TRICARE Program Integrity Operational Report

“Guarding the Health Care of Those Who Guard Us”

January 1, 2010 through December 31, 2010

John Marchlowska Director, Program Integrity

Management Control and Financial Studies Directorate

Office of Chief Financial Officer TRICARE Management Activity

Aurora, Colorado

Table of Contents

Section 1.0  TRICARE Program Integrity – General .............................................................................. 1 

Section 2.0  Operation TRICARE Fraud Watch .................................................................................... 2 

Section 2.1  Explanation of Benefits (EOBs) – A Tool to Validate Receipt of Care ........................... 2 Section 2.2  Contractor Roundtable ................................................................................................. 3 Section 2.3  Training, Education and Information Sharing ............................................................... 3 Section 2.4  TRICARE’s Fraud and Abuse Website ......................................................................... 4 

Section 3.0  TMA Program Integrity Activity Report: Calendar Year 2005 – 2010 ................................ 5 

Section 3.1  Fraud Judgments ......................................................................................................... 5 Section 3.2  Voluntary Disclosures .................................................................................................. 5 Section 3.3  Provider Sanctions ....................................................................................................... 6 

Section 4.0  Fraud Cases: Year in Review .......................................................................................... 6 

Section 4.1  Snapshot of Fraud Settlements/Prosecutions Involving TRICARE ............................... 7 Section 4.2  Fraud and Abuse Issues Overseas .............................................................................. 9 Section 4.3  Balance Billing and Violation of Participation Agreements ......................................... 11 Section 4.4  Quality of Care Cases ................................................................................................ 12 Section 4.5  Eligibility Fraud .......................................................................................................... 12 Section 4.6  Identity Theft .............................................................................................................. 13 Section 4.7  Preventing Fraud and Abuse at Military Treatment Facilities (MTFs) ......................... 14 

Section 5.0  Contractor Oversight and Compliance ............................................................................ 15 

Section 5.1  Case Referrals from Contractors ................................................................................ 15 Section 5.2  Prepayment Review ................................................................................................... 16 

Section 6.0  Purchased Care Data ..................................................................................................... 16 

Section 6.1  Purchased Care Data Warehouse (PCDW) ............................................................... 17 Section 6.2  Purchased Care Detail Information System (PCDIS) ................................................. 17 

Section 7.0  Program Integrity Affiliations ........................................................................................... 17 

Section 7.1  Defense Criminal Investigative Service (DCIS) .......................................................... 17 Section 7.2  Pharmacy Operations Directorate: Pharmacy Operations Center (POC) and

Pharmacy Data Transaction Service (PDTS) ............................................................. 18 Section 7.3  National Quality Monitoring Contract (NQMC) ........................................................... 18 Section 7.4  TRICARE Clinical Quality Forum ............................................................................... 19 

Section 8.0  TRICARE Fiscal Stewardship ......................................................................................... 19 

Section 8.1  Automated Computer Edit Software Program ............................................................ 20 Section 8.2  Post-payment Duplicate Claim Software .................................................................... 20 Section 8.3  Cost Recovery Contract ............................................................................................. 20 

Appendix A:  Acronym Index ................................................................................................................ 22 

Section 1.0 TRICARE Program Integrity – General

The TRICARE Management Activity (TMA) Program Integrity (PI) Office is responsible for all anti-fraud activities worldwide for the Defense Health Program (DHP). This includes both the purchased care and direct care settings within the Military Health System (MHS). TMA PI executes policies and procedures regarding prevention, detection, investigation and control of TRICARE fraud, waste and program abuse. The office monitors contractor program integrity activities, coordinates with the Department of Defense (DoD) and external investigative agencies and initiates administrative remedies as required. TMA PI reports to the Director, Management Control and Financial Studies. This reporting structure facilitates the implementation of anti-fraud programs throughout the entire DHP. Because of the nature and scope of the work performed, the TMA PI reporting line is separate and distinct organizationally from the day-to-day operational activities of other departments to avoid the appearance or potential of undue influence or conflict of interest. TMA PI’s vision statement is to “ensure that the DHP and TMA purchased care contractors have an effective fraud control program in place that can be considered a model for the industry, save valuable benefit and taxpayer dollars and ensure appropriate, quality care for beneficiary families.”

TMA PI provides technical assistance, program expertise and support to the DoD Office of the Inspector General (DoD IG) for Investigations, the Department of Justice (DOJ) and the U.S. Attorney Offices (USAOs) in developing cases for prosecution and/or settlement action. TMA PI provides DOJ with trial preparation activities such as creating reports, charts and graphs for use as exhibits and provides expert witness testimony related to the TRICARE program and range of benefits. Through a Memorandum of Understanding, TMA PI refers its fraud cases to the Defense Criminal Investigative Service (DCIS). TMA PI also coordinates investigative activities with other agencies such as the Military Criminal Investigative Organizations (MCIO), as well as other federal, state and local agencies. This support is continuous and ongoing throughout the investigative, settlement and/or prosecution phase.

To encourage the early identification of fraud, TMA PI engages in multiple proactive activities designed to focus on various scenarios in the area of health care and claims submissions that may be vulnerable to fraudulent and abusive billings. TMA PI develops areas of focus and mines claims data to identify outliers. The outliers are shared with the various contractors responsible for the geographical areas in which the outliers occurred. The contractor then pursues further development such as a probe audit to determine if the services billed were appropriate. These proactive activities have generated a number of referrals that are actively pursued by law enforcement.

Along with other efforts, TMA PI prepares monthly spotlights (articles related to fraud schemes) and fraud alerts (designed to alert our contractors to providers committing fraud) in an effort to promote early identification of fraud schemes and minimize the loss of government dollars. The office also maintains a comprehensive healthcare fraud and abuse reference library which contains over ten years of healthcare fraud-related articles, policy guidelines, news articles, medical journal excerpts, code of ethics for various professions, etc. The library is a valuable resource when preparing documents for trial, drafting issue papers, responding to interagency questions and researching case-related issues.

Recognizing the importance of sharing information with the investigative community, TMA PI (often a presenter) regularly attends task force meetings, information sharing meetings and quarterly healthcare fraud meetings. Additionally, TMA PI is a member of the National Health Care Anti-Fraud Association (NHCAA) and attends regular board meetings and information sharing sessions. These sessions are attended by multiple government and private health insurance plans. Topics discussed include healthcare fraud cases and schemes. The NHCAA was founded by private health insurers and federal/state law enforcement officials. It is a unique, issue-based non-profit organization comprising private and public sector organizations and individuals responsible for the detection, investigation, prosecution, and prevention of fraud against private and public health insurance plans. Its mission is to protect and serve the public interest by increasing awareness and improving the detection, investigation, civil and criminal prosecution and prevention of health care fraud.

In addition to saving dollars, TMA PI actions contribute to patient safety. In the course of investigations, TMA PI may become involved in initiating notification alerts to beneficiaries who may have potential

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exposure arising from re-use of syringes, the use of single dose vials of anesthesia medication on multiple patients, watering down of immunizations, dilution of chemotherapy solutions, and other such potentially harmful situations. Attempts are made to contact beneficiaries who may have been victimized personally, by mail and by posting a special alert on the fraud web page: www.tricare.mil/fraud.

Section 2.0 Operation TRICARE Fraud Watch

As part of a campaign to raise the level of awareness of fraud detection throughout DoD, TMA PI launched Operation TRICARE Fraud Watch at its first fraud training conference held in September 1999 at Myrtle Beach, South Carolina. The conference, which was a tremendous success, was attended by representatives from most of TRICARE's prime contractors, lead agent offices, the two claims processing subcontractors and various government agencies that work together to combat fraud. Since then, TMA PI has held national fraud conferences on a biennial basis drawing as many as 240 attendees from around the nation, representing a broad mix of federal, state, and county/city agencies; contractors for TRICARE and Medicare; agencies and organizations including anti-fraud units; prosecutors from state and federal agencies; representatives from the Department of Veterans Affairs (VA); DOJ; Military Treatment Facilities (MTF); TRICARE Regional Offices (TROs); DCIS; Department of Health and Human Services; Office of Inspector General (DHHS OIG); Federal Bureau of Investigation (FBI); Medicare; Medicaid; Internal Revenue Service (IRS); Drug Enforcement Administration (DEA); Office of Personnel Management; Office of Inspector General (OPM OIG); and Uniformed Services Family Health Plans (USFHP). Speakers represent a diverse group of professionals in law enforcement, state and federal health care programs, and private industry.

The 2011 TRICARE Anti-Fraud Conference is scheduled to be held in Denver, Colorado, from April 27 through April 29, 2011, and will offer many networking opportunities. The theme for the upcoming conference is “Moving Forward in the Fight Against Health Care Fraud.” One of the highlights of our conference will include presenting the “Case of the Year” as well as the “Contractor Anti-Fraud Performance of the Year” awards.

The education, information sharing and networking that takes place during and after each conference creates a surge in fraud case identification and referrals from attendees. TMA PI appreciates the continued support and attendance at our conferences. Without such a commitment, we could not continue having this valuable venue to network and share thoughts and ideas about fighting healthcare fraud.

