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Hearing on Improving Efforts to Combat Health Care Fraud

March 02, 2011










March 2, 2011


Printed for the use of the Committee on Ways and Means






CHARLES W. BOUSTANY, JR., Louisiana, Chairman

DIANE BLACK, Tennessee                      
JIM GERLACH, Pennsylvania

RON KIND, Wisconsin

JON TRAUB, Staff Director
JANICE MAYS, Minority Staff Director





Peter Budetti, Deputy Administrator and Director, Center for Program Integrity, Centers for Medicare and Medicaid Services

Lewis Morris, Chief Counsel, Office of Inspector General


Karen Ignagni, President and CEO, America’s Health Insurance Plans

Louis Saccoccio, Executive Director, National Health Care Anti-Fraud Association

Aghaegbuna “Ike” Odelugo, Plead guilty to state and federal charges related to Medicare fraud. According to the Department of Justice, the total amount paid by Medicare as a result of Odelugo’s scheme was approximately $9,933,354.27*.  He has been assisting law enforcement while awaiting sentencing in May. 




Wednesday, March 2, 2011
U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.

The subcommittee met, pursuant to call, at 2:09 p.m., in Room 1100, Longworth House Office Building, Hon. Charles Boustany [chairman of the subcommittee] presiding.


Chairman Boustany.  Now we will turn to today’s hearing on health care fraud. 

I want to begin this hearing by welcoming our guests, who are here to join a very important discussion about health care fraud.  And, gentlemen, I know you have been very busy today, and we appreciate you being here today. 

For our first panel, we welcome Dr. Peter Budetti, who serves as deputy administrator of the Centers for Medicare and Medicaid Services and is director of its Center for Program Integrity.  Welcome.

We also welcome Mr. Lewis Morris.  Mr. Morris serves as the chief counsel to the Department of Health and Human Services’ Office of Inspector General, an organization that is on the front lines of the fight against health care fraud.  Welcome. 

On our second panel, we will hear from Karen Ignagni from America’s Health Insurance Plans, and Lou Saccoccio from the National Health Care Antifraud Association.  Both of these witnesses will provide insight into how the public and private sectors work together to fight health care fraud and where we might be able to improve anti‑fraud efforts, and I thank them for coming as well.

We also have a very rare chance to hear from Mr. Ike Odelugo.  Through a variety of schemes involving durable medical equipment, Mr. Odelugo defrauded the Medicare program of an estimated $9 million.  Since his days of committing health care fraud, he has assisted law enforcement efforts to track down those engaged in similar activities.  Today, he will describe both how he went about defrauding the Medicare system and, in his experience, just how easy it was. 

This promises to be an eye‑opening hearing on a very critical topic.  This is not simply about those committing fraud; it is about the patients and health care providers that are hurt by it.  I come from a family line of physicians, and, as a cardiothoracic surgeon, I certainly understand that every dollar lost to health care fraud is a dollar not spent on patient care. 

And we are not talking about small sums of money.  Health care spending accounts for one‑sixth of our Nation’s economy, and within this spending is an incredible amount of money lost to fraudsters.  Professor Malcolm Sparrow of the Harvard Kennedy School said before the Senate Judiciary Committee in 2009, “The units of measure for losses due to health care fraud and abuse in this country are hundreds of billions of dollars per year.  We just don’t know the first digit.” 

The FBI estimates that between 3‑ and 10 percent of all health care spending is fraudulent, as much as $250 billion each and every year.  As much as $50 billion of this yearly fraud is in the Medicare program, and to put it another way, that is over $135 million per day in the Medicare system alone. 

Medicare crooks are robbing the American taxpayer each and every year of the same amount it took Bernie Madoff decades to rob from his private investors.  Medicare fraud has become such an attractive target for criminals that the FBI and OIG have seen an increasing number of foreign criminal groups coming to America to exploit the program because it is less risky and a lot more lucrative than other illegal ventures.

Without action, the problem is only going to get worse.  The Medicare program had estimated outlays of $509 billion in the year 2010, and that number is expected to grow at a rapid pace as 7,000 baby boomers become eligible for Medicare every single day in the year 2011.  CMS expects annual Medicare spending to approach $900 billion by 2019, and, as this spending goes up, so will the amount of taxpayer money potentially lost to fraud. 

While the Affordable Care Act included some new anti‑fraud provisions, it left a lot of suggestions by the Office of Inspector General, Government Accountability Office, and Members of Congress from both parties on the cutting‑room floor. 

At the same time, the law created a host of new health care spending programs.  The Congressional Budget Office estimates these new programs will cost $940 billion over the next 10 years and much more after that.  CBO has estimated the act’s anti‑fraud provisions would save about $5.8 billion over the next 10 years.  That is less than 1 percent of the expected fraud against Federal health care programs during the same period.

There is also good news on the subject.  Just last month a joint effort by the Departments of Justice and Health and Human Services resulted in charges against 111 defendants for allegedly defrauding the Medicare program of over $225 million.  This was the largest crackdown we have seen yet, and we look forward to hearing about these and other efforts from our witnesses. 

There was also a lot to explore regarding potential private‑public collaborations.  As private health insurers develop new methods in technology to prevent fraud, it is important that the public and private sector work together in what should be a mutually beneficial collaboration.

With important reforms, new technology, better use of data, and increased cooperation between the public and private sector, it is my hope we can put a substantial dent in the problem of health care fraud.  This hearing seeks to begin that process.

Before I yield to our ranking member, Mr. Lewis, I ask unanimous consent that all members’ written statements be included in the record, and without objection, so ordered.

Chairman Boustany.  Mr. Lewis, we will now turn to you for your opening statement.

Mr. Lewis.  Thank you very much, Chairman Boustany, for holding this important hearing on ways to fight health care fraud.  This is an important topic that touches the lives of millions of Americans.  Our health care dollars are too precious, and we must ensure that those dollars are spent on health care. 

Last year, this subcommittee held a hearing on fraud in the Medicare program.  We learned about new tools and new approaches that were being used to protect Medicare patients and return billions of dollars to the program and the taxpayers.  We also explored the new provisions of the Affordable Care Act that gave government agents new tools to fight fraud. 

Today, I look forward to learning how these tools are being used to protect the Medicare program.  I am interested in the new initiatives of the Department of Health and Human Services in this area.  I am also interested in learning how people become involved in Medicare fraud and how health plans, government agencies, and organizations can work together to detect and stop this abuse.

In closing, Mr. Chairman, I would like to thank the witnesses for being here today.  I thank you for your testimony and your willingness to share your experiences and ideas.  I remain committed to protecting the Medicare program and finding new ways to work together with you and my colleagues to fight fraud in this important program.  Together we can ensure that the Medicare program remains strong for the next generation of Americans. 

With that, Mr. Chairman, I yield back my time.

Chairman Boustany.  Thank you, Mr. Lewis. 

We have a vote called.  I think what we will do is take the witnesses’ testimony now and then probably recess at that point for three votes, and then we will return and resume the hearing.

So now we would like to turn to our first panel of witnesses.  I want to welcome Dr. Peter Budetti, deputy administrator and director of the Center for Program Integrity with CMS.  Mr. Budetti, you may proceed.

Dr. Budetti.  Thank you very much, Chairman ‑‑ Dr. Boustany and Ranking Member Lewis and members of the subcommittee for the invitation to discuss the Centers for Medicare & Medicaid Services’ efforts to reduce fraud, waste, and abuse in the Medicare, Medicaid, and CHIP programs.  I am also very pleased to be sharing the table with my distinguished colleague in fighting fraud, the chief counsel for the Office of the Inspector General, Lewis Morris. 

Mr. Chairman, from the first day that I had the privilege of accepting this job about a year ago, I have been asked two questions over and over again:  Why do you let crooks into the Medicare and Medicaid programs, and why do you pay their claims when they are fraudulent?  And I am very pleased to be able to report to you today that we are making a great deal of progress on both fronts.  We will be keeping the bad guys out of the programs, the people who don’t belong there, while working to make sure that the good providers and suppliers who are our partners have, if anything, less difficulties with our processes, and we will be moving to deny claims and screen them out when they are fraudulent and should not be paid.  And we actually will be doing that in collaboration with our colleagues at the Office of the Inspector General.

Under the leadership of Secretary Sebellius, CMS has taken several administrative steps to better meet the emerging needs and challenges in fighting fraud and abuse.  The Secretary consolidated within CMS, program activities into four centers, one of which is the new Center for Program Integrity, and that is the one that I have the privilege of leading.  This has served our purposes well.  It has also helped foster our collaboration with our law enforcement partners.

The Affordable Care Act also enhances this organizational change by providing us with an opportunity to jointly develop Medicare and Medicaid policies together, because the new center combines the Medicaid Program Integrity Group and the Medicare Program Integrity Group under the same roof for the first time; and because the Affordable Care Act, for example, the screening provisions in the Affordable Care Act apply equally to Medicare and Medicaid, this gives us a new opportunity to consolidate and to coordinate the programs and activities and policies across both programs to assure better consistency in what we are about.

You might wonder whether administrative changes at an organization really mean anything.  I can tell you that in our case, creating a Center for Program Integrity that is on a par with the other major components within the Centers for Medicare & Medicaid Services, elevates the issue substantially for both internally and also sends a message to the would‑be fraudsters that we are taking this seriously.

To explain how we have been transforming our fraud detection and prevention work, I now draw your attention to our chart which I believe we have also given you some hard copies of ‑‑ but this is a poster that depicts how we are moving from our historical state which was based on “pay and chase” ‑‑ pay claims first and then try to find problems afterwards ‑‑ to preventing fraud.  That is our number one goal. 

Number two, we are committed not to pursuing a monolithic approach but, rather, to use our resources to apply to bad actors and to identify those who pose the most serious risks to our programs. 

Third, we are taking advantage of advances in technology and other innovations to modernize our approaches to doing this. 

Four, consistent with this administration’s commitment to being transparent and accountable, we are developing performance measures that will specify what our targets are for improvement. 

Five, we are actively engaging our public and private partners from across the spectrum because there is much to learn from others who are engaged in fighting fraud, and we know that the private sector is oftentimes victim to the same schemes and to the same fraudsters as the public sector is. 

Finally, we are committed to coordination and integration among all the CMS fraud fighting programs wherever possible.

I would like to particularly stress one point, Mr. Chairman, which is that as we crack down on those who would commit fraud, we are mindful of the necessity to be fair to health care providers and suppliers who are our partners in caring for beneficiaries, and to protect beneficiary access to necessary health services.  This requires striking the right balance between preventing fraud and other improper payments without impeding the delivery of critical health care services to beneficiaries. 

