Copyright 1999 Federal News Service, Inc.
Federal News Service
FEBRUARY 10, 1999, WEDNESDAY
SECTION: IN THE NEWS
LENGTH:
7996 words
HEADLINE: PREPARED TESTIMONY OF
JUNE
GIBBS BROWN
INSPECTOR GENERAL
OFFICE OF INSPECTOR GENERAL
DEPARTMENT
OF HEALTH AND HUMAN SERVICES
BEFORE THE HOUSE COMMITTEE ON
GOVERNMENT REFORM
SUBJECT - HIGH RISK PROGRAMS
BODY:
Testimony of June Gibbs Brown, Inspector
General Department of Health and Human Services
Good Morning, Mr. Chairman.
I am June Gibbs Brown, Inspector General of the Department of Health and Human
Services. I am here today to discuss the most significant issues that confront
our Department. These are complex problems that defy quick fixes and simplistic
solutions. But failing to address them undermines the effectiveness of our
programs, costs taxpayers billions in lost and wasted dollars, and deprives
vulnerable beneficiaries, of the care and support they need. I will describe
these problems, give you a flavor of some of their tangible consequences, and
tell you what is being done about them. Finally, I will give you my own sense of
the broader strategies and commitments that I think are needed to fully respond
to them. SIGNIFICANT ISSUES CONFRONTING THE DEPARTMENT
The following is a
very brief description of what I believe are the most significant issues now
confronting the Department of Health and Human Services.
Payment Controls
and Financial Statements
Because of the increasing complexity, scope, and
reach of programs, especially Medicare, the controls needed to insure the
integrity Of payments have not been reliable enough. We estimated that in FY
1996 improper Medicare fee-for-service payments totaled about $23.2 billion, or
about 14 percent of payments made. In FY 1997, the error was $20 billion, or 11
percent of payments made. The improper payments reflect billings for services
that were insufficiently documented, medically unnecessary, incorrectly coded,
or not covered. Examples include:
-- $3,000 for rental of an electric
hospital bed submitted with inadequate justification by a company whose offices
had been vacated at the time of our review;
-- $1,967 for a 19-day stay in a
skilled nursing facility for which there was no evidence that the service was
provided;
-- $2,915 paid to a home health agency for skilled nursing
services which were not needed and which were provided to a beneficiary who left
home daily and therefore did not meet the definition of "homebound;"
--
$7,844 for transporting a beneficiary from a nursing home to a dialysis center
when the beneficiary could have traveled safely by far less expensive means;
-- $535 paid for a gel pressure pad for a mattress when in fact the supplier
had provided a wheelchair pad for which the allowable Medicare payment is only
$123; and
-- $22,229 for a hospital bill for which the secondary diagnosis
code was not supported, resulting in approval of only $10,151 and an overpayment
of $12,078.Some of these improper payments are due to inadvertent mistakes. Some
are deliberate false billings. In either case, the outcome is costly and is
wasteful of tax dollars.
Another indicator of the depth and fundamental
nature of these control weaknesses is that, based on our audits, we could not
attest in 1996 nor 1997 to the reliability of the Department's financial
statements for those years.
I am happy to report that we are beginning to
see signs of real progress in these areas. Yesterday, I announced that the error
in FY 1998 had dropped to $12.6 billion, or 7.1 percent of payments,
approximately half of what it was in FY 1996. The Department can be pleased with
this accomplishment, but it still has a long way to go. With more than $210
billion spent on Medicare in FY 1998, and increases expected indefinitely into
the future, we must continue to make improvements in control and accounting
systems until the errors are insignificant.
Computing Crises
Of
necessity, the management of our modem programs is increasingly reliant on
sophisticated computer systems. This is not only true of Medicare, but also of
numerous public health, child support enforcement, welfare, and foster care
programs. The risk that something could go wrong or that system developments
could fall behind growing management needs is compounded by the fact that these
programs rely on the information processing capabilities of organizations
outside the Department. For example, progress in increasing child support
enforcement collections has in the past suffered from delays by States in
upgrading their automatic data processing systems; and exciting new developments
in this field mandated by recent legislation are dependent on simultaneous
development of mutually compatible and interlinked local, State, and Federal
government information systems.
No clearer dramatization of these risks is
needed other than the well known Year 2000 computing crisis. Again, Medicare can
be singled out as especially vulnerable. In order to properly and efficiently
pay Medicare bills, it will be necessary not only for the Health Care Financing
Administration (HCFA) to correct millions of lines of its own computer programs
to make them ready to compute eight digit dates (the so called "Year 2000
compliance" criteria), but the 75 private insurance companies that, as Medicare
intermediaries and carriers, process Medicare payments must also have their
programs fixed as well. Not only that; ultimately all physicians, hospitals,
nursing homes, medical supply companies, home health agencies, clinical
laboratories, rehabilitation service agencies, and other health care providers
who take care of Medicare beneficiaries will need to make their systems
compliant. Given the 900 million claims that Medicare pays each year and the
more than one million providers involved, this is an extraordinarily complicated
and critical undertaking.
