Fraud Crackdown

TMA Fights Against Fraud, For Due Process

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Law Feature -- March 2004  

By Walt Borges
Associate Editor  

Medicaid fraud is still a hot issue with the press and public. The headlines accompanying the January arrest of an Odessa allergist confirm that fact.

With soaring federal deficits and tight state budgets further focusing attention on Medicaid spending, the Texas Health and Human Services Commission (THHSC) is ramping up its fraud detection operations.

When the Texas Legislature mandated the consolidation of health care agencies under THHSC last year, it centralized the scattered responsibilities for detecting Medicaid fraud in a new Office of Inspector General (OIG). That office is currently considering rules on how it will investigate fraud allegations and recover overpayments. The Texas Medical Association and other associations representing hospitals, dentists, home care professionals, and nursing homes have weighed in with suggestions to fine-tune the proposed rules.

"The physicians of Texas are opposed to fraud of any kind, including Medicaid fraud, because it deprives our patients of needed care," said TMA President Charles W. Bailey Jr., MD. "However, it's important in investigating cases of alleged fraud that physicians are afforded the protections of due process that are guaranteed in the Constitution."

The association does not condone fraud or any other criminal activity, especially if committed by members of the medical profession. Organized medicine in Texas supports federal and state efforts to eliminate genuine fraud within the Medicare, Medicaid, and workers' compensation programs, and suggests that the savings produced by efforts to eliminate fraud and abuse should be used to improve patient care for those programs' beneficiaries.

On the other hand, physicians share numerous anecdotes of "fraud and abuse" cases that actually amount to confusion among physicians and their office staff over a highly complex and intricate coding system or honest differences of opinion over what constitutes medically necessary care.

TMA leaders stress that physicians are responsible for coding correctly. TMA regularly presents workshops, develops publications, and posts online tips and reference documents to help its member physicians learn correct coding and abide by the government health programs' often-Byzantine rules and procedures.

Physicians also are concerned that fraud investigations be conducted fairly and professionally. That is why the association joined others in reviewing the fraud rules under which the THHSC inspector general will operate.

Inspector General Brian Flood says the legislature did not intend only to consolidate functions, but it added new duties in an effort to eliminate waste, fraud, and abuse from the Medicaid program.

"There are some things, such as the seizure of property or placing payment holds without notice, that physicians haven't faced before," Inspector General Flood said. "We are also supposed to look at new types of conduct that we didn't address before."

The inspector general says he has "a good relationship" with the representatives of the associations and has held several discussions with them to explain the commission's positions and to look at acceptable ways to draft the proposed rules.


During the 2003 session, the legislature passed House Bills 2292 and 1743 to "strengthen the state's ability to improve fraud and abuse detection, investigation, criminal referral and prosecution, and recovery of overpayments plus damages and penalties against Texas Medicaid and health and human services providers, recipients, and contractors," a THHSC summary says.

The bills consolidated several investigation units plus the department's compliance and audit functions under the new OIG.

THHSC officials say the consolidation is intended to "provide for an increased effort to identify fraud or abuse prior to payments being made, resulting in improved fiscal control of funds." In other words, a tight state budget means THHSC needs to make sure it's not paying the wrong person the wrong amount.

The rules also provide for increased collection efforts by the state when overpayments are identified. 

Texas Hospital Association (THA) General Counsel Charles Bailey, JD, (no relation to the TMA president) noted that the proposed rules were released to health care stakeholders and medical organizations just two days before the THHSC's Medical Care Advisory Committee (MCAC) met to review the rules in November. The MCAC understood the need for a measured review by the private sector stakeholders and postponed consideration of the rules until its meeting this month, he says.

The THA lawyer says the comments submitted by a working group of the health care associations are corrective comments designed to clean up and clarify the rules rather than question the intent and direction of THHSC.

TMA, THA, the Texas Dental Association, the Texas Association for Home Care, and the Texas Health Care Association (which represents nursing home operators) conducted a joint review and submitted a joint letter to THHSC in mid-January.

The letter prefaced its suggestions for rule changes with an endorsement of the agency's mission. "Each of our associations supports the efforts of [THHSC], the Office of Inspector General, and Program Integrity staff to investigate and take appropriate action against health care providers who may have committed Medicaid fraud or abuse," the letter stated. The associations added that they also support rules and policies "that clearly specify providers' rights and responsibilities when services are provided to Medicaid recipients."