We will always respect the fact that the vast majority of health care providers and suppliers are honest people who provide critical health care services to millions of Americans every day, and we are committed to providing health care services to our beneficiaries while reducing the burden on legitimate providers, targeting fraudsters, and saving taxpayer dollars. 

I appreciate the opportunity to meet with you today, and I will be happy to answer any of your questions later on.  Thank you very much.

Chairman Boustany.  Thank you, Dr. Budetti, and I should say also that your full written statements will be made part of the record, as is customary.

[The statement of Dr. Budetti follows:]

Chairman Boustany.  Now, Mr. Morris, you may present your testimony.


Mr. Morris.  Good afternoon, and thank you for the opportunity to testify about the efforts of the Office of Inspector General and our partners to combat health care waste, fraud, and abuse. 

The OIG has been fighting the fight against health care waste, fraud, and abuse for over 30 years.  Most of our health care integrity efforts are funded by the Health Care Fraud and Control program account, or HCFAC, and this anti‑fraud program is a prudent investment of taxpayer dollars.  Last fiscal year, HCFAC activities returned an unprecedented $4 billion in fraudulent and misspent funds.  Over the last 3 years, for every dollar spent on the program integrity and enforcement efforts, the government has returned an average of $6.80.  But despite our successes, there is much more to be done. 

Those intent on breaking the law are becoming more sophisticated, and the schemes more difficult to detect.  Some fraud schemes are viral.  They replicate easily and they migrate.  As law enforcement cracks down on a particular scheme, the criminals may redesign it or relocate to another city.  When their schemes are detected, some perpetrators have fled with stolen Medicare funds and become fugitives.

To fight health care fraud, our response must be swift, agile, and well‑organized.  My written testimony describes in more detail our collaborative efforts and fraud‑fighting initiatives, and this afternoon I would like to highlight three of the government’s ongoing initiatives.

First, our Medicare Strike Forces are cracking down on criminals in fraud hot spots across the country.  Since their inception in 2007, Strike Force operations have charged almost 1,000 defendants whose fraud schemes have involved more than $2.3 billion in Medicare claims.  Just last month, as you referenced, sir, Strike Forces engaged in the largest Federal health care fraud takedown in history.  The teams charged more than 100 defendants in nine cities, including doctors, nurses, and health care company owners.  The alleged fraud schemes involved more than $225 million in Medicare billings. 

Second, the OIG is using its exclusion authorities to bar from the Federal health care program those individuals who lack integrity and pose a threat to our beneficiaries.  In particular, we are holding responsible the corporate executives who are accountable for their company’s criminal behavior.  Health care is not limited to career criminals and sham providers.  Unfortunately, major corporations also commit fraud, sometimes on a grand scale.  We are concerned that some executives of these health care companies may believe that as long as the ill‑gotten profits outweigh civil penalties and criminal fines, health care fraud is worth the risk.  The long and short of it is that we aim to change that cross‑benefit calculus by excluding the executives who are responsible for the fraud either directly or because of their position of responsibility in the company.  We are mindful of our obligation to exercise this authority judiciously, but if an executive knew or should have known of the criminal misconduct of his organization, we will operate on the presumption in favor of excluding in order to protect our program and its beneficiaries.

Our third initiative enlists the public and the vast majority of honest health care providers to help prevent fraud.  For example, we are conducting free compliance seminars in six cities.  One of those is taking place in Tampa, Florida, today.  These seminars educate providers on fraud risks and share compliance best practices.  We also recently published a fraud and abuse booklet for new physicians.  It provides guidance on how physicians can comply with the fraud and abuse laws in their relationship with papers, vendors, and fellow providers.  We have had over 27,000 hits on our Web site for this booklet alone.

We are also reaching out to the public to play a very special role in helping us track down Medicare fraud fugitives.  We have posted online on our Web site OIG’s most‑wanted health care fraud fugitives, and I have included a snapshot of that Internet posting for your consideration.  Our current most‑wanted list includes 10 individuals who allegedly defrauded taxpayers of more than $136 million. 

In conclusion, the OIG is building on our successes and employing all the oversight and enforcement tools available to us to protect our health care programs, the people served by them, and the American taxpayer. 

Thank you for your support of our mission, and I would be pleased to answer any questions.

[The statement of Mr. Morris follows:]

Chairman Boustany.  Thank you, Mr. Morris and Dr. Budetti. 

What we are going to do now, since we have this pending vote, we are going to recess and we will return promptly ‑‑  we have three votes ‑‑ and resume with questioning.  And I appreciate your indulgence.  The committee stands in recess. 


Chairman Boustany.  The committee will resume its proceedings, and we will start off with questions, now that you all have both given your testimony.

Mr. Morris, I think you were before our committee last year, and we spoke about fostering better cooperation between health care providers and anti‑fraud efforts, and both of you alluded to this in your oral testimony. 

I am interested in further exploring the role of physicians in preventing health care fraud; identifying it, helping you on the front end to identify it.  Certainly physicians, nurses, other medical professionals, are in a unique position to pick up on fraudulent activity on the ground, as sort of direct intelligence on the ground as to what is happening.  And I know you and I spoke about the case in Lafayette, in my hometown, and how it involved a whistle‑blower who was actually a partner of a physician who brought something to light that maybe for years had been ongoing and really ‑‑ was really not detectable until that whistle‑blower activity. 

So what barriers are there now that you are seeing that would inhibit physicians and other providers from coming forward and helping you in your efforts to identify potentially fraudulent activity? 

Mr. Morris.  I think there are a number of opportunities.  We have to do a better job of reaching out to physicians and other professionals.  Part of it is through education.  I made reference in my written testimony to the Road Map for new physicians, and the idea behind that actually came from medical residents who told us they didn’t understand what the fraud and abuse laws were.  OIG put together a booklet that will help them not only protect themselves but also be able to recognize when a practice is doing something that they might not want to get involved in.  Education is part of our outreach. 

Every time we go out and demonstrate our commitment to compliance, demonstrate that we recognize that this is a complex program and that there are lots of opportunities to make mistakes, and that it is incumbent on physicians to embrace compliance, that that is the way to go.  We are not a hammer looking at everything as a nail.  Building that trust goes a long way. 

Next week we are meeting with the American Medical Association to get their ideas on how we can work together better and ways we can spot opportunities for collaboration.  I think a big part of it is education.  A large part of our efforts is also sending a message of compliance, that physicians and nurses and other professionals can be our partners in ensuring that waste, fraud, and abuse don’t harm our program.

Chairman Boustany.  Thank you.  Dr. Budetti. 

Dr. Budetti.  Yes.  Thank you, Mr. Chairman. 

We have had a series of regional fraud prevention summits, and at each one of the summits, the Attorney General and the Secretary have chaired them, and then we have had panels with law enforcement and providers and beneficiaries.  And then I have put together breakout sessions with providers at each one of the regional fraud prevention summits, and I have to say, I am extremely encouraged by the response of physicians and providers that I have been meeting with in these groups; that they are now very interested in working with us on this, to the point where I have been so impressed that I actually have created a position within the Center for Program Integrity of a medical officer. 

So I am hiring a full‑time medical officer to work with the physicians and other health care providers around the country on program integrity issues, both to get the message to them but also to listen and to figure out what it is that we can work on together and what we could do different inside of CMS that would be more responsive.  Because the message we have gotten from the providers was very straightforward, but it went in two directions.  It was, on the one hand, they really want to work on this.  On the other hand, they want us to do what Mr. Morris just said, which is not treat everybody the same; recognize the big difference between fraudsters and honest physicians, and we are committed to doing that.  So I think there is a real opportunity here to work very closely with the medical community and other providers because the enthusiasm seems very strong on their side.

Mr. Morris.  If I could add one more thing, we share the view that physicians should be part of our team, and we also have a chief medical officer who provides valuable counsel to us as we do our work, planning and ensuring that we best understand what is going on from the physician’s perspective.

Chairman Boustany.  I know in the private sector, the private insurers often go through credentialing processes.  Can you talk a little bit about what you are doing now at CMS in that regard? 

Dr. Budetti.  One of the major provisions in the recent legislation that will take effect, our final regulation will take effect on March 25, speaks to screening of applicants to be able to bill Medicare and Medicaid.  We all know that that has been kind of a soft spot in the programs, people getting in too easily.  But under the new authorities, we are doing risk‑based screenings so that categories of providers and suppliers are assigned to different levels of risk with different levels of screening.  Then they also have to revalidate periodically, every 3 or 5 years depending upon the categories.  So this is a new approach.  It is going to mean a much greater degree of scrutiny for the high‑risk providers, and about the same scrutiny, but maybe done more efficiently for other providers. 

We get something on the average of 19,000 applications every month to become a provider in Medicare.  So it is a large number of people that we have to screen through because most of them are going to be honest, of course, but with our new screening systems, we are very pleased to have that authority and we are putting it into place with a great deal of energy.

Chairman Boustany.  Thank you.  Mr. Lewis, you may inquire.

Mr. Lewis.  Thank you very much, Mr. Chairman.  Welcome. 

Dr. Budetti, in your testimony, you talk about the new fraud fighting tools because of the Affordable Care Act.  If the Affordable Care Act is repealed, what would that do to your ability to fight fraud in Federal health programs? 

Dr. Budetti.  Thank you, Mr. Lewis. 

Yes, the Affordable Care Act did provide us with very powerful new tools, as well as resources.  Both of those are extremely important to us.  I mentioned the screening provisions.  The Secretary also has authority to declare a moratorium on enrollment of new providers or suppliers, where necessary, to fight fraud.  We have a different test for when we can suspend payments when there is a credible allegation of fraud.  We have coordination of a number of activities such as termination of Medicare and Medicaid, linking those two together.  There is a variety of other provisions related to enhancing the requirements for durable medical equipment and home health that are areas of high risk.  There are additional penalties for violation of the statutes that are involved.  There is a wide range of very important authorities in the Affordable Care Act, and we are very pleased to have them and look forward to implementing all of them.

Mr. Lewis.  Could you explain to members of the committee why the Medicare Strike Forces have been so successful, and do you plan to expand them? 

Dr. Budetti.  Mr. Lewis, I am very pleased with the success of the Strike Forces.  I think I will turn to my colleague, Mr. Morris, who is more directly involved in those.