Section 2.1 Explanation of Benefits (EOBs) – A Tool to Validate Receipt of Care

Beneficiaries are a valuable partner with the government in ensuring the appropriate expenditure of government funds. Many fraud cases have been initiated as a result of the military beneficiary population reviewing their EOBs and reporting that the services were not received.

Beneficiaries are being strongly encouraged to request copies of EOBs for all services received to help preserve their TRICARE benefit, to save taxpayer dollars and to assist in identifying fraud as demonstrated by the following case scenarios:

TRICARE Overseas Beneficiary Review of EOB Leads to Case Development

Information was received from a TRICARE Overseas beneficiary who indicated that he received an EOB stating that services were paid on his behalf to a physical therapy clinic. The beneficiary did not receive services from this clinic. He also alleged that the clinic forged his signature on claims. The beneficiary contacted Wisconsin Physicians Service (WPS) Program Integrity who conducted a statistically valid random sample audit. The audit results found that the clinic was engaged in fraudulent and abusive billing practices by billing for services not rendered, misrepresenting the provider of service, providing insufficient documentation, waiving cost shares, and falsifying records. A statistically valid random sample audit determined a loss of $132,146. A case referral was developed and forwarded to DCIS for investigation.

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Drug Diversion through Identity Theft

One or more unknown individuals in the Northwest are utilizing the identities and TRICARE pharmacy benefits of several Active Duty Service Members, dependents, and retirees of the US Army, Air Force, and Navy to obtain controlled substances. This issue was brought to the attention of Express Scripts, Inc., (ESI) when the mother of a beneficiary reported to the EOB hotline that prescriptions filled under her son’s profile were not his. On the same day another beneficiary reported a prescription in her profile that did not belong to her and stated that her purse had been stolen. ESI ran the profile for the two doctors attributed to the denied prescriptions and received denials from the prescribing physicians. TRICARE loss is $27,403. Case was forwarded to DCIS for investigation.

Section 2.2 Contractor Roundtable

In 2002, TMA PI kicked off a Contractor Roundtable Session as a vehicle for addressing issues impacting all contractor Program Integrity (PI) units, emphasizing the importance of partnering and cooperation.

Since then, these roundtable sessions have served as an opportunity for our partners at the contractor PI units to inform our office of issues they may have regarding their contractual obligations in the area of anti-fraud provisions as well as provide each of us an opportunity to collaborate together to fight fraud in bold, innovative ways.

Open dialogue between our office and the contractor PI units has always been essential. Our roundtable discussions remain interactive, lively, and candid - all critical to staying vigilant and allowing us to remain at the forefront in addressing ways to combat fraud and abuse against TRICARE.

In 2010, TMA PI hosted several telephonic sessions. While not face-to-face, these roundtable sessions were devoted to discussions of a series of topics proposed in advance by the participants. These telephonic sessions served as valuable networking tools to address critical issues such as: audit clarifications involving 95 vs. 97 Current Procedural Terminology changes, review of Evaluation and Management coding guidelines, unauthorized Defense Eligibility Enrollment Reporting System (DEERS) enrollments, and performance assessment tool requirements.

Also key to these roundtable sessions were discussions on prevention and detection elements such as:

Maintaining an organizational management philosophy that demonstrates a commitment to Healthcare Fraud detection and prevention;

Updating detailed policies and procedures;

Ongoing training/education of all staff, providers, & beneficiaries on reporting fraud/abuse; and,

Emphasizing effective lines of communication.

Thanks to the collective efforts of all of the participants, these roundtable sessions were successful in sharing new insights into the challenges associated with fighting healthcare fraud and the necessity for having an arsenal of fraud fighting weapons at our disposal.

Section 2.3 Training, Education and Information Sharing

Recognizing the importance of sharing information with the investigative community, TMA PI (often a presenter) regularly attends task force meetings, information sharing meetings and quarterly healthcare fraud meetings. As a member of the NHCAA, TMA PI attends regular membership meetings and information sharing sessions. The information sharing sessions are attended by multiple public and private healthcare plans and focus on achieving maximum interaction regarding fraudulent and abusive schemes and using strategic collaboration to deter fraud, waste and abuse.

As a member of NHCAA, TMA PI also shares fraudulent billing schemes with other private and public health care plans. TMA PI works with DCIS, the FBI, state investigative agencies, and the numerous

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healthcare fraud task forces established throughout the United States. TMA PI routinely participates in the multi-agency task force information sharing meetings. These meetings bring together state, federal, and private insurance companies, as well as law enforcement, for the purposes of sharing like concerns regarding healthcare fraud and identifying potential issues that all programs might be susceptible to.

Additionally, fraud and abuse training highlighting the area of responsibilities and policies of the TMA PI was provided to the following groups:

TMA PI Medical Directors Briefing, Aurora, CO

Contractor Roundtable and Information Sharing Teleconference, Denver, CO

MHS Clinical Quality Forum Meetings - monthly teleconference, Falls Church, VA

TRICARE Communications and Customer Service Conference, New Orleans, LA

TRICARE/VA Information Sharing Meeting, Denver, CO

TMA Uniform Business Office Webinar Training (worldwide)

Joint Uniformed Services Personnel Action Committee Meeting, Millington, TN

Army National Guard Multi-Systems Technical Advisory Committee, St. Louis, MO

Marine Corps Site Security Manager Training Conference, Fredericksburg, VA

Department of Justice Pharmaceutical and Device Fraud Conference, Washington, DC

NHCAA Quarterly Information Sharing Meeting, Baltimore, MD

NHCAA National Annual Training Conference, Las Vegas, NV

NHCAA Monthly Audio Training Conference, Nationwide

Association of Certified Fraud Examiners Information Sharing Meeting, Denver, CO

Colorado Healthcare Fraud Federal/State Task Force Meetings, Denver, CO - monthly

Colorado SIU, Denver, CO - monthly

Iowa Healthcare Fraud Task Force Meeting - monthly teleconference

Oregon Healthcare Fraud Coordination Committee Meeting – quarterly teleconference

Medicare Part D Contractor Task Force Meeting, Miami, FL

Section 2.4 TRICARE’s Fraud and Abuse Website

In 2010, TMA PI’s website www.tricare.mil/fraud continued to be a popular stop for beneficiaries concerned about healthcare fraud. The current design allows beneficiaries to easily navigate from one topic to another and gather valuable fraud fighting information. The site also facilitates the reporting of fraudulent activities directly to the TMA PI Office and is a frequently used feature. The email address is: fraudline@tma.osd.mil. In calendar year 2010, TMA PI received 166 fraudline referrals.

For calendar year 2010, there have been over 71,000 visitors to the TRICARE Fraud and Abuse web page breaking last year’s count by more than 15,000. The most popular page continues to be the Sanction List with 22,887 visits, followed by Frequently Asked Questions (FAQ) and Reporting Fraud. TMA PI’s goals for the web page continue to be realized by enhancing the effectiveness of the Office, raising the public awareness of fraud and abuse, maximizing utilization of the contractor’s PI staff and providing new and inventive ways for TRICARE beneficiaries to report suspected fraud.

Looking towards the future, TMA PI has been holding discussions with the web team related to new design ideas. These changes, more than likely, will not be realized until sometime in 2012.

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Section 3.0 TMA Program Integrity Activity Report: Calendar Year 2005 – 2010

TMA PI had another milestone year. During calendar year 2010, TMA PI referred 392 new cases to investigative agencies, responded to 2,035 requests for assistance (1,183 related to eligibility fraud), and evaluated 340 new Qui Tam cases. A Qui Tam is a provision of the Federal Civil False Claims Act that allows private citizens, known as relators, to file lawsuits in the name of the U.S. Government alleging that private companies—usually their employer—have submitted fraudulent claims for government payment. The private whistleblowers who file these Qui Tam lawsuits receive a percentage of the settlement or judgment amount if the federal government intervenes and takes over as the plaintiff. This unique law facilitates the effective identification and prosecution of government procurement and program fraud and the recovery of revenue lost as a result of the fraud. Many states are also considering or have already added whistleblower legislation at the state level with a similar sharing of the recovery.

The following chart documents the results of TMA PI’s activities over the last six years. Launched in late 1999, OPERATION TRICARE Fraud Watch, with its increased emphasis on anti-fraud programs, had an impact on the early identification of fraud, thus minimizing dollar losses within the program. A 2007 NHCAA survey has estimated that for every $1 spent on anti-fraud activities, $7.60 is saved.

