Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

The OIG has issued a report entitled “Recovery Audit Contractors' Fraud Referrals.” By way of background, CMS contracts with recovery audit contractors (RACs) to identify improper payments of Medicare Part A and Part B claims, and they receive contingency fees based on the amount of improper payments identified. While RACs are not responsible for reviewing claims for fraudulent activity, they are responsible for referring any cases of potential fraud they identify to CMS. In its review, the OIG found that RACs referred only two cases of potential fraud to CMS during the period of March 2005 through March 2008, while CMS reported receiving no potential fraud referrals from RACs during this period. The OIG notes that RACs do not receive contingency fees for such fraud cases, which may serve as a disincentive for RACs to refer cases of potential fraud to CMS. The OIG recommended that CMS: (1) determine the outcomes of the two referrals made during the demonstration project, (2) implement a system to track fraud referrals, and (3) require RACs to receive mandatory training on the identification and referral of fraud. CMS concurred with the recommendations.

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The OIG has issued a report entitled "Average Sales Prices: Manufacturer Reporting and CMS Oversight." According to the OIG, for each quarter under review, over 40% of manufacturers submitted average sales prices (ASP) late, but most submitted the data within 10 days after the deadline. The OIG observes that current CMS methods for recording ASP data, including the use of manual processes, "may inhibit efficiency and result in potential errors." In addition, almost one-fifth of labeler codes with ASP submissions were associated with manufacturers that were not actually required to provide these prices, and in some cases Medicare payment amounts were based solely on submissions from manufacturers that did not have rebate agreements in effect. According to the OIG, if these manufacturers chose not to report ASPs, CMS would be unable to calculate ASP-based Medicare payment amounts for these drugs. In the report, the OIG recommends that CMS (1) develop an automated system for collecting ASP data, and (2) seek a legislative change to require all manufacturers of Part B-covered drugs to submit ASPs. CMS concurred with the first recommendation, but did not agree to seek a such legislative change at this time. In a separate report, “Comparison of Average Sales Prices and Average Manufacturer Prices: An Overview of 2008," the OIG noted that in 2008, the ASP for 80 HCPCS codes exceeded average manufacturer prices (AMP) by at least 5% in one or more quarters. If reimbursement amounts for these 80 codes had been lowered to 103% of the AMP, as is authorized by the statute, it would have reduced Medicare expenditures by almost $22 million. The OIG recommends that CMS develop a process to adjust payment amounts based on the results of OIG's pricing comparisons (CMS concurred), and that CMS lower Medicare reimbursement amounts for drugs that meet the 5% threshold (CMS did not agree). CMS also outlined steps it is taking to address a third OIG recommendation – that CMS ensure that drug manufacturers are submitting the required AMP data in a timely manner.

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CMS has posted new "Telemarketing FAQs" to supplement the OIG's recent revisions to its Special Fraud Alert on Telemarketing by Durable Medical Equipment Suppliers.  Among other things, the FAQs address circumstances under which DME suppliers can contact a beneficiary based on the receipt of a physician’s order.  For a more information, see our discussion on our sister blog, Life Sciences Legal Update.

 

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On January 28, 2010, Reed Smith Partner Elizabeth Carder-Thompson, in her capacity as president of the American Health Lawyers Association, attended the National Summit on Health Care Fraud, sponsored by the U.S. Department of Health and Human Services and the U.S. Department of Justice. Ms. Carder-Thompson’s observations on the summit are available on our sister blog, Life Sciences Legal Update. 

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The Social Security Act requires the HHS Office of Inspector General (OIG) to notify the HHS Secretary if the average sales price (ASP) for a particular drug exceeds the drug's average manufacturer price (AMP) by a threshold of 5%.  If that threshold is met, the Secretary is authorized to disregard the ASP for that drug and substitute the lesser of the widely available market price for the drug or 103% of the AMP. The OIG recently posted several reports identifying specific codes for which Medicare ASP exceeded the AMP by at least 5% during the period spanning the fourth-quarter of 2008 through the second quarter of 2009. The OIG estimates that if Medicare reimbursement for these codes had been based on 103 percent of AMP, Medicare expenditures would have been reduced by millions of dollars. In addition, the OIG points out that while it has issued more than a dozen reports comparing ASPs to AMPs, CMS has yet to make any changes to reimbursement as a result of its findings.

