[Senate Hearing 111-120]
[From the U.S. Government Publishing Office]
S. Hrg. 111-120
CATCH ME IF YOU CAN:
SOLUTIONS TO STOP MEDICARE AND MEDICAID FRAUD FROM HURTING SENIORS AND
TAXPAYERS
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC
__________
MAY 6, 2009
__________
Serial No. 111-5
Printed for the use of the Special Committee on Aging
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
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SPECIAL COMMITTEE ON AGING
HERB KOHL, Wisconsin, Chairman
RON WYDEN, Oregon MEL MARTINEZ, Florida
BLANCHE L. LINCOLN, Arkansas RICHARD SHELBY, Alabama
EVAN BAYH, Indiana SUSAN COLLINS, Maine
BILL NELSON, Florida BOB CORKER, Tennessee
ROBERT P. CASEY, Jr., Pennsylvania ORRIN HATCH, Utah
CLAIRE McCASKILL, Missouri SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island LINDSEY GRAHAM, South Carolina
MARK UDALL, Colorado
KIRSTEN GILLIBRAND, New York
MICHAEL BENNET, Colorado
ARLEN SPECTER, Pennsylvania
Debra Whitman, Majority Staff Director
Michael Bassett, Ranking Member Staff Director
(ii)
?
C O N T E N T S
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Page
Opening Statement of Senator Mel Martinez........................ 1
Opening Statement of Senator Herb Kohl........................... 3
Panel of Witnesses
Statement of R. Alexander Acosta, United States Attorney,
Southern District of Florida, U.S. Department of Justice,
Miami, FL...................................................... 4
Statement of Daniel R. Levinson, Inspector General, U.S.
Department of Health and Human Services, Washington, DC........ 35
Statement of James Frogue, State Project Director, Center for
Health Transformation, Washington, DC.......................... 48
Statement of Robert A. Hussar, First Deputy Medicaid Inspector
General, Office of the Medicaid Inspector General, State of New
York, Hauppauge, NY............................................ 69
Statement of Stephen C. Horne, Vice President, Master Data
Management and Integration Services, Dow Jones Enterprise Media
Group, Edgewater, NJ........................................... 77
APPENDIX
Daniel Levinson's Response to Senator Martinez Question.......... 93
Statement of S3 Matching Technologies............................ 94
Statement from the American Association for Homecare............. 97
Statement of William A. Dombi, Vice President for Law, The
National Association for Home Care and Hospice................. 102
(iii)
CATCH ME IF YOU CAN: SOLUTIONS TO STOP MEDICARE AND MEDICAID FRAUD FROM
HURTING SENIORS AND TAXPAYERS
---------- --
WEDNESDAY, MAY 6, 2009
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The Committee met at 3:12 p.m., in room SD-216, Hart Senate
Office Building, Hon. Mel Martinez, presiding.
Present: Senators Kohl, Martinez, and Graham.
OPENING STATEMENT OF SENATOR MEL MARTINEZ, RANKING MEMBER
Senator Martinez. Good afternoon, everyone. I am, at the
request of Chairman Kohl, going to begin the hearing since we
are already running a little bit late. He will be here very,
very shortly, and when he comes, I am sure he will want to make
some opening comments.
Let me begin by welcoming all of you here today to a very
important hearing, and I want to thank my chairman, Chairman
Kohl, for agreeing to hold this very, very important hearing.
This issue of fraud and abuse in our Medicare and Medicaid
system is something that has become a national scandal, and as
we talk about ways in which we might improve our overall health
care system in our country, there is no question that
addressing this issue is at the cornerstone of improving the
health care system for all Americans.
Americans expect their Government to be good stewards of
the dollars that they pay in taxes. Since almost all of us in
this room will some day rely on Medicare for our health care,
it is something in which all of us have, indeed, a very
personal stake if not only a governmental stake.
One of the greatest threats to our Nation's health care
safety net programs like Medicare and Medicaid is fraud and
abuse, and both programs have seen more than their share of
this. Authorities estimate that health care fraud costs
taxpayers more than $60 billion a year. This fraud perpetrated
against Medicare diverts resources that are supposed to finance
health care for 43 million American seniors and disabled. This
fact hurts Medicare beneficiaries, the legitimate businesses
that serve these patients, and really every taxpayer.
I regret to say that my home State of Florida has a large
number of criminals involved in Medicare fraud, and some of the
most egregious cases are in south Florida, as I know we will
hear from one of our witnesses. Just two weeks ago, the
Department of Health and Human Services' Office of the
Inspector General issued a report and that report revealed that
while 2 percent of the Nation's Medicare beneficiaries reside
in south Florida, that region accounts for 17 percent of
Medicare expenditures on durable medical equipment and related
items such an inhalation drugs. The Inspector General found
that two-thirds of south Florida Medicare beneficiaries with
Medicare claims for these inhalation drugs had not seen a
doctor in over three years. This raises suspicion that durable
medical equipment suppliers are fraudulently billing Medicare
for inhalation drugs that doctors have not prescribed.
Another Inspector General review revealed that 8 percent of
the Nation's AIDS patients live in south Florida. Yet, 72
percent of Federal AIDS medication payments are sent to that
area. In that area alone, there is an estimated $2 billion in
fraud. These are just a couple of examples of the systemic
fraud and abuse perpetrated against Medicare and the taxpayers.
An example that Mr. Acosta, the U.S. Attorney for the
Southern District, who is one of our four witnesses, recounted
to me is that of a woman who noticed on her Medicare statement
a series of $10,000 Medicare payments for artificial knees,
ankles, a glass eye, and a wheelchair, among other things. The
truth is that she was completely healthy and, in fact, someone
was billing Medicare using her stolen Medicare number.
This is why Senator John Cornyn and I introduced the
Seniors and Taxpayers Obligation Protection, or STOP, Act. I am
pleased to say that Senator Collins has also joined this bill,
and I believe there are a few other Senators who have joined
with us on that as well.
Our bill safeguards Medicare beneficiaries from those who
use it to fraudulently bill Medicare, helps providers assure
that Medicare is not billed for items that they did not
prescribe, and focuses on real-time fraud prevention and
detection. This legislation will help stop Medicare fraud
before it starts rather than continue the current practice of
pay and chase.
I want to ask other colleagues of mine on the Aging
Committee to join in taking some of these common sense steps to
prevent Medicare fraud, save taxpayer dollars, and restore
peace of mind to physicians, as well as beneficiaries.
Medicaid also has fraud problems. There are often-cited
examples of Medicaid paying for hysterectomies or for birth
control for a male patient, things as crazy as that. To address
this, I recently introduced the Medicaid Accountability Through
Transparency Act, or the MATT Act, which sheds a light on
Medicaid claims by posting claims information on the Web while
maintaining the privacy of the patient. This will help us all
to see where and how taxpayer dollars are being spent. This
would reveal crime trends that will help us weed out fraudulent
spending.
Of course, this does not solve all the problems, but it
would be an easy step forward that would reveal information
that has not been revealed before. This is modeled on the
Coburn-Obama Earmark Transparency Legislation passed by
Congress last session. It is, in essence, a taxpayers' right-
to-know issue.
With that, I appreciate, Chairman Kohl, you agreeing to
this hearing, which I think is terribly important, and I would
call on you to make any opening remarks you care to make.
OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN
The Chairman. Thank you very much, Senator Martinez.
I appreciate serving on this panel with you as the ranking
member, and I appreciate your holding today's hearing on the
topic of Medicare and Medicaid fraud.
The high cost of health care is rapidly depleting the
Medicare trust fund, crushing State Medicare budgets, and
bankrupting working families who cannot afford health
insurance. Health care fraud robs patients and providers of the
precious resources they need.
According to one estimate, Medicare and Medicaid fraud cost
the Government $72 billion last year. So clearly, we need to
make sure that every dollar spent by a public or private health
plan does, indeed, go to quality health care and not to line
the pockets of a scam artist or even a criminal.
So we are eager to hear from today's witnesses about how we
can best put a stop to these types of fraud, and we are
especially interested in innovative ideas that will put us
ahead of the curve in terms of detecting fraudulent schemes
before they are carried out. We can detect improper claims
before they are paid and address weaknesses in our system more
effectively. We can save time and money that is currently spent
on chasing down bad payments that have already been made.
Senator Martinez and I have been working closely with the
Finance and the HELP Committees as part of a bipartisan group
on this issue. Specifically, we are drafting proposals to
address the problem of health care fraud as an essential
component of health care reform, including measures to improve
the detection and prevention of waste, fraud, and abuse and to
provide law enforcement with sufficient tools to investigate
and prosecute criminal schemes. We believe it is our obligation
to protect the integrity of Medicare and Medicaid and ensure
that our Government's resources are defended against dishonesty
and abuse.
Thank you so much, Senator Martinez.
Senator Martinez. Thank you, sir.
Today we have with us five witnesses to speak about the
rampant fraud and abuse in Medicare and Medicaid, and we look
forward to hearing your thoughts on combating fraud and your
recommendations for reducing this fraud while maintaining
quality of care for all the beneficiaries of this system.
First, we have with us the Honorable Alexander Acosta. Mr.
Acosta is the United States Attorney for the Southern District
of Florida. Mr. Acosta has placed special emphasis on health
care fraud prosecutions, hosting the first health care fraud
strike force in the Nation, and he has also presided over a 30
percent increase in prosecutions during his tenure there in the
Southern District of Florida.
Prior to his appointment as United States Attorney, Mr.
Acosta served as the Senate-confirmed Assistant Attorney
General for the Civil Rights Division of the United States
Department of Justice. Mr. Acosta was the first Hispanic to
serve as an Assistant Attorney General at the Department of
Justice.
Next is the Honorable Daniel Levinson, Inspector General of
the United States Department of Health and Human Services. As
Inspector General, Mr. Levinson is the senior official
responsible for audits, evaluations, investigations, and law
enforcement efforts with one of the largest Departments in the
Federal Government.
We have Jim Frogue, who serves as the Center for Health
Transformation's chief liaison to State policy projects. His
primary areas of focus are on Medicaid and health savings
accounts.
Robert Hussar, who is the first Deputy Medicaid Inspector
General in the State of New York's Office of the Medicaid
Inspector General. He works with the Inspector General to
oversee investigations of Medicaid fraud in State agencies and
private providers.
Finally, we have with us Stephen Horne, Vice President of
Master Data Management and Integration Services for Dow Jones
Business and Relationship Intelligence. Mr. Horne has over 30
years' experience in large-scale data integration and data
utilization.
Gentlemen, we welcome all of you. We thank you for taking
the time to be with us today, and Mr. Acosta, we will begin
with you for your opening remarks.
STATEMENT OF R. ALEXANDER ACOSTA, UNITED STATES ATTORNEY,
SOUTHERN DISTRICT OF FLORIDA, U.S. DEPARTMENT OF JUSTICE,
MIAMI, FL
Mr. Acosta. Thank you, Senator. Mr. Chairman, Ranking
Member Martinez, members of the committee, thank you very much
for holding today's hearing.
As you both mentioned, Americans enjoy one of the world's
best health care systems. A challenge to that system is the
increasing costs of health care. One reason for this is health
care fraud. There are various estimates regarding the size of
this fraud. One number that is often repeated is $60 billion.
It could be even greater. I am certain you hear many estimates,
however. So what I wanted to do in my opening remarks is to
present a few facts based on my own experiences in South
Florida.
Now, in 2006, I organized a health care fraud prosecution
initiative in the Southern District of Florida, and we did this
in partnership with the FBI and the Office of Inspector
General. The following year, our efforts were substantially
energized as the Criminal Division's Fraud Section contributed
their attorneys and their resources through the strike force.
The results have been both sad and spectacular. We have
charged in South Florida more than 700 individuals responsible
for billing Medicare more than $2 billion. Those are actual
cases that have now been brought. We have collected more than
$350 million that has been returned to the Federal Treasury,
both civilly and criminally. We have prevented an estimated, at
least--or contributed to the prevention of $1.75 billion in
additional expenditures and billings to DMEs. We have done this
with a local budget of $2.5 million annually spent by the
United States Attorney's Office, and we could do more.
Resources are our primary limitation.
Senators, that billions are being wasted each year should
come as absolutely no surprise. The problems are well known.
Allow me to describe, if I could, an operation that we call
Operation Whac-a-Mole, the old video game. In this operation
Federal agents visited 1,581 durable medical equipment
suppliers. They visited them and inspected them for basic
criteria. Were the businesses there? Were they open? Did they
have regular business hours? Four hundred ninety-one of the
durable medical equipment companies failed that inspection, one
out of three. Instead of a durable medical equipment company,
Federal agents found flower shops, a real estate company,
locations with mail stacked outside the door, pharmacy closed
signs, for rent signs. In less than one year, those 491
nonexistent companies had billed Medicare $237 million and
Medicare had actually paid them $97 million, $97 million
wasted. That is just one example.
I should add that many of the civil matters that we do are
an important part of our effort and account for a large part of
our collections.
I began this health care fraud effort in 2006 because I was
absolutely disgusted by the levels of health care fraud that I
found in South Florida, and we will continue to prosecute these
cases and will continue these efforts. But I want to make some
important points.
First, this is not just a South Florida problem. Senator
Martinez pointed to some numbers regarding South Florida, but
in part, because we are doing so much, the problems have been
identified in South Florida. The strike forces are being set up
based on the South Florida model in other cities around the
Nation. Two cities are or will be hosting strike forces. So
whatever changes should be made should be systemic and go
beyond South Florida.
Secondly, as a prosecutor, I want to put emphasis on a
point that is, to some extent, contrary to my interests as a
prosecutor but is important to the Nation. Prosecutions are not
the solution. Let me explain what I mean.
If one wants to prevent traffic accidents, one puts up red
lights. One puts up stop signs. One has good rules of the road
that prevent accidents in the first place. Tickets given after
an accident occurs rarely prevent accidents in the first place,
not to mention we do not have enough law enforcement to watch
every intersection. So what we do is we have good rules of the
road.
The same applies for health care fraud. With additional
resources, my office could easily double and triple the
prosecutions. We could go from $2 billion to $3 billion to $4
billion in fraud prosecuting, but the best way by far to
prevent fraud in the first place is to improve the rules of the
road, in other words, to implement systemic changes at CMS that
are designed to ensure rapid payment as is appropriate, yet at
the same time identify and deny fraudulent bills.
