Medicare Fraud and Abuse: DOJ's Implementation of False Claims Act
Guidance in National Initiatives Varies (Letter Report, 08/06/1999,
GAO/HEHS-99-170).

Pursuant to a legislative requirement, GAO reviewed the Department of
Justice's (DOJ) and selected U.S. Attorneys' Offices' implementation of
the False Claims Act guidance, focusing on: (1) the status of DOJ's work
groups efforts and the initiative-specific guidance they prepared; (2)
DOJ's efforts to assess U.S. Attorneys' compliance with the guidance;
(3) the implementation of the guidance at selected U.S. Attorneys'
Offices; and (4) state hospital associations' concerns regarding DOJ's
use of the False Claims Act.

GAO noted that: (1) DOJ's national initiative work groups have made
further progress in implementing the Department's False Claims Act
guidance since GAO issued its February 1, 1999, report; (2) all four
work groups have completed their examination of the legal and factual
basis for their initiatives and have prepared initiative-specific
guidance for the U.S. Attorneys' Offices participating in the
initiatives; (3) the guidance prepared by these work groups is
consistent with the requirements in DOJ's guidance; (4) while DOJ
officials told GAO compliance with its False Claims Act guidance is an
ongoing priority for the Department, GAO believes DOJ's process for
assessing the U.S. Attorneys' Offices' compliance may be superficial;
(5) these assessments appear to involve little more than reviewers
asking supervisors what they have done to ensure compliance with the
guidance; (6) DOJ's plans for strengthening the assessment process, such
as adding more questions, may not be enough to effectively assess
compliance; (7) in GAO's view, these additional questions will not
provide more substantive information than the original question and are
only a starting point for an effective assessment; (8) GAO also found
that the implementation of DOJ's False Claims Act guidance varied among
the eight U.S. Attorneys' Offices GAO visited that were participating in
the national initiatives; (9) five of these offices were participating
in the Laboratory Unbundling initiative and had begun their involvement
before DOJ's guidance was issued; (10) GAO found that their actions
were, to varying degrees, inconsistent with the guidance; (11) GAO's
limited review also raised questions about whether four of these offices
were promptly incorporating the guidance into their ongoing
investigations; (12) restrictions on GAO's access at all offices
prevented GAO from conducting a complete and independent review; (13)
GAO's survey of state hospital associations indicated that the issuance
of DOJ's False Claims Act guidance has lessened their concerns about
national initiative investigations; and (14) half of the associations
expressing concerns with DOJ's use of the False Claims Act prior to the
issuance of the guidance said that the guidance had fully addressed
their concerns.

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

 REPORTNUM:  HEHS-99-170
     TITLE:  Medicare Fraud and Abuse: DOJ's Implementation of False
	     Claims Act Guidance in National Initiatives Varies
      DATE:  08/06/1999
   SUBJECT:  Hospitals
	     Claims processing
	     Medical expense claims
	     Overpayments
	     Health insurance cost control
	     Program abuses
	     Investigations by federal agencies
	     Internal controls
IDENTIFIER:  Medicare Prospective Payment System
	     DOJ/HHS Laboratory Unbundling Project
	     Medicare Program
	     DOJ/HHS 72 Hour Window Project

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Cover
================================================================ COVER

Report to Congressional Requesters

August 1999

MEDICARE FRAUD AND ABUSE - DOJ'S
IMPLEMENTATION OF FALSE CLAIMS ACT
GUIDANCE IN NATIONAL INITIATIVES
VARIES

GAO/HEHS-99-170

DOJ's False Claims Act Guidance

(101799)

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

  ACE - Affirmative Civil Enforcement
  DOJ - Department of Justice
  EOUSA - Executive Office for U.S.  Attorneys
  HHS - Department of Health and Human Services
  OIG - Office of Inspector General
  PPS - prospective payment system

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

B-282251

August 6, 1999

The Honorable Ted Stevens
Chairman
The Honorable Robert C.  Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

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

The Honorable C.  W.  Bill Young
Chairman
The Honorable David R.  Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives

The Honorable Henry J.  Hyde
Chairman
The Honorable John Conyers, Jr.
Ranking Minority Member
Committee on the Judiciary
House of Representatives

Improper billings to Medicare have been a longstanding threat to the
fiscal integrity of the program.  The Office of Inspector General
(OIG) of the Department of Health and Human Services (HHS) estimates
that overpayments due to billing errors, fraud, medically unnecessary
services, and other problems totaled $12.6 billion in fiscal year
1998. 

With the increased attention to health care fraud and abuse in recent
years, the Department of Justice (DOJ) has been using the False
Claims Act (31 U.S.C.  sec.  3729(a)-3733) for practices that in the
past might have been dealt with by seeking repayment.  The act's
damages and penalties make it a powerful enforcement tool. 

DOJ's efforts have included a series of nationwide investigations of
hospitals.  These national initiatives--as they are termed by
DOJ--have been widely criticized by the hospital community.\1
Hospitals have alleged that they have been unfairly targeted and that
DOJ has been overzealous in its application of the act.  Responding
to hospital and congressional concerns, DOJ issued guidance in June
1998 on the appropriate use of the act in civil health care matters,
including national health care initiatives. 

Concerns about DOJ's implementation of the guidance prompted the
Congress to add a provision to the Omnibus Consolidated and Emergency
Supplemental Appropriations Act of 1999 (P.L.  105-277) requiring us
to monitor DOJ's and the U.S.  Attorneys'\2

compliance with the guidance, including any revisions.  We are
required to issue two reports on the results of our work. 

Our first report, issued in February 1999, focused on DOJ's early
implementation of the guidance.\3 We reported that DOJ had designated
four national initiatives involving hospitals--Laboratory Unbundling,
72-Hour Window, Prospective Payment System (PPS) Transfer, and
Pneumonia Upcoding--and had established work groups for each.  We
also noted that DOJ had begun taking steps intended to ensure that
the 93 U.S.  Attorneys comply with the guidance.\4 For example, we
reported that DOJ had incorporated the guidance into its training
programs and was planning to include an assessment of compliance with
the guidance in its ongoing reviews of the U.S.  Attorneys' Offices. 
We also reported that the work groupsconsisting of representatives
from DOJ and selected U.S.  Attorneys' Officeshad been established
to support the four ongoing national initiatives.  These work groups
were then in various stages of preparing documentation, such as legal
analyses and investigative plans, required by the guidance to assist
the U.S.  Attorneys' Offices participating in the initiatives.  Our
survey of all 93 U.S.  Attorneys found that the majority were
participating in at least one national initiative.  Our survey also
found that several offices had closed a large number of
investigations related to one initiative without taking actions
against the providers. 

