Provide education and guidance regarding complying with current health care law.
In this assignment you will have an opportunity to review an annual report produced by the Department of Justice. The report summarizes compliance activities conducted by Federal agencies and the outcomes of cases which have been prosecuted.
Download the Heathcare fraud and abuse
and complete the questions using information found within the Annual Report attached (below.
The department of justice healthcare fraud and abuse control program annual report for 2015
and worksheet Heathcare fraud and abuse
The Department of Health and Human Services
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report for Fiscal Year 2015
TABLE OF CONTENTS
I. Executive Summary 1
II. Statutory Background 3
III. Program Results and Accomplishments 5
Monetary Results 5
Overall Recoveries 8
Health Care Fraud Prevention and Enforcement Action Team 8
Health Care Fraud Prevention Partnership 9
Medicare Fraud Strike Force 10
Highlights of Successful Criminal and Civil Investigations 12
IV. Department of Health and Human Services 36
Office of Inspector General 36
Centers for Medicare & Medicaid Services 45
Administration on Community Living 56
Office of the General Counsel 58
Food and Drug Administration Pharmaceutical Fraud Program 62
V. Department of Justice 64
United States Attorneys 64
Civil Division 66
Criminal Division 69
Civil Rights Division 72
VI. Appendix 77
Federal Bureau of Investigation 77
Return on Investment Calculation 80
Total HCFAC Resources 81
VII. Glossary of Terms 82
All years are fiscal years unless otherwise
noted in the text.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national
Health Care Fraud and Abuse Control Program (HCFAC or the Program) under the joint
direction of the Attorney General and the Secretary of the Department of Health and Human
, acting through the Inspector General, designed to coordinate federal, state and
local law enforcement activities with respect to health care fraud and abuse. In its nineteenth
year of operation, the Program?s continued success confirms the soundness of a collaborative
approach to identify and prosecute the most egregious instances of health care fraud, to prevent
future fraud and abuse, and to protect program beneficiaries.
During Fiscal Year (FY) 2015, the Federal Government won or negotiated over $1.9 billion in
health care fraud judgments and settlements2
, and it attained additional administrative
impositions in health care fraud cases and proceedings. As a result of these efforts, as well as
those of preceding years, in FY 2015, approximately $2.4 billion was returned to the Federal
Government or paid to private persons. Of this $2.4 billion, the Medicare Trust Funds3
transfers of approximately $1.6 billion during this period, and $135.9 million in Federal
Medicaid money was similarly transferred separately to the Treasury as a result of these
efforts. Of the approximately $29.4 billion returned by the HCFAC account to the Medicare
Trust Funds since the inception of the Program in 1997, over $16.2 billion has been returned
between 2009 and 2015.
In FY 2015, the Department of Justice (DOJ) opened 983 new criminal health care fraud
investigations. Federal prosecutors filed criminal charges in 463 cases involving 888 defendants.
A total of 613 defendants were convicted of health care fraud-related crimes during the year.
Also in FY 2015, DOJ opened 808 new civil health care fraud investigations and had 1,048 civil
health care fraud matters pending at the end of the fiscal year. In FY 2015, the FBI investigative
efforts resulted in over 625 operational disruptions of criminal fraud organizations and the
dismantlement of the criminal hierarchy of more than 144 health care fraud criminal enterprises.
In FY 2015, HHS? Office of Inspector General (HHS-OIG) investigations resulted in 800
criminal actions against individuals or entities that engaged in crimes related to Medicare and
Medicaid, and 667 civil actions, which include false claims and unjust-enrichment lawsuits filed
in federal district court, civil monetary penalties (CMP) settlements, and administrative
recoveries related to provider self-disclosure matters. HHS-OIG also excluded 4,112 individuals
Hereafter, referred to as the Secretary.
The amount reported as won or negotiated only reflects the federal recoveries and therefore does not reflect state
Medicaid monies recovered as part of any global federal-state settlements. 3
Also known as the Medicare Hospital Insurance (Part A) Trust Fund and the Supplemental Medical Insurance (Part
B) Trust Fund.
and entities from participation in Medicare, Medicaid, and other federal health care programs.
Among these were exclusions based on criminal convictions for crimes related to Medicare and
Medicaid (1,329) or to other health care programs (424), for patient abuse or neglect (302), and
as a result of licensure revocations (1,743). HHS-OIG also issued numerous audits and
evaluations with recommendations that, when implemented, would correct program
vulnerabilities and save program funds.
Due to sequestration of mandatory funding in 2015, there were fewer resources for DOJ, FBI,
HHS, and HHS-OIG to fight fraud and abuses against Medicare, Medicaid, and other health care
programs. A total of $22.0 million was sequestered from the HCFAC program in FY 2015, for a
combined total of $74.2 million in the past three years. Including funds sequestered from the
FBI, the total equals $101.2 million in the past three years.
The Annual Report of the Attorney General and the Secretary detailing expenditures and
revenues under the Health Care Fraud and Abuse Control Program for Fiscal Year 2015 is
provided as required by Section 1817(k)(5) of the Social Security Act.
The Social Security Act Section 1128C(a), as established by the Health Insurance Portability and
Accountability Act of 1996 (P.L. 104-191, HIPAA or the Act), created the Health Care Fraud
and Abuse Control Program, a far-reaching program to combat fraud and abuse in health care,
including both public and private health plans.
As was the case before HIPAA, amounts paid to Medicare in restitution or for compensatory
damages must be deposited in the Medicare Trust Funds. The Act requires that an amount
equaling recoveries from health care investigations?including criminal fines, forfeitures, civil
settlements and judgments, and administrative penalties?also be deposited in the Trust Funds.
The Act appropriates monies from the Medicare Hospital Insurance Trust Fund to an expenditure
account, called the Health Care Fraud and Abuse Control Account (the Account), in amounts that
the Secretary and Attorney General jointly certify as necessary to finance anti-fraud activities.
The maximum amounts available for certification are specified in the Act. Certain of these sums
are to be used only for activities of the HHS-OIG, with respect to the Medicare and Medicaid
programs. In FY 2006, the Tax Relief and Health Care Act (TRHCA) (P.L 109-432, ?303)
amended the Act so that funds allotted from the Account are ?available until expended.?
TRHCA also allowed for yearly increases to the Account based on the change in the consumer
price index for all urban consumers (all items, United States city average) (CPI-U) over the
previous fiscal year for fiscal years for 2007 through 2010.4 In FY 2010, the Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act,
collectively referred to as the Affordable Care Act (P.L. 111-148, ACA) extended permanently
the yearly increases to the Account based upon the change in the consumer price index for all
urban consumers, or CPI-U.
In FY 2015, the Secretary and the Attorney General certified $279.7 million in mandatory
funding to the Account after accounting for sequester reductions of $22.0 million to the total
appropriation. Additionally, Congress appropriated $672.0 million in discretionary funding. A
detailed breakdown of the allocation of these funds is set forth later in this report. HCFAC
appropriations generally supplement the direct appropriations of HHS that are devoted to health
care fraud enforcement and supported over two-thirds of DOJ?s health care fraud funding and
over three-fourths of HHS-OIG?s appropriated budget in FY 2015. (Separately, the FBI, which
is discussed in the appendix, received $129.2 million from HIPAA, after accounting for $10.2
million in mandatory sequester reductions.) Under the joint direction of the Attorney General
and the Secretary, the Program?s goals are:
The CPI-U adjustment in TRHCA did not apply to the Medicare Integrity Program (MIP). Section 6402 of the
ACA indexed Medicare Integrity Program funding to inflation starting in FY 2010.
(1) to coordinate federal, state and local law enforcement efforts relating to health care fraud
and abuse with respect to health plans;
(2) to conduct investigations, audits, inspections, and evaluations relating to the delivery of
and payment for health care in the United States;
(3) to facilitate enforcement of all applicable remedies for such fraud; and
(4) to provide education and guidance regarding complying with current health care law.
The Act requires the Attorney General and the Secretary to submit a joint annual report to the
Congress that identifies both:
(1) the amounts appropriated to the Trust Funds for the previous fiscal year under various
categories and the source of such amounts; and
(2) the amounts appropriated from the Trust Funds for such year for use by the Attorney
General and the Secretary and the justification for the expenditure of such amounts.
This annual report fulfills the above statutory requirements.
Additionally, this report fulfills the requirement in the annual discretionary HCFAC
appropriation (Public Law 113-235 ?Consolidated and Further Continuing Appropriations Act,
2015?) that this report ?include measures of the operational efficiency and impact on fraud,
waste, and abuse in the Medicare, Medicaid, and CHIP programs for the funds provided by this
Centers for Medicare & Medicaid Services
Centers for Medicare and Medicaid Services
PROGRAM RESULTS AND ACCOMPLISHMENTS
As required by the Act, HHS and DOJ must detail in this Annual Report the amounts deposited
to the Medicare Trust Funds and the source of such deposits. In FY 2015, approximately
$2.4 billion was deposited with the Department of the Treasury and CMS, transferred to other
federal agencies administering health care programs, or paid to private persons during the fiscal
year. Monetary results from these transfers and deposits are provided in the table below:
Monetary Results: Total Transfers/Deposits by Recipient FY 2015
Department of the Treasury
Deposits to the Medicare Trust Funds, as required by HIPAA
Gifts and Bequests $10,372
Amount Equal to Criminal Fines 56,549,115
Civil Monetary Penalties 45,772,271
Asset Forfeiture 14,791,644
Penalties and Multiple Damages 512,054,108
HHS-OIG Audit Disallowances ? Recovered – Medicare 132,612,502
Restitution/Compensatory Damages 793,934,739
Grand Total of Amounts Transferred to the Medicare Trust Funds $1,555,724,750
Restitution/Compensatory Damages to Federal Agencies
HHS-OIG Cost of Audits, Investigations and Compliance Monitoring 7,766,281
Other Agencies 18,200,774
Federal Share of Medicaid 135,866,585
HHS-OIG Audit Disallowances ? Recovered – Medicaid 168,955,572
Relators= Payments** 414,456,455
*Restitution, compensatory damages, and recovered audit disallowances include returns to both the Medicare
Hospital Insurance (Part A) Trust Fund and the Supplemental Medical Insurance (Part B) Trust Fund.
**These are funds awarded to private persons who file suits on behalf of the Federal Government under the qui tam
(whistleblower) provisions of the False Claims Act, 31 U.S.C. ‘ 3730(b).
***State funds are also collected on behalf of state Medicaid programs; only the Federal share of Medicaid funds
transferred to CMS are represented here.
The above transfers include certain collections, or amounts equal to certain collections, required
by HIPAA to be deposited directly into the Medicare Trust Funds. These amounts include:
(1) Gifts and bequests made unconditionally to the Trust Funds, for the benefit of the
Account or any activity financed through the Account;
(2) Criminal fines recovered in cases involving a federal health care offense, including
collections under section 24(a) of Title 18, United States Code (relating to health care
(3) Civil monetary penalties in cases involving a federal health care offense;
(4) Amounts resulting from the forfeiture of property by reason of a federal health care
offense, including collections under section 982(a)(7) of Title 18, United States Code;
(5) Penalties and damages obtained and otherwise creditable to miscellaneous receipts of the
general fund of the Treasury obtained under sections 3729 through 3733 of Title 31,
United States Code (known as the False Claims Act, or FCA), in cases involving claims
related to the provision of health care items and services (other than funds awarded to a
relator, for restitution or otherwise authorized by law).
In the nineteenth year of operation, the Secretary and the Attorney General certified
$279.7 million in mandatory funding as necessary for the Program, after accounting for
mandatory sequester reductions of $22.0 million as required by law. Additionally, Congress
appropriated $672.0 million in discretionary funding. See allocation by recipient below:
FY 2015 ALLOCATION OF HCFAC APPROPRIATION
Department of Health and Human
Office of Inspector General6
$200,718,475 $67,200,000 ($14,652,449) $253,266,026
Office of the General Counsel 10,000,000 0 0 10,000,000
Administration for Community
Living 8,710,136 0 0 8,710,136
Food and Drug Administration 3,377,220 0 0 3,377,220
Centers for Medicare & Medicaid
Services 13,500,000 544,320,000 0 577,820,000
Unallocated Funding 2,802,456 0 (2,802,456) 0
Subtotal 239,108,287 611,520,000 (17,454,905) 853,173,382
Department of Justice
United States Attorneys 31,400,000 20,505,542 51,905,542
19,538,751 12,093,818 31,632,569
Criminal Division 4,580,184 10,162,659 14,742,843
Civil Rights Division 2,376,000 5,443,276 7,819,276
Justice Management Division 200,000 100,000 300,000
Department of Justice – Other 4,574,898 12,174,705 (4,574,898) 12,174,705
Subtotal 62,669,833 60,480,000 (4,574,898) 118,574,935
$301,778,120 $672,000,000 ($22,029,803) $971,748,317
As of FY 2007, mandatory funds are available until expended. Discretionary funds are available for two years. 6
In addition, HHS-OIG obligated $9.8 million in funds received as ?reimbursement for the costs of conducting
investigations and audits and for monitoring compliance plans? as authorized by section 1128C(b) of the Social
Security Act, 42 U.S.C. ? 1320a-7c(b). 7
The Elder Justice Initiative, managed by the Civil Division, is included in the Civil Division figures.
Amounts only represent those that are provided by statute, and do not include other mandatory sources or
discretionary appropriated sources provided through Departments? annual appropriations.
During this fiscal year, the Federal Government won or negotiated over $1.9 billion in judgments
and settlements, and attained additional administrative impositions in health care fraud cases and
proceedings. As a result of these efforts, as well as those of preceding years, approximately $2.4
billion was returned to the Federal Government or private persons. Of this $2.4 billion, the
Medicare Trust Funds received transfers of approximately $1.6 billion during this period; and
another $135.9 million in Federal Medicaid money was transferred to the Treasury separately as
a result of these efforts.9
In addition to these enforcement actions, numerous audits, evaluations and other coordinated
efforts yielded recoveries of overpaid funds, and prompted changes in federal health care
programs that reduce vulnerability to fraud.
The return on investment (ROI) for the HCFAC program over the last three years (2013-2015) is
$6.10 returned for every $1.00 expended. Because the annual ROI can vary from year to year
depending on the number and type of cases that are settled or adjudicated during that year, DOJ
and HHS use a three-year rolling average ROI for results contained in the report. Additional
information on how the ROI is calculated can be found in the Appendix.
Health Care Fraud Prevention and Enforcement Action Team (HEAT)
The Attorney General and the Secretary maintain regular consultation at both senior and staff
levels to accomplish the goals of the HCFAC Program. On May 20, 2009, Attorney General
Holder and Secretary Sebelius announced the Health Care Fraud Prevention & Enforcement
Action Team (HEAT), a new effort with increased tools and resources, and a sustained focus by
senior level leadership to enhance collaboration between the Departments of Health and Human
Services and Justice. With the creation of the new HEAT effort, DOJ and HHS pledged a
Cabinet-level commitment to prevent and prosecute health care fraud. HEAT, which is jointly
led by the Deputy Attorney General and HHS Deputy Secretary, is comprised of top level law
enforcement agents, prosecutors, attorneys, auditors, evaluators, and other staff from DOJ and
HHS and their operating divisions, and is dedicated to joint efforts across government to both
prevent fraud and enforce current anti-fraud laws around the country. The Medicare Fraud
Strike Force teams are a key component of HEAT.
The mission of HEAT is:
? To marshal significant resources across government to prevent waste, fraud and
abuse in the Medicare and Medicaid programs and crack down on the fraud
perpetrators who are abusing the system and costing us all billions of dollars.
? To reduce health care costs and improve the quality of care by ridding the system of
perpetrators who are preying on Medicare and Medicaid beneficiaries.
Note that some of the judgments, settlements, and administrative actions that occurred in FY 2015 will result in
transfers in future years, just as some of the transfers in FY 2015 are attributable to actions from prior years.
? To highlight best practices by providers and public sector employees who are
dedicated to ending waste, fraud, and abuse in Medicare.
? To build upon existing partnerships between DOJ and HHS, such as our Medicare
Fraud Strike Force Teams, to reduce fraud and recover taxpayer dollars.
Since its creation in May 2009, HEAT has focused on key areas for coordination and
improvement. HEAT members are working to identify new enforcement initiatives and areas for
increased oversight and prevention to increase efficiency in areas such as pharmaceutical and
device investigations. DOJ and HHS have expanded data sharing and improved information
sharing procedures in order to get critical data and information into the hands of law enforcement
to track patterns of fraud and abuse and increase efficiency in investigating and prosecuting
complex health care fraud cases. The departments established a cross-government health care
fraud data intelligence sharing workgroup to share fraud trends, new initiatives, ideas, and
success stories to improve awareness across of issues relating to health care fraud.
Both departments also have developed training programs to prevent honest mistakes and help
stop potential fraud before it happens. This includes CMS compliance training for providers, ongoing
meetings at U.S. Attorneys? Offices (USAOs) with the public and private sector, and
increased efforts by HHS to educate specific groups?including elderly and immigrant
communities?to help protect them. In addition, DOJ conducts, with the support of HHS, a
Medicare Fraud Strike Force training program designed to teach the Strike Force concept and
case model to prosecutors, law enforcement agents, and administrative support teams.
Healthcare Fraud Prevention Partnership (HFPP)
The Healthcare Fraud Prevention Partnership (HFPP) is the groundbreaking public/private
partnership between the Federal Government, State officials, law enforcement, private health
insurance plans and associations, and healthcare anti-fraud associations. The purpose of the
partnership is to exchange data and information between the partners to help improve capabilities
to fight fraud, waste and abuse in the health care industry. Since its inception in 2012, the
number of participants has increased to 45 public, private and state partner organizations. The
Partnership has completed several studies associated with fraud, waste or abuse that have yielded
successful results for participating partners. Studies have examined such subjects as ?false store
fronts? or ?phantom providers? and top billing pharmacies. Additional studies are underway and
the Partnership has established a Trusted Third Party (TTP) which conducts HFPP data
exchanges, research, data consolidation and aggregation, reporting, and analysis. The TTP will
not share the source of the data (i.e., which partner submitted what data) during an exchange in
order to keep the identity of the data source confidential. HFPP is continuing to expand with
The Partnership is a demonstrated example of effective departmental collaboration between HHS
and DOJ, working together to create a strong partnership with the states and private payers to
detect fraud, waste, and abuse. In FY 2015, the Partnership hosted its fifth Executive Board
meeting. The meeting focused on developing a strategy to ensure the productivity of the
Partnership and highlighted achievements and progress since the last meeting including data
exchanges, information sharing, and partnership growth.
Medicare Fraud Strike Force
The first Medicare Fraud Strike Force (Strike Force) was launched in March 2007 as part of the
South Florida Initiative, a joint investigative and prosecutorial effort against Medicare fraud and
abuse in South Florida. The Strike Force is comprised of interagency teams made up of
investigators and prosecutors that focus on the worst offenders in regions with the highest known
concentration of fraudulent activities. The Strike Force uses advanced data analysis techniques
to identify aberrant billing levels in health care fraud ?hot spots??cities with high levels of
billing fraud?and target suspicious billing patterns, as well as emerging schemes and schemes
that migrate from one community to another. Based on the success of these efforts and increased
appropriated funding for the HCFAC program from Congress and the Administration, DOJ and
HHS expanded Strike Force operations to a total of nine areas in the United States?Miami,
Florida; Los Angeles, California; Detroit, Michigan; Southern Texas; Brooklyn, New York;
Southern Louisiana; Tampa, Florida; Chicago, Illinois; and Dallas, Texas.
Each Medicare Fraud Strike Force team brings the investigative and analytical resources of the
FBI and HHS-OIG and the prosecutorial resources of the Criminal Division?s Fraud Section and
the USAOs to analyze data obtained from CMS and bring cases in federal district court. Strike
Force accomplishments in the areas noted above and USAO accomplishments in their districts
during FY 2015 include10:
? 200 indictments, informations and complaints involving charges filed against
391 defendants who allegedly collectively billed the Medicare program approximately
? 314 guilty pleas negotiated and 28 jury trials litigated, with guilty verdicts against
48 defendants; and
? Imprisonment for 263 defendants sentenced during the fiscal year, averaging more than
56 months of incarceration.
In the eight and a half years since its inception, Strike Force prosecutors filed more than
1,164 cases charging more than 2,536 defendants who collectively billed the Medicare program
more than $8 billion; 1,781 defendants pleaded guilty and 243 others were convicted in jury
trials; and 1,477 defendants were sentenced to imprisonment for an average term of
approximately 49 months.11
Medicare payment trends demonstrate the positive impact of Strike Force enforcement and
prevention efforts. For example, Medicare payments for home health care increased from 2006
until 2010. In 2009, CMS changed Medicare?s Home Health Agency (HHA) outlier coverage
policy, following federal enforcement actions initiated by the HEAT Strike Force case U.S. v.
Zambrana in Miami and HHS-OIG reports regarding home health outlier payments. As reflected
10 The accomplishments figures presented in the bullets include all reported Strike Force cases handled by DOJ
Criminal Division attorneys and AUSAs in the respective USAOs during FY 2015.
11 These statistics are for the period of May 7, 2007 through September 30, 2015.
on the chart below, since 2010, payments for HHAs in Miami decreased by $100 million per
quarter since the peak in 2009, and continue to decline. In Dallas and Detroit, payments for
HHAs are down by over $40 million and $25 million per quarter, respectively, since 2010. This
may suggest that the home health fraud convictions not only eliminated some of the bad actors
but also deterred other fraudsters from exploiting the outlier coverage policy. We have seen
similar patterns of decreased Medicare payments for Durable Medical Equipment (DME) and
community mental health services (CMHC) following concentrated law enforcement initiatives
and administrative fraud prevention efforts.
Medicare Payments for CMHC, DME, and HHA Services,
Calendar Years 2006-2015
HHA Dallas area
For examples of successful Strike Force cases initiated or concluded during FY 2015, please see
?Highlights of Successful Criminal and Civil Investigations? beginning on p. 12.
Highlights of Successful Criminal and Civil Investigations
Our respective Departments successfully pursued Medicare Fraud Strike Force matters, as well
as other criminal and civil investigations in a wide range of areas. Cases are organized by type
and presented in chronological order. Strike Force cases are denoted by (SF) in the lead
Ambulance and Transportation Services
In November 2014, the co-owner of Brotherly Love, a Philadelphia, Pennsylvania ambulance
company, was sentenced to 5 years and 4 months of incarceration and was ordered to pay more
than $2 million in restitution after pleading guilty to health care fraud and the anti-kickback
statute (AKS) charges. The investigation revealed that the co-owner and her co-conspirators
transported by ambulance patients who could walk; transported patients in personally owned
vehicles, but billed as if the patients were transported by ambulance; used patient information to
bill as if the patients had been transported by ambulance when, in fact, the patients actually
transported themselves; and paid patients to be transported by Brotherly Love.
In May 2015, five Orange County California ambulance companies in San Diego, California
agreed to pay a total of more than $11.5 million to settle civil False Claims Act (FCA)
allegations that they engaged in so-called ?swapping? kickback schemes by providing deeply
discounted?and often below cost?ambulance services to hospitals and/or skilled nursing
facilities (SNFs) in exchange for exclusive rights to the facilities? more lucrative Medicare
patient referrals in violation of the AKS. The government alleged that the arrangements resulted
in false claims for Medicare Part B transports, which in essence subsidized the discounted trips.
The settling defendants were Pacific Ambulance, Inc., Bowers Companies, Inc., Care
Ambulance Service, Inc., Balboa Ambulance Service, Inc., and E.R. Ambulance, Inc.
(SF) In August 2015, the owner, operators, and managers of ProMed Medical Transportation, an
ambulance transportation company in the greater Los Angeles area, were convicted after trial for
their roles in a $2.4 million Medicare fraud scheme. The evidence at trial demonstrated that the
defendants conspired to bill Medicare for ambulance transportation services for individuals
whom the defendants knew did not need such services. The defendants also instructed
emergency medical technicians who worked at ProMed to conceal the true medical conditions of
patients they were transporting by altering requisite paperwork and creating fraudulent
documents to justify the transportation services.
(SF) In June 2015, a general manager and a dispatch supervisor of Mauran Ambulance Inc., an
ambulance company in San Fernando, California, were indicted for their roles in a $28 million
Medicare fraud scheme. The defendants allegedly billed Medicare for medically unnecessary
ambulance transportation services, which primarily were to and from dialysis treatments. In
their respective roles at Mauran, the defendants instructed emergency medical technicians who
worked at Mauran to conceal the true medical condition of patients they were transporting by
altering paperwork and creating false reasons to justify Mauran?s ambulance transportation
services. A former administrator of a dialysis clinic was also indicted for receiving cash
kickbacks from Mauran?s general manager in exchange for patient referrals.
In FY 2015, DaVita Healthcare Partners, Inc., the nation?s largest provider of dialysis services,
agreed to pay a total of $800 million to settle allegations made in two civil FCA actions. In
October 2014, DaVita agreed to pay $350 million to settle civil FCA allegations that it paid
kickbacks to induce the referral of patients to its dialysis clinics. The government alleged that
DaVita offered physicians lucrative opportunities to acquire and/or sell an interest in DaVita
dialysis clinics to which their patients would be referred for treatment and then prevented the
physicians from referring their patients to other dialysis providers through a series of noncompete
and non-disparagement agreements with the physicians. In June 2015, DaVita paid an
additional $450 million to settle civil FCA allegations pursued by two whistleblowers that it
created unnecessary waste in administering the drugs Zemplar and Venofer to dialysis patients,
and then billed federal health care programs for such avoidable waste.
(SF) In October 2014, two owners of several Brooklyn, NY medical clinics pled guilty to health
care fraud conspiracy and falsification of records in the Eastern District of New York. The
medical director of one clinic pled guilty to health care fraud conspiracy in March 2015. The
defendants owned and operated a series of medical clinics that were used to submit more than
$14.3 million in Medicare claims, of which $5.3 million was paid. The indictment alleged that
the majority of the claims were fraudulent because they were for services such as vitamin
infusions, physical and occupational therapy, and diagnostic tests that were medically
unnecessary, not provided, or otherwise not reimbursable. The defendants also allegedly
laundered the proceeds of the fraudulent scheme and falsified documents, which they then
provided to Medicare auditors and the FBI in order to conceal the fraudulent scheme.