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On January 28, 2010, Reed Smith Partner Elizabeth Carder-Thompson, in her capacity as president of the American Health Lawyers Association, attended the National Summit on Health Care Fraud, sponsored by the U.S. Department of Health and Human Services and the U.S. Department of Justice. Ms. Carder-Thompson’s observations on the summit are available on our sister blog, Life Sciences Legal Update.

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On January 15, 2010, CMS issued a transmittal on “Various OIG Reports that have Medical Review Implications.”  The transmittal instructs Medicare contractors to take steps to strengthen program safeguards to prevent improper payment in areas identified by the HHS Office of Inspector General (OIG). Specifically, reports highlighted by CMS address negative pressure wound therapy pumps, ambulance transportation for skilled nursing facility residents, pressure reducing support surfaces, and hospice services. CMS instructs contractors to use the information contained in the OIG reports and follow the processes and procedures already in the Medicare Program Integrity Manual concerning data analysis, contractor strategies, and the progressive corrective action process.

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On December 15, 2009, HHS announced the latest expansion of the Medicare Fraud Strike Force, a multi-agency team of federal, state and local officials working to combat Medicare fraud through the use of data analysis techniques and an increased focus on community policing. The Strike Force is now operating in Brooklyn, Tampa and Baton Rouge, joining other teams in Miami, Los Angeles, Detroit, and Houston. Since its inception, the Strike Force has obtained more than 460 indictments for Medicare fraud involving a total of more than $1 billion in claims.

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 The OIG has issued a report on Midyear Formulary Changes in Medicare Prescription Drug Plans, which concludes that Part D drug plan sponsors and CMS are managing midyear formulary changes without major problems.  The OIG found that all drug plan sponsors made formulary changes in 2008, but the majority (64%) of these changes were positive (i.e., they added new drugs, reduced cost sharing, or removed utilization controls).  Of the changes that were more restrictive (which must be approved by CMS), 62% promoted generic drug substitution. According to the OIG, most plan sponsors met beneficiary notification requirements for formulary changes.

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On October 15, 2009, the OIG published a notice that seeks information from organizations that believe they have the capability to be monitors of health care entities under quality-of-care CIA with OIG.  Such monitors typically are responsible for assessing the effectiveness, reliability, and thoroughness of the health care entity's: (1) internal quality control systems; (2) response to quality-of-care issues; (3) development and implementation of corrective action plans and the timeliness of such actions; (4) proactive steps to ensure that each patient receives care in accordance with basic care, treatment, and protection-from-harm standards; the governing regulations; and the policies and procedures required to be adopted under the CIA; and (5) in residential settings, compliance with staffing requirements. In making these assessments, the monitor conducts site visits, analyzes available data, observes facility and corporate-level committee meetings, and reviews relevant documents, and the monitor submits regular written reports to the provider and OIG. The OIG notes that in order to select an appropriate monitor for any individual quality-of-care CIA, the OIG consider, but is not limited to, selecting an organization that responds to this notice. Responses may be submitted to the OIG on an ongoing basis.

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On October 9, 2009, CMS issued a transmittal to contractors highlighting several HHS Office of Inspector General (OIG) reports with recommendations on addressing Medicare’s vulnerability to questionable claims. In particular, CMS cites OIG reports on Medicare Part B chemotherapy administration payments, nonphysicians who performed Medicare physician services, inappropriate Medicare payments for chiropractic services, and Medicare Part B billing for ultrasound. CMS directs contractors to review claims data for services mentioned in the OIG reports and take appropriate action (e.g., prepayment edits and reviews, postpayment reviews, and physician/supplier education), if the data warrants action. 