This report summarizes the results of our monitoring of DOJ's and
selected U.S.  Attorneys' Offices' compliance with the guidance. 
Specifically, we (1) determined the status of the work groups'
efforts and reviewed the initiative-specific guidance they prepared,
(2) evaluated DOJ's efforts to assess U.S.  Attorneys' compliance
with the guidance, (3) examined implementation of the guidance at
selected U.S.  Attorneys' Offices, and (4) identified state hospital
associations' concerns regarding DOJ's use of the False Claims Act. 

In preparing this report, we conducted work at DOJ's Civil Division
and its Executive Office of U.S.  Attorneys and visited 10 U.S. 
Attorneys' Offices.  Eight of the 10 offices were participating in at
least one national initiative.  Four of the 10 had been involved in
large numbers of Laboratory Unbundling investigations but had closed
them after DOJ's guidance was issued; we visited these offices to
determine the reasons they had closed the investigations.  The
results of our visits to these four offices are described in appendix
I.  Finally, we surveyed state hospital associations regarding their
views on DOJ's guidance and its implementation. 

DOJ officials restricted our access to certain types of information
at U.S.  Attorneys' Offices because they believed public disclosure
of this information could adversely affect pending law enforcement
matters.  For example, DOJ preselected materials from pending
investigations, limiting these materials to those they considered
relevant to our review.  Furthermore, because investigations were
pending, we could not obtain complete information about how the
offices were planning and conducting their initiatives.  We conducted
our work between February and July 1999; except for the access
limitations noted above, our work was performed in accordance with
generally accepted government auditing standards.  These limitations,
however, did not have a material effect on the conclusions we reached
in this report.  For a complete discussion of our scope and
methodology, including the limitations on our access to information
needed to conduct our review, see appendix II. 

--------------------
\1 DOJ defines a national initiative as a nationwide investigation
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 programs. 

\2 U.S.  Attorneys are supervised by the Attorney General but
exercise a large degree of independence and discretion in the
handling of their cases. 

\3 See Medicare Fraud and Abuse:  Early Status of DOJ's Compliance
With False Claims Act Guidance (GAO/HEHS-99-42R, Feb.  1, 1999). 

\4 These 93 U.S.  Attorneys serve the nation's 94 federal judicial
districts.  One U.S.  Attorney serves both the District of Guam and
the District of the Northern Mariana Islands. 

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

DOJ's national initiative work groups have made further progress in
implementing the Department's False Claims Act guidance since we
issued our February 1, 1999, report.  All four work groups have
completed their examination of the legal and factual basis for their
initiatives and have prepared initiative-specific guidance for the
U.S.  Attorneys' Offices participating in the initiatives.  The
guidance prepared by these work groups is consistent with the
requirements in DOJ's guidance.  For example, the guidance addresses
the legal basis underlying each initiative and includes suggestions
for conducting investigations of individual hospitals. 

While DOJ officials told us compliance with its False Claims Act
guidance is an ongoing priority for the Department, we believe DOJ's
process for assessing the U.S.  Attorneys' Offices' compliance may be
superficial.  In February 1999, DOJ began to include in its periodic
reviews of U.S.  Attorneys' Offices assessments of compliance with
the guidance.  These assessments, however, appear to involve little
more than reviewers asking supervisors what they have done to ensure
compliance with the guidance.  Such limited efforts will not provide
the information needed to adequately assess actual compliance.  While
we were not given access to the review results, DOJ officials told us
that, as of June 25, only 2 of the 15 assessments that had been done
contained any information about these offices' compliance with the
guidance.  DOJ's plans for strengthening the assessment process, such
as adding more questions, may not be enough to effectively assess
compliance.  In our view, these additional questions will not provide
more substantive information than the original question and are only
a starting point for an effective assessment.  Accordingly, we are
recommending that DOJ take additional steps to improve its oversight
of national health care initiatives. 

We also found that the implementation of DOJ's False Claims Act
guidance varied among the eight U.S.  Attorneys' Offices we visited
that were participating in the national initiatives.  Five of these
offices were participating in the Laboratory Unbundling initiative
and had begun their involvement before DOJ's guidance was issued.  We
found that their actions were, to varying degrees, inconsistent with
the guidance.  Our limited review also raised questions about whether
four of these offices were promptly incorporating the guidance into
their ongoing investigations.  While the 72-Hour Window initiative
also started before DOJ's guidance was issued, our work at the one
office that was conducting this initiative indicated that the
office's actions were consistent with the subsequent guidance.  We
could not fully assess compliance at the offices we visited that were
participating in DOJ's two newest national initiativesPPS Transfer
and Pneumonia Upcodingbecause few investigations had started for
either initiative nationwide.  Nevertheless, based on our discussions
with representatives from the two work groups and the offices, it
appears that the initiatives are being developed in accordance with
the guidance.  Restrictions on our access at all offices prevented us
from conducting a complete and independent review. 

Our survey of state hospital associations indicated that the issuance
of DOJ's False Claims Act guidance has lessened their concerns about
national initiative investigations.  Half of the associations
expressing concerns with DOJ's use of the False Claims Act prior to
the issuance of the guidance said that the guidance had fully
addressed their concerns. 

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

The False Claims Act provides that anyone who knowingly submits
false claims to the government is liable for damages up to three
times the amount of the erroneous payment plus mandatory penalties
between $5,000 and $10,000 for each false claim submitted.  The act
defines knowingly to mean that a person (1) has actual knowledge of
the false claim, (2) acts in deliberate ignorance of the truth or
falsity of the information, or (3) acts in reckless disregard of the
truth or falsity of the information.  In the health care setting,
where providers submit thousands of claims each year, the potential
damages and penalties provided under the False Claims Act can quickly
add up. 

