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Testimony on Health Care Fraud and Abuse in Nursing Homes by Kathleen A. Buto
Deputy Director, Center for Health Plans and Providers
Health Care Financing Administration
U.S. Department of Health and Human Services

Before the House Committee on Government Reform and Oversight, Subcommittee on Human Resources
July 10, 1997


Mr. Chairman and Members of the Subcommittee, I am pleased to be here today to discuss the Health Care Financing Administration's (HCFA) fraud and abuse prevention initiatives. My testimony today will focus on the type of fraud and abuse that occurs in nursing home settings, a particularly egregious crime which preys on some of the weakest and most vulnerable members of our society. Particularly as the Medicare and Medicaid population of the medically fragile elderly increases, we must be increasingly vigilant in guarding against improper provider claims and billing. At HCFA, we are strongly committed to acting aggressively against all forms of fraud and abuse in Medicare and Medicaid. As I will describe later, we have some innovative weapons in the war against fraud and abuse, and we have been working with the authorizing committees on proposals to reinforce these efforts.

Overview of HCFA's Fraud Prevention Policy

The annals of medicine are replete with case histories demonstrating that prevention is the best antidote to illness. This is equally true in the area of fiscal well-being: in order for our Medicare and Medicaid programs to remain both solvent and strong, we need to prevent improper or fraudulent claims which strain the fiscal and personnel resources of the system. By guaranteeing the initial accuracy of both claims and payments, we avoid having to "pay and chase," and we can prevent opportunities for fraud and abuse.

Incorrectly billed claim can stem not only from fraud, but from confusion and misinformation about the proper billing procedures. For example, if there is a payer primary to Medicare, the Medicare contractor will reject the claim for submission to the appropriate primary payer. Where Medicare is primary, the Medicare contractor will make payment, then send the paid claims data to the supplemental insurer. For dual Medicare and Medicaid eligibles, the Medicare contractor will pay first and then send paid claim data to Medicaid as the payer of last resort. Although one would not expect dual eligibles to have Medicare supplemental coverage, the Medicare contractor would send the paid claims information to the supplemental insurer, if one exists and where there is an established trading partner agreement.

HCFA uses many pre-payment mechanisms to determine not only the primary payer for benefits for a Medicare beneficiary, but to ensure that every bill is properly submitted. Some of these mechanisms are part of our Medicare as a Secondary Payer (MSP) Activity, and include an Initial Enrollment Questionnaire, contractor systems edits, IRS/SSA/HCFA Data Match, Voluntary Insurer/Employer Reporting, Hospital Admissions Procedures Review, First Claim Development, Trauma Code Development, and MSP Litigation Settlement, as well as unsolicited updates (i.e., phone calls and letters) from providers and beneficiaries. Using these methods to ensure proper billing, we can concentrate our resources on locating and eliminating areas of fraud and waste, as I win describe next.

Specific Areas of Concern

We are targeting fraud and abuse of Medicare and Medicaid at a critical time, when America is spending approximately 15% of the gross national product on health care. In 1995, the bill for nursing home care financed by the Medicare and Medicaid programs reached $44 billion, which represents 55% of all spending for nursing home care. Especially in the area of nursing home care, there are numerous opportunities for fraudulent claims. The nursing home population has a high percentage of patients who are incapable of monitoring their own bills, and may not have family members to do this for them; this makes them easy prey for unscrupulous providers and suppliers. The following are some of the areas we are especially concerned about in regard to fraud and abuse, and which are identified in several of the President's FY98 proposals. Under current law, we do not have adequate authority to address some of these concerns.

  • Dual Eligibles - We estimate that in 1995 there were almost 6 million dually eligible beneficiaries in Medicare and Medicaid, of which approximately one-quarter resided in nursing homes. Individuals who are dually eligible for both Medicare and Medicaid are a diverse and particularly vulnerable population. The complexity of the Federal laws governing Medicare and Medicaid reimbursement often causes confusion and billing errors, even where there is no illicit intent. This is especially true in the area of dual eligibles, and the problems particularly great for dual eligibles who reside in nursing homes.

