<DOC>
[105 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:54282.wais]
S. Hrg. 105-892
MEDICARE FRAUD PREVENTION AND ENFORCEMENT EFFORTS
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HEARING
before the
PERMANENT
SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
DECEMBER 9, 1998
(CHICAGO, ILLINOIS)
__________
Printed for the use of the Committee on Governmental Affairs
-----------
U.S. GOVERNMENT PRINTING OFFICE
54-282 CC WASHINGTON : 1999
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
U.S. Government Printing Office, Washington, DC 20402
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
Hannah S. Sistare, Staff Director and Counsel
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
------
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
SUSAN M. COLLINS, Maine, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SAM BROWNBACK, Kansas JOSEPH I. LIEBERMAN, Connecticut
PETE V. DOMENICI, New Mexico DANIEL K. AKAKA, Hawaii
THAD COCHRAN, Mississippi RICHARD J. DURBIN, Illinois
DON NICKLES, Oklahoma ROBERT G. TORRICELLI, New Jersey
ARLEN SPECTER, Pennsylvania MAX CLELAND, Georgia
Timothy J. Shea, Chief Counsel and Staff Director
David McKean, Minority Staff Director
Mary D. Robertson, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Collins.............................................. 1
Senator Durbin............................................... 3
WITNESSES
Wednesday, December 9, 1998
Dorothy Collins, Regional Administrator, Health Care Financing
Administration, U.S. Department of Health and Human Services,
Chicago, Illinois.............................................. 7
James A. Kopf, Director, Criminal Investigations Division, Office
of Inspector General, U.S. Department of Health and Human
Services, Washington, DC....................................... 9
Barbara Coyle, Volunteer, Catholic Charities, Suburban Area
Agency on Aging, accompanied by Jonathan Lavin, Executive
Director, Suburban Area Agency on Aging........................ 14
Alphabetical List of Witnesses
Coyle, Barbara:
Testimony.................................................... 14
Prepared statement of John Grayson submitted by Ms. Coyle.... 39
Collins, Dorothy:
Testimony.................................................... 7
Prepared statement........................................... 31
Kopf, James A.:
Testimony.................................................... 9
Prepared statement........................................... 35
Lavin, Jonathan:
Testimony.................................................... 14
Prepared statement........................................... 40
Toomey, Mary Clare:
Prepared statement........................................... 40
MEDICARE FRAUD PREVENTION AND ENFORCEMENT EFFORTS
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WEDNESDAY, DECEMBER 9, 1998
U.S. Senate,
Permanent Subcommittee on Investigation,
of the Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10 a.m., at
the Federal Courthouse, 219 South Dearborn Street, Room 2525,
Chicago, Illinois, Hon. Susan Collins, Chairman of the
Subcommittee, presiding.
Present: Senator Collins and Durbin.
OPENING STATEMENT OF SENATOR COLLINS
Senator Collins. Good morning. The Subcommittee will please
come to order. Let me begin today by taking the opportunity to
thank my colleague, Senator Dick Durbin, for inviting me to the
beautiful, albeit, supposed to be windy City of Chicago, as the
Permanent Subcommittee on Investigations continues its inquiry
into fraud in the Medicare Program.
Senator Durbin and I have worked together on several
initiatives to protect consumers from fraud. He traveled to my
home State of Maine last February to attend a hearing this
Subcommittee held regarding telephone billing fraud known as
slamming. On the day of the hearing we did not have a crystal
clear day like today. This is a typical Maine day, the weather
you are having today.
However, that cold February day the weather changed from
snow to rain to ice to sleet and back to snow throughout the
day. And Senator Durbin's heroic efforts to participate in that
hearing reminded me of the faithful postal carrier in that
neither rain nor wind nor snow nor all three at once could
deter him from attending that hearing. I appreciate his
commitment to protecting consumers throughout the United States
as well as his long time interest and concern about the subject
of this hearing, Medicare fraud.
This is the third hearing that the Subcommittee has held
examining waste, fraud and abuse in the Medicare Program. At
our first hearing on June 26, 1997, we heard from a variety of
witnesses including representatives from the General Accounting
Office, the Inspectors General's Office, the FBI and the Health
Care Financing Administration.
That hearing provided an overview of the problem and
evaluated the extent to which waste, fraud and abuse affects
the Medicare Program. We learned that the Medicare Trust Fund
loses more than $20 billion per year. I want to repeat that--
$20 billion a year in improper payments, an astounding and
completely unacceptable financial drain on the system.
As we in Congress struggle with how to restore the solvency
of the Medicare Program and look at painful issues such as
whether we should needs test part of Medicare, it is terrible
that we're losing this kind of money each year to waste, fraud
and abuse. Surely we should make sure that we stem that drain
before we pursue other issues to restore solvency.
This loss undermines the fiscal integrity of Medicare and
our ability to provide needed health care services to the 38
million Americans who rely on this vital program.
During our second hearing on January 29, 1998, we explored
a dangerous trend in Medicare fraud. That is the increasing
number of bogus providers who enter the system with the sole
and explicit purpose of robbing it. One of our witnesses told
us that he went into Medicare fraud because it was way easier
than dealing drugs. He could make way more money at far less
risk.
In another example, the Subcommittee investigators
uncovered two physicians who submitted more than $690,000 in
fraudulent Medicare claims after listing nothing more than a
Brooklyn, New York laundromat as their office location. If
anyone had done the least bit of checking, it would have been
evident that this was completely bogus.
In another case revealed by the Subcommittee, over $6
million in Medicare funds were sent to durable medical
equipment companies that provided no goods or services
whatsoever. One of these companies even listed an absurd
fictitious address--physical address--that had it existed would
have been in the middle of the runway of the Miami
International Airport.
Today's hearing is a continuation of the Subcommittee's
efforts to fight waste, fraud and abuse in the Medicare
Program. The most effective way to stop this attack on Medicare
is to prevent the fraud in the first place instead of chasing
after the money from the crooks long after the money is gone.
This hearing will focus on the successful fraud prevention
and enforcement efforts in Illinois and the surrounding areas
that have been undertaken by an impressive coalition of Federal
and State agencies and private organizations during the past 3
years.
In highlighting these efforts, we hope to draw some lessons
that may be useful in preventing Medicare fraud nationwide. As
Congress and the administration work to maintain the solvency
of the Medicare Program, we must be far more aggressive in
curtailing the billions of dollars lost each year to waste,
fraud, abuse and improper payments. Unfortunately, this task is
not as easy as it sounds. There isn't a line item in the
Federal budget entitled Medicare waste, fraud and abuse that we
can simply strike and be done with it.
Fraud not only compromises the solvency of the Medicare
Program, but also in some cases directly affects the quality of
care delivered to older and disabled Americans. We have a
solemn obligation to those Americans and to all of our Nation's
taxpayers to protect Medicare. We must ensure the solvency of
the Medicare Trust Fund so that it can continue to serve older
and disabled Americans into the 21st Century.
We must guard against unscrupulous providers who give our
seniors inferior or substandard health care. And we must
protect the Nation's taxpayers from career criminals whose
illegal schemes cost us millions of dollars each year.
Let me make this clear. The vast majority of health care
professionals are dedicated and caring individuals whose top
priority is the well being of their patients. They too are
appalled by the unscrupulous providers and others who take
advantage of weaknesses in the program to steal millions of
dollars from the Medicare Trust Fund. Our goal is to bring
about effective Medicare reform that will prevent such fraud in
the future, allowing millions of Americans to continue to rely
on this vital program's many capable, caring and conscientious
health care providers.
Today we will hear about two successful demonstration
projects designed to prevent fraud and abuse. The first
program, Operation Restore Trust, was a demonstration project
initiated by the Department of Health and Human Services in
1995. The goal of the ORT Program was not only to detect and
punish fraud and abuse using traditional law enforcement
techniques, but also to identify areas of vulnerability in
order to stop fraud before it happens. This hearing will assist
those of us in Congress in evaluating the effectiveness of this
program.
The second project we will discuss today involves tapping
the skills and the expertise of retired professionals who are
beneficiaries themselves and ask them to help us in identifying
and reporting waste, fraud and abuse in the program. In May
1997, the Administration on Aging at the direction of Congress
awarded funds to 12 organizations around the country to recruit
and train retired doctors, nurses, teachers, lawyers,
accountants and other professionals to identify Medicare fraud
and to conduct community education activities.
One of the entities that received support was the Suburban
Area Agency on Aging in Oak Park, Illinois, an organization
represented by one of our witnesses today. I look forward to
hearing about the accomplishments of this innovative volunteer
program operating here in Illinois.
Indeed, I look forward to hearing from all of our witnesses
this morning as they describe their efforts to fight and
prevent the kind of abuse that our previous hearings have
uncovered. I realize that I opened the hearing without
identifying myself. I'm used to being in either Maine or
Washington. So perhaps I should do that more formally at this
point.
I am Senator Susan Collins. I'm from the State of Maine,
the great State of Maine, as we say. And I am the Chairman of
the Permanent Subcommittee on Investigations. It is now my
pleasure to yield to my friend and distinguished colleague,
Senator Dick Durbin.
OPENING STATEMENT OF SENATOR DURBIN
Senator Durbin. Thank you, Senator Collins. And I'm happy
to welcome you to Chicago, having endured the horizontal rain
storm in Maine when I visited for the hearing there. I can tell
you that if you stick around here for a few more weeks, you may
find the same thing in Chicago. Fortunately, today we have a
wonderful, beautiful day in a beautiful city known as the windy
city, and it's always a debate topic as to whether that relates
to the weather or the politicians, but whatever the origin of
that phrase, we certainly love this town and the State that
it's in. Thank you for joining us.
This Permanent Subcommittee on Investigations is a
Subcommittee of great history, and one that has made a valuable
contribution to the Nation over the years. Senator Collins, as
the most recent Chair of this Subcommittee, has carried on that
fine tradition. I can honestly tell you it is one of my best
and most rewarding assignments as a U.S. Senator from Illinois,
because Senator Collins has a special feeling about issues
involving consumers and the need to make certain that we are
fair and do everything in our power to give consumers a break.
And whether it's Medicare and the seniors and their families
who will lose from the cheats and the waste and the fraud,
telephone slamming and cramming, an issue that came to my
attention here in Chicago, and we have worked on together in
Washington, or doing something to make sure that the food
safety inspection system across America is the very best that
it can be. This Subcommittee leads the way, and I am honored to
be a Member of it. And I thank you for this important hearing
today.
For the 38\1/2\ million Americans who rely on Medicare for
their health protection, this is more than just another
governmental program. This is literally a matter of life and
death. It is a question of quality health care versus some of
the budget constraints which we're all very aware of. If our
debate in Washington goes as planned, for the next few months
we will talk a great deal about the future of Social Security,
and we should.
The fact is that Social Security untouched will be solvent
and will pay out every year with a cost of living adjustment
for at least three more decades. That doesn't mean that we
should shirk our responsibility. We certainly ought to address
even longer term solvency.
Medicare, on the other hand, is in a much more precarious
position. Medicare untouched, by some estimates, may go
bankrupt as soon as 2008. We continue to put money from our
General Treasury into the Medicare system to try to keep costs
under control. Congress is under pressure, and should be, to
respond to this as quickly as possible.
None of us want to raise premiums. None of us want to cut
back on services. But we have to face the reality. This hearing
addresses what I consider to be the first and easiest place for
us to visit to help Medicare. To go after some $23 billion in
waste every single year, waste that affects every senior
citizen. Waste that denies to seniors the basic and good
quality medical care which they've come to expect. The kind of
waste which defrauds taxpayers and is virtually intolerable.
The hearings that we've had in Washington have been a
revelation. You can read about it in the newspaper, but when
Senator Collins brings in a man who has been convicted of
Medicare fraud who will not appear except behind a curtain and
he testifies to us what he was able to get by with, it is just
disgusting. To think that some rip-off artist would get into
the Medicare system and literally abuse it by taking advantage
of senior citizens and taxpayers. This man is serving time in
prison. I'm convinced that a lot of others should, too.
But make no mistake. As the Senator has said, the vast
majority of providers are honest people. They're doing their
very best. They worry about the bureaucracy of the forms and
all of the things that government tosses in their path. But
they understand, I hope, that we have got to keep this system
as good and effective as possible.
Some of the examples Senator Collins noted I'll never
forget. To have a medical care provider provide an address to
the Federal Government which even the most cursory examination
of the telephone book or even a driver in Miami in this case
would have told you was a total fictitious address, an address
in the middle of the runway at Miami International Airport. To
have addresses given that turn out to be laundromats, turn out
to be drop boxes, and these are people who are literally
billing the Medicare system thousands and millions of dollars a
year for fictitious services and equipment.
We had a case where one so-called durable medical equipment
company was providing diapers for incontinent nursing home
patients. Each diaper cost 30 cents. They billed the Federal
Government $8 for each one of them, referring to them as
urinary collection devices. This is common and, unfortunately,
it takes the money out of the system that needs to be put back
in to help so many people.
Luckily, we've taken an initiative at the Federal level,
Operation Restore Trust, which we are going to explore today,
and just see how effective it's been. There's entirely too much
fraud still in the system, but maybe we're moving in the right
direction. And those who will testify and tell us about it will
give us an indication of our success and what more we can do.
I happen to believe the first line of defense on Medicare
fraud are seniors and their families. I understand that many
elderly people under Medicare are not in a position because of
a physical ailment or other problems to police the system for
us, to read carefully every line item in their billing, but
honestly, if they can and if their families can join them in
this effort, it is the first line of defense. To look and find
something preposterous that is being billed to the Federal
Government and to say this just isn't right and it isn't fair
and I'm going to tell somebody about it.
There's nothing, I think, more effective than to have
seniors activated and mobilized to do just this. And we're
going to hear testimony today about efforts to make that
happen. I think that will go a long way.
Second, the Federal Government has to do a better job. To
think that, as Senator Collins and I have seen, so many people
are ripping off the system in such obvious ways without the
kind of surveillance that's necessary really calls for new
legislation. And Senator Collins and I are working on a bill
which will bring basic accountability and auditing procedures
here to make certain that we catch up with those that are
trying to cheat the system.
