BG H.B. 820 75(R)BILL ANALYSIS PUBLIC HEALTH H.B. 820 By: Cuellar 3-19-97 Committee Report (Substituted) BACKGROUND According to the Comptroller of Public Accounts, Texas spends nearly $10 billion dollars a year on Medicaid. With more than 550,000 Medicaid claims from 121,000 providers processed in an average week, the implications of any fraudulent claims and their cost to the taxpayers are staggering. Unfortunately, such offenses are difficult for the Attorney General's office to detect. One way that other states have attempted to deal with the problem of health care fraud is through the authorization of citizen qui tam suits, which encourage the public to come forward with information. Qui tam statutes establish civil actions and recoverable penalties for acts such as health care fraud. These statutes also provide that part of such a penalty go to the person who brings the action with the remainder going to the state or other institution. Thus, they are more attractive than Texas's current whistle-blower statutes, which only promise citizens proceeds from the Health and Human Services Commission funds, contingent on their availability. PURPOSE CSHB 820 proposes the addition of a qui tam statute to the state's legal tools for combating Medicaid fraud. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 36, Human Resources Code, by designating certain sections and renumbering other sections, and adding a new Subchapter A, heading entitled "General Provisions." SECTION 2. Amends Chapter 36, Human Resources Code, by designating certain sections and renumbering other sections, and adding a new Subchapter B, heading entitled "Action by Attorney General." SECTION 3. Renumbers a Section of the Human Resources Code, and amends the reference to a renumbered Section in Subsection (e). SECTION 4. Amends Sec. 36.005, Human Resources Code, (as renumbered by this Act as Sec. 36.053) Subsection (b) by updating a reference to a changed section number to read Sec. 36.054 instead of 36.006. SECTION 5. Amends Sec. 36.009, Human Resources Code, (as renumbered by this Act as Sec. 36.005) by updating references to a changed section number in Subsection (a) to read Sec. 36.052 instead of 36.004. Adds Subsection (c) stating that a person is considered liable under Sec. 36.052 if a person is found liable in an action brought under Subchapter C. SECTION 6. Amends Subchapter B, Chapter 36, Human Resources Code by adding Sec. 36.055, allowing the attorney general to bring an action as relator in respect to 31 U.S.C. Sections 3729 and 3730, relating to the Medicaid program. Permits the attorney general to contract with a private attorney to represent the state. SECTION 7. Adds Subchapter C, entitled "Action by Private Persons", to Chapter 36, Human Resources Code, as follows: Sec. 36.101 Action by Private Authorized. Subsection (a) allows a civil action for a violation of Section 36.002 to be brought by a person for the person and the state. Requires that the action be brought in the name of the state. Subsection (b) clarifies that in a suit filed under this subchapter, a person in violation of Section 36.002 is liable under Section 36.052. Sec. 36.102 Initiation of Action. Subsection (a) requires a person suing under this chapter to serve a copy of the petition, and a written disclosure of all evidence and information on the attorney general as per Texas Rules of Civil Procedure. Subsection (b) requires that the petition be filed in the judge's chambers and remain under seal until the 60th day after the filing date; prohibits serving the defendant with the petition until ordered by the court. Subsection (c) allows the state to intervene and proceed with the action if not later than 60 days after the petition and evidence was received by the attorney general. Subsection (d) allows the state to request to extend the petition's sealed time period if good cause is shown. Provides that affidavits or other submissions for such motions may be supported in camera (in the judge's chambers). Subsection (e) allows the dismissal of a suit under this subchapter only if consented to in writing by the court and the attorney general. Sec. 36.103. Establishes that a defendant is not required to file an answer until the 20th day after a petition, filed under this subchapter, is unsealed and legally served. Sec. 36.104. Requires that the state proceed with the action; or notify the court that action has been declined by the last day the petition is under seal. Sec. 36.105. Allows the attorney general to contract with a private attorney to represent the state in an action under this subchapter. Sec. 36.106. Prohibits intervention or related action by a person other than the state. Sec. 36.107. Regarding the rights of the parties if the state continues action. Subsection (a) establishes that the state has primary prosecuting responsibility and is not bound by an act of the original party. Establishes the right of the original party to continue subject to specified