Good morning Mr. Chairman and Members of the Committee. I am John E.
Hartwig, Deputy Inspector General for Investigations, Office of Inspector
General of the United States Department of Health and Human Services and I thank
you for giving us the opportunity to testify on the subject of Medicare coverage
of investigational devices and the OIG's significant accomplishments in this
effort.
OVERVIEW - THE OFFICE OF INSPECTOR GENERAL
By way of background, the Office of Inspector General (OIG) was created in
1976, and is statutorily charged with protecting the integrity of departmental
programs, as well as promoting their economy, efficiency, and effectiveness. The
OIG meets this statutory mandate through a comprehensive program of audits,
program evaluations, and investigations designed to improve the management of
the Department and to protect its programs and beneficiaries from fraud and
abuse.
Our role is to detect and prevent fraud and abuse, and to ensure that
beneficiaries receive high quality, necessary services, at appropriate payment
levels. We have been extensively involved in examining the Department of Health
and Human Services' policies concerning investigational medical devices. I will
first report on our investigation of improper billing by hospitals for
procedures involving devices not approved by the Food and Drug Administration
(FDA) for general marketing. I will then describe our assessment of whether
controls over clinical testing of investigational devices adequately ensure
patient safety and sound clinical research.
THE INVESTIGATION OF HOSPITAL BILLINGS FOR
INVESTIGATIONAL DEVICES
In 1993, the OIG was advised by the Health Care Financing Administration
(HCFA) that it was concerned that several hospitals had billed Medicare
improperly for minions of dollars worth of surgical procedures involving
unapproved medical devices. Specifically, it was alleged that these hospitals
knowingly were billing Medicare for the implantation of pacemakers,
defibrillators and other cardiac devices that had not been determined to be safe
and effective by the FDA. Under Medicare program rules then in effect, medical
devices that have not been approved for marketing by the FDA were considered
investigational, and as such were not reimbursable by Medicare. The policy
prohibiting payment for these experimental devices had been clearly set out in
the Medicare Hospital manual provided to all hospitals participating in the
Medicare program.
In response to HCFA's request, the OIG opened an investigation to determine
whether the hospitals' practices violated any provisions of the various civil
and criminal false claims statutes. OIG subpoenas were issued to five
manufacturers of the investigational devices in October 1993.
In March 1994, the investigation significantly expanded to determine whether
the deliberate use of improper billing codes was part of an industry-wide abuse
that encompassed both hospitals and many medical device manufacturers. In June
1994, the OIG issued over 130 additional subpoenas to hospitals in 30 States for
documents related to the billing of investigational cardiac devices.
The requests for documents drew strenuous objections from the hospitals and
interested medical groups. Our attorneys then engaged in protracted negotiations
with lawyers for some of the subpoenaed hospitals before the requested materials
were produced. The affected groups also turned to Congress for support, arguing
that HCFA's reimbursement policy unfairly deprived Medicare patients of the
benefit of new technologies. The industry's request for legislative relief
produced proposed legislation that not only would extend Medicare coverage to
procedures involving new devices, but also make the revised rules retroactive,
thus possibly nullifying the basis of the OIG investigation.
Despite these challenges, OIG continued its investigation and eventually
received several hundred boxes of responsive documents. These documents were
logged and reviewed by teams of OIG Special Agents and auditors. As the
investigations progressed into early 1995, the Department of Justice and Federal
prosecutors were apprised of developments affecting the cases in their
jurisdictions.
FINDINGS OF THE OIG INVESTIGATION
To date, we have invested over 4,000 staff hours to analyzing documents,
developing leads and conducting interviews in furtherance of the investigational
devices investigation. When discussing an investigation as complex as this one,
it is difficult to summarize its findings without oversimplifying the issues.
However, several conclusions are readily apparent.
First, the majority of hospitals that we examined had billed for
investigational cardiac device procedures that were not covered by Medicare and
for which payment should not have been made. The number of improper billings on
a per-hospital basis ranged from less than 10 to in excess of 400 procedures.
Although additional audit work must be completed before we know the precise
amount of the improper payments, it is clear that Medicare was misled into
paying millions of dollars to hospitals for procedures using these experimental
devices.
