Medicaid Fraud and Abuse: Stronger Action Needed to Remove Excluded
Providers From Federal Health Programs (Letter Report, 03/31/97,
GAO/HEHS-97-63).

Pursuant to a congressional request, GAO reviewed the Department of
Health and Human Services (HHS) Inspector General's (OIG) process for
excluding providers from federal health care programs.

GAO noted that: (1) over the years, the OIG, working with state
agencies, has excluded thousands of providers from participating in
federal health care programs because of health care fraud, abuse, or
quality-of-care problems, thus helping to protect the financial
integrity of those programs and decreasing the likelihood that program
beneficiaries receive substandard care; (2) several weaknesses in this
exclusion process allow many unacceptable providers to remain on the
rolls of federal health programs; (3) the weaknesses GAO identified
include: (a) lack of controls at OIG field offices to ensure that all
state referrals received are reviewed and acted on promptly; (b)
inconsistencies among OIG field offices as to the criteria for excluding
providers; (c) lack of oversight to ensure that states make appropriate
exclusion referrals to the OIG; and (d) problems states experience in
attempting to identify and remove from their programs providers that
appear on the OIG's exclusion list; (4) these weaknesses place the
health and safety of beneficiaries at risk and compromise the financial
integrity of Medicaid; (5) moreover, difficulties states experienced in
using OIG exclusion data allowed some providers to continue to be
enrolled in a state Medicaid program after they had been excluded
nationwide by the OIG; (6) OIG officials attributed many of these
problems to repeated cutbacks in resources occurring in the past several
years; (7) the Health Insurance Portability and Accountability Act of
1996, however, addresses this concern by providing the OIG with extra
funding, specifically for dealing with health care fraud; (8) some of
this funding, officials said, will be used to hire additional staff to
process exclusion referrals; (9) the act also includes tools and
resources to facilitate identifying unacceptable providers; (10) these
tools include a system of unique billing numbers for health care
providers, to be developed to reduce the potential for inappropriate
payments, and an adverse action data bank, to be established to record
information on any adverse action taken against a health care provider;
(11) when implemented, these tools should help to limit the number of
providers excluded from one program that continue to participate in
others; (12) in the interim, the HHS Inspector General has initiated
actions to improve the effectiveness of the exclusion process; and (13)*

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-97-63
     TITLE:  Medicaid Fraud and Abuse: Stronger Action Needed to Remove 
             Excluded Providers From Federal Health Programs
      DATE:  03/31/97
   SUBJECT:  Fraud
             Program abuses
             Health care programs
             Inspectors general
             Federal/state relations
             State-administered programs
             Questionable payments
             Internal controls
             Data bases
IDENTIFIER:  Medicaid Program
             Medicare Program
             Illinois
             Maryland
             Missouri
             New York
             Virginia
             District of Columbia
             Maternal and Child Health Block Grant
             Federal Employees Health Benefits Program
             Title XX Social Services Grant
             CHAMPUS
             Civilian Health and Medical Program of the Uniformed 
             Services
             HHS National Practitioner Data Bank
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Human Resources and
Intergovernmental Relations, Committee on Government Reform and
Oversight, House of Representatives

March 1997

MEDICAID FRAUD AND ABUSE -
STRONGER ACTION NEEDED TO REMOVE
EXCLUDED PROVIDERS FROM FEDERAL
HEALTH PROGRAMS

GAO/HEHS-97-63

Medicaid Fraud and Abuse

(101518)


Abbreviations
=============================================================== ABBREV

  HCFA - Health Care Financing Administration
  HHS - Health and Human Services
  MFCU - Medicaid fraud control unit
  NPI - National Provider Identifier
  OIG - Office of the Inspector General, HHS

Letter
=============================================================== LETTER


B-275645

March 31, 1997

The Honorable Christopher Shays
Chairman, Subcommittee on Human Resources
 and Intergovernmental Relations
Committee on Government Reform and Oversight
House of Representatives

Dear Mr.  Chairman: 

Medicaid, a joint federal-state health program for the poor, spent
approximately $160 billion in 1996 to provide health care coverage
for about 37 million people.  Because of its size and complex
structure, Medicaid is vulnerable to fraud and abuse.  State Medicaid
agencies have the primary responsibility to protect the program's
financial integrity and to ensure that beneficiaries have access to
quality care.  This responsibility includes ensuring that appropriate
safeguards are in place to remove from state programs those providers
that commit fraud or abuse or those that are incompetent.  State
Medicaid agencies must report providers they remove from their
programs to the Office of the Inspector General (OIG), Department of
Health and Human Services (HHS).  The OIG is responsible for
determining whether the circumstances that resulted in states'
removing providers warrant promptly excluding them from federal
health care programs nationwide. 

Exclusion should be a strong deterrent to unacceptable providers, but
the deterrent effect is diluted if they can continue to receive
payment for program services.  Concerned that this situation could be
occurring, you asked us to examine how well the OIG's exclusion
process is working.  On September 5, 1996, we testified before the
Subcommittee on the preliminary results of our work,\1 which
suggested several weaknesses in the OIG's exclusion process.  In some
instances, these weaknesses have resulted in unacceptable providers
continuing to participate in federal health care programs.  The HHS
Inspector General agreed with our findings and testified that she was
taking steps to strengthen the process. 

In this report, we present the final results of our work, expanding
on our testimony concerning the weaknesses in the OIG's process.  In
addition, we ascertained what corrective actions the OIG has taken or
plans to take and further examined the problems states experience
when using OIG exclusion data.  Moreover, we interviewed officials
from the OIG and Health Care Financing Administration (HCFA)--the
agency that administers Medicaid at the federal level--to determine
their plans to improve health care provider data systems, as required
by the Health Insurance Portability and Accountability Act of 1996. 

In developing information for this report, we visited Illinois,
Maryland, Missouri, New York, Virginia, and Washington, D.C.\2 To
understand the processes for removing providers from state Medicaid
programs, we worked with officials of state Medicaid agencies,
Medicaid fraud control units (MFCU), and state licensing boards.  We
also met with officials from the four OIG field offices--Chicago, New
York, Philadelphia, and Washington, D.C.\3 --that oversee these six
states and with officials from OIG and HCFA headquarters.  At
selected state agencies, we reviewed case files for a judgmentally
selected sample of providers that the states determined had abused
the Medicaid program to ascertain the nature of the providers'
wrongdoing and whether they had been referred to the OIG.  We
followed up at the Chicago, New York, and Philadelphia OIG field
offices to determine whether they acted on the referrals and at
Medicare contractors to determine whether providers continued to
participate in Medicare after they had been excluded from Medicaid. 
Our scope and methodology are discussed in more detail in appendix I. 


--------------------
\1 Fraud and Abuse:  Providers Excluded From Medicaid Continue to
Participate in Federal Health Programs (GAO/T-HEHS-96-205, Sept.  5,
1996). 

\2 In this report, we refer to Washington, D.C., as a state. 

\3 In September 1996, the Washington field office became a suboffice
of the Philadelphia field office. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Over the years, the OIG, working with state agencies, has excluded
thousands of providers from participating in federal health care
programs because of health care fraud, abuse, or quality-of-care
problems, thus helping to protect the financial integrity of those
programs and decreasing the likelihood that program beneficiaries
receive substandard care.  However, several weaknesses in this
exclusion process allow many unacceptable providers to remain on the
rolls of federal health programs.  The weaknesses we identified
include (1) lack of controls at OIG field offices to ensure that all
state referrals received are reviewed and acted on promptly, (2)
inconsistencies among OIG field offices as to the criteria for
excluding providers, (3) lack of oversight to ensure that states make
appropriate exclusion referrals to the OIG, and (4) problems states
experience in attempting to identify and remove from their programs
providers that appear on the OIG's exclusion list. 

These weaknesses place the health and safety of beneficiaries at risk
and compromise the financial integrity of Medicaid, Medicare, and
other federal health programs.  For example, OIG delays in acting on
state referrals allowed one physician to receive nearly $61,000 for
services provided to Medicare patients; these services were provided
for more than 2 years after a state Medicaid program had removed him
for maintaining an unacceptable practice.  Moreover, difficulties
states experienced in using OIG exclusion data allowed some providers
to continue to be enrolled in a state Medicaid program after they had
been excluded nationwide by the OIG.  In one state, there were 13
instances in which this occurred.  One of the providers had been paid
over $25,000 since being excluded by the OIG. 