limitations. Subsection (b) allows state dismissal over an original party's objection if the attorney general notifies the person that the state has filed to dismiss and the person is provided an opportunity for a court hearing. Subsection (c)allows the state to settle over an original party's objection if a court hearing determines it to be a fair, adequate, and reasonable settlement. Allows the hearing to be held inside the judge's chambers. Subsection (d) allows the court to limit a person's participation if shown that unrestricted involvement in the suit would interfere or unduly delay prosecution; or would be repetitious, irrelevant, or for purposes of harassment. Includes limiting the number and length of witnesses testimonies, limiting crossexamination, or other participation in the suit. Subsection (e) allows the court to limit the original party's participation if the defendant shows that the person's unrestricted involvement is only for harassment or would submit the defendant to unnecessary expense. Sec. 36.108. Regarding rights of the parties if the state decides not to proceed with the action. Subsection (a) establishes that the original party has the right to bring the suit if the state opts not to proceed. Subsection (b) requires the parties to serve the attorney general with all state requested pleadings and send the attorney General copies of all deposition transcripts. Subsection (c) allows the court to permit the state to intervene at a later date if good cause is shown, and the status and rights of the original party are not limited. Sec. 36.109. Stay of Certain Discovery. Subsection (a) allows the court to halt the original party's discovery for up to 60 days, whether or not the state remains in the suit, if such discovery would interfere with the state's work on a civil or criminal case arising out of the same facts. Subsection (b) requires that motions heard to halt discovery be within judge's chambers. Subsection (c) allows court extension of the 60-day halt period if, in chambers, it is further shown that the state has diligently pursued investigation but still needs more time. Sec. 36.110. Pursuit of Alternate Remedy by State. Subsection (a) allows the state to pursue its claim through other available remedies, including administrative proceedings. Provides that if the state pursues another remedy, the original party retains the rights that were established under this subchapter. Subsection (b) states that a finding of fact or conclusion of law made final in the other proceeding is conclusive on all parties. Establishes that the finding or conclusion is final if it has been determined so on appeal, or no appeal has been filed by the expiration date of the appeal filing time, or it is not subject to judicial review. Sec. 36.111. Award to Private Plaintiff. Subsection (a) establishes that, except as provided by Subsection (b), the original party is entitled to 10% to 25% of the proceedings of an action brought by the state, depending on the extent of the person's substantial contribution to the case. Subsection (b) allows the court to award an appropriate amount, not equal to more than 7% of the proceeds, if it finds that the suit is based less on the original party's information and more on other information disclosed through other sources. Requires the court to consider the significance of the original party's information in advancing the case to litigation. Subsection (c) allows the court to grant the original party a reasonable amount of any settlement or award if the state does not participate in the suit; limits the award to between 25% and 30% of the proceeds. Subsection (d) requires that payment to the original party be made from the proceeds of the suit; provides that an awarded party is also entitled to receive a reimbursement for necessary expenses, attorney's fees, and costs. Requires that this reimbursement amount be paid by the defendant. Subsection (e) specifies that the term "proceeds of the action" includes proceeds of a settlement. Sec. 36.112. Reduction of Award. Subsection (a) allows the court to reduce the amount of the award if it finds that the action was brought by a person who planned and initiated the fraud. Subsection (b) requires the court to dismiss the original party from the suit and prohibit them from receiving any part of the proceeds if convicted of criminal conduct from his or her fraud. Establishes that such dismissal does not interfere with the state's right to continue with the suit. Sec. 36.113. Award to Defendant for Frivolous Action or Action Brought for Purposes of Harassment. Subsection (a) allows the court to award reasonable attorney's fees and expenses to the defendant in cases where the action is brought by the original party and not the state if the defendant wins in the action and there is a court determination that the claim is frivolous or harassing. Subsection (b) establishes that Chapter 105, Civil Practices and Remedies Code, entitled "Frivolous