The basic message which I hope goes out today from this
hearing in Chicago is that when it comes to cutting corners and
cheating seniors and ripping off the Treasury, that is
absolutely unacceptable. Whether it's Medicare or any other
program, we are not going to tolerate it. We hope that we can
mobilize a bipartisan effort in the U.S. Senate, in Congress
and across the Nation.
The President's announcement this week of further
initiatives by the administration give us encouragement, but we
have to make sure that we do our job by getting the facts
straight, and that's what this hearing is all about.
I thank Senator Collins and all those in the audience for
joining us today. I'm looking forward to it.
Senator Collins. Thank you, Senator. We will now hear from
our panel of witnesses who will discuss their efforts to fight
and prevent waste, fraud and abuse in the Medicare Program.
I'd ask that our witnesses come forward at this point. Our
first witness is Dorothy Collins. She is Regional Administrator
for the Health Care Financing Administration here in Chicago.
Ms. Collins is responsible for monitoring the Medicare Program
in Illinois and five surrounding States.
I would also note that I have an aunt with the same exact
name, but we are not related in this case, but good name.
Our second witness is James Kopf. He is the Director of the
Criminal Investigations Division of the Department of Health
and Human Services, Office of Inspector General. Mr. Kopf has
more than 20 years of Federal law enforcement experience. He
served as the National Coordinator of Operation Restore Trust
Demonstration Project during its first year.
Finally, we will hear from Barbara Coyle, who has very
kindly agreed to step in this morning at the last moment to
testify in place of John Grayson, who had been slated to
testify before the Subcommittee today. Unfortunately, Mr.
Grayson is ill and is unable to be with us this morning. We
very much appreciate Ms. Coyle stepping into the breech and
taking up the cause.
Ms. Coyle is from Evergreen Park, Illinois. She is a
retired public health nurse. She volunteers with Catholic
Charities, the South Suburban Senior Services, and with the
Southwest Council in Aging for the Suburban Area Agency on
Aging. She is accompanied by Jonathan Lavin, who is the
Executive Director of the Suburban Area Agency on Aging, the
Triple A, I think I'll call it from now on.
Again, we are very pleased to have you all with us. We have
a rule at the Permanent Subcommittee on Investigations that
requires us to swear in all of the witnesses. I want to tell
you it's not that we doubt that any of you will do anything but
tell us the truth, but it is part of our rule. So I'm going to
ask that you all stand and raise your right hand so that I can
swear you in.
(Witnesses sworn.)
Thank you. You may be seated. We will make your entire
written testimony part of the hearing record. We're going to
ask that you limit your oral testimony to no more than 15
minutes a person this morning. And we will start with Ms.
Collins.
TESTIMONY OF DOROTHY COLLINS,\1\ REGIONAL ADMINISTRATOR, HEALTH
CARE FINANCING ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND
HUMAN SERVICES, CHICAGO, ILLINOIS
Ms. Collins. Good morning. Chairwoman Collins, Senator
Durbin, thank you very much for inviting me here today to
discuss Operation Restore Trust and our ongoing fight against
fraud, waste and abuse.
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\1\ The prepared statement of Ms. Collins appears in the Appendix
on page 31.
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Operation Restore Trust was launched by President Clinton
in 1995 as a five-State demonstration project. It has rapidly
become the way we do day-to-day business nationwide because of
its overwhelming success.
Operation Restore Trust, along with the stable funding for
program integrity work that was established in 1996, marks a
turning point in our fight against fraud, waste and abuse. It
has led to record levels of convictions, fines, restitutions
and exclusions of unscrupulous providers.
It has shown us how to move faster and smarter. We are
using what we learn broadly and aggressively. We are conducting
more audits, more reviews and site visits than ever before.
Operation Restore Trust also helped generate broad support
to close loopholes, raise standards, promote efficiencies and
prevent problems in the first place.
Most importantly, Operation Restore Trust taught us how
critically important it is to coordinate with all of our
partners, from the FBI to the individual beneficiary. And it
inspired us to work with our partners to develop a
comprehensive program integrity plan. Together we are making
fraud and abuse harder to accomplish, easier to see and less
appealing to the unscrupulous.
Illinois was among the first Operation Restore Trust
demonstration States. We brought together teams from the Health
Care Financing Administration, the Office of the Inspector
General and the Administration on Aging to target areas where
we knew we had problems, home health agencies, nursing homes,
hospices and durable medical equipment suppliers. We tackled
these problems through several key elements of Operation
Restore Trust.
We used statistical methods to identify potential problems.
We cooperated through inter-disciplinary teams to review
questionable providers. We coordinated investigations with law
enforcement to assure coordination at all relevant levels of
investigation. We empowered aging organizations, ombudsmen and
individual beneficiaries and health care workers, by training
them to detect and report potential problems. And we looked for
efficiency. For example, by using State survey officials who
already monitor care for quality, to also look for questionable
billing practices.
In Illinois, one of our first projects focused on 20 home
health agencies. We used statistical analysis to draw up a list
of agencies that had aberrant billing patterns. We coordinated
our plans with our law enforcement partners who had separate
investigations underway. We trained State registered nurse
surveyors who conduct home health agency quality reviews to
spot program integrity problems and had them conduct surveys of
the agencies on that list.
The State surveyors also, and importantly, visited
individual beneficiaries at home to ask about their care. They
found that far too often services were overused, not medically
necessary or not covered by Medicare. In some cases, the
beneficiary was not even homebound. We then had our claims
processing contractor review the State surveyors' findings.
They determined that these 20 home health agencies had been
improperly paid more than $777,000, which is now being
recouped.
They also prevented further improper payment of another
$570,000 to these agencies. All for an investment, in this
particular project, of about $52,000.
Other Operation Restore Trust initiative in Illinois
uncovered hospice billing for patients who were not terminally
ill and there were other questionable practices. Several
hospice cases have been referred to law enforcement for further
action.
We also found durable medical equipment vendors billing for
unnecessary and expensive supplies that were simply being
stockpiled in nursing home storage rooms. One provider has been
referred to the FBI and substantial overpayments are being
recovered from other providers.
Overall, Operation Restore Trust has saved more than $200
million nationwide in its first 2 years through restitutions,
fines, settlements and identified overpayments. Its expansion
began as soon as its success became apparent.
In 1997, we began to incorporate Operation Restore Trust
into our day-to-day business approach. We added community
mental health centers' abuse of Medicare's partial
hospitalization benefit to the Operation Restore Trust project
list and found centers with no trained professionals providing
no treatment of any kind or billing for therapies such as
bingo. We now have a national initiative underway to stop these
abuses. As the result of initiation of the community health
center review in Illinois, a provider with 13 sites was found
not to meet even the basic requirements and is now no longer a
Medicare provider.
We also initiated special reviews of rehabilitation
agencies, home health agencies and other types of providers in
other States.
Also in 1997, we made significant improvements to Operation
Restore Trust's special anti-fraud hotline, 1-800-HHS-TIPS, so
that beneficiaries and health care workers with potential
problems to report can get information quickly to the right
people who will follow up.
Since this hotline started in June 1995, its operators have
spoken to some 145,000 individuals regarding potential fraud,
waste and abuse problems. In this region, we have received
about 4,000 complaints through the hotline so far, which have
led to almost $2 million in recoveries in about 350 cases and
an additional 75 referrals to law enforcement for further
criminal investigation.
In order to build on the lessons of Operation Restore
Trust, the Health Care Financing Administration has developed a
comprehensive program integrity plan which is nearing
completion. We began last March by sponsoring an unprecedented
National Conference on Fraud, Waste and Abuse. Groups of
experts from private insurers, consumer advocates, health care
provider groups, State health officials and law enforcement
agencies shared successful techniques and explored new ideas.
Those discussions were synthesized and analyzed to
determine the most effective approaches and most promising new
ideas. The result is a comprehensive program integrity plan
with several clear objectives, which all can be traced to
lessons learned in Operation Restore Trust. These objectives
are to increase the effectiveness of our medical review, to
implement the Medicare Integrity Program, proactively address
the new programs initiated in the Balanced Budget Act, promote
provider integrity, prepare for the year 2000 computer issue
and target known problem areas such as congregate care scams
and the community mental health centers.
This plan also notes the legislative initiatives recently
announced by the President to address fraud, waste and abuse in
the Medicare Program.
In conclusion, Operation Restore Trust has led to
unprecedented success and it has become the standard for our
business operating procedures and practices. We greatly
appreciate your interest and support for these efforts and we
look forward to working with you as we continue to move
forward, and I am happy to answer any questions you might have.
Senator Collins. Thank you, Ms. Collins. Mr. Kopf, would
you please proceed.
TESTIMONY OF JAMES A. KOPF,\1\ DIRECTOR, CRIMINAL
INVESTIGATIONS DIVISION, OFFICE OF INSPECTOR GENERAL, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC
Mr. Kopf. Thank you. Good morning, Madam Chairman, Senator
Durbin. Thank you for inviting me to participate in this vital
hearing.
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\1\ The prepared statement of Mr. Kopf appears in the Appendix on
page 35.
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I'm James A. Kopf, the Director of the Criminal
Investigations Division in the Office of Inspector General at
the U.S. Department of Health and Human Services. I'm here to
tell you about some innovative practices we have developed in
fighting fraud and abuse in Medicare and Medicaid. We've had
noble successes, but we cannot let our guard down and be
satisfied with today's successes in this area.
Let me share some insights about our experiences with the
constantly escalating assaults on our programs. With annual
expenditures of well over $300 billion, the Medicare and
Medicaid Programs present a sizeable target to those who seek
to unjustly enrich themselves at the taxpayers' expense.
In late fall of 1994, with resources shrinking, Health and
Human Service Secretary Donna Shalala, asked the Inspector
General, June Gibbs Brown, to develop a new approach that would
enlist the resources of the various health and human services
components to attack fraud and abuse in Medicare and Medicaid.
It was decided to implement a coordinated effort involving the
OIG, the Health Care Financing Administration and the
Administration on Aging.
Those three components of HHS served as a cornerstone to
the department's new initiative and brought the department's
many years of experience and expertise together in a
concentrated effort.
In addition, we invited the Department of Justice,
including the Federal Bureau of Investigation, the U.S.
Attorneys Office, State and local agencies involved in fighting
health care fraud and abuse to participate in this combined
effort which became known as Operation Restore Trust. It was
started in March 1995 and became a presidential initiative in
May of that year.
The purpose of the initiative was three-fold. To coordinate
all available resources in an effort to make a significant
impact on health care fraud and abuse. To reach out and educate
the public on the growing problem of the health care fraud
schemes. And to demonstrate the combined effort would be the
most cost efficient method of attacking this problem with
results yielding a significant return on the dollars invested.
We focused our efforts on five key States and three high
growth areas. The States were New York, Florida, Illinois,
Texas and California. These States represented over one-third
of all the beneficiaries and expenditures in the Medicare and
Medicaid Program. The high growth areas were both health,
nursing facilities and durable medical equipment.
Our audits, evaluations and investigations indicated that
the home health industry had become the target for unscrupulous
providers. Criminals had increased their profit margin five-
fold in the 2 years preceding Operation Restore Trust. Nursing
facilities also came under scrutiny not only for fraud and
abuse, but also for the potential of quality of care and
patient abuse issues. Durable medical equipment is
traditionally a hotbed for those who want to steal from the
government.
At the time, Medicare provider numbers, that are the
authorized numbers used to bill the Medicare Program, were
easily obtainable and no prior health care experience was
required to go into the DME business. As was mentioned before,
so profitable was this area that criminal elements in south
Florida decided to leave a lucrative drug business and open up
DME companies because, as you mentioned, it was more profitable
and less risky.
After the first year of the project, hospice care was added
as a high growth focus area based on our audits of the industry
and indicated a potential for fraud and abuse. Project
coordinators in each of the five States established work groups
comprised of the agencies I mentioned earlier. The work groups
determined project goals and objectives unique to each State
and implemented innovative plans that made the best of all the
available resources.
The States coordinated their efforts with the OIG, HCFA and
AOA headquarters, which in turn shared the results in the
States' efforts with the entire demonstration team. The result
was a cohesive, concentrated attack on health care fraud.
Members of the partnerships we formed are here today to tell
you about the results of this initiative. Each will provide a
unique perspective as to what they hope to see accomplished.
I am here to share information regarding some of the
successful cases that flowed out of this project. First, during
Operation Restore Trust, a scheme was uncovered involving
incontinence supplies provided to nursing home patients. Adult
diapers are not items that a nursing facility can bill
separately to Medicare. The cost of providing adult diapers is
the responsibility of the nursing facility as part of its
routine costs of providing care to patients.
Investigations revealed that unscrupulous providers
convinced nursing home operators that they had found a
legitimate way to bill Medicare for the diapers. In return for
the names and the Medicare numbers of incontinent patients,
these suppliers provided the nursing homes with an endless
supply of adult diapers at no cost. The suppliers then billed
Medicare as if the diapers were an item known as a female
urinary collection device that Senator Durbin referred to
earlier.
This device could be billed for $7 to $8 per item while the
cost of purchasing the diaper was only 30 cents. The supplier
billed Medicare as if the more expensive collection devices
were being provided three times a day, 7 days a week. The cost
to Medicare mounted at an incredible rate. The suppliers
quickly recouped their overhead and began making money.
If I may, I'd like to show you. This is the adult diaper
that sells for 30 cents. This is the actual device that was
billed at $7 to $8, the female urinary collection device. As
you can see, there's a vast difference between the two of them.
This particular scheme was found to be so widespread that
involved patients and suppliers throughout the country. These
cases have been successfully investigated and a number of the
investigations are still ongoing, including here in the State
of Illinois. We were able to detect this scheme and investigate
all the matters concerned because of the combined efforts and
the resources of all of the partners of ORT.
In all, savings to Medicare as a result of this type of
investigation has amounted to an estimated $104 million in
1996, with projected estimated savings to be $534 million over
the next 5 years.
The next case had some distinct characteristics not found
in some of our investigations. This supplier provided
incontinent care kits to nursing homes. These relatively
inexpensive kits included a pair of latex gloves, a small cup
of sterile water, a disinfectant, an absorbent pan, a pair of
plastic tweezers and a small plastic pair of scissors. The
supplier misrepresented the patients as having chronic
incontinence in order to bill Medicare, then inflated the
number of kits actually provided. An average of 90 kits per
month per patient was billed, but only about a third of that
number was actually provided.
