By Cuellar, Coleman, Maxey, Dukes                      H.B. No. 820

         Substitute the following for H.B. No. 820:

         By Berlanga                                        C.S.H.B. No. 820

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to civil actions to recover fraudulent Medicaid claims.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Chapter 36, Human Resources Code, is amended by

 1-5     designating Sections 36.001, 36.002, 36.007, 36.008, 36.009,

 1-6     36.010, 36.011, and 36.012 as Subchapter A, renumbering Sections

 1-7     36.007, 36.008, 36.009, 36.010, 36.011, and 36.012 as Sections

 1-8     36.003, 36.004, 36.005, 36.006, 36.007, and 36.008, respectively,

 1-9     and adding a subchapter heading to read as follows:

1-10                      SUBCHAPTER A.  GENERAL PROVISIONS

1-11           SECTION 2.  Chapter 36, Human Resources Code, is amended by

1-12     designating Sections 36.003, 36.004, 36.005, and 36.006 as

1-13     Subchapter B, renumbering those sections as Sections 36.051,

1-14     36.052, 36.053, and 36.054, respectively, and adding a subchapter

1-15     heading to read as follows:

1-16                  SUBCHAPTER B.  ACTION BY ATTORNEY GENERAL

1-17           SECTION 3.  Section 36.004, Human Resources Code, as

1-18     renumbered by this Act as Section 36.052, is amended by amending

1-19     Subsection (e) to read as follows:

1-20           (e)  The attorney general may:

1-21                 (1)  bring an action for civil remedies under this

1-22     section together with a suit for injunctive relief under Section

1-23     36.051 [36.003]; or

1-24                 (2)  institute an action for civil remedies

 2-1     independently of an action for injunctive relief.

 2-2           SECTION 4.  Section 36.005, Human Resources Code, as

 2-3     renumbered by this Act as Section 36.053, is amended by amending

 2-4     Subsection (b) to read as follows:

 2-5           (b)  In investigating an unlawful act, the attorney general

 2-6     may:

 2-7                 (1)  require the person to file on a prescribed form a

 2-8     statement in writing, under oath or affirmation, as to all the

 2-9     facts and circumstances concerning the alleged unlawful act and

2-10     other information considered necessary by the attorney general;

2-11                 (2)  examine under oath a person in connection with the

2-12     alleged unlawful act; and

2-13                 (3)  execute in writing and serve on the person a civil

2-14     investigative demand requiring the person to produce the

2-15     documentary material and permit inspection and copying of the

2-16     material under Section 36.054 [36.006].

2-17           SECTION 5.  Section 36.009, Human Resources Code, as

2-18     renumbered  by this Act as Section 36.005, is amended by amending

2-19     Subsection (a) and adding Subsection (c) to read as follows:

2-20           (a)  The commissioner of human services, the commissioner of

2-21     public health, the commissioner of mental health and mental

2-22     retardation, the executive director of the Department of Protective

2-23     and Regulatory Services, or the executive director of another state

2-24     health care regulatory agency may suspend or revoke:

2-25                 (1)  a provider agreement between the department or

2-26     agency and a person found liable under Section 36.052 [36.004]; or

2-27                 (2)  a permit, license, or certification granted by the

 3-1     department or agency to a person found liable under Section 36.052

 3-2     [36.004].

 3-3           (c)  For purposes of this section, a person is considered to

 3-4     have been found liable under Section 36.052 if the person is found

 3-5     liable in an action brought under Subchapter C.

 3-6           SECTION 6.  Subchapter B, Chapter 36, Human Resources Code,

 3-7     as designated by this Act, is amended by adding Section 36.055 to

 3-8     read as follows:

 3-9           Sec. 36.055.  ATTORNEY GENERAL AS RELATOR IN FEDERAL ACTION.

3-10     To the extent permitted by 31 U.S.C. Sections 3729-3733, the

3-11     attorney general may bring an action as relator under 31 U.S.C.

3-12     Section 3730 with respect to an act in connection with the Medicaid

3-13     program for which a person may be held liable under 31 U.S.C.

3-14     Section 3729.  The attorney general may contract with a private

3-15     attorney to represent the state under this section.

