By Brandy Schnautz Mann 

In January, the Office of the Inspector General (the "OIG") of the Texas Health and Human Services Commission ("HHSC") released its FY 2009 Annual Report, which showcases what was, in the words of the report, "a record year for the OIG." The OIG is the state entity charged with investigating fraud, waste, and abuse in the health and human services programs in Texas, including the state Medicaid program. The report touts the OIG's recovery of $338 million in FY 2009, which exceeds by $68 million the dollar amount recovered in FY 2008.  The report also suggests that health care providers who participate in Medicaid and other state-funded programs can expect increased scrutiny from the OIG in 2010.

According to the FY 2009 Annual Report, the OIG received approximately $62.4 million of the $338 million total recovery through the imposition of sanctions and civil monetary penalties ("CMPs") on health care providers.  This amount is actually quite comparable to the total sanctions and CMPs collected in FY 2008 of $61.4 million.  The big jump in dollars came between FYs 2008 and 2007, when total sanctions and CMPs jumped $48.2 million.  What should concern providers about the relative stability of sanctions and CMPs collected in FYs 2008 and 2009 is in the details of the report.  Specifically, the OIG explains that a reorganization of the Sanctions Section during FY 2009 resulted in a "temporary interruption in the aggressive pursuit of administrative enforcement cases" and a corresponding "reduction in the collection of overpayments and penalties."  This language implies that, absent this reorganization, dollars collected would have substantially exceeded the $62.4 million total.  The report also suggests that a restructured, more efficient Sanctions Section has entered FY 2010 with renewed collections vigor.

The OIG received $30 million of the total recovered through the efforts of the Utilization Review ("UR") Unit of the OIG's Quality Review Section.  In FY 2009, the UR Unit conducted on-site and desk reviews of 29,843 hospital claims and 23,702 nursing facility forms to identify overpayments to these entities by the Medicaid program.  The UR Unit identified $22.2 million in overpayments to hospitals and $8 million in overpayments to nursing facilities.  Although amounts recovered from hospitals remained stable between FYs 2008 and 2009, amounts recovered from nursing facilities actually declined by 22%; however, one must consider this decline in light of the 2009 transition in payment methodology from the Texas Index for Level of Effort ("TILE") to the Resource Utilization Group ("RUG") model.  Specifically, in FY 2008, under the TILE model, the UR Unit reviewed 33,420 nursing facility forms.  In FY 2009, as the unit transitioned away from TILEs to RUGs, the number of forms reviewed by the UR Unit declined by 30%—but the dollar amount recovered declined only 22%.  This trend indicates that as the transition to RUGs is completed in FY 2010, the number of nursing facility forms reviewed by the unit will increase, along with the amount of money recovered.

The UR Unit refers cases of suspected provider fraud, waste, and abuse of Medicaid dollars to the Medicaid Provider Integrity ("MPI") Section of the OIG.  The MPI investigates all provider types for Medicaid violations including altered records, billing for services not rendered, and billing for services that are not medically necessary.  The MPI refers cases involving suspected criminal activity to the Office of the Attorney General (the "OAG"). According to the report, FY 2009 witnessed an increase in the number of investigations of providers for Medicaid fraud or abuse opened—from 455 opened in FY 2008 to 563 opened in FY 2009.  Cases referred to the OAG remained stable at 270, and cases referred to the Sanctions Section increased from 21 in FY 2008 to 29 in FY 2009.  The report specifically references one case closed by the MPI that involved a lengthy joint investigation between the OIG and the federal Office of the Inspector General and the Department of Justice and netted a $4 million settlement.

The largest increases in recovery by the OIG came from its Third Party Resources ("TPR") Unit, which is charged with minimizing Medicaid payments to providers by ensuring that third party payors pay their share of a medical claim before Medicaid provides payment.  The TPR Unit saw a $70 million increase in recovered funds over FY 2008, most of which came from third party payors such as insurance companies and Medicare.  The two programs within the TRP Unit aimed primarily at recovery from healthcare providers witnessed only moderate increases from FY 2008.  Reimbursement made by providers to the Medicaid program following their receipt of payment from third party payors increased by $125,000.  Provider Audit Recoveries, which identify duplicate payments resulting from third party recoveries by providers, increased $212,000.

Although often less visible than its federal namesake, the state OIG regularly targets healthcare providers suspected of fraud, waste, or abuse and conducts audits designed to minimize payments made by the Medicaid program.  There is no indication in the FY 2009 Annual Report that audits or investigations will decrease in number or intensity in FY 2010.  Indeed, as the OIG’s Sanction Section emerges from reorganization and the UR Unit increases its review of nursing facility RUGs, providers are likely to witness more intense scrutiny.  When combined with the increased efforts of federal authorities to ferret out Medicare "waste," Texas providers can expect compliance measures to appear somewhere near the top of their 2010 "to do" lists.

If you have any questions regarding this e-Alert, please contact Carla Cox at 512-236-2040 cjcox@jw.com or Brandy Schnautz Mann at 512-236-2310 or bmann@jw.com.