OIG Revises Performance Standards for State Medicaid Fraud Control Units

On Friday, June 1, 2012, the Office of Inspector General (OIG) issued a guidance detailing the new standards it will apply to assess the performance of State Medicaid Fraud Control Units (MFCU) during the certification/recertification process. The revised standards will supercede the standards published on September 26, 1994. On October 6, 2011, OIG issued a proposal for the revised standards and has made several adjustments to the proposal as a result of commenters’ recommendations.

The function of MFCUs is to investigate fraud and patient abuse and neglect by Medicaid providers and prosecute if necessary. OIG is the agency responsible for certifying and recertifying each MFCU on an annual basis to ensure they are in compliance with laws and OIG policies. MFCUs are operated as “single identifiable entit[ies]” of each state’s government and must be “separate and distinct” from the state’s Medicaid agency. They are required to operate as part of a state agency with prosecutorial authority or have authority to refer cases to such an agency, and must have such authority over both facilities that are funded by the Medicaid program and “board and care” facilities that do not receive Medicaid funding. While MFCUs are administered by states, they are mostly funded by the federal government, receiving 90 percent of funding for their initial three years of operation and 75 percent thereafter. States are obligated to fund the remainder of the MFCU’s costs.

Use of Statistics

The primary criticism of commentors involved the proposed revision for Standard 8 “Performance Outcome and Measurement,” which required each MFCU to design a performance management system that incorporates both performance goals and outcomes for case work, as well as non-case work. The National Association of Medicaid Fraud Control Units submitted comments that firmly disagreed with this standard because it appeared as a new mandate for MFCUs and it served as an over-reliance by the OIG on statistical measures to evaluate the performance of MFCUs.

In response to this criticism, OIG removed the proposed revision for Standard 8, which imposed a distinct benchmark for monitoring case outcomes. Elements of that standard relating to performance outcomes, such as fines, referrals, and convictions, were combined with the new Standard 7 “Maintaining Case Information.” While statistical information relating to those elements will be reviewed by OIG, MFCUs will not be evaluated solely on that information, as OIG conceded that it would be inappropriate to do so. The agency emphasized that statistical outcome comparisons between MCFUs are discouraged since each MFCU is subject to unique organizational constraints and legal authorities.

While the development of of monitoring and measurement processes and management systems will not be required of MFCUs in the standards, OIG strongly urges them to implement such processes as an effective practice and offers suggestions to accomplish that task. OIG also encourages MFCUs to monitor their own involvement in performance-improving non-case endeavors, such as outreach activities that increase fraud and abuse referrals.

The final version of the revised performance standards can be viewed here.