Fraud and Abuse: Providers Excluded From Medicaid Continue to Participate
in Federal Health Programs (Testimony, 09/05/96, GAO/T-HEHS-96-205).
GAO discussed whether the Department of Health and Human Services' (HHS)
Office of Inspector General's (OIG) process for removing fraudulent
health care providers from all federal health programs. GAO noted that:
(1) weaknesses within HHS OIG allow sanctioned health care providers to
remain in federal health care programs; (2) these weaknesses include
lengthy delays in the OIG decision-making process, inconsistencies among
OIG field offices, states not informing OIG of the providers withdrawing
from state Medicaid programs, and states using information from OIG to
remove excluded providers from state programs; (3) these problems
compromise the financial integrity of the Medicaid program; (4) OIG
field offices are unable to account for the number of referrals they
receive from OIG state offices; (5) health care providers deemed unfit
in one state continue to participate in Medicaid programs in other
states; (6) OIG needs to consider whether it is capable of protecting
beneficiaries from substandard care and ensuring the integrity of the
federal health care system; and (7) OIG could become more efficient in
detecting fraudulent health care providers by providing more guidance
for OIG field staff, timely preparing individual case files, clarifying
guidance for OIG field offices, ensuring that states act quickly in
removing OIG-excluded providers from Medicaid participation, and
requiring states to report providers' voluntary withdrawal from Medicaid
programs to OIG field offices.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-HEHS-96-205
TITLE: Fraud and Abuse: Providers Excluded From Medicaid Continue
to Participate in Federal Health Programs
DATE: 09/05/96
SUBJECT: Health care programs
Fraud
Federal/state relations
Federal aid programs
State-administered programs
Health maintenance organizations
Program abuses
Inspectors General
Health services administration
IDENTIFIER: Medicaid Program
Medicare Program
District of Columbia
Illinois
Maryland
Missouri
Virginia
New York
Maternal and Child Health Block Grant
Social Services Block Grant
Federal Employees Health Benefits Program
Civilian Health and Medical Program of the Uniformed
Services
Illinois Medicaid Program
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Before the Subcommittee on Human Resources and Intergovernmental
Relations, Committee on Government Reform and Oversight, House of
Representatives
For Release on Delivery
Expected at 10:00 a.m.
Thursday, September 5, 1996
FRAUD AND ABUSE - PROVIDERS
EXCLUDED FROM MEDICAID CONTINUE TO
PARTICIPATE IN FEDERAL HEALTH
PROGRAMS
Statement of Leslie G. Aronovitz, Associate Director
Health Services Quality and Public Health Issues
GAO/T-HEHS-96-205
GAO/HEHS-96-205T
(101503)
Abbreviations
=============================================================== ABBREV
CHAMPUS - Civilian Health and Medical Program of the Uniformed
Services
FEHBP - Federal Employees' Health Benefits Program
HHS - Department of Health and Human Services
MFCU - Medicaid Fraud Control Unit
OIG - Office of Inspector General
PROVIDERS EXCLUDED FROM MEDICAID
CONTINUE TO PARTICIPATE IN FEDERAL
HEALTH PROGRAMS
============================================================ Chapter 0
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our ongoing work related to
health care providers who have been removed from their state Medicaid
programs for committing program fraud or rendering substandard care
to beneficiaries. When this occurs, the Department of Health and
Human Services' (HHS) Office of the Inspector General (OIG) is
responsible for determining whether such circumstances warrant prompt
nationwide exclusion of those providers from all federal health
programs. Our work responds to your concern that despite the OIG's
efforts, providers who have been convicted of fraud or who have
delivered inadequate or inappropriate care may still be participating
in these programs.
My comments today will focus on the process the OIG uses for
excluding providers from Medicaid, Medicare, and other federal health
programs. Our objective was to determine whether this process
effectively ensures that excluded providers do not continue to
participate in these programs.
