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Testimony on Efforts to Control Medicare / Medicaid Waste, Fraud and Abuse by Bruce Merlin Fried
Director, Center for Health Plans and Providers
Health Care Financing Administration
U.S. Department of Health and Human Services

Before the House Committee on Commerce, Subcommittee on Oversight and Investigations
September 29, 1997


Good morning, Mr. Chairman and Members of the Subcommittee. I am pleased to be here today to discuss HCFA's efforts to curb Medicare waste, fraud and abuse through information technologies. Ensuring the integrity of the Medicare and Medicaid programs is a key priority of this Administration. Promoting program integrity is a vital element of every policy decision. The President has been vocal in his commitment to the importance of taking strong measures to guarantee that our nation's safety net programs remain healthy and secure for this and future generations. With this in mind, I would like to discuss the role of technology in HCFA's antifraud and abuse strategy, other fraud and abuse initiatives, the Medicare Transaction System (MTS) and the lessons we have learned from it.


This Administration can be proud of its success in combating waste, fraud, and abuse. Health care has become a target for unscrupulous individuals. Both private industry and government are employing a variety of tools to combat fraud and abuse. Since 1992, we have made tremendous progress in protecting the fiscal integrity of the Medicare program. An example is the HCFA initiated partnership with the enforcement agencies targeting fraud and abuse in those five states that account for nearly 40 percent of all Medicare and Medicaid beneficiaries. This two-year project, Operation Restore Trust, encompassed a wide range of projects aimed at eliminating fraud schemes and identifying vulnerabilities in the Medicare programs. The reforms enacted in the Balanced Budget Act of 1997 and the Health Insurance Portability and Accountability Act of 1996 provide significant new tools to further assist us. But I think we all know that equally tremendous challenges he ahead. Our goal is to ensure that the Medicare and Medicaid programs have the necessary arsenal to combat fraud and abuse.

The Administration is pursuing a strategy intended to deter fraud and abuse on every front -prevention, early detection, collaboration and enforcement. Prevention is the best means we have to guarantee the initial accuracy of both claims and payments, and to avoid having to "pay and chase", a lengthy, uncertain and expensive process. Early detection is a second key ingredient of our approach. We can identify patterns of fraudulent activity early by using data to monitor the billing patterns and other indicators of the financial status of providers, promptly identifying and collecting overpayments, and making appropriate referrals to law enforcement.

Close collaboration with our partners in the law enforcement arena is one way we can maximize our success. A lesson learned through Operation Restore Trust is the importance of working closely with the states, the Department of Justice, including the FBI, the Inspector General and the private sector to share information and tactics about fighting fraud and abuse.

Finally, when we find "bad apples" among our many good providers, we must take enforcement action against them, including suspension of payment, exclusion from the program, disenrollment, collection of overpayments, and imposition of civil money penalties. Investing in prevention, early detection and enforcement has a proven record of returns to the Medicare Trust Fund. In FY 1995, every dollar spent by our Medicare contractors using these methods yielded $14 in return.

Our prevention, early detection and enforcement strategies are aided by using the best technology available. In combating fraud and abuse in Medicare, HCFA needs to rely on the best technology available to detect fraudulent providers and deter them from abusing the Medicare Trust Funds.


Developing technologies to fight fraud and abuse is a formidable challenge. Because of the complexity of the programs, the multiplicity of providers and the numerous opportunities for abusers to "game" the system, no single piece of technology solves all fraud and abuse problems. Our range of anti-fraud mechanisms include software to detect aberrant patterns of health care utilization, tools to prevent duplicative payments and mechanisms to identify fraudulent providers

Medicare Transaction System

Because of the Committee's special interest in MTS, I want to discuss HCFA's original plans to develop a single integrated claims processing system which would have added to HCFA's current tools for fighting fraud and abuse. As originally conceived, MTS would have provided HCFA with a single system to streamline Medicare claims processing, integrate data for Medicare Parts A and B, track beneficiary entitlement and insurance information, achieve better financial oversight, and incorporate managed care. As you can see, MTS would have augmented our current fraud and abuse efforts, but MTS also would have fulfilled other goals that were important to HCFA, such as complying with the CFO Act, continuing to make managed care payments, and supporting customer service functions. We are currently reevaluating the appropriate way to continue HCFA's efforts in pursuing these goals.