TMA PROGRAM INTEGRITY ACTIVITY REPORT: CALENDAR YEAR 2005 – 2010

DESCRIPTION 2005 2006 2007 2008 2009 2010

Qui Tams 219 204 163 175 235 340

Civil/criminal cases settled 33 27 28 20 32 42

DoD hotlines 1 2 1 2 2 0

Lead requests: written requests for consultation, case support, or assistance from DCIS, DOJ, and other law enforcement entities 770 713 781 1,171 1,450 2,035

Referrals to DCIS 269 320 294 399 277 327

Cases referred to MCIO 1 2 6 3 4 65

Balance billing and violations of participation agreements 27 28 14 18 14 11

Providers sanctioned (fiscal year 2009) 3,806 3,425 3,814 2,787 3,187 3,440

TRICARE dollars identified for recovery $5.9

million

$36.7

million

$18.3

million

$122.9

million

$40.9

million

$96.6

Million

Section 3.1 Fraud Judgments

TRICARE received judgments totaling $96.6 million for calendar year 2010. The settlement with Glaxo SmithKline highlighted the year, returning just over $51 million benefit dollars back to the TRICARE program. In addition to court ordered recoveries, $8 million was identified by TMA PI and the Managed Care Support Contractors (MCSCs) PI units for administrative recoupment. These are benefit dollars returned to the program. Also, please see Section 4.5 of this report for additional administrative recoveries related to ineligible beneficiaries. Section 3.2 Voluntary Disclosures

In its continuing efforts to protect the integrity of its program from provider fraud and abuse, TRICARE continues to encourage providers to “police” themselves by conducting voluntary self-evaluations and making voluntary disclosures. By participating in voluntary disclosure programs, providers hope to avoid

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being subjected to criminal penalties and civil actions. While not protected from civil or criminal action under the False Claims Act (FCA), the disclosure of fraud or self-reporting of wrongdoing by a provider could be a mitigating factor in recommendations to prosecuting agencies. Self-reporting offers providers the opportunity to minimize the potential cost and disruption of a full scale audit and investigation, and to negotiate a fair monetary settlement. Because a provider’s disclosure can involve anything from a simple error to outright fraud, full disclosure and cooperation generally benefits the individual or company.

As a result of the voluntary compliance and self-audits by medical providers under the current program, TRICARE receives voluntary disclosure of overpayments. In 2010, TRICARE received one voluntary disclosure from a medical provider in which TRICARE was reimbursed a total of $1,357. As previously stated, the self-policing of providers saves TRICARE expenditures in time, money, and resources in attempting to recoup dollars through more expensive investigative and litigation processes. In addition, the voluntary return of funds ensures an open-line of communication between all parties concerned. Many times these voluntary disclosures and returns of erroneous payments involve multiple agencies, e.g., local, state, and federal government entities) and the providers working in a cooperative effort for the benefit of all concerned.

Section 3.3 Provider Sanctions

A function of TMA PI is to track providers sanctioned by DHHS OIG. An agreement between TMA PI and DHHS OIG enables sharing of information between our two agencies from its List of Excluded Individuals/Entities (LEIE) through individual and entity names and their provider taxpayer identification numbers. As part of the agreement, DHHS OIG provides TMA PI with updates from its LEIE on a monthly basis which lists providers who have been excluded, terminated or suspended, as well as a list of providers who have been reinstated. This ensures that no payment is made by TRICARE for any items or services furnished, ordered or prescribed by an excluded individual or entity.

Additionally, exclusion, termination or suspension identified in the DHHS OIG LEIE extends to any payment that would be made for anything that an excluded individual or entity furnishes, orders, or prescribes. This payment prohibition applies to the excluded person, anyone who employs or contracts with the excluded person, any hospital or other provider where the excluded person provides services, and anyone else. The exclusion also applies regardless of who submits the claims and applies to all administrative and management services furnished by the excluded person.

This list is used by the TRICARE contractors to flag providers and ensure that no payments are made for services prescribed or provided by sanctioned providers. TMA PI also provides the sanction list to the Surgeons General (SGs), TROs, USFHP, Pharmacy Operation Center (POC), TRICARE’s National Quality Monitoring Contract (NQMC), DCIS, the Civilian Health and Medical Program of the Veterans Administration (CHAMPVA), the TRICARE dental and pharmacy contractors and the Defense Logistics Agency (DLA). DHHS OIG has taken sanction action against 3,440 providers in fiscal year 2010. The basis for exclusion includes convictions for program-related fraud, patient abuse, and state licensing board actions.

TMA has exclusion and suspension authority based on Title 32, Code of Federal Regulations (CFR), 199.9. TMA PI works with the TMA Office of General Counsel to recommend sanctions when necessary. TRICARE’s sanction list can be found at www.tricare.mil/fraud by clicking on the “Sanctions” link on the left hand side under “Fraud and Abuse.” Searches can be done by provider or facility name. The user can also access the DHHS OIG Sanction List by clinking on “Links” on the left hand side under “Fraud and Abuse” and then clicking on “HHS-IG Sanction Report.” As stated above, the DHHS OIG website has an online searchable database which allows searches by provider or facility name.

Section 4.0 Fraud Cases: Year in Review

This section reviews a sample of significant fraud cases from calendar year 2010.

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Section 4.1 Snapshot of Fraud Settlements/Prosecutions Involving TRICARE

Case Study: U.S. v. Learning Links Educational Network Services Center, Inc. - Conviction for Aiding and Abetting Healthcare Fraud

Ms. Sandra Elliot, the owner of four Learning Links clinics throughout the North Carolina area, provided early intervention services for children with special needs. Investigators learned that the Medicaid and TRICARE identification numbers associated with 623 special needs children were abused as part of a scheme to submit fraudulent claims. Ms. Elliott was accused of billing for services that were not rendered, employing unlicensed personnel to provide various billed services to children, and misrepresenting the provider of services. On September 10, 2010, Ms. Elliott was sentenced to the maximum prison term of 10 years followed by three years’ supervised release after pleading guilty on January 15, 2010, to aiding and abetting healthcare fraud. The Court ordered full restitution to TRICARE and Medicaid in the amount of $1,885,196 with $1,172,648 attributed to the TRICARE Program. Additionally, law enforcement seized in excess of $345,000 in assets which have been forfeited to the United States.

Case Study: U.S. v. David W. Webb, M.D. - Conviction, Florida Provider Prescribing Schedule II through IV Medications without Medical Necessity

On January 28, 2010, Dr. David Willis Webb, the owner and operator of Destin Primary Care Clinic and Doctors on Call, was sentenced to life in prison as a result of his conviction last September for 130 of the 131 charges filed against him by federal agents for distribution of and conspiracy to distribute controlled substances. Dr. Webb was under federal scrutiny for several years when the charges were filed against him in 2009. Between 2003 and 2005, three of his patients died using drugs he had prescribed; two of the deaths were due to unintentional overdoses. Dr. Webb’s medical license was suspended for 30 days in 2005 after he prescribed drugs over the Internet to patients he had never seen. However, he continued to see patients and prescribe drugs during his suspension. When local pharmacies caught on and stopped filling the prescriptions, he used another doctor’s DEA registration number to continue prescribing drugs. Federal agents seized 14,000 patient records from Dr. Webb in the summer of 2006, but he continued to prescribe large doses of controlled substances such as Oxycontin, Percocet, and Vicodin to his patients. Another of Dr. Webb’s patients died of an overdose in 2007. In all, Dr. Webb was convicted of 36 counts of healthcare fraud, 90 counts of illegal distribution of controlled substances, two counts of conspiracy to commit those offenses, and two counts of identity theft. The jury determined that Webb was responsible for the deaths of three of his patients (none were TRICARE beneficiaries) that resulted from his commission of healthcare fraud, conspiracy, and distribution of controlled substances. TMA PI assisted in this case from its inception providing claims data and court testimony.

Case Study: U.S. v. GlaxoSmithKline - Manufacturing Deficiencies in Production of Pharmaceuticals in Puerto Rico

On October 26, 2010, SB Pharmco Puerto Rico, Inc., a subsidiary of GlaxoSmithKline, PLC agreed to plead guilty to a criminal felony and pay $750 million for releasing into interstate commerce certain adulterated drugs made at GlaxoSmithKline’s now closed manufacturing facility in Cidra, Puerto Rico in violation of the Food, Drug, and Cosmetic Act (FDCA). Four drugs manufactured by SB Pharmco were deemed adulterated after they did not conform to U.S. safety requirements and did not meet the quality and purity characteristics which they were represented to possess. The identified drugs, manufactured at the plant between the years 2001 and 2005, were Kytril, Bactroban, Paxil CR, and Avandamet. The criminal charges alleged that SB Pharmco’s manufacturing operations failed to ensure that Kytril and Bactroban finished products were free of contamination from microorganisms, Avandamet tablets did not always contain the Food and Drug Administration (FDA) - approved mix of active ingredients, and its manufacturing process caused Paxil CR two-layer tablets to split,

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causing the potential distribution of tablets that did not have any therapeutic effect and tablets that did not contain any controlled release mechanism. The Government also alleged that SB Pharmco’s Cidra facility suffered from longstanding problems of product mix-ups, which caused tablets of one drug type and strength to be commingled with tablets of another drug type and/or strength in the same bottle. Under the plea agreement, the company agreed to pay a criminal fine of $150 million and pay an additional $600 million to the federal government and the states to resolve claims under the FCA. This is the fourth largest amount ever paid by a pharmaceutical company to the United States. TRICARE will receive $51,500,000 from the civil settlement.

