Life Science Compliance Update

November 14, 2016

OIG Releases FY 2017 Work Plan


The United States Health and Human Services (HHS) Office of Inspector General (OIG) recently released its 2017 Work Plan, which summarizes new and ongoing reviews and activities that OIG plans to pursue with respect to HHS programs and operations during the current fiscal year (and beyond). The Work Plan is updated throughout the year, and this edition describes OIG audits and evaluations that are either currently underway or planned, as well as certain legal and investigative initiatives that are continuing. The Work Plan also notes items that have been completed, postponed, or canceled, and includes new items that have been started or planned since April 2016.

Some of the projects that are described in the Work Plan are statutorily required, such as the audit of the Department’s financial statements (mandated by the Government Management Reform Act).

Additionally, OIG does not provide additional details on jobs to be undertaken or information on the status of jobs contained in its Work Plan. For example, while estimated issue dates are included in the Work Plan, OIG will not provide revised estimates, nor will it provide current status updates.

Open Payments

The Work Plan notes that the Physician Payments Sunshine Act (PPSA) requires that manufacturers disclose payments made to physicians and teaching hospitals to CMS. Manufacturers and group purchasing organizations (GPOs) must also report ownership and investment interests held by physicians. OIG plans to analyze 2015 data extracted from the Open Payments website to determine the number and nature of financial interests.

OIG will also determine how much Medicare paid for drugs and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) ordered by physicians who had financial relationships with manufacturers and GPOs. OIG plans to determine the volume and total dollar amount associated with drugs and DMEPOS ordered by these physicians in Medicare Parts B and D for 2015. The expected issue date of a “Data Brief on Financial Interests Reported Under the Open Payments Program” is FY 2017.

Skilled Nursing Facility Reimbursements

Another area of focus will be skilled nursing facility (SNF) reimbursements, with a special focus on therapy documentation. According to the report, “Previous OIG work found that SNFs are billing for higher levels of therapy than were provided or were reasonable or necessary. We will review the documentation at selected SNFs to determine if it meets the requirements for each particular resource utilization group.”

OIG also noted it plans to conduct reviews into how state agencies conduct nursing home complaint investigations, whether incidents of abuse and neglect at SNFs were properly reported, and the outcomes of the National Background Check program for long-term care employees.

Protecting Access to Medicare Act of 2014 (PAMA)

In the report, OIG states that it will conduct a review of Medicare payments for certain clinical diagnostic laboratory tests, as mandated under Section 216 of PAMA. OIG will perform the required annual analysis of the top twenty-five laboratory tests by Medicare payments and analyze the implementation and effect of the new payment system. OIG will also analyze Medicare payments for clinical diagnostic laboratory tests performed in 2016 and monitor CMS’ implementation of the new Medicare payment system for these tests.

This work continues to build upon previous analyses performed by CMS of Medicare Part B laboratory test payments in 2014 and 2015 and our review of CMS’ progress toward implementing the new Medicare payment system.


These three topics are just a small sample of what is covered under the OIG 2017 Work Plan. We encourage pharmaceutical and medical device companies, clinical laboratories and other healthcare entities to review the Work Plan in full to determine areas of government focus. The Work Plan can serve as a useful resource for companies planning and prioritizing compliance activities for the upcoming year, including training, auditing, and monitoring. Other reports issued by the OIG after a review can also be a valuable resource regarding the OIG’s current analysis of industry activities.

October 24, 2016

House Ways and Means Subcommittee on Oversight Holds Hearing on Health Care Fraud Investigations


On Wednesday, September 28, 2016, the House Ways and Means Oversight Subcommittee held a hearing on Health Care Fraud Investigations. During the hearing, Congressmen and women examined how the federal government investigates and prosecutes fraud and improper payments, with a special focus on the Medicare program. The Subcommittee heard testimony from officials with the U.S. Department of Justice (DOJ), the Office of Inspector General (OIG), and Health Integrity, LLC.

Each witness spoke to the importance of inter-agency collaboration and two of the witnesses highlighted their involvement in, and knowledge of, the case of Dr. Farid Fata, who was sentenced to forty-five years in prison in 2015 for subjecting 553 of his patients to medically unnecessary cancer treatments, defrauding Medicare and private insurers of roughly $34 million.

Opening Statements

Subcommittee Chairman Peter Roskam referred to the Dr. Fata case as “one of the most egregious examples” demonstrating how health care fraud not only has an impact on taxpayers, but can also actively harm patients, noting, “several patients who were perfectly healthy ended up dying because of his actions.” Roskam asked Congress to consider how painkillers are arriving on the black market and the impact that fraud may be having on the national opioid epidemic.

Witness Testimony

Barbara McQuade

Ms. McQuade is the United States Attorney for the Eastern District of Michigan, and she testified before the Subcommittee on behalf of the DOJ. In her testimony, Ms. McQuade described how the agency partners with colleagues at both the OIG and Centers for Medicare and Medicaid Services (CMS), as well as federal courts and the Federal Bureau of Investigation (FBI), to prosecute health care fraud. She noted that the DOJ’s criminal enforcement efforts are “at an all-time high.”

Abhijit Dixit

Mr. Dixit, a Special Agent within the OIG’s Office of Investigations, gave the Subcommittee a field agent’s perspective on fraud investigations. He testified that during Fiscal Years 2013 through 2015, OIG investigations resulted in 2,856 criminal actions, 1,447 civil actions, 11,343 program exclusions, and over $10.9 billion ordered or agreed to be paid back to government programs.

