thoughtful and vigorous discussion. i appreciate all of you very much for being here. thank you. this hearing is adjourned. be part of c-span's campaign

2014 coverage, follow us on twitter and like us on facebook, to get debate schedules, video clips of key moments. c-span is bringing you over 100 senate, house and government debates, and you can instantly share your reactions to what the candidates are saying. the battle for control of congress. stay in touch and engaged by following us on twitter, at c-span, and liking us on facebook, at facebook.com/c-span. in kansas, incumbent senator pat roberts is facing independent challenger greg orman in a close race. we're covering that debate from wichita kansas, 8:00 p.m. eastern on c-span. according to a government report, improper medicare payments totaled $50 billion in 2013. up next, the house oversight

committee investigates medicare fraud and abuse. this hearing from earlier this year is about 2 hours 20 minutes. congressman darrell issa of california chairs this committee. >> the hearing will come to order. without objection, the chair's authorized to declare a recess of the committee at any time. we'll take this a little bit out of order today. some of the democrat members will be here later today. the subcommittee hearing on health care entitlement, oversight of the federal government effort to recapture misspent funds. we secure two fundamental principles.

americans deserve an effective government that to protect these rights. the solemn responsibility is to hold government accountable to the taxpayers. we will work tirelessly as citizen watchdogs to deliver the facts to the american people. this is the mission of the committee. medicare currently pays one-fifth of all health care services provided nationwide, making it the largest single purchaser of health care in the country. unfortunately, every year the medicare program wastes an enormous amount of money in overpayments, frauds and unnecessary tasks and procedures. in 2013, $50 billion was lost to improper payments. an increase of $5 billion from 2012. medicare fee for service accounted for $36 billion of this total. gao has related medicare as a high risk since 1990. in part due to programs to the waste, which make up a

staggering 47% of total improper payment identified by the federal government last year. misspending and fraud represents a significant threat to the 50 million beneficiaries who depend on its services, and also the program's financing. the trust fund has been in deficit since 2008. the medicare actuaries predict it will be fully depleted by 2026. the centers for medicare and medicaid services have the responsibility to combat the fraud from the outside organizations. to combat perpetrators who steal identities and falsify billing documents. there is a risk-based screening for providers and suppliers. in april of 2014, cms announced fingerprint based background checks will be provided. moratoriums are placed on

medicare providers and suppliers in the areas that are high risk for fraud. cms has begun administering private sector technology to identify possible fraudulent claims for review. cms also relies on four types of contractors to combat improper payments. these contractors such as the recovery audit contractors, review claims to overpayment and recover the misspent funds. gao and others found these efforts sometimes overlap and the requirements are responding to audits are not uniform. this puts a greater burden on providers. the gao has recommended that improving consistency among contractors would improve efficiency of the medicare claims. once the improper payments are identified, they will try to reclaim the overpayments. this third level of appeal is administered by 66 administrative law judges at hhs's office of hearings and appeals. there's currently a massive

backlog of over 460,000 pending appeals for alj hearings. due to this backlog, hhs stated it could currently take up to 28 moiths months for a hearing before an alj. not many businesses can survive having their money held for 28 months while they wait to decide if they're actually going to get reimbursed. nancy griswald was asked to testify on this issue, but she was unable to appear. the government accountability office for hhs office of the inspector general, and the director for the senator of integrity at cms. we'll discuss how cms can address oversight. i look forward to your testimony. the american people deserve a government that protects their

tax dollars and uses them wisely. we must do more to strengthen the integrity of government programs overall. but particularly medicare given the enormous size and scope. clearly more needs to be done to improve the federal government efforts to recover $50 billion in overpayments and other improper payments. i hope today's hearing will provide the subcommittee with clarity about these areas. the process cannot drive up the cost of health care for seniors and reduce their options for care. i look forward to the conversation we'll have today. i recognize miss grisham for an opening statement. >> i agree with the chairman that reducing waste and fraud and abuse in the medicare program is critically important, not only to protect taxpayer funds, but as you just heard, it's also incredibly important to protect the health of our nation's seniors and disabled

adult population. we've got more than 10,000 seniors aging into the medicare program each day this year. it is now more important than ever that we ensure the integrity of the medicare funds and keep it alife for the generations of future americans. i'm grateful to have mr. ritchie here for the office of the inspector general to talk about the oig's efforts to do exactly that. the oig in conjunction with the department of justice prosecutes some of the worst instances of health care fraud. providers billing for nonexistent beneficiaries or services that were never provided, and providers who order unnecessary or in fact harmful procedures. the health care fraud and abuse program, a joint program under the direction of the attorney general, and the secretary of the hhs, is a model for interagency cooperation and coordination. in fis kalg year 2013, that program recovered a record $4.3

billion in health care fraud judgments and settlements. this is remarkable. i look forward to hearing from the assistant inspector general about how this was achieved and what can be done to strengthen the program going forward. i also think it's important to underscore what we've heard, that these bad actors represent a small fraction of all providers. the vast jors of providers are deeply dedicated to the care of their patients. and given the size and complexity of the medicare programs, overpayments are going to occur. and cms must be vigilant in detecting and recouping them. but well-meaning providers are entitled to have their claims administered fairly, efficiently, and without undue delay so that they can focus on the core mission of providing care. i have some serious concerns that the current system of post-payment audit is resulting in a significant burden on some

providers, particularly smaller entities. smaller providers, such as herbal or medical equipment, may not have the resources to in fact appeal overpayment determinations. the considerable backlog in medicare hearings and appeals only makes these matters worse, as these providers and suppliers do not have the luxury of waiting months for their appeals to be adjudicated. i also have concerns about how rac audits may affect beneficiaries. as a representative of new mexico's first district, care is always paramount in my mind. if a provider or a supplier is forced to cut back services or close its doors as a result of a rac audit, i think this is a lose-lose situation for everyone. particularly as we're working to build access to care,

particularly preventive care for these populations. the cms recently announced that it will implement several changes to the rac program, which will be effective with the next rac program contract awards. i look forward to hearing from dr. agrawal about the efforts to improve the oversight of the rac in particular. i hope that you will also address some of the issues we both raised, the chairman and i, regarding the burden on medicare providers, and with a particular focus on the smaller providers, or providers in rural and frontier states like mine. and the impact that that has directly on the beneficiaries, who are working to access those services. i also look forward to hearing from all the witnesses about what cms is doing to move away from the pay and chase model, to a more proactive model that identifies improper payments up front. such a model would spare both providers and taxpayers from expending resources that could

be much better spent on providing care. which in the long run shores up medicare for future generations. with that, mr. chairman, i yield back. >> an opening statement. >> thank you, mr. chairman, for holding this hearing. and thank you for continuing to highlight that we need to make sure that the american taxpayers' money is well protected. this particular hearing is of importance to me, primarily because i have some constituents that have been caught up in this alj backlog. and as the ranking member just testified, it can be extremely difficult on small businesses. the request for a particular company in my district threatens to put them out of business. and yet all they want is a fair hearing. i shared this with the chairman, and shared some of my concerns

about where we are. and in his opening statements he talked about the fact that we have a 28-month backlog. well, actually, it's worse than that. if you look at the real number, that today if we hired, according to the budget request for cms, if we hired all the adjudicators, it would take close to ten years to work through this backlog. a million appeals. and if you look at the rate, and actually, the adjudicators have been improving their efficiencies. they've been getting better year after year. and yet what we do is we have a policy of where we're saying, you're guilty until prove eninnocent. and we're all against waste, fraud and abuse. but what we must make sure of is that we do it under the rule of law, and that we have laws that -- the guidelines that are there.

there is a law right now that says that if we ask -- if a constituent asks for a hearing, the law says that they should have some kind of adjudication, and a decision within 90 days. and yet, even according to the website there for cms, we're not even opening the mail for weeks and months, and months and months. so it's not even being put in terms of on the docket where it can be assigned to a judge, for many, many months. we've got to do better than this. and make sure that in this, we don't take those that are innocent and put them out of business. now, i say that, because if our overturn rate was not that great, we wouldn't have a problem. but according to documents, many of these appeals are being overturned by the adjudicators. over 50% of them are being overturned.