DOJ's use of the False Claims Act currently includes four national
initiatives involving hospitals.  The 72-Hour Window initiative,
which began in 1995, centers on separate payments for outpatient
services received within 72 hours of a hospital admission, which are
paid as part of Medicare's inpatient reimbursement to hospitals.  The
Laboratory Unbundling initiative, which began in 1994 by U.S. 
Attorneys' Offices in Ohio, identifies excess payments for laboratory
tests that were performed concurrently on automated equipment but
improperly billed or unbundled as separate tests.  In January 1999,
DOJ announced two new national initiatives.  The PPS Transfer
initiative focuses on overpayments to hospitals that incorrectly
report transfers to other hospitals as discharges in order to receive
higher Medicare payments.\5 The Pneumonia Upcoding initiative targets
inappropriate coding of inpatient hospital billings for a form of the
disease that is more costly to treat and paid at a higher rate than
was supported by a patient's medical records. 

In 1998, we reported that hospital groups had criticized DOJ's use of
the False Claims Act in the two older national initiatives.\6 They
alleged that in both the 72-Hour Window and the Laboratory Unbundling
initiatives, DOJ subjected many of the nation's hospitals to
unwarranted investigations, resulting in large penalties for
unintentional errors.  In particular, the Laboratory Unbundling
initiative provoked considerable controversy.  The hospital groups
complained that the initiative lacked a sufficient legal basis and
relied on flawed data.  They also charged that some U.S.  Attorneys'
Offices had issued demand letters threatening prosecution without
sufficient evidence that the hospitals had submitted false claims. 

On June 3, 1998, DOJ issued Guidance on the Use of the False Claims
Act in Civil Health Care Matters. The guidance emphasizes the fair
and responsible use of the act in all civil health care matters,
including all current and future national health care initiatives. 
It also instructs all DOJ attorneys to determine, before they allege
violations of the act, that the facts and the law sufficiently
establish that a claimant knowingly submitted false claims.  The
guidance requires them to take a number of steps, including reviewing
relevant statutes and regulations and verifying the accuracy of the
data relied on, to ensure that they support the allegations. 

The guidance also contains new requirements specifically applicable
to national initiatives.  The guidance generally requires the U.S. 
Attorneys to use contact letters to notify providers of their
potential exposure under the False Claims Act and to offer providers
an opportunity to discuss the matter before a specific demand for
payment is made.  The new requirements also specify that a work group
must be established for each current and future initiative.  Work
groups of Civil Division attorneys and Assistant U.S.  Attorneys with
expertise in health care fraud are expected to coordinate the
development and implementation of the initiatives.  The work groups
are also expected to prepare initiative-specific guidance, such as
a legal analysis of pertinent issues, a summary of relevant claims
data, and an investigative plan to guide the U.S.  Attorneys' Offices
participating in the initiatives. 

DOJ's False Claims Act guidance provided that it would be subject to
review within a 6-month period.  This review, completed in February
1999, clarified a number of issues in the guidance and also described
how providers under investigation could elevate their concerns within
the Department if they believed the guidance was not being followed. 
It also announced that national initiative work groups would be
required to solicit and consider the views of HHS' OIG and other
relevant agencies in conducting the initiatives.  The review
concluded that no major revisions to the guidance were necessary. 

--------------------
\5 Under Medicare PPS, payment rates are established in advance and
hospitals treating Medicare beneficiaries must generally accept the
rate as full payment, regardless of the patient's length of stay. 

\6 See Medicare:  Application of the False Claims Act to Hospital
Billing Practices (GAO/HEHS-98-195, July 10, 1998) and Use of False
Claims Act to Target Hospitals (B-279893, July 22, 1998). 

   WORK GROUPS HAVE COMPLETED
   INITIATIVE-SPECIFIC GUIDANCE
------------------------------------------------------------ Letter :3

At the time we issued our first report, only the Laboratory
Unbundling and PPS Transfer work groups had completed preparing the
required initiative-specific guidance.  Since that time, the 72-Hour
Window and Pneumonia Upcoding work groups have also finished their
guidance.  We examined the initiative-specific guidance prepared by
the work groups and found that this guidance was consistent with the
requirements outlined by DOJ for False Claims Act investigations. 
The confidential nature of these work group documents precludes us
from discussing them in detail.  However, we can make some general
observations about each work group's initiative-specific guidance. 

All the work groups have developed model contact letters for
notifying providers that they were the subjects of False Claims Act
investigations.  We noted that these letters were carefully worded to
avoid any inference that the providers had violated the False Claims
Act.  Unlike the demand letters previously used by some U.S. 
Attorneys' Offices, the new contact letters did not include a
specific demand for payment nor, in our opinion, did they contain the
type of language that many hospitals had found to be intimidating and
coercive. 

We found similarities between the documentation prepared by the
Laboratory Unbundling, PPS Transfer, and Pneumonia Upcoding work
groups.  All three sets of documents elaborated on DOJ's general
guidance and provided detailed steps for planning and conducting the
initiatives.  The documentation included an analysis of the legal
basis underlying each initiative; however, we did not evaluate these
analyses.  All three sets of documentation included investigative
plans containing specific suggestions for conducting investigations
of individual hospitals.  These plans also outlined procedures for
determining whether claims submitted by these hospitals were false
and, if so, whether the hospitals knowingly submitted them.  In
addition, the work group materials addressed the source, limitations,
and reliability of the claims data to be used in the investigations. 
In our opinion, the documentation prepared by these three work groups
was consistent with the requirements in DOJ's guidance. 

The 72-Hour Window work group prepared a report that assessed the
initiative's activities in light of DOJ's guidance, rather than the
detailed guidance prepared by the Laboratory Unbundling, PPS
Transfer, and Pneumonia Upcoding work groups.  Unlike the other three
national initiatives, which are being conducted by multiple U.S. 
Attorneys' Offices, a single U.S.  Attorney's Office is conducting
the 72-Hour Window initiative.  For this reason, and because the
initiative was more than two-thirds complete at the time DOJ's
guidance was issued, this work group did not develop the same
step-by-step instructions that were developed by the other three work
groups.  Nevertheless, we believe the report showed that the work
group, as directed, had considered whether the initiative met the
requirements established by DOJ's guidance.  Among other things, it
evaluated the accuracy of the data used in the initiative, the
clarity of the relevant billing rules, and the appropriateness of the
office's approach for completing the initiative.  In our view, this
report satisfies the requirement that work groups prepare
initiative-specific guidance. 