Mr. Morris.  The Medicare Fraud Strike Forces represent a collaborative effort that includes the Inspector General’s Office, CMS, the Department of Justice, and U.S. Attorneys’ Offices.  Part of the reason they are successful is we are working better together.  We are using data to spot fraud hot spots and get to the problem quicker.  Instead of waiting 6 months or a year to identify an abusive provider, we know within weeks if someone is engaged in Medicare fraud. 

By putting resources into these fraud spots and focusing prosecutors and dedicated investigative resources, we are able to more effectively deploy them in strategic fashion.  We are getting remarkable results as a result of those efforts.

Mr. Lewis.  Thank you very much. 

Mr. Morris, in your testimony you discuss the agency’s ability to exclude providers from Medicare.  On average, how many providers do you bar from Medicare each year, and how has your focus on corporate executives helped you fight fraud? 

Mr. Morris.  On average, we exclude around 3,300 individuals and entities each year from the Federal health care programs.  The basis of those exclusions include convictions related to Medicare fraud and patient abuse, as well as a number of discretionary authorities; loss of licensure in a State, for example. 

One of the things that we would like to close a loophole on is our ability to go after corporate executives who are responsible for corporate crime but evade our exclusion tool by simply quitting the company.  The current statute only allows us to exclude if the person continues to be employed by that sanctioned entity.  We think we need to close that loophole.

We also need the ability to focus on related entities.  If we identify one nursing home that has committed criminal abuse of its residents, ofttimes that is because the corporate heads have denied needed resources to that facility.  It has been very difficult for us to get up to the corporate heads and hold them responsible for the abuse of residents in an individual facility, and the amendment of our discretionary exclusion authority would give us the ability to do that and be able to say to that corporate executive, you are out of our program because you are not treating our residents the way we expect you to.

Mr. Lewis.  Again, I want to thank the two of you for being here and thank you for your service.  I yield back, Mr. Chairman.

Chairman Boustany.  I thank the ranking member for his questions. 

The chair now recognizes Ms. Black, if you are ready, or I can now move on. 

Ms. Black.  Is there someone else ready? 

Chairman Boustany.  We will give you some time.  Ms. Jenkins, you may inquire.

Ms. Jenkins.  Thank you, Mr. Chairman.  Thank you for joining us. 

Mr. Budetti, one of the new tools put in place by the new health care law was the requirement for face‑to‑face meetings for certain Medicare services.  In Section 6407 of the bill, it requires that a provider conduct face‑to‑face meetings before certifying that patient is eligible for their home health services.  And while I understand the intent of this regulation to fight abuse of the system, I wonder if your agency has taken regional concerns into consideration. 

In a rural State like Kansas, we already have a shortage of physicians, and this requirement is simply not feasible for direct supervision for outpatient therapeutic services for critical access in rural hospitals.  If the regulations are followed as written, many of my hospitals would have to eliminate a lot of outpatient services, and that is creating access and cost issues for the beneficiaries. 

So I was just wondering if you could speak to any discussions that you have had or any ideas for how to make this new requirement work in our rural communities.

Dr. Budetti.  Well, thank you, Ms. Jenkins.  I think that, of course, we are in the position of enforcing the statute as written, but we are also very much interested in not cutting off beneficiary access, and we are very sensitive to the kinds of issues that you are raising. 

This area of home health and also the area of durable medical equipment have been high‑risk areas for us, and so it is quite important for us to move forward with implementing some of the different approaches.  But that is an area that we did listen to some of the comments that we received about the timetable, and we are responding to that, and we are very interested in working on this. 

And I would be delighted to listen to any specific incident that you would like to relate from your home State of Kansas.  I would be pleased to meet with you and listen to that and try to understand exactly what the kinds of issues are and how we might address those.

Ms. Jenkins.  Okay.  Thank you.  We will look forward to taking you up on that offer.

On another note, CMS is expanding their use of recovery audit contractors, the RACs, and authority given to them by this new law.  And I have some concerns that these contracts are for profit and aggressively going after claims with cash‑strapped hospitals, especially in rural States like Kansas.  While I agree that waste and fraud needs to be found and addressed, this seems to me to be a duplication of audit services.  Search and probe audits were already occurring before this RAC process was authorized.  The rate of denied claims by the RAC which are then being overturned is over 70 percent.  During this time, if a hospital does not pay the recoupment requested and allows it to follow the automatic process, interest is then charged on the claim amount to the hospital at over 13 percent; and even if the claims are reversed, they don’t get their interest back. 

So questions for you:  What is the net cash to CMS on the RAC program, and can you speak to whether this is actually saving money in the health care system and increasing quality patient care, or is it simply shifting more of the cost to these small hospitals by requesting payment after the fact and adding to their administrative costs? 

Dr. Budetti.  The recovery audit contractor program is, as you mentioned, one that is based on contingency fees, and so they are paid for out of their recoveries, and so that is the structure of the RAC program, as you mentioned. 

And the RAC program was implemented, first, in a small number of States, and it did experience a number of issues.  And so the feedback that we got during the initial implementation phase has been taken into very strong consideration in shaping the way the program is being implemented going forward.  We phased in the full national implementation for just that reason, and we are also taking that experience into account as we also follow the new provisions that require the expansion of RACs to Medicaid and to Part C and D of Medicare. 

So the way that the RACs work is, as you mentioned, in terms of a portion of the recoveries is how they are funded, but we are working very, very hard to make sure that the kinds of things that the RACs learn both provide a basis for education to other providers so that they can deal with those kinds of issues and also so that we understand how to improve the RAC program. 

I would have to get back to you on the exact recoveries.  I do know that the rate of being overturned on appeal was much higher.  I don’t offhand remember the exact numbers but it was much higher during the initial phase, the pilot phase, and that many of the issues that came up in that setting are now being taken into consideration on implementation of the full program.  But I will be happy to get you those numbers.

Ms. Jenkins.  Okay.  I would appreciate it.  Thank you.  I yield back.

[The information follows, The Honorable Ms. Jenkins:]

Chairman Boustany.  The gentlelady, Ms. Black, is recognized.

Ms. Black.  Thank you, Mr. Chairman.

My question is for you, Mr. Morris, and I am going to borrow on my experiences at my State level.  Tennessee was the pilot project for initiating universal care, and that program was called TennCare.  It was unsuccessful.  It failed and we had to disassemble it because of its high costs. 

And one of the problems in that program that caused it to fail is the sheer amount of waste and fraud.  And we do have an Office of Inspector General, and one of the things that we saw that was so effective is to have a hotline for people to actually call and report abuses, and it was very successful. 

I didn’t notice in your testimony ‑‑ and of course, you have the most‑wanted fugitives up here and the hotline for that ‑‑ but do you have something in place that if just an individual knew of someone that was abusing the program, that they would be able to make a call so that you could investigate? 

Mr. Morris.  Yes, we do.  The number is 1‑800‑HHSTIPS, T‑I‑P‑S.  We have operators standing by.  They are trained to process complaints and concerns, many of which actually don’t pertain to our program. 

As an example, we get calls about Social Security checks.  The operators are trained to send those over to Social Security.  Operators also vet the continuing complaints and refer many of them to our Office of Investigations or our Office of Audit Services.  We get thousands of hotline calls every month, and one of the jobs of these operators is to go through them, and those that have potential to start a criminal investigation or a civil investigation are sent to our investigative teams.

Ms. Black.  And to follow up on that, can you give me some kind of an idea about how effective those calls are?  Are you finding that you are able to pick up fraud, waste, and abuse on those calls ‑‑ or from those calls? 

Mr. Morris.  I would need to get back to you with the specific percentages within the universe of what actually turn into viable criminal investigations.  As I mentioned, a number of the calls come from citizens who just need to talk to someone about a problem with the government.  When we are not able to be directly responsive because it is an issue outside of our agency, we do make sure they get to the right place.  But I will be glad to get back to you on the specifics of what percentage of those calls translate into a viable investigative lead.

Ms. Black.  And how is it that you let the public know that this line is accessible and available to them? 

Mr. Morris.  Well, it is on our Web site, which gets thousands of hits every week.  We make a point of bringing it to the attention of communities that we speak to. 

I mentioned in my oral remarks that OIG staff are in Tampa, Florida, today, talking about compliance training to the provider communities down there, and the hotline is one of the features that we talk to them about.  That way, if they see a problem, they know there are avenues to bring it to our attention.

Ms. Black.  I would really like to get further feedback from you on how effective those calls are and whether you really are seeing some actual useful information.

Ms. Black.  My second question along that same line is, you actually have in your written testimony how critical it is for the Office of Inspector General to obtain real‑time data on Medicare claims from CMS.  Are you able to get that data in a timely fashion? 

Mr. Morris.  We are make important strides, thanks to our partnership with Dr. Budetti and his team.  The challenge right now, frankly, is one of technology.  Dr. Budetti can speak better to this, but I believe that many of the claims processing systems that CMS has are somewhat antiquated, and there are about 20 different systems in play.  CMS is making great efforts to move those systems into the 21st century so that we will be able to get data more quickly. 

The other challenge, of course, we face is being able to do something with the data once it arrives at our door; and we are committing significant resources to be able to analyze the data so we can spot fraud trends and get to the site of a crime as quickly as possible.

Ms. Black.  Well, thank you.  And I do absolutely agree with you, because that is one thing we found in our State is that the data was there, and being able to mine that data was very, very helpful.  So I certainly will encourage that we continue to do that.  Thank you.  I yield back my time.

Chairman Boustany.  Thank you.  The chair now recognizes Mr. Becerra to inquire.

Mr. Becerra.  Thank you, Mr. Chairman, and again, thank you very much for having this be the very first hearing that the Oversight Subcommittee does. 

Gentlemen, thank you very much actually for your patience, the interruption with votes.  We appreciate you being here and the work you are doing.

Quick question.  How much are you able to do with the health community in the private sector?  We are talking about Medicare for the most part, Medicaid, but we know that there is a lot going on that overlaps between the private sector health care system and the public sector health care system.  Any quick examples ‑‑ and I want to get to some other questions ‑‑ but any quick examples of how CMS is able to work with the private sector in health care to try to deal with fraud that hits both public and private sector health care? 

Dr. Budetti.  Sure.  We are doing two things that I can speak to right off the top of my head.  One is that we are now in the process of moving into, as Mr. Morris said, the 21st century, with the technology and the sophisticated analytics that are currently being applied in the private sector both in the health care industry and in other industries.  So we are reaching out to get the best ideas and the best approaches from the private sector and use them in the public programs.  That is one thing that we are doing. 

We also have been engaged for some time in a dialogue with the private sector about building a public‑private partnership to work together to fight fraud, and that is something that my colleague from the Inspector General could also speak to.