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The HHS OIG has released a report entitled "Effect of the Part D Coverage Gap on Medicare Beneficiaries Without Financial Assistance in 2006." The OIG found that 7% of Part D beneficiaries entered the coverage gap and did not receive financial assistance with prescription drug costs in 2006.  During the coverage gap, 69% of beneficiaries decreased the average number of drugs they purchased, which could have resulted from beneficiaries trying to reduce their financial burden during the coverage gap, or from appropriate reductions due to changes in beneficiaries' health status.  The greater the average number of drugs per month that beneficiaries purchased before entering the coverage gap, the more they reduced the average number of drugs per month that they purchased during the coverage gap. The OIG recommends that CMS support outreach and education activities targeted at beneficiaries who make more prescription drug purchases before entering the coverage gap.

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The has OIG issued a report entitled "Comparing Pharmacy Reimbursement: Medicare Part D to Medicaid." The OIG found that Part D and nationwide Medicaid pharmacy reimbursement amounts for most of the single-source drugs that the OIG reviewed were similar; however, Medicaid reimbursement amounts for the multiple-source drugs reviewed were typically higher than the Part D amounts. The OIG notes that it compared only the amount reimbursed to pharmacies by Part D and Medicaid; the OIG did not compare total program expenditures or examine the impact of rebates or post-point-of-sale price concessions. Moreover, in a review of five states, the OIG found that Medicaid and Part D ingredient cost reimbursement amounts were similar for single-source drugs, but the average Medicaid ingredient costs exceeded the average Part D ingredient costs for most multiple-source drugs under review. In addition, Medicaid dispensing fees were substantially higher than average Part D dispensing fees for both the single-source and multiple-source drugs under review.

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The OIG has issued a report entitled “Medicare Payments in 2007 for Medical Equipment and Supply Claims with Invalid or Inactive Referring Physician Identifiers.” The OIG reports that Medicare allowed almost $34 million in 2007 for medical equipment and supply claims with physician identification numbers that had never been issued or had been deactivated by CMS, including $5 million for claims with dates of service after the referring physicians had died. The OIG recommends that CMS take a number of steps to promote the accurate and appropriate use of physician identifiers, and CMS concurred with the recommendations.

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The HHS Office of Inspector General (OIG) has issued a report on the top management and performance challenges facing the HHS. Key areas identified by the OIG include: Medicare Part D oversight (including drug pricing and rebates, fraud and abuse safeguards, and access to accurate information); Medicare integrity (including DME fraud and competitive bidding); Medicare Advantage; Medicaid and State Children’s Health Insurance program integrity (including prescription drug fraud and pharmacy reimbursement); quality of care (including pay-for-performance, “never events,” and transparency of ownership and performance); emergency preparedness and response; oversight of food, drugs, and medical devices (including food safety and security, drug and medical device safety, and transparency of provider financial interests); grants management; integrity of information systems and the implementation of health information technology; and ethics program oversight and enforcement.

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The OIG has issued a report comparing first-quarter 2008 average sales prices (ASPs) and average manufacturer prices (AMPs) and associated Medicare reimbursement for the third quarter of 2008. In the report, the OIG identified 41 HCPCS drug codes with ASPs that exceeded AMP by at least 5 percent in the first quarter of 2008. If reimbursement amounts for these 41 codes had been based on 103 percent of the AMPs, Medicare expenditures would have been reduced by $7.8 million during the third quarter of 2008 alone. The OIG could not compare ASPs and AMPs for 76 HCPCS codes because of missing AMP data; the OIG is working with CMS to evaluate and pursue appropriate actions against those manufacturers that fail to submit required data.

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On December 17, 2008, the HHS Office of Inspector General (OIG) published its annual solicitation of proposals and recommendations for new or revised safe harbor provisions under the federal anti-kickback statute, and new OIG special fraud alerts. The comment deadline is February 17, 2009. A status report on the comments the OIG received in response to last year's solicitation is set forth in Appendix D to the OIG’s Semiannual Report for the period of April 1, 2008 through September 30, 2008. 

