The Department of Health and Human Services
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 1999

January 2000


GENERAL NOTE: All years are fiscal unless otherwise noted in the text.


The detection and elimination 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 (the 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 brought 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 third year of operation under the Program saw a continuation of the collaborative efforts of Federal and state enforcement and oversight agencies to identify and prosecute the most egregious instances of health care fraud, to prevent future fraud or abuse, and to protect program beneficiaries.

Civil and Criminal Enforcement Actions

Federal prosecutors filed 371 criminal indictments in health care fraud cases in 1999 -- a 16 percent increase over the previous year. A total of 396 defendants were convicted for health care fraud-related crimes in 1999. There were also 2,278 civil matters pending, and 91 civil cases filed in 1999.

Monetary Results

In 1999, the federal government won or negotiated more than $524 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 1999 collected $490 million. It should be noted that some of the judgments, settlements, and administrative impositions in 1999 will result in collections in future years, just as some of the collections in 1999 are attributable to actions from prior years.

Nearly $369 million of the funds collected and disbursed in 1999 were returned to the Medicare Trust Fund. An additional $4.7 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 1999, HHS excluded 2,976 individuals and entities.


One of the fundamental principals of the Program is to maximize the effectiveness and efficiency of law enforcement efforts by promoting information sharing and collaboration among the many federal, state and local allies in the fight against health care fraud. Such collaboration has increased during 1999, through heightened data sharing, establishment of a National Health Care Fraud Task Force chaired by the Deputy Attorney General (bringing together federal, state, and local prosecutors and other enforcement officials) and joint training, to name a few. In addition to the many joint health care investigations undertaken daily across the country, collaborative efforts have also produced effective new beneficiary outreach initiatives, and fraud prevention efforts.

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, and beneficiary and provider education and outreach. Fraud prevention and compliance efforts are reaping significant results; the most recent audit of the Medicare payment error rates showed a $10.6 billion or 45 percent drop in improper fee-for-service payments over the last two years.

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, entering settlement agreements with 60 hospitals and physicians, and received one default judgment for a total of 61 individuals and entities -- up from a previous high of 53 settlements in 1998. The Government collected $1.725 million in civil monetary penalties associated with these cases.



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 (the 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 equaling recoveries 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.

As stated above, the Act appropriates monies from the Medicare Trust Fund to a newly created expenditure account, called the Health Care Fraud and Abuse Control Account (the Account), in amounts that the Secretary and Attorney General 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 1999, the third year of the Program, the Secretary and the Attorney General certified $137.5 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 $66 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 1999, as a result of the combined anti-fraud actions of the federal and state governments and others, the federal government collected $490 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 1999
Department of the Treasury
HIPAA Deposits to the Medicare Trust Fund
Gifts and Bequests
Amount Equal to Criminal Fines
Civil Monetary Penalties
Amount Equal to Asset Forfeiture *
Amount Equal to Penalties and Multiple Damages
Health Care Financing Administration
OIG Audit Disallowances - Recovered
Restitution/Compensatory Damages


$ 2,500


Restitution/Compensatory Damages to Federal Agencies
Office of Personnel Management
Other Agencies
Treasury Miscellaneous Receipts
Department of Health and Human Services - Other than HCFA


Relators' Payments ** 44,418,028
TOTAL *** $490,466,482

*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).



In the third year of operation, the Secretary and the Attorney General certified $137.5 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
Office of the General Counsel
Administration on Aging
Health Resources Services Administration
Departmental Appeals Board


Department of Justice
United States Attorneys
Civil Division
Criminal Division
Justice Management Division


Total 137,233(4)

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 $66 million in funding which is discussed in the Appendix to this Report.



During this year, the federal government won or negotiated more than $524 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 1999 collected $490 million in cases resulting from health care fraud and abuse, of which nearly $369 million was returned to the Medicare Trust Fund, and $4.7 million was recovered as the federal share of Medicaid restitution. It should be emphasized that some of the judgments, settlements, and administrative impositions in 1999 will result in collections in future years, just as some of the collections in 1999 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. Among them, are the following.

These and other settlements reflect the culmination of investigations that have been ongoing for several years. Though settled in 1999, the fines and restitution generated by some of these cases will not be credited to the Medicare Trust Funds until 2000.


Effective health care fraud and abuse control requires close collaboration and regular exchanges of information among federal, state and local law enforcement entities. Shown here are a few of the many instances of collaborative effort between DOJ, HHS, and many other organizations involved in combating health care fraud.

National Health Care Fraud Task Force. In 1999, the Administration launched a new National Health Care Fraud Task Force, chaired by the Deputy Attorney General, in which HHS/OIG, HCFA, DOJ and State and local prosecutors will work together in formulating strategies to combat health care fraud and abuse and safeguard the well-being of Medicare and Medicaid beneficiaries. While the task force will focus on a wide range of health care fraud and abuse policy issues, particular attention will be devoted to fighting nursing home fraud and abuse and excluding dishonest and abusive providers from participation in Medicare, Medicaid and other Government-funded health care programs.

Nursing Homes. The destructive impact of fraudulent billing is not measured in dollars only. During 1999, the Program continued to pursue investigations, prosecutions, audits and evaluations that directly affect not only financial losses, but also the quality of care provided to Medicare, Medicaid and other beneficiaries of government funded health care programs. Quality of care in nursing homes has been identified as a priority for both DOJ and HHS; and in October 1998, DOJ launched a major new initiative to crack down on fraud, abuse and neglect in nursing homes and other residential care facilities. The Nursing Home Initiative, coordinated by the Civil Division, focuses on enhanced enforcement; training; outreach to industry, resident advocates, medical professionals, academics and others; new legislation to address gaps in federal law; an analysis of the applicable state laws and improved inter-agency and governmental coordination, use of data, and services to victims.