Mr. Morris.  I did a quick check last night of the number of cases that our Office of Investigations is working with its private sector counterparts.  We have 50 ongoing cases where we are sharing intelligence and resources, to tackle a problem which is both in the private and the public side.  The NHCAA ‑‑ you will be hearing from its representative in the next panel ‑‑ I think will tell you that we are working very effectively together in finding new ways to improve.  We are working on a best practices document, for example, so that we can find additional ways to multiply our efforts.

Mr. Becerra.  Excellent.  I hope you continue to give us reports on how you are working together because we know that the costs of health care outside of Medicare and Medicaid are helping drive the costs of Medicare and Medicaid higher.  And so to the degree that we help them tamp down costs on the private side, it helps us control them on the public side.

A question ‑‑ and I had ask asked my staff what the acronym stood for, because last year my father ended up having a difficult time, and he survived an episode with a heart condition, but he got a CPAP machine, and it stands for continuous positive airway pressure.  I just got to the point of calling it the CPAP, the air machine.  It helps him breathe. 

We know that there has been an issue with fraud in the area of DME, durable medical equipment, the CPAP machine, the oxygen equipment, the wheelchairs, the hospital beds that are often provided to beneficiaries under Medicare.  And in the next panel, we are going to hear from an individual who was convicted of Medicare fraud involving durable medical equipment. 

I wonder if you could tell me what was done in the historic health care reform of the Affordable Care Act which is going to help us address what we know is pretty aggressive fraud in the area of durable medical equipment.

Dr. Budetti.  The area of durable medical equipment, as you mentioned, also is in fact one of the high‑priority areas.  And I mentioned before that we had structured, as the act requires, our screening processes by categories, and the highest level of risk includes new durable medical equipment suppliers, and so they will be subject to the highest level of screening for new entrants. 

There are also provisions in the Affordable Care Act that provide for increased surety bonds and other kinds of oversight of new DME providers and initial claims.  We are also very much involved in a completely different approach which has to do with the implementation of competitive bidding for durable medical equipment, because when you have a limited number of bidders who undergo scrutiny to get into that program, we believe that will also be helpful in terms of having controls on it.  And we have had a series of durable medical equipment specific initiatives in the past in south Florida and elsewhere. 

So it is something that we are attacking from multiple points because that is an area that we have to do a better job of preventing fraud.

Mr. Becerra.  Mr. Morris, instead of answering to that question ‑‑ I know I am going to run out of time ‑‑ can I ask one last question?  You are obviously using personnel.  They are obviously having success in helping us detect and track down some of this fraud.  What happens if you have to furlough or reduce your personnel because of budget constraints? 

Mr. Morris.  Because the significant part of our funding is off of the general appropriations ‑‑ it is through the HCFAC account ‑‑ we are going to be able to keep a law enforcement presence.  It will be reduced, unfortunately. 

I think the other challenge we will face will be just the general disruption when the government goes through a shutdown process.  We will spend a lot of time on that instead of catching bad guys, but to the extent possible, with the funds available, we will continue to fight against fraud.

Mr. Becerra.  Thank you.  Thank you, Mr. Chairman.

Chairman Boustany.  Mr. Gerlach, you may inquire.

Mr. Gerlach.  Thank you, Mr. Chairman, and thank you, gentlemen.

Really quickly, want to give you a constituent matter that I just uncovered 2 months ago, and I would like to get your reaction to it based upon your testimony that you have presented to the subcommittee. 

About 2 months ago, a constituent of mine, someone who is on Medicare, sought medical advice from his orthopedic surgeon regarding an MCL problem he was having with his knee.  The orthopedic surgeon then prescribed a knee brace for him to help him with his recovery of that situation.

When Medicare was billed for that knee brace, it was billed for about $690.  That really struck this gentleman as being very odd, based upon the knee brace that he got.  So he went online to the manufacturer’s Web site and saw online that the manufacturer is only retailing this knee brace for about $190, about 2‑1/2 to 3 times more being reimbursed by Medicare for what the manufacturer is retailing this knee brace for.

So with that as a background, Mr. Budetti, for example, in your testimony you indicate that the Affordable Care Act has offered more opportunities and more provisions to combat fraud, as well as new tools for deterring wasteful and fiscally abusive practices to ensure the integrity of the program.  So what would your specific recommendation be today to immediately halt this practice of Medicare paying 2‑1/2 to 3 times for this kind of medical product?  And I am sure there are thousands of kinds of medical products that the system or the program reimburses for that are probably out of whack for what you could pick it up retail for.  What are you doing specifically to halt that practice immediately? 

Dr. Budetti.  Thank you for that question, Mr. Gerlach. 

What I mentioned just a minute ago, the competitive bidding for durable medical equipment projects a very substantial reduction in the prices that will be paid by Medicare.  I believe it is on the order of 32 percent are based upon competitive bidding, and we believe that introducing this level of competition into the provision of durable medical equipment supplies is an important step towards combating exactly what you just mentioned.

I would also add in follow‑up to Ms. Black’s question from a minute ago ‑‑

Mr. Gerlach.  May I interrupt just so I understand exactly what you are saying? 

So you are going to have folks competitively bid to have the ability to be the entity that provides the product for that particular medical condition.  Are you going to relate at all whatever those bids are to the real‑world retail price for those products, or are you just going to allow bidding among certain entities but they still, even though you picked the lowest bid, may not be tied to what the reality is in terms of what that product retails for in the real world? 

Dr. Budetti.  You know, I would be very ‑‑ I can’t ‑‑ I can’t speak to the exact market dynamics that governed our initial implementation of the competitive bidding, Mr. Gerlach.  I would be happy to look at exactly that issue for you and get back to you on how well the bids that we took compared to the market prices that we otherwise would have seen, because that is the core of what we are trying to do is to get to a point where we are paying either market price or whatever the market should be charging for things.

Mr. Gerlach.  When was the last time, if you know, this competitive bidding process was used for a knee brace product in the program so that that would have been the basis to set this new brace price at $690?

Dr. Budetti.  We are just implementing the competitive bidding this year, and it was in nine areas, but the projection is for it to be phased in across the country.  I will be happy to get you all the details.

[The information follows, The Honorable Mr. Gerlach:]

Mr. Gerlach.  Thank you, sir. 

And real quickly, Mr. Morris, your office is obviously responsible for auditing, evaluating these programs.  Have you at any time in the past looked at the overcharging, overpayment for products of this nature?  And if so, what have your recommendations been, and how has CMS handled those recommendations; or has this been an issue you have not looked at before? 

Mr. Morris.  This is an issue we have looked at a great deal over the last 10 years or more.  The OIG, of course, does not set prices.  It merely does the audits.  But we have looked at everything from wheelchairs to oxygen concentrators to orthotics and, in each case, reported back to CMS that we believed that the program is paying way too much.

Mr. Gerlach.  What has been the response by CMS to those recommendations? 

Mr. Morris.  It has varied a great deal on the particular product, but CMS has generally been receptive to our recommendations.  In some instances, they put it out they felt they had legal barriers to actually reducing the prices.  The competitive bidding process ‑‑

Mr. Gerlach.  Have you had a systematic recommendation to cover all of the products that are utilized through the program, or have your recommendations been product specific, a wheelchair or a knee brace or an oxygen tank? 

Mr. Morris.  They have been product specific, but with broader programmatic recommendations that would go to the principle of we ought to pay at market rate and not above it.

Mr. Gerlach.  It seems to me there ought to be some systematic recommendations, not individual equipment specific recommendations.  There are probably problems across the entire spectrum of product reimbursement in the program.  So, appreciate your additional thoughts on that.

Thank you, Mr. Chairman.

Chairman Boustany.  Mr. Kind, you may inquire.

Mr. Kind.  Thank you, Mr. Chairman.  Thank you for holding what I think is a very important hearing, and hopefully we will have an opportunity in the course of this session of Congress to get into this as well.  I think it is very helpful.

Nothing drives people crazier than the thought of wasteful payments going out to fraudulent claims being made against the Medicare system.  So I appreciate the work both of you gentlemen and your agencies are doing to combat this.

Mr. Morris, let me start with this.  Have you had a chance to quantify the type of return we get on the dollar that we spend on anti‑fraud measures, what type of return that we are recovering from that? 

Mr. Morris.  Yes, we have.  We are very mindful of how valuable the taxpayers’ dollars are, and we want to make sure we are a good investment.  If you look at the money spent on our health care anti‑fraud efforts in the last 3 years, we brought back to the government $6.80.  That is a great ROI.  So the short answer is yes, and it is a great number.

Mr. Kind.  So, under the Affordable Care Act, if I got my numbers right, roughly $350 million was authorized over a 10‑year period for the feet‑on‑the‑street effort, and I think the President’s 2012 effort was asking for about $270 million for HCFAC.  You think that is going to be a wise use of the money as far as the potential for return? 

Mr. Morris.  I confess that I have a somewhat self‑interested answer here.  Yes, of course.  More seriously, I can tell you that there are cases that we want to get to that our current resources do not allow us to.  By way of example, we have put a lot of resources into the Medicare Strike Forces and realized a tremendous return both in taking bad guys off the street and saving Medicare money, but it has meant that some of our civil cases, civil cases involving pharmaceutical fraud and others, have had to wait.  The ability to bring more feet to the job and focus on those cases I think will return very positive benefits.

Mr. Kind.  So you don’t have to answer this, but it just seems intuitively, then, that this is an area where further budget cuts may end up costing us more in the long run if we are taking away that enforcement capability or investigative capability.

To follow up on what I think Ms. Black was referring to earlier, are we getting better at being able to distinguish innocent errors that are submitted versus outright fraudulent practices?  Mr. Budetti? 

Dr. Budetti.  This is a very high priority for us to do exactly that, and that is why I mentioned the risk‑based approach that we are taking.  We are implementing a variety of different private sector approaches analyzing data and not just claims data, but moving into a much wider range of data.  We have set a goal of having essentially zero false positives.  We want to be very sure that we have reached the right conclusions in analyzing the data.  So, yes, so I believe that we are making great progress in that direction.

Mr. Kind.  Let me ask both of you if you have an opinion on this.  But I think ultimately the key to whether health care reform is successful or not is our ability to change the way we pay for health care in this country, starting with Medicare and moving from the fee‑for‑service system we currently have under Medicare to a fee‑for‑value or a quality‑ or outcome‑based reimbursement system.  If we are successful in making that transition to a new reimbursement, rewarding value over volume, what impact is that going to have on fraudulent practices throughout the country? 