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The HHS Office of Inspector General (OIG) has released the Health Care Fraud and Abuse Control (HCFAC) Program Annual Report for FY 2007.  The HCFAC program is designed to coordinate federal, state and local law enforcement activities focused on health care fraud and abuse. Among other things, the report announces that the federal government won or negotiated approximately $1.8 billion in health care fraud judgments and settlements in FY 2007. Also during that period, U.S. Attorneys' Offices opened 878 new criminal health care fraud investigations, and federal prosecutors had a total of 1,612 health care fraud criminal investigations pending. A total of 560 defendants were convicted for health care fraud-related crimes during the year. With regard to civil cases, the Department of Justice opened 776 new civil health care fraud investigations and had 743 civil health care fraud investigations pending at the end of the fiscal year.

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The OIG has posted its Semiannual Report to Congress for the period of September April 1, 2008 - September 30, 2008. The OIG reported savings and expected recoveries of more than $20.4 billion for all of FY 2008, including $16.72 billion in implemented recommendations, $1.33 billion in audit receivables, and $2.35 billion in investigative receivables. In FY 2008, OIG excluded 3,129 individuals and organizations from participation in federal health care programs. In addition, OIG reported 775 criminal actions brought against individuals or organizations that engaged in crimes against HHS programs and pursued 342 civil actions, which include False Claims Act and unjust enrichment suits, Civil Monetary Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters. The report also includes a review of major enforcement actions and policy recommendations for the second half of FY 2008.

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The OIG has issued an “early alert memo” on “Payments to Medicare Suppliers and Home Health Agencies Associated With ‘Currently Not Collectible’ Overpayments.” The OIG’s review of a small sample of Texas DMEPOS suppliers with outstanding Medicare debt (e.g., unreturned Medicare overpayments) found that a majority of suppliers were associated with other Medicare suppliers or home health agencies, and that complete ownership/management information was not always provided in public records. According to the OIG, the results suggest that individuals associated with Medicare debt could inappropriately receive Medicare payments by omitting owner/manager information on their enrollment applications and working through other DMEPOS suppliers and HHAs. Because this initial review examined a small number of suppliers using a limited set of issue questions, OIG intends to conduct follow-up work regarding the vulnerabilities raised in this memorandum.

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The HHS Office of Inspector General (OIG) has issued a report entitled "Nationwide Review of the Centers for Medicare & Medicaid Services Health Insurance Portability and Accountability Act of 1996 (HIPAA) Oversight." By way of background, the HIPAA security rule requires health plans, providers, and other covered entities that transmit health information in electronic form to: (1) ensure the integrity and confidentiality of the information, (2) protect against any reasonably anticipated threats or risks to the security or integrity of the information, and (3) protect against unauthorized uses or disclosures of the information. The OIG found that CMS had no effective mechanism to ensure that covered entities adequately implemented the HIPAA security rule or that electronic protected health information was being adequately protected. The OIG recommended that CMS establish policies and procedures for conducting HIPAA security rule compliance reviews of covered entities. While CMS disagreed with the OIG’s findings, the agency agreed to establish policies for conducting compliance reviews.

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The OIG and the Government Accountability Office (GAO) have issued several reports regarding the Medicare Part D drug program. In a report entitled “Medicare Drug Plan Sponsors' Identification of Potential Fraud and Abuse,” the OIG recommends a number of steps to address fraud and abuse. For instance, the OIG calls on CMS to: review variances in potential fraud and abuse among plans; determine if Part D prescription drug plan (PDP) sponsors investigated and corrected potential abuses; and require PDP sponsors to report on their fraud and abuse programs. In a separate report, “Oversight of Prescription Drug Plan Sponsors' Compliance Plans,” the OIG found that CMS conducted only one focused audit and no routine audits of PDP sponsors’ compliance plans in 2007. Further, CMS did not verify sponsor’s responses to a compliance plan self-assessment. CMS agreed with an OIG recommendation that CMS conduct audits to verify that PDP sponsors' compliance plans meet regulatory and manual requirements. Additionally, an OIG report on "Centers for Medicare & Medicaid Services Audits of Medicare Part D Bids" found that one-quarter of all bid audits completed for plan years 2006 and 2007 identified at least one material finding, but CMS has not adjusted PDP sponsors’ bid amounts based on such findings. The OIG recommends that CMS hold plan sponsors more accountable for material findings identified in bid audits, and conduct the required number of financial audits in a timely manner. Finally, the GAO has reported on "Medicare Part D Prescription Drug Coverage: Federal Oversight of Reported Price Concessions Data." The GAO found that CMS has initiated about half of its planned detailed financial audits to examine Part D price concessions data for 2006, with the rest delayed due to financial constraints. The audits are expected to be completed by October 2009. CMS also pointed to variation in defining and reporting price concessions data, such as differences in how sponsors allocate manufacturer rebates between their Part D plans and other business, as likely creating oversight challenges.