OIG officials attributed many of these problems to repeated cutbacks
in resources occurring in the past several years.  The Health
Insurance Portability and Accountability Act of 1996, however,
addresses this concern by providing the OIG with extra funding,
specifically for dealing with health care fraud.  Some of this
funding, officials said, will be used to hire additional staff to
process exclusion referrals.  The act also includes tools and
resources to facilitate identifying unacceptable providers.  These
tools include a system of unique billing numbers for health care
providers--to be developed to reduce the potential for inappropriate
payments--and an adverse action data bank--to be established to
record information on any adverse action taken against a health care
provider.  When implemented, these tools should help to limit the
number of providers excluded from one program that continue to
participate in others. 

In the interim, the HHS Inspector General has initiated actions to
improve the effectiveness of the exclusion process.  For example, the
OIG has initiated a system to track all incoming exclusion referrals,
staff have received additional training to improve the consistency
and quality of exclusion processing, and outreach efforts are under
way to help ensure that states forward all required information. 
While these efforts are significant, we believe further refinements
are necessary to improve the exclusion process. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Secretary of HHS has delegated to the OIG the authority, under
sections 1128 and 1156 of the Social Security Act, to exclude certain
health care providers from most federal health care programs.\4 Under
the law, the OIG, which acts through its Office of Investigations,
must exclude, nationwide, providers that have been convicted of a
criminal offense related to Medicare\5 or any state health care
program, a criminal offense related to patient abuse or neglect, or a
felony related to other health care fraud or controlled substances. 
Under these circumstances, providers fall into the category of
"mandatory exclusions."

The OIG also has authority to exclude individuals or organizations if
the OIG determines that the particular facts in a case meet certain
criteria.  These actions are termed "permissive exclusions." They may
be based on, for example, submitting excessive claims, license
suspensions and revocations, and sanctions imposed by federal or
state health agencies.  (See app.  II for the legal bases for
exclusions.)

OIG field offices receive exclusion referrals from state Medicaid
agencies, licensing boards, MFCUs,\6 and others.  For mandatory
exclusion cases, the field offices assemble and forward to
headquarters the case files containing evidence of a provider's
criminal conviction.  For other referrals, which could result in
permissive exclusions, the field offices receive documents on
disciplinary actions taken by state Medicaid agencies, licensing
boards, or others.  The field offices assess the relevant facts and
forward to OIG headquarters the names of providers they recommend for
exclusion.  OIG headquarters makes the final decision on excluding
the provider from program enrollment. 

When the OIG excludes a provider, it sends notification letters to
organizations--such as state Medicaid agencies, Medicare contractors,
and state licensing boards--in the states in which the provider is
known to practice or operate.  When applicable, the provider's
employer is also notified.  In addition, the OIG provides HCFA with
periodic cumulative reports and monthly updates on excluded
providers, which HCFA distributes nationally. 

As of October 1996, about 9,500 providers were excluded from federal
health care programs nationwide.  Three exclusion
categories--conviction for program-related crime, conviction for a
criminal offense related to patient abuse or neglect, and license
suspensions and revocations--accounted for 76 percent of these
nationwide exclusions. 


--------------------
\4 OIG exclusions apply to Medicare (title XVIII of the Social
Security Act) and state health care programs, defined as Medicaid
(title XIX), Maternal and Child Health Services Block grant (title
V), and Block Grants to States for Social Services (title XX).  As a
result of the Federal Acquisition Streamlining Act of 1994, which
mandates and expands the governmentwide effect of all debarments,
suspensions, and other exclusionary actions on federal procurement
and nonprocurement programs, OIG exclusions also apply to health care
providers participating in the Federal Employees' Health Benefits
Program (FEHBP), administered by the U.S.  Office of Personnel
Management, and the Civilian Health and Medical Program of the
Uniformed Services (CHAMPUS), administered by the Department of
Defense. 

\5 Medicare is the federal program financing health care for the
nation's elderly and disabled. 

\6 Most states have MFCUs that must be organizationally independent
of the agency that operates the state Medicaid program.  An MFCU is
usually a component of the state attorney general's office.  MFCUs
investigate and prosecute provider fraud and cases relating to
neglect or abuse of patients in nursing homes and other facilities. 


   OIG PROCESS DOES NOT ENSURE
   ACCOUNTABILITY AND TIMELY
   RESOLUTION OF ALL EXCLUSION
   REFERRALS
------------------------------------------------------------ Letter :3

Unless the OIG maintains accountability for state exclusion
referrals, providers that have committed fraud or rendered
substandard care to Medicaid beneficiaries in one state can continue
to provide services (1) to Medicaid beneficiaries in other states,
(2) under Medicare, or (3) through other federal health programs. 
Likewise, long delays in processing exclusion referrals allow
unacceptable providers to continue to provide services in federal
health care programs.  In our review of a judgmental sample of 88
state exclusion referrals to three OIG field offices, we found that
almost one-half of the referrals had significant processing problems. 
Field offices had no record of 11 referrals.  Processing time for
another 30 referrals, or 34 percent, was 1 year or longer.  All of
the missing and delayed referrals occurred among the 66 referrals we
followed up on in the Chicago and New York field offices.  In these
offices, long delays occurred for both mandatory referrals--which the
OIG is required by law to exclude--and permissive referrals--for
which the OIG has to decide whether certain exclusion criteria are
met.  While these referrals remained unresolved, some providers
received thousands of dollars from Medicare. 


      ACCOUNTABILITY LACKING FOR
      REFERRALS
---------------------------------------------------------- Letter :3.1

OIG field offices could not account for all referrals received from
state agencies.  While the Philadelphia field office had files for
all 22 referrals we reviewed, the Chicago and New York field offices
had no records for 11 of the 66 state referrals we checked. 

The Chicago field office could not locate 5 of 18 referrals from the
Illinois Medicaid program and 1 of 14 referrals from the Illinois
MFCU.  Moreover, three of the state Medicaid agency referrals
involved serious quality-of-care issues.  For example, in April 1995,
the Illinois Medicaid agency excluded a dentist from its program for
providing care that placed his patients at risk.  Among the charges
was that the dentist had performed surgical extractions and had given
patients general anesthesia without documented need.  The state
Medicaid agency's case file on this dentist showed that he had been
referred to the OIG in June 1995.  When we inquired at the Chicago
field office in March 1996, however, no record could be found of the
case.  After our inquiry, the office opened a case file on the
dentist and he was excluded by the OIG in December 1996.  During the
17-month period between state removal from Medicaid and OIG exclusion
from all federal health care programs, this dentist received over
$13,000 for services provided to Medicare patients. 

Likewise, the New York field office had no record for 5 of the 28
referrals we reviewed that the New York Medicaid officials claimed
had been referred to the OIG.  Specifically, the field office had no
record of a physician who had been excluded from the state's Medicaid
program over a year earlier for a variety of quality-of-care
problems, such as failure to evaluate patient problems and
overutilization of laboratory and other tests.  From the time this
physician was removed from Medicaid in New York, Medicare had paid
him over $108,000, as of November 1996.  In another case, the field
office had no record of a durable medical equipment supplier who had
been removed from Medicaid 2 years earlier, after an audit determined
that the supplier had overbilled the Medicaid program by more than
$173,000. 


      DELAYS IN PROCESSING
      EXCLUSION REFERRALS
---------------------------------------------------------- Letter :3.2

OIG processing of state referrals was sometimes delayed while the
Chicago and New York field offices waited for states to send in
documents needed by the OIG to exclude the provider nationwide.  In
mandatory exclusion cases, the OIG requires copies of conviction and
sentencing documents; in permissive cases, the OIG requires basic
information describing what the provider did to bring about the state
removal.  The extent to which states furnished such documentation
when referring a case to the OIG varied among state agencies we
contacted.  This variation seemed due, in part, to an absence of
clear guidance from the OIG on the documentation needed for exclusion
processing.  Moreover, when these documents were not provided with
the referral, case files often did not show any indication of field
office follow-up to obtain the missing information.  Even after all
the information was received, some case files showed long periods of
inactivity.  OIG guidance requires that after field office staff
receive a permissive exclusion referral, they must decide, within 60
working days, whether to pursue exclusion.  However, the guidance
does not set any standards or performance goals for actually
processing state referrals after the decision is made to pursue an
exclusion. 