DOJ began a series of regional training conferences in 1999 that brought together representatives of federal, state, and local law enforcement, regulatory, survey, oversight and advocacy entities. During the conferences, State Working Groups (SWG) were formed (or expanded where they existed), including representatives of the many entities that play a role in nursing home quality of care. These SWGs provide an on-going opportunity to promote quality of care by establishing a forum for key players to meet, share information and skills, identify problem facilities, best practices, and ways to address quality of care given the unique situations in the various states.

These and other investigative initiatives complement HCFA's ongoing Nursing Home Initiative, which has already resulted in significant improvements to nursing home oversight, enforcement and quality monitoring. Communication and coordination are facilitated by monthly Nursing Home Steering Committee meetings attended by the Civil Division, Criminal Division, Civil Rights Division, FBI, HHS/OIG, HCFA, HHS/OGC as well as in Senior Staff and Executive Level policy meetings during which nursing home fraud, abuse and neglect are among the health care issues addressed.

Examples of investigations of nursing homes for false claims relating to the quality of care provided to their residents that were brought to successful conclusion in 1999 include:

  • A survey by the state Department of Health of a Pennsylvania nursing home disclosed inadequate wound care, incontinence care and nutrition. After investigation, the nursing home entered a settlement agreement with the government, agreeing to pay $195,000, to implement specific quality of care protocols, and to appoint a monitor to oversee the quality of patient care.

  • In Kansas, a therapy service provider agreed to pay the Government $688,996 to settle allegations of impropriety in providing services to nursing home patients. It was alleged that the provider billed for therapy that was medically unnecessary and excessive, as well as billed for staff education inappropriately, and overbilled for applications of splints and positioning of patients. As part of the settlement, the provider agreed to adhere to a 3-year comprehensive corporate integrity agreement.

Beneficiary Outreach. On February 24, 1999, the HHS/OIG, DOJ, HCFA, and the Administration on Aging (AoA) joined with the American Association for Retired Persons (AARP) to launch an initiative against Medicare fraud, waste, and abuse. The educational campaign -- entitled "Who Pays? You Pay. Report Medicare Fraud" -- was held in 31 cities throughout the country, and was attended by approximately 10,000 Medicare beneficiaries. Outreach materials developed for the campaign include a brochure, entitled "What You Can Do To Stop Medicare Fraud" in English and Spanish, a drain-image poster entitled "Medicare Fraud is Money Down the Drain", and a 30-second public service announcement. The award-winning announcement was produced by AARP and is shown under the logos of AARP and HHS.

Since the campaign kick-off, the collaborative partnership between HHS/OIG, HCFA, AoA, DOJ, and AARP has continued. Monthly meetings are held to update partners on the activities of each respective partner and to plan for future collaborative activities. Since the event, the HHS/OIG Hotline 1-800-HHS-TIPS, has served as an educational and reporting resource to approximately 300,000 callers (up from 76,000 calls in 1998). The Hotline has also experienced a spike in calls from Puerto Rico and has established an active monitoring and evaluation system to ensure that concerns of the Hispanic community are addressed. To address this call increase, the Hotline has hired an additional Spanish-speaking representative and has increased the number of Spanish representatives at the contractor site in Chicago.

Data Sharing. In 1999, efforts continued to share information ­ both general data about trends in health care fraud and emerging investigative and prosecutorial techniques -- and to communicate and coordinate with respect to specific investigations. A general data sharing process was instituted between the FBI and the HHS/OIG to ensure that complete, accurate and current information on Federal health care fraud investigations is maintained and readily accessible by both agencies.

Preventing Health Care Fraud

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. These activities, coupled with the overall sentinel effect of our heightened enforcement efforts have netted real results. Perhaps the most concrete evidence of the success of anti-fraud and oversight efforts is the significant reduction in the error rates in Medicare fee-for-service payments ­ an overall 45 percent reduction in improper payments in just 2 years. As part of the HHS/OIG audit of HHS's 1996 financial statements, HHS/OIG developed a statistically valid estimate of improper payments amounting to $23.2 billion, or about 14 percent of the total payments made in the fiscal year. Just 2 years later, improper payments dropped by $10.6 billion to $12.6 billion, or about 7 percent of the fiscal year total.

According to Treasury Department and Congressional Budget Office statistics, Medicare spending rose at an average annual rate of about 9 percent from 1994 to 1997, then dropped to 1.5 percent in 1998 -- the smallest increase in the history of the program. 1998 also marked the first year that Medicare spending grew more slowly than the Federal budget as a whole, which increased by 3 percent. This downward trend is continuing; during 1999, Medicare spending actually declined 0.7 percent. Even home health care expenditures, which experienced explosive growth during most of the 1990's, declined. The Medicare Trustees recently announced that the solvency of the Trust Fund had been extended 7 years to 2015, after also being extended 7 years the prior year.

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 DOJ and HHS 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, as well as good public policy.  



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 third year of the Program, the Act provides that between $90 and $100 million be devoted to these purposes. The Secretary and the Attorney General jointly allotted $98.2 million to the HHS/OIG in 1999, an increase of $12 million over 1998.

With these increased resources, HHS/OIG conducted or participated in 942 prosecutions or settlements in 1999. A total of 2,976 individuals and entities were also excluded, many as a result of criminal convictions for program-related crimes (550), criminal convictions for patient abuse or neglect (323), and others were excluded based on licensure revocations (1,416).

