oversight

Inspector General: Information on Resources and Planning at the Department of Health and Human Services

Published by the Government Accountability Office on 1997-08-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

       United States
YGAO   ยท General   Accounting Office
       Washington, D.C. 20548
       Accounting and Information                                        159096
       Management Division


        B-277134


        August 1, 1997

        The Honorable David E. Skaggs
        House of Representatives

        Subject:      Inspector General: Information on Resources and Planning at the
                      Department of Health and Human Services

        Dear Mr. Skaggs:

        This is in response to your request for certain information on the operations of
        the Department of Health and Human Services (HHS) Inspector General (IG).
        Specifically, you asked for information on the decline in IG investigative
        resources and on other federal and state actions designed to improve health
        care fraud investigative and enforcement activities.

        RESULTS IN BRIEF

        During February 1993, the IG began implementing a strategic plan developed by
        its Office of Investigations to address budget limitations and investigative staff
        reductions and to help it continue to fulfill its investigative responsibilities. The
        plan focused investigative resources on states that received the most HHS
        money. As of February 1997, the IG's Office of Investigations had 237 staff
        located in 27 states, the District of Columbia, and its headquarters office. (See
        table 1 and figure 1, respectively.)

        In the past few years, several actions have been taken to improve health care,
        fraud investigative and enforcement activities across the country. Operation
        Restore Trust, which began in 1995 as a 2-year demonstration program and was
        extended in 1997, is a collaborative federal and state effort to fight fraud, waste
        and abuse in selected health care areas. Further, the Health Insurance
        Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, calls
        for the HHS Secretary, acting through the HHS IG, and the Attorney General to
        establish a health care fraud and abuse control program. This program is
        intended to, among other things, coordinate federal, state, and local law
        enforcement programs to control fraud and abuse in health plans, and to
        conduct investigations and other actions relating to the delivery of and payment
        for health care. Using its $27 million budget increase over fiscal year 1996, the

                                               GAO/AIMD-97-125R HHS Inspector General

                                       LQ2l9Qe
                                            /coj6Cf
B-277134

IG plans, in part, to increase investigative staff by approximately 60 in fiscal
year 1997. The budget increase resulted from $70 million provided by HIPAA
for health care-related fraud and abuse efforts and a $43 million decrease in the
IG's discretionary budget. If the IG receives the maximum amount of funding
permitted under HIPAA after fiscal year 1997, the IG plans to have investigators
in almost all states by the year 2002. Finally, other federal and state
organizations, such as the Federal Bureau of Investigation and State Medicaid
Fraud Control Units, participate in efforts to reduce health care fraud, and the
Health Care Financing Administration has begun an effort to improve the
Medicare claims processing system.

SCOPE AND METHODOLOGY

To obtain information on the decline in HHS IG investigative resources, we

    reviewed IG strategic plans, resource allocation strategies, and other
    documentation to identify the IG's nationwide investigative staff levels and
    investigative plans, and

-   interviewed IG officials to further understand the strategic plan.

To identify actions to improve health care fraud investigative and enforcement
activities, we

-   obtained IG and other documents to identify IG and other organization
    health care fraud investigative plans and activities, including those for
    implementing the joint HHS and Department of Justice fraud and abuse
    control program required by HIPAA, and

-   interviewed IG officials to obtain an understanding of current and planned
    health care fraud investigative and enforcement improvement activities.

We primarily used IG-prepared documents in compiling the information
contained in this report. We reviewed and compared these documents to
ensure that they were consistent in their treatment of, and comments on,
investigative staffing issues and the need for, and implementation of, the IG's
strategic plan. In general, we did not independently verify the information
contained in these documents. We conducted our review from March through
June 1997 in accordance with generally accepted government auditing
standards. We provided a draft of this report to IG officials and have
incorporated their views where appropriate.




2                                      GAO/AIMD-97-125R HHS Inspector General
B-277134

BACKGROUND

When the HHS IG was established in 1976, field investigators from throughout
HHS became the nucleus of the IG's Office of Investigations. Staff size
increased as the number of complaints of program fraud grew and as a result of
 1982 and 1983 actions that transferred personnel from the Social Security
Administration and the Health Care Financing Administration to the IG. Most
investigators were located in field offices throughout the nation.