  • Coverage: Most problems arise when benefits are covered by both programs but under somewhat different coverage rules, creating opportunities for confusion, billing errors, misdirected or duplicate payments, and in the worst cases, outright fraud. Such opportunities are prevalent in particular for dual eligibles who reside in nursing homes. For example, both Medicare and Medicaid cover a nursing home benefit. The Medicare benefit is limited to no longer than 100 days, and is designed to serve Medicare beneficiaries who need relatively brief periods of rehabilitative care. While Medicaid also covers such short, rehabilitative stays if the patient is eligible only for Medicaid, its nursing home benefit also goes to persons needing longer term and mainly custodial care. It is sometimes difficult for providers or beneficiaries to predict, when a patient is admitted to a nursing home, which program will eventually pay. As a result, bills may be submitted to both programs, with the expectation that those paying the bills will sort things out.

  • Payment: When a service is provided to a dual eligible who is covered by both Medicare and Medicaid, Medicare pays first. Medicaid pays only the beneficiary's Medicare beneficiary cost-sharing. When a service is provided to a dual eligible who is covered only by Medicaid, then Medicaid pays. Requirements and systems safeguards are in place at both the State and Federal levels to ensure that claims are paid by the appropriate program. However, given the difficulties described above in determining coverage, and given the natural desire of both programs to avoid making erroneous payments, delays in payments sometimes occur, creating more incentives for providers to "game" the system.

  • Mental Health Services - Findings from the IG's medical necessity review demonstrated that in 32 per cent of Medicare records reviewed, mental health services for nursing home residents had been ordered improperly or unnecessarily. Specifically, there was no medical indication for mental health services for these patients, and medical necessity was questionable for an additional 16 per cent of patient records reviewed. The total amount of these services was $27 million in 1993.

  • Medical Supplies - Providers of medical supplies such as those required for wound care, incontinence, and orthotic equipment may unreasonably inflate prices for these supplies or may inaccurately describe the supplies. For example, a seat cushion may be described as a "custom fitted orthotic body jacket" to obtain a larger Medicare or Medicaid reimbursement. Similarly, Medicare dollars have been lost or misspent when a higher price has been paid for supplies which could be more cost- effectively obtained through other sources. Some examples of this include I.V. poles, enteral nutrition supplies, and portable x- rays for patients. Also, providers are often charging separately for items such as aspirin, tape or cotton balls that should be included in the routine per them rate.

  • Hospice Services - Hospice care shifts the focus from curative to palliative care, to help the patient spend the remaining days of life as comfortably as possible; consequently, hospice care may be less costly to the nursing facility. Although hospices can provide services either at home or in a separate hospice facility, often patients in nursing homes may also receive "hospice services." For the nursing homes, the IG has found that there is a considerable financial incentive to enroll patients in the hospice benefit since Medicare makes an additional payment for these beneficiaries, while few additional services are provided.

The IG has estimated that as many as one-fifth of hospice patients residing in nursing homes may be erroneously enrolled under the Medicare hospice benefit. Audits of hospice patients in the fourth benefit period have shown that as many as two-thirds found to be ineligible were nursing home patients. Also, the IG found that they were receiving fewer services from hospices than at-home patients and that most services would have been available from the nursing home without the hospice designation. This is significant because a condition of enrollment in a hospice is that the patient forgo his rights to Medicare payment for curative care.

  • Therapy Services - Specialized rehabilitation agencies often provide services such as speech-language pathology, occupational or physical therapy services to nursing home patients in both Medicare and Medicaid. The multi-layered structure of these organizations, which often use outside billing services, tend to complicate payment oversight. There have been Medicare salary equivalency guidelines for contracted physical therapy services and respiratory therapy since 1975 and 1978 respectively. However, in the past there were no established salary equivalency guidelines for contracted occupational and speech-language pathology therapy services, and therapists and therapy companies were able to bill providers for services based on exorbitant salaries and other administrative costs, resulting in charges of as much as $688 per hour for occupational and speech-language pathology therapy services. HCFA has proposed to limit excessive charges for Medicare therapy services; in the interim, intermediaries are applying the "prudent buyer concept" to ensure program payments are appropriate. On March 28, 1997, HCFA proposed new salary equivalency guidelines to combat these abuses. This proposal introduces guidelines for the contracted speech-language pathology and occupational therapy services winch in most instances limits excessive charges for therapy services in Medicare. The proposal also updates the physical and respiratory therapy guidelines amounts with a modest increase. We are just starting to review and prepare responses to the comments on the proposed regulation. Until we have reviewed and addressed all of the individual comments, we cannot indicate the details of the final guidelines.

This Administration has been successful in taking aggressive measures to staunch the flow of Medicare and Medicaid funds to perpetrators of fraud and waste. In order to stay one step ahead of unscrupulous providers and suppliers, we need to step up our efforts, using innovative, state-of-the-art prevention and detection methods. However, in many areas we lack the authorization we need to create effective and thorough anti-fraud and abuse programs. With the support of the Congress to increase our authorization in these areas, we can reduce Medicare and Medicaid losses dramatically.

