

United States General Accounting Office

GAO

March 2001 MEDICARE FRAUD AND ABUSE DOJ Has Improved Oversight of False
Claims Act Guidance

Page i GAO- 01- 506 DOJ False Claims Act Letter 1

Appendix I GAO Reports Concerning the Use of the False Claims Act in Civil
Health Care Fraud 15

Abbreviations AHA American Hospital Association DOJ Department of Justice
HCFA Health Care Financing Administration HHS- OIG Department of Health and
Human Services

Office of Inspector General PPS prospective payment system Contents

Page 1 GAO- 01- 506 DOJ False Claims Act

March 30, 2001 Congressional Committees Payments resulting from improper
billing represent a major threat to the fiscal integrity of Medicare- the
federal health insurance program serving approximately 39 million elderly
and disabled Americans. The Department of Justice (DOJ) places a high
priority on identifying improper billing of Medicare and other federally
funded health care programs, and it reported recoveries of over $840 million
in fiscal year 2000 related to civil health care fraud. Many of these
recoveries are related to the False Claims Act, 1 which provides for
substantial damages and penalties against providers who knowingly submit
false claims to federal programs- including federally funded health
insurance programs.

The use of the False Claims Act against health care providers has been
controversial. The hospital industry has criticized DOJ for being overly
aggressive in its pursuit of hospitals for improper Medicare billings
through a series of nationwide investigations, known as national initiatives
or projects. For example, in 1998 many hospitals claimed that DOJ had
conducted unwarranted investigations and demanded large penalties for
unintentional errors related to billings for outpatient laboratory tests. In
response to hospital and congressional concerns, DOJ issued guidance on the
fair and responsible use of the act in civil health care matters, including
national initiatives, in June 1998. The guidance was intended to emphasize
the importance of pursuing False Claims Act cases against health care
providers in a fair and even- handed manner and to implement new procedures
related to national initiatives.

Congress subsequently required us to monitor DOJ's implementation of the
guidance, 2 which has resulted in a series of reports (see app. I). While
our initial reviews indicated some problems with DOJ's implementation of

1 31 U. S. C. sect.sect. 3729 to 3733: Anyone who “knowingly” presents
false claims for payment to the United States may be found to be in
violation of the False Claims Act. The act defines “knowingly”
to include a person who (1) has actual knowledge of the false claim, (2)
acts in deliberate ignorance of the truth or falsity of the claim, or (3)
acts in reckless disregard of the truth or falsity of the claim.

2 These requirements were contained in the Omnibus Consolidated and
Emergency Supplemental Appropriations Act of 1999 (P. L. 105- 277) and the
Consolidated Appropriations Act of 2000 (P. L. 106- 113).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 506 DOJ False Claims Act

the guidance, our more recent work shows that DOJ had made progress in
correcting these problems.

This report continues our ongoing evaluation of DOJ's efforts to ensure
compliance with the guidance and focuses on the application of the guidance
in two recent DOJ initiatives. The Prospective Payment System (PPS) Transfer
initiative identifies hospitals that have incorrectly reported patient
transfers between hospitals as discharges. The Pneumonia Upcoding initiative
assesses whether Medicare has been billed improperly on behalf of
beneficiaries hospitalized with pneumonia. Both initiatives focus on
hospitals that may have received greater reimbursement from the Medicare
program than they were entitled to receive. Our specific objectives were to
(1) review the actions taken by DOJ to improve its oversight of U. S.
Attorneys' Offices to ensure compliance with the guidance and (2) determine
if the PPS Transfer and Pneumonia Upcoding projects are being conducted in
accordance with the guidance.

While DOJ's guidance applies to all civil health care fraud matters, we
focused our review, as we have in past reports, on the use of the guidance
in national initiatives. To evaluate DOJ's oversight of U. S. Attorneys'
Offices, we discussed ongoing monitoring and compliance efforts with DOJ
officials, including those responsible for periodic evaluations of the
operations of each U. S. Attorney's Office. We also reviewed relevant
materials related to these evaluations. To determine if the PPS Transfer and
Pneumonia Upcoding projects are being conducted in a manner consistent with
the guidance, we interviewed members of DOJ's working groups that coordinate
each initiative. We also visited 4 of the 94 U. S. Attorneys' Offices and
reviewed files for 11 closed matters and 15 open matters, representing both
initiatives. We chose the offices to visit in order to review several
examples of matters for each initiative. In addition, we contacted
representatives of the American Hospital Association (AHA) and state
hospital associations within each of the districts we visited to obtain
their views regarding the implementation of the guidance.