3-16           SECTION 7.  Chapter 36, Human Resources Code, is amended by

3-17     adding Subchapter C to read as follows:

3-18                  SUBCHAPTER C.  ACTION BY PRIVATE PERSONS

3-19           Sec. 36.101.  ACTION BY PRIVATE PERSON AUTHORIZED.  (a)  A

3-20     person may bring a civil action for a violation of Section 36.002

3-21     for the person and for the state.  The action shall be brought in

3-22     the name of the state.

3-23           (b)  In an action brought under this subchapter, a person who

3-24     violates Section 36.002 is liable as provided by Section 36.052.

3-25           Sec. 36.102.  INITIATION OF ACTION.  (a)  A person bringing

3-26     an action under this subchapter shall serve a copy of the petition

3-27     and a written disclosure of substantially all material evidence and

 4-1     information the person possesses on the attorney general in

 4-2     compliance with the Texas Rules of Civil Procedure.

 4-3           (b)  The petition shall be filed in camera and shall remain

 4-4     under seal until at least the 60th day after the date the petition

 4-5     is filed.  The petition may not be served on the defendant until

 4-6     the court orders service on the defendant.

 4-7           (c)  The state may elect to intervene and proceed with the

 4-8     action not later than the 60th day after the date the attorney

 4-9     general receives the petition and the material evidence and

4-10     information.

4-11           (d)  The state may, for good cause shown, move the court to

4-12     extend the time during which the petition remains under seal under

4-13     Subsection (b).  A motion under this subsection may be supported by

4-14     affidavits or other submissions in camera.

4-15           (e)  An action under this subchapter may be dismissed before

4-16     the end of the period prescribed by Subsection (b), as extended as

4-17     provided by Subsection (d), if applicable, only if the court and

4-18     the attorney general consent in writing to the dismissal and state

4-19     their reasons for consenting.

4-20           Sec. 36.103.  ANSWER BY DEFENDANT.   A defendant is not

4-21     required to file an answer to a petition filed under this

4-22     subchapter until the 20th day after the date the petition is

4-23     unsealed and served on the defendant in compliance with the Texas

4-24     Rules of Civil Procedure.

4-25           Sec. 36.104.  STATE'S DECISION TO CONTINUE ACTION.   Not

4-26     later than the last day of the period prescribed by Section

4-27     36.102(b), as extended as provided by Section 36.102(d), if

 5-1     applicable, the state shall:

 5-2                 (1)  proceed with the action; or

 5-3                 (2)  notify the court that the state declines to take

 5-4     over the action.

 5-5           Sec. 36.105.  REPRESENTATION OF STATE BY PRIVATE ATTORNEY.

 5-6     The attorney general may contract with a private attorney to

 5-7     represent the state in an action under this subchapter with which

 5-8     the state elects to proceed.

 5-9           Sec. 36.106.  INTERVENTION BY OTHER PARTIES PROHIBITED.   A

5-10     person other than the state may not intervene or bring a related

5-11     action based on the facts underlying a pending action brought under

5-12     this subchapter.

5-13           Sec. 36.107.  RIGHTS OF PARTIES IF STATE CONTINUES ACTION.

5-14     (a)  If the state proceeds with the action, the state has the

5-15     primary responsibility for prosecuting the action and is not bound

5-16     by an act of the person bringing the action.  The person bringing

5-17     the action has the right to continue as a party to the action,

5-18     subject to the limitations set forth by this section.

5-19           (b)  The state may dismiss the action notwithstanding the

5-20     objections of the person bringing the action if:

5-21                 (1)  the attorney general notifies the person that the

5-22     state has filed a motion to dismiss; and

5-23                 (2)  the court provides the person with an opportunity

5-24     for a hearing on the motion.

5-25           (c)  The state may settle the action with the defendant

5-26     notwithstanding the objections of the person bringing the action if

5-27     the court determines, after a hearing, that the proposed settlement

 6-1     is fair, adequate, and reasonable under all the circumstances.  On

 6-2     a showing of good cause, the hearing may be held in camera.