One of the ways we have already succeeded in reducing losses is through Operation Restore Trust (ORT), which has already shown an impressive return on resources invested in the program. The program integrity activities of the Medicare contractors initiate many of the cases subsequently developed by the Office of Inspector General and Federal Bureau of Investigation, and support their prosecution by the Department of Justice. In addition, using monies expand our successful efforts using the State survey agencies to be our "eyes and ears" in the field and report to the contractors whether providers are meeting Medicare billing requirements. We have used this model successfully with our expanded home health surveys in the 5 ORT States.

Operation Restore Trust

Operation Restore Trust provided valuable experience in fraud and abuse detection and prevention that is enabling HCFA to dramatically reduce waste of Medicare and Medicaid funds. The original ORT was a two-year demonstration project which concluded on March 31, 1997. It was launched by the President in May 1995 and was designed to demonstrate new partnerships and new approaches in finding and minimizing fraud. As a demonstration project, ORT targeted four areas of high spending growth: home health agencies, nursing homes, DME suppliers, and hospices. Since more than a third of all Medicare and Medicaid beneficiaries are located in New York, Florida, Illinois, Texas, and California, ORT efforts were targeted at these five states.

The ORT project was the first comprehensive effort at collaboration between HCFA and law enforcement agencies. Through HCFA's expanded efforts, approximately $1.8 million has been allocated to HCFA for "ORT Plus" through HIPAA's Fraud and Abuse Control Program, to enhance the program integrity activities and to integrate these activities into our certification surveys conducted by State agencies. Eighteen States will participate in a total of 26 HIPAA funded projects, allowing us to survey approximately 300 providers for both certification and reimbursement issues. These enhanced surveys will be made of providers of home health services, skilled nursing services, outpatient physical therapy services, and laboratory services, as well as psychiatric services in both hospitals and community mental health centers. Many of these surveys will be modeled after the home health agency and skilled nursing facility surveys conducted during ORT. This collaboration, which was continued through the Fraud and Abuse Control Program established in HIPAA, establishes a funding stream for health care fraud activities, and requires DoJ and HHS to establish priorities jointly. Most importantly, HIPAA, through the Fraud and Abuse Control Account and MIP, is helping us to finance new ways of doing business in the future.

Medicare Integrity Program (MIP)

This program authorizes the Secretary to promote the integrity of the Medicare program by entering into contracts with eligible entities to carry out program integrity activities such as audits of cost reports, medical and utilization review, and payment determinations. Section 202 of P.L. 104-191 (the Medicare Integrity Program (MIP)) was enacted to strengthen the Secretary's ability to deter fraud and abuse in the Medicare program in a number of ways. First, it created a separate and stable long-term funding mechanism for MIP activities. Historically, Medicare contractor budgets had been subject to fluctuations of funding levels from year to year. Such variations in funding did not have anything to do with the underlying requirements for MIP activities. This instability made it difficult for HCFA to invest in innovative strategies to control fraud and abuse. Our contractors also found it difficult to attract, train, and retain qualified professional staff, including clinicians, auditors, and fraud investigators. A dependable funding source allows HCFA the flexibility to invest in new and innovative strategies to combat fraud and abuse. It will help HCFA to shift emphasis from postpayment recoveries on improper claims to pre-payment strategies designed to ensure that more claims are paid correctly the first time.

Second, by permitting the Secretary to use full and open competition rather than requiring that we contract only with the existing intermediaries and carriers to perform MIP functions, the government can seek to obtain the best value for its contracted services. Prior law limited the pool of contractors that could compete for contracts, thus, we have not always been able to negotiate the best deal for the government or take advantage of new ways to deter fraud and abuse. Using competitive procedures, as established in the Federal Acquisition Regulations (FAR), we expect to attract a variety of offerors who will propose innovative approaches to implement MIP.

Third, MIP permits HCFA to address potential conflict of interest situations. We will require our contractors to report situations which may constitute conflicts of interest, thus minimizing the number of instances where there is either an actual, or an apparent, conflict of interest. By invoking the FAR in establishing multi-year contracts with an expanded pool of contractors, we win be able to avoid potential conflicts of interest and obtain the best value. Also, by permitting us to develop methods to identify, evaluate and resolve conflicts of interest, we can create a process to ensure objectivity and impartiality when dealing with our contractors. This is a concern particularly when intermediaries and carriers are also private health insurance companies processing Medicare claims.