   DOJ'S ASSESSMENTS OF U.S. 
   ATTORNEYS' OFFICES' COMPLIANCE
   WITH THE GUIDANCE MAY BE
   SUPERFICIAL
------------------------------------------------------------ Letter :4

According to DOJ officials, the U.S.  Attorneys' Offices' compliance
with the guidance is an ongoing priority for the Department. 
However, DOJ's process for assessing compliance may be superficial. 
As we described in our first report, DOJ said that beginning February
1, 1999, it would include assessments of the offices' compliance with
the guidance as part of the reviews it conducts at each office every
3 years.  DOJ's assessments of compliance with the guidance during
these periodic reviews of offices consists of a single interview
question in which supervisors are asked to identify the steps being
taken to ensure compliance.  We believe these assessments provide
little assurance that offices comply with the guidance. 

According to DOJ officials, as of June 25, 1999, reviews
incorporating this assessment were completed at 15 U.S.  Attorneys'
Offices.  DOJ officials told us the reports on these offices were not
yet complete; thus, they were unwilling to share them with us.  They
said that they had reviewed the draft reports or, if no draft report
had yet been prepared, the reviewers' submissions.  DOJ officials
said that reviewers typically only report negative information.  They
also told us that the 15 draft reports or reviewer submissions
contained no negative information about the offices' compliance with
the guidance; in two cases, positive comments were made.  For
example, according to DOJ, one reviewer's report consisted of the
following: 

     This [office] is in compliance with the requirements of the
     Deputy Attorney General's guidance on the use of the False
     Claims Act in health care fraud cases and matters.  Training on
     the requirements has been provided to all ACE unit personnel.\7

In response to our concerns about these reviews, officials told us
that they would require reviewers to comment both negatively and
positively on offices' compliance with the guidance in all future
reviews.  We do not believe that the two positive responses,
however, provided much insight about either of the offices' efforts
to comply or their actual compliance because the comments were not
specific.  In our view, if the new requirement results in the
reporting of similar information on all the offices assessed, these
reports would not be meaningful. 

In addition, the officials told us that, due to the importance of
ensuring compliance, they had instructed reviewers to ask additional
questions in future reviews.  These questions ask whether an office
has participated in any national initiatives since the office's last
review and whether the office has complied with the guidance and the
work groups' recommendations for conducting investigations.  While
these additional questions are relevant, we believe that they are
only a starting point for an effective assessment and will not
provide a more meaningful assessment of compliance than the original
question. 

DOJ officials told us that they were taking other steps, such as the
following, to ensure that the guidance is followed. 

  -- The Deputy Attorney General has emphasized the necessity of
     compliance both orally and in writing on a number of occasions
     and has encouraged U.S.  Attorneys' Offices to document their
     compliance in investigative case files.  We noted that three of
     the offices we visited had developed forms to document their
     compliance. 

  -- Compliance with the guidance is a top priority of the
     Subcommittee on Health Care Fraud of the Attorney General's
     Advisory Committee.  In this regard, the national initiative
     work groups are required to update the subcommittee on the
     status of each initiative on a regular basis. 

  -- Work groups are expected to maintain regular contact with U.S. 
     Attorneys' Offices participating in an initiative, monitor their
     progress, and provide guidance throughout the investigative and
     litigative processes. 

  -- DOJ has assigned an experienced Civil Division attorney to each
     work group.  DOJ officials believe that because these
     representatives specialize in False Claims Act matters, their
     presence on the work groups helps ensure consistent adherence to
     Department policies concerning False Claims Act matters. 

--------------------
\7 Most U.S.  Attorneys' Offices have ACE (Affirmative Civil
Enforcement) units, which pursue civil actions to recover money lost
due to fraud and other misconduct. 

   IMPLEMENTATION OF GUIDANCE BY
   U.S.  ATTORNEYS' OFFICES VARIES
   AMONG NATIONAL INITIATIVES
------------------------------------------------------------ Letter :5

DOJ's False Claims Act guidance applies to all national initiative
health care investigations--including those ongoing at the time the
guidance was issued.  Our limited review showed that the offices'
implementation of the guidance varied among national initiatives. 
Eight of the offices that we visited were participating in at least
one of the national initiatives.  Five of these offices began
participating in the Laboratory Unbundling initiative before DOJ's
guidance was issued.  Our review raised questions about how promptly
four of them were incorporating the guidance into ongoing
investigations.  While the 72-Hour Window initiative also started
before DOJ issued its guidance, the one office conducting this
initiative did not appear to be having difficulty implementing the
guidance, and we were more convinced that this office was conducting
the initiative in compliance with the guidance.  We could not fully
assess compliance at the offices participating in DOJ's two newest
national initiativesPPS Transfer and Pneumonia Upcodingbecause few
U.S.  Attorneys' Offices, including those we visited, had started
investigations for either initiative nationwide. 

Table 1 shows the participation in the national initiatives for the
eight U.S.  Attorneys' Offices at the time of our visits.  We are not
identifying these offices or the exact number of their investigations
because DOJ is concerned that doing so could compromise open
investigations. 

                                Table 1
                
                    U.S. Attorneys' Offices Visited
                 Participating in National Initiatives

                                                                Number
                                                                    of
                                                                office
National initiative                                                  s
--------------------------------------------------------------  ------
Laboratory Unbundling                                                5
72-Hour Window                                                       1
PPS Transfer                                                         3
Pneumonia Upcoding                                                   5
----------------------------------------------------------------------
Two of the eight offices had terminated their involvement in the
Laboratory Unbundling initiative by the time of our visits.  We also
visited two other offices that decided to discontinue their
participation in this project.  These two additional offices were not
involved in any other national initiative at the time of our visit. 
(For a discussion of the four offices' participation in the
Laboratory Unbundling initiative and their decisions to terminate
their involvement, see app.  I.)

      IMPLEMENTATION OF GUIDANCE
      SLOW AT U.S.  ATTORNEYS'
      OFFICES PARTICIPATING IN
      LABORATORY UNBUNDLING
---------------------------------------------------------- Letter :5.1

The five offices participating in the Laboratory Unbundling
initiative had taken actions in their investigations prior to the
issuance of DOJ's False Claims Act guidance that, to varying degrees,
were inconsistent with the subsequent guidance.  Generally, the five
U.S.  Attorneys' Offices we visited sent demand letters to large
numbers of hospitals that alleged or implied violations of the False
Claims Act.  The letters warned that the hospitals could be liable
for three times the amount of any overpayment plus penalties of
between $5,000 and $10,000 for each false claim.  The letters also
presented the hospitals with an alternative:  volunteer to conduct an
independent self-audit and pay two times the amount of overpayments
identified.  However, contrary to the subsequent guidance, at the
time these allegations were made, most of the offices had not
sufficiently analyzed the claims data to determine if the
pervasiveness and magnitude of the apparent errors were sufficient to
warrant alleging a False Claims Act violation.  Moreover, they also
lacked evidence that each of the hospitals had knowingly submitted
the alleged false claims. 