The Office of Inspector General is reviewing the
Department's level of readiness to become Year 2000 compliant. This includes an
assessment of the Department's plans, time frames, and schedules for internal
systems testing and for monitoring the conversion efforts of external entities
named above. We are closely evaluating the systems' compliance and periodically
reporting on progress. In addition, we have surveyed a sample of health care
providers and are now analyzing their responses to assess their readiness and
technical assistance needs. We havebeen working closely with HCFA on this
effort, and will be sharing our results with them as soon as they are available.
Mental Health Services
Through our audits, evaluations, and
investigations we are becoming increasingly aware of serious shortcomings in our
nation's mental health service system. A good illustration of this is in the
so-called "partial hospitalization" program.
This term refers to
non-residential mental health services that are provided in hospitals and
community mental health centers to serious mentally ill patients who, without
these day services, need to be institutionalized.
In a five-State review we
found that over 90 percent of the Medicare payments to community mental health
centers for partial hospitalization services ($229 million of $252 million) were
unallowable or highly questionable. The individuals for whom these payments were
made did not have the kind of severe or disabling psychiatric conditions
envisioned by the authorizing statute, nor was there any indication that they
would otherwise need inpatient hospitalization. Furthermore, the services they
received were not the intensive type covered by Medicare in a true partial
hospitalization situation. For example:
-- An 85-year-old woman, living
independently, had been consulting a psychiatrist for several years due to
depression after the death of her husband. The psychiatrist, a Medical director
for a partial hospitalization program, arranged for program employees to
transport her and the psychiatrist's other patients to an adult activities
center to engage in arts and crafts and exercise classes. There was no
indication that she was psychotic or demented; her memory and orientation to
time, place, and person were intact; and she insisted that she was never in
danger of hospitalization. Yet, Medicare had been billed for partial
hospitalization services for 18 months at the time we reviewed her case.
--
In another case, a 99-year-old woman who resided in an assisted living facility
was placed in what she believed to be an adult day- care program of social and
recreational activities. She was extremely surprised and upset to learn that the
program she had attended was described as being intended for the severely
mentally ill.
Further, an enrollment initiative by HCFA in nine States,
covering nearly 700 centers, found that a high percentage of the centers did not
meet certification requirements to qualify for Medicare payments. In addition,
reviews at selected mental health centers disclosed that the cost reports which
were used to support their Medicare billings contained significant unallowable
and non reimbursable items; and the centers experienced numerous other problems
related to provider enrollment, patient recruitment, patient and staff
certification, and the facilities' physical condition. We have also found
improper billings and inappropriate treatment of mental health patients in
nursing homes. In a 1996 study, we found that 32 percent of the records reviewed
for such patients were for services that were not medically necessary or
appropriate. These included such things as socialization activities that were
not true mental health treatments and psychotherapy for individuals incapable of
benefitting from it.We have begun focusing on services provided in hospital
psychiatric facilities, and are following up on reports about abusive practices
and negligence, including misuse of restraints. We plan to conduct follow-up
studies as necessary on all of these issues.
Managed Care
Currently 6.6
million, or 16 percent of Medicare beneficiaries are enrolled in health
maintenance organizations (HMOs) rather than the traditional fee-for-service
medical plans. Similarly, Medicaid beneficiaries are being enrolled in a variety
of managed care plans being offered by their State governments. As these types
of care develop and new forms of and opportunities for them arise, we are
beginning to experience a broad array of new issues connected with them. Some of
these issues are similar to the traditional fraud and waste that we see in the
fee-forservice environment, but some times the health maintenance organization
or other managed care plan is being abused by unscrupulous providers. Other
issues relate to quality of care, beneficiary protections, marketing practices,
access, and cost. We have been following all of these matters closely and have
conducted studies on related topics since the inception of new approaches to
medical care. Following are summaries of some of our more recent or current
studies in this area.
Administrative Costs. Risk-based HMOs receive
substantial funds for administrative costs to operate their Medicare managed
care programs. HCFA has very little information available on how the HMOs use
these funds, which are provided as part of the Medicare capitation amount. We
are analyzing the variances in administrative funds (as a percentage of total
funds received from Medicare) among HMOs to determine whether Medicare is
absorbing more than its fair share of these costs and how they are being used.
For example, our assessment of the administrative costs included in HMOs' rate
proposals showed that Medicare could save about $1 billion a year if
administrative costs were determined in accordance with Medicare's longstanding
principle of paying only its fair share of needed health care costs. Looking at
specific HMOs, we identified administrative costs that would be considered
inappropriate in other Medicare reimbursement situations. We are sharing our
results with HCFA so that appropriate legislative change may be considered.
