The Department of Health and Human Services And Health Care Fraud and Abuse Control Program Annual Report For FY 1998

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The Department of Health and Human Services
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 1998

February 1999


  • Executive Summary
  • Introduction
  • Monetary Results
  • Expenditures
  • Department of Health and Human Services
  • Department of Justice
  • Appendix: Federal Bureau of Investigation - Mandatory Funding
  • Glossary of Terms

    General Note: All years are fiscal years unless otherwise noted in the text.


    The detection and eradication of health care fraud and abuse is a top priority
    of federal law enforcement. Our efforts to combat fraud were consolidated
    and strengthened considerably by the Health Insurance Portability and Accountability
    Act of 1996 (HIPAA). HIPAA established a national Health Care Fraud and
    Abuse Control Program (Program), under the joint direction of the Attorney
    General and the Secretary of the Department of Health and Human Services
    (HHS)(1), acting through the Department's
    Inspector General (HHS/OIG), designed to coordinate federal, state and local
    law enforcement activities with respect to health care fraud and abuse.
    HIPAA made available much needed and powerful new criminal and civil enforcement
    tools and financial resources that permitted the government to expand and
    intensify the fight against health care fraud.

    The second year of operation under the Health Care Fraud and Abuse Control
    Program saw continuing returns to the Medicare Trust Fund, a rise in the
    number of individuals excluded from participation in federally-funded health
    care programs, and the initiation and enhancement of important efforts to
    prevent health care fraud and to safeguard the quality of care
    furnished to beneficiaries under those programs.

    Civil and Criminal Enforcement Actions

    Federal prosecutors filed 322 criminal cases in health care fraud cases
    in 1998 -- a

    14 percent increase over the previous year, and 326 defendants were convicted
    of health care fraud-related crimes. Also in 1998, 107 civil cases were
    filed, and at the end of the year 3,471 civil matters were pending.

    Monetary Results

    In 1998, the Federal Government won or negotiated more than $480 million
    in judgments, settlements, and administrative impositions in health care
    fraud cases and proceedings. As a result of these activities, as well as
    prior-year judgments, settlements, and administrative impositions, the Federal
    Government in 1998 collected $296 million. It should be noted that some
    of the judgments, settlements, and administrative impositions in 1998 will
    result in collections in future years, just as some of the collections in
    1998 are attributable to actions from prior years.

    More than 92 percent ($271 million) of the funds collected and disbursed
    in 1998 were returned to the Medicare Trust Fund. An additional $9 million
    was recovered as the federal share of Medicaid restitution.

    Exclusion from Federally Sponsored Programs

    HIPAA expanded and strengthened the government's ability to prohibit companies
    or individuals who have been convicted of certain health care offenses,
    lost their licenses, or engaged in other professional misconduct from participating
    in Medicare, Medicaid or other federally sponsored health care programs.
    In 1998, HHS excluded 3,021 individuals and entities, an increase of 11
    percent over 1997.

    Administrative Penalties for "Patient Dumping"

    The government expanded its efforts under the Patient Anti-Dumping Statute,
    which requires hospitals' emergency departments to provide emergency medical
    screening and stabilizing treatment to individuals needing emergency care.
    Settlement agreements were entered into with 53 hospitals and physicians
    -- up from a previous high of 18 settlements in 1996 -- and a record $1.8
    million in civil monetary penalties was collected.

    Preventing Health Care Fraud

    Preventing health care fraud and abuse is a central component of the Program.
    The Program's prevention efforts include the promulgation of formal advisory
    opinions to industry on proposed business practices, industry-specific program
    compliance guidance, special fraud alerts, corporate integrity agreements
    with providers who settle allegations of fraud, beneficiary and provider
    education and outreach, and substantial implemented program improvements.



    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 (Program),
    a far-reaching program to combat fraud and abuse in health care, including
    both public and private health plans.

    The Act requires that an amount equal to collections from health care investigations
    -- including criminal fines, forfeitures, civil settlements and judgments,
    and administrative penalties, but excluding restitution, compensation to
    the victim agency and relators' shares -- be deposited in the Medicare(2)
    Trust Fund. All funds deposited in the Trust Fund as a result of the Act
    are available for the operations of the Trust Fund.

    The Act appropriates monies from the Medicare Trust Fund to an expenditure
    account, called the Health Care Fraud and Abuse Control Account (Account),
    in amounts that the Attorney General and the Secretary jointly certify are
    necessary to finance anti-fraud activities. The maximum amounts available
    for expenditure are specified in the Act. Certain of these sums are to be
    available only for activities of the HHS/OIG, with respect to Medicare and
    Medicaid programs. In 1998, the second year of the Program, the Attorney
    General and the Secretary certified

    $119.6 million for appropriation to the Account. A detailed breakdown of
    the allocation of these funds is set forth later in this report. These resources
    supplement the direct appropriations of HHS and DOJ that are devoted to
    health care fraud enforcement. (Separately, the Federal Bureau of Investigation
    (FBI) received $56 million from HIPAA which is discussed in the Appendix.)

    Under the joint direction of the Attorney General and the Secretary, the
    Program's goals are:

    (1) to coordinate federal, state and local law enforcement efforts relating
    to health care fraud and abuse;

    (2) to conduct investigations, audits, 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;

    (4) to provide guidance to the health care industry regarding fraudulent
    practices; and

    (5) to establish a national data bank to receive and report final adverse
    actions against health care providers.

    The Act requires the Attorney General and the Secretary to submit a joint
    annual report to the Congress which identifies:

    (A) the amounts appropriated to the HI Trust Fund for the previous fiscal
    year under various categories and the source of such amounts; and

    (B) the amounts appropriated from the Trust Fund for such year for use
    by the Attorney General and the Secretary and the justification for the
    expenditure of such amounts.

    This annual report is submitted in fulfillment of the above statutory requirements.


    As required by the Act, HHS and DOJ must detail in this Annual Report the
    amounts deposited and appropriated to the Medicare Trust Fund, and the source
    of such deposits. In 1998, as a result of the combined anti-fraud actions
    of the federal and state governments and others, the Federal Government collected
    $296 million in connection with health care fraud cases and matters(3).
    These funds were deposited with the Department of the Treasury and Health
    Care Financing Administration (HCFA), transferred to other federal agencies
    administering health care programs, or paid to private persons. The following
    chart provides a breakdown of the transfers/deposits:

    Total Transfer/Deposits by Recipient 1998
    Department of the Treasury
    HIPAA Deposits to the Medicare Trust Fund
    Gifts and Bequests $3,000
    Amount Equal to Criminal Fines 2,503,298
    Civil Monetary Penalties 1,855,277
    Amount Equal to Asset Forfeiture * 0
    Amount Equal to Penalties and Multiple Damages 103,025,990
    Health Care Financing Administration
    OIG Audit Disallowances - Recovered 27,998,956
    Restitution/Compensatory Damages 144,741,634
    Subtotal 280,128,155
    Restitution/Compensatory Damages
    to Other Federal Agencies
    Department of Defense 7,488,888
    Office of Personnel Management 173,866
    Other 3,125,418
    Department of Health and Human Services - Other
    than HCFA
    Subtotal 12,058,368
    Relators' Payments **  
    Relators' Payments ** 4,344,610
    TOTAL *** $296,531,133

    *This includes only forfeitures under 18 United States Code (U.S.C.) 1347,
    a new federal health care fraud offense that became effective on August
    21, 1996. Not included are forfeitures obtained in numerous health care
    fraud cases prosecuted under federal mail and wire fraud and other offenses.

