Dr. ROSENBERG. Most certainly.

Ms. VANCE. Certainly. Even for the employees. I mean I think the employees are fearful as well.

Dr. ROSENBERG. Could I just say one thing?

Mr. SHAYS. Real brief because we want to get to the next panel and we are going to close down at 3:45, so we want to make sure the audience can speak as well. Did you have a quick comment to make?

Dr. ROSENBERG. Well, I just do not understand why HCFA, if they are going to audit, cannot say to the doc, look, we do not think you are doing it right, instead of just sending them a letter out of the clear blue and saying you owe us this much money and then you have to wait 4 or 5 months to get an appeal. I mean why can they not just come in and say, you know, something is wrong here, let us sit down and talk it over.

Mr. SHAYS. Fair enough.

Just to let the second panel know, we are going to conclude with Congressman Barrett and then we are going to take no more than a 5-minute break just for setup and we are going to begin right away with the second panel.

Mr. BARRETT. Mr. Robertson, you talked about the Health Care Claims Guidance Act and it brings to mind the Medicare DRG 3day window, the PATH audits, and the unbundling. Of those three, which do you consider the most onerous or unfair?

Mr. ROBERTSON. The 72-hour window is a very difficult issue to implement. We have figured out how to do it, by and large. Each one of those has their complexities around them and I am not sure which one of them I would say would be the most difficult to deal with, they just are different issues to be dealt with.

Mr. BARRETT. Obviously one of the underlying tenets of this bill is that the treble damage is inappropriate and I think that there certainly are situations where it is inappropriate. On the flip side, it strikes me that a law that would say that if you inappropriately bill, that the remedy for that would be paying the amount that is due plus interest would create no incentive at all for a physician or a hospital to maintain their charges, because as Mr. Shays said, there is a belief out there- or the perception among us, whether it is true or not, that providers can, either intentionally or unintentionally, avoid an audit for some period. So if the only remedy is past payment plus interest, I would be more than happy to take that money and invest it, knowing that if they catch me, I will pay it. What should be the appropriate penalty? I assume that you think there should be more than just past payment plus interest, is that correct?

Mr. ROBERTSON. I think the issue is when it is clear that fraud was intended. Errors happen in human life every day and those are the things where we create significant burdens on the staff. So I think what the act is dealing with is trying to create a narrowing of what is really fraud versus what is just an error.

Mr. BARRETT. Well, let us stay with the errors because I think there is even an issue with errors. If a hospital or a physician erroneously did not pay for 3 years, do you think that the proper penalty for that would be reimbursement plus interest, or do you think there should be more than that?

Mr. ROBERTSON. I think there should be more than that.

Mr. BARRETT. And it would be helpful for me to know what that extra would be. Again, I do not think it should be treble damages, but I do not think that simply saying pay it back with interest sends any message other than “Oh, that is OK." And I think we have to do more than that.

Mr. ROBERTSON. I agree that we have to do more than that, although I would say that Shawnee Mission implemented the double coding long before the criminal charges were available. We did that because we were committed to doing it correctly. And I believe that is pervasive in the industry, doing it correctly is the desire. So what are the penalties? I think-what are the economics you have to look at? What community are they serving? Do you kill the provider community when that happens in that community? I think it has to take into consideration what is happening around that environment for that community.

Mr. BARRETT. Finally, I just want to say that one of the most surprising things here for me today was hearing again the involvement of HCFA and the AMA. And the AMA and the American Hospital Association are not exactly small players in this debate in Washington, and my unsolicited advice is that they should be more aggressive, frankly with HCFA. I think if AMA was involved with HCFA, that they could play a role in reducing this five layer confusion that we have. The one thing I am certain of, you do not want me setting this stuff. I do not know if Chris feels confident or Congressman Snowbarger feels confident, but you do not want the politicians to come in here and start setting levels because then you will really be mad. And you are far better off, I think, havingworking with HCFA to do so, because I just think we can gum up this thing faster than you can say Jack Robinson.

Mr. SHAYS. We can provide incentives though.

Mr. BARRETT. Yes.

Dr. BUIE. Whatever system we pick, the delineation is the intent standard. You know, the AMA never went on board to say we ought to criminalize this, we ought to, you know, make sure there are areas that will have civil monetary penalties for folks giving care in good faith. That was never agreed upon. I think there is a lot of confusion on that. I mean Dr. Dickey can clarify it when she comes, but that is the distinction. Yes, we will have codes, there will be some system. It will be imperfect, we will try to reach consensus and agree. It is the intent standard that needs to be guarded vigorously.