Mr. Morris.  I think it is going to have the potential of reducing conventional fraud, in for example the paying of a kickback to get a service ordered.  The challenge we will face is that in any system of reimbursement, there are opportunities to exploit it.  As we move into an integrated delivery system where we are rewarding quality, we are going to also need to make sure that some of the other reverse incentives don’t result in skimping on care or steering of patients.  We are mindful of those risks, but I think it is critical that we move to an integrated system and that we are going to have to give the system an opportunity to sort of try itself out.  Every system has opportunities for exploitation and we are going to need to be vigilant. 

Mr. Kind.  Sure.  Dr. Budetti? 

Dr. Budetti.  Yes.  I think that, as you are well aware, we are moving towards implementing a number of new ways of organizing and paying for care with accountable care organizations and medical or health homes, value‑based purchasing, a variety of different initiatives.  In each case, we are raising exactly what Mr. Morris raised which is, if we are going to approach this from a new direction, let’s look at what the vulnerabilities are.  Let’s do that prospectively so that we don’t set ourselves up for a different kind of problem going forward. 

So, yes, we might very well escape some of the past problems that we have had.  We want to also be on the lookout for what kind of new situations we might encounter as we change the system. 

Mr. Kind.  All right.  Thank you both.  Thank you, Mr.   Chairman. 

Chairman Boustany.  Mr. Buchanan, you may inquire.  

Mr. Buchanan.  Thank you, Mr. Chairman for holding this important hearing.  Gentlemen, I was curious because I hear so many numbers and I am a Member from Florida.  But when you look at just the fraud or abuse or whatever for Medicare and Medicaid, what is the best number?  What is the range that you use?  Because there are so many numbers out there.  I hear $100 billion, $60 billion.  What is the estimate as it relates to basically Medicare and Medicaid? 

Mr. Morris.  We share your frustration that there is not one number and that there seem to be estimates all over the place ‑‑ you hear everything from 3 to 10 percent, 3 percent being what the NHCAA estimates, 10 percent being what the GAO estimated about 10 years ago.  To be honest with you, I don’t think we know with precision how much fraud there is out there.  That is in part because fraud is, by the nature of the crime, concealment.  Good frauds go undetected. 

Mr. Buchanan.  But what is your best estimate?  As someone who deals in this every day, what would you say is a range from a high to a low or whatever? 

Mr. Morris.  My best estimate, not based on any empirical proof but just everything we see, is that the fraud ranges anywhere from about $60‑ to $100 billion a year across all systems, public and private.  

Mr. Buchanan.  And how much is the public system, Medicare and Medicaid; just your estimate?  And I am not holding you to it.  I am just trying to get a sense of what that might be. 

Mr. Morris.  Well, if we assume that both public and private systems are preyed on by the same set of criminals, I think we can presume that we would share our proportion of the total health care expenditures.  So it is going to be in the tens of billions of dollars.  It is way too high. 

Mr. Buchanan.  Doctor, what is your thought on it? 

Dr. Budetti.  Yes, sir.  I think that whatever it is, it is too high.  I think that whether we have a number or not, that one thing that we do see is that the more we look for it, the more we find. 

Mr. Morris mentioned the return on investment.  The return on investment has been going up consistently over time  as we have spent more money to fight fraud.  I view that as both good news and bad news.  It means that it is a wise investment of public funds.  It also means that we are not on the flat of the curve, so to speak; that there is still quite a bit of fraud out there for us to find and to deal with.  So I think that whatever the number is, it is very substantial, and it needs our attention. 

Mr. Buchanan.  Let me mention, you always hear ‑‑ you brought it up here a few minutes ago about south Florida, Miami/Dade/Broward Counties.  And being the only member on Ways and Means in Florida, I hear a lot of that even in my own district. 

But let me state something that I read.  It was reported by the University of Miami.  There was a recent report out that said it is their understanding that six of the Nation’s top most‑wanted Medicare fraud fugitives have been given refuge in Cuba.  Could this be the case?  Is it ongoing?  Is there any organized crime component that you are aware of as it relates to fraud?  And can it be any kind of a tie‑in with the Cuban Government? 

Mr. Morris.  I am not aware of any tie‑in to foreign governments as it relates to the health care fraud perpetrators that we either have listed here or elsewhere. 

Mr. Buchanan.  Have you heard about the six of the Nation’s most‑wanted Medicare fraud victims are in Florida ‑‑ or, I mean, are in Cuba? 

Mr. Morris.  I have not.  I have heard rumors that three of them are in Cuba in a Cuban jail. 

Mr. Buchanan.  Okay.  Well, we hear different information.  Doctor, do you have anything to add to that? 

Dr. Budetti.  No, I don’t. 

Mr. Buchanan.  The other thought is, and you touched on this a little bit earlier, that you are working with the private sector together to combat fraud.  In terms of the various agencies ‑‑ you know, and I heard you touch on it a little bit ‑‑ could you expand on that a little bit more, what you are doing?  I know you can’t be everywhere at all times.  But in terms of working with the private sector to deal with fraud, what are you actually doing? 

Mr. Morris.  Well, let me give you a great example.  The Investigation of the Year, awarded by the NHCAA last year, was for a collaborative effort in Kansas, focusing on a pill mill, two defendants who were pushing painkillers.  They were associated with potentially 60 deaths from drug overdoses.  The DEA, FBI, OIG teams and a number of private insurers came together, pooled their information on the prescription patterns and practices, identified the trends and were able to focus and build a case that would have otherwise taken far longer and taken far more resources. 

The result is we got the convictions and we were able to close down a pill mill that was threatening citizens’ lives.  That is a great example of how we can work with the private sector to pool our resources and our intel to get to a just result. 

Mr. Buchanan.  We have 1,300 pill mills.  We are dealing with that right now.  I will yield back. 

Chairman Boustany.  Yes.  Gentlemen, thank you for your testimony and your answers to these questions.  Please be advised that members may have written questions they would like to submit, and I would ask you to oblige.  Thank you for the work you are doing, and we look forward to hearing from you again on this ongoing problem that we are having to deal with on Medicare health care fraud. 

Mr. Morris.  Thank you very much, Mr. Chairman.  Members. 

Chairman Boustany.  I would now ask the second panel to take their seats. 

I want to thank and welcome Karen Ignagni, President and CEO of America’s Health Insurance Plans; Mr. Louis Saccoccio, Executive Director of the National Health Care Anti‑Fraud Association; and Mr. Ike Odelugo who has pled guilty to State and Federal charges related to Medicare fraud.  And I want to thank all of you for being here as we try to delve into this important subject and try to understand what more might need to be done. 

You will each have 5 minutes to present your oral testimony.  Your full written statements will be made a part of the record.  And Ms. Ignagni, we will begin with you.  Thank you. 


Ms. Ignagni.  Thank you, Mr. Chairman, Dr. Boustany, Ranking Member Lewis, and members of the subcommittee.  We are pleased to have the opportunity today to discuss how health plans are playing a leadership role in fighting and preventing health care fraud; how we are working with the Department of Health and Human Services ‑‑ a number of you inquired about that; how we are working with law enforcement and where there are opportunities to do even more. 

Our members have developed cutting‑edge techniques, as you have heard this afternoon, to identify fraud and halt practices that lead to substandard care.  We are involved in flagging the delivery of inappropriate or unnecessary services that may harm patients, inappropriate charges or charges for phantom services; detecting unlicensed or unqualified personnel, and identifying substance abuse and increasingly identity theft.  Our members’ anti‑fraud initiatives have prioritized preventing fraud before it takes place rather than paying and chasing after the fact. 

We are proud that these initiatives were models for the important new efforts being made in the public sector and believe now even more progress can be made.  Health plans fight fraud by operating special investigations units that are staffed with personnel with clinical, statistical, and law enforcement expertise.  They do four things:  They perform intensive license and qualification review.  That is the credentialing function.  They work to identify potential fraud before a claim is paid by employing sophisticated software techniques to detect anomalies in billing.  They investigate the clinical basis for the claim that has been flagged and tagged by relying on physicians, pharmacists, and other trained personnel.  Quite a number of these matters, as you heard this afternoon, involve medical equipment, infusion, and narcotics prescribing.  We take action by suspending payments when fraud is detected, jettisoning providers from networks, and providing information to law enforcement. 

Increasingly, efforts are focused on preventing identity theft.  When a patient borrows a friend’s identity to obtain insurance coverage, harm can result to the real beneficiary of that insurance policy who may be inappropriately or incorrectly tagged with the wrong blood type or identified inappropriately as having a condition they do not have.  We detect substance abuse as a very, very high‑priority activity, a current fraud and abuse initiative that literally has life‑and‑death significance. 

Looking ahead we have offered the committee this afternoon four recommendations: 

First, we are urging a reconsideration of how fraud prevention and credentialing programs are treated under the interim final regulation for the new medical loss ratio requirement.  The Department of Health and Human Services’ interim final rule adopts the recommendations that were made by the National Association of Insurance Commissioners which, in those recommendations, only allowed fraud recoveries to be considered as quality improvement, not the cost of programs that have been the focus of discussion this afternoon, the prevention and early intervention.  This is at odds with the promising efforts now being incorporated into the public sector programs which are based on the very programs that our members have pioneered.  Similarly, the MLR interim final regulation excludes provider credentialing from the definition of activities that improve health care quality which is now recognized as a critical function, and we applaud the Department for doing that in the efforts that are underway.  We urge the committee to ask for reconsideration of how these programs are handled. 

Second, we have recommended that existing partnerships between the private and public sectors be strengthened.  We have made a recommendation about how that can happen.  We think a simple aspect of more clarity about the ability of law enforcement to share information is important in this endeavor. 

Third, we recommend that the health plans should be included in restitution agreements when the Department of Justice or other enforcement agencies enter into agreements and obtain restitution from people who commit health care fraud.  This is done sometimes, not always; and we think there are opportunities here. 

Fourth, we recommend creating a safe harbor for health plans that supply information concerning suspected health care fraud to any public or private entity. 

Mr. Chairman, there has been a great deal of progress made in certain States.  We are encouraged by that.  We think there should be a more uniform approach, and we hope that the committee might consider that more attention could be paid to that matter.  This concludes our testimony.  We appreciate the opportunity to be here. 

And, Mr. Chairman, we are very happy to have the opportunity to sit next to Mr. Saccoccio who has done a fantastic job operating his group that has brought many in the public and private sectors together to share this kind of information.  Thank you very much. 

Chairman Boustany.  I thank you. 