    **These are funds awarded to private persons who file suits on behalf of
    the Federal Government under the qui tam provisions of the False
    Claims Act, 31 U.S.C. sec 3730(b).

    ***Funds are also collected on behalf of state Medicaid programs and private
    insurance companies; these funds are not 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 Fund. These amounts include:

    (1) Gifts and bequests made unconditionally to the Trust Fund, 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 1347 of title 18, U.S.C. (relating to health
    care fraud);

    (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)(6) of title
    18, U.S.C.;

    (5) Penalties and damages obtained and otherwise creditable to miscellaneous
    receipts of the general fund of the Treasury obtained under sections 3729
    through 3733 Title 31, United States Code (known as the False Claims Act),
    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).

    HIPAA requires an independent review of these deposits by the General Accounting
    Office (GAO). The GAO submitted its first report to Congress on June 1,


    In the second year of operation, the Attorney General and the Secretary certified
    $119.6 million as necessary for the Program. The following chart gives the
    allocation by recipient:


    (Dollars in thousands)

    Department of Health and Human Services
    Office of Inspector General $85,680
    Office of the General Counsel 2,200
    Administration on Aging 1,300
    Health Resources Services Administration 1,000
    Health Care Financing Administration 950
    Total 91,130
    Department of Justice
    United States Attorneys 23,856
    Civil Division 3,803
    Criminal Division 561
    Justice Management Division 250
    Total 28,470
    Total $119,600

    These resources supplement the direct appropriations of HHS and DOJ that
    are devoted, in part, to health care fraud enforcement. Separately, the
    FBI received an additional $56 million in funding which is discussed in
    the Appendix to this Report.

    Overview of Accomplishments


    During this year, the Federal Government won or negotiated more than $480
    million in judgments, settlements, and administrative impositions in health
    care fraud cases and proceedings. As a result of these activities, as well
    as prior year judgments, settlements, and administrative impositions, the
    Federal Government in 1998 collected $296 million in cases resulting from
    health care fraud and abuse, of which $271 million was returned to the Medicare
    Trust Fund, and $9 million was recovered as the federal share of Medicaid
    restitution. It should be emphasized that some of the judgments, settlements,
    and administrative impositions in 1998 will result in collections in future
    years, just as some of the collections in 1998 are attributable to actions
    from prior years.


    Working together, we have brought to successful conclusion the investigation
    and prosecution of numerous costly health care fraud schemes. These investigations
    were not limited to providers and suppliers of health care services -- 1998
    saw the conclusion of two major investigations involving allegations of
    fraud on the part of the contractors who process claims on behalf of the
    Medicare program:

    • Health Care Services Corporation, the Medicare carrier for Illinois
      and Michigan agreed to pay the government $140 million in settlement of
      a qui tam suit alleging that it shredded claims, altered documents
      and otherwise manipulated data relied on by HCFA to evaluate its contract
      performance. In addition to the civil settlement, the corporation agreed
      to plead guilty to obstructing a federal audit, conspiracy to obstruct
      a federal audit, and making false statements to HCFA which will result
      in a $4 million criminal fine. In order to guard against future misconduct,
      and to ensure that any potential lapses are detected early, the government
      and the corporation also entered into a strict corporate integrity agreement.
      We anticipate collecting these funds in the next fiscal year.
    • PBSXACT, the Medicare carrier for several mid-Atlantic states, resolved
      a 2-year investigation by agreeing to pay $38.5 million in settlement
      of allegations that it improperly processed Medicare secondary payor claims,
      neglected to recover overpayments, bypassed certain computer payment safeguards,
      and failed to implement required screens for certain lab tests, all of
      which resulted in false claims to the Medicare program. Again, the contractor
      agreed to undertake corporate integrity obligations, including training
      and external reviews of its performance.

    HHS and DOJ continue to pursue a number of National and Multi-District
    Projects including:

    • Physicians at Teaching Hospitals: In the sixth resolution of
      a case in the Physicians at Teaching Hospitals or "PATH" project, the
      government reached settlement with a state university school of medicine
      for allegedly billing the Medicare and Medicaid programs in violation
      of rules governing payment for physician services rendered by residents
      and interns. The University of Pittsburgh agreed to pay $17 million to
      settle potential liability under the False Claims Act and Civil Monetary
      Penalties Laws. The government took steps to prevent future improper claims
      by negotiating a corporate integrity agreement that, in part, requires
      periodic audits and reports by the university for a period of five years.
    • Diagnosis Related Groups (DRG) 72 Hour Window Project: A joint
      nationwide project targeting improper Medicare claims by hospitals for
      outpatient services continued in 1998. Medicare reimbursement of hospitals
      for inpatient services includes compensation for related outpatient services,
      such as laboratory tests, provided during the three days preceding the
      day of admission and during the hospital stay. In addition to recouping
      charges for amounts improperly paid to hospitals, the settlements under
      this project require hospitals to establish internal controls to prevent
      submission of such improper Medicare claims. As of September 30, 1998,
      2,483 hospitals had settled with the United States, agreeing to pay a
      total of $63,849,947. The project is expected to continue into 1999.

    Quality of Care

    The destructive impact of fraudulent billing is not measured in dollars
    only. During 1998, the Program also stepped up pursuit of investigations
    and prosecutions that directly affect the quality of care provided
    to Medicare, Medicaid and other beneficiaries of government funded health
    care programs. During 1998, the government utilized the False Claims Act
    to proceed against nursing homes that furnished substandard, even dangerous,
    patient care. For example, Chester Care, a chain of three nursing homes
    in suburban Philadelphia settled an action alleging grossly deficient patient
    care, in one case resulting in the scalding death of a patient, in which
    the homes were required to institute rigorous and extensive quality of care
    compliance provisions. These standards included strict guidelines for the
    care of nursing home residents with diabetes; standards that in many respects
    exceed professional standards in the industry. Enforcement of the standards
    is ensured by an independent monitor; for the worst of the three homes,
    an outside manager was instituted to oversee all aspects of the facility
    until such time as HCFA finds that the home has returned to compliance.

    The government also concluded its investigation of a publicly owned nursing
    home for allegations of substandard care (including excessive use of restraints,
    lack of cleanliness, and a high level of injuries among patients). Again,
    in settlement of the action, the facility agreed to implement specific protocols
    to ensure quality of care, and to employ a monitor to ensure full implementation
    and further safeguard the patients. The impetus for these and similar actions
    is not only to obtain compensation for the government's losses, but also
    to prevent future violations and protect patient safety.