so you have over 50% of the people who are innocent, who are having to wait years for a decision. and in that, we must do better, and we must find a better way to address this. so i look forward to hearing your testimony on all these things. and i thank you, mr. chairman. >> thank the gentleman for all his work and research that has gone into this hearing. he's been a leader in this. i'd be glad to be able to receive the testimony now of our three witnesses. pursuant to committee rules, all witnesses are sworn in before they testify. so if you would please rise and raise your right hand. do you solemnly swear or affirm the testimony you're about to give is the truth, the whole truth and nothing but the truth, so help you god? let the record reflect all three witnesses answered in the

affirmative. you may be seated. kathleen king, thank you for being here. dr. agrawal is the director for the center for program integrity at cms. mr. brian ritchie is the acting deputy inspector general at the office of inspector general at hhs. thank you all for being here. and thanks for your testimony today. we've all received your written testimony. that will be a part of the permanent record. we would now be glad to receive your oral testimony as well. i would ask to limit it to five minutes. you'll see the clock in front of you. miss king, you are first. >> mr. chairman, and members of the subcommittee, thank you for inviting me to talk about improver payments. cms has made progress in implementing recommendations to reduce improper payments. i want to focus my remarks today on three areas. provider enrollment, prepayment

claims review, and post-payment claims review. with respect to provider enrollment, cms has implemented provisions of the patient protection in the affordable care act to strengthen the enrollment so the providers are prevented from enrolling in medicare and higher risk providers undergo more scrutiny before being permitted to enroll. there's more moratoria on the certain types of providers, and has contracted for finger print based background checks for high-risk providers. however, cms has not completed certain actions, which would also be helpful in fighting fraud. it has not yet published regulations to require additional disclosures of information regarding actions previously taken against providers, such as payment suspensions, and it has not

published regulations establishing the core element of compliance programs, or requirements for surety bonds for certain types of at-risk providers. with respect to review of claims for payment, medicare uses prepayment review to deny payment for claims that should not be paid. and post-payment review to recover improperly paid claims. prepayment reviews are typically automated edits in claims processing systems that can prevent payment of improper claims. for example, some prepayment edits check to see whether the claim is still bild properly and that the procedure is enrolled in medicare. other prepayment edits check to see if the service is covered by medicare. we found some weaknesses in the use of prepayment edits, and made a number of recommendations to cms. to promote implementations effective of edits regarding

national policies, and to encourage more widespread use of local policies by contractors. cms agreed with our recommendations, and has taken steps to imme meant most of them. post-payment claims reviews may be automated, like prepayment reviews are complex. which means that trained staff review medical documentation to determine whether the claim was properly. cms uses four types of contractors to perform most post-payment reviews. we recently completed work that examined cms's requirements for these contractors, and found differences that can impede efficiency and effectiveness by increasing administrative burden on providers. for example, the minimum number of days contractors must give providers to respond to documentation of a service ranges from 30 to 75 days.

we recommend that the cms make the requirement for these contractors more consistent, when it would not impede the efficiency of efforts to recover improper payments. cms agreed with our recommendations, and is taking steps to implement them. we also have further work under way on the post-payment review contractors, to examine whether cms has strategies to coordinate their work, and whether these contractors comply with cms's requirements regarding communications with providers. although the personal of claims subject to post-payment review is very small, less than 1% of all claims, the number of post-payment reviews has increased substantially in recent years. from 2011 to 2012, the number of these reviews increased from 1.5 million to 2.3 million. this is one factor contributing to a backlog and delays in

resolving appeals by administrative law judges. we have been asked to examine the appeals process, including reasons for the increase, its effects on ben fishsaries, providers and contractors, and options to streamline the process. in conclusion, because medicare is such a large and complex program, it is vulnerable to improper payments and fraud and abu abuse. given the level of improper payments in medicare, we asked cms to use all available authorities for preventing, identifying and recouping improper payment. this concludes my prepared remarks. thank you. >> thank you. dr. agrawal. >> thank you. chairman langford, ranking member and members of the subcommittee, thank you for the invitation to discuss the program integrity effort. it's a top priority for the administration and agencywide effort for cms.

we're at the forefront of our integrity efforts. i view program integrity through the lens of my experience of an emergency medicine physician who fundamentally cares about the health of patients. our health care system should offer the highest quality and most appropriate care possible to ensure the wealthiest of individuals and populations. cms is committed by preventing recovering payments for wasteful abuses. helping to extend the life of the trust fund. the importance of the efforts extend beyond dollars in health care costs alone. it is fundamentally ensuring we have the resources to provide for their care. as part of our responsibility to taxpayers and beneficiariebenefs has an obligation to perform audits, medical review and use other oversight tools. i would like to make three points about the status of our efforts. first, we are having real impact

in reducing waste and abuse and fraud in the program. we continuously work to reduce provider burden while meeting our obligations to the trust fund. finally, we continue to improve and innovate to meet our mission. on the first point, we're seeing successful efforts to detect and prevent waste, abuse and fraud. through medical review activities, in fiscal '13 alone, $5.6 billion in payments were prevented from being paid, or were returned to the trust fund. we've saved an additional $7.5 billion over the last several years from payment edit. which prevents bad payments from being made in the first place. at the direction of congress, cms uses the recovery auditors to perform medical review to identify and correct medicare improper payments. recovery auditors have returned over $7 billion to the medicare trust fund since the start of the national program in 2010. our anti-product iths have also had impact. funding returned about $4 billion to the trust fund resulting in an 8-to-1 return on

investment. we've revoked over 17,000 and deactivated over 60,000 suppliers since passage of the affordable care act. at the same time we recognize the efforts pose burdens on the provider. cms continually strives to continually balance our responsibilities to protect the medicare trust fund with our desire to limit the burden these efforts can place. to that end, we use tools such as educational efforts, data transparency, and significant contractor oversight to minimize burden wherever we can. we also engage in continuous dialogue with provider communities to improve our programs. as one example, during the next round of recovery audit contracting, cms is making changes to the program based on feedback from stakeholders, that we believe will result in a more effective and efficient program with improved accuracy and more program transparency. we have also utilized other approaches such as prior authorization to reduce improper payments, while granting more security and assurances to the provider community. we will continue to listen to

stakeholders to make improvements to our program. third, we appreciate the committee's interest in ensuring that cms is improving the integrity efforts and know that the congress and the public expect real and tangible results. to that end we're looking to implement new authorities or improvements which can enhance our efforts. and impact. in july 2013, cms imposed moratoria for the first time on the enrollment of certain types of new providers in geographic areas which have been prone to high amounts of fraud. the moratoria in place, we revoked the billing privileges of over 100 home health agencies in the miami area and we are also continuing to work with law enforcement in the hot spot areas. cms is also using private sector tools and best practices to stop improper payments. since june 2012, the fraud prevention system has applied advanced analytics for fee claims. in the first year they identified over $100 million in

improper payments, including savings from kicking out bad actors. we've also begun to use the common private sector tool of prior authorization to address an area of high improper payments, the use of powered mobility devices. in 2012, cms began a demonstration in seven states that resulted in a significant decrease in expenditures. over 66% in the demonstration phase and over 50% in the nondemonstration phase. support from the provider community has been significant. many of whom have requested cms expand prior authorization to other parts of the country. while we know that we have made progress to address areas of vulnerability, we also know more work remains to prevent improper payments and fraud. i look forward to answering the subcommittee's questions on how we can improve our commitment while protecting beneficiaries' access to high quality care.

>> mr. ritchie? >> good morning, chairman langford, ranking member grisham and other distinguished members of the subcommittee. thank you for the opportunity to discuss oig's work on medicare improper payments. improper payments cost taxpayers and beneficiaries about $50 billion a year. recovering these lost dollars and preventing future improper payments is paramount. in short, more action is needed from cms, its contractors and the department. cms needs to better ensure that medicare makes accurate, appropriate payments, when improper payments do occur cms needs to identify and recover them. it must also implement safeguards. it relies on contractors for many of these vital functions. this means ensuring effective contractor performance is essential. finally, the medicare appeals system needs to be fundamentally changed to ensure efficient, effective, and fair outcomes for the program, the beneficiaries

and providers. my written testimony elaborates on all these areas. this morning i'll focus on four key points. first, cms must do a better job ensuring the payments are accurate. for example, cms needs to better protect medicare and ben fishsaries from inappropriate providing the drugs. both a safety and financial issue. we found the part "d" paid millions of dollars for drugs prescribed by a massage therapist, athletic trainers and others with no authority to prescribe. cms is working toward implementing several o, girks recommendations to tighten up monitoring and billing for drugs. second -- >> check your microphone there. it clicked off. is it still lit up there? >> thanks. second, improper payments occur, cms needs to do four things. identify, recover, assess, and

address. cms contractors recovery auditors, to identify improper payment. in 2010 and 2011, rac audits resulted in more than $700 million in overpayments recovered. cms assesses the rac findings to find out why the overpayments occur. it must then address these issues to stop future improper payment. and ensure the contractors perform effectively. cms contractors pay claims, identify and recover overpayment, and protect medicare from fraud and abuse. oig has consistently raised concern about contractor performance and oversight. cms needs to assess performance more effectively and take action when contractors fail to meet standards. finally, the medicare appeals system needs to be fundamentally changed. even before the recent surgeon appeals and subsequent backlog,

oig raised concerns about the administrative law judge, or alj level. the alj overturned decisions more than half the time. this happens partly because medicare policies are not clear. oig recommends clarifying medicare policies, and then coordinating training on those policies at all levels of the appeals. administrative inefficiencies also contribute to the problem. we recommend the paper files be standardized and made electronic. in closing, more needs to be done to reduce and recover improper payment, ensure effective contractor performance and improve the appeals process. oig is committed to finding solutions to reduce waste, protect the beneficiaries and improve the program. thank you for your time. and i welcome your questions. >> thank you all. i recognize myself for the first round of questioning.