Other Initiatives
  • Medicare as a Second Payer Initiative - This "front end" activity takes an active approach to identifying the correct payer before the claim is processed. There are multiple areas that are scrutinized to ensure that the appropriate payer is billed; these mechanisms include contractor systems edits, the Initial Enrollment Questionnaire, data matches and first claim development, as well as unsolicited updates (i.e., phone calls and letters) from providers and beneficiaries.

  • PACE and SHMO Demonstrations - The Program for All- inclusive Care for the Elderly (PACE) and Social Health Maintenance Organization (SHMO) programs are two models that. address the problem of fragmentation of Medicare and Medicaid benefits and health care services for dual eligibles. A lack of coordination between services and benefits increases opportunities for fraud in addition to jeopardizing quality of care. PACE and SHMO are prototypes that integrate acute and long- term care into a single system, which can then be closely monitored. The President's proposals would grant full permanent provider status for the PACE demonstration sites that currently meet the PACE protocol. Also, SHMO demonstrations would be extended until December 31, 2000. SHMOs enroll a cross-section of the elderly living in the community and provide standard Medicare benefits, together with limited long-term care benefits. These Congressionally-mandated demonstrations are currently set to expire on December 31, 1997. A three-year extension would provide additional time to evaluate this delivery model. Although these models may not be appropriate or workable in all settings, we believe that coordination of Medicare and Medicaid funding in these programs could reduce the possibility of fraud and abuse, while improving overall quality.

  • Durable Medical Equipment - There is widespread concern that Medicare's payments for durable medical equipment are excessive. Medicare payments for DME are based on a fee schedule methodology established by Congress in Omnibus Budget Reconciliation Act (OBRA) 1987, and these fee schedule amounts were based on supplier's "reasonable charges" in the mid- 1980s. Unless otherwise specified by Congress, these amounts have been increased annually by the Consumer Price Index-Urban (CPI-U) as required by statute. This statutorily prescribed payment methodology does not consider changes in technology or any other factors impacting suppliers' costs and as a result HCFA's payments for DME are often excessive.

It is essential that providers of durable medical equipment (DME) have proven track records of reliable and scrupulous business practices, given the potential for fraud and abuse in this area. By bonding these providers much in the same way that other businesses are bonded, there is greater control over the fly-by-night operations that seek to defraud the Medicare and Medicaid programs. A notice will be issued this summer by HCFA that will require that DME providers meet certain criteria, including putting up a surety bond for licensure, and greater proof of the bona fide existence of the business. This will prevent abuses such as the case of the Florida man who received a DME license, despite the fact that the only actual supplies he had in stock were stuffed alligator heads and other souvenirs he sold from his garage. He had applied for a DME certification to sell wheelchairs to complement his brother-in-law's business of installing wheelchair lifts in cars. Examples like this are a good argument for DME bonding.

  • Grants Program: Reforming Service Delivery for Dually Eligible Beneficiaries - On May 22, 1997, we announced that HCFA is Sponsoring a grants program to foster a more integrated and flexible service delivery system for Persons entitled to both Medicare and Medicaid. Our principal interest is, of course, to develop better ways of serving this most vulnerable population. In addition, another very important and desirable outcome would be to reduce the kind of fragmentation and duplication that results from dual coverage and that so readily sets the stage for fraud and abuse.

  • Interagency Collaboration - We are collaborating with similar efforts of other organizations and agencies, such as the Long Term Care Ombudsman Program funded by the Administration on Aging. This Program sends ombudsmen to visit nursing homes and other sites of potential fraud and waste. In addition, programs such as Operation Restore Trust have used State Survey and Certification teams, Medicaid Fraud Control Units, Departments of State and Justice personnel, and law enforcement officials to complement and enhance oversight of Medicare and Medicaid providers.

The Health Insurance Portability and Accountability Act (HIPAA) legislation provided a solid foundation on which to build program integrity activities. To extend these efforts, the President proposed a number of additional fraud and abuse proposals in his FY98 Budget and the Medicare and Medicaid Fraud, Abuse, and Waste Prevention Amendments of 1997.

Proposals Targeting Special Areas Of Concern

The President's budget contains a number of proposals to reduce waste, fraud and abuse in the Medicare Program. They include provisions to require insurance companies to report the insurance status of beneficiaries in order to ensure that Medicare pays appropriately. Generally private insurance is the primary payer when Medicare or Medicaid beneficiaries have such coverage, and Medicare or Medicaid is required to be the secondary payer. Primary insurers should not be allowed to cost- shift evade their fiscal responsibilities.