    The Program also continues to focus on prevention of health care
    fraud and abuse through inclusion of rigorous corporate integrity provisions
    in settlements with alleged offenders, industry-specific program compliance
    guidance, formal advisory opinions, special fraud alerts, beneficiary outreach,
    and exclusions from program participation.

    A more detailed description of these and other accomplishments of the major
    federal participants in the coordinated effort established under HIPAA follows.
    While information in this report is presented in the context of a single
    agency, most of these accomplishments reflect the combined efforts of HHS,
    DOJ and other partners in the anti-fraud efforts. The continuing accomplishments
    of the HHS and DOJ and our partners in the coordinated anti-fraud effort,
    as well as prevention efforts, demonstrate that the increased funds to battle
    health care fraud and abuse continue to be sound investments.


    Office of Inspector General

    Certain of the funds appropriated under HIPAA are, by statute, set aside
    for Medicare and Medicaid activities of the HHS/OIG. During the second year
    of the Program, the Act provides that between $80 and $90 million be devoted
    to these purposes. The Attorney General and the Secretary jointly allotted
    $85.7 million to the HHS/OIG in 1998, an increase of $15.7 million over

    With these increased resources, HHS/OIG conducted or participated in 1,114
    successful prosecutions or settlements in 1998. For the second straight
    year, there was a significant rise in the number of individuals and entities
    excluded from doing business with Medicare, Medicaid and other federal and
    state health care programs. A total of 3,021 individuals and entities were
    so excluded, many as a result of criminal convictions for program-related
    crimes (584) and criminal convictions for patient abuse or neglect (302).
    Others were excluded based on licensure revocations (1,251) or other professional
    misconduct. Overall, there was an 11 percent increase in exclusions (from
    the 2,700 exclusions in 1997).

    In addition to the OIG's role in bringing about the judgments and settlements
    described in the Overview of Accomplishments, HHS acted on OIG recommendations
    and disallowed $27.7 million in improperly paid health care funds in 1998.
    HHS/OIG continues to work with HCFA to develop and implement recommendations
    to correct systemic vulnerabilities detected during HHS/OIG evaluations
    and audits. These corrective actions often result in health care funds not
    expended (that is, funds put to better use as a result of implemented HHS/OIG
    initiatives). In 1998, such funds not expended on improper or unnecessary
    care amounted to approximately $10.8 billion -- nearly $8.3 billion in Medicare
    savings, and nearly $2.6 billion in savings to the Medicaid program.

    HHS/OIG moved closer to its goal of extending its investigative and audit
    staffs to cover all geographical areas in the country, particularly
    those that were under served during lean budget years. During 1998, overall
    HHS/OIG staff levels increased from 1,126 to 1,258, and HHS/OIG opened five
    new investigative offices. The staff increases also strengthened the office's
    ability to conduct rapid national evaluations that provide policymakers
    with factual information, analysis and recommendations for improving HHS
    programs. The outcomes of these inspections lead to increased cost savings,
    improved quality of care or services, improved program efficiency and the
    identification of program vulnerabilities.

    Focus on Prevention

    Affirmative enforcement, with an eye toward prosecution or recovery of
    misspent funds, has been and remains a key role of the HHS/OIG. However,
    with the increased resources made available under HIPAA, the HHS/OIG has
    also continued to expand activities designed not just to uncover existing
    fraud and abuse, but to prevent it.

    A cornerstone of HHS/OIG's prevention efforts has been the development
    of compliance program guidance to encourage and assist the private health
    care industry to fight fraud and abuse. The guidance, developed in consultation
    with DOJ and the provider community, identifies steps that health providers
    may voluntarily take to improve adherence to Medicare and Medicaid rules.
    Each guidance sets forth seven elements that the HHS/OIG considers necessary
    for a comprehensive compliance program and identifies risk areas for the
    specific industry sector. In 1998, the OIG issued compliance program guidance
    for use by hospitals and home health agencies, and issued a revised guidance
    for clinical laboratories. The HHS/OIG also solicited input from the durable
    medical equipment industry on issues that should be addressed in upcoming
    guidance for that health care sector.

    With increasing frequency, health care providers that enter agreements
    with the government in settlement of potential liability for violations
    of the False Claims Act also agree to adhere to a separate "corporate integrity
    agreement." Under this agreement, the provider commits to establishing a
    compliance program or undertaking other specified steps to ensure their
    future compliance with Medicare and Medicaid rules. The duration of most
    corporate integrity agreements is 3 to 5 years, during which time the provider
    must submit an annual report to HHS/OIG on its compliance activities. At
    the close of 1998, the OIG was monitoring approximately 350 agreements;
    a total of 231 corporate integrity agreements were entered into in 1998.

    Industry outreach and education is another critical component of fraud
    prevention. During this past year, the HHS/OIG issued final regulations,
    in consultation with DOJ, implementing a process for issuing written advisory
    opinions to the public on the sanction authorities enforced by HHS/OIG,
    including the anti-kickback statute and the Civil Monetary Penalties Law.
    In 1998, HHS/OIG issued 15 advisory opinions on a wide range of concerns.
    Moreover, HHS/OIG received 21 requests for opinions in the last quarter
    of the year, almost 40 percent of the total requests for the year, reflecting
    growing industry recognition of the value of the advisory opinion process.
    In addition, HHS/OIG issued a special fraud alert on financial relationships
    between hospices and nursing homes, as well as presented frequent speeches
    to industry groups on areas of suspected fraud and abuse and measures they
    can take to avoid trouble.

    Enlisting beneficiaries as partners in fighting fraud assists in identifying
    abuses at an early stage, and preventing ongoing or widespread abuse. An
    HHS/OIG survey found that Medicare beneficiaries are well-positioned to
    identify fraud, with three out of four stating that they "always" read their
    Explanation of Medicare Benefit statements. The HHS/OIG continues to work
    with the Administration on Aging, HCFA, and the American Association of
    Retired Persons to develop an outreach campaign to educate beneficiaries
    and those who work with the elderly to recognize fraud and abuse and to
    report it appropriately. This campaign will be fully "launched" in 1999.
    The beneficiary outreach program, in part, encourages individuals to contact
    the HHS/OIG Hotline, 1-800-HHS-TIPS, which receives complaints of improprieties
    in Medicare and other HHS programs. In 1998, the Hotline received over 76,000
    calls (up from 58,000 in 1997), which resulted in more than 12,500 complaints.
    Approximately $1.04 million in collections are associated with complaints
    referred to and resolved by HCFA and its contractors.

