[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

MEDICARE CONTRACTORS' EFFORTS TO FIGHT FRAUD--MOVING BEYOND ``PAY AND
CHASE''

=======================================================================

HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

JUNE 8, 2012

__________

Serial No. 112-149

Printed for the use of the Committee on Energy and Commerce

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COMMITTEE ON ENERGY AND COMMERCE

FRED UPTON, Michigan
Chairman

JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chairman DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire MIKE ROSS, Arkansas
PHIL GINGREY, Georgia JIM MATHESON, Utah
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin
LEONARD LANCE, New Jersey Islands
BILL CASSIDY, Louisiana KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

7_____

Subcommittee on Oversight and Investigations

CLIFF STEARNS, Florida
Chairman
LEE TERRY, Nebraska DIANA DeGETTE, Colorado
SUE WILKINS MYRICK, North Carolina Ranking Member
JOHN SULLIVAN, Oklahoma JANICE D. SCHAKOWSKY, Illinois
TIM MURPHY, Pennsylvania MIKE ROSS, Arkansas
MICHAEL C. BURGESS, Texas KATHY CASTOR, Florida
MARSHA BLACKBURN, Tennessee EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California GENE GREEN, Texas
PHIL GINGREY, Georgia CHARLES A. GONZALEZ, Texas
STEVE SCALISE, Louisiana DONNA M. CHRISTENSEN, Virgin
CORY GARDNER, Colorado Islands
H. MORGAN GRIFFITH, Virginia JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California (ex
FRED UPTON, Michigan (ex officio) officio)

(ii)

C O N T E N T S

----------
Page
Hon. Cliff Stearns, a Representative in Congress from the State
of Florida, opening statement.................................. 1
Prepared statement........................................... 4
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, prepared statement.............................. 8
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 13
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 14
Hon. John Sullivan, a Representative in Congress from the State
of Oklahoma, prepared statement................................ 97

Witnesses

Robert A. Vito, Regional Inspector General for Evaluations and
Inspections, Office of Inspector General, Department of Health
and Human Services............................................. 16
Prepared statement........................................... 18
Kathleen M. King, Director, Health Care, Government
Accountability Office.......................................... 27
Prepared statement........................................... 29
Ted Doolittle, Deputy Director for Policy, Center for Program
Integrity, Center for Medicare and Medicaid Services,
Department of Health and Human Services........................ 52
Prepared statement........................................... 55
Answers to questions from Mr. Dingell........................ 85
Answers to submitted questions............................... 98

Submitted Material

Statement, dated June 8, 2012, of the American Medical
Association, submitted by Ms. DeGette.......................... 88
Statement, dated June 8, 2012, of the American Federation of
State, County and Municipal Employees, submitted by Ms. DeGette 91

MEDICARE CONTRACTORS' EFFORTS TO FIGHT FRAUD--MOVING BEYOND ``PAY AND
CHASE''

----------

FRIDAY, JUNE 8, 2012

House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in
room 2123, Rayburn House Office Building, Hon. Cliff Stearns
(chairman of the subcommittee) presiding.
Members present: Representatives Stearns, Terry, Burgess,
Blackburn, Griffith, DeGette, Schakowsky, Castor, and Dingell.
Staff present: Nick Abraham, Legislative Clerk; Andy
Duberstein, Deputy Press Secretary; Todd Harrison, Chief
Counsel, Oversight and Investigations; Dave Mehring, Detailee,
Oversight (OIG/HHS); Alan Slobodin, Deputy Chief Counsel,
Oversight; John Stone, Counsel, Oversight; Alvin Banks,
Democratic Investigator; Phil Barnett, Democratic Staff
Director; Brian Cohen, Democratic Investigations Staff Director
and Senior Policy Adviser; Kiren Gopal, Democratic Counsel; and
Elizabeth Letter, Democratic Assistant Press Secretary.

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA

Mr. Stearns. Good morning, everybody, and we start the
Subcommittee on Oversight and Investigations with this hearing.
We convene this hearing of the Subcommittee on Oversight
and Investigations to examine the efforts of the Centers for
Medicare and Medicaid Services, CMS, oversight of its Medicare
contractors and to identify ways to improve the contractors'
effectiveness at preventing and combating fraud.
Medicare fraud is a growing plague on our health care
system. I have personally seen how fraud impacts seniors in my
congressional district and throughout the State of Florida.
CMS, the very agency tasked with administering Medicare and
conducting and overseeing anti-fraud efforts, incredibly simply
cannot define the scope of the problem. However, we have heard
the estimates that 10 percent of all health care billings are
potentially fraudulent, a 60 to 80 billion drain on the Federal
dollars. Regardless of the ultimate numbers cited, every dollar
lost to fraud is a dollar that should have gone towards the
care and well-being of a Medicare beneficiary.
I applaud the recent efforts of Federal, State and local
officials across six States in busting over 100 fraudsters,
more than half of whom were operating in south Florida, in
scams that total over $450 million.
I look forward to hearing from our witnesses today about
how we can keep these criminals out of Medicare in the first
place.
Since 1999, CMS has contracted with Program Safeguard
Contractors, or PSCs, to prevent, identify and investigate
potential fraud. They are now in the process of transitioning
these responsibilities to Zone Program Integrity Contractors,
or ZPICs, though the contract recipients are primarily the same
entities and with the same capabilities.
Unfortunately, information obtained from the committee's
investigation indicates that these ``benefit integrity
contractors'' are simply not getting the job done and CMS is
asleep at the wheel.
Last December I sent a letter along with Chairman Upton and
other members of the committee to CMS Acting Administrator
Marilyn Tavenner requesting documents related to the
performance of the CMS benefit integrity contractors since
2007; 3 months ago she responded to our request with systemic
performance data that includes some concerning trends. One, the
benefit integrity contractors identify less than 1 percent of
the estimated fraud out there. They recover only 10 percent of
the improper payments they identify. They rarely employ their
authority to suspend payments to suspected fraudsters. They
initiated fewer investigations in 2011 than in 2007. And
finally, fewer of these investigations were based on proactive
analysis of claim data.
The figures CMS provided to the committee are astonishing
in terms of the declining contractor effectiveness they
display. However, according to CMS, while the trends are
correct, the numbers provided were inaccurate. Not only were
they inaccurate but knowing that they were a key element of our
hearing, CMS failed to inform committee staff about this fact
until less than 48 hours ago on a phone call initiated by
committee staff on another matter.
Since they did not feel confident in the accuracy of the
data they had on-hand, CMS was forced to reach out to the
contractors and have them resubmit as much of the data that was
requested as possible.
More accurate numbers were provided last evening confirming
the trends. Nevertheless, this error only confirms CMS's utter
incompetence in conducting any meaningful oversight of these
contractors, the point that is echoed loud and clear in the
IG's prepared testimony.
The complacency shown by CMS towards this committee's
oversight efforts, their repeated indifference to GAO's
recommendations since and their total disregard for OIG's
extensive body of work in this area must end today. While these
issues are not new, they are getting worse while the fraudsters
are getting better and better.
As the OIG's office testified before this subcommittee in
June 2001, ``Medicare contractors are the heart of the Medicare
program. When they don't function properly, the entire program
is jeopardized. Those who benefit from it, those who provide
care and those who pay for it all suffer the consequences.''
This hearing proves the importance of congressional
oversight. Without the committee asking the questions we would
never know about the serious data integrity and management
issues concerning CMS oversight of their contractors.
Without the committee insisting that CMS and its
contractors be accountable for meaningful performance metrics,
we cannot achieve the significant improvements and results in
reducing Medicare fraud.
So I look forward to working in a bipartisan fashion to
make this hearing the start of a turning point for CMS and
contractor performance. With that, I yield to the ranking
member, Ms. DeGette.
[The prepared statement of Mr. Stearns follows:]

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OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO

Ms. DeGette. Thank you very much, Mr. Chairman. I am glad
there is bipartisan consensus on aggressively fighting Medicare
fraud because it costs the government billions of dollars, and
you are exactly right, it harms our most vulnerable citizens.
I am confident that we can work together to build on the
provisions to strengthen the Medicare program integrity that
were included in the Affordable Care Act, and I am looking
forward to hearing how the CMS is implementing this new law to
help fight fraud.
I appreciate all of our witnesses coming today to offer
their expertise.
The Affordable Care Act provided about $350 million in
increased funding to fight fraud, money that will return
billions of dollars to the taxpayers. It contains over 30 new
provisions to help CMS and the law enforcement authorities
fight Medicare fraud. This expanded toolbox in conjunction with
the leadership of the Obama administration has helped lay the
groundwork for a new era in the Federal Government's response
to fraud.
In the past, CMS operated under a ``pay and chase''
approach which made it harder to recover losses. Now, CMS is
taking new important steps to prevent fraud before it occurs,
and I am looking forward to hearing about that today. What CMS
does is carefully screen health care providers when they sign
up for the Medicare program, keeping out these criminals that
the chairman talked about who prey on vulnerable seniors.
The agency's new Fraud Prevention System employs predictive
modeling technology in order to screen claims before payment is
made. Using this system, CMS can identify patterns of fraud and
deny claims, suspend payment or revoke Medicare billing
privileges for suspicious actors.
During the first 10 months of operation, this new Fraud
Prevention System has resulted in 591 new investigations and
550 direct interviews with providers suspected of participating
in fraudulent activity.
CMS investigators now watch billing patterns in real time.
If a provider submits a claim that seems inconsistent, for
example a bill from San Francisco for a patient who lives in
Maine, then it triggers a flag in the system. Medicare
contractors then investigate the suspicious leads that this new
system produces. The Fraud Prevention System now monitors 4.5
million claims every day. It is a big step forward to prevent
Medicare fraud, and I am eager to see how well it is working
and what improvements can be made to make it work even better.
One of the questions I have for our witnesses today is how,
with a shift from pay and chase to fraud prevention we should
evaluate CMS successes. Our typical measures, like the dollar
value of fraud recoveries, might not be the right measures of
success if you are actually preventing the fraud, because if
CMS is successful at preventing the fraud in the first place,
we would expect the dollar value of the recoveries to go down,
not up, but we would still have to figure out how much fraud we
were preventing.
This hearing today will primarily focus on CMS's use of
contractors to monitor claims, investigate suspicious activity
and refer cases to law enforcement authorities.
Congress mandates that CMS use these contractors and the
alphabet soup of Medicare integrity organizations--we were
talking about this at our office--ZPIC, MEDIC, PSCs, RACs,
MACs, have become a part of the efforts to fight fraud. The HHS
Inspector General has identified problems with the contractors
and CMS oversight of their work going back for at least a
decade. And having been on this committee for the past 16
years, I know that we have investigated some of these
contractors.
These are longstanding problems, but the IG's work has
raised important questions that we need to learn more about
today. Are Medicare anti-fraud contractors using uniform
standards to identify and investigate cases of fraud and refer
them to law enforcement authorities? Is CMS doing all it can to
respond to concerns raised by contractors and reduce the fraud
vulnerabilities they have identified? Are contractors and CMS
taking appropriate action to ensure mistakes are fixed and
overpayments reclaimed for the taxpayer?
Mr. Chairman, I want to make a suggestion as we look
further into this issue. At our next hearing I suggest we bring
the contractors in directly and get their perspective on these
issues. Thank you.
Mr. Chairman, if there is more we can do to reduce Medicare
fraud, I am happy to work with you and our colleagues on both
sides of the aisle to address this important issue. Nobody
wants to see taxpayer money wasted and we should be doing
everything possible to protect the integrity of the Medicare
program.
And Mr. Chairman if I may, Mr. Waxman is unable to be with
us this morning, so I would ask unanimous consent to put his
opening statement into the record.
Mr. Stearns. By unanimous consent, so ordered.
[The prepared statement of Mr. Waxman follows:]

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Mr. Stearns. I appreciate the gentlelady's willingness to
cooperate, and I think her idea of bringing the contractors in
is very good.
With that I recognize for 3 minutes the gentleman from
Texas, Dr. Burgess.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS

Mr. Burgess. Thank you, Mr. Chairman, for the recognition
and maybe acknowledging the ranking member's comments on a
metric that we could employ in the future is how many years the
CMS or Medicare payment system is not on the high risk list at
GAO. It seems like it spent the last 25 years there. That might
be a good metric where we could concentrate and all understand
that perhaps we are finally doing a good job with this because
apparently we are not and we all know that not enough has been
done to address fraud. Our Nation's health care systems
needlessly waste billions of dollars every year.
It seems like this embarrassing hemorrhage for the program
really should have been a priority to fix before these programs
were expanded under the Affordable Care Act. Analysts estimate
that up to 10 percent of the total health care expenditures are
lost yearly to fraud. That is a pretty big number, probably
over $1 billion a week.
Now Members of the United States Congress rightly were
outraged when a private industry, JPMorgan Chase lost $2
billion of investor money. We lose $2 billion of taxpayer money
twice a month and yet there are no headlines on that. Perhaps
if we had the appropriate focus, we would do our job.
If we are serious about bringing down the cost of health
care, we have to eliminate, not just reduce, but eliminate
these inappropriate payments.
Medicare spending currently represents 15 percent of
Federal spending and almost a fifth of national health care
spending. Yet we pay providers in practically an automatic
fashion without review or scrutiny, actually inviting the type
of behavior that we are getting.
I support prompt pay. As a physician that is critically
important to our providers across the country. But the size,
the scope, the complexity of the Medicare program makes this
highly susceptible to fraud, highly susceptible to
mismanagement and highly susceptible to improper payments.
The U.S. Government Accountability Office and others have
said these characteristics are unsustainable, and the GAO has
placed Medicare on its high risk list since 1990. That was
after the program had been in effect for 25 years. We are
rapidly approaching the 50-year anniversary, and once again I
would suggest that it would be a great 50-year anniversary goal
to remove Medicare off of the high risk list that the GAO
maintains.
Our office has been briefed on the Center for Medicare &
Medicaid Services's efforts to move away from a ``pay and
chase'' mindset into one that is builds on predictive modeling.
That is a great step and I welcome it. I have long suspected
these programs are already proving to be an innovative way to
build upon each other in nine original algorithms in just a few
months have grown to over 30; however, backend investigations
will remain a part of what the Centers for Medicare and
Medicaid Services does for some time. Currently they oversee a
network of private contractors that conduct various program
integrity activities but as Ranking Member DeGette points out,
it may be necessary to have these individuals in to the
committee to understand their steps to solve this problem.
Mr. Chairman, I thank you for calling the hearing, and I
will yield back the balance of my time.
Mr. Stearns. I recognize the gentlelady for however many
minutes that she consumes. You can have the 5 minutes. Ms.
Schakowsky.

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Ms. Schakowsky. I don't know that I will take that. Thank
you very much, Mr. Chairman. I just want to make sure that
everybody understands that everyone on both sides of the aisle
in this committee as well as the Obama administration makes
fraud prevention absolutely a priority. So I hope there is no
misunderstanding about that, that we are all working together
to do that.
In May of 2009, Health and Human Services and the DOJ
announced the creation of the health care fraud prevention and
enforcement team, HEAT, designed to coordinate Cabinet level
agency activities to reduce fraud.
In January 2010, HHS and DOJ held the first national summit
on health care fraud to bring together public and private
sector experts to identify and discuss ways to investigate and
eliminate health care fraud.
In fiscal year 2011, HEAT's efforts resulted in 132
indictments against defendants who collectively billed the
Medicare program more than $1 billion as well as 17 jury trials
and the imprisonment of 175 defendants.
And in April 2010 CMS established the Center for Program
Integrity, consolidating the agency's Medicare and Medicaid
anti-fraud activities in an effort to improve coordination
between the two programs with other agencies at the State and
local level.
Since 2009 CMS, with law enforcement partners, has
recovered $7.87 billion in fraudulent Medicare payments, $2.51
billion in 2009, $2.86 billion in 2010 and $2.5 billion in
2011.
And since the passage of the Affordable Care Act, which I
affectionately call ``Obamacare,'' the Obama administration has
implemented key anti-fraud provisions in the law. The ACA
contains over 30 provisions to help CMS, HHS, OIG and DOJ to
reduce Medicare and Medicaid fraud. The most important
provisions involve a shift from the traditional ``pay and
chase'' approach to a strategy based on prevention, keeping
fraudulent suppliers out of the program before they can commit
fraud.
The nonpartisan Congressional Budget Office estimates that
these provisions will save taxpayers over $7 billion over the
next decade.
Clearly, we want to do as much as we can, and if there is
more to be saved, which we all think there is, we should do it.
So today what I want to do is talk to the witnesses and
find out just what those tools are, how they are being
implemented and how we can all work together to make sure that
these all work to the benefit of the consumer and the taxpayer.
We want to look at that OIG report on vulnerabilities reported
by the Medicare benefit integrity contractors. Certainly we
want to make sure that they are doing their job and all of us
will pursue this together to make the Medicare program even
more efficient and to root out every dollar of fraud.
And I will yield back.
Mr. Stearns. And the gentlelady yields back. And does
anyone else seek an opening statement? We have a couple of
minutes left. If not, we will move to our witnesses.
We have three witnesses. Mr. Robert A. Vito is Regional
Inspector General, Office of Evaluations and Inspections,
Office of Inspector General, the United States Department of
Health and Human Services. We welcome you.
Ms. Kathleen M. King, Director, Health Care, U.S.
Government Accountability Office, and Mr. Ted Doolittle, Deputy
Director, Center for Program Integrity, Center for Medicare and
Medicaid Services, U.S. Department of Health and Human
Services. Welcome.
As you know, the testimony you are about to give is subject
to title 18, section 1001 United States Code. When holding an
investigative hearing, this committee has the practice of
taking testimony under oath. Do you have any objection to
taking testimony under oath?
Mr. Vito. No.
Ms. King. No.
Mr. Doolittle. No.
Mr. Stearns. The chair then advises you that under the
rules of the House and the rules of the committee you are
entitled to be advised by counsel. Do you desire to be advised
by counsel at this time?
Mr. Vito. No.
Ms. King. No.
Mr. Doolittle. No.
Mr. Stearns. In that case, will you please rise and raise
your right hand? I will swear you in.
Do you swear that the testimony that you are about to give
is the whole truth and nothing but the truth, so help you God?
Mr. Vito. Yes.
Ms. King. Yes.
Mr. Doolittle. Yes.
Mr. Stearns. Welcome again and Mr. Vito, we welcome your 5-
minute summary of your written statement. Just make sure your
speaker is on.