What sets this investigation apart from the others was the
fact that the perpetrators closed and then reincorporated their
business under different names 31 times during the course of
the investigation. Shortly after they started doing business
with Medicare, the Quisenberrys, a father and daughter team,
became aware that the Medicare contractor who processes the
claims was scrutinizing the claims due to the concerns about
possible fraud and abuse in this area.
Before the company du jour could run up enough claims to
gain the attention of the contractor, the Quisenberrys would
simply close the business and incorporate a different name and
a different location. They were able to accomplish this by
enlisting the aid of friends and family who fronted the
operation for them. When this investigation was concluded, the
Quisenberrys and five of their associates were named in a
Racketeering, Influenced, Corrupt Organization indictment. The
RICO indictment was the first of its kind in the health care
fraud arena.
More significantly, it was the largest RICO indictment in
the history of the judicial district in which it was filed,
alleging damages of approximately $30 million to the Medicare
Program. All parties pled guilty to their part in the scheme.
This is not the largest Medicare fraud case we have
investigated, but the Quisenberry case clearly was one of the
more unique investigations setting the trend in how to cheat
the government. A number of jurisdictions are now considering
similar charges in other investigations that are related to
this type of scheme.
Although this supplier was actually based in Michigan, it
did over $1 million in business with nursing homes in Illinois,
and for that reason it was included as part of Operation
Restore Trust. Again, if it was not for the resources and the
expertise brought under the ORT umbrella by all of the
partners, this investigation would not have come to a
successful conclusion.
Based on periodic cost reports, Medicare reimburses home
health agencies, nursing facilities and other providers who
render care in a facility-like setting. The cost report is used
to itemize the total cost of operation of the provider and
identifies the proportion of the provider's total cost to costs
that was related to the care of Medicare beneficiaries and
forms on the basis of Medicare reimbursement.
It is possible, however, to bury within this document
expenditures which are totally unrelated to providing Medicare
beneficiaries with treatment. Through ORT we initiated a number
of cost report cases in Illinois as they apply to nursing
facilities or home confined patients. In one case, a nursing
home administrator embezzled money from the owners of his
nursing home by including non-medical expenses in the cost
report disguising them as reimbursable items.
In some instances, the money was actually used for
improvements on his private residence and an accumulation of
over 200 pornographic videotapes. In addition, he created a
ghost employee and paid himself a sizeable salary under that
name. He also embezzled money from residents in the nursing
home by gaining control of their personal finances.
In all, this man stole $1.6 million, all but $200,000 was
obtained through false claims on the false cost reports. He
pled guilty as a result of this investigation and was sentenced
to a total of 46 months' imprisonment and ordered to pay $1.6
million in restitutions, including $67,000 to a Medicare
beneficiary from whom he swindled money.
In another type of case which was identified during
Operation Restore Trust, a number of businesses who identified
themselves as community health care centers were found to be
defrauding Medicare and Medicaid. These providers supplied
adult day care under the guise of mental health therapy.
Patients at other nursing facilities were delivered by the
provider and held for the day in an empty warehouse of an
abandoned building. They were allowed to watch T.V. or play
cards, but were otherwise provided no structured care.
The providers claimed the expense of providing
transportation, meals and services of mental health
professionals when they did not in fact provide any of these
services. These investigations are far from complete and are
very serious questions about the quality of care received by
nursing home patients.
Last, I'll describe the case of Home Pharmacy Services, a
firm that operated in Illinois that provided pharmaceuticals
for residents of 96 nursing facilities in that part of the
State. These supplies were paid predominantly through Medicaid,
although the example clearly demonstrates the application of
the ORT protocol.
Under the rules of Medicaid, drugs that are unused at the
time of the patient's death or discharge are to be destroyed.
This company, however, was recovering the unused drugs,
repackaging them and reselling them often to other Medicaid
patients. In addition, the unused drugs were not stored in
appropriate places, usually creating a substantial health risk.
The drugs could have lost the potency necessary to produce the
medical goals of subsequent patients to which they were given.
And more seriously, the drugs could have become toxic and
threatened the user's health.
An ORT coordinated task force executed a search warrant on
the premises of the business in May 1996. Agents filled two 14-
foot postal trucks with records and evidence including a large
amount of the recovered drugs which had not been repackaged.
The drugs had been stored in store rooms that were neither
sanitized nor climate controlled.
The parent corporation of Home Pharmacy Services
subsequently entered into a settlement negotiation with the
Office of the U.S. Attorney and our office. As a result, the
corporation paid $5.3 million in penalties and restitutions,
entered into a corporate integrity plan and agreed to cooperate
in the criminal prosecution of the manager and former owner of
Home Pharmacy Services.
The former owner, who had sold his business to the current
owners, and who had actually started the scheme, entered into a
plea agreement with the U.S. Attorney's Office. He was
sentenced to 2 years in a Federal penitentiary and ordered to
pay $750,000 in fines and restitutions to the government.
This case came to fruition because of a cooperative effort
put forth under Operation Restore Trust. The investigation was
the earliest joint effort under the ORT and was an
investigation comprised of a health care task force in the
Southern District of Illinois. The task force was comprised of
a team of agents from several State and Federal agencies
including HHS, OIG, the FBI, Postal Inspection Service, the
Illinois Medicaid Fraud Control Unit, the IRS and the Illinois
Pharmacy Board.
Funding made available through ORT helped make it possible
to open an OIG field office in Fairview Heights, Illinois, the
city in which the Office of the U.S Attorney for the Southern
District is located, making prosecution easier. As you can see,
the Operation Restore Trust experience provided all of us with
a new template for the way we do business. New lines of
communications were opened and cooperation among agencies
involved in fighting health care fraud reached new heights.
The proof is in the remarkable return on investment
realized under the 2 year demonstration project. In the five
States, we identified $187.5 million in fines, restitutions and
settlements. This constitutes approximately $23 to $1
investment in the project.
Operation Restore Trust also paved the way for the passage
of the Health Insurance Portability and Accountability Act in
1996. That statute included a solid funding base which allows
our agency to continue an aggressive fight against fraud and
abuse in the Medicare and Medicaid Programs. It also enabled us
to become a full partner with other law enforcement agencies in
pursuing these goals.
We're very proud of our accomplishments, but we cannot be
naive or rest on our laurels. Every day criminal elements are
developing new and novel approaches to exploiting Medicare and
Medicaid and other health care programs. We need to stay ahead
of them. We are therefore eager to work with this Subcommittee
to further redefine our tools and the program safeguards needed
to protect taxpayer dollars and Medicare resources.
Thank you for holding this hearing, and I welcome your
questions.
Senator Collins. Thank you very much. Ms. Coyle.
TESTIMONY OF BARBARA COYLE,\1\ VOLUNTEER, CATHOLIC CHARITIES,
SUBURBAN AREA AGENCY ON AGING; ACCOMPANIED BY JONATHAN
LAVIN,\2\ EXECUTIVE DIRECTOR, SUBURBAN AREA AGENCY ON AGING
Ms. Coyle. This morning I am going to be John Grayson, if
you don't mind. My name actually is Barbara Coyle, and I am a
retired public health nurse. I am also a volunteer in the
Suburban Area Agency on Aging Health Care Anti-Fraud, Waste and
Abuse Community Volunteer Demonstration Project.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Grayson submitted by Ms. Coyle
appears in the Appendix on page 39.
\2\ The prepared statement of Mr. Lavin and Ms. Toomey appears in
the Appendix on page 40.
---------------------------------------------------------------------------
While I am talking as John Grayson, I would also like to
tell you that essentially what I am saying represents all of
the volunteers and the presenters in this program.
Mr. Grayson's testimony reads: I first heard about the
project from a public service announcement that was on the
radio. I contacted Ms. Mary Clare Toomey, project director, and
subsequently enrolled in her training program. In my training
class, there were 38 volunteers. And the training program
extended over a period of 3 days, during which the speakers
included staff from the Office of Inspector General, the
Illinois Department of Public Aid, Ombudsman Program and the
Medicare Fraud Units.
In my area, Catholic Charities Northwest, based in
Arlington Heights, Illinois, is the host site with Mary
Nommenson, the local coordinator of the program. Mary makes
calls to various senior organizations and sets up the
appointments for me to make my presentations. I am generally
assisted by another volunteer named Jim Grimm, who is present
at this hearing, from Elk Grove Village. He does a little bit
of the speaking and helps me by passing out literature and
conducting surveys and doing personal interviews after my
presentation.
At the presentations I first introduce myself and then
attempt to build some interest and some enthusiasm for what
we're doing by pointing out to the senior citizens that
Medicare spends $200 billion a year of which it is estimated
that $20 billion is lost through fraud, waste and abuse. I
point out that it is predicted that Medicare will go bankrupt
in 10 years and that undoubtedly, as it starts to go bankrupt,
benefits will be reduced or co-payments will be increased. So
it is in all of our interest to help save Medicare by doing
what we can to spot any indications of fraud and abuse.
I want to point out that we are saving this vital program
not just for ourselves, but for our children and potentially
our grandchildren. I explain how easy it is for crooks to
swindle the system by merely having a doctor's prescription for
unnecessary procedures or equipment as well as having your
Medicare number. I explained that the Medicare number is just
like your credit card number and that you should never give it
out to anyone who isn't known to you to be a genuine provider
of services.
I relate some of the instances or types of fraud that have
been perpetrated on people and the system. These examples of
fraud are the ones that already have been conceived by the
crooks who have been caught, but the possibilities for new
theft and fraud schemes are infinite and changing constantly.
We are seeking the help of our audiences in spotting fraud,
because they are on the front lines and have the best
opportunity to see suspicious activity first. I emphasize that
it is very important for them to examine their medical summary
notice or explanation of medical benefits following a medical
procedure. They need to be sure that they received everything
that was billed to Medicare.
When they do spot something that doesn't look right, the
first call should be to their medical provider to obtain an
explanation. If they aren't satisfied with this, I suggest they
call their SHIP counselor--Senior Health Insurance Program
counselor--to assist them in getting an explanation. If they
still aren't satisfied, then I suggest that they call the
numbers on the pamphlet I give them, which would either be the
Federal 1-800-HHS-TIPS line, a local number at the Suburban
Area Agency on Aging (1-800-699-9043), or call Mary Nommenson
at Catholic Charities (847-253-5500).
I try to give them an incentive by telling them that there
is now a bounty being paid to whistle blowers who help us
uncover fraud. They could be paid 10 percent of whatever is
recovered, up to $1,000.
I conclude by reiterating the three main points I wanted to
make. First, don't give your Medicare number to anyone that you
don't know. Second, check your explanation of medical benefits
carefully to make sure you received everything that Medicare is
being billed for. And third, save our literature so that if you
do come across anything that doesn't look right, you'll have
our number and where you can call us.
I close by thanking them for their attention and by urging
them to help us save Medicare. I then explain that Jim Grimm
and myself will be available after the presentation to talk to
anybody who wants to ask us questions. We also want to hear
them tell us about their own experiences. Generally we do have
a few people who want to talk to us on a one-to-one basis. We
ask them to fill out the survey form so that we can report
these back to our host for documentation and statistics.
I personally have provided presentations to a variety of
community organizations and am constantly amazed at the level
of interest by participants in attendance. There are usually
three or four individuals in the audience who share their
personal stories of suspected fraud and abuse after the
presentation.
I have found participation in the Suburban Area Agency on
Aging's Fraud and Abuse Program to be challenging and rewarding
and am very pleased to be able to relate my experience with you
today.
Senator Collins. Thank you very much, Ms. Coyle.
Mr. Lavin, please proceed.
Mr. Lavin. I'm not scheduled to give oral testimony.
Senator Collins. OK. At this point I'm going to turn to
Senator Durbin to lead off the questions of the witnesses.
Senator Durbin. Thank you, Madam Chairman. Thank you for
your testimony. I appreciate it very much. Ms. Collins, can you
start off by making clear a part of this record a statement
about some of the process that is followed. For example, it's
my understanding that in each State there is an intermediary or
some company that has been hired by Medicare which basically
does the work of receiving the bills from the providers and
sends those bills on to the Federal Government. Is that
correct?
Ms. Collins. Yes, that's true.
Senator Durbin. In our State of Illinois, what company is
that?
Ms. Collins. Currently now the intermediary for Part A
operations is Administar Federal and for Part B claims it is
Wisconsin Physician Services.
Senator Durbin. Does that change from time to time? Is
there a bidding process or some sort of a reevaluation?
Ms. Collins. These contracts are fairly new in the State.
They were only established this last year, because the long-
time contractor, Health Care Service Corporation, withdrew from
the program this year. Many contractors have been in the
programs for a long, long time, but there has been some
turnover recently.
Senator Durbin. And so let's say that I wanted to open up a
business which was going to sell durable medical equipment to
senior citizens. In this State I would contact the
intermediary, is that correct, to establish myself?
Ms. Collins. Yes, that's right.
Senator Durbin. And the intermediary would then issue me a
number to provide services or equipment, whatever it happens to
be?
Ms. Collins. Yes. And we have changed the process somewhat
related to enrollment of new providers, particularly suppliers,
due to the problems that have been identified in the Operation
Restore Trust effort. It is no longer just call up and get a
number. There is a screening process that is carried out.
Senator Durbin. Is every prospective provider screened?
Ms. Collins. Right now the suppliers, all suppliers,
prospective providers, are screened and there is a site visit
conducted. Other prospective providers, say a new hospital or
other kind of organization, there's a different process that is
undertaken, not necessarily called a provider enrollment
screening process.
Senator Durbin. What does screening consist of?
Ms. Collins. Information is collected for verification of
location and address.
Senator Durbin. Physical verification?
Ms. Collins. There are on-site reviews that are taking
place for new suppliers and for previous suppliers, there is a
3-year cycle of on-site reviews that we're undertaking now to
check those suppliers who already have a provider number.
Senator Durbin. Is there a criminal background check as
part of this?
Ms. Collins. I would be glad to provide that for the
record.