Securing due process for doctors, medical professionals, hospitals, and nursing homes is a central theme of the 15 suggested changes proposed by the associations in the letter.                

The Right Standard  

One issue likely to cause a stir among doctors is the authority granted to the inspector general to issue subpoenas for records or witnesses solely because the OIG believes the evidence or witness is "necessary for the investigation." That's a different and possibly more ambiguous standard than authorized for agency subpoenas in the Government Code -- a different section of state law, Mr. Bailey says.

The associations suggest the OIG adopt the Government Code standard that allows courts to issue subpoenas only after the party seeking the subpoena shows there is "good cause" that the requested evidence or testimony is relevant to the investigation or dispute.

"In the legal system, a judge usually determines if there is 'good cause' to support a subpoena and the request for records and evidence," Mr. Bailey said. "An administrative body such as an agency should show that it used its thoughtful discretion in issuing a subpoena."

Mr. Bailey says the associations also are concerned that indiscriminate investigative subpoenas could drain money from doctors, dentists, hospitals, and other health care facilities already struggling to meet costs because of decreasing fees.

The associations' letter notes that photocopies of subpoenaed records and witness expenses are reimbursed under the Government Code and suggests that the same arrangements should be made to compensate those being investigated by the inspector general.

The proposed rules also grant the THHSC Program Integrity division the right to deny or delay enrollments of physicians, facilities, and hospitals in commission programs and services. Mr. Bailey says the associations' letter recommends striking this provision because the decision on enrollment resides with the commission, not the staff of the OIG. Program Integrity officials should be limited to recommending actions to the commission, he says.

Surety Bonds   

To enhance the OIG's collection efforts, the legislature allowed the OIG to require medical practices, facilities, and physicians with a history of correct payment problems to post surety bonds. However, the proposed rules fail to include language that limits the amount of the bond, Mr. Bailey says.

Both HB 2292 and HB 1743 included language that indicated the bond should be "reasonable," and the associations are pressing for that language to be included in the final rules.

"There ought to be some limitation on the bond they set," Mr. Bailey said. He explained that such bonds often are set at amounts that not only cover the amounts due to be returned, but also cover penalties and damages associated with the overpayments.

A Lack of Authority  

The five associations filing the comment letter also question whether rules allowing seizures of fraud suspects' bank accounts and other assets are backed by the proper legislative grant of authority.

Under the proposed rules, the inspector general can seize assets of a doctor, hospital, or nursing home suspected of Medicaid fraud. The seizure is used to assure that assets remain to pay back overpayments made by the state, plus damages and penalties.

Mr. Bailey of THA says the commission does not have the authority to make the seizure. It can only ask the state attorney general to ask a court to bar the suspected physician, practice, or facility from selling an asset or transferring money from its accounts to another entity.

"The only statutory authority that THHSC was provided in either HB 2292 or HB 1743 is the authority to request the attorney general to obtain injunctive relief in order to prevent a provider from disposing of an asset," the associations said in their letter.

In fact, one section of the proposed rules specifically allows the inspector general to ask the attorney general to obtain an injunction, but it goes too far in allowing the seizure without a review by a court, Mr. Bailey says.

"We are challenging that because we think that only courts can seize assets through process," Mr. Bailey said. "We believe the commission and inspector general would follow the laws, but we want to be sure."

Inspector General Flood, however, says that the Code of Criminal Procedure has provisions on money laundering that require a court to be involved in seizures, including those under the Medicaid system.

Among the other concerns mentioned in the letter are:

  • The need to ensure confidentiality of investigation records to protect physicians and other suspects accused of fraud;
  • Provisions that make negligence resulting in injury or death a violation subject to OIG action, a provision that Mr. Bailey says exceeds OIG's scope; and
  • Rules that would open up physician or facility contracts with managed care to determine if Medicaid is paying the lowest rates available, regardless of the discounts offered by managed care health plans.

"Our main concern," Mr. Bailey said, "is the lack of clarity in terms that could lead to adverse interpretations. Our second concern is whether or not the providers of medical services have due process in administrative actions." 

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