[The statement of Ms. Ignagni follows:]

Chairman Boustany.  Mr. Saccoccio, you may proceed.

Mr. Saccoccio.  Thank you.  Good afternoon, Chairman Boustany, Ranking Member Lewis, and other distinguished members of the committee.  I am Louis Saccoccio, Executive Director of the National Health Care Anti‑Fraud Association, NHCAA. 

NHCAA was established in 1985 and it is the leading national organization focused exclusively on combating health care fraud.  We are uncommon amongst associations in that we are a private‑public partnership.  Our members comprise more than 85 of the Nation’s most prominent private health insurers, along with more than 80 Federal, State, and local government law enforcement and regulatory agencies that have jurisdiction over health care fraud who participate in NHCAA’s law enforcement liaisons. 

NHCAA’s mission is simple:  to protect and serve the public interests by increasing awareness and improving the detection, investigation, civil and criminal prosecution, and prevention of health care fraud.  The magnitude of this mission remains the same regardless of whether the patient has health care coverage as an individual or through an employer or through Medicare, Medicaid, TRICARE, or other Federal or State program. 

Health care fraud is a serious and costly problem that affects every patient and every taxpayer in America.  Just as importantly, health care fraud is a crime that directly affects the quality of health care.  Patients are physically and emotionally harmed by health care fraud.  As a result, fighting health care fraud is not only a financial necessity, it is a patient safety imperative.  Also, health care fraud does not discriminate between types of medical coverage.  The same schemes used to defraud Medicare migrate over to private insurers, and schemes perpetrated against private insurers make their way into government programs. 

Additionally, many private insurers are Medicare Part C and D contractors or provide Medicaid coverage in the States, making clear the intrinsic connection between private and public interests. 

As a result, the main part I want to emphasize is the importance of anti‑fraud information‑sharing between private and public payers.  NHCAA has stood as an example of the power of a private‑public partnership against health care fraud since its founding, and we believe that health care fraud should be addressed with private‑public solutions. 

One salient example that illustrates the power of cooperative efforts against health care fraud can be found in south Florida.  In response to the challenge of health care fraud schemes in south Florida, including fraud schemes involving infusion therapy in home health care, NHCAA formed the South Florida Work Group.  In meetings held in 2009 and 2010, this NHCAA work group brought together representatives of private insurers, FBI headquarters, and field divisions, CMS, HHS, OIG, DOJ, the Miami U.S. Attorney’s Office, and other Federal and State law enforcement agencies, to address the health care fraud schemes emanating in south Florida.  The details of the emerging schemes, investigatory tactics and the results of recent prosecutions were discussed with the dual goals of preventing additional losses in south Florida and preventing the schemes from spreading and taking hold in other parts of the country. 

This type of anti‑fraud information‑sharing is critical to the success of anti‑fraud efforts.  HHS, OIG, CMS, and DOJ have demonstrated a strong commitment to information‑sharing with private insurers and are working with NHCAA to identify the barriers, both actual and perceived, to effective anti‑fraud information‑sharing with the goal of increasing the effectiveness of this critical tool in the fight against health care fraud. 

It would greatly enhance the fight against health care fraud if Federal and State agencies clearly communicate to their agents the guidelines for sharing information with private insurers, emphasizing that information‑sharing for the purposes of preventing, detecting, and investigating health care fraud is authorized and encouraged, consistent with applicable legal principles. 

In addition to information‑sharing, the other effective way to detect emerging fraud patterns and schemes in a timely manner is to apply cutting‑edge technology to the data to detect risk and emerging fraud trends.  The pay‑and‑chase model of combating health care fraud, while necessary in certain cases, is no longer tenable as the primary method of fighting this crime.  In recognition of this fact, many private sector health insurers now devote additional resources to predictive modeling technology and real‑time analytics, applying the fraud prevention methods on the front end, prior to medical claims being made. 

The Federal Government has also recognized the value of real‑time data analysis as a key aspect of its interagency HEAT initiative.  The Medicare Strike Force model, as you have heard, employed by the HEAT program combines Medicare paid claims into a single searchable database, identifying potential fraud more quickly and effectively.  Additionally, CMS is working to implement risk‑scoring technology to apply effective predictive models to Medicare. 

NHCAA is encouraged by the renewed Federal emphasis given to fighting health care fraud, and NHCAA knows continued investment and innovation are critical.  And as greater attention is given to eradicated fraud from government health care programs, we urge decision makers to also recognize and encourage the important role that private insurers play in keeping our health care system healthy and free from fraud. 

Thank you for allowing me to testify today.  I would be happy to answer any questions.  Thank you. 

Chairman Boustany.  Thank you Mr. Saccoccio. 

[The statement of Mr. Saccoccio follows:]

Chairman Boustany.  And, Mr. Odelugo, thank you for being here.  You may proceed, sir.

Mr. Odelugo.  Thank you, Mr. Chairman and members of the committee.  It is with profound humility and deep gratitude for this opportunity that I come before the members of the committee today to provide testimony on the pressing issue of Medicare fraud in the durable medical equipment (DME) sector of the health care services industry. 

My name is Aghaegbuna “Ike” Odelugo.  I am from Nigeria and came to the United States in 1998 with the sincerest of intentions to eventually acquire my master’s degree.  Instead, beginning in 2005 and extending to 2008, I engaged in a business that presents unique opportunities for fraud and abuse.  I am speaking of the DME sector of the health care services industry.  I engaged in fraud and abuse in this industry.  I participated with others in 14 different companies, reaching 11 different States. 

DME fraud is incredibly easy to commit.  The primary skill required to do it successfully is knowledge of basic data entry on a computer.  Additionally required is the presence of so‑called “marketers” who recruit patients and often falsify patient data and prescription data.  With these two essential ingredients, one possesses a recipe for fraud and abuse.  The oven in which this recipe is prepared is the Medicare system.  This system has a number of weaknesses which are easily exploitable.  This is a nonviolent crime and is often committed by very educated people, including business people, hospitals, doctors and administrators.  It reaches across all ethnic and racial lines.  It relies on an often unsuspecting victim base of Medicare recipients, elderly citizens who long for attention and care, who simply want someone to talk to.  It also at times involves patients who willingly participate in the fraud. 

DME providers who engage in this type of fraud either do their own billing or outsource the billing to persons such as myself.  In my own experience, I dealt with 14 DME companies and did their billing.  I often dealt directly with marketers who provided patient referrals, most of them fraudulent.  I also dealt with physicians who knowingly participated in this fraud by knowingly writing prescriptions when they knew they were not medically necessary, or at times writing prescriptions for patients they never saw. 

I am not here today to appear proud of what I have done, yet I want the members of the committee to understand that I have done everything humanly possible to correct my past wrongs.  The opportunity to testify today before this subcommittee is something I am very grateful to be able to do. 

Mr. Chairman and members of the committee, I want to thank you for allowing me the opportunity to address the Subcommittee on Oversight.  I sincerely regret my actions over the past years and today’s testimony, I hope, will be understood as part of a continuing effort on my part to help in any way I can to correct my wrongs and prevent future wrongs. 

I also wish to take this opportunity to publicly thank Assistant United States Attorney Al Balboni and Special Agent Joseph Martin of Health and Human Services for the confidence they have placed in me during the course of my continued cooperation. 

Finally, I wish to publicly apologize to this body and, most of all, to the American taxpayers.  I am now prepared to answer any questions the members of the committee may have.  Thank you. 

Chairman Boustany.  Thank you, Mr. Odelugo.  We appreciate your testimony.

[The statement of Mr. Odelugo follows:]

Charman Boustany.  Ms. Ignagni, in your testimony you mentioned the possible negative impact of the medical loss ratio rules on a private insurer’s anti‑fraud efforts.  Could you elaborate more on that?  What will happen if this rule is fully implemented, and what the impact will be on your efforts or your private insurer companies, their efforts to conduct anti‑fraud activities? 

Ms. Ignagni.  Thank you, Mr. Chairman.  We appreciate the opportunity to speak more about this.  Essentially what the MLR requirements involve in a very direct way is that it allows plans to categorize expenditures for health care quality activities.  What is not included in the quality activities are two buckets, basically.  Number one, credentialing of providers.  Dr. Budetti talked, I think very effectively, about the importance of that being added to government programs.  We agree with that.  We have pioneered those techniques.  We are not allowed to account for those under quality in the present recommendation that was submitted by the NAIC to the Department of Health and Human Services, number one. 

Number two, also the preventive aspects that I talked about and Mr. Saccoccio talked about; the data mining, the predictive modeling, the early detection prevention that now the Department is working very hard also to incorporate into their public programs, again, important activities underway at HHS.  We have had those activities underway for very, very many years and have been very successfully undergoing and engaging in programs and efforts.  So we flagged that both for the NAIC, we flagged it for the Department, and we wanted to flag it today as the committee is focusing on the progress that is being made now in public programs, particularly incorporating these very techniques.  It is penny‑wise and pound‑foolish, essentially. 

Chairman Boustany.  So in addition to that, both you and the panel before you talked about the importance of public‑private partnerships. 

Ms. Ignagni.  Yes, sir.

Chairman Boustany.  And if this rule goes forward, it really hurts your ability to conduct anti‑fraud activity at a time when we are trying to enhance and move forward on these collaborations between the private sector and the public sector.  Is that correct? 

Ms. Ignagni.  The incentives are, as you have correctly stated, now under the recommendations that were made originally by the NAIC, and there was considerable discussion about that here.  It is only for the pay‑and‑chase situation.  And that is precisely what everyone wants to get away from and what our plans have worked very, very hard to actually not only think about executing programs but actually operating programs very effectively and very successfully. 

And as you heard from Mr. Morris who spoke very effectively about this as well, we are now turned to by law enforcement agencies for help in their activities, and are very effectively doing that. 

Chairman Boustany.  Mr. Saccoccio, do you want to comment on that as well? 

Mr. Saccoccio.  Yes.  You know, we feel that if you look at the Federal side, a lot of resources have been put into anti‑fraud efforts.  And the President’s budget I know asks for an increase of discretionary funding for the health care fraud and abuse control program.  There are additional fundings in the Affordable Care Act.  It doesn’t make sense to put all those investments on the Federal side and then create a rule that is really a disincentive for private plans to invest in the type of preventive‑type techniques that you want to use to go after fraud. 

Chairman Boustany.  It runs counter to the whole effort, it seems. 

Mr. Saccoccio.  That is correct. 

Chairman Boustany.  Okay.  Thank you. 

With regard to the interaction between private sector and public, when a private insurance company highly suspects fraud or actually detects fraud, you do contact CMS to notify them, right?  Most of the time or all the time? 