In contrast to the Chicago and New York field offices, the
Philadelphia field office resolved all of the 22 referrals we
reviewed in less than 1 year and most took 6 months or less.  This
situation appeared to be due, in part, to the Maryland MFCU--the
state agency whose referrals we selected for follow-up in the
Philadelphia field office--consistently sending the field office all
the required documentation. 

The following examples illustrate the delays we found in Chicago and
New York (additional examples can be found in app.  III): 

  -- A pharmacy was removed for overbilling the Illinois Medicaid
     program by more than $117,000.  The Chicago field office took 15
     months to forward this permissive exclusion case to
     headquarters.  The case file showed no activity for extended
     periods of time, including a 10-month period. 

  -- In a mandatory exclusion case, the Chicago field office referred
     a provider to headquarters for exclusion 19 months after the
     Illinois MFCU notified it that the provider had pled guilty and
     was sentenced in state court for falsely billing for Medicaid
     services.  Two-and-one-half months after the case was forwarded
     to OIG headquarters, the provider was excluded nationwide. 

  -- In another mandatory exclusion case, a dentist was sentenced in
     June 1995 for stealing more than $220,000 from New York's
     Medicaid program, charging for more expensive procedures when
     less expensive ones were actually performed or charging for
     services not provided.  State delays in providing documents on
     the sentencing initially delayed the New York field office's
     processing of the case.  These documents were received in
     November 1995, but no further action had been taken on the case
     until a few days before we reviewed it in November 1996. 

  -- The Medicare program in New York paid a physician nearly $61,000
     during the more than 2-year period from the time the state
     Medicaid agency in New York notified the OIG field office that
     it had removed a physician to the time the OIG excluded the
     physician from all federal health programs.  The state had
     removed the physician from Medicaid for maintaining an
     unacceptable practice, keeping inadequate records, and for
     inappropriately sharing fees for professional services.  We
     reviewed the New York field office case file on this permissive
     exclusion, and it showed inactivity for extended periods of
     time, including one 17-month period. 

  -- In a similar permissive exclusion case, OIG headquarters decided
     not to pursue exclusion against a physician, who had been
     removed from New York's Medicaid program for providing poor
     quality of care to Medicaid beneficiaries, because it considered
     the case too old to pursue.  The field office had received the
     referral 18 months earlier.  Since exclusion from Medicaid,
     Medicare in New York had paid this physician over $86,000. 


   PROCESSING OF PERMISSIVE
   EXCLUSIONS INCONSISTENT AMONG
   FIELD OFFICES
------------------------------------------------------------ Letter :4

We identified inconsistencies in the way the OIG has handled
permissive exclusions, that is, cases in which the OIG has discretion
on whether to recommend nationwide exclusion.  In 1987, the OIG was
given expanded discretionary authority to exclude providers
nationwide.\7 The OIG, however, has not always used its expanded
exclusion authority consistently.  Given competing demands on the
OIG's time, permissive exclusions have sometimes had a relatively low
priority, OIG officials said.  In October 1992, the OIG instructed
its field offices to process state Medicaid agency and licensing
board disciplinary actions only when actual harm was done to patients
and the provider had moved to another state.  Field offices, in turn,
asked state agencies to refer only these kinds of cases.  About a
year later, however, the OIG rescinded this guidance and state
agencies were asked once again to refer all cases. 

We also observed inconsistencies in the way field offices process
permissive exclusion cases.  As a result, providers with equally
serious problems could be treated differently by the OIG, depending
on location.  For example, the Washington, D.C., field office would
not consider recommending nationwide exclusion unless a state
Medicaid agency had excluded the provider or a licensing board had
revoked a license for at least 1 year, a field office official said. 
The Chicago and New York field offices, however, use a 2-year rule of
thumb.  Moreover, cases that appeared to be equally serious received
different treatment in the same field office.  For example, the New
York field office forwarded to OIG headquarters a physician's case
for nationwide exclusion after the state Medicaid agency removed the
physician.  The reasons for removal were providing excessive
services, treating patients inappropriately with the wrong
medications, and not performing sufficient testing to determine the
cause of patients' complaints.  This field office, however, did not
forward the case of another physician, whom the state had removed for
similar reasons about a year earlier.  The field office case file
lacked an explanation or rationale for why this case had not been
investigated.  The regional inspector general, the head of the field
office, said the office's large backlog of cases and shortage of
staff accounted for the situation. 


--------------------
\7 Medicare and Medicaid Patient and Program Protection Act of 1987
(P.L.  100-93). 


   OIG OVERSIGHT OF STATE AGENCIES
   COULD BE IMPROVED
------------------------------------------------------------ Letter :5

Section 1902 of the Social Security Act requires state Medicaid
agencies to report to HHS whenever a provider of services is
terminated, suspended, or otherwise sanctioned or prohibited from
participating in the program.\8 For purposes of indicating which
providers the OIG may exclude, HHS regulations define the term
"otherwise sanctioned" as intending to cover all actions that limit
the ability of a person to participate in the program, regardless of
what such an action is called, including situations in which an
individual or entity voluntarily withdraws from a program to avoid a
formal sanction (42 C.F.R.  1001.601). 

We found, however, that states were not always clear about reporting
requirements and OIG field offices did not monitor state agencies to
ensure that all cases that fell under the OIG's exclusion authority
were being referred.  Consequently, the OIG was not informed of all
providers that had committed fraud or abuse or had furnished poor
quality of care in a state Medicaid program; such providers could
therefore continue providing services to beneficiaries under Medicare
or other state Medicaid programs. 


--------------------
\8 Section 1902 of the act also requires MFCUs to operate in
accordance with standards established by the Secretary of HHS.  One
of these standards requires MFCUs to report convictions to the OIG. 


      SOME STATE MEDICAID AGENCIES
      NOT REPORTING TO THE OIG
---------------------------------------------------------- Letter :5.1

During our state visits, we found that four state Medicaid agencies
did not always report removals.  Two states--Illinois and New
York--did not notify the OIG of certain providers effectively removed
from their programs; Missouri did not report removals to the
appropriate OIG field office.  Further, the Medicaid agency in
Washington, D.C., did not report any removals to the OIG because
officials were unaware of the reporting requirements. 

In Illinois, the state Medicaid program sometimes negotiates a
settlement agreement with a provider against whom it has initiated
removal proceedings because of, for example, serious quality-of-care
problems.  The settlement, in effect, excludes the provider, but the
state does not spend the time and resources needed to pursue a formal
action.  In such an agreement, the provider admits no wrongdoing, but
agrees to withdraw from participation in Medicaid.  The provider also
forfeits the right to appeal if denied reinstatement at a later date. 
The provider does not, however, face the prospect of losing the
license to practice because, according to state Medicaid officials,
the case is not referred to the state licensing board.  In addition,
the state does not report such a case to the OIG.  This settlement
enables Illinois to remove providers from its Medicaid program
relatively quickly and keep them out.  But, because the state does
not refer these actions to the state licensing board or the OIG, the
providers may continue to provide services like those for which the
state sought the provider's removal from Medicaid. 

As of June 1996, about 23 percent of the physicians not allowed to
participate in the Illinois Medicaid program had withdrawn rather
than face an adverse action.  When we checked on the Medicare status
of four providers who had withdrawn from Medicaid between 1992 and
1995, we found that all four were still enrolled in Medicare and
three continued to bill for services.  These providers had withdrawn
from Medicaid for serious quality-of-care problems.  For example,
Medicare paid a podiatrist over $32,000 for services provided to
program beneficiaries after he had withdrawn from the Illinois
Medicaid program in August 1995.  The podiatrist withdrew from the
program after the state alleged that he had provided grossly inferior
care to Medicaid beneficiaries.  Another provider, a physician,
withdrew in April 1995, after the state charged him with providing
poor care to Medicaid beneficiaries.  The following were among the
allegations made by the state:  diagnoses were inconsistent with
medical findings, abnormal laboratory test results were not
addressed, and medications were used without clinical indications. 
Since this physician's withdrawal from Medicaid, Medicare has paid
him over $7,000. 