Case Study: U.S. v. Forest Pharmaceuticals, Inc. - Kickbacks and Off-Label Marketing of Levothroid, Celexa, and Lexapro

On September 15, 2010, Forest Pharmaceuticals, Inc., a subsidiary of New York City-based Forest Laboratories, Inc, agreed to plead guilty to criminal charges and pay the government $313,000,000 to resolve allegations related to its off-label marketing of the pharmaceutical drugs Levothroid, Celexa, and Lexapro. The Government alleged that Forest Pharmaceuticals began distributing Levothroid, a drug used to treat thyroid conditions, without first obtaining FDA approval. In addition, Forest Pharmaceuticals submitted inaccurate information to the FDA as part of its New Drug Application (NDA) submission for Levothroid and obstructed an FDA regulatory inspection concerning the data submitted in the NDA. The criminal charges also alleged, despite a limited approval only for adult depression, Forest Pharmaceuticals promoted Celexa and Lexapro for use in treating children and adolescents suffering from depression and used illegal kickbacks to induce physicians and others to prescribe Celexa and Lexapro. The kickbacks included expensive meals, lavish entertainment, and cash payments disguised as grants or consulting fees.

As a result of the investigation, Forest Pharmaceuticals agreed to plead guilty to one criminal felony count of obstructing justice, one criminal misdemeanor count of distributing an unapproved drug in interstate commerce, and one criminal misdemeanor count of distributing a misbranded drug in interstate commerce. Under the plea agreement, Forest Pharmaceuticals was ordered to pay a criminal fine of $150 million, forfeit an additional $14 million in assets, pay over $149 million to resolve allegations under the FCA, and enter into a five-year Corporate Integrity Agreement with DHHS requiring Forest to implement a compliance program that addresses promotional activities and regulatory functions. TRICARE recovered $8,057,297 from the civil settlement.

Case Study: U.S. v. Dr. Robert J. Tomlinson – Conviction, Arkansas Orthopedic Surgeon Billing for Services Not Rendered

On August 20, 2010, Dr. Robert J. Tomlinson received a ten month sentence in U. S. District Court in Fort Smith following a guilty plea on April 2, 2010, for healthcare fraud. Dr. Tomlinson, an orthopedic surgeon with practices located in Fayetteville and Rogers, Arkansas, specialized in knee and shoulder surgeries. According to pleadings in the case, Dr. Tomlinson would conduct actual surgeries on patients and bill federal insurance programs along with private insurance companies for procedures and services he did not perform in order to inflate his payments. The case originated as a whistle-blower complaint in which TMA PI provided investigative support to the U. S. Department of Justice. Dr. Tomlinson will serve five months in federal prison then five months in home detention with electronic monitoring, followed by three years of supervised release. TRICARE recovered $10,404 from the criminal case and an additional $91,900 from the civil settlement. As a result of the conviction, Dr. Tomlinson will be excluded from participation in Medicare, Medicaid, and other federal and state health care programs, and he will surrender his medical license. Total TRICARE recovery is $102,304.

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Case Study: U.S. v. Sierra Military Health Services – Double Payment Profit Scheme

On January 26, 2010, following a seven year investigation, Sierra Military Health Services, LLC agreed to pay $2.2 million to settle allegations that it over-billed TRICARE and filed false claims from 1997 through 2004. In 1997, Sierra entered into a contract with TMA to provide administrative and claims services for TRICARE beneficiaries located in Region 1, which at the time included much of the East Coast. Pursuant to the contract, Sierra received an administrative fee to pay certain costs incurred to administer the TRICARE contract, including payments to subcontractors to assist with the administration of the contract. One such Sierra subcontractor, Post Acute Care, LLC (PAC), entered into an agreement with Sierra to circumvent this requirement. According to the agreement, PAC billed TRICARE for its costs by including its fees in health benefits claims that PAC submitted on behalf of its long-term care and rehabilitation facilities that rendered services to TRICARE beneficiaries. The U.S. alleged that these claims were false and that Sierra caused the submission of these false claims knowing that PAC should have been paid from Sierra’s administrative fees under the contract rather than from TRICARE health care claims funds. This is the first case of its type in which a TRICARE MCSC used benefit dollars to pay for its case management rather than using its own administrative dollars. As part of the settlement, Sierra, which was bought by UnitedHealth Group in 2007 and is no longer in operation, did not admit to violating the FCA. TRICARE’s portion of the settlement is $1,100,000.

Section 4.2 Fraud and Abuse Issues Overseas

On September 1, 2010, International SOS (ISOS) was selected by TMA as the new managed care support contractor for the TRICARE Overseas Program. Prior to this date, Humana Military Health Services (HMHS) was the TRICARE contractor for the overseas arena. In 2010, TMA PI, with support from HMHS and ISOS as well as their subcontractor WPS, continued to work diligently in utilizing all available administrative controls in an ongoing effort to curtail and prevent health care fraud and abuse throughout the world. Similar to the administrative controls utilized within the continental United States, ongoing efforts to curtail and prevent fraud and abuse in the overseas arena have been implemented as well. These administrative controls include but are not limited to:

(a) Prepayment Review. When unusual billing practices are identified by our contractor, a provider may be placed on prepayment review and their billings are subjected to closer examination. The review process may require the provider to submit additional information such as medical documentation associated with the claim. Prepayment review is one of the most effective anti-fraud controls available. This control helps ensure appropriate expenditure of government dollars, avoiding the “pay and chase problem” of getting dollars back after they are paid. A number of overseas providers were placed on prepayment review in 2010. This resulted in disallowed services that otherwise would have been paid had these providers not been placed on prepayment review. In addition to prepayment review of providers, some beneficiaries residing in overseas locations have been placed on prepayment review as well.

(b) National Drug Coding Requirements. Drug products in the United States are universally identified

and reported using a unique, three-segment number called the National Drug Code (NDC). Generally, overseas providers are not required to submit NDCs for TRICARE pharmacy claims. However, pharmacy claims from overseas providers in the Philippines, Costa Rica and Panama are reviewed annually to identify those providers submitting a total number of pharmacy claims that exceed $3,000 (during the previous twelve months). Providers exceeding the $3,000 cap are notified that they will be required to submit NDCs with their pharmacy claims and will be subject to cost control measures outlined in the TRICARE Reimbursement Manual, Chapter 1, Section 15. For calendar year 2010, 488 providers were required to comply with this administrative cost control measure.

(c) Recoupment Actions. On occasion, an erroneous payment may be issued resulting in an overpayment. Overpayments occur for a variety of reasons including: an erroneous calculation of

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the allowable charge, an erroneous coding of a procedure, an erroneous calculation of the cost-share or deductible, a payment being issued that is actually a duplicate payment, a payment made for a patient that was not eligible for benefits at the time of service, a payment made for services rendered by an unauthorized provider, etc. The general rule for determining liability for overpayments is that the person who received the erroneous payment is responsible for the refund.

(d) Fee Schedule. Generally in the overseas arena, payments for claims are paid as billed based on

the reasonable and customary rates for the country and locality where services were provided. To curtail excessive charges, the TRICARE Overseas Program has implemented country specific CHAMPUS Maximum Allowable Charge (CMAC) fee schedules for the Philippines and Panama. The fee schedules control costs through price caps and curb fraud and abuse committed by the overbilling of services. This payment system is based on the U.S. National CMAC, adjusted for the country, using the country-specific index factor to account for differences in the cost of living and currency exchange rate. The country specific CMAC better reflects the actual medical costs for services. Implementation of the fee schedule has not slowed requests from providers seeking to become authorized as TRICARE providers.

(e) Education Letters. Overseas beneficiaries and providers are mailed education letters when

inappropriate behavior is identified that does not initially raise to the level of warranting a referral to an investigative agency (for example, an education letter advising providers that waiving deductibles or cost-shares and/or offering a financial inducement to encourage the receipt of health care services is inappropriate and could constitute fraud). If the inappropriate behavior continues after educational efforts are made, the mere fact that education was provided strengthens a case for referral to an investigative agency.

During this calendar year, 17 overseas cases were referred to TMA PI for investigation. Collectively these cases represent $5,304,060 of TRICARE dollar exposure. Examples of cases that were developed by TMA PI and referred to DCIS are illustrated below:

Case Study: Beneficiary Conviction for Fabricating a Claim – Monrovia, Liberia

TMA PI received a referral from Health Net Federal Services (HNFS) alleging that the dependant spouse of a mobilized Army National Guard enlisted member submitted a false claim for services he never received. The dependant spouse claimed he was hospitalized for malaria while traveling in Monrovia, Liberia. He submitted a claim for this hospitalization with a billed amount of $19,310 and provided an invoice stamped paid and a type-written letter signed by a physician in support of his claim. However, research conducted by TMA PI revealed that the physician died six months prior to the alleged hospitalization. TMA PI contacted the clinic where the hospitalization was purported to have occurred. The clinic denied ever having this beneficiary as a patient, confirmed the physician was deceased at the time of the purported hospitalization, and advised that the billed amount was much higher than what they would have billed. The dependant spouse was asked by the contractor to provide additional proof of payment and he responded by providing a photocopied check. The bank verified that the photocopy was not of an actual bank-issued check. The referral was forwarded to DCIS and pursued by the Maryland State’s Attorney Office in Prince George’s County. The dependant spouse was interviewed by DCIS and confessed to the false claim. On July 21, 2010, he entered a guilty plea to one count of theft. He was sentenced to 5 years in prison with 5 years suspended sentence and supervised probation for 3 years. He was also ordered to pay restitution of $18,310 and total criminal fines and costs of $257.50. The court reserved the right to extend or shorten the supervised probation depending on the payment of the restitution.