We were given access to documents through an agreement with DOJ to ensure
that confidentiality of ongoing cases and DOJ's internal review process
would not be compromised. This agreement did not materially affect our
review because we were able to document compliance with specific elements of
the guidance in both open and closed matters. We conducted our work between
October 2000 and February 2001. Except for these restrictions on our access,
our work was performed in accordance with generally accepted government
auditing standards.

Page 3 GAO- 01- 506 DOJ False Claims Act

DOJ has taken steps to further strengthen its oversight of compliance with
its False Claims Act guidance. DOJ's review of each U. S. Attorney's
Office's compliance with the guidance now appears to be an integral part of
the periodic evaluations it makes of all U. S. Attorneys' Offices. Also,
DOJ's annual requirement that all U. S. Attorneys' Offices involved in civil
health care fraud control certify their compliance with the guidance appears
to have promoted compliance at the offices we visited. We found that these
offices had either documented their compliance in case files or instituted a
review process under the direction of their office's Civil Chief. Finally,
we found that the working groups continue to coordinate national initiatives
and maintain ongoing contacts with participating U. S. Attorneys' Offices to
determine whether they are complying with the guidance.

Our review also suggests that DOJ is implementing its two most recent and
active national initiatives- the PPS Transfer and Pneumonia Upcoding
projects- in a manner that is consistent with the guidance. Our review
indicated that the working groups had conducted sufficient background
research and developed legal and factual bases underlying the initiatives.
They also provided U. S. Attorneys' Offices participating in these
initiatives with detailed claims data, model contact letters, and other
relevant documentation before hospitals were contacted regarding potentially
false claims. The offices we visited coordinated their activities with the
working groups and, as the guidance requires, took each hospital's unique
circumstances into consideration. The hospital association representatives
we spoke with continue to express concerns about the appropriateness of
DOJ's use of the False Claims Act in civil health care matters, but did not
identify specific examples of noncompliance with the guidance among U. S.
Attorneys' Offices. Officials from DOJ's Executive Office for U. S.
Attorneys and its Civil Division generally concurred with our findings and
conclusions.

To emphasize fair and responsible use of the False Claims Act, DOJ issued

“Guidance on the Use of the False Claims Act in Civil Health Care
Matters” on June 3, 1998. The guidance instructs DOJ attorneys and U.
S. Attorneys to determine, before they allege violations of the act, that
the facts and the law sufficiently establish that the claimant knowingly
submitted false claims. The guidance covers all civil health care matters
and has specific provisions to address national initiatives. DOJ defines
these initiatives as nationwide investigations stemming from an analysis of
national claims data, indicating that numerous, similarly situated health
care providers have engaged in similar conduct to improperly bill government
health care Results in Brief

Background

Page 4 GAO- 01- 506 DOJ False Claims Act

programs. Prior to alleging a violation of the act in connection with a
national initiative, attorneys shall, in general, use contact letters to
notify a provider of a potential liability and give the provider an
opportunity to respond before a demand for payment may be made. The guidance
contains other safeguards to ensure the fair treatment of hospitals. For
example, U. S. Attorneys' Offices must consider alternative remedies to the
use of the False Claims Act, including administrative remedies such as
recoupment of overpayments, program exclusions, and other civil monetary
penalties. In addition, they must also consider a provider's ability to pay;
the effect on the community served by the provider, particularly for rural
and community hospitals; and the extent of provider cooperation in the
matter.

