Sun to Set on Overzealous Fraud Investigations
By Kara Nuzback Texas Medicine January 2015

TMA, Sunset Advisory Commission, Legislators Support Stricter Criteria for Medicaid Payment Holds

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Law Feature — January 2015

Tex Med. 2015;111(1):55-58. 

By Kara Nuzback

The Texas Sunset Advisory Commission is considering the sunset staff's scathing report of the Texas Health and Human Services Commission (HHSC) Office of Inspector General (OIG). The report says the OIG — tasked with preventing, detecting, and investigating fraud, waste, and abuse in the Medicaid system — fails at fraud prevention, takes more than three years to resolves cases, and wins back only a fraction of the amount of allegedly abusive or wasteful spending it identifies. According to the report, the OIG collected only $5.5 million in 2012 and 2013, during which it identified $1.1 billion in possible Medicaid overpayments.

The OIG's practice of freezing payments to physicians it suspects of Medicaid fraud "has gone beyond the law's intent," the report says. The staff offers recommendations to streamline the OIG's investigative process and clarify the agency's authority to deny payment to physicians caring for Medicaid patients. 

Texas law requires the OIG to suspend Medicaid payments to physicians when a “credible allegation of fraud” exists. The Texas Medical Association worked with lawmakers in 2013 to craft Senate Bill 1803, which clarifies the definition of credible allegation of fraud and establishes timelines for when OIG must notify doctors of an investigation or can withhold payments in the process. 

Still, the report reads, the OIG uses payment holds as a bargaining tool, "even for cases that do not pose significant financial risks to the state." The recommendations would forbid the OIG from using payment holds in all but the most serious circumstances. The report also suggests the OIG pay all costs of payment hold hearings before the State Office of Administrative Hearings (SOAH). Currently, the OIG forces physicians to pay half the cost of their hearing. 

TMA Backs Office Overhaul

TMA Select Committee on Medicaid, CHIP, and the Uninsured Chair John Holcomb, MD, wrote to Sen. Jane Nelson (R-Flower Mound), the Sunset Advisory Commission chair, saying TMA supports the staff's call to overhaul OIG's investigative process. 

TMA has long championed improvements in the Medicaid system and in OIG's investigations of physicians accused of fraud, waste, and abuse. In his letter, Dr. Holcomb said, "Specifically related to payment holds, TMA supports the Report's recommendations to clarify OIG's payment hold authority and streamline the CAF [credible allegation of fraud] hold hearing process." 

TMA supports these sunset report recommendations:  

  • Have a fair administrative process designed to define, detect, and prevent fraudulent and abusive conduct that wastes taxpayer funds;
  • Improve the efficiency of the investigation process, reserve payment holds for serious situations to mitigate ongoing financial risk to the state, and streamline the administrative appeal hearing process;
  • Include the expertise of medical practitioners with appropriate training and experience in investigations concerning the practice of medicine;
  • Implement quality assurance reviews and consistency in investigations;
  • Clarify organizational oversight and accountability in an effort to ensure OIG is efficiently and effectively accomplishing its mission to combat fraud, waste, and abuse;
  • Clarify the roles and responsibilities among and between OIG, managed care organizations, and special investigative units; and
  • Require OIG to pay the full hearing costs for payment hold appeals at the SOAH.  

Dr. Holcomb, who also testified in person before the Sunset Advisory Commission, adds that clarifying Medicaid rules and regulations would allow physicians who voluntarily enroll in the Medicaid program to dedicate their time, talent, and staff resources to patient care, as opposed to administrative hassles, burdensome audits, and fear of fraud and abuse accusations. 

TMA advocates education and outreach to prevent administrative errors and improper payments. The commission's report discusses the need to "promote compliance and help prevent fraud, waste, abuse, and certainly errors, by educating providers on Medicaid policies and procedures."

Read more about TMA's advocacy efforts

Legislature Considers OIG Changes

At hearings in November, members of the Sunset Advisory Commission lauded the report for reflecting their concerns. Sen. Charles Schwertner, MD (R-Georgetown), says he answers to both health care professionals and to media outlets regularly about the OIG's actions.

"We have a loss of confidence in your [OIG] office," he said.

Sen. Juan "Chuy" Hinojosa (D-McAllen) says the report proves the OIG slaps health care professionals with fraud charges for what are actually clerical mistakes. 

"I look forward to making some changes," he said of the office.

Former Rep. Arlene Wohlgemuth, who served in the legislature from 1995-2005, addressed the Sunset Advisory Commission in hearings as executive director of the Texas Public Policy Foundation. She says employees at nursing homes and other facilities tell her the OIG seems to have an "I caught you" mentality, rather than trying to help the facility improve during an investigation.

"I would like to see … incentives for the inspectors to help the nursing homes … to become better, if there's not intentional neglect and abuse," she said.

Ms. Wohlgemuth says the OIG has done little to encourage physicians to participate in Medicaid.