In commenting on this report, Illinois said that federal requirements
for state reporting of negotiated settlements were unclear. 
Specifically, the state questioned whether a direct link existed
between the statute--which requires state Medicaid agencies to report
providers who are "otherwise sanctioned"--and the federal
regulation--which defines the term to explain the circumstances under
which the OIG may impose a permissive exclusion.  Although the
regulation may be somewhat unclear, the OIG interprets it as
requiring states to report providers who voluntarily withdraw from
the Medicaid program. 

We do not know how many states, other than Illinois, allow providers
to avoid adverse action by withdrawing from Medicaid.  In four other
states we visited-- Maryland, Missouri, Virginia, and Washington,
D.C.--such withdrawals seldom occurred or were not allowed.  In the
remaining state, New York, providers are sometimes allowed to
withdraw from its program, but state Medicaid officials said these
cases are reported to the OIG, the state licensing board, and others. 
New York, however, removes certain providers it suspects of abuse,
but does not report the cases to the OIG.  New York program
regulations permit either the provider or the state Medicaid agency
to end the provider's participation in the program "without cause,"
with 30 days' written notice.  This practice has been used primarily
against pharmacies that the state suspected were heavily involved in
dispensing prescription drugs easily diverted to illicit use.  As a
result, the state agency has been able to deal quickly with
pharmacies that it believed were involved in drug diversion. 

In the course of our work, we identified two other problems in state
reporting to the OIG.  In Missouri, for over 1 year, referrals from
the Missouri Medicaid program did not reach the OIG's Chicago field
office because of some confusion associated with the closure of the
OIG's Kansas City field office and a realignment of
responsibilities.\9 One of the referrals that was not promptly
considered involved a pediatric dentist who had been removed from the
Missouri Medicaid program in May 1995, after the state licensing
board had revoked his license.  Among the numerous charges of poor
quality of care against this dentist was that while attempting to
administer a local anesthetic, he penetrated the nasal cavity of one
child and pierced the jaw of another.  He was also charged with being
abusive to a patient by striking her and, in another case, failing to
consult with a child's parent before extracting four front teeth.  A
program analyst in the Chicago field office told us he first became
aware of, and started working on, this case in March 1996, after
receiving information on the dentist's license revocation from the
state dental board.  The dentist was excluded nationwide by the OIG
in August 1996--approximately 15 months after he had been excluded
from the Medicaid program in Missouri. 

Finally, in Washington, D.C., Medicaid officials told us they did not
report disciplinary actions to the OIG, and the official with overall
responsibility for provider enrollment and removal did not know of
the requirement to do so.  Records in Washington's Medicaid agency
indicated that as of August 1996, 36 providers had been removed from
its program for disciplinary reasons.  In one case, the Medicaid
agency had removed a provider in April 1994 for poor quality of care
and patient abuse. 


--------------------
\9 In April 1996, Missouri Medicaid officials told us that they
reported providers they had removed from their program to the OIG's
Kansas City investigations field office.  According to OIG officials,
however, this office had been closed about a year earlier and the
state should have been reporting cases to the Chicago field office. 
Missouri officials said that the information sent to the Kansas City
field office was never returned, so they had no way of knowing it was
not being received.  Chicago OIG officials were unaware that they
were not receiving cases from the state Medicaid agency until we
brought this to their attention. 


      STATE MFCUS MAY NOT HAVE
      REPORTED ALL CONVICTIONS
---------------------------------------------------------- Letter :5.2

In May 1996, the OIG began an effort, known as Project WEED,
designed, in part, to determine if state MFCUs were reporting all
mandatory exclusion cases.  The project identified over 400
convictions resulting from MFCU investigations that, the OIG
contended, had not been reported to its field offices.  Although some
of these cases may not have been reported to the OIG, the OIG may
have been unaware of others because field offices lacked
accountability over cases, as discussed earlier.  One MFCU
representative we contacted acknowledged his unit had not been
reporting cases.  However, a representative from another unit, which
accounted for nearly one-third of the Project WEED cases, told us the
cases had been reported to the appropriate field office. 

We believe that the OIG needs to provide clearer guidance to states
on its reporting requirements.  We also believe improved oversight by
OIG field offices of key state agencies that refer cases to the OIG,
such as MFCUs and state Medicaid agencies, would at least identify
those agencies that are not reporting.  Improved oversight would also
allow the OIG to be better informed about the extent of states'
compliance with statutory reporting requirements for removed
providers. 


   STATES SOMETIMES HAVE
   DIFFICULTY IDENTIFYING
   OIG-EXCLUDED PROVIDERS
------------------------------------------------------------ Letter :6

The OIG and HCFA periodically provide state Medicaid agencies with
lists of providers that have been excluded from federal health care
programs.  States are expected to use these exclusion data to ensure
that OIG-excluded providers are removed from their Medicaid programs,
if currently enrolled, or prevented from enrolling at a later date. 
Limitations in OIG's exclusion data and inconsistencies between OIG
and state tracking systems, however, can make it difficult for states
to identify excluded providers.  As a result, providers that have
been excluded nationwide by the OIG sometimes continue to be enrolled
in state Medicaid programs.  The Health Insurance Portability and
Accountability Act of 1996 contains provisions that could make the
identification and tracking of excluded providers easier and more
reliable, but these improvements are most likely years away from
implementation. 


      EXCLUSION DATA DISTRIBUTED
      TO STATE MEDICAID AGENCIES
---------------------------------------------------------- Letter :6.1

About twice a year, the OIG prepares a Cumulative Sanction Report,
which is an alphabetical list of all individuals and organizations
that have been excluded nationwide from federal health programs.  For
each name listed, the report shows date of birth and Social Security
number (for individuals), health care specialty or type of business,
and address.  Also shown is the authority used to impose the
exclusion and the date the exclusion took effect.  The OIG provides a
copy of the report, on a diskette, to HCFA.  HCFA's Issuances Unit
prepares a paper copy of the report, which is then forwarded to a
contractor for printing and distribution to state Medicaid agencies. 
The HCFA-prepared report does not identify individuals or
organizations by Social Security or employer identification
number.\10 We were informed, however, that state Medicaid agencies
could obtain a copy of the complete report, on a diskette, from the
OIG.  The OIG also provides HCFA with monthly exclusion updates on
diskette, which HCFA sends to state Medicaid agencies in paper copy
and via electronic mail.  In contrast to the cumulative report, both
the paper copy and, until recently, electronic versions of the
monthly updates have included the Social Security numbers of
individuals who were excluded since the previous monthly update. 


--------------------
\10 Since 1996, the cumulative exclusion list and the monthly update
have been available on the Internet, but also lack identifiers. 


      IDENTIFYING EXCLUDED
      PROVIDERS IS TIME-CONSUMING
      AND CUMBERSOME
---------------------------------------------------------- Letter :6.2

In the six states we visited, Medicaid officials responsible for
ensuring that OIG-excluded providers were not enrolled in their
programs were generally unaware of the availability of cumulative
exclusion data on diskette, as well as monthly updates on electronic
mail.  Thus, to check on providers, Medicaid officials typically
relied on paper copies of the cumulative exclusion list and monthly
updates.  Manually comparing the thousands of names on the OIG
cumulative list and the dozens of names on the monthly updates with
their enrollment files is difficult, if not impractical.  Moreover,
the paper copy of the cumulative exclusion list received by state
Medicaid agencies lacks identifiers, such as Social Security numbers
or employer identification numbers, which could facilitate checking. 
Although the OIG's diskette of the cumulative exclusion list does not
contain employer identification numbers for organizations, it does
have Social Security numbers for individuals.  Thus, states, if made
aware that the diskette is available, could use it to cross-check
with their provider enrollment files, to the extent state files
contain Social Security numbers. 