we'll go back and forth here. let me set some context during my time. if a provider will have something reviewed, let's talk to the process and expect context for everyone on this. go back to miss grisham's statement. this is the post-payment has occurred, how will someone find out that they're going to be checked, inspected, whatever it may be, post-payment, for any kind of claim? what's the step one? how will they be notified? >> they get a letter from a contractor. >> that with being are a rac contractor? >> it could be one of four types of contractors. it could be an administrative contractor, a brac, a sert contractor which pulls a sample of random claims to estimate the improper payment rate. or it could be a z-pic, the contractor who is looking specifically for potential

fraud. >> let's back up. let's take a physical therapy clinic. stand-alone, privately owned clinic. private pay. and also medicare. so you're saying that one physical therapy clinic could receive a request to pull a file from any one of those four, or those four are unique, four different entities? >> they could receive a request from any one of the four. >> is it possible that all four of them will make a request during the course of the year? >> not supposed to happen. >> is it possible? >> theoretically, but highly unlikely. >> how are they notified then if one of them does it, or could two of them do it in the course of a year? all four unlikely? >> the racs are not supposed to duplicate reviews that are done by other contractors. >> to the same provider? or to the same case? >> to the same case. a duplicate claim is considered

to be the same file for the same service. >> could a provider get a review from all four of those different folks, different cases, but that provider itself get reviews from four different groups of people from medicare? >> possible. but it's unlikely. >> so what about from two of those? or from three of those? you say four is unlikely. is it possible for them to get two of them? >> yes. for example, they might get a review from rac, and a review from a sert, who's estimating the improper payment rate. >> how many files are they pulling when rac contacts them? pulling one, or a sampling? how many are they going to pull? >> they're pulling one. i believe. you know, overall, the rac did over 1 million reviews. >> correct. >> but when they're reviewing, you know, for a provider, they're pulling for that service. >> but they're pulling -- go

back to the physical therapy clinic as well. they're not going to reach in and randomly grab one case, are they? are they going to grab a sampling of cases to review? >> no, i don't believe so. >> how do they select which patient's file to review? >> in the case of rac, cms tells the rac what kind of issues they can look at. they work together with cms, and cms approves the type of issues that rac is going to investigate. >> they go in and make the request of a certain type of client that's there? they're not just pulling one patient, are they, from that type? they may pull ten? they may pull 20? >> no, i believe the claims are investigated on an individual basis. >> right. but the provider, i'm saying to the provider, when they get notification from the rac -- >> they get notification of a claim. investigation of a claim.

i'm sorry, correction, there could be more than one, but there's a limit. >> that's what i'm trying to get, what is that limit? how many are they trying to pull? does anyone else know the number on that? how many are they pulling at a time for a rac audit? >> let's take a little bit of a step back. there are numerous contractors that can audit a single provider. each of those contractors actually has -- they are set in statute, do the job that they're doing. the third contractor's function is different from the rac contract. the sert contractor's function is to actually determine the improper payment rate. it, of course, has to do the medical record audit to determine whether or not an improper payment has occurred. it's an assumption to evaluate our services. so while i agree that numerous contractors can touch providers, we do try to coordinate not touching the same claim and not touching the same provider too often. in answer to your last question, we have set limits for rac contractors, so that they can

touch a provider, and request a particular sampling based on the size of the provider themselves. >> so how large is that sampling? >> a hypothetical example might be a smaller provider that sends in 10,000 claims a year, rac would be permitted to obtain no more than 20 to 25 claims at a time, and no more frequently than, i believe, every 45 days. >> they could come in every 45 days, and pull 20 to 25, correct? different files? and say, we're not going to pay these until we get a chance to check them? correct? not correct? >> conceivably, that's correct. but again, we do provide oversight to ensure we're not burdening individual providers or individual entities during the course of these processes. >> i've exceeded my time. we'll come back to that. i do want to come to the statement that we're not burdening the individual providers. i could name you several dozen

individual providers in my district that would beg to differ on that statement. now, you will find no greater advocates for the taxpayers, and going after fraud than us, at this panel. but we're also advocates to make sure we don't lose providers that are seniors, still have access to multiple providers that aren't providers that say this is not worth it and drop out. i won't take medicare anymore because it becomes too brdsome for them. i recognize miss grisham. >> thank you, mr. chairman. and i'm going to do a couple of things, assumeping i don't run out of time. i want to follow up on a couple of things that chairman langford said. that balance is really tricky. and given that this committee clearly wants to focus on waste, fraud and abuse, even if the medicare program and every other health care program was flush, and that wasn't our being efficient and worrying about having services available for a

growing population, our job is to make sure that every tax dollar is being used the way it was intended. we want bad actors and bad providers barred from this system and all others. no question about that. we also recognize that you have to do a due process system. and we appreciate that. but the due process system is clearly broken. if you're waiting years without payment, or having the payment removed, that's not due process. and i would agree, too, that we've created a very burdensome administrative environment. it's not just a federal medicare program, although that is a federally operated. remember that most of these programs take medicare, medicaid, they're serving dual eligibles. they're being touched, reviewed, audited, administratively watched by a whole bunch of different private entities. these sometimes small providers are spending an incredible

amount of time being administratively reviewed, and these recovery audits, given that there is a contingency fee where they're being incentivized for these audits, makes a ripe environment for what you have today, which is we've now, with the office of medicare hearings and appeals, we've recently announced that we're going to suspend the ability of providers to have their appeals heard by administrative law judges. the decision was made as a result of a massive backlog of appeals awaiting in alj hearings. which by the medicare hearings and appeals' own admission has grown from 92,000 to over 460,000 in just two years. now, dr. agrawal, i understand that the office of medicare hearings and appeals is not part of cms. i also understand that your office oversees these

contractors, including rac, whose audits are the cause of many, if not most of these appeals. given the long wait times for getting an appeal heard by -- wouldn't it be prudent for cms to suspend rac audits until the claims bag lock is cleared? i want you to touch on the fact that there are other ways to make sure that we are preventing fraud more than just the rac audits. >> sure. thank you. i would start at just agreeing with you that it is a real challenge that we are doing our job, protecting the trust fund and at the same time doing as much as we can to lower the burden on providers, and make sure that there are no access to care issues for beneficiaries. that is a top priority. something i said in my opening statement. i think it's also important to focus a little bit on the amount of burden we are placing on the system through our activities. as pointed out earlier by miss

king, we audit far less than 1% of the claims that we receive. with respect to rac in particular, there are clearly appeals that occur from rac audits. but the overall rate of appeals from overdetermination, i'm sorry, the overturn rate from the overdeterminations is about 7%. that's in the latest publicly available data. if you look at just appeals that are initiated after an overpayment determination by rac, there's the overpayment rate is about 14% out of all appeals that are generated. i do think that the appeals process is important for providers. it allows them an opportunity to represent their claim, to represent their interests. it provides an important check and balance on our approach. as far as the third level of appeal that involves the alj, as you pointed out, that is not directly under our control. we have been working with the department to devise strategies for that backlog. what is directly under our control are the first two levels

of appeal, and i can tell you that both the overturn rate is not substantially high in those areas, and they are being -- and the appeals are being heard in a timely fashion. there are numerous other kind of strategies that we've taken to try to decrease the appeals. i want to -- i'm happy to go into them if you like. >> i just want to -- i appreciate that. except that i would certainly make the statement that -- and you heard the same throughout this hearing -- we have providers who would differ with you about these administrative burdens. and whether 14% is reasonable in terms of what they can manage, in terms of cash flow for their patients and staff. i would also say that many of the smaller providers couldn't afford to appeal. so i'm not sure if this data is really relevant, and what strategies have you undertaken to identify how many providers certainly come to me, who would love to appeal because they believe they've been wronged, there's been an administrative error but don't have the ability

to do it. also, i would say fear intimidation and retaliation, and just pay. or do whatever it is that they're asked to do at the next level. and i'm way over time. if you could respond to that, and then i'll come back. >> sure. in addition to appeals, congresswoman, there are other controls we have implemented over our contractors. we do determine what areas rac can look at. they have to achieve sort of get permission from a board at cms before they enter into any particular audit area. that is a type of oversight. we have an independent validation contractor that looks behind the racs themselves to see whether or not they are making these determinations accurately. all of the racs have through that validation contractor achieved well over 90% accuracy rate. i think the incentive structure itself actually incentivizes getting it right. rac does get paid on a

contingency basis. but if they lose on appeal, they lose the contingency fee. they want to make the right determinations in the first place. let me correct one issue. i said it was 14% overturn rate overall. that is in part -- since a lot of our issues are identified -- >> mr. chairman, if i can, the answer is, however, we don't know how many providers are unable to appeal, and there's no test to determine -- i mean, you have one side of the data equation, and i'm not sure that's an accurate representation as a ruesult. i yield back, mr. chairman. but i'd like to explore that further. >> great. we will in the second round. let me just make one quick statement as well. you mentioned there is a -- the incentive for racs to be able to limit that because they lose their contingency fee in they lose on appeal. let me give you an oklahoma illustration. if you're fishing you can put