The guidance also requires the formation of a working group to coordinate
each national initiative. The working groups, composed of DOJ attorneys and
Assistant U. S. Attorneys with expertise in health care fraud control, must
develop “initiative- specific guidance” to provide direction and
support to the U. S. Attorneys' Offices that are participating in the
initiative. For example, working groups may prepare a legal analysis of
pertinent issues, provide a summary of Medicare claims data indicating
potentially significant billing errors, and develop an investigative plan.
The working groups track the participating offices' progress and respond to
their questions as each initiative proceeds. Ongoing contacts can help
assure the working group that the offices are following the guidance.

The two national initiatives that currently have the most active
investigations are the PPS Transfer and Pneumonia Upcoding projects. The PPS
Transfer 3 initiative was developed from a series of audits and joint
recovery projects by the Department of Health and Human Services Office of
Inspector General (HHS- OIG), the Health Care Financing Administration
(HCFA)- the agency within HHS that administers the Medicare program- DOJ,
and the claims processing contractors to identify improperly coded transfers
and recover overpayments from hospitals. 4 The Pneumonia Upcoding initiative
targets inappropriate

3 Under Medicare's prospective payment system, hospitals are reimbursed a
single amount to cover an entire inpatient stay. When a patient is
transferred from one inpatient hospital to another, the transferring
hospital is only entitled to receive a pro- rated payment based upon the
patient's diagnosis and the number of days at that hospital.

4 See, for example, HHS- OIG, Medicare Hospital Patient Transfers
Incorrectly Paid as Discharges- January 1992- December 1994 (A- 06- 95-
0083), Nov. 1996, and Medicare Hospital Patient Transfers Improperly
Reported and Paid as Hospital Discharges (A- 06- 9300095), Feb. 1995.

Page 5 GAO- 01- 506 DOJ False Claims Act

coding of inpatient hospital claims for a relatively rare bacterial form of
the disease that is more costly to treat- approximately $2,500 more per
claim- than the more common forms of pneumonia. The initiative assesses
whether hospitals submitted claims for a more complex form of the disease
than was supported by the patient's medical records.

This is the fourth report we have issued regarding DOJ's implementation of
its False Claims Act guidance and its efforts to oversee compliance. In
February 1999, we issued an early status report on DOJ's initial efforts to
implement the guidance. 5 In August 1999, we reported that DOJ's process for
reviewing implementation of the guidance appeared superficial and that U. S.
Attorneys were not consistent in their application of the guidance. 6
However, in March 2000, we reported that DOJ had taken steps to improve
compliance with its False Claims Act guidance. 7 We noted that DOJ had
strengthened its oversight of U. S. Attorneys' Offices and that the offices
that we had previously found to be slow in implementing the guidance
appeared to have addressed their shortcomings. We also found that the
working groups were providing legal and factual material on each national
initiative for U. S. Attorneys' Offices to consult prior to contacting
hospitals about potential False Claims Act liability.

DOJ has demonstrated its continued commitment to promoting the importance of
compliance with the False Claims Act guidance at its U. S. Attorneys'
Offices. In response to our prior recommendations, DOJ revamped its process
for periodically evaluating the compliance of these offices and instituted
an annual compliance certification requirement for all U. S. Attorneys'
Offices participating in national initiatives. These steps have helped to
encourage compliance.

5 Medicare Fraud and Abuse: Early Status of DOJ's Compliance With False
Claims Act Guidance (GAO/ HEHS- 99- 42R, Feb. 1, 1999). 6 Medicare Fraud and
Abuse: DOJ's Implementation of False Claims Act Guidance in National
Initiatives Varies (GAO/ HEHS- 99- 170, Aug. 6, 1999). 7 Medicare Fraud and
Abuse: DOJ Has Made Progress in Implementing False Claims Act Guidance (GAO/
HEHS- 00- 73, Mar. 31, 2000). DOJ Continues to