MTS and Fraud and Abuse

In terms of fraud and abuse, MTS was designed as a shared system (with combined Part A and Part B data), which would assist in fraud efforts by integrating all claims information, and permitting more "real time" access to data. Under the old claims processing system, obtaining provider data would mean querying 8 operational systems -- with 70 contractors at 34 data centers. It could take significant time and resources to find comprehensive information about a type of service for a beneficiary to build a case showing a pattern of fraudulent billing.

Through our work on MTS we are now one step closer to achieving shared data among our myriad of contractors, an important part of our effort to detect fraud and abuse because we will be able to track claims data across both Part A and Part B. As a result of the MTS development efforts, we will consolidate existing contractor systems into standard Part A, Part B, and DME systems by the year 2000. We have awarded contracts to the Electronic Data Systems (EDS) Corporation for maintenance and installation of the Part B standard system and to the Viable Information Processing Systems (VIPS) Corporation for the standard DME system.

To date, 20 Part A intermediaries have been transitioned to the Florida Shared System and the remaining 20 will be transitioned by next August. Three of the four DME contractors are using VIPS now and the transition for the fourth will be completed by July 1998. Eight Part B carriers are using the EDS system now and the remaining 24 will be using the system by August 2000. Consolidation of contractor systems is an exceptional accomplishment for HCFA in terms of achieving administrative efficiencies and we will continue to oversee this development to ensure - that the transitions take place on schedule and within cost.

MTS and Project Management

In terms of project management, I would now like to discuss the MTS project and lessons that HCFA has learned from it. In your letter of invitation yon asked us to discuss the problems around the development of MTS. MTS was designed to house all information on beneficiaries, providers, payments and services on a single database. The project was much more complex than either HCFA or the contractor had originally anticipated. Although we had specifically defined goals, there were significant unknown variables. It was anticipated that the proposed MTS electronic claims system would consolidate and standardize a complex universe of discrete software programs. In the absence of a single integrated system, 80 contractors were using several different systems to process approximately 800 million claims annually with unique, idiosyncratic, and often proprietary software. This made it difficult for HCFA to consolidate data necessary to analyze, monitor and act on fraudulent and abuse situations.

In January, 1994, HCFA entered into a $19.4 million contract with GTE for development of MTS. Although the contract was the result of competitive bidding, there were very few bidders for the task. The scope of the original contract was to collect and codify requirements for the system, to develop alternative proposals for the architecture of the system, and ultimately to develop the software system based on the requirements and the selected alternative. In the cyberworld, the term "requirements" refers to comprehensive specifications of the intended product, its structure, and the timetable, much in the way a blueprint is used in house construction. The original schedule was very aggressive, anticipating a fully operational MTS by September, 1999, and providing for simultaneous work on the whole project, rather than separating the project into smaller tasks.

In the two years following the contract start date, work progressed at a slower pace than was anticipated. It became clear that both HCFA and GTE had underestimated the complexity, of creating this system. By the spring of 1996, HCFA and GTE agreed that the contract needed to be renegotiated in recognition of the project's complexities; these renegotiations were completed

In September 1996. There were several aspects of the renegotiation: the work was divided into 6 smaller segments or "releases" and the revised schedule extended the completion date to May 2000. The complexity of the project was recognized both in the revised schedule and by the increase in the overall amount of the contract from $19 million to $92 million. The revised contract also included specific performance. measures or standards negotiated by HCFA and GTE which would be used to monitor contract performance as the work progressed.

As work on the contract continued in late 1996, HCFA monitored GTE's performance using the new standards approved by both parties. When a review of GTE's performance in spring 1997 showed that the project was still behind schedule, HCFA issued a "stop work order" for all activities except managed care. The managed care system was the first product we wanted delivered and as such, was at a more advanced stage in the development process. By focusing on a single phase, we hoped GTE would be more successful in meeting performance requirements. The purpose of the stop work order was to allow HCFA to evaluate how to move forward on the project. As various alternatives were considered, HCFA officials consulted extensively within HFIS and with OMB.

In addition to input from HHS and OMB, HCFA continued to review and evaluate recommendations from the General Accounting Office (GAO), most notably in a report issued in May 1997. Advice was also solicited from the Information Technology Review Board (ITRB), a multi-agency group of Information Technology managers chartered by ONIB to review large information technology projects. A common theme in the advice provided to HCFA was the recommendation that the work be divided into smaller, self-contained incremental pieces which could be more easily managed. On the basis of the performance measures, HCFA notified GTE on August 15 of the decision to terminate the contract. We are now rethinking how we will achieve the goals that prompted MTS.