    There is a final, and critically important HHS/OIG effort to prevent fraud
    and abuse. Frequently, investigations (and resulting civil settlements or
    criminal prosecutions), audits and evaluations reveal vulnerabilities or
    incentives for fraud in agency programs or administrative processes. As
    required by the Inspector General Act, the HHS/OIG makes recommendations
    to correct these vulnerabilities, and thereby promote economy and efficiency
    in HHS programs and operations. Relying on the independent factual information
    generated by HHS/OIG, agency managers fashion legislative proposals and
    other corrective action that, when enacted or implemented, close loopholes
    and avoid ineffective expenditures or improper conduct. The savings from
    these joint efforts toward program improvements can be vast. Among the OIG
    studies that provided evidence and ideas supporting proposals for significant
    cost savings during 1998, and studies conducted in 1998 that will likely
    reap such savings in the future are:

    • Home Health - A combination of OIG investigations, audits, and
      evaluations helped support a general reform of home health services provided
      by Medicare. Legislation was recently enacted to strengthen and protect
      the Medicare home health benefit, by establishing payment on a prospective
      basis for each episode of care, rather than on a visit-by-visit basis.
      An interim payment system will control reimbursements until the prospective
      payment system is implemented. The legislation also requires agencies
      to purchase surety bonds, eliminates periodic interim payments, requires
      home health agency owners to submit their social security numbers and
      detailed information about related businesses, authorizes HCFA to re-enroll
      agencies every 3 years, and gives HCFA more power to refuse to enter into
      agreements with suspect individuals or companies.
    • Nursing Homes - Similarly, new legislation has reformed the
      way Medicare pays for nursing home services. Again, the new policy adopts
      a prospective payment system for nursing home stays covered under Medicare
      Part A. Under new "consolidated billing," nursing facilities must also
      submit bills for Part B-covered services to Medicare for residents who
      are either Medicaid or private pay.
    • Prescription Drugs - In response to HHS/OIG findings and recommendations
      that showed Medicare paid more for prescription drugs than the Medicaid
      program and that Medicare payments greatly exceeded suppliers' acquisition
      costs, Congress reduced Medicare payment rates for drugs by 5 percent.
      The new legislation also authorized HCFA to make inherent reasonableness
      adjustments of up to 15 percent to all Part B services except physician
    • Hospice Care - A combination of audit and evaluation reports
      were the subject of numerous congressional hearings and media coverage
      that resulted in heightened awareness of problems with hospice care especially
      when provided in nursing homes. New legislation provides more frequent
      certification of eligibility for the hospice benefit. This will help control
      costs while improving the overall quality of care for Medicare patients
      facing death. In addition, the OIG issued a Fraud Alert to the public
      regarding problems of coordination of hospice benefits with nursing home

    In addition to this work already completed, the OIG continues to develop
    new proposals and new ideas to ensure the integrity of the Medicare program.

    Focus on Quality of Care

    Some of the HHS/OIG's most important investigations, audits and evaluations
    focused on the quality of care furnished to program beneficiaries.
    A number of these investigations are described in the "Overview of Accomplishments"
    section of this report. Others include:

    • Investigation revealed that the Northern Louisiana Rehabilitation Hospital
      was billing Medicare for services that were medically unnecessary or provided
      no benefit to the Medicare patient. The hospital also delayed discharging
      Medicare patients in order to bill additional services to Medicare. The
      hospital and its majority stock holder agreed to pay nearly $4.5 million
      in settlement of these allegations of false claims to Medicare.
    • In partnership with the Illinois State Medicaid agency, the HHS/OIG
      investigated Home Pharmacy Service, Inc, a pharmacy that provided services
      to nursing homes, for failing to return unused medications after the resident
      died. Instead, the pharmacy allegedly reused the medications, thereby
      both potentially endangering patients and submitting false claims to Medicaid.
      The pharmacy settled these allegations for $5.3 million.
    • Corporate integrity agreements can also be an important instrument
      in safeguarding patient quality of care. For example, Charter Behavioral,
      a psychiatric hospital, agreed to having a monitor selected by the government
      to oversee the medical necessity for and duration of each admission, and
      otherwise review the quality of patient care. As mentioned in the Overview
      of Accomplishments, a Pennsylvania nursing home also signed a settlement
      agreement that included strict guidelines for the care of nursing home
      patients with diabetes.

    Both HCFA and the HHS/OIG have significantly stepped up enforcement actions
    under the patient anti-dumping statute. Federal law requires that an emergency
    medical screening examination and stabilizing treatment be provided by the
    emergency department of a Medicare participating hospital. The HHS/OIG is
    currently investigating over 150 instances, in which individuals were allegedly
    refused medical screening or treatment that were analyzed and referred by
    HCFA. In 1998, HHS/OIG entered 53 settlement agreements with hospitals and
    physicians and collected civil monetary penalties of $1.8 million. This
    is a marked increase from the previous high of 18 settlements in 1996, and
    reflects the commitment of both HCFA and HHS/OIG to ensure patient access
    to appropriate emergency medical services.

    Elder abuse in nursing homes is of growing concern. An HHS/OIG review concluded
    that state safeguards do not ensure that potentially dangerous applicants
    are identified and denied employment in nursing homes. States rely on a
    patchwork of measures, such as criminal background checks and screens of
    nurse aide registries. These safeguards vary widely among the states. Moreover,
    where screens exist, they often apply only to "in-state" records that do
    not include information on some individuals' criminal histories.


    The Office of Investigations (OI) has held numerous conferences and training
    seminars during the first two years of HIPAA. These include two durable
    medical equipment conferences; eight HCFA contractor fraud unit training
    seminars and one conference on fraud in home health agencies. Outreach programs
    on durable medical equipment and home health agencies were given in coordination
    with the HCFA contractor fraud units throughout the country to members of
    the health care community. In addition, OI personnel have made presentations
    to provider organizations on current issues of health care fraud and abuse.
    The organizations include hospital, home health, hospice and nursing home

    Other Initiatives to Combat Health Care Fraud and Abuse

    The annual audit of HCFA's financial statements (mandated by the Chief
    Financial Officers Act and the Government Management Reform Act) provides
    an objective evaluation of the reliability of those statements and, importantly,
    an evaluation of financial management processes, systems and internal controls.
    The fiscal year 1997 audit, jointly funded by HHS/OIG and HCFA, noted an
    improvement in federal financial accountability. HHS/OIG issued a qualified
    opinion; an improvement over the disclaimer issued for the previous year.
    Because of continuing problems, however, OIG was unable to issue an unqualified
    (or "clean") opinion. The audit report estimated that improper Medicare
    fee-for-service payments in 1997 amounted to about

    $20.3 billion, or about 11 percent of the total $177.4 billion in fee-for-service
    payments. Much of these improper payments were the result of insufficient
    or no medical documentation of the services, lack of medical necessity,
    incorrect coding, and unallowable services. The audit did not determine
    what portion of these improper payments are attributable to fraud. Additionally,
    OIG identified systemic internal control problems. HCFA continues to work
    with the HHS/OIG in its efforts to complete corrective action.