(SF) In October 2014, an occupational therapist pled guilty in the Eastern District of New York
to health care fraud conspiracy for his role in a scheme that involved the payment of cash
kickbacks to elderly beneficiaries who received massages and light group exercises that were
billed to Medicare and Medicaid as individual one-on-one occupational therapy and other
occupational therapy services. As part of the scheme, the defendant, who was a full-time
therapist for the New York Board of Education, signed false and fabricated patient charts and
billing records for therapy that was not actually provided. As part of the plea, the defendant
agreed to restitution and forfeiture of $1.6 million. Between February 2008 and February 2011,
the defendant was the seventh-highest biller of occupational therapy in the country.
(SF) In January 2015, two physician owners of Spectrum Care P.A., a Houston community
mental health clinic, were sentenced to 148 months and 120 months, respectively, for their roles
in a $97 million Medicare fraud scheme. The physician defendants were convicted, along with
three co-defendants?a group home owner, a physician assistant, and an office manager?of
health care fraud conspiracy and substantive counts of health care fraud following a five-week
jury trial. The evidence at trial showed that the physician defendants signed admission
documents and progress notes certifying that Medicare beneficiaries qualified for partial
hospitalization services, when they did not. The evidence also showed that the physician
defendants paid kickbacks to group home operators and patient recruiters, including their codefendants,
in exchange for the referral of beneficiaries. The group home owner was sentenced
to 54 months? imprisonment, the office manager was sentenced to 60 months? imprisonment, and
the physician assistant was sentenced to 68 months? imprisonment.
In January 2015, six co-conspirators in Arlington, Texas were sentenced for submitting over $5
million in false health insurance claims to Blue Cross Blue Shield of Texas (BCBS), the Federal
Employees Health Benefits Program, and other insurers for services not rendered at a
chiropractic clinic. The co-conspirators included a licensed chiropractor and occupational
therapist who allowed the use of their provider numbers to fraudulently bill insurers for services
not provided. To further the scheme, a union representative for a Texas automotive parts
manufacturer actively recruited employees to go to the co-conspirators? chiropractic clinic. The
union representative and recruited employees received illegal kickback for these referrals. The
sentences imposed in this case ranged from 6 months imprisonment to 156 months
imprisonment, and restitution from $1.3 to $2.4 million.
(SF) In February 2015, the co-owners of BONB LLC, aka Bioscan, were sentenced to 57 and 37
months? imprisonment in the Middle District of Florida for their roles in a health care fraud and
money laundering scheme. Bioscan was a shell company the defendants used to facilitate a
multi-million dollar fraud scheme executed through several purported medical clinics. As part of
their guilty pleas, the defendants admitted that their co-conspirators submitted $12 million in
fraudulent claims to Medicare, including claims resulting from illegal kickback arrangements
and claims for radiology, audiology, neurology, and cardiology services that were never
rendered. The defendants admitted to attempting to conceal the proceeds of the fraudulent
claims by transferring funds through bank accounts for Bioscan and other entities. In addition to
the prison sentences, one defendant agreed to forfeit a $60,000 platinum and diamond ring he
purchased with health care fraud proceeds.
In July 2015, the operator of a sham clinic in the Central District of California was sentenced
after being convicted at trial to 15 years in federal prison for his role in a $20 million scheme to
defraud Medicare and Medicaid by fraudulently prescribing expensive anti-psychotic
medications, selling these drugs on the black market, and then redistributing them to pharmacies,
where the drugs would be subject to new claims made to Medicare and Medicaid as though they
were new bottles of drugs. Employees of sham clinic generated thousands of prescriptions for
identity theft victims?such as elderly Vietnamese beneficiaries of Medicare and Medicaid,
military veterans who were recruited from drug rehab programs, and denizens of Skid Row.
This case was the first in the nation involving an organized scheme to defraud government health
care programs through fraudulent claims for expensive anti-psychotic medications.
Community Mental Health Centers
(SF) In December 2014, a certified nursing assistant in Miami, Florida was sentenced to 12 years
and six months in prison and ordered to pay $18.2 million in joint and several restitution after
being convicted by a jury on charges of relating to health care fraud. American Therapeutic
Corporation (ATC) operated several purported partial hospitalization programs (PHP)
throughout Florida. Evidence at trial demonstrated that the defendant received thousands of
dollars a month in cash kickbacks in exchange for referring Medicare patients to ATC. The
evidence also demonstrated that the beneficiaries he sent to ATC did not need, qualify for, or
receive PHP treatment. Nevertheless, ATC submitted false claims to Medicare for PHP services
purportedly provided to each of these patients. To date, 30 defendants, including the owners of
ATC, have previously pleaded guilty or been convicted at trial on charges related to the ATC
scheme, which resulted in more than $200 million in fraudulent Medicare billings.
(SF) In January 2015, two physicians in Houston, Texas were sentenced to a combined 22 years
and 4 months in prison and ordered to pay a combined $8 million in restitution after being
convicted by a jury on charges relating to health care fraud. The two physicians owned a
community mental health center (CMHC) that purportedly provided PHP services to Medicare
beneficiaries. Evidence at trial showed that the two physicians paid kickbacks to group care
home operators and patient recruiters in exchange for bringing ineligible Medicare beneficiaries
to their CMHC. They then signed admission documents and progress notes certifying that the
beneficiaries qualified for PHP services when, in fact, they did not qualify for or need these
services and/or the actual services were not performed. The CMHC billed Medicare
approximately $97 million for these fraudulent services. One of the group home owners was
sentenced to 4-and-a-half years in prison and ordered to pay $1.8 million in restitution.
(SF) In April 2015, a licensed mental health counselor in Miami, Florida was sentenced to 4
years in prison and ordered to pay $13.6 million in joint and several restitution after pleading
guilty to conspiracy to commit health care fraud. The defendant worked as a therapist for Health
Care Solutions Network, Inc., in Florida (HCSN-FL). He admitted that he provided intensive
therapy to mental health patients who were ineligible to receive the therapy or could not benefit
from partial hospitalization program (PHP) services, including patients suffering from dementia,
mental retardation, and Alzheimer?s disease. He signed fabricated PHP therapy notes and other
medical records, which were used to support the false claims to Medicare and Medicaid. During
his employment, the defendant and his co-conspirators submitted approximately $31 million in
false claims to Medicare and Florida Medicaid programs.
In December 2014, OtisMed Corp. of Newark, New Jersey was ordered to pay $34.4 million in
fines and $5.1 million in forfeiture after pleading guilty to distributing, with the intent to defraud
and mislead, adulterated medical devices into interstate commerce in violation of the Food,
Drug, and Cosmetic Act. OtisMed submitted a pre-market notification to the Food and Drug
Administration (FDA) seeking clearance to market the OtisKnee in October 2008. In September
2009, the FDA sent OtisMed a notice that its submission was denied, stating that the company
failed to demonstrate that the OtisKnee was as safe and effective as other legally marketed
devices. Despite his awareness of the letter and advice from legal counsel that it would be
unlawful to continue distributing the OtisKnee, the Chief Executive Officer ordered employees
at OtisMed to distribute more than 200 OtisKnee devices to surgeons throughout the United
States. The CEO and others also concealed the shipments from the FDA, and did not disclose
that distributing OtisKnee was prohibited. The CEO pleaded guilty to introducing adulterated
medical devices in interstate commerce and was sentenced on June 29, 2015 to 24 months in
prison. Apart from the criminal plea, OtisMed agreed to pay a $41.2 million settlement to
resolve its civil FCA liability arising from the marketing and distribution of the OtisKnee, and to
be excluded from participation in federal health care programs for 20 years.
In February 2015, medical device manufacturer ev3 Inc., formerly known as Fox Hollow
Technologies Inc., agreed to pay $1.3 million to resolve civil FCA allegations that it caused
certain hospitals to submit false claims to Medicare for unnecessary inpatient admissions for
procedures involving its atherectory device. Atherectomy is a minimally-invasive surgical
procedure that uses a small cutting device to remove atherosclerosis, or hardening of the arteries,
from large blood vessels within the body. The government alleged that to increase hospital
purchases of its atherectomy devices, Fox Hollow advised hospitals that they should bill
atherectomy procedures as more expensive inpatient claims, as opposed to less costly outpatient
claims. As a result, certain hospitals allegedly claimed greater reimbursement than they were
entitled to receive for procedures involving Fox Hollow?s devices.
In April 2015, Medtronic plc and certain affiliated Medtronic companies agreed to pay
$4.4 million to settle civil FCA allegations that they made false statements to the U.S.
Department of Veterans Affairs and the U.S. Department of Defense regarding the country of
origin of certain Medtronic products sold to the United States. The Trade Agreements Act of
1979 (TAA) generally requires companies selling products to the United States to manufacture
them in the United States or in another designated country. The settlement resolved allegations
that Medtronic sold to the United States products manufactured in China and Malaysia; under the
TAA, the Government is precluded from acquiring the products at issue from those countries.
The specific Medtronic products included anchoring sleeves sold with cardiac leads and used to
secure the leads to patients, certain instruments and devices used in spine surgeries, and a
handheld patient assistant used with a wireless cardiac device.
In July 2015, NuVasive Inc. of San Diego, California, agreed to pay $13.5 million to resolve
allegations that the company promoted its CoRoent System for surgical uses that were not
approved or cleared by the FDA and paid kickbacks to induce physicians to use its CoRoent
System. The government alleged that, between 2008 and 2013, NuVasive promoted its CoRoent
System for certain surgical uses, including for use in treating two complex spine deformities:
severe scoliosis and severe spondylolisthesis. Because these specific uses were not approved or
cleared by the FDA, the claims submitted to Medicare and Medicaid from physicians and
hospitals for these spine surgeries were not eligible for reimbursement. The government also
alleged that NuVasive knowingly offered and paid illegal remuneration to certain physicians to
induce them to use the CoRoent System in spine fusion surgeries, in violation of the Federal antikickback
statute. The alleged illegal remuneration consisted of promotional speaker fees,
honoraria, and expenses relating to physicians? attendance at events sponsored by a group that
was allegedly created, funded, and operated by NuVasive.
In January 2015, Daiichi Sankyo Inc., a global pharmaceutical company, agreed to pay
$39 million to resolve civil FCA allegations that it paid kickbacks to induce physicians to
prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol. The alleged kickbacks
took the form of honoraria payments, lavish meals, and other remuneration to physicians who
participated, or supposedly participated, in speaker programs. Daiichi allegedly made payments
to physicians even when physicians took turns ?speaking? on duplicative topics over Daiichipaid
dinners, the recipient spoke only to members of his or her own staff in his or her own office,
or the associated dinner was so lavish that its cost exceeded Daiichi?s own internal cost
limitation of $140 per person.
In February and May 2015, Medco Health Solutions, Inc., a wholly-owned subsidiary of the
pharmacy benefit manager Express Scripts Holding Company, and AstraZeneca, a
pharmaceutical manufacturer, agreed to pay a total of $15.8 million to settle civil FCA
allegations of a kick-back scheme involving marketing and selling pharmaceutical products. The
government alleged that AstraZeneca paid kickbacks to Medco in exchange for identifying
Nexium as the ?sole and exclusive? proton pump inhibitor on certain of Medco?s prescription
drug lists known as formularies. The alleged remuneration from AstraZeneca took the form of
price concessions on certain AstraZeneca drugs other than Nexium, namely on Prilosec, Toprol
XL, and Plendil.
In July 2015, drug manufacturers AstraZeneca LP and Cephalon, Inc. agreed to pay a total of
$54 million to settle civil FCA allegations that they knowingly underpaid rebates owed under the
Medicaid Drug Rebate Program (MDRP). Pursuant to the MDRP, drug manufacturers must pay
quarterly rebates to state Medicaid programs in exchange for Medicaid?s coverage of the
manufacturers? drugs. The rebates are based, in part, on the Average Manufacturer Prices
(AMPs) that the manufacturers report to the government for each of their covered drugs. The
settlements with AstraZeneca and Cephalon resolved allegations that they underreported AMPs
for a number of their drugs by improperly reducing the reported AMPs for service fees they paid
to wholesalers. As a result, the government contended that AstraZeneca and Cephalon underpaid
quarterly rebates owed to the states and caused the United States to be overcharged for its
payments to the states for the Medicaid program.
Durable Medical Equipment (DME)
In December 2014, a medical supplies company owner was sentenced in Baton Rouge, Louisiana
to 156 months imprisonment for submitting hundreds of false and fraudulent claims to Medicare
for medical devices over a two year period. For instance, he submitted claims for ?brace kits,?
regardless of whether any of the Medicare beneficiaries named in the claims needed or had
prescriptions for the items, submitted claims for custom-fabricated devices which were never
provided, and submitted numerous claims for expensive replacement power wheelchairs that he
falsely claimed had been damaged or destroyed by a hurricane. The owner was ordered to make
restitution to the Medicare program in the amount of $1.2 million, to forfeit the proceeds of his
criminal activity up to an additional $1.2 million, and to serve a two-year term of supervised
(SF) In February 2015 and May 2015, two individuals pled guilty to health care fraud conspiracy
for their roles in a $13 million long-running scheme to submit false claims for durable medical
equipment to a government-sponsored organization for managed care in New York. The scheme
involved the defendants using information for approved, in-network equipment providers to
obtain approvals that were then used to secure payments on behalf of sham companies that the
defendants set up. Companies believed to have been involved in the scheme submitted
fraudulent claims to the managed care organization in amounts over $13 million since 2008. In
September 2015, one of the defendants was sentenced to 21 months in jail and ordered to pay
over $337,000 in forfeiture and the same amount in restitution.
(SF) In March 2015, an owner of Colonial Medical Supply, a durable medical equipment
company in Los Angeles, was convicted after a jury trial for his role in a $3.3 million Medicare
fraud scheme. The evidence at trial established that the defendant paid cash kickbacks to
medical clinics for fraudulent prescriptions for durable medical equipment, such as expensive
power wheel chairs, which the patients did not need. The defendant then used these
prescriptions to bill Medicare for the medically unnecessary equipment. In May 2015, the
defendant was sentenced to 84 months? imprisonment.
(SF) In March 2015, an owner of Ezcor-9000, Inc., a durable medical equipment company in
Valencia, California, was convicted after an eight-day jury trial for her role in a $3.5 million
Medicare fraud scheme. The evidence at trial established that the defendant paid illegal
kickbacks to patient recruiters in exchange for patient referrals. The evidence also showed that
the defendant paid kickbacks to physicians for fraudulent prescriptions?primarily for medically
unnecessary, but expensive, power wheelchairs?that she then used to support her fraudulent
bills to Medicare. In June 2015, the defendant was sentenced to 97 months in prison.
In May 2015, DME suppliers Orbit Medical Inc. and its partial successor, Rehab Medical Inc.,
agreed to pay $7.5 million to settle civil FCA allegations that Orbit submitted false claims to
federal health care programs for power wheelchairs and accessories. The settlement resolved
allegations that Orbit sales representatives knowingly altered physician prescriptions and
supporting documentation to get Orbit?s power wheelchair and accessory claims paid by
Medicare, the Federal Employees Health Benefits Plan and the Defense Health Agency. In
particular, the government alleged that Orbit sales representatives changed or added dates to
physician prescriptions and chart notes to falsely document that the prescription was sent to the
supplier within 45 days of the face-to-face beneficiary exam; changed the physician prescription,
chart notes, and other documentation to falsely establish medical necessity for the power
wheelchair or accessory; and added facsimile stamps to supporting documentation to make it
appear as though the physician?s office had sent the documents to Orbit.
In May 2015, a DME supplier in Austin, Texas was sentenced to 36 months imprisonment and 3
years supervised release, and ordered to pay $846,171 in restitution for submitting fraudulent
bills through the Department of Labor for items never sent to patients. The supplier was billing
primarily for electrode pads. The false claims were for DME supplies for U.S. Postal employees.
The scheme ran for at least three years and involved billings to the Government of over $1
million. The supplier paid the restitution/forfeiture up-front, and the forfeiture included cash and
a 2014 BMW.
(SF) In May 2015, a registered nurse and owner of a DME company in Los Angeles, California
was sentenced to 4 years in prison and ordered to pay $4.3 million in joint and several restitution
after being convicted of health care fraud and laundering of monetary instruments. According to
the investigation, the nurse/owner and her co-conspirators used cash and checks to pay illegal
kickbacks to recruit Medicare beneficiaries for power wheelchairs and other DME, to which the
beneficiaries did not have a legitimate medical need. She and her co-conspirators also paid
illegal kickbacks to a physician in exchange for writing false prescriptions and documents for the
DME, which was then used to fraudulently bill Medicare.
Electronic Health Records
In June 2015, the Chief Financial Officer (CFO) of Shelby Regional Medical Center of Center,
Texas, was sentenced to 1 year and 11 months in jail and ordered to pay $4.4 million in
restitution after pleading guilty to making a false statement. As CFO he oversaw the
implementation of electronic health records (EHR) for the hospital and was responsible for
attesting that the hospital?s EHR platform met meaningful use requirements in order to qualify
for incentive payments under Medicare?s EHR Incentive Program. During FY 2012, Shelby
Regional did not meaningfully use the EHR platform, despite an attestation from the CFO that it
did. He falsely certified to CMS that Shelby Regional met the meaningful use requirements,
even though he was fully aware that Shelby Regional used the EHR system sparingly and did not
meet the criteria for incentives. As a result of his conduct, Shelby Regional received a $785,655
EHR incentive payment from CMS in FY 2012.
Health Maintenance Organization
In May 2015, an employee of several organizations in Miami, Florida, including Florida
Healthcare Plus, Inc. (FHCP), was sentenced to 2 years in prison and ordered to pay $16 million
in joint and several restitution after pleading guilty to conspiracy to commit health care fraud and
wire fraud. FHCP was a health maintenance organization in Florida. According to the
investigation, the defendant submitted fraudulent Medicare and Medicaid enrollment
applications for beneficiaries, which claimed that the beneficiaries resided in Florida, when they
actually resided in Nicaragua and the Dominican Republic. In addition to the defendant, five
other individuals connected to this health care fraud scheme were sentenced in June 2015 to a
combined 10 years and 3 months in prison and ordered to pay $16 million in joint and several
Home Health Providers
(SF) In October 2014, the director of two Miami-based businesses that purportedly provided
home health services to Medicare beneficiaries was sentenced to 10 years and 1 month in prison
and ordered to pay $18.6 million in restitution after pleading guilty to conspiracy to commit
health care fraud and payment of kickbacks in connection with a federal healthcare program.
The investigation related that the director paid co-conspirators thousands of dollars in kickbacks
in exchange for referring Medicare beneficiaries and also paid kickbacks to the owner of a
medical clinic in exchange for home health service prescriptions.
In November 2014, CareAll Management LLC, a Nashville, Tennessee home health provider,
agreed to pay $25 million to settle civil FCA allegations that it submitted false and upcoded
home health care billings to the Medicare and Medicaid programs. The settlement resolves
allegations that CareAll overstated the severity of patients? conditions to increase billings and
billed for services that were not medically necessary and rendered to patients who were not
(SF) In November 2014, an administrator and owner at two Miami-based Florida businesses
which purportedly provided home health care and physical therapy services to Medicare
beneficiaries was sentenced to 6 years and 8 months of incarceration and ordered to pay
$45 million in restitution after pleading guilty to conspiracy to commit health care fraud. The
investigation revealed that administrator/owner and her co-conspirators paid kickbacks to patient
recruiters for the referral of patients and for the provision of medically unnecessary or sham
prescriptions, plans of care, and certifications for therapy and home health services. The
businesses submitted approximately $74 million in fraudulent claims for home health services to
Medicare and were paid approximately $45 million on those claims. Another co-conspirator was
previously sentenced to 5 years in prison and ordered to pay $27 million in restitution.
(SF) In January 2015, the owner of Nation?s Best Home Health, a Miami home health care
agency, was sentenced to 106 months? imprisonment for his role in a $35 million Medicare fraud
scheme. According to his plea agreement, the defendant and his co-conspirators operated
Nation?s Best for the purpose of billing the Medicare program for, among other things, physical
therapy and other home health care services that were not medically necessary or not provided.
The co-conspirators paid kickbacks to patient recruiters in exchange for patient referrals to
Nation?s Best, as well as prescriptions, plans of care, and certifications for medically
unnecessary home health care services, all of which were used to fraudulently bill the Medicare
program for unnecessary home health care services.
In January 2015, an owner and operator of Norfolk, Virginia based Community Personal Care
home health care services was sentenced to 63 months in prison, followed by three years of
supervised release, and his wife who was the company?s office administrator and executive
assistant was sentenced to 25 months in prison, followed by three years of supervised release for
their operation of a massive false billing scheme. During a three week trial, the government
proved that 7,800 fraudulent claims were submitted to the Virginia Medicaid program, falsely
representing that personal care and respite care services had been provided to 78 Medicaid
recipients by Community Personal Care. To conceal the fraudulent payments, the defendants
directed employees to alter the company?s office records, including home health aide time
sheets. Both defendants were ordered together to pay $1.5 million in restitution.
(SF) Between January 2015 and May 2015, five patient recruiters pled guilty for their roles in a
$4.5 million Medicare fraud scheme involving Joystar Home Health Services, LLC, a home
health care company located in Richmond, Texas. According to court documents, each of the
defendants agreed with Joystar?s owner and director of nursing to refer Medicare beneficiaries to
Joystar in exchange for kickbacks. Joystar then billed Medicare for home health care services
that were medically unnecessary or not provided. The co-conspirators in the fraud also paid
beneficiaries to participate in the scheme and paid physicians to authorize medically unnecessary
services. Previously, the owner of Joystar was sentenced to five years? imprisonment following
his guilty plea to structuring over $1.8 million to conceal the funds he used to pay kickbacks to
patient recruiters and physicians. Joystar?s director of nursing, who pled guilty to health care
fraud and structuring, is awaiting sentencing.
In February 2015, ResCare Iowa Inc., a home health service provider, agreed to pay $5.6 million
to settle civil FCA allegations that it submitted false home health care billings to Medicare and
Medicaid. Medicare and the state of Iowa?s Medicaid program require an independent physician
to certify that home health care services are medically necessary and to order the specific type
and amount of health care services to be provided by the home health agency (HHA). The
settlement resolves allegations that ResCare Iowa billed the government for services provided to
Medicare and Medicaid patients in Iowa without documenting compliance with these
(SF) In April 2015, the Miami, Florida owner of a business that purportedly provided home
health care and physical therapy services to Medicare beneficiaries was sentenced to 9 years and
5 months in prison and ordered to pay $21 million in restitution after pleading guilty to
conspiracy to commit health care fraud. According to the investigation, the owner and his coconspirators
paid patient recruiters to place beneficiaries at the business. The recruiters then sent
the beneficiaries to doctors to obtain prescriptions for home health services that were not
medically necessary and were not provided. The man and his co-conspirators caused patient
documentation to be falsified in order to bill Medicare approximately $32 million for the
fraudulent services. He was indicted in May 2013 and was an HHS-OIG Most Wanted Fugitive
living in Cuba until he returned to the United States in September 2014 and was arrested.
(SF) Between April and July 2015, three defendants were sentenced in the Eastern District of
Michigan to a combined 20 years and 8 months in jail and ordered to pay more than $22 million
in joint and several restitution after being convicted of conspiracy to commit health care fraud
and other charges. Two of the defendants jointly operated several home health agencies in
Michigan, while the third, who was a daughter of one of the others, co-operated a home health
agency. According to the investigation, the three defendants, along with their co-conspirators,
paid kickbacks and bribes to recruiters and others for beneficiary information that would be used
to falsely bill Medicare millions for home health services that were medically unnecessary and
not performed. Another co-conspirator, who jointly operated several of the home health care
facilities, was indicted in September 2012, but investigators believe that he fled the country.
(SF) In April 2015, the owner of AA Advanced Home Health Inc., a Miami home health care
agency, was sentenced to 113 months? imprisonment for his role in a $32 million home health
care fraud scheme. As part of his guilty plea, the defendant admitted that he and his coconspirators
paid kickbacks to patient recruiters in exchange for patient referrals and billed
Medicare for physical therapy and other home health care services that were medically
unnecessary or not provided.
(SF) In April 2015, the owner of multiple home health care agencies in the Detroit area was
sentenced to 120 months? imprisonment after being convicted in an eight-week jury trial for his
role in a $29.1 million Medicare fraud scheme. The wide-ranging scheme involved
approximately 30 purported medical clinics in the Detroit area that paid kickbacks to patient
recruiters and billed Medicare for home health services that were not provided. Eight codefendants
previously pled guilty and two co-defendants were convicted at trial. One of the codefendants
who owned two home health care companies involved in the scheme pled guilty and
was sentenced to 80 months? imprisonment in July 2015. That defendant also received proceeds
of the home health care fraud through bank accounts he controlled, withdrew substantial sums
for his personal use, failed to report these proceeds on his individual federal income tax returns,
and pled guilty to filing a false tax return.
(SF) In May 2015, the owner of a Miami-based business that purportedly provided home health
and therapy services to Medicare beneficiaries was sentenced to 10 years in prison and ordered
to pay $13 million in joint and several restitution after pleading guilty to conspiracy to commit
health care fraud. The owner admitted that he and his co-conspirators billed Medicare for,
among other things, expensive physical therapy and home health care services that were not
medically necessary and/or were not provided. The owner and his co-conspirators also paid
kickbacks and bribes to other co-conspirators in doctors’ offices and clinics in exchange for
providing home health and therapy prescriptions. From approximately January 2009 to
November 2014, Longcare submitted more than $13 million in claims to Medicare for home
health services that were not necessary and/or were not provided. Eight defendants who
participated in the fraud scheme were previously sentenced to a combined 53 years and 7 months
In June 2015, a group of home health care companies?Friendship Home Healthcare, Inc.,
Friendship Home Health, Inc., Angel Private Duty and Home Health, and Friendship Home
Health Agency, LLC. (collectively ?Friendship?)?and their owner agreed to pay $6.5 million to
resolve civil FCA allegations that they improperly billed federal health care programs for home
health services. The settlement resolves allegations that Friendship submitted false claims for
private duty nursing services that were furnished or supervised by a woman who was excluded
from billing federal and state health care programs and that Friendship submitted required forms
containing the forged signature of Friendship?s Director of Nursing.
(SF) In July 2015, an owner and controller of multiple home health care agencies in the Detroit
area and a co-owner were convicted at trial for their roles in a $33 million home health care fraud
scheme. One co-defendant, a patient recruiter, previously pled guilty for her role in the scheme.