Claim by State Agency," applies to state actions under this subchapter. Sec. 36.114. Certain Actions Barred. Subsection (a) prohibits an action from being brought if a similarly based civil suit or administrative proceeding, in which the state is a party, is already underway. Subsection (b) prohibits a person from bringing a suit based on public disclosure or news, unless that person is an original source of the information. Defines "original source" to mean a person who has direct and independent knowledge of the relevant facts and has voluntarily shared that knowledge with the state before filing a suit. Sec. 36.115. State Not Liable for Certain Expenses. Establishes that the state is not liable for expenses a person incurs in an action brought under this action. Sec. 36.116. Retaliation by Employer Against Person Bringing Suit Prohibited. Subsection (a) entitles anyone suffering discrimination or retaliation for a suit brought under this subchapter to reinstatement with the same seniority and financial awards amounting to at least twice back pay, interest on the back pay, and compensation for any special damages, including costs and attorney's fees. Subsection (b) allows such person to seek legal relief in the appropriate district court. SECTION 8. Amends Chapter 531, Government Code, by adding Subchapter C, entitled " Medicaid Fraud, Misuse, or Overcharges", as follows: Section 531.101. Award for Reporting Medicaid Fraud, Misuse, or Overcharges. Subsection (a) allows the Health and Human Services Commission to award someone who reports fraud or misuse of funds in the state Medicaid program, if the commission determines that the recovery of funds or termination of the fraud results from the disclosure. Subsection (b) requires the commission to determine the amount of such award, which must equal at least 10% of the resultant state savings. Requires that the commission, in its determination of the award amount, consider the importance of the report in ensuring fiscal integrity of the program. Subsection (c) establishes that such award is subject to appropriation. Requires that the award come from money appropriated or available to the commission, and prohibits additional appropriation of money for purposes of paying the award. Subsection (d) states that an award paid from federal funds is subject to the permissible use under federal law. Subsection (e) specifies that anyone bringing a suit under Subchapter C, Chapter 36, Human Resources Code, is ineligible for an award under this section. Sec. 531.102 Assisting Investigations by Attorney General Subsection (a) requires the commission and the attorney general to execute a memorandum of understanding by which investigative support as required in connection with cases under Subchapter B, Chapter 36, Human Resources Code must be provided by the commission. Requires that, under the memorandum of understanding, the commission assist in preliminary and ongoing investigations for attorney general actions brought through this section. Subsection (b) requires the memorandum of understanding to stipulate that in one fiscal year, the commission is not required to provide investigative support in more than 100 open cases. SECTION 9. Requires the office of the attorney general to develop strategies to increase state recoveries under 31 U.S.C. Sections 3729-3733, and requires the office to report results of its efforts to the Legislature by September 1, 1998. SECTION 10. Establishes conformation of Chapter 531, Government Code, to Section 1, Chapter 444, Acts of the 74th Legislature, Regular Session, 1995. Specifies that in case of conflict relating to nonsubstantive additions and corrections, this Act would prevail over other legislation of the 75th Legislature, Regular Session. SECTION 11. Establishes that Section 531.102 is contingent on passage of other legislation which would transfer employees of the Texas Department of Human Services and the Texas Department of Health to the Health and Human Services Commission. SECTION 12. Allows the attorney general to retain a portion of the recoveries for the administration of this act as specified under the General Appropriations Act. SECTION 13. Effective date: September 1, 1997. SECTION 14. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE CSHB 820 replaces Section 36.105 with a new heading and content, so as to clarify that a private attorney may be hired in a state action under this subchapter. The original section and subsequent sections follow, and are renumbered to conform. The substitute bill removes any state responsibility for paying expenses for required copies of pleadings and deposition transcripts even when requested by the state as per Section 36.108(b). Section 531.102 has been newly added to Chapter 531, Government Code under SECTION 8 of the substitute bill. CSHB 820 replaces SECTION 11 and SECTION 12 with two new sections, and then renumbers and conforms the original sections to subsequently follow the additions.