Over the years, the focus and scope of IG operations expanded and adjusted to
meet emerging patterns of program fraud and abuse. For example, the strategic
plan noted that, as health care costs increased in the 1980's, the IG shifted
resources to this area. Pressure for investigative assistance also resulted from
problems in certain areas, such as the use of false Social Security numbers.

IG STRATEGIC PLAN

In February 1993, the Inspector General began implementing a strategic plan
developed by its Office of Investigations to address budget limitations and
investigative staff reductions and to help it continue to fulfill its investigative
responsibilities. The plan noted that the problem of an increasing workload due
to health care and Social Security program growth and decreasing resources
had to be resolved or at least mitigated. It also recognized that "[a]ny
resolution [to the problem] will involve some sort of cut, or reduction, in costs
or coverage." Further, the plan noted that, to absorb the extra personnel-related
costs caused by mandated salary and locality pay increases, the IG would not
fill vacated positions.

According to the strategic plan, the IG considered several alternative actions
before selecting one. The plan acknowledged the need for reductions in
caseloads, geographic deployment of staff, and program coverage. The
alternative selected concentrated the IG's investigative resources in the
geographic and program areas where the IG felt that it could have the greatest
impact-generally, those states that received the most HHS money. The plan
called for some regional realignments to reduce travel costs and to improve
management efficiency and investigative coverage. Further, except under
special circumstances, the IG would generally not open new investigations in
states with no investigative office or in states that received the lowest amounts
of HHS money. The plan also called for the continuation of training,
promotions, and other items that would have been cut under other alternatives
considered.

Under the plan, the IG would also increase the number of health care fraud
referrals it made to other federal and state organizations, such as the Federal

3 `                                    GAO/AIMD-97-125R HHS Inspector General
B-277134

Bureau of Investigation, the United States Postal Service, and State Medicaid
Fraud Control Units. These referrals typically related to situations where
providers bill (1) for services not rendered, (2) for unnecessary services, and (3)
at rates higher than those allowable for the services rendered.

OFFICE OF INVESTIGATIONS
NATIONWIDE STAFFING

As of February 1997, the IG's Office of Investigations had 237 investigative staff
located in 27 states, the District of Columbia, and in its headquarters office, as
shown in table 1.




4                                      GAO/AIMD-97-125R HHS Inspector General
B-277134

Table 1: IG Investigative Staff Levels. By Location, in February 1997


                                  Office of
    Location               Investigations Staff as
                             of February 1997

    Alabama                           2
    Arizona                           2
    Arkansas                          2
    California                       31
    Colorado                          4
    Connecticut                       1
    District of Columbia              5
    Florida                          17
    Georgia                          12
    Illinois                         17
    Indiana                           2
    Kentucky                          1
    Louisiana                         2
    Maryland                          5
    Massachusetts                    12
    Michigan                          3
    Minnesota                         3
    Missouri                          2
    New Jersey                        3
    New York                         24
    North Carolina                    2
    Office of                        39
    Investigations-
    Headquarters
    Ohio                              4
    Oregon                            2
    Pennsylvania                     14


5                                           GAO/AIMD-97-125R HHS Inspector General
B-277134

                            Office of
    Location         Investigations Staff as
                       of February 1997
    Texas                      18
    Virginia                    2
    Washington                  2
    Wisconsin                   4
     Total                    237

Source: HHS Inspector General. We did not independently verify this
information.


Figure 1 identifies, geographically, the 27 states with investigative staff and the
23 with none as of February 1997. The strategic plan stated that the IG would
focus investigative staff in states that received the most HHS money. Based on
information provided by the IG, the 23 states with no investigative staff received
about 12 percent of the total fiscal year 1993 (the year the IG began
implementing its strategic plan) HHS money received by states.'




'In 1994, the Social Secuity Administration (SSA) became an independent
federal agency. We excluded SSA money from HHS money received by states in
calculating the percentage of monies received by states because of the transfer
of SSA-related activities and staff from HHS to SSA.