Enhanced Payments to HMOs. HMOs are entitled to higher than usual payments
for their beneficiaries who have end stage renal disease (ESRD) or are dually
eligible for Medicare and Medicaid. Our audits have shown that some HMOs have
misrepresented the number of beneficiaries in these categories, resulting in
substantial overpayments. For example, our 1996 work on enhanced payments for
ESRD beneficiaries identified some $35 million in overpayments and our work in
1995 and 1996 identified another $85 million overpaid by Medicare for dually
eligibles.
Fee-for-Service Payments to Disenrolled Beneficiaries. The HCFA
analysis of how well an HMO performs does not include reviewing fee- for-service
payments made for beneficiaries after they have disenrolled from the HMO. We
will analyze the medical services received by these disenrolled individuals to
determine if the HMO may have encouraged their disenrollment and/or provided
poor care. As an interim step, HCFA could use our computer technique to help
improve its evaluations of HMOs until better methods are
developed.Dissatisfaction of Vulnerable Beneficiaries. Although beneficiaries,
in responding to OIG surveys, reported generally positive experiences with HMOs,
some indicated that they disenrolled because they received a lower standard of
health care or because they felt their health had declined while in the HMO.
This was particularly true of disabled beneficiaries and those with functional
impairments and serious illnesses, who reported much less positively about their
experiences. We also found some problems in communications between the HMOs and
beneficiaries related to appeals and grievances. Our work in this area is
ongoing.
Withdrawal of HMOs from Medicare. Recently, a number of Medicare
HMOs have indicated that they will withdraw from participation in Medicare. We
plan to study the impact of these withdrawals on beneficiaries, including
adequacy of notification, availability of other health care options, and extent
of costs to beneficiaries associated with these changes.
Home Health
Through our audits, investigations, and evaluations, we have found the home
health benefit to be particularly vulnerable to fraud and abuse. The inability
of Medicare to effectively identify improper claims before payment is made (due
primarily to the sheer volume of claims), the open ended nature of the benefit,
and weaknesses in physician oversight of patients' eligibility, combined with
the ease of entry into the program by business with questionable credentials,
increased the risk of losses due to payment errors and outright fraud. Just
three years ago we found the payment error rate in New York, Illinois,
California, and Texas to be 40 percent. This was primarily due to payments for
medically unnecessary services, for services provided to patients who did not
meet Medicare's definition of "homebound," and for services which were not
properly certified by a physician.
The nature of fraud in this program can
be seen in the following examples:
-- In February 1998, the vice president
of a Wisconsin company that managed four home health agencies was sentenced to 4
years probation for her part in a conspiracy to defraud Medicare and Medicaid
and for filing false income tax returns. The firm's president charged the
government for personal living expenses such as housekeeper services, bottled
water, private massage treatments, and vacations to Europe and Disney World.
-- In April 1998, the former administrator/owner of a Maine home health
agency pled guilty for herself and her corporation to defrauding Medicare and
Medicaid. During 1993 and 1994, false cost reports were filed that were based on
fictitious invoices for office improvements, supplies, computer software
development, equipment purchases, and rent. In addition, the corporation made
false statements in failing to reveal related-party transactions.
-- In
September 1998, an owner of a Chicago home health agency pled guilty to several
counts of filing false cost reports to the Medicare program. These reports
included a number of personal expenses such as $90,000 in personal loans and
over $20,000 in jewelry that she had charged to the Medicare program. In all,
she had obtained in excess of $500,000 in payments from Medicare to which she
was not entitled. She also failed to pay $46,000 in withholding taxes.
Fortunately, most of the vulnerabilities have been addressed by the Balanced
Budget Act of 1997, and in subsequent Departmental regulatory and administrative
initiatives. We also worked closely with representatives of the home health
industry to develop compliance program guidance to assist them in developing
specific measures to combat fraud, waste, and abuse and to establish a culture
of ethics that promotes prevention, detection, and resolution of instances of
misconduct. We are therefore hopeful that the error rate has declined. However,
until all the recent reforms are fully implemented, the Medicare home health
program will remain a serious risk. Therefore, we will continue to closely
monitor the program and measure the progress being made in lowering the error
rate.
Implementation of Balanced Budget Act Provisions
The Balanced
Budget Act of 1997 instituted what is commonly thought of as the most sweeping
set of changes to Medicare since the program's inception. The law literally made
hundreds of changes to the program. We were very pleased that many of these
reforms were consistent with recommendations made by our office or were aimed at
correcting program weaknesses and vulnerabilities identified by our work. The
following is a list of some of the more significant changes contained in the
law:
-- Developing a prospective payment system that covers most non-
professional services rendered during Part A covered nursing home stays.