One final point and an important one. Our prosecutions did
not second guess medical judgment, and this is important to
both physicians and to industry. We do not look over
physicians' shoulders. The frauds that I speak about are
blatant, people billing for services that have never been
provided, an individual billing for the same wheelchair time
after time after time after time when not a single patient
receives that wheelchair. This is not second guessing medical
judgment, and that is important to understand.
We will continue to do our part, but it is important that
we address systemic changes in the system in my opinion. To put
this in perspective, it is easy to throw around numbers like
$60 billion in fraud, $2 billion in fraud prosecuted. So far,
in our district in South Florida, if you look at and assume
approximately 500,000 beneficiaries, we have prosecuted $4,000
in fraud per capita. So my question is this. What could be done
with the savings of $4,000 per Medicare beneficiary? That is
money that is currently going to line the pockets of criminals.
Those are precious health care dollars that could, instead, be
used where they need to be used to help those in need. That is
why I thank you for holding this hearing.
[The prepared statement of Mr. Acosta follows:]
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Senator Martinez. Thank you very much, sir. I appreciate
that very clear testimony.
Mr. Levinson.
STATEMENT OF DANIEL R. LEVINSON, INSPECTOR GENERAL, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC
Mr. Levinson. Mr. Chairman Kohl, Ranking Member Martinez,
and Senator Graham, thank you and good afternoon.
This is a great opportunity for us to discuss the Office of
Inspector General's experience in fighting fraud, waste, and
abuse in the Medicare and Medicaid programs and OIG's strategy
and recommendations for ensuring the integrity of these vital
health care programs.
The Office of Inspector General is committed to promoting
the efficiency and effectiveness of the Medicare and Medicaid
programs and protecting these programs and their beneficiaries
from fraud and abuse. Our work demonstrates that for Medicare
and Medicaid to serve the needs of beneficiaries and remain
solvent for future generations, the Government must pursue a
comprehensive strategy to combat waste, fraud, and abuse. Based
on our audit, evaluation, investigative, enforcement, and
compliance work, we have identified the following five
principles of an effective health care integrity strategy.
First, scrutinize those who want to participate as
providers and suppliers prior to their enrollment in the
Federal health care programs. A lack of effective enrollment
screening gives dishonest and unethical individuals access to a
system that they can easily exploit. As my written testimony
describes in more detail, criminals too easily enroll in
Medicare and steal millions before detection. Medicare and
Medicaid provider enrollment standards and screening should be
strengthened. Heightened screening measures for high-risk items
and services could include requiring providers to meet
accreditation standards, requiring proof of business integrity
or surety bonds, periodic recertification and on-site
verification that conditions of participation have been met,
and full disclosure of ownership and control interests.
Second, establish payment methodologies that are reasonable
and responsive to changes in the marketplace. Our office has
conducted extensive reviews of payment and pricing
methodologies and has determined that the programs pay too much
for certain items and services. When pricing policies are not
aligned with the marketplace, the programs and their
beneficiaries bear the additional costs. In addition to wasting
health care dollars, these excessive payments are a lucrative
target for unethical and dishonest individuals. These criminals
can reinvest some of their profit in kickbacks, thus using the
programs' funds to perpetuate fraud schemes. Medicare and
Medicaid payments should be sufficient to ensure access to care
without wasteful overspending. Payment methodologies should
also be responsive to changes in the marketplace, medical
practice, and technologies. Although CMS has the authority to
make certain adjustments to fee schedules and other payment
methodologies, some changes require congressional action.
Third, assist health care providers in adopting practices
that promote compliance with program requirements. Health care
providers can be our partners in ensuring the integrity of our
health care programs by adopting measures that promote
compliance with program requirements. Although compliance
programs alone will not solve the problem, they are an
important component of a comprehensive strategy to curb waste,
fraud, and abuse in the health care system. The importance of
health care compliance programs is well recognized. Over 90
percent of hospitals have integrated compliance measures into
their systems. New York requires providers and suppliers to
implement an effective compliance program as defined by our
office as a condition of participation in its Medicaid program.
Medicare Part D prescription drug plan sponsors are also
required to have compliance plans. Accordingly, we recommend
that providers and suppliers should be required to adopt
compliance programs as a condition of participating in the
Medicare and Medicaid programs.
Fourth, vigilantly monitor the programs for evidence of
fraud, waste, and abuse. The health care system compiles an
enormous amount of data on patients, providers, and the
delivery of health care items and services. However, Federal
health care programs often fail to use claims-processing edits
and other information technology effectively to identify
improper claims before they are paid and to uncover fraud
schemes. For example, Medicare should not pay a clinic for HIV
infusion when the beneficiary has not been diagnosed with the
illness, pay twice for the same service, or routinely process
claims that rely on the provider identifiers of deceased
physicians. Better collection, monitoring, and coordination of
data would allow Medicare and Medicaid to detect these problems
earlier and avoid making improper payments. Moreover, this
would enhance the Government's ability to detect fraud schemes
more quickly.
In addition to improving the programs' data systems, it is
critical that law enforcement have real-time access to all
relevant data. Currently, we receive data weeks or months after
claims have been filed, making it far more difficult to detect
and thwart new scams.
We also recommend the consolidation and expansion of the
various adverse action databases. Providing a centralized,
comprehensive public database of sanctions taken against
individuals and entities would strengthen program integrity.
Last, respond swiftly to detected fraud, impose sufficient
punishment to deter others, and promptly remedy program
vulnerabilities. Health care fraud attracts criminals because
the penalties are lower than those for other criminal offenses.
There are low barriers to entry. Schemes are easily replicated.
There is a perception of a low risk of detection. We need to
alter the criminal's cost-benefit analysis by increasing the
risk of swift detection and the certainty of punishment.
As part of this strategy, law enforcement must accelerate
the response to fraud schemes. Although resource-intensive the
anti-strike force, as detailed by Mr. Acosta, it is a powerful
tool and represents a tremendous return on the investment.
In conclusion, our office and its law enforcement partners
are implementing a comprehensive strategy to combat waste,
fraud, and abuse in Federal health care programs. But
sophisticated fraud schemes increasingly rely on falsified
records, elaborate business structures, and the participation
of health care providers, suppliers, and even beneficiaries to
create the false impression that the Government is paying for
legitimate health care services. In addition, improper payments
and misaligned reimbursement rates waste scarce health care
resources. The principles that I have described provide the
framework to identify new ways to protect the integrity of the
programs, meet the needs of the beneficiaries, and keep Federal
health care programs solvent for future generations.
Thank you and I will welcome your questions later.
[The prepared statement of Mr. Levinson follows:]
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Senator Martinez. Thank you, Mr. Levinson.
Mr. Frogue.
STATEMENT OF JAMES FROGUE, STATE PROJECT DIRECTOR, CENTER FOR
HEALTH TRANSFORMATION, WASHINGTON, DC
Mr. Frogue. Chairman Kohl, Senator Martinez, and Senator
Graham, thank you very much for the opportunity to share some
thoughts with you today.
Think for a moment how other large businesses operate.
Federal Express and UPS have 23 million packages a day that
they ship. You can go online and track in real time for free
with your $12 fee.
Large, sophisticated retailers in the supermarket,
clothing, or auto parts industry can tell you every night how
many cans of soup, pairs of pants, or spark plugs they sold
anywhere in the world.