According to the evidence at trial, patient recruiters were paid kickbacks to bring Medicare
beneficiaries into the scheme. In exchange for cash kickbacks and prescriptions for controlled
substances, the beneficiaries signed forms and therapy visit sheets that were later falsified to
indicate they received home health services that were never provided. Physicians employed by
one of the defendants then purported to examine non-homebound Medicare beneficiaries for
home health care services, signed false paperwork so they could be billed through four home
health agencies, and provided the patients with narcotic prescriptions.
In February 2015, for-profit hospice provider Good Shepherd Hospice Inc., whose main location
is in Oklahoma City, and certain affiliated entities agreed to pay $4 million to resolve civil FCA
allegations that they submitted false claims for hospice patients who were not terminally ill. The
Medicare hospice benefit is available for patients who elect palliative treatment for a terminal
illness and have a life expectancy of six months or less if their illness runs its normal course.
The settlement resolved allegations that Good Shepherd knowingly submitted false claims for
hospice care for patients who were not terminally ill by pressuring staff to meet admissions and
census targets, paying bonuses to staff based on the number of patients enrolled, hiring medical
directors based on their ability to refer patients, and failing to properly train staff on the hospice
In June 2015, Covenant Hospice Inc., a non-profit hospice service provider, agreed to pay
$10 million to settle civil FCA allegations that it overbilled Medicare, TRICARE and Medicaid
for hospice services. Hospice benefits are generally available only for patients who have a life
expectancy of six months or less if their disease runs its normal course. Patients admitted to a
hospice stop receiving care to cure their illnesses and instead receive medical care focused on
providing them with relief from the symptoms, pain and stress of a terminal illness. The
settlement resolved allegations that Covenant improperly submitted hospice claims for higherlevel
inpatient care that should have been billed at lower-level routine home care.
(SF) In June 2015, two physicians and three owners of hospice and home health care companies
in the greater Detroit area were charged for their roles in a $58.3 million scheme to defraud
Medicare by submitting claims for home health care and hospice services that were medically
unnecessary or not provided. According to court documents, the owners of the home health care
and hospice companies, two of whom are also registered physical therapists, paid physicians and
patient recruiters kickbacks for referring patients, then billed Medicare for services that were
medically unnecessary or never provided. The companies, located in Livonia, Michigan, were A
Plus Hospice and Palliative Care, At Home Hospice, and At Home Network Inc., a home health
care agency. The physicians who solicited and received kickbacks also submitted claims to
Medicare for medically unnecessary physician services. Court documents also allege that one of
those physicians used prescriptions for controlled substances to induce beneficiaries to allow At
Home Network to bill Medicare for purportedly providing services to the beneficiaries.
Hospitals and Health Systems
In October 2014, Dignity Health, the fifth largest health system in the country formerly known as
Catholic Healthcare West, agreed to pay $36.7 million to settle civil FCA allegations that 13 of
its hospitals in California, Nevada, and Arizona knowingly submitted false claims to Medicare
and TRICARE by admitting patients who could have been treated on a less costly, outpatient
basis. Specifically, the government alleged that certain Dignity hospitals billed Medicare and
TRICARE for inpatient care for certain patients who underwent elective cardiovascular
procedures and elective, minimally-invasive kyphoplasty procedures and patients with certain
common medical diagnoses where admission as an inpatient was medically unnecessary and
appropriate care could have been provided in a less costly outpatient or observation setting.
In December 2014, the owner/operator of a hospice agency in Greenwood, Mississippi was
sentenced to 5 years and 10 months in prison and ordered to pay $7.9 million in restitution after
pleading guilty to conspiracy to commit healthcare fraud. The investigation revealed that, from
around March 2010 to February 2013, the owner/operator and her co-conspirators used the
hospice to submit millions of dollars in fraudulent claims to Medicare, for which they were
reimbursed more than $12.5 million. These false billings included claims for patients who were
not eligible for hospice benefits because they were not terminally ill and claims based on medical
records containing forged signatures of the beneficiaries, the hospice Medical director, and/or the
beneficiaries? attending physician. In addition, the defendant, through the hospice, submitted
claims to Medicare based on patient referrals from physicians who, in actuality, never referred
patients. Many of the patient names were obtained from a medical records clerk, who has been
separately charged for accepting over $240,000 in kickbacks from the defendant. The defendant
used the funds obtained from Medicare to purchase more than $1.4 million in vehicles and
In December 2014, five senior hospital administrators and five hospital physicians and a
podiatrist in Illinois were charged with criminal violation of conspiracy to receive kickbacks and
receiving kickbacks. In December 2014, two administrators pled guilty and the remaining
administrators went to trial. After a seven-week trial, on March 19, 2015, the jury found each of
the defendants guilty of the charges alleged. The Court sentenced one administrator to 54
months? imprisonment and a $770,000 fine, another administrator was sentenced to 21 months?
imprisonment, and a third was sentenced to a term of imprisonment of 12 months and 1 day and
to pay a fine of $25,000 on July 30, 2015. The Court has also entered joint and several orders of
forfeiture against the administrators in the amount of $10.5 million and $8.5 million. Three
doctors pled guilty and one has been sentenced to six months imprisonment, two went to trial
and one was acquitted, the third doctor is set to go trial in 2016.
In February 2015, Community Health Systems Professional Services Corporation (CHS), a
nationwide hospital management company, and three of its affiliated New Mexico hospitals
agreed to pay $75 million to settle civil FCA allegations that they made illegal donations to
county governments that were used to fund the state share of Medicaid payments to the hospitals.
Under a program discontinued in 2014, the federal government reimbursed New Mexico for
approximately 75 percent of supplemental Medicaid expenditures in rural hospitals, and required
that New Mexico?s 25 percent matching payments had to consist of state or county funds, and
not donations from private hospitals. The government alleged that CHS knowingly made
improper donations to Chaves, Luna, and San Miguel counties, which were then used by the
counties, and subsequently the state, to obtain federal matching payments. The government
alleged that CHS concealed the true nature of these donations, and as a result of its scheme,
received supplemental Medicaid payments which were funded by the United States in the
amount of three times CHS? donations.
In April 2015, The Medical Center of Central Georgia, Inc. (MCCG) agreed to pay $20 million
to resolve civil FCA allegations that it submitted false claims to Medicare for medically
unnecessary inpatient admissions, including zero-day stays, one-day stays, cardiac stays with a
procedure, and cardiac stays without a procedure. Specifically, these services should have been
billed as outpatient or observation services due to the absence of medical necessity for inpatient
In April 2015, Citizens Medical Center, a county-owned hospital in Victoria, Texas, agreed to
pay $21.7 million to settle civil FCA allegations that it engaged in improper financial
relationships with referring physicians. The settlement resolved allegations that the hospital
provided compensation to several cardiologists that exceeded the fair market value of their
services and that the hospital paid bonuses to emergency room physicians that improperly took
into account the value of their cardiology referrals in violation of the Stark Law.
In June 2015, Children?s Hospital in Washington, DC, Children?s National Medical Center Inc.,
(CNMC) and its affiliated entities agreed to pay $12.9 million to resolve civil FCA allegations
that they submitted false cost reports and other applications to the components and contractors of
HHS, as well as to Virginia and District of Columbia Medicaid programs. The settlement
resolves allegations that CNMC misstated information regarding its available bed count and
overhead costs on cost reports and applications that were used by HHS and Medicaid programs
to calculate reimbursement rates to CNMC.
In June 2015, Community Health Network (CHN), an Indiana-based non-profit health system,
agreed to pay over $20 million to resolve allegations that it submitted false claims to the
Medicare and Medicaid programs. CHN contracted with free-standing ambulatory surgery
centers (ASCs) to provide outpatient surgical services to CHN patients. When billing Medicare
and Medicaid, however, CHN allegedly represented that the surgery was performed in the outpatient
department of CHN?s hospitals, rather than in an ASC. Based on this prohibited practice,
CHN allegedly received a higher reimbursement from the Medicare and Medicaid programs than
it was entitled.
(SF) In July 2015, the former owner and chief executive officer, the chief operating officer, and
the chief financial officer of Sacred Heart Hospital, a now-closed acute care facility in Chicago,
were sentenced to 54 months, 21 months, and 12 months and a day in prison, respectively, for
their roles in a Medicare and Medicaid kickback scheme. Following a seven-week trial, a jury
convicted these defendants of conspiring to violate the AKS and of substantive AKS violations.
The evidence at trial revealed that the defendants were involved in a conspiracy to pay
physicians hundreds of thousands of dollars in illegal bribes and kickbacks to induce patient
referrals to the hospital and to increase the patient census, which, in turn, increased hospital
revenue. Five other defendants pled guilty in the case, including three physicians, a chief
operating officer, and the vice president of geriatric services. Another physician defendant was
found guilty of violating the AKS following a bench trial that ended in June 2015. One
remaining defendant in the case, a physician, is scheduled for trial in February 2016.
(SF) In August 2015, a jury in the Southern District of Florida returned guilty verdicts against a
former medical director and three therapists of Health Care Solutions Network Inc., a defunct
partial hospitalization program that purported to provide intensive psychiatric treatment to
Medicare and Medicaid beneficiaries. The trial evidence showed that the former medical
director routinely signed what he knew to be fabricated and altered medical records without
reviewing the substance of the records and, in most instances, without ever meeting with the
patients. The evidence at trial also demonstrated that the three therapists fabricated medical
records to support Healthcare Solution Network?s false and fraudulent claims for reimbursement
for intensive psychiatric services. In total, Healthcare Solutions Network submitted
approximately $63.7 million in fraudulent claims to Medicare and Medicaid, which paid $28
million on those claims. Two co-defendants were each sentenced to six years? imprisonment in
February 2015, following their convictions in a separate November 2014 trial.
In September 2015, North Broward Hospital District, a special taxing district of the state of
Florida that operates hospitals and other health care facilities, agreed to pay $69.5 million to
settle civil FCA allegations that it engaged in improper financial relationships with referring
physicians. The settlement resolved allegations that the hospital district provided compensation
to nine employed physicians that exceeded the fair market value of their services in violation of
the Stark Law.
In September 2015, Columbus Regional Healthcare System (Columbus Regional) and a
physician agreed to pay more than $25 million to settle civil FCA allegations that they submitted
claims to federal health care programs that violated the Stark Law and that misrepresented the
level of services they provided. The government alleged that Columbus Regional provided
excessive salary and directorship payments to the physician that violated the Stark Law,
submitted claims for services at higher levels than supported by the documentation, and
submitted claims for radiation therapy at higher levels than the therapy that was provided.
Under the settlement agreement, Columbus Regional agreed to pay $25 million, plus additional
contingent payments not to exceed $10 million, for a maximum settlement amount of $35
million; the physician has agreed to pay $425,000.
In September 2015, Adventist Health Care System, a non-profit healthcare organization that
operates hospitals and other healthcare facilities in 10 states, agreed to pay $115 million to settle
civil FCA allegations that they submitted false claims to Medicare and Medicaid. Adventist
allegedly paid bonuses to its employed physicians based on the number of tests and procedures
they ordered and billed Medicare for its employed physicians? professional services using
improper coding modifiers.
In June 2015, an individual in Naples, Florida was sentenced to 6 years in prison and ordered to
pay $351,358 in joint and several restitution after pleading guilty to charges relating to health
care fraud, identity theft, and distribution of controlled substances. He admitted that he and his
co-conspirators, including his brother, submitted claims for reimbursement from Medicare,
Medicaid, and TRICARE for prescriptions that were not filled or provided to beneficiaries or
recipients, including prescriptions for patients that had not been written or authorized by a
licensed physician. The brother, who was a licensed pharmacist and owner of a pharmacy used
to further the scheme, previously pleaded guilty to conspiracy to commit health care fraud and
was sentenced to 2 years in prison in March 2014.
In June 2015, a husband and wife were sentenced to a combined 30 years and 9 months of
incarceration and ordered to pay over $1.2 million in joint and several restitution and forfeiture
after being convicted of charges related to health care fraud. Evidence at trial showed that the
two operated a sham clinic in Coral Gables, Florida, and employed unlicensed medical
professionals to bill Medicare for HIV services that were never rendered. The clinic used billing
numbers of other medical professionals without their knowledge in order to submit the
fraudulent claims. The couple also paid co-conspirators to recruit Medicare beneficiaries for
their Medicare identification numbers, and they instructed the beneficiaries to enroll into a
targeted Medicare Part C & D plan.
In August 2015, in Newark, New Jersey, three physicians were sentenced after pleading guilty to
charges related to a test-referral kickback scheme. According to the investigation, Biodiagnostic
Laboratory Services LLC (BLS) solicited and paid bribes to physicians in exchange for referring
patient blood specimens to the laboratory. As part of the kickback scheme, BLS entered into
sham consulting agreements, sham rental and service agreements, and offered cash and other
inducements, such as third party businesses, credit card payments, and valuable items (cars and
electronics). BLS used the patient blood specimens to submit more than $100 million in claims
to Medicare and private insurers. In April and May of 2015, the physicians admitted to
accepting approximately $1,500 or more per month in return for referring patient blood
specimens. The three were sentenced to a combined 7 years and 2 months in jail and ordered to
pay a combined $434,300 in restitution. BLS?s owner pleaded guilty to conspiracy to commit
bribery and money laundering and is awaiting sentencing.
In April 2015, two cardiovascular testing laboratories?Health Diagnostics Laboratory Inc.
(HDL), of Richmond, Virginia, and Singulex Inc., of Alameda, California?agreed to resolve
civil FCA allegations that they paid physicians kickbacks in exchange for patient referrals and
billed federal health care programs for medically unnecessary testing. The laboratories allegedly
induced physicians to refer patients for blood tests by paying them processing and handling fees
of between $10 and $17 per referral and by routinely waiving patient co-pays and deductibles.
Under the settlements, HDL will pay $47 million and Singulex will pay $1.5 million.
Nursing Homes and Facilities
In October 2014, Extendicare Health Services Inc., a nationwide skilled nursing facility, and its
subsidiary Progressive Step Corporation (ProStep), a rehabilitation services provider, agreed to
pay $38 million to settle civil FCA allegations that they billed Medicare and Medicaid for
nursing services that were so deficient that they were effectively worthless and billed Medicare
for medically unreasonable and unnecessary rehabilitation therapy services. The settlement
resolves allegations that Extendicare, among other things, failed to have a sufficient number of
skilled nurses to adequately care for its skilled nursing residents, failed to provide adequate
catheter care to some of the residents, and failed to follow the appropriate protocols to prevent
pressure ulcers or falls. As a result of the inadequate care, the government alleged that patients
suffered fractures, head injuries, malnutrition, dehydration, pressure ulcers, infections, and
amputation of limbs. In addition, the settlement resolves allegations that Extendicare provided
medically unreasonable and unnecessary rehabilitation therapy services to its Medicare Part A
beneficiaries so that it could bill Medicare for those patients at the highest possible per diem rate.
In March 2015, two skilled nursing facility operators?the Catholic Health Care System, a/k/a
ArchCare and Ross Manor, agreed to pay a total of $4.7 million to resolve civil FCA allegations
that they submitted false claims to Medicare for rehabilitation services delivered by their
subcontractor, RehabCare Group East, Inc. (RehabCare), a part of Kindred Healthcare, Inc.. The
government alleged that the nursing homes failed to prevent RehabCare from routinely providing
unreasonably high levels of therapy during so-called ?assessment reference periods,? and then
providing less therapy to those same patients outside the assessment reference periods. As a
result of this practice by RehabCare, the nursing homes frequently billed Medicare for its
patients? care at the highest therapy-based levels, even though the patients often were not
receiving therapy at those levels. The settlements further resolved allegations that the nursing
homes failed to prevent RehabCare from presumptively placing patients in the highest
reimbursement level and planning amounts of therapy based on thresholds for billing at higher
reimbursement levels rather than based on patients? clinical needs.
In June, 2015, Hebrew Homes Health Network Inc., a skilled nursing service provider in MiamiDade
County, Florida, and its former president and executive director, agreed to pay $17 million
to resolve civil FCA allegations of improperly paying doctors for referrals of Medicare patients
requiring skilled nursing care. The settlement resolved allegations that Hebrew Homes hired
numerous physicians ostensibly as medical directors, when in reality, most of the medical
directors were required to perform few, if any, of their contracted job duties. Instead, they were
allegedly paid for their patient referrals to the Hebrew Homes facilities, which increased
exponentially once the medical directors were put on the payroll.
In October 2014, a Westchester County, New York cardiologist was sentenced to 3 years in
prison and ordered to pay $2 million in restitution and forfeiture after pleading guilty to a charge
of health care fraud. According to the investigation, the cardiologist lured new patients and
maintained existing patients by offering them narcotic prescriptions in exchange for those
patients undergoing unnecessary diagnostic tests and other medical procedures. He then billed
Medicare, Medicaid, and private insurance carriers millions of dollars for these fraudulent
claims. Investigators believe that he also performed cardiac procedures that served no legitimate
medical purpose, billed for office visits that did not occur, and falsified patients’ symptoms to
justify costly and unnecessary diagnostic tests.
(SF) In July 2015, a Detroit area hematologist-oncologist was sentenced to 45 years?
imprisonment and ordered to forfeit $17.6 million for the health care fraud, money laundering
and kickback scheme he devised and executed. The government showed at a contested
sentencing that the defendant administered medically unnecessary infusions and injections to 553
individual patients, including medically unnecessary chemotherapy, cancer treatments,
intravenous iron, and other infusion and injection therapies. Patients receiving these treatments
suffered many serious side effects as a result. The defendant also referred patients for
unnecessary cancer tests at his diagnostic facility, United Diagnostics, PLLC, in Rochester Hills,
Michigan. The defendant billed Medicare, Blue Cross Blue Shield of Michigan, Health Alliance
Plan, and other insurers approximately $34 million in fraudulent claims through his cancer
treatment clinic, Michigan Hematology Oncology P.C., which had multiple locations in
Michigan, and through United Diagnostics. The defendant also admitted to soliciting and
receiving kickbacks from Guardian Angel Hospice and Guardian Angel Home Health Care in
exchange for referring his patients to those companies. Finally, he admitted that he laundered
the proceeds of his infusion therapy fraud to promote his diagnostic testing fraud.
In December 2014, Rite Aid Corporation, a national retail drugstore chain, agreed to pay nearly
$3 million to settle civil FCA allegations that it offered and provided improper inducements to
beneficiaries of government programs to transfer their prescriptions to Rite Aid pharmacies in
violation of the AKS. These inducements took the form of gift cards, gift checks, and similar
In May 2015, PharMerica Corporation, a national long-term care pharmacy provider, entered
into two settlements for a total of $31.5 million to resolve claims that it violated the FCA and the
Controlled Substances Act. The government alleged that PharMerica dispensed and billed
Medicare for schedule II controlled substances without a valid prescription. The prescriptions
were allegedly invalid because they did not have a prescriber’s signature or, in the case of
emergency dispenses, were not based on an oral prescription from the prescriber followed by a
written prescription with the prescriber’s signature within seven days.
In July 2015, Blanding Health Mart Pharmacy, a Jacksonville, Florida-based compounding
pharmacy, agreed to pay $8.4 million to resolve civil FCA allegations that it sought
reimbursement for compounding pharmaceutical prescriptions that were not medically necessary
and were written by physicians that had never actually seen the patients.
In August 2015, the Chief Executive Officer of a Kentwood, Michigan pharmacy was sentenced
to ten years in prison, agreed to a 50-year exclusion from federal health care programs, and is
likely to pay over $8 million in restitution in connection with a conspiracy to commit health care
fraud by billing Medicare Part D plans, Medicaid, and private insurers for over $79 million in
drugs that were adulterated and misbranded in violation of the Federal Food, Drug, and Cosmetic
Act. The CEO?s conviction was the eighteenth criminal conviction in a case that included the
felony convictions of six licensed pharmacists. This pharmacy serviced over 800 nursing and
adult foster care homes between 2006 and 2010. As part of its operations they retrieved unused
prescription drugs (including controlled substances) from those homes and returned those drugs
to pharmacy stock in a manner that resulted in the cross-contamination of drugs, the improper
labeling of drugs, the placement of different drug dosages into stock bottles, and the placement
of different drugs in the same stock bottle. The pharmacy then re-dispensed and billed health
care insurers for those adulterated and misbranded drugs.
In October 2014, two groups of diagnostic centers agreed to pay a total of $2.6 million to settle
civil FCA allegations. The first group, doing business as One Step Diagnostic, agreed to pay
$1.2 million to settle allegations that it violated the Stark Law and the FCA by entering into
sham consulting and medical director agreements with physicians who referred patients to its
diagnostic centers. The second group, comprised of Complete Imaging Solutions LLC doing
business as Houston Diagnostics, Deerbrook Diagnostics & Imaging Center LLC, Elite
Diagnostic Inc., Galleria MRI & Diagnostic LLC, Spring Imaging Center Inc. and West Houston
MRI & Diagnostics LLC, agreed to pay $1.4 million to resolve allegations that they engaged in
improper financial relationships with referring physicians and improperly billed Medicare using
the provider number of a physician who had not authorized them to do so and had not been
involved in the provision of the services being billed.
(SF) In December 2014, a physician and a registered nurse were sentenced to 120 months and 48
months in prison, respectively, for their roles in a $3 million Medicare fraud scheme following
their convictions at trial in May 2014. According to the evidence at trial, the physician defendant
falsely certified that beneficiaries needed home health care and, in exchange for kickbacks,
referred beneficiaries to PTM Healthcare Services Inc., a defunct home health care agency in
Irving, Texas, at which his co-defendant served as the director of nursing. The nurse defendant
and co-conspirators then prepared falsified medical records to make it appear that beneficiaries
needed home health care services and billed Medicare for services that were medically
unnecessary or not provided. The owner of PTM Healthcare Services previously pled guilty in
2013 to health care fraud conspiracy.
(SF) In February 2015, a jury in Detroit convicted an unlicensed physician for his participation in
a nearly $4.7 million Medicare fraud scheme. The evidence at trial revealed that the defendant
used pre-signed prescription pads from a licensed physician to prescribe drugs to Medicare
patients and also referred patients for medically unnecessary home health care services in
exchange for kickbacks. In January 2015, shortly before trial, the owner of Cherish Home
Health Services, Inc., one of the companies to which the unlicensed physician referred patients,
pled guilty and admitted to paying kickbacks to the unlicensed physician and billing Medicare
for home health care services that were not provided. Two other defendants?a patient recruiter
and a physician?previously pled guilty for their roles in the fraud.
(SF) In February 2015, an Illinois physician pled guilty to accepting illegal kickbacks and
benefits totaling nearly $600,000 from two pharmaceutical companies?Teva Pharmaceuticals
USA Inc. and IVAX LLC?in exchange for regularly prescribing the anti-psychotic drug
Clozapine to his patients. As set forth in the plea agreement, the physician agreed to switch his
patients to generic Clozapine if the manufacturer agreed to pay him $50,000 under a one-year
?consulting agreement? and to provide other benefits to the physician. The physician also agreed
to pay over $3.8 million to settle a parallel civil FCA lawsuit alleging that, by prescribing
Clozapine in exchange for kickbacks, he caused the submission of false claims to Medicare and
Medicaid for the Clozapine he prescribed for thousands of elderly and indigent patients in at
least 30 Chicago-area nursing homes and other facilities. Previously, in March 2014, Teva and
IVAX paid a total of $27.6 million to resolve allegations related to paying kickbacks to the
(SF) In March 2015, a New York doctor pled guilty to health care fraud conspiracy for his
involvement in a scheme to fraudulently bill Medicare for $14.2 million in claims for medically
unnecessary treatments. As part of the plea, the defendant agreed to pay $5.4 million in
restitution to the Medicare program, which represents the total amount of money Medicare paid
as the result of the fraudulent claims. In connection with his guilty plea, the defendant admitted
that he and other medical providers at the clinic submitted approximately $14.2 million in false
and fraudulent claims to Medicare for medically unnecessary vitamin infusions, physical
therapy, and occupational therapy that did not qualify for reimbursement by Medicare.
(SF) In April 2015, a physician who served as the medical director of Hollywood Pavilion, LLC,
a state-licensed psychiatric hospital located in Hollywood, Florida, was sentenced to 60 months?
imprisonment for his role in a $67 million Medicare fraud scheme. Evidence at trial revealed
that the defendant falsified medical records certifying that patients qualified for and received
intensive outpatient services. The evidence demonstrated that the defendant signed patient files
for over 400 patients, certifying that he had provided mental health services to each of them,
even though he never saw or provided any treatment to the patients. Hollywood Pavilion used
these falsified records to submit over 2,800 false claims to Medicare. Five other individuals
previously were convicted and sentenced in this case, including Hollywood Pavilion?s former
chief executive officer, chief operating officer, and clinical director.
In April 2015, Family Dermatology P.C., the owner and operator of dermatology practices and a
dermatopathology laboratory, agreed to pay $3.2 million to settle civil FCA allegations that its
financial relationships with certain employed physicians violated the Stark Law. Family
Dermatology employs dermatologists as independent contractors and routinely required them to
use Family Dermatology?s in-house pathology lab, Nelson Dermatopathology, for their
pathology services. The government alleged that Family Dermatology violated the Stark Law
and FCA by billing Medicare for dermatopathology analyses performed by Nelson
Dermatopathology on specimens that were sent to the laboratory by these employed physicians.
In April 2015, a medical doctor and sole physician at a pain clinic in Athens, Tennessee, was
sentenced to 28 months and was ordered to pay $7.5 million in restitution to Medicare for
misbranding drugs with the intent to defraud. The doctor purchased 254 vials of Botox from a
foreign supplier, and had used 204 vials during the course of the scheme to defraud, but had
billed Medicare for 16,119 vials. A forfeiture order was also entered against the $6.8 million
seized from the defendant?s bank accounts.
In May 2015, Garden State Cardiovascular Specialists P.C., a New Jersey cardiology practice
that owns and operates several facilities under the name NJ MedCare/NJ Heart, agreed to pay
$3.6 million to settle civil FCA allegations that its facilities and their principals submitted claims
to Medicare for various cardiology diagnostic tests and procedures, including stress tests, cardiac
catheterizations, and external counterpulsation, which were not medically necessary.