[The information provided follows:]
Information requested for the record
Criminal background checks.--We do not currently perform
criminal background checks on potential providers or suppliers.
We are interested in studying whether criminal background
checks could help reduce fraud among some or all provider and
supplier groups. Our contractors do use third party validation
sources to verify information on provider and supplier
application forms, and some of these sources contain criminal
background information. We ask all providers and suppliers on
our enrollment applications whether any individual with 5
percent or more ownership (including individual health care
practitioners who seek to be enumerated as a provider in the
Medicare program) has been convicted of a health care related
crime or a felony. Any who say yes are referred to contractor
fraud units for further investigation. If owners have been
excluded from Medicare by the HHS Inspector General, the
application is denied. We also are currently developing a
regulation that will implement a Balanced Budget Act provision
giving the HHS Secretary authority to deny or revoke enrollment
to any convicted felon.
Senator Durbin. Now, one of the things that we have tried
to stress is the important role the seniors can play in
detecting fraud in the Medicare system. Ms. Collins, you would
agree with that, I'm sure.
Ms. Collins. Oh, yes. Definitely.
Senator Durbin. And so what troubles me is I learn that
HCFA is considering a change in the billing procedure under
Medicare, whereas in the past there used to be a statement of
benefits and an explanation of benefits sent to senior
citizens, which will give them a better understanding of what
they're being billed for.
If I'm not mistaken, HCFA is at least considering reducing
or suppressing, as they say, some of this information. That
would seem to be counter-productive to me. It wouldn't really
help the seniors if they didn't have enough information to
detect the fraud, would it?
Ms. Collins. Right. I share your concern with that. There
has been some suppression of those notices that have gone to
beneficiaries. But we are changing that. By April of this year
we will be requiring all of our intermediaries to issue notices
regarding claims on virtually all claims.
Senator Durbin. I want to make sure I understand this.
Ms. Collins. Sure.
Senator Durbin. Because I thought this was a HCFA procedure
that was underway to reduce the explanation of benefits that
were being mailed out. Are you saying that's been changed?
Ms. Collins. We will be telling contractors in April to
mail out notices, either the explanation of medical benefits or
the Medicare summary notice, on virtually all claims. You are
correct that there has been some suppression of those notices
currently. But we are taking steps to rectify that situation.
Senator Durbin. That's good. And do you believe that you
are sending out--I'm going to ask Ms. Coyle the same question,
Mr. Lavin as well. Do you believe you're sending out clear
information as to senior citizens on Medicare about the TIPS
hotline and what they should do to police their own bills to
find out if there's potential fraud?
Ms. Collins. There is always room for improvement with that
information. The HHS-TIPS number and supporting information are
provided with the explanation of medical benefits and the
Medicare summary notice.
Senator Durbin. I would say, Ms. Collins, if a survey that
I read is accurate, that we are not doing a good enough job.
And I say we, because Congress has a responsibility here, too,
to provide you the resources to get that done.
What I refer to is a survey done by the AARP and one done
by the Office of Inspector General, I might add, as well,
concerning the public level of awareness of Medicare fraud and
our government efforts to combat it. The findings, are you
aware of them, Ms. Collins, are rather troubling.
They confirmed that 85 percent of seniors were not aware of
any government agency working to reduce fraud in Medicare, 83
percent were not aware of the Office of Inspector General
hotline, and 85 percent believed it was their responsibility
personally to report fraud, that's good, 74 percent reported
always reviewing the explanation of Medicare benefits. I say
that because it clearly says to me, if this is accurate, and I
believe that these two surveys are, we need to do a lot more so
that seniors can learn of their responsibilities and their
opportunities.
Ms. Coyle, has that been your experience, too, that many
seniors don't know what's available?
Ms. Coyle. Right. True.
Senator Durbin. So that stops them from using the system
we're putting in place from Operation Restore Trust. Mr. Kopf,
one of these surveys was by your office, is that your finding
as well?
Mr. Kopf. The survey did indicate that many of the seniors
did not know the efforts we've made. What we're doing now is
increasing our efforts to get the word out to the senior
citizens, not only of our office but of the various schemes and
fraudulent use of people that are involved in this type of
thing so they can refer it accurately to us.
Senator Durbin. It seems like this is a big undertaking. I
mean, the numbers of people, Ms. Coyle, that you referred to
and Mr. Lavin, the agency that's been involved in it, in the
thousands. And if I'm not mistaken, the number of Medicare
beneficiaries in our State could approximately reach what, 2
million, or is it somewhere in that neighborhood? I think it
might be.
Ms. Coyle. Oh, I'm not aware of that. I'm sorry.
Senator Durbin. I'm not aware of----
Mr. Lavin. I think 2 million is a high figure.
Senator Durbin. One-point-six million.
Mr. Lavin. That's it.
Senator Durbin. So we have a long way to go here in terms
of reaching that level of public information. I think we have
to do a lot more. Mr. Kopf, that question of suppressing the
explanation of benefits under Medicare, do you have any
feelings about that?
Mr. Kopf. We would encourage that the explanation of
medical benefits continue to go out to the beneficiaries
because it works hand in glove with the efforts that all of us
are trying to do to inform the public. And once we inform the
public, they would actually have a piece of paper in front of
them to remind them of what they should be looking for.
For example, if they receive the care or not.
Senator Durbin. Now, let's assume that we've got a
suspicious situation here. And you've been involved in some of
these investigations. I'd really like to ask you what kind of
cooperation you receive from the U.S. Attorney's Office and
other prosecutors when you've detected a potential fraud?
Mr. Kopf. We've received a high degree of cooperation. Over
the last couple of years especially, since the initiation of
Operation Restore Trust, a lot of U.S. Attorneys have hired
prosecutors to come into their offices.
There has been a ramp up of education. These cases are a
little more complex than the prosecutors are used to. But the
cooperation is there. Their task force, because of ORT, and now
through HCFA, are task forced in literally all of the districts
throughout the country in health care form. So I think there's
a good foundation for cooperative effort, not only with our
offices and the U.S. Attorneys, but also with HCFA and AOA, in
a combined effort to bring the information together.
Senator Durbin. I have some other questions, but I'm going
to defer to the Chairman to ask hers and then I'll return. But
if I might ask one last question. The TIPS procedure which
offers an incentive to beneficiaries alone. I believe it's an
incentive only to beneficiaries, but am I mistaken on that? The
10 percent, is that available only to beneficiaries?
Ms. Collins. Yes.
[The information provided follows:]
Information requested for the record
Incentive payments for reporting fraud and abuse.--Incentive
payments of up to $1,000 for those who report fraud and abuse
in Medicare can be made to both beneficiaries and non-
beneficiaries. These payments can be made starting in January
1999 and should bolster our critical efforts to enlist the
support of Medicare beneficiaries, health care workers, and our
many other partners in the fight against fraud, waste and
abuse.
Senator Durbin. It raises a question in my mind as to why
that incentive is not available to anyone who would produce
information that would lead to a successful prosecution and
recovery of money that should not have been spent under
Medicare.
There are Qui Tam actions and others under the Federal Law
which create rewards, incentives for whistle blowers and
investigators and the like to come forward. Do you think that
might be of some benefit in perhaps engaging others to keep an
eye out for this kind of Medicare fraud?
Mr. Kopf. I think any type of system that encourages
turning in individuals that are defrauding the government is
good. Of course, with a reward type of system, it's a little
bit difficult. These cases take a long time to develop and the
financial rewards are usually 2 and 3 years down the road.
But as you mentioned, not only this type of system that
HCFA is putting into effect, but the simple effect that the Qui
Tam issue has grown so large that a lot of people are using
that as a vehicle to inform us of wrongdoing.
Senator Durbin. It's been a major source of litigation in
southern Illinois against one particular agency in our State.
And it created the type of incentive where, frankly, the people
who were blowing the whistle were discouraged many, many times
but stuck with it, because they believed they had legitimate
claims. Ultimately they did and they will be rewarded for that.
I think when we look at the magnitude of this problem, in
the area of $20 billion plus, we need similar mechanisms
available so that whistle blowers and those who perceive
wrongdoing won't be easily discouraged from trying to ferret it
out. I yield to the Chairman.
Senator Collins. Thank you, Senator. I want to follow up on
a couple of the excellent points that you raised.
Ms. Collins, you talked about the screening and on-site
reviews that your region is doing. And I want to commend you
for those. From the previous hearings this Subcommittee has
held, Senator Durbin and I know how effective a simple on-site
visit can be or even a minimal screening can be to exclude the
completely bogus provider of services, or actually that don't
provide any services in a lot of cases.
I want to clarify, however. Is this screening and on-site
review that is being done only being done in the States that
are part of Operation Restore Trust?
Ms. Collins. No. It's in all States.
Senator Collins. It is now in all States?
Ms. Collins. Yes.
Senator Collins. When was that adopted, do you know?
Ms. Collins. That has recently been expanded.
[The information provided follows:]
Information requested for the record
Site visits to medical equipment suppliers.--We announced
plans for a nationwide policy of mandatory site visits for all
durable medical equipment suppliers on January 24, 1998. We
began requiring site visits of all newly enrolling suppliers
and virtually all re-enrolling suppliers in June.
Senator Collins. That is something that we are looking at
putting into legislation. I am pleased to hear that it's
recently been expanded. I think it will really help screen out
some people right up front before damage is done.
Mr. Lavin, we were talking earlier. Senator Durbin raised
the issue of the need to get more information to seniors about
what to do when they spot fraud. And Ms. Coyle was telling
about the efforts the volunteers are making in making the
presentations. I notice that you've also put out what I think
is a really terrific brochure. It starts off saying, ``Who
pays? You do.''
It tells seniors what to do. It also gives some tips. Could
you talk to us a bit about the brochure and give us some idea
on how you're distributing it?
Mr. Lavin. Yes. Thank you very much. Barbara is really nice
to have come in to give John Grayson's testimony. He lives in
the northwest suburbs and she lives in the southern. It's
probably about 60 miles distance between the two. So she did an
excellent job of filling his shoes at the very last minute.
Today in the audience--please bear with me--(I'm mentioning
this to answer your question) we have our volunteers and some
of the people who are staffed at local agencies in Skokie, Lake
County, Oak Park, Kankakee, Elk Grove Village, Harvey,
Northfield, Kane, and McHenry counties, and possibly others
came in since we started this.
We really put our emphasis on making sure that the
community is part of this information campaign. We work with 11
different organizations that are community based. Jointly we
seek to get the word out about the Operation Restore Trust
message to report things that don't look right. We try to act
as a buffer if there's something that may be correct, but does
not look right. Our goal is to help cut the congestion at the
1-800-HHS-TIPS line so that the really important calls are not
lost.
Our approach in the Operation Restore Trust brochure was to
use the aging network of our volunteers as well as their host
sites. We said to them that we want to present something that
would really help get the message across. They helped design
this particular brochure. We sent out drafts of it. They sent
back comments. And they use the brochure combined with their
own agency materials. In Barbara's case, Catholic Charities
South Suburban Senior Services, created a brochure saying, ``If
you have a question or concerns about your Medicare or Medicaid
charges, call MAMA''--which means what, Barbara?
Ms. Coyle. It's the Medicare And Medicaid Advocacy program.
Mr. Lavin. So the MAMA is, picked up right away in terms of
knowing you are going to get help, you're going to get a good
explanation, and you're going to get the homework done on your
behalf--right in your community. So we're very proud of this
presentation.
We've also in the early days, when we had a small contract
from the Administration on Aging, we were able to get out over
15,000 brochures to older persons, some translated into
Russian, Spanish, and Polish for this area. We are doing a good
job of getting information together, getting it into the hands
of people like Barbara, John Grayson, and the folks here with
us today to give these brochures to the people, and hopefully
the information will be there when they have a question, they
will call us, and make contact with the local agency. They can
then begin a relationship with their volunteers and with their
community organization for a number of programs and benefits.
All of this is possible--(see they should have let me
testify!)--because we were able to take this program and put it
right into our older Americans Act at Senior Service Network
throughout the metropolitan area existing programs and
community agencies that help older people. By allowing us to
work on this problem and using our ability to get the message
out to all the people, this program went very quickly. We had
volunteers in the community within 3 months of the notification
of our grant.
Senator Collins. It's an excellent effort, and I really
commend you for it. I was in Iowa in October and visited the
Area Agency on Aging. And they have a similar effort underway
and it's something that I'd very much like to see New England
start doing as well.
Mr. Kopf, don't you think if we could somehow get this
information in the hand of every Medicare beneficiary, maybe
you'd be overwhelmed, I don't know, but given the findings that
Senator Durbin gave us from the AARP survey and the survey from
your office, it seems to me that most seniors don't know where
to go if they have a problem. Do you think we should be doing
more to try to get information such as this in the hands of
more beneficiaries?
Mr. Kopf. Definitely. We may be overwhelmed, but I welcome
that problem rather than letting other people go about stealing
from the government.
The more outreach we can do, the more we can put out to the
general public, not only the beneficiaries, but also the
children of beneficiaries, that help them, the better we're
going to be at doing our job. Not only can they become our eyes
and ears, which is most important, because our resources are
such that it's limited to certain areas, but they can become
our eyes and ears and they can also make significant
recommendations as to how they're seeing on such issues as
quality of care and the services being given.
So it's really a win-win situation when something like this
happens.
Senator Collins. Ms. Coyle, I like the reference in the
testimony that you delivered to treating your Medicare number
as you would treat a credit card number. I think that's a very
good analogy that all of us can relate to, and yet we know from
our previous hearings that oftentimes seniors have been very
trusting in giving out that number.
As you've been giving the presentations yourself, are
people surprised that they need to be that careful, or what is
their reaction?
Ms. Coyle. I'll tell you the response we receive. They
indicate to us that they really have never thought about it
before. So actually, we repeat that message, treat your
Medicare card like a credit card, we may say it four or five
times during the presentation. It's really one of the most
important things we do.
One of our volunteers gave a presentation at a low income
senior citizen housing unit, and after the presentation, one of
the residents went to the coordinator for the building and
reported that there was something funny going on in their
building. There was a group that was going around to the
residents and offering them fun days, free trips to Navy Pier,
in exchange for their Medicare number.