    With more than six million Medicare beneficiaries receiving health care
    services through managed care plans (as of February 1998), the HHS/OIG conducted
    various reviews assessing this health care delivery option. Among these,
    the HHS/OIG evaluated beneficiary and provider satisfaction with HMOs and
    other managed care plans, reviewed the components of the administrative
    costs included in calculating the adjusted community rate and recommended
    that legislation be sought that would exclude inappropriate expenses that
    currently inflate that rate beyond what is Medicare's "fair share" (with
    a potential cost saving of $1 billion); and made recommendations to improve
    beneficiaries' access to services.

    Health Care Financing Administration

    The Health Care Financing Administration (HCFA) is the agency with primary
    responsibility for administering the Medicare and Medicaid programs. HCFA
    has a mandatory appropriation to support its Medicare Integrity Program(4),
    however, appropriations for the integrity program cannot be used in support
    of activities conducted directly by agency personnel.

    In 1998 HCFA received $950,000 from the Account to support efforts at controlling
    fraud and abuse in the Medicare program.

    • Medicare Satellite Offices. $720,000 in HCFAC funds
      were used to continue Satellite Office operations in Miami and to open
      a new satellite office in New Orleans, Louisiana.

      Satellite Offices' support newly established, cross-jurisdictional
      partnerships with various entities that had previously worked in isolation
      to combat fraud. Specifically, Satellite Office staff are charged with
      working directly with staff of other federal agencies, various law enforcement
      agencies, relevant state agencies and various private companies to function
      as a "hub" coordinating and helping avoid duplication in the fraud prevention,
      detection and elimination efforts of these partners.

      The New Orleans Office opened mid-year and spent a considerable portion
      of 1998 getting established; the Miami office continued to enjoy the
      success needed to demonstrate the viability of the Satellite Office.
      Since 1996, the Miami office, working collaboration with its partners
      in Florida, has identified significant fraudulent and abusive claims
      against the Medicare and Medicaid programs, resulting in the identification
      of $75 million in overpayments. In addition, the collaborative projects
      focused on identifying the root causes of fraud, waste and abuse, so
      that corrective action could be taken and further occurrences prevented.

    • State Survey and Certification projects. $230,000
      in HCFAC funds were used to support continuation of state survey and certification

      State survey agency personnel were trained on methods to identify
      problem providers and used that training as part of their ongoing survey
      work in laboratories and other health care facilities. HCFAC funds supported
      state personnel and HCFA oversight of these activities for projects
      in 25 states.

    Health Resources and Services Administration

    The Act mandates that the HHS/OIG and DOJ establish a national health care
    fraud and abuse data collection program for the reporting and disclosure
    of certain final adverse actions (excluding settlements in which no findings
    of liability have been made) taken against health care providers, suppliers,
    and practitioners. The Health Resources and Services Administration (HRSA)
    is authorized to design, implement and operate this program, currently named
    the Healthcare Integrity and Protection Data Bank (HIPDB). In 1998, HRSA
    was allocated $1 million from the Account to further development of
    the HIPDB.

    The HIPDB initial operating capability stage was completed and tested in
    March 1998. The next stage of development included the addition of
    systems capability to receive adverse licensure and certification reports,
    as well as reports of other adverse federal and state actions, on health
    care practitioners. The HIPDB also was developed to receive reports of all
    types of health care related final adverse actions against health care providers
    and suppliers. The first generation of the HIPDB will be substantially complete
    by May 1999. Pursuant to the Act, the HIPDB may not open for operations
    until final regulations are issued by the Secretary.

    The HIPDB system has undergone and successfully completed Y2K compliance
    testing to ensure that dates beginning with the year 2000 will not disrupt
    operations. Once the HIPDB becomes operational, the query fee payment will
    be collected via an interface with Mellon Bank. This link is the only part
    of this data collection program that has not yet undergone Y2K compliance
    testing. Certification regarding Y2K compliance is expected from Mellon
    Bank in 1999.

    Progress to date includes:

    • design specifications developed and approved;
    • specific design reviews conducted of key hardware and software;
    • physical facilities modified to accommodate the new equipment; and
    • equipment ordered, received, installed and currently in use for the
      development of the system.

    Data acquisition activities including working with:

    • DOJ to acquire all federal judgments and convictions;
    • HCFA to acquire Medicare and Medicaid adverse and exclusion actions;
    • Departments of Defense and Veterans Affairs to acquire disciplinary
      and adverse actions; and
    • Various health care related and health professional organizations, including
      those representing Nursing and Chiropractic Licensing Boards.

    Office of the General Counsel

    The Office of the General Counsel (OGC) headquarters' divisions (the Health
    Care Financing Division and the Business and Administrative Law Division)
    as well as its 10 regional offices provide legal support under the HCFAC

    OGC was allocated $2.2 million in HCFAC funding for 1998. These funds were
    used for litigation activity, both administrative and judicial. OGC continues
    to experience an increase in the number of new litigation items: a 104 percent
    increase in 1997 and a 17 percent increase in 1998. The bulk of the administrative
    (non-court) litigation involved: (1) civil money penalties (CMP) imposed
    on Medicare nursing facilities; (2) revocations, terminations or denials
    of provider status (especially home health agencies, nursing facilities,
    and Community Mental Health Centers); (3) Medicare Secondary Payor (MSP)
    cases; and, (4) Medicare suspensions of payments to providers and suppliers.
    The bulk of the court litigation involved MSPs or bankruptcies.


    • Prospective Payment System (PPS) Transfer Recovery Project: OGC's HCF
      Division has been assisting OIG and DOJ in a nationwide False Claims Act
      initiative. HHS/OIG has been investigating certain PPS hospitals that
      improperly code patients as being discharged from the hospital when the
      patients have, in fact, been transferred to another PPS hospital. Medicare
      regulations allow a hospital to receive the full DRG payment for a patient
      who is discharged from the hospital. Hospitals that transfer patients
      to another PPS hospital, however, are entitled to receive only a per diem
      payment for the actual length of stay at the first hospital. The OIG's
      investigation has found that thousands of hospitals miscoded transfers
      of patients as discharges, causing Medicare to pay the full DRG payment
      improperly to both the transferor and transferee hospitals.
    • OGC's Region I office, working with HCFA, defended HCFA against a legal
      challenge brought by a large national nursing home chain. In a case involving
      one of the chain's facilities in Region I, OGC's assistance resulted in
      the termination of the facility's Medicare provider agreement, and the
      imposition of a CMP in the amount of $637,000.
    • Region III, in collaboration with the U.S. Attorney's Office in Philadelphia,
      issued the first joint DOJ/HCFA Consent Order against a skilled nursing
      facility in a fraud case. The facility and two related facilities agreed
      to pay $500,000 in CMPs; implement staffing changes pursuant to federal
      regulations; and, adopt a corporate compliance program.
    • The Region V office had a record high 940 new MSP cases filed in 1998.
      Contributing to this were partnership arrangements with contractors and
      U.S. Attorneys in Michigan and Ohio as well as a new notice letter to
      assist fiscal intermediaries in recoveries. This effort contributed to
      nearly $3.6 million in Medicare recoveries through MSP litigation.
    • OGC's Region VI in cooperation with HCFA, was instrumental in suspending
      payments to 40 providers and suppliers on the basis of fraud and misrepresentation
      with only one suspension challenged in court.