When we cross-checked the automated version of OIG's February 1996
Cumulative Sanction Report against the state Medicaid agency enrolled
provider files, we found excluded providers enrolled in five state
Medicaid programs.  For example, we found 13 out-of-state providers
who had been excluded by the OIG between 1988 and 1995, but were
still enrolled in the Illinois Medicaid program.  Similarly, we found
10 OIG-excluded providers enrolled in the Washington, D.C., Medicaid
program, two each enrolled in Maryland and Missouri, and one enrolled
in Virginia.  One of the Illinois providers had received almost
$25,000, while one of the Missouri providers had received over
$9,000.  Although none of the other providers had billed their state
Medicaid programs after being excluded by the OIG, state Medicaid
officials acknowledged that these providers would have been paid had
they submitted claims.\11

The states we visited tended to use the paper version of the OIG's
monthly list for a one-time cross-check against their active provider
files.  However, most states did not review earlier monthly lists to
cross-check for an excluded provider who tried to enroll in the
state's Medicaid program in any month after exclusion.  Thus, a
provider could enroll in a state's Medicaid program, after being
excluded nationwide by the OIG, and not be detected.  Likewise, some
states we visited did not always cross-check providers that appeared
on the monthly update but had out-of-state addresses.  This can lead
to problems because many providers can provide services in more than
one state or can relocate, gaining access to Medicaid.  An official
in Missouri, for example, told us that although staff did cross-check
the OIG monthly list against in-state and border state addresses,
they did not check names from other states.  New York officials also
told us they only cross-checked names with addresses in their state
because too much time would be required to cross-check the entire
list.  In our cross-checking, we found that almost all of the
OIG-excluded providers enrolled in state Medicaid programs were
listed with out-of-state addresses on the OIG's excluded provider
list. 

HCFA officials have recently updated a software program that would
enable them to compress cumulative exclusion data and transmit the
data to the states on the Internet.  This report--unlike the
cumulative report already available on the Internet and available to
the public--would include Social Security numbers for individual
providers.  However, because of concerns about maintaining
confidentiality for Social Security numbers transmitted over the
Internet, HCFA decided not to electronically transmit to the states
the cumulative report with Social Security numbers and stopped
including Social Security numbers on the monthly updates.  Thus, the
OIG's cumulative and monthly diskettes are currently the only
automated means to obtain excluded providers' Social Security
numbers. 

After we gave several state officials an OIG diskette of excluded
providers, including Social Security numbers, they told us that if
they could have these data routinely, they would explore the
feasibility of cross-checking the data against their enrollment
files.  For example, one state official told us that once he received
automated listings of excluded providers, he intended to do periodic
computer matches of OIG exclusion data and state provider files. 
Such matching, however, would still require extensive manual analysis
of the results, he said, because OIG's format cannot readily be made
compatible with the state's own files.  Moreover, such
computer-matching would not prevent a provider from enrolling in the
program between matches.  Much better, he said, would be for the
state to integrate the exclusion data into its enrollment file; this
integration would automatically ensure that OIG-excluded providers
would be removed from the state's Medicaid program and that
OIG-excluded providers not currently enrolled could not enroll later. 
Consequently, he said, he had requested that the Medicaid agency's
information system staff explore the feasibility of setting up a
system for capturing OIG exclusion data.  Information system
resources are currently focused on the state's implementation of
managed care and other priorities, however, he said, so this project
most likely will not receive attention for a long time. 


--------------------
\11 The OIG has found similar problems in Medicare in Maryland.  In
Medicare Payments to Excluded and Unlicensed Health Care Providers,
Office of Inspector General, Report No.  A-14-96-00202 (Nov.  1996),
the OIG reported that Medicare reimbursed six Maryland providers
after they were excluded by the OIG and six other providers after
their licenses were suspended or revoked by the state licensing
board. 


      LACK OF COMMON IDENTIFIERS
      HAMPERS DETECTION
---------------------------------------------------------- Letter :6.3

No universal identifier for health care providers currently exists,
and health care providers often have multiple identifiers for the
programs and organizations with which they do business.  This makes
it difficult to identify and track excluded providers across health
care programs.  State Medicaid agencies, for instance, sometimes have
difficulty determining whether OIG-excluded providers are enrolled or
have attempted to enroll in their programs because identifying
information about the providers on the exclusion list may be
incomplete or different from the identifiers used in state data
systems. 

Although OIG exclusion data usually include Social Security numbers
for excluded individuals, the data do not include identifiers for
certain excluded organizations, such as pharmacies, home health care
agencies, and medical transportation companies.  Almost 800 excluded
organizations were listed on the OIG's October 1996 cumulative
report.  Without an identifier, such as an employer identification
number, it is difficult for a state Medicaid agency to determine
whether a provider enrolled in its program is the same organization
as one on the excluded provider list with the same or a similar name. 
Although OIG exclusion data usually include the addresses of excluded
organizations, they frequently relocate or operate out of multiple
locations.  But including employer identification numbers on the OIG
exclusion list would not necessarily solve the problem because
organizations can use different numbers. 

The lack of common identifiers also hampers tracking providers in
states that use identifiers other than Social Security numbers. 
Missouri and Virginia, for example, give individuals the option of
enrolling by Social Security number or employer identification
number.  To the extent individuals in these states use employer
identification numbers, excluded providers are unlikely to be
detected through computer-matching of Social Security numbers. 
Alternatively, these states could attempt to match by name, but
name-matching can result in many erroneous identifications, as well
as the need for time-consuming research and follow-up.  In some
states, however, individual providers are identified solely or
primarily by Social Security numbers, making it relatively easy to
cross-check the OIG exclusion data with state enrollment files. 

In addition, certain kinds of excluded providers that do not directly
bill a state Medicaid program--such as nurses, pharmacists, or
physicians employed by hospitals, nursing homes, pharmacies, and
health maintenance organizations--are difficult to identify.  These
providers, once excluded, can change employers or move to other
states and continue to provide services through federal health care
programs without detection.  To at least partly deal with this
problem, OIG exclusion data will be added to the National
Practitioner Data Bank--a repository of information on practitioners
(physicians, dentists, and other state-licensed health care
providers) concerning malpractice payments; clinical privilege
actions; and adverse actions taken by hospitals, insurance companies,
licensing boards, and professional societies.  The OIG believes that
this action will substantially reduce the number of excluded licensed
providers that continue to indirectly participate in federal health
care programs in hospitals.  This is because hospitals, when making
appointments to their medical staff or granting clinical privileges,
are required to query the database for all new practitioners and all
current practitioners every 2 years.  But not all excluded providers
would be exposed by these queries.  For one thing, not all providers
are covered by the database because some are not state licensed.  For
example, Maryland does not license nurses' aides.  Moreover, some
providers may not be affiliated with hospitals.  Other
organizations--such as nursing homes, pharmacies, and health
maintenance organizations--are allowed, but not required, to query
the database. 


      NEW LEGISLATION MAY MAKE
      IDENTIFYING EXCLUDED
      PROVIDERS EASIER AND MORE
      RELIABLE
---------------------------------------------------------- Letter :6.4

The Health Insurance Portability and Accountability Act of 1996,
enacted in August 1996, has added tools that may help the OIG and
states track unacceptable providers.  One of these tools is a system
of unique health identifiers for all health care providers, which the
act requires HHS to establish.  Assigning a unique identifier to each
health care provider should make it easier for state Medicaid
agencies to determine if excluded providers are enrolled in their
programs, reducing opportunities for excluded providers to receive
inappropriate payment.  However, full implementation will take
several years. 

The act requires that within 18 months, the Secretary of HHS adopt a
standard for a unique health identifier for all health care
providers--both individuals and organizations.  Since 1993, HCFA has
been developing a unique identifier for Medicare providers, known as
the National Provider Identifier (NPI).  HCFA plans to adapt the NPI
to meet the requirements of the act and has begun working to
encourage states, private payers, and other federal agencies to adopt
the NPI.  A proposed regulation announcing the standard and seeking
public comment is expected to be published in spring 1997, with a
final regulation planned for July 1997. 

Although the law requires compliance with the standard within 24
months after it is adopted, according to HCFA officials we spoke
with, it will most likely take much longer to assign NPIs to all
health care providers.  The law primarily deals with those providers
who bill federal programs electronically, HCFA officials believe. 
Thus, HCFA will emphasize assigning identification numbers to these
providers, reserving for later assigning numbers to other providers,
including the estimated thousands who do not participate in federal
programs at all.  Implementing the provisions for a unique identifier
may also be delayed because of unresolved questions on how to (1)
meet the cost of implementing the new system, (2) ensure that all
health care providers are identified and assigned NPIs, and (3)
minimize the disruption to health plans and organizations when
converting their provider enrollment files. 

