The Senate Judiciary Committee held a recent hearing on the problems of health care fraud. According to Chairman Patrick Leahy (D-VT), the scale of health care fraud in America today is "staggering." "According to conservative estimates," the Senator said in his opening statement, "about three percent of the funds spent on health care are lost to fraud -- more than $60 billion dollars a year. In the Medicare program alone, the Government Accountability Office estimates that more than $10 billion dollars was lost to fraud just last year."

Senator Leahy expressed his appreciation that pending health care reform legislation includes provisions allowing for more access by law enforcement to essential information and appropriate access to the data and information needed to uncover fraud. "To stop the drain on our health care system caused by these types of fraud, we must make anti-fraud enforcement stronger and more effective. Much has been done to improve enforcement since the late 1990s, but we can and must go further."

Hearing witness Bill Corr, Deputy Secretary of the Department of Health and Human Services (HHS) testified that under President Obama's new priority in combating health care fraud, the government has had a more rapid response to fraudulent schemes and has increased recovery of funds lost to fraud than in previous years. Corr pointed out that the HHS Office of Inspector General investigations have resulted in $4 billion in receivables for FY 2009, and that strike force cases are indicted and litigated faster than traditional criminal health care fraud cases. Corr also recounted the $2.3 billion settlement with Pfizer to resolve criminal and civil liability form the illegal promotion of some pharmaceutical products, the largest health care fraud settlement in history.

In the federal health care fraud investigations, Corr explained that HHS most important components are the Office of Inspector General (OIG), CMS and the Food and Drug Administration (FDA). OIG's role is providing essential support through its analysis of data for patterns of fraud, conducting independent investigations, supporting federal prosecutions of providers who commit criminal and civil fraud and pursuing administrative remedies. CMS' field offices provide on-ground presence and conduct further data analysis to identify fraud trends, as well as significant data and analytical support to OIG and DOJ investigators and referrals of potential fraud cases for investigation to law enforcement entities. The FDA supports investigations of Food, Drug and Cosmetic Act violations and False Claims Act cases involving the illegal use of medicines for unapproved promotion.

Continuing problems involve the increasing sophistication of criminals committing health care fraud and the increasing involvement of organized crime enterprises. These criminals illegally obtain provider or enrollment information and use the information to submit fraudulent billings to Medicare and Medicaid. Corr says strike forces are aggressively pursuing such criminal organizations and individuals. Other methods being used to combat fraud include additional training provided directly to state governments by the Medicaid Integrity Institute (MII), established in September 2006 to provide quality education on program integrity to State Medicaid employees. Since February of 2007, more than 1,300 State employees have been trained at the MII. The CMS also conducts comprehensive management reviews of each State's Medicaid program integrity procedures and processes on a triennial basis.

Corr noted that Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS or "DME") has particular risk for fraud. The HHS is employing new methods of analysis in using claims data to identify fraud and implementing new prevention techniques. Much of the focus is on suspicious spikes in DME claims. The HHS vigilantly investigates those spikes while also screening DME providers. Corr says through its efforts, the agency is now seeing substantial drops in DME claims in high-risk areas of the country.

Corr feels the competitive bidding for suppliers will be an important tool for preventing fraud, through the use of surety bonds and accreditation. Until DME competitive bidding is fully operational, CMS will focus on Medicare fraud in seven high-risk areas across the country, with increased pre-payment reviews of medical equipment suppliers, and focusing on the highest-billed claims: continuous positive airway pressure (CPAP) devices, oxygen equipment, glucose monitors and test strips, and power wheelchairs - the most lucrative items and at the greatest risk of fraud.

Witness Tony West, Assistant Attorney General, spoke about the Department of Justice's (DOJ) efforts in health care fraud. In particular is the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) with HHS. The Medicare Fraud Strike Force has been expanded to four localities: Detroit, Houston, Los Angeles and South Florida. This has resulted in several indictments on nearly $100 million in fraudulent billings and schemes. The HEAT team is analyzing Medicare data to identify fraud hot spots and expand operations to those areas. There are also efforts to educate the public about detecting and preventing fraud, including HEAT's website, www.stopmedicarefraud.gov.

West explained that the DOJ's enforcement tools are civil remedies through the False Claims Act, and the new Fraud Enforcement and Recovery Act. In addition, private plaintiffs are bringing lawsuits under the qui tam provisions as whistleblowers under the False Claims Act. The DOJ's Civil Division also investigates claims of physician kickbacks violating the Physician Self-Referral laws, and criminal prosecutions through the Office of Consumer Litigation, which investigates and prosecutes drug and device manufacturers illegally promoting and distributing mis-branded/adulterated drugs and devices.

West also discussed the Federal Bureau of Investigation's efforts in health care fraud through its White Collar Crime program and its Public Corruption and Corporate Fraud program. These programs focus on internet pharmacies, medical equipment and infusion therapy fraud, utilizing undercover operations and wiretaps. Finally, the Civil Rights Division of the DOJ and its Special Litigation Section ensures the rights of persons in institutions (i.e. for developmental disabilities and mental illness and nursing homes), reviewing and investigating conditions and practices in these facilities.

The testimony may be accessed at: http://judiciary.senate.gov/hearings/hearing.cfm?id=4139