    Administration on Aging

    The Administration on Aging (AoA) is the only federal agency with sole
    responsibility for program policies and services for older Americans. In
    1998, the AoA was allocated $1.3 million under the Program. These funds
    continued to train and educate both paid and volunteer staff in the aging
    network, especially those associated with Older Americans Act programs and
    services, such as long-term care ombudsmen, to recognize and report potential
    practices and patterns of fraud and abuse in the Medicare and Medicaid programs.
    Additionally, AoA and its network agencies engaged in outreach and educational
    activities to assist older persons, their families and their communities
    to recognize and report fraudulent and abusive situations and to prevent
    or minimize victimization by such behavior.


    • Increased to 18 the number of cooperative agreements to state units
      on aging to support education, training and outreach efforts to help aging
      network staff and volunteers to recognize and report health care fraud
      and abuse. Based on a pre-test of AoA's HCFAC/ORT performance measures,
      the following activities were documented:

      • Cumulatively, more than four and a half million people were reached
        through public service announcements, community education events,
        and other activities.
      • 275 formal training sessions were conducted for over 8,500 aging
        network staff and volunteers who, in turn, conducted public information
        forums attended by over 15,000 persons. Over 100 brochures, manuals,
        and videos were developed and publicly distributed to support training
    • Based on information gathered from AoA's partners and stakeholders,
      the agency developed and implemented a series of new technical assistance
      activities designed to more effectively carry out their mandates, including:

      • Planning and convening a 3 day national technical assistance and
        resource exchange conference in August 1998.
      • Establishing a limited access internet "chat room," and creating
        and maintaining an AoA anti-fraud web page.
      • Establishing a bi-monthly "AoA Fraud Watch" newsletter designed
        to exchange updates, best practices, resources, and information between
        AoA's community volunteer and education projects.
    • HCFAC funding also provided vital technical assistance support to AoA's
      twelve Community Volunteer Projects which have been highly successful
      in recruiting and training retired professionals to identify and report
      waste, fraud and abuse. In its first year of operation, these Community
      Volunteer Projects trained more than 3,600 retired older Americans how
      to review their Explanation of Benefit Statements for potential waste,
      fraud and abuse. The senior volunteers in turn held over 1,300 group and
      counseling sessions attended by more than 41,000 Medicare beneficiaries
      on strategies for combating, preventing, and reporting waste, fraud and
      abuse in the Medicare and Medicaid programs.


    United States Attorneys

    Health care fraud involves many different types of schemes that defraud
    Medicare, Medicaid, the Department of Veterans Affairs, or other insurers
    or providers. The fraudulent activity may include double billing schemes,
    kickbacks, billing for unnecessary or unperformed tests, or may be related
    to the quality of the medical care provided. United States Attorneys' offices
    (USAOs) criminally and civilly prosecute health care professionals, providers,
    and other specialized business entities who engage in health care fraud,
    and work with the Department's Civil and Criminal Divisions, and the FBI.

    USAOs continue to cooperate closely with numerous federal, state and local
    law enforcement agencies who are involved in the prevention, evaluation,
    detection, and investigation of health care fraud. In addition to the HHS/OIG
    and HCFA, these agencies include the State Medicaid Fraud Control Units;
    Inspectors General Offices of other federal agencies; the Drug Enforcement
    Administration; Department of Defense, Defense Criminal Investigative Service;
    and the TRICARE Support Office in the Department of Defense.

    To assist in coordination and communication at national, state, and local
    levels, each USAO has appointed both a criminal and civil health care fraud
    coordinator. Prior to the enactment of HIPAA, USAOs dedicated substantial
    resources to combating health care fraud, HIPAA allocations have supplemented
    these efforts.


    The Executive Office for the United States Attorneys' Office of Legal Education
    (OLE) is tasked with the responsibility for providing health care fraud
    training for USAO, and DOJ attorneys, investigators, and auditors. During
    1998, OLE conducted a number of presentations and complete courses on health
    care fraud, including:

    • Affirmative Enforcement/Health Care Fraud Investigators Session

    • Basic Health Care Fraud for Attorneys

    • Basic Affirmative Civil Enforcement - includes a health care fraud

    • Advanced Affirmative Civil Enforcement - which includes a health care
      fraud component

    • Advanced Health Care Fraud for Attorneys

    • Basics of Medicare for Attorneys and Paralegals

    While the primary student body at each of these courses were DOJ employees,
    personnel from HHS/OIG and other agencies were also invited to participate
    as presenters and students. Additionally, USAO attorneys, investigators
    and auditors participated in a number of non-OLE sponsored, multi-agency
    health care fraud training courses over the last year.

    Accomplishments - Criminal Prosecutions

    The primary objective of criminal prosecution efforts is to ensure the
    integrity of our Nation's health care programs and to punish and deter those
    who, through their fraudulent activities, abuse the health care system and
    the taxpayers.

    Each time a criminal case is referred to a USAO from the FBI, HHS/OIG,
    or other law enforcement agency, it is opened as a matter pending in the
    district. A case remains a matter until an indictment or information is
    filed or the case is declined for prosecution. In 1998, the USAOs had 1,866
    criminal matters pending involving 2,986 defendants, a 23 percent increase
    over 1997. 322 cases were filed with 439 defendants. This represents a 14
    percent increase over cases filed in 1997. Health care fraud convictions
    include both guilty pleas and guilty verdicts. During 1998, there were 219
    criminal health care fraud convictions, involving 326 defendants.

    In one case, the owner of The Human Resources Inc. Concept, pleaded guilty
    to charges that he defrauded the Medicaid program of $7.3 million by billing
    it for individual and group psychotherapy sessions allegedly provided to
    children attending after-school and summer day camp programs. After 4 days
    of trial testimony, the defendant pleaded guilty to one count each of conspiracy
    and mail fraud. The defendant and others recruited inner-city school children,
    who were eligible for Medicaid, to enter after-school and summer school
    programs at a community center and roller skating rink. These programs were
    promoted as providing academic and cultural enrichment and recreational
    opportunities. The defendant directed employees to go door-to-door in poor
    areas to recruit children without telling the parents that Medicaid would
    be billed for individual or group psychotherapy sessions. Parents testified
    that they had not enrolled their children for psychotherapy sessions, and
    that their children did not need those services. Several former employees
    testified that psychological counseling was not provided. On September 30,
    1998 the defendant was sentenced to 3 years and 10 months in federal prison,
    and ordered to pay $7.3 million in restitution.