In addition to the HHS/OIG's role in bringing about the judgments and settlements described in the Overview of Accomplishments, the Department of Health and Human Services acted on HHS/OIG recommendations and disallowed $113.5 million in improperly paid health care funds in 1999. 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 1999, such funds not expended on improper or unnecessary care amounted to approximately $11.8 billion -- about $10.8 billion in Medicare savings, and nearly $1 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 previously underserved. During 1999, overall HHS/OIG staff levels increased from 1,258 to 1,363 by the end of the year, and HHS/OIG opened 2 new investigative offices. The HHS/OIG also significantly increased its staffing resources devoted to ensuring health care providers' compliance with Federal health care program rules.

Fraud and Abuse Prevention

The increased resources made available under HIPAA have enabled the HHS/OIG to expand activities designed not just to uncover existing fraud and abuse, but to prevent it. Vital prevention initiatives, such as those listed below, inform and assist the health care industry, and patients. Equally important, these prevention activities reduce the government's enforcement costs and program losses.

Compliance Guidance. A key element 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 conjunction with the provider community, identifies steps that health providers may voluntarily take to improve adherence to Medicare and Medicaid rules. In 1999, the OIG developed and released final compliance program guidance for third party medical billing companies, hospices and the durable medical equipment, prosthetics, orthotics, and suppliers industry.

Corporate Integrity Agreements. Many 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 its future compliance with Medicare and Medicaid rules. The duration of most corporate integrity agreements is 5 years, during which time the provider must submit periodic reports to HHS/OIG. These agreements require a substantial effort by the provider to ensure that the organization is operating in accordance with Federal health care programs rules and regulations and the parameters established by the corporate integrity agreement. Breach of the agreement may result in a variety of sanctions, including exclusion of the provider. At the close of 1999, HHS/OIG was monitoring more than 425 corporate integrity agreements.

Industry Guidance. The centerpiece of the HIPAA guidance initiatives is an advisory opinion process through which parties can obtain binding legal guidance as to whether their existing or proposed health care business transactions run afoul of the Federal anti-kickback statute, the civil money penalties laws, or the exclusion provisions. The advisory opinion process has become an integral part of the Inspector General's ongoing commitment to preventing health care fraud. During 1999, the HHS/OIG accepted 39 requests for advisory opinions and issued 15 opinions. Many requests are still being processed; others were withdrawn or rejected as outside the scope of the advisory opinion process.

The advisory opinion process also serves to enhance the HHS/OIG's understanding of new and emerging health care business arrangements and informed the development of new safe harbor regulations, fraud alerts, and special advisory bulletins. Topics so addressed in 1999 include hospital payments to physicians to reduce or limit services to beneficiaries (commonly known as "gainsharing" arrangements); the effect of exclusion from Federal health care programs on excluded providers and those who employ or contract with them; physician liability for certifications of medical necessity in the provision of medical equipment and home health services; and the effects of exclusion from Federal health care programs on current and prospective employees.

The HHS/OIG made significant strides toward resolving pending safe harbor regulations. Formal clearance was begun for a proposed anti-kickback safe harbor for ambulance restocking arrangements between hospitals and ambulance providers who transport patients to hospital emergency rooms and a proposed safe harbor under the civil money penalty law for inducements to beneficiaries to protect certain payments by ESRD facilities of insurance premiums for their patients. Two final anti-kickback statute safe harbor rules were finalized for issuance in early 2000 -- one promulgating eight new safe harbors and a series of clarifications to existing safe harbors (originally proposed in 1993 and 1994), and another addressing the statutory exception for shared risk arrangements.

In addition, HHS/OIG has made frequent presentations to industry groups on areas of suspected fraud and abuse and measures they can take to avoid trouble.

Medicare Error Rate: The HHS/OIG's annual audit of the Department's financial statements included a statistically valid review of the error rate in Medicare fee-for-service payments. This year's estimate is $7.7 billion less than last year's estimate of $20.3 billion and $10.6 billion less than the previous year's estimate of $23.2 billion--a 45 percent drop. While there is no empirical evidence supporting a specific causal relationship between the error rate decline and particular corrective actions, we believe that among the important causes for the reduced error rate are the fraud and abuse prevention and detection initiatives, the Medicare Integrity Program administered by HCFA and the cooperative efforts of major provider groups.

Recommendations for Systemic Improvements: 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 actions that, when enacted or implemented, close loopholes and avoid ineffective expenditures or improper conduct. The net savings from these joint efforts toward program improvements can be substantial.

An example of an HHS/OIG study that provided evidence and ideas supporting proposals for significant cost savings issued during 1999 was the series of reports on the early effects of the prospective payment system (PPS) on access to skilled nursing facilities and the appropriateness of Medicare payments for physical and occupational therapy in skilled nursing facilities. The studies found that there are no serious problems in placing Medicare beneficiaries in nursing homes; however, nursing homes are changing their admission practices in response to the new PPS. One-fifth of the hospital discharge planners say that it has become more difficult to place patients who require extensive services while it has become easier to place patients who need rehabilitation services. Most nursing home patients were appropriate candidates for and benefitted from the physical and occupational therapy they received. However, 13 percent of the therapy was improperly billed to Medicare. In terms of dollar amounts, Medicare reimbursed skilled nursing facilities almost $1 billion for improperly billed physical and occupational therapy and almost $331 million for undocumented physical and occupational therapy.

The reports recommended that HCFA instruct Medicare fiscal intermediaries to provide more training to facility and therapy staff on Medicare coverage criteria and guidelines, local medical review policies, and monitoring procedures for therapy and adequately fund Medicare contractors to perform medical reviews of therapy.