Senator Collins. Interesting.
Ms. Coyle. And now that's under investigation. But here's
the tale of a resident, once informed, who could act on
something like that.
Senator Collins. See, that shows exactly the value of the
outreach you're doing. Because you alert people that there's a
problem and all of a sudden it triggers a thought in their
minds that may well expose a major fraud. So I think this
program sounds very worthwhile.
Before I yield back to Senator Durbin, I want to just raise
one issue with you, Mr. Kopf. And that's on the Quisenberry, I
think is the name of the case.
Mr. Kopf. Yes.
Senator Collins. Thank you. This case is incredible to me,
because as I understand it, this family reincorporated the
business more than 30 times, is that correct?
Mr. Kopf. That's correct.
Senator Collins. And that didn't raise any red flags? Is
that because in each case it was under a different provider
number?
Mr. Kopf. It was under a different provider number under
each case. And at the time the Quisenberrys entered into their
fraudulent schemes, the contractors, while they had state-of-
the-art computers tracking it, the state-of-the-art at the time
was really archaic to what it is now. So that by the time the
contractors were aware that a scheme was going on, it was
usually 6 to 9 months after it had already been started. The
Quisenberrys were smart enough to know that they could stay
below the radar screen of the contractors if after that time
period they simply reincorporated.
Now, as you know, incorporating a business is a State
function and not controlled by the Federal Government. So they
could have as many incorporations as they can getting different
provider numbers. Today, however, that time period has shrunk
dramatically, because of the knowledge that HCFA has gained
through correcting provider numbers being issued, and also the
computer system. So there's no longer this long gap that was
there before HCFA now has a customer information database that
can more rapidly pinpoint the scope and extent of any of the
billers in relation to the beneficiaries and utilization of
that particular project.
Senator Collins. Does the HCFA form which is used to grant
a provider number by the intermediary ask whether or not the
company has ever done business in the past with Medicare under
a different provider number?
Mr. Kopf. I'm not sure. I don't believe that it does.
Senator Collins. Ms. Collins, do you know?
Ms. Collins. I honestly don't know the answer to that
question.
Senator Collins. It seems that would be a simple fix is to
automatically have a question about have you ever done business
with Medicare under a different provider number. And that you
could tell whether they've been suspended or terminated from
the program. It seems like that would give you a tracking so
that you just can't swiftly close down 1 day, open up the next
day, apply for a new number and go on ripping off the program.
Ms. Collins. I don't know if that is specifically asked,
but we're certainly asking for a great deal more information
than we ever have before. And the checking that we do is more
thorough than ever before. But I just can't answer that
question specifically.
Senator Collins. If you would, for the record, get back to
us on that.
Ms. Collins. Well, I'll be happy to.
[The information provided follows:]
Information requested for the record
Application forms.--Medicare provider application forms do
specifically ask whether the provider or supplier has ever
billed Medicare or Medicaid before. Applicants who have
previously billed Medicare or Medicaid must submit information
regarding that prior billing entity.
Senator Collins. That would be great, because that's an
issue that we may want to pursue. Senator Durbin.
Senator Durbin. Mr. Kopf, why do these cases take 3 years
to investigate and prosecute?
Mr. Kopf. Most health care cases are very complex white
collar crime investigations that involve a lot of documentation
to be observed and gone through. When we issue a subpoena, for
example, to look at records, the records are in massive
amounts.
The tracking of an individual case from the initiation of
the complaint that comes in is such that it not only deals with
one particular issue, but it will spread to other areas. For
example, in one particular company they were taking the money
used in a home health agency and depositing that money, sending
it off shore to the Cayman Islands, reinvesting it under
related businesses such as a travel agency, such as employing
health care benefits for their own employees. And really it
becomes a very complex case. It's hard to understand.
Second of all, as we go about presenting the cases, it
really has to have the type of jury appeal to show that there
was clear intent involved. Usually one of the chief defenses
that is used is the provider will say, well, we did give a
service. And so we were providing the community with something.
But taking that all into consideration, by the time you go
through the documentation to compare it to the utilization,
it's really a complex white collar crime case.
Senator Durbin. I seemed to detect at some of our earlier
hearings that, for better or for worse, Florida seems to be a
leader in fraud, probably because of the number of seniors
there and the language situation that presents itself from time
to time. If I'm not wrong, one of the earlier witnesses
testified about these community mental health centers and
really it was Florida where it appears they first figured out
how to get into the system and to bill Medicare for services
which should not have been billed.
Is that a correct observation, or am I being too tough on
that?
Mr. Kopf. Florida is certainly a prime target area because
of the number of seniors that reside in that State. California
and New York are second and third right behind it. And also,
not only because there are a lot of beneficiaries that live in
this State, but as you pointed out, there is a language
difference. There are a lot of aliens that come in, and rather
than trust the local physician, they'll go back to their own
community. And it's a difficult situation.
Senator Durbin. What are you detecting in Florida and those
other States that we can expect to become the next national
trend in terms of Medicare fraud?
Mr. Kopf. I think one of the areas that we mentioned
earlier was the community mental health centers. I think that
is an area that we have found through our studies, our audits
already completed, is a rapidly growing industry. I think it
increased in payments well over 500 percent over the last
couple of years.
We looked at that to be one of the new areas. That's on the
bad side. The good side is we have detected it early. And
working with HCFA and working with the seniors in the State, I
think we'll be able to possibly put this under control more
rapidly than some of the other schemes in the past.
Clearly though, the durable medical equipment will always
be a prime target, especially where there are a lot of seniors
and there's a lot of advertising and telemarketing going on.
Senator Durbin. How many of these cases lead to debarment
each year where a provider is debarred from doing business, any
further business with the Federal Government?
Mr. Kopf. Last year our office excluded from the program
over 3,000 providers.
Senator Durbin. Out of how many? What's the universe?
Mr. Kopf. I really don't know. It's a vast universe, but
it's increasing. I think we're having closer cooperation with
State facilities, particularly the Medicaid Fraud Control
Units.
Also other agencies such as the FBI that are bringing their
private cases to us that are convicted, so that we can get
these people out of the system.
Senator Durbin. Ms. Collins, there's a problem, is there
not, once a provider has been excluded or debarred as to
whether or not they continue to receive payments from the
intermediaries at HCFA?
Ms. Collins. Clearly that has to be addressed to assure
that these excluded providers do not get any future payments
from Medicare.
Senator Durbin. Well, one of the provisions in the bill
that Senator Collins and I will be working on is requiring
Medicare or Medicaid contractors to reimburse the Federal
Government if they continue to pay a provider which has been
found guilty and debarred from doing business with the
government.
That seems so obvious. I'm sure a lot of people listening
are thinking, wait a minute, you have said that these people
cheated the taxpayers and now you said they can't do business
with the Federal Government. And yet the intermediary continues
to do business with them and pay it out of the Treasury.
That seems to be something that we ought to address and
shouldn't have much controversy associated with it.
Ms. Collins. Well, I would respond that I think there are
other ways to address that rather than holding the intermediary
liable for that payment. We have a responsibility to make sure
that the intermediary has the good information in order to
assure that those payments are not made. And I believe Mr. Kopf
has talked about our efforts in that regard to assure that
those payments are not made with improved databases and cross-
checks.
[The information provided follows:]
Information requested for the record
Payment to excluded providers.--Clearly, we must make sure
payments do not go to excluded providers, and we are now
developing a more sophisticated system to make sure that they
do not. We expect contractors to make a good faith effort to
prevent payment to excluded providers. However, contractors
have not always been given all the data needed to prevent
payment to excluded providers. Working with the HHS Inspector
General and our contractors, we have identified ways to improve
our system for preventing such improper payments. The system we
are now developing includes a substantially improved database
on excluded providers. That will help make sure our contractors
have the information they need to prevent improper payments to
these providers. We will instruct contractors to check that
database against files of providers billing Medicare. We also
will instruct contractors to check the excluded provider
database against databases with employment information. That
will help prevent excluded individuals and entities from
getting back into the program, and should be much more
effective than our old system.
In addition, we are considering a regulation to require
providers to periodically re-enroll in Medicare, thereby
allowing us to reevaluate whether each provider continues to
meet Medicare's standards. This would help assure that only
legitimate providers are enrolled and able to receive Medicare
payments.
Senator Durbin. I might return to the point made by Senator
Collins about Medicare numbers. I don't know how they are
provided to seniors. Once you qualify for Medicare, do you
receive notice in the mail from the Federal Government of your
Medicare number?
Ms. Collins. Yes. You receive a card and a number.
Senator Durbin. And is there any kind of warning or advice
on there about how important it is to keep that number
confidential?
Ms. Collins. Yes. And in our literature we do provide
information about that.
Senator Durbin. Well, I hope we're doing everything we can
as people do with new credit cards to impress upon seniors the
need to keep that number confidential.
One other element that we checked out was, Mr. Kopf,
perhaps you can address it. It appears that some of these
providers, once they've been discovered as having defrauded the
government, have been able to escape fines by declaring
bankruptcy. Are you familiar with that?
Mr. Kopf. Very much, yes.
Senator Durbin. Could you explain that?
Mr. Kopf. What happens is once an individual knows they are
under investigation, is they will declare bankruptcy. They'll
dissipate all of the illegal gotten funds as quickly as they
can. And what this does to us, it hinders our ability to
collect those ill gotten gains and bring them back to the
Treasury, bring them back to the Trust Funds.
It's been on the increase and it seems to be a way of doing
business once they're aware that we are looking at them. We can
almost count on within a few months that all of a sudden
they've claimed bankruptcy and have an inability to pay back
the government.
Senator Durbin. One of the provisions of the bill we're
working on would not allow them to discharge this debt to the
Federal Government, so that we could continue to pursue them
and collect it. And I hope that we can provide that as well.
Mr. Kopf. That would be excellent.
Senator Durbin. I don't think the bankruptcy court should
be a shelter for those who have defrauded the government from
paying back what they have taken from us.
I'd like to thank this panel for your testimony and yield
back to the Chairman at this point.
Senator Collins. Mr. Kopf, one of the cases that you cited
in your testimony involved a pharmaceutical company that, if I
understood you right, was improperly recycling drugs, I guess
would be one way to put it, from nursing home facilities in
cases where the patient had either died or been discharged, and
not used the full amount of the drug. The drug is then being
repackaged and resold. Is that correct?
Mr. Kopf. That's correct.
Senator Collins. And that's an important case because in
many instances when we talk about Medicare fraud, we talk about
the monetary loss. But in this case, what was being done posed
a health threat as well. Because the people were getting drugs
that weren't properly stored, that may have been expired. Is
that accurate?
Mr. Kopf. That's correct. That's accurate.
Senator Collins. Why hasn't a problem like this been
identified earlier? Is this a case where the controls on
pharmaceuticals that aren't used are inadequate? Talk to us a
bit about how this occurred and how it could be prevented.
Mr. Kopf. It occurred because when this particular
pharmaceutical company came to a nursing home, the nursing home
assumed that they were doing a service for that nursing home.
There's a lot of trust that goes between each individual. And
the nursing home would trust the pharmaceutical company to
provide that service and then the nursing home would not have
to provide that service.
As you know, criminals lie. And they were able to----
Senator Collins. I am beginning to realize that.
Mr. Kopf. So they're able to convince the nursing homes
that they are going about the normal destruction of these
different drugs when in fact they weren't. Probably two things
that could occur at this time is that, again, an awareness to
the nursing homes about this type of fraud scheme once it's
gone through the courts and it's public. Let them know to be
aware of the proper disposal of the drugs would go a long way.
Senator Collins. Ms. Collins, I wanted to go back to the
issue that Senator Durbin raised about when people get their
Medicare card. You referred that there is literature that comes
with that. Could you explain to us, I mean, is there some sort
of brochure that gives the 1-800-HHS-TIPS number and some of
the kinds of guidelines that this brochure has?
Ms. Collins. A new Medicare beneficiary, when they receive
their card, they will receive a Medicare handbook. And in that
handbook there is information regarding the hotline number and
other helpful phone numbers to contact if there are questions
or concerns.
Senator Collins. Is the 1-800 number put on the explanation
of benefits form?
Ms. Collins. Yes, it is.
Senator Collins. Good. I think that the more we can get
that out and the more we can have dedicated volunteers like Ms.
Coyle out there doing demonstrations and talking to people, the
more we can involve senior citizens in this problem. I think
the seniors are very eager to help. They are very protective of
this program. And they realize how vital it is to their well
being. And I think enlisting them is a wonderful idea.
For that reason, I really enjoyed learning about Operation
Restore Trust both from the HCFA perspective, the IG's
perspective and the Area Agency's perspective, and that of a
dedicated volunteer.
This hearing will be very helpful to Senator Durbin and me
as we complete our process of drafting a Medicare Anti-Fraud
bill which we hope to introduce shortly after we reconvene in
January.
I don't have any further questions, but I want to see if
Senator Durbin may.
Senator Durbin. I might have one last question. And that is
whether or not, there is an area of medical care which I
consider to be very important and very good, but also open to a
lot of abuse and that's home health care. Because unlike a
nursing home situation or an institutional situation where
there is usually a paper trail and a lot of witnesses, many of
the services and pieces of equipment provided through home
delivery and home health care usually consists of a provider
and a senior with no one else on the scene and very little
paper to evidence the transaction.
Ms. Collins, how can we preserve home health care and the
important contribution it makes toward the health of America
and still have appropriate accounting and auditing so that the
rip-off artists don't gravitate toward it?
Ms. Collins. Well, I think the challenge has to be
addressed in several ways. There are certain reimbursement
incentives that we want to make sure are driven in the right
direction. One of the loopholes that was closed in the Balanced
Budget Act was to require that services are billed for from
where they are given and not from some billing location which
may be conveniently in a very high cost area so the
reimbursement is inflated.
Also our involvement of the surveyors in their routine
survey work where they become the eyes of the agency and the
ears of the agency. They are highly professional, trained
participants in not only assuring quality of care provided to
home health beneficiaries receiving the home health care. They
also have a working knowledge of Medicare coverage and billing
requirements, and are trained in program integrity issues, to
help us spot them. And more importantly, they have the
knowledge and a relationship with us, and with the Inspector
General, to report on those issues so that there can be prompt
follow-up.