--
Requiring nursing homes to directly bill Medicare for most services rendered to
Medicare beneficiaries in other than Part A covered stays. This is commonly
referred to as "consolidated billing."
-- Requiring that a prospective
payment system be developed for home health related services and that an interim
payment system be utilized to control cost and utilization prior to
implementation of the prospective system.
-- Vastly expanding the health
Care options available to beneficiaries by creating the Medicare+Choice program.
-- Instituting a great number of program safeguard provisions, including
requiring surety bonds for certain providers, recertifying the hospice benefit
for longer term patients, and strengthening civil monetary penalty and exclusion
authorities.
-- Mandating that the Department redesign the way Medicare
reimburses ambulance services through "negotiated" rule making.
-- Making a
whole host of reimbursement changes including but not limited to those related
to Medicare prescription drugs, therapy services, and oxygen.
-- Authorizing
Medicare payments for a variety of preventative services
including mammography, pap smear and pelvic exams, prostate
cancer screening, and colorectal screening.
-- Allowing
Medicare to be a more prudent purchaser of services by
authorizing competitive bidding and "inherent reasonableness" payment
reductions.
These provisions are quite impressive in their scope and
significance. Implementing this level of programmatic change is an overwhelming
task under any circumstances. In the environment of significant concern over
possible computer failures associated with the Year 2000, it is an even more
daunting task. Even so, the Health Care Financing Administration reports that it
has completed implementation of 188 out of 335 Balanced Budget Act provisions.
However, because of the attention needed to make their systems compliant for the
Year 2000, HCFA has also indicated that it will be unable to implement certain
reforms by statutorily mandated dates, including consolidated billing in nursing
homes, and the home health and outpatient prospective payment systems. HCFA
plans to implement delayed provisions as soon after April 1, 2000 as possible,
but more complex system changes may have to be phased in. We believe that it
will be very important to monitor the progress of implementation of these
provisions and the effects of any delays that will occur.
Quality of Care in
Nursing Homes
Sorely needed payment reforms for nursing homes were included
in last year's Balanced Budget Act and summarized above. We are now turning our
focus to the quality of care in nursing homes. Recent studies by the General
Accounting Office and HCFA as well as our own office have revealed serious
concerns about the quality of care. These were highlighted in recent
Congressional hearings by the Senate Special Committee on Aging, and HCFA has
developed an action plan to address most of the serious systems problems noted
in these reviews. Our own office has had a long history in dealing with such
problems--through the Medicaid Fraud Control Units which are funded by grants
administered by my office; through our removing any individuals or entities
convicted of abusing patients from participation in Federal Government funded
nursing home operations; and through various studies of abuse in nursing homes
and the systems intended to deal with abuse complaints.
Most recently we
issued a report that provides insight into measures taken by States to safeguard
nursing home residents from abuse. We found that States varied widely in the way
they systematically identify, report, and investigate suspected abuse and that
background checks of nursing home employees were usually limited to State
records. Also, individuals with criminal histories were not recorded in State
central registries for use in screening prospective employees. Specifically, our
audit of 8 Maryland nursing homes disclosed 51 employees that, according to FBI
records, had been convicted of a variety of crimes, some of a violent nature.
The employees included certified nurse aides as well as staff holding jobs not
subject to background checks. Similarly, our background check of 35 individuals
who had been convicted of elder abuse in Maryland showed 7 had prior convictions
for other types of crimes. We recommended that HCFA consider establishing
Federal requirements and criteria for criminal background checks and assist in
the development of a National abuse registry and expansion of current
Stateregistries to include all workers who have abused residents in Federally
reimbursed facilities. We also suggested that legislation be enacted to allow
inclusion of the National abuse registry in an expanded version of the current
Healthcare Integrity and Protection Data Bank.
We continue to remain
concerned that a more intensive effort is needed to raise the level of quality
of care in nursing homes to an acceptable level. During 1998, we took action
against nursing homes that furnished substandard, even dangerous, patient care:
-- A chain of three nursing homes in suburban Philadelphia settled an action
alleging grossly deficient patient care. One case resulted in the scalding death
of a patient. The homes were required to institute rigorous and extensive
quality of care compliance provisions. These standards included strict
guidelines for the care of nursing home residents with diabetes; standards that
in many respects exceed professional standards in the industry. Enforcement of
the standards is ensured by an independent monitor; at one of the three homes we
required an outside manager to oversee all aspects of the facility until such
time as HCFA finds that the home is operating effectively and safely.
-- The
Government also concluded its investigation of a publicly owned nursing home for
allegations of substandard care (including excessive use of restraints, lack of
cleanliness, and a high level of injuries among patients). Again, in settlement
of the action, the city agreed to implement specific protocols to ensure quality
of care, and to employ a monitor to ensure full implementation and further
safeguard the patients. The paramount impetus for these and similar actions is
not to obtain compensation for the Government's losses, but to prevent future
violations and protect patient safety.