Case Study: General Practice Group - Philippines

This case referral alleged that a general practice group located in the Republic of the Philippines engaged in fraudulent and abusive practices by: billing for services not rendered, falsifying their medical records, misrepresenting their patients’ diagnoses, over utilizing drugs and other

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services, misrepresenting the actual provider of services, reciprocal billing, providing care of inferior quality, failing to maintain adequate/sufficient documentation, billing for duplicate services, billing in excess of customary or reasonable charges, upcoding, unbundling, and waiving cost shares. A review of the claims submitted, an audit of these claims, beneficiary surveys, and beneficiary complaints supported these allegations and the provider was placed on prepayment review. The estimated harm to the TRICARE program is $1,680,384.

Section 4.3 Balance Billing and Violation of Participation Agreements

In addition to handling the more familiar types of healthcare fraud against the program, TMA PI is also dedicated to addressing fraud issues involving billing in excess of 115% (balance billing) and violation of the participation agreement. TMA PI is responsible for ensuring that non-participating providers comply with Public Law 102-396, Section 9011, passed by Congress as part of the DoD Appropriations Act for 1993. The text of this Public Law limits the billed charges to no more than 115% of the allowable rate. This law specifies that non-participating providers are allowed to collect a maximum of 15% over the CMAC from a TRICARE beneficiary. The term “balance billing” has been derived from this limitation.

TMA PI is also responsible for ensuring participating providers do not collect more than the CMAC when participating on a claim. Participating providers (those marking “yes” to accept assignment on the claim form) are prohibited from collecting from beneficiaries any amount in excess of the CMAC. This is commonly referred to as a violation of the participation agreement.

In either of the above scenarios, if providers attempt to collect monies in excess of what they are entitled to collect, beneficiaries are instructed to notify the MCSCs. During the past several years, the contractors successfully resolved a majority of the billing disputes. This success is primarily due to strong educational letters issued by the contractors. After two unsuccessful attempts by the contractor to resolve a case, the case is forwarded to TMA PI. TMA PI has been successful in resolving balance billing, violation of participation, hold harmless process, waiver of liability, and disputed Diagnosis Related Group (DRG) cases. This “safety net” established for military families has generated many “thank you” letters each year.

Occasionally, providers file a summons and issue a complaint. Once TMA PI is notified, immediate action is taken to educate the provider when appropriate. Despite the fact that the beneficiaries face court action, TMA PI has been quite successful in preventing adverse actions being taken by the providers. Between January 1, 2010, and December 31, 2010, TRICARE received four violation of participation agreement cases and seven balance billing cases. TMA PI effectively intervened and prevented the erroneous payment of $2,034.87 to providers by families. This kind of stewardship on the part of TMA makes a positive difference to the budgets of affected families. An example of one such intervention is illustrated below:

Balance Billing Vignette: Precision Rx Specialty Solution Billing in Excess of 115% Billing Limitation

In August 2010, a retired sponsor reported that a mail order pharmacy billed him in excess of the 115% billing limitation. The sponsor had primary pharmacy coverage through his employment. The non-network pharmacy declined to file a claim with TRICARE, requiring the sponsor to pay the cost share remaining after payment by his primary coverage. After paying the cost share the sponsor filed a TRICARE claim. The billing limitation for TRICARE is the same as the limiting charge for Medicare for nonparticipating providers and suppliers. Because the cost share he was required to pay exceeded the 115% billing limitation, the sponsor contacted the TRICARE contractor for the North Region, HNFS for assistance. After HNFS educated the provider concerning the 115% limiting charge, the provider refunded all monies billed in violation of the 115% Billing Limitation to the sponsor.

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Section 4.4 Quality of Care Cases

Rising health care costs continue to challenge the industry’s ability to provide affordable, quality health care. Unknowingly paying fraudulent services billed by unscrupulous providers contributes to the escalation factor. Health care fraud adversely impacts quality of care and can cause patient harm. TMA PI continues to treat cases of aberrant billings involving possible patient harm on a high priority basis. The case study below shows our commitment to quality care.

Case Study: Melbourne Internal Medicine Associates P.A., Melbourne, Florida - Billing False and Fraudulent Claims for Medical Services

In March 2010, Dr. Todd J. Scarbrough and Melbourne Internal Medicine Associates, P.A. agreed to a consent judgment of $12 million to settle claims that it violated the FCA by submitting false claims to Medicare and TRICARE. The investigation revealed that claims were billed for radiation oncology services that were not supervised by physicians, for duplicate and unnecessary services and for services not rendered. TRICARE recovered $464,784.

Section 4.5 Eligibility Fraud

TMA PI routinely handles eligibility fraud cases. In 2010, TMA PI processed 2,091 names for potential eligibility fraud and abuse related to unreported eligibility, a late-reported eligibility change, or an unauthorized eligibility enrollment. TMA PI identified a total of $8,737,362 in unauthorized DoD health care services received by ineligible beneficiaries - $5,975,682 in TRICARE services and $2,759,589 in direct care services at a MTF.

Each branch of the Uniformed Services is responsible for determining eligibility for its members, their dependants and its retirees. The Defense Manpower Data Center (DMDC) maintains eligibility information in DEERS. TRICARE’s claim processors use DEERS to determine whether a beneficiary is eligible for benefits on the dates services were received.

A TRICARE beneficiary, parent, or legal representative, when appropriate, must provide the necessary evidence to establish and update dependent eligibility in DEERS. Sponsors are responsible for reporting eligibility changes within 30 days to the appropriate Uniformed Service. Failure to timely report can result in the sponsor being held financially liable for the cost of any health care services that are received through the MTFs or TRICARE. Fraudulent use of DoD health care entitlements is a violation of Title 18 U.S.C. and could subject the sponsor or beneficiary to a fine, imprisonment or both.

Eligibility updates in DEERS can be initiated by visiting an identification card issuing facility or by contacting the DMDC Support Office Telephone Center at 1-800-538-9552. To find the nearest identification card issuing facility, beneficiaries may visit www.dmdc.osd.mil/rsl.

Examples of eligibility changes include birth, death, marriage, adoption, divorce, proof of genetic relationship, sponsor discharge from the military, and changes in the secondary dependency of wards and dependant parents. If a state court mandates health care services be provided as a result of a divorce or custody change, that does not mean the individual is eligible for TRICARE or care in the MTFs. State courts cannot determine or direct eligibility for TRICARE. Eligibility is established by federal statute. Divorces must be reported by sponsors and entered into DEERS by the military personnel office. If a sponsor is held financially responsible for an ex-spouse’s health care costs in a divorce, financial responsibility cannot be passed to TRICARE, unless former spouse eligibility requirements are met.

In 2010, TMA PI in coordination with DMDC and the Uniformed Services initiated a proactive administrative review of over 4,500 service member names placed on active duty appellate leave prior to discharge under Other Than Honorable or Bad Conduct conditions. The review showed that after the service members appellate leave periods were terminated and they were discharged, over 1,000 of these service members and their dependents were erroneously allowed to remain in DEERS as eligible due to administrative error. TMA PI identified 515 of these former service members and their dependents as

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accessing and using over $1.9 million in DoD health care after discharge because of this administrative error. Recoupment actions were initiated for these appellate leave cases.

Examples of eligibility fraud case scenarios are highlighted below:

Case Study: Eligibility Fraud by Former Spouse

TMA PI received a case referral regarding a former spouse in Overland Park, Kansas, who divorced an active duty Marine Corps sponsor in January 2007. Through administrative oversight, the sponsor record was not updated to remove the former spouse from eligibility in DEERS. Knowing she was not, eligible the former spouse continued to use TRICARE entitlements totaling $97,711 in order to sustain a substance abuse disorder. The DCIS Kansas City Resident Agency accepted the case for investigation. Subsequently, the former spouse entered into a plea agreement with the USAO, District of Kansas in which she pled guilty to one count of healthcare fraud. The former spouse was sentenced to five years probation, ordered to pay restitution for the money lost to the government, and ordered to enroll in an approved program for substance abuse treatment.

