[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
RESULTS OF THE HEALTH CARE FINANCING ADMINISTRATION'S FISCAL YEAR 1999
FINANCIAL STATEMENTS AUDIT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
MARCH 15, 2000
__________
Serial No. 106-162
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
__________
U.S. GOVERNMENT PRINTING OFFICE
67-152 WASHINGTON : 2000
______
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Lisa Smith Arafune, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Bonnie Heald, Director of Communications
Bryan Sisk, Clerk
Trey Henderson, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on March 15, 2000................................... 1
Statement of:
Brown, June Gibbs, Inspector General, Department of Health
and Human Services, accompanied by Joseph E. Vengrin,
Assistant Inspector General for Audit Operations and
Financial Statement Activities............................. 6
Hash, Michael M., Deputy Administrator, Health Care Financing
Administration, Department of Health and Human Services,
accompanied by Michelle Snyder, Chief Financial Officer of
Health Care Financing Administration and Director, Office
of Financial Management.................................... 45
Jarmon, Gloria L., Director of Health, Education and Human
Services Accounting and Financial Management Issues,
Accounting and Information Management Division, U.S.
General Accounting Office.................................. 20
Letters, statements, et cetera, submitted for the record by:
Brown, June Gibbs, Inspector General, Department of Health
and Human Services, prepared statement of.................. 9
Hash, Michael M., Deputy Administrator, Health Care Financing
Administration, Department of Health and Human Services,
prepared statement of...................................... 47
Jarmon, Gloria L., Director of Health, Education and Human
Services Accounting and Financial Management Issues,
Accounting and Information Management Division, U.S.
General Accounting Office, prepared statement of........... 22
Turner, Hon. Jim, a Representative in Congress from the State
of Texas, prepared statement of............................ 4
RESULTS OF THE HEALTH CARE FINANCING ADMINISTRATION'S FISCAL YEAR 1999
FINANCIAL STATEMENTS AUDIT
----------
WEDNESDAY, MARCH 15, 2000
House of Representatives,
Committee on Government Reform,
Subcommittee on Government Management, Information, and
Technology,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:02 a.m., in
room 2154, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Biggert, Ose, and Turner.
Staff present: J. Russell George, staff director and chief
counsel; Bonnie Heald, director of communications; Bryan Sisk,
clerk; Ryan McKee, staff assistant; Louise DiBenedetto, GAO
Detailee; Trey Henderson, minority counsel; and Jean Gosa,
minority clerk.
Mr. Horn. The Subcommittee on Government Management,
Information, and Technology will come to order.
Today's hearing is the third in a series of hearings to
examine the results of financial statement audits of selected
Federal agencies. Today we'll focus on the Health Care
Financing Administration. This agency, which administers the
Medicare and Medicaid programs, helps pay the medical bills for
millions of Americans, from the youngest and the sickest to the
oldest and most vulnerable.
In 1999, the cost of these two programs exceeded $300
billion. Last week, the Health Care Financing Administration
released the results of its fiscal year 1999 financial audit.
The Inspector General of the Department of Health and Human
Services reported that, as of September 30, 1999, the Health
Care Financing Administration's financial statements fairly
presented the agency's financial position in all material
respects. In accounting terms, that is often called a ``clean
audit opinion.''
I commend the Health Care Financing Administration for
achieving that goal; however, we need to sweep through some of
the smoke and mirrors that cloud the agency's overall financial
condition. Because of those longstanding financial problems,
the reported financial information was technically reliable for
only 1 day--Thursday, September 30, 1999.
The Medicare program continues to be vulnerable to fraud,
waste, and abuse, partly because of the program's lack of
oversight on a regular basis. For fiscal year 1999, the Health
Care Financing Administration reported an estimated $13.5
billion in improper payments. Last Wednesday, the ``Washington
Post'' reported that the Connecticut General Life Insurance
Co., a contractor responsible for processing Medicare claims,
agreed to pay about $9 million to settle allegations it had
overcharged Medicare for its expenses.
Yesterday, the ``Washington Post'' reported that the
Department of Justice is seeking triple damages of $1 billion
from Vencor, one of the Nation's largest nursing home
companies, saying it had defrauded the Federal Government's
health insurance programs.
On another page of the same newspaper, reporter Steve Barr
wrote, ``The patients died, but the bills kept coming, and the
Federal Government kept paying.'' In 1997, the Medicare program
paid an estimated $20.6 million for health care services to
people who were dead.
In a renewed effort to reduce waste and fraud, the
administrator of the Health Care Financing Administration said
that she plans to increase the agency's oversight of the 56
insurance companies that process Medicare claims on behalf of
the agency.
These recent examples of fraud demonstrated the great need
for vigilant oversight. We must ensure the fiscal integrity of
this program, and I welcome our witnesses, who will give us a
very close examination of what they have done already in their
role as the General Accounting Office, as the Inspector General
of Health and Human Services, and as the agency itself.
We will start with panel one. If you will stand and raise
your hands, we will swear you in.
[Witnesses sworn.]
Mr. Horn. We had five at the witness table and three at
backups, the clerk will note.
We'll just simply begin as the witness list is. We'll start
with the Honorable June Gibbs Brown, Inspector General,
Department of Health and Human Services. She's accompanied by
Mr. Joseph Vengrin, Assistant Inspector General for audit
operations and financial statement activities.
Ms. Gloria L. Jarmon will be the next witness, and that's
coming after Ms. Brown. We'll introduce her then, along with
Mr. Hash, who will be accompanied by Ms. Snyder.
There's a statement from Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
I think all of us here today understand what the Medicare
and Medicaid programs mean to this country. For many Americans,
particularly the elderly and the poor, these programs are the
only thing that stand between them and disaster.
As Members of Congress, we have a fiduciary responsibility
to ensure that these programs remain solid and dependable for
this generation as well as the next.
As the agency with oversight over these programs, HCFA has
an equally critical role to play; yet, as we'll hear today, I
believe HCFA's management practices unnecessarily and sometimes
unwittingly put these programs in jeopardy, and I don't think
I'm the only one who thinks so.
For the last several years, the General Accounting Office
has categorized programs run by HCFA as high risk for waste,
fraud, and abuse.
Among other things, the GAO has been unable to estimate the
national error rate for fee-for-service payments, which has
resulted in billions lost annually in improper payments; has
found that HCFA has been slow to deploy tools given to it by
Congress to correct these problems; and GAO has found that HCFA
has material weaknesses relating to the management of Medicare
accounts receivables, financial reporting, and computer
security.
I am aware of and commend the steps taken by HCFA to
address its management problems. In fact, as we will hear,
estimated improper Medicare payments for this past fiscal year
were $13.5 billion, down from about $20 billion reported in
fiscal year 1997, and $23.2 billion for fiscal year 1996.
Despite this progress, $13.5 billion of waste, fraud, and
abuse is still too much, particularly given the poor financial
condition the Medicare program finds itself in right now. This
wasted money could have been better put to use shoring up the
solvency of the program or as a down payment on a Medicare
prescription drug benefit.
Today's hearing presents this subcommittee with an
opportunity to review HCFA's financial management practices.
I trust that our expert panel of witnesses will help us
work our way through the questions. Their expertise in the
field of government management will be useful as we explore
ways to rid our government of waste, fraud, and abuse. I look
forward to hearing their thoughts on where HCFA is headed as an
agency.
Again, Mr. Chairman, I thank you for calling this important
oversight hearing.
Mr. Horn. Well, I thank the vice chair.
I would like to ask if the gentleman from Texas, the
ranking member, would like to have an opening statement.
Mr. Turner. Mr. Chairman, I think I will forego my opening
statement and file it for the record so we can proceed with the
hearing.
Mr. Horn. It will be put on the record between my opening
statement and Mrs. Biggert's as if read.
Thank you.
[The prepared statement of Hon. Jim Turner follows:]
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Mr. Horn. We will now proceed with Ms. Brown, the Inspector
General.
STATEMENT OF JUNE GIBBS BROWN, INSPECTOR GENERAL, DEPARTMENT OF
HEALTH AND HUMAN SERVICES, ACCOMPANIED BY JOSEPH E. VENGRIN,
ASSISTANT INSPECTOR GENERAL FOR AUDIT OPERATIONS AND FINANCIAL
STATEMENT ACTIVITIES
Ms. Brown. Thank you, Mr. Chairman.
I'm pleased to report to you, as you've all mentioned, that
the Health Care Financing Administration [HCFA], has made great
progress in reducing Medicare payment errors, and also in
presenting reliable financial information.
I'd like to begin by acknowledging cooperation and support
received from the Department, HCFA, and the General Accounting
Office. HCFA's assistance in making available medical review
staff at the Medicare contractors and peer review organizations
was invaluable. Also, we worked closely with GAO in carrying
out its responsibility for auditing the consolidated financial
statements of the Federal Government.
My statement today will focus first on our review of
Medicare payment errors, which we conducted at HCFA's request,
and then on the fiscal year 1999 financial statement.
Our review included a statistical sample of 5,223 Medicare
claims from the population of $169.5 billion in fiscal year
1999 fee-for-service claim expenditures. Payments to providers
for 1,034 of these claims did not comply with Medicare laws and
regulations. By projecting these sample results, we estimated
that the fiscal year 1999 net payment errors totaled about
$13.5 billion nationwide, or about 9.97 percent of Medicare
fee-for-service benefit payments.
This is the mid-point of the estimated range at the 95
percent confidence level. The range is $9.1 billion to $17.9
billion, or about 5.4 to 10.6 percent.
I mention those details because the sampling is not
statistically significantly changed from what it was last year,
because we work with these ranges.
As in past years, improper payments could range from
inadvertent mistakes to outright fraud and abuse.
It should be noticed that medical personnel detected almost
all of the improper payments in our sample. When these claims
were submitted for payment to Medicare contractors, they
contained no visible errors.