Scott Ward

Mr. Ward is a Senior Vice President of Health Integrity, LLC, a nonprofit Medicare and Medicaid contractor for CMS and certain states. Health Integrity employs “statisticians, data analysts, predictive modeling specialists, medical directors, registered nurses, certified coders, subject matter experts, communication specialists, auditors, investigators, and business analysts” to combat fraud. He testified about the work Health Integrity and its parent program, Quality Health Strategies, Inc., does to support CMS in “protecting the integrity of the Medicare and Medicaid programs.”


Impact of Fraud

Representative Tom Reed brought up the fact that improper payments amount to roughly $60 billion per year, in Medicare alone. While there is some debate as to what percentage of that total is accounted for by actual fraud versus incorrect billing, he noted that the number is three times the federal budget for NASA and twice the amount the government spends to fund the National Institutes of Health (NIH).

Representative Jason Smith discussed with Ms. McQuade whether patient harm is considered or quantified when determining settlement amounts in civil cases. She stated that there are a number of ways to identify damages, and patient harm is among a wide spectrum of factors considered. Representative Jim Renacci shared that he hears from providers that they struggle against false accusations of fraud, citing one example where a particular practice spent more money defending themselves against false claims than they had in revenue that year.

Predictive Data Analytics

Representative Rice and Representative George Holding expressed doubts as to the effectiveness of the predictive data analysis used by OIG and Health Integrity. Rep. Holding asked Mr. Dixit, “how was [Dr. Fata] able to elude your sophisticated data analysis for so long?” Mr. Dixit responded, noting that the analytics can only identify outliers and reiterated the importance of “boots on the ground” in the form of more agents and resources so jurisdictions can respond to data leads more efficiently and effectively.

Mr. Ward noted that there are some gaps in the system data, for example, a delay in the Social Security system’s database. He believes that Health Integrity could more effectively detect fraud with enhanced access to data from the Internal Revenue Service (IRS), the State Department, and immigration records.


As the Subcommittee continues to move forward, they will likely have to wrestle with tension between data analysis and manpower. Chairman Roskam noted that he will continue his work on a Secure ID bill that seeks to reduce fraud through the use of chip technology, thereby making Medicare cards more secure.

The Medicare system is large and complex, and the size and complexity make it very vulnerable to fraud. The Subcommittee understood that it is an important mission to protect honest providers and their patients. Ranking Member Lewis noted, “in our fight against fraud, we must be mindful, we must be careful, and we must put Medicare patients first. Patients must continue to have access to necessary medical treatments. We must do all we can to preserve their choice of doctors and hospitals.”

July 25, 2016

CMS Reports $42 Billion Saved in Medicare and Medicaid

On July 20, 2016, CMS released a report that showed investments that are made in program integrity activities – such as stamping out fraud and reducing and deterring other improper payments – pay off for taxpayers and beneficiaries alike. For Fiscal Years (FY) 2013 and 2014, every dollar that was invested in CMS' Medicare program integrity efforts saved $12.40 for the Medicare program. With savings per dollar like that, Medicare and Medicaid programs have saved billions of dollars in that two-year period alone.     

The report highlights CMS' significant achievements in reducing potentially fraudulent and improper payments. CMS achieved almost $42 billion in cost savings over the aforementioned two-year period by using a multifaceted approach, ranging from provider enrollment and screening standards, to use of enforcement authorities, to use of advanced analytics, such as predictive modeling.

According to Shantanu Agrawal, M.D., Deputy Administrator and Director of the Center for Program Integrity,

CMS is dedicated to promoting better care, protecting patient safety, reducing health care costs, and providing people with access to the right care, when and where they need it.  This includes continually strengthening and improving Medicare and Medicaid programs that provide vital services to millions of Americans.  We take our responsibility to deliver better care at a better value seriously.

In collaboration with the DOJ, HHS recently announced the largest healthcare fraud takedown in its history. In that case, HHS helped to charge 301 individuals, including 61 physicians and licensed medical professionals, with allegedly participating in healthcare fraud activities, totaling $900 million in false medical billing. A large portion of the individuals charged were involved in home healthcare, psychotherapy, physical and occupational therapy, durable medical equipment services, and prescription drug services.

CMS' efforts to proactively prevent potentially fraudulent and improper payments from being made have been increasingly effective, moving efforts away from the "pay-and-chase" method of recovering payments after they had already been made. In fiscal year 2013, savings from prevention activities represented about 68 percent of total savings. In fiscal year 2014, the portion of savings from preventing potentially fraudulent and improper payments rose to nearly 74 percent. This development means that more taxpayer dollars intended to care for the beneficiaries are not being paid at all, avoiding the need to recover improperly paid amounts from health care providers and suppliers. Preliminary information from FY 2015 indicates that CMS's program integrity efforts continue to accrue savings of this magnitude and that the portion attributed to prevention continues to increase. CMS is set to release FY 2015 numbers later this year.

According to Dr. Agrawal, CMS remains committed to implementing a robust program integrity strategy to protect beneficiaries from harm and further safeguard taxpayer funds by paying only for appropriate health care items and services. CMS tries to continuously evaluate and update its program integrity strategy. They often welcome input from beneficiaries, providers, suppliers, and others to inform possible future enhancements to the program integrity strategy. CMS encourages stakeholders to reach out to CMS at 1-800-MEDICARE (1-800-633-4227) or TTY: 877-486-2048 with your thoughts or to report potentially improper billing.


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