Another tool provided for by the act--which may help the OIG, state
Medicaid agencies, and other health care programs keep track of
problem providers--is the Adverse Action Data Bank.  Currently, no
centralized database exists to track fraud and abuse in the health
care system.  The OIG's excluded provider list is but one of several
databases and information sources that contain information on problem
health care providers.  The Adverse Action Data Bank would provide a
comprehensive and centralized database of "final adverse actions,"
such as criminal convictions, civil judgements, exclusions from
federal health care programs, administrative sanctions, and other
disciplinary actions imposed against health care providers.  This
database is to be widely accessible to public and private health care
organizations. 

Like assigning unique identifiers, setting up the database will take
time to accomplish.  The OIG, in conjunction with the Department of
Justice, is responsible for overseeing the development of the
database, but OIG officials we spoke with estimated implementation
was at least a year away.  Although start-up costs could be about $2
million, the costs to operate the database are largely unknown. 
Moreover, certain factors could limit the data bank's effectiveness. 
For instance, the law does not contain sanctions or penalties if a
government agency or health plan fails to report its adverse actions
or use the database.  Thus, some way must be found to (1) persuade
these entities to report their adverse actions and (2) convince them,
especially state agencies and health plans that will be charged for
inquiries, that the database is useful.  In addition, the law
specifies that the database must not duplicate information already
contained in the National Practitioner Data Bank.  Moreover, the law
exempts from reporting those settlements in which no findings of
liability have been made, such as the provider withdrawals we found
occurring in the Illinois Medicaid program.  HCFA and OIG officials
fear that if large numbers of providers attempt to enter into
settlements to avoid being listed in the database, these exemptions
could undermine the usefulness of the database. 


   THE OIG IS TAKING ACTIONS TO
   STRENGTHEN THE EXCLUDED
   PROVIDER PROCESS
------------------------------------------------------------ Letter :7

OIG officials attributed many of the problems we found to resource
cuts over the last several years.  For the audit and investigation of
health care providers, the Health Insurance Portability and
Accountability Act appropriates for the OIG not less than $60 million
and not more than $70 million in extra funds for fiscal year 1997,
with additional amounts authorized for subsequent years. 
Headquarters officials plan to use some of this money to hire
additional field office staff to process exclusion cases, they said. 
In addition, under the Project WEED umbrella, the OIG has taken or
planned other corrective actions: 

  -- Tracking of incoming exclusion referrals:  Since September 1996,
     the OIG field offices have maintained a database on all
     exclusion referrals from states.  According to a headquarters
     official, as of December 1, 1996, more than 4,300 exclusion
     referrals had been logged in. 

  -- Training of field office staff:  In July and September 1996,
     field office staff who process exclusion referrals from states
     received training.  It focused on what staff need to do to
     prepare a case for exclusion and reemphasized the criteria and
     guidance staff are expected to follow, headquarters officials
     said. 

  -- Outreach efforts:  The OIG plans to contact state Medicaid
     agencies, MFCUs, and licensing boards to ensure that all
     information needed to process provider exclusions is forwarded
     to field offices.  Letters will be sent to these organizations,
     describing the specific documentation the OIG needs to process a
     case for exclusion. 


   CONCLUSIONS
------------------------------------------------------------ Letter :8

When providers defraud federal or state health care programs or give
poor quality care, the OIG has authority to exclude them nationwide
from participation in these programs.  The process for excluding
providers can and has operated successfully, with thousands of
unacceptable providers excluded from Medicare, Medicaid, and other
federal health care programs over the years. 

However, we found cases in which unacceptable providers in one
state's Medicaid program can be enrolled as providers under Medicare
or in other states.  Because of the amount of communication and
coordination needed at the state and federal levels, the exclusion
process is complex.  Nevertheless, we believe that more attention
must be paid to a system designed to help ensure the integrity of
federal health programs and protect beneficiaries from poor quality
care.  In the long run, certain provisions of the Health Insurance
Portability and Accountability Act of 1996 may assist the OIG and
states in addressing these problems, but implementation is most
likely several years in the future.  Interim actions are needed. 

The OIG has taken several important actions to address some of the
problems we identified.  Tracking of incoming exclusion referrals
should strengthen accountability for referrals received from the
states and help ensure that none are overlooked.  Training that has
been provided to current staff should help reduce inconsistencies
among field offices and improve the quality of processing, and plans
to hire additional staff should improve the timeliness of exclusion
processing.  Outreach to states under Project WEED has resulted in
identifying previously unknown exclusion cases.  The OIG plans for
further outreach to states under this project may result in
identifying additional cases and may improve the extent to which
states refer cases to the OIG. 

The OIG believes--and we concur--that these actions should help
correct many of the problems we identified.  However, we believe that
refinements to these actions would encourage states to refer more
unacceptable providers to the OIG and help the OIG to process these
referrals promptly.  For example, the OIG can further strengthen its
exclusion referral process by clarifying reporting requirements and
systematically monitoring key state agencies' compliance.  It could
also follow through on its plans to contact state agencies to ensure
that states provide the documentation the OIG needs to consider an
exclusion action.  In addition, the OIG could establish consistent
standards--performance goals or benchmarks--to facilitate the timely
processing of state referrals.  Finally, OIG exclusion data need to
be distributed to appropriate state officials in a format that aids
timely comparison with state provider files. 


   RECOMMENDATIONS TO THE HHS
   INSPECTOR GENERAL
------------------------------------------------------------ Letter :9

We recommend that the HHS Inspector General

  -- improve oversight of key state agencies that refer cases to the
     OIG, such as the state Medicaid agency and MFCU, to ensure that
     states understand and comply with the statutory reporting
     requirements for state-removed providers;

  -- clarify to states that settlements and provider withdrawals to
     avoid formal sanctions should be reported to the OIG, in
     accordance with its regulations (42 C.F.R.  1001.601);

  -- provide ongoing, clear, and consistent guidance to the states on
     the documentation needed for timely processing;

  -- establish consistent standards--performance goals or
     benchmarks--for the timely processing of state referrals; and

  -- in collaboration with HCFA, transmit OIG exclusion data either
     electronically or by diskette, including Social Security
     numbers, to state Medicaid agency officials responsible for
     enrolling and removing providers. 


   AGENCY COMMENTS AND OUR
   EVALUATION
----------------------------------------------------------- Letter :10

We provided a draft of this report to the HHS Inspector General.  In
providing written comments, she also incorporated comments from HCFA
(see app.  IV).  In general, she concurred with our recommendations. 

Concerning our recommendation that the OIG establish consistent
standards--performance goals or benchmarks--for the timely processing
of state referrals, the HHS Inspector General said she had recently
reiterated to regional managers that they should apply criteria in
the Office of Investigation's Special Agent's Handbook to permissive
exclusion cases.  The handbook criteria require that exclusion
documents be forwarded immediately to the appropriate field office
supervisor for evaluation and, as a general rule, within 60 working
days of receipt, a decision should be rendered on whether or not the
OIG will process the case for a permissive exclusion action.  We
believe that reemphasizing existing guidance as to time frames for
evaluating whether to process an exclusion referral is an important
step to improve timeliness.  However, evaluating whether processing
of a referral is warranted is only the first component of the overall
exclusion process.  Thus, we believe additional performance measures
or goals, such as target time frames for completing the cases and
referring them to headquarters, need to be established to improve
timeliness, as well as to help the OIG measure the effectiveness of
its work. 

The Inspector General expressed concern with our recommendation to
ensure that state Medicaid officials responsible for enrolling and
removing providers were aware of the availability of automated
exclusion data with Social Security numbers.  She said that it would
be unreasonable and unnecessarily costly for HCFA, which is
responsible for distributing exclusion data to the states, to provide
the cumulative and monthly lists to each official in a state agency
who might need that information.  Instead, she said, the state
official who receives the lists should ensure that all appropriate
officials who need to be notified of the exclusion also receive the
information.  Nevertheless, the Inspector General said she would
encourage HCFA to remind state officials of their responsibility to
ensure the lists reach those who need them. 