The American credit card industry involves over $2 trillion
in transactions a year, almost the size of health care. There
are over 700 million credit cards in existence, millions of
vendors, and countless items that can be purchased. Yet, total
credit card fraud is less than 1 percent.
Now look at health care. A GAO study in January 2009
estimated that a full 10 percent of Medicaid claims paid in
2007 were improper. It is a total of $32.7 billion. These GAO
reports are consistent with OIG and State-level investigations
too. I will not go through a list of examples of fraud. The
other witnesses have done a good job and there are many to go
through.
But Miami-Dade County, for example, presently has 897
licensed home health agencies which is more than the entire
State of California.
I spoke with Jim Sheehan, the Medicaid Inspector General of
New York, and he corrected something that is in my written
testimony. There are actually only 55 men who received
maternity benefits in New York State Medicaid over a 2-year
period.
The Medicare and Medicaid systems we have in place today,
in particular fee-for-service, which account for the majority
of enrollees and dollars, simply beg for waste, fraud, and
abuse. They cheat taxpayers, honest doctors, and hospitals, but
most importantly, 100 million Americans who are elderly or low-
income who depend on these vital programs.
My purpose today, however, is not to dwell on examples of
fraud but, instead, to give some specific solutions. I want to
agree with something Mr. Acosta pointed out. Law enforcement is
only a very small part of the answer here. Even successful
prosecutions tend to be expensive, take years, and end up only
capturing a small amount of money lost, not to mention their
deterrent effect appears to be negligible.
The No. 1 most important thing that the Congress or States
can do is put all Medicare and Medicaid claims and patient
encounter data online for public access. This is similar to the
idea, Senator Martinez, that you have in your piece of
legislation.
Selected academics have had access to Medicare claims data,
for example, for years. The Dartmouth Health Atlas, which comes
out annually, is a fantastic publication. More importantly than
where the dollars go, it tracks health outcomes. For example,
one of the key findings of the Dartmouth Health Atlas is that
per capita Medicare spending by locality is inversely
correlated with the likelihood of receiving recommended care. A
look at another State's Medicaid claims data last year found
out, for example, that only 17 percent of women over age 50
were getting annual mammograms who were on Medicaid. These
records are appalling, but nobody knew this because nobody has
access to the data. It is like taking a test and you have the
answers right here, but you are not allowed to look at them.
Simply put, patients and taxpayers have the right to know
the quality produced and where the dollars are going.
Among the couple ideas I would like to walk through, one of
them is--this would cost Congress absolutely not a penny--allow
seniors on Medicare the option, just the option, of traveling
to another city to receive major, nonemergency surgeries if it
is something they chose to do. If a particular set of
procedures was thousands of dollars less in Des Moines than it
was in Chicago, and if patients opted for it, why not split the
difference with them?
The commercial insurer Wellpoint just launched a
demonstration project that allows customers the option of
traveling to India, as in India next to China, for services
that are less expensive but the quality is equally as good.
Surely taking advantage of arbitrage opportunities in our own
Medicare system is not too radical.
Another is enhanced discovery of third party liability in
Medicaid. There is a GAO study a couple years back that showed
13 percent of people on Medicaid actually had third party
coverage. There was another private study recently that found
that. One to two percent of every State's Medicaid spending is
on people who are already covered by another. That is simply
reported coverage. If you add unreported to that, the numbers
go up dramatically.
Use unique ID numbers for Medicare beneficiaries instead of
their Social Security numbers. A Social Security number makes
people particularly vulnerable to fraud.
Consider moving to or biometric ID for Medicare and
Medicaid beneficiaries, which is much harder to be stolen,
copied, or forged.
Recognize the recommendations of MedPAC, which is the
shortcomings of fee-for-service, uncoordinated care, and fraud
is much higher in fee-for-service than it is in managed care
options. Move rapidly toward a medical home model which has
shown a lot of success in many places.
Encourage better data analytics across programs. This is
much like law enforcement. Sex offenders, for example--if they
move to a different State, they have a couple days to register,
and if they do not, they are tracked instantly using public
documents. If you are a bad doctor or a bad DME provider in
Miami and you move to a different State, no one may ever know.
So this technology is not crazy or nonexistent. It exists in
law enforcement right now.
Durable medical equipment. The fraud in DME is almost
laughable. Instead of trying to have CMS fix their forms and
their culture, you might as well just outsource the whole thing
to Visa or Mastercard. They have 700 million cards in existence
right now and could do a much better job. They certainly could
not do worse than CMS and studies prove it.
Medi-Cal, the Medicaid program in California, has done a
very good job of rooting out DME fraud. They are one of the
best and do a much better job than Medicare fee-for-service and
others state Medicaid programs.
One other is allow Medicare and Medicaid to auto-enroll
patients with outlier behaviors into managed care. This is a
very tiny percent. It is just 1 to 2 percent. Individuals who
are excessively billing at, say, emergency rooms or DME
providers, are probably getting poor, uncoordinated care. It
may not even necessarily be them. It might be fraudulent
providers doing it without the knowledge of the patient.
But there are several other recommendations, and I look
forward to your questions, Chairman Kohl. Thank you and,
Senator Martinez, thank you.
[The prepared statement of Mr. Frogue follows:]
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Senator Martinez. Thank you.
Mr. Hussar.
STATEMENT OF ROBERT A. HUSSAR, FIRST DEPUTY MEDICAID INSPECTOR
GENERAL, OFFICE OF THE MEDICAID INSPECTOR GENERAL, STATE OF NEW
YORK, ALBANY, NY
Mr. Hussar. Thank you, Chairman Kohl and Ranking Member
Martinez and all committee members present. On behalf of New
York's Medicaid Inspector General, James Sheehan, and the New
York State Office of the Medicaid Inspector General, known as
OMIG, I thank you for the opportunity to describe our efforts
at preventing and detecting Medicaid fraud, waste, and abuse in
New York's program.
The OMIG was created to coordinate and improve the State's
process of combating Medicaid fraud, waste, and abuse. We do
this by collaborating with our fellow State and Federal
partners and with providers and their representatives to
prevent or detect and recoup overpayments in the Medicaid
program. We pursue this mission in the framework of Governor
Patterson's commitment to ensuring a patient-centered approach
to health care, and we carefully consider the effect that each
and every enforcement action has on the quality and
availability of care in the community.
Measured by fraud and abuse recoveries reported to CMS, New
York was the most successful State in the Nation in Medicaid
program integrity over the past year, identifying recoveries of
more than $551 million. This success results from the
commitment of State elected officials and State agencies, as
well as the support of Federal agencies. While recovering
overpayments is an essential part of our efforts and although
we have been successful in identifying significant recoveries,
New York's long-term program integrity goal is to prevent or
minimize improper payments. This is a daunting task, given the
approximately $48 billion we spend on Medicaid, which covers
approximately 60,000 providers and over 4 million enrollees.
Even at a time of enacting our enabling legislation, the
New York State legislature fully appreciated that a pay-and-
chase approach is neither effective nor efficient and that
providers have a responsibility and are in a prime position to
identify instances of noncompliance and to correct billing and
payment mistakes. Through bipartisan legislation, New York now
requires Medicaid providers to implement effective compliance
programs. As a former in-house compliance officer for a
comprehensive health care system, I have seen firsthand what
works and what does not in terms of provider efforts to assure
program integrity.