Case Study: Eligibility Abuse by Unauthorized Retired Sponsor

TMA PI received a case referral regarding a former Army sponsor in Hemphill, Texas, who was discharged in 1969 after one year of military service. The case alleged an informant reported the sponsor was falsely enrolled in DEERS in 1991 as a retired sponsor. The former sponsor and his family received $364,992 in DoD healthcare after enrollment in DEERS - $76,052 TRICARE and $288,940 in MTF care. The DCIS Houston Resident Agency accepted the case for investigation. The former sponsor professed he was medically retired in 1969 but could not produce record of retirement, although DCIS did substantiate the sponsor was 100% disabled for post traumatic stress disorder. The USAO, Eastern District of Texas declined to seek prosecution. Recoupment actions were taken to recover costs.

Section 4.6 Identity Theft

According to the Federal Trade Commission, more than 250,000 Americans per year have been victims of medical identity theft. There are concerns within the medical and fraud fighting communities regarding the emergence of the electronic medical record and the possibility of many more victims. Medical identity theft is a criminal act that occurs when a person uses someone else’s personal information, such as name and insurance card number, without that individual’s knowledge to obtain or make false claims for medical services or goods. Perpetrators of medical identity theft harm their victims by causing false entries to be placed into their victims’ medical records at hospitals, doctors' offices and pharmacies. These false entries made to victims’ medical files and histories can remain on record for years without discovery or correction. As a result of false medical histories, victims may receive inappropriate and potentially harmful medical treatment. Victims may even fail screening exams for employment due to the presence of diseases and other conditions in their health records that are not theirs but rather belong to the individuals who stole the identities. The fraudulent use of their identity may also result in their health insurance benefits being exhausted.

Because medical identity theft has received scant attention compared to other forms of identity crimes, it can be the most difficult form of identity theft to prevent or detect. While there is a significant segment of the consumer protection industry that has been developed to assist in protecting financial services’ customer records such as credit reports, credit card transaction records, bank and investment account data, there are no specific services available to monitor and safeguard your medical records.

Identity theft may be committed by individuals, health care providers or organized criminal enterprises. There are cases where family members and acquaintances have assumed the identity of an individual to take advantage of the victim’s health insurance benefits. There are also cases where workers in doctors’ offices, clinics, and hospitals have copied patient information to use it themselves or provide that information to organized criminal syndicates. Organized criminal groups typically use the stolen medical

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information to set up “phantom” or fake medical clinics, submit bogus claims, collect payments for a few months and then disappear before the insurance carriers realize they have been scammed.

An effective anti-fraud control measure utilized by TRICARE to curtail this type of fraud is providing beneficiaries with an EOB. The EOB provides beneficiaries the opportunity to check the dates of service, the type of service, and the name of the provider who rendered the service and submitted the claim. When a beneficiary receives and reviews an EOB concerning a claim in their name, it affords them the opportunity to alert TRICARE of the potential of a fraudulent claim. When TRICARE is alerted of medical identity theft, the affected beneficiary’s file is flagged so the beneficiary can be contacted to verify the authenticity of future claims. Past claims are also reviewed to verify their validity. Furthermore, beneficiaries are advised to take steps to correct their medical records.

The following are examples of medical identity theft experienced by the TRICARE program:

Medical Identity Theft Vignette 1

An active duty service member reported an identity theft to the ESI fraud tip line in March, 2010. This beneficiary denied having prescriptions filled at five pharmacies in the Las Vegas area from September 9, 2009, through March 25, 2010. These prescriptions were provided by two separate doctors. ESI sent both providers prescription verification letters. One provider responded that he did not write the prescriptions in question and he had never seen a patient by the name indicated. The second provider did not respond to ESI’s request. ESI was not able to determine who was misrepresenting themselves as the active duty member in order to obtain these prescriptions. The active duty member did inform ESI that they had lost their wallet with their military ID in San Diego, California. The actual loss to TRICARE was determined to be $3,283.

Medical Identity Theft Vignette 2

DCIS initiated a case against an individual in Austin, Texas who stole the identity of a retired Army sponsor residing in Buffalo, New York. The individual managed to acquire the retirement discharge papers of the sponsor in order to divert the sponsor’s retirement pay to Austin and receive unauthorized VA benefits, Army Emergency Relief funds, and TRICARE benefits totaling $23,443 for himself and a spouse. The individual is currently incarcerated for two years by the State of Texas for falsely reporting his date of birth and social security number as that of the retired Army sponsor. He will be released from Texas prison in August 2011, upon which time the USAO, Western District of Texas will seek Federal charges against him.

Section 4.7 Preventing Fraud and Abuse at Military Treatment Facilities (MTFs)

It is DoD policy that MTFs will exercise responsibility in establishing and implementing anti-fraud programs designed to ensure appropriate expenditure of financial resources in the delivery of health care to entitled beneficiaries. Key to this is the identification of possible erroneous and/or fraudulent billings which require investigation. DoD Instruction (DoDI) 5505.12, dated October 19, 2006, implemented policy, responsibilities, and prescribed procedures for preventing, detecting, reporting, and evaluating fraud and abuse by contracted civilian health care providers at MTFs.

In accordance with DoDI 5505.12, each MTF will develop overall policy, establish procedures, and identify organizational units for preventing, detecting, developing, reporting, and evaluating suspected fraud and/or abuse cases. Those cases identified as alleged fraud and/or abuse shall be forwarded to the Director of TMA PI. TMA PI provides oversight support to monitor and evaluate suspected fraud cases identified by MTFs and forwards cases deemed questionable to investigative services for further action and potential litigation.

TMA PI provides anti-fraud training and information for designated MTF personnel as they request it. Additionally, TMA PI provides MTF representatives training at its biennial Anti-Fraud Conference. TMA PI

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also assists, as requested, in the development of anti-fraud programs at the MTFs, educates personnel in the detection of potential fraud or abuse situations, and instructs individuals in the proper procedures to identify and report allegations.

During 2010, TMA PI presented information and guidance on the MTF Anti-Fraud Program DoDI 5505.12 via the TMA Uniform Business Office Webinar worldwide training event. TMA PI reached out and provided education and support to both MTF’s and DMDC. In addition, TMA PI also collaborated with designated MTF liaisons to proactively combat fraud, waste and abuse.

Section 5.0 Contractor Oversight and Compliance

During 2010, TMA PI’s small team of Subject Matter Experts (SME) continued to perform complex oversight duties such as: performing one major focused onsite inspection; providing technical consultations on topics that ran the gamut from performing appropriate medical audits to how to perform statistically valid random samplings; and educating contractors in the best practices for developing cases.

Throughout the year, TMA PI strengthened the environment of compliance and accountability by continually reinforcing our anti-fraud strategy: ensuring contractor PI staff met all contractual obligations (in essence, all performance requirements); met quality assurance standards for case referrals and “delivery” of products; and complied with the terms and conditions of the contract. TMA PI also applied various methods to assess contractor performance, detected trends and problems as they arose and corrected them early.

This year has seen many changes and enhancements in the contract oversight function of TMA PI. With the anticipated roll-out of the T3 contracts and the addition of two new contracts (Overseas and TRICARE Fraud and Abuse Pharmacy Support Contract), contract oversight has become an even greater focus of TMA PI. This expanded focus on contract requirements and adherence called for a new model for contractor onsite evaluations that tied in directly with contract requirements.

Beginning in May 2010, the contract oversight branch of TMA PI began the first of many regular onsite visits to TRICARE MCSC’s. The goal is to review onsite operations of each contractor at a minimum of every 18 months. This puts TMA PI on track to visit four contractors a year. The onsite evaluation of contractor PI operations enhances the purpose of contractor oversight by allowing the team of SME’s to evaluate contract compliance directly at the contractor level. The SME evaluates the contractor in five areas that are taken directly from the TRICARE Operations Manual (TOM) requirements. The SME then has the opportunity to observe areas such as corporate strategy and commitment, anti-fraud software, case development techniques, internal fraud and abuse training and medical review in a real-time setting. Additionally, it allows the SME to interact directly with the contractor PI staff to improve and enhance techniques and processes used to detect and prevent fraud and abuse.

In addition to the increased focus on onsite evaluations and observations, the trend in the field of healthcare fraud and abuse detection and prevention is partnerships. Recently, DOJ and DHHS expanded their partnership of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) to several cities beyond Miami and Los Angeles. Such partnerships have led to increased emphasis on the problem of healthcare fraud as well as increased prosecution and deterrence in the targeted areas. Learning from the lessons developed through our participation in HEAT, TMA PI has encouraged increased partnering and information sharing between contractors. This has resulted in stronger cases being referred for prosecution.

Overall, TMA PI continues to seek new and creative ways to engage in partnerships with our contractors and encourage information sharing between our contractors to enhance our fraud fighting capabilities.

Section 5.1 Case Referrals from Contractors

In calendar year 1999, prior to TMA PI receiving the responsibility to oversee contractor PI functions, there were only 11 fraud referrals from all the MCSCs. In 2000, the referrals doubled. For calendar year 2010, TRICARE contractors submitted 111 fraud and abuse case referrals.