    Accomplishments - Civil Cases

    Civil health care fraud efforts constitute a major focus of Affirmative
    Civil Enforcement (ACE) activities. The ACE Program is a powerful legal
    tool used to help ensure that federal laws are obeyed, and that violators
    provide compensation to the government for losses and damages they cause
    as a result of fraud, waste, and abuse. Civil health care fraud matters
    ordinarily involve the United States utilizing the False Claims Act, as
    well as the common law of fraud, payment by mistake, unjust enrichment and
    conversion, to recover damages from those who have knowingly submitted false
    or fraudulent claims. Additionally, in conjunction with a defendant committing
    a criminal health care fraud offense, the United States may file a civil
    proceeding using the Fraud Injunction Statute, to ensure assets traceable
    to such violation are available to repay those victims the defendant has

    Each time a civil matter is referred to a USAO it is opened as a matter
    pending in the district. Civil health care fraud matters are referred directly
    from federal or state investigative agencies, or result from filings by
    private persons known as "relators," who file suits on behalf of the Federal
    Government under the 1986 qui tam amendments to the False Claims
    Act and may be entitled to share in the recoveries resulting from these
    lawsuits. At the end of 1998, the USAOs had 3,471 civil health care fraud
    matters pending.

    A matter becomes a case when the United States files a civil complaint,
    or intervenes in a qui tam complaint, in United States District
    Court. A large majority of civil health care fraud cases and matters are
    settled without a complaint ever being filed. In 1998, civil health care
    fraud cases filed increased 20 percent over 1997, from 89 to 107.

    A significant agreement in 1998 arising from a qui tam case, involved
    Health Care Service Corporation (HCSC), the Medicare contractor for Illinois
    and Michigan, in which the company agreed to plead guilty to eight felony
    counts and agreed to pay a $4 million criminal fine and $140 million in
    settlement of its liability under the federal False Claims Act. HCSC, also
    known as Blue Cross and Blue Shield of Illinois, agreed to plead guilty
    to six counts of making false statements to conceal evidence of its poor
    performance in processing Medicare claims from HCFA, and two counts of obstructing
    and conspiring to obstruct federal auditors. The civil settlement resolves
    allegations that the company falsified documents and manipulated samples
    used in government audits of the company's Medicare operations, failed to
    process claims in accordance with guidelines established by HCFA, and failed
    to handle beneficiary and physician inquiries in a timely manner. Prior
    to the corporate plea, one former and one current manager at HCSC's Marion
    office pleaded guilty to charges of conspiracy, wire fraud and obstruction
    of a federal audit. Through their submission of false information to HCFA
    concerning the performance of HCSC on its Medicare Part B contracts, HCSC
    had its contracts with HCFA renewed, and received almost $1.3 million in
    incentive payments from HCFA. In December 1997, HCSC agreed to withdraw
    from the Medicare program and, as of September 1, 1998, was no longer a
    Medicare contractor. This case combined efforts of the U.S. Attorney in
    Southern Illinois, the FBI, the HHS/OIG, the U.S. Postal Inspection Service,
    the Criminal Division, and the Civil Division.

    Civil Division

    Civil Division attorneys vigorously pursue civil remedies in health care
    fraud matters, working closely with the USAOs, the FBI, the Inspectors General
    of HHS and Defense, as well as other federal and state law enforcement agencies.
    A total of 161 new health care fraud matters were initiated in 1998. In
    addition to pursuing more health care fraud allegations, the Civil Division
    is pursuing an increasing number of health care fraud cases in which the
    apparent single damages are particularly high.

    A particularly significant 1998 accomplishment was the $4.7 million settlement
    with Charter Behavioral Health Systems, a psychiatric hospital chain, to
    resolve claims in a qui tam lawsuit. The government alleged
    that a Charter hospital improperly billed Medicare for millions of dollars
    of psychiatric services rendered to individuals who could not benefit from
    the services because they had debilitating organic brain disorders, such
    as Alzheimer's Disease and severe dementia. These beneficiaries were routinely
    admitted to the hospital by doctors allegedly seeking to increase patient
    admissions in response to pressure from Charter's corporate headquarters.
    As part of the agreement, the hospital will be monitored under a 5 year
    corporate integrity agreement, and will not bill Medicare for any services
    for a 15- month period.

    In another health care qui tam case, $17.2 million was paid by
    the University of Texas Health Science Center/Medical School at San Antonio
    to settle allegations that inflated claims for physician services were submitted
    to Medicare, Medicaid, TRICARE and the State Legalization Alien Impact Assistance
    Grant program. The government alleged that the Medical Center submitted
    claims for services personally provided by faculty physicians when, in fact,
    the Center's records did not support the claim that the faculty member personally
    provided the service.

    In addition, Invacare Corporation paid $2.6 million to the Department of
    Veterans Affairs to settle allegations of fraud in the sale of wheelchairs.
    Invacare allegedly failed to provide accurate and complete cost data during
    contract negotiations and violated the Buy America Act by supplying foreign-made

    In 1998, the Civil Division received $3.8 million from the Account. Resources
    were allocated primarily to fund 33 positions, including attorneys, analysts,
    auditors, paralegals, secretaries and a litigation support specialist. Because
    coordination across many organizations and locations is crucial to enforcement
    efforts, one attorney served as the Civil Division's health care fraud coordinator.
    This attorney provided guidance and information, developed training, and
    coordinated policy development and information exchange with other DOJ components,
    HHS/OIG, HCFA and other Government agencies and the private sector.

    Although very limited 1998 resources were available for Automated Litigation
    Support (ALS), auditors and consultants from the Account, the Civil Division
    was able to apply other appropriated funds for these critical services.
    During 1998, much needed ALS was provided to 17 cases while auditor/consultant
    support was provided to 15 cases. Four of the supported cases have settled,
    yielding nearly $14 million. Expected recoveries in the remaining cases
    range from several million to hundreds of millions of dollars.

    Criminal Division

    The Fraud Section of the Criminal Division develops and implements white
    collar crime policy and provides support to the Criminal Division, the Department
    and other federal agencies on white collar crime issues. The Fraud Section
    supports the USAOs with legal and investigative guidance and, in certain
    instances, provides trial attorneys to prosecute criminal fraud cases. For
    several years, a major focus of Fraud Section personnel and resources has
    been to investigate and prosecute fraud involving federal health care programs.