Based upon our evaluation of the documents provided in response to the OIG
subpoenas, the level of culpability of the hospitals also varied. We found ample
evidence that the majority of hospitals had some knowledge of the prohibition
against billing Medicare for the implantation of an investigational device.
We also identified close to 30 hospitals that appear to have knowingly
submitted improper claims for procedures involving investigational devices and
which took steps to obscure the experimental nature of the implanted device. We
believe these hospitals intentionally defrauded the Medicare program. In
addition, we have questions concerning the role played by the physicians in the
implantation of investigational devices, as they may bear some responsibility
for these fraudulent claims. After all, as clinical investigator for the medical
device manufacturer, the physician must submit research protocols to the
hospital's institutional review board (IRB) prior to the use of the
investigational device in clinical trials. Furthermore, we believe physicians
must have known that the device he or she was about to implant in a patient was
still awaiting FDA approval.
In view of these findings, Inspector General June Gibbs Brown has written to
Bruce Vladeck, the Administrator of HCFA, urging that HCFA recover the
overpayments made to the hospitals and physicians who improperly billed for
these investigational devices. She fully supports the recovery of these funds
and has directed my staff to work closely with HCFA to facilitate the recovery
effort. She also requests that HCFA take steps to ensure that the hospitals do
not attempt to offset the repayments to Medicare by billing the patients who
received these devices. In any case where the audits to determine the amount of
overpayments uncover evidence of criminal conduct, the matter will be referred
to OIG investigators for further investigation.
Although the recovery of overpayments is a priority, let me state again that
the OIG also supports the prosecution of entities and individuals engaged in
criminal fraud. With regards to the evidence of fraud that already has been
uncovered by the OIG, we will make appropriate referrals to the Department of
Justice for an assessment of the prosecutive merit of these cases.
ASSESSMENT OF CONTROLS OVER CLINICAL TESTING OF
INVESTIGATIONAL DEVICES
In addition to investigating the submission of improper claims related to
investigational devices, we conducted a study in 1994 at the request of FDA to
address concerns with the clinical testing of investigational devices. FDA was
particularly concerned about manufacturers distributing investigational devices
outside of clinical trials and clinical investigators implanting devices in
patients who do not fit clinical protocols. The design and size of clinical
trials are carefully determined to minimize the number of patients exposed to
risk while still generating information to establish efficacy of the device.
We traced four investigational devices through the clinical trials process
from the manufacturer to the clinical investigator and local hospital where
clinical research is carried out. AR of these devices in our review were
significant-risk, implantable devices, but were not part of our investigation on
hospital billing practices.
During our assessment of the testing process, we found problems in the
accounting and tracking of investigational devices and in the local oversight by
IRBS, including the informed consent process. With three of the devices we found
problems with the distribution outside of the approved clinical trials. One
device was distributed in excess of the approved protocol, with one clinical
investigator clearly implanting devices in more patients than the local review
board or FDA had granted permission. Two of the devices we focused on were not
properly accounted for among clinical investigators.
The study also identified potential weaknesses in local oversight of
clinical trials. We found that institutional review boards within hospitals have
difficulty monitoring clinical trials. They are dependent on information
provided by clinical investigators and may not independently verify data. We
found several cases where clinical investigators violated orders from the local
review board or began implanting devices prion our contributions in
this critical area. The Office of Inspector General plays the role of the fact
finder for the Department as well as providing an accurate assessment of the
Department's policies. I believe that through our efforts to date we have
accomplished four equally important objectives. First, we have identified a
significant abuse by hospitals and physicians of the Medicare program, and
assisted HCFA in identifying these inappropriate billing practices. Second, we
have identified a source of significant Medicare overpayments and will support
the ongoing overpayment collection efforts. Third, we have identified potential
criminal violations relating to the submission of fraudulent claims and are
making appropriate referrals of these cases to the Department of Justice.
Finally, we have served as the catalyst for a review of a Medicare coverage
policy that has resulted in a change that the Department believes will allow
Medicare beneficiaries greater access to advances in technology.
Our work in this area is not over. We will continue to work with HCFA, FDA
and the Department of Justice to ensure that the integrity of the Medicare
Trusts Funds are preserved, our beneficiaries received the highest quality of
medical care and those who attempt to cheat the system are held accountable. We
thank you for your support of our efforts and I will be happy to answer any
questions you may have.