Monitor Compliance With False Claims Act Guidance

Page 6 GAO- 01- 506 DOJ False Claims Act

We found that DOJ's periodic evaluations of the U. S. Attorneys' Offices now
incorporate a more substantive examination of compliance with the guidance.
The review process, which was instituted in February 1999, initially
contained only one interview question relating to the guidance, but DOJ has
since expanded its evaluation procedure as it relates to the guidance. By
April 2000 the review included a number of questions devoted to the guidance
in both the previsit questionnaires and the interviews conducted during on-
site visits. Respondents must now describe in detail the activities and
procedures each office has in place to ensure that the attorneys are
informed of the guidance and that the office is in compliance. Of the 16
full evaluations that took place between April 2000 when the evaluation
process was expanded and the end of the calendar year, none resulted in a
determination that an office was out of compliance with the guidance. 8
Through our discussions with DOJ officials and our review of relevant
materials, we were able to verify that the evaluations provide an effective
mechanism for identifying and documenting areas of concern and potential
vulnerability, such as the need for additional information on the guidance
for attorneys. No such findings were made during reviews of U. S. Attorneys'
Offices currently participating in a national initiative. U. S. Attorneys'
Offices must respond to weaknesses identified in the review, and the
Executive Office for U. S. Attorneys subsequently verifies that, if needed,
corrective action is taken. Our review showed that, when weaknesses were
identified, this process was followed and implementation of corrective
actions was monitored.

DOJ's annual requirement that all U. S. Attorneys' Offices involved in
national civil health care fraud initiatives certify their compliance with
the guidance appears to have promoted compliance at the offices we visited.
DOJ officials told us that all U. S. Attorneys' Offices participating in
civil health care matters had attested to their compliance for the period
ending December 31, 2000. Although DOJ has not required offices to document
their compliance with the guidance as part of the certification process, the
offices we visited had either documented their compliance in individual case
files or instituted a review process under the direction of their office's
Civil Chief. For example, every closed case file we reviewed in one office
contained a certification that the case had been conducted in accordance

8 The evaluations generally take place on a 3- year cycle, with about 31
offices being reviewed each year. DOJ officials informed us that, due to
budget constraints, only 22 full reviews took place during calendar year
2000. DOJ Evaluation Process

Now Provides Meaningful Assessment of Compliance With the Guidance

U. S. Attorneys' Offices Certify Compliance

Page 7 GAO- 01- 506 DOJ False Claims Act

with the guidance. Based on our review of the supporting documentation in
these case files, we found no basis to dispute the office's compliance
certifications. Another office directed an attorney not involved in the
national initiatives to review case files for evidence of compliance. The
attorney then prepared a report for the review and approval of the Civil
Chief prior to completing the annual compliance certification. We found this
report provided detailed support for the attorney's conclusion that the
cases were handled in a manner consistent with the guidance.

Based on our analysis of working group materials and review of case files at
four offices, we believe that DOJ is following its guidance as it pursues
the PPS Transfer and Pneumonia initiatives. The working groups have prepared
material for the U. S. Attorneys' Offices on the legal and factual bases for
contacting hospitals about potential False Claims Act liability for each
initiative. In addition, the working groups have prepared model contact
letters and other documents to ensure that hospitals are contacted in a
manner consistent with the guidance. The U. S. Attorneys' Offices we visited
consulted the working group materials and conducted independent
investigations so that their settlement terms could be adjusted to reflect
each hospital's situation. Although the AHA and some state hospital
association representatives remain concerned that the False Claims Act is
inappropriately being applied to inadvertent billing errors, they did not
identify specific instances where a particular U. S. Attorney's Office has
acted inconsistently with the guidance in either national initiative.

The working groups prepared extensive initiative- specific guidance and
memoranda outlining the relevant legal and regulatory requirements
underlying the initiatives. After consulting with the HHS- OIG and HCFA, the
working groups analyzed national and hospital- specific claims data. The U.
S. Attorneys' Offices were then able to use these data as a starting point
to begin investigating whether specific hospitals had knowingly submitted
false claims. The PPS Transfer working group conferred with the HHS- OIG
regarding its prior audits of PPS hospitals. Similarly, the Pneumonia
Upcoding working group obtained extracts of national inpatient claims data
from HCFA and reviewed these data with HCFA specialists, the HHS- OIG, and
an independent consultant to ensure their validity.

We found that in addition to providing resources and coordinating the
initiatives, the working groups play an active role in monitoring the
progress of the offices participating in the initiatives. We were able to
PPS Transfer and

Pneumonia Upcoding Initiatives Are Being Conducted in Accordance With the
Guidance

Working Groups Provide Standardized Guidance and Oversight

Page 8 GAO- 01- 506 DOJ False Claims Act

verify that participating districts consult with working group members on an
ongoing basis throughout the development and settlement of their cases. This
exchange of information allows the working groups to assess compliance with
the guidance.