6                                      GAO/AIMD-97-125R HHS Inspector General
B-277134

Figure 1: Nationwide Investigative Staff Allocation as of February 1997




                                                                          NH



                                                                                     MA

              7                              GAO/AIMD-97-12R HHS Inspector GeneralI

                                                                                NJ
                                                                                     DE
                                                                               DC




                    HI




                         States without InvestigativeStaff
                         States with Investigative Staff




Source: HHS Inspector General. We did not independently verify this
information.




7                                            GAO/AIMD-97-125R   HHS Inspector General
B-277134

RECENT FRAUD INVESTIGATIVE AND
ENFORCEMENT ACTIVITIES AND INITIATIVES

In the past few years, several federal, state and local governments have taken
actions to strengthen health care fraud investigative and enforcement activities.
These include the initiation of the Operation Restore Trust program, the passage
of the Health Insurance Portability and Accountability Act of 1996, health care
fraud activities by other federal, state, and local organizations, and HHS efforts
to improve its Medicare claims processing systems.

Operation Restore Trust

In March 1995, the HHS IG initiated Operation Restore Trust as a 2-year
demonstration program in which federal and state agencies joined to fight fraud,
waste, and abuse in home health agencies, nursing homes, and the medical
equipment and supply industry. This program targeted five States (New York,
Florida, Illinois, Texas, and California) which accounted for 40 percent of the
nation's Medicare and Medicaid beneficiaries. According to the IG, as of
May 20, 1997, this 2-year demonstration program (1) incurred total spending of
$7.9 million and identified $187.5 million in program savings resulting from
restitutions, fines, settlements, and other identified overpayments, and
(2) resulted in 74 convictions, 58 civil actions, and the exclusion of 218
providers from participation in Medicare and Medicaid for various periods of
time. In addition, the IG issued 47 audit and inspection reports related to
Operation Restore Trust and had another 31 audits and evaluations underway.
Finally, we were advised that a hotline the IG established in 1995 under the
Operation Restore Trust program had received about 13,000 calls and letters
relating to problems in HHS programs.

On May 20, 1997, the HHS Secretary announced that Operation Restore Trust
would be extended beyond its 2-year demonstration period. Initially, it is to be
expanded into 12 new states-Arizona, Colorado, Georgia, Louisiana,
Massachusetts, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia,
and Washington. The Secretary noted that, over the longer term, the techniques
developed through Operation Restore Trust are to be applied in Medicare and
Medicaid program areas in all 50 states.




8                                     GAO/AIMD-97-125R HHS Inspector General
B-277134

Health Insurance Portability and Accountability Act of 1996

The Health Insurance Portability and Accountability Act of 1996 is intended to
combat waste, fraud, and abuse in health insurance and health care delivery. It
calls for the establishment of a fraud and abuse control program to

-   coordinate federal, state, and local law enforcement programs to control
    health plan fraud and abuse;

-   conduct investigations, audits, evaluations, and inspections of the delivery of
    and payment for health care in the United States;

-   facilitate the enforcement of health care fraud and abuse statutes;

-   provide for the modification and establishment of safe harbors and the
    issuance of advisory opinions and special fraud alerts; and

-   provide for the reporting and disclosure of certain final adverse actions
    against health care providers, suppliers, or practitioners.

HIPAA provides HHS and the Department of Justice with funding to combat
health care fraud and abuse. The IG receives some of this funding. For
example, its gross budget authority increased from $89 million for fiscal year
1996 to an estimated $116 million for fiscal year 1997. This $27 million net
increase resulted from $70 million provided by HIPAA for health care-related
fraud and abuse efforts and a $43 million decrease in the IG's discretionary
budget. HIPAA provides increasing amounts of funding for the IG for fiscal
years 1998 through 2003, and level funding of between $150 million and $160
million per year, thereafter.

IG officials told us that they will use the fiscal year 1997 budget increase, in
part, to increase overall investigative staff by about 60 individuals. The IG now
plans to have investigative staff in almost all states by the year 2002.
Specifically, it plans to staff new investigative offices in 35 states and San Juan,
Puerto Rico, during a 7-year 6-phase program starting in fiscal year 1997.
According to IG officials, these planned actions are based upon the assumption
that the IG will receive the maximum amount of funding available under HIPAA.
Documents provided by the IG show that 23 of these states were the ones that
had no investigative staff in February 1997 as shown in figure 1. As of June
1997, the IG had assigned investigative staff to new offices in 6 of the 35 states.




