Congress blasts HCFA’s oversight of private carriers

House Commerce Committee Chairman Tom Bliley (R-VA) charged the Health Care Financing Administration (HCFA) with vastly underestimating the level of fraud in the Medicare program and vowed to initiate major changes in the agency’s oversight function. Bliley’s assault came on July 14 as General Accounting Office (GAO) investigators told his committee that HCFA’s lackluster oversight of its 64 carriers is wasting billions of dollars and jeopardizing the integrity of the $217 billion Medicare program.

Bliley’s latest attack on HCFA is part of a wide-ranging inquisition into HCFA’s oversight of its Medicare, Medicaid, and private carriers. "HCFA is still failing to provide effective oversight of its contractors," asserted Bliley.

He said the new evidence uncovered by the Health and Human Services’ (HHS) Office of Inspector General (OIG) proves that "the real figure is probable far higher" than the $12 billion in Medicare fraud the agency consistently touts. In reality, he said HCFA has made little effort to measure the full scope of waste, fraud, and abuse in the Medicare program.

Bliley was not alone in his condemnation of HCFA. HHS OIG Deputy Director George Grob revealed to Bliley’s committee that in addition to the nine civil settlements and two criminal convictions his office already has under its belt, that office is now actively investigating no fewer than 21 former or current contractors.

Grob told the committee his office has found significant weaknesses and vulnerabilities throughout these operations. "Of all the problems we have observed," Grob asserted, "perhaps the most troubling has to do with contractor’s own integrity, [including] misusing government funds and actively trying to conceal their actions, altering documents, and falsifying statements that specific work has been performed."

In some cases, Grob said contractors used "bogus documents to falsely demonstrate superior performance for which Medicare rewarded them with bonuses and additional contracts." In other instances, carriers simply turned off system edits designed to prevent inappropriate payments. He highlighted several examples that he added, "are not isolated cases." For example:

-Between 1985 and 1997, Health Care Service Corporation altered documents and manipulated data in order to improve its performance review. Last year, the carrier agreed to pay $140 million — the largest civil fraud settlement to date — to resolve its liability under the Civil False Claims Act and the Civil Monetaries Penalty Law, as well as a $4 million criminal fine for obstructing a criminal audit and related charges.

-XACT Medicare Services of Pennsylvania agreed to pay $38 million last year after a joint investigation by the OIG and other federal agencies discovered that the carrier was rigging samples for HCFA audits, failing to recover overpayments and other fraudulent activities.

The GAO followed Grob’s testimony with the release of two separate reports that shred HCFA’s glowing self-assessment about its war on Medicare fraud.

"HCFA’s oversight of Medicare claims administration contractors has significant weaknesses that leave the agency without assurance that contractors are paying providers appropriately," concludes the June 14 report. "HCFA still does not regularly check contractors’ internal management controls, management and financial data, and key program safeguards to prevent payment errors."

In fact, HCFA’s headquarters does not even set oversight priorities, says the GAO, but instead cedes that responsibility almost entirely to regional office reviewers.

HCFA has begun to take steps to improve its oversight, but the GAO concludes it is too early to tell whether those measures will address the fundamental problems.

In a separate report, the GAO points out that every major investigation by the OIG, FBI and U.S. Department of Justice that it reviewed were triggered by the filing of a qui tam action by a current or former employee. In none of these cases had HCFA detected the contractors’ fraudulent activity. GAO says the reasons for this are manifold:

-HCFA gave contractors advance notice of performance evaluation reviews as well as specific or probable records that would be reviewed.

-HCFA relied on copies of documents that were altered and recopied without detection.

-HCFA representatives are often "too close" with contractors and "lose their objectivity and ability to conduct meaningful reviews."

Penny Thompson, Director of HCFA’s Program Integrity Group, was quick to point out that the agency has been proposing sweeping reforms that would increase competition among contractors for six years.

In short, Thompson says the agency wants explicit authority from Congress that would let it choose its intermediaries, contract separately for specific functions and use payment methods that would allow contractors to earn profits on their Medicare business.

In the meantime, Thompson says HCFA is taking several immediate steps including contracting with an independent public accounting firm to develop standard review procedures, implementing a new management reporting system, and developing a business strategy for Medicare fee-for-service contractor operations.

A spokesperson for the Commerce Committee says no legislative remedy to the problems uncovered by the OIG and GAO is imminent, but signaled that scrutiny of HCFA’s oversight is likely to intensify in the months ahead.