-- An additional investigation
disclosed that a northern Louisiana rehabilitation hospital was billing Medicare
for services that were medically unnecessary or provided no benefit to the
Medicare patient. The hospital also delayed discharging Medicare patients in
order to bill additional services to Medicare. The hospital and its majority
stockholder agreed to pay nearly $4.5 million in settlement of these allegations
of false claims to Medicare.
Corporate integrity agreements can
also be an important instrument in safeguarding patient quality of care. For
example, a psychiatric hospital agreed to have a monitor selected by the
Government to oversee the medical necessity for and duration of each admission,
and otherwise review the quality of patient care. Also, a Pennsylvania nursing
home signed a settlement agreement that included strict guidelines for the care
of nursing home patients with diabetes.
The Omnibus Budget Reconciliation
Act of 1987 created a comprehensive set of nursing home reforms. We have begun a
multi-year, systematic examination of the implementation of those provisions. We
are currently examining the trends in quality of care in nursing homes and the
overall capacity of current processes (survey and certification, ombudsman
program, and State patient abuse coordinators) to deal with them, and assessing
the availability of nursing home survey results to the public. In the future, we
plan to examine the accuracy of resident assessments and plans of care; the
process for resolving patient abuse complaints; the role of medical directors in
ensuring quality of care; and nurse aide training requirements.
Child
Support Enforcement
On December 31, 1998, the Administration on Children and
Families reported that the Federal/State child support enforcement programs
collected an estimated $14.4 billion for Fiscal Year 1998, an increase of 7
percent from 1997's $13.4 billion, and an increase of 80 percent since 1992 when
$8 billion was collected. In addition, the Federal Government collected over
$1.1 billion in delinquent child support from what was to have been Federal
income tax refunds for tax year 1997. This amount was 3 percent higher than the
previous year and a 70 percent increase since 1992. Collections were made on
behalf of nearly 1.3 million families.
Although collections have increased
dramatically, much work still remains to be done. According to the
Administration of Children and Families' 21st Annual Report to Congress,
information reported for FY 1996 indicates that $16.9 billion in current support
and $40 billion in prior years support remains uncollected. To the extent that
these payments are not collected, the children of these families are at greater
risk of welfare dependency. These statistics reflect both the positive result of
many years of continuing and increasingly intensive attention to the problem of
unfulfilled parental obligations through the payment of child support, and the
more negative features of the intractability of the problem and progress yet to
be made. Our office has been involved in these efforts for more than a decade
though audits and evaluations dealing with such topics as paternity
establishment, review and adjustment of orders, medical support, and income tax
cheating by non-custodial parents. More recently, our investigative capabilities
have also been brought to bear on this problem.
In 1995, the Office of
Inspector General was authorized by the Department of Justice to investigate
violations of the Child Support Recovery Act. This Act, passed in 1992, makes it
a Federal offense for a non-custodial parent residing in a different State than
the children to willfully avoid paying his or her court ordered support
obligations. Since 1995, we have opened over 420 cases, and arrested 130
subjects. As a result of these efforts, 90 individuals have been sentenced and
over $7.3 million ordered in restitution. Additionally, in conjunction with the
Office of Child Support Enforcement, my office has created and established a
multi-agency, multi-jurisdictional task force whose purpose is to identify,
investigate and prosecute the most egregious criminal non-support matters at
both the State and Federal levels. To date, this task force, covering the States
of Illinois, Michigan, and Ohio, has opened over 250 investigations and arrested
approximately 185 individuals. These arrests have resulted in 167 convictions
and restitution ordered in the amount of $4.4 million.
The following are
examples of some of our recent cases:
-- A non-custodial parent was arrested
after being charged in Oregon with failure to pay child support. There were
three additional arrest warrants for him in the Oregon, including a warrant for
illegal weapon possession. He was working as a pipefitter/welder at remote gold
mines in Nevada and Utah, earning $60,000 per year. He owed approximately
$47,000 in child support; and, to avoid paying, he changed jobs every time the
State tried to garnish his wages. When he appeared before the U.S. Magistrate,
he was ordered detained as a flight risk and was transferred back to Oregon.
-- A Virginia resident told his former spouse that he was quitting his job
and leaving the country to avoid paying child support. He then went to Hawaii
and started a scuba diving school. He was arrested by U.S. Marshals on the dock
when he brought his boat in after a class. The man pled guilty and was sentenced
to pay the full amount of child support owed -- $17,000.