STATEMENTS OF ROBERT A. VITO, REGIONAL INSPECTOR GENERAL FOR
EVALUATIONS AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL,
DEPARTMENT OF HEALTH AND HUMAN SERVICES; KATHLEEN M. KING,
DIRECTOR, HEALTH CARE, GOVERNMENT ACCOUNTABILITY OFFICE; AND
TED DOOLITTLE, DEPUTY DIRECTOR FOR POLICY, CENTER FOR PROGRAM
INTEGRITY, CENTER FOR MEDICARE AND MEDICAID SERVICES,
DEPARTMENT OF HEALTH AND HUMAN SERVICES

STATEMENT OF ROBERT A. VITO

Mr. Vito. Good morning, Mr. Chairman and members of the
subcommittee. I am Robert Vito, Regional Inspector General for
the Office of Evaluation and Inspections at the U.S. Department
of Health and Human Services' Office of Inspector General.
Thank you for your continued interest in this important topic.
For more than a decade, the OIG has been conducting work on
Medicare benefit integrity contractors. OIG has reviewed the
fraud units at the Medicare claims processors, then the Program
Safeguard Contractors, or PSCs, and now the Zone Program
Integrity Contractors and the Medicare Drug Integrity
Contractors, known as ZPICs and MEDICs.
Time after time, regardless of the type of contractor under
review, the OIG work has uncovered similar problems. These
problems include limited results from proactive data analysis,
difficulties in obtaining data needed to prevent and detect
fraud, a lack of program vulnerability identification and
resolution, inaccurate and inconsistent data reported by
contractors, and limited use by the CMS of quantitative data in
evaluating contractor performance and investigating variability
across contractors.
Finally, the OIG has found that very few of the
overpayments identified by the benefit integrity contractors
are collected and returned to the Medicare program.
CMS expects its benefit contractors to do more than just
investigate complaints. They wanted their contractors to
conduct proactive data analysis to identify fraud. As early as
1998, OIG raised concerns about the lack of results from
proactive methods, and these concerns still remain.
The lack of proactive and early identification of fraud
results in the Medicare program relying on familiar ``pay and
chase'' models rather than the risk reduction model that
includes early detection and prevention of inappropriate
payments. We all recognize that without data there can be no
proactive data analysis. However, OIG repeatedly found that
contractors have difficulty accessing data, especially in the
early years of their contracts. The Congress can help correct
this problem by authorizing the MEDICs to obtain information
like prescriptions directly from pharmacies and physicians.
Another way to help prevent fraud, waste, and abuse is to
identify program vulnerabilities. OIG's early review of fraud
units found that more than one-third had not identified any
program vulnerabilities. During a 2011 review, OIG found that
not all benefit contractors identified vulnerabilities. And
even when vulnerabilities were identified, CMS had not taken
significant action to resolve three-quarters of them. The
reported impact of the vulnerability was estimated at over $1
billion.
OIG also found that CMS has not taken full advantage of the
contractor-reported data to evaluate performance or investigate
variability among contractors. The OIG has found extreme
variation in the number of fraud cases being investigated and
referred by the benefit integrity contractors. These variations
could not be explained by the size of the contractor's budget
or the oversight responsibility.
In addition, OIG work has repeatedly found that CMS
performance evaluations provide very few quantitative data
about the contractors' achievement in detecting fraud. OIG's
most recent ZPIC review also found that data use by CMS to
oversee the contractors may not be uniform or accurate. Some of
the inaccurate data may be due in part to the contractors'
different interpretations of fraud terms and definitions. OIG
has recommended that CMS determine the cause of these
variations in the contractors' activity levels; however, CMS
has yet to perform these types of review.
Benefit integrity contractors are also required to refer
overpayments that they identify to the Medicare claims
processors for collection. In the report done in response to a
request from this committee, OIG found that PSCs referred $835
million in overpayments to the claims processor for collection
in 2007. However, as of June, 2008, only $55 million of the
$835 million was collected.
CMS is implementing new anti-fraud tools as part of its
twin pillar strategy. As the OIG did in the past, we will
continue to review CMS's strategy to determine its impact on
the Medicare program, and, if warranted, make recommendations
for improving the strategy.
OIG also plans to continue its body of work on the Medicare
benefit integrity contractors, including an update of our
previous work on the MEDICs. We also have work underway on
Medicare overpayments and debt collection.
Thank you again for your interest in this important topic
and for the opportunity to testify before the subcommittee
today.
[The prepared statement of Mr. Vito follows:]

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Mr. Stearns. Thank you, Mr. Vito.
Ms. King, we welcome your opening statement.

STATEMENT OF KATHLEEN M. KING

Ms. King. Mr. Chairman, Ranking Member DeGette, and members
of the subcommittee, I am pleased to be here today to discuss
our work regarding fraud in the Medicare program as well as
recent laws and agency actions that may help reduce fraud.
Multimillion-dollar fraud convictions demonstrate that
fraud is a significant problem for Medicare. However, the full
extent of the problem is not known. There are no reliable
estimates of fraud for the Medicare program or for the health
care industry as a whole. By its very nature, fraud can be
difficult to detect as those involved are engaged in
intentional deception.
My testimony today focuses on the steps CMS has taken to
reduce fraud and on additional steps we have recommended to
them as well as work that we have underway.
Congress provided CMS with new tools to reduce fraud in the
Patient Protection and Affordable Care Act and the Small
Business Jobs Act. I want to focus on three key strategies.
First, strengthening provider enrollment standards and
procedures; second, improving pre- and post-payment claims
review; and, third, developing a robust process for addressing
identified vulnerabilities, which are weaknesses that can lead
to payment resource.
With respect to provider enrollment, CMS has taken
important steps to ensure that only legitimate providers and
suppliers are enrolled to bill Medicare. Specifically, in
accordance with PPACA, CMS designated three levels of risk.
Those at the highest risk levels are subject to the most
rigorous screening. In addition, CMS recently contracted with
two contractors to automate enrollment processes and to conduct
site visits for new providers in the moderate- and high-risk
categories to ensure that they are legitimate providers.
We urge CMS to fully implement other key PPACA provisions,
such as requiring surety bonds for providers designated as high
risk, conducting fingerprint-based criminal background checks,
and requiring key disclosures from providers and suppliers
before enrollment, such as whether they have ever been
suspended from a Federal health program.
Our work has also shown that prepayment reviews are
essential to help ensure that Medicare pays correctly the first
time. CMS's contractors use automated prepayment controls
called edits, which are instructions programmed into IT systems
to check to see if providers are eligible for payment and if
claims comply with Medicare's coverage and payment policies. We
have previously found weaknesses in some of these prepayment
edits and are currently evaluating prepayment edits regarding
coverage and payment policies.
We are also currently reviewing CMS's newest effort, the
Fraud Prevention System, which uses predictive analytic
technologies to analyze fee-for-service claims on a prepayment
basis. These technologies are used to review claims for
potential fraud by identifying unusual or suspicious patterns
or abnormalities in Medicare provider networks, claims billing
patterns and beneficiary utilization.
We have also found that CMS could take additional steps in
improving its post-payment review of claims which are critical
to identifying payment errors. In particular, the agency could
make better use of two information technology tools designed to
provide them with more data and analytical tools for finding
fraud: the Integrated Data Repository and the One Program
Integrity tool.
We have also found that CMS needs a more robust process for
identifying vulnerabilities that can lead to fraud. In our work
on the Medicare Recovery Audit Contract Program, we recommended
CMS improve its process for implementing corrective actions
regarding vulnerabilities.
We have also recently been asked to evaluate the ZPICs, the
Zone Program Integrity Contractors, and we expect to start that
work soon.
In conclusion, CMS has several tools at its disposal and
has taken important steps toward preventing fraud; however,
more work is ahead. Those intent on committing fraud will
continue to find ways to do so, so continuing vigilance is
critical. We will continue to assess efforts to fight fraud and
provide recommendations to CMS as we see appropriate.
We urge CMS to continue its efforts as well.
Mr. Chairman, that concludes my prepared remarks. I would
be happy to answer questions.
[The prepared statement of Ms. King follows:]

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Mr. Stearns. Thank you, Ms. King.
Mr. Doolittle, welcome for your opening statement.