    The Fraud Section has provided guidance to FBI agents, AUSAs and Criminal
    Division attorneys on criminal, civil and administrative tools to combat
    health care fraud, and worked on an inter-agency level through:

    • updates on criminal, civil, administrative and regulatory efforts to
      combat health care fraud.
    • updates on significant appellate decisions concerning health care fraud
    • participation in the negotiated rulemaking committee which sought to
      develop standards for the shared risk exception to liability under the
      anti-kickback statute. The committee met several times and developed a
      committee report which is presently being worked by HHS into its final
    • development of guidance on suspension of Medicare payments to ensure
      program integrity. The memorandum provides information to Department attorneys
      and AUSAs concerning the standards and process for suspension of Medicare
      payments. It also encourages the attorneys to engage in effective and
      timely communication with representatives of HCFA to discuss all significant
      issues which may impact the government's decision whether to employ the
      suspension remedy in a particular instance.
    • development of a Statement of Principles for the Sharing of Health Care
      Fraud Information Between the DOJ and Private Health Plans. This is a
      general statement of principles governing the Department's exchange of
      health care fraud information with private health insurance plans as required
      by the HCFAC Program Guidelines issued by the Attorney General and the
    • providing frequent advice and written materials to AUSAs, and investigative
      agents, on confidentiality and disclosure issues regarding medical records
      which arise in the course of investigations and legal proceedings.
    • reviewing and commenting on numerous requests for advisory opinions
      submitted by health care providers to the HHS/OIG and consulting with
      the HHS/OIG on draft advisory opinions per the requirements of HIPAA.

    Justice Management Division

    The Justice Management Division, Debt Collection Management Staff continues
    to perform various administrative and coordination duties. The duties of
    this office include: budget formulation, oversight and coordinating with
    the Office of Management and Budget and HCFA; development and data collection
    for the internal program evaluation; coordinating with HHS/OIG and the Department
    of the Treasury on the tracking of collections; coordinating with the GAO
    on required audits; and preparation and coordination of the annual report.


    Federal Bureau of Investigation

    Mandatory Funding

    "There are hereby appropriated from the
    general fund of the United States Treasury and hereby appropriated to the
    Account for transfer to the Federal Bureau of Investigation to carry out
    the purposes described in subparagraph (C), to be available without further
    appropriation-- (I) for fiscal year 1998, $56,000,000".

    Successful health care fraud enforcement cannot be achieved by any one
    agency alone. Investigations must be a cooperative effort if they are to
    be successful in combating the increasing problems of health care fraud.
    The FBI is involved in this cooperative effort. The FBI works many health
    care fraud cases on a joint basis with other federal agencies, including
    the HHS/OIG. These two federal agencies collaborate through attendance at
    health care fraud working groups, attend each others training conferences,
    and have a liaison program between the two organizations. In addition, the
    Health Care Fraud task forces represent the coordinated efforts of the FBI,
    state and local law enforcement, investigative agencies such as Inspectors
    General, and private industry. The FBI and HHS/OIG share a common commitment
    to ending fragmented health care fraud enforcement.

    In addition to providing new statutory tools to combat health care fraud,
    HIPAA specified mandatory funding to the FBI for health care fraud enforcement.
    In 1998, $56 million was provided by HIPAA for 569 positions (340 agents).
    The FBI used this funding, in large part, to fund an additional 44 agents
    and 28 support positions for health care fraud and to create several new
    dedicated Health Care Fraud Squads. This increase in personnel resources
    along with the direct FBI funding increased the number of FBI agents addressing
    health care fraud in the fourth quarter of 1998 to approximately 460 agents
    as compared to 112 in 1992.

    As the FBI has increased the number of agents assigned to health care fraud
    investigations, the caseload has increased dramatically from 591 cases in
    1992, to 2,700 cases through 1998. The FBI caseload is divided between those
    health plans receiving government funds and those that are privately funded.
    Criminal health care fraud convictions resulting from FBI investigations
    have risen from 116 in 1992, to 352 through the third quarter in 1998.

    Health care fraud investigations are among those investigations having
    the highest priority within the FBI. The investigations are generally complex
    and require specific knowledge, skills and abilities to successfully investigate.
    Often sophisticated, innovative and creative ideas are needed to combat
    and eventually prosecute the perpetrators of these crimes. As the complexity
    and long-term nature of health care fraud investigations increase, the FBI
    anticipates that the number of FBI investigations and convictions will begin
    to level off.

    A considerable portion of the increased funding was utilized to support
    major health care fraud investigations. In addition, operational support
    has been provided for FBI national initiatives focusing on pharmaceutical
    diversion, chiropractic fraud, and medical clinics. Further, the Health
    Care Fraud Unit, FBI Headquarters, supported individual field offices with
    equipment and supplies to assist in numerous individual investigations.

    In January 1998, four former executives of Damon Clinical Laboratory were
    indicted on federal criminal charges of conspiracy to defraud the Medicare
    Program of more than $25 million. These charges are in addition to the Damon
    Corporate plea in October 1996 when the company pled guilty to conspiracy
    to defraud Medicare in connection with conduct alleged against these executives,
    and paid $119 million to the United States. It is alleged that the individuals
    conspired to manipulate the way physicians order blood tests.

    The funding made available through HIPAA also made possible 4 Regional
    Training Conferences for FBI agents assigned to health care fraud investigations.
    These 1 week training sessions sponsored by HCFA provided in depth training
    on the Medicare Program to almost 250 agents. Other training made possible
    by HIPPA included: a session for the FBI's Financial Analysts; and a joint
    FBI, Defense Criminal Investigative Service, HHS/OIG Managers Conference.
    Further, funding from HIPAA was utilized in Pharmaceutical Division and
    Cost Report Training sessions to more than 100 FBI agents.


    Account - The Health Care Fraud and Abuse Control Account

    ACE - Affirmative Civil Enforcement

    ALS - Automated Litigation Support

    AoA - Administration on Aging

    AUSA - Assistant United States Attorney

    DOJ - The Department of Justice

    DRG - Diagnosis Related Group

    FBI - Federal Bureau of Investigation

    GAO - General Accounting Office

    HCFA - Health Care Financing Administration

    HHS - The Department of Health and Human Services

    HIPAA, or the Act - The Health Insurance Portability and Accountability
    Act of 1996, P.L. 104-191

    HIPDB - Healthcare Integrity and Protection Data Bank

    HRSA - Health Resources and Services Administration

    MSP - Medicare Secondary Payer

    OGC - The Department of Health and Human Services, Office of the General

    OI - The Department of Health and Human Services, Office of Inspector General,
    Office of Investigations

    OIG - The Department of Health and Human Services, Office of Inspector

    OLE - Office of Legal Education, located within the Executive Office for
    the United States Attorneys

    PPS - Prospective Payment System

    Program - The Health Care Fraud and Abuse Control Program

    Secretary - The Secretary of the Department of Health and Human Services

    USAO - United States Attorney's Office

    U.S.C. - United States Code

    1. Hereafter, referred to as the Secretary.

    2. Also known as the Hospital Insurance (HI) Trust Fund.
    All further references to the Medicare Trust Fund refer to the HI Trust

    3. In 1998, DOJ collected, or continued to hold in suspense,
    an additional $96,480,614 in health care fraud cases and matters that was
    not disbursed to the affected agencies and/or the Account in 1998 due to:
    (i) on-going litigation regarding relator shares in qui tam cases
    that will affect the amount retained by the Federal Government; and (ii)
    receipt of funds late in the year that were then processed in 1999.

    4. The Medicare Integrity Program is run through Medicare
    contractors and is intended to protect the trust fund from abusive or fraudulent

Updated September 9, 2014