With this in mind, in developing our compliance guidance
documents, in addition to addressing the typical billing and
coding issues, we have raised the bar for accountability of
board members, senior executives, and front-line staff related
to governance and oversight of ethical business conduct and the
expectation that all providers will ensure access to high-
quality care.
To complement our compliance initiatives, we also support
the use of administrative tools related to provider enrollment
review, payment suspension, prepayment review, audits, and
individual and entity exclusions when improper payments are
discovered. These remedies should not be deterred pending the
outcome of an extended criminal investigation with the result
of keeping those providers in the program who are most likely
to be collecting the improper payments.
Recognizing that we will never eliminate all overpayments,
we have and continue to develop ways to integrate technology
into our audit and investigatory practices. Every OMIG auditor,
investigator, clinical staff, and data analyst has access to
our claims data that consists of over $200 billion in claims
data covering the past 5 years, and they incorporate data
mining into their daily activities.
Examples of recent findings resulting from the use of one
and sometimes multiple applications in our data mining toolbox
include: fees paid to managed care companies after a Medicaid
recipient has been admitted to an assisted living or a nursing
home; multiple client identification numbers used for the same
recipient; the pharmacies which reportedly provided home-
delivered prescriptions to patients who died weeks or months
before; managed care plans and hospitals that bill Medicaid for
prenatal services, as Jim already mentioned; the transportation
company that bills Medicaid for patients who are dead,
hospitalized, or incarcerated at the time the outpatient
services were allegedly provided; and finally, those providers
who do refund money when an agency review identifies an
overpayment, but then rebills for those same claims 6 months or
a year down the road.
We need to move to a system which makes program integrity a
major goal of oversight, investigative, and prosecutive efforts
through the following principles.
First, require and support effective corporate compliance
programs and professional compliance officers. This can be
done, in part, by holding senior executive board members
accountable for failing to have systems in place to prevent
improper billing. The Office of the Inspector General has done
a great job of articulating its expectations for board members
of hospitals and nursing homes. We need now to expand that
effort.
Literature has shown that frequent and predictable
communication and interventions with providers are more
effective than occasional severe sanctions.
Next, as I mentioned earlier, we need to evaluate, support,
and use administrative tools of payment suspension, prepayment
review, audit, sanctions, and exclusions when appropriate.
We also need to have regular discussions with providers,
and we are regularly engaged in outreach with the provider
community.
We are finding fraud, waste, and abuse in recovering
overpayments, but our ultimate goal, as I said, is to prevent
those payments from being made in the first place. Toward that
end, we are committed to educating the provider communities on
ways to incorporate compliance into their day-to-day activities
and to build integrity in on the front end of the program. Our
efforts have contributed significantly to the integrity of the
Medicaid program in New York and beyond, and we hope that our
ideas will be replicated in other States as we as a Nation seek
to improve the quality of health care for all citizens.
Again, on behalf of the OMIG and New York, I thank you
again for the opportunity to share these thoughts.
[The prepared statement of Mr. Hussar follows:]
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Senator Martinez. Thank you, sir, very much.
Mr. Horne.
STATEMENT OF STEPHEN C. HORNE, VICE PRESIDENT, MASTER DATA
MANAGEMENT AND INTEGRATION SERVICES, DOW JONES ENTERPRISE MEDIA
GROUP, EDGEWATER, NJ
Mr. Horne. Good afternoon, Chairman Kohl, Ranking Member
Martinez, Senator Graham.
I have spent about 30 years working on building very
complex databases, and as I am listening to the people here on
the panel, it sounds like we have got an information problem.
It has been well documented that there is a tremendous
amount of waste, fraud, and abuse within the Medicare system.
According to the recent Government Accountability Office
report, the Centers for Medicare and Medicaid Services is now
estimating there are about $10.4 billion improper payments made
for just fee-for-service providers alone. That is out of the
over $70 billion I understand is part of the overall waste,
fraud, and abuse number.
The Medicare system is made up of hundreds of processors,
hundreds of thousands of providers, millions of recipients, all
of whom can independently contribute to abuse. In the past, it
was thought to be prohibitively expensive to rebuild the
infrastructure to provide the information necessary to assert
the proper controls over the Medicare system.
The original computer systems that were designed to process
Medicare claims were mostly based on older mainframe-based
technology that were designed to efficiently process data at
the lowest cost possible at the time of implementation. These
systems are not very effective at creating useful analysis that
could lead to a reduction in abuse.
Today, it is cost-effective to extract the data from the
current computer systems in near real time. Using specialized
methods, data can be transformed into actionable information
that can be analyzed by applying potentially hundreds of
thousands of ``rule'' combinations to create true transparency
and oversight of the Medicare system, capture those parts of
the process that are susceptible, and provide the appropriate
analysis to correct the problem.
For example, you heard in the IG's report for inhalation
therapy drugs in South Florida where 2 percent of the Medicare
beneficiaries live. I believe, Senator Martinez, you also
brought this up. The area accounted for 17 percent of the
Medicare spending in 2007. Medicare paid almost $143 million,
about 20 times greater than any other county except for Cook,
which was the next largest county in total payments. Cook
County is home to almost twice as many Medicare beneficiaries
as in Miami-Dade.
With today's technology, data mining, and analysis tools,
the data that was found by the IG's audit would set off a
series of alarms as soon of the thresholds of reasonable
volumes were breached. This would create two possible
opportunities for managing waste, fraud, and abuse.
The first was we would be able to deny claims that were
outside the bounds of reasonable norms as soon as they were
identified and allow HHS and the IG to recover those claims
paid that fell into the categories identified in near real
time.
Second, it would enable the IG's office to identify and act
on problems as they occur rather than having to react to
problems after the fact. Technology would not only reduce the
amount of funds lost through waste, fraud, and abuse, but it
would serve as a traffic cop for the Medicare system to deter
misuse.
The processes an individual claim may go through from
submission through final disposition can sometimes be called a
Rube Goldberg combination of procedures that no one can easily
figure out, particularly when Medicare and Medicaid
transactions intersect with each other.
Databases, when programmed correctly, are much better at
figuring out what we call ``tree logic'' that these claims
follow and may branch off into multiple directions. We try to
capture the information between the various rules and
jurisdictions of each claim of the agencies and processes
indicated on an individual claim. Although these claims my
represent a fraction of the total claims processed by the
system, they probably take up the majority of the expense of
the processing cost because the amount of human interaction
required to get them right. This is where there probably is the
highest significant potential for pure waste.
There is also a substantial what we call ``Pareto Factor''
in the system. Pareto's Law, also known as the 80-20 rule,
applies in the case where 80 percent of instances of waste,
fraud, and abuse occur in 20 percent of the total cases. I
believe that further analysis will find that the numbers are
more likely 90-10. Reducing the percentage of instances of
problems and segmenting these problems into manageable groups
will allow the system to manage the problems on a more cost-
effective basis. The present system is not capable of achieving
comparable results because it cannot identify the 10 percent of
the specific possibilities for waste, fraud, and abuse. I
believe if you look at the CERT program, you will see that that
is a 120,000-record sample out of millions of transactions. You
cannot figure it out that way.