In developing this information, we visited the District of Columbia,
Illinois, Maryland, Missouri, and Virginia. For these five states,\1
we worked with officials of state Medicaid agencies, licensing
boards, and Medicare contractors to document their exclusion
processes. We performed computer matches of OIG and state lists of
excluded providers and Medicare claims data. We also reviewed case
files for a judgmentally selected sample of excluded providers to
determine the nature of their wrongdoing and the types of sanctions
they received. We also performed limited work in New York State to
understand the state Medicaid program's exclusion process. In
addition, we met with officials from the four OIG field
offices--Chicago, New York, Philadelphia, and Washington, D.C.--that
oversee these six states, and with OIG headquarters officials.
In brief, although the OIG has excluded thousands of providers, our
work suggests that several weaknesses in its process can leave
sanctioned providers on the rolls of federal health programs for
unacceptable periods of time. This puts at risk the health and
safety of beneficiaries and compromises the financial integrity of
Medicaid, Medicare, and other federal health programs. The
weaknesses we identified include (1) lengthy delays in the OIG's
decision process, even in cases where a provider has been convicted
of fraud or patient abuse or neglect; (2) inconsistencies among OIG
field offices regarding which providers will be considered for
nationwide exclusion; (3) states not informing the OIG about
providers who agree to stop participating in their Medicaid programs
even though the reason for agreeing to withdraw is sometimes
egregious patient care or abusive billing; and (4) how states use
information from the OIG to remove excluded providers from state
programs.
In addition to identifying these system weaknesses, we attempted to
assess the magnitude of these problems. Incomplete records in the
OIG field offices where we conducted work did not permit such an
analysis, however. We therefore could not identify the universe of
cases referred to the OIG field offices, determine if all cases
received were reviewed and acted upon in a timely manner, or obtain
the rationale for decisions not to recommend exclusion to
headquarters.
--------------------
\1 For the purposes of this discussion, we include the District of
Columbia as a state.
BACKGROUND
---------------------------------------------------------- Chapter 0:1
Medicaid is a joint federal-state health program for the poor that
expended $159 billion in fiscal year 1995 to provide health care
coverage for over 40 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 includes ensuring that appropriate safeguards are
in place to remove providers that commit fraud or abuse, or are
incompetent, from state programs.
At the federal level, the Secretary of HHS has delegated to the OIG
the authority under sections 1128 and 1156 of the Social Security Act
to exclude health care providers from most federal health care
programs.\2 The OIG, through its Office of Investigations, is
required to exclude, nationwide, providers who have been convicted of
Medicare- or Medicaid-related fraud and patient abuse or neglect, and
felonies related to health care fraud and controlled substances.\3
These actions are termed "mandatory exclusions."
The OIG also has authority to exclude other individuals or entities
if the OIG determines that the particular facts in a case meet its
criteria. These so-called "permissive exclusions" may be based on,
for example, submitting excessive claims, license suspensions and
revocations, and sanctions imposed by federal or state health
agencies. (See the appendix for a complete list of exclusion
authorities.)
The OIG field offices receive referrals of sanction actions taken by
state Medicaid agencies, licensing boards, Medicaid fraud control
units (MFCU),\4 and others. For mandatory cases, they assemble and
forward to headquarters the case files containing evidence of a
provider's criminal conviction. For referrals falling under the
permissive exclusion authorities, the field offices receive documents
related to disciplinary actions taken by state Medicaid agencies,
licensing boards, or others. They assess the relevant facts and
forward to OIG headquarters the cases they recommend for exclusion.
OIG headquarters makes the final decision about whether to exclude
the provider from program participation.
When the OIG excludes a provider, it sends notification letters to
organizations such as state Medicaid agencies, Medicare
claims-processing contractors, state licensing boards, and MFCUs in
the states where the provider is known to practice or operate. When
applicable, the provider's employer is also notified. In addition,
information on excluded providers is disseminated nationally through
monthly reports and semiannual cumulative listings.
As of February 1996--the latest date for which cumulative data were
prepared--the OIG had excluded 8,830 providers from federal health
care programs nationwide. Three exclusion categories--conviction for
program-related crime, conviction for patient abuse or neglect, and
license suspensions and revocations--accounted for 76 percent of
these nationwide exclusions.
--------------------
\2 OIG exclusions are effective with respect 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 to 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.
