Kusserow on Compliance: OIG issues detailed report on state Medicaid Fraud Control Units

1,564 Criminal Convictions

1,000 Civil Settlements

Almost $2 billion in recoveries

The OIG Office of Evaluation and Inspection (OEI) issued a more detailed analysis of statistical results from the State Medicaid Fraud Control Units (MFCUs) for 2016. The OIG is the designated Federal agency that oversees them and has been instrumental in establishing the Units.  As Inspector General, I worked to establish a number of these MFCUs that currently operate in 49 States and the District of Columbia (States). Once established the OIG administers a grant to each of the units that provides 75 percent of their funding and set performance standards, reviews each state’s program, provides technical assistance identify best practices, and collect and analyze statistics. The mission of MFCUs is to investigate and prosecute, under State law, Medicaid provider fraud and patient abuse or neglect. In FY 2016, the OIG reported 1,564 convictions, over one-third of which involved personal care services attendants. The OIG reported nearly 1,000 civil settlements and judgments, with settlements with pharmaceutical manufacturers making up almost half of settlements; along with almost $1.9 billion in criminal and civil recoveries. The OIG works often with the MFCUs and in 2016 the OIG Medicaid cases resulted in 312 indictments, 348 criminal actions, and 222 civil actions. These Medicaid cases—some of which also involved Medicare—resulted in almost $3 billion dollars in expected recoveries. However, in most cases the MFCUs work their own cases without assistance from other agencies.

It is noteworthy that current funding for Medicaid fraud control is at a higher level than for the federally funded and administered Medicare program. Medicaid annual expenditures exceed $500 billion dollars and funding for the MFCUs was also at a high level of $258,698,147 in 2016.  The staffing level of investigators, auditors, and attorneys was 1,965. Those entities investigated 15,505 fraud cases and another 3,221 abuse and neglect cases. The largest category of convictions involved personal care services (PCS) (35 percent). Nursing care came in second (11 percent) and involved of licensed practical nurses (LPN), registered nurses (RN), physician assistants (PA), or nurse practitioners (NP). Convictions of nurse-aides represented the third largest category (10 percent).

In this report, the OIG provided a detailed breakdown of the types of cases and trending data. Statistical results by state are included in the OIG Report.  Comparison of results to the prior year can be made by referring to the OIG issued report for 2015 that noted MFCUs achieving 1,553 convictions, 731 civil settlements and judgments, and $744 million in criminal and civil recoveries.

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 © 2017 Strategic Management Services, LLC. Published with permission.

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: HHS OIG annual report on Medicaid Fraud Control Units

Medicaid Fraud Control Units (MFCUs) are funded jointly by each state and the federal government. Federal funding is administered by the HHS Office of Inspector General (OIG) with each receiving approximately 75 percent of its total expenditures from the federal government. In fiscal year (FY) 2015, combined federal and state expenditures for the MFCUs totaled approximately $251 million.

Statistical results from 2015 MFCU investigations

  1. 1,553 convictions
  2. 731 civil settlements
  3. $744 million in criminal and civil recoveries
  4. 71 percent of convictions involved fraud
  5. 29 percent of convictions involved abuse or neglect
  6. Half of fraud cases involved unlicensed providers
  7. Personal care services attendants accounted for 439 convictions (or 65 percent of all fraud convictions)
  8. 40 percent of all abuse or neglect convictions were nurse aides, with 160 convictions
  9. 117 drug diversion cases were 8 percent of convictions and $4.4 million in recoveries
  10. All MFCUs reported civil settlements or judgments, ranging from 3 to 69 per Unit
  11. 731 civil settlements and judgments
  12. 279 (38 percent) civil settlements involved pharmaceutical manufacturers
  13. 54 settlements and judgments involved retail and wholesale pharmacies
  14. On average MFCUs recovered almost $3 for every dollar spent

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

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