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2010 Annual Fraud and Abuse Report - Tricare

VIEWS: 2 PAGES: 25

									    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     $36.7     $18.3     $122.9     $40.9     $96.6
                                                  million   million   million   million    million   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.




                                                                                                        8
    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



                                                                                                             9
        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



                                                                                                               10
        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



                                                                                                           12
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



                                                                                                           14
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   FCA     False Claims Act
              Defense for Health Affairs

BCAC          Beneficiary Counseling and Assistant   FDA     Food and Drug Administration
              Coordinator

CAP/DME       Capital Expense and Direct Medical     FDCA    Food, Drug, and Cosmetic Act
              Education

CFR           Code of Federal Regulations            HB&FP   Uniform Business Office

CHAMPVA       Civilian Health and Medical Program    HCSR    Health Care Service Record
              of the Veterans Administration

CMAC          CHAMPUS Maximum Allowable              HEAT    Health Care Fraud Prevention and
              Charge                                         Enforcement Action Team

CMS           Centers for Medicare and Medicaid      HMHS    Humana Military Healthcare Services

DCIS          Defense Criminal Investigative         HNFS    Health Net Federal Services
              Service

DEA           Drug Enforcement Administration        IG      Office of the Inspector General

DEERS         Defense Enrollment Eligibility         IRS     Internal Revenue Service
              Reporting System

DHHS          Department of Health and Human         ISOS    International SOS
              Services

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        TED      TRICARE Encounter Data
         System

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   WPS      Wisconsin Physician Services
         Integrity Office)




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