In making this recommendation, our principal concern was that state
Medicaid officials responsible for removing unacceptable providers
from their programs were unaware that cumulative exclusion data with
Social Security numbers were available in automated form.  If state
officials had such information, they might find it easier to ensure
that OIG-excluded providers were not participating in their programs;
in addition, the problems we found through computer-matching might
not have occurred.  To respond to the Inspector General's comments,
we revised this recommendation and combined it with a previous one to
emphasize that the OIG and HCFA should collaborate to provide
complete exclusion data, in automated form, to the states. 

We also requested comments on a draft of this report from the six
state Medicaid agencies included in our review, as well as the MFCUs
in Illinois, Maryland, and New York.  We received written responses
from the Illinois, Maryland, Missouri, and New York state Medicaid
agencies.  In general, they agreed with our conclusions and
recommendations.  In addition, the Illinois and Missouri state
Medicaid agencies and the New York MFCU provided clarifying comments,
which we incorporated as appropriate. 

Illinois, however, questioned our language indicating that federal
regulations require states to report voluntary withdrawals to the
OIG.  The state suggested that federal reporting requirements as to
negotiated settlements were unclear.  Specifically, the state
questioned whether a direct link existed between the law--which
requires state Medicaid agencies to report providers who are
"otherwise sanctioned"--and the federal regulations (42 C.F.R. 
1001.601)--which define the term for purposes of explaining the
circumstances under which the OIG may impose a permissive exclusion. 
We agree that the regulation is unclear.  Consequently, we revised
our language to remove any implication that the state had violated
federal regulations by not reporting negotiated settlement agreements
to the OIG.  Nevertheless,the OIG interprets the regulation as
requiring states to report providers who voluntarily withdraw from
the Medicaid program to avoid an adverse action and communicated its
interpretation in a letter to Illinois, dated February 24, 1997.  In
addition, the OIG plans to contact all state Medicaid agencies by
spring 1997 to provide them with guidelines on the kind of cases that
fall within the OIG's exclusion authority and the documentation
needed to support an exclusion.  The guidance will cover provider
withdrawals to avoid formal exclusion. 


--------------------------------------------------------- Letter :10.1

As arranged with your office, unless you announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter.  At that time, we will send copies of
this report to the Secretary and the Inspector General of HHS, the
Administrator of HCFA, state officials in the six states we visited,
and other interested parties.  We also will make copies available to
others upon request. 

Please call me at (312) 220-7600 or Kathryn G.  Allen, Assistant
Director, at (202) 512-7059 if you or your staff have any questions
about this report.  Other major contributors to this report include
Robert T.  Ferschl; Paul T.  Wagner, Jr.; Robert E.  Lippencott;
Alfred R.  Schnupp; and Jonathan H.  Barker. 

Sincerely yours,

Leslie G.  Aronovitz
Associate Director, Health Financing and
 Systems Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To understand federal and state processes for excluding providers
from Medicaid, we discussed the processes with Medicaid officials in
six states, four OIG field offices, and OIG headquarters.  In our six
judgmentally selected states--Illinois, Maryland, Missouri, New York,
Virginia, and Washington, D.C.--we spoke with officials who managed
units that (1) enrolled providers in state Medicaid programs, (2)
removed these providers when necessary, or (3) operated computer
systems supporting those functions.  In these states, we also
contacted officials from the state MFCU--to obtain information on its
fraud and abuse convictions--and selected state licensing boards--to
understand the processes for disciplining providers that violate
state licensing requirements. 

In the OIG's Chicago, New York, Philadelphia, and Washington, D.C.,
field offices--which process referrals from the six states--we met
with staff responsible for processing referrals; in OIG headquarters,
we met with officials who make exclusion decisions and prepare the
cumulative and monthly lists of excluded providers.  At HCFA, we met
with officials responsible for distributing OIG exclusion data to
state Medicaid agencies and others.  We also interviewed officials at
OIG headquarters and HCFA to determine their plans to establish an
Adverse Action Data Bank and develop a unique health care identifier,
as required by the Health Insurance Portability and Accountability
Act of 1996. 

To examine how well the OIG's provider exclusion process was working,
we examined a sample of cases, referred by selected state agencies,
to determine their disposition by the OIG.  Because field offices did
not always log in or otherwise account for all referrals they
received, we could not identify the universe of all cases from which
we could draw a sample.  Instead, we judgmentally sampled referrals
made by state agencies to the Chicago, New York, and Philadelphia OIG
field offices.  See table I.1 for the OIG field offices and state
agencies we visited and the number of cases we reviewed. 



                         Table I.1
          
            Exclusion Referrals Reviewed by GAO

OIG field                                        Referrals
office          Referring state agency            reviewed
--------------  ----------------------------  ------------
Chicago         Illinois Department of                  18
                 Public Aid\a                           14
                 Illinois State Police                   6
                 (MFCU)
                 Missouri Division of
                 Medical Services\a
New York        New York Department of                  28
                 Social Services\a
Philadelphia    Maryland MFCU                           22
==========================================================
Total                                                   88
----------------------------------------------------------
\a State Medicaid agency. 

In general, these cases represented referrals that state agencies had
made to OIG field offices during 1994 and 1995.  We reviewed the case
files at OIG field offices from the Illinois and New York state
Medicaid agencies and the Maryland MFCU.  For the Illinois MFCU and
Missouri Medicaid agency cases, we only determined their status at
the OIG.  In addition, for selected Illinois and New York Medicaid
referrals, we determined if the providers were enrolled in Medicare,
according to the Medicare contractors serving those states.  Because
these cases were not randomly selected, results cannot be generalized
to all such cases referred by the states or processed by the OIG
field offices and headquarters.  However, the results of the OIG's
Project WEED indicate that the problems we identified through our
work may be pervasive.  In determining the disposition of permissive
cases, we did not question OIG decisions on whether an exclusion was
warranted. 

To determine whether any nationally excluded providers were still
providing services under state Medicaid programs, we compared the
OIG's February 1996 list of excluded providers against states' active
provider files.  To ascertain whether states were reporting to the
OIG as required, we also compared states' lists of providers excluded
from their programs against the OIG's excluded provider list. 

We performed our work between November 1995 and January 1997 in
accordance with generally accepted government auditing standards. 


LEGAL BASIS FOR EXCLUDING
PROVIDERS UNDER THE SOCIAL
SECURITY ACT
========================================================== Appendix II

Section of the
act               Exclusion reason
----------------  ----------------------------------------------------
1128(a)(1)\a      Program-related conviction

1128(a)(2)\a      Conviction for patient abuse or neglect

1128(a)(3)\a      Felony conviction related to health care fraud

1128(a)(4)\a      Felony conviction related to controlled substances

1128(b)(1)        Misdemeanor conviction related to health care fraud

1128(b)(2)        Conviction for obstructing an investigation

1128(b)(3)        Misdemeanor conviction related to controlled
                  substances

1128(b)(4)        License revocation or suspension

1128(b)(5)        Suspension or exclusion under a federal or state
                  health care program

1128(b)(6)        Excessive claims or furnishing of unnecessary or
                  substandard items and services

1128(b)(7)        Fraud, kickbacks, and related activities

1128(b)(8)        Entities owned or controlled by a sanctioned
                  individual

1128(b)(9)        Failure to disclose required information

1128(b)(10)       Failure to supply requested information on
                  subcontractors and suppliers

1128(b)(11)       Failure to provide payment information

1128(b)(12)       Failure to grant immediate access

1128(b)(13)       Failure to take corrective action

1128(b)(14)       Default on health education loan or scholarship
                  obligations

1128(b)(15)       Individuals controlling an excluded entity

1128A(a)          Imposition of a civil money penalty or assessment

1156(b)           Peer review organization recommendation
----------------------------------------------------------------------
\a Mandatory exclusion provisions. 


OIG PROCESS:  PROBLEMS WITH STATE
EXCLUSION REFERRALS
========================================================= Appendix III

Several examples of (1) cases for which the OIG had no record of
state exclusion referrals when we initially inquired and (2) delays
in OIG processing of state exclusion referrals (discussed on pp. 
5-8).  The following are additional examples of these two problems,
which we identified in both the Chicago and New York field offices. 