one hook in the water or five hooks in the water. you'll catch more more often. if rac tries, they'll grab 20 different cases and hope they win ten of them. that's better than grabbing ten of them. if it's close, go ahead and just grab that file, and keep moving from there, and we may win it, we may not win it. that's helpful to the rac in their contingency fee. that's definitely not helpful to the provider to go through the process. we can talk about that in more detail. but i recognize dr. gozar. >> do you have any differenti differentiation in your facts in regard to small or large providers in the overturn rate? >> i don't think the data differentiates. i'm not aware of data that differentiates between large and small. the point i made earlier is we have different requirements of the contractors when they look to audit a smaller provider versus a larger one. there's different medical

record, request requirements to try to limit that burden placed especially on smaller providers. >> i represent rural arizona. and so i would like to see some type of movement to try to make that accountable. when you said an overturn rate with part "a," what about part "b"? >> you know, i'm actually not aware of -- i don't have the figure in front of me. we can connect with your office to get you the overturn rate. >> that's very important, just because most of the part "b" aspects are institutions, not individual providers. would you agree? >> i think the part -- let me make sure i heard you correctly. i believe the part "a" claims tend to be more institutional, hospitals, and then the part bchtd claims can tend to be individual providers, or groups of providers. >> miss king, from your oversight aspect, do you see maybe a change that you would

recommend for methodology, instead of, you know, looking at the provider as being guilty in an aspect, kind of an atmosphere like that? do you see a better way of handling the -- that the post-payment review starts off with the provider is guilty. i think it's not -- it's not a criminal matter. it's a matter of a -- either an overpayment or an underpayment, and i do think that cms has a responsibility as stewards of the trust funds to make sure that claims are paid properly and as part of that i think they need to do as much as they can effectively on the prepayment side but i also think that they need to look at the post-payment side. that being said, we have found some instances in which the requirements are posing administrative burdens on

providers and we have recommended that cms reduce not the requirements, but the differences across contractors so that providers have a better understanding of what they are required to do. >> from the standpoint of that process, dr. agrawal, is there a way that we could actually identify maybe frequent flyers? do we have a frequent flyer list? i mean, state boards kind of do this. we're kind of replicating something that state boards do. >> well, i think we take a different approach. so, you know, the spectrum of program integrity is long and there are folks on one side that are totally legitimate providers that are trying to abide by our rules that are honest and they

are the vast majority of providers. on the other side, a much smaller subset are potential criminals or people that are perhaps trying to rob the program. so we do take, you know -- i would argue that the various approaches that we have to overseeing the program integrity issues do try to take into account where our risk really lies. and i think part of why we can take an audit base or post-pay approach for the vast majority of providers is because they are legitimate and an audit is a reasonable approach for them. we do take a much more kind of risk-based approach on the fraud side that really can ratchet up the intensity of how we look at a provider based on findings from audits. i think that's really appropriate for providers that are pushing the line, potentially of even committing criminal activities. we try, on the other side of the house, to take a much more fact-based approach. we look at issues that are big national issues where we know there are improper payments and then we'll do deeper analyses to determine which providers to look at, but it tends to be focused on where our improper payments are occurring. it's not ratcheting up on a

single provider. >> but wouldn't it be more efficient in regards to looking -- having some type of a profiling aspect? you know, in state boards, i mean, you have a list of the -- most of your problems are with 10% of the population? >> right. i would remind you that state boards are dealing with the most difficult of cases. they're the ones on the right side of the house where these are providers that are committing potentially criminal or negligent activity. they are dealing with the worst actors. again, we do do that with a similar set of actors. i think what we are looking at perhaps, again to try to decrease the potential burden from these audits, is not ratcheting up, but perhaps looking at solutions that might ratchet down. as providers get audited and it turns out their claims are substantiated, perhaps we could audit them less. that's a solution that we are look into to see if we can implement.

>> thank you, pr chairman? >> as of when? that is one of the recommendations that hovers out there. how does someone prove, basically, i'm a good actor, and don't get someone constantly coming in to check them all the time? >> there are a number of solutions we're looking at. as someone pointed out earlier, rac is currently in a paused state where we're working on the next round of procurements. as part of that procurement activity, we're taking into account a lot of opinions, from stakeholders, including providers, and trying to solution how racs can still do their job and meet their obligations but decrease that burden. that's one of many solutions we're considering. >> when >> i couldn't promise an exact date. >> is that two years, ten years from now? >> i think we are working on the procurement now and we hope to complete it now in the next few months. >> i've heard that. >> it remains to be seen if that's a change that can be

pursued in the near term. >> that's still under discussion? that's not a definite -- i've got a good actor there, as dr. gosar had mentioned? >> it's one of many exclusions we are looking at. we've heard a lot of input from the provider community and trying to take action where we can. >> we'll come back to that. >> thank you very much, mr. chairman. listening this morning, it gets frustrating up here. despite the fact that we all come from different communities and are sharing very clear examples as to why the approach that's being taken isn't working, we continue to get pushback and reiterating the same points without any clear idea of when things will improve. on behalf of the constituents i reiterating the represent in

nevada, medicare is vitally important to their quality of life. i'm talking about the beneficiaries here. and when someone who is medicare eligible can't see an ob/gyn in my community because there are no providers who will accept them, because of issues ranging from the reimbursement rate to the delay in being paid for services rendered to other compliance issues, it makes me want to know what can we do now in the short term to be able to move this forward. you know, medicare is a bedrock of our programs.

people rely on these services. we have providers who, about a third or more of their patients are medicare covered. as my colleague miss grisham explained, it also typically includes medicaid or other paid sources as well. and so when you layer that burden on the provider, it's tough to provide services. that's what we're hearing. so after speaking to several stake holders in nevada, particularly hospitals and medical providers, all around the las vegas valley, and i also include some of the rural counties in nevada, which are woefully underserved by enough providers, the accountability of the recovery audit contractor

program seems questionable, at best. and i don't understand how you continue something that doesn't even -- hasn't even been properly evaluated. while these programs have a note worthy mission of seeking out improper payments of medicare services, it seems there are potentially perverse incentives to these racs. in 2010, the rac program was expanded to all 50 states and made permanent. again, i don't know how you start something, don't evaluate it, then expand it to 50 states, first of all. in 2013, over 192,000 claims were filed by these auditors to the office of medicare hearings and appeals, contributing to a backlog of over 357,000 claims. the recovery audit contractor program, as i said, may have been well intentioned, but there have been unintended

consequences. so acting deputy inspector richie, in your testimony, you include a long list of policy recommendations for cms to address. you reported that 72% of denied hospital claims at the third level of adjudication are overturned, ultimately in favor of the hospitals. what recommendations have you offered cms and this committee to address the concerns that racs are, no pun intended, dramatically racking up the numbers of claims backlogged? >> i think, first, we offered recommendations both in the rac area and in the appeals area. i think it's important while so intertwined to consider those separate, in some ways, and a rac work, that was all the work that we have that we're talking about was before this current backlog.

we've seen things that we think are relevant in the rac work. we did see in 2010 and 2011, that they were helping as i mentioned in my testimony. we need to make appropriate payments and when inappropriate payments are made, they need to be recovered. only they did recover $1.3 billion in 2010 and '11. and 6% were appealed. when they're appealed, there's a very high overturn rate. clearly something needs to be done. i point to the alj work for the recommendations that i push to the most. for the system to really work and where the backlog is, we think the biggest recommendation we had is that medicare policies are not clear. and i think, you know, all fraud is certainly improper payments. but not all improper payments are fraud. most of the providers are not committing fraud, they simply don't understand a complex system and are trying to submit claims that are complicated. we saw in the alj work that 56% of aljs overturn 20% of the prior level overturned. a lot was due to different

interpretations of the policies. >> are there a set of recommendations dealing with the medicare policies? >> yeah. in our recommendations, because there are so many, it's mainly to clarify -- select the policies that need to be clarified. clarify those and educate the people on the policy to create less overpayment. less appeals in the process. in my written testimony, i talk about our home health work. we found with the recent face to face requirement if a physician is certifying you're eligible for home health they have to have a face-to-face encounter. we found 2 billion in improper payments in 2011 and '12. a third of the claims didn't meet the requirement. we don't think a third of the claims were fraudulent. it's because they are complex policies as people get more used to them. it will probably go down. to educate people on the policies, make them more clear we think is really a key -- the

key being the appeals backlog lower. >> i know my time is up for this round. i'll come back to additional questions. >> recognize the chairman of the full committee, chairman issa. >> thank you, mr. chairman. thank you for holding this important hearing. the gentleman from nevada and i don't always agree. every once awhile, there's a nuance of agreement from this extreme to that extreme of the diaz. this is one where i think the entire committee is frustrated. and chairman langford's work on this, in addition to enc, really shows how bad things are. and let me just give you two questions, and then we'll go into comments. dr. agrawal, let me just ask you -- and for the ig, mr. richie, new york city -- new york state owes us $15 billion in overpayments. they flat billed more than the cms maximum for medicaid and we held hearings on that more than a year ago. what have you done to get $15 billion back while, in fact, you send out hordes of people to

harass doctors with a less than stellar success rate of success in accuracy in the audits? what have you done to get back from a state that knowingly billed far greater than the rate? and it's $15 billion. it's ten years worth of your recovery. any answers? >> so, that is an area we're looking at now. >> you're looking at it? $15 billion and you're looking at it? >> at the request of the committee, we have -- we are currently taking on an evaluation of new york state. we're waiting to get the findings and release the results, after which time i think we can have a conversation about how to proceed. >> the newspapers make it abundantly aware the numbers speak for itself. they are hard numbers of what was sent out versus the maximum allowed by law and you're looking at it more than a year later? >> sir, i think these evaluations do take time. they are rigorous.