 6-3           (d)  On a showing by the state that unrestricted

 6-4     participation during the course of the litigation by the person

 6-5     bringing the action would interfere with or unduly delay the

 6-6     state's prosecution of the case, or would be repetitious,

 6-7     irrelevant, or for purposes of harassment, the court may impose

 6-8     limitations on the person's participation, including:

 6-9                 (1)  limiting the number of witnesses the person may

6-10     call;

6-11                 (2)  limiting the length of the testimony of witnesses

6-12     called by the person;

6-13                 (3)  limiting the person's cross-examination of

6-14     witnesses; or

6-15                 (4)  otherwise limiting the participation by the person

6-16     in the litigation.

6-17           (e)  On a showing by the defendant that unrestricted

6-18     participation during the course of the litigation by the person

6-19     bringing the action would be for purposes of harassment or would

6-20     cause the defendant undue burden or unnecessary expense, the court

6-21     may limit the participation by the person in the litigation.

6-22           Sec. 36.108.  RIGHTS OF PARTIES IF STATE DOES NOT CONTINUE

6-23     ACTION.  (a)  If the state elects not to proceed with the action,

6-24     the person bringing the action has the right to conduct the action.

6-25           (b)  If the state requests pleadings and deposition

6-26     transcripts, the parties shall serve the attorney general with

6-27     copies of all pleadings filed in the action and shall make

 7-1     available to the attorney general copies of all deposition

 7-2     transcripts.

 7-3           (c)  The court, without limiting the status and rights of the

 7-4     person bringing the action, may permit the state to intervene at a

 7-5     later date on a showing of good cause.

 7-6           Sec. 36.109.  STAY OF CERTAIN DISCOVERY.  (a)  Regardless of

 7-7     whether the state proceeds with the action, on a showing by the

 7-8     state that certain actions of discovery by the person bringing the

 7-9     action would interfere with the state's investigation or

7-10     prosecution of a criminal or civil matter arising out of the same

7-11     facts, the court may stay the discovery for a period not to exceed

7-12     60 days.

7-13           (b)  The court shall hear a motion to stay discovery under

7-14     this section in camera.

7-15           (c)  The court may extend the period prescribed by Subsection

7-16     (a) on a further showing in camera that the state has pursued the

7-17     criminal or civil investigation or proceedings with reasonable

7-18     diligence and that any proposed discovery in the civil action will

7-19     interfere with the ongoing criminal or civil investigation or

7-20     proceedings.

7-21           Sec. 36.110.  PURSUIT OF ALTERNATE REMEDY BY STATE.  (a)

7-22     Notwithstanding Section 36.101, the state may elect to pursue the

7-23     state's claim through any alternate remedy available to the state,

7-24     including any administrative proceeding to determine an

7-25     administrative penalty.  If an alternate remedy is pursued in

7-26     another proceeding, the person bringing the action has the same

7-27     rights in the other proceeding as the person would have had if the

 8-1     action had continued under this subchapter.

 8-2           (b)  A finding of fact or conclusion of law made in the other

 8-3     proceeding that has become final is conclusive on all parties to an

 8-4     action under this subchapter.  For purposes of this subsection, a

 8-5     finding or conclusion is final if:

 8-6                 (1)  the finding or conclusion has been finally

 8-7     determined on appeal to the appropriate court;

 8-8                 (2)  no appeal has been filed with respect to the

 8-9     finding or conclusion and all time for filing an appeal has

8-10     expired; or

8-11                 (3)  the finding or conclusion is not subject to

8-12     judicial review.

8-13           Sec. 36.111.  AWARD TO PRIVATE PLAINTIFF.  (a) If the state

8-14     proceeds with an action under this subchapter, the person bringing

8-15     the action is entitled, except as provided by Subsection (b), to

8-16     receive at least 10 percent but not more than 25 percent of the

8-17     proceeds of the action, depending on the extent to which the person

8-18     substantially contributed to the prosecution of the action.

8-19           (b)  If the court finds that the action is based primarily on

8-20     disclosures of specific information, other than information

8-21     provided by the person bringing the action, relating to allegations

8-22     or transactions in a criminal or civil hearing, in a legislative or

8-23     administrative report, hearing, audit, or investigation, or from

8-24     the news media, the court may award the amount the court considers

8-25     appropriate but not more than seven percent of the proceeds of the

8-26     action.  The court shall consider the significance of the

8-27     information and the role of the person bringing the action in

 9-1     advancing the case to litigation.

