Highlight on Oregon: Medicaid fraud control unit gets report card from OIG

A 2016 study by the HHS Office of Inspector General (OIG) of Oregon’s Medicaid Fraud Control Unit (MFCU) found that for fiscal years (FYs) 2013 through 2015, the Oregon Unit reported 92 criminal convictions, 34 civil judgments and settlements, and combined criminal and civil recoveries of nearly $33 million.

The OIG study also found that while the Oregon Unit was generally in compliance with applicable laws, regulations, and policy transmittals, it identified three areas where the Unit should improve its adherence to performance standards and its compliance with applicable federal requirements. Specifically, the Unit: (1) did not fully secure its case files; (2) part of the Unit’s memorandum of understanding (MOU) with two of its state partners was inconsistent with the federal regulation governing Medicaid payment suspensions; and (3) the Unit did not report some convictions and adverse actions to federal partners within the appropriate timeframes.

MFCU program

The mission of MFCUs is to investigate and prosecute Medicaid provider fraud and patient abuse or neglect under state law. Section 1902(a)(61) of the Social Security Act requires each state to operate a MFCU, unless the Secretary of HHS determines that operation of a Unit would not be cost-effective because minimal Medicaid fraud exists in a particular state and the state has other adequate safeguards to protect Medicaid beneficiaries from abuse and neglect. Currently, 49 states and the District of Columbia have MFCUs.

Section 1903(a)(6)(B) gives the HHS Secretary the authority to delegate the administration of the MFCU grant program. The authority to administer the MFCU grant program has been delegated to the OIG. To receive federal reimbursement, each Unit must submit an initial application to OIG for approval and be recertified each year thereafter. In annually recertifying the Units, OIG evaluates Unit compliance with federal requirements and adherence to performance standards.

Study details

Of the Unit’s 92 convictions over the three-year period, the OIG found that 78 involved provider fraud and 14 involved patient abuse or neglect. Of the Unit’s 34 civil judgments and settlements, 33 were from “global” cases and one was from a state-only civil case. “Global” cases are civil False Claims Act (FCA) cases that are litigated in federal court by the U.S. Department of Justice and involve a group of MFCUs. According to Unit management, the Unit prioritizes the investigation of cases that will result in a criminal conviction and thus pursues few state-only civil cases.

Global cases accounted for $24 million of the $33 million in total recoveries. Of the approximately $8 million in recoveries from nonglobal cases, $2 million were from criminal cases and $6 million were from a state-only civil case in FY 2013.

Unsecured case files

During the onsite review, the OIG observed that the Unit’s paper case files were not secured from access by non-Unit staff. The OIG observed that the Unit stored case files for closed cases in cabinets without locks, located in general office space. And although individuals must use a coded access card to enter the Unit’s general office space, non-Unit staff could access the space without supervision during non-business hours. In addition, the Unit did not have policies or procedures in place for securing paper case files from unauthorized access.

MOU inconsistent with federal regulations

The OIG found that in its MOU with the Oregon Health Authority (OHA) and the Department of Human Services (DHS), the Unit requested that in all cases in which a credible allegation of fraud is referred to the Unit, the Medicaid agency find good cause not to impose a payment suspension. Such a “blanket” request pertaining to all referrals is inconsistent with the federal regulation governing Medicaid payment suspensions, which requires that a Medicaid agency suspend payments to a provider when there is a credible allegation of fraud against the provider, unless the Medicaid agency determines that good cause exists not to suspend payments. Unit management reported to the OIG that they were aware that the MOU needed to be revised to remove the blanket request and stated that they planned to make revisions in 2017. Unit management also told the OIG that although it had not updated the MOU to reflect the change, in January 2015 the it began making case-by-case determinations on whether to request that the Medicaid agency not impose payment suspensions for each referral.

Late reporting of convictions/adverse actions 

The study found that although the Unit reported nearly all convictions to the OIG and all adverse actions to the National Practitioner Data Bank (NPDB), it did not report some within the appropriate 30 day timeframes.