Focus on Collaboration

Federal-State Audit Partnership. In 1994, the HHS/OIG initiated a partnership between federal and state auditors to enhance and provide broader audit coverage of the Medicaid program. Collaboration among HHS/OIG, State auditors, inspectors general, Medicaid agencies and HCFA maximizes scarce resources at both the Federal and State levels. The focus of the partnership effort is not on the traditional identification and recovery of unallowable Medicaid costs; rather the program focuses on identifying program improvements and reducing the cost of providing necessary services to Medicaid recipients. HHS/OIG auditors provide computer support, audit programs and guides, training, information-sharing and other specialized assistance to State auditors, as well as direct audit support.

To date, active partnerships flourish in 22 states. This partnership effort has been a resounding success. State auditors have shown a great interest in creating partnerships and we continue to get inquiries on other potential joint projects. By the end of 1999, these State partnerships generated approximately $145 million in Federal and State savings since the partnership began. Many of these recommendations related to Medicaid prescription drugs.

Roundtable on Compliance. In conjunction with the health care industry, the HHS/OIG conducted a joint roundtable on health care compliance to gain new insights into the challenges of creating effective compliance programs. The event reflects HHS/OIG's commitment to engage in ongoing discussions with the health care compliance industry about practices and policies related to compliance programs, including the impact of compliance recommendations advanced by HHS/OIG. More than 125 compliance officers, government representatives and others attended the event.

Self-Disclosure Protocol. In October 1998, the HHS/OIG implemented a self-disclosure program, to assist providers and suppliers in investigating and reporting potential violations of Federal health care laws. The program offers providers an opportunity to police themselves, correct underlying problems and work cooperatively to resolve these matters. Since issuance of the protocol, 40 health care providers have submitted self-disclosures to the HHS/OIG. Two of these were successfully resolved through the return of overpayments to the Federal Government; the others are under investigation.

Data Sharing. With the increased focus on investigations that are national in scope, close collaboration among investigative and prosecutive agencies has become critical. To this end, the HHS/OIG Office of Investigations and the FBI have initiated an efficient information sharing system. Copies of all healthcare fraud referrals and allegations received by HHS/OIG are sent to the FBI Health Care Fraud Unit at FBI Headquarters. The FBI then serves as an informational contact and dissemination point for DOJ and its prosecutors nationwide. In turn, the FBI provides information on their health care investigative matters to HHS/OIG. All such cases, wherever generated, are entered into the HHS/OIG Case Information Management System, which serves as a comprehensive data base for Federal health care investigations. This prompt information sharing system fosters efficient investigative teamwork, supports criminal prosecutions and deters health care fraud.

Beneficiary Outreach. The HHS/OIG's outreach efforts are not limited to industry; equally important is enlisting the beneficiary population in the fight against fraud and abuse. The HHS/OIG continues to distribute hundreds of its Medicare fraud educational materials to beneficiaries through AoA grantees, the AoA network, AARP regional offices, and to public libraries in each State. HHS/OIG has developed a working relationship with national Asian American and Hispanic organizations to seek advice on translating and printing HHS/OIG Medicare fraud materials into Chinese, and to distribute these materials and those already printed in Spanish, respectively, to Chinese Americans and a wider Spanish-speaking population.

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. These include the investigations described in the Overview section of this report, as well as the following activities:

Patient Anti-Dumping Enforcement. Both HCFA and the HHS/OIG continue to vigorously pursue potential violations 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. In 1999, HHS/OIG entered 61 settlement agreements with hospitals and physicians and collected civil monetary penalties of $1.7 million. This is an increase from the previous high of 53 settlements in 1998, and reflects the commitment of both HCFA and HHS/OIG to ensure patient access to appropriate emergency medical services.

Quality of Care in Nursing Homes. The HHS/OIG released a series of inspection reports concluding that serious problems with quality of care continue to exist in nursing homes. This is demonstrated by an increase in survey and certification "quality of care" deficiencies as well as an increase in ombudsman complaints, especially about resident care. Other findings include inadequate nursing home staffing levels; weaknesses in the survey system; inadequate resources in the ombudsman program; and inconsistent and unreliable State systems to safeguard nursing home residents. The problems described in this inspection will require continuing attention. An effective strategy would include actions to enhance the survey and certification process; strengthen the ombudsman program with increased resources; improve nursing home staffing levels; and improve coordination between State survey agencies and ombudsmen. Additionally, further evaluation and performance measurement of the Omnibus Budget Reconciliation Act 1987 and the conditions in nursing homes would make an important contribution to efforts to advance nursing home care.

Hospital Quality Oversight. A two-year study by the HHS/OIG found major deficiencies in the external oversight system intended to make sure the nation's hospitals are safe and recommended how those agencies responsible for oversight can provide leadership in improving quality and accountability. The study received significant national media attention when it was released. Four evaluation reports assessed the key roles in hospital quality oversight played by the Joint Commission for Accreditation of Healthcare Organizations, the State survey and certification agencies, and HCFA, which oversees Medicare. Overall, the reports concluded that while the system of oversight that HCFA relies upon has some strengths, it also has deficiencies that warrant serious attention. The HCFA does little at present to hold either the Joint Commission or the State survey agencies accountable for their performance.