they're designed to be rigorous. >> oh, they do? do you know how many doctors have had to stop their practices and answer nothing but questions because you take their money and then they try to get it back? isn't that correct? >> i wouldn't characterize it as stopping their practices. >> no. i'm telling you that doctors in some cases have to stop their practices because the audits for small practitioners are incredible detail. they don't get their money back until they prove their innocence through the process. let me go through this again. you have the right to stop payments in your state based on a good faith belief that they got over $15 billion. and then they can spend legions of time to argue why they should get to keep far more than they were supposed to receive. couldn't you? >> i would have to look into whether or not we have that authority, sir. >> well, why don't you look into it, doctor? and while you're looking into it, pursuant to congressional action under the small businesses jobs act, you owe enc -- subsequently, we get a copy of it.

you owe a report, a second-year report on predictive modeling, don't you? >> yes, we do. >> and you've owed it since october? >> i believe the report has been due since earlier this year, but i take your point. >> no, you don't take my point. we did away with a bunch of reports through the congressional action. we ran it through the house. the senate may have acted on it. we ask for reports we don't always need. we didn't just ask for the report. we ordered the executive branch to deliver it. it is extremely important because the kinds of thing that the gentleman from nevada were talking about. auditors going out half you know what, being wrong and on appeal being dramatically overturned even to zero dollars, in some cases, after physicians and clinics go through a great process. much of that would go away if your predictive modeling went and looked for the fraud where it is most likely to occur. mr. richie, are you concerned

that chase manhattan can see your credit card perhaps being misused and calls you, but the organization that you're auditing has no such capability? >> that's definitely a concern. we do think that the fraud prevention system has taken steps and shows promise. i know, tie in to the other question with the rac work. one of the things that cms does when they look at the rac audits is they identify vulnerabilities if the cumulative issue is over $500,000 and they need to address those vulnerabilities and assess them. one of our recommendations was to fully do that. we found once they identifying recovery payments you need to set up the safeguards to prevent them from occurring in the future so you don't have the problem. >> has the ig looked into the excess payments requested by and given to the state of new york that this committee earlier had as to whether or not any criminal charges could be brought? >> i'm not aware of that.

i don't believe we have looked at criminal charges. i do know that we have -- >> but they knowingly overcharged more than the maximum and cross-funded that payment to other services not even covered by cms, in many cases. the question is, is it worth taking a look to see whether or not the threat of criminal just might get new york to return $15 billion in excess payments? ten times what your audits that we're talking about here today in part are revealing? >> personally, yes. i think it's worth it. i'm not the enforcement person, but my office and audit, we've done a whole series of audits in new york that we've shared with the committee. i can go back to the office and talk to our investigators about this and our counsel and look into it. >> mr. chairman, i appreciate you giving me a little extra time. i will say that i'm deeply concerned that reports that are required by congress that ultimately are necessary in order to improve the system are

clearly done, but are being held back so they can be sort of looked at again and again. this is the politicking of releases. i would only suggest to the chairman that we have the authority to compel the work documents, if we need to, if that report doesn't come in a timely fashion from here on. i yield back. >> dr. agrawal, before i yield, this was a pending question from the chairman. when will that report come? we know it's months late. when? >> so, as you now, the small business jobs act requires us not only produce a report but have -- >> when? >> -- results certified by oig. we are in the process of working with the oig to achieve the certification. that is taking some time. i hope to release it as soon as we can. >> that doesn't answer a when, does it? >> i cannot give you a specific timeframe right now. >> can you give me a week or a decade? >> it is less than a decade, sir. >> how much less?

this is a report that all of us want. it matters to all of us. it deals with what we're dealing with, with providers, trying to shift us to where we all want to go. when? is it a month? is it two months? this is a simple question from the chairman. when? >> i cannot give you a specific date. however, i think what is important for the committee and for, you know, the american people and public transparency is that we not only release a report but release it with certification from the ig, so people can trust the numbers and base future decisions upon a certified report. the importance of that is clear, so we are working to achieve that. >> mr. chairman, only because the doctor did say public transparency, public transparency would be releasing all the work documents that show the reason for delay, the political correspondents, the loop to the white house that occurs on each of these reports. i rather doubt we'll get the transparency. >> mr. chairman, would you yield?

>> i would yield. >> doctor, it's a pretty simple question. if you can't give us a precise date, is it three months, six months? and what is holding it up? >> as i mentioned, you know, again, we are working closely with the office of inspector general, as required in the law to try to achieve certification for this report. i think the importance of that is very clear. so people cannot only get a report but trust the numbers that are in the report. >> and, you know, we're not stupid up here. we understand when people are trying not to answer a question. so if you would, be kind enough to answer the question. is it three months away, six months away, and what is holding it up? >> i cannot give you a specific date. the reason i cannot is because it's a process that is being worked in collaboration between cms and the office of inspector general. >> you can give us a precise date.

you need to maybe ask someone else, but we expect to know. we have the right to know. i mean, if there's a problem holding it up, we have a right to know what's holding it up. >> it isn't an issue of holding up the report. >> do you have a draft report that is complete? is it just being agreed to by various parties that then makes it available to be released? >> again, i think our -- >> just answer that question. >> our -- >> answer the question. >> we are working with -- >> is the draft complete? >> there is a draft report that is -- that utilizes a methodology to arrive at numbers that the office of inspector general is reviewing or is in the process of reviewing. we hope to be able to release that report in the next month or two. i cannot be more specific. >> that's helpful. that's a lot better than earlier. >> miss duckworth. >> thank you, mr. chairman. i would like to follow up a little bit on what the chairman

of the full committee, mr. issa, was talking about, these rac audits. i agree that combatting medicare waste and fraud is a critical goal. in fact, there are studies that show as much as $50 billion are wasted each year due to waste, fraud, and abuse in medicare and medicaid. we need to go after that. but it's also become clear to me that the well-intentioned efforts of the cms are not working and are in bad need of reform. i want to talk specifically about how these audits, these rac audits affect the process throughout the industry and the patients they serve. i heard from providers from all over the country, many of whom are small businesses. how they're being targeted by overzealous and misdirected audits that are threatening to put them out of business. they're having to wait years and carry hundreds of thousands of dollars on the books that they're not getting paid for and

these businesses cannot survive this. taken collectively, the stain on the industry undermines access to critical services for patients who have suffered from limb loss or limb impairment. oftentimes these businesses are the only providers of prosthetics and orthotics in their area which means the patients can not get access and must go without the medical equipment that they need for their lives. the volume of audits lead to a huge backlog in appeals for providers who feel they have been wrongly denied payment for legitimate services. i'm particularly concerned that cms has chosen to deal with this backlog by suspending for two years the ability of providers to appeal decisions at the administrative law judge law. with alj siding with providers in over half of all decisions and increasingly audits, it's simply unacceptable to deal with the problem by denying the providers due process. they're continuing the audits. you're taking these people's money by not paying them and saying now you have no right for appeal. you have to wait over two years. that's not the way businesses

work and you're going to drive these hard-working americans, small businesses, out of business. and you're going to leave all of their patients out there without the limbs and the equipment that they need in order to live their lives. at the public hearing on this issue, the chief administrative law judge griswold gave an explanation of how the office of appeals -- of their position but really offered no short-term remedies that would restore the right of a timely due process to providers. if you are going to suspend the hearing by two years, then suspend the rac audits for two years. give them their money back and collect it two years later. it seems blatantly unfair and unamerican to take these folks' money and not give them due process. does cms have any plans to restore fairness to the system for our providers? >> so, just to clarify at the outset. the third level of appeals or the administrative law judge

level is outside the cms. it is overseen by omaha. we have district oversight over is the first two level of appeal. >> okay. >> everybody is afforded, you know, any over determination whether by a mac, rac, or other contractor. providers are afforded the opportunity to use the appeal process as part of their oversight of us to make sure that the audits are being conducted properly and the right to interpret nations are peeg being arrived at.being arrived at. >> what is the backlog at the first two levels? how long are they waiting to get into the appeal process and getting it resolved? >> at the first two levels, the second of which is an independent level of appeal, or oversight, the oig published a report that shows there's no substantial backlog. at the first two levels of appeal. the backlog issue arrives later. on average, we are within the time frames that are required of us. i would say, you know, in addition with respect to the prosthetics issue you brought up earlier. it's clearly an important area. if there are, you know, issues

of access to care with respect to specific beneficiaries or companies, i'm happy to work with you on that. that's a priority for us. >> excellent. i will have the orthotics and prosthetic industry come in and sit down and talk with you. what you're telling me is that the third level of appeals is holding everything up, and they've suspended for two years the right to due process. and even though this is being caused by the rac audits that cms is continuing to conduct, it's not your fault, it's someone else's fault, but you're still going to shove more people into the system who now have no access to this? it's kind of convenient, don't you think, that you're pushing people into the system with these aggressive rac audits, but on the other hand you're saying it's not our fault that they can't get through the third level. what are you doing to work with the administrative law judges to fix the delay in the appeal process? >> sure. so we have taken a number of approaches to ensure that number one the audits are being conducted appropriately and whenever we can to help address appeals issues.