Specifically, out of 92 convictions, the Unit reported 14 convictions to the OIG more than 90 days after sentencing, 12 within 61 to 90 days after sentencing, and 28 within 31 to 60 days after sentencing. According to the OIG, late reporting of convictions could delay the initiation of the program exclusion process, resulting in improper payments to providers by Medicare or other federal health care programs, or possible harm to beneficiaries.

In addition, the OIG found that while the Unit reported 95 adverse actions to the NPDB, it reported 67 of these more than 30 days after the adverse action. Specifically, the Unit reported 21 adverse actions more than 90 days after the action, 8 within 61 to 90 days after the action, and 38 within 31 to 60 days after the action. The NPDB is designed to restrict the ability of physicians, dentists, and other health care practitioners to move from state to state without disclosure or discovery of previous medical malpractice and adverse actions. As with program exclusions, late reporting of adverse actions to the NPDB could result in improper payments or beneficiary harm.

OIG recommendations

The OIG report recommended that the Unit: (1) implement procedures for securing case files; (2) revise its MOU with state partners to be consistent with federal regulation; and (3) implement processes to ensure it reports convictions and adverse actions to federal partners within the appropriate timeframes. The Unit concurred with all three recommendations.

Kusserow on Compliance: GAO reported continued fraud vulnerability under the Affordable Care Act

The Government Accountability Office (GAO) issued a report that the Affordable Care Act (ACA) marketplaces remain “vulnerable to fraud,” after the agency successfully applied for coverage for multiple fake people, who hadn’t filed tax returns for 2014 but were still able to get tax credits to help pay their monthly premiums for 2016 coverage. The GAO engaged in testing by using undercover attempts to obtain health-plan coverage from the federal marketplace and selected state marketplaces for 2015. The tests found the federal marketplace and selected state marketplaces approved each of 10 fictitious application for subsidized health plans. All 10 were approved, even though eight of these 10 fictitious applications failed the initial online identity-checking process.

Four applications used Social Security numbers that were never been issued. Other applicants obtained duplicate enrollment or obtained coverage by claiming that their employer did not provide insurance that met minimum essential coverage. Three of GAO’s applications were approved for Medicaid, although GAO provided identity information that would not have matched Social Security. For two applications, the marketplace or state Medicaid agency directed the fictitious applicants to submit supporting documents, and GAO provided fake information that resulted in the applications were approved. A third marketplace did not seek supporting documentation, and the application was approved by phone. CMS, California, Kentucky, and North Dakota, advised the GAO that they are only inspecting for supporting documentation that has obviously been altered; otherwise documentation submitted would not be questioned for authenticity.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2016 Strategic Management Services, LLC. Published with permission.

New rule would allow attorney adjudicators, precedential Council decisions

In light of the incredible administrative backlog of Medicare appeals, CMS has proposed some changes to the appeals process. The agency now finds it appropriate to allow the chair of the Departmental Appeals Board (DAB) to deem Medicare administrative council (MAC) decisions precedential. The Proposed rule also suggests allowing attorney adjudicators to issue decisions that do not involve a hearing, dismissals for withdrawn hearing requests, and remands for information.

Never going to catch up

In fiscal year (FY) 2014, each administrative law judge (ALJ) in the Office of Medicare Hearings and Appeals (OMHA) issued an average of 1,048 decisions and ordered over 450 other claims to be dismissed. Despite this increased productivity, the number of requests for hearings and reviews of QIC and IRE dismissal continue to grow. OMHA currently has the capacity adjudicate about 77,000 claims annually, but over 750,000 appeals were pending on April 30, 2016. In order to address these issues, HHS intends to implement new rules in an attempt to (1) request new resources for all levels of appeal; (2) reduce the number of pending appeals; and (3) reform legislation to allow new funding and new review authority.