There have been a lot of numbers quoted in the press lately about the cost of MTS. Let me take a moment to clarify them. At the beginning of 1997, we estimated that we would spend $102 million for MTS contracts -- $92 million for the GTE software contract and $1 0 million for smaller contracts for services such as independent verification and validation and testing support. As of September 9, GTE reported to HCFA that it had incurred costs of about $45 million. As of that date GTE has submitted vouchers to HCFA for about $41 million which HCFA has paid. This means, to date, HCFA has spent approximately $41 million on the software contract.

HCFA has obtained other tangible products from the NITS effort including a system design to meet the needs of a completely redesigned managed care and fee-for-service transaction system; and a high-level set of requirements (what the system must do) for the entire Medicare environment, including both fee-for-service and managed care, covering both current and future capabilities. The requirements development work, even that which has not been completed, will be useful to us in whatever way we choose to proceed.

As I mentioned before, HCFA has received advice from many sources about management of technology projects. That advice, along with HCFA's experiences in the project, have formed a valuable set of lessons learned.

  • more aggressively oversee the integrity of the system's architecture, the transition efforts and the millennium change;

  • to do more complete integrated project planning and project management;

  • to ensure the adoption and adherence to a rigorous system development methodology;

  • to complete requirements before moving to later stages of software;

  • to divide work into small, incremental pieces which can be more easily managed;

  • to completely analyze alternatives and return on investment before moving forward; and

  • to use the contract management process as a management tool.

HCFA has taken to heart the advice of the GAO, the information resource management experts in OMB and HHS, and the ITRB. Some examples of how HCFA is incorporating these lessons learned into improving our approach to future technology initiatives are:

  • We are adding the use of a systems integrator and an independent validation and verification contractor to the systems transition and millennium efforts;

  • We are creating an integrated project plan that includes not only the requirements development but also other HCFA-critical activities such as the Balanced Budget Act, millennium, and systems transitions. This will allow us to understand the relationships between projects and manage the overall environment more effectively;

  • For the completion of the managed care requirements, we are following a methodology which has been proven successful in the past, and from which we will expect similar rigorous processes for future contracts;

  • Before we more forward with the managed care requirements, we will conduct a complete analysis of the alternatives of next steps and document the process, and then will proceed according to results of our analysis-,

  • We will evaluate each piece of work relative to its manageability, risk, and cost benefit, as well as the resource demands of other work being done by HCFA;

  • We will submit the documented results of our analysis to the investment review process for evaluation and decision; and

  • We will continue to use such performance indicators as the "earned value" concept to assist us in monitoring and decision-making. This is a way of measuring the progress of the contractor's efforts against an established baseline.

Looking back, MTS has been a difficult and complex project. HCFA and GTE had anticipated that greater documentation of contractor systems would have existed. This lack of documentation at the contractors added difficulty, time and cost to the project. But, as I've mentioned, HCFA has learned many valuable lessons and will use these lessons learned with MTS when developing future technologies. The question that remains to be answered is how HCFA plans to go forward. HCF A is working very hard to start from first principles: compile data, analyze it, and then make our decisions. Then, later this fall, after fully consulting with OMB and GAO, we will discuss with you our new plans to address the problems we still need to solve. Whatever we decide, we can assure you that each component of the plan will meet OMB guidance for funding information systems investments and the requirements of the Information Technology Management Resource Act.

Preventing Erroneous Payment

HCFA contractors currently have state of the art systems that enable us to make proper payments and prevent fraudulent claims from ever being paid. We are constantly searching for ways to update and improve our contractor's claims processing technologies.

Extensive Use of Edits -- Our contractors process over 800 million claims a year. Using our standard systems, these claims are subjected to a rigorous prepayment electronic screening process to verify beneficiary information, provider information, utilization history, procedure and diagnosis, and coordination of benefits. Each computer instruction which verifies information on a claim is called an edit.

These edits are performed to determine beneficiary information such as if the patient is enrolled in Medicare, and if all co-payments and deductibles have been met. Our contractors also perform a series of edits to determine if the provider is eligible and is in good standing with the Medicare program. Claims are then edited for utilization history. For example, our contractor's systems will only pay one claim in a patient's lifetime for an appendectomy. Many claims are also checked to verify if the procedure being billed for is appropriate for the diagnosis. Finally, our contractors coordinate benefits to determine if a beneficiary has other coverage that is primary to Medicare. In total our contractors have thousands of these edits in place which perform a comprehensive review of each claim before Medicare payment is made for a service.