we are actively working with omaha on their backlog and trying to arrive at solutions in conjunction with them. i think on the front end, where we have more direct oversight and authority, we've implemented strategies to ensure that the audits are being conducted correctly and with high accuracy. as one example in the rac program, we do have a validation contractor that looks behind the racs to make sure that the racs are following cms requirements and payment rules and guidelines and all of the racs have achieved well-above 90% accuracy rate of the findings.

there's a statement sent us to. i would like to put that in the record. >> no objection. >> i want to follow up on that. you're acting like you have nothing to do with the backlog. i think that's an unfair characterization. do you not agree? you have nothing do with the backlog? >> i think that clearly, providers would not have a lot to appeal if we didn't -- >> let's's look at the inspector attorney general's report. they said the overturn rate at the appellate level is anywhere between 50, depend houon how yo read it, 56 to 76%, according the oig.

you have to review them first before they get here and they are overturned between 56 to 76% of the time according to the oig report in 2010? >> no, sir. >> so you are just denying claims and denying claims. i've talked to physicians, hospitals, health care providers. they say the first fair hearing they get is at the administrative law side of things and that what happens is you guys are just denying them and you're saying it's tough. you have to pay it. and wait for your turn in the cue. >> i don't think that's a fair characterization. >> this comes from hhsgov website. you you aul /* /- y'all changed

that within the last 30 days. what it says is appeals are in 356 days. do you agree with that? for fiscal year -- >> sir, you're talking about the third level of paappeal or alj level. i couldn't comment on that. >> well there is your site. average appeal time is 356 days. would you agree with that? >> i think if that's what the date data show, that's what it shows. >> fiscal 2013 hasn't even ended yet. >> sir, i'm not sure what data you're look at. >> we can give you a copy of it. somebody in your office knows because you changed it within the 30 days. because what you are saying is they are not being assigned for

28 -- i will give you, 28 months they weren't being assigned and that's been changed. who changed it. >> i think all of tissues you a describing, hopefully this is accurate, they are the third level issues. what i stated earlier is we have oversite of the first two levels of appeals and we are abiding by the time lines of those appeals. >> moms and dads back home could care less about the internal division. they see it as all part of cms. one in the same. they see it as the government. here we are are for the budget request that we've got that says backlog will reach 1 million. at what point does it become a crisis? at what point in when do you start putting companies out of business because you already are, when does it become a crisis that you're willing to do something about? this is your document. 1 million backlogged by the end of this year.

is that a crisis. >> sir if there are individuals put out by the audits -- >> i've already called on behalf of some of my constituents. that would be a great response but it's not true. i've dealt with jonathan plum. i've called to make sure that kathleen sebelius knew about it. i've called the white house. you say too bad. la do i tell the moms and dads who lose their jobs because they don get a fair hearing. what do we tell them? >> sir, we are able do what we are authorized to do. so whether it is an alternative payment arrangement or something else working with a provider -- >> you've got five years for alternative payment arrangement. i know this stuff. i've been studying this stuff for the last six months. five years. so if the backlog is ten years. what do they do? just pay it?

because right now, a million people at a million appeal, your rate, best rate from the adjudicate sores 79,000 a year. and even with your budget increase, that would still be a ten-year delay. that's a taking in my book. would you wait for ten years for your salary? yes or no? >> we do what he are authorized to do to work with providers and make the -- >> what do we do. >> stretch out payments, change things in individual payments. >> something changed. you know what? the audits went from 1500 a week to 15,000 a week. so what did you change? >> i will give you a copy.

what did you change? >> again, i think it is important to level set on this. it is our obligation to audit. we have payment you have heard about from other witnesses that you heard about from the rest of the committee. it is our obligation to go after improper payments, reduce the rate and make recoveries where possible or where they should be played. that is an obligation created in law. o we audit far less than 1% of all claims that we receive. in fact, all of the overpayment determinations made by racs made public are less than -- >> my time is expired. i would like one answer to this. the law says that they need a decision in 90 days. is that law being violated? and who makes the choice on what laws we enforce and what laws we ignore? the law says 90 days. >> i cannot comment out of jurisdiction -- >> this is in your jurisdiction. >> that is omaha --

>> no, this talks about qualified independent contractors which is under yours and the alj is after that. 90 days after that. >> great, so as far as second level appeal, the contractor level, there is recent reporting from oig that shows we are remaining on track as far as expectations of how long it takes go through that appeal. >> jonathan blum said you changed in 2012. what did you change? >> sir, i was not part of that conversation. >> do you know of any changes in 2012? i'm out of time. i yield back. i apologize mr. chairman. >> we will come back in second round. i would like consent to have ranking members spears opening statement entered into the record. without objection. >> thank you. i apologize for my late arrival. we add we had a memorial service at

arlington forrer isses ha milit. i felt obligated to be there. let me say out the outset, i have local hospitals embroiled in the rac situation. i have a hospital that is teetering on bankruptcy right now and the rac experience exacerbated it. i also think it is really important for those of us who sit on this committee to recognize that we have a situation, beyond just beating up those who come before us like this to recognize that if we want to fix the the backlog, we've got to pay for it. there is a backlog because in 2007, rac claims amounted to 20,000. today that number is 192,000 a year. that's ten times what it was in

2007 and we have not added one single person. to respond those claims. so if we want to deal with the backlog, erase it, we've got to recognize that you cannot expect people to do ten times the work with the same number of work hours. now let me start with mr. richie, if i could. you've got a repretty remarkable run in terms of the efforts by the health care fraud and abuse program. which resulted in $4.3 billion in recoveries. to the treasury in 2013. that represents 8 to 1 return. is that the highest level of recovery to date, mr. richie? yes, that is.

>> how is that achieved? we partner with other partners in enforcement in the program to fight fraud waste and abuse through investigation through audits, through evaluations that we've done. the recoveries in 2013 were record recoveries. >> i think in your testimony you reference that sequestration will result in 20% reduction in medicare medicaid oversight, is that correct. >> unfortunately, yes. >> what does that mean in terms of what you're going to do and what we're going to see in terms of waste, fraud and abuse being properly handled? >> for our office, not good. less investigations, less audits, less investigation. i'm not the budget expert but i live this everyday. i'm acting in charge of our evaluation office.

at this point between 2012 and 2014 medicare and medicaid outlays went up 20%. during that time my office reduced medicare and medicaid by 20%. it is really challenging given we have $50 billion payment, 10% error rate we are dealing with that it means less auditors, investigators, evaluators on the ground to handle this. i've been working in i kb for 27 years and i never felt as challenged looking ahead to see what the growing programs and responsibility, how we go about doing those. >> should we just roll out a red carpet for the fosters of this country? >> i would certainly hope not. in our office we pick the best topics. we make our budget request and for us personally, the best thing is to fund the budget request to get us back on target. it is definitely gone down by 200 fte ks, full-time employees over that time.

we have today stop eval yalgss and audits and top investigation leads. >> it safe to say that because of the reduction, there are investigations that haven't moved forward that probably would have resulted in savings to the taxpayers in this country? >> we have to make tough decisions everyday for what we start and don't start and it is difficult in sort of looking at this. you think you are making tough choices with things that look good. do you a risk assessment and feel there is so much to look at but you only have so many resources and those resources are declining and we've add hiring freeze for two years and people have left through buyouts so we've just been consistently reducing. >> so give us an example of the kind of case that you had to let drop by the way side.