 9-2           (c)  If the state does not proceed with an action under this

 9-3     subchapter, the person bringing the action or settling the claim is

 9-4     entitled to receive an amount that the court decides is reasonable

 9-5     for collecting the civil penalty and damages.  The amount may not

 9-6     be less than 25 percent or more than 30 percent of the proceeds of

 9-7     the action.

 9-8           (d)  A payment to a person under this section shall be made

 9-9     from the proceeds of the action.  A person receiving a payment

9-10     under this section is also entitled to receive an amount for

9-11     reasonable expenses that the court finds to have been necessarily

9-12     incurred, plus reasonable attorney's fees and costs.  Expenses,

9-13     fees, and costs shall be awarded against the defendant.

9-14           (e)  In this section, "proceeds of the action" includes

9-15     proceeds of a settlement of the action.

9-16           Sec. 36.112.  REDUCTION OF AWARD.  (a)  Regardless of whether

9-17     the state proceeds with the action, if the court finds that the

9-18     action was brought by a person who planned and initiated the

9-19     violation of Section 36.002 on which the action was brought, the

9-20     court may, to the extent the court considers appropriate, reduce

9-21     the share of the proceeds of the action the person would otherwise

9-22     receive under Section 36.111, taking into account the person's role

9-23     in advancing the case to litigation and any relevant circumstances

9-24     pertaining to the violation.

9-25           (b)  If the person bringing the action is convicted of

9-26     criminal conduct arising from the person's role in the violation of

9-27     Section 36.002, the court shall dismiss the person from the civil

 10-1    action and the person may not receive any share of the proceeds of

 10-2    the action.  A dismissal under this subsection does not prejudice

 10-3    the right of the state to continue the action.

 10-4          Sec. 36.113.  AWARD TO DEFENDANT FOR FRIVOLOUS ACTION OR

 10-5    ACTION BROUGHT FOR PURPOSES OF HARASSMENT.  (a)  If the state does

 10-6    not proceed with the action and the person bringing the action

 10-7    conducts the action, the court may award to the defendant the

 10-8    defendant's reasonable attorney's fees and expenses if:

 10-9                (1)  the defendant prevails in the action; and

10-10                (2)  the court finds that the claim of the person

10-11    bringing the action was clearly frivolous, clearly vexatious, or

10-12    brought primarily for purposes of harassment.

10-13          (b)  Chapter 105, Civil Practice and Remedies Code, applies

10-14    in an action under this subchapter with which the state proceeds.

10-15          Sec. 36.114.  CERTAIN ACTIONS BARRED.  (a)  A person may not

10-16    bring an action under this subchapter that is based on allegations

10-17    or transactions that are the subject of a civil suit or an

10-18    administrative penalty proceeding in which the state is already a

10-19    party.

10-20          (b)  A person may not bring an action under this subchapter

10-21    that is based on the public disclosure of allegations or

10-22    transactions in a criminal or civil hearing, in a legislative or

10-23    administrative report, hearing, audit, or investigation, or from

10-24    the news media, unless the person bringing the action is an

10-25    original source of the information.  In this subsection, "original

10-26    source" means an individual who has direct and independent

10-27    knowledge of the information on which the allegations are based and

 11-1    has voluntarily provided the information to the state before filing

 11-2    an action under this subchapter that is based on the information.

 11-3          Sec. 36.115.  STATE NOT LIABLE FOR CERTAIN EXPENSES.   The

 11-4    state is not liable for expenses that a person incurs in bringing

 11-5    an action under this section.

 11-6          Sec. 36.116.  RETALIATION BY EMPLOYER AGAINST PERSON BRINGING

 11-7    SUIT PROHIBITED.  (a)  A person who is discharged, demoted,

 11-8    suspended, threatened, harassed, or in any other manner

 11-9    discriminated against in the terms of employment by the person's

11-10    employer because of a lawful act taken by the person in furtherance

11-11    of an action under this subchapter, including investigation for,

11-12    initiation of, testimony for, or assistance in an action filed or

11-13    to be filed under this subchapter, is entitled to:

11-14                (1)  reinstatement with the same seniority status the

11-15    person would have had but for the discrimination; and

11-16                (2)  not less than two times the amount of back pay,

11-17    interest on the back pay, and compensation for any special damages

11-18    sustained as a result of the discrimination, including litigation

11-19    costs and reasonable attorney's fees.