Ms. Ignagni.  The first place that normally this contact is made is law enforcement.  Oftentimes there are criminal cases that our plans suggest and expect based on what they are seeing in their data.  So oftentimes that is the first place. 

Increasingly, Mr. Chairman, there will be this exchange of information now with the new activities that are being built in the public sector.  We have similar kinds of activities.  So it is easier to go back and forth.  And there has been a great deal of communication both in Mr. Saccoccio’s association as well as with law enforcement directly.  We think there is an opportunity ‑‑ more opportunity for information‑sharing from law enforcement to the private sector, when there is a case that has been opened, to more routinely share information.  And we think that there needs to be some clarification in that regard to make sure that agents are aware that that is permissible and that they can do that. 

Chairman Boustany.  So you still are encountering some barriers there whereby a Federal agent may not feel comfortable cooperating or collaborating with ‑‑

Ms. Ignagni.  In some cases.  We think there is just an opportunity for clarity here and there could be more consistency and more uniformity of practice. 

Chairman Boustany.  And if you have further suggestions specifically on how we might do that, you might bring it forward to the committee. 

Ms. Ignagni.  Thank you, sir. 

Chairman Boustany.  Thank you.  Mr. Kind, you may inquire.

Mr. Kind.  Thank you, Mr. Chairman.  And I thank the panelists for their testimony here today.  Karen, let me continue with you for a second.  You said first referral goes to local law enforcement for follow‑up and possible prosecution.  Have you found that they have the level of competency or expertise in order to pursue these investigations? 

Ms. Ignagni.  It is a very good question that you are posing.  And it really depends on the issue at hand.  This is a very important question.  In some cases they are very active ‑‑ we had a case recently where one of our special fraud investigative units found that they were being billed for phantom procedures by infusion clinics that weren’t providing services to anyone.  They were just being billed.  And they noticed that in the data because they noticed an uptick from what was going on usually in the community.  So it caused them to ask questions and so on. 

That is fairly straightforward in terms of how that compares statistically with norms.  If you have certain overutilization of procedures which are very clinical, very high tech, we have found now that there is a great deal of activity going on in law enforcement to make sure that they are getting the kind of medical expertise that Mr. Morris talked about, frankly, with the medical director being involved in the OIG activities.  There is quite a lot of that going on. 

And I know Mr. Saccoccio has far more experience than I do.  So I am happy to yield to him, Mr. Kind, for more explanation about this. 

But generally we are finding that in our units, we have staffed them with people who know about law enforcement, people who are clinicians, people who know about pharmacy, and people who are statisticians.  And that served our plans very, very well, to have a full panel of techniques they can deploy. 

Mr. Kind.  Mr. Saccoccio, do you have anything to add? 

Mr. Saccoccio.  Mr. Kind, one of our goals and one of our missions at NHCAA is to educate investigators about fraud.  So we probably educate between 150 to 200 FBI agents every year, about 50 to 70 IG agents every year.  So that that is an important part of what we do, too, and that was the concept behind this public‑private partnership.  And when this education takes place, it is both private and public investigators coming together, sharing their experiences, sharing what they know, their best practices.  And that is really critical. 

So I think we are seeing that.  For example, the FBI and the IG does have that expertise.  As they bring in new agents, we take them into our programs, educate them about what they need to know, because you are dealing with coding and medical jargon and those kinds of things that you know, say, maybe a new FBI agent isn’t aware of.  But I know the agency is very good about getting their agents trained, and we do a lot of that with them. 

Mr. Kind.  Karen, if we eventually move from fee‑for‑service to fee‑for‑value reimbursement, is that going to have any impact on anti‑fraud measures? 

Ms. Ignagni.  This is also a thoughtful question.  I heard you pose it to the last panel.  I think, Yes, but.  Let me just tell you the “but” I was thinking when I was sitting back there listening.  What we are seeing in some of our fraud units also is when you go to bundling of payments and you have more integration, there are new skills that are required to make sure that we are not seeing upcoding in that situation.  So, yes.  But I want to provisionally say that there are new skills and tools that we are already deploying to make sure that we can spotlight problems. 

Also moving from the ICD‑9 to ICD‑10 coding system, you are going to be creating thousands of new codes.  We are very concerned about upcoding there as well.  So we will be deploying new skills to make sure we are spotlighting that early.

Mr. Kind.  And what about the build‑on on the HIT systems and the integration of those systems?  Is that going to enhance data collection? 

Ms. Ignagni.  It has in our case.  What we have seen is just the investment that we have made in infrastructure in HIT, has really allowed the statistical tools to be deployed.  They are very sophisticated and you need the right kinds of personnel to operate them, obviously.  But this investment in IT allows that to move much faster. 

In the old days we used to be looking at clinical charts.  Now we are looking at data and we can look at reports and we look at statistical profiles, frankly, of areas and different practitioners. 

Mr. Kind.  Thank you.  I have to go run and vote. 

Mr. Gerlach.  [Presiding.]  Let me follow up on some of the points you made in your testimony.  And you see members moving off of the dais here because we had a vote series called about 15 minutes ago, so that is why they are running over to the floor and voting and then some of them are coming back as well, given the space that we have between a couple of the votes.  So we would like to try to conclude the hearing today, and hopefully we can do that with your continued testimony here over the next few minutes. 

Mr. Odelugo, if I may go to you, sir.  Thank you for testifying today.  And thank you for your insights.  We heard from the other two presenters on the panel with you, some of their more systematic views of what is happening with health care fraud, their experiences out there in the system from a systematic standpoint. 

You were very much involved in fraudulent activity through your individual activity and those of those you partnered with.  You said in your testimony that it was incredibly easy to commit fraud, and as a result you billed the system for over $1 million, if our information is correct.  Is that accurate? 

How long did it take you to put in place the plan of action that you engaged in, getting other folks to participate with you to the point where you were able to make claims and ultimately collect over $1 million in Medicare reimbursement payments? 

Mr. Odelugo.  It didn’t take me that long.  It was just a matter of understanding the system.

Mr. Gerlach.  I am sorry.  Say that again? 

Mr. Odelugo.  I said it didn’t take that long.  It was a matter of understanding the system and setting up the structures.  Not more than a month. 

Mr. Gerlach.  Okay.  The people you worked with in this process, in this scheme, how did you approach them?  And how willing were they to participate?  Because, obviously, they were going to make money out of this scheme that they shouldn’t have been making.  Was it pure greed?  Or what was it that got you to entice them to participate in this fraudulent activity? 

Mr. Odelugo.  Basically I didn’t approach them.  I found ‑‑ well, like I found a loop in the system where I could bill for some things on a patient ‑‑ maybe out of a patient bill up to $4,000, $5,000.  And I kind of set up a billing system.  Where most of them were interested in billing for wheelchairs, I was concentrating on billing for these ortho-kits.  And they couldn’t figure it out on how to do it.  So most of them had to come to me to bill for their provider services. 

Mr. Gerlach.  Was there somebody that gave you this idea initially to participate in this activity?  Or did somehow you decide, you have accessed physician identifier numbers on the computer and figured out how to move forward? 

Mr. Odelugo.  No.  Just like I heard your last question you were asking about the knee brace.  My understanding, the cost of the back brace which was about $960, against $80.  And then, you know, from there, I started getting into more of it.  Then I got to know about the hinged knee braces.  All of this is right in the computer.  You go online, you can see them and how much they pay for it.  And you just get the correct code and bill it.  That is all it takes. 

Mr. Gerlach.  Okay.  Ms. Ignagni and Mr. Saccoccio, have you had an opportunity to read the Affordable Care Act’s anti‑fraud provisions that were enacted in this law?  And if so, what is your overall sense of how effective they might be?  Or what other recommendations would you have that are not included in those provisions that we ought to be looking at making into law to try to really address the fraud and waste and abuse problems that we have? 

Mr. Saccoccio.  The anti‑fraud provisions in the Affordable Care Act I think are going to be effective, with respect to the screening, as Dr. Budetti and Mr. Morris spoke about earlier.  Screening, the moratorium, bringing in certain classes of providers, given the circumstances, the Secretary’s ability to suspend payments when there is a credible allegation or credible evidence of fraud.  All those things I think are good things. 

The additional resources as far as money that is there, I think also obviously is a good thing, especially given the return on investment that you get.  It is unlike maybe some other Federal spending.  This is money that you put in, that you get back a nice return on investment. 

As far as other things, I think there is ‑‑ as CMS goes forward and develops their analytical tools, their data analytics, to the extent that they are able to share that information with private insurers, I think that would be very helpful.  In other words, as they, say, get into the 21st century with respect to looking at Medicare data, as they begin to find trends and schemes, to be sure to share that with the private side.  I mean, we do a lot of that now.  But I think it is going to be important as they ‑‑ because they have probably the largest group of data than any ‑‑ the other private insurers obviously are divided up, you know, by company.  Here with Medicare, to be able to get that information that they develop based on those analytics, I think would be very helpful and critical once they are able to do that. 

Mr. Gerlach.  Ms. Ignagni, do you agree? 

Ms. Ignagni.  I agree with Mr. Saccoccio.  And I think further that one could provide more clarity about the sharing of information so that particularly law enforcement agents know that that is permissible. 

Second, I do believe that there should be more thought to this issue of having safe harbors for health plans that actually provide information to State insurance commissioners, provide information to law enforcement, to the agency, to make sure that it is very clear that that is permissible and there will not be countersuits from providers who are at the other end of that information. 

And then I do believe that in the area of restitution, it should be more routine that the private sector is included in those restitution agreements and efforts.  And then finally the MLR, sir. 

Mr. Gerlach.  I will yield back to the chairman.  Thank you. 

Chairman Boustany.  [Presiding.]  The chair recognizes the ranking member of the subcommittee, Mr. Lewis.

Mr. Lewis.  Thank you very much, Mr. Chairman.  And welcome.  Thank you for your testimony.  I have had an opportunity to read over it. 

Mr. Odelugo, we understand that you have been cooperating with law enforcement for over 2 years.  Why did you initially get involved with Medicare fraud?  And why have you chosen to come forward?  What moves you?  What suggested to you to cooperate, to come forward? 

Mr. Odelugo.  Before I came forward, I really stopped doing it.  I stopped doing that in December of 2007 when I knew there was an ongoing investigation on me.  So I approached my attorney right here, and he advised me that the best thing for me to do was to come forward and get them to know me and talk to me.  And that is how I got to turn myself in.  And from then on, I started cooperating with them, based on their suggestion.  