Mr. Chairman, our 4-year analysis substantiates HCFA's
continued vigilance in monitoring and reducing payment errors.
This year's $13.5 billion estimate is, in fact, $9.7 billion
less than that for fiscal year 1996.
In addition, our audit results clearly show that the
majority of health care providers submit claims to Medicare for
services that are medically necessary, billed correctly, and
sufficiently supported.
For both fiscal years 1998 and 1999, we estimated that over
90 percent of the fee-for-service payments met Medicare
reimbursement requirements; however, our analysis also
demonstrates that unsupported and medically unnecessary
services remained pervasive problems. These types of errors
accounted for more than 70 percent of the total improper
payments over the 4-years.
Our chart, which is also attached to the written testimony,
demonstrates the trends in improper payments by the major types
of errors we have found. The chart is on the board there. The
red area indicates unsupported services where we saw a
substantial increase. The blue indicates medically unnecessary
services, a continuing problem. The green indicates incorrect
coding. Finally, the yellow shows uncovered services and
miscellaneous errors.
I'd like to talk a little bit about these error categories.
Unsupported services represents the largest error category
every year except in 1998, when they dropped dramatically.
Although these errors increased by $3.4 billion over last
year's estimate, they remained below the levels found in fiscal
years 1996 and 1997.
Unsupported services were largely attributed to three
provider groups this year--home health agencies were $1.7
billion; durable medical equipment, or DME suppliers, $1.6
billion; and physicians, $1.1 billion.
Medicare regulations specifically require providers to
maintain records that contain sufficient support to justify the
diagnosis, admissions, and other services.
As the second-largest error category this year, medically
unnecessary services totaled $4.4 billion. For these errors,
medical reviewers found enough documentation in the medical
records to make an informed decision that the services were not
medically necessary. These types of errors in inpatient
prospective payment system, or PPS hospital claims, were
significant in all 4 years.
Incorrect coding was the third-largest coding category.
Physician and inpatient PPS claims accounted for 90 percent of
the coding errors over the 4-years.
For most of these errors, medical reviewers determined that
the documentation submitted by providers supported a lower
reimbursement code.
Now, turning to our audit of the financial statements for
fiscal year 1999, we are pleased to issue the first unqualified
or clean audit opinion, both for HHS and for HCFA.
In achieving this important milestone, HCFA has
successfully resolved billions of dollars in problems that
affected our previous audit opinions. In particular, problems
in Medicare accounts receivable, which are debts that the
providers owe to HCFA, have been systemic and longstanding.
This year, HCFA embarked on an extensive effort to validate
and document receivables, with the assistance of my office and
two independent accounting firms. The validation effort,
together with HCFA's aggressive action to require that
contractors maintain support for this debt, enabled us to
conclude that the receivables balance was fairly presented and
sufficiently documented for the first time in 4 years.
However, the underlying internal control environment and
accounting systems at the Medicare contractors still need
substantial improvement. Even such things as a basic double
entry bookkeeping system are needed, and adequate checks and
balances to promptly detect errors and irregularities.
The control weaknesses impair HCFA's ability to reliably
report activity related to Medicare debt and increase the risk
that future debt may not be collected timely.
Our report also discuses our concern that HCFA has not yet
established adequate financial controls, such as routine
accounting analysis to detect accounting aberrations or
sufficient controls over Medicare electronic data processing
systems.
To briefly summarize, Mr. Chairman, we're encouraged by
HCFA's sustained success in reducing Medicare payment errors
and by the important progress made in resolving prior years'
financial reporting problems.
We remain concerned, however, that inadequate internal
controls or accounts receivable leave the Medicare program
vulnerable to potential loss or misstatement.
As HCFA begins the lengthy process to integrate its
accounting system with the Medicare contractor systems,
internal controls must be strengthened to ensure that this debt
is accurately recorded and an adequate debt collection process
is in place.
With the year 2000 remediation challenge successfully
completed, we urge HCFA to focus these critical internal
controls, while continuing its effort to reduce payment errors
and ensure provider integrity.
I appreciate the opportunity to appear before you today and
I welcome your questions.
Mr. Horn. Thank you very much for your very full statement.
[The prepared statement of Ms. Brown follows:]
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Mr. Horn. Next is the representative of the General
Accounting Office, Mrs. Gloria Jarmon, Director of the Health,
Education and Human Services Account and Financial Management
Issues in the Accounting and Information Management Division,
the part of the legislative branch which we are proud to have
your fine staff working for us.
Please proceed, Mrs. Jarmon.
STATEMENT OF GLORIA L. JARMON, DIRECTOR OF HEALTH, EDUCATION
AND HUMAN SERVICES ACCOUNTING AND FINANCIAL MANAGEMENT ISSUES,
ACCOUNTING AND INFORMATION MANAGEMENT DIVISION, U.S. GENERAL
ACCOUNTING OFFICE
Mrs. Jarmon. Thank you.
Mr. Chairman and members of the subcommittee, I am pleased
to be here today to discuss our review of HCFA's financial
management activities for Medicare. Our report on these issues
is being released today, and copies have been given to the
subcommittee.
As Ms. Brown mentioned, over the past 4 years HCFA has
worked hard to improve its auditor's opinion on its financial
statements, from the auditors not being able to issue an
opinion in fiscal year 1996 to the clean opinion in fiscal year
1999.
As you know, while getting a clean opinion is an important
goal that HCFA should be commended for, it is not an end in and
of itself. The ultimate goal is to keep improving internal
controls and financial systems that support them and to
generate reliable, timely, accurate, and useful information for
decisionmaking on an ongoing basis.
Our report discuses some of the significant challenges that
HCFA faces in meeting this goal. I will summarize these
challenges into three areas.
First, Medicare contractor oversight--HCFA's over 50
contractors process about 3.5 million claims, worth an average
of $650 million each business day, yet HCFA's procedures for
following up on audit findings and evaluating actions of these
contractors to correct them were not up to par.
Audits of HCFA have repeatedly cited these contractors for
internal control and financial reporting weaknesses, such as
not safeguarding checks that providers give them for
overpayments, and incorrectly reporting billions owed to the
Medicare program for such overpayments.
Further, HCFA was not routinely analyzing the contractors'
financial data to find irregularities and assess risks as part
of daily monitoring, nor did it have up-to-date guidance for
contractors on key financial matters.
The second challenge relates to financial reporting and
related systems issues, which have been material internal
control weaknesses in HCFA's auditors' reports for several
years, since 1996.
HCFA relied on a manually intensive process to prepare
annual financial statements. It had to make extensive
adjustments, totaling billions of dollars. In short, HCFA
obtained a clean audit opinion through a lot of hard work
because its financial systems were not adequate.
The auditors reported that HCFA's systems did not fully
meet the requirements of the Federal Financial Management
Improvement Act. Basically, this means that HCFA's systems
cannot reliably produce timely and useful financial information
for day-to-day decisionmaking.
The auditors also cited weaknesses related to computer
security, which is of high concern because of the sensitivity
of the data in HCFA and its contractors' systems.
The third challenge relates to controls over Medicare
accounts receivable. These receivables represent amounts due
back to the Medicare program for things like overpayments to
health care providers and other entities.
For fiscal year 1999, HCFA spent a lot of time and effort
on this problem. It entered into an inter-agency agreement with
the Department's Office of Inspector General, as mentioned by
Ms. Brown, to help validate accounts receivable balances, and
it wrote off billions of dollars of receivables that it
considered invalid, uncollectible, and/or unsupported.
While these actions greatly improved HCFA's accounts
receivable balance at year end, the basic control problems
related to these accounts--namely, knowing what should be
collected and from whom--remain. For this reason, the auditors
still reported the Medicare accounts receivable issue as a
material internal control weakness.
We know that HCFA's management recognizes that these
problems are serious, and it has shown a commitment to making
things better; however, with billions of dollars at risk, we
cannot overstate the importance of safeguarding Medicare
assets. The serious financial management weaknesses mentioned
and described in more detail in our report stress the need for
HCFA to have a very comprehensive strategy to direct its
financial activities and assess its human capital needs related
to these activities.
In responding to our report, HCFA's management outlined its
ongoing and planned initiatives to address the problems
highlighted in our report. Top management's continued support
of these initiatives and sustained actions will be key to its
success in resolving these problems. We plan to continue to
monitor HCFA's progress in implementing its financial
management improvement efforts.
Mr. Chairman, this concludes my statement. I'd be happy to
answer any questions from you or other members of the
subcommittee.
Mr. Horn. Thank you very much, Mrs. Jarmon.
[The prepared statement of Mrs. Jarmon follows:]
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Mr. Horn. We now move to the agency. Representing the
Health Care Financing Administration this morning is the Deputy
Administrator, Mr. Michael Hash, and he is accompanied by Ms.
Michelle Snyder, the Chief Financial Officer of the Health Care
Financing Administration.
Welcome.
STATEMENT OF MICHAEL M. HASH, DEPUTY ADMINISTRATOR, HEALTH CARE
FINANCING ADMINISTRATION, DEPARTMENT OF HEALTH AND HUMAN
SERVICES, ACCOMPANIED BY MICHELLE SNYDER, CHIEF FINANCIAL
OFFICER OF HEALTH CARE FINANCING ADMINISTRATION AND DIRECTOR,
OFFICE OF FINANCIAL MANAGEMENT
Mr. Hash. Thank you, Chairman Horn, Congressman Turner,
Mrs. Biggert, and other members of the committee. I want to
thank you for the opportunity to come here today to discuss our
efforts to get Medicare's financial house in order and to fight
and continue our fight against waste, fraud, and abuse.
With me, as you noted, Mr. Chairman, is Michelle Snyder,
HCFA's Chief Financial Officer and the Director of our Office
of Financial Management.