Senator Durbin. Well, I thank you. And I thank each of you
for your testimony today. I think I've come away from this
hearing with some specific things in mind. When it comes to
HCFA, I think that your testimony, Ms. Collins, today was good
news to Senator Collins and myself about additional activities
by your agency to verify the locations and backgrounds of the
providers.
I think that that is a very positive improvement. I'm also
happy to hear that what appeared to be a decision to suppress
some explanation of benefits has been reversed so that seniors
receive enough information to make important reviews of their
own medical billing.
Mr. Kopf, continue your work, of course, and I hope that we
can provide you the resources and change the law in a way to
make your effort even more successful in the future. I hope
that we can find ways of creating more incentives for whistle
blowers and people to come forward, because I think this is a
valuable part of the process and what we are trying to achieve.
And I thank you for all that you've contributed today in your
testimony.
Ms. Coyle and Mr. Lavin, thank you, too. I think seniors
many times can provide the kind of expertise and knowledge to
really make this work and work well. And what you've been able
to do through Operation Restore Trust and with your own
suburban agency has demonstrated that time and time again.
I hope that many of the seniors who hear about this get a
little upset to think that somebody is trying to rip them off.
I can recall my mom calling me once in a while and saying, I'm
not sure they're treating me right. And I hope that this will
be additional incentive to spread this program across the
country. And some basic things like telling people how
important it is to keep their numbers to themselves and
confidential so that they aren't used by other people.
Thank you for your testimony. You've really given us, I
think, first-hand information about efforts that are being made
and Senator Collins, thank you for being here.
Senator Collins. My pleasure. It is my hope, Senator
Durbin, that perhaps it was the combined experience of
Operation Restore Trust and the hearings that we held in
Washington that exposed what happens when you don't have site
visits that perhaps prompted HCFA to expand this nationwide.
But whatever its cause, it's certainly good news and we
look forward to working with all of you. I want to again thank
Senator Durbin for inviting me to his home State. I can see why
he's so proud to represent Chicago and indeed the entire State
of Illinois. And I want to come back again.
Thank you all very much for attending the hearing and for
your contributions. I also want to thank our staff who worked
very hard. Senator Durbin's staff was very helpful in the
logistics for this hearing and Marianne Upton from his
Washington staff, who has been working with us on several
issues, is also here today, as well as several members of my
staff, Steve Abbott, my Chief of Staff, Tim Shea, Don Mullinax,
Eric Eskew, and Lindsey Ledwin from the Subcommittee, all
worked very hard and I want to thank them for their efforts as
well.
This hearing is now adjourned.
(Whereupon, 11:42 a.m., the Subcommittee was adjourned.)
A P P E N D I X
----------
PREPARED STATEMENT OF DOROTHY COLLINS
Chairwoman Collins, Senator Durbin, distinguished Subcommittee
members, thank you for inviting me here today to discuss Operation
Restore Trust and our ongoing fight against fraud, waste and abuse. We
greatly appreciate your interest and Support for this essential effort.
Operation Restore Trust was launched by President Clinton in May
1995 as a five-State demonstration project targeting just three areas.
It has rapidly become the way that we do day-to-day business throughout
our agency because of its overwhelming success.
Operation Restore Trust, along with the stable funding for program
integrity work that was established by the Health Insurance Portability
and Accountability Act in 1996, marks a turning point in our fight
against fraud, waste and abuse. It has lead to record levels of
criminal convictions, civil monetary fines, financial restitutions, and
permanent exclusions of unscrupulous providers from our programs. It
has shown us how to move faster and smarter. We are using what we have
learned broadly and aggressively, and conducting more audits, medical
reviews, and site visits than ever before. It has generated broad
bipartisan support for changes in the law to close loopholes, raise
standards, promote efficiency, and prevent problems from occurring in
the first place. And it has inspired us to work with our partners to
develop a Comprehensive Program Integrity Plan to make fraud and abuse
harder to accomplish, easier to see, and less appealing to those who
are unscrupulous.
Most importantly, Operation Restore Trust has taught us how
critically important it is for us to coordinate with all our partners,
from the Federal Bureau of Investigation on down to individual
beneficiaries.
Since the inception of Operation Restore Trust, we have been
greatly assisted by provisions of the Health Insurance Portability and
Accountability Act of 1996 and the Balanced Budget Act of 1997, which
included increased and dedicated funding to fight fraud, waste and
abuse, and several other important provisions which help protect
program integrity. We are committed to continuing our success and
expanding it at every opportunity.
BACKGROUND
Illinois was among the first five Operation Restore Trust
demonstration States, the others being California, Florida, New York,
and Texas. Together these States include nearly 40 percent of all
Medicare and Medicaid beneficiaries. Operation Restore Trust brought
together teams from the Health Care Financing Administration, the HHS
Inspector General, and the Administration on Aging in these States to
target three fast-growing areas where we knew we had problems--home
health, nursing homes and hospices, and durable medical equipment.
Operation Restore Trust includes several key elements:
<bullet> LSophistication--Advanced statistical methods are used to
identify areas and individual providers for investigation and audit;
<bullet> LCooperation--Interdisciplinary teams review questionable
providers, both for problems specific to that provider and to
indications of more systemic problems in our programs;
<bullet> LCoordination--Investigations are planned and conducted
together with law enforcement agencies at all relevant levels;
<bullet> LEmpowerment--State and local aging organizations,
ombudsmen and individual beneficiaries and health care workers are
engaged and trained to detect and report potential problems, with
reporting facilitated through a toll-free anti-fraud hotline; and
<bullet> LEfficiency--State survey officials who already monitor
care for quality are used as eyes and ears to also look for
questionable billing. Increased cooperation and coordination also
eliminate duplication of efforts that occurred in the past.
In Illinois, one of our first Operation Restore Trust projects
focused on 20 home health agencies that we identified through a process
that has now become standard practice.
<bullet> LWe used statistical analysis to rank all agencies for
total dollars paid, dollars paid per beneficiary, number of service
units per beneficiary, and volume of claims.
<bullet> LWe drew up a list of those that had aberrant billing
patterns based on our analysis, and had our law enforcement partners
review this list so we would not target any that were already under
separate investigations.
<bullet> LWe worked with the State to specially train its
registered nurse surveyors, who already routinely conducted home health
agency quality reviews for us, to spot program integrity problems, as
well. These nurse surveyors conducted thorough surveys of the
questionable agencies we had identified, including their medical
documentation records.
<bullet> LThe State surveyors also, importantly, visited individual
beneficiaries in their homes to ask about the care the home health
agencies were providing. They found that far too often services for
which the taxpayers were being billed were either overused, not
medically necessary, or not covered by Medicare. In some cases, the
beneficiary was not even homebound, which is an essential criterion to
qualify for home health care.
<bullet> LWe had our claims processing contractor review the State
surveyor's findings and conduct further studies. They determined that
these 20 home health agencies had been improperly paid more than
$777,000, which is now being recouped. In addition, they prevented
further improper payment of another $569,555 to these agencies, all for
an investment in this particular project of just $52,889. Similar
Operation Restore Trust successes were achieved in all the five pilot
States.
Other Operation Restore Trust initiatives in Illinois uncovered
hospices billing for patients who were not terminally ill, and durable
medical equipment vendors billing for unnecessary and expensive
supplies that were simply being stockpiled in nursing homes storage
rooms.
EXPANSION
Overall, Operation Restore Trust saved more than $200 million in
its first two years through restitutions, fines, settlements, and
identified overpayments. Its expansion began as soon as its success
became apparent.
In 1997, we began working to incorporate Operation Restore Trust
into our day-to-day business approach throughout the country. Operation
Restore Trust strategies were expanded to a total of 19 States--
Arizona, California, Connecticut, Florida, Illinois, Indiana,
Louisiana, Massachusetts, Minnesota, Missouri, New Jersey, Ohio,
Oklahoma, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming.
Community mental health center abuse of Medicare's partial
hospitalization benefit was added to the Operation Restore Trust
project list, as our analyses showed costs soaring far beyond any
reasonable projection. The partial hospitalization benefit provides
outpatient psychiatric services to mentally ill patients who otherwise
would have to be hospitalized. Operation Restore Trust investigations
found centers with no trained professionals, providing no treatment of
any kind, or billing us for ``therapies'' such as bingo. We now have a
national initiative underway to terminate the most egregious community
mental health centers, and to closely monitor others to ensure
appropriate care and compliance with coverage requirements.
We made significant improvements to Operation Restore Trust's
special anti-fraud hotline, 1-800-HHS-TIPS, so beneficiaries and health
care workers with potential problems to report could get more user-
friendly service and quicker access to live operators. As Secretary
Shalala has said, beneficiaries and honest providers are among our most
important allies in fighting fraud, and we must make sure they know how
to reach us and how they can help. This hotline is a critical link, and
since its inception in June 1995 HHS operators have spoken to
approximately 145,000 individuals regarding potential issues of fraud,
waste and abuse.
We have received 3,956 complaints through the hotline in Region
Five since its beginning in 1995 that so far have lead to $1.9 million
in recoveries on 352 cases, with another 75 cases referred to law
enforcement for further criminal investigation.
Here in Region Five, we expanded Operation Restore Trust
investigations into Indiana, Minnesota, and Ohio. This year we have
expanded them into Wisconsin. And next year we are planning to use
Operation Restore Trust strategies to target suspected problems in
clinical laboratories, hospices, and skilled nursing facilities.
Because of Operation Restore Trust, we are getting more information
from beneficiaries about potential problems, and seeing much broader
public awareness in general of how to fight health care fraud. We are
seeing routine program integrity referrals from State surveyors. We are
seeing provider groups do more to educate their members on program
integrity issues, like the need for proper documentation. We have
secured several important changes in legislation and regulation that
help fight fraud, waste, and abuse, including:
<bullet> Lhome health reforms that close loopholes, eliminate
incentives to bill for unnecessary or uncovered care, and tighten
eligibility standards;
<bullet> Lthe ability to bar convicted health care felons from ever
again getting paid by Medicare, and to exclude family members of
sanctioned providers as well, so that they can't continue operating
just by transferring the business in name to a relative; and
<bullet> Lthe right to require providers to give us their social
security and employer identification numbers so that we can check to
see if they've ever committed health fraud in the past.
In fact, the success of Operation Restore Trust and our overall
crackdown on fraud, waste and abuse may have generated undue concern
among some providers. Let me be clear--we have no intention of
prosecuting anyone for honest mistakes. If providers do make billing
errors, we do want to find those errors, preferably before we make
payment. If we find errors after we make payment, make no mistake about
it, we do want the money back.
But we are not looking to put anyone in jail for honest mistakes,
and we are not going to refer physicians to law enforcement agencies
for occasional errors. We know that most providers are honest and
conscientious, and we have to believe that the provider knows he or she
was violating billing rules before we make any referrals. Let me also
be clear, however, that we have zero tolerance for fraud, waste, and
abuse.
COMPREHENSIVE PLAN
In order to further institutionalize and build on the lessons of
Operation Restore Trust, we have developed a Comprehensive Program
Integrity Plan, which is nearing completion. Its development began last
March when we sponsored an unprecedented national conference on fraud,
waste, and abuse in Washington, D.C., with broad representation from
our many partners in this effort. The bulk of the conference consisted
of discussion sessions. Groups of experts from private insurers,
consumer advocates, health care provider groups, State health officials
and law enforcement agencies were invited to share successful
techniques and explore new ideas. Their discussions were synthesized
and analyzed to determine the most effective strategies and practices
already in place, and which among the new ideas that were raised
deserve further exploration. The result is a Comprehensive Program
Integrity Plan with several clear objectives.
Increase the Effectiveness of Medical Review. This includes:
<bullet> Lincreasing the overall level of review, and targeting it
on problem areas such as durable medical equipment, physician
evaluation and management services, and home health claims;
<bullet> Lhiring additional physicians as claims processing
contractor Medical Directors to improve the effectiveness of medical
review and foster better understanding of program integrity issues
among physicians;
<bullet> Lmaking more efficient use of prepayment review with
claims processing computer ``edits'' that automatically deny improper
claims;
<bullet> Ltraining for approximately 500 Medicare and Medicaid
contractor employees by the HHS Inspector General's office on how to
develop cases for prosecution when warranted;
<bullet> Levaluating local review policies to determine where
national policy may be needed; and
<bullet> Lmeasuring how well individual contractors perform medical
review activities.
Implement the Medicare Integrity Program. This allows us to hire
special contractors who will focus solely on Program integrity, as
authorized under the Health Insurance Portability and Accountability
Act. We are now reviewing public comments on a proposed regulation for
how these contracts will work, and expect to issue a final regulation
early next year. Until now, only insurance companies who process
Medicare claims have been able to conduct audits, medical reviews, and
other program integrity activities. Under the new authority, we can
contract with many more firms who can bring new energy and ideas to
this essential task. We expect to have four new types of contractors:
<bullet> Lpayment Safeguard Contractors will focus on medical
review, fraud case development, cost report audits and related program
safeguard functions as needed;
<bullet> La Coordination of Benefits Contractor will consolidate
all activities associated with making sure Medicare does not pay for
claims when private insurers or other government programs are liable;
<bullet> La Statistical Analysis Contractor will provide a
comprehensive on-going analysis of trends, utilization data and other
information which helps detect fraud, waste, and abuse; and,
<bullet> LManaged Care Integrity Contractor(s) will target the
program integrity issues that are unique to health plans.
We have already issued one Program Safeguard Contract solicitation
to establish a multiple awards contract for these MIP activities. Once
established, the multiple awards contract will allow us to issue Task
Orders for any or all program integrity activities. This way we can
have a pool of contractors available to undertake the work before we
solicit proposals for specific contractors' workloads. This lets us
experiment with various configurations of program integrity activities,
and provides flexibility that will help mitigate risk related to the
Year 2000 issue and other challenges. We also will be able to turn to
these contractors when various situations arise, such as the appearance
of new scams or the departure of another contractor.