Precedential decisions

MAC decisions are considered the final administrative decision, and once they are issued a party may proceed to judicial review. In 2004, HHS determined that precedential authority was not yet appropriate for these decisions, at least until after changes required under the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) (P.L. 106-554) and the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) (P.L. 108-173) were implemented. Now that they are, CMS proposes that the chair of the DAB have the authority to designate a MAC decision precedential in order to provide a “consistent body of final decisions of the secretary upon which [appellants] could determine whether to seek appeals.” CMS also believes that this would assist all adjudicators by providing clarity on some legal and policy issues.

When a decision is declared precedential, notice would be provided in the Federal Register, posted on an HHS website, and would bind all lower-level decision-makers. This includes all CMS components, HHS components that adjudicate under CMS jurisdiction, and on Social Security Administration (SSA) components that are also under CMS jurisdiction. The decision will no longer be binding if CMS revises the relevant authority or provision, such as manual instructions.

Additional Adjudicators

Certain appealable decisions by the SSA or Medicare contractors come with a right to a hearing before an ALJ. However, some hearing requests may be addressed without actually conducting a hearing. If the parties agree in writing that they do not wish to attend a hearing, or if the evidence supplied supports a finding for the appealing party on every issue, the ALJ may issue a decision on the record without a hearing. ALJs also receive a large number of requests to withdraw hearing requests. CMS proposes to allow attorney adjudicators to issue decisions in the following instances:

  • when decisions can be issued without a hearing;
  • dismissals when a hearing request is withdrawn; and
  • remands for information that can only be provided by CMS, CMS contractors, or at the direction of the MAC.

The rules would allow decisions and dismissals issued by attorney adjudicators to be reopened or appealed in the same manner as ALJ decisions. CMS states in its Proposed rule that allowing attorney adjudicators these powers would allow ALJs to focus on cases that include a hearing.

Next generation sequencing guidances intended to further precision medicine

The FDA is doing its part to support the precision medicine initiative by focusing on genomic study. Two draft guidances related to next generation sequencing (NGS) are intended to help industry continue pursuing innovation in the field while ensuring that tests are accurate and provide actionable results. The first draft guidance provides recommendations for NGS tests for hereditary diseases, and the second involves reliance on clinical evidence from existing genome databases to assist in obtaining marketing clearance or approval. The notices will officially publish in the Federal Register on July 8, 2016.

Sequencing for diagnosing hereditary diseases

Most in vitro diagnostic (IVD) tests are designed to search for certain genetic variants to test for known conditions, but NGS tests are designed to measure millions of substances and may detect new variations. These tests have broad uses, and the FDA has held various discussions to determine the best approach for regulatory oversight. At this time, NGS-based tests are automatically classified as Class III devices and subject to a premarket approval application (PMA). These tests may be reclassified into Class II following the de novo review process.

NGS-based testing will typically include several elements, from reagents to software, as well as a lengthy number of steps. Test developers should support the analytical validation by conforming with FDA standards or special controls to demonstrate that the developer has properly identified the intended clinical use and that the test is designed appropriately. This includes providing the indications for use, specific user needs for the test, specimen type, genome regions, performance needs, and components and methods for the test.

Database use

The FDA acknowledged that the adoption of NGS testing has generated an increasing amount of data, but noted that the newly discovered genetic variants are difficult to obtain and not publicly accessible. The aggregation of clinical genotype-phenotype association in generic variant databases could increase the amount of useful clinical evidence, which the agency encourages. If these databases follow the recommendations contained in the guidance, the agency would consider data and assertions obtained from these databases valid scientific evidence.

A database should: (1) provide sufficient information and assurances regarding the quality of source data; (2) provide transparency about the data source; (3) collect, store, and report data in compliance with regulations governing protected health information, data security, and subject protections; and (4) include information generated from validated methods. The database should strive for transparency and public accessibility, have a defined standard operating procedure (SOP), preserve data, and strive for a high level of security and privacy. The data must be of sufficient quality to ensure that the assertions made are accurate. Interpretation and assertions should conform to well-defined SOPs. The agency will also implement a recognition process for databases and their assertions.