>> do you take big cases that get in the way and the big fosters get in the way of the little fosters? >> i'm not there. i do know that our investigation office told us that they close 2200 investigative complaints since 2012. i think it is a mix. we try to put the best on the cases but we can't afford to do all that. i snow know in our strike force cities we've add reduction in resources. so it's been across the board in every aspect of the enforcement. >> my time's expired. i'll follow up on the second round. >> mr. chair? >> thank you. i appreciate the report you put out. i want to go to the first complete pamg. page. this is the latter half of it. i will read it to catch everybody up. for example cms hired contractors to determine whether

providers and suppliers have licenses, meet standards and have legit mitt locations. also contracting for checking for criminal risk. however, cms has not implemented other screening action authorized by the affordable care act that could strength provider enrollment. can you help enlighten me where you think they have not implemented other actions to strengthen the process? >> yes. i think there are a few things that we point out. one is in relation to assurity bond, regulation regarding surety bonds for certain types of providers. one is in not publishing a regulation that has to do with disclosure of past actions that have been taken against providers such as payments suspension. >> so, doctor, why not do that? >> i think these are great ideas.

we are finding out where our vulnerabilities and weaknesses are and doing something about them. we continue to have the conversations. we have to prioritize -- >> we are trying to get rid of waste, fraud aep abuse and authorized by the law, why haven't you done it? >> absolutely. it isn't, i think, a disagreement over the objectives. we have done a lot in the last couple of years to really, you know, boef up approach to screenings. some of the stuff like fingerprinting is just coming on-line now. there are limitations in terms of what we can get to and how quickly base owned resources based on budget. >> is there a list or summary so we can understand what you are prioritizing, what you're doing and not doing. >> i think you are seeing priorities occurring. >> but where do i find that? is that something you can provide the committee? >> i don't know that we have a list. >> can you create a list?

we are trying to get transparency, exposure, which you say you are in favor of. you're saying you're not doing all you do. you have to make choice. i want to understand what you have prior advertised and what you are doing and not doing. is that fair? to put that on a piece of paper and share with congress? >> it might be useful to get your insights. >> no, no, no. >> you want me to run your agency, i'll run it for you. gao is making recommendation. i'm not looking for a 700-page report. i'm looking for a couple page summary to understand what you're implementing and what you're not. you've got to have some kind of document. i didn't expect to spend five minutes asking about a list to find out what you are working on. >> sure, we will provide it.

>> when is a reasonable time to get that documendocument? you come up with a date. >> can you give me a few weeks? >> sure. give me a date. >> a month. >> the end of june. >> one thing we were working on is providers. are we engaging and allowing people with serious delinquit tax debt to be engaged in the process. there's a big government-wide problem. we have contractors with serious dealing with tax debt. i don't expect you to understand the question. it's something that i personally and the committee would benefit from understanding. what are the policies you have there. it should be a key indicator if you're not able to pay the federal taxes. why do we give you more and more business. the president has been in support of this.

when he was senator obama. i think it's a bipartisanship thing the committee dealt with a bill specific to that. if you can also provide me information about what you do with that and the answer may be we don't do anything with that. i would just like to know the an answer to that question. can we shoot for the end of june you give me that information is that fair? >> i think that's fair. but i think just to comment on that a little bit. we have all kinds of information we could collect from providers. i think the question often, you know, we have is what information can we collect that is actionable for us. so there are some clear bright lines in the program. if you didn't have the right license to practice medicine in the state in which you want to enroll, you don't get to enroll in that state. there are certain other type of disqualifiers like certain felony conviction. i think it makes a lot of sense to include as much risk assessment data and analysis as one could to look at providers. i think we have to -- there's

just a sub set of those potential risks that push over the line and allows us to take action. if the provider, you know, the exclusion list or the -- >> i'm worried about the contractors you're engaging that are supposed to help on this. that are supposed to help you engage with the people. those are some of the specifics that i would like to see as well. it's not just -- i'm not talking about the providers about contractors, it's the contracting that you're contracting with in order to be make these things, thank you very much, mr. chairman. i yield back. >> the second round for questioning. during this time, there's full interaction. you can jump in at any time. there's no clock run at this time period. for our witnesses, if you have specific things you want to get in the conversation feel free to initiate the topics to make sure you're clear. the goal is to make sure we bring all the issues out and find the areas that need to be resolved and the timeline for resolution on those things. you're free to be able to bring them forward and make sure we have clarity on this. i want to reaffirm.

let me first take first crack. this panel is committed to how do we deal with fraud. there's $50 billion in unaccounted for money possibly overpayments in fraud. we affirm that we are pursuing the fraud. it's the taxpayer dollar. it's essential. the solvency of the program and the taxpayer themselves. so continue to do that. i think the frustration is the prepayments side of this we know it's the direction it should go. we're not having to chase and that's why we want to know the report, we want to know what is happening at this point and how do we get ahead of this in the days ahead and not having to go back to constantly good providers and say we're going to hold the providers. and for them to have a portion of their cases pulled and not paid for for an indefinite period of time as they go through the appeals process is untenable from them.

you want you to hear it from me and us. we're not opposed to going after fraud. we're opposed to the methods. there have been changes in the audit process as cms learned the way through this. we're proposing additional changes in this. to say what can we do to help expedite the process and make sure overturn the appeals and get the money faster and have fewer people engaged. let me run through couple of these again. we're going through the revalidating process. get that completed that the point for providers nationwide. revalidate the providers and fingerprinting, background, re-enroll. is that complete at this point? what stage is that in? >> the revalidation process was initiated after the aca puts us on a five-year cycle. i believe the latest number is we have revalidated over 770,000 providers at this point. that puts us on track to being complete in time for the first cycle. >> two more years? >> i think that's about right, yes, if i remember correctly.

>> then the prepayment pursuit of fraud? we have a report due to us. obviously we discussed that. it's coming in the next couple of months to give us the details and progress on that. we move into the post payment. do you make any comment on the the prepayment side? >> well, i think just that clearly the affordable care act did provide us a lot of authorities to make changes on the prepayment front. such as, you know, payments suspension which we are able to leverage against the worst actors. i think the only point i would make, congressman, is to differentiate what we do when we're going after potential fraudsters, criminals, the worst actors from those providers, the vast majority that are perhaps producing waste or producing inefficiency in medicare not quite following our rules. but have the intention to follow our rules. are trying to do their best. i ask to keep the framework in mind. i think it sort of determines for us what tools we utilize so they're not overly per jortive.

-- pe ortive. is not a great tool for legitimate actors. it's essentially suspends all the payments they'd be getting. >> right. it's the hammer down in the area. even for the high risk areas. there's moratorium. some of those areas may have a deficiency number of good companies that are actually providing. if you can continue that more people entering immediate care. there's a need for more providers. >> it is. i agree with you. it's a notable piece of authority we implemented with a lot of care and over time. it took us years to go from having the authority and the aca to implementing it for the first time. i would say the areas we try to address, the geography and home health services as well as

ambulance services, are areas we knew there was a lot of market saturation. there was very little concern. we have been looking at it continuously about access to care issues. you know, home health and ambulance services and texas and south florida are areas of a lot of agreement with the office of inspector general, the department of justice within cms, within state medicaid agencies there's just a lot of market saturation sort of 3 to 5 times the number of providers on average. so while access to care is clearly something we care about and looking at in realtime to make sure the moratorium does not have negative impact. we're currently not seeing it in those areas. >> let me come back. i would like to get a timeline for everyone the length of time. you said they're on schedule. let talk about appeal number one. someone has a problem. the rac caught it. the appeal number one is to who and how long does it take? >> sure.

i believe the first level of appeals providers have 120 days to file the appeal. there's a 60-day time limit. they're responsibility is their responsibility. you have 60 days to respond, correct? >> correct. who is responding they're appealing to who? i believe in almost all cases it's the mack administrative contractor that handles the first level. >> so you have the rac folks making a decision, and then the mac folks that are making the response to the appeal, is that correct? >> correct. so there's 60 days to respond. you're saying it's on time. >> right. >> they disagree with that. they come back on the second level. who is that. how long does it take? >> the qualified administrative contractor. they have 180 days to file the appeal. the provider does. we have 60 days to make a decision on the appeal. >> and you're saying it's on time as well. >> so i have average times that

are below the 60-day mark, correct. 53 and 54 days for most of the appeals. >> do you have the overturned rate on both of those? >> it would depend on the specific audit. so is there a particular audit you're referring to? >> either one. the first or the second level. >> and rac audit, sir? >> yes, sir. >> i would have to look. i think while i'm looking. let me say the overall overturned rate for the rac audit are between part a and b about 6 to 7%. it's the latest data that is public. >> you're talking through the alj process? you're talking through the first -- that's what we're trying to figure out. get a cumulative number. we get to see a cumulative number. >> no, i believe, i believe that the 6 and 7% numbers are all the way through are ever overturned. >> okay. i'm trying to figure that out. the latest number on the alj is

between 56 and 70 some o percent in that level. >> correct. if i can perhaps explain it a bit. the rac, you know, make determinations. i think the latest public data is 1.6 million claims found contain overpayment. providers make a decision about whether or not to appeal those overpayment determinations. and basically at every level of appeal as you go through one, two, three, the number of claims going to the next level comes down. the overturned rate might vary between the levels. i'm not finding the level right away. that's helpful. thank you. the first two levels, we're seeing a 9% overturn rate for the rac in specific. >> both of them or each one? 9 percent -- >> no at the first level of appeal.