Because DOJ's guidance applies to all health care investigations,
including those ongoing at the time it was issued, these offices were
faced with the task of determining what needed to be done to bring
their investigations into compliance.  We found that, more than 1
year after the guidance was issued, four of these offices had not
completed actions to address the shortcomings in their ongoing
Laboratory Unbundling investigations.  Allegations that over 100
hospitals violated the False Claims Act remain unresolved at these
four offices.  The following provides more details related to our
observations at these offices. 

  -- In late 1997, one U.S.  Attorney's Office notified about two
     dozen hospitals that they were under investigation because the
     office had identified certain claims that may have been
     submitted in violation of the False Claims Act.  However,
     officials told us in March 1999 that these hospitals had
     actually been selected primarily because they were the largest
     billers of Medicare in the state, not because the office had
     evidence that they were unbundling laboratory claims.  They
     acknowledged that their selection methodology was inconsistent
     with DOJ's guidance but told us that they had subsequently
     obtained data showing that all of these hospitals had submitted
     significant numbers of unbundled laboratory claims to Medicare. 
     We could not verify their statement because, citing the pending
     nature of the investigations, officials declined to share the
     data with us.  In June 1999, more than a year and a half after
     beginning their investigations and 1 year after DOJ's guidance
     was issued, these officials told us that they had recently begun
     a detailed analysis of billing data on each of the hospitals. 
     The analysis, while not completed, indicated that at least one
     of the hospitals should not be pursued for violating the False
     Claims Act.  Other hospitals could be dropped from the
     investigation once their analysis is completed, they said.  In
     addition, DOJ officials told us in July that the office, which
     had never before provided the hospitals with any of the evidence
     it had compiled against them, planned to share excerpts of the
     data indicating they had improperly billed Medicare. 

  -- Officials at another U.S.  Attorney's Office acknowledged making
     False Claims Act allegations against 75 hospitals in 1997 before
     obtaining sufficient evidence to support the allegations, as the
     guidance now requires.  Officials told us that they did not know
     if these hospitals had knowingly submitted false claims at the
     time they made the allegations.  Investigations against some of
     the hospitals were dropped after further analysis by the office
     indicated that the estimated overpayments to them were small. 
     In addition, responding to the hospitals' concerns about the
     cost of the proposed self-audits, most hospitals were later
     given the opportunity to accept the office's estimate of the
     false claims plus damages in lieu of an audit.  At the time of
     our visit in April 1999, however, over 60 of the investigations
     remained unresolved.  Because the investigations were pending,
     officials would not discuss them.  They did indicate, however,
     that opening so many investigations at the same time had
     strained their resources and, as a result, establishing whether
     all of these hospitals had knowingly submitted false claims--a
     step now required before alleging False Claims Act
     violations--would be time-consuming and difficult.  In July
     1999, officials told us that all of the investigations were
     still pending and they did not know how long it might take to
     resolve them. 

  -- In 1997, another U.S.  Attorney's Office alleged that about 10
     hospitals had violated the False Claims Act, but the office
     lacked evidence that the claims were false--let alone that the
     hospitals were knowingly submitting false claims.  The
     allegations were based on a computer analysis of claims data
     that indicated these hospitals had received the largest
     overpayments from unbundling laboratory services.  At the time
     of our May 1999 visit, all these investigations were pending. 
     The majority of the hospitals had completed self-audits, but
     self-audits of the remaining hospitals had not yet started. 
     According to the officials, all of the completed audits found
     insignificant billing errors that could not, in their view,
     support a False Claims Act case.  Officials conceded that
     investigations against some, maybe all, of these hospitals might
     not have been started had they done a better analysis of the
     claims data, as now required by DOJ's guidance.  Nevertheless, a
     DOJ official told us in July 1999 that investigations of the
     remaining hospitals will continue. 

  -- In 1997, another U.S.  Attorney's Office sent letters to about
     three dozen hospitals in the state alleging that the hospitals
     might have submitted false claims and asking them to volunteer
     to conduct self-audits of their laboratory billings.  At this
     time, however, the officials had not verified the accuracy of
     the data they were relying on to support this allegation, nor
     did they have information showing that false claims were
     knowingly submitted.  The office did not initially respond to
     hospital requests that it provide the data supporting its
     allegations of false claims.  When some hospitals did not
     promptly decide whether to volunteer for self-audits, they were
     warned that the government would seek the full penalties of the
     False Claims Act if the office did the audits itself.  The
     office continued to assert that hospitals had submitted false
     claims.  For example, in a late 1997 letter to an attorney
     representing one of the hospitals, the office said it did not
     consider the matter to be a mere overpayment case.  Rather, the
     letter said that the office would agree to settle the case for
     an amount equal to twice the overpayment, absent extenuating
     circumstances.  Ultimately, the office obtained additional data
     that revealed that the original data used to select the
     hospitals for investigations had apparently overstated the
     hospitals' billing errors.  In late 1998, more than a year after
     the investigations had begun, the office concluded that about
     one-fourth of the hospitals should not be pursued for False
     Claims Act violations.  At the time of our May 1999 visit,
     officials told us that they were developing overpayment
     estimates for the remaining hospitals.  In July 1999, a DOJ
     official told us that a few additional investigations had been
     resolved but the office was attempting to collect evidence from
     the remaining hospitals in order to prove the knowing element
     necessary to establish that the claims were false. 

The fifth U.S.  Attorney's Office sent letters to about 75
hospitalsvirtually all the acute care hospitals in the office's
jurisdictionalleging that they had submitted false claims.  Based on
our review, this office appeared to have stronger evidence than the
other offices that some of these hospitals had knowingly submitted
false claims because they had been repeatedly identified in Medicaid
audits and investigations as having unbundled laboratory services. 
At the time of our visit, the majority of the office's investigations
had been settled and over $5 million had been recovered.  However,
over 40 percent of these settlements involved only the recovery of
the overpayments without False Claims Act damages or penalties being
assessed. 