I would also like to acknowledge, in the effort that we
have been talking about this morning, the invaluable assistance
of our IG at the Department of Health and Human Services and
the staff at the General Accounting Office for their highly
constructive assistance in our efforts.
First, let me say that we are pleased that we were able to
obtain a clean opinion this year. As you know, that represents
a lot of hard work and confronting some very difficult issues.
We've worked with a number of CPA firms and with the IG's
office to clean up our books, and so that we can delete bad
debt and aggressively pursue the money that is owed to us. We
are continuing a wide range of additional efforts to strengthen
financial management and accounting systems and, importantly,
we are developing an automated, integrated, and dual entry
accounting system that we all agree is needed.
The audit also found examples of system weaknesses and
human errors that need to be addressed. For example, funds that
should have been credited to one of our trust funds were
instead posted to another. And, while no taxpayer money was
lost, we are working hard to fix what is broken and to make
sure that these types of problems do not occur again.
We have also made progress in improving system security for
the sensitive information that is included in our data bases,
and we expect to make more progress on this front now that we
have cleared the Y2K challenge.
Meanwhile, our payment error rate is holding steady. That's
both good news and bad news, I think. The rate is a lot better
than it was when it was first measured 4 years ago, and it is
proof that last year's dramatic reduction was not a one-time
phenomenon. It can and is being sustained.
It is noteworthy because this year's audit sample includes
many more claims for known problem areas, including home health
and durable medical equipment, but we all agree that the error
rate has to come down further, and we're working hard to make
that happen.
We are focusing our immediate attention on the
documentation problems that increased the error rate in this
year's findings. To that end, we are contacting all physicians,
home health agencies, and medical equipment providers to
explain the seriousness of this issue and how to avoid common
errors that they are making.
We also are testing new documentation guidelines for
physician services that should be easier to use, and we are
establishing toll-free lines where providers can get answers to
billing questions.
While much remains to be done, we have made significant, I
think, and sustained progress. With your support, we will
continue to do so, Mr. Chairman.
I want to assure you that we are attacking our financial
management challenges and problems with the same focus and
energy that we brought to bear on our Y2K challenge, and we
intend to be just as successful.
Thank you, again, for inviting me to be here. I would be
happy to answer any questions that you or other members of the
subcommittee may have.
[The prepared statement of Mr. Hash follows:]
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Mr. Horn. Ms. Snyder, do you want to add anything at this
point, or just respond to questions? What would you like?
Ms. Snyder. I will be responding to questions.
Mr. Horn. OK. Because of the complexity of this situation
and the money involved, we are going to have 10 minutes per
member. I'll start, Mr. Turner will be next, and Mrs. Biggert
will be next. Then, if we need more time, we'll go back and
have another 10-minute round.
I read Mr. Barr's quote there on how they were still paying
out the payments to the dead, and I guess my query is this, Mr.
Hash: the Social Security Administration faces the same type of
problem, that they might still be grinding out checks. Is there
a coordination between the Medicare file and Social Security so
that we wouldn't be paying checks to dead people?
Mr. Hash. Yes, there is, Mr. Chairman. There are two
sources of information about deceased beneficiaries--one is the
Social Security Administration and, one can be from our health
plan, our Medicare-Plus-Choice plans.
In the instance that Mr. Barr referred to and that you are
talking about, those systems did not work properly. We've taken
steps to modify the reporting system on beneficiary death, and
we believe that those errors will not reoccur, and we have
recovered the funds that were paid inappropriately as a result
of those system errors.
Mr. Horn. Yes. It came right to mind that Social Security
does this, and, of course, we built the whole idea of Medicare
on top of Social Security, so I hope those agencies are talking
to each other in their computers.
Mr. Hash. They are, Mr. Chairman.
Mr. Horn. OK. Now, both the Inspector General and the
General Accounting Office have reported various examples of
instances resulting from inadequate controls and the oversight
of the Medicare program. Now, we also have learned about a bank
participating in the Medicare program, which was making a
practice of withdrawing funds prematurely from the Federal
Reserve System, which allowed the bank inappropriately to earn
interest of $13.2 million. So I guess I would ask the Inspector
General, Ms. Brown, could you describe how this happened and
how it was discovered? I think we have a chart here on that.
Ms. Brown. Yes. Mr. Vengrin actually ran the audit which is
still in progress, I might add--and I'd like him to give you
the detail on that.
Mr. Vengrin. Mr. Chairman, there are two instances where
the bank did premature draw-downs during a 10-day period in
February 1999. There were instances where the bank actually
needed $60 million. They drew down excessively between $110 and
$450 million. We computed the interest on that at $740,000.
This review was done at the request of Michelle Snyder, the
CFO, who did learn about this. I believe this instance here was
learned from the contractor. The other one I'm going to
describe to you was learned by the FDIC auditors, who did
notify HCFA.
We do believe that the bank has monthly limits. This
particular bank services nine Medicare contractors. At their
disposal, under the letter of credit system, they can draw down
approximately $3 billion. It is going to be our recommendation
to Health Care Financing that they consider periodic caps other
than a monthly basis that would preclude banks from doing this.
The second instance was during a 7-year period, from fiscal
year 1993. This bank withdrew funds 1 day to 2 days in advance
of when they needed cash. For example, Mr. Chairman, if the
contractor notified the bank that basically it was going to
electronic transfer $60 million and also it needed money to
cover current cleared checks, if the bank actually needed this
money on a Friday they would prematurely draw it down on
Thursday. This practice, the bank estimated earned the bank
approximately $12.5 million in interest.
The bank, on its premature draw-down a day early, sent the
money over and sold it to another bank, earning interest.
That is a clear violation, Mr. Chairman, of the agreement
that HCFA has with this bank; namely, that these funds should
not leave the Medicare account. In fact, they did.
Our review is still ongoing, sir, and we should have the
final results in a couple weeks. We're trying to go back and
secure the records for the prior period to compute the
interest.
Mr. Horn. Just so we're clear on how this process works,
the FDIC found it when they went through the bank records; is
that correct?
Mr. Vengrin. Again, there are two separate issues. The
latter one, sir, I believe the facts are the FDIC auditors did
note it when they were at the bank and they did notify HCFA.
Mr. Horn. Now, that bank would regularly draw down to pay
the various bills of what? The intermediaries? Or was the bank
the intermediary?
Mr. Vengrin. As the contractors processed their check
electronically, they would forward that information to their
bank. The bank would consider both the electronic wire that
they needed plus the cleared checks minus any deposits.
So on Thursday afternoon they would ascertain exactly how
much cash they needed, and they would pull this down 1 day in
advance from the Federal Reserve.
Mr. Horn. Now, you're telling me that the regulations of
the Health Care Financing Administration are quite specific on
this; that you only get from the Federal Reserve the funds you
need to pay the bills? Is that it?
Mr. Horn. My understanding, Mr. Chairman, is that is in the
contract that the banks have with us and with our
intermediaries and carriers.
Mr. Vengrin. I confirm that, Mr. Chairman. It is clear.
Mr. Horn. So you are saying every bank that is doing this,
getting the money to go out to the intermediaries to pay the
bills of the hospitals, the doctors, and so forth, that they
all should know that, that anything else is a violation? In
other words, you're saying they can take the money out of the
Federal Reserve the night before, and then they're supposed to
issue the checks?
Let's say they take it out Thursday night and they issue
the checks on Friday, but they're not supposed to keep running
interest game on the float.
Mr. Hash. Absolutely not. And not only is that a violation
of our contract, but, as I understand it, Mr. Chairman, it is
also a violation of banking laws and, in fact, when it came to
the attention of the FDIC, it was because the bank, as I
understand it, was having difficulty meeting its obligation to
get the money to the Federal Reserve Bank each day. It was late
in transferring the money. As the bank examiners looked more
carefully, they determined that, in fact, the money had been
deposited overnight in another account, in another interest-
bearing account, and that interest was being kept by the bank
and it was causing them to be late to make their deposits in
the Federal Reserve system.
Mr. Horn. Without objection, I would like the language that
is in the Medicare regulations put at this point in the record
so it is very clear that those regulations exist.
And you're saying all banks have signed off on that?
Mr. Hash. It is in their contract language, Mr. Chairman.
Mr. Horn. And how often is that reviewed?
Mr. Hash. I beg your pardon?
Mr. Horn. How often is that reviewed, that contract?
Mr. Hash. I think the contracts have been pretty stable
over the life of the Medicare program. In fact, this bank has
been a depository bank for the program since 1978. We do look
at those contracts on an annual basis, but I think the
substance of those contracts has not significantly changed over
the years.
Mr. Horn. OK. But in all the audits by either the Health
Care Financing Administration--let's ask if GAO had ever done
those audits, and if the Inspector General. This is the first
time it has come up, I take it?
Mr. Hash. Yes, sir.
Mr. Horn. But the tip-off was the FDIC auditors.
Mr. Vengrin. Right.
Mr. Horn. So they had never discovered it either; is that
correct?
Mr. Vengrin. That's correct, sir.
Mr. Horn. Yes. And have they looked at other banks in the
country now?
Mr. Vengrin. I don't know whether they are, sir, but we are
expanding our review and we've got pilots in three additional
banks, and we're in there right now. Plus, after the results of
this survey, we will reassess and expand it even further to
make sure other banks are not doing this.
Mr. Hash. If I may, Mr. Chairman, when this matter came to
our attention from the FDIC, we brought it immediately to the
attention of the Inspector General's office and we did ask them
to expand their review of these practices at other contracting
banks, and we also sent letters reminding all of our banking
contractors of these particular requirements. So we have tried
to followup aggressively on this once it was uncovered.
In the first instance, it took place, as Mr. Vengrin
described. Actually, what brought it to our attention was the
providers who were served by a particular intermediary were not
getting paid in a timely basis, and when they inquired about
not being paid it turned out that that was a result of the
banks not properly processing the electronic funds transfer in
a timely manner, and that's how that happened to come to our
attention.