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CASE REFERRALS FROM CONTRACTORS, CALENDAR YEAR 2007 - 2010

CONTRACTORS 2007 2008 2009 2010

Health Net Federal Services, North 10 14 19 21

TriWest Healthcare Alliance, West 38 32 27 23

Humana Military Healthcare Services, South 29 15 23 28

Humana Military Healthcare Services, Overseas 18 10 10 10

International SOS, Overseas (ISOS)** N/A N/A N/A 7

WPS (TDEFIC*), National 78 39 2 3

Express Scripts, Inc, National 6 5 11 18

UCCI, National 1 4 1 0

Maximus, National 5 5 8 1

TOTALS: 185 124 101 111

*NOTE: TRICARE Dual Eligibility Fiscal Intermediary Contract (TDEFIC). **NOTE: The ISOS contract started work 9/1/2010.

Section 5.2 Prepayment Review

Prepayment review is one of the strategies used by TMA PI contractors to prevent payment for questionable billing practices or fraudulent services. Providers and beneficiaries may be placed on prepayment review as part of the administrative remedy options available to TRICARE. The following chart shows a breakout of each contractor, the number of providers and beneficiaries on prepayment review, and the dollars saved by prepayment review for the period January 1, 2010, through December 31, 2010.

PROVIDER AND BENEFICIARY PREPAYMENT REVIEW REPORT, CALENDAR YEAR 2010

CONTRACTORS PROVIDERS BENEFICIARIES DOLLARS SAVED

Health Net Federal Services, North 79 89 $417,272

TriWest Healthcare Alliance, West 195 38 $1,031,465

Humana Military Healthcare Services, South 309 405 $7,823,039

Humana Military Healthcare Services, Overseas 2,928 3,036 $11,497,249

WPS (TDEFIC), National 358 11 $1,060,340

Express Scripts, Inc, National 0 0 $0.00

UCCI, National 61 17 $176,334

TOTALS: 6,868 6,543 $23,085,286

Section 6.0 Purchased Care Data

TRICARE’s purchased care data includes all processed claims related data. This represents the health care services delivered to MHS beneficiaries via a global network of civilian health professionals,

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hospitals, pharmacies and suppliers. The data from the purchased care system is used for analysis by TMA to account for the expenditure of government funds, to develop trends and budget projections, to report to Congress and the Executive Branch, and to identify from a procedure code level who received care and who provided that care for the purpose of detecting patterns of possible fraud. The TRICARE Encounter Data (TED) record is the current data set of information required for all purchased care and is submitted electronically to TMA by the MCSCs. The TED System serves as the core collection point of purchased care and handles more than 1 million records a day. This accurate and timely data is available to TMA PI for data analysis to detect patterns of fraudulent or abusive billing by commercial health providers.

Section 6.1 Purchased Care Data Warehouse (PCDW)

The PCDW contains TED (current heath care record format) and Health Care Service Record data (HCSR legacy health care record format). This single repository contains ten years of data that is readily available to users. Combining all data into a single repository allows for more complex inquiries to identify patterns of aberrant billing.

Section 6.2 Purchased Care Detail Information System (PCDIS)

TRICARE’s national purchased care database continues to be the cornerstone of TMA PI’s investigative efforts. In order to respond to the data needs of its customers (primarily those who investigate or prosecute allegations of fraudulent practices), TMA PI uses PCDIS. This web-based system accesses TED and HCSR healthcare detail claims related data by provider, beneficiary and internal control/claim number, as well as fiscal year summarized provider and beneficiary data. When received at TRICARE, the TED record is run against an extensive set of specific quality control edits, which contributes to data integrity and the fiscal soundness of a single audit trail. The TED and/or HCSR facilitates the investigation of allegations of fraud and abuse through analysis of a suspected provider’s billing patterns and an assessment of the cost impact for use by the DOJ in its settlement negotiations.

PCDIS is an invaluable tool used by a variety of users to include TRICARE health care managers and analysts, Beneficiary Counseling and Assistance Coordinators (BCACs) assisting beneficiaries with claims-related questions, third party liability litigators, claims processors and fraud and abuse investigators within DoD. Data in PCDIS assists in the analysis and reporting of purchased care cost and workload, resource sharing opportunities, network and non-network provider information and potential dollars to be recaptured by MTFs.

Identified as “power users,” the TMA PI staff is the driving force behind continued efforts to identify and implement PCDIS system upgrades and enhancements. TMA PI’s ongoing commitment to expanding and augmenting the capabilities of the PCDIS system is important if TMA PI is to continue to provide the level of information required to fight health care fraud and abuse against the TRICARE program.

Section 7.0 Program Integrity Affiliations

TMA PI continues to partner with federal law enforcement agencies, including DCIS, DOJ, and FBI as well as state prosecutors and investigators. Additionally, partnerships have been established with MCSCs, dental and pharmacy contractors, the Pharmacoeconomic Center (PEC) and POC, USFHP, and MTFs for program-specific data and allegations. TMA PI works with other federal benefits administrators within the VA and Centers for Medicare and Medicaid Services (CMS) to identify trends within federal benefits programs. TMA PI also participates in public-private sector partnerships with the NHCAA, local SIUs and healthcare task forces throughout the United States and the National Insurance Crime Bureau (NICB) to combat health care fraud.

Section 7.1 Defense Criminal Investigative Service (DCIS)

In fiscal year 2010, TRICARE provided services to over 9.6 million eligible beneficiaries worldwide. According to the industry (public and private sectors), 3-10 percent of health care costs are attributed to payment of fraudulent services billed by unscrupulous providers.

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DCIS program support has considerably diminished since the September 11 attacks. As the primary investigative arm for TRICARE, their availability to participate in TRICARE healthcare fraud investigations continued to be compromised by other priorities. Many viable cases were declined by DCIS for lack of resources and returned to TMA PI for administrative action or possible referral to other investigative sources. The cooperative working relationship dedicated to fighting fraud and abuse against the TRICARE program continued between TMA PI and DCIS on those case referrals they were able to investigate. In 2010, TMA PI pursued most of the TRICARE cases with other law enforcement agencies and with DOJ. TMA and DCIS continue to work cooperatively in moving forward together in the fight against healthcare fraud and abuse. To that goal, DCIS will be identifying healthcare fraud as one of its investigative priorities in 2011.

Section 7.2 Pharmacy Operations Directorate: Pharmacy Operations Center (POC) and Pharmacy Data Transaction Service (PDTS)

The POC supports users of PDTS, a centralized data repository that allows a common patient medication profile to be created for all DoD beneficiaries who use the TRICARE pharmacy benefit. PDTS was created to improve patient safety by maintaining the prescriptions data received from all MHS points of service including MTFs, TRICARE retail network pharmacies, non-network pharmacies through the direct member paper claim reimbursement process, and the Mail Order Pharmacy program. Establishing one central patient medication profile allows Prospective Drug Utilization Reviews (ProDUR) to be conducted for all prescribed medications regardless of the point of service selected by the patient. The process allows for real time systematic checks to minimize unnecessary safety risks that are present in a non-integrated pharmacy system.

Through the use of the ProDUR function, PDTS has allowed DoD to improve the quality of its prescription service while at the same time better managing the pharmacy benefit and costs. Each new and refill prescription has ProDUR performed against the beneficiary’s complete drug profile. ProDUR includes screening for drug-drug interactions, therapeutic duplications, high dose and excessive use of medications. The central data repository has also allowed DoD to monitor pharmaceutical costs, track patient utilization, and examine provider prescribing patterns through the MHS.

With the use of BusinessObjects software, the POC is able to provide important data for investigational purposes to TMA PI, as well as to each of the PI units of the MCSCs, pharmacy contractor, and TDEFIC. The POC receives requests and provides detailed information for investigating providers, pharmacies, patients and medication utilization. The reports are encrypted and password protected when sent to the requestor. The POC has a group dedicated to supporting program integrity functions.

Fraud and abuse measures are now included in all TRICARE contracts compelling each contractor to have a dedicated PI unit and to coordinate program integrity functions with other contractor PI units. In 2011, that will include Cahaba, the new Pharmacy Fraud and Abuse Support Contractor.

The POC, ESI and Cahaba are active participants in TMA roundtable meetings. At these meetings, an environment is created where information sharing can take place across contractual borders. Ideas concerning fraud/abuse schemes, detection, data-mining, case preparation and investigation are shared with all members.

As noted above, establishing one central patient medication profile minimizes a patient’s exposure to unnecessary safety risks. For the purposes of identifying fraud and abuse, as well as support of cases already under investigation, the provision of detailed information on providers, patients, and pharmacies by the POC has proven to be invaluable. The POC has become an important partner in the fight against fraud and abuse.

Section 7.3 National Quality Monitoring Contract (NQMC)

TMA contracted with Maximus to provide an independent, impartial evaluation of the care provided to MHS beneficiaries as well as to evaluate “best value health care” as defined in the TOM.

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Maximus, as TMA’s NQMC, completes evidence-based, peer-defensible reviews and then incorporates data from these independent reviews into monthly, quarterly, and semi-annual reports. Specifically, they are responsible for assessing patient safety, evaluating the quality of health care delivery and monitoring overall clinical performance for medical services provided to TRICARE beneficiaries.