      IMPLEMENTATION OF GUIDANCE
      AT THE U.S.  ATTORNEY'S
      OFFICE LEADING THE 72-HOUR
      WINDOW INITIATIVE APPEARS
      APPROPRIATE
---------------------------------------------------------- Letter :5.2

The 72-Hour Window initiative, like Laboratory Unbundling, began
before DOJ issued its False Claims Act guidance.  Officials at the
one office conducting the 72-Hour Window initiative told us that they
believed that actions taken in their investigations were consistent
with the guidance.  Our review of selected closed case files found no
compelling evidence to dispute the officials' assertions. 
Consequently, despite limitations on our access, we were more
convinced that this office was conducting the initiative in
compliance with the guidance than we were at offices involved in the
Laboratory Unbundling initiative. 

Our review of closed files showed that the office had sent letters to
the hospitals alleging that they had violated the False Claims Act
and providing an estimate of their total financial exposure under the
act.  The hospitals were offered an opportunity to settle these
matters before litigation by paying lesser amounts.  The case files
contained overpayment data that the officials told us had been
developed from an audit conducted by HHS' OIG.  These data formed the
basis for the office's allegations that the hospitals had submitted
false claims.  Moreover, this audit was the fourth in a series of
audits going back to 1983 that showed that thousands of hospitals had
repeatedly violated the 72-Hour Window.  In addition, they told us
that the three prior audits along with the recovery of overpayments
identified in those audits clearly put the hospitals on notice of the
billing rule.  The officials believed that the hospitals' continued
submission of improper claims after these audits was a strong
indicator that the hospitals were knowingly submitting false
claims. 

We did note, however, that some investigations that were pursued as
False Claims Act violations before DOJ's False Claims Act guidance
was issued involved small dollar amounts.  The guidance requires
offices to consider the pervasiveness and magnitude of the improper
billings in assessing whether the false claims were knowingly
submitted rather than mere mistakes.  Officials told us that the
pervasiveness and magnitude of improper billings would be taken into
account in future investigations. 

      IMPLEMENTATION OF GUIDANCE
      CANNOT BE FULLY ASSESSED AT
      U.S.  ATTORNEYS' OFFICES
      PARTICIPATING IN THE PPS
      TRANSFER AND PNEUMONIA
      UPCODING INITIATIVES
---------------------------------------------------------- Letter :5.3

We could not fully assess compliance with DOJ's False Claims Act
guidance at the U.S.  Attorneys' Offices we visited that were
participating in the two newest national initiativesPPS Transfer and
Pneumonia Upcoding.  Most investigations related to these initiatives
were pending at the time of our visits and, consequently, our access
to information related to both initiatives was restricted.  Moreover,
only a few PPS Transfer investigations had been started and none of
them had progressed very far.  Further, many of the pending Pneumonia
Upcoding investigations were related to a qui tam lawsuit,\8 which we
agreed to exclude from the scope of our review.  While we could not
fully assess compliance with the guidance, based on our work, it
appears that these two initiatives are being developed in accordance
with DOJ's guidance. 

While DOJ's PPS Transfer national initiative has been under
development since late 1997, only a few U.S.  Attorneys' Offices are
currently participating in the initiative, and investigations of
individual hospitals by these offices are just beginning.  We visited
three of these offices.  Shortly before our visits, two of the
offices had sent several hospitals contact letters notifying them
that they were under investigation.  Officials at the third office
told us they had recently completed analyzing data on one hospital,
had concluded an investigation was warranted, and planned to send the
hospital a contact letter soon.  Other than showing us redacted
copies of the contact letters and, in one instance, a redacted copy
of the hospital's response, officials at the three offices told us
they could not provide any other information about these pending
investigations. 

DOJ's Pneumonia Upcoding initiative was established to determine
whether certain hospitals referred by HHS' OIG had violated the False
Claims Act by upcoding pneumonia claims.  But investigations of
hospitals referred by the OIG had not started at the offices we
visited.  Five of the offices, however, were involved in
investigations of pneumonia upcoding at 19 other hospitals.  All but
two of these investigations were pending at the time of our visits;
therefore, our access to information about these cases was
restricted.  Moreover, many of the pending investigations were
related to a qui tam lawsuit and thus, as discussed further in
appendix II, these were outside the scope of our review.  At two
offices, we were provided some documents related to several pending
investigations that did not involve qui tam lawsuits.  At a third
office we examined materials associated with one of the closed
investigationsnot enough information, in our opinion, to be able to
reach conclusions regarding these offices' implementation of the DOJ
guidance. 

--------------------
\8 A qui tam lawsuit involves an action brought by an individual on
behalf of the United States alleging that false or fraudulent claims
have been submitted to the government. 

   DOJ'S GUIDANCE APPEARS TO HAVE
   LESSENED STATE HOSPITAL
   ASSOCIATIONS' CONCERNS
------------------------------------------------------------ Letter :6

Of the 39 state hospital associations responding to our survey, 34
indicated they were concerned with DOJ's use of the False Claims Act
prior to the issuance of the guidance.  Seventeen of the 34 reported
that the guidance fully addressed these concerns, and 2 said they
were not sure.  The remaining 15 reported concerns reflecting a range
of issues.  But no single concern was shared by a majority of these
associations.  For example, six associations told us that they
believed that the guidance should have established a minimum
threshold of alleged overpayments before a False Claims Act
investigation would be initiated.  One association charged that the
guidance is vague enough to allow DOJ to characterize intimidating
and unfair use of the act as compliance with the guidance. 

Eight state hospital associations reported that they did not believe
the guidance was being followed in an ongoing national initiative in
their state.  In all but one of these responses, the concerns raised
were related to the Laboratory Unbundling initiative.  The most often
voiced criticism was that this initiative lacked a legal basis.\9
These eight state hospital associations also mentioned a variety of
other concerns related to the Laboratory Unbundling initiative.  For
example, they criticized U.S.  Attorneys' Offices for using
questionable data, alleging False Claims Act violations based on
these data, and requesting the hospitals to assist in the
investigations by conducting self-audits. 

--------------------
\9 As previously stated, we did not evaluate the legal merits of any
of DOJ's national initiatives, but we did verify that DOJ has
performed a legal analysis for the Laboratory Unbundling initiative. 