STATEMENT OF TED DOOLITTLE

Mr. Doolittle. Thank you, sir. My name is Ted Doolittle. I
am the Deputy Director of the Center for Program Integrity
within CMS.
Chairman Stearns, Ranking Member DeGette, before I give my
statement, I wanted to personally apologize for the compilation
mistakes in the information that CMS first provided in response
to Chairman Upton's recent oversight request. One of our
greatest priorities is to always provide accurate information
to Congress, and as a former Federal prosecutor I recognize the
importance of having accurate data on which to base important
public decisions. So I am very chagrined by that occurrence. I
am sorry we didn't live up to that standard in response to your
recent data request. I want you to know that we do take this
problem very seriously. I have already asked my staff to
investigate what happened and to determine how we can prevent
problems like this in the future.
Chairman Stearns, I would like to, I hope that today I can
show to you that we are indeed not complacent about oversight.
We welcome it. And I also at least hope to convince you that I
am awake. I am not just awake, I am excited about trying to
discharge the responsibilities that Congress has given to us in
this tough fight against health care fraud.
So I want you to know that we welcome your oversight, we
welcome the oversight also of the GAO and the OIG. And frankly,
I hope that this exchange that we are going to have today is
the first step in a renewed partnership and perhaps a series of
oversight events.
I wanted to make sure the data we gave you was clean so
that you can perhaps be able to look at it in the future and be
able to compare with a good baseline. So we are changing a lot
of our operations and the way we compile data is one of the
changes that we are making and I hope to improve.
So I came here today to speak about CMS's program integrity
efforts and how they are moving away from pay and chase and
toward fraud prevention through two new automatic systems: one
called the Automated Provider Screening system, which I will be
referring to as APS, and one called the Fraud Prevention
System, which I will call FPS.
The Automated Provider Screening system is a first line of
defense in protecting us against fraudsters and ineligible
providers who would do harm to the program if they got in. It
enables us, for the first time, to very rapidly conduct routine
and automated screen checks against thousands of private and
public databases to more efficiently identify and remove
ineligible providers and suppliers.
The Fraud Prevention System, for its part, is a historic
development and it is a way to apply advance analytics against
Medicare fee-for-service claims on a streaming and national
basis. We hope in the future to expand that to include Part C,
D, and Medicaid. That is a very long-term goal, of course.
These new systems are key to our twin pillars strategy,
which is a key to making real improvements to Medicare's
program integrity efforts as we try to focus on prevention and
detection and move away from pay and chase.
As OIG's data has shown, our Medicare administrative
contractors who screen and enroll providers and process 4-1/2
million claims each day are not able to always collect the
overpayments that our anti-fraud contractors, the ZPICs,
identify. The reason for that is simple. The mission of the
ZPICs is to find fraudsters. When we find fraudsters, when they
learn that we are on to them they can abscond with the money.
That makes it very difficult to get the money back.
The point of the ZPICs is while we don't want to back away
from the overpayments and we do recover up to 10 percent of
that--and that is real money--if you are looking for cash back
into the program, you have to look to other of our contractors
such as the RACs. It is just difficult to get money out of a
fraudster in any arena, be it public or private.
So because of the challenges with the outdated ``pay and
chase'' approach, we are moving towards focus on prevention, as
I mentioned, to keep bad actors out of our program, to kick
them out when we find them, and to use our array of
administrative tools to stop payment when we suspect fraud.
Overpayments are only part of the Medicare program integrity
story, and we are moving toward a more comprehensive and
sophisticated view of how we should view these improvements and
the difficulties in our performance and in our contractors'
performance.
I assure you, members of the panel, that we are currently
developing metrics to measure not just the Fraud Prevention
System but our entire operation, and with respect to the Fraud
Prevention System you should be on the lookout for our report
on the first year and that is due to Congress on September
30th, and you will find there I hope a really thought provoking
first attempt, first cut at trying to move to a true metrics
around prevention and detection.
The Fraud Prevention System is providing, today, CMS with a
national view. It gives us the opportunity to divide the work
up amongst the ZPICs. They formerly didn't know what the other
might be working on; the right hand didn't necessarily know and
now we do because of this new system. It will be much more easy
for us to see whether a ZPIC has referred an investigation to
law enforcement or has requested a payment suspension.
We are currently working around a lot of metrics, as I
mentioned, but we are working specifically to develop weekly
reports based on the information in the FPS that we can share
with the ZPICs and our law enforcement partners so that we can
summarize all the investigative activity around the country.
CMS is now at a major and very exciting, in my view,
transitional period for program integrity. It is not without
its bumps along the way, and in terms of bumps I certainly
apologize for the data errors in the oversight request and,
again, I am working to make sure that doesn't happen again. I
want to stress that the changes that are being put into place
now are going to modernize and simplify our current data
systems so that problems like this can be avoided and so our
program integrity strategy overall will improve.
Thank you so much for your attention and, again, I do hope
that we can continue this dialogue.
[The prepared statement of Mr. Doolittle follows:]