The reports called for HCFA to exert leadership in addressing the shortcomings. The HHS/OIG urged HCFA to steer the external review process so that it represented a balance between the educationally oriented approaches of the Joint Commission and the enforcement-oriented approaches of the State agencies. In recommendations, the HHS/OIG presented a number of steps HCFA should take to hold both the Joint Commission and the States more fully accountable for their performance in reviewing hospitals. In addition, the HHS/OIG called for HCFA to determine the appropriate minimum cycle for conducting certification surveys of non-accredited hospitals. Since the publication of the final report, the Joint Commission has made several changes to its review and accreditation process, based on HHS/OIG recommendations, that have made the process more meaningful and more accountable.

Mental Health Services. A settlement agreement was reached with a university to resolve its civil liability for the submission of false claims to Medicare, Medicaid and other Federal health care programs from 1992 through 1997. At issue were claims for mental health services rendered at its clinics by non-paid, unsupervised students. The university submitted the claims and was reimbursed as if qualified mental health providers (psychologists or psychiatrists) had provided the services. The university agreed to enter a 5-year comprehensive corporate integrity agreement with the HHS/OIG. It also agreed to pay the government a total of over $4 million. Monetary payment will be made to the federal government for both the Medicare damages and the federal portion of Medicaid damages. However, the State agreed that the university could satisfy its liability for the state share of the Medicaid damages through the provision of services rather than through a cash payment.

The HHS/OIG also completed a five-State study of partial hospitalization program services provided in community mental health centers. This program is an intensive outpatient psychiatric program which provides services to acutely ill individuals in order to prevent their hospitalization. Medical reviewers found that over 90 percent of the Medicare payments ($229 million of $252 million) were for unallowable or highly questionable services. Cost reports at selected centers contained significant unallowable and nonreimbursable items. Further, HCFA's enrollment initiative in nine States found that a high percentage of the nearly 700 centers covered did not meet certification requirements to qualify for Medicare payments. To address these problems, HCFA developed a 10-point plan under which approximately 150 centers have already been terminated (this includes voluntary terminations and cessation of business). Instructions were issued to fiscal intermediaries on intensified medical review and provider education. HCFA is also implementing a prospective payment system for partial hospitalization program services, and has started the process of deactivating billing numbers for centers that have not billed Medicare within 6 months.  

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) has been authorized to design, implement and operate this program, currently named the Healthcare Integrity and Protection Data Bank (HIPDB). In 1999, HRSA received $4.4million from the Account to continue development of the HIPDB as an all electronic system that will collect, store and disseminate reports to the law enforcement community and health plans upon request.

The Act requires Secretarial rulemaking for certain features of the HIPDB, including access, information dissemination, disclosures to the subjects of reported information and report corrections, and any other optional reporting elements that the Secretary chooses to request. Decisions were made jointly by HHS and DOJ to continue the development of the data base in 1999 in anticipation of the publication of the Final Rule. Final regulations were published in the Federal Register in October1999 and plans are underway to open the data bank in early 2000.

Development of the HIPDB has included activities related to data base design specifications, reviews of required hardware and software, modification of physical facilities, and the procurement and installation of equipment. The forms and methods of information to be collected to populate the data base has also been part of the HIPDB development process. Most of the information reported to the HIPDB will come from Federal agencies and State licensing authorities. Data acquisition activities have included working with: DOJ, HCFA, HHS/OIG, the Departments of Defense and Veterans Affairs, and various health care related and health professional organizations, including those representing Nursing and Chiropractic Licensing Boards.

Operations will be supported by charging a fee for searching the data base. When the HIPDB becomes operational, the query fee payment will be collected via an interface with Mellon Bank. To date, more than 2,300 entities have registered to query the HIPDB in anticipation of its opening for operation.  

Office of the General Counsel

The Office of the General Counsel's (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 consistent with the statutory authority of the HCFAC Program. These OGC components, in partnership with other HHS components --- including HCFA, HHS/OIG and DOJ, work jointly to combat health care fraud and abuse.

OGC was allocated $2.3 million in HCFAC funding for 1999. These funds were used primarily for litigation activity, both administrative and judicial. OGC continues to experience an increase in the number of new Program Integrity Litigation items: an approximate increase in new cases for fiscal years 1998 and 1999 of 17 and 18 percent, respectively. Pending cases for those fiscal years increased 34 and 14 percent respectively. It is our anticipated new litigation and pending litigation that drives OGC's activities. The bulk of the administrative (non-court) litigation involved: (1) Civil Money Penalties (CMPs) and other sanctions imposed on nursing facilities; (2) revocations, terminations or denials of provider status (especially nursing facilities, home health agencies, as well as Community Mental Health Centers (CMHCs) under the Operation Restore Trust CMHC Initiative); (3) Medicare Secondary Payor (MSP) cases; and, (4) suspensions of Medicare payments to providers and suppliers. The bulk of the court litigation involved MSPs or bankruptcies. The dollars reflected here are not included in the Monetary Results section of this report.


Within this year's framework of prominent HCFAC themes such as civil and criminal enforcement actions; exclusions from federally sponsored programs; initiatives for preventing health care fraud; administrative penalties for Emergency Medical Treatment and Active Labor Act (EMTALA) violations; and collaborative and outreach efforts, OGC had the following HCFAC accomplishments:

  • OGC's HCFA Division worked with OIG to draft a Special Advisory Bulletin to clarify the applicability of the EMTALA to managed care organizations. That Division also assisted HCFA in its efforts to draft a regulation to clarify the scope of EMTALA so that hospitals will know when their obligations under EMTALA begin and end and whether the obligations under EMTALA apply to hospital inpatients. Other EMTALA efforts included a presentation by Region X staff to the Washington State Bar Association on EMTALA requirements.