(SF) In May 2015, an administrator and a biller were convicted after trial for their roles in a
$4 million Medicare fraud scheme involving Medicall Physicians Group, a home visiting
physician practice in Schaumburg, Illinois. The evidence at trial revealed that Medicall billed
Medicare for services that were never provided to patients, including physician oversight of
patient care plans, extended patient visits, and other services purportedly provided to individuals
who had already died. A third defendant, the owner and medical director of Medicall, pled
guilty prior to trial. In September 2015, the lead administrator of a home visiting physician
practice was sentenced to 87 months in prison and the medical biller, who submitted many of the
fraudulent claims to Medicare, was sentenced to serve 45 months in prison and pay restitution of
approximately $1 million.
(SF) In August 2015, a dermatologist was sentenced to seven years? imprisonment, following a
jury trial that resulted in six mail and wire fraud convictions. The defendant also was ordered to
pay over $3.7 million in restitution to Medicare, private insurers, and patients. According to the
evidence at trial, the defendant misdiagnosed patients? benign skin conditions as pre-cancerous
lesions and falsely billed cosmetic treatments as the destruction of large numbers of such lesions.
In August 2015, a Brooklyn doctor was sentenced to 24 months in prison for his role as the ?no
show? doctor in a $13 million health care fraud conspiracy scheme. Medical services were
provided by a physician?s assistant who was acting without supervision by a medical doctor, but
the doctor still billed Medicare and Medicaid for the services using his provider number. He also
falsely certified that patient transportation by ambulette was medically necessary and billed for
this unnecessary service. As part of the sentence, the court entered an order directing the doctor
to pay $6.4 million in restitution and to forfeit $6.6 million.
(SF) In October 2014, the operator of a Dallas family practice and weight loss management
clinic based in Dallas, Texas, was sentenced to 7 years and 3 months of incarceration and
ordered to forfeit his house, cars, boat, and funds from several bank accounts after pleading
guilty to conspiracy to unlawfully distribute controlled substances. The investigation revealed
that clinic operated as a pill mill, where ?dealers? recruited and drove ?patients? in groups to the
clinic to obtain prescriptions for hydrocodone and Xanax. The clinic?s office manager and three
dealers were also sentenced during this reporting period to more than 18 years in prison,
In October 2014, two individuals were sentenced to a combined 17 years and 1 month in jail and
ordered to pay $6.2 million in joint and several restitution after pleading guilty to conspiracy to
commit health care fraud. The two individuals operated a Miami-based retail pharmacy. The
investigation revealed that their co-conspirators recruited and paid Medicare beneficiaries to
obtain prescriptions, including for expensive antipsychotic and skin treatment pharmaceutical
drugs that the co-conspirators subsequently furnished back to the two men. The two then used
the fraudulent prescriptions to bill the Medicare Part D program.
In November 2014, a Baltimore, Maryland individual was sentenced to 8 years and 4 months of
incarceration after pleading guilty to conspiracy to distribute and possession with intent to
distribute oxycodone. The investigation revealed that the individual obtained fraudulent
prescriptions for oxycodone from a secretary who was stealing prescriptions from the doctor?s
office where she worked. The prescriptions were filled out in the names of Medicare
beneficiaries and other defendants. He then either filled the prescriptions himself and billed
Medicare, or he had them filled by other individuals and sold the oxycodone pills for around $10
per pill on the streets. Eight other defendants previously pleaded guilty to charges in connection
with this scheme and were sentenced to a combined 29 years and 6 months in jail.
In May 2015, the owner/operator of Astramed, a chain of purported medical clinics with multiple
locations in the Bronx, New York, was convicted of conspiracy to distribute and possess with
intent to distribute oxycodone and is awaiting his sentencing. The charge carries a maximum
sentence of 20 years in prison. Astramed doctors were paid cash in exchange for writing tens of
thousands of medically unnecessary prescriptions for large quantities of oxycodone; these
prescriptions were then filled at pharmacies by co-conspirators who, in turn, resold and
distributed the drugs at vastly inflated rates. In total, Astramed issued approximately 31,500
medically unnecessary prescriptions for oxycodone, comprising nearly 5.5 million tablets with a
street value of up to $164 million. More than 20 defendants?including doctors, clinic
employees, and drug traffickers?have previously pleaded guilty to their participation in the
In July 2015, the operator of an imaging center in Glendale, California, was sentenced to 15
years in prison and ordered to pay $9.1 million in joint and several restitution after being
convicted on charges relating to health care fraud, identity theft, and misbranding pharmaceutical
drugs. As part of the scheme, patient recruiters brought beneficiaries to the clinic in exchange
for cash or other inducements. The patients received prescriptions for anti-psychotic
medications and other drugs, even though they were not evaluated by a physician or there was no
medical need for the medications. The patients were then driven to a pharmacy where, under the
supervision of the driver, they filled their prescriptions and then gave the drugs to the driver.
The drugs were eventually sold on the black market or redistributed to pharmacies, where they
could be rebilled to Medicare and Medi-Cal as ?new? bottles of drugs. In addition to recruiting
beneficiaries, the operator and his co-conspirators also stole the identities of beneficiaries and
used their information to generate fraudulent prescriptions. Ten of his co-conspirators were
previously sentenced to a combined 28 years and 3 months in prison.
Psychiatric and Psychological Testing and Services
In April 2015, Health Management Associates, Inc. (HMA) in Naples, Florida, and 14 hospitals
formerly owned and operated by HMA agreed to pay $15 million to resolve allegations that they
billed Medicare for intensive outpatient psychotherapy (IOP) services that did not meet the
conditions for payment, including services provided to patients whose condition did not qualify
(SF) In June 2015, two owners were indicted for their roles in a $25 million psychological
testing scheme carried out through eight companies operating in multiple states. According to
court documents, the defendants owned and operated Nursing Home Psychological Service and
Psychological Care Services, each with locations in Louisiana, Mississippi, Alabama, and
Florida. The indictment alleges that the defendants contracted with nursing homes in these states
to allow their companies to administer psychological tests to the nursing homes? residents. The
defendants then caused the submission of claims for purported psychological testing,
psychotherapy, and related services to the nursing home residents that were medically
unnecessary or not provided.
Quality of Care
In May 2015, Country Villa Service Corp, d/b/a Country Villa Health Services, and the ARBA
Group, Inc., CF Watsonville East, LLC and CF Watsonville West, LLC of California entered
into separate settlement agreements worth a combined $3.8 million to resolve allegations of false
claims for materially substandard or worthless services. The government alleged that employees
at Country Villa Watsonville East Nursing Center and Country Villa Watsonville West Nursing
Center persistently overmedicated elderly and vulnerable residents of their facilities, causing
infection, sepsis, malnutrition, dehydration, falls, fractures, pressure ulcers, and for some
beneficiaries, premature death. In addition to the settlements, the CF Watsonville companies
entered into a 5-year CIA with HHS-OIG, under which they will retain a quality monitor chosen
by HHS-OIG to perform quarterly reviews of the facilities? quality and compliance systems.
Other Medicare and Medicaid Matters
(SF) In October 2014, the owner/manager of two health centers in Baton Rouge, Louisiana was
sentenced to 7 years and 6 months in prison and ordered to pay $43.5 million in joint and several
restitution after being convicted by a jury on charges of conspiracy to commit health care fraud
and health care fraud. A second defendant was sentenced to 5 years in prison and ordered to pay
$3.2 million in joint and several restitution after being convicted by a jury of conspiracy to
commit health care fraud and conspiracy to pay and receive health care kickbacks. The
investigation revealed that owner/manager and co-conspirators recruited Medicare beneficiaries
to attend medically unnecessary or sham programs at the health centers. The second defendant
and others were paid cash kickbacks to recruit Medicare beneficiaries to receive partial
hospitalization program services at the centers. The health centers billed Medicare more than
$258 million for these fraudulent services. In addition to these two defendants, 15 defendants
have been convicted in connection with this scheme.
In January 2015, the Commonwealth of Pennsylvania agreed to pay $48.8 million to settle civil
FCA allegations that it provided benefits to ineligible aliens in violation of federal law. Under
the Personal Responsibility Work Opportunity Act, only documented aliens who meet certain
low-income requirements and who have been in the country for more than five years may receive
non-emergency aid under Medicaid, Temporary Assistance for Needy Families (TANF) and the
Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. The
United States alleged that, between 2004 and 2010, Pennsylvania provided Medicaid, TANF and
SNAP benefits to ineligible aliens in violation of these restrictions.
In March 2015, heart monitoring company BioTelemetry, Inc., agreed to pay $6.4 million to
settle civil FCA allegations that its subsidiary, CardioNet, billed Medicare for Mobile Cardiac
Outpatient Telemetry (MCOT) services that were not reasonable or medically necessary. An
MCOT monitor is a real-time, outpatient cardiac monitoring service. The settlement resolves
allegations that although CardioNet was aware that MCOT services were not eligible for
Medicare reimbursement when provided to patients who had experienced only mild or moderate
heart palpitations, CardioNet knowingly submitted claims to Medicare for more expensive
MCOT services by using an inaccurate diagnostic code that ensured that the claims would be
reimbursed by Medicare at a higher rate.
In August 2015, two workers at a wholesale drug distribution operation were sentenced for
distributing counterfeit and adulterated Botox to a medical clinic in Missouri. One worker
received 24 months imprisonment and another received three months imprisonment, and both
were ordered to forfeit $1 million. Eight other individuals were previously convicted in the
Eastern District of Missouri?s investigation, including two local doctors and a clinic owner, a
citizen of the United Kingdom, and two Turkish nationals, with sentences ranging from 30
months to probation, and over $5 million recovered in forfeitures and fines. The USAO also
reached civil settlements with three local doctors who were purchasing unapproved drugs and
billing them to Medicare and Medicaid, resulting in civil program recoveries in excess of
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General
A certain portion of the funds appropriated under HIPAA are, by law, set aside for Medicare and
Medicaid activities of HHS-OIG. In FY 2015, the Secretary and the Attorney General jointly
allotted $186.1 million to HHS-OIG after accounting for a sequester reduction of $14.7
million. Additionally, Congress appropriated $67 million in discretionary funding for HHS-OIG
In FY 2015, HHS-OIG investigations resulted in 800 criminal actions against individuals or
entities that engaged in crimes related to Medicare and Medicaid; and 667 civil actions, which
include false claims and unjust-enrichment lawsuits filed in Federal district court, civil monetary
penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure
matters. In addition, during FY 2015, HHS-OIG excluded a total of 4,112 individuals and
entities, the details of which are below.
In FY 2015, HHS-OIG continued to staff and support Medicare Strike Force operations worked
in conjunction with DOJ Criminal Division?s Fraud Section, local USAOs, the FBI, and State
and local law enforcement agencies. HHS-OIG has assigned agents to Strike Forces in Miami,
New York City, Houston, Tampa, Detroit, Los Angeles, Southern Louisiana, Dallas, and
Chicago. HHS-OIG has supported Strike Force operations by providing investigative, analytic,
and forensic resources. These Strike Forces have effectively investigated and prosecuted
individuals and entities that do not provide legitimate health care services, but exist solely for the
purpose of defrauding Medicare and other government health care programs. The continued
support of Medicare Strike Force operations is a top priority for HHS-OIG.
Investigations, audits, and evaluations frequently reveal vulnerabilities or incentives for
questionable or fraudulent practices in agency programs or administrative processes. As
required by the Inspector General Act, HHS-OIG makes recommendations to agency managers
to address these vulnerabilities. In turn, agency managers recommend legislative proposals or
other corrective actions that, when enacted or implemented, close loopholes and reduce improper
payments or conduct. The savings from these joint efforts toward program improvements can be
substantial. For FY 2015, potential savings from legislative and administrative actions that were
supported by HHS-OIG recommendations were estimated by third parties, such as the
Congressional Budget Office or actuaries within HHS, to be $20.5 billion?$18.4 billion in
Medicare savings and $2.1 billion in savings to the Federal share of Medicaid.
Settlement with New York State based on HHS-OIG Audit Recommendations: Included in these
savings figures is the $1.95 billion the State of New York agreed to pay to CMS pursuant to a
settlement agreement based on HHS-OIG audit work. HHS-OIG had found that New York?s
Medicaid daily rate for 15 selected State-operated intermediate care facilities (ICFs or
development centers) for individuals with intellectual and developmental disabilities did not
meet Federal requirements. The daily rate for Medicaid beneficiaries to reside in the selected
developmental centers grew by a factor of 21 between State fiscal year (SFY) 1985 and SFY
2009 because the State?s rate-setting methodology significantly inflated the Medicaid daily rate
for the developmental centers. On March 20, 2015, New York and CMS entered into a
settlement agreement in which New York agreed to pay a total of $1.95 billion to the Federal
Government to resolve the resulting overpayment determination. In addition, CMS approved a
plan amendment to New York?s Medicaid program that changed the rate to better reflect the
actual costs of providing care, saving approximately $1.2 billion.
Additional information about savings achieved through such policy and procedural changes may
be found in the HHS-OIG fall Semiannual Report to Congress, on-line at http://oig.hhs.gov.
One important mechanism for safeguarding the care provided to program beneficiaries is through
exclusion of providers and suppliers who have engaged in the abuse or neglect of patients or
fraud from participation in Medicare, Medicaid, and other federal health care programs.
During FY 2015, HHS-OIG excluded a total of 4,112 individuals and entities. Among these
were exclusions based on criminal convictions for crimes related to Medicare and Medicaid
(1,329) or to other health care programs (424); for patient abuse or neglect (302); or as a result of
licensure revocations (1743). This list of conduct is not meant to be exhaustive, but identifies the
most prevalent causes underlying HHS-OIG?s exclusions of individuals or entities in FY 2015.
In addition to those mentioned in the Program Accomplishments section above, exclusion
actions by HHS-OIG included:
? Michigan?In July 2015 a pharmacist was excluded for a minimum period of 18 years based
on his conviction for, among other charges, conspiracy to distribute and possess with intent
to distribute controlled substances. The pharmacist owned and operated a pharmacy in
Detroit, Michigan. He conspired with other individuals to bring him fraudulent prescriptions,
to which he dispensed controlled substances with no legitimate medical purpose. The
pharmacist then received cash payments for illegally dispensing the controlled substances.
He was sentenced in February 2015 to 6 years of incarceration.
? Indiana?In June 2015 an employee of a group home was excluded for a minimum period of
20 years based on his conviction for criminal deviate conduct. While working in a group
home, he instructed a mentally retarded patient to perform sex acts on him in the living room
of the group home. As a result of his conviction, he was sentenced in October 2014 to 10
years of incarceration.
? Florida?In May 2015 an employee of a chiropractic clinic was excluded for a minimum
period of 15 years based on his conviction for conspiracy to commit mail fraud. The
employee helped recruit individuals to participate in staged automobile accidents, instruct
those recruited on how to participate in the accident and how to collect police reports, told
them what clinics they should go to for treatment, and prepared fraudulent documentation to
support medically unnecessary treatment. As a result of his conviction, Sacerio was
sentenced in July 2015 to 4 years in prison and ordered to pay approximately $1.1 million in
? New York?In January 2015 a physician was excluded for a minimum period of 50 years on
the basis of his conviction health care fraud, conspiracy to defraud the United States Railroad
Retirement Board (RRB), and other related charges. From approximately 1998 through
2008, the physician assisted employees from the Long Island Railroad (LIRR) in applying for
disability benefits from the RRB, even though he knew they were not disabled. The LIRR
employees generally paid the physician $800 to $1200, often in cash, to prepare medical
assessments and/or illness narratives for submission to the RRB. He prescribed and billed
patients? insurers for unnecessary medical tests and he ordered physical therapy and medical
treatments in an effort to pad their medical files. The physician fabricated and fraudulent
assessments enabled 242 LIRR employees to supplement their pensions with a collective $70
million in RRB disability benefit payments to which they were not entitled. He was
sentenced to 8 years in prison and ordered to pay $70.6 million in restitution. The New York
State Board for Professional Medical Conduct revoked his medical license, and the New
York State Office of the Medicaid Inspector General excluded him from participation in the
? Texas?In December 2014 a pharmacist was excluded for a minimum period of 10 years on
the basis of her conviction for conspiracy to unlawfully distribute controlled substances. The
pharmacist owned and operated Urban Independent Pharmacy (UIP). The investigation
revealed that she participated in a scheme whereby ?dealers? recruited ?patients? to obtain
unlawful prescriptions for controlled substances and drove the patients to UIP, where she
filled their prescriptions. After the pharmacist filled the prescriptions, the patients provided
the pills to the dealers, who then sold them on the street for a profit. She was sentenced to 5
years in prison.
? Iowa?In November 2014 a pediatrician was excluded for a minimum of 30 years on the
basis of his conviction of possession of child pornography. The investigation revealed that
the pediatrician used a hidden camera to take pictures and videos of his minor patients
without the advice or knowledge of the patients, their parents, or guardians. The images and
videos were taken during what were purported to be necessary medical exams. Investigators
searched his computers and found files that included child pornography along with videos
and images of the minor patients. Jones was sentenced to 10 years and 1 month in prison.
The Iowa Board of Medicine also accepted the surrender of his license to practice as a
Civil Monetary Penalties
HHS-OIG has the authority to impose civil monetary penalties (CMPs) against providers and
suppliers who knowingly submit false claims to the Federal Government, who participate in
unlawful patient referral or kickback schemes, who fail to appropriately treat or refer patients at
hospital emergency rooms, or who engage in other activities prescribed in statute. HHS-OIG
continues to pursue its affirmative enforcement actions under these authorities. Examples
? New Jersey?In March 2015 Sandoz, Inc. agreed to pay $12,640,000 to settle allegations that
it misrepresented drug pricing data to the Medicare program. Sandoz, a division of Novartis
Pharmaceuticals and one of the world?s largest generic manufacturers, markets hundreds of
generic medications in the United States. Under federal law, drug makers must report both
accurate and timely Average Sales Price (ASP) information to CMS, which CMS uses to set
payment amounts for most drugs covered under Medicare Part B. OIG alleged that Sandoz
failed to submit accurate ASP data to CMS for each quarter from January 2010 through
March 2012. OIG previously pursued CMPs against Sandoz for late reporting of drug
pricing information to CMS. That case was settled in December 2011 with Sandoz agreeing
to a $230,000 settlement. The 2015 Sandoz settlement is the largest ever under OIG?s drug
price reporting CMP authority.
? Texas?In October 2014 three Houston-area physicians collectively agreed to pay $200,266
for allegedly violating the Civil Monetary Penalties Law (CMPL) provisions applicable to
kickbacks. OIG alleged that a family practitioner and two orthopedic surgeons received
illegal remuneration from another physician and his practice. This improper remuneration
took the form of the physician paying the salary of one of the family practitioner?s employees
to serve as a ?referral coordinator? and hiring the two surgeons as medical directors. OIG
alleged that these arrangements took into account the volume or value of referrals made to
the physician?s practice. To date, 11 physicians have agreed to pay a collective total of
$1,415,137 to resolve their CMPL liability for allegedly receiving kickbacks from the
physician?s practice. Yet another physician agreed to be excluded from participation in
federal health care programs for 3 years.
? New York?In December 2014 a physician and his medical clinic entered into a $694,887
settlement agreement with OIG. The settlement resolved allegations that, from May 2008 to
December 2013, the physician and the clinic knowingly submitted, or caused to be submitted,
fraudulent claims to Medicare for physical therapy services. Specifically, OIG alleged that
these claims were fraudulent for one or more of the following reasons: (1) physical therapy
services were not provided or supervised by the rendering provider, (2) group services were
billed as one-on-one provider-patient physical therapy services, (3) services were performed
by unqualified individuals, and (4) claims for time-based physical therapy services did not
accurately reflect the actual time spent performing the services.
? California?In February 2015, Hyundai Drugs and its owner agreed to pay $1,342,295 to
resolve allegations under the CMPL. From January 1, 2009 through April 12, 2014, Hyundai
allegedly submitted claims to Medicare Part D for prescription drugs that it knew or should
have known were not provided as claimed and were false or fraudulent. The case was
investigated as part of Operation Pharm Fury, a joint effort between OIG?s Office of
Investigations, Office of Evaluation and Inspections, and Office of Counsel to the Inspector
General. Operation Pharm Fury has exposed pharmacies across the country that have shown
a pattern of questionably high billing practices when submitting claims to Medicare for
? Kansas?In March 2015 Newton Healthcare Corporation d/b/a Newton Medical Center
(NMC) agreed to pay $45,000 to resolve its liability under EMTALA. OIG alleged that
NMC failed to provide an adequate medical screening examination for a patient who arrived
at its emergency department 38 weeks pregnant and complaining of abdominal and lower
back pain. OIG contended that NMC did not record the patient?s medical history, take any
vitals, conduct fetal monitoring, test for fetal movement, or perform any exam on the patient.
Instead, OIG alleged that NMC instructed the patient to leave and see her personal physician.
The patient left NMC by private vehicle and arrived at the emergency department of another
hospital, where she was admitted and delivered a stillborn baby.
Audits and Evaluations
The focus of HHS-OIG?s audits and evaluations is determined through a dynamic process and
adjustments are made to HHS-OIG?s work plan throughout the year to meet priorities and to
anticipate and respond to emerging issues with the resources available. HHS-OIG assesses
relative risks in Medicare and Medicaid (as well as the many other programs for which HHSOIG
has oversight authority) to identify the areas most in need of attention and, accordingly, to
set priorities for the sequence and proportion of resources to be allocated. In assessing this
relative risk, HHS-OIG considers a number of factors, including:
? Mandatory requirements for OIG reviews, as set forth in laws, regulations, or other
? Requests made or concerns raised by Congress, HHS management, or the Office of
Management and Budget (OMB);
? Top management and performance challenges facing HHS;
? Work to be performed in collaboration with partner organizations;
? Management?s actions to implement our recommendations from previous reviews; and
As a consequence of this work planning process, HHS-OIG identified questionable or improper
conduct in Medicare and Medicaid, and recommended corrective actions that, when
implemented, will return misspent funds and prevent future wasteful or improper payments.
Among HHS-OIG?s audit and evaluation findings in FY 2015 were the following:
Medicaid Orthodontic Services
Texas did not ensure that requests for prior authorization of Medicaid orthodontic services were
approved in accordance with State Medicaid guidelines. HHS-OIG estimated that Texas paid at
least $133.4 million for unallowable orthodontic services. Of 106 sampled orthodontic priorauthorization
requests, 89 were improperly approved: 78 did not qualify for orthodontic
services, and 11 did not have sufficient documentation to determine whether they qualified.
Medicaid Pediatric Dental Services
HHS-OIG identified 329 general dentists and 6 orthodontists in California with questionable
billing. Medicaid paid these providers $117.5 million for pediatric dental services in 2012.
These 335 dental providers?representing 8 percent of the California general dentists and
orthodontists whom we reviewed?provided either a large number of services or provided
certain services to an extremely large number of children, among other practices. Half of the
dental providers with questionable billing worked for dental chains.
Medicaid Drug Rebates
Missouri did not always comply with Federal Medicaid requirements for billing drug
manufacturers for rebates for physician-administered drugs. Missouri did not collect the national
drug codes (NDCs) that were required for it to invoice manufacturers for rebates associated with
about $34.8 million in physician-administered drugs. In addition, Missouri did not capture the
utilization and coding data necessary to collect rebates for all physician-administered drugs.
Without the NDCs, HHS-OIG was unable to determine whether Missouri improperly claimed
federal reimbursement for an additional $13.2 million for other physician-administered drug
Medicaid Home Health Services
CMS could not rely on New York?s or New Jersey?s qualification requirements to ensure quality
of care was provided to Medicaid beneficiaries receiving home health services. Some New York
and New Jersey home health agencies (HHAs) did not meet certain Federal and State
requirements for employee health screenings and training, among other issues. HHS-OIG
estimated that $31.9 million in Federal Medicaid reimbursement was associated with HHA
workers who did not meet Federal and State requirements ($27.9 million in New York and $4
million in New Jersey).
Terminated Medicaid Providers
The Affordable Care Act (ACA) requires States to terminate providers who were already
terminated for cause in another State, yet States face challenges complying with this mandate.
HHS-OIG found continued participation from providers terminated in one State in other States?
Medicaid program, and about one-third received payments for services provided to Medicaid
beneficiaries after the providers? terminations for cause. Continued participation of providers
after their terminations for cause presents a vulnerability to Medicaid and raises concern that
these providers could continue to treat Medicaid beneficiaries.
Developmental Disabilities Waiver Program
New York improperly claimed an estimated $76.8 million in Federal Medicaid reimbursement
for some Office for People With Developmental Disabilities (OPWDD) waiver program services
during CYs 2006 through 2008. The OPWDD waiver program is intended to enable adults and
children with developmental disabilities to live in the community as an alternative to
intermediate care facilities for individuals with intellectual disabilities.
Access to Medicaid Managed Care Services
Slightly more than half of providers reviewed could not offer appointments to enrollees.
Notably, 35 percent could not be found at the location listed by the plan, and another 8 percent
were at the location but were not participating in the plan. Among the providers who offered
appointments, the median wait time was two weeks. However, over a quarter had wait times of
more than one month. Finally, primary care providers were less likely to offer an appointment
than specialists; however, specialists tended to have longer wait times.
Non-Emergency Medical Transportation Services
During FY 2011, Texas claimed at least $30.4 million for unallowable Medicaid payments for
nonemergency medical transportation (NEMT) services. Federal regulations require each State
to ensure that Medicaid beneficiaries have necessary transportation to and from medical
providers. Prior OIG reviews have found that States? claims for NEMT services were not always
in accordance with Federal and State requirements.
Targeted Case Management Services
Missouri claimed $11.5 million of unallowable Medicaid payments for Targeted Case
Management (TCM) services provided to individuals with developmental disabilities during
State FYs 2011 through 2013. Missouri did not address OIG?s recommendations to, among
other things, refund $11.5 million to the Federal Government.
Anti-Psychotic Drugs Prescribed to Children
In the five States reviewed, medical reviewers identified quality-of-care concerns in the medical
records associated with 67 percent of claims for second-generation antipsychotic (SGA) drugs
prescribed to children. Quality-of-care concerns identified through medical record reviews
corresponded to the following issues: dosage, duration, indications for use, monitoring,
polypharmacy (too many drugs), patient age, and side effects. The high percentage of claims for
which our reviewers identified quality-of-care concerns indicates that more needs to be done to
ensure the quality of care provided to children receiving SGAs paid for by Medicaid.