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Mr. Stearns. All right, I will start my questions. Mr.
Doolittle, thank you for your apology. It was a little
startling to the staff to get information from you folks and
then, when we called recently, to find out the information we
asked for was totally incorrect. Is that correct?
Mr. Doolittle. Yes, sir.
Mr. Stearns. OK. And this is a, I would think this is a
little embarrassing to you considering you have the necessary
people to provide the information, don't you?
Mr. Doolittle. Yes, we do, sir.
Mr. Stearns. And do you have the necessary equipment,
computers and things that you can accurately provide the
committee the information in the future?
Mr. Doolittle. Yes, sir.
Mr. Stearns. When do you think we can actually get the
latest and greatest information that is accurate that you feel
comfortable sending us?
Mr. Doolittle. We are working, of course, as hard as
possible. I can't tell you exactly the date, it's going to be
as soon as possible where we update all the detailed sheets
behind the summary.
Mr. Stearns. Well, since fraud is a major issue for the
American people and this committee and to find that you don't
have a handle on this and that the information you provided, by
your own admission, is incorrect, don't you think that creates
a disturbing sense of confidence in the committee and the
American people to think that you in your position cannot even
provide information on a consistent basis and yet you are the
Deputy Director, Center for Program Integrity, as I understand
it, Center for Medicare and Medicaid Services?
So don't you think that that leaves us with a sense of
incredulity and a lack of credibility and integrity on your
department?
Mr. Doolittle. I can't tell you what sense you are left
with, sir, but I can tell you that in this instance there was a
human error. The underlying data was accurate, but two fields
that were added together shouldn't have been added together.
Mr. Stearns. This is across the board on the data you gave
us. It's not just two fields. And it's also this is not the
first time, wouldn't you agree on that?
Mr. Doolittle. Not the first time for what, sir?
Mr. Stearns. Getting information to us that was incorrect.
Mr. Doolittle. This is the--I am aware of this, we're
working to----
Mr. Stearns. You submitted data to us in March of this year
that were initially inaccurate, isn't that true?
Mr. Doolittle. Well, they were actually based on accurate
data, and they were correct in that sense. The integrity of the
data is sound. It was a human error----
Mr. Stearns. Back in March.
Mr. Doolittle. Yes. We have never compiled----
Mr. Stearns. I am just trying to confirm that back in March
you gave us information that was incorrect.
Mr. Doolittle. Right.
Mr. Stearns. That's all we need to know.
Mr. Doolittle. OK.
Mr. Stearns. And so you are saying information we recently
got is incorrect and you are saying that you will get this new
information to us, you are not clear when. Yes or no, do you
have the correct numbers in front of you?
Mr. Doolittle. I have what was given to your staff last
night.
Mr. Stearns. So you haven't got anything corrected in front
of you yet. OK. Yes or no, since 2007 has the total number of
investigations initiated, have they steadily declined?
Mr. Doolittle. I wouldn't say that they have steadily
declined. I think it has been up and down.
Mr. Stearns. So you are saying they have not declined?
Mr. Doolittle. I would say that if you look across that
there has been----
Mr. Stearns. Our figures show that they declined.
Mr. Doolittle. Excuse me?
Mr. Stearns. Our figures show that they declined. Is that
true? Can any one of the panelists confirm that the total
number of investigations initiated has steadily declined? Ms.
King?
Ms. King. Are you speaking about investigations done by the
ZPICs?
Mr. Stearns. Yes.
Ms. King. No, I don't know the answer to that. But I can
tell you that we are doing work that tracks the number of
investigations and convictions, both civil and criminal, in
2005 and 2010.
Mr. Stearns. Mr. Doolittle, I have something that you have
in front of you in which you show that the ZPICs workload,
2007, the total number of investigations were 8,300, in 2008 it
went down to 7,700; 2009, 6,800; 2010, 5,800; and 2011 about
5,800. So it looks to me from the data that you've provided in
the data you have in front of you it declined. Is the data that
you provided here incorrect too?
Mr. Doolittle. No. You were right, sir, and if you would
like a further explanation----
Mr. Stearns. No, that's all right because you had indicated
they had not declined but I want to make it clear to you that
you are incorrect again.
CMS purports to be shifting its emphasis to prevention
based upon pro active data analysis. Yes or no, is the total
number of investigations initiated as a result of proactive
data analysis lower than each of the previous 4 years? Yes or
no?
Mr. Doolittle. For the 2011? No--excuse me--let me----
Mr. Stearns. Because when I am looking at the figure that
you also have----
Mr. Doolittle. For ZPICs, yes. For ZPICs, yes.
Mr. Stearns. So the answer is yes, they have declined. We
have established that.
Mr. Vito, does it surprise you that CMS was unable to
provide basic contractor performance data to this committee?
Mr. Vito. I think it's very difficult----
Mr. Stearns. Just yes or no. Can you pull the mic a little
closer? We're not asking how to get to the Moon here. We're
just asking a yes or no question here.
Mr. Vito. Could you repeat the question?
Mr. Stearns. Mmh hmm. Does it surprise you that CMS is
unable to provide basic contractor performance data to this
committee? They are responsible, they are the integrity office,
they've admitted that they have not provided information that's
accurate. Does that surprise you? Yes or no? Or is this typical
what you expect from CMS?
Mr. Vito. No. I think it's--we have been----
Mr. Stearns. We think it is deplorable. What do you feel?
Mr. Vito. Well, we think that there's been problems with
the data, and we have presented that information to you as part
of----
Mr. Stearns. But isn't the fact is that your office has had
the same issues with CMS providing accurate or uniform data
that's hindered your ability in conduct critical oversight?
Isn't that true?
Mr. Vito. We have identified problems for over 12 years.
Mr. Stearns. Sometimes you just have to say yes or no. Just
yes or no. Isn't that true?
Mr. Vito. Yes.
Mr. Stearns. Yes. Has CMS adequately addressed these data
concerns that OIG raised in its November 2011 report titled
``Zone Program Integrity Contractors?''
Mr. Vito. I think it would be better to ask them if they've
resolved them. I am not sure that they----
Mr. Stearns. You don't know.
Mr. Vito. Well, we believe that some of them might and some
of them might not be, so it would be better for you to ask
them. I think they would have a better answer.
Mr. Stearns. All right, my time has expired. The gentlelady
from Colorado.
Ms. DeGette. Thank you, Mr. Chairman. Well, we're obviously
all concerned that we get accurate data.
And I just want to ask you, Mr. Doolittle, the error in the
data was a human error in your agency, is that correct?
Mr. Doolittle. Yes, absolutely, the underlying data were
correct.
Ms. DeGette. You discovered that on your own as an agency,
is that correct?
Mr. Doolittle. Yes, on Wednesday.
Ms. DeGette. You discovered it on Wednesday when preparing
for this hearing?
Mr. Doolittle. Yes, ma'am.
Ms. DeGette. And when you discovered it you informed the
staff and yesterday you provided the correct information to the
committee at 5 o'clock?
Mr. Doolittle. Yes, ma'am.
Ms. DeGette. Are you aware of any other situations since
you've been there when incorrect data has been provided to this
committee or to any other congressional committee?
Mr. Doolittle. I am not aware of it.
Ms. DeGette. And was this incorrect information provided
willfully to try to avoid a thorough investigation to your
knowledge?
Mr. Doolittle. Quite to the contrary. It was a human error.
Ms. DeGette. It was just an accident?
Mr. Doolittle. It was a human error, yes.
Ms. DeGette. OK. And what steps are you taking to make sure
these--let's see. My staff says this accident happened when a
former employee--so they're not there any more, right?
Mr. Doolittle. Yes.
Ms. DeGette. Accidentally added up one wrong cell of the
spreadsheet while summarizing data. So they added it up wrong,
right?
Mr. Doolittle. Right. They added in field B6 instead of
field B7.
Ms. DeGette. People need to show up at this committee with
accurate information. I understand that you are going to get us
even more accurate information, right?
Mr. Doolittle. Yes, ma'am.
Ms. DeGette. And when is that going to happen?
Mr. Doolittle. As soon as possible. A lot of this
information does go back to 2007. So it goes to previous
contractors.
Ms. DeGette. OK. Well, get it to us as quickly as you can,
and let's try not to have this happen again. But what I really
want to talk about is the fight against Medicare fraud. So
let's talk a little bit about that.
Briefly, Mr. Doolittle, can you tell me what the
administration is doing that's different to try to fight
Medicare and Medicaid fraud?
Mr. Doolittle. Yes, ma'am. We're moving away from pay and
chase, we're starting, we have almost a year into our first
major data analytics program. And we also have instituted
Automated Provider Screening that allows us to catch the bad
guys on the front end before they get into the program and
monitor them if they turn bad while they're in the program.
Ms. DeGette. So the administration is shifting to try to
preventing fraud rather than to catch the evil-doers right?
Mr. Doolittle. That's right.
Ms. DeGette. And there is this HEAT program, the health
care fraud prevention and enforcement team. As I understand it,
this initiative aims to coordinate strategies to fight fraud
among the Department of Justice, U.S. Attorney's Office, CMS
and the HHS Office of Inspector General, is that right?
Mr. Doolittle. Yes. I would add FBI.
Ms. DeGette. And FBI. And there's anti-fraud strike forces
in seven regions of the country, right?
Mr. Doolittle. Yes.
Ms. DeGette. So what's the purpose of the strike forces,
and have they achieved any results yet?
Mr. Doolittle. The purpose of the strike force is to try to
be able to accelerate and compress the time that it takes for
criminal investigations and to get more throughput through the
criminal justice system for health care fraud.
Ms. DeGette. OK. Mr. Vito, are you familiar with this HEAT
program?
Mr. Vito. Yes, ma'am.
Ms. DeGette. And what's your opinion of it?
Mr. Vito. Well, I think they're doing great things. It's in
nine locations. They have charged more than 1,300 defendants,
and with over $4 billion--that had billed over $4 billion. It's
a way that the OIG uses data to identify the hotspots and then
put the resources in the hotspot to make things happen.
Ms. DeGette. And the prosecutions are way up too from 797
in fiscal year 2008 to almost double, 1,430 in 2011, is that
right?
Mr. Vito. [Nodding.]
Ms. DeGette. So that seems to be a pretty good avenue that
we could go to try to catch, to catch criminals, right?
Mr. Vito. Yes.
Ms. DeGette. Now, Ms. King, can you just briefly talk to me
about some of the Affordable Care Act provisions that are
targeted to reduce fraud and have they begun to be implemented?
Ms. King. Some of the most important provisions I think in