Mr. Horn. Because of letting another bank use the money
overnight and thus gaining the interest for bank one, does that
mean that they were slow in getting the needed money to the
providers?
Mr. Hash. I'll let Mr. Vengrin speak to this, because he
knows more of the details than I, but I believe that the
instance that I was talking about, which was the 10-day period
of drawing down too much money, was a systems failure of the
bank.
Mr. Vengrin. That is correct. In the instance that you just
described, Mr. Chairman, what happened, as Mr. Hash was
alluding to, was they encountered trouble with the banking
institute, because when they made electronic transfer, actually
they were short of funds because bank B delayed getting the
money back. So this set off the whistles and bells with the
Federal Reserve System that money should have been there but
was not, because of this delay getting the money back overnight
from bank B.
Mr. Horn. Now, do we know if the Federal Reserve System is
depending strictly on the FDIC auditors, or do they have their
own auditors?
Mr. Vengrin. I believe it is depending on the FDIC.
Mr. Horn. So where are we with the FDIC? Have they looked
at all of these banks just to check them, or is that the
Inspector General doing it?
Ms. Brown. Well, I'm afraid I can't speak for what the FDIC
is doing, but we have let everyone know that is concerned in
this that we are expanding our review to see whether this is an
anomaly, which I think it is, but it is possible that that has
happened in other banks, and we want to make sure that that
hasn't become a practice.
Mr. Horn. Well, can the Inspector General reveal what bank
it is, or are they under review by the U.S. Attorney?
Ms. Brown. They are not at this point. It is Highland Bank
in Chicago.
Mr. Horn. And they have been a long-time bank for
depositories----
Ms. Brown. Yes, they have.
Mr. Horn [continuing]. To pay the bills. And do you know
how far back that practice goes?
Ms. Brown. We're going back to 1993, and it appears to have
gone back that far, at least.
Mr. Horn. And when did they start? Are they considered an
intermediary or simply the funding of the intermediaries?
Ms. Brown. Strictly the people who arrange for the funds.
The money is transferred to them, and then they are supposed to
electronically, that same day, distribute the money that is
needed as a result of the contractors work. Contractors let
them know the exact amount that they are going to have to
disburse, and they are supposed to take that exact amount out
of the Federal Reserve and have it available for payment.
Mr. Horn. Do we know whether or not, when the money goes
from the Federal Reserve to the bank in Chicago, and then goes
to a variety--maybe a dozen or more--intermediaries that are
paying the bills under either part A or part B of Medicare, how
do we know they aren't keeping the money and not paying the
hospitals or the doctors and making a little money off of it?
Ms. Brown. The money never goes to the contractor. The
money is available. The contractor makes it known how much is
to be transferred, and the bank electronically transfers that
amount for payment.
Now, there is another account where there are a few paid by
check, but relatively few. Most of the money is electronically
transferred.
So the bank is the only one who really has possession of
the money, other than the Federal Reserve, and, of course, the
recipient.
Mr. Vengrin. Mr. Chairman, if I could embellish Ms. Brown's
statement----
Mr. Horn. Yes.
Mr. Vengrin [continuing]. HCFA does monitor the Federal
Reserve draw-down on a monthly basis and compares monthly
expenditures on a report called a 1522/21, so they do monitor
that. There is a tie-in to the draws, as well as the
expenditures paid.
Mr. Horn. Yes, Mr. Hash?
Mr. Hash. I want to say, since we've named the particular
institution, Mr. Chairman, that that institution is withdrawing
from participation as one of our contracting banks.
Mr. Horn. And has that already happened, or what?
Mr. Hash. It has happened. They served eight of our
contractors, and I believe they have ceased serving seven of
them. The remaining one they are serving is only to, I think,
next month, and it happens to be a contractor that is otherwise
leaving participation in the Medicare program.
Mr. Horn. OK. Any other comment, Ms. Snyder?
Ms. Snyder. No, sir.
Mr. Horn. OK. I now yield to the ranking member, Mr.
Turner, for 13 minutes. That's what we took here.
Mr. Turner. Thank you, Mr. Chairman.
Mr. Hash, I'm interested in the use of sampling. I
understand that the contractors are utilizing sampling. In many
cases, I'm told by some of the providers that sampling
methodology, when applied to an individual provider, can be
very burdensome, and oftentimes of questionable validity.
Who sets up the standards for sampling techniques used on
an individual provider?
Mr. Hash. Mr. Turner, what you are referring to is some of
our program integrity activities, where we may be doing
enhanced medical reviews of a particular provider because of a
pattern we've discerned in their billing, and we go in and
actually audit the claims or a sample of the claims to
determine whether they can be supported by the medical record.
That process is governed by a statistically valid sampling
methodology, which we would be happy to supply for the record.
It has been reviewed independently by statisticians, and it is
found to be an appropriate tool from which we can extrapolate
to the universe of claims that a particular provider has filed
with us.
Mr. Turner. So you just go in and take one sample, and,
based on that sample, the provider would be advised that they
owe back X number of dollars? That's basically the way it
works, as I understand it.
Mr. Hash. I believe that's correct, Mr. Turner.
Mr. Turner. It just seems to me, from some of the
discussions I have had with providers, that you could do a
sampling process twice and come up with entirely different
numbers; that there's not any way of really verifying that the
sampling technique is all that accurate.
Mr. Hash. My understanding of how this process works is
that when the sampling is done and the extrapolation is
computed, that a provider has the option of having all of their
claims more intensively reviewed or to accept the results of
the sample. Most providers have accepted the results of the
sample, but they're not bound to accept that result. They have
the option for a more-thorough review of all their claims.
Mr. Turner. But if they exercise that option, which is
quite a lengthy process, and during that interim they're still
charged back for the amount that the sample reveals they owe
the Government. Isn't that the way it works? And so it is very
difficult for an individual provider to want to exercise that
option of having all their claims reviewed.
Mr. Hash. I'm not totally certain of the detail of that,
Mr. Turner, but I would be happy to get you a more-definitive
answer.
I believe that they have the option to have a more-
intensive review. During the pendency of that review, what I'm
uncertain about is whether the extrapolated amount is beginning
to be offset from the future claims that they may be
submitting. I don't know.
I would like to get a more-complete answer for the record,
if I may, Mr. Turner.
Mr. Turner. For example, I would be interested in knowing
what the policy is if the sample is taken and the provider
immediately shows that certain individual payments that you put
in the sample were simple errors--somebody forgot to make an
entry, or something that didn't represent any fraud or really
any actual over-payment, but just a clerical oversight--whether
those can be corrected and that sample adjusted and the
extrapolated number changed in short order.
Mr. Hash. The answer to that I'm more confident is yes.
And, clearly, this process is not designed to make a judgment
that, in fact, the ones that are in error are in error because
of intentional fraud. They just happen to be erroneous for
various reasons, some of which you have just suggested. But it
is not a judgment that, in fact, the errors are the result
necessarily of intent or wilful defrauding.
Ms. Snyder. If I could add, Mr. Turner, this statistical
sampling methodology was well discussed and well reviewed, both
by the provider community as we went through this process, and
the statisticians who worked with us in figuring out how to
select and assess those samples.
Mr. Horn. Ms. Snyder, you're going to need to put that
microphone within 2 inches of your mouth. That's the only way
we can hear you.
Ms. Snyder. The statistical sampling methodology, as I was
saying, was well reviewed by the provider community. This
statistical sampling methodology was presented to the provider
community as we started to move to that type of sampling
technique. We worked through it with them. We had a number of
meetings with different groups. There were a number of
independent statisticians who looked at this to say it was a
sound methodology.
If I might, it's the same type of methodology that is used
by the Office of the Inspector General in doing the statistical
error rate.
So we've tested this in a number of ways in a number of
sort of formats, and so we are pretty confident that it is a
good way of projecting those overpayments as a way of also
saving resources, and working through it pretty quickly.
There are also, within the process, itself, opportunities
to correct the kind of errors that you mentioned. If we get
into that and we find out it was simply the document was
missing, they can submit that. If, for some reason, a plan or
something that needed to be there as a process matter isn't
there, we accept that. That does modify the amount of the
overpayment.
It is not perfect, but, we think, in light of resources and
the dollar volume that is involved, it is a good way to
estimate the overpayments.
Mr. Turner. When there is an overpayment determination made
after the provider has exercised whatever options they have to
appeal, what is the options for how to handle the repayment of
the overpayment? I know there are many providers who complain
about the fact that once they have been assessed an overpayment
they really, in some cases, can't even figure out financially
how to handle it. So are there options that you have for the
providers there?
Ms. Snyder. Yes, sir, there are. From the agency
perspective, though, I must say our preferred option is that we
have a continuing business relationship with them to net that
overpayment out of the next month's payments that are due to
them, and we do collect a lot of our debt through offsetting
collection and have been pretty successful.
But when we have folks that are having financial
difficulties, we do work with them to do what we call
``extended repayment'' plans, where we look at their financial
ability to repay, and I think an example of that where we've
used it quite a bit is with our home health agencies, where, as
many of you probably know, there were difficulties there
because of changes in payment methodology.
So we do work with people to try to do extended repayment
plans. If we have to have an extended repayment plan, we like
to do it within 12 months. We have gone up to 3 months, and in
some cases even longer than that, so we do try to work with the
provider and consider their financial viability.
Mr. Hash. If I may, on the home health I think what Ms.
Snyder meant to say was up to 3 years, because in the case of
home health agencies who had overpayments as a result of the
interim payment system, I'm sure you may be aware that we have
provided many of them with up to a 3-year and some longer than
3-year opportunity, the first year of which has been interest
free.
Mr. Turner. How many home health agencies do we have in
this country today, as compared to, say, 3 years ago, before
the changes were implemented?