Correct Coding Initiative --- Implemented in 1996, the Correct Coding initiative began with a contract to evaluate all physician coding and recommend policy for how codes should be billed, including which codes should be bundled prior to payment when separately billed. Unbundling occurs when physicians incorrectly use multiple procedure codes when describing individual components of a service instead of a single, comprehensive procedure code which describes the entire service. Our carriers have installed approximately 93,000 computerized coding edits which check each claim for "unbundled" services and prevent a payment from being made. The project has resulted in approximately $200 million in savings in the first year of implementation.

Commercial Off-the-Shelf Software (COTS) -- The committee has expressed a special interest in commercial off-the-shelf software (COTS) to do some of this editing. We are currently studying COTS and it may become a part of our arsenal. In 1996, HCFA selected GPG (GMIS Products Group) to test a commercially available software application know as "Claims Check" which is designed to evaluate physician claims and reduce erroneous or abusive billing on a prepayment basis.

We are currently testing this software at one of our contractors to evaluate the underlying policy of edits, the customization needs, savings, and the installation and integration issues. We have completed a preliminary comparison of COTS and the Medicare claims processing system by taking one month's claims and running them through both systems. The COTS product as a stand alone system identified $2.3 million of claims for denial and the Medicare contractor system identified $2.7 million. Our goal when we began this evaluation was to achieve maximum savings by integrating the COTS claims editing software into the Medicare claims processing system--in effect achieving the best of both worlds. However, it has been very difficult to achieve this integration. When our final evaluation is completed later this fall, we will make a decision about how we can best use claims editing technology to ensure that claims are paid correctly and most cost effectively.

Detecting Aberrant Patterns of Health Care Utilization

HCFA is constantly seeking means to assure that we avoid paying for improper claims. This is an area where we work very closely with the agencies that have responsibility for enforcement actions.

Enhanced HCFA Customer Information System (WIS) --- The HCIS has been used in one of our most successful anti-fraud programs, Operation Restore Trust, which began as a collaborative demonstration project with the Department of Justice and State Medicaid AntiFraud Units. The HCIS enables HCFA and its contractors to view provider or service utilization data at several levels including the national, the state, contractor, provider type, or individual provider. For example, if I were trying to find out how many times a certain service had been billed in a state, I could obtain that information through the HCIS database immediately. This capability allows the rapid identification and analysis of factors contributing to aberrant data. As a result, audits or reviews can be focused, rapidly and inexpensively, on a particular level.

HCFA first used HCIS last year to identify a number of skilled nursing facilities with potential problems in Miami, Florida. The project identified over $2 million in overpayments and mandated corrective action plans from the problem providers. To date, over $24 million in overpayments have been identified in these reviews. The OIG and the DOJ also both routinely request information from HCIS to assist them with their cases.

Statistical Analysis Contractors --- Since 1993, HCFA has supported a dedicated statistical analysis contractor, Palmetto Government Benefits Administrator, Inc., to support our four Durable Medical Equipment Regional Contractors (DMERCs). The contractor produces ongoing analysis of trends, utilization rates, billing patterns, referral patterns and related information at the national and regional levels. As an example, through their analysis the contractor has identified fraudulent billing practices for nebulizers and related drugs, and many abusive practices for incontinence supplies, surgical dressings, parenteral & enteral nutrition and urological supplies. The DMERCs have made changes in their payment policies that have saved the Medicare program in excess of $200 million. The changes related to Nebulizers alone resulted in a savings of $40 million. They have also used this data to trigger provider reviews, support fraud investigations, and target enrollment verification activities.

Detecting Fraudulent Providers

An important tool in our technology arsenal is a data system that maintains a centralized record of information about perpetrators of fraud that can be accessed and shared by all of our partners.