We are also
continuing our studies in the area of child support enforcement, focusing
primarily on ways to improve paternity establishment, gain greater support from
public assistance clients in establishing support orders, improving States
methods of reviewing and adjusting child support orders, and improving medical
support coverage in support orders. Medicare Prescription Drugs
Under
provisions of the Balanced Budget Act of 1997, Medicare allowances are now based
on a 5 percent discount of the published average wholesale price of prescription
drugs. Based on our work, we believe that Medicare continues to substantially
overpay for these drugs. For example, we found that Medicare and its
beneficiaries could save about $1 billion per year if Medicare allowed amounts
for 34 drugs were equal to prices obtained by the Department of Veterans
Affairs. This potential savings represented almost half of the $2 billion
Medicare and its beneficiaries paid for these drugs in 1997.
We believe that
additional legislative action or more extensive use of "inherent reasonableness"
payment authorities is warranted to reduce outlays for prescription drugs.
Legislative options include basing allowances on acquisition costs, mandating
rebates, and permitting/requiring competitive bidding.
Medical Equipment and
Supplies
While Medicare payments for medical equipment and supplies
represent a relatively small proportion of the program (about $6 billion), over
the years we have had to devote significant resources to this area due to the
significant problems encountered. Some of these problems, including kickbacks,
false claims, and excessive prices became so widespread and ingrained that they
were almost accepted as unsolvable, almost tolerable, features of the program.
The following examples illustrate the extremes to which irresponsible Providers
have gone to exploit the Medicare program:
-- In January 1999, the owner and
operator of a medical supply company pled guilty to conspiring to submit $41.8
million in false Medicare claims. The supplier knowingly sold incontinence
urinary kits to nursing homes that Medicare did not cover and admitted to
billing Medicare between $8.35 and $22.57 for adult diapers (which are also not
covered under Medicare and which cost between 25 and 45 cents.) He also pled
guilty to laundering $8.9 million of the $15.1 million in illegal proceeds
Medicare paid to him. The Court issued a Preliminary Order of Forfeiture that
forfeited to the United States Government between $35 million to $40 million in
currency, real estate and personal property he had accumulated with the illegal
proceeds. The property forfeited included over $700,000 in cash and negotiable
instruments, the proceeds of 45 corporate and individual bank accounts, 32
pieces of real estate worth approximately $35 million, 11 pieces of real estate
in the Cayman Islands worth over $3 million, the assets of 27 corporations owned
by the supplier, 3 trucks, 2 cars and one motor home, 6 fur coats, 100 to 150
head of cattle, and jewelry valued at $127,000. The supplier additionally
devised three phony supply companies in order to continue billing Medicare for
three years after the program suspended payments to his company. Sentencing has
not yet taken place.
-- Along the same lines, one of the highest-reimbursed
Medicare suppliers of incontinence care products pled guilty to conspiracy to
defraud Medicare of more than $70 million. He had actually collected $45 million
by distributing adult diapers but billed Medicare for female urinary collection
pouches. He agreed to forfeit $32 million in seized bank accounts, paid $2.5
million in restitution, and was sentenced to 10 years imprisonment.
--
We found that questionable payments of wound care supplies (fillers or
protective covers that treat openings on the body caused by surgical procedures,
wounds, ulcers, or burns) may have accounted for as much as two-thirds of the
$98 million Medicare allowed for these items from June 1994 through February
1995. We found one beneficiary was charged $5,290 for tape over a 6-month
period. Medicare paid for, but the beneficiary probably did not receive, 66,000
feet, or 12.5 miles of one-inch tape. Another beneficiary was charged $11,880 in
hydrogel wound filler. This beneficiary's record showed payments for 120 units
of one-ounce hydrogel wound filler each month for six consecutive months, or
over 5 gallons. Concerted efforts by HCFA, Medicare's durable medical equipment
regional carders, and our office have since contributed to a dramatic decline in
allowances for wound care, saving Medicare $58 million between 1995 and 1996.
-- Orthotic body jackets are customized, rigid devices intended to hold
patients immobile and treat patients with muscular and spinal conditions. They
cost about $100 to $1,200 each. Medicare payments for this device increased by
over 8,200 percent from 1990 to 1992 (from $217,000 to $18 million). We found
that 95 percent of claims in a sample which we studied were for non-legitimate
devices. We have obtained convictions of entities that billed-Medicare for body
jackets but provided seat pads or other restraining devices typically used to
help support beneficiaries in wheelchairs. We are currently updating our study
because we believe that this problem may not have been completely corrected.
Although Medicare expenditures have decreased, we feel that we have not yet
eliminated this problem.
We are continuing our work in this area, including
looking for ways to keep illegitimate providers out of the Medicare program. For
example, we recommend that providers should be required to pay an application
fee to cover the cost of processing their applications to participate in the
program.Provider Numbers
Ensuring that only legitimate providers enter the
program and provide services to Medicare beneficiaries is of paramount
importance to us. The Balanced Budget Ac us a powerful tool by authorizing
Medicare to collect Social Security and tax identification numbers from
providers. The Health Insurance Portability and Accountability Act of 1996 also
contained significant provisions related to administrative simplification which
call for a National provider identification system. Medicare will not be secure
until these new systems are carefully developed. We will closely monitor the
implementation of the new statutory provisions to ensure that these systems work
as intended. We are now conducting a study on the identification system used for
Medicare physicians and another to determine if medical care providers who have
been excluded from the program continue to bill for services to Medicare
beneficiaries.