the Affordable Care Act have to do with enrollment processes
because it's important to try and keep out people that you
think might be wanting to cheat you from entering the program.
So there are new screening processes at the front end to take a
closer look at providers and they are stratified by risk and
there's increased scrutiny on providers deemed to be at high
risk. And at the moment, those providers are home health
providers and durable medical equipment providers.
Ms. DeGette. And have those provisions gone into effect?
Ms. King. They have gone into effect.
Ms. DeGette. When did they go into effect?
Ms. King. Earlier this year, I believe.
Ms. DeGette. Earlier in 2012?
Ms. King. Yes.
Ms. DeGette. Have you seen any results from them?
Ms. King. We have not. I think it's too soon to really
gauge the full effect of this.
Ms. DeGette. When do you think you'll see results?
Ms. King. I would say in about a year we ought to be able
to tell whether they're having any effect.
Ms. DeGette. I have just one more question for Mr. Vito.
So, this is an issue I raised in my opening statement, is if--
and Mr. Doolittle says they're trying to prevent fraud rather
than catch the bad guys after they defraud Medicare. So the
question is what kind of metrics can we use to see if our
efforts at prevention are actually working, if we're spending
our money wisely? Because what you are going to do is have the
number of people who are caught go down if you are preventing
fraud.
Mr. Vito. I think there are a number of ways. I think you
are bringing a very good point. For example, in the program
vulnerabilities, what you are able to do is you have identified
a program vulnerability and then you put an edit in place, that
edit will give you the dollars that they're saving. So that
actually will work in one way of making you know exactly how
well it's going.
In addition to that, there's other metrics like in south
Florida they took a lot of action down there, the strike force
in the DME area, we were told that the dollars that are now
being billed in DME have dropped substantially. So there are
all these good things that you can see, and they are difficult
to make that comparison.
The other thing is you'll never be able to determine the
sentinel effect, and I think that's what you are asking about,
is what, when we go out and we make people realize that we're
doing the job and that there's a chance that they're going to
get caught and if they get caught they're going to have to pay.
Those are the things that it's hard to keep an eye, you know,
to really determine that level of detail. Those are the, I
think that's your point that you are bringing forth.
Ms. DeGette. Yes. Thank you. Thank you, Mr. Chairman.
Mr. Stearns. I thank the gentlelady.
I recognize Dr. Burgess for 5 minutes.
Mr. Burgess. Mr. Vito, let's just pick up on that sentinel
effect for just a moment because that is an extremely important
point and part of the effectiveness of the sentinel effect is
that people truly believe that you have a way to watch and are,
in fact, watching, there is someone actually at the terminal
watching. Because I can recall in the late 1990s there was, in
the Clinton administration there was a great hue and cry, Janet
Reno was really goes to clamp down on Medicare fraud and they
went all around the country talking about this. But as a
provider, I got the sense that it was all for show, that these
were photo ops and there wasn't anything really different
happening. And I don't know whether that was an accurate
opinion that I had but certainly it wasn't unique to me. Other
people talked about it as well.
There was a program, and it was a crop insurance program.
Charlie Stenholm, a Democrat from Texas, had worked with a Dr.
Bert Little at I think it was Tarleton State University, a
small college in west Texas, because Charlie was concerned
about the amount of crop insurance fraud that he saw. And they
worked out a computer algorithm, essentially predictive
modeling, and they talked about it in the community about how
this was going to be applied. And one of the first things they
noticed was the requests for crop insurance claims fell. And it
was the sentinel effect that they were observing.
So if you guys know that and you know there's been other
experiences in the crop insurance program right next door to
your agency, why has it been so difficult for this thought to
permeate in to the bureaucracy? I appreciate the stuff that's
happening in the Affordable Care Act, I appreciate the
enrollment process improvement. I've got to tell you I've got
my doubts there. But why not do this years ago if you knew that
it worked?
Mr. Vito. A very good question. I would like to point out
to you that the work of the OIG has recognized it's better to
prevent fraud than actually pay and chase. And if you look at
the work that we have talked about today, largely it focuses on
preventing.
In addition to that, once it occurs, you have to have
swift, you know, law enforcement action, and you have to make
the prosecutions. And our Office of Investigation is one of the
best groups that investigate health care fraud. And the people
that prosecute it, I think we are doing our best now to move
where people are starting to believe that they are at risk when
they take advantage of this program.
We have to do a better job up front. We have to make sure
the people we're doing business with are the people that we
want to do business with, and that's very important that that
happens. And then once things are starting, overpayments occur,
we have to stay on top of that. We can't allow the overpayments
to be billions of dollars which we can't collect.
Mr. Burgess. Let me just point out to you what I think is a
problem, and I hear this all the time. People who make a
legitimate coding error, and it is just a error, that is the
little low hanging fruit in your system. You can go after those
folks and clobber them. But that ain't your problem. Your
problem is down in McAllen, Texas. I was there 2 years ago
after Atul Gawande's article was published and the doctors down
there were feeling significantly put upon and would you come
down and hear our story, hear our side of the story. And
someone just offered to me, and I don't remember exactly the
number, but they said we have grown from 40 home health
agencies to 150 in about a year and a half's time. Well, that
ought to be a red flag. There's something going on there. Were
there all these people that needed home health services that
were just being ignored previously? Or has somebody found a
business model that works for them, and this business model may
be actually outside the parameters of the law or what is
lawfully allowed? And you know rather than going after an
individual who may have made a coding error and calling them to
task, why don't we go after the big stuff?
Mr. Vito. Again, that is when you, if you are doing
proactive data analysis, you are going to be able to see that
there's all of a sudden this many more home health agencies,
there's this many more people getting these services and
there's this many more people billing for it. So then if you
were doing that then you could investigate that very----
Mr. Burgess. Why didn't we?
Mr. Vito. I don't know that answer, but I can tell you that
we have focused, the OIG has focused on the importance of doing
proactive data analysis to make sure that all this type of
action is identified.
Mr. Burgess. I appreciate what you are doing and I don't
mean to be critical, but it just seems to me sometimes we
leave, we ignore the biggest problem and go after what's easy
to correct.
Mr. Doolittle, I just have to ask you, you'd have to be
stone deaf in this town to not recognize the Supreme Court is
considering a mighty big case. In a week or 2 or 3 we're all
going to get the result of that case and as a result of their
opinions, the Affordable Care Act possibly could be struck from
the books.
Now, are your efforts at eliminating or reducing fraud and
inappropriate payments, are they going to end when the
Affordable Care Act ends?
Mr. Doolittle. No, they're not going to end. We have
several other bills that we operate under such as the Hicks Act
bill.
Mr. Burgess. Correct, and it's not like you weren't doing
anything before the Affordable Care Act was enacted to crack
down on fraud. After all, Janet Reno came to Dallas, Texas in
1998 or 1999 and outlined all the things that she was doing to
eliminate Medicare fraud. So you've been doing stuff all along.
It may not have been effective but you've been doing stuff.
Mr. Doolittle. That's right, and we will implement any new
tools----
Mr. Burgess. Are you making any contingency plans for what
might happen from an adverse ruling from the Court?
Mr. Doolittle. Many of our activities, for instance, the
FPS, the Fraud Prevention System, that is funded under the
Small Business Jobs Act and authorized under the Small Business
Jobs Act, that won't be affected. Many of our activities won't
be affected.
Mr. Burgess. Are you making any plans for a contingency if
the Supreme Court were to remove the Affordable Care Act?
Mr. Doolittle. We're confident that the ACA is going to be
upheld by the Supreme Court and we're going to move forward----
Mr. Burgess. You are taking the Fifth on this, too. I can't
get anybody from your agency. Are you looking at what's going
to happen to you after sequestration kicks in in January?
Sequestration after all is a law that was signed by the
President. You are going to be cut 7 to 8 percent across the
board in discretionary funding at HHS. Are you preparing for
that?
Mr. Doolittle. I have--I am not sure if the agency has been
preparing for that. I haven't been party to those
conversations.
Mr. Burgess. Thank you, Mr. Chairman.
Ms. DeGette. Mr. Chairman, I'd just like just the record to
reflect I know that Mr. Burgess was using the phrase ``taking
the Fifth'' in a colloquial way, but however the witnesses
today are under oath, and I just want the record to reflect
that none of the witnesses has actually exercised their Fifth
Amendment right against self-incrimination.
Mr. Stearns. I thank the gentlelady.
The gentlelady from Illinois is recognized for 5 minutes.
Ms. Schakowsky. Thank you, Mr. Chairman.
Mr. Chairman, I would like to note that, though you
certainly we're all disappointed that there was an error in the
data, the data--the error was reported by Mr. Doolittle and his
office. It's not like there was any effort to cover up that
there was a mistake, either now or I understand in March that's
true as well, that there is concern, maybe more so than we are,
that a mistake is made. We all look forward to the corrections.
I just for one want to say, Mr. Doolittle, that I
appreciate that you did inform the committee and obviously want
you to do a quick a job to get us the information. But this
isn't something that was another example of some sort of
deliberate fraud on the part of CMS.
Did you want to comment on that?
Mr. Doolittle. Certainly it was not, madam.
Again, let me apologize and let me just state for the
record we did give you corrected summary information last
night. We are working to get you the backup for that.
Ms. Schakowsky. Thank you.
Ms. King, let me just apologize to you, in my opening
remarks I didn't mention the importance of GAO and the
information that you provide.
And I also appreciate the comments that you've made about
the improvements that have been made in our fraud prevention