TMA selects a stratified, random sample of care received by TRICARE beneficiaries based upon claims processed for payment in the previous month. TMA provides Maximus with the sample. Maximus requests approximately 1,400 cases per month from the MCSCs and TDEFIC, and 75 cases per month from the USFHP. Each of these cases of care rendered is reviewed to determine if the care was medically necessary and medically appropriate. Not until after review by a licensed health care professional, an impartial, peer-matched specialist and the NQMC's Medical Director is a case reported as a quality finding to the MCSC, USFHP, and TDEFIC for review and appropriate corrective action if necessary. Cases fall into one of the below categories:

Coding irregularities - DRG and Resource Utilization Group

Patient safety - Surgical Management Events and Care Management

Events (TOM and National Quality Forum); inappropriate medical care; preventable admissions; and care that is not a TRICARE Benefit.

The quality reviews are performed on every chart, but there is another specific area of review called "Harms" that is performed on those which show an injury that occurred during the episode of care and required an intervention. There are eighteen named "Harms" that are grouped into six categories. The categories are listed as follows: Health Care Associated Infection, Surgical Event, Development of Venous Thromboembolism, Hematologic Events, Respiratory Events and Other Hospital Acquired Events.

Maximus also has the following responsibilities: external reviews for TMA Appeals, Hearings and Claims Collections Division, Medical Necessity Reconsideration Appeals, Mental Health Facility Standard of Care Peer Reviews, Mental Health Facility Certifications, Focused Studies and Technology Assessments.

Maximus is also tasked with identifying "incident referrals" in which they may identify care that does not match the billing that was made to the program. These "incidents" are referred to TMA PI where additional investigation is pursued as to whether it is a single "incident" or whether there is a pervasive pattern of misrepresenting the services provided.

Section 7.4 TRICARE Clinical Quality Forum

TMA PI is a member of the TRICARE Clinical Quality Forum, Office of the Assistant Secretary of Defense for Health Affairs (ASD HA) Committee because of the recognized relationship between quality of care and healthcare fraud. The Forum has oversight responsibility for clinical quality assessment programs with primary responsibility to monitor and assess the quality of health care provided to DoD beneficiaries and to report findings in an annual report to the ASD HA. The Forum is an important vehicle for providing recommendations to senior leadership pertaining to future clinical quality initiatives and oversight programs. The Forum contributes to ensuring quality and cost effective care for military families whether the care is received in the military direct care system or through the purchased care side of TRICARE and TMA PI participates in the monthly teleconferences for this forum.

Section 8.0 TRICARE Fiscal Stewardship

To be effective fiscal managers of taxpayer dollars, robust fraud controls need to be built into each area of the program. TMA PI utilizes multiple fraud controls to ensure that fiscal stewardship and management is a core effort of the office. These efforts not only involve the utilization of sophisticated computer software but the careful oversight and responsible management of TRICARE resources through the practice of ensuring compliance, efficiency, and accountability within the MHS. TMA PI accomplishes this not only through on-going education processes but by detecting, investigating and preventing fraud, waste and program abuse. These actions help to ensure that TRICARE dollars are paid appropriately and where

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weakness are identified effective corrective action is taken by implementing recoveries, pursuing recoupment, and identifying avenues for cost avoidance due to fraud.

TMA PI, through teamwork with our contractor PI units and other health oversight partners strives to:

Operate the most cost efficient and effective anti-fraud system possible thereby protecting healthcare dollars and enhancing the quality and appropriateness of services delivered;

Provide technical assistance, program expertise and support to the DoD IG for investigations, and to DOJ and the USAOs in developing cases for prosecution and/or settlement action;

Require and support efforts of the contractors PI Units to identify and resolve program integrity issues;

Develop and communicate consistent measures of program integrity effectiveness, which captures cost reduction and avoidance, as well as recoveries, and minimizes costs imposed by reviews and investigations; and,

Identify areas of vulnerability that adversely affect program integrity and implement corrective actions.

Section 8.1 Automated Computer Edit Software Program

MCSCs are required to use prepay claims processing software, that includes rebundling and mutually exclusive edits. The rebundling edits are designed to detect and correct the billing practice known as unbundling, fragmenting, or code gaming. Defined unbundling involves the separate reporting of the component parts of a procedure instead of reporting a single code which includes the entire comprehensive procedure. This practice is improper and is a misrepresentation of the services rendered. Providers are cautioned that such a practice can be considered fraudulent and abusive. TRICARE claims are adjudicated against this system of checks and balances. It is important to note that the software does not set coverage/benefit policy; it merely audits claims for appropriate code combinations.

The software also contains specific auditing logic designed to ensure appropriate coding of professional claims and eliminate overpayments. It plays a key role in protecting government dollars. The unbundling software requirement started with the inception of each MCSC. For calendar year 2010, the prepayment audit software in use by MCSCs accounted for $115,589,383 in cost savings for TRICARE. These savings continue to decrease as a result of implementing reimbursement under the Outpatient Prospective Payment System.

Section 8.2 Post-payment Duplicate Claim Software

Post payment duplicate claim software was developed by the TMA Policy and Operations Directorate and is used by the MCSCs. This software was designed as a retrospective auditing tool. Since 1997 (when the software was first required) through December 31, 2010, the software has identified and accounted for $177,540,164 in recoupment or offsets nationally. For calendar year 2010, $22,357,895 was identified for recoupment or offset.

Section 8.3 Cost Recovery Contract

TMA makes Capital Expense and Direct Medical Education (CAP/DME) payments to hospitals similar to the Medicare payment methodology for the same program.

Based on audits covering 1992 through 2004, TMA established (in fiscal year 2009) over 600 of the highest dollar recoupment cases with a net target value to be recouped of $11.7 million. As a result of the Defense Contract Audit Agency’s administrative reviews during fiscal year 2010, the net value of these cases was recalculated downward to $9.7 million. In 2009, $5.2 million was recouped. In fiscal year

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2010, TMA has recovered $4.2 million. TMA anticipates recouping the remaining amount of the $9.7 million in fiscal year 2011.

The offices tasked with the establishment of CAP/DME recoupment cases and tracking the recovery of overpayments associated with this process are accomplished by TMA’s Performance Evaluation and Transition Management Branch, Acquisition Management and Support Directorate, and the Contract Resource Management Office.

For more information on the content of this report, please contact the TMA PI Office in writing at the address below. TRICARE Management Activity ATTN: Program Integrity Office 16401 East Centretech Parkway Aurora, CO 80011-9066

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Appendix A: Acronym Index

ASD (HA) Office of the Assistant Secretary of Defense for Health Affairs

FCA False Claims Act

BCAC Beneficiary Counseling and Assistant Coordinator

FDA Food and Drug Administration

CAP/DME Capital Expense and Direct Medical Education

FDCA Food, Drug, and Cosmetic Act

CFR Code of Federal Regulations HB&FP Uniform Business Office

CHAMPVA Civilian Health and Medical Program of the Veterans Administration

HCSR Health Care Service Record

CMAC CHAMPUS Maximum Allowable Charge

HEAT Health Care Fraud Prevention and Enforcement Action Team

CMS Centers for Medicare and Medicaid HMHS Humana Military Healthcare Services

DCIS Defense Criminal Investigative Service

HNFS Health Net Federal Services

DEA Drug Enforcement Administration IG Office of the Inspector General

DEERS Defense Enrollment Eligibility Reporting System

IRS Internal Revenue Service

DHHS Department of Health and Human Services

ISOS International SOS

DHP Defense Health Program LEIE List of Excluded Individuals/Entities

DLA Defense Logistics Agency MCIO Military Criminal Investigative Organizations

DMDC Defense Manpower Data Center MCSC Managed Care Support Contractor

DoD Department of Defense MHS Military Health System

DoDI Department of Defense Instruction MTF Military Treatment Facility

DOJ Department of Justice NDA New Drug Application

DRG Diagnosis Related Group NDC National Drug Code

EOB Explanation of Benefits NHCAA National Health Care Anti-Fraud Association

ESI Express Scripts, Inc. NICB National Insurance Crime Bureau

FAQ Frequently Asked Questions NQMC National Quality Monitoring Contract

FBI Federal Bureau of Investigation OIG Office of the Inspector General

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OPM Office of Personnel Management SME Subject Mater Expert

PAC Post Acute Care, LLC TDEFIC TRICARE Dual Eligible Fiscal Intermediary Contractor

PCDIS Purchased Care Detail Information System

TED TRICARE Encounter Data

PCDW Purchased Care Data Warehouse TMA TRICARE Management Activity

PEC Pharmacoeconomic Center TOM TRICARE Operations Manual

PI Program Integrity TRO TRICARE Regional Office

POC Pharmacy Operation Center USAO United States Attorney’s Office

ProDUR Prospective Drug Utilization Review USFHP United States Family Health Plan

SG Surgeon General VA Department of Veterans Affairs

SIU Special Investigation Unit (or Program Integrity Office)

WPS Wisconsin Physician Services