Creating a single payer for services provided to Part A patients in skilled nursing facilities would dramatically streamline the Medicare billing process, enabling carriers to scrutinize bills for medical necessity documentation. Currently, Medicare pays room and board charges under Part A for up to 100 days of post-hospital skilled care, while certain therapy services may be contracted out and those Providers paid separately under Part A cost reimbursement or Part B payments. In other cases, some nursing homes may provide supplies and services themselves and we pay the nursing homes directly. The broad range of variations creates confusion and stymies coordination Of payments, thus providing a Scenario ripe for abuse and fraud. The President's FY98 Budget includes a proposal to implement a PPS for SNF services provided to beneficiaries eligible for Medicare SNF care --- whether the services have been historically reimbursed under Part A or Part B. A consolidated billing requirement would create an incentive for skilled nursing facilities to monitor and control payments for therapy services not provided during a Medicare SNF stay.

We have several other proposals to prevent excessive and inappropriate billing for home health services. We are proposing to close a loophole in the current payment calculation by linking payments to the location where care is actually provided, rather than the billing location. When we implement a home health prospective payment system (PPS), we are proposing to eliminate home health agency (HHA) periodic interim payments, which were originally established to encourage HHAs to join Medicare by providing a smooth cash flow. Since over 100 new agencies join Medicare each month, such financial inducements are no longer needed. We also propose to work with the medical community to develop more objective criteria for determining the appropriate number of visits for specific conditions, so that we can prevent excessive utilization.

Medicare and Medicaid Fraud Abuse And Waste Prevention Amendments of 1997

In March, the President presented an additional set of legislative proposals titled the "Medicare and Medicaid Fraud, Abuse, and Waste Prevention Amendments of 1997." Some of these proposals build on the provisions enacted in HIPAA. Others seek to close loopholes or weaknesses in the Medicare statute that allow providers to take advantage of Medicare payment. Provisions in the bill especially relevant to nursing homes include:

  • Hospice Benefit Modifications - This proposal would revise Medicare hospice coverage and payment policies in certain cases. First, after the two initial 90-day periods this proposal would replace the current third and fourth hospice benefit periods with an unlimited number of thirty-day periods. This change would help HCFA ensure that the hospice benefit is used for those beneficiaries with a terminal illness, but it would not end hospice care for those fortunate to survive longer than expected. Thirty-day re-certifications would, in fact, help ensure that only terminally ill patients continue to receive hospice care. Second, as the President's FY98 budget bill proposed for home health, this proposal would link payment for hospice services to the geographic location of the site where the service was furnished. Third, this proposal would also limit beneficiary liability under hospice care. Currently, the major cause for denial of hospice claims is the fact that the beneficiary was not terminally ill within the meaning of the law (i.e., did not have a prognosis of six months or less of fife at the time the services were rendered). If a hospice claim is denied because the patient was not terminally ill, the patient's liability for payment would be waived and the hospice would be liable for the overpayment unless it could prove that it did not know or have reason to know the claim would be disallowed. The standard of proof authority for CMHCs to be surveyed upon request by state agencies to determine compliance with Federal requirements or investigate complaints. It would also prohibit Medicare-only CMHCs. Finally, the bill includes a provision to penalize physicians for false certification of partial hospitalization need which parallels the authority created in HIPAA for penalties for false certification of home health services. This provision would create a strong incentive for physicians to certify need for partial hospitalization services only for those individuals who meet Medicare requirements. Unfortunately, our proposal is not included in the House or Senate mark.

  • Improving the Provider Enrollment Process - We propose to clarify the provider enrollment process, and strengthen HCFA's ability to combat fraud and abuse by not allowing "bad actors" to become Medicare providers and/or suppliers. These provisions would provide the Secretary the authority to deny Medicare entry for those provider applicants who have been convicted of a felony, and the authority to collect a fee for all Medicare and Medicaid applicants when they apply for enrollment or re- enrollment. The fee would cover administrative costs in processing applications and administering the HIPAA National Provider Identification program requirements. If an application is denied, a six-month waiting period must be completed before the provider could reapply.