Mr. Hash. I think we were, 3 years ago--and these are round
figures. I would be happy to get more specific for the record;
3 years ago we had 10,500 agencies, and now we have about
7,500.
Mr. Turner. You have an initiative that I understand will
begin this summer with four companies that will take a look at
the durable medical equipment providers. Why were those
providers selected, as opposed to any others, for this
particular emphasis?
Mr. Hash. I think, in part, the Inspector General may want
to respond to this, as well, but this is an area where we have
uncovered significant problems in billing, particularly in the
documentation area. Durable medical equipment items are
generally--not all of them, but many of them need to be
accompanied by something called a ``certificate of medical
necessity,'' which is a document that is executed by a
prescribing physician that details what he believes an
individual patient needs, and that that document must be
present in the records to justify a claim for certain items of
medical equipment and supplies.
We've had problems in documentation that have been pretty
significant. As a matter of fact, I think this year's audit
indicates that that is a significant problem.
We have a select group of contractors who process only
claims associated with durable medical equipment, and what we
are going to do--we are going to eventually do this for all of
our contractors, but, beginning this summer, we are going to
put into place a procedure for calculating an error rate, and
we are going to take the same approach that the Inspector
General's annual error rate activity on the national basis
does--draw a sample of claims from each of these durable
medical equipment contractors--intermediaries or carriers, I
should say--and determine their error rate using the same
statistical methodology that is being applied to generate the
error data that we have been talking about here this morning.
That is really for two purposes: in order for us to be able
to work with those contractors to improve and correct the
reasons for the errors that we find, and it also gives us an
opportunity to focus our oversight activity and contractor
management on those areas where error rates are a significant
performance problem.
Mr. Turner. I've read that the total Medicare claims in
this country are much lower than had previously been estimated.
Is that because of the aggressive work that you have done to
try to attack overpayments, or are there some other elements
that resulted in the estimates of total Medicare payments being
lower?
Mr. Hash. Mr. Turner, I think the answer to that is that it
is a multi-faceted set of reasons for why estimates of Medicare
expenditures have not, in reality, been as high as previously
estimated.
A significant portion, we believe, is related to a greater
scrutiny and intensity of our review of claims processing,
which we think has had an effect of making providers more
knowledgeable about proper ways to bill and more sensitive to
the accuracy of their coding and those kinds of activities.
We also think that there are significant changes in the
economy, in general, that have affected Medicare expenditure
rates. For example, for the last several years we have had
extraordinarily low inflation rates, which means that the cost
of medical care that Medicare pays for has not risen as rapidly
as was anticipated a number of years ago.
We also have had some changes in our payment systems that
have probably slowed down the processing of claims in some
regards, and that has caused, in various accounting periods,
for things to lag over into another accounting period and to
produce a lower outlay of expenditures.
So I think the most accurate answer is that there are a
number of factors that are contributing to the lower growth in
Medicare expenditures. No one has been able to pull out from
that experience exactly what portion is attributable to fraud
and abuse activities, although we think it has played a
significant role.
Mr. Turner. Thank you. Thank you, Mr. Chairman.
Mr. Horn. I thank the gentleman for those good questions,
and now I yield 13 minutes to the vice chairwoman of the
committee and the gentlewoman from Illinois.
Mrs. Biggert. Thank you, Mr. Chairman. Is there something
special about 13 today? [Laughter.]
We've heard testimony today focusing on the payment errors,
incorrect coding, and non-covered services and the lack of
medical necessity. Mr. Hash, you just said you don't know what
part of some of these categories would be attributed to fraud.
But I am concerned, in a report by the GAO which was done in
October, I think, of 1999, that there is a growing trend in
Medicare fraud that has a criminal element coming in with
absolutely no medical experience, licenses, and training who
are getting into the Medicare program for the sole purpose of
bilking the system.
In this report that was released, it looked at fraud in
three States--Florida, North Carolina, and my home State of
Illinois--and they reviewed seven cases and found as many as
160 sham entities submitting fake Medicare claims, ranging from
$795,000 to more than $120 million.
The GAO said, ``Criminals previously involved in other
types of crime are now migrating into the health care fraud
arena.''
I wonder if you could comment on this, and then I have just
a couple of questions to ask you on that.
Mr. Hash. Yes, Mrs. Biggert. We have been trying to address
that kind of problem by strengthening the enrollment process--
that is to say, the process that providers and other people who
are rendering services to Medicare beneficiaries must go
through in order to obtain a billing number, a provider number,
which allows them to bill the program.
We are, for example, doing site visits for certain kinds of
providers where we think the prevalence of unscrupulous and
unqualified providers is very high.
For example, we are now doing site visits for people who
are applying to get a provider number as a durable medical
equipment supplier. We are also putting into place a regulation
which will allow us to, in effect, go back and recertify
providers to make sure they continue to meet the requirements
of the law and regulations.
So we have, I think, a significantly aggressive program to
tighten up on the procedures for admission into billing into
the program, and I would be happy to also furnish more detail
about that.
I don't know if you want to add anything to that, but we
figure the most important thing is to keep people out of the
program who don't meet certain basic qualifications, and we
have been trying to do a much more effective job of that.
Mrs. Biggert. Well, specifically, do you require background
investigations on all new providers?
Mr. Hash. In the case of suppliers of durable medical
equipment, we are doing the checks to determine whether they've
had any record of fraud or abuse with our programs or any other
criminal activity.
Mrs. Biggert. Is that for every provider, or is that a
sampling?
Mr. Hash. In the case of durable medical equipment, I
believe it is virtually all of the ones who are applying now to
get a number for that.
We are also in the process of going back and reviewing
durable medical equipment suppliers to make sure that they are
a bona fide business entity, that they are, in fact, meeting
appropriate requirements.
Mrs. Biggert. Is there, then, a requirement for site
inspections of all new DMEs?
Mr. Hash. We are doing that now. Yes, ma'am. That's my
understanding.
Mrs. Biggert. Of all sites?
Mr. Hash. All new ones who are applying for a Medicare
provider number.
Mrs. Biggert. OK. And what about community health centers?
Mr. Hash. We are also doing site visits there, both for
ones who are already billing us, as well as the ones who are
applying to become a part of our program.
As you know, the statue has provided that these
organizations must provide four core services laid out in the
statute. We determined that a number of them have not met those
requirements, and if they were already in the program, we have
lifted their certification. If they were applying, we did not
allow them to receive Medicare certification.
There are also some changes that need to be made in the
design of the partial hospitalization benefit that community
mental health centers are often providing, and in the
President's 2001 budget proposals there are some important
legislative recommendations to tighten up the design of this
particular benefit.
Mrs. Biggert. Well, we have been talking about Medicare,
but what about the Medicaid program? The Inspector General has
reported the need for estimating the amount of improper
payments being made in the Medicare program. Why isn't this
being done?
Mr. Hash. Well, the payments under Medicaid, of course, are
made by State agencies, and some of them have contractors who
actually make the payments. We have, in fact, launched an
effort, through our regional office in Atlanta, of Medicaid
fraud and abuse activities around the country. We have a
website that shares best practices in identifying waste, fraud,
and abuse in Medicaid. We've run a number of national
conferences associated with Medicaid fraud. We've tried to
bring together the State fraud units, the attorneys general, as
well as the Medicaid program administrators to work together to
establish stronger protections against fraud.
With respect to your specific question, we are now working
with the States to see if we can get them to apply a
methodology of calculating an error rate in the administration
of the Medicaid programs.
Mrs. Biggert. Thank you.
Ms. Brown, you were talking about the bank, and that's the
Highland Community Bank? Is that the name of it?
Ms. Brown. Yes.
Mrs. Biggert. OK. Do you believe that if you had criminal
prosecutorial powers--in other words, if you had the laws that
would allow you to prosecute criminally, would that help you?
Ms. Brown. Well, we do, of course, prosecute a great many
criminally every year, and also have civil settlements with
many of those folks that, for one reason or another, good
reason, they are meant to stay in the system to provide the
service and there aren't other alternatives.
We not only get a monetary collection----
Mrs. Biggert. I guess I was thinking of full law
enforcement authority within your agency. Do you have that now?
Ms. Brown. We have law enforcement authority, but the full
law enforcement is done through a blanket deputization from the
Department of Justice. We have about 300 criminal investigators
that are out doing this type of thing.
Between 1997 and 1999, while we were getting the HCFA
funding, which was provided by Congress, we won or negotiated
over $2.2 billion in judgments, settlements, and administrative
impositions of fines, and collected $1.6 billion back to the
trust fund from that amount.
We had 1,085 defendants that were convicted for health care
fraud and related crimes, and 8,697 individuals and entities
have been excluded. My office processes the exclusions, where
those entities can no longer work in any government health care
system. So it is effective not only with Medicare, Medicaid,
but Tri-Care from Department of Defense, VA, and other types of
medical programs.
Mrs. Biggert. When providers who are unscrupulous use
recruiters to obtain beneficiary identification numbers so that
these providers can bill for services, there is no statute to
prohibit such a practice, is there?
Ms. Brown. Well, we use a variety of statutes, even RICO,
which would be conspiracy. We have found such things as a room
about this size filled with medical records from floor to
ceiling which we have subpoenaed. Not one of those medical
records are true records. They have all been actually produced
by this criminal element who were providing no services but
were taking extensive care to actually develop medical records
against which they could charge millions and millions of
dollars to Medicare.
There are many cases like that. Many of them have nothing
to do with honest providers. These are people who have found,
in the past, at least, it was easy to get into the system and
get a Medicaid number so that they could start billing, or
Medicare number, and they could start billing as a provider.
We have a very small percentage who are not actually
medical professionals who have been providing honest services,
or even dishonest services. Most of these that we find that
have conspiracies are not medical folks or real providers, but
people who have gotten into the system, as you mentioned.