  • Region V staff assisted in successfully defending against federal district court and bankruptcy court suits seeking to enjoin recoupment of overpayments from a home health agency in Indiana ($5 million) and from a nursing facility ($1 million).

  • Region VI's collaborative and outreach efforts are plentiful and significant: for example, in ongoing collaborative efforts with HCFA, the Texas Department of Human Services and the Texas Attorney General's Office, an action plan to preserve patient health and safety when nursing home chains become insolvent or file for bankruptcy was coordinated. These efforts arose out of the bankruptcy of a Texas nursing home chain where issues of fraud, suspension of payments, patient safety and bankruptcy were all present. As a result, this model will be used in similar OGC efforts in the future.

  • Region VI also was successful in protecting HCFA's interests when a nursing home chain in Texas (90 facilities) filed for bankruptcy. Through the efforts of Region VI's staff, HCFA was able to recoup a $3 million cost report overpayment over a 12-month period. Additionally, they were able to arrange for continued repayment of a $885.9 thousand settlement of 29 civil monetary penalty cases.

  • OGC's Region III and Region X offices collaborated with efforts to sustain denial of $4.8 million in payments to a Medicare supplier, headquartered in Pennsylvania, of orthotics and lymphedema pumps. The supplier filed for bankruptcy protection which most likely would have resulted in HCFA (as an unsecured creditor) receiving pennies on the dollars for its claims. However, OGC was able to convince the unsecured creditors' committee that the debtor's claims were fraudulent, and that the appeal of the denial of claims would be fruitless. Medicare was able to retain the $4.8 million as a result of these offices' efforts.

Administration on Aging

In 1999, the Administration on Aging (AoA) was allocated $1.4 million in HCFAC funds to train and educate both paid and volunteer aging network staff to recognize and report potential practices and patterns of fraud, waste, and abuse in the Medicare and Medicaid programs. These activities were focused on training nursing home ombudsmen, health insurance counselors, state and area agency on aging staff, senior center directors, social workers, eldercare information specialists, and other professionals in 18 states how to identify and report potentially fraudulent practices.

This funding also helped to support the technical assistance and nationwide infrastructure for educating beneficiaries to be the "eyes and ears" of the Medicare system. The AoA and its network agencies engaged in coordinated outreach and educational activities designed to assist older persons and their families to recognize and report fraudulent and abusive situations and to prevent or minimize victimization of such behavior.


  • The 18 grantees trained more than 10,000 staff and volunteers to be Medicare resources and educators in their communities.

  • With the collaboration and assistance of HCFA, the HHS/OIG, health care providers, and other professionals from around the country, the projects developed more than 150 community-based training manuals, educational brochures, and public information documents designed to recruit volunteers, involve providers in the campaign, and inform beneficiaries of what they should do if they have questions regarding their Explanation of Medicare Benefits Statement or Medicare Summary Notice. Educational materials were developed in a variety of languages, and outreach initiatives were targeted to high-risk populations. The AoA entered into a contract to develop culturally sensitive videos and brochures targeted to the African American, Hispanic, and Chinese communities.

  • The AoA grantees convened more than 1,500 community education events which educated and informed over 200,000 individuals through public forums and education and training sessions to identify and report health care waste, fraud, and abuse. Special initiatives were undertaken to include local health care providers in these activities. Two examples of these efforts include the assistance of physicians in developing a personal health care journal that beneficiaries can use to record the services they receive during a doctor or hospital visit, and a collaboration with hospitals in developing and distributing an informational brochure on waste, fraud, and abuse that individuals receive when they are discharged from the hospital.

  • With the assistance of the HHS/OIG and HCFA, the grantees developed and tested telephone screening systems and tracking mechanisms designed to trace the outcomes of inquiries made by beneficiaries. Of the more than 9,800 calls concerning potential cases of health care fraud, waste, and abuse which were screened by the projects, approximately half were referred to Medicare carriers, intermediaries, or regional durable medical equipment carriers for follow-up, thirty percent were referred to providers, and one-fifth were referred to the HHS/OIG Hotline, State Medicaid Fraud Control Units, State Attorney General's Offices, or other fraud and abuse agencies.

HCFAC funding also provided vital technical assistance to support AoA's Senior Medicare Patrol Projects which have been highly successful in recruiting and training retired professionals to report waste, fraud, and abuse.

Departmental Appeals Board

The Secretary delegated to the Departmental Appeals Board (DAB) responsibility for conducting hearings and reviewing appeals in administrative sanction cases initiated by the HHS/OIG. The HHS/OIG administrative sanction cases may result in exclusion from participation in Medicare and State health care programs imposed under sections 1128 and 1156 of the Social Security Act, and imposition of CMP pursuant to section 1128A of the Act. Another substantial category of HHS/OIG administrative sanction cases involve violation of the Patient Anti-Dumping Statute, section 1867 of the Social Security Act. With enhanced HHS/OIG resources resulting from HIPAA, the HHS/OIG has processed an ever-increasing number of administrative sanction cases.

The DAB Civil Remedies Division received $138,000 in 1999 in HCFAC funds. These funds supported the work involved in issuing 33 decisions, dismissing 73 cases, and closing 106 cases in 1999. All of these cases were generated by the HHS/OIG.  



United States Attorneys

Health care fraud involves a variety of schemes that defraud public and private insurers and providers nationwide. In addition to Medicare and Medicaid, a number of federally funded health benefit programs have been the targets of these schemes. The fraudulent activity may include double billing schemes, kickbacks, billing for unnecessary or unperformed tests, or may be related to the quality of care provided to patients. In addition to monetary losses, in some instances these improper activities endanger patient safety. United States Attorneys' offices (USAOs) are responsible for civilly and criminally prosecuting health care professionals, providers, and other specialized business entities who engage in health care fraud and abuse.