Dr. COOLEY. And I do not think you would have any difficulty with physicians, and I do not want to speak for hospitals because it may even be more complicated, but a physician knows when he is doing a complete exam and a physician knows when he is doing an office visit and he knows when a nurse is acting under his supervision. Those are clear cut areas. If they are billing for something that was not performed, then there should be penalties, but that is a very simplistic way to measure it, and then we can all go about our business of taking care of more or less sick patients on a day-by-day basis.

Mr. BARRETT. Thank you.

Mr. SHAYS. I would like to announce the second panel. It is Jackie Williams, U.S. attorney, District of Kansas, U.S. Department of Justice; James Kopf, Director, Criminal Investigations Division, Office of Inspector General, U.S. Department of Health and Human Services; Joe Tilghman, Consortium Administrator, Kansas and Chicago Regional Offices, HCFA, U.S. Department of Health and Human Services; Leslie Watson, director of medicare payment safeguards, Blue Cross and Blue Shield of Kansas; and Dr. Nancy Dickey, president-elect of the American Medical Association.

I would invite them to come up. We will start in 5 minutes and I would like to thank this first panel. You have done an excellent job and you have complimented each other well. Thank you very much. [Applause.]

[Recess.]

Mr. SHAYS. I have already introduced our witnesses, if they would stand, I would like to swear them in and then we can begin with testimony.

[Witnesses sworn.]

Mr. SHAYS. For the record, all our witnesses have responded in the affirmative.

We are going to be pretty strict about the 5-minute rule. Our other panel-and if you could have told me I could have gotten the number of doctors and administrators to stay strict with the 5minute rule, I would have said I am not so sure. But they did a great job, a wonderful panel.

We look forward to your testimony and we will ask questions. I am going to ask in a second how many in our audience may want to speak afterwards because it gives me a sense of time. Well, I will ask now, since some of you are raising your hands-eight. I will ask again and we will see how that number changes. But you will have time. The question is will it be 2 minutes or 4 minutes or 1 minute. We will figure that out when we know the limit to the number of people participating.

I think we will go right down the row and we will end with you, Dr. Dickey. Mr. Williams, you have got the floor. I would ask you to speak loudly and into the mic, if you would.

STATEMENTS OF JACKIE N. WILLIAMS, DEPARTMENT OF JUSTICE, U.S. ATTORNEY, DISTRICT OF KANSAS; JAMES A. KOPF, DEPARTMENT OF HEALTH AND HUMAN SERVICES OFFICE OF INSPECTOR GENERAL, CRIMINAL INVESTIGATIONS DIVISION; JOE L. TILGHMAN, HEALTH CARE FINANCING ADMINISTRATION CONSORTIUM ADMINISTRATOR, KANSAS AND CHICAGO REGIONAL OFFICES; LESLIE D. WATSON, DIRECTOR OF MEDICARE PAYMENT SAFEGUARDS, BLUE CROSS AND BLUE SHIELD OF KANSAS; AND NANCY DICKEY, M.D., PRESIDENT-ELECT, AMERICAN MEDICAL ASSOCIATION

Mr. WILLIAMS. Thank you, Chairman Shays, Vice Chairman Snowbarger and Congressman Barrett, I am Jackie Williams, U.S. attorney for Kansas. As Congressman Snowbarger knows, we cover the entire State, we have offices in Wichita, Topeka, and Kansas City.

I am very pleased to be here today to tell you about our efforts to combat fraud, waste, and abuse in the Medicare system. As you

know, Medicare pays out more than $1.5 billion in the State of Kansas each year. We recognize that the majority of physicians, hospitals, and other health care providers are honest, hard-working, and dedicated to providing the very best health care possible to Medicare beneficiaries. However, there are providers who engage in improper billing practices which cause immeasurable damage that threaten the financial integrity and the public's faith in the Medicare system.

The primary purpose of my remarks today is to describe how we use the tools available to us to pursue fraud and abuse, and briefly discuss some of the results that we have achieved in Kansas.