Payments to Delinquent Providers
CMS made $10.7 million in Medicare and Medicaid payments associated with 23 of 82
individual physicians with delinquent debts after CMS had referred their Medicare debts to the
U.S. Department of the Treasury (Treasury) for collection. In addition, 13 of the 23 individual
physicians had ownership interest in and/or managing control of 15 Medicare Part B entities that
received Medicare reimbursement from CMS after CMS referred the individual physicians?
debts to Treasury. CMS is required to seek recovery of all identified overpayments and can
recoup or offset overpayments against a provider?s future Medicare and/or Federal share of
Medicare Outpatient Drugs
Medicare contractors in 13 jurisdictions overpaid providers $35.8 million for selected outpatient
drugs from July 1, 2009, through June 30, 2012. For 88 percent of the overpayments, providers
billed either incorrect units of service or, otherwise, a combination of incorrect units of service
and incorrect Healthcare Common Procedure Coding System codes. The Medicare claims
processing systems did not have sufficient prepayment edits in place to prevent all
Financial Incentives to Provide Hospice Care
Medicare payments for hospice care provided in assisted living facilities (ALFs) more than
doubled in 5 years, totaling $2.1 billion in 2012. Hospices provided care much longer and
received much higher Medicare payments for beneficiaries in ALFs than for beneficiaries in
other settings. Beneficiaries in ALFs often had diagnoses that usually require less complex care.
This report raises concerns about hospices? targeting beneficiaries in ALFs because they may
offer the hospices the greatest financial gain.
Potential Fraud in Medicare Part D
Spending for Part D drugs, especially commonly abused opioids, has grown substantially. HHSOIG
identified questionable billing by 1,400 pharmacies that may indicate fraudulent activity.
Each of these pharmacies billed for extremely high amounts for one or more of our billing
measures. HHS-OIG also identified geographic hotspots for certain drugs that point to possible
fraud and abuse.
Medicare Part D Program Integrity
This portfolio presents an overview of HHS-OIG investigations, audits, evaluations, and legal
guidance related to Part D. It synthesizes numerous HHS-OIG reports that have identified
weaknesses in Part D program integrity, and provides updates on Departmental efforts to address
these weaknesses. In particular, HHS-OIG has identified weaknesses in the use of data to
identify vulnerabilities, as well as in the oversight by all parties responsible for protecting Part D:
CMS, Part D plan sponsors, and the Medicare Drug Integrity Contractor. OIG has made
recommendations to strengthen Part D program integrity, and progress has been made.
However, Part D remains vulnerable to fraud, as evidenced by ongoing investigations.
Swing-Bed Services at Critical Access Hospitals
Medicare spending for swing-bed services in critical access hospitals (CAHs) steadily increased
to, on average, almost four times the costs of similar services at alternative facilities from
calendar years 2005 through 2010. Medicare reimburses CAHs at 101 percent of their
reasonable costs for providing services to beneficiaries rather than at rates set by Medicare?s
prospective payment system or Medicare?s fee schedules. Medicare could have saved $4.1
billion over a 6-year period at CAHs if swing-bed services were reimbursed using the skilled
nursing facility prospective payment system rate.
Skilled Nursing Facilities
The findings of this and prior HHS-OIG reports demonstrate the need for CMS to reevaluate the
skilled nursing facility (SNF) payment system. Medicare payments for therapy greatly exceeded
SNFs? costs for therapy. Combined with the current method of paying for therapy, this large
difference between therapy payments and costs creates a strong financial incentive for SNFs to
bill for higher levels of therapy than necessary. Increases in SNF billing?particularly for the
highest level of therapy?resulted in $1.1 billion in Medicare payments in FYs 2012 and 2013.
Hospital Outlier Payments
Medicare contractors did not always refer Medicare cost reports whose outlier payments
qualified for reconciliation to CMS. In addition, the 13 contractors did not always reconcile the
outlier payments associated with cost reports whose outlier payments qualified for reconciliation.
The financial impact to Medicare of the unreconciled outlier payments and cost reports for all the
contractors was approximately $428.3 million. Medicare supplements basic prospective
payments for inpatient hospital services by making outlier payments for unusually high-cost
Medicare paid for HIV drugs for over 150 deceased beneficiaries in 2012. CMS has edits (i.e.,
systems processes) in place that reject prescription drug event records for drugs with dates of
service more than 32 days after death. This practice allows payment for drugs for deceased
beneficiaries for dates of service within 32 days of death. A change in the edits would affect all
Part D drugs, not just HIV drugs.
Medicare paid $24 million in the first half of 2012 for ambulance transports that did not meet
certain program requirements justifying payments, and that about one in five ambulance
suppliers had questionable billing. These findings indicate that inappropriate and questionable
billing for ambulance transports pose vulnerabilities to Medicare program integrity.
Other OIG Fraud and Abuse Prevention Activities
HCFAC funding also supported HHS-OIG?s continued enhancement of data analysis and mining
capabilities for detecting health care fraud, including tools that allow for complex data
analysis. OIG continues to use data mining, predictive analytics, trend evaluation, and modeling
approaches to better analyze and target the oversight of HHS programs. Analysis teams use
near-time data to examine Medicare claims for known fraud patterns, identify suspected fraud
trends, and to calculate ratios of allowed services as compared with national averages, as well as
other assessments. When united with the expertise of OIG agents, auditors, and evaluators, as
well as our HEAT partners, HHS-OIG?s data analysis fosters a highly effective combination of
technologies and traditional skills to the fight against fraud, waste, and abuse.
Industry Outreach and Guidance
Central to the HIPAA guidance initiatives is an advisory opinion process through which parties
may obtain binding legal guidance as to whether their existing or proposed health care business
transactions run afoul of the AKS, the CMP laws, or the exclusion provisions. During FY 2015,
the HHS-OIG, in consultation with DOJ, issued 15 advisory opinions. A total of 329 advisory
opinions have been issued during the 19 years of the HCFAC program.
Corporate Integrity Agreements
Many health care providers elect to settle their cases before litigation. As part of the settlements,
providers often agree to enter into Corporate Integrity Agreements (CIA) with OIG to avoid
exclusions from Medicare, Medicaid, and other federal health care programs. Under a CIA, a
provider commits to establishing a program and taking other specified steps to ensure future
compliance with Medicare and Medicaid rules. The compliance programs are designed, in part,
to prevent future fraud. OIG monitors providers? compliance with these agreements. OIG may
impose penalties on entities that fail to comply with the requirements of their CIAs, as shown in
the example below:
? Illinois?In March 2015, LifeWatch Services, Inc., a durable medical equipment supplier,
agreed to pay $737,572 to settle allegations that it knowingly submitted false claims to
Medicare from February 21, 2013 through June 30, 2014 for cardiac monitoring services.
Specifically, OIG alleged that LifeWatch submitted claims to Medicare for Ambulatory
Cardiac Telemetry (ACT) services for which the medical record documentation did not
support that the physician had ordered ACT services. The settlement resolves a reportable
event submitted by LifeWatch as required under its CIA. LifeWatch entered into the CIA in
March 2012 as part of an $18.5 million civil settlement with the United States, resolving
allegations that, among other things, it submitted claims to Medicare for cardiac monitoring
services that were not medically necessary and encouraged the use of more expensive cardiac
monitoring devices when a less expensive device was sufficient to meet the patient?s needs.
Centers for Medicare & Medicaid Services
In FY 2015, CMS was allocated $13.5 million by HHS, and appropriated $544.3 million in
discretionary funds by Congress to support its comprehensive program integrity strategy for
Medicare, Medicaid, and the Children?s Health Insurance Program (CHIP). With these funds,
CMS is working to ensure that public funds are not diverted from their intended purpose: to
make accurate payments to legitimate entities for allowable services or activities on behalf of
eligible beneficiaries of federal health care programs. CMS also performs many program
integrity activities that are beyond the scope of this report because they are not funded directly
by the HCFAC Account or discretionary HCFAC funding. Medicare Fee-for-Service and
Medicaid improper payment rate measurement and activities, the Fraud Prevention System,
Recovery Audit Program activities, and prior authorization initiatives are discussed in separate
reports, and CMS will submit a combined Medicare and Medicaid Integrity Program report to
Congress later this year.
Building on strong anti-fraud efforts already underway in the home health provider and
ambulance supplier arenas, CMS in July 2013 announced the first use of its temporary moratoria
authority granted by the Affordable Care Act in certain counties in Florida, Illinois, and
Texas. The moratoria stops the enrollment of new home health and ambulance enrollments in
Medicare, Medicaid, and CHIP in fraud ?hot spot? areas of the country with demonstrated
oversupply of certain types of providers. In January 2014, CMS extended the original
enrollment moratoria for these locations and expanded the enrollment moratoria to include
HHAs in Broward county Florida; the Michigan counties of Wayne, Macomb, Monroe, Oakland,
and Washtenaw; and the Texas counties of Dallas, Collin, Denton, Ellis, Kaufman, Rockwall,
Tarrant, Harris, Brazoria, Chambers, Fort Bend, Galveston, Liberty, Montgomery, and Waller.
CMS also expanded the moratorium on ground ambulance suppliers in the Philadelphia area,
including several New Jersey counties, at the same time. All of these moratoria actions continue
to be extended an additional six months with the latest notice effective January 2016. The focus
of these efforts is to prevent and deter fraud, waste, and abuse in problematic services and areas
across the country while ensuring beneficiary access to care.
Under the moratoria, existing providers and suppliers can continue to deliver and bill for
services, but no new provider and supplier applications will be approved in these areas, allowing
CMS and its law enforcement partners to remove bad actors from the program while blocking
provider entry or re-entry into these already over-supplied markets. After reviewing the number
of providers in the moratoria areas and recent Medicare Payment Advisory Commission
(MedPAC) reports, CMS determined that the moratoria do not adversely impact beneficiary
access to care. CMS is required to re-evaluate the need for such moratoria every six months.
One Program Integrity
In FY 2015, CMS continued making improvements and changes to One Program Integrity (One
PI), CMS? centralized portal that provides CMS contractors and law enforcement with a single
access point to Medicare data, as well as analytic tools to review the data. CMS continues to
enhance the existing analytic tools. One PI improves CMS? ability to detect fraud, waste, and
abuse with consistent, reliable, and timely analytics.
One PI users have access to the CMS Integrated Data Repository (IDR) to perform data
analytics. The IDR contains a comprehensive and accurate set of Medicare provider, beneficiary,
and claims data from Medicare Parts A, B, C, and D back to January 2006. The IDR includes
claims data at three distinct points in the claim life-cycle: at the time the claims are enumerated,
at the time claims are adjudicated, and at the time the claims have payment data posted. This
access allows users to perform prepayment analytics on historical data and develop models that
can be applied in CMS? predictive analytics system, the Fraud Prevention System. With claims
available from 2006, Zone Program Integrity Contractors (ZPICs) are also able to improve their
analytics for post-payment detection of fraud, waste, and abuse.
In order to streamline access for our law enforcement partners, in 2015, CMS released a reengineered
version of the Services Tracking Analysis and Reporting System (STARS) that
improves system access, enhances the end-user experience, and improves overall
performance. STARS, a health care fraud, waste, and abuse analytics tool, is part of the One PI
suite of tools. The One PI team enhanced the overall training process by including virtualized
training in combination with on-site instructor led training to reduce training costs and provide
better access for law enforcement. Additionally, STARS initiated a monthly end users group to
Compromised Number Checklist
In January 2010, CMS created the repository of compromised Medicare beneficiary and provider
ID numbers called the Compromised Number Checklist (CNC). In March 2013, CMS deployed
a Web-based application that allows direct update and real-time access of CNC information by
CNC users. This database is populated by submissions from CMS program integrity
contractors. The purpose of the CNC is to share compromised ID numbers and any associated
corrective actions that have been taken among CMS staff, program integrity contractors, and law
enforcement such as the FBI. CMS uses the national CNC database to enhance efforts to detect
and prevent fraud and abuse in Medicare.
The Command Center
CMS opened its state-of-the-art Command Center on July 31, 2012 to facilitate improvements in
health care fraud detection and investigation, drive innovation, and help reduce fraud and
improper payments in the Medicare and Medicaid programs. CMS is using the Command
Center to collaborate in unprecedented ways with the private sector, law enforcement, and our
State partners. The Command Center?s advanced technologies and collaborative environment
allow multi-disciplinary teams of experts and decision makers to more efficiently coordinate
policies and case actions, reduce duplication of efforts, and streamline fraud investigations for
more immediate administrative action. These collaborative activities enable CMS to take
administrative actions, such as revocations of Medicare billing privileges and payment
suspensions, more quickly and efficiently.
In FY 2015, the Command Center conducted 41 missions that included participants from CMS
and our partners, including the HHS-OIG and FBI that are designed to lead to improvements in
the fraud prevention and detection process. Missions are facilitated collaboration sessions that
bring together experts from various disciplines to improve the processes for fraud prevention in
Medicare and Medicaid. CMS is also working with the FBI, HHS-OIG, and other federal
agencies in the Command Center to pool resources to tackle cross-cutting issues surrounding
DME suppliers pose a high risk of fraud to the Medicare Program and CMS has undertaken an
aggressive strategy to address this risk. Through the DME Stop Gap Project, initiated in 2009,
ZPICs/Program Safeguard Contractors (PSCs) have increased site visits and interviews of DME
suppliers, providers, and beneficiaries receiving DME products in high billing areas for DME
supplies and products. In FY 2015, these additional funds supported DME investigations, which
included site visits to, and interviews of, suppliers, doctors, and patients that were identified as
potentially suspicious or high risk.
National Correct Coding Initiative (NCCI)
CMS developed the National Correct Coding Initiative (NCCI) to promote national correct
coding methodologies and to control improper coding leading to inappropriate payment in
Medicare claims. The use of the NCCI edits saved the Medicare program $681.9 million in FY
2014.12 In FY 2015, CMS also continues to work with states to fully and correctly implement
the NCCI methodologies in their Medicaid programs, to add new Medicare and Medicaid NCCI
edits to the quarterly Medicaid NCCI edit files that are compatible with claims filed with
Medicaid, and to update the technical guidance document for states.
Medicaid Enterprise System
Today?s modern design of IT systems encompasses the use of current technologies that span
across the entire Medicaid Enterprise. These systems work in concert with one another and must
adhere to certain regulations and guidance, including the Medicaid Information Technology
Architecture (MITA) framework and the Seven Standards and Conditions. Adhering to these
mandates will promote the consistency of business and technical processes and IT platforms, as
well as standards across the Medicaid Enterprise.
The project includes independent technical assistance for IT and policy requirements, including
monitoring and oversight, in working with state-specific system requirements, IT system builds,
and associated interfaces for all states and the territories. All fifty states and the territories
received technical assistance with moving through the Enterprise Life Cycle (ELC) Gate Review
Process, including any associated consults. States received assistance with project management,
implementation, and operations. Technical artifacts required by statute were analyzed and
tracked to assess state progress. Gap analyses were done on a regular basis and risk registers
were studied to identify opportunities for improvement.
12 NCCI savings are from Medicare Part B Medically Unlikely Edits (MUEs) and Part B Procedure-to-Procedure
Strengthened Program Integrity Activities in Medicare Advantage and Medicare Part D
Medicare Drug Integrity Contractors (MEDICS)
National Benefit Integrity
In FY 2015, the National Benefit Integrity (NBI) MEDIC received on average approximately
762 actionable complaints per month, processed an average of 54 requests for information from
law enforcement per month, and referred an average of 48 cases to law enforcement per month
through July. NBI MEDIC referrals have resulted in sentences ordering restitution of $41.4
million, forfeitures of $13.6 million, and civil settlements of $12.2 million according to FY 2015
notifications from law enforcement. The NBI MEDIC was responsible for assisting the OIG and
the Department of Justice (DOJ), through data analysis and investigative case development, in
achieving 68 convictions, 35 arrests, and 45 indictments from FY 2015 notifications. In one
case, the NBI MEDIC investigated complaints concerning out-of-country beneficiary
enrollments in Nicaragua and the Dominican Republic alleging that a Medicare plan was
advertising improper inducements for Medicare-eligible beneficiaries to sign up for the plan.
Ten subjects involved were charged with multiple counts of health care fraud and have pled
guilty. As of July 2015, 6 of the 10 have been sentenced for their involvement in a transnational
health care fraud scheme and ordered to pay restitution of $14.5 million.
Outreach and Education
In FY 2015, the Outreach and Education (O&E) MEDIC facilitated the CMS Parts C & D Fraud
Waste and Abuse (FWA) training sessions that offered Medicare Advantage organizations and
Prescription Drug plans an opportunity to collaborate and discuss techniques on how to prevent
and detect fraud, waste, and abuse in the Medicare Advantage and Part D programs. These FWA
training sessions are designed to educate Medicare Advantage organization and Prescription
Drug plan staff through enhanced collaboration, information sharing, data analytics and
communication. FWA training session stakeholders include plan sponsors, Pharmacy Benefit
Managers (PBMs), representatives from law enforcement agencies?including HHS-OIG, U.S.
DOJ, and other state and local law enforcement entities. These FWA training sessions provide a
forum for stakeholders to learn about the most recent fraud schemes and fraud prevention best
practices to assist in developing effective fraud prevention programs.
The O&E MEDIC is also responsible for other outreach activities and has developed many
courses and resources to train Medicare Advantage organizations and Prescription Drug plans on
best practices to detect and investigate Medicare Advantage and Prescription Drug fraud, waste,
and abuse. In order to help Parts C and D Plan sponsors better educate their enrollees on fraud
waste and abuse, the O&E MEDIC developed a video on Open Enrollment Fraud, as well as
several fraud alerts on identity theft, prescription drug abuse, telemarketing, and phishing
schemes. The O&E MEDIC also created a video tutorial for providers to explain how to enroll
in PECOS and comply with the CMS-4159-F requirements. In FY 2015, the O&E MEDIC also
updated its most comprehensive fraud fighting tool, the ?Medicare Advantage and Part D Fraud
Handbook: Practical Techniques and Approaches on Detecting and Preventing Fraud,? and an
Online Training Module for Medicare Advantage organizations (MAOs) and Part D sponsors.
The handbook is a modular online reference providing MAOs and Part D sponsors with industry
best practices regarding processes, methods, and resources to support fraud prevention,
detection, corrective action, preliminary investigation, and referral activities. The training is an
online presentation covering each chapter of the Fraud Handbook in an on-demand webcast
Medicare Advantage (MA) Benefits Review Activities
Each year, MA organizations are required to submit bids detailing how their MA plans will
provide coverage to beneficiaries for the following year. These 3,600 MA plans cover more than
17 million beneficiaries. Bid submissions are reviewed to ensure they do not discriminate
against beneficiaries and comply with all CMS regulations. Plan requirements are established
and communicated annually and the following reviews are performed:
? Low Enrollment Plans?Each year, CMS evaluates existing MA plans that have low
total enrollment to make sure these plans are sustainable over time and protect
beneficiaries from selecting a potentially unsustainable plan.
? Total Beneficiary Cost (TBC)?Evaluate increases in beneficiary cost sharing or
decreases in plan benefits from one year to the next. This evaluation ensures
beneficiaries receive value in their benefit package selection and do not experience large
increases in out of pocket costs.
? Maximum Out of Pocket Costs (MOOP)?This review examines the maximum out-ofpocket
costs that face beneficiaries who enroll in MA. These reviews protect
beneficiaries from very high out of pocket medical costs.
? Meaningful Difference?This review helps to reduce potential confusion for
beneficiaries when they are choosing between multiple plan options. By conducting this
review, CMS helps to protect meaningfully different choices between plans and prevent
MA organizations from offering similar plans in the same geographic area.
? Service Category Cost-Sharing Standards?Each year, CMS evaluates the costsharing
standards plans include in their bids to make sure the plans do not exceed
established limits. There are currently 26 cost-sharing health care service categories that
have established limits and this review enables CMS to protect beneficiaries from
discriminatory cost sharing levels.
? Actuarial Equivalence?CMS also reviews bids to make certain the actuarially
estimated cost sharing presented in the bid does not exceed the cost-sharing levels in
Original Medicare. CMS currently examines four categories for actuarial equivalence
and this examination helps guard against plans imposing discriminatory cost-sharing on
? Supplemental Benefits?There are several reviews conducted in this area, including a
review of supplemental benefits that help make sure that any optional supplemental
benefits offered are of reasonable value, as well as a review to make certain the benefits
are offered in a non-discriminatory fashion.
All of these reviews are conducted in careful coordination with the Office of the Actuary and the
Medicare Drug Benefit Group to make certain that plans make all necessary changes to their
bids. These reviews occur between early June and August and involve communications with
MA organizations to correct issues and resubmit their bids. Following bid approval, MA
organizations must complete the contracting process with CMS and may market to beneficiaries
beginning October 1. MA benefits requirements and review processes are intended to protect
beneficiaries from discrimination and to make sure that MA plans provide value to enrollees.
Medicare Advantage Encounter Data Processing System Contract
The Medicare Advantage (MA) Encounter Data Processing System (EDPS) is currently being
maintained and modified out of guidance published in the final FY 2009 inpatient prospective
payment system (IPPS) rule. In that rule, CMS revised regulations to clarify that CMS has the
authority to require MA organizations to submit encounter data for each item and service
provided to MA plan enrollees. Consistent with this authority, CMS is requiring MA
organizations to submit encounter data for dates of service January 3, 2012 and later. MA plans
are required to submit data for all institutional, professional, and DME services provided to MA
plan enrollees on or after that date. To date, CMS has collected over 1.7 billion encounter data
The encounter data detail each item and service provided to enrollees of Medicare Advantage
organizations. These records are comparable in format and detail to claims submitted to the
MACs by FFS providers. The encounter data collected by EDPS will allow CMS to recalibrate
the risk adjustment payment model, so that MA payments more accurately reflect the patterns of
care and the predicted costs of diseases for MA enrollees. Recalibrating the model on MA
diagnoses and expenditures, rather than using the FFS experience, will result in payments that
are more accurate to MA organizations. CMS is also able to use the information to evaluate
service utilization, assess quality of care, and assess the performance of MA plans.
Beginning with payment year 2015, CMS began to use encounter data as an additional source of
diagnoses to risk adjust payments to Medicare Advantage Organizations. For payment year
2016, CMS continued that transition and will ultimately use encounter data as the sole source of
plan-submitted diagnosis information.
Medicaid/CHIP Financial Management Project
Under this project, funding specialists, including accountants and financial analysts, worked to
improve CMS? financial oversight of the Medicaid Program and CHIP. In FY 2015 through the
continued efforts of these specialists, CMS removed an estimated $2.5 billion (with
approximately $1 billion recovered and $1.5 billion resolved) of approximately $9.4 billion
identified in questionable Medicaid costs.
Furthermore, an estimated $1.028 billion in questionable reimbursement was actually averted
due to the funding specialists? preventive work with States to promote proper State Medicaid
financing. The funding specialists? activities included reviews of proposed Medicaid state plan
amendments that related to reimbursement; development of financial management reviews;
research regarding state Medicaid financing policy and practices; collaboration with states to
resolve the Medicaid and CHIP portions of the A-133 ?Single State? audits; and identification of
sources of the non-Federal share of Medicaid program payments to ensure proper financing of
Medicaid program costs.
HHS-OIG Hotline Database
OIG Hotline Operations accepts tips and complaints from all sources about potential fraud,
waste, abuse, and mismanagement in HHS? programs. The CMS-OIG HOTLINE database is
used by CMS and its contractors to investigate and resolve those complaints that are sent from
the HHS OIG.
3. Transparency and Accountability
Healthcare Fraud Prevention Partnership
One of the Secretary?s key health care fraud prevention initiatives is to establish an ongoing
partnership with the private sector to fight fraud across the health care system. Data collected
and shared across payers can assist payers in evaluating trends, recognizing patterns consistent
with potential fraud, and potentially uncover schemes or bad actors they could not otherwise
identify using only their own information. Such collaboration is the purpose of the Healthcare
Fraud Prevention Partnership (HFPP), which brings together both public and private, federal and
state-level individuals and organizations combatting health care fraud across all payers.
The legal authority for the HFPP is 42 U.S.C. ? 1320a-7c. The delegated authority allows for the
HFPP to consult with, and arrange for the collection of data from, and sharing of data with
representatives of health plans under the HCFAC program.
CMS added additional partners to the HFPP and is targeting further expansion of the HFPP to
include additional willing public and private payers once the technical and legal components of
the program are in place. The increase in members providing data will increase the resources
necessary for the trusted third party contractor to process and store the increased number of
claims data from the new members.
The HFPP has completed eight studies to date, listed below:
? Study 1, Iterations 1 & 2 (counted as two studies): Misused Codes and Fraud Schemes
?To share information on misused codes and potential fraud schemes to improve overall
awareness of fraud patterns and trends.
? Study 2, Iterations 1 & 2 (counted as two studies): Non-Operational Providers?To
create an aggregate list of non-operational provider entities for use in investigations.
? Study 3: Terminated/Revoked Providers?To create an aggregate list of
terminated/revoked provider entities for potential investigations.
? Study 4: Top Billing Pharmacies?To identify outlier pharmacies that are dispensing
a high amount of controlled prescription drugs.
? Study 5: Urine Drug Screens?To study how providers bill for qualitative and
quantitative urine drug screens.
? In-Person Study: High Risk Procedures?To view summary data live and examine
potential trends in high-risk procedures.
The HFPP also has received input from partners about which study topics would have the
highest potential value and identified 15 study topics of common interest in addition to the
eight studies previously mentioned.
After using the first study’s findings for analyses and corrective action determinations,
CMS reported $187.7 million in savings to the Medicare Trust Funds from system edits,
revocations, and payment suspensions related to the first two studies listed above. This
estimate is based on CMS’ latest savings calculation methodologies, but the estimate is
subject to change due to improvements in the methodological approach and data accuracy.
However, CMS does not expect any changes to be significant.
Participating HFPP partners received results for studies 1-5. Partners have been assessing and
continue to assess the results and independently determine appropriate corrective actions.
Partner outcomes, savings, and cost avoidance data will be available in the future.
Improper Payment Rate Measurement and Increased Accountability in Medicaid and CHIP
The Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments
Elimination and Recovery Improvement Act of 2012 (IPERIA) requires each agency to
periodically review programs it administers, identify programs that may be susceptible to
significant improper payments, estimate the amount of improper payments, submit those
estimates to Congress, and report on actions the agency is taking to reduce improper payments.