Fraud Investigation Database --- Since 1996, the Fraud Investigation Database has provided a comprehensive nationwide system devoted to accumulating fraud and abuse information. It represents all cases Medicare contractors have referred to law enforcement, chronology of events for each case, and disposition of each case. The database also contains the Office of the Inspector General excluded provider list. Currently this database is available to HCFA, the Office of the Inspector General, Department of Justice, including the FBI, U.S. Postal Inspector, and Medicaid Fraud Control Units. For example, two cases, one involving a provider of diagnostic services and the other involving ambulance services became national investigations because of the FID. Local Medicare contractors queried the FID and noticed that diagnostic and ambulance services were under investigation in several jurisdictions across the country. The contractors were able to consolidate their investigative efforts and pursue two national cases. The FID has also served as a valuable resource to investigators and attorneys as they begin new cases. Through the FID, they can search for past, similar cases, and gather information about the investigation, prosecution and disposition of similar cases. HCFA will use this database as another tool for analyzing patterns to help in prevention and detection activities.


Those who prey on the Medicare Trust Funds are ever resourceful. As a result, HCFA must seek out new ways of detecting fraudulent claims and preventing their payment. The previously described program integrity initiatives will help us to remain abreast of the latest technology, but

We need to be looking even further ahead. One effort on this front, which I know this committee has been very interested in, s our research agreement with Los Alamos National Laboratories.

In 1995, HCFA entered into an 2-year interagency agreement with he Department of Energy to use the expertise of Los Alamos National Laboratory to develop a ground-breaking new claims review approach that differs from existing methodologies. The ultimate goal of this new technology is to know on a prepayment basis, the likelihood that a claim coming in the door is suspect. This kind of research is bold and promising, but like all basic research, one whose payoff is not certain. Our hope is that the product of this project will be a prototype system of dynamic algorithms and features that have been tested and refined to detect fraud, waste, and abuse in prepayment environments

The prototype methodology uses mathematical models and algorithms in combination with provider and beneficiary profiles containing "features" or pieces of information that reliably pinpoint fraud and abuse from the incredible volume of data. The work of Los Alamos to date has been to determine and construct the features of each type of profile, conduct statistical and mathematical analyses on our massive claims database, and to test the prototype with contractors to see if the complicated models match up with reality. Through our work with Los Alamos, we hope to demonstrate that it is possible to build an automated prepayment mechanism that can identify suspicious incoming claims.

The Los Alamos prototype on physician claims has already been tested in the State of Florida. These results will help Los Alamos to fine-tune and improve their methodology. Further testing has also begun on the prototype in the State of New York. We expect results from the provider verification by the end of the year.

HCFA is now entering into a new interagency agreement for further research work. It contemplates several phases over four years. Ultimately, Los Alamos will provide a software design or blueprint for incorporating their prototype into our claims processing systems. "le Los Alamos may be our future, today we require our contractors to use software to help them analyze claims data, to identify trends and patterns and to profile providers. HCFA's requirements have fostered the development and improvement of several different types of software.


HCFA has not looked solely to technology to build our arsenal to fight fraud, waste and abuse. We are employing a number of on-going innovative strategies along other fronts as well.

Home Health Moratorium

The steadily increasing volume of investigations, indictments, and convictions against home health agencies has led to a great deal of publicity and concern about home health care fraud. In response to this concern, earlier this month President Clinton and Secretary Shalala announced an unprecedented moratorium on the entry of any new home health agencies into Medicare. The moratorium is designed to reduce the likelihood of "fly-by-night" operators entering the program while HCFA strengthens its requirements, thus preventing fraud, waste and abuse.

While the temporary moratorium is in effect, the Department of Health and Human Services will implement program safeguards included in the Balanced Budget Act, and work on important changes in requirements for home health agencies. For example, DHHS will implement the statutory requirement that home health agencies post at least a $50,000 surety bond before they are certified. Additionally, a related rule will require new agencies to have enough funds on hand to operate for the first three to six months. These requirements will establish the financial stability of home health providers.

During this six-month moratorium, the Department will also develop more stringent standards against fraud. New regulations will include requirements for more business information from home health agencies and experience based on serving a minimum number of patients prior to Medicare certification. W e are in the process of completing a final regulation to require home health agencies to conduct criminal background checks of the aides they hire, and to be more accountable for the care they provide. In conjunction with this regulation, new videos and brochures will be designed to teach beneficiaries how to detect and report fraud and abuse.

These changes will not only str engthen the payment safeguards we already have in place, but will expand and enhance them. There will always be unscrupulous providers and questionable billing practices --- but with the tools provided to us in the BBA and our new, stricter standards, we will have the ability to be one step ahead of them.