NO RECORD OF STATE REFERRALS


      EXAMPLE 1
----------------------------------------------------- Appendix III:0.1

On June 2, 1995, Illinois notified the OIG's Chicago field office
that it had removed a physician from its Medicaid program for
providing poor quality care to Medicaid beneficiaries.  For example,
the state found that the physician often prescribed medications that
had no correlation to patient symptoms or diseases and that his
diagnoses were often unsupported.  In one instance, the physician had
prescribed a medication with a high sugar content for a diabetic.  In
another, he had prescribed the wrong medication for an eye problem. 
The OIG field office had no record of this case, when we inquired in
March 1996.  After our review, the field office obtained information
on the removal and began processing the case.  The physician was
excluded in December 1996--18 months after the state first reported
the case to the OIG.  During this time period, the physician was
enrolled in, but did not bill, Medicare. 


      EXAMPLE 2
----------------------------------------------------- Appendix III:0.2

The Chicago field office had no record, when we inquired in March
1996, of a physician who had (1) been removed from the state Medicaid
program in September 1995 for defaulting on a state student loan and
(2) had his license revoked in October 1995 for leaving a
hospitalized patient without physician coverage.  As in the case
above, the field office obtained information on the case after our
review and forwarded the case to headquarters in June 1996.  The case
remained unresolved, however, as of January 1997, over 14 months
after it was first referred by the state of Illinois. 


      EXAMPLE 3
----------------------------------------------------- Appendix III:0.3

When we inquired in March 1996, the Chicago field office had no
record of a physician who, according to state files, had been removed
from the Illinois Medicaid program in September 1995 and reported to
the OIG the following month.  The state had removed the physician for
repeatedly providing harmful and grossly inferior care to Medicaid
beneficiaries.  Among the state's charges were that the physician
failed to observe a patient during the 18 hours she was in labor in a
hospital or to be present at the delivery, placed a patient at risk
by not promptly treating a bladder infection, and failed to refer a
patient to a specialist after long-term treatment did not control his
blood pressure.  The field office subsequently opened a case on the
physician in April 1996.  According to field office officials, the
case remains unresolved as of January 1997.  After this physician was
excluded from Medicaid, he was paid over $9,000 (through Dec.  1996)
for services provided to Medicare beneficiaries in Illinois. 


      EXAMPLE 4
----------------------------------------------------- Appendix III:0.4

In March 1996, the Chicago field office had no record of a referral
sent by the Illinois Medicaid agency 9 months earlier, in June 1995. 
The state had removed the provider, a transportation company, from
the Medicaid program for overbilling.  The case did not meet OIG
criteria for exclusion, OIG officials later said. 


      EXAMPLE 5
----------------------------------------------------- Appendix III:0.5

New York excluded a durable medical equipment supplier from Medicaid,
effective June 1994, on the basis of a consistent disregard for
Medicaid rules and regulations, as well as unacceptable recordkeeping
practices.  The state found over 2,000 claims, totaling more than
$120,000, for which the provider could supply no documentation; for
another 148 claims, totaling about $9,000, the documentation
available was inadequate.  About $21,500 of these overpayments had
been collected as of November 1996.  Over 2 years have elapsed since
this provider was removed by the state, but the New York field office
had no record of an exclusion. 


      EXAMPLE 6
----------------------------------------------------- Appendix III:0.6

The New York field office had no record of a durable medical
equipment dealer who had been excluded from the state's Medicaid
program in September 1994, after an audit revealed that the provider
had billed for items not ordered by physicians and had "upcoded" some
bills, charging for custom-made items when standard items were
provided. 

DELAYS IN PROCESSING STATE
REFERRALS


      EXAMPLE 1
----------------------------------------------------- Appendix III:0.7

The OIG excluded a transportation company 16 months after the
Illinois Medicaid program reported that it had removed the company
for billing for unauthorized services, using improper procedure
codes, and failing to keep proper records.  The field office case
file showed no activity for lengthy periods. 


      EXAMPLE 2
----------------------------------------------------- Appendix III:0.8

Over 16 months elapsed--including one 9-month period when no
processing occurred--before the OIG excluded a pharmacy that had
overcharged the Illinois Medicaid program by $136,000. 


      EXAMPLE 3
----------------------------------------------------- Appendix III:0.9

After an audit revealed incomplete medical records, no documentation
of patient medical histories, and multiple quality-of-care problems,
New York removed a physician from Medicaid for 5 years, effective
March 1995.  The OIG's New York field office was notified of the case
in June 1995, but did not start processing the case until February
1996.  Fourteen months after receiving the referral, the OIG excluded
the provider. 


      EXAMPLE 4
---------------------------------------------------- Appendix III:0.10

New York's Medicaid agency excluded a physician for 5 years, in April
1994, after (1) an audit concluded the physician was overprescribing
drugs and (2) an undercover investigator was able to obtain
prescriptions on request, after a cursory examination.  We could not
determine from state or OIG case files when the OIG was notified, but
about a year after state removal, the New York field office--because
it had a backlog of work--transferred the case to the Boston field
office.  Thirteen months later, the Boston field office recommended
exclusion and, in September 1996, the physician was excluded
nationwide--more than 2 years after first being removed from New
York's Medicaid program.  Between the state removal and federal
exclusion dates, Medicare paid this provider over $8,700. 


      EXAMPLE 5
---------------------------------------------------- Appendix III:0.11

New York excluded an ophthalmologist for 2 years, effective May 1995,
after an audit determined that the physician rendered inappropriate
care to Medicaid beneficiaries.  The state charged, among other
things, that the provider performed excessive glaucoma testing and
treated patients inappropriately, using medications that were not
indicated.  In some cases, patients were placed at substantial risk. 
The state notified the New York OIG field office of this case in
August 1995, and the OIG excluded the provider 1 year later. 


      EXAMPLE 6
---------------------------------------------------- Appendix III:0.12

New York excluded a registered physician assistant for 5 years,
effective March 1995, for conducting an unacceptable practice,
maintaining inadequate records, and providing medical care and
services far in excess of patients' needs.  Among other things, the
state charged that the physician assistant often prescribed
medications without adequate indication and provided medical care to
Medicaid beneficiaries without adequate supervision of a licensed
physician.  The state notified the OIG of this case in late April
1995, but other than assigning the case a file number some time in
1996, the case file showed no activity when we reviewed it almost 19
months later.  Given the age of this case and the office's backlog,
the regional inspector general said the case was unlikely to be
processed for exclusion. 


      EXAMPLE 7
---------------------------------------------------- Appendix III:0.13

New York removed a physician from its Medicaid program for 5 years,
effective May 1994, for false claims, unacceptable recordkeeping,
excessive services, and failure to meet recognized standards.  For
example, the state claimed that the physician provided potentially
dangerous care by frequently prescribing the drug Elavil to substance
abusers.  The state also referred the provider to the state licensing
board.  We could not determine precisely when the field office
received this case, but more than 2-1/2 years after the state removed
the physician, the case remained unresolved.  Like the case above,
the regional inspector general said that because of the age of this
case, it was unlikely to be processed for exclusion. 


      EXAMPLE 8
---------------------------------------------------- Appendix III:0.14

New York removed a podiatrist from Medicaid, in May 1995, after she
was convicted of billing Medicaid for services not actually provided. 
The OIG's New York field office was already aware of this case at the
time of the state removal because it had been notified of the
physician's indictment in February 1994.  Although the field office
lacked key documents needed to process the case for exclusion, the
case file showed no evidence of follow-up until November 1996.  Since
the time the podiatrist had been removed from Medicaid in New York,
Medicare had paid her about $1,900. 


      EXAMPLE 9
---------------------------------------------------- Appendix III:0.15

A physician assistant was removed from Medicaid in New York,
effective September 1995, based on an evaluation of quality of care,
which showed that he did little to attempt to improve the health of
patients other than frequently repeating laboratory tests.  The
Medicaid agency concluded that this was particularly dangerous
because many of his patients had serious illnesses.  In addition,
there was no evidence of the assistant's supervision by a licensed
physician.  The OIG was notified of this case in November 1995, but
did not open its own case file until May 1996.  The case was referred
to headquarters in July 1996 and was still pending when we reviewed
the file in November 1996. 




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE OIG
========================================================= Appendix III



(See figure in printed edition.)



(See figure in printed edition.)



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(See figure in printed edition.)



(See figure in printed edition.)


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