Mrs. Biggert. How have you discovered them?
Ms. Brown. We have a variety of ways, some even from our
congressional Representatives that send us leads. We get about
50,000 calls a month on our hotline, which we screen. We have
an active, large group of people who answer this hotline.
They're really speaking to an individual, even with Spanish-
speaking operators where that is appropriate.
We have a lot of things that are referred from the
auditors, when they go in and find that there not only are
discrepancies, where they should get money back, but it appears
there could be something more behind that. They turn that over
to the investigative units who followup.
We do a lot of analysis of the payment trends. If we see
something, for instance, that there is a 1,000 percent increase
of a certain type of payment and not an epidemic that would
give a reason for this kind of thing, we look into it and see
whether it is an audit issue, whether or not it might be an
investigative issue, or there is some new billing scam that is
going on.
Mrs. Biggert. Would you agree that there is a growing
criminal element trying to make a profit off of the Medicare?
Ms. Brown. I think the Medicare program was developed by
people who really wanted to provide service to the
beneficiaries, and they did not take all of the precautions to
keep everybody out who would want to bilk the program. It
became well known that there is a lot of money here, and it was
pretty easy to get a provider number and start billing. We even
have cases where people learned about it in jail from jail
mates, came out and did business together--had no medical
background whatsoever, but learned about the ease of getting
into this system.
Now, as we developed these cases, of course, we had
extensive meetings with HCFA, and many of the precautions that
HCFA is now undertaking, which were described by Mr. Hash, were
as a result of that.
The first time I think it was HCFA folks that went out and
checked about 10 new DME applicants they found about 7 of them
were just fronts--you know, an entire store or something where
somebody had an extra telephone in the back room that they used
to answer any questions about their DME business. They had no
business, no supplies, no legitimate contacts of any kind.
Mrs. Biggert. Is there anything else that you think that we
can be doing legislatively to help?
Ms. Brown. Well, we have presented different possibilities.
Most of them take funding. And so if we can get the budget for
them, there are a number of additional things that we can do
that I think would certainly help a great deal.
We are getting back in my office in the last 2 years, $98
and $99 for every $1 spent, or at least savings of that nature.
And HCFA certainly has seen this decline in the inflation of
what they have to pay out for Medicare.
So I think that the combined efforts are really producing a
lot of results, and they are very cost effective, and for both
of our offices additional funding would allow us to do more.
That is always the constraint.
Mrs. Biggert. Thank you.
Thank you, Mr. Chairman.
Mr. Horn. Thank you very much.
I am going to ask Ms. Jarmon, on behalf of the General
Accounting Office, you stated that the Health Care Financing
Administration has not yet established an adequate foundation
for control and accountability over Medicare programs,
financial operations, and you further stated that the Health
Care Financing Administration lacked two key components to
successful financial management reform. Could you elaborate on
some of the problems you have found and what the Health Care
Financing Administration should be doing in the short term to
address those problems?
Mrs. Jarmon. We believe there are several key initiatives
that are ongoing, and, like we said, if successfully
completed----
Mr. Horn. You might want to move that microphone closer.
Mrs. Jarmon. OK. The two things that we were referring to
there was the need for a very comprehensive plan or strategy to
address the audit findings that have been reported over the
past years, because, like I mentioned in my statement, several
of their weaknesses have been reported since 1996, the key
weaknesses that we saw related to oversight of the contractors,
financial reporting and systems problems, and the problems with
the EDP controls, and the computer security controls. But I
know that HCFA has an initiative underway to develop a
comprehensive plan to look at their human resource needs, and
we just think it is very important that those initiatives are
completed timely and that the results are seriously considered
to address these longstanding problems so that we are not here
next year talking about the same material weaknesses.
Mr. Horn. And you are saying, from GAO's eyes, that the
administration there is taking the advice and implementing it;
is that correct?
Mrs. Jarmon. I think many of the initiatives that they have
started are relatively recent or over the last 6 or 7 months,
and we are encouraged by those, but I think it is too early for
us to say what the results will be.
Mr. Horn. How about it, Mr. Hash? Are you going to address
the GAO concerns?
Mr. Hash. Well, Mr. Chairman, we actually think the glass
is at least half full. We have embarked on a number of efforts
to address financial management concerns, both within the
offices of HCFA, as well as, importantly, in our contractors.
On the longer-range track, because of our attention to Y2K,
we have not been able to implement as quickly as we would like
an automated dual entry accounting system at all the
contractors, which can also interface with HCFA's systems in
the central office, which would be a much more effective way of
monitoring financial controls across our contractors.
We expect to have that in place by 2004, but, in the
meantime, we have undertaken a number of efforts to put into
place special automated systems related to accounts receivable.
We are also particularly addressing, within that, the area of
Medicare secondary pay. These are liabilities owed by other
insurance companies or employers because the Medicare is the
payer of last resort. That is a significant part of our
accounts receivable, and we are taking a number of steps to
address that.
We are also hiring a number of CPA firms to go out and do
independent reviews of financial controls at contractors. In
the course of this year, I believe we will be visiting 25 of
our contractors that represent over 80 percent of all the
Medicare dollars, and we will be doing financial audits of
their financial systems to ascertain what kinds of changes need
to be put into place to be sure that they are accurately
reflecting financial affairs and that they are following proper
procedures.
In my longer written testimony, I outlined a number of
significant initiatives to strengthen internal financial
controls.
Mr. Horn. Ms. Brown, as Inspector General is there anything
else you would like to see them do?
Ms. Brown. Well, I think that HCFA is taking some good
steps in the right direction. As Mrs. Jarmon said, it is too
early to evaluate the results of those things.
I do want to add that I was quite appalled. I think, of the
whole financial statement process, the most astonishing thing
to me was that there was essentially no financial system at
these contractors, because it was not specified expressly in
the contracts. They do not even have double entry bookkeeping
systems. They do not have subsidiary ledgers, so that if there
are amounts owed back to the Government, they did not even have
records, in some cases, of who owed that money. So, of course,
it would be impossible to ever collect it.
I am sure the Congress had the intent of getting
experienced, reliable people from the private sector when they
set up the system of only using insurance companies to pay
these claims. There must have been an assumption that they
would use the same kinds of financial controls. They do not.
And I think HCFA and the Department have, for a number of years
now, asked for greater flexibility in who they contract with,
and that would certainly go a long way in making this more
competitive.
They are taking steps now to try to get the contractors,
even though it might not be a specific provision in the
contract, that they have to use generally accepted accounting
principles, as would anybody in the private sector. Up until
now, they are not available.
Mr. Horn. Mrs. Biggert asked the question on what laws do
we need here, and I guess I would ask, can the administration
implement that by administrative regulation so you do need
legislation?
Mr. Hash. With respect to the financial control matters, I
think we have administrative discretion to do contract changes.
With respect to the broader issue that the Inspector General
spoke to, which is the shrinking pool of contractors that,
under the law, we are allowed to do business with, it is a real
impediment for us. For, I think, 5 or 6 years running, the
Administration has submitted to the Congress legislation asking
for authority to have greater flexibility more like the Federal
acquisition regulations that exist for other agencies to
identify appropriate and qualified entities to contract with us
for claims processing.
Mr. Horn. Well, I have never seen it, so do me the favor of
getting together with the Inspector General and sending me the
language you need.
Mr. Hash. I would be happy to do that, Mr. Chairman.
Mr. Horn. Because when it comes to economy and efficiency,
we have got jurisdiction. I realize you have got authorizing
committees and they sometimes, for one reason or another, have
other things to do.
I think it is very important that you have the legislative
language you need, so let us know about it.
Mr. Hash. Could I just followup, Mr. Chairman, for a moment
about actions that were taken that I did not mention a moment
ago that the Inspector General's comments triggered in my
memory?
One of the things we are doing is amending our contracts
with all of our contractors to make it a contractual obligation
to submit to us detailed plans of corrections related to audit
findings, to give us a plan with timeframes and milestones for
meeting and correcting those deficiencies, and to actually make
that a part of their contractual obligation, which has not been
in the past and, I think, importantly, the development for all
contractors of an error rate methodology that will help us to
determine the performance level of our contractors by taking a
sample and subjecting it to the kind of analysis that the
Inspector General does on a national basis.
So those are, again, I think, important tools to strengthen
accountability in financial management by our contractors.
Mr. Horn. Well, that is very helpful.
Now, you mentioned 2004. Why cannot we speed that up? What
does it take to speed it up?
Mr. Hash. Let me ask Ms. Snyder to talk about what is
involved in the design of this, but it will be a system that is
double entry automated accounting system. It will also
interface with the new financial management system within HCFA.
So we are actually putting together both a new financial
management system for contractors, as well as for HCFA.
And the goal here, of course, is to make sure that we can
roll up in a comparative way information about performance of
the contractors across the country. We can compare fairly one
contractor to another.
Mr. Horn. So you would use the software, I take it, and
develop it for all of the various intermediaries?
Mr. Hash. That is correct. And, unfortunately, Mr.
Chairman, I do not believe it is an off-the-shelf product. It
is one that has to be designed, and I think that accounts for
the time.
Part of the delay is, of course, associated with our Y2K
obligations, and obviously put us behind. We are looking at
whether or not off-the-shelf products could meet our needs in
this area, and therefore accelerate our time table, but maybe
you would like to elaborate a little bit on the plans for this
system.
Ms. Snyder. The Administrator and the Deputy Administrator
have charged me and the Chief Information Officer, Dr.
Cristoff, who I know has appeared before you many times----
Mr. Horn. Right.
Ms. Snyder [continuing]. To develop the integrated general
ledger accounting system.
Dr. Cristoff and I are absolutely committed to doing this
the right way, which I think has a lot to do with the schedule,
the estimation of 2004.
We have pulled together that project team. We brought in a
senior systems expert to head that team, someone who had had a
lot of experience over at the Social Security Administration.