   CONCLUSIONS
------------------------------------------------------------ Letter :7

One of DOJ's most important weapons in the fight against health care
fraud is the False Claims Act.  As with all enforcement tools, it is
important that the law be fairly applied.  Questions about the
appropriateness of DOJ's use of the act in national initiatives led
to the issuance of DOJ's False Claims Act guidance.  DOJ has made
progress in implementing the guidance since it was issued last year. 
The materials the work groups have prepared to guide U.S.  Attorneys'
Offices provide detailed steps for planning and conducting the
initiatives.  In our view, these materials are consistent with the
guidance and are designed to avoid actions that offices previously
took that would not have met the guidance's requirements.  DOJ also
appears to be developing the two newest national initiativesPPS
Transfer and Pneumonia Upcodingin a manner that is consistent with
the guidance.  In addition, our limited review at the one office
conducting the 72-Hour Window initiative suggested that little would
need to be changed to incorporate the guidance into the initiative. 
However, four of the five U.S.  Attorneys' Offices we visited that
were participating in the Laboratory Unbundling initiative had not
completely incorporated the guidance into investigations they had
started before the guidance was issued. 

DOJ's assessments of the U.S.  Attorneys' Offices' compliance with
the guidance, as now performed, appear superficial.  Although DOJ
intends to enhance these reviews, we do not believe that the proposed
enhancements will provide more useful information about the offices'
compliance.  Given the importance DOJ says it places on the guidance,
we believe that its monitoring of U.S.  Attorneys' Offices should
provide DOJ management with specific information on the offices'
compliance efforts and the results of these efforts.  Such
assessments should involve more than asking questions about an
office's compliance; it should also include verification of this
compliance. 

   RECOMMENDATION
------------------------------------------------------------ Letter :8

We recommend that DOJ improve its oversight of U.S.  Attorneys'
Offices participating in national health care initiatives. 
Specifically, DOJ should

  -- develop guidance for reviewers that includes specific steps for
     determining whether offices appropriately follow the guidance
     and

  -- require reviewers to independently determine whether the offices
     are complying with the guidance. 

   AGENCY COMMENTS
------------------------------------------------------------ Letter :9

We provided DOJ a draft of this report.  In written comments, the
Department generally agreed with our findings and said it would
implement our recommendations.  In addition, DOJ said it would give
special attention to U.S.  Attorneys' Offices where the Laboratory
Unbundling initiative was ongoing at the time its False Claims Act
guidance was issued.  As an initial step, DOJ plans to require these
offices to document their compliance with the guidance. 

DOJ also offered comments in response to our concerns about the
Laboratory Unbundling initiative.  These comments revolved around two
issues:  (1) the timeliness of incorporating the guidance into
ongoing investigations and (2) the adequacy of the evidence used as a
basis for alleging False Claims Act violations. 

Concerning the first issue, DOJ said that a number of factors have
affected the speedy resolution of Laboratory Unbundling
investigations.  In particular, it said that investigations have
proceeded with caution to ensure that errors made in the past are not
repeated.  DOJ also explained that, in many cases, hospitals have
requested extensions to allow for further review of claims data and
that these requests have been granted.  While we agree that offices
should proceed cautiously and that it is reasonable to grant time
extensions, we are uncertain about the extent to which the slow
progress in these investigations is attributable to these factors. 
For example, as we described in the report, more than 1 year after
the guidance was issued, one office had only recently begun a
detailed analysis of hospital billing data.  Also, as mentioned in
the report, officials at another office attributed their slow
progress to having opened too many investigations at the same time. 
According to these officials, the volume of pending investigations
had strained their resources, making it difficult and time-consuming
to bring these investigations in compliance with the guidance. 

Concerning the second issue, DOJ questioned our contention that some
of the offices we visited had alleged violations of the False Claims
Act before obtaining sufficient evidence.  DOJ acknowledged that one
office had sent letters to hospitals discussing possible False Claims
Act violations prior to obtaining evidence that false claims had been
submitted by these hospitals.  However, DOJ said that the other
offices contacted hospitals only after examining several years of
claims data that had suggested claims were improperly submitted.  We
agree these offices had some data that suggested that unbundling of
laboratory services could be occurring.  However, the offices used
these data as a basis for alleging that numerous hospitals had
violated the False Claims Act.  As discussed in the report, at the
time these allegations were made, most offices had not adequately
analyzed the data to determine if the apparent errors were sufficient
to warrant a false claims violation, as DOJ guidance now requires. 
We also found that these offices lacked evidence that each of the
hospitals had knowingly submitted false claims. 

Finally, DOJ said that self-audits have always been, and remain, a
voluntary option for hospitals.  DOJ expressed concern with a
statement in our draft report that one office was requiring hospitals
to conduct self-audits.  We recognize that the self-audit approach is
a voluntary option and we revised the report accordingly.  We have
included the Department's comment letter as appendix III. 

---------------------------------------------------------- Letter :9.1

We are sending copies of this report to the Honorable Janet Reno,
Attorney General of the United States, officials from the
organizations we visited, and other interested parties.  We will also
make copies available to others upon request.  Please call me at
(202) 512-7114 or Leslie G.  Aronovitz at (312) 220-7600 if you or
your staff have any questions about this report.  Other major
contributors to this report include Paul D.  Alcocer, Barry R. 
Bedrick, Stefanie G.  Weldon, Robert T.  Ferschl, and Geraldine
Redican-Bigott. 

William J.  Scanlon
Director, Health Financing and
 Public Health Issues

DATA PROBLEMS LED TO TERMINATION
OF LABORATORY UNBUNDLING IN
ILLINOIS AND TEXAS
=========================================================== Appendix I

In our February 1999 report, we discussed the results of our survey
of all the U.S.  Attorneys' Offices.  We reported that some offices
closed large numbers of Laboratory Unbundling investigations after
DOJ's False Claims Act guidance was issued, without taking adverse
actions against providers.  We also said we planned to determine the
reasons for the seemingly large number of Laboratory Unbundling
declinations in preparation for this report.  The majority of these
declinationsmore than 85 percent
involved U.S.  Attorneys' Offices in Illinois and Texas.  These
offices had also reported they were no longer involved in Laboratory
Unbundling. 

The three U.S.  Attorneys' Offices in Illinois and the four U.S. 
Attorneys' Offices in Texas pursued Laboratory Unbundling
investigations on a coordinated basis in their respective states. 
The investigations began in 1996 in Illinois and in 1997 in Texas. 
At their peak, more than 100 investigations were under way against
Illinois hospitals, while about 300 hospitals were under
investigation in Texas.  We visited two offices in each of these
states. 