\3 These latter two mandatory exclusions were recently added by the
Health Insurance Portability and Accountability Act of 1996.
\4 Most states have MFCUs that must be organizationally independent
of the agency that operates the state Medicaid program. A 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
THAT ALL PROVIDERS ARE EXCLUDED
IN A TIMELY MANNER
---------------------------------------------------------- Chapter 0:2
In reviewing the OIG's exclusion of state-referred cases, we
identified a number of cases--including those involving mandatory
exclusions or serious quality of care issues--that remained
unresolved for long periods of time. In the Chicago and Washington
field offices, for example, we found delays that were due, at least
in part, to state Medicaid agencies and MFCUs not always submitting
documentation the field offices needed to process the exclusion.
Thus, the completeness of the documentation provided by these
agencies varied, necessitating frequent back-and-forth telephone
contacts and correspondence to obtain data. The Washington field
office advised us that it could take as long as 2 months to obtain
needed documentation from state agencies.
In other instances, however, case files showed long periods of
inactivity with no apparent explanation for the delays. In one case,
a pharmacy was terminated for overbilling the Illinois Medicaid
program by over $117,000. It took the Chicago field office 15 months
to forward the case to headquarters for exclusion. The case file
showed no activity for extended periods of time, including a 10-month
period. In another case, the field office referred a provider to
headquarters for exclusion 19 months after the Illinois MFCU notified
it that the provider had pled guilty in state court to falsely
billing for Medicaid services. Two and one-half months after the
case was forwarded to OIG headquarters, the provider was excluded
nationwide.
INCONSISTENCIES AMONG FIELD
OFFICES
---------------------------------------------------------- Chapter 0:3
Another weakness we identified in the OIG's process involves
inconsistencies among its field offices in how they use their
discretionary authority and the types of cases they refer to
headquarters. This is especially true in the case of permissive
exclusions, where the field offices may decide whether to recommend
exclusion.
In 1987, the OIG was given expanded discretionary authority to
exclude providers nationwide.\5 Our work to date, however, indicates
that the OIG has not always used its expanded exclusion authority as
widely as it could. OIG officials told us that given the OIG's
competing priorities, permissive exclusions have sometimes taken a
lower priority. In October 1992, the OIG instructed its field
offices to only process state Medicaid agency and licensing board
disciplinary actions in which there was actual harm to patients and
in which the provider had moved to another state. Field offices
asked state agencies to only report these types of cases. About 1
year later, however, the OIG rescinded this guidance and state
agencies were asked to once again refer all cases.
We also observed apparent inconsistencies in the way field offices
are processing permissive cases. As a result, providers with equally
serious problems could be treated differently by the OIG depending on
their location. For example, an official in the Washington field
office told us that the office would not consider recommending
nationwide exclusion unless the state Medicaid agency had excluded
the provider, or a licensing board had revoked a license, for at
least 1 year. The Chicago and New York field offices, however, use a
2-year rule of thumb.
--------------------
\5 Medicare and Medicaid Patient and Program Protection Act of 1987
(P.L. 100-93).
OIG NOT NOTIFIED OF CERTAIN
WITHDRAWALS FROM STATE MEDICAID
PROGRAMS
---------------------------------------------------------- Chapter 0:4
During our state visits we found that states were not always
notifying the OIG of certain providers effectively excluded from the
respective state's Medicaid program. One state we visited sometimes
permits providers who are being considered for removal from their
Medicaid programs to "voluntarily" withdraw rather than face formal
sanction. Another state sometimes terminates on short notice
providers it suspects of engaging in improper or inappropriate
activities. Neither type of withdrawal is reported to the OIG.
While this results in safeguards for those states' Medicaid programs
and beneficiaries, it affords no protection for Medicare or other
states' Medicaid programs.\6
Illinois sometimes negotiates a settlement agreement with a provider
against whom it has initiated termination proceedings. This
effectively excludes the provider without the state having to spend
the time and resources needed to pursue a formal action. In such an
agreement, the provider admits to no wrongdoing but agrees to
withdraw from participating 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 his or her
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 withdrawal
process enables Illinois to remove providers from its Medicaid
program relatively quickly and keep them out. But, because the state
does not report these actions to the state licensing board or the
OIG, the providers may continue to provide harmful, unnecessary, or
excessive services to beneficiaries in other federal or state
programs.