So Dr. Cristoff and I think we have the right resources in
place.
The thing that makes this a long-term problem is just the
fact that we have business at so many different entities. If we
had a central mainframe kind of operation, it would be a pretty
easy thing, but what we have is distributed processing over
many different locations and many different sites.
We are going about this very carefully. We are using
Clinger Cohen to estimate what is the best way to go about
this, how should we do it. We are looking very, very carefully
at the commercial, off-the-shelf software that is out there
that has been approved and certified by the joint Federal
management improvement program.
We do not want to reinvent the wheel. If we can get
functionality out of something that is already there, we are
going to use it. In fact, as an interim step we are going to
try to look at, over the next year, commercial, off-the-shelf
software that is on the schedule so that we can get some
control over the accounts receivable in an automated fashion
sooner than 2004.
But I think the reason for the longevity is the complexity
of the project, the fact we just want to do it right, and we
want to follow all the technology guidelines.
And it is a two-part--I think this is important, too. At
the same time we are doing the contractor piece, we are looking
at our financial accounting system in our headquarters and in
the HCFA system, itself, because those two things have got to
be able to work together if we are going to be able to produce
the audited financial statements from an accrual perspective.
Mr. Horn. Well, I am glad to hear that you are going to try
to get it off the shelf, because I think I can go back to my
freshman year here in 1993-1994, where the FAA blew $4 billion
before the plug was pulled. There was no management in that
project. I could walk through the door and you could tell right
away there was no management. Everybody had their new bright
idea at 7 a.m., the next morning and there was no focus, no
time table, no nothing.
And then, of course, the IRS blew $4 billion and did not
get anything out of it.
So I wish you well, but what it takes is on-the-site
management that says, ``Folks, we just cannot have every idea
in here. We have got to do this by this time, et cetera.''
If you manage it well, it ought to work. But I know what
you are going through, and we have asked the General Accounting
Office to go look throughout the executive branch on both the
capacity, the generation that both the hard frames as well as
the software is and see if we cannot upgrade the executive
branch, and we ought to do that.
You mentioned, Mr. Hash, that you said the Y2K obviously
held you up a little, but I would hope in that Y2K exercise
that you would say, ``Hey, do we really need this? Get rid of
that system, and merge this,'' and so forth. I would hope it
would be a constructive exercise when you look at it from that
perspective.
Mr. Hash. Absolutely, Mr. Horn. We clearly learned--I think
there are a lot of silver linings to the Y2K experience,
particularly in the ADP area, and I think the extensive
attention, renovation, testing, and retesting has really helped
renovate all of this in a way that hopefully this kind of
project will benefit from, just as you indicated, because I
think our systems, claims processing systems, have never been
so thoroughly renovated as over the last 2 years, and that has
got to--will pay dividends, I think, in putting in this
management information system for financial controls.
Mr. Horn. Before I yield to Mr. Ose, let me ask, you
mentioned the Atlanta website. Is that just for waste, fraud,
and abuse in that area?
Mr. Hash. No, sir. It is a website, a national website, and
it is not just in Atlanta, by any means. Atlanta happens to be
the regional office that heads up our efforts on Medicaid
waste, fraud, and abuse.
That website has been contributed to by State fraud units,
by Medicaid agencies, by States attorneys general, and a host
of law enforcement and programmatic people, and what it
includes are information about successful investigations, best
practices, ways in which you can more appropriately target your
law enforcement and oversight responsibilities to get the most
yield from the resources that are available.
So it is a tool to actually bring together and strengthen
the efforts of a multiple group of folks who are involved in
waste, fraud, and abuse for Medicaid.
Mr. Horn. Besides WWW or whatever, what comes next in
access to it? Or just send it to us.
Mr. Hash. I will send it to you for the record. I do not
want to misstate it.
Mr. Horn. Thank you.
Mr. Hash. It also has a compilation, importantly, of State
laws that have been passed to address fraud and abuse in
Medicaid, and that is very important, because other States, who
are trying to strengthen their Medicaid fraud activities, want
the benefit of the laws, themselves, as tools, and this website
includes information about laws that States have passed to
provide more effective tools to law enforcement.
Mr. Horn. Well, let us know what the access is on it.
The gentleman from California, Mr. Ose?
Mr. Ose. Thank you, Mr. Chairman.
I think I would like to direct my questions to Mr. Hash,
initially.
One of the things we struggle with up here is that
oftentimes it seems that the interpretations HCFA puts out for
Congress' intentions diverge from what we on the Hill think
might have been the point. I am trying to find out--and I did
not see it in the testimony--who is responsible for making such
interpretations? In other words, who do I call up and say,
``No, I disagree with your interpretation''?
Mr. Hash. Well, in our regulation or in our guidance, where
we exercise administrative discretion under the law, then the
accountable individuals are the administrator of our agency and
the Secretary of the Department.
Mr. Ose. Pardon my ignorance. What would those people's
names be?
Mr. Hash. Secretary Shalala and Administrator DeParro.
I mean that in the sense of, when we make regulations in
the Medicare program, they are technically regulations of the
Secretary. Under her authority, under the law, she is issuing
them, so the process of developing those regulations, while
they start in the Health Care Financing Administration if it is
on Medicare--and we are certainly accountable for that--they
are also reviewed by the Department of HHS, as well, because
they represent the Secretary's use of her authority under the
law to implement the Medicare program.
Mr. Ose. The reason I bring it up, there is not a single
Member of Congress on any side of any aisle who has not heard
the horror stories that constituents or their parents have been
faced with when various service providers say, such as Vencor
or other convalescent hospital and nursing home facilities, are
put in a position where they have to cut therapeutic services
and the like in order to continue to cover their basic housing
costs of operation.
I do not believe it was the intention of Congress to, in
effect, provide with one hand various services and take away by
administrative fiat with another hand, and I am just curious
what your audit--what role the audit process plays in
reconciling congressional intent with administrative ruling on
these reimbursement rates.
Mr. Hash. Well, in terms of the audit, I would yield to my
colleagues from Inspector General's office, but, with respect
to implementation, for example, of the prospective payment
system for skilled nursing facilities that you may have been
referring to, Congress included a very significant change in
the Balanced Budget Act to how we pay for services in nursing
facilities. That law was quite prescriptive in its design of
what the payment system is.
For the most part, I think you would find that, in
publishing the regulation that implemented that payment change,
the law was largely self-executing. In other words, the law was
very specific about exactly how that new payment system should
be operated, and we did not exercise discretion. We did not
have under the law very much discretion at all with respect to
that payment system.
Mr. Ose. I am also aware of Congresswoman Northup's letter
last fall that, in the space of about 2 hours, collected over
180 signatures on the floor of the House, challenging the
interpretations that had been implemented relative to the 1996
BBA, and I think was a great contributor to the additional
funding the House put forward last fall in the--I do not recall
if it was the BBRA, or whatever you call it. I lose the
acronyms after a while.
But it is my intention to inspect congressional intention
there so that you will respect congressional intention there. I
appreciate the information that you have provided so far.
I want to move on to the other two questions I have.
One of the things we struggle with, particularly in my
District, is that being so efficient to date, as it relates to
the operational side of various providers, our cost base is
relatively low, compared to, say, New York or Florida or
whatever, and I am wondering whether or not--and this might be
more accurately directed to Ms. Brown--I am wondering whether
or not you have any data comparing reimbursement rates for
Medicare services amongst such regions--for instance, this one.
I apologize for picking on Illinois. It is not my intention to
pick on Illinois, but do you have a comparison of the
reimbursement rates provided in California with, say, Illinois
or Alaska or New Mexico for any given service?
Ms. Brown. That would be HCFA's responsibility to determine
the rates by region.
Mr. Ose. Back to you, Mr. Hash.
Mr. Hash. Yes, sir. We do have information about the rates
that are paid in different parts of the country. Obviously,
each one of the provider categories has, generally, its own
payment policies, and they vary quite dramatically, but----
Mr. Ose. By region?
Mr. Hash. No, no. I mean just the basic way we pay
hospitals or nursing homes or home health agencies or
physicians or the durable medical equipment suppliers. All of
those are different payment systems, but all of them have
embedded within them procedures for adjusting them to reflect
the various costs that are associated geographically, usually
on the basis of wage cost, because wage costs frequently make
up such a large portion of the cost of the service. We have a
national wage index that provides for payment adjustments in
many areas, based on the cost of labor to provide the services.
So we do not have in the Medicare program uniform national
rates where we pay the same amount for a service everywhere in
the country.
Mr. Ose. Do the adjustments accurately reflect inflation or
the ability of a region, for instance, where they have had
significant HMO investment and involvement, significant savings
generated by that--I guess I am more accurately asking what are
the adjustments based on.
Mr. Hash. The adjustments typically are based on either the
relative cost of wages in the particular locality--and we have
a wage index that does that--and they are adjusted with respect
to inflation, as measured by several different indices--the
CPI, or there is a medical care inflation index. Those are
typically the kinds of adjustments that payments get made, or
that are made to payments.
I am trying to answer this in the most specific way I can.
If you are asking why typically there are differences in
payments between rural and urban areas, much of that is the
result of, in the Medicare program, historic differences in the
costs that have been reported for those services in those
different areas, and that has been kind of the basis.
As you look around the country and compare costs for
medical care in different marketplaces, they vary, as I know
you know, very dramatically from one area to another.
One of the best illustrations of the range of variation is
we calculate a per capita cost for Medicare in each of the
counties, over 3,000 counties around the country. We have done
that for purposes of the method for paying for managed care
organizations. But what that number shows to you is that on a
monthly basis the range is from something like $230 a month to
as much as nearly $800 a month per person in terms of the
Medicare expenditures that are made on a county-by-county
basis. So that produces different payment rates.