Proactively Address the Balanced Budget Act. This law created
several new programs, benefits, and payment systems which all create
new vulnerabilities. We are acting to address program integrity
problems before they occur for:
<bullet> Lthe Children's Health Insurance Program;
<bullet> Ldiabetes self-management, mammography screening, prostate
cancer screening, and osteoporosis screening benefits;
<bullet> Lreimbursement changes for physicians assistants and nurse
practitioners; and,
<bullet> Lthe prospective payment system for skilled nursing
facilities.
Promote Provider Integrity. We intend to make clear that we do not
simply pay bills, but enter into agreements to do business with
providers. To do so, we will:
<bullet> Lstep up efforts to educate providers on how to comply
with program rules;
<bullet> Lpublish a proposed regulation to establish clear
enrollment and periodic reenrollment requirements, including conditions
under which we will deny or revoke billing privileges and an appeal
process for providers whose billing privileges are denied or revoked;
and
<bullet> Lpursue bond requirements for certain types of providers,
pending receipt of a General Accounting Office report on how to best
use bonds to protect program integrity.
Prepare for the Year 2000 Computer Issue. We have special work
groups exploring how the millennium problem could impact program
integrity efforts. They are evaluating the function, value, and Year
2000 risks for each of our program integrity efforts, and developing a
plan to mitigate or circumvent any problems if they do arise.
Target Known Problem Areas. These include inpatient hospital care,
managed care, congregate care (delivered settings such as assisted
living facilities), nursing homes, and community mental health centers.
<bullet> LInpatient Hospital Care. We will have Medicare's Peer
Review Organizations (PROs) investigate, correct, and prevent problems
documented in audits of Medicare, such as providing unnecessary or
uncovered services, failing to properly document care, and coding
claims incorrectly. PROs currently perform activities such as
validating diagnostic codes and reviewing medical records. Our new
contracts with them will include strong financial incentives to reduce
improper payment rates for inpatient care.
<bullet> LManaged Care. As mentioned above, we will hire a special
program integrity contractor to focus on managed care, where fraud,
waste, and abuse are more likely to involve inadequate care, avoiding
enrollment of high-cost patients, and misrepresenting data on which
payment rates are based. We expect such contractors to verify data,
review beneficiary appeals to ensure that access to care is not denied
inappropriately, and monitor plan compliance with Medicare rules.
<bullet> LCongregate Care. Beneficiaries in nursing homes, assisted
living centers or adult day care facilities are easy targets because
there is easy access to large numbers of beneficiary billing numbers.
Unscrupulous providers conduct ``gang visits'' in which all
beneficiaries receive a service or supply whether they need it or not,
or they submit bills for every beneficiary without furnishing anything
at all. They also submit duplicate bills to both Medicare and other
payers for services that only one payer should cover. We will mount
Operation Restore Trust style projects to fight these types of scams.
We also will work to anticipate shifting incentives for congregate care
fraud, waste, and abuse as we move to more prospective payment systems.
<bullet> LNursing Homes. As one of our original Operation Restore
Trust focus areas, much is already underway to fight fraud, waste, and
abuse and improve the quality of care. We will continue our initiative,
announced by the President this summer, in which we are: working with
States to improve their nursing home inspection systems; cracking down
on nursing homes that repeatedly violate safety rules; seeking to
require criminal background checks on all new nursing home employees;
working to reduce the incidence of bed sores, dehydration, and
malnutrition; and publishing nursing home quality ratings on the
Internet. We also are likely to work with law enforcement partners to
address egregious cases. And we will continue to develop Operation
Restore Trust style projects targeted on specific nursing home fraud,
waste, and abuse problems.
<bullet> LCommunity Mental Health Centers. As another of our
earlier Operation Restore Trust focus areas, much is already being done
to stop abuses in this area, as well. We have a 10-point action plan
underway which first and foremost ensures that beneficiaries who need
intensive psychiatric services get them from qualified providers. We
are doing so through coordination with other agencies, providers, and
advocacy groups. This beneficiary protection is essential as we
terminate the worst offenders and work aggressively to bring others
into compliance with all rules and regulations. We are increasing
claims review and developing a prospective payment system that will
eliminate incentives for inappropriate, unnecessary or inefficient
care. We also are increasing scrutiny of new applicants and requiring
site visits nationwide to ensure that they meet all of Medicare's core
requirements. Already this year we have denied Medicare participation
to more than 100 applicants because they failed to provide all the
required services. And last year President Clinton sought legislation
to strengthen CMHC enforcement activities by: authorizing fines for
falsely certifying a beneficiary's eligibility for partial
hospitalization services; prohibiting partial hospitalization services
from being provided in a beneficiary's home or other residential
setting; and authorizing the Secretary to set additional requirements
for CMHCs to participate in the Medicare program.
CONCLUSION
Operation Restore Trust has lead to unprecedented success in
fighting fraud, waste and abuse. It has become the way we do business
on a day-to-day basis throughout our Regional Office here in Chicago
and the Nation. It lead us to conduct an unprecedented national
conference on how to fight health care fraud, and from there to develop
a Comprehensive Program Integrity Plan that builds on our successes and
lessons learned. We greatly appreciate your interest and support for
these efforts. Senator Collins, I know this area is of particular
concern to you, and that you have conducted previous hearings and
drafted legislation to help us in these efforts. We are honored to have
you here with us today in Chicago. We look forward to working with you
and Senator Durbin on further efforts to protect Medicare from fraud,
waste and abuse, and I am happy to answer any questions you may have.
__________
PREPARED STATEMENT OF JAMES A. KOPF
Good morning Madam Chairman. I am James A. Kopf, Director of the
Criminal Investigations Division in the Office of Inspector General
(OIG) at the U.S. Department of Health and Human Services (HHS). I am
here to tell you about some innovative practices we have developed to
fight fraud and abuse in the Medicare and Medicaid programs. We have
had notable successes; and we know we cannot let our guard down or be
satisfied with today's tools.
Let me share some insights about our experiences with the
constantly escalating assaults on our programs.
Developing New Enforcement Approaches
With annual expenditures of well over $300 billion, the Medicare
and Medicaid programs present a sizeable target to those who seek to
unjustly enrich themselves at the taxpayers' expense.
In late fall of 1994, with resources shrinking, the HHS Secretary
asked the Inspector General to develop a new approach that would enlist
the resources of the various HHS components to attack fraud and abuse
in Medicare and Medicaid. It was decided to implement a coordinated
effort involving the OIG, the Health Care Financing Administration
(HCFA) and the Administration on Aging (AoA). Those three components of
HHS served as the cornerstone for the Department's new initiative and
brought the Department's many years of experience and expertise
together in a concerted effort.
In addition, we invited the Department of Justice, including the
Federal Bureau of Investigation, the Offices of the United States
Attorneys, and State and local agencies involved in fighting health
care fraud and abuse issues to participate in this combined effort,
which became known as Operation Restore Trust (ORT). It was started in
March 1995, then became a Presidential initiative in May of that year.
The purpose of this initiative was threefold: (1) to coordinate all
available resources in an effort to make a significant impact on health
care fraud and abuse; (2) to reach out and educate the public on the
growing health care fraud schemes and issues; and (3) to demonstrate
that a combined effort would be the most cost efficient method of
attacking this problem, with results yielding a significant return on
the dollars invested.
We focused our efforts on five key States and three high-growth
program areas. The States were New York, Florida, Illinois, Texas, and
California. These States represented over one third of all
beneficiaries and expenditures for Medicare and Medicaid nationally.
The high-growth program areas were home health care, nursing
facilities, and durable medical equipment.
Our audits, evaluations, and investigations indicated that the home
health industry had become a target for unscrupulous providers. Nursing
facilities also came under scrutiny, not only for fraud and abuse, but
also for potential of quality of care and patient abuse issues. Durable
medical equipment (DME) is traditionally a hot bed for those who choose
to steal from the government. At that time, Medicare provider numbers
(i.e., authorized numbers used to bill the Medicare program) were
easily obtainable, and no prior health care experience was required to
go into the DME business. So profitable was this area that criminal
elements in South Florida were leaving the illegal drug business to
open DME companies. This was as profitable as dealing in drugs and was
less risky.
After the first year of the project, hospice care was added as a
high-growth focus area, based on audits of the industry that indicated
a high potential for fraud and abuse.
Project Coordinators in each of the five States established work
groups comprised of the agencies I mentioned earlier. The work groups
determined project goals and objectives unique to each State and
implemented innovative plans that made the best use of available
resources. The States coordinated their efforts with the OIG, HCFA, and
AoA headquarters, which in turn shared the results of each State's
efforts with the entire demonstration team. The result was a cohesive,
concentrated attack on health care fraud.
Members of the partnerships we found are here today to tell you
about the results of this initiative. Each will provide a unique
perspective as to what they hoped to see accomplished. I am here to
share information regarding some of the successful cases that flowed
out of this project locally.
Examples of Schemes Investigated in Illinois
Incontinence Supplies
First, during Operation Restore Trust, a scheme was uncovered
involving incontinence supplies provided to nursing home patients.
Adult diapers are not items that a nursing facility can bill separately
to Medicare. The cost of providing adult diapers is the responsibility
of the nursing facility as a part of its routine cost of providing care
to patients.
Investigations revealed that unscrupulous suppliers convinced
nursing home operators that they had found a legitimate way to bill
Medicare for the diapers. In return for the names and Medicare numbers
of incontinent patients, these suppliers provided the nursing homes
with an endless supply of adult diapers at no cost. The suppliers then
billed Medicare as if the diapers were an item known as a ``Female
Urinary Collection Device.'' This device could be billed for $7.00 to
$8.00 per item while the cost for purchasing the diapers was only 30
cents per diaper. The supplier billed Medicare as if the more expensive
collection devices were provided three times a day, 7 days a week. The
cost to Medicare mounted at an incredible rate. The suppliers quickly
recouped their overhead and began making money.
This particular scheme was found to be so wide-spread that it
involved patients and suppliers throughout the country. These cases
have been successfully investigated, and a number of these
investigations are still ongoing, including some in Illinois.
We were able to detect this scheme and investigate these matters in
Illinois because of efforts and resources provided through ORT. In all
States, savings to Medicare are as a result of these types of
investigations resulted in savings estimated at $104 million in 1996,
projected to about $534 million over 5 years.
Changing Identities
The next case had some distinct characteristics not found in the
preceding examples. This supplier provided incontinence care kits to
nursing homes. These relatively inexpensive kits included a pair of
latex gloves, a small cup of sterile water, a disinfectant, an
absorbent pad, a pair of plastic tweezers and a small plastic pair of
scissors. The supplier misrepresented the patients as having chronic
incontinence in order to bill Medicare, then inflated the number of
kits actually provided. An average of 90 kits per month per patient was
billed, but only about a third of that number was provided.
What sets this investigation apart from the others was the fact
that the perpetrators closed and then reincorporated their business
under different names 31 times to avoid detection. Shortly after they
started doing business with Medicare, the Quisenberrys, a father/
daughter team, became aware that the Medicare contractor who processed
their claims was scrutinizing the claims due to concerns about possible
fraud or abuse. Before their company du jour would run up enough claims
to gain the attention of the contractor, the Quisenberrys would simply
close the business and incorporate under a different name and location.
They were able to accomplish this by enlisting the aid of friends and
family who ``fronted'' for them.
When this investigation was concluded, the Quisenberrys and five of
their associates were named in a Racketeering Influenced, Corrupt
Organization (RICO) indictment. The RICO indictment was the first of
its kind in the health care fraud arena. More significantly, it was the
largest RICO indictment in the history of the judicial district in
which it was filed, alleging damages of approximately $30 million to
the Medicare program. All the parties charged pled guilty to their part
in this scheme. While not being the largest Medicare fraud case which
we have investigated, the Quisenberry case clearly was one of the more
unique investigations, setting a trend on how to cheat the Government.
A number of jurisdictions are now considering similar charges in other
investigations.
Although this supplier was actually based in Michigan, it did over
$1 million in business with nursing homes in Illinois, and for that
reason, it was included as an Operation Restore Trust investigation.
Again, if not for the resources and expertise that were brought in
under ORT, this investigation would not have been brought to a
successful conclusion.
Phony Cost Reports
Based on periodic cost reports, Medicare reimburses Home health
agencies, nursing facilities, and some other providers who render care
in a facility-like setting. The cost report is used to itemize the
total cost of operation of the provider. It identifies the proportion
of the provider's total cost that is related to the care of Medicare
beneficiaries and forms the basis for Medicare reimbursement. It is
possible, however, to ``bury'' within this document expenditures which
are totally unrelated to providing Medicare beneficiaries with
treatment.
Through ORT, we initiated a number of cost report cases in Illinois
as they apply to nursing facilities or home-confined patients.
In one case, a nursing home administrator embezzled money from the
owners of his nursing home by including non-medical expenses in the
cost report, disguising them as reimbursable items. In some instances,
the money was actually used for improvements to his private residence
and an accumulation of over 200 pornographic video tapes. In addition,
he created a ghost employee and paid himself a sizeable salary under
that name. He also embezzled money from residents in the nursing home
by gaining control of their personal finances.
In all, this man stole approximately $1.6 million. All but $200,000
was obtained through false cost reports. He pled guilty as a result of
this investigation and was sentenced to a total of 46 months
imprisonment and ordered to pay $1.6 million in restitution, including
over $67,000 to a Medicare beneficiary from whom he swindled money.
Exploiting the Frail Elderly to Bill Medicare
In another type of case that was identified during Operation
Restore Trust, a number of businesses identifying themselves as
Community Mental Health Centers were found to be defrauding the
Medicare and Medicaid programs. These providers supplied adult day care
under the guise of mental health therapy.
Patients at area nursing facilities were delivered by the provider
and held for the day in empty warehouses or other abandoned buildings.
They were allowed to watch TV or play cards, but were otherwise
provided no structure or care. The providers claimed the expense of
providing transportation, meals and the services of mental health
professionals when they did not, in fact, provide any of these
services. These investigations are far from complete and have raised
serious questions about the quality of care received by nursing
facility patients.
Home Pharmacy Services
Last, I will describe the case of Home Pharmacy Services, a firm
that operated in Southern Illinois that provided pharmaceuticals for
residents of 96 nursing facilities in that part of the State. These
supplies were paid for predominantly through Medicaid, although the
example clearly demonstrates the application of the ORT protocol.