through Obamacare, the Affordable Care Act. And it is
interesting to me that, on the Republican side, concerns seem
to be raised on, oh, what's going to happen if Obamacare
disappears, since almost every week that we're in session there
are efforts to get rid of Obamacare.
Clearly, we would want fraud mechanisms and prevention to
go forward. This isn't the first time that Dr. Burgess has
raised this.
He also seemed concerned of what's going to happen to
doctor fees if Obamacare goes away. These are things that
perhaps before asking for its repeal that my Republican
colleagues might have thought about in addition to the millions
of people who have already benefited from the provisions in
that legislation.
I also just wanted to point out that we don't have to look
any further than recent headlines to see the priority that the
Obama administration has placed on fighting fraud and the
enhanced tools provided to CMS by Obamacare to fight fraud.
Just yesterday, the Justice Department announced that
Orthofix, Inc., a medical device company, agreed to pay $34.2
million to resolve civil claims that the company defrauded the
Medicare program when selling bone growth simulator devices.
Last month was the biggest crackdown on Medicare fraud in
history. The Medicare Fraud Strike Force uncovered $452 million
worth of false billings to Medicare by more than 100 people in
seven cities, including Chicago, which is my hometown, across
the country.
So let me ask you, Mr. Doolittle. Why do we rely on these
private entities to engage in this and exactly what we're going
to do to make sure they are performing?
And before you do, let me just say that it has also been
sort of religion on the other side of the aisle that always the
private sector does better than the public sector. Now they
want to move Medicare itself into the private sector through a
voucher program and the Medicare Advantage program, where I
know we've found many examples of fraud, even though the
companies haven't always found the fraud.
So let me just ask you about these private contractors and
how we are going to keep them in line.
Mr. Doolittle. So, first, why we rely on the contractors?
This was the system that was set up by Congress, and we're
vigorously implementing it.
In terms of oversight of our contractors, we have a
vigorous system of oversight for the Zone Program Integrity
Contractors. We have training rotations every other week where
they come into our headquarters. Each one of the contractors
has at least one full-time employee that's assigned to
oversight. We do site visits. We do random pulls of files. We
also at the end of the year go through an award fee process, go
carefully through their performance, and they can qualify for
some--there's mostly a cost--fixed-cost contract, but there are
some awards that they can qualify for.
So those are some of our oversight tools.
Ms. Schakowsky. Thank you very much.
Mr. Stearns. The gentlelady yields back.
The gentleman from Nebraska is recognized for 5 minutes.
Mr. Terry. Thank you, Mr. Chairman.
And, Mr. Doolittle, I don't think anyone on our side of the
aisle has accused you of purposefully deceiving us, so I'm a
little--I want to make sure you didn't feel that way. We're
being accused of that, but I just want to make sure that we
knew it was a mistake. There was no malfeasance, but it does
just show that there's a level of inability to really keep
track of the numbers there, and that's what we are trying to
fix here.
Also, one other point goes to my question to you, Mr.
Doolittle, is perhaps if we had a Medicare fraud reform bill it
would have been very bipartisan, and truly I think the way that
every business model is working is to the money ball predictive
prevention model. If baseball can develop it, CMS can develop
it, predictive preventive fraud analysis.
And the beauty of what makes it best business practice now
with as predictive as we can make it is that when those
anomalies occur, like Mr. Burgess brought up where there is a
spike in increase of home health care, those things tend to
stand out like a sore thumb. You then can go back and say, OK,
something in our predictive analysis is showing an anomaly that
we need to investigate here. So in baseball and money ball if
that pitcher that you thought was going to have so many
strikeouts per year and isn't performing, that sounds out in
your predictive analysis.
So I like that you're going in that direction.
So let me ask you, you mention that you'll have kind of the
rough draft by December 31st or you hope that--is that an
accurate statement or regurgitation of your testimony, December
31st?
Mr. Doolittle. So what I was speaking of on September 30th,
under the provisions of the Small Business Jobs Act of 2011,
we're required to provide Congress with a report on the first
year of our modeling system.
Mr. Terry. So the predictive modeling is already in place
now.
Mr. Doolittle. Right. It started on June 30th of last year.
Mr. Terry. OK.
Mr. Doolittle. We were assigned to start it in 10 States by
July of last year. Instead, we started it in 50 States, 1 day
early.
Mr. Terry. So by December 31st we'll have the first year
rough analysis of it's working or not working.
Mr. Doolittle. Right. And we hope to have some----
Mr. Terry. Who is in charge of developing that model? Is
that you or some other--I would think there's probably multiple
mathematicians doing this.
Mr. Doolittle. That facility is contained within my unit,
the Center for Program Integrity, and contractors that we're
using as well. We are working closely with OIG through the
whole process as well.
Mr. Terry. What are some of the--I guess if it is
predictive, what are you looking at--what area of statistics
are you looking at from your contractors to be able to
determine if there's anomalies that are occurring?
Mr. Doolittle. So there's a variety of different types of
predictive modeling, and I would be happy to go into this at
great depth. But the most sophisticated types of predictive
modeling which we're starting to do is rare even in private
industry, but in government we are starting to do it, is where
you take attributes of known bad guys, you develop what
characteristics they might have in common, and then you apply
it to the raw data set and see who fits that model.
Mr. Terry. All right. Well, I appreciate that.
Ms. King, I want to ask a question. Maybe, Mr. Vito, if you
can help us here. But Mr. Doolittle made a statement that I
think is fairly correct and may answer why many of us feel like
the private sector can do things more nimbly, not necessarily
better, but they've adopted more of the predictive analysis,
fraud prevention in the private sector. So do we have any
comparison of the ability of government CMS to detect and
prevent fraud as compared to the private-sector insurance
companies?
Ms. King. We're also looking at the Fraud Prevention System
and the predictive analytics, and we'll have a report out later
this fall. And as part of that, we are looking at how does what
CMS does compare to what's going on in the private sector.
Mr. Terry. Thank you.
Mr. Vito, do you want add quickly on to----
Mr. Vito. I think in general we don't have the oversight of
private. But we do see some of our cases identify problems that
are occurring in the private sector, and we share with them.
In addition to that, we have other work where we are going
out to all the managed care companies and asking if they had
identified incidents of fraud, waste, and abuse; and they had.
In addition to that, we have some new work that will be
coming out on the MEDICs, and the MEDICs have responsibility
for Part C, which is the Medicare Advantage, and we will be
able to give you details on that.
Mr. Stearns. Thank the gentleman.
The gentlelady from Florida, Ms. Castor, is recognized for
5 minutes.
Ms. Castor. Well, thank you, Mr. Chairman, and good
morning.
Mr. Chairman, I would like to thank you for calling this
hearing on the Obama administration's efforts to fight fraud in
Medicare. I think it is very important, and I would like to
thank our expert panel for being here today.
From where I sit, I believe the Obama administration has a
very strong record on rooting out fraud and waste in Medicare.
I represent the Tampa Bay area in Florida, and we are one of
the seven communities across the country--I guess Florida has
been a hot spot and south Florida but also in the Tampa Bay
area. So we have one of those strike forces that brings
together the United States Attorneys Office, HHS, the Florida
Department of Law Enforcement, other law enforcement agencies,
the Department of Justice.
And my colleague, Ranking Member DeGette, asked you all
have you achieved results yet. Well, from what I have seen, you
all have been very aggressive. We had a major bust last month,
arrested a pharmacist that has been a real fraudster. You've
also arrested a lot of folks all across the State. That
followed on last year another huge roundup of people who are
bilking Medicare and really putting the trust fund at risk. So
my hat's off to the aggressive stance the Obama administration
has taken to root out fraud and waste in Medicare.
And I'm very gratified that you all are putting the tools
provided in the Affordable Care Act to good use. We gave you
some additional tools under the Affordable Care Act to be more
aggressive, and it feels like you're just getting started, but
I think we're seeing significant progress already.
I think there is one problem area that I think deserves
attention and should be improved when it comes to the ZPIC and
these audits. I'm hearing from a lot of folks all across the
State they kind of feel like this is the Wild West. Because
these auditors come in, and there is no real due process, there
are no real checks and balances. And I don't think it's fair
for an auditor to come in, to upset their business, to take
documents and not have some time frame for or even a dialogue.
It's kind of a one-way dialogue, and I think these businesses
deserve to have some due process.
Tell me, Mr. Doolittle, who trains the ZPIC staff on
Medicare policy? What is their experience auditing claims? Who
insures that that training is adequate? And what rules govern
the ZPIC audit procedures?
Mr. Doolittle. So we within CMS train the ZPICs on a
regular ongoing basis. As I mentioned before, every other week
one of the ZPICs is at our headquarters for training. We are
constantly going out to them to train them on various aspects.
I believe that the problem that you're referring to--and I
agree it is a problem--is probably stemming from what we call
prepayment edits, prepayment medical review. That is a tough
system. Obviously, fraud is a tough problem. It is a tough
system. I will say that I have started to review our processes
on that. We have to stay tough, but we have to be fair as well.
So we're trying to take a fresh look at that.
Ms. Castor. Are there rules that govern time frames that
the auditors--so that it is not completely open ended, what are
the due process rights for some of these visits?
Mr. Doolittle. So the way the due process works is they are
able to, after the claim is examined and determined whether it
is denied or paid, they can appeal a denial. Now they still
stay on prepay, and that's the frustrating part for the
providers.
Ms. Castor. That is very frustrating.
Mr. Doolittle. Right.
Ms. Castor. Because it is so open ended.
Mr. Doolittle. Yes.
Ms. Castor. And I just--and then they are also hiring