Our review of case files at the four offices we visited suggests the
interactions between these offices and the hospitals they investigated were
consistent with the guidance. In reviewing records relating to initial
contacts from the U. S. Attorneys' Offices and hospitals, the
investigations, and settlements, we observed that the offices were attentive
to hospitals' individual circumstances and that they varied their actions
accordingly, as required by the guidance. For example, our review of
correspondence showed that the contact letters used by these four offices
were based on the model letters distributed by the working groups.
Consistent with the guidance, the letters we reviewed informed hospitals of
potential False Claims Act liabilities but did not make demands for payment
and gave hospitals the opportunity to meet to discuss the matters further.

We found that U. S. Attorneys' Offices we visited did not pursue hospitals
identified by the working group data as a matter of course. Instead, the
offices conducted their own reviews of each hospital's billing patterns and
circumstances, as the guidance requires. These efforts sometimes revealed
other explanations for erroneous billing at specific hospitals, and the
hospitals repaid the overpayments with no imposition of damages or
administrative sanctions. For example, one Assistant U. S. Attorney reviewed
the data supplied by the PPS Transfer working group and found that, while
the billing patterns for two hospitals indicated incorrectly coded cases,
they did not necessarily reflect “knowing” behavior, as defined
by the False Claims Act. Without initiating a formal investigation by
sending a contact letter, the office held discussions with management at
both hospitals to solicit possible explanations that might account for these
billing aberrations. These interviews revealed that the hospitals had not
been informed that the facility they were transferring patients to had
changed its payment status. The hospitals thought they were discharging
patients to a rehabilitation facility- in which case they would have been
entitled to receive the full inpatient payment amount- when in fact the
facility had become a PPS hospital and the partial- payment rule applied.
Because the Assistant U. S. Attorney determined that the improper payments
were not knowingly submitted, there was no potential violation of the False
Claims Act and no contact letter was sent. U. S. Attorneys' Offices'

Interaction With Hospitals Is Consistent With the Guidance

Page 9 GAO- 01- 506 DOJ False Claims Act

In another instance, a study conducted for a U. S. Attorney's Office
indicated that the claims data for one hospital reflected improper billing.
The office's investigation determined that the hospital's inaccurate coding
was not the result of deliberate action or recklessness on the part of the
hospital, but rather the mistakes of one individual member of the coding
staff. This hospital refunded the excess reimbursements to the Medicare
program and was not assessed damages.

Offices we visited routinely considered unique factors surrounding the case
as well as each hospital's circumstances during the settlement process. In
one case, an office settled for lower damages because the hospital had
voluntarily disclosed that it had a billing problem. The hospital's cost of
performing its own audit was deducted from the settlement amount. In another
case, the office reduced its proposed settlement to reflect the hospital's
cooperation in voluntarily conducting a self- audit as well as its unique
status as the only provider in an area of the state.

While working groups are not authorized to approve or disapprove settlement
agreements, we found that the U. S. Attorneys' Offices we visited kept them
informed of the status of cases nearing settlement and shared proposed
settlement agreements with them. For example, one proposed settlement was
accompanied by a detailed analysis documenting how it was handled in
accordance with each element of the guidance. Our review of closed cases
also showed that the working groups were given an opportunity to comment on
the proposed settlement before the agreements were finalized.

During our review, we contacted representatives from several state hospital
associations and the AHA. Most continued to voice concerns over the
appropriateness of DOJ's national initiatives. They told us that they
generally believe that the vast majority of overpayments made to hospitals
reflect the complexity of the Medicare billing system and are not an attempt
to defraud the program. Therefore, they suggested that these matters be
handled by fiscal intermediaries 9 without the threat of harsh penalties.