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The OIG has issued a report entitled "South Florida Durable Medical Equipment Suppliers: Results of Appeals." The OIG followed up on a previous review that had led to the revocation of Medicare billing privileges for 491 suppliers that failed to meet Medicare supplier standards. The OIG found that nearly half of the revoked suppliers appealed the revocations, and billing privileges were restored for 91% of these suppliers. The OIG found that two-thirds of the suppliers whose billing privileges were reinstated subsequently had their privileges revoked again or inactivated, and some individuals connected to reinstated suppliers have been indicted. The OIG recommended that CMS strengthen the appeal process by developing criteria regarding the types of evidence required for hearing officers to reinstate suppliers' billing privileges; CMS agreed to consider establishing such guidelines.

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On October 1, 2008, the HHS Office of Inspector General (OIG) released its FY 2009 Work Plan, which discusses planned OIG audit, inspection, and investigative initiatives affecting virtually every type of health care provider and supplier.

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The HHS Office of Inspector General (OIG) has releaseda report entitled "Marketing Materials for Medicare Prescription Drug Plans." Among other things, the OIG found that CMS's oversight of marketing materials for stand-alone Medicare prescription drug plans is limited, the agency’s model documents are not consistent with its guidelines, and 85% of marketing materials failed to meet at least one element of CMS's guidelines.

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The OIG has issued a report that examined Medicare Part B drug pricing when a new generic drug enters the market, based upon an examination of Medicare payment for irinotecan, an injectable cancer drug.  The FDA approved the first generic version of irinotecan on February 20, 2008. The OIG looked at the difference between the Medicare payment amount and manufacturer-reported sales prices during March 2008, when the generic version was available for purchase but yet reflected in the Medicare average sales price because of a two-quarter lag in the payment system. The OIG found that the Medicare payment amount for irinotecan was more than double the OIG-calculated average manufacturer sales price. The OIG noted that CMS’s current authority to address such payment disparities is limited, since time is needed for the OIG to collect payment data, and any resulting pricing changes would not take effect until the quarter after OIG provides the data to CMS. The OIG therefore recommends CMS explore alternative options to address pricing discrepancies arising from newly available generic drugs, which may include seeking a legislative change. CMS concurred with the OIG's recommendation.

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A new OIG report raises questions about the effectiveness of CMS’s Comprehensive Error Rate Testing (CERT) program, along with the validity of CMS estimates of improper Medicare payments for durable medical equipment (DME).   Based on the CERT contractor's medical review, CMS had reported that the FY 2006 DME error rate was 7.5 percent, or about $700 million in improper payments. However, the OIG’s independent contractor’s reviews of beneficiaries’ medical records found errors in Medicare DME claims that CERT contractor had not identified and concluded that the estimated error rate for the FY 2006 CERT DME sample was actually 28.9 percent. The OIG attributes these review discrepancies to the CERT contractor’s reliance on clinical inference rather than additional medical records available from health care providers, CMS’s inconsistent policies regarding proof-of-delivery documentation, physicians’ lack of understanding of documentation requirements, and CMS’s lack of procedures for obtaining information on high-risk DME items from beneficiaries. The OIG recommends that CMS: (1) require the CERT contractor to review all available supplier documentation, (2) establish a written policy to address the appropriate use of clinical inference, (3) require the CERT contractor to review all medical records necessary to determine compliance with medical necessity requirements, (4) document oral guidance that conflicts with written policies, (5) instruct its Medicare contractors to provide additional documentation training to physicians, and (6) require the CERT contractor to contact beneficiaries named on high-risk claims to help determine whether the beneficiaries received the items and the items were medically necessary. CMS generally agreed with the OIG’s findings and recommendations. 