  • New Fraud and Abuse Sanctions - New sanctions on fraud and abuse will authority for CMHCs to be surveyed upon request by state agencies to determine compliance with Federal requirements or investigate complaints. It would also prohibit Medicare-only CMHCs. Finally, the bill includes a provision to penalize physicians for false certification of partial hospitalization need which parallels the authority created in HIPAA for penalties for false certification of home health services. This provision would create a strong incentive for physicians to certify need for partial hospitalization services only for those individuals who meet Medicare requirements. Unfortunately, our proposal is not included in the House or Senate mark.

  • Improving the Provider Enrollment Process - We propose to clarify the provider enrollment process, and strengthen HCFA's ability to combat fraud and abuse by not allowing "bad actors" to become Medicare providers and/or suppliers. These provisions would provide the Secretary the authority to deny Medicare entry for those provider applicants who have been convicted of a felony, and the authority to collect a fee for all Medicare and Medicaid applicants when they apply for enrollment or re- enrollment. The fee would cover administrative costs in processing applications and administering the HIPAA National Provider Identification program requirements. If an application is denied, a six-month waiting period must be completed before the provider could reapply.

  • New Fraud and Abuse Sanctions - New sanctions on fraud and abuse will discourage those seeking opportunities to "game" the Medicare and Medicaid programs. By penalizing false certifications, barring kickbacks, and specifying civil monetary penalties, we will gain tighter control over the caliber of individuals providing health care for our beneficiaries.

  • Value of Capital When Ownership of an Institution Changes - This proposal, which would apply to all providers, would deem the sales price of an asset to be its net book value. There have been instances in which SNFs or hospitals currently game the system by creating specious "losses" in order to be eligible for additional Medicare payments. For example, a seller might claim that a significant portion of the purchase price of a hospital is attributable not to the value of the hospital building and other capital assets, but to the value of the certificate of need, the already assembled hospital staff, or some other intangible asset. By minimizing the value attributable to the capital assets, the seller is able to record a lower sales price, and a greater "lose' on the sale. The seller is then entitled to partial reimbursement for the loss from Medicare. This existing loophole is especially problematic in the case of hospitals paid under PPS for capital because the prospective capital payments to the new owner are unaffected by the low valuation of the hospital. Prior to PPS, the new owner would be somewhat disadvantaged by the gaming because their cost-based capital payments would have been lower because of the low sales price. Effectively, this Proposal would eliminate the need for any Payment adjustments for gains or losses.

  • Bankruptcy Provisions - These Proposals would protect Medicare and Medicaid interests in bankruptcy situations' - A Provider would Still be liable to refund overpayments and pay penalties and lines even if it filed for bankruptcy. Quality of care penalties could be imposed and collected, even if a provider were in bankruptcy, and Medicare suspensions and exclusions (including educational loan defaults) would still be in force even if a provider files for bankruptcy. Bankruptcy courts would not be able to re-adjudicate our coverage and/or Payment decisions.

  • Rural Health Clinic (RHC) Benefit Reforms - Recognizing the importance of the rural health clinics, reforms are needed to strengthen Medicare policy and better target assistance. It should be emphasized that the inclusion of RHC proposals in the Medicare and Medicaid Fraud and Abuse Prevention bill is not meant to imply that we believe these providers are engaged in fraudulent or abusive activities. We do believe, however, that the RHC program could be better targeted to serve truly under- served rural areas, and as suck we have included several proposals to address this issue. These Proposals would hold provider-based RHCS to the same Payment limits as independent RHCs, better target the Placement of RHCS in under-served areas and still provide access to clinic services. We are pleased that both the House and Senate, Reconciliation bills include these proposals. Neither bill, however, includes a provision that would authorize the development of a PPS system for RHC services. We hope that such a provision is added in Conference.

We are witnessing both an increase in the elderly Population, and an unprecedented rate of change in the health care environment' As innovative new health care arrangements flourish, or fraud. The vulnerability of skilled of these two phenomena may also create new Opportunities f the combination nursing facility patients encourages individuals seeking to defraud Medicare to target the very ill or elderly, who may not be able to monitor their own bills for fraudulent charges.

Another lend that will be increasing in the future is the concentration of large numbers of the elderly in specific geographic locations, and specific residential and care facilities. The changing demographics of our society indicate that not only a greater Proportion of the national economy will be devoted to care of the elderly, but that this concentration of elderly will create territory that is ripe for exploitation by profiteers.

As new trends emerge on the health care horizon, we must be prepared to respond to them. For example, health care mega- corporations pose challenges for fraud detection and Prevention: new mergers and acquisitions are resulting in ever-larger health care corporations, which will be more difficult to monitor for fraud and abuse. The challenge

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