According to the IG's office, the Government paid more than
$1 billion in questionable Medicare claims for medical supplies
just in 2007 that showed little relation to a patient's
condition, including blood glucose strips for sexual impotence,
special diabetic shoes for leg amputees, wheelchairs or
wheelchair accessories for patients listed as having a deformed
nose and sprained wrist. In cases such as these, the line
between waste, fraud, and abuse are blurred because these
errors, regardless of intent, would have been prevented if a
codification validation system were in place.
We can extend the life of the existing Medicare computer
systems if they are used for the purposes that they were
originally intended for, which is to process claims. Do not
force them to do anything else. Outliers can be identified by a
separate but connected computer system that incorporates
technology-based data mining and analysis tools to enable CMS
and the IG's office to effectively act in cases of fraud and
abuse, and process management techniques can be initiated to
counteract waste.
Thank you, Mr. Chairman, Ranking Member Martinez, Senator
Graham for your time and your attention.
[The prepared statement of Mr. Horne follows:]
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Senator Martinez. Thank you very much. Chairman Kohl had to
be excused.
Senator Graham has a couple of questions, and then I have
some myself. So we will call on Senator Graham.
Senator Graham. Well, thank you, Senator Martinez. To you
and the chairman, I really appreciate having this hearing, and
I know people are busy, but I cannot think of a more important
topic than waste, fraud, and abuse when it comes to Medicare
and Medicaid. If you are serious about health care reform, you
have to be serious about this topic. If you asked any audience
in America how many people in this room believe that waste,
fraud, and abuse is a problem with Medicare and Medicaid, and
you have experienced some of it, everybody raises their hands.
The numbers are staggering.
But one observation, Mr. Frogue--is that how you pronounce
your name? Mr. Horne. You have given some examples of a lot of
abuse that really was not caught in the example of a
wheelchair. You talked about American Express and credit card
companies and FedEx being able to do a better job tracking the
flow of inventory and finding out where the dollars are.
To me the big difference is that in a private sector
enterprise, if you allow people to rip you off, you go out of
business. When it is my money, I am a lot more concerned about
being ripped off if I got to pay my credit card bill
fraudulently or somebody ripped my credit card bill off or they
did something that affects my pocket. The problem here is that
we are not stealing money from individual pockets, and there is
no bottom-line effect. We just print more money.
Do you not think that is a basic problem, Mr. Frogue? A big
difference?
Mr. Frogue. I think you hit the nail right on the head,
Senator Graham. That is exactly right. We also recognize the
problem of a third party payor system where if a third person
is paying the bill and you are in a transaction, the purchasers
does not spend money as wisely. Medicaid is actually a fourth
party payor system where there is yet another entity, which is
the Federal Government, paying the bill. So people care even
less.
Senator Graham. We have got to fix that somehow. We have
got to make people care. Senator Martinez mentioned that an
insurance adjustor in a worker's comp--you have people
following around false claims all the time because it puts the
insurance company out of business if I pay too many false
claims.
So we have got to somehow get people caring more because it
is bankrupting future generations. The amount of money we are
spending on Medicare and Medicaid alone in 20 years is going to
equal the entire discretionary budget. So this may not be
coming directly out of a pocket and it does not affect the
bottom line of a business. It affects your kids and your
grandkids.
So I would like, if you could, to me or the committee--you
have all given a lot of input. Could you in one or two pages
put down a consensus among yourselves, talk among yourselves,
as to the things that this committee and this Congress could do
to deal with fraud? Because you have given a lot of
information, but if you sat down in a room, I bet you could
find the top four or five things we need to do.
Second, as to caring, I know that prosecution alone is not
going to work. It is like the horse is out of the barn deal.
You want to prevent it. But I have found, being a military
officer, that when the military got very serious about DUIs--if
you had a DUI as a senior NCO or an officer, your career was
over. The culture in the military was to drink every Friday and
people got home the best they could. When we got serious about
cracking down on driving under the influence, it really did
change because people realized that if I get caught with a DUI,
my career is over.
So I would urge you--is it Mr. Acosta?
Mr. Acosta. Yes.
Senator Graham. To not discount so much--I want to work
with Senator Martinez and Senator Kohl to increase penalties
dramatically. I really do want to send a signal that if you are
robbing the system, you are cheating the system, you are
hurting the country. We are going to look at dramatically
increasing the penalties.
Senator Martinez. Would you comment on that, Mr. Acosta,
because I think you probably have some ideas of how we could do
that?
Mr. Acosta. Well, certainly, Senator. Let me emphasize when
I say that prosecution is not the solution, in no way, shape,
or form--
Senator Graham. I totally agree with that.
Mr. Acosta [continuing]. Am I discounting the value of
prosecution. Since beginning the initiative in 2006, we went
from prosecuting $186 million in fraud a year to nearly $800
million in fraud a year. My only point is with the limited
prosecutorial resources, there is a limit to how many cases can
be brought.
One thing that I think is worth noting is we are seeing--
and some patterns that we see are, I think, quite interesting.
We see individuals that used to engage in drug dealing, for
example, that will say quite openly--and these are individuals
that have now been convicted.
Senator Graham. The cost of doing business is lower.
Mr. Acosta. The cost of doing business is safer to engage
in Medicare fraud and it is more profitable to engage in
Medicare fraud, and so we are now engaging in Medicare fraud.
Senator Graham. I have to go here. With your help, give us
some idea, not now but later on, about how we could increase
the penalty scheme to make the cost of doing business here
unacceptable for a large percentage. There will always be
people trying to cheat. But you go where it is easiest to cheat
and where the penalties are the least. I think Senator Martinez
and myself are convinced that if we increase penalties, the
cost of doing business would be harder and it might, at least
on the margins, affect the people involved.
So thank you all for what you are doing for our country.
Senator Martinez, this is a great hearing. Let us stay on
this topic because I think this is one place for
bipartisanship.
Senator Martinez. Thank you, Senator Graham. I appreciate
it.
I wanted to follow up with a few questions of my own. Mr.
Acosta, I wanted to ask you because it is so embarrassing that
the State of Florida seems to be absolutely in the lead here,
even beyond Cook County, which I find astounding. Why do you
think Florida has such a problem with this fraud?
Mr. Acosta. Well, Senator, it is difficult to say with
specificity. South Florida is, unfortunately, a leader in many
types of fraud from Medicare fraud to mortgage fraud. So South
Florida has one of the largest U.S. Attorney's offices because
we have one of the largest law enforcement challenges.
All that said, because we are focusing so much on health
care fraud and because we are working so closely with the
Inspector General's Office, we are the subject of heightened
scrutiny. I think that is great, but that does focus the eye on
South Florida. In the same way that in South Florida, whether
it is HIV infusion or inhalers or now where we are putting our
focus is home health care, we see those particular types of
fraud in other parts of the country. I am certain that other
types of fraud are sort of the fraud du jour.
Different regions have different payor systems, and as a
result there are different frauds that we see in different
parts of the country. I say that because a solution to this
would not simply be to begin demonstration programs in South
Florida. That does not address the issue. It really has to be a
nationwide set of solutions.
Senator Martinez. Well, I can also imagine if prosecutions
continue like you have done them in south Florida, the problem
will only move elsewhere because it will be easier to do it
someplace else.