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The HHS Office of Inspector General (OIG) has released a report comparing Medicare prescription drug average sales prices (ASPs) and average manufacturer prices (AMPs) for the fourth quarter of 2007. This is the OIG’s first pricing comparison since CMS implemented a revised volume-weighted ASP payment methodology mandated by the Medicare, Medicaid, and SCHIP Extension Act of 2007. Using CMS’s revised ASP payment methodology, the OIG identified 12 of 285 drug codes with ASPs that exceeded AMPs by at least 5 percent in the fourth quarter of 2007.  

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On July 17, 2008, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) finalized its March 26, 2008 interim final rule revising the process for advisory opinion requestors to submit payments for advisory opinion costs. The text of the rule, which is effective July 17, 2008, is posted here.

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Certain retroactive payment increase provisions in MIPPA result in increased beneficiary copayment amounts for certain items and services furnished from July 1 through July 14, 2009. As a result, beneficiaries who already paid or were billed for cost-sharing amounts based on lower prices temporarily in effect are liable for additional cost-sharing amounts. On July 24, 2008, the OIG issued a policy statement assuring suppliers and providers affected by retroactive rate increases that they will not be subject to OIG administrative sanctions if they waive retroactive beneficiary cost-sharing amounts attributable to those increased payment rates (subject to certain conditions). The policy impacts the following types of items and services: physician fee schedule services; certain DMEPOS in the initial bidding areas; brachytherapy sources and therapeutic radiopharmaceuticals under the outpatient prospective payment system; and ambulance services. Note, however, that suppliers and providers are not required to waive retroactive beneficiary liability, and they may instead choose to bill the beneficiary for the additional copayment obligation. 

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The Office of Inspector General (OIG) of the Department of Health and Human Services has released the FY 2007 State Medicaid Fraud Control Unit (MFCU) Annual Report. In FY 2007, MFCUs recovered more than $1.1 billion in court-ordered restitution, fines, civil settlements, and penalties. They also obtained 1,205 convictions and there were 607 successful civil actions. Moreover, they were responsible for 805 OIG exclusions from participation in federal health care programs. The report is posted here.

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On June 12, 2008, the HHS Office of Inspector General (OIG) released its “Semiannual Report to Congress” for the first half of fiscal year 2008. The OIG announced expected recoveries of $2.2 billion resulting from efforts to reduce fraud, waste, and abuse in HHS programs, including $1.1 billion in audit-related recoveries and another $1.1 billion in investigative-related recoveries. Also for this period, OIG reported exclusions of 1,291 individuals and organizations for fraud or abuse involving federal health care programs; 293 criminal actions against individuals or organizations that engaged in crimes against HHS programs; and 142 civil actions, which include False Claims Act and unjust enrichment suits filed in district court, Civil Monetary Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters.

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The OIG has released a report entitled "The Food and Drug Administration's Generic Drug Review Process". The OIG found that FDA disapproved 96 percent of original Abbreviated New Drug Applications (ANDA) under review in 2006 because they did not meet FDA review standards, and that many reviews exceeded the statutory review timeframe. In response, the FDA stated that it is implementing process improvements to address these areas.

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The HHS Office of Inspector General (OIG) has issued its “Compendium of Unimplemented Office of Inspector General Recommendations.” This publication is a compilation of significant monetary and nonmonetary recommendations that the OIG believes has the potential to result in cost savings and improvements to HHS program efficiency and effectiveness if enacted.

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