Everything is Big in Texas, Including Fraud Efforts. Maybe Too Big, Say Doctors

CORRECTION: This post was edited on August 29, 2012 to reflect that Carousel Pediatrics is not a hospital but a large pediatric medical practice.

With the success of recent Texas Medicaid fraud efforts, the state’s Health and Human Services Commission has been applauded as a model for other states seeking to reduce costs in their own Medicaid programs. Recently, the Commission’s Office of Inspector General (OIG) has greatly increased the number of cases under investigation and subsequently, the potential amount of money recovered.

Part of the OIG’s success has come as a result of the employment of a tactic called a payment hold, which allows the agency to deny reimbursement to the provider in question under any federal Department of Health and Human Services (HHS) program, including Medicare and Medicaid, while the OIG completes its investigation of the matter. This strategy has many health care providers crying foul, claiming that payment holds punish providers without affording them due process.

Since 2011, the OIG has implemented payment holds for about 100 health care providers, effectively halting the financing for many of them. Under federal law, a state must cease Medicaid payments if a “credible allegation of fraud” (CAF) has been verified by the state’s Medicaid agency. Texas law supports the federal regulation by permitting a stoppage in payments “on receipt of reliable evidence that the circumstances giving rise to the hold on payment involve fraud or willful misrepresentation under the state Medicaid program…” CAF holds can now be issued on a “preponderance of the evidence” as opposed to the higher standard of “beyond a reasonable doubt.”

Providers contend that as little as an anonymous call to the agency’s fraud hotline can be interpreted by the OIG as a CAF, and can result in payments being suspended immediately without a hearing. These providers express concerns that this practice cripples their businesses and affects their ability to provide services to Medicaid patients, causing a lack of access to health care for the poor residents and children covered under the program.

A prominent Texas pediatric medical practice, Carousel Pediatrics, recently came under suspicion for billing errors and had payments cut off by OIG while it investigated. Panic ensued as the hospital could not afford to treat its Medicaid patients, which make up 90 percent of the 40,000 children it treats. It took intervention by Texas HMOs and Medicaid managed care plans, which defended the hospital, for payments to be reinstated.

One doctor stated that a hold that has been placed on his practice for months while the OIG completes its investigation “is like an atom bomb being dropped on my business. I could lose everything.” He claims that he has been forced to cut his employees’ wages as a result of the payment freeze and that layoffs are a real possibility.

The OIG emphasizes the importance of freezing payments at the first indicator of fraud or abuse. “When we’re going after them after the fact, they’ve already spent our money,” said one agency official.

The agency maintains that it utilizes hired physicians to assist it with thorough reviews before issuing payment holds, and that collected data dictates which providers are targeted by the investigations. The agency claims this strategy is essential to saving the program costs of up to $50 million over time, as they had been pressured to do by state lawmakers.

OIG officials conceded that providers may not be able to get administrative hearings for months after a payment hold is issued, but stated that providers may access an informal review of their case at any time.