Mr. Acosta. I have spoken with my colleague in the Central
District of Florida, in the Tampa-Orlando region, that has
noticed an increase in frauds, and I have also been told that
Atlanta is now seeing an increase in frauds as people leave
South Florida and set up shop, unfortunately, elsewhere.
Senator Martinez. Mr. Levinson, one of the durable medical
equipment issues that I have noticed is how can we look at that
problem, which seems to be so flagrant, and create some
safeguards that might prevent some of that from occurring as we
go forward? Do you have any suggestions there?
Mr. Levinson. Mr. Martinez, I think it would be especially
valuable to focus on enrollment, on who gets into the program.
Historically Medicare has been very, very concerned with
access, understandably so especially in the early years of the
program. But as the program has matured over the years and as
the population affected has truly exploded in growth, the
paperwork, the filtering, the need to focus on who should be in
the program has not kept pace. Rather than have enrollment in
Medicare as a privilege, in effect a special opportunity, it is
simply treated too much as ``fill out the form''. If you have
the form right, you get the number and you are in the Medicare
program. We need to do a much better job of controlling
enrollment because it is a whole lot easier, if possible, to
keep the fraudster out of the program in the first instance
than to try to catch up later to do what often is a pay-and-
chase.
Senator Martinez. What about the fraudulent billing part of
the business, if you will? Do you have any recommendations?
Mr. Levinson. Well, we in the course of our studies,
certainly have identified excessive reimbursement for a variety
of DME equipment. We think that getting prices better aligned
with the market would make DME fraud a less attractive target
over time. So it is important to make sure that as CMS looks at
its reimbursement policies, that we get a better alignment with
real marketplace pricing.
Senator Martinez. Mr. Frogue, have any States begun to
place Medicaid data online while, at the same time, protecting
the identity of patients?
Mr. Frogue. Senator Martinez, that is a great question.
Governor Sanford in South Carolina has a version of this where
you can search any provider in the State and get the amount of
money they receive and the number of patients they treat. It is
a good first step. I think the next step after that is more
along the lines of where you are trying to go, which is to get
all the claims online in a usable fashion so not only can you
track all the dollars, but track the health outcomes of every
provider because there are very, very wide discrepancies in
which hospital is most likely to kill you. That is good
information to have. It does not matter where you are in the
political spectrum. You want to know which hospital is more
likely to kill you. The data--it is all there and we just have
to access it.
As Mr. Horne said, it is just an information problem. If we
use better tools--and again, these tools are all in the private
sector, FedEx, UPS, any large retailer. Everywhere else it
exists. This is not theory. We just need to apply the best
practices to health care.
Senator Martinez. Explain to me, if you could, the
difference in the Medicare and Medicaid fraud?
Mr. Frogue. I think it is substantial in both. Again, the
data explains it better than anything. There are a lot of
examples of fraud all over the country and not only in South
Florida but in every region of the entire United States. It is
different but it is substantial in every program and in every
State, but it is difficult to track because the information
technology is so poor and the incentives, as Senator Graham
pointed out, are not there to actually not have it occur in the
first place.
Senator Martinez. Mr. Hussar, what has the State of New
York done to focus more on the investigation of Medicaid fraud?
Mr. Hussar. We have taken essentially three approaches. No.
1, as some of the other witnesses have testified to, we have
put in mandatory compliance programs. So we put some of the
onus on providers to adopt effective compliance programs to
really build integrity in on the front end of the program and
self identify and report internet problems.
No. 2, we have engaged in effective measurement of program
integrity. We believe that that measurement has to go beyond
just the amount of--I am sorry--rather, the amount of
recoveries or the number of prosecutions. We need to look also
at cost avoidance to make sure that we have a consistent, well-
publicized process to evaluate our effectiveness. I think there
is a common saying that we manage what we measure, and we need
to make sure that we are measuring the right thing.
Third, we publicize and utilize, to a great extent, our
exclusion and other administrative tools. We want to make sure
that we get people out of the program who do not deserve to be
in there, people who are billing the program inappropriately,
people who are unable on who fail to come into compliance with
established professional standards.
Again, a lot of this is done through data mining. We have
data mining that goes on throughout our organization. We have
virtually real-time access to our claims data, and that ensures
that all of our individuals, whether they be clinicians,
auditors, or investigators, can look at what the latest trends
are and address concerns as they arise.
If I may, Senator Martinez--
Senator Martinez. Yes, please.
Mr. Hussar [continuing]. Just to follow up on Inspector
General Levinson's remarks on DME. I think there are three
areas that New York has engaged in that have been effective,
that do relate to the pre-enrollment process.
First, we have a density analysis that we perform by
geographical location to make sure that we do not have an
oversupply of providers within a particular community.
Obviously, if there are too many providers, it may lead to
inappropriate billing.
Second, we ensure that the entities need to be viable
beyond just the Medicaid reimbursement, that they can survive
on Medicare and other third party insurance, lest they be
forced to focus on inappropriate alternatives.
Finally, we conduct pre-enrollment site visits to make sure
that they actually stock the appropriate items, that they are
not just a storefront--
Senator Martinez. It seems pretty basic. I mean, you go see
if they really are in business before you start sending them
checks.
Mr. Hussar. Right, and we do see a number of times where
they do have a storefront setup where the mail is piled up
outside and clearly no one has been there.
Senator Martinez. Mr. Acosta showed me a picture of a
closet with some half-used cans of paint that acted as the
storefront or the supposed place of business for one of these
entities.
Mr. Frogue.
Mr. Frogue. Senator, if I might--
Senator Martinez. It would be really funny if it was not so
sad and if it was not our taxpayer dollars and the future of
our children.
Mr. Hussar. Well, and if they were not trying to pass
Reeboks off as medical shoes.
Senator Martinez. Yes.
Mr. Frogue. To add to either a sad or funny quotient, there
is a State representative who I spoke to in preparation for
this, Julio Robaino, in Miami who said right next to his
district office he watches busloads of people pull up, walk
into a fake DME provider, and walk out counting their cash.
This is literally right underneath his nose. So this is so
obvious and so apparent.
Again, there are tools in the private that are very common
which are not applied to health care.
Senator Martinez. We did this Whack-a-Mole operation. How
many of these 491 durable medical equipment companies were
expelled from billing Medicare after Operation Whack-a-Mole,
Mr. Acosta, Mr. Levinson?
Mr. Acosta. Well, I believe the majority were recommended
that they be de-licensed, but that then went into the CMS
administrative process, and I believe Mr. Levinson might be in
a better position to--
Senator Martinez. It went into the CMS administrative
process. I do not think I like where this is going.
Mr. Levinson. It, nevertheless, has a reasonably happy
ending in terms of enforcement because many of those who had
appealed were ultimately denied readmission to the program.
This was an exercise that I think is worth reminding everyone
concerned that this involved is a very small number of the
basic requirements for enrollment in the program. Investigators
and inspectors were only looking at some of the bare minimum
requirements, you know such as, do you have an office? Do you
have office hours? Are you open during office hours--not even
getting to the admittedly more complicated requirements of
running a business. So this was really a threshold effort that
unexpectedly resulted in scores of DME providers being thrown
out of the program and who remain out of the program.
Mr. Acosta. Senator, if I may. I was just provided some
numbers. Of the 491, 243 appealed and received hearings before
CMS. Those hearings traditionally are one-sided in that the
provider has the hearing before the CMS administrative agent,
but the Government is not necessarily there. Of those, 222 were
reinstated. We subsequently prosecuted several of those. Upon
conviction, they then were finally brought out of the Medicare
system. So I can provide further details.