We observed that these four officeslike the other offices we visited
that were continuing with their Laboratory Unbundling investigations
as discussed in our letterhad taken actions during their
investigations that would no longer be permitted by DOJ's guidance. 
For example, the offices sent demand letters to the hospitals
alleging that the hospitals had unbundled laboratory claims in
violation of the False Claims Act.  However, the offices had not
adequately verified or analyzed the data they were relying on as a
basis for their allegations and they also lacked evidence that any
false claims had been knowingly submitted by the hospitals.  The
key difference between the Illinois and Texas offices and the offices
that are continuing with Laboratory Unbundling appeared to be related
to the accuracy and reliability of the data supporting the False
Claims Act allegations.  In Illinois and Texas, these data were
seriously flawed.  The other offices did not appear to have such
serious data problems, but we could not be sure in all instances
because of limitations on our access to this information. 

The allegations against Illinois and Texas hospitals were based on
claims data obtained from the local fiscal intermediaries,\10 and the
hospitals were provided with either computer disks or printouts
listing claims the offices believed had been unbundled.  These claims
data, however, had not been adequately analyzed and verified before
the offices made their allegations.  When hospitals reviewed the
data, they found what they believed to be a variety of errors. 
Follow-up by the U.S.  Attorneys' Offices confirmed that the data
were indeed flawed.  Offices in both states made adjustments to their
overpayment estimates on the basis of partially corrected fiscal
intermediary data, but not all of the errors could be readily
corrected.  Primarily because of the unreliability of the data, both
the Illinois and Texas offices ultimately concluded they had no
alternative but to withdraw their allegations of False Claims Act
liability against the hospitals and terminate their involvement in
the initiative.\11

--------------------
\10 Fiscal intermediaries are private insurance companies that
contract with the government to pay Medicare claims for services from
hospitals and certain other health care providers. 

\11 Three of the offices told the hospitals they were referring the
matters to the local fiscal intermediary for possible collection of
some of the amounts.  The other office reached an agreement with the
hospitals it was investigating whereby the hospitals agreed to repay
an adjusted amount to the fiscal intermediary without damages or
penalties.  At the four offices we visited, hospitals that had
previously settled5 in Illinois and 19 in Texaswere refunded the
amounts they had paid as part of their settlement agreements.  In
addition, one Texas hospital opted not to rescind its settlement
agreement.  A refund to another Texas hospital, which was involved in
bankruptcy proceedings, had not been made at the time of our visit. 

SCOPE AND METHODOLOGY
========================================================== Appendix II

To monitor DOJ's compliance with its False Claims Act guidance, we
met with officials from the Civil Division and the Executive Office
for U.S.  Attorneys (EOUSA).  In addition, we met with
representatives from the work groups that have been established to
support the four national health care initiatives.  We also visited
10 U.S.  Attorneys' Offices to discuss the offices' participation in
the national initiatives; their implementation of the guidance; and,
in four cases, their decisions to terminate their involvement in the
Laboratory Unbundling initiative. 

We used the results of our survey of all U.S.  Attorneys' Offices,
discussed in our first report, to judgmentally select the 10
locations.  Six of the 10 offices were chosen because they had
significant numbers of pending investigations related to at least one
of the national initiatives.  In addition, four offices were selected
primarily because they reported closing large numbers of Laboratory
Unbundling investigations without adverse action against the
providers.  These four offices were no longer participating in the
Laboratory Unbundling, but two of them were participating in other
national initiatives at the time of our visit.  Thus, in total, we
visited eight offices that were actively involved in at least one of
the national initiatives. 

We stated in our first report that DOJ was unwilling to give us
access to information relating to its use of the False Claims Act
that we needed to assess compliance with the guidance.  At that time,
DOJ would not give us access to certain work group documents and
deleted or redacted portions of other documents.  In addition, DOJ
would not allow us access to documents related to ongoing
investigations.  DOJ deemed this information confidential and feared
that public disclosure could potentially compromise these
investigations. 

For this review, DOJ officials agreed to expand our access, provided
that we not disclose the contents of these documents.  We agreed and,
consequently, were permitted to examine unredacted versions of the
work group documents.  We were also allowed access to some documents
related to pending national initiative investigations at U.S. 
Attorneys' Offices.  However, DOJ officials preselected these
documents and limited them to those that they considered relevant to
our review.  In addition, while we routinely obtain copies of
documents in our reviews, DOJ would not permit us to have copies of
any of these materials.  In most cases, we were allowed to take
handwritten notes, but this was a time-consuming process that may
have interfered with our ability to monitor the offices while we were
there.  Moreover, while we normally have independent access to
officials outside of an agency's headquarters, DOJ would not permit
us to interview or contact officials from U.S.  Attorneys' Offices
unless a representative from EOUSA was present.  Likewise, we were
not permitted to meet with work group representatives without an
EOUSA official in attendance.  For these reasons, we cannot say with
certainty that we have all of the information necessary to conduct a
complete and independent review of U.S.  Attorneys' compliance with
the guidance. 

Our access was also limited by the existence of qui tam or
whistleblower lawsuits, which, DOJ officials told us, involved the
majority of pending investigations related to one of the national
initiativesPneumonia Upcoding.  Such lawsuits are typically filed
under seal allowing DOJ to investigate without the defendant's
knowledge.  DOJ officials told us the seal prohibits them from
disclosing information about such cases.  Consequently, we excluded
pending qui tam investigations from the scope of our review.  By
doing so, however, our ability to monitor U.S.  Attorneys' Offices'
compliance with the Pneumonia Upcoding initiative was limited. 

In performing our work, we did not attempt to assess DOJ's legal
basis for alleging that hospitals had violated the False Claims Act,
nor did we attempt to verify the accuracy of the data used by DOJ in
making these allegations.  In addition, while DOJ's False Claims Act
guidance applies to all civil health care fraud and abuse
investigations, we limited our review to those investigations that
were related to the four designated national initiatives. 

We surveyed hospital associations from all 50 states as well as the
District of Columbia and Puerto Rico to obtain their views on DOJ's
False Claims Act guidance and its implementation in national
initiatives.  We also met with representatives from a state
association and from the American Hospital Association. 

We performed our work between February and July 1999.  Except for the
access restrictions discussed above, our work was performed in
accordance with generally accepted government auditing standards. 
These limitations, however, did not have a material effect on the
conclusions we reached in this report. 

(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
JUSTICE
========================================================== Appendix II

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

*** End of document. ***