WAYS TO ADDRESS THESE PROBLEMS
As noted earlier and as
evidenced by the examples discussed above, the problems that I have discussed
with you today are extremely complex. Clearly, we cannot eliminate the errors,
waste, and fraud without relentless oversight through audits, investigations,
and .evaluations and through effective agency oversight. In the past we have not
always had a stable source of funding to do this. However, since the passage of
the Health Insurance Portability and Accountability Act of 1996 our
effectiveness has been strengthened through an increased and predictable funding
base for us and the Health Care Financing Administration.
It became
increasingly obvious that our traditional approaches alone would not be
sufficient to win this battle. We needed structural reforms, new partnerships,
and new ways of thinking.
Only through a multifaceted, coordinated effort
could we eliminate or mitigate the risks and avoid the consequences I have
discussed here. Again, the Health Insurance Portability and Accountability Act
of 1996 gave us the foundation for doing this. It authorized the Health Care
Fraud and Abuse Control Program, a partnership between the Office of Inspector
General and the Department of Justice to coordinate Federal, State, and local
law enforcement activities with respect to health care fraud and abuse. We are
very thankful that the Congress and the Administration have provided us with
additional resources and authorities in recent years to assist us in addressing
the challenges we face. I would like to take a moment to describe some of the
broad initiatives that we have taken as a result.
General Upgrading of
Capacity
Our first step was to upgrade our facilities, methods,
technologies, skills, and organizations. We are opening new offices,
particularly in areas with higher than usual suspicious activity, and more
generally in an all out effort to provide full security coverage for our
programs. We have developed new analytic techniques and computing capacity to
uncover and analyze suspicious payment and utilization trends which can then be
investigated or audited as appropriate. We are combining our audit,
investigative, evaluation, and legal functions to more effectively prevent,
uncover, and respond to fraud and waste. And we have strengthened our procedures
for coordinating our efforts with those of the Justice Department.In FY 1998
there were 261 convictions (193 were health care related), 927 civil settlements
(921 health care), and 3,021 exclusions from the Medicare program. The Office of
Inspector General was pleased to report record savings of $11.6 billion
comprised of almost $11 billion in implemented recommendations and other actions
to put funds to better use, $147 million in disallowances from questioned costs,
and $516 million in investigative receivables.
Program Structural Reform
It was clear that some of the more serious problems the Department was
facing stemmed from the very structure of its programs. This was particularly
true of those where payments to providers were based on their costs or charges.
This approach contains inherent incentives to exaggerate prices and overutilize
services. Some programs also had very weak screening criteria and enrollment
processes, enabling easy entry by unscrupulous individuals and business
entities. Others used payment methods that made it too easy for Medicare to pay
incorrectly in the first place and difficult to recover funds when improper
payments were discovered. In many cases the sheer volume of payments made
reasonable scrutiny practically impossible.
Examples of exactly these kinds
of situations are those which I have described earlier in my
testimony--including home health, nursing home, and mental health services, and
medical equipment and supplies. No amount of auditing and investigating can
adequately deter, detect, and respond to the errors, waste, and outright fraud
that could occur in these areas. What is needed are fundamental reforms in the
program structures themselves, and stronger safeguards in the form of
certification standards and enrollment procedures.
We are particularly proud
of the studies which my office contributed to promoting a greater understanding
of the vulnerabilities that were addressed in the Balanced Budget Act of 1997.
The Congressional Budget Office has estimated that the savings from the reforms
to which we made contributions will total almost $70 billion over five years.
Industry Outreach and Education
We have engaged in numerous proactive
outreach efforts designed to help the medical care industry avoid fraud and
waste, increase their compliance with Medicare rules, and generally understand
more about the nature of waste, fraud, and abuse. Following is a brief
description of these initiatives. Information about these outreach efforts and
results of our audits, investigations, and evaluations are routinely made
available through the Internet on our website at www.hhs.gov/progorg/oig. We
have issued an open letter inviting health care providers to join us in a
National campaign to eliminate fraud and abuse.
-- Compliance Plans. A
cornerstone of our prevention efforts has been the development of compliance
program guidance to encourage and assist the private health care industry to
fight fraud and abuse. The guidance, developed in conjunction with the provider
community, identifies steps that health care providers may voluntarily take to
improve adherence to Medicare and Medicaid rules. Each guidance sets forth seven
elements that we consider necessary for a comprehensive compliance program and
identifies risk areas for the specific industry settlor. So far we have issued
compliance program guidance foruse by clinical laboratories, hospitals, home
health agencies and third party billers. We also solicited input from the
nursing home and durable medical equipment industries on issues that should be
addressed in upcoming guidance for those health care sectors.