Currently, about 23 percent of the physicians not allowed to
participate in the Illinois Medicaid program have withdrawn in lieu
of an action against them. We found that some of the providers who
had withdrawn for what appeared to be serious quality of care
problems were still able to bill Medicare in Illinois. For example,
Medicare paid a podiatrist over $20,000 for services provided to
program beneficiaries since he withdrew 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 recipients.
An Illinois Medicaid official told us that he did not believe that
the settlement agreements preclude the state from formally referring
withdrawals to outside organizations. If the state agency started to
do so, however, he believed that providers would soon opt to pursue
the formal sanction route rather than withdrawing. Consequently, the
state might lose a valuable tool for removing undesirable providers
from Medicaid and would be forced to spend more time pursuing
exclusion. This official speculated that had Illinois not
aggressively moved to remove these providers from the Medicaid
program through voluntary withdrawals, the providers would still be
in the program.
We do not know how prevalent voluntary withdrawals are nationwide.
Most of the other states we visited told us they do not allow
providers to withdraw from their programs to avoid formal sanction.
Although New York sometimes allows providers to withdraw from its
program, state Medicaid officials told us these cases are reported to
the OIG, the state licensing board, and others. Certain providers
New York suspects of abuse, however, are terminated but not reported
to the OIG.
We were informed by New York officials that state program regulations
permit either the provider or state Medicaid agency to terminate a
provider's participation in the program upon 30 days' written notice.
According to state officials, this practice has been used primarily
against pharmacies that the state suspected were heavily involved in
dispensing drugs with a street market. As a result, the state agency
has been able to deal quickly with pharmacies that it believed were
involved in drug diversion. Like voluntary withdrawals in Illinois,
however, these cases are not reported to the OIG.
--------------------
\6 Section 1902 of the Social Security Act requires the state
Medicaid agency to report to HHS whenever a provider of services is
terminated, suspended, or otherwise sanctioned or prohibited from
participating in the program. 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). Furthermore, the provision
regarding exclusion for loss of license also defines surrender of
license to avoid an adverse action as grounds for exclusion.
STATES' USE OF THE OIG'S
EXCLUDED PROVIDER LISTS
---------------------------------------------------------- Chapter 0:5
The OIG widely disseminates information on excluded providers through
monthly reports and periodic cumulative listings to various state and
federal agencies so that they, too, will remove these providers from
their programs. We found, however, that for several reasons states
sometimes have difficulty identifying and excluding providers who
appear on the lists.
First, the states have difficulty identifying individuals--such as
nurses, pharmacists, or physicians--who are employed by hospitals,
nursing homes, pharmacies, and health maintenance organizations that
bill the program under the entities' billing number. These
providers, once sanctioned, can change employers or move to other
states and potentially continue to provide services through federal
health care programs without detection.
Second, providers sometimes are not identified because states tend to
use the OIG's monthly list for a onetime check against their active
provider files. However, they may not review prior monthly lists to
check a provider who applies for program participation in a
subsequent month. Thus, a provider could later enroll in the state's
Medicaid program after being excluded nationwide by the OIG and not
be detected.
Finally, some states do not always check providers appearing on the
list who have out-of-state addresses. An official in Missouri, for
example, told us that although they check the OIG monthly list with
in-state and border state addresses, they do not check names from
other states. New York officials also told us that it would be
time-consuming to check the list of their Medicaid providers against
the entire OIG list each month; instead, they only check for New York
addresses. In addition, they said the OIG's cumulative list is
cumbersome to use and the information is not formatted in a way that
would permit a large state, such as New York, to match provider
names.
When we performed a computer match of the OIG exclusion list to
Illinois' enrolled provider file, we found 13 out-of-state providers
who had been excluded by the OIG between 1988 and 1995 but who were
still enrolled in the Illinois Medicaid program. One of them had
received almost $25,000 in Medicaid payments since being excluded by
the OIG. Although the others had not billed the program since they
were excluded by the OIG, state Medicaid officials acknowledged that
they would have been paid had they submitted claims.