The Medicaid Program and CHIP have been identified as at risk for significant improper
payments. CMS estimates improper payment rates in Medicaid and CHIP established through
the Payment Error Rate Measurement (PERM) Program. The improper payment rates are based
on reviews of the fee-for-service (FFS), managed care, and eligibility components of Medicaid
and CHIP in the fiscal year under review. CMS measures Medicaid and CHIP improper
payment rates using a 17-state rotation so that each state is reviewed once every three years.
In light of changes to the way states adjudicate eligibility for Medicaid and CHIP under the
Affordable Care Act, CMS is currently updating the PERM eligibility component measurement
methodology and related program regulations to reflect the required changes. During this time,
CMS will not conduct the eligibility measurement component of PERM and the national
Medicaid eligibility improper payment rate will be held constant at the FY 2014 reported rate as
a proxy in the overall improper payment rate calculation. In place of PERM eligibility, all states
are required to conduct eligibility review pilots through FY 2018. The eligibility review pilots
provide more targeted, detailed information on the accuracy of eligibility determinations and
provide states and CMS with critical feedback during initial implementation.
CMS reported in the FY 2015 Agency Financial Report the national Medicaid improper payment
rate that is based on measurements that were conducted in FYs 2013, 2014, and 2015. The FY
2015 national Medicaid improper payment rate is 9.8 percent, representing $29.1 billion in
estimated improper payments compared to the FY 2014 improper payment rate of 6.7 percent or
$17.5 billion in improper payments. The national component improper payment rates are as
follows: Medicaid FFS?10.59 percent, Medicaid managed care?0.12 percent, and Medicaid
eligibility?3.11 percent. The Medicaid eligibility component improper payment rate is held
constant at the FY 2014 reported rate of 3.1 percent. The major cause of error was state
difficulties achieving compliance with new system requirements that were put in place to
strengthen program integrity. The Affordable Care Act requires all referring/ordering providers
to be enrolled in Medicaid and requires claims to contain the referring/ordering provider
National Provider Identifier (NPI). The Affordable Care Act also requires states to screen
providers under a risk-based screening process prior to enrollment. Additionally, a new Health
Insurance Portability and Accountability Act of 1996 (HIPAA) standard requires the attending
provider?s NPI be on all electronically-filed institutional claims. While these requirements will
ultimately strengthen the integrity of the program, it takes time for states to make the necessary
compliant systems changes.
CMS reported in the FY 2015 Agency Financial Report the national CHIP improper payment
rate that is based on measurements that were conducted in FYs 2013, 2014, and 2015. The FY
2015 national CHIP improper payment rate is 6.8 percent, representing $0.6 billion in estimated
improper payments compared to the FY 2014 improper payment rate of 6.5 percent or $0.6
billion in improper payments. The national component improper payment rates are as follows:
CHIP FFS?7.33 percent and CHIP managed care?0.37 percent. The CHIP eligibility
component improper payment rate is held constant at the FY 2014 reported rate of 4.2 percent.
The major cause of error in CHIP is the same cause described in Medicaid above.
CMS is currently measuring cycles that will be reported in FYs 2016 and 2017.
Improper Payment Rate Measurement and Increased Accountability in Medicare Advantage
(Part C) and Medicare Prescription Drug Benefit Program (Part D)
In compliance with IPIA, as amended by IPERA and IPERIA, CMS has implemented a
systematic plan regarding improper payments for Part C and D programs.
The Part C payment error estimate reported for FY 2015 (based on calendar year CY 2013) is 9.5
percent. The Part C payment error is driven by errors in risk adjustment data (clinical diagnosis
data) submitted by Part C plans to CMS for payment purposes. Specifically, the Part C payment
error estimate reflects the extent to which diagnoses that plans report to CMS are not supported
by medical record documentation.
In an effort to improve the Part C improper payment rate, CMS has implemented two key
specific corrective actions described below: contract level audits and new regulatory provisions.
? Contract-Level Audits: CMS conducts Risk Adjustment Data Validation (RADV)
contract-level audits to recover overpayments. RADV verifies, through medical record
review, the accuracy of enrollee diagnoses submitted by MA organizations for risk
adjusted payment. RADV audits are HHS?s primary corrective action to recoup
overpayments from MA organizations. CMS expects that payment recovery will have a
sentinel effect on the quality of risk adjustment data submitted by plans for payment.
RADV audits of payment year 2011, which began in FY 2014, will be the first CMS
reviews to recoup funds based on extrapolated estimates.
? New Regulatory Provisions: In CMS-4159-F, ?Policy and Technical Changes to the
Medicare Advantage and the Medicare Prescription Drug Benefit Program? (79 FR 100),
HHS codified the Affordable Care Act requirement that MA organizations must report
and return overpayments that they identify. In CMS-1613-FC, ?CMS-Identified
Overpayments Associated with Submitted Payment Data? (79 FR 66769), HHS also
established a payment recovery and appeal mechanism to be applied when HHS identifies
erroneous payment data submitted by an MA organization.
The Part D payment error estimate reported for FY 2015 (based on CY 2012) is 3.6 percent. The
FY 2015 Part D error estimate represents the combined impact on Part D payments of four
sources of error: Payment error related to low income subsidy status; payment error related to
Medicaid status; payment error related to prescription drug event data validation; and payment
error related to direct and indirect remuneration.
In an effort to improve the Part D error rate, CMS has implemented two key specific corrective
actions described below: outreach to plan sponsors and new regulatory provisions.
? Outreach: Formal outreach to plan sponsors will continue for invalid/incomplete
? New Regulatory Provisions: HHS codified the ACA requirement that Part D sponsors
must report and return overpayments that they identify. CMS also proposed a payment
recovery and appeal mechanism to be applied when CMS identifies erroneous payment
data submitted by a Part D sponsor.
Probable Fraud Measurement Pilot
There is no reliable estimate of the amount of fraud in the Medicare program. Documenting the
baseline amount of fraud in Medicare is of critical importance, as it allows officials to better
evaluate the success of ongoing fraud prevention activities. In collaboration with the HHS
Office of the Assistant Secretary for Planning and Evaluation (ASPE), CMS developed the
methodology for the first nationally representative estimate of the extent of probable fraud in the
Medicare FFS program in FY 2011. In FY 2012, CMS developed the measurement tools for the
pilot, and collaborated with government partners, including ASPE, on the strategy for
implementation. CMS received OMB approval in May 2013. CMS awarded a contract in
September 2015 to conduct the pilot.
This project will estimate probable fraud in the Home Health benefit to pilot test the
measurement approach and calculate a service-specific estimate. This pilot is measuring
?probable fraud? rather than ?fraud? because ?fraud? is a legal determination that involves
establishing intent?a determination that is made through the judicial system. A review panel of
experienced health care analysts, clinicians, policy experts, and fraud investigators will review
all collected data and determine if there is sufficient evidence to warrant a referral to law
enforcement. After the completion of this pilot, CMS will assess the value of expanding the
measurement to other areas of Medicare. CMS began collecting data on probable fraud to
establish an estimate of probable fraud within HHAs in 2015.
CMS in FY 2015 continued its use of the new Affordable Care Act authority to suspend
payments to providers during an investigation of a credible allegation of fraud. CMS also has
authority to suspend payment if reliable information of an overpayment exists. During FY 2015,
there were 420 payment suspensions that were active at some point during the fiscal year (data
reflected as of September 10, 2015). Of the 420 payment suspensions, 105 new payment
suspensions were imposed during FY 2015.
CMS has designated program integrity field offices located in or near the HEAT cities of Miami,
Los Angeles, and Brooklyn that provide a CMS presence in high risk fraud areas of the country.
All three field offices have staff that are designated CMS Strike Force Liaisons, who coordinate
with law enforcement, facilitate data analysis, and expedite suspension requests. The field
offices also work with CMS central office and the ZPICs to conduct data analysis to proactively
identify targets and to coordinate efforts among various contractors and agencies to identify local
issues and vulnerabilities with national or regional impact.
CMS program integrity field offices develop solutions to the most challenging fraud issues in
their regions. For example, the Miami field office has implemented a comprehensive, multiagency
approach to address Medicare and Medicaid aspects of health care fraud in South Florida
and has served as a testing ground for efforts that have been expanded to a national level. To
address emerging fraud schemes by ambulance providers, the Los Angeles staff is working with
county Emergency Medical Service licensing authorities and related health care providers; CMS
contractors; and local, state, and federal law enforcement.
Enrollment Special Study
This is a project designed to utilize and expand the existing programmatic infrastructures to take
administrative actions under existing CMS authorities by conducting site verifications of
potentially high risk providers and suppliers. The information obtained during site verifications
is used to determine if provider enrollment requirements are met and to calculate a fraud level
Since inception in July 2009, this project has produced significant results; including an increased
number of revocations, deactivations, and prepayment edit savings. The project has also
provided valuable information that CMS has used to identify and implement programmatic
changes that have proven successful to deter and prevent Medicare fraud.
As of June 30, 2015, the Medicare Administrative Contractor covering Florida (First Coast
Service Operations), had conducted 6,838 site verifications to verify providers? and suppliers?
operational status, deactivated 117 practice locations, and revoked or denied 773 providers.
CMS saved $8,919,228 from prepayment medical record review.
Administration for Community Living
The mission of the Senior Medicare Patrol (SMP) program is to empower and assist Medicare
beneficiaries, their families, and caregivers to prevent, detect, and report health care fraud,
errors, and abuse through outreach, counseling, and education. In FY 2015, the Administration
for Community Living (ACL) was allocated $3.4 million in HCFAC funding by HHS to support
infrastructure, technical assistance, and other SMP program support. In addition to this funding,
ACL was allocated $5.3 million for capacity-building activities designed to enhance the
effectiveness of state-wide SMP programs. During FY 2010 and FY 2011, CMS had provided
this capacity funding to ACL for the SMP projects. Since FY 2012 HCFAC funding has been
allocated directly to ACL. The base SMP project grant is funded from a separate Congressional
SMP Project Activities and Outcomes
ACL funds 54 SMP statewide projects (each state, Guam, Puerto Rico, U.S. Virgin Islands and
the District of Columbia) with funds authorized in the Older American Act and the HCFAC
Wedge. In addition to the projects? base grants, funded from the Older American Act, the SMP
program offers HCFAC funds to each grantee so that they can expand their program. Prior to FY
2013, the additional funding was based largely on the known fraud prevalence within each state.
However, in FY 2013, the program moved to a formula-driven allocation taking into account the
number of Medicare beneficiaries living in each state and the ruralness of the state. The new
formula is intended to provide a more equitable allocation of funds and reflects the reality that
the prevalence of fraud is much broader than a few selected states.
According to the most recent annual performance report from HHS-OIG?s Deputy Inspector
General for Evaluation and Inspections, issued August 2015, a total of 5,249 active volunteers
served SMP projects during 2014. These volunteers performed an essential function of this
program, contributing 117,300 hours and conducting over 202,862 one-on-one counseling
sessions in efforts to educate beneficiaries about how to prevent and detect Medicare fraud
within local communities.
Outreach to Medicare beneficiaries is a key element of the SMP program. During 2014, SMP
projects held 12,417 community outreach education events reaching more than 1,118,982 people,
and were responsible for over 110,615 media airings to increase beneficiary awareness about
issues related to Medicare fraud. In addition, over 452,714 beneficiaries were educated through
14,692 group educational sessions conducted by SMP programs in local communities. SMP
projects nationwide received 94,368 inquiries for information or assistance in 2014 from or on
behalf of beneficiaries. This included receipt of 1,614 complex issues, i.e., beneficiary
complaints requiring further research, assistance, case development, and/or referral. SMP
projects reported that 1,369 complex issues were resolved for beneficiaries during 2014, while
660 complex issues with an estimated dollar value of over $994,603, were referred to law
enforcement, CMS integrity contractors, state Medicaid Fraud Control Units, or other entities for
further action. During this period, HHS-OIG documented that $200,598 in health care
expenditures were avoided and nearly $741,562 in Medicare, Medicaid and other savings
resulted from actions taken by the SMP program.
We continue to emphasize the projects may not be receiving full credit for savings
attributable to their work. It is not always possible to track referrals to Medicare
contractors or law enforcement from beneficiaries who have learned to detect fraud,
waste, and abuse from the projects. In addition, the projects are unable to track the
substantial savings derived from a sentinel effect whereby fraud and errors are reduced
by Medicare beneficiaries? scrutiny of their bills.
Since the program?s inception, the program has educated over 6.6 million beneficiaries in group
or one-on-one counseling sessions and has reached more than 30 million people through
community education outreach events. While SMPs make numerous referrals of potential fraud
to investigators, it is still difficult to measure the outcome of these cases without a tracking
mechanism. Therefore, we have no specific measure of these outcomes, though we anticipate
that they would demonstrate an additional benefit of the SMP program?s ability to detect and
prevent fraud and abuse in the Medicare program. In addition, the impact of the SMP program?s
primary activities?education of beneficiaries to prevent health care fraud?is extremely difficult
to quantify in dollars and cents. As HHS-OIG indicated in the August 2015 report:
ACL recognizes the importance of measuring the value of the SMP program impact to the fullest
degree possible. Toward that end, in 2012, ACL contracted for the first-ever SMP program
evaluation that assessed the national design and implementation of the SMP program, the
adequacy of current SMP performance measures, and sought to determine the most appropriate
measures of SMP program value (benefits, results and impact). The contract concluded in
December 2013 and ACL is reviewing the evaluation recommendations for implementation in
FY 2015. In addition, in FY 2013, the SMP program issued a three-year research grant designed
to measure the value of prevention activities. As the SMP program is focused on education and
prevention, the true value of the program comes from beneficiaries avoiding fraud in the first
place. This grant is intended to help the program identify a way to measure that effect.
Despite the factors that have limited ACL?s ability to quantify the value of the SMP program in
preventing, identifying, and reporting health care fraud, HHS-OIG has documented in the annual
performance report over $122 million in savings attributable to the program as a result of
beneficiary complaints since its inception in 1997.
SMP Infrastructure and Program Support
SMP Resource Center
In FY 2014, the SMP Resource Center?s grant was up for competition and a new three-year grant
was awarded. The SMP Resource Center, established October 1, 2003, provides technical
assistance, support and training to the SMP projects, ensuring a fully consolidated national
approach to reaching Medicare and Medicaid beneficiaries. The goal of the Center is to provide
professional expertise and technical support, serve as an accessible and responsive central source
of information, and maximize the effectiveness of the SMP projects in health care integrity
outreach and education. The Center has been instrumental in supporting ACL efforts to forge
national visibility for the SMP program.
SMP Data System
The SMP program issued a contract in FY 2014 for the development of a new data system
designed to support the evolving needs of the SMP program. The previous system, SMART
FACTS, has been in operation for seven years and is at the end of its functionality. The new
system will be operational in late FY 2015 and is expected to last at least 10 years.
Integration Project Grants
The goal of the SMP program is to provide education to all Medicare beneficiaries. However,
there are specific populations that are historically hard to reach. Three of these populations?
Medicare beneficiaries under age 65; Lesbian, Gay, Bisexual and Transgender (LGBT) Medicare
beneficiaries; and American Indian/Alaska Native (AI/AN) Medicare beneficiaries?were
specifically identified as target populations. In FY 2013, ACL awarded five grants to
organizations that initiated seventeen-month projects seeking to increase awareness,
empowerment, and actions to prevent health care fraud amongst these generally underserved
populations. The goal of these grants is to develop new, efficient, and sustainable approaches for
ensuring high-quality and culturally competent service delivery and help educate consumers to
prevent health care fraud. This work ended in FY 2015.
Prevention Research Grant
As mentioned above in FY 2013, the SMP program issued a three-year research grant to identify a
way to measure the overall impact of the SMP program. Specifically, the grantee will develop and
test an evaluation method to determine how to best measure the effects of the SMP program?s
community education techniques on health care fraud prevention. This work continued in FY 2014.
Office of the General Counsel
In FY 2015, the Office of the General Counsel (OGC) was allocated approximately $10 million
in HCFAC funding by HHS to supplement OGC?s efforts to support program integrity activities.
Many of OGC?s efforts in FY 2015 were focused heavily on program integrity review, in which
OGC reviews CMS? programs and HCFAC activities in order to strengthen them against
potential fraud, waste, and abuse. OGC also continued its active litigation role in order to assist
in the recovery of program funds. During FY 2015, OGC was involved in a wide range of
HCFAC efforts that resulted in Government recoveries of over $2.4 billion in judgments,
settlements, or other types of recoveries, savings, or receivables as described elsewhere in this
The Affordable Care Act
The Affordable Care Act (ACA) significantly amended existing anti-fraud statutes. These
provisions established fundamental expectations for compliance, disclosure, transparency, and
quality of care, and are matched by corresponding enforcement provisions. Some specific
provisions of the ACA that particularly support HCFAC priorities include amending Medicare
and Medicaid provider/supplier enrollment requirements, strengthening overpayment provisions
to specifically invoke the False Claims Act (FCA), and creating a statutory disclosure protocol
for violations of the physician self-referral prohibition known as the ?Stark law.? During FY
2015, as new ACA programs continued to be implemented, OGC spent significant time and
resources working with the relevant CMS client components to ensure that program integrity
issues were reviewed and resolved, and assisted the client in addressing program integrity and
compliance problems as they occurred.
During FY 2015, OGC was involved in Health Care Fraud Prevention and Enforcement Action
Team (HEAT) initiatives and worked closely with other HEAT members to combat fraud, waste,
and abuse in the Medicare and Medicaid programs by providing advice on the myriad legal
issues presented as the Government works to initiate innovative anti-fraud programs in various
hotspots throughout the country. OGC assisted DOJ in pursuing both criminal and civil cases
involving individuals and entities seeking to defraud the Medicare and Medicaid programs and to
defend any federal court challenges that are brought as a result of HEAT initiatives. OGC?s
involvement in HEAT also included advising CMS on provider and supplier revocations,
payment suspensions, recoupments, and defending the administrative appeals that resulted.
FCA and Qui Tam Actions
OGC supported DOJ in assessing qui tam actions filed under the FCA by interpreting complex
Medicare and Medicaid rules and policies to assist DOJ in discerning which allegations were
program violations and should be pursued, and to help DOJ focus government resources on those
matters which were most likely to result in a recovery of money for the Government. When DOJ
filed or intervened in a FCA matter, OGC provided litigation support, including interviewing and
preparing witnesses and responding to often extensive requests for documents and information.
OGC also expended considerable resources in responding to requests for information and witness
testimony in declined qui tams that were litigated by relators. In FY 2015, OGC participated in
FCA and related matters that recovered over $452 million for the Government. The types of
FCA cases that OGC worked collaboratively with DOJ on included: drug pricing manipulation,
illegal marketing activity by pharmaceutical manufacturers that resulted in Medicare and
Medicaid paying for drugs for indications not covered, physician self-referral violations, and
provider upcoding cases.
Provider/Supplier Suspensions and Enrollment Revocations or Denials
Suspensions play a critical role in protecting against the abuse of program funds. OGC advised
CMS on whether to suspend payments to Medicare providers and suppliers and defended the
suspensions when challenged through the appeal process. In FY 2015, OGC attorneys were
involved in a myriad of suspension and recoupment actions, which involved suspected fraudulent
billings by many different segments of the health care industry, including DME suppliers,
ambulance companies, physicians, infusion clinics, therapists, home health agencies, and
diagnostic testing facilities. OGC also represented CMS when a provider or supplier appealed a
denial of enrollment or revocation. In FY 2015, OGC represented CMS in appeals before the
HHS Departmental Appeals Board (DAB) and worked to resolve these cases without formal
hearings. Further, OGC continued to advise CMS on the interpretation of enrollment regulations
and reviewed proposed enrollment rules and manual changes.
Medicare Prescription Drug Program (Part D) & Medicare Advantage (Part C) Compliance
During FY 2015, OGC continued to provide extensive advice to CMS on a variety of Part D and
Medicare Advantage (MA)-related contract compliance issues, including identifying
enforcement options against sponsors that are noncompliant or violate program rules, such as the
Marketing Guidelines. OGC reviewed compliance-related correspondence that CMS issued to
Part D sponsors and MA plans in the form of warning letters, corrective action plan letters,
intermediate sanctions, Civil Monetary Penalty (CMP) notices, and non-renewal or termination
Civil Monetary Penalties
CMS has the responsibility for administering numerous CMP provisions enacted by Congress to
combat fraud, waste, and abuse by enforcing program compliance and payment integrity. In FY
2015, OGC provided legal advice to CMS regarding the development and imposition of CMPs
and defended CMS in many administrative appeals and judicial litigation resulting from these
Petitions for Remission
OGC collaborated with federal law enforcement, including the FBI, U.S. Attorney?s Offices, the
Secret Service, U.S. Postal Service, and the U.S. Marshal?s Service in filing petitions for
remission directed to recover assets subject either to administrative forfeiture by federal law
enforcement or civil judicial forfeiture by DOJ. Each petition set forth the background of the
fraudulent scheme, the history of Medicare?s payments, and how the fraudulently induced
payments could be traced to the seized assets. During FY 2015, OGC petitioned these agencies
to recover funds in both criminal and civil litigation matters in which Medicare was a victim of
Regulatory Review and Programmatic Advice
In FY 2015, OGC advised CMS on a vast variety of regulatory and program issues, all to assist
CMS in strengthening its programs and activities against fraud and to prevent the wrongful
disbursement of program funds in the first instance. Some highlights of OGC efforts include:
providing counsel to the CMS ?Innovation Center? regarding new payment and delivery models
to improve the quality of care and reduce costs to the Medicare and Medicaid programs, working
with CMS to implement the agency?s second notice related to provider and supplier enrollment
moratoria, and providing counsel on the program integrity issues to CMS to assist in the
development of the Notice of Proposed Rulemaking for the Medicare Shared Savings Program
published on December 8, 2014. Further, OGC worked on a final rule amending CMS?s
enrollment regulations to establish new authority for CMS to deny or revoke billing privileges
from individuals and entities that pose a program integrity risk to the Medicare program. Among
many other things, the regulation provides new authority to deny enrollment to individual or
entity affiliated with entities that have an existing Medicare debt and new authority to revoke
enrollment from providers and suppliers that have a pattern or practice of billing for services that
do not meet Medicare requirements. In addition, OGC routinely works with CMS to review
legislative proposals regarding program integrity matters.
Medicaid Program Integrity
Continuing recent trends, OGC saw continued increasing involvement in FY 2015 in Medicaid
program integrity issues as CMS devoted more resources to financial reviews and oversight and
as states continued to present innovative proposals to reconfigure their Medicaid programs. For
example, in Detroit-Wayne Mental Health Authority, OGC obtained a fully favorable decision
from the DAB, sustaining the Division of Cost Allocation?s denial of the Authority?s request to
use unspent Medicaid funds to reduce its pension obligations, and resulting in an affirmative
recovery of $4.8 million as the State of Michigan recently refunded the unspent funds to CMS.
Further, OGC assisted CMS with the Indiana Medicaid Program?s pilot project to recover
Medicare overpayments through the offset of the FFP portion of Medicaid payments. To date,
this pilot project has recovered nearly $1 million. OGC anticipates providing similar support to
CMS with a recently launched initiative with the State of Ohio Medicaid Program that has so far
recovered over $100,000.
OGC provided guidance to CMS and DOJ in navigating the complexities of the Stark physician
self-referral law. This consultation helps to build stronger cases and focus investigatory efforts,
leading to successful results for the Government. In FY 2015, OGC provided extensive counsel
to CMS in its ongoing implementation of the Medicare Physician Self-Referral Disclosure
Protocol (SRDP)?created under the ACA to enable Medicare providers to self-disclose
technical violations of the Stark law?s physician self-referral prohibition. OGC advised CMS
regarding numerous matters disclosed under this protocol, now numbering over 350.
Medicare Secondary Payer (MSP) Workload
OGC?s efforts to recover conditional payments by Medicare that are the primary responsibility of
other payers directly supports the HCFAC statutory goal of facilitating the enforcement of all
applicable legal remedies for program fraud and abuse. During FY 2015, OGC has been
successful in establishing the right to recover over $4.8 million for Medicare under the MSP
program. Further, statutory changes implementing mandatory insurance reporting requirements
to the MSP law have strengthened and expanded OGC?s efforts in this area?to the benefit of the
Medicare Trust Funds?including the authority for CMS to impose substantial CMPs for failure
OGC protects Medicare funds from waste in bankruptcy cases by asserting CMS recoupment
rights to collect overpayments, arguing to continue suspension or termination actions against
debtors, seeking adequate assurances from the bankruptcy court that CMS interests in the
debtor?s estate will be protected, arguing for the assumption of the Medicare provider agreement
as an executory contract, and petitioning for administrative costs where appropriate. In FY 2015,
OGC asserted CMS? interests in numerous bankruptcy and receivership actions involving
physicians, hospitals, independent diagnostic test facilities, DME suppliers, nursing homes, and
nursing home chains, collecting or establishing the right to collect over $16 million in recoveries
involving bankrupt providers.
Denial of Claims and Payments
CMS and its contractors engaged in various activities and initiatives to detect and prevent
abusive and fraudulent billing practices. These measures included provider and beneficiary
education, use of claim sampling techniques, and a more rigorous scrutiny of claims with
increased medical review. In FY 2015, OGC played a major role in advising CMS regarding the
development and implementation of these types of program integrity measures and defended
CMS in litigation brought by providers and suppliers who challenged these efforts. OGC
continued to aggressively defend CMS and its contractors in cases seeking damages for the
alleged wrongful denial of claims, for being placed on payment suspension, and for not being
granted extended repayment plans.
In summary, OGC?s FY 2015 work in support of CMS advances the specific goals of the
HCFAC program, including program integrity, fraud prevention, and fraud response. Most CMS
operations have a fraud/abuse component, and OGC?s work supporting all CMS substantive
program areas directly supports the HCFAC program?s goals of fraud and abuse prevention in
those operational program areas.
Food and Drug Administration Pharmaceutical Fraud Program
In FY 2015, $3.4 million in HCFAC funding was made available for the FDA Pharmaceutical
Fraud Program (PFP). The PFP was instituted to enhance the health care fraud-related
activities of FDA’s Office of Criminal Investigations (OCI) and the Office of the General
Counsel (OGC) Food and Drug Division. OCI, with the support of OGC, investigates
criminal violations of the Federal Food, Drug, and Cosmetic Act (FFDCA), the Federal AntiTampering
Act, and related Federal statutes.