-- Corporate
Integrity Plans.
Health care providers that enter into agreements with
the government in settlement of potential liability for violations of the False
Claims Act also agree to adhere to a separate "corporate integrity agreement."
Under this agreement, the provider commits to establishing a compliance program
or undertaking other specified steps to ensure their future compliance with
Medicare and Medicaid rules. The duration of most corporate integrity agreements
is 3 to 5 years, during which time the provider must submit an annual report to
us on its compliance activities. At the close of 1998, our office was monitoring
approximately 350 agreements; a total of 231 corporate integrity agreements were
entered in 1998.
-- Fraud Alerts. We issue special fraud alerts on topics
that warrant attention by medical care providers. Through these alerts we can
spell out the kind of situations that could get providers into trouble if they
are not careful. For example, in March 1998 we issued a special fraud alert on
the interrelationship between the hospice and nursing home industries describing
some potentially illegal practices identified in arrangements between these
providers. These arrangements are vulnerable to fraud and abuse because nursing
home operators have control over the specific hospice or hospices they will
permit to provide hospice services to their residents. An exclusive or semi-
exclusive arrangement between a nursing home and a hospice may involve a request
or offer of illegal remuneration to influence a nursing home's decision to do
business with a hospice. Potential kickbacks may also be involved in an attempt
to influence the referral of patients. Nursing homes and hospice care providers
can use the guidance in the fraud alert to avoid potentially problematic and
illegal arrangements.
Other fraud alerts have been issued concerning
physician liability for certifications in the provision of medical equipment and
supplies and home health services; the provision of services in nursing
facilities; joint venture relationships; routine waiver of Part B copayments and
deductibles; hospital incentives to referring physicians; prescription drag
marketing practices, and arrangements for the provision of clinical lab
services.
-- Advisory Opinions. During this past year, in consultation with
the Department of Justice, we finalized our process for providing written
advisory opinions in response to requests for clarification from businesses
regarding the sanction authorities enforced by the Office of Inspector General,
including the anti-kickback statute and the Civil Monetary Penalties Law. We
received 21 requests for opinions in the last quarter of the year, almost 40
percent of the total requests for the year, reflecting growing industry
recognition of the value of the advisory opinion process. In addition, we
frequently speak to industry groups on areas of suspected fraud and abuse and
measures they can take to avoid trouble.
Beneficiary Outreach and Education
Enlisting beneficiaries as partners in fighting fraud and waste assists in
identifying abuses at an early stage, and preventing ongoing or widespread
abuse. In a survey completed last year, we found that Medicare beneficiaries are
well-positioned to identify fraud, with three out of four stating that they
always read their Explanation of Medicare Benefits statements. We have been
working with the Administration on Aging, HCFA, and AARP to develop an outreach
campaign to educate beneficiaries and those who work with the elderly to
recognize fraud and abuse and to report it appropriately. Some steps are already
well underway, including our assistance to State and local area offices on aging
supported by the Administration on Aging. Some of them are already teaching
Medicare beneficiaries how to protect their Medicare cards and numbers, avoid
situations which can lead to fraud, how to interpret their Medicare bills and
explanations of benefits, and how to report questionable billings to Medicare or
to the Inspector General's Hotline. A much broader campaign that also involves
HCFA, the Justice Department, and AARP will be launched just two weeks from now.
Congress has also been of assistance in our fight against waste, fraud and
abuse by enacting the Beneficiary Incentive Program in which individuals can
receive cash awards in exchange for leads resulting in action against fraudulent
or abusive providers.
Fraud Hotline
In conjunction with both the
industry and beneficiary outreach efforts, we have also been expanding the
toll-free hotline for beneficiaries and providers to report suspected fraud. Now
millions of beneficiaries see the number 1-800-HHS-TIPS printed on the forms
they receive that explain the Medicare benefits paid for them. Since 1995, the
Hotline has received 600,000 calls which contributed to identifying $15 million
in improper Medicare payments, of which approximately $10 million has already
been recovered.
CONCLUSION
I appreciate the opportunity to appear before
you today and share with you some of our concerns related to issues that
confront the Department. There are other problems as well. Each year we issue
our Cost-Saver Handbook, also known as "The Red Book," which summarizes all of
our major cost saving recommendations that have not been substantially
implemented, as well as "The Orange Book," a compendium of significant
non-monetary recommendations for improving departmental operations. If you
remember one thing from my testimony today, I hope it will be that the problems
we confront are significant and their impact tangible and alarming; we can
address them effectively if we work together.
I welcome your questions.
END
LOAD-DATE: February 12, 1999