subcontractors. Do the same rules apply to the subcontractors?
Are these subcontractors approved by CMS? We've had cases where
they've had to give files to the subcontractors, and it is
months and months and months and months before they hear
anything from an auditor or CMS.
Mr. Doolittle. If the ZPICs were to use subcontractors,
they would have to be approved by our office, yes.
Ms. Castor. OK. I'm going to submit some other questions
for the record from CMS on the ZPICs. Because when people are
calling it the Wild West and you're subjecting--I know you're
going to catch some fraudsters, but you're subjecting good
businesses to a process that doesn't appear to have any end and
appears to be unreasonable, I think there is a lot of room for
improvement here.
Mr. Doolittle. I agree with that.
Can I just say that as we try to be more aggressive we feel
that one of the down payments we have to put on the table is we
have to be fair to the vast majority of good and honest
providers, and we're trying to work from several angles,
including, for instance, we recently implemented a new
process--totally new process by which a provider whose number
has been scammed--the provider number has been scammed--and
they found out that, when they received a bill from the IRS for
the $2 million of income they never received, it is an innocent
provider, before they had been left to their own devices to try
to find a way out of that jam. If we are convinced that it is
an innocent provider, we now have a systematized process where
we are able to go out to help that provider and even help them
work through their issues with the Department of Treasury.
Ms. Castor. Good. I will look forward to the answers to
these additional questions.
I yield back.
Mr. Stearns. I thank the gentlelady.
The gentlelady from Tennessee is recognized.
Mrs. Blackburn. Thank you, Mr. Chairman.
The bell has rung, and we're going to have votes, and I
know that Mr. Griffith has some questions.
I do have a couple of things I want to ask you. Because
being from Tennessee and having had TennCare, which I know all
three of you are familiar with the TennCare program, which is
our Medicaid delivery, we have been on the fraud issue for a
long time. I did the first field hearing on fraud dealing with
TennCare and Medicaid delivery systems in 2004 and then another
one in 2005 in our district in Tennessee. So I have got a
couple of things I want to quickly go into, and then Mr.
Griffith will be able to get his questions in.
Let's look first--and, Mr. Doolittle, I guess this probably
would best come to you. Let me just direct it to you, and then
if either of you want to add something that would be great.
DME claims. The DMEPOS claim, the average, is estimated at
$75 per month, with the low being only a couple of dollars per
month to a high range of several hundred dollars per month or a
one-time sale. Yet we are hearing that the ZPIC and the other
audit process is very paper-intensive. The auditors may send
one letter per patient claim audited, and it is all in separate
envelopes, takes a lot of work. So you've got thousands of
separate mailings, et cetera. Private insurers are sending one
spreadsheet, and they are working from that or they are getting
one email.
So we've heard that some of the auditors are asking for the
same paperwork for the same patients month after month, even
though the patient is chronically ill. So I would like to know
what you have in place to look at that high administrative
burden and the cost of auditing that this is for our providers?
And what is the return on investment on what is a very
expensive and labor-intensive process for these providers? And
what can you learn from them and incorporate into these
Medicare audits?
Mr. Doolittle. So I certainly appreciate the comment about
the labor-intensiveness. We are always looking for ways to
streamline, aggregate. Of course, it is frustrating and
aggravating to get 500 letters. We need to get one letter
describing the same--similar situations for 500.
In terms of DME, we've taken a variety of special
approaches. As you know, it is an area that is of extremely
high risk, and we have to be as careful as possible.
There were several provisions in the ACA that have
dramatically reduced the DME costs, including the face-to-face
requirement, a requirement that a doctor meet face to face
before a DME prescription, as well as a surety bond
requirement. So we feel that we have opened a dialogue as well
with the providers. We feel that we are on track to try to
rationalize the system while still clamping down very hard in
what is a very fraud-prevalent area.
Mrs. Blackburn. Well, it is important to us because one of
the things that we have found through our experience with
TennCare was that if you've got someone that is more prone to
fraud you're going to have unnecessary care that is in there,
and then it's going to be more difficult on the other end that
you're able to process these claims.
If you simplify your system, if you make it easier for
people to read through, if you're getting one email in one
spreadsheet instead of separate mailings, cleaning the system
up, we will have a better outcome and a better quality of care.
It is all related. We want to work with you on this and would
love to see a timeline for moving some of these forward.
I am going to yield back my time.
Mr. Stearns. The gentleman from West Virginia is
recognized.
Ms. DeGette. No, Mr. Dingell is recognized.
Mr. Stearns. There is still time.
Mr. Griffith. If I could take Mrs. Blackburn's 23 seconds.
Mr. Stearns. Yes, go ahead.
Mr. Griffith. I will just make a quick statement.
It appears that we are failing in tracking down the fraud
we should be tracking down. I know everybody's trying. It is
not a Democrat problem. It is not a Republican problem. It is
the government is failing the people. And this is extremely
important to all of us on both sides of the aisle.
And I will tell you quickly that last night at a town hall
meeting a lady was wondering why her home health was being cut
back because she has MS and her mother has diabetes. These are
real-life problems for folks out there.
So all I can say to you is get us better numbers and track
down the bad guys. Because as a team working for the American
people we have got to stop this fraud.
Thank you.
Mr. Stearns. I thank the gentleman, and the gentleman from
Michigan is recognized for 5 minutes.
Mr. Dingell. Thank you, Mr. Chairman.
These will be yes-or-no questions to the witnesses.
As we all know, Medicare fraud is a serious issue, costing
us billions of dollars, an unacceptable situation. Because of
the deplorable nature of Medicare fraud and abuse, this
committee and I worked hard to make sure that the Affordable
Care Act gave the Centers for Medicare & Medicaid Services new
tools to fight the swindlers who perpetrate these frauds.
Mr. Doolittle, I want to thank you for being here today,
and I want you to know we appreciate your hard work in fighting
Medicare fraud.
Now, yes or no, we all agree that CMS must move away from
the pay-and-chase models to more proactively of mechanisms to
catch wrongdoers. Since the Affordable Care Act has passed, CMS
has begun screening providers and suppliers on three risk
levels: limited, moderate and high. Will screening based on
risk levels help CMS to better target their resources to high-
risk suppliers and providers? Yes or no.
Mr. Doolittle. Yes, sir.
Mr. Dingell. Now does CMS have the ability to adjust the
level of risk for screening as needed? For example, if you have
a low-risk provider and supplier whose billing privileges have
been revoked, would they be subject to high-level screening?
Yes or no.
Mr. Doolittle. Yes, sir.
Mr. Dingle. CMS has begun conducting announced and
unannounced site visits of moderate and high-risk providers
prior to initial enrollment or revalidation since the
Affordable Care Act. How many site visits does CMS intend to
conduct?
Mr. Doolittle. Over 50,000 additional site visits over what
we were doing before.
Mr. Dingell. Is that number sufficient?
Mr. Doolittle. It's a start. We'll see how we are at this
time next year.
Mr. Dingell. Do you believe the site visits will better
help CMS to identify if providers and suppliers are legitimate
and meet Medicare standards? Yes or no.
Mr. Doolittle. Yes, sir.
Mr. Dingell. As a part of your screening process, do you
now have the ability to terminate from Medicare providers that
have already been terminated from any Medicaid programs? Yes or
no.
Mr. Doolittle. Yes, sir.
Mr. Dingell. The Affordable Care Act provided nearly $500
million in increased funding to help fund efforts like those to
fight fraud. Does CMS have the resources it needs, financial
and personal, to fight fraud in Medicare and Medicaid? Yes or
no.
Mr. Doolittle. Yes, sir.
Mr. Dingell. At the beginning of May, the Medicare Fraud
Strike Force took down 107 individuals for $452 million in
false Medicare billing. In Detroit alone, 22 defendants were
arrested for $58 million in Medicare fraud. This involved the
highest amount of false Medicare billings in a single takedown
in your strike force history. As a member who has participated
in one of these ride-alongs of the strike force I know they are
working hard to recover taxpayers' dollars. Do you know the
Affordable Care Act requires CMS to share data with the States,
the Department of Justice, and the Inspector General, amongst
others, to help fraud and abuse? Will this authority help the
strike force continue their good work?
Mr. Doolittle. Yes, sir.
Mr. Dingell. Would you submit to us any additional
authorities that you might need in that particular for the
record, please?
Mr. Doolittle. Uh----
Mr. Dingell. Is it fair to say that the Affordable Care Act
significantly increases the ability to suspend payments until
an investigation is complete so that Medicare does not make
overpayments or payments for false services? Yes or no.
Mr. Doolittle. Yes, it is fair.
Mr. Dingell. Is this sufficient? Is this authority
sufficient?
Mr. Doolittle. Yes.
Mr. Dingell. Now would you agree that because of the
Affordable Care Act CMS now has the most tools it has ever had
to detect and prevent waste, fraud, and abuse? Yes or no.
Mr. Doolittle. Yes.
Mr. Dingell. Would you submit to us, if you please, sir,
whether additional authority is needed and how your authorities
are working and whether new authorities are needed and what
they might be for the record?
Mr. Doolittle. Yes, sir.
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Mr. Dingell. Please.
Mr. Chairman, I thank you,
Mr. Stearns. I thank the gentlemen. And he makes a very
good point. You have all the tools you need as you pointed out.
By unanimous consent, the documents Ms. DeGette has
requested is part of the record.
Ms. DeGette. Mr. Chairman, I didn't yet request them.
Statements from the American Medical Association and the
American Federation of State, County and Municipal Employees.
Mr. Stearns. By unanimous consent, so ordered.
[The information follows:]

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Mr. Stearns. I want to thank the witnesses for coming today
for the testimony and members for their devotion to this
hearing today.
The committee rules provide that members have 10 days to
submit additional questions for the record to the witnesses.
With that, the committee is adjourned.
[Whereupon, at 11:05 a.m., the subcommittee was adjourned.]
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