Mr. Lewis.  Do you have any regrets?  Would you tell others that may have the desire, the urge to participate in defrauding Medicare or some other Federal health program, suggest to them that this is not the way to go? 

Mr. Odelugo.  I have been doing that already. 

Mr. Lewis.  All right.  I appreciate that. 

Mr. Saccoccio, on your Web site, you warn consumers about a new scam involving health care.  What are the types of scams you have seen to date?  What tips do you give consumers? 

Mr. Saccoccio.  I think probably if I had to pick the one top scam, it would be identity theft.  And that is not just identity theft where person A steals person B’s identity in order to get health care, but large‑scale identity theft that occurs in Medicare and Medicaid, regrettably on a regular basis, where folks on the inside that is somebody, say, working at a clinical laboratory or a hospital, decides that they are going to take this information and sell it on the outside.  So folks could still make false claims.  Sometimes the information is obtained through misrepresentations, phone calls where seniors are fooled into giving their information over the phone. 

So I think the biggest one right now is medical identity theft.  And the biggest recommendation we give to consumers is to protect your health insurance information, whether it be Medicare, private insurance, whatever it happens to be.  Make sure you protect that just like you would a credit card, your Social Security number.  Just do not give that information out to anyone on the phone unless you particularly know who you are speaking to.  So I think identity theft is really the biggest one. 

And the other hot areas that we have seen I think are similar to Medicare.  It has been DME.  It has been home health care.  It has been infusion therapy.  And the other one, community mental health centers, are now I think becoming a challenge as well.  But you know, from a patient and a consumer perspective, I think identity theft is the number one thing they need to look out for. 

Mr. Lewis.  Thank you.  Ms. Ignagni, I understand your members have experience in analyzing claims and they are using this to predict fraud.  Based on their experience, what recommendation or best practice will you share with us and CMS? 

Ms. Ignagni.  I think, sir, that CMS now is in the process of adopting exactly the kinds of tools and techniques that we use.  It is called in statistical terms “predictive modeling,” software packages that actually detect anomalies in data.  In other words, in a particular area, there are patterns of practice.  When you see in the data that a particular physician, a particular pharmacy, a particular area, is up significantly or we have seen situations where physicians are billing over 50‑some patients in a day, that would be an anomaly that this software would flag. 

We have been very pleased that CMS now, and the Department, is adopting the same kind of tools and techniques, and they work very, very well to really give you that early intervention and that kind of emphasis on prevention so you want to detect fraud before any claim is paid. 

It is much harder when you are paying and chasing, and it is much better when you can do this earlier on.  And that is where we have really focused a great deal of our activities.  And, frankly, that was the model on which there was a lot of discussion last year, and now the Department is actually operating those same skills. 

Mr. Lewis.  I just want to thank you for being here and for your testimony.  Mr. Chairman, thank you for holding this hearing. 

Chairman Boustany.  Thank you.  Ms. Jenkins, you may inquire. 

Ms. Jenkins.  Thank you, Mr. Chairman.  And I, too, want to thank you for this hearing and thank you all for your testimony. 

Ms. Ignagni, as you are aware, the Medicaid program was designated as high risk by the Government Accountability Office in 2003 and Medicare has been designated that way since 1990.  In the last update on these high‑risk programs back in February of this year, GAO states that CMS has not met their criteria for having the Medicare program removed from this list.  And while they have implemented certain recommendations for Medicaid, more Federal oversight of the fiscal and program integrity is needed.  The new health reform law expands eligibility to both of these programs. 

So, could you just please address how this will affect your Association’s ability to reduce fraud over an even larger population and pool of taxpayer dollars? 

Ms. Ignagni.  What our plans have done is actually pioneer a number of different practices which are very, very important.  First, credentialing.  We have put a lot of resources into making sure that physicians have the qualification that patients expect, that they are licensed, that they don’t have malpractice efforts, that they have not been convicted of fraud, et cetera.  They just go down the line.  Those are very robust activities that we have worked very, very hard to make sure as we are putting together panels of practitioners, clinicians, that we can guarantee to our beneficiaries that we have executed those processes, number one. 

Number two, the whole area that the chairman was inquiring about a few minutes ago in terms of how do you step back and prevent fraud, getting the statistical packages operating with ‑‑ they are called SIUs, special investigative units, with clinicians, with statisticians, with pharmacy experts, with law enforcement experts, so that you can look at what are we seeing in the data; where are their hot spots, if you will; where is there trouble?  What needs to be done?  We flag claims and then we do further investigations.  So that is on the front end. 

Also, when payments are made, there are similar processes that are executed to make sure you are following those; if we have missed anything, to make sure that we are catching it also on the back end.  Similarly for pharmacy, in the area of pharmacy, we have found clinics that are prescribing pain medications.  There have been a number of efforts to shut those clinics down, detect them, et cetera.  There has been a great deal of work between our health plans and law enforcement and public officials to do exactly that.  And you will see that expanding. 

Infusion, as Mr. Saccoccio said, we have seen a very, very significant uptick in problems related to infusion; clinics springing up, billing, and no patients behind those bills.  So we have worked very hard to put in place practices that will detect that. 

Unnecessary procedures that can be life‑threatening for patients.  We have seen situations where physicians have operated on patients who didn’t need those operations.  Or in some cases people weren’t qualified to actually practice the services they were providing.  So unnecessary services, a very, very big area.  I must say, of course, that the majority of physicians, of course, are upstanding, ethical individuals.  But there are some bad apples.  So our tools and techniques are designed to detect those. 

We worked very closely with Mr. Saccoccio’s Association that has brought together health plans, law enforcement, and public officials to share this kind of information.  Mr. Saccoccio does a great deal of training, as he indicated, which is very, very important to make sure that all sides have access to the best practices that work and that work effectively. 

And now that the public agencies have adopted the practices of private sector plans, then I think there is reason to be very, very hopeful about the ability to do even more to share information under the auspices of Mr. Saccoccio’s Association and the activities that are underway at the Department that we heard about earlier. 

Ms. Jenkins.  Okay.  Thank you. 

Ms. Ignagni.  Sure. 

Ms. Jenkins.  Ten years ago, back in Kansas City, we had one of the most horrendous cases of health care fraud that I ever heard of.  A local pharmacist was convicted of diluting nearly 100,000 prescriptions for 4,000 patients.  His profits came from diluting expensive chemotherapy medications.  A local pharmaceutical sales rep was the first one to suspect foul play.  He discovered that pharmacist was selling more of a specific drug than he was purchasing from him.  He worked with a doctor who used this pharmacy and the local authorities to bring charges against the pharmacist. 

Mr. Ignagni and Mr. Saccoccio, you both mentioned the need for more public‑private cooperation to help combat health care fraud.  The case I just mentioned was greatly assisted by private companies.  Can either one of you elaborate on what else those of us in Congress can do to allow and encourage private companies to work with CMS and our law enforcement to reduce fraud in the system? 

Mr. Saccoccio.  Well, I think, as I mentioned, data analysis is going to become critical going forward.  CMS is in the process of looking for and putting in place the right type of system as far as predictive modeling for Medicare.  I think it is going to be critically important as they develop these systems on the set of data that they have, which is an enormous set of data, that that data be shared, that what comes out of that data be shared with the private side. 

It is critically important not just for the commercial side, but remember again the private insurers have Medicare Part C, Part D.  They are doing Medicaid in the State.  So there is a lot of tie‑in both on the private side and public side in the public program.  So I think that sharing of data is going to be critically important. 

And then I think the other thing is, there is a commitment I believe on the part of the IG and HHS, CMS, and DOJ to share information with the private side.  I think a lot of that information has to filter down to the agents in the field; that they need very specific guidance about what they can and can’t do.  And we have been working with Mr. Morris, with Dr. Budetti, and others to try to address that particular issue.  And hopefully in the near future we are going to see some progress along those lines, too.  Where agents are in the field though, okay, this is not only okay for me to do, it is something that I should be doing. 

Ms. Jenkins.  Thank you.  We will look forward to working with you.  I yield back. 

Chairman Boustany.  One final question for you.  Mr. Odelugo, how easy is it to get physician provider numbers in your experience and to file additional claims?  You know, if you get denied, getting a different number and filing additional claims.  Could you talk a little bit more about your experience with that? 

Mr. Odelugo.  Thank you, Mr. Chairman.  Basically to get a physician’s UPIN number, you just have to go online and pick it out.  It is public information. 

Chairman Boustany.  So just go online and you can find these numbers? 

Mr. Odelugo.  Yes.  You just get it from there.  You can even get the one that has the closest ZIP Code to wherever the patient lives, and you can input it on the system and transmit. 

Chairman Boustany.  Is there a method to what provider numbers you would pinpoint?  Do you look for those who perhaps may be licensed in multiple States versus just in a single location? 

Mr. Odelugo.  Well most providers will want to get licensed in every four regions of Medicare.  That way they can bill for any patient, depending on where they are.  That is why if you look at my statement or my recommendations, I was trying to suggest that any claim that doesn’t cross‑reference with the doctor’s billing for the services should not be paid.  That way, providers cannot just turn in a claim without the doctor billing for the services of, you know, doing the prescription. 

So try to implement it that way because most of businesses are done by the billers.  Most billers know whatever is going on between the doctors and the providers.  But they transmit the claims.  If they can have it where they can get the billers to be held responsible for a little bit of whatever that is going on, that can help assist them. 

Chairman Boustany.  Thank you.  Mr. Lewis, do you have any further questions? 

Mr. Lewis.  Mr. Chairman, I don’t have any further questions. 

Chairman Boustany.  Thank you.  Well, that will conclude our questioning of the witnesses.  I want to thank all of you for being here today and providing your testimony and answering questions of the members.  I want to remind you that members may have some written questions they would like to submit later to you, and I would ask you if you would oblige and make those answers a part of the record. 

One final thing, Mr. Ranking Member, Mr. Roskam, a member of the full committee, has a statement that he would like to submit for the record. 

Mr. Lewis.  Without objection. 

Chairman Boustany.  Without objection, so ordered.

[The information follows, The Honorable Mr. Roskam:]

Chairman Boustany.  With that, we will conclude this hearing, and the hearing is adjourned. 

[Whereupon, at 4:22 p.m., the subcommittee was adjourned.]


The Honorable Mr. Roskam


The Honorable Chairman Boustany
The Honorable Mr. Gerlach
The Honorable Ms. Jenkins


Academy of Managed Care Pharmacy
Apria Healthcare
Dream Software
Pharmaceutical Care Management Association