Mr. Ose. I would submit to you, at least as it relates to
the seven rural counties that I represent, that the algorithm
you use to come to that payment level does not equitably
reflect, if you will, a minimum survival level for provision of
adequate medical services. That has resulted in a reduction in
the level of medical care available in many of the rural
counties that I represent.
I would hope that you would convey that back to your
colleagues, and perhaps we could have some attention focused on
that.
Mr. Hash. I agree. It is an important issue, and one which
we need to pay attention to, because providing access to our
beneficiaries who reside in rural areas is an important concern
and objective of our program, and we definitely want to work to
make sure that there is not only adequate access, but that the
quality of care that beneficiaries receive who live in rural
areas also meets the highest standards.
I think in some of these cases, if I may, the differences
relate to the way in which the statute is designed, and that
really calls on all of us to take a look at those payment
systems and see whether they need to be revised in light of the
experience that some rural health care providers are having.
Mr. Ose. I appreciate your comments. The reason I broach
this subject is that I would hate to get us in a position
where, for financial reasons, we find ourselves quite literally
denying medical service to those folks who live in rural areas.
Mr. Ose. Mr. Chairman, if I may, one other question and
observation.
In my District, we have a very efficient number of HMOs,
and you can like them or dislike them, but they are a fact of
life. Oftentimes, under the prospective payment system, they
end up in a situation where they will self-report having
received an overpayment from Medicare and attempt to return
such funds to Medicare, as the law requires.
The thing that I find most incredible is that, in the
situation I am familiar with related to some $7 million, the
provider has proffered the money back to--having identified it
by themselves, proposed returning the money, and they find
themselves in a dispute with Medicare over whether they can
return the money and the circumstances under which they can.
The thing that is so aggravating is that, instead of being
able to return the money and going on about business, having
self-identified it--it had gotten past all the other auditors--
they now find themselves in the position of spending scarce
resources battling with Medicare over legal issues that they
brought to the table in a good faith effort, rather than
providing medical services to their participants.
I cannot tell you how aggravating--I mean, I love
attorneys. Do not get me wrong. But I cannot tell you how
aggravating it is to take scarce resources and quibble over
this, that, or the other thing when we could use those
resources to provide medical care.
So I am curious whether or not, either in the course of the
regular audit or the operational side, Mr. Hash, whether we
have any information regarding the aggregate cost that arises
in circumstances of this nature across the country, where a
provider has self-reported overpayment and then ends up in the
position of battling to return the money, having to spend money
to battle rather than money to provide medical service.
Mr. Hash. Well, I share the frustration that you have just
voiced on behalf of folks in your District, because there has
been, I think, in the past an issue about the procedures for
the acceptance, on the traditional fee-for-service side of
Medicare, by our contractors of voluntarily returned amounts.
What we did last year--in fact, it will be a year next
month--in April 1999 we sent out guidance to our contractors,
the fiscal intermediaries and carriers, and informed them that
they were to take checks or cash or whatever the instrument was
to convey the money and to deposit it into their account, and
then, subsequently, we would determine the proper allocation or
crediting of that to the proper trust fund, and so forth.
But the failure of contractors to have had procedures in
place to accept and deposit such refunds or voluntarily
submitted funds is something we have tried to correct, and we
believe that now there is an understanding among our
contractors that these returned moneys are to be deposited into
their accounts and that they are to be recorded, and then we
will make a determination later about the appropriateness of
where they should be credited.
Mr. Ose. I think my question was more oriented toward do
you have any sense of the amount of money that is being
expended to battle over this between, say, Medicare or HCFA and
the providers, contractors? Do you have any----
Mr. Hash. In the case of voluntary returns, I would hope
that there are no fights going on. Once it was--my
understanding was the fight was the contractors were not
accepting the checks. I think we have gotten past that.
There may be issues about overpayments that have come up in
the Inspector General's experience with respect to compliance
plans that have been entered into by organizations because of
settlement agreements or one kind of thing that may result in
disputes about returned money, but a voluntarily self-
disclosed, self-returned amount should be accepted by our
contractors and should not be the occasion of an ongoing
dispute about it.
Mr. Ose. Perhaps we could visit more about this privately.
Mr. Chairman, my last observation would be--and I am not
normally given to this, but as recently as 14 months ago I was
on the private side dealing with all these questions emanating
from Congress and the State legislature.
My private experience tells me that, as a buyer of goods
and services, you tend to get what you pay for. And I have to
take exception. I know it does not emanate from the
distinguished persons testifying here, but I have to take
exception to some of the claims emanating from other parts of
the Administration that the medical community is not doing its
job.
The reality is that the medical community is in a position
where they are receiving less and less for their services, and
the spin, if you will, that is coming out of that, from some
portions of the Administration, is that doctors are not
providing the same level of care that they have historically
provided, and it has resulted in a higher mortality rate
because of errors or omissions or what have you.
Well, the reality is that if HCFA, by virtue of its
interpretations of Congress' intentions, reduces reimbursement
rates to providers. The doctors are going to be in a position
where they cannot provide therapy or they cannot have nurse
assistants in the operating rooms for thoracic surgery and the
like, and the result is a higher mortality rate.
There is an inescapable connection between what we are
willing to pay for inservices and the level of service that a
doctor can provide. It is inescapable.
I submit that for the record.
Mr. Horn. Well, I agree with what the gentleman has said so
eloquently. There is no question about it, as far as I am
concerned.
I now yield 16 minutes to the gentleman from Texas, the
ranking member, Mr. Turner. See, you get more and more time
with the more time my colleagues take.
Mr. Turner. I am going to yield to you, Mr. Chairman. At
this time, I do not have any further questions.
Mr. Horn. OK. Are there any other questions then? The
gentlewoman from Illinois?
Mrs. Biggert. OK. I just want to go back to the issue of
site inspections and provider numbers.
An example is that two doctors submitted in excess of
$690,000 in Medicare claims and listed nothing more than a
Brooklyn, NY, Laundromat as their office location. In Florida,
over $6 million in Medicaid funds were sent to a medical
equipment company that provided no services whatsoever, and one
of these companies listed their address that would have put the
business in the middle of the Miami International Airport. I
know we have all heard about that.
Another one, a medical equipment company, provided adult
diapers, which were not covered under Medicaid and were priced
at 30 cents apiece, to nursing home patients, but they billed
Medicare $8 an item after coding these diapers as an item under
Medicaid.
So my question is: is there mandatory site inspection? Now,
you said you do have it. Is it mandatory, or is it just that
you could do it if it looks like it is necessary?
Mr. Hash. It is my understanding that we are currently site
visiting any applicant who applies for a provider number as a
durable medical equipment supplier.
Mrs. Biggert. And that is only the new ones?
Mr. Hash. And we are putting into place a process whereby
we will be visiting current ones to validate that they are, in
fact, bona fide businesses and appropriately qualified.
Mrs. Biggert. Well, then, why did these happen?
Mr. Hash. I beg your pardon?
Mrs. Biggert. Well, then, why would these cases come up?
Mr. Hash. I am speaking also specifically of Medicare. I do
not know how many of your examples related to Medicaid.
Mrs. Biggert. They were all Medicare.
Mr. Hash. Medicare?
Mrs. Biggert. Yes.
Mr. Hash. Then they should not be happening now. I think we
have been working on this. We started, actually, the stepped-up
attention to provider qualifications as a part of the operation
to restore trust that the Inspector General's office and our
agency entered into back in 1995, and part of the outgrowth of
that was that we identified several. Perhaps some of the ones
you named are ones that we actually identified and removed from
the program and instigated collection procedures for.
We are, obviously, zero tolerance for letting people into
the program who are not qualified and who are intent to defraud
the taxpayers and the Medicare beneficiaries, and we think we
are making progress on that.
As I say, I think many of those examples are ones that we
actually identified, ourselves, through our stepped-up
attention to the qualification of suppliers.
Mrs. Biggert. And then I think in the paper just yesterday
was the Medicare program paid an estimated $20.6 million for
health care to people that are dead. How is this found?
Mr. Hash. That was a systems problem that related to the
notification of the death of beneficiaries and the failure of
that notification to have triggered the timely suspension of
capitation payments to HMOs. We have, we believe, corrected
that systems problem, and we have collected all of the
overpayments, or are in the process of collecting the
overpayments associated with that mistake.
Mrs. Biggert. Thank you.
Mr. Chairman, before we conclude--I do not know if you have
more questions--I think that I would like to thank all the
participants for their testimony, but I still believe that we
need to really address the issue of the Medicare and Medicaid
fraud and abuse at a different time, so I would ask at some
time that we do schedule a hearing on this issue separately and
look at the GAO report that was issued in October.
Mr. Horn. Thank you. That is a good suggestion. We will do
that.
Any other questions?
[No response.]
Mr. Horn. OK. I want to thank you all for coming. There
have been very good questions here that have gotten a lot of
these important issues. I particularly thank all of you that
have been so knowledgeable in this, and we are depending on you
to be the ones that figure out a way that we do not defraud the
government, in particular.
Obviously, we want to help you, if it takes additional
legislative language.
I want to also thank the staff on both the Democratic side
and the Republican side for putting things together for this
hearing: J. Russell George is the staff director and chief
counsel for the majority; Louise DiBenedetto is the chief
auditor on loan from the General Accounting Office for the
subcommittee and the counsel for this hearing, and that is the
distinguished member of the staff on my left and your right;
Bonnie Heald, director of communications; Bryan Sisk, clerk to
the subcommittee; and Ryan McKee, staff assistant.
And for the democratic staff we have Trey Henderson,
counsel to Mr. Turner and the subcommittee there, and Jean
Gosa, minority clerk, and our faithful court reporter, who I
think can now hear what people are saying. Thank you. That is
Mike Willsey.
Thank you very much for coming.
With that, we are adjourned.
[Whereupon, at 11:48 a.m., the subcommittee was adjourned.]