9 Fiscal intermediaries are insurance companies that contract with the
government to process and pay Medicare claims submitted by hospitals.
Hospital Association

Representatives Expressed Concerns With National Initiatives

Page 10 GAO- 01- 506 DOJ False Claims Act

Hospital association representatives also raised several concerns. They
questioned the use of national normative claims data to target hospitals on
the basis that this process fails to take into account each hospital's
unique circumstances- such as patient demographics- which may account for
discrepancies between a hospital's billing pattern and broader, national
trends. This concern is particularly applicable to the Pneumonia Upcoding
project, in which hospitals are identified for review following a comparison
of hospital and national claims data. While we did not independently analyze
the methods used to prepare the claims data for the pneumonia project,
information on each hospital's specific billing pattern for complex
pneumonia and the national norm for that diagnosis was presented in each of
the contact letters we saw. During our site visits we saw evidence that the
claims data were used as the starting point for further investigation.

AHA representatives expressed concern that the data used to select hospitals
for the investigation of allegedly upcoded pneumonia claims were drawn from
a different time period than the period used as the national norm for
comparison purposes. DOJ officials stated that this was not the case.
Furthermore, the claims data that DOJ relied upon were obtained from the
HHS- OIG, and HCFA and an independent claims review consultant were involved
with extracting and analyzing the pneumonia claims.

In addition, AHA representatives stated that DOJ is engaging in other
projects that have national implications but have not been recognized as
national initiatives. DOJ officials explained that they may have
multidistrict initiatives underway involving subjects under investigation in
multiple jurisdictions, but that these projects do not meet DOJ's definition
of a national initiative. 10 DOJ has instituted written guidelines
specifically addressing the proper coordination of multidistrict
investigations, and, like all civil health care fraud matters, multidistrict
initiatives must be conducted in accordance with the guidance. Our work for
this report involved no assessment of compliance with the guidance in such
cases.

Another concern raised by hospital association representatives was that DOJ
often included burdensome corporate integrity agreements in

10 We noted in our February 1999 report that DOJ's definition of a national
initiative is limited to those multidistrict projects that rely on national
claims data.

Page 11 GAO- 01- 506 DOJ False Claims Act

national initiative settlements at the insistence of the HHS- OIG. 11 The
representatives suggested that DOJ's willingness to accommodate the HHS- OIG
violates the part of the guidance that requires that an individual
provider's unique circumstances be taken into account when reaching a
settlement. They consider the imposition of corporate integrity agreements
to be particularly troublesome in cases where hospitals settled for simple
repayment without False Claims Act damages and had not demonstrated serious
billing problems. However, at the four U. S. Attorneys' Offices we visited,
we found that 4 of the 11 closed PPS Transfer and Pneumonia Upcoding cases
we reviewed were resolved without the imposition of corporate integrity
agreements. Although corporate integrity agreements were imposed in the
remaining cases, all of these cases required repayment of the original
overpayment and additional damages. The HHS- OIG makes an independent
decision whether to require a corporate integrity agreement as part of a
settlement; it also has its own guidance addressing participation in
national initiatives.

Representatives from the state hospital associations we contacted did not
have specific complaints regarding the way U. S. Attorneys' Offices were
conducting either the PPS Transfer or the Pneumonia Upcoding initiatives.
These associations also did not identify instances of U. S. Attorneys'
Offices failing to comply with the guidance. Some associations acknowledged
the willingness of the offices to develop an acceptable investigative
process. In addition, they noted that some Assistant U. S. Attorneys have
developed extensive knowledge about Medicare billing requirements and
provide reasonable opportunities to present their positions.

We will continue to solicit the concerns of the hospital community regarding
DOJ's implementation of the False Claims Act guidance when we prepare our
2002 mandated report.

DOJ seems to have made substantive progress in ensuring compliance with the
False Claims Act guidance. It has strengthened its oversight of U. S.
Attorneys' Offices. The review of each district's compliance now

11 A corporate integrity agreement is an obligation imposed on a provider by
the HHS- OIG as part of a settlement of a potential fraud matter. In return,
the HHS- OIG agrees not to seek further administrative penalties against the
provider for the behavior in question. Corporate integrity agreements
typically last for 3 years for national initiative cases and require
affirmative steps to improve compliance and report periodically to the HHS-
OIG. Concluding

Observations

Page 12 GAO- 01- 506 DOJ False Claims Act

appears to be an integral component of the periodic evaluation conducted at
all U. S. Attorneys' Offices. These evaluations seem to be effective in
identifying areas of vulnerability leading to corrective action taken by the
local district. Further, each U. S. Attorney's Office participating in a
national initiative is required to certify that it has complied with the
guidance on an annual basis.