Under the rules of Medicaid, drugs that are unused at the time of a
patient's death or discharge are to be destroyed. This company,
however, was recovering the unused drugs, repackaging them and re-
selling them, often to other Medicaid recipients. In addition, the
unused drugs were not stored appropriately after they were recovered by
the company, creating a substantial health risk. The drugs could have
lost the potency necessary to produce the medical goals of the
subsequent patient; and, more seriously, the drugs could become toxic
and threaten the user's health.
An ORT-coordinated task force executed a search warrant on the
premises of this business in May, 1996. Agents filled two 14-foot
Postal trucks with records and evidence, including a large amount of
recovered drugs which had not yet been repackaged. The drugs were being
stored in store rooms which were neither sanitized nor climate
controlled.
The parent corporation of Home Pharmacy Services subsequently
entered into settlement negotiations with the Office of the United
States Attorney and with our office. As a result, the corporation
agreed to pay $5.3 million in penalties and restitution, enter into a
corporate integrity plan, and cooperate in the criminal prosecution of
the manager and former owner of Home Pharmacy Services. The former
owner, who had sold his business to the current owners devised this
scheme, entered into a plea agreement with the United States Attorney.
He was sentenced to two years in a Federal penitentiary and ordered to
pay $750,000 in fines and restitution to the Federal government.
This case came to fruition because of the cooperative effort put
forth under the auspices of Operation Restore Trust. The investigation
was one of the earliest joint efforts under ORT and was the first
investigation of the Health Care Fraud Task Force in the Southern
District of Illinois which was itself a product of Operation Restore
Trust. The Task Force was comprised of a team of agents from several
State and Federal agencies, including the HHS OIG, the FBI, Postal
Inspection Service, the Illinois Medicaid Fraud Control Unit, the IRS,
and the Illinois Pharmacy Board. Funding made available through ORT
helped make it possible to open an OIG field office in Fairview
Heights, Illinois, the city in which the Office of the United States
Attorney for the Southern District of Illinois is located and where
this case was prosecuted.
Conclusion
As you can see, the Operation Restore Trust experience provided all
of us with a new template for the way we do business. New lines of
communication were opened, and cooperation among agencies involved in
fighting health care fraud reached new heights. The proof is in the
remarkable return on investment realized at the end of the 2-year
project. In the five States, the initiative identified $187.5 million
in restitutions, fines, settlements, and other overpayments. This
constitutes a return of more than $23 for every $1 invested in the
project.
Operation Restore Trust paved the way for the passage of the Health
Insurance Portability and Accountability Act of 1996. That statute
included a solid funding base that allows our agency to continue to
aggressively fight fraud and abuse in the Medicare and Medicaid
programs and to be a full partner with the other agencies and law
enforcement entities in this effort.
We are proud of our accomplishments, and we cannot afford to be
naive or to rest on our laurels. Even as we speak, criminal elements
are developing novel new approaches to exploit Medicare, Medicaid, and
other health care programs. We need to stay ahead of them. We are
therefore, eager to work with this committee to further refine our
tools and the program safeguards needed to protect taxpayer dollars and
medical care resources.
Thank you for holding this hearing. I welcome your questions.
__________
PREPARED STATEMENT OF JOHN GRAYSON SUBMITTED BY BARBARA COYLE
My name is John Grayson and I am a volunteer at the Suburban Area
Agency on Aging for the Health Care Anti-Fraud, Waste and Abuse
Community Volunteer Demonstration Project. I am a retired owner of a
manufacturing company in the north west suburbs, and have been with the
project since October 1997. Next to me is Jonathan Lavin, Executive
Director of the Suburban Area Agency on Aging in Oak Park, Illinois and
Mimi Toomey also with the Suburban Area Agency on Aging in Oak Park,
Illinois.
I first heard about the project from a public service announcement
that was on the radio. I contacted Miss Toomey and subsequently
enrolled in her training program. In my training class there were 38
volunteers and the training program extended over the period of 3 days,
during which the speakers included staff from the Office of Inspector
General, Illinois Department of Public Aid, Ombudsman Program and the
Medicare Fraud Units. In my area the Catholic Charities Northwest is
the host and Mary Nommenson is the coordinator. Mary makes calls to
various senior organizations and sets up the appointments for me to
make my presentations. I am generally assisted by another volunteer
named Jim Grimm, from Elk Grove Village, who does a little bit of the
speaking and helps by passing out literature and conducting surveys and
doing personal interviews after my presentation.
At the presentations, I first introduce myself and attempt to build
some interest and some enthusiasm for what we're doing by pointing out
to the senior citizens that Medicare spends 200 billion dollars a year
of which it is estimated that 20 billion dollars is lost through fraud,
waste and abuse. I point out that it is predicted that Medicare will go
bankrupt in 10 years, and that, undoubtedly, as it starts to go
bankrupt, benefits will be reduced or co-payments will be increased so
it is in all of our interests to help save Medicare by doing what we
can to spot any indications of fraud and abuse. I want to point out
that we are saving this not just for ourselves but for our children and
potentially our grandchildren. I explain how easy it is for crooks to
swindle the system by merely having a doctor's prescription for
unnecessary procedures or equipment as well as having your Medicare
number. I explain that the Medicare number is just like your credit
card number and that you should never give it out to anyone who isn't
known to you to be a genuine provider of services. I relate some of the
instances or types of fraud that have been perpetrated on people and
the system. These are the examples of fraud that has already been
detected, by crooks who have been caught, but the possibilities for
theft and fraud are infinite, and changing constantly. We are seeking
the help of our audiences in spotting fraud, because they are on the
front line and have the best opportunity to see it first. I emphasize
that it is very important for them to examine their medical summary
notice, or explanation of medical benefits, following a medical
procedure. They need to be sure that they received everything that was
billed to Medicare. When they do spot something that doesn't look
right, the first call should be to their medical provider to obtain
explanation. If they aren't satisfied with that, I suggest they call
their SHIP counselor, Senior Health Insurance Program counselor, to
assist them in getting an explanation. If they still aren't satisfied,
then I suggest that they call the numbers on the pamphlet I give them,
which would either be the Federal HHS-TIPS line or our local number at
the Suburban Area Agency on Aging, or call Mary Nommenson at Catholic
Charities. I try to give them an incentive by telling them that there
is now a bounty being paid to whistle blowers who help us to uncover
fraud and that they could be paid 10 percent of whatever is recovered
up to $1,000.
I conclude by reiterating the three main points I wanted to make.
First, don't give your Medicare number to anyone that you don't know.
Second, check your explanation of medical benefits carefully to make
sure you received everything that Medicare is being billed for. And
save our literature so that if you do come across anything that doesn't
look right, you'll have our number where you can call us. I close by
thanking them for their attention and by urging them to help us to save
Medicare. I then explain that Jim Grimm and myself will be available
after the presentation to talk to anybody that wants to ask us
questions. We also want to hear them tell us about their own
experiences. Generally we do have a few people who do want to talk to
us on a one-on-one basis. We ask them to fill out the survey form so
that we can report these back to our host for documentation and
statistics.
I personally have provided presentations to a variety of community
organizations and am constantly amazed at the level of interest by
participants in attendance. There are usually three or four individuals
in the audience who share their personal stories of suspected fraud or
abuse after the presentation.
I have found participation in the Suburban Area Agency on Aging's
fraud and abuse program to be challenging and rewarding and am very
pleased to be able to relate my experience with you today.
__________
PREPARED STATEMENT OF JONATHAN LAVIN AND MARY CLARE TOOMEY
The Suburban Area Agency on Aging, and the Northeastern Illinois
Area Agency on Aging are pleased to be participants in the U.S.
Administration on Aging ``Health Care Anti-Fraud, Waste, and Abuse
Community Volunteer Demonstration Project.'' We greatly appreciate the
assistance provided to us from Stasys Zukas our program officer in the
Chicago office of the combined Regions 5 and 7 offices for the
Administration on Aging, and in Washington D.C., Brian Lutz and Valarie
Soroka. Our project also works in conjunction with the City of Chicago
Department on Aging which has assisted us to spread the word on what
Medicare beneficiaries and senior service agencies may do to identify
and report fraud and abuse in the Medicare and Medicaid programs. We
also want to mention how much we appreciate the advice and experience
offered to us by the Illinois Department on Aging which has always been
one of the leaders in Operation Restore Trust since it began in May of
1995.
We are one of twelve projects funded by the U.S. Department of
Health and Human Services' Administration on Aging to recruit and train
retired individuals to identify waste, fraud, and abuse in the Medicare
and Medicaid program. In addition to the federal funds we receive, Blue
Cross/Blue Shield of Illinois has provided us resources for volunteer
recruitment and training in each of the first two years of the project.
We also identify the time of our volunteers as in-kind match to our
grant award. Once trained, these volunteers alert other seniors and
help them recognize and report excessive charges for services or
supplies, unnecessary service charges, and questionable billing
practices.
This Project is centered in local senior service agencies
throughout the metropolitan Chicago area. In addition we were able to
tap the expertise of the Illinois Department of Insurance Senior Health
Insurance Program, the Illinois Nursing Home Ombudsman Program, the
Office of Inspector General, the Illinois Attorney General's Office,
Office of Inspector General, Department of Public Aid, and the State
Police. Volunteers are recruited from all of suburban Cook County and
the Collar Counties (DuPage, Grundy, Kane, Kankakee, Kendall, Lake,
McHenry, and Will).
The Area Agencies on Aging have subcontracted with eleven host
sites in the metropolitan Chicago area to organize presentations and
supervise volunteers. Each host site is responsible for coordinating
volunteers to provide at least two educational programs per week with
various senior organizations, civic organizations and church groups.
Volunteers also provide individual assistance to beneficiaries on a as-
needed basis for specific issues and concerns. The participating
organizations are all current grantees to the Area Agencies on Aging
under Title III of the Older Americans Act and through the direction
from Washington D.C. by the Administration on Aging and from
Springfield, Illinois from the Illinois Department on Aging, to the
regional level and then to the community as part of the Illinois senior
service network. This network was able to develop proposals and
implement volunteer recruitment and presentations in a rapid and
effective fashion under this program.
We emphasize that the vast majority of health care providers are
honest and are trying to provide the best care that they can. We have
worked with a number of doctors, nursing home administrators, hospital
staff and other health care professionals to develop strategies which
better ensure the integrity of the Medicare and Medicaid programs. It
is in fact only a small percentage of unscrupulous people who are
creating a serious problem.
The U.S. General Accounting Office estimates that as much as $20
billion are lost each year to fraud, waste and abuse. What is more,
consumer surveys by the American Association of Retired Persons and the
U.S. Department of Health and Human Services reveal that these
practices are causing a great mistrust in the public's perception of
our health care system. Like a neighborhood watch system, our mission
is to be the eyes and ears of the Medicare program in our communities--
to help restore trust and help ensure that people are receiving the
care that we pay for.
The level of interest in this project demonstrated by the retired
professionals has been quite impressive. Retired attorneys, paralegals,
registered nurses and insurance professionals have made up the majority
of those trained.
The cooperation of federal, state, and local agencies to unite our
efforts in combating fraud and abuse in Medicare and Medicaid was an
achievement in itself. These groups have integrated efforts to not only
raise beneficiary awareness, but have developed a system to share
information which has been invaluable to our project. Agencies such as
the Office of Inspector General, Illinois Department of Public Aid and
the Illinois state police have provided speakers to participate in
training the retired beneficiaries. The groups involved have benefited
from the partnerships formed as a result of the combined efforts to
combat Medicare and Medicaid fraud and abuse.
Based on information provided by the Office of Inspector General we
share ``horror'' stories with beneficiaries at presentations. We site
specific examples of what to be aware of in detecting fraud and abuse.
According to the latest figures, over $3 million has been recouped as a
result of the volunteer activities across the country, but most
important is the message we are sending to fellow seniors that they
have the responsibility to help preserve their own Medicare and
Medicaid programs.
Of course, not every allegation becomes a case for investigation. A
good deal of our assistance comes from helping people to navigate the
health care system including who they should call, how to get
information, and how to be better health care consumers. We try to
educate people not only about what may be fraud, but also, what isn't
fraud. A simple call to their provider or to their Medicare insurance
carrier may clear up the discrepancy. But in those instances where
something still may not seem right, the case is referred to the Office
of Inspector General for investigation.
To date, the Health Care Waste, Fraud and Abuse Community Volunteer
Projects across the country have trained over 2,000 retired volunteers,
held over 1,200 training sessions, informed more than 250,000 persons
through community education sessions, reached more than 7 million
persons through public service announcements and media messages, and
referred several hundred cases to the Office of Inspector General which
are currently under investigation.
In the fiscal year 1999, the Administration on Aging has received
$7 million to expand these volunteer projects nationwide, affirming the
success of our combined efforts to combat fraud, waste and abuse in the
health care system.
The following figures highlight major achievements made during the
period October 1997-October, 1998 in the Chicago Metropolitan Area:
<bullet> LNumber of individuals trained: 105
<bullet> LNumber of retired professionals trained: 85
<bullet> LNumber of others trained: 20
<bullet> LNumber of people reached through anti-fraud
presentations: 10,075
<bullet> LNumber of individual beneficiary contacts: 90
<bullet> LNumber of suspected fraud reports made OR to be made by a
volunteer: 21
<bullet> LNumber of reports NOT found to be fraudulent and handled
locally: 69
We are very pleased to have the opportunity to continue our
project. We ask you to examine a few issues that may impact the program
in the future:
1. LThe Health Care Financing Administration is suggesting that
they may save funds by suspending the mailing of Summary of Benefits
(previously the Explanation of Medicare Benefits Notice). If these
notices are not sent to Medicare beneficiaries, a key tool for the
combating of Medicare fraud and abuse will be lost. We ask that these
notices continue to be mailed and that you join us in promoting the
close examination of those notices by beneficiaries.
2. LWe ask that the Administration on Aging program be briefed of
major findings by others who are combating fraud in the federal
government so that our volunteers may offer current and accurate
information in their presentations. The more knowledgeable we are of
the fraud and abuse stories in the major headlines, the more convincing
our message is to our audiences.
Thank you for asking us to participate in this hearing.
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