9                                     GAO/AIMD-97-125R HHS Inspector General
B-277134

Four of these 6 states were among those that had no investigative staff as of
February 1997.

Other Federal and State-Level Health Care Fraud Efforts

As mandated by HIPAA, the HHS Secretary and the Attorney General issued
Health Care Fraud and Abuse Control Program and Guidelines, effective
January 1997. The guidelines, in part, outline the responsibilities of the fraud
and abuse control program at the federal, state, and local law enforcement
agency levels. In addition to HHS, federal organizations involved in the
program include:

-    the Federal Bureau of Investigation, which focuses on fraud in private health
     plans and on any health plan receiving federal funds including Medicare,
     Medicaid, and the Federal Employees Health Benefits Program;

-    the IG, Defense Criminal Investigative Service, Department of Defense,
     which investigates fraud and abuse in health care programs for active duty
     and retired military personnel, their dependents and survivors;

-    the Department of Veterans Affairs IG, which focuses on fraud relating to
     health care for veterans; and

-    The Department of Labor IG, which investigates health care fraud in major
     federal health benefit and disability programs administered by the
     Department that compensate or provide benefits to federal workers, coal
     miners, and longshore/harbor workers.

At the state level, organizations involved in the program include:

-    the State Medicaid Fraud Control Units that investigate and prosecute
     (1) criminal violations of state laws regarding Medicaid program fraud, and
     (2) patient abuse and neglect in Medicaid-funded facilities,

-    State Attorneys General that investigate health care fraud offenses under
     state law, and

-    State survey and certification agencies that monitor quality of care in long-
     term care facilities.




10                                     GAO/AIMD-97-125R HHS Inspector General
B-277134

In addition, private health plans investigate allegations of fraud related to
specific private plans.

According to the National State Auditors Association's Auditing in the States: A
Summary (1996 Revision), (1) almost all states have audit agencies that have the
authority to investigate fraud, waste, abuse, or illegal acts, (2) audit agencies in
31 states can issue subpoenas, and (3) 16 state audit agencies operate hotlines
to allow citizens to report perceived instances of fraud, waste, abuse, or illegal
acts.

Health Care Systems Upgrades

In another area, the Health Care Financing Administration (HCFA), the HHS
organization that runs the Medicare and Medicaid programs, is attempting to
upgrade its Medicare claims processing system-the Medicare Transaction
System (MTS)-by replacing nine separate automated information systems with a
single, unified system. The new system is intended to improve customer
service, reduce operating expenses, provide more effective control over claims
processing, provide better oversight of contractors, provide for substantial
administrative savings, and better protect program funds against waste, fraud,
and abuse. In a May 1997 report and testimony, 2 we noted that, despite much
hard work and some progress, critical weaknesses-both managerial and
technical-continued to exist. These weaknesses call into serious question
whether MTS, without significant change, will be able to perform as required.
Our report includes 20 major recommendations to help HCFA enhance the
likelihood of acquiring the kind of system it must have, in a cost-effective
manner.

AGENCY COMMENTS

We provided a draft of this report to HHS IG officials. The officials agreed with
the information presented, and their views have been incorporated where
appropriate.




                                                    /
2Medicare Transaction System: Success Depends Upon Correcting Critical
Managerial and Technical Weaknesses (GAO/AIMD-97-78, May 16, 1997); and
Medicare Transaction System: Serious Managerial and Technical Weaknesses
Threaten Modernization (GAO/T-AIMD-97-91, May 16, 1997).   -

11                                     GAO/AIMD-97-125R HHS Inspector General
B-277134

We are sending copies of this report to the Secretary of the Department of
Health and Human Services, the Attorney General, the Inspector General of the
Department of Health and Human Services, the Office of Management and
Budget, and other interested parties. Copies will be made available to others
upon request. If you or your staff have any questions about our work, I can be
reached on (202) 512-3029.




Theodore C. Barreaux
Associate Director, Audit Oversight and Liaison




 (911742)




 12                                   GAO/AIMD-97-125R HHS Inspector General