In general, there are three types of false billing practices that our investigations have uncovered. The first is billing for services not rendered; the second is billing for a higher level of service than actually performed, which is commonly known, as you know, as upcoding; and the third improper billing practice involves providing kickbacks and bribery in exchange for referrals. While these are not the only types of matters we see, they do make up the majority of cases currently being worked in the district.

In the U.S. attorney's office, we have two primary venues to eliminate Medicare fraud and abuse. We can pursue false billing, either criminally or civilly. The Department of Health and Human Services, in particular the inspector general, have additional administrative remedies for addressing improper conduct. In all our criminal cases, we have the proof of an intent to defraud, which is an essential element to a conviction. We pursue criminal cases when the evidence as to intent is present and the conduct at issue is significant enough to warrant a criminal prosecution.

I would like to give you some examples of successful criminal prosecutions we have had in the last 2 or 3 years. The first case is a Florida medical equipment supplier that billed 30 cent diapers as $9 female urinary collection devices and he made over $80 million in the course of 1 year. The supplier, Mr. Ben Carroll, knew that Medicare would not reimburse for the diapers and instructed employees to refer to and bill the diapers as prosthetic devices. Mr. Carroll pleaded guilty last year to fraud and is now serving 10 years in Federal prison. He also forfeited $36.5 million which is all the funds that he had left at that time.

If I could, I would like to show you the diaper. This is one of the actual diapers that we introduced before the grand jury. It costs 30 cents and he was billing at $9 to the various nursing homes and things.

In November, a Kansas City psychiatrist was convicted for billing his services for up to 26 hours a day, including billing for patient psychiatric care while he was on vacation in Cancun, Mexico. His sentencing will be later this month in Federal court in Kansas City, KS.

In Topeka, a hospital administrator and a contractor responsible for the hospital's marketing were convicted and sentenced to 3 years in Federal prison for paying nearly $50,000 in bribes to an employee assistance counselor in Corpus Christi, TX. The bribes were paid in exchange for the counselor's referral of patients from Corpus Christi to their psychiatric hospital in Topeka. As a result

of the bribery scheme, the hospital received more than $600,000 in revenue from various insurance companies.

On the civil side, our primary civil statute for recovering funds improperly charged to the Medicare trust fund is the False Claims Act, the FCA. The FCA is primarily used when the facts indicate that false billing was a result of a reckless disregard or deliberate ignorance of the rules and regulations governing the Medicare system.

In analyzing the applicability of the FCA, we give consideration to various factors relating to the issue of culpability, including such things as the guidance provided by HCFA, whether the violations occurred over a period of time and whether any steps were taken to assure compliance with HCFA regulations in general. The determination of whether a matter if actionable under the FCA or alternatively constitutes a simple, honest billing error, rests on an individualized review of all relevant facts related to the provider, which go to the issue of culpability.

When the civil investigation leads to evidence of an FCA violation, the provider is notified about the allegations in detail. And further, as with all of our affirmative civil enforcement matters, potential defendants are given an opportunity prior to filing suit to come in and raise any and all defenses or other mitigating factors such as ability-to-pay issues.

This district has not and will not pursue cases involving simple mistakes. And again I want to say, my office has not and will not pursue cases involving honest mistakes, nor have we been asked to.

Cases not worth or appropriate for FCA action; that is, the simple billing errors, are routinely referred either to Health and Human Services or the fiscal intermediate for their internal remedies.

We have recently completed a number of civil matters under the False Claims Act. A few examples: In September 1997, a Kansas City medical center agreed to settle a matter for $17.5 million involving allegations that the hospital had received more than $40 million in Medicare funds in exchange for paying more than $1 million in bribes to another health care provider and physicians in return for their referrals of Medicare-eligible patients.

Also last year, another Kansas City hospital agreed to pay more than $1.2 million to settle a matter involving allegations that the hospital received more than $4 million in Medicare funds as a result of an illegal patient referral kickback scheme.

While we believe our efforts are important, ultimately the integrity of the Medicare trust fund will depend in large measure upon the provider community. This is because our civil enforcement efforts can respond only to the portion of the false claims that come to our attention. In this computerized age, responsibility lies with providers to ensure that they have systems in place to bill accurately and in accordance with Medicare rules.

We hope that our efforts under the False Claims Act will encourage providers to adopt those systems and we look forward to working with them to explore other means of improving compliance with the law. I want everyone to know that my door is always open to dialog and talking.