Medicare Integrity Program (MIP)

This program, enacted in the Health Insurance Portability and Accountability Act of 1996, authorizes the Secretary to promote the integrity of the Medicare program by entering into contracts with eligible entities to carry out activities such as audits of cost reports, medical and utilization review, and payment determinations. MIP provides a stable source of funding for HCFA's program integrity activities, and gives us authority to contract for these activities with any qualified entity, not just those insurance companies who are currently our fiscal intermediaries or carriers.

The Medicare Integrity Program strengthens the Secretary's ability to deter fraud and abuse in the Medicare program in a number of ways. First, it creates a separate and stable long-term funding mechanism for program integrity 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 program integrity 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 helps HCFA shift emphasis from post-payment recoveries on fraudulent 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 HCFA 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 were not always able to negotiate the best deal for the taxpayers or take advantage of new ways to deter fraud and abuse. Using competitive procedures, as established in the Federal Acquisition Regulations System (FARS), we expect to attract a variety of offerors who will propose innovative approaches to implement MIR.

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 will 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.

We are currently developing regulations to implement MIP, and we are also working on a statement of work for competitive contracts. As we transition work from one of our contractors, Aetna (which is terminating its Medicare work), we are testing a new contracting relationship in several Western States that will separate out (and consolidate) payment integrity activities from claims processing. This will give us valuable experience as we prepare to implement MIR.

Operation Restore Trust (ORT)

The Operation Restore Trust (ORT) project was the first comprehensive effort at collaboration between HCFA and law enforcement agencies. This two-year demonstration project, which was launched by the President in May 1995 and concluded on March 31, 1997, was designed to demonstrate new partnerships and new approaches in finding and minimizing fraud in Medicare and Medicaid. 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. Although the demonstration is over, we are continuing to use the principles we learned.

Fraud and Abuse Control 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. Using monies made available through the Fraud and Abuse Control Fund, established in HIPAA, we expanded our successful ORT efforts using the State survey agencies to be our "eyes and ears" in the field and to report back to the contractors whether providers are meeting Medicare billing as well as quality requirements. We have used this model successfully with our expanded home health surveys in the 5 Operation Restore Trust (ORT) States.

Approximately $1.8 million was allocated to HCFA for "Project ORT" through HIPAA's Fraud and Abuse Control Program, to enhance the program integrity activities that involve collaboration with State certification agencies. Eighteen States are participating 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 are modeled after the home health agency and skilled nursing facility surveys conducted during ORT.

Benefit Notices

A final, and equally important, program integrity priority for HCFA is beneficiary information. As a product of our claims payment system, HCFA sends each beneficiary a Explanation of Medicare Benefits (EOMB) statement. These statements detail actions that Medicare has taken on claims filed in their behalf We have learned that better-informed customers can actually help fight fraud and abuse. We currently receive and investigate an overwhelming number of inquiries from beneficiaries alerting us to questionable services on their statements. All of our carriers have 1-800 numbers which appear at the bottom of the EOMB encouraging beneficiaries to call with questions about their claims. By expanding our consumer information programs, we are ensuring that Medicare beneficiaries receive current, easy-to-understand, and unambiguous information in a timely manner, so that they may assist us in identifying improper claims and erroneous bills. A well-informed beneficiary can save us Medicare and Medicaid funds by alerting our investigators and claims reviewers to potential fraud, waste, and abuse of taxpayers' dollars.


The world changed dramatically with the proliferation of computer technology after World War II, and requests are now being made for laptop computer use in Congressional sessions. There is no going back; as the Luddites learned in the last century, technology marches on and HCFA has consistently been in the vanguard in exploring advanced computer systems. We have taken an important step forward in acknowledging the fact that an effective, cost efficient and standardized claims processing system is essential for the Medicare program.

No ambitious enterprise was ever completed without its share of snags and setbacks. Discouraging though they may be, these seemingly undesirable setbacks serve to guide us along to the proper course, which especially in the realm of complex computer technology, is a dynamic and evolving process. Technological capabilities which were merely hypothetical a decade ago are now used on a daily basis, and innovative answers to software limitations are constantly surfacing.

HCFA is committed to aggressively pursuing technology that can and will prevent improper payments, detect fraudulent activities earlier and aid in the battle against health care fraud and abuse. We have learned from our experiences in developing the MTS project, and we are now prepared to forge ahead incorporating the lessons we have learned into our technology plan. I appreciate Congressional interest in these important endeavors and look forward to working with this committee to find new- and innovative approaches to fighting fraud and abuse.

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