USAOs continue to strengthen cooperative efforts with federal, state and local law enforcement agencies involved in the prevention, evaluation, detection, and investigation of health care fraud and abuse. In addition to the FBI, HHS/OIG and HCFA, USAOs offices work with State Medicaid Fraud Control Units, Offices of Inspectors General for a number of federal agencies, the Drug Enforcement Administration, and the Department of Defense Criminal Investigative Service and TRICARE Support Office. Each USAO has appointed both a civil and criminal health care fraud coordinator to assist in coordination and facilitate communication between federal, state and local law enforcement groups.

Over the past year, USAOs have diligently worked to enhance provider understanding of the Department's enforcement responsibilities and efforts. A number of outreach presentations have been made to health care professionals, provider organizations, and beneficiary groups around the country in this regard.

Prior to the enactment of HIPAA, USAOs dedicated substantial resources to combating health care fraud and abuse. 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 1999, OLE conducted a number of courses and presentations on health care fraud, including:

  • Affirmative Enforcement for Investigators (including a health care fraud training component)

  • Civil Health Care Fraud for Attorneys

  • Criminal Health Care Fraud for Attorneys

  • Basic Health Care Fraud for Attorneys - Criminal and Civil

  • Basic Affirmative Civil Enforcement for Attorneys (includes a health care fraud component)

While the primary participants in OLE sponsored courses were DOJ employees, agency counsel and investigative personnel were also invited to participate as presenters and students. In addition to OLE sponsored training a number of USAO attorneys, auditors and investigators participated in 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 improper activities, adversely affect 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 referral remains a matter until an indictment or information is filed or the case is declined for prosecution. In 1999, the USAOs had 1,994 criminal matters pending involving 3,158 defendants, a 6.9 percent increase in the number of criminal matters over 1998. During 1999, 371 cases were filed involving 506 defendants. This represents a 16.3 percent increase over cases filed in 1998. A total of 396 defendants were convicted for health care fraud-related crimes in 1999. Health care fraud convictions include both guilty pleas and guilty verdicts.

In one case, 20 individuals were convicted for their involvement in a massive and sophisticated scheme to defraud Medicare. The convictions arose from an almost five-year investigation (conducted by HHS/OIG, FBI, the Internal Revenue Service, and the Department of Labor) of a home health agency, which from 1991 to 1994 was the largest Medicare-certified home health agency in Miami. During that time, the home health agency was paid approximately $120 million by Medicare for reimbursement of services, including nursing and home health aide visits, which either had not been provided, were not necessary, or were provided to persons who were not eligible. In some cases, Medicare was billed for services provided to persons who were already deceased when the billed services were supposedly rendered. The two highest level home health agency administrators admitted to illegal hidden partnerships in literally hundreds of subcontractor groups and the conspirators' involvement in hundreds of thousands of dollars in illegal payoffs to everyone from "professional beneficiaries" to home health aids, nurses and doctors. The convicted defendants, in what eventually became two separate federal court cases, arising from two separate series of indictments, received sentences ranging from 18 months imprisonment to, in the case of the highest level administrator, 12 years imprisonment. A single defendant returned $1.1 million in fraudulently obtained assets.

Accomplishments - Civil Cases

Civil health care fraud efforts constitute a major focus of Affirmative Civil Enforcement (ACE) activities. The ACE Program helps ensure that federal laws are obeyed and that violators provide compensation to the government for losses and damages they cause. Civil health care fraud matters ordinarily involve the United States utilizing the False Claims Act, as well as common law fraud remedies, payment by mistake, unjust enrichment and conversion to recover damages from those who have submitted false or improper claims to the United States.

Each time a civil referral is made 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. Relators may be entitled to share in the recoveries resulting from these lawsuits. At the end of 1999, the USAOs had 2,278 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 action, in United States District Court. The vast majority of civil health care fraud cases and matters are settled without a complaint ever being filed. In 1999, 91 civil health care fraud cases were filed.

A multimillion dollar settlement was reached with one of the largest home health care companies in Texas, which agreed to pay the Government $10 million to resolve allegations involving its subsidiary, a provider of home health care and infusion therapy services. Allegedly, the subsidiary improperly charged Medicare for unallowable costs including salaries, travel, and legal fees. In addition, the subsidiary allegedly conspired with and caused skilled nursing facilities to overcharge Medicare for infusion therapy drugs, supplies, and nursing services. As part of the settlement, the subsidiary also entered into a comprehensive corporate integrity agreement with HHS/OIG.  

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. Cases involve health care providers, carriers and fiscal intermediaries that defraud Medicare, Medicaid and other federal health care programs.

The Department's Nursing Home Initiative, launched in October 1998 to crack down on fraud, abuse and neglect in nursing homes and other residential care facilities, is coordinated by a Civil Division attorney, and focuses on eight key areas: (1) stepped up enforcement; (2) improved coordination among federal agencies and among federal, state and local law enforcement, regulatory agencies and resident advocates; (3) development and use of data systems to target facilities that provide inadequate care; (4) focused training, particularly training that brings together prosecutors, investigators, regulators, surveyors, advocates and others;(5) outreach efforts to industry to promote compliance and to patient advocates, medical professionals and academics; (6) new legislation to address gaps in federal law; (7) improved services to victims of fraud, abuse and neglect; and (8) analysis of state laws to identify effective or promising state abuse and neglect statutes and enforcement practices. This Initiative complements the efforts being undertaken at HCFA and HHS/OIG, communication and coordination are facilitated by monthly Steering Committee meetings attended by the Criminal Division, FBI, HHS/OIG, and HCFA.