The PFP is designed to detect, prosecute, and prevent pharmaceutical, biologic, and medical
device fraud. The PFP gathers information from sources inside and outside FDA and focuses on
fraudulent marketing schemes, application fraud, clinical trial fraud, and flagrant manufacturingrelated
violations concerning biologics, drugs, and medical devices. The goal of the program is
the early detection and prosecution of such fraudulent conduct and furthers FDA?s public health
mission by helping to reduce health care costs, in most cases before they are incurred, and deter
future violators. By initiating investigations of pharmaceutical fraud schemes earlier in their
lifecycle, FDA is able to preclude potential public harm by barring medical products, which
have not followed the legal FDA approval processes and do not meet FDA standards, from
making it to market, thus saving valuable health care dollars from being spent.
The PFP has identified multiple alleged medical product fraud schemes through various
avenues. Since the inception of the PFP, OCI has opened a total of one hundred twenty criminal
investigations. In FY 2015, FDA?s fifth full fiscal year of HCFAC Program activity, OCI,
through its PFP, opened twenty-nine criminal investigations, described below:
? Two investigations involving allegations of questionable manufacturing practices of
foreign-based drug firms. The investigations are focused on violations related to
application fraud, data integrity, data manipulation, and adulteration.
? Two investigations involving allegations of questionable manufacturing practices of an
injectable drug by a domestic firm causing the finished product to be sub-potent. The
investigation is focused on misbranding and/or adulteration.
? Three investigations involving allegations of questionable manufacturing practices of
medical devices ultimately causing public safety risks. The investigations are
focused on misbranding and/or adulteration.
? Five investigations involving marketing schemes by medical device and drug
manufacturers. These investigations involve alleged misbranding of devices and drugs
by offering them for sale to address conditions for which they are not FDA cleared or
? Seventeen investigations involving allegations of clinical trial or application
fraud. These investigations are focused in part on individuals or companies suspected
of improperly commencing and conducting clinical trials, falsifying clinical trial data,
forging signatures of clinical investigators, and enrolling ineligible or non-existent
subjects in clinical trials, as well as falsifying approval or clearance applications made
to the FDA.
In regard to judicial action, the types of criminal investigations conducted through the PFP tend to
be complex in nature requiring extensive document review and coordination with the affected FDA
Center. It is not unusual for these complex fraud investigations to last five years or more from
initiation to conclusion. For example, in February 2015, one of our PFP investigations opened in
FY 2011 concluded with a clinical trial coordinator being sentenced to 36 months in prison, 36
months of probation, and ordered to pay approximately $200,000 for making false statements in
a matter within the jurisdiction of the FDA. Specifically, an FDA investigator found evidence to
show a number of study subjects that had been reported as being enrolled in a clinical study of an
HIV drug did not actually participate in the study and that all the data regarding their
participation had been fabricated.
Additionally, in March 2015, the first investigation opened at the inception of our PFP program
in mid-FY 2010, concluded with a large prescription and over-the-counter drug manufacturer
located in the Philadelphia area pleading guilty for introducing adulterated infant?s and
children?s liquid medications into interstate commerce. The investigation netted a $25,000,000
Furthermore, FDA believes that various investigations already initiated under the PFP show
promise of future judicial action that may include criminal prosecution and monetary
recoveries. These promising cases include several large foreign generic drug manufacturers
under investigation for data integrity and other manufacturing violations which would deem
their products adulterated and could possibly pose a risk to the public?s health and safety.
Sixty percent of generic drugs in the United States come from foreign manufacturers.
In addition to these investigative activities, FDA conducted a one day training session in early
March 2015 for criminal investigators covering PFP related topics. The training also provided
background on FDA?s participation in the HCFAC Program and resources available to assist in
investigations being conducted under the PFP. Due to this training, FDA has seen a measurable
increase in HCFAC Program awareness, interest, and level of skill in conducting the
DEPARTMENT OF JUSTICE
United States Attorneys
In FY 2015, the United States Attorneys? Offices (USAOs) were allocated approximately
$51.9 million in HCFAC funding to support civil and criminal health care fraud and abuse
litigation, as exemplified in the Program Accomplishments section. The USAOs dedicated
substantial district resources to combating health care fraud and abuse in 2015, and HCFAC
allocations have supplemented those resources by providing funding for attorneys, paralegals,
auditors and investigators, as well as funds for litigation of resource-intensive health care fraud
cases. USAOs work with CMS by reviewing and conferring with CMS about their imposing any
potential civil monetary penalties against a provider. Additionally, the Attorney General
Advisory Committee?s (AGAC) Health Care Fraud Working Group has supported and is
working on efforts to reduce the number of home health care fraud cases. The effort to reduce
this type of fraud is in working on proposals to change the home health care documentation, and
providing extended education to providers about their responsibilities to correctly certify service
for these programs and the risks they face for not submitting correct information.
The 93 United States Attorneys and their assistants, or AUSAs, are the nation?s principal
prosecutors of federal crimes, including health care fraud. Each district has a designated
Criminal Health Care Fraud Coordinator and a Civil Health Care Fraud Coordinator. Civil and
criminal health care fraud referrals are often made to USAOs through the law enforcement
network described herein, and these cases are usually handled primarily by the USAOs, although
the civil referrals are sometimes handled jointly with the Civil Division?s Commercial Litigation
Branch (Fraud Section). The other principal source of referrals of civil cases for USAOs is
through the filing of qui tam (or whistleblower) complaints. These cases are often handled
jointly with trial attorneys in the Fraud Section. USAOs also handle most criminal and civil
appeals at the Federal appellate level.
USAOs play a major role in health care fraud enforcement by bringing criminal and affirmative
civil cases to recover funds wrongfully taken from the Medicare Trust Funds and other taxpayerfunded
health care systems as a result of fraud, waste, and abuse. Civil and criminal AUSAs
litigate a wide variety of health care fraud matters, including false billings by physicians and
other providers of medical services, overcharges by hospitals, Medicaid fraud, and kickbacks to
induce referrals of Medicare or Medicaid patients, fraud by pharmaceutical and medical device
companies, home health and hospice fraud, and failure of care allegations against nursing home
owners. Working closely with their partners in the Civil Division, several civil health care fraud
AUSAs have focused their efforts on pharmaceutical fraud, resulting in significant recoveries.
Most notably, health care giant Johnson & Johnson agreed to pay $2.2 billion to resolve criminal
and civil liability arising from allegations relating to the prescription drugs Risperdal, Invega and
Natrecor, including misbranding related to the promotion for intended uses not approved as safe
and effective by the Food and Drug Administration (FDA) and payment of kickbacks to
physicians and to the nation?s largest long-term care pharmacy provider.
Other major pharmaceutical cases included: Endo Health Solutions Inc., which agreed to pay to
pay $192.7 million to resolve criminal and civil liability arising from Endo?s marketing of the
prescription drug Lidoderm for intended uses not approved as safe and effective by the FDA,
which rendered the drug misbranded; and Teva Pharmaceuticals USA Inc., which agreed to pay
the Government and the State of Illinois $27.6 million for allegedly violating the FCA by making
payments to induce prescriptions of an anti-psychotic drug for Medicare and Medicaid
beneficiaries. Most of the major civil settlements were part of a global resolution, which also
addressed the criminal liabilities, resulting in criminal pleas, as well as significant fines and
forfeitures. The criminal portion of these investigations and resolutions was handled by criminal
health care fraud AUSAs, often working with their counterparts at the Consumer Protection
Branch of the Civil Division. These global settlements resolved allegations including reporting
of false and inflated drug prices, manufacturing and distributing adulterated drugs, distribution of
drugs for uses not approved by FDA, and kickbacks.
The USAOs also partner with the Criminal Division in the Medicare Fraud Strike Forces
currently operating in nine areas across the country. Each USAO has dedicated several AUSAs
and support personnel to work with Criminal Division attorneys in this important initiative.
Additionally, USAOs in Strike Force and non-Strike Force cities work on other substantial cases
which result in high monetary recovery or have a substantial impact on the law and the
community. Examples of successful cases that were not initiated or concluded in districts as part
of a Strike Force team during FY 2015 are detailed earlier in this report.
In addition to the positions funded by HCFAC, the Executive Office for United States Attorneys?
Office of Legal Education (OLE) uses HCFAC funds to train AUSAs and other DOJ attorneys,
as well as paralegals, investigators, and auditors in the investigation and prosecution of health
care fraud. In April 2015, OLE offered a Health Care Fraud Seminar which was attended by
over 85 AUSAs and DOJ trial attorneys. In November 2015, OLE offered training for USAO
auditors, investigators, and paralegals which included a focus on health care fraud investigations.
Many USAO attorneys, investigators, auditors, and paralegals served as faculty at these OLE
trainings, and also participate in other federal, state, and private health care fraud seminars.
In FY 2015, the United States Attorney?s Offices (USAO) opened 983 new criminal health care
fraud investigations. Assistant United States Attorneys (AUSA) filed criminal charges in 463
cases involving 888 defendants. A total of 613 defendants were convicted of health care fraudrelated
crimes during the year.
Civil Matters and Cases14
In FY 2015, USAOs opened 808 new civil health care fraud investigations and had 1,048 civil
health care fraud matters pending at the end of the fiscal year.
13 FY 2015 numbers are actual data through the end of September 2015. This data includes records classified either
with the primary or tertiary 03G ? Health Care Fraud program code. 14 FY 2015 numbers are actual data through the end of September 2015. This data includes those records classified
under with the FRHC ? Health Care Fraud civil code.
In FY 2015, the Civil Division received approximately $31.6 million in FY 2015 HCFAC
funding to support the health care fraud activities of the Commercial Litigation Branch?s Fraud
Section and the Consumer Protection Branch. This amount also included funding to support the
Department of Justice?s Elder Justice Initiative.
The Commercial Litigation Branch?s Fraud Section
The Civil Division?s Commercial Litigation Branch (Fraud Section) investigates complex health
care fraud allegations and files suit under the FCA to recover money on behalf of defrauded
federal health care programs including Medicare, Medicaid, TRICARE, and the FEHBP. The
Fraud Section works closely with the United States Attorneys? Offices and often team with the
Consumer Protection Branch, HHS-OIG, state Medicaid Fraud Control Units and other law
enforcement agencies to pursue allegations of healthcare fraud. As a result of these efforts, the
Fraud Section has obtained settlements and judgments in health care cases of over $1 billion
almost every year since 2000 and over $1.9 billion in FY 2015 alone.
The Fraud Section investigates and resolves matters against a wide array of health care providers
and suppliers. In FY 2015, some of the most significant matters pursued by the Fraud Section
involved hospitals and physicians. In some of these cases, the hospitals allegedly improperly
admitted patients who could have been treated on a less costly outpatient basis (such as the
Dignity Health, MCCG, and CHS matters discussed above). Other cases against hospitals and
physicians involved alleged violations of the Stark Law, which prohibits physicians from
referring their patients to other entities for services payable by Medicare when the physician or
an immediate family member of the physician has a direct or indirect financial relationship with
the entity (such as the North Broward Hospital District, Robinson Health System, Citizen?s
Medical Center, Columbus Regional, and Adventist Health Care System matters discussed
above). The Fraud Section continues to look closely at these types of arrangements to make sure
that Medicare and Medicaid, as well as the beneficiaries of these programs, are protected from
the distorted medical decision-making that these improper financial deals can cause.
The Fraud Section has been called upon to litigate an increasing number of FCA cases that in the
past may have been settled. For example, while it has settled allegations against for profit
hospice providers relating to the admission of beneficiaries not eligible for the hospice benefit
(such as the Good Shepherd Hospice and Covenant Hospice matters discussed above), the
Section has filed complaints and committed significant resources to litigating claims against a
number of other hospice providers, including Vitas Hospice Services, AseraCare Hospice,
Creekside Hospice, and Evercare Hospice and Palliative Care (now known as Optum Palliative
Care and Hospice). Similarly, while the Section has settled allegations against nursing homes
and healthcare providers relating to medically unnecessary and inappropriate levels of
rehabilitation therapy administered to elderly residents (such as the Extendicare Health Services
and RehabCare matters discussed above), it has filed complaints against other providers,
including Life Care Centers of America, Inc. and HCR Manorcare.
Matters involving pharmaceutical and device manufacturers were historically some of the most
complex and resource intensive cases handled by the Fraud Section, and the Section?s historic
recoveries in these areas have had a significant deterrent effect on industry. The Section
continues to investigate allegations that drug and device manufacturers caused the submission of
false claims to federal healthcare programs by promoting drugs for uses not approved by the
FDA and not covered by federal health care programs (as alleged in the Inspire Pharmaceuticals
matter discussed above), by distributing unapproved and non-reimbursable medical devices (as
alleged in the OtisMed and NuVasive matters discussed above), and by paying kickbacks to
healthcare providers to recommend or prescribe particular products (as alleged in the Daiichi
Sankyo and Medco Health/AstraZeneca matters discussed above).
Because the Fraud Section receives every FCA complaint filed across the country by
whistleblowers (otherwise known as ?relators?), it has a unique vantage point over health care
fraud trends and developments nationwide and therefore regularly handles some of the most
complex matters and takes the lead on coordinating national investigations with its law
enforcement partners. Likewise, given the diversity of health care fraud cases pursued by the
Fraud Section, it frequently provides training and guidance to AUSAs and agents on the FCA
and health care fraud issues. The Section works closely with HHS-OIG, Office of General
Counsel, in all settlements of health care fraud allegations in order to ensure that the
administrative remedies possessed by HHS are appropriately considered and to enable the
negotiation of compliance terms that diminish the risk that the offending conduct will be
repeated. The Section also collaborates with and counsels CMS and HHS-OIG on interagency
initiatives and proposed rules and regulations.
The Elder Justice Initiative, which is housed in the Civil Division, coordinates and supports law
enforcement efforts to combat elder abuse, neglect, and financial exploitation. The Initiative
supports law enforcement efforts by maintaining an information bank of Elder Justice related
materials (including briefs, opinions, indictments, plea agreements, subpoena templates); funding
medical reviewers, auditors, and other consultants to assist DOJ attorneys and AUSAs in their
nursing home and/or long term care facility cases; hosting quarterly teleconferences with DOJ
attorneys and AUSAs across the country to discuss issues or developments in connection with
our nursing home and failure of care cases; and coordinating nationwide investigations of skilled
nursing facilities. In addition to supporting law enforcement efforts, the Initiative continues to
fund research projects awarded by the Office of Justice Programs, National Institute of Justice, to
study the abuse, neglect, and exploitation of elderly individuals and residents of residential care
facilities. Elder Justice Initiative members represent the Justice Department on Interagency
Working Groups such as the Elder Justice Coordinating Council?s Working Group. The Civil
Division maintains the Elder Justice Website (www.justice.gov/elderjustice), a valuable resource
for elder abuse victims and their families, state and local prosecutors, elder abuse researchers, as
well as practitioners.
The Consumer Protection Branch
The Consumer Protection Branch (CPB) litigates consumer fraud actions to end dangerous
practices that harm America?s most vulnerable populations, like the sick and elderly. Among its
top priorities are pursuing cases against those who market unsafe or fraudulent products and
services that endanger the health and safety of patients. CPB works closely with United States
Attorney?s Offices, the Commercial Litigation Branch?s Fraud Section, the Food and Drug
Administration (FDA), and other law enforcement partners on a wide range of health care fraud
cases, including those involving the promotion and distribution of unapproved and adulterated
drugs and medical devices. CPB has made significant headway in fighting fraud schemes that
endanger the public health, having successfully prosecuted dozens of cases resulting in
significant jail terms, fines, and forfeitures. This litigation serves to deter companies and
individuals from marketing and selling unsafe pharmaceuticals and medical products to the
In partnership with key agencies, in FY 2015, CPB prosecuted medical device maker OtisMed
Corporation and its former president and CEO for distributing an unapproved medical device
used in knee replacement surgery. OtisMed marketed the OtisKnee cutting guide as a tool to
assist surgeons in making accurate bone cuts during knee replacement surgery. After FDA
notified OtisMed and its CEO that the OtisKnee had failed to demonstrate that it was as safe and
effective as other legally marketed devices and therefore that distribution of the device was
prohibited, the CEO ordered the shipment of approximately 218 devices to surgeons
nationwide. The corporation pled guilty to violating the Federal Food, Drug, and Cosmetic Act
and paid a criminal fine and forfeiture totaling $39.6 million. It also entered into a civil
settlement with the federal government and the states of more than $40 million. The CEO was
sentenced to 24 months in prison followed by one year of supervised release, and ordered to pay
a $75,000 fine.
In another medical device matter, CPB, in collaboration with the U.S. Attorney?s Office for the
Middle District of Florida, entered into a deferred prosecution agreement with Genzyme
Corporation, a wholly-owned biotechnology subsidiary of French pharmaceutical company
Sanofi, to resolve criminal charges that it violated the Federal Food, Drug, and Cosmetic Act
with regard to Seprafilm, a surgical device it markets and promotes. A two-count criminal
information charged that, between 2005 and 2010, Genzyme caused Seprafilm to become
adulterated and misbranded while held for sale. For instance, some Genzyme sales
representatives taught surgeons how to mix Seprafilm sheets into a slurry that could be squirted
through the narrow tubes used during laparoscopic surgery, even though Seprafilm was never
FDA-approved for use in such procedures. In addition, during the course of the government?s
investigation, Genzyme voluntarily disclosed that it had distributed promotional material that
implied that Seprafilm had been proven safe and effective for use in gynecologic cancer
surgeries, even though Seprafilm?s FDA-approved label cautioned against such use. Genzyme
paid a monetary penalty of more than $32 million and agreed to undertake several measures to
enhance its internal compliance program. In 2013, the government entered into a separate
$22.3 million civil agreement to resolve allegations under the False Claims Act related to
CPB has also increased its attention to dietary supplement manufacturers that sell misbranded
and adulterated products, which pose a danger to the public and scam consumers out of money
for misrepresented products. For example, last fiscal year, CPB along with the FDA, and the
U.S. Attorney?s Office in New Jersey, teamed together to prosecute the owner and president of
the dietary supplement company, Raw Deal Inc. The president instructed employees to add
fillers like maltodextrin, rice flour, and cocoa replacer to dietary ingredients in supplements sold
to customers. The company president was sentenced to prison and ordered to forfeit $1 million
in profits from his fraudulent scheme.
CPB brought actions in FY 2015 to ensure the safety and integrity of the nation?s drug supply.
McNeil-PPC, Inc., a wholly-owned subsidiary of Johnson & Johnson, pled guilty in U.S. District
Court for the Eastern District of Pennsylvania to delivering for introduction into interstate
commerce adulterated infants? and children?s over-the-counter (OTC) liquid medicines from in
or around May 2009 to in or around April 2010. The drugs were adulterated because McNeil did
not manufacture them in compliance with current Good Manufacturing Practices (cGMP), which
is required under the Federal Food, Drug, and Cosmetic Act. Among other things, McNeil
received a consumer complaint regarding ?black specks? in its Children?s Tylenol (later
identified as nickel/chromium-rich inclusions, which were not intended ingredients in the OTC
liquid drug). In addition to this consumer complaint, McNeil discovered other OTC batches with
particulates. However, McNeil did not initiate or complete a Corrective Action Preventive
Action plan as required by its standard operating procedures. Consequently, McNeil was not in
compliance with cGMP regarding the manufacturing of certain OTC liquid drugs. As part of the
plea, McNeil agreed to pay a $20 million fine and forfeit $5 million in substitute assets.
CPB also made inroads in the area of drug diversion, successfully prosecuting multiple
individuals engaged in a massive drug diversion scheme involving more than $390 million worth
of prescription drugs. In FY 2015, these individuals were charged with conspiracy and related
offenses as part of this scheme relating to sale of prescription drugs from illegal, unlicensed
sources to wholesalers and pharmacies throughout the United States. To hide the true, illegal
sources of their prescription drugs, the defendants falsified pedigree documents required by law
that show the source of drugs. In FY 2015, five defendants pled guilty to crimes relating to their
part in the scheme.
In FY 2015, the Criminal Division was allocated $14.7 million in FY 2015 HCFAC funding to
support criminal health care fraud litigation and interagency coordination, which is carried out
primarily by the Fraud Section and, to a lesser extent, the Organized Crime and Gang Section.
The Fraud Section
The Fraud Section initiates and coordinates complex health care fraud prosecutions and supports
the USAOs with legal and investigative guidance and training and trial attorneys to prosecute
health care fraud cases. Beginning in March 2007, the Fraud Section, working with the local
USAOs, the FBI and law enforcement partners in HHS-OIG, and state and local law enforcement
agencies, launched the Medicare Fraud Strike Force in Miami-Dade County, Florida, to
prosecute individuals and entities that do not provide legitimate health care services but exist
solely for the purpose of defrauding Medicare and other government health care programs.
Since 2007, DOJ and HHS have expanded the Strike Force to nine regions. In FY 2015, the
Fraud Section continued to provide attorney staffing, litigation support, and leadership and
management oversight for numerous Strike Force prosecutions in eight of the nine regions. The
Fraud Section?s key litigation accomplishments in FY 2015 can be summarized as follows:
? Filed 200 indictments, informations and complaints involving charges filed against
391 defendants who allegedly collectively billed the Medicare program approximately
? Obtained 314 guilty pleas and litigated 28 jury trials, with guilty verdicts against
48 defendants; and
? Secured imprisonment for 263 defendants sentenced during the fiscal year, averaging
more than 56 months of incarceration.
The Fraud Section attorneys staffed and coordinated the Division?s health care fraud litigation
through the existing Medicare Fraud Strike Force teams in Miami, Los Angeles, Detroit,
Southern Texas, Brooklyn, Southern Louisiana, Tampa, Dallas, and Chicago.
In FY 2015, the Criminal Division organized the largest national health care fraud takedown in
history, both in terms of individuals charged and the loss amount. On June 18, 2015, Attorney
General Loretta E. Lynch and Department of Health and Human Services (HHS) Secretary
Sylvia Mathews Burwell announced a nationwide sweep led by the Medicare Fraud Strike Force
in 17 U.S. Attorneys? Offices, resulting in charges against 243 individuals, including 46 doctors,
nurses and other licensed medical professionals, for their alleged participation in Medicare fraud
schemes involving approximately $712 million in false billings. In addition, the Centers for
Medicare & Medicaid Services (CMS) also suspended a number of providers using its
suspension authority as provided in the Affordable Care Act.
In addition to Medicare Fraud Strike Force cases, the Fraud Section handles corporate criminal
health care fraud investigations. Often, such cases are handled in a parallel manner by the Fraud
Section?s prosecutors along with DOJ Civil Division attorneys and/or AUSAs from USAOs
across the country. In FY 2015, the Criminal Division opened several new corporate health care
fraud matters and had over a dozen active investigations into large, nationwide medical
In addition to health care fraud litigation, the Fraud Section also provided legal guidance to FBI
and HHS-OIG agents, health program agency staff, AUSAs, and other Criminal Division
attorneys on criminal, civil, and administrative tools to combat health care fraud. Throughout
FY 2015, the Fraud Section?s prosecutors met with federal prosecutors and agents across the
United States to provide training, investigative leads based on data analysis, and related support.
The Fraud Section also provided advice and written materials on patient medical record
confidentiality and disclosure issues, and coordinated referrals of possible criminal HIPAA
privacy violations from the HHS Office for Civil Rights; monitored and coordinated DOJ
responses to legislative proposals, major regulatory initiatives, and enforcement policy matters;
reviewed and commented on health care provider requests to the HHS-OIG for advisory
opinions, and consulted with the HHS-OIG on draft advisory opinions; worked with CMS to
improve Medicare contractors fraud detection, referrals to law enforcement for investigation, and
case development work; and prepared and distributed to all USAOs and FBI field offices
periodic summaries of recent and significant health care fraud cases. Finally, the Fraud Section
also held a National Health Care Fraud Training Conference in September 2015 that was
attended by 280 criminal and civil prosecutors (representing over 50 U.S. Attorneys? Offices)
and law enforcement personnel.
The Organized Crime and Gang Section (OCGS)
The Criminal Division?s Organized Crime and Gang Section (OCGS) supports and conducts
investigations and prosecutions of fraud and abuse targeting private sector health plans as well as
health care fraud and abuse perpetrated by domestic and international organized crime groups.
With respect to private sector health care fraud, OCGS supports and conducts enforcement
efforts combatting fraud and abuse directed at the 2.5 million private sector health plans
sponsored by employers and/or labor organizations which cover some 137 million Americans.
OCGS also works to improve strategic coordination in the identification and prosecution of
domestic and international organized crime groups engaged in sophisticated frauds posing a
threat to the health care industry.
In FY 2015, six OCGS attorneys were assigned to health care fraud prosecutions and
investigations. Two OCGS attorneys worked with the Organized Crime Strike Force in the
Philadelphia United States Attorney?s Office on prosecutions involving Medicare fraud in the
operation of a hospice. A third OCGS attorney conducted the prosecution of an employer in the
District of Maryland who created false documents to conceal the company?s underpayment of
required contributions for employee benefits. Additional OCGS attorneys were engaged in
health care fraud investigations involving fraudulent billings by an ambulance service provider,
embezzlement and fraud targeting large collectively bargained health plans, fraud in the
operation of a pharmacy, and theft of personally protected health care information from a health
The Philadelphia case involved the prosecution of a registered nurse in connection with a scheme
to defraud Medicare in the operation of a hospice. The nurse, who served as the Director of
Professional Services and supervised the nursing staff at the hospice, is alleged to have
authorized the submission of more than $9.5 million in fraudulent medical claims for hospice
services provided to patients who did not receive services or were ineligible for the benefits
claimed. The hospice founder, a co-owner, the medical director, and four staff nurses have
previously been convicted and sentenced in connection with this false billing scheme. The
massive fraud was alleged to be successful due to participation by nurses and other staff in the
altering of patient records to make patients appear eligible for hospice services when, in reality,
they were not. Trial for the remaining defendant is scheduled for FY 2016.
The District of Maryland prosecution involved the victimization of a union health care plan by
an employer who underpaid contributions to the plan which were required by a collective
bargaining agreement and concealed the underpayment in plan records and reports for three
years. In October 2014, the company owner was sentenced to probation and ordered to make
restitution for making false statements in documents required by the Employee Retirement
Income Security Act.