MAGNITUDE OF PROBLEM COULD NOT
BE DETERMINED
---------------------------------------------------------- Chapter 0:6
Although we attempted to identify the magnitude and pervasiveness of
problems in the exclusion process, we were unable to do so--primarily
because of a lack of case file documentation at the OIG field
offices.
In our visits to OIG field offices, we found that they were not
always able to fully account for the number of referrals they
received from the states. For example, the Chicago field office
could not locate 5 of 17 referrals sent by a state Medicaid agency
during 1994 and 1995. As a result, it could not confirm that it had
received the referrals or explain why it had not considered
exclusion.
Our review of these five cases at the state Medicaid agency
determined that three of them involved what appeared to be 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 of harm. 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. Subsequent to our inquiry, the office opened a case file on
the dentist, but as of August 8, 1996, the case had not been
forwarded to headquarters for a final decision. Since this dentist
was excluded from Medicaid, he has received almost $12,000 for
services provided to Medicare patients.
When discussing weaknesses in the OIG's exclusion process with
headquarters officials, they acknowledged that improvements are
needed and informed us of a recent initiative to increase the number
and quality of exclusion cases being forwarded from the field
offices. In May 1996, the OIG began an effort to identify all
mandatory exclusion cases referred to them by the states, along with
permissive exclusion cases meeting certain criteria. Staff
performing this function will receive extra training on the
processing of provider exclusions submitted by state agencies.
OIG officials also attributed these problems to resource cuts over
the last several years. With the recent enactment of the Health
Insurance Portability and Accountability Act of 1996, officials
believe they will be able to obtain additional resources to further
address these problems.
OBSERVATIONS
---------------------------------------------------------- Chapter 0:7
Our work to date shows that the opportunity exists for--and indeed we
found cases in which--providers deemed to be unfit to participate in
one state's Medicaid program can continue to do so in Medicare or in
other states. Because of the amount of communication and
coordination that is needed at the state and federal levels, the
referral and exclusion process is complex. Nevertheless, we believe
that more attention must be paid to a system that works to protect
beneficiaries from substandard care and helps ensure the integrity of
federal health programs.
Although the OIG believes its initiatives and the potential for
additional investigative resources will help remedy weaknesses in the
long term, we believe that the OIG could take immediate action in
several areas that would substantially improve its effectiveness.
For example, the OIG could provide more guidance for OIG field staff
and the states to facilitate the prompt preparation of case
files--including required documentation--for OIG decisions. It could
also clarify guidance for the field offices to ensure more
consistency in the cases that are sent forward to headquarters for a
final decision. Furthermore, it could explore ways to ensure that
states quickly identify and act to remove OIG-excluded providers from
Medicaid participation. Finally, the OIG may want to ask states to
begin reporting information on those who have agreed to withdraw from
a state Medicaid program rather than subject themselves to the formal
sanction process.
-------------------------------------------------------- Chapter 0:7.1
Mr. Chairman, this concludes my statement. I would be happy to
respond to any questions that you or Members of the Subcommittee may
have.
CONTRIBUTORS
---------------------------------------------------------- Chapter 0:8
For more information on this testimony, please call Kathy Allen,
Assistant Director, at (202) 512-7059. Other major contributors
included Jon Barker, Bob Ferschl, Bob Lippencott, Al Schnupp, and Ted
Wagner.
SECTIONS OF THE SOCIAL SECURITY
ACT UNDER WHICH EXCLUSIONS ARE
IMPOSED
=========================================================== Appendix I
Section Exclusion
---------------------------------- ----------------------------------
1128(a)(1) Program-related conviction
1128(a)(2) Conviction for patient abuse or
neglect
1128(b)(1) Conviction related to health care
fraud (non-HHS)
1128(b)(2) Conviction related to obstruction
of an investigation
1128(b)(3) 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 other
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
1128Aa Imposition of a civil money
penalty or assessment
1156(b) Peer review organization
recommendation
----------------------------------------------------------------------
*** End of document. ***