9% for part a. >> part b? >> 3%. >> all right. for the second level of appeal? >> at the second level for part a is 14.9%. >> so 15% basically? and then part b? >> 0.5%. no, i'm sorry. i don't have it called out. i have the percentage of appeals that make it to the second level. i don't have the overturn rate for second level. we can get it to you. >> that's unknown. after that they have done 60 days in the first and second one. they disagree with that as well. and now we're heading to the aljs. which is as commented on now could take ten years to get to that spot.

depending on perspective you get there. we've heard 28 months. it's pretty ambitious based on the number of people and the number that is typically handled. i know, you've said over and over again it's the responsibility we'll visit with them on this. it's the next level. and the fifth level is what if they disagree with that? >> there is another level they can go to which is, i think, federal district court level. >> okay. >> i'm sorry it's the departmental appeals. of that is federal district court. >> that's a fifth level. >> correct. >> okay. thank you. i want to get the context for everyone. jump in at any point. >> i guess my question is so let's look at part b, d and e. what is the overturn rate for that? which would include, you know, some of the other stuff. let me add, i have a report here

from your office here on april 2nd of 2014, that says that overturn rate is about 52%, is that correct? is this report correct from your office? would it be about 52% for dme overturn rate? >> i think it depends on what document and what level you're looking at. if you look at all dme claims. it's about 7.5% of all overpayment determinations. >> we're talking about on the appellate report. this is office of medicare hearings and appeals. their report. it says the overturn rate is 52% is either fully favorable or partially favorable. 24.87 was unfavorable. and so with that, it would indicate that the overturn rate is much higher than what you would indicate. >> well -- on dme. >> there's a calculated overturn rate at each level. what i communicated about the

fist two levels gives you the overturn rate for the levels. >> i'm trying to figure out how does your report say 52% here and what you testified said -- where is the difference? help me understand that. >> generally, as you go up at the various level of appeal. providers make a decision at each level whether or not they appeal to the next level. we see general trends. providers tend to -- the number of claims appealed at each level tends to drop. and the overpayment or the overturn rate can increase. so at the third level of appeal, at the alj level. i can agree with what is on the piece of paper. that it probably does approach 50% for dme. >> all right. >> but at lower level of appeal given there's more claims that are appealed and fewer decided in the provider's favor. the overturn rate is much lower. >> that makes sense. out of the 1 million in backlog that your budget request talked about.

how many of those would you anticipate based on this rate are going to be overturned? out of the 1 million backlogged appeals going to alj? >> i think that's an individual case-to-case determination. >> it is. but based on historical evidence, how many would be overturned? >> sir -- >> 520,000 of them. based on these numbers, wouldn't that not be correct. >> based on those numbers. >> let me ask you one other question. is the american hospital association, they have rac facts. per rac track, which this is all greek to me, 47% of hospital denials are appealed and, quote, almost 70% of these appeals are overturned. is that incorrect? >> i can't really speak to their data, sir. what we know, what we track the data, of course, very closely internally. our numbers would not agree with that. if you look at the first level of appeal for part a.

we see a 5% appeal rate that makes it to the first level. >> mr. ritchie, if i could interject. there's a problem here. why is it that if you've got enough money to go to the third appeal with the alj, if you can hold out that long, if you're not a single provider, if you're a big hospital, you can hold out -- if you go to the alj you have a 60 to 70% chance of winning. why wouldn't everyone just go to that appeal process, if they can afford it? the question i have, why the discrepancy? what do you know about the alj system that allows for such huge swings in the determination? >> okay. we looked at prior to the backlog. i think it's still relevant.

we look at the alj and at the time 56% overturn rate. this was 2010 data. for the prior level to qualified independent contractor there was 20% overturn rate. the big differences we saw, again, i mentioned earlier the unclear medicare policies we think are a trigger to a lot of this. at the alj level we found they tend to interpret them less strictly than at the prior level with the quick level. because they're confusing and complex policies. they're open to interpretation. the other thing at the level it's more specialized. they have specific people looking at part a. specific people looking only at part b. they have clinicians revealing that. at the alj, they deal with everything that comes their way and relying on documentation and testimony of the treating physician to make their decisions. so the process is different. we have seen the case files are different. it's more of an administrative thing. the things they're maintaining and holding in the case laws are different from level to level and creates some of the

inefficiency. the alj level is still on paper. the quick has everything electronic. they have to print it out and send it to the alj. they have to get papers from couldn't tractors and sort them out. it is to clarify policy and to create one system that's electronic. >> if i understand you correctly, at the level, they are very specialized, they know what they are looking for and they make their determination because they are trained to look for certain things, i guess. i guess that's part of what you're saying? >> correct. we didn't assess and look at which level is better. they are very different. but we have seen they have clinicians looking at it and specific of a complaint or appeal comes in, it comes into part a, it is going there. where as alj, they've got everything -- >> aljs aren't clinicians. they are using discretion in

terms of interpreting the law. >> in terms of tinterpreting th law and relying on testimony and evidence. where as quick level is relying on their own clinicians to interpret documentation. >> go ahead. >> congresswoman will yield. it speaks to larger issues. i want to get back at, what are the real overturn rates? are we targeting correctly? what can we do to improve the system so we're not harming good providers, which means we are harming just beneficiaries, going after fraudulent and wasteful behavior. medicare is an incredibly complex system. the reality is, that if we don't start dealing up front with the medicare complexities -- we can chase this all day long and go from one extreme to the other and we're going to find significant flaws in our ability to hold providers accountable and to support providers to do a better job.

and what we haven't done in this conversation, i'm as concerned as anyone else about getting it wrong and overpayments. i'm also concerned your part a providers, large providers, and part b providers, hot spot providers, they can't afford go through the process. ? that regard your data is skewed. for one group. and i'm not trying to vilify one group over another. but large hospital groups can afford wait a decade, potentially. smaller hospitals, as pli colleague from californiafide, cannot. i want to get back to a couple of things. one, then yield back. can you give us some recommendations -- you talked about the predictive modeling. you say we are identifying prescription practices that are clearly problematic. is there a way to be targeting

those areas. and is there a way it start targeting areas where we've got real issues with access. because cms has a responsibility to assure access. we're only doing one side of this here. we're eliminating access. no response about that. >> so i'm sorry, could you clarify, recommendations for what? >> a couple. the first is you identified in your testimony that there are areas that you've identified that we could start looking at much more directly. and aren't. so we could do predictive modeling in terms of where folks commonly make mistakes and where we've got potential fraud. and two you identified in that discussion, i don't know if it was tied to the predictive modeling, per se, but you've identified prescription practices that are clearly problematic. you said i think you've got folks who are not prescribers, as an example, prescribing medications for beneficiaries. why aren't we focused more in those areas.

and then i wanted either dr. agrawal or someone else to talk to me about what we're doing if you've got hot spots for fraud, what are you doing to shore up mistakes, so that we don't lose those providers by providing better education and support to those providers, and creating in low access areas frontier and rural states, what are you doing to assure you don't lose providers. >> thanks for clarifying. we make those types of recommendations all of the time. we have a series of reports that we call questionable billing reports, several of which i referred to in the testimony. finding questionable prescribers, questionable pharmacies and questionable home health agencies. in all of those cases we take the ones that have identified that are extreme outlyers based on the statistical test and give it to our investigations office to see if they want to further pursue, because these look severe. after that we send them to cms and cms will share with their contractors to take appropriate action and we always recommend that they take the kind of questionable criteria that we

have and implement -- i know the fraud prevention system is starting to build some of that in. i think specific to the example that's mentioned in the testimony, and you mentioned on the prescribers, we saw, we have $5 million in a year prescribed by people without authority to prescribe, massage therapists, and things, just yesterday, i believe it was because it was late last night that i got it, but cms actually issued or published a final rule that requires prescribers of part "d" drugs to enroll in the medicare fee for service program starting next june. june 1st of 2015. this is going to allow cms the plans and medicare program integrity contractors to verify that they actually have the authority to prescribe. because now, they aren't a massage therapist isn't billing medicare, but they could write the prescription, for drugs that we found that were pretty severe. so that problem will be fixed based on this rule. so we are working with cms to get some of the recommendations implemented. but i think it's a combination of doing things like that, and

implementing edits on a prepay basis to try to stop future improper payments. >> i think what we're interested in -- i'm taking too long -- but is to get the information to the committee so we know when so that we can weigh in on how you're balancing these issues. if the chairman doesn't mind, can we get something on access? what are you doing to ensure that small providers aren't discriminated even further in this process because of the size of the provider and the capacity of the provider and have you thought about treating them differently? we have tiered regulatory environments. what is your thought about making sure that access is protected? >> yeah. again. and i appreciate the question. that is an extremely important area for us. so as far as tiering providers, we do currently tier providers by size. we actually have medical record request limits, specifically for

the rac contractors based on the size of the provider. i had also mentioned earlier a future solution where we would ratchet down the number of reviews that a particular provider would face if the reviews are generally in their favor. they're basically following the rules. we're putting that solution into our rac procurement process right now so it will be part of the racs going forward.