Senator Martinez. It would be nice if you would provide
those details for the record.
Mr. Acosta. But certainly the way it proceeds, the CMS
administrative process reinstated their numbers until they were
not just charged but then subsequently convicted.
Senator Martinez. Mr. Horne, a computer system, it would
seem to me--and I am not a computer person, but I can just see
how it would be so easy to have a system that would analyze the
data to provide minimal sorts of checks. We are talking about a
$60 billion fraud bill. I would bet it is higher. What do you
think could be done in terms of providing a system that would
be effective and also at what cost?
Mr. Horne. Well, I think you have to look at it in a couple
of different ways.
First, I want to sort of congratulate you, Senator, on the
fact that you and your staff, you being an original sponsor of
the TARP transparency bill, and your staff looked at me and
said, if you could do TARP transparency, could you also do
Medicare transparency? Data is data. So the reality is that
yes, not that it is simple because nothing from this is simple.
It takes grunt work, but from a logic standpoint, it is very
straightforward. It is take the data, put it into a structured,
normalized format, examine it, analyze where the anomalies are,
process the claims through that should be processed through,
flag the ones that should not, and put actions in place to stop
those behaviors. It is straightforward.
You heard members of this panel say over and over again
part of issue was in terms of prosecution and the actual CMS
review process. These are all processes. Processes can be
fixed. Processes can be changed. But if you do not identify
where the issues are in the first place--and what is happening
now is in most cases, the IG's Office, the special prosecutor's
office have to go and find the problem. Systems will bring
those problems to the surface.
Senator Martinez. Well, maybe it would prevent them from
ever becoming a problem in the first place.
Mr. Horne. Prevent them from ever happening in the first
place because you would know that somebody is actually in
violation at the point of violation, not at the point 6 months
down the road where you show up at the doorstep and there is
paint in the closet, if you get my drift. That is kind of the
way that this happens.
What happens is that these people do migrate. They will
become sort of like a migratory bird flying around the country
going from place to place where they can set up new shops. They
can be identified. They can be identified and thwarted before
they ever get to the point of setting up shop.
Senator Martinez. Right.
Mr. Acosta. If I may comment on the systems, as well, with
a specific example. One of the things that we did through our
initiative--I do not know if it is still the case, but we were
the first U.S. Attorney's Office in the Nation to interface
with and collocate with the Office of Inspector General so that
we now have agents with the Bureau and OIG and prosecutors
working side by side. What that has also done is give us access
to data which is very important.
One of the ways that we have identified many of our cases
is I have directed our prosecutors and Federal agents to look
for suppliers that are billing for providing medical services
to a substantial number of patients that live more than X miles
from where that provider is located on the theory that most
people do not travel a few hundred miles to receive their
inhaler or to get their wheelchair. These companies are getting
individuals' numbers from around the Nation and they are
billing Medicare for providing those services.
Senator Martinez. It is common sense stuff.
Mr. Acosta. Very, very common sense, and what is so painful
about this is that there are very common sense algorithms that
can be used that we run on a manual basis because we have to do
it that way. But there are a number of common sense solutions
that credit card companies do all the time that could be
applied to that data. That is how we identify so many of those
cases.
Mr. Horne. Senator Martinez, just as a comment on what the
prosecutor was saying, I have built or been involved with
building systems such as the UPS tracking system, such as the
American Express system. I was involved in some of the original
on their business cards, working with IBM in terms of their
global customer management system.
These are processes that are exactly the same from company
to company. It does not change. Your staff saw so clearly that
the TARP process and this process--it is data. What inhibits
the people who are responsible for tracking these things from
getting the job done as easily as they could is because they
have to go find the data. If you just gave them information,
which is the transformation of data into usable knowledge that
they can act upon, then we can limit this process, a lot of the
exercise up front dramatically, and put them in the position
where they can go after the worst offenders in order and
literally get them out of the way, categorize them, and then
build all the flags and alarms into the system that set off as
soon as a problem has occurred.
Senator Martinez. Understood.
Well, thank you all very, very much for participating on
the panel. To those of you who are fighting this every day, I
appreciate what you are doing and thank you. We look forward to
perhaps having you put together some of the answers that
Senator Graham requested because I think it would help us to
have some of your specific recommendations on how we can help
alleviate the problem. It is obvious that there is need for
legislation. There is a need for more resources and a common
sense approach.
As we look at the future of health care in America--and we
are about to have a big debate in the Congress about perhaps
enlarging the role of Government in health care. It is
frightening to think that what is being done today with the
money that is being spent on Medicare and Medicaid would apply
tenfold, and the fraud that is happening in this program would
be no different than any other. If we are talking about 10
percent of the money being wasted basically by criminality and
waste and fraud, imagine 17 percent of GDP being treated the
same way. It would bankrupt our Nation. So this is important.
It is timely.
I thank you for being with us. I thank you for your work.
At this point, I will declare the hearing adjourned.
[Whereupon, at 4:20 p.m., the hearing was adjourned.]
A P P E N D I X
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Daniel Levinson Response to Senator Martinez Question
Question. You testified that of the 1,581 durable medical
equipment suppliers that DOJ, HHS-OIG, and CMS visited in 2007
in South Florida, 491 failed to maintain a physical facility or
were not open for business and staffed. How many of the 491
durable medical equipment suppliers were referred for
revocation of billing privileges? How many suppliers' billing
privileges were actually revoked? How many appealed the
revocation? How many were reinstated after appeal? Of those
that were reinstated, how many were ultimately convicted or
agreed to settle?
Answer. As set forth in our report entitled ``South Florida
Durable Medical Equipment Suppliers: Results of Appeals
(October 2008),'' OIG and CMS staff conducted unannounced site
visits to 1,581 suppliers located in Miami-Dade, Broward, and
Palm Beach Counties. OIG found that 491 of these suppliers
failed to maintain physical facilities or were not open and
staffed during the unannounced site visits as required.
All the 491 suppliers were referred to CMS so that CMS
could consider revoking their billing privileges. CMS
subsequently revoked these suppliers' billing privileges.
Nearly half of the suppliers appealed and received hearings;
hearing officers conducted hearings for 243 of the 491 revoked
suppliers. Billing privileges were reinstated for 222 of the
243 suppliers. As of March 2008, the billing privileges of half
of the suppliers (111 of 222) that were reinstated by hearing
officers have subsequently been revoked as a result of National
Supplier Clearinghouse's follow-up project and its continuing
efforts to identify suppliers that do not meet Medicare
standards. In addition, 17 percent of the suppliers (37 of 222)
have had their billing privileges inactivated. As a result,
two-thirds of suppliers whose billing privileges were
reinstated by hearing officers (148 of 222) had their
privileges revoked again or inactivated by CMS.
Between April and September 2007, the U.S. Attorney's
Office indicted 18 individuals connected to 15 of the 222
reinstated suppliers. As of April 2008, 10 of the 18
individuals had been convicted, sentenced to jail terms, and
ordered to pay restitution. Six of the eight remaining
individuals have since been sentenced to jail terms and ordered
to pay restitution. Two of the eight individuals are currently
fugitives.
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