11-20          (b)  A person may bring an action in the appropriate district

11-21    court for the relief provided in this section.

11-22          SECTION 8.  Chapter 531, Government Code, is amended by

11-23    adding Subchapter C to read as follows:

11-24           SUBCHAPTER C.  MEDICAID FRAUD, MISUSE, OR OVERCHARGES

11-25          Sec. 531.101.  AWARD FOR REPORTING MEDICAID FRAUD, MISUSE, OR

11-26    OVERCHARGES.  (a)  The commission may grant an award to an

11-27    individual who reports activity that constitutes fraud or misuse of

 12-1    funds in the state Medicaid program or reports overcharges in the

 12-2    program if the commission determines that the disclosure results in

 12-3    the recovery of an overcharge or in the termination of the

 12-4    fraudulent activity or misuse of funds.

 12-5          (b)  The commission shall determine the amount of an award.

 12-6    The award must be equal to not less than 10 percent of the  savings

 12-7    to this state that result from the individual's disclosure.  In

 12-8    determining the amount of the award, the commission shall consider

 12-9    how important the disclosure is in ensuring the fiscal integrity of

12-10    the program.

12-11          (c)  An award under this section is subject to appropriation.

12-12    The award must be paid from money appropriated to or otherwise

12-13    available to the commission, and additional money may not be

12-14    appropriated to the commission for the purpose of paying the award.

12-15          (d)  Payment of an award under this section from federal

12-16    funds is subject to the permissible use under federal law of funds

12-17    for this purpose.

12-18          (e)  A person who brings an action under Subchapter C,

12-19    Chapter 36, Human Resources Code, is not eligible for an award

12-20    under this section.

12-21          Sec. 531.102.  ASSISTING INVESTIGATIONS BY ATTORNEY GENERAL.

12-22    (a)  The commission and the attorney general shall execute a

12-23    memorandum of understanding under which the commission shall

12-24    provide investigative support as required to the attorney general

12-25    in connection with cases under Subchapter B, Chapter 36, Human

12-26    Resources Code.  Under the memorandum of understanding, the

12-27    commission shall assist in performing preliminary investigations

 13-1    and ongoing investigations for actions prosecuted by the attorney

 13-2    general under Subchapter C, Chapter 36, Human Resources Code.

 13-3          (b)  The memorandum of understanding must provide that the

 13-4    commission is not required to provide investigative support in more

 13-5    than 100 open investigations in a fiscal year.

 13-6          SECTION 9.  The office of the attorney general shall develop

 13-7    strategies to increase state recoveries under 31 U.S.C. Sections

 13-8    3729-3733.  The office shall report the results of the office's

 13-9    effort to the legislature not later than September 1, 1998.

13-10          SECTION 10.  (a)  In addition to the substantive changes made

13-11    by this Act, this Act conforms Chapter 531, Government Code, to

13-12    Section 1, Chapter 444, Acts of the 74th Legislature, Regular

13-13    Session, 1995.

13-14          (b)  To the extent of any conflict, this Act prevails over

13-15    another Act of the 75th Legislature, Regular Session, 1997,

13-16    relating to nonsubstantive additions to and corrections in enacted

13-17    codes.

13-18          SECTION 11.  Section 531.102, Government Code, as added by

13-19    this Act, takes effect only if the transfer of employees of the

13-20    Texas Department of Human Services and the Texas Department of

13-21    Health to the Health and Human Services Commission, as proposed by

13-22    Section 2, S.B. No. 741, or similar legislation, is enacted by the

13-23    75th Legislature in regular session and becomes law.

13-24          SECTION 12.  The office of the attorney general may retain a

13-25    reasonable portion of recoveries under this Act, not to exceed

13-26    amounts specified in the General Appropriations Act, for the

13-27    administration of this Act.

 14-1          SECTION 13.  This Act takes effect September 1, 1997.

 14-2          SECTION 14.  The importance of this legislation and the

 14-3    crowded condition of the calendars in both houses create an

 14-4    emergency and an imperative public necessity that the

 14-5    constitutional rule requiring bills to be read on three several

 14-6    days in each house be suspended, and this rule is hereby suspended.