In addition to conducting health care fraud investigations and prosecutions, OCGS attorneys
routinely provide litigation support and advice to AUSAs and criminal investigative agencies in
the investigation and prosecution of corruption and abuse of private employment-based group
health plans covered by the Employee Retirement Income Security Act (ERISA). Litigation
support is provided as requested at any stage of the prosecution from indictment through trial and
on appeal. Private sector employment-based group health plans are the leading source of health
care coverage for individuals not covered by Medicare or Medicaid. OCGS attorneys also
provide support to investigations and prosecutions of fraud schemes by corrupt entities that sell
unlicensed health insurance products as well as fraud schemes by corrupt employers that cheat
workers out of health benefits required by the prevailing wage laws and regulations.
OCGS attorneys regularly provide health care fraud and abuse training and legal guidance to
AUSAs and to criminal investigators and agents of the Department of Labor?s Employee
Benefits Security Administration and Office of Inspector General. Such training and guidance
covers prosecutions involving abuse of private sector employee health plans subject to ERISA
and health plans sponsored by labor organizations as well as fraud and abuse committed in
connection with the operation of multiple employer welfare arrangements. OCGS is also
responsible for drafting and reviewing criminal legislative proposals affecting employee health
benefit plans. Finally, OCGS provides legal guidance to prosecutors and required approvals in
the use of the Racketeer Influenced and Corrupt Organizations (RICO) statute in prosecutions of
Medicare and Medicaid frauds as well as private sector health care frauds.
Civil Rights Division
In FY 2015 the Civil Rights Division was allocated approximately $7.8 million in FY 2015
HCFAC funding to support Civil Rights Division litigation activities related to health care fraud
and abuse. The Civil Rights Division pursues relief affecting public, residential and
nonresidential health care facilities and service systems, as well as conducts investigations to
eliminate abuse and grossly substandard care in public, Medicare and Medicaid funded longterm
care facilities. Consistent with the Supreme Court?s decision in Olmstead v. L.C., 527 U.S.
581 (1999), the Division has also undertaken initiatives to eliminate the needless
institutionalization of individuals who require health care supports and services.
The Division plays a critical role in the HCFAC Program. The Special Litigation Section of the
Civil Rights Division is the sole DOJ component responsible for the Civil Rights of Institutionalized
Persons Act, 42 U.S.C.?1997 (CRIPA). CRIPA authorizes the investigation of conditions
of confinement at state and local residential institutions (including facilities for persons with
developmental disabilities or mental illness, and nursing homes) and initiation of civil action for
injunctive relief to remedy a pattern or practice of violations of the Constitution or Federal
statutory rights. The program includes review of conditions in facilities for persons who have
mental illness, facilities for persons with developmental disabilities, and nursing homes.
The Disability Rights Section of the Civil Rights Division has primary enforcement authority
for the Americans with Disabilities Act (ADA). Title II of the ADA authorizes investigation of
allegations of discrimination by public entities against individuals with disabilities, including
discrimination in the form of needless institutionalization of persons who require health care
supports and services. See Olmstead, 527 U.S. 581. Title II also authorizes the initiation of
civil action to remedy discrimination in violation of the ADA. In addition to violating the civil
rights of individuals with disabilities, such unnecessary institutionalization often results in
unnecessarily increased Medicaid costs inconsistent with the Medicaid requirements for home
and community-based services. Both the Special Litigation Section and the Disability Rights
Section have undertaken initiatives to combat the use of Medicaid funding for the unjustified
institutionalization of persons with disabilities.
The Educational Opportunities Section of the Civil Rights Division also participates in the
HCFAC Program to address the use of Medicaid funding for unnecessary institutionalization of
youth with disabilities in segregated education placements in violation of the ADA.
The Special Litigation, Educational Opportunities, and Disability Rights Sections work
collaboratively with the USAOs and with HHS.
Fiscal Year 2015 Accomplishments
Key litigation and enforcement accomplishments in FY 2015 by the Civil Rights Division can be
summarized as follows:
? Number of matters in active enforcement: 19;
? Cumulative estimate of individuals with disabilities affected: 33,322; and
? Number of institutional facilities affected: 2,172.
Special Litigation Section
In Fiscal Year 2015, the Special Litigation Section resolved two major systemic reform cases
after the jurisdictions complied with settlement agreements; issued findings that a state
unnecessarily institutionalizes children with mental illness; opened one statewide investigation
regarding the unnecessary institutionalization of people with mental health disabilities in nursing
facilities; monitored compliance of 10 statewide settlement agreements and four facility-focused
agreements impacting thousands of people; monitored an agreement with an urban police
department requiring them to connect individuals with mental illness to community-based
services instead of costly institutional services and to avoid unnecessary criminal justice
involvement; and filed one statement of interest in litigation regarding a Protection and
Advocacy organization?s ability to access investigatory records needed to ensure individuals at a
health care facility were not subjected to abuse and neglect. In FY 2015, the Section?s work?
including its formal investigations, monitoring of remedial agreements, and active litigation?
affected more than 1,700 health care facilities in 17 states as well as the District of Columbia.
The large number of health care facilities reflects the Section?s expanded focus on whether states
are ensuring that nursing facilities and other institutional settings do not inappropriately admit
persons who should be served in more integrated settings.
An important aspect of the Division?s work is the active enforcement of its agreements (i.e.,
ongoing monitoring to ensure agreements are successfully implemented and pursuit of remedial
measures where expected compliance is not occurring). Because of these agreements? scope and
complexity, this work typically spans several years. In FY 2015, the Special Litigation Section
brought to a successful close two such agreements after years-long enforcement efforts. In
Nebraska, the Section concluded a seven-year enforcement effort to improve conditions at the
State?s largest institution for people with intellectual and developmental disabilities, the Beatrice
State Developmental Center, and enact system reforms to improve community services
throughout the state. The court-ordered agreement required the State to remedy health, safety,
and welfare issues at the institution, and more importantly, required the State to significantly
expand and enhance community capacity and to establish robust quality assurance mechanisms
in the community. It impacted the lives of hundreds of people who have received services at the
institution and thousands of people who benefited from the system-wide reforms called for by
the settlement. In Connecticut, the Section concluded a six-year enforcement effort to improve
conditions at the Connecticut Valley Hospital. The agreement there required the State to remedy
health, safety, and welfare issues for people with mental health disabilities at the institution,
improve treatment and planning, and more appropriately consider community-based services for
people residing at the facility.
The Section continued monitoring implementation of large-scale, systemic reform agreements in
numerous jurisdictions across the country. These ongoing enforcement efforts include:
? A statewide agreement in Amanda D. v. Hassan / United States v. New Hampshire
(D.N.H. 2012) requiring the creation of robust community alternatives?including highintensity
services for at least 1,500 people, integrated housing for hundreds of people,
and employment supports for hundreds of people?that will reduce the risk that people
needing only community-based services will be psychiatrically hospitalized
? An agreement with the City of Portland in United States v. City of Portland (D. Or.
2012) requiring the Portland Police Department to train officers in mental health crisis
intervention and connect individuals with mental illness to community-based mental
health services to avoid unnecessary criminal justice involvement and
? A statewide settlement agreement in United States v. Virginia (E.D. Va. 2012) requiring
the development of approximately 4,200 home and community-based waivers for people
with intellectual and developmental disabilities who are on waitlists for community
services and individuals transitioning from four State-run institutions;
? A statewide agreement in United States v. Delaware (D. Del. 2011) requiring the
development of comprehensive community mental health supports?including highintensity
services for more than 1,000 people, integrated housing for 650 people, and
employment supports for 1,100 people?for people with mental health disabilities in, or
at risk of being placed in, the Delaware Psychiatric Center; and
? A statewide agreement in United States v. Georgia (N.D. Ga. 2010) requiring the
development of community resources to serve thousands of people with serious mental
illness or intellectual disabilities who reside in Georgia?s State Hospitals or are at risk of
being institutionalized there.
In FY 2015, the Section also issued findings in its investigation into West Virginia?s children?s
mental health system. The United States concluded that West Virginia fails to serve children
with mental health conditions in the most integrated setting appropriate to their needs in violation
of the Americans with Disabilities Act (ADA) and Olmstead v. L.C. More than 1,000 children in
the state reside in segregated, expensive residential facilities, often for long periods unrelated to
their disability, because of a lack of less expensive, community-based service options.
Negotiations began this fiscal year to resolve these issues in a comprehensive agreement.
Also in FY 2015, the Section opened an investigation into Louisiana?s use of nursing facilities to
serve people with mental illness and continued its investigation into South Dakota?s use of
nursing facilities to serve older adults and people with disabilities.
The Section filed one statement of interest in Idaho regarding a Protection and Advocacy
organization?s ability to access investigatory records needed to ensure individuals at a health care
facility were not subjected to abuse and neglect.
Disability Rights Section
In FY 2015, the Disability Rights Section resolved one major, statewide litigation; continued to
actively litigate another systemic, statewide case; monitored compliance of three statewide
settlement agreements, under which more than 15,700 people collectively will obtain relief; and
filed two statements of interest in litigation raising issues of needless segregation.
The Section entered into a proposed statewide settlement agreement with the State of Oregon in
Lane v. Brown (D. Or.), a class action in which the United States intervened and which addresses
the unnecessary segregation of individuals with disabilities in sheltered workshop and facilitybased
day programs in violation of Title II of the ADA. Under the agreement, the State has
pledged a sustained commitment to transform its service system, impacting approximately 7,000
people. The State will provide supported employment services so that 1,115 working-age
individuals will obtain competitive, integrated employment. The State will also reduce the
number of individuals receiving services in segregated settings, and will ensure that at least
4,900 youth ages 14 to 24 are provided the employment services necessary for them to prepare
for, choose, and maintain integrated employment.
The Section continued to litigate United States v. Florida (S.D. Fla. 2013), a case in which the
United States alleges, among other things, that the State of Florida administers its Medicaid
service system for children with significant medical needs in violation of the ADA and Olmstead
by unnecessarily segregating them in nursing facilities, when they could, and want to, be served
at home or in other community-based settings.
The Section also continued to monitor the implementation of its eight-year settlement agreement
with the State of North Carolina, pursuant to which the State is providing opportunities to
individuals with mental illness in adult care homes to transition to less costly, integrated service
settings. To date, more than 400 individuals have moved from institutions to community-based
settings, and more than 4,000 people receive community-based mental health services.
It also continued to monitor its settlement agreements with the State of Rhode Island and the City
of Providence, addressing the unnecessary segregation of individuals with disabilities in
sheltered workshop and facility-based day programs. Under the agreements, the State will
provide supported employment placements to roughly 2,000 individuals with intellectual and
The Section also monitored its settlement agreement with the State of New York and private
plaintiffs regarding New York?s mental health service system, in United States v. New York
(E.D.N.Y. 2013). The agreement benefits at least 2,500 people and remedies discrimination by
the State in the administration of its mental health service system and ensures that individuals
with mental illness who reside in 23 large adult homes in New York City receive services in the
most integrated setting appropriate to their needs consistent with the ADA and Olmstead. Under
the agreement, such individuals will have the opportunity to live and receive services in the
community such that they are able to live, work, and participate fully in community life.
The Section filed two statements of interest in litigation raising issues of needless segregation in
Florida and Indiana. These briefs have addressed issues relating to the unnecessary
institutionalization of individuals in state-run and private institutions.
Educational Opportunities Section
The Educational Opportunities Section (EOS) has participated in the HCFAC Program for the
past two years. The Section has carefully analyzed the legal issues related to unnecessary
segregation in the context of K-12 schools.
In FY 2015, the Section completed its investigation of the Georgia Network of Educational and
Therapeutic Services (GNETS) program, which provides segregated educational services for
approximately 5,000 Georgia students with emotional and behavioral disabilities. On July 15,
2015, the Division issued a letter of findings to the State identifying the ways in which the State
unnecessarily segregates children with disabilities in its operation and administration of the
program. GNETS is funded and operated by the State and provides services to most of the
students in the program in segregated GNETS Centers throughout the State rather than providing
community-based behavioral health services for these children.
The Section filed five statements of interest or amicus briefs in litigation raising issues of
needless segregation of children in Pennsylvania, Mississippi, and the U.S. Court of Appeals for
the Third and Eleventh Circuits. These briefs have addressed issues relating to the unnecessary
institutionalization of children in state-run and private, state-funded institutions.
Federal Bureau of Investigation
In FY 2015, the FBI was allocated $129.2 million in funding from HIPAA to support the
facilitation, coordination and accomplishment of the goals of the HCFAC Program. This yearly
appropriation was used to support 797 positions (476 Agent, 321 Support).
In FY 2015, the FBI initiated 642 new Health Care Fraud (HCF) investigations and had 2,744
pending investigations. Investigative efforts produced 718 criminal HCF convictions and 1,038
indictments and informations. In addition, investigative efforts resulted in over 625 operational
disruptions of criminal fraud organizations and the dismantlement of the criminal hierarchy of
more than 144 HCF criminal enterprises.
The FBI is the primary investigative agency involved in the fight against HCF that has
jurisdiction over both federal and private insurance programs. HCF investigations are
considered a high priority within the FBI?s Complex Financial Crime Program. Each of the 56
FBI field offices had personnel assigned specifically to investigate HCF matters.
The FBI seeks to approach the HCF crime problem in a threat-based and intelligence-driven
manner. The approach employs the prioritization of enforcement efforts, at both the national and
field office levels, to ensure limited resources are focused on the most significant entities
committing health care fraud and abuse. As part of the process, the FBI gathers relevant data
and information to understand the impact of the crime problem and to identify intelligence
?gaps,? or areas which require additional research and analysis. The need and availability of
resources to support mitigation efforts, including enforcement and intelligence related activities,
are also factored into the analysis. The process is constantly on-going and requires collaboration
not only between FBI components, but also with our public and private partners.
As part of our collaboration efforts, the FBI maintains investigative and intelligence sharing
partnerships with government agencies such as other DOJ components, HHS-OIG, state
Medicaid Fraud Control Units, and other enforcement and regulatory agencies. On the private
side, the FBI conducts significant information sharing and coordination efforts with private
insurance partners, such as the National Health Care Anti-Fraud Association, the National
Insurance Crime Bureau, and private insurance investigative units. The FBI is also actively
involved in the Healthcare Fraud Prevention Partnership, an effort to exchange facts and
information between the public and private sectors in order to reduce the prevalence of HCF.
As a result of the collaboration and review process, the FBI has designated criminal enterprises
and other crime groups, corporate-level fraud and abuse, and public safety issues as the priority
HCF threat areas of focus. Each field office conducts a similar analysis to determine their areas
of focus and the actions they will take to mitigate the associated threat.
FBI field offices throughout the U.S. proactively address the HCF threat through joint
investigative efforts; intelligence collection, sharing, and analysis; and the utilization of
advanced and sophisticated investigative techniques. Each FBI field office is involved in a HCF
Task Force and/or working group. Members of the groups include US Attorney?s Office and
HHS-OIG personnel, and in many cases also include other federal, state, local, and private
insurance personnel. Based on information sharing and coordination, additional cases are vetted
and identified for investigation. These activities seek to identify and pursue investigations
against the most egregious offenders involved in health care fraud and abuse.
The FBI?s Health Care Fraud Unit (HCFU) oversees program efforts, including providing
guidance to field offices, to ensure the threat is mitigated in an effective and efficient manner. In
support of joint agency activities and general threat mitigation efforts the HCFU has
promulgated three initiatives, including the Health Care Fraud Prevention and Enforcement
Action Team (HEAT), Large Scale Conspiracies, and Major Provider Fraud Initiatives.
HEAT is DOJ?s and HHS? Cabinet-level commitment to prevent and prosecute HCF. HEAT,
which is jointly led by the Deputy Attorney General and HHS Deputy Secretary, is comprised of
top level law enforcement agents, prosecutors, attorneys, auditors, evaluators, and other staff
from DOJ and HHS and their operating divisions, and is dedicated to joint efforts across
government to both prevent fraud and enforce current anti-fraud laws around the country. The
Medicare Fraud Strike Force (Strike Force) teams are a key component of HEAT. As part of the
HEAT Initiative, the FBI coordinates with the DOJ and HHS-OIG on all HEAT aspects
including funding, resource allocation, Strike Force expansion, target identification, training, and
operations. The FBI has 62 agents assigned to the nine Strike Forces in Miami, New York City,
Southern Texas, Tampa, Detroit, Los Angeles, Southern Louisiana, Dallas, and Chicago. In
addition to funding agent resources, the FBI funded undercover operation expenses, financial and
investigative analysis support, offsite and evidence storage locations, and other investigative
costs. The Strike Forces have effectively investigated and prosecuted individuals and entities
that do not provide legitimate health care services, but exist solely for the purpose of defrauding
Medicare and other federal health care programs. The continued support of Medicare Strike
Force operations is a top priority for the FBI. In addition, the FBI completes coordination and
intelligence sharing with HHS and DOJ components on other prevention and enforcement
activities, including efforts associated with the Large Scale Conspiracies and Major Provider
The Large Scale Conspiracies Initiative seeks to identify and target criminal enterprises and
other groups whose schemes result in significant losses to health care benefit programs.
Intelligence efforts for this initiative include information sharing and analysis of billing data with
HCF enforcement partners. As the FBI continued to focus efforts on these groups, statistical
accomplishments associated with the operational disruptions of criminal fraud organizations and
the dismantlement of the criminal hierarchy of criminal enterprises have consistently increased,
with an over fifty percent increase from FY 2012 to FY 2015. Investigative assistance provided
to field offices as part of the initiative can include support for undercover operations, source
identification and support, and funding of investigative costs. An example of these types of
cases was the conviction of the former medical director of, and three therapists employed by, a
now-defunct mental health provider for conspiracy to commit HCF and related charges for their
roles in a scheme to fraudulently bill Medicare and Florida Medicaid more than $63 million.
According to the evidence presented at trial, from approximately 2004 through 2011, the
provider billed Medicare and Medicaid for mental health services that were not medically
necessary or never provided, and paid kickbacks to assisted living facility owners and operators
who in exchange referred beneficiaries to provider. The FBI is committed to addressing this type
of crime problem through the disruption, dismantlement and prosecution of those involved in
criminal enterprises and other organized criminal activities.
The Major Provider Fraud Initiative seeks to identify and target corporate-level groups involved
in fraud and abuse schemes with significant billing to health care benefit programs. The related
schemes are frequently complex, challenging to identify, and can involve conduct that is
nationwide in scope. Extensive resources and coordination are frequently required due to the
complexity and scope of the schemes. Qui tams are a significant intelligence source for these
types of cases. These investigations frequently involve pharmaceutical manufacturers, hospital
corporations, and regional or national medical provider agencies. In addition to the work
completed at the field office level, and in response to this substantial threat, the FBI has
established a centralized support team to provide investigative assistance on these cases
nationwide. An example of these types of cases would include the investigation of Health
Diagnostics Laboratory Inc. (HDL), of Richmond, Virginia, which resulted in HDL agreeing to
pay $47 million to resolve allegations they violated the False Claims Act. The FBI coordinates
efforts in these types of cases with our law enforcement partners, such as DOJ components,
HHS-OIG, and other federal agencies.
The FBI actively provides training and guidance on HCF matters. The FBI has teamed with the
DOJ, HHS, and private insurance organizations to provide training in the priority threat areas of
HCF. Funded training has included innovative methods of employing advanced investigative
techniques; basic HCF training for FBI special agent and professional staff newly assigned to
investigate HCF; and sessions on new and current HCF trends and issues. FBI personnel training
opportunities included sessions offered by the FBI, other government agencies and the private
sector. In FY 2015, more than 223 FBI HCF investigators and analysts received training. FBI
personnel also conducted a wide range of training for external audiences, including private
insurance and regulatory personnel.
Funding received by the FBI is used to pay direct and indirect personnel-related costs associated
with the 797 funded positions. Funds not used directly for personnel matters, are used to provide
operational support for HCF investigations, national initiatives, training, specialized equipment,
expert witness testimony, and Strike Force operations.
Return on Investment Calculation
? The return on investment (ROI) for the HCFAC program is calculated by dividing the total
monetary results to the Federal government (not including relator payments) by the annual
appropriation for the HCFAC Account in a given year (not including portions of CMS
funding dedicated to the Medicare Integrity Program listed in the table on page 81).
? The monetary results include deposits and transfers to the Medicare Part A Trust Fund and
the Treasury, as well as restitution and compensatory damages to Federal agencies.
? The HCFAC Account is made up of three funding sources: mandatory funding for HHS and
DOJ, including HHS-OIG, appropriated through Section 1817(k)(3)(A) of the Social Security
Act; mandatory funding for FBI activities appropriated through Section 1817(k)(3)(B) of the
Social Security Act; and discretionary funding for the HCFAC Account appropriated through
the annual Labor-HHS-Education appropriation.
? FBI mandatory HIPAA funding is included in the HCFAC ROI calculations given the
important role the FBI plays in achieving the monetary results reflected in the HCFAC
annual report and because that statute states that the funds are for the same purposes as the
funds provided for HHS and DOJ under the Social Security Act. However, FBI spending
and monetary results are not required to be reported per the statute. Therefore, even though
the FBI mandatory HIPAA funding is included in the HCFAC ROI calculation, it is not
reflected in the table on page 7 of this report.
? Only certain portions of discretionary HCFAC Account funding are included in the ROI
calculation. All discretionary HCFAC funding for HHS-OIG and DOJ are included in the
HCFAC report ROI since they spend their discretionary funding on the same types of
activities that they support with mandatory funding. Only the portion of CMS Medicare
discretionary HCFAC funding that supports law enforcement is included in the HCFAC
report ROI. The remainder of CMS?s HCFAC Medicare discretionary funding supports
activities in the Medicare Integrity Program (MIP) that are included in the MIP ROI, which
calculates the impact of the prevention activities supported by the MIP mandatory and
discretionary funds is calculated separately from the HCFAC ROI and is reported outside of
the HCFAC report. Impacts for both the CMS Medicaid and Medicare program integrity
funding are included in a separate report.
Total Health Care Fraud and Abuse Control Resources
The table below sets forth HCFAC funding, by agency, for health care fraud and abuse control
activities in FY 2015, including sequester reductions. The FBI also receives a stipulated amount
of HIPAA funding for use in support of the Fraud and Abuse Control Program, which is shown
below. Separately, CMS receives additional Mandatory Resources under the Medicare Integrity
Program (section 1817(k)(4) of the Social Security Act). The inclusion of the activities
supported with these funds is not required in this report, and this information is included for
Since 2009, Congress has also appropriated annual amounts to help carry out health care fraud
and abuse control activities within DOJ and HHS. Those amounts are set forth as Discretionary
Resources in the table below and the results of the efforts supported with these funds are
contained within this report.
Mandatory Resources1 Fiscal Year 2015
Office of Inspector General $186,066,026
Health and Human Services Wedge2
Medicare Integrity Program3
MIP/Medicare (non-add) 797,329,155
Medi-Medi (non-add) 66,444,096
Department of Justice Wedge2
Federal Bureau of Investigation4
Subtotal, Mandatory HCFAC $1,272,738,148
Office of Inspector General $67,200,000
CMS Program Integrity 544,320,000
Medicare Program Integrity (Non-Add) 477,120,000
Medicaid Program Integrity (Non-Add)5
Department of Justice 60,480,000
Subtotal, Discretionary HCFAC 672,000,000
Grand Total, HCFAC $1,944,738,148
All mandatory resources are post-sequester.
The HHS and DOJ Wedge funds are divided among multiple agencies within HHS and DOJ. Page 7 of this report
includes the allocations of the HHS and DOJ Wedge by agency or activity.
Medicare Integrity Program (MIP) and Medi-Medi fund fraud prevention and detection activities within Medicare
and Medicaid, which are not included in this report to Congress. There is another mandatory report due to Congress
regarding MIP activities.
The FBI receives funding annually to conduct anti-fraud activities authorized by HIPAA. This funding is included
in the HCFAC ROI calculation for this report.
This does not include the Medicaid Integrity Program authorized in the Deficit Reduction Act of 2005, which
receives funding separately from the HCFAC account.
Glossary of Terms
The Account?The Health Care Fraud and Abuse Control Account
ACA ? Affordable Care Act
AKS? Anti-Kickback Statute
AoA?Department of Health and Human Services, Administration on Aging
ACL?Department of Health and Human Services, Administration for Community Living
ASPA ? Assistant Secretary for Public Affairs (HHS)
AUSA?Assistant United States Attorney
CHIP?Children?s Health Insurance Program
CIA?Corporate Integrity Agreement
CMP ? Civil Monetary Penalty
CMPL?Civil Monetary Penalties Law
CMS?Department of Health and Human Services, Centers for Medicare & Medicaid Services
CNC?Compromised Number Contractors
CPI?Center for Program Integrity
CRIPA?Civil Rights of Institutionalized Persons Act
D.XX or X.D.Xx?Federal judicial district of a state, which may include north, south, east, west
DME?Durable Medical Equipment
DOJ?The Department of Justice
FEHBP?Federal Employee Health Benefits Program
FBI?Federal Bureau of Investigation
FCA?False Claims Act
FDA?Food and Drug Administration
FDCA?Food, Drug, and Cosmetic Act
HCFAC?Health Care Fraud and Abuse Control Program or the Program
HEAT?Health Care Fraud Prevention & Enforcement Action Team
HFPP?Health care Fraud Prevention Partnership
HHA?Home Health Agency
HHS?The Department of Health and Human Services
HHS-OIG?The Department of Health and Human Services – Office of the Inspector General
HI?Hospital Insurance Trust Fund
HIPAA ? The Health Insurance Portability and Accountability Act of 1996, P.L. 104-191
HIV?Human Immunodeficiency Virus
MEDIC?Medicare Drug Integrity Contractors
MFCU?Medicaid Fraud Control Unit
OCGS?Organized Crime and Gang Section
OGC?Office of the General Counsel, Department of Health and Human Services
PERM?Program Error Rate Measurement
PFP?Pharmaceutical Fraud Pilot Program
The Program?The Health Care Fraud and Abuse Control Program
Secretary?The Secretary of the Department of Health and Human Services
SMP?Senior Medicare Patrol
USAO?United States Attorney?s Office
ZPIC?Zone Program Integrity Contractor
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