The financial crisis in the nursing home industry has to date resulted in bankruptcy filings by two of the ten largest nursing home chains and several smaller chains. These bankruptcy cases, the largest ever involving health care providers, raise both financial and quality of care issues, and require significant on-going coordination between the Civil Division's Corporate Finance (bankruptcy experts) and Civil Fraud sections, the Criminal Division, HCFA, and HHS/OIG.

The Civil Division continues to chair the Managed Care Fraud Working Group, which meets quarterly and coordinates the managed care enforcement activities of DOJ, FBI, HHS/OIG, HCFA, TRICARE Management activity of the Department of Defense, Office of Personnel Management Office of Inspector General, The National Association of Attorneys General, the National Association of Medicaid Fraud Control Units, and the Internal Revenue Service.


In 1999, 182 new health care fraud matters were initiated. 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. Following is a discussion of some of the significant cases the Division has been involved in during 1999.

A $32 million payment was received from a university -- the largest recovery ever in a case involving either the Food and Drug Administration or the National Institutes of Health (NIH). The case established favorable new case law and its settlement resolved allegations that, for more than two decades, the University had illegally profited from selling an unlicensed drug, failed to report the sales income to NIH, improperly tested the drug on patients and improperly used grant funds.

The Civil Division, in conjunction with 39 USAOs, is handling a qui tam action alleging that 100 hospitals located nationwide upcoded pneumonia diagnosis codes to falsely obtain higher Medicare reimbursements. Thus far, settlements have been reached with eight defendants for a total recovery of $15.4 million.

A $15 million settlement resolved a case against a billing service and its physician founder, for submitting false claims on behalf of emergency physicians around the country. The settlement with the United States and twenty-eight states was reached after a trial on liability in which the court found both the company and the owner liable for violating the False Claims Act. In addition to the civil settlement, the owner was excluded from participation in all federal health care programs for fifteen years.

A drugstore chain paid nearly $8 million to settle allegations of submitting false prescription claims to state Medicaid and other federally-funded health programs. The case was the first to address a common practice of billing insurance programs for the full amount of prescriptions which were only partially filled.

Vital resources were made available from the Account to provide the Civil Division with Automated Litigation Support (ALS), auditors and consultants. These resources supplemented other Civil Division funds. During 1999, ALS was provided to 14 cases while auditor/consultant support was provided to 21 cases. Four of the supported cases have settled, yielding more than $44 million. Recoveries in the remaining cases are expected to reach 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, DOJ 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:

  • providing frequent advice and written materials on confidentiality and disclosure issues arising in the course of investigations and legal proceedings regarding medical records.

  • 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.

  • sponsoring a national Nursing Home Fraud and Abuse conference to address the problems of financial fraud and resident abuse and neglect. The conference brought together key officials from DOJ, USAOs, HHS/OIG, HCFA, and other federal, state, and local agencies, to develop a plan of action for combating fraud, abuse, and neglect in nursing homes across the nation. The national conference helped lead to the development of DOJ's Nursing Home Initiative and the development of regional nursing home training conferences that will be held in Los Angeles, Philadelphia, and Des Moines.

  • preparing and distributing to all USAOs and FBI field offices a quarterly electronic newsletter summarizing recent developments on major issues, interagency initiatives, and significant activities of DOJ's health care fraud component organizations as well as periodic electronic newsletters summarizing recent cases.

  • participating on interagency working groups and task forces formed to address fraud in health care and managed care as well as newly emerging problem areas involving illicit online sales of drugs and medical products and nursing home fraud and resident abuse.


Justice Management Division

The Justice Management Division, Debt Collection Management Staff continues to perform for the program 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 1999, $66,000,000".

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 other's 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 1999, $66 million was provided by HIPAA for 651 positions (380 agents). The FBI used this funding, in large part, to fund an additional 40 agents and 42 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 1999 to approximately 493 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 3,027 cases through 1999. 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 548 in 1999.

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.

As part of the FBI's national strategy to address health care fraud, the Bureau utilizes proactive investigative techniques, to include the use of undercover operations. A major FBI led undercover investigation culminated in 1999 with the last of over 40 subjects either entering guilty pleas or being found guilty at trial as a result of their participation in a fraud scheme that robbed the Medicare Program of millions of dollars. During this investigation the FBI actually purchased a bogus home health agency and through various business dealings with the subjects uncovered a system rampant with fraud from top to bottom.

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.

The funding made available through HIPAA also made possible two Basic Health Care Fraud training conferences which provided the expertise necessary for an additional 200 FBI agents to address the health care fraud crime problem. A total of 82 additional FBI agents received specialized training on fraud schemes plaguing a particular provider service that has been historically vulnerable to fraud. The HIPAA funding also allowed FBI headquarters staff to conduct specialized training sessions in a number of FBI field offices and to make numerous presentations to various industry groups.  


The 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

CMHC - Community Mental Health Centers

CMP - Civil Monetary Penalty

DOJ - The Department of Justice

EMTALA - Emergency Medical Treatment and Active Labor Act

ESRD - End-stage Renal Disease

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

NIH - National Institutes of Health

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

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

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

PPS - Prospective Payment System

The 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

  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 Fund.

  3. In 1999, 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 1999 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 FY 2000.

  4. The original certification was for $137,540,000. However, during the fiscal year a $307,000 recission was taken against the account, leaving $137,223,000 available.