Senator Hinojosa agrees: "We discourage a lot of honest health care providers from being part of the system and making it work better." According to a 2014 Physicians Foundation survey, 46.5 percent of Texas physicians accept Medicaid patients.

Senator Hinojosa adds when you accuse physicians of fraud, it taints their reputation in the community, and the OIG casts a wide net of fraud that captures many innocent doctors.

Sunset staff Senior Policy Analyst Sarah Kirkle, who managed the review of the OIG, also spoke during Sunset hearings. The legislature created the office in 2003, and it was largely inactive until it attempted to ramp up enforcement in the last couple of years, she says. Despite its boost in activity, its investigations lack structure, and the office is not communicative or transparent, she adds.

"What is lacking is … guidance to the employees on how to make their decisions," Ms. Kirkle said during the hearing, adding the investigative process needs structure to ensure consistency and equal treatment of all those whom the OIG investigates.

Ms. Kirkle also mentioned an OIG employee accused of manipulating data during an investigation, but she did not say the employee's name or go into detail about the case. According to the article, "Fraud inspector's falsified work could cost state millions," published Oct. 18 in the Austin American-Statesman, Brad Nelson, a senior actuary, was fired from OIG for manipulating statistics in the office's investigation of Austin dentist Rachel Trueblood. The OIG had accused Dr. Trueblood of $16.2 million in fraudulent Medicaid charges. The state settled the case one day after Mr. Nelson was fired for just $39,000, the article states. 

In its report, the sunset staff recommends the legislature require the OIG to improve staff training and develop criteria for opening a case and separate criteria for prioritizing cases by highest potential for recovery or by financial risk to the state through volume of billings, history of noncompliance, or identified fraud trends. The recommendation also would require criteria to guide OIG investigators in closing cases that are not worth a full-scale investigation.

Rep. Richard Pena Raymond (D-Laredo) says the legislature wants to see people who steal from Medicaid prosecuted, but the OIG appears to be abusing its power. 

"This agency is messed up. It's been messed up for a long time," he said. "It's not [Inspector General] Doug Wilson. It's the operation."

Inspector General Responds to Criticisms 

In his testimony before the Sunset Advisory Commission, Mr. Wilson said he took over leadership of the OIG four years ago and only recently acquired the manpower to work through cases in a more timely manner.

"There is a backlog of cases," he said. "We're getting a ton of complaints." 

Mr. Wilson says the office now has 103 investigators and about 1,150 open cases.

"We take this report and its findings seriously," he said. "There is no question there are areas we need to improve upon."

Rep. Cindy Burkett, (R-Sunnyvale) says if Mr. Wilson's numbers are correct, that's only 11 cases per investigator, which, she says, is not an unreasonable workload. 

If the legislature adopts staff's recommendations, the OIG, which now takes an average of three years to complete a case, would have to conduct a preliminary investigation against a Medicaid participant within 45 days. The OIG would have 180 days to conduct and complete a full investigation.

The OIG is, by statute, a division of HHSC, but organizationally and practically, it operates independently. The governor, not HHSC Executive Commissioner Kyle Janek, MD, appoints the inspector general to a one-year term of office. The report recommends allowing the HHSC commissioner to make the appointment.

Sunset Staff Director Ken Levine says HHSC Executive Commissioner Janek does not feel he has the authority to fix problems within the OIG because Mr. Wilson is an appointee of the governor. If the legislature moves the OIG under the direct supervision of Dr. Janek, he would have a responsibility to make sure the office operates properly, Mr. Levine says.

Further, the report suggests the legislature require the OIG to undergo a special sunset review in six years, rather than the usual 10 years. "Within six years, OIG should have a case management system and the ability to track data to better illustrate its overall performance and the effectiveness and efficiency of its processes," the report states.

Sunset Advisory Commission Chair Senator Nelson appointed a workgroup, led by Senator Hinojosa, to examine the staff recommendations regarding OIG. The workgroup will return to the full commission with modifications on the recommendations. Once the Sunset Advisory Commission finalizes recommended changes to OIG, the Texas Legislature will consider and vote on the changes.

"We are ready to work with the sunset commission and the Texas Legislature," Mr. Wilson said.

Kara Nuzback can be reached by phone at (800) 880-1300, ext. 1393, or (512) 370-1393; by fax at (512) 370-1629; or by email.

Legal articles in Texas Medicine are intended to help physicians understand the law by providing legal information on selected topics. These articles are published with the understanding that TMA is not engaged in providing legal advice. This is not a substitute for the advice of an attorney. When dealing with specific legal matters, readers should seek assistance from their attorneys.


OIG by the Numbers

2014 budget: $48.9 million
Full-time employees: 774
Open cases: 1,156
2013 cases resolved: 12
Average time from complaint receipt to final notice of overpayment: 1,143 days
Amount collected in Medicaid overpayments, 2012-13: $5.5 million
Amount identified in Medicaid overpayments, 2012-13: $1.1 billion 

Source: Sunset staff report on HHSC

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