DOJ's implementation of the two most recent initiatives, the PPS Transfer
and Pneumonia Upcoding projects, appears to be consistent with the guidance,
based on our visits to a limited number of offices. Each working group has
taken the lead in developing the legal and factual basis for its initiative.
Their development of detailed claims data and other relevant materials, such
as model contact letters, has helped to promote consistency among the
districts in their implementation of the initiatives. In our visits to
several U. S. Attorneys' Offices, we found that attorneys were conducting
their investigations in accordance with the guidance. They coordinated their
activities with the working group to ensure consistency, but took into
account the unique factors surrounding each hospital's circumstances. This
flexibility is in keeping with the principles outlined in the guidance.

We provided a draft of our report to DOJ for comment. Officials from DOJ's
Executive Office for U. S. Attorneys and its Civil Division provided oral
comments, in which they generally concurred with our findings and
conclusions. They also provided several technical comments, which we
incorporated as appropriate.

We are sending copies of this report to the Honorable John Ashcroft,
Attorney General of the United States, the Honorable Tommy Thompson,
Secretary of HHS, and other interested parties. We will make copies
available to others upon request. Agency Comments

Page 13 GAO- 01- 506 DOJ False Claims Act

If you or your staff have any questions about this report, please call me at
(312) 220- 7600, or Geraldine Redican- Bigott at (312) 220- 7678. Other
major contributors were Suzanne Rubins and Frank Putallaz.

Leslie G. Aronovitz, Director Health Care- Program Administration

and Integrity Issues

Page 14 GAO- 01- 506 DOJ False Claims Act

List of Committees The Honorable Orrin G. Hatch Chairman The Honorable
Patrick J. Leahy Ranking Member Committee on the Judiciary United States
Senate

The Honorable Judd Gregg Chairman The Honorable Ernest F. Hollings Ranking
Member Subcommittee on Commerce, Justice, State,

and the Judiciary Committee on Appropriations United States Senate

The Honorable F. James Sensenbrenner, Jr. Chairman The Honorable John
Conyers, Jr. Ranking Minority Member Committee on the Judiciary House of
Representatives

The Honorable Frank R. Wolf Chairman The Honorable Jose E. Serrano Ranking
Minority Member Subcommittee on Commerce, Justice, State,

the Judiciary and Related Agencies Committee on Appropriations House of
Representatives

APPENDIX I: GAO Reports Concerning the Use of the False Claims Act in Civil
Health Care Fraud

Page 15 GAO- 01- 506 DOJ False Claims Act

Medicare Fraud and Abuse: DOJ Has Made Progress in Implementing False Claims
Act Guidance (GAO/ HEHS- 00- 73, Mar. 31, 2000).

Medicare Fraud and Abuse: DOJ's Implementation of False Claims Act Guidance
in National Initiatives Varies (GAO/ HEHS- 99- 170, Aug. 6, 1999).

Medicare Fraud and Abuse: Early Status of DOJ's Compliance With False Claims
Act Guidance (GAO/ HEHS- 99- 42R, Feb. 1, 1999).

Medicare: Concerns With Physicians at Teaching Hospitals (PATH) Audits (GAO/
HEHS- 98- 174, July 23, 1998).

Letter to the Committee on Ways and Means, B- 278893, July 22, 1998.
Medicare: Application of the False Claims Act to Hospital Billing Practices
(GAO/ HEHS- 98- 195, July 10, 1998). Appendix I: GAO Reports Concerning the

Use of the False Claims Act in Civil Health Care Fraud

Report Mandated by the Consolidated Appropriations Act of 2000 (P. L. 106-
113)

Reports Mandated by the Omnibus Consolidated and Emergency Supplemental
Appropriations Act of 